##### 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, 2007
 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 1-16695
 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.)
 2492 Walnut Avenue, Suite 100, Tustin, California 92780
  (714) 505-4460
  Not Applicable
   o þ
  þ o




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##### 



PAGEPART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Unaudited Condensed Consolidated Balance Sheet at September 30, 2007
    
    
    3Unaudited Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) for the three and nine months ended September
30, 2007 and 2006
    
    
    4Unaudited Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2007 and 2006
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    26Item 3A. Controls and Procedures
    
    
    38PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    39Item 3. Defaults Upon Senior Securities
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    40Item 5. Other Information
    
    
    40Item 6. Exhibits
    
    
    41SIGNATURES
    
    
    42EXHIBIT INDEX
    
    
    43EXHIBIT 10.44EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMDL, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 September 30,2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,228,022Accounts receivable, net
    
    
    3,055,584Inventories
    
    
    835,505Prepaid consulting
    
    
    797,063Other prepaid expenses and current assets
    
    
    1,990,679Total current assets
    
    
    7,906,853Property and equipment, net
    
    
    10,994,939Intangible assets, net
    
    
    5,137,616Other assets
    
    
    2,116,601Total assets
    
    $
    26,156,009LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    2,692,786Value added and other taxes payable
    
    
    558,240Deferred revenue
    
    
    279,344Current portion of notes payable
    
    
    3,248,864Total current liabilities
    
    
    6,779,234Notes payable, net of current portion
    
    
    1,891,561Total liabilities
    
    
    8,670,795Stockholders 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; 12,679,317 shares issued and
12,579,317 shares outstanding
    
    
    12,579Additional paid-in capital
    
    
    54,704,855Accumulated other comprehensive gain
    
    
    569,526Accumulated deficit
    
    
    (37,801,746
    )Total stockholders equity
    
    
    17,485,214$
    26,156,009
  3




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##### Table of Contents



AMDL, INC.
 
 CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net revenues
    
    $
    5,808,376
    
    
    $
    21,005
    
    
    $
    9,646,056
    
    
    $
    54,105Cost of sales
    
    
    2,226,692
    
    
    
    8,972
    
    
    
    4,186,051
    
    
    
    21,460Gross profit
    
    
    3,581,684
    
    
    
    12,033
    
    
    
    5,460,005
    
    
    
    32,645Operating expenses:Research and development
    
    
    2,407
    
    
    
    162,894
    
    
    
    15,534
    
    
    
    282,139Selling, general and administrative
    
    
    3,090,059
    
    
    
    819,265
    
    
    
    8,330,604
    
    
    
    2,340,319Total operating expenses
    
    
    3,092,466
    
    
    
    982,159
    
    
    
    8,346,138
    
    
    
    2,622,458Gain (loss) from operations
    
    
    489,218
    
    
    
    (970,126
    )
    
    
    (2,886,133
    )
    
    
    (2,589,813
    )Other income (expense):Loss on the disposal of equipment
    
    
    (1,555
    )
    
    
    
    
    
    
    (3,855
    )
    
    
    Interest income
    
    
    1,996
    
    
    
    7,789
    
    
    
    7,584
    
    
    
    22,489Interest expense
    
    
    (87,081
    )
    
    
    
    
    
    
    (276,045
    )
    
    
    Total other income (expense), net
    
    
    (86,640
    )
    
    
    7,789
    
    
    
    (272,316
    )
    
    
    22,489Income (loss) before provision for
income taxes
    
    
    402,578
    
    
    
    (962,337
    )
    
    
    (3,158,499
    )
    
    
    (2,567,324
    )Provision for income taxes
    
    
    19,470
    
    
    
    
    
    
    
    108,154
    
    
    
    Net income
(loss)
    
    
    383,108
    
    
    
    (962,337
    )
    
    
    (3,266,603
    )
    
    
    (2,567,324
    )Other
comprehensive income:Foreign currency translation gain
    
    
    247,918
    
    
    
    
    
    
    
    591,254
    
    
    
    Comprehensive gain (loss)
    
    $
    631,026
    
    
    $
    (962,337
    )
    
    $
    (2,675,349
    )
    
    $
    (2,567,324
    )Basic income (loss) per common share
    
    $
    0.05
    
    
    $
    (0.13
    )
    
    $
    (0.24
    )
    
    $
    (0.38
    )Diluted
income (loss) per common share
    
    $
    0.05
    
    
    $
    
    
    
    $
    
    
    
    $Weighted average common shares
outstanding  basic
    
    
    12,550,666
    
    
    
    7,372,750
    
    
    
    11,357,055
    
    
    
    6,689,326Weighted average common shares
outstanding  diluted
    
    
    12,773,521
    
    
    
    7,372,750
    
    
    
    11,357,055
    
    
    
    6,689,326
  4




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AMDL, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (3,266,603
    )
    
    $
    (2,567,324
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    884,812
    
    
    
    81,463Loss on disposal of equipment
    
    
    3,855
    
    
    
    Fair market value of common stock, warrants and options issued for
services
    
    
    1,744,164
    
    
    
    481,525Fair market value of options granted to employees and directors for
services
    
    
    1,577,610
    
    
    
    240,300Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,176,945
    )
    
    
    Inventories
    
    
    (94,847
    )
    
    
    4,983Prepaid expenses and other current assets
    
    
    (1,928,412
    )
    
    
    21,115Other assets
    
    
    (465,166
    )
    
    
    Accounts payable and accrued expenses
    
    
    (34,868
    )
    
    
    220,630Deferred revenue
    
    
    279,344
    
    
    
    Value added and other taxes payable
    
    
    558,240
    
    
    
    Net cash used in operating activities
    
    
    (1,918,816
    )
    
    
    (1,517,308
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,946,551
    )
    
    
    (2,797
    )Purchases of
production rights
    
    
    (1,340,853
    )
    
    
    Cash paid for JPI acquisition, net of cash acquired
    
    
    
    
    
    
    (373,104
    )Net cash used in investing activities
    
    
    (3,287,404
    )
    
    
    (375,901
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issuance of common stock, net of offering costs of $757,014
in 2007 and $354,571 in 2006
    
    
    4,572,497
    
    
    
    1,457,924Proceeds from exercise of options
    
    
    271,200
    
    
    
    Proceeds from exercise of warrants
    
    
    
    
    
    
    42,241Net cash provided by financing activities
    
    
    4,843,697
    
    
    
    1,500,165Effect of exchange rates on cash and cash equivalents
    
    
    (5,572
    )
    
    
    Net change in cash and cash equivalents
    
    
    (356,951
    )
    
    
    (393,044
    )Cash and cash equivalents, beginning of the period
    
    
    1,584,973
    
    
    
    1,398,092Cash and cash equivalents, end of period
    
    $
    1,228,022
    
    
    $
    1,005,048SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Cash paid during the period for interest
    
    $
    276,045
    
    
    $
    Cash paid during the period for income taxes
    
    $
    108,199
    
    
    $
    2,881SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:Value of
common stock recorded as prepaid consulting and accrued expenses
    
    $
    1,893,600
    
    
    
    Increase in debt and fixed assets due to purchase price adjustment
    
    $
    214,617
    
    
    
    
  5




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AMDL, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 For the Nine Months Ended September 30, 2007 and 2006
 NOTE 1  MANAGEMENTS REPRESENTATION
   NOTE 2  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 AMDL, Inc.
 ®
 Acquisition of JPI
   ®
 6




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 ®
 Business
Combinations,
  Fair ValuePurchase 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
    
    
    1,405,829Prepayments, primarily product licenses
    
    
    1,292,531Identifiable intangible assets acquired:Non-compete agreements
    
    
    324,415Customer relationships
    
    
    214,328Trade name and logo
    
    
    530,829Total 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
    7




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
  For the Three Months
    
    
    For the Nine MonthsEnded
    
    
    EndedSeptember 30, 2006
    
    
    September 30, 2006Net revenues
    
    $
    1,996,608
    
    
    $
    5,125,211Net loss
    
    $
    (170,408
    )
    
    $
    (946,051
    )Basic and diluted loss per share
    
    $
    (0.03
    )
    
    $
    (0.14
    )Weighted average common shares outstanding  basic and diluted
    
    
    5,680,267
    
    
    
    6,689,326
 Going Concern
 ® ®
 ®
    8




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
    Reverse Stock Split
  Principles of Consolidation
  Revenue Recognition
  Revenue Recognition in Financial Statements,
 Wholesale Sales
  Direct Distribution
  9




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
   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
   Research and Development
  10




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 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
  Land Use Rights
  Non-Compete Agreements
  11




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 Customer Relationships
  Trade Name and Logo
  Production Rights
  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.
   12




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 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,
   13




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
  Summary of Assumptions and Activity
   2007
    
    2006Dividend yield
    
    
    
    
    
    
    Expected volatility
    
    
    353
    %
    
    
    108
    %Risk-free interest rate
    
    
    4.92
    %
    
    
    4.76
    %Expected term
    
    
    5.0
    years
    
    
    1.0
    year
   Weighted
    
    
    RemainingAverage
    
    
    Contractual
    
    
    AggregateNumber
    
    
    Exercise
    
    
    Term
    
    
    Intrinsicof Shares
    
    
    Price
    
    
    (Years)
    
    
    ValueOptions outstanding at January 1, 2007
    
    
    1,562,637
    
    
    $
    4.35
    
    
    
    3.35Granted
    
    
    427,000
    
    
    $
    4.06Expired/forfeited
    
    
    (293,402
    )
    
    $
    5.02Exercised
    
    
    (113,000
    )
    
    $
    2.40Options outstanding and exercisable at
September 30, 2007
    
    
    1,583,235
    
    
    $
    3.59
    
    
    
    3.33
    
    
    $
    76,540
    14




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 Basic and Diluted Income (Loss) Per Share
  Income Taxes
 Accounting for Income Taxes.
  Value Added Tax Payable
  Use of Estimates
  Risks and Uncertainties
 ®
 ® ® ®
 15




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 ® ® ® ®
 ®
    Operations in China
     Concentration of Risk
  Customers
  16




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
    Fair Value of Financial Instruments
 Disclosures About Fair Value of
Financial Instruments,
 Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 17




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 NOTE 3  SEGMENT REPORTING
 Disclosures about Segments of an Enterprise and Related
Information.
   China-Wholesale
    

China-Direct
Distribution
    

Corporate
    
    TotalNet revenue
    
    $
    9,513,272
    
    
    $
    39,084
    
    
    $
    93,700
    
    
    $
    9,646,056Gross profit
    
    $
    5,344,500
    
    
    $
    39,084
    
    
    $
    76,421
    
    
    $
    5,460,005Depreciation
    
    $
    639,744
    
    
    $
    
    
    
    $
    4,740
    
    
    $
    644,484Amortization
    
    $
    165,329
    
    
    $
    
    
    
    $
    75,000
    
    
    $
    240,329Interest expense
    
    $
    276,045
    
    
    $
    
    
    
    $
    
    
    
    $
    276,045Net income (loss)
    
    $
    2,787,289
    
    
    $
    39,084
    
    
    $
    (6,092,976
    )
    
    $
    (3,266,603
    )Identifiable assets
    
    $
    22,515,975
    
    
    $
    557,093
    
    
    $
    3,082,941
    
    
    $
    26,156,009Capital expenditures
    
    $
    3,275,073
    
    
    $
    
    
    
    $
    12,331
    
    
    $
    3,287,404
   NOTE 4  OTHER PREPAID EXPENSES AND CURRENT ASSETS
  Deposits
    
    $
    362,270Other receivables
    
    
    1,476,872Advance to related parties
    
    
    22,085Other prepaids
    
    
    129,452$
    1,990,679
   18




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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 NOTE 5  OTHER ASSETS
  Deposit  production
rights

$
1,609,556Deposit  supplier


399,064Advances to
employees


85,122Other


22,859$
2,116,601
    NOTE 6  INTANGIBLE ASSETS
  Weighted-Reclassification
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AverageGross
    
    
    Adjustment
    
    
    of Gross
    
    
    Adjusted
    
    
    
    
    
    
    
    
    
    
    AmortizationCarrying
    
    
    due to currency
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    
    
    
    
    PeriodValue
    
    
    translation
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    Net
    
    
    (in years)Assets subject to
amortization:Intellectual property
    
    $
    2,000,000
    
    
    $
    
    
    
    $
    
    
    
    $
    2,000,000
    
    
    $
    (616,667
    )
    
    $
    1,383,333
    
    
    
    20Production rights
    
    
    1,340,853
    
    
    
    
    
    
    
    
    
    
    
    1,340,853
    
    
    
    (17,824
    )
    
    
    1,323,029
    
    
    
    10Land use rights
    
    
    1,200,769
    
    
    
    104,794
    
    
    
    205,060
    
    
    
    1,510,623
    
    
    
    (37,947
    )
    
    
    1,472,676
    
    
    
    33Non-compete agreements
    
    
    382,389
    
    
    
    9,812
    
    
    
    (57,974
    )
    
    
    334,227
    
    
    
    (73,069
    )
    
    
    261,158
    
    
    
    5Customer relationships
    
    
    254,926
    
    
    
    9,546
    
    
    
    (40,598
    )
    
    
    223,874
    
    
    
    (34,796
    )
    
    
    189,078
    
    
    
    7Trade name and logo
    
    
    637,317
    
    
    
    31,067
    
    
    
    (106,488
    )
    
    
    561,896
    
    
    
    (53,554
    )
    
    
    508,342
    
    
    
    10$
    5,816,254
    
    
    $
    155,219
    
    
    $
    
    
    
    $
    5,971,474
    
    
    $
    (833,857
    )
    
    $
    5,137,616
 NOTE 7  ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  Accounts payable
    
    $
    1,395,414Accrued payroll and related expenses
    
    
    239,543Accrued
consulting fee (see Note 8)
    
    
    817,500Other liabilities and accrued expenses
    
    
    240,329$
    2,692,786
 NOTE 8  EQUITY TRANSACTIONS
     19




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
        20




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
    NOTE 9  NOTES PAYABLE
   Years ending December 31,2007
    
    $
    3,248,8642008
    
    
    1,891,5615,140,425Less current portion
    
    
    (3,248,864
    )$
    1,891,561
  NOTE 10  COMMITMENTS AND CONTINGENCIES
 Operating Leases
  21




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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 Litigation
      Suspension of Product Sales
   Consulting Agreements
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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 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.
   Indemnities and Guarantees
  Construction in Progress
  Purchase of Production Rights
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##### Table of Contents



AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
 NOTE 11  SUBSEQUENT EVENTS
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AMDL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the Nine Months Ended September 30, 2007 and 2006
   ®
 ®
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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.
   
    
    Access to the fastest growing pharmaceutical and consumer market in the world, China;
    
    A platform to in-license North American drugs for manufacture and sale in China and
Asia;
    
    A program for DR-70(R) and CIT clinical trials, sales, and marketing into China and
Asia;
    
    New opportunities for cancer-related product development in China.
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##### Table of Contents



JPIS Sales and Distribution Activities
  Region
    
    PercentageCentral
    
    
    26
    %South East
    
    
    22
    %North East
    
    
    20
    %Eastern
    
    
    23
    %North
    
    
    8
    %South West
    
    
    1
    %
     ®
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##### Table of Contents




    
    JPI signed an agreement with Heze Mudan Medicals Co. Ltd. to distribute Domperidone
tablets in the Province of Shandong and the surrounding areas, one of the most affluent
regions in China. Domperidone is an important medicine for treating nausea and vomiting.
JPIs generic version of this product is significantly lower priced than competitors. The
contract is subject to minimum sales which will be reviewed annually and is expected to add
at least $2.3 million in annual revenues to JPI.
    
    JPIs subsidiary JJB launched a new anti-aging and skin care injectible product under
the brand name Goodnak. This initial product is the first in a new line of anti-aging &
skin care products currently under development by JJB. Goodnak is a high quality injectible
anti-aging & skin care product that contains an amalgam of various therapeutic elements
including human placental histosolution (HPH). JPI has begun selling Goodnak, in August,
through wholesale distribution channels that service high-end beauty salon and plastic
surgery hospitals and or medical cosmetology institutions.
    
    JPIs subsidiary JJB has signed a key set of regional distribution agreements for its new
anti-aging and skin care injectible product under the brand name Goodnak. This initial
product is the first in a new line of anti- aging & skin care products currently under
development by JJB. JJB has signed three new Southern Region exclusive, one-year renewable
Distribution and Agency Agreements that were signed with Changsha Hongli Co., Ltd. (CHC),
Wenzhou Limeikang Trade., Ltd. (WLT) and Xiamen Larry Beauty Technology Co., Ltd. (XLB).
These agreements cover the key cities in Hunnan, Zhejiang and Fujian Provinces that have a
combined population of approximately 134.4 million people. These two separate agreements in
combination, require these new distributors to purchase a minimum of $7,126,496 of JJBs
new Goodnak product during the one-year period of the contracts and a minimum initial order
of $3,563,248.
    
    JPIs subsidiary JJB has signed the third round of regional distribution agreements for
its new anti-aging and skin care injectible product under the brand name Goodnak. JJB has
signed three new Western Regional exclusive, one-year renewable Distribution and Agency
Agreements that were signed between JJB and Xian Maryland Cosmetics
Co., Ltd. (XMC), Lanzhou Charm Trade Co., Ltd. (LCT) and Wulumuqi Ozi Cosmetics Co.,
Ltd. (WOC). These agreements cover the key cities in Shanxi, Xinjiang and Gansu Provinces
that have a combined population of approximately 86 million people. These two separate
agreements in combination, require these new distributors to purchase a minimum of
$6,844,206 of JJBs new HPH product during the one-year period of the contracts and a
minimum initial order of $3,422,102.
    
    During the three months ended September 30, 2007, JPI entered into an agreement with
Jiangxi Yibo Medicine Technology Development Co., Ltd to acquire five new medical products,
two of which went into production. JPI paid approximately $1,340,000 for the license
rights to produce these two products. The application of these products include treatments
for coronary dysfunction, adult rhinallergosis, primary and secondary treatment for
oophoroplasty and breast cancer and acute and chronic virus hepatitis.
 The Current Economic and Market Environment
  Research and Development
 ®
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® ® ®
   
    
    Increase in inventory necessary for anticipated demand for product;
    
    Renovation of current manufacturing facilities to accommodate new products;
    
    Purchasing or licensing new products;
    
    Purchase of new machinery to increase capacity for existing products as well as
purchase of machinery to facilitate the manufacture of new products; and
    
    Increase the distribution network for current as well as new products.
  Liquidity and Capital Resources
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® ®
 ® ®
  Critical Accounting Policies
   Allowance for Doubtful Accounts
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##### Table of Contents



Inventories
  Sales Allowances.
 Valuation of Intangible 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.
  31




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##### Table of Contents



Revenue Recognition.
 Revenue Recognition in Financial Statements
 Wholesale Sales.
 Direct Distribution.
  How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement
(That Is, Gross Versus Net Presentation)
 Deferred Taxes
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##### Table of Contents



Litigation Accounting for
Contingencies
 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
  33




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##### Table of Contents



Accounting for Stock-Based Compensation
 Results of Operations
 Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
  Net Revenues
  ® ® ® ®
 ® ® ®
   34




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##### Table of Contents



Research and Development. ®
 General
and Administrative Expenses
 Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
  Net Revenues
 Corporate
 ® ® ® ®
 . ® ®
  China-Wholesale
    China-Direct
Distribution
  35




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##### Table of Contents



Percent ofName
    
    Total JPI SalesHuman Placenta Tissue Injections
    
    
    30.55
    %Domperidone
    
    
    28.58
    %Diavitamin, Calcium Hydrogen Phosphate and Lysince Tablets
    
    
    9.01
    %Levofloxacin Lactate and Sodium Chloride Injection
    
    
    5.53
    %GS and GNS
    
    
    8.55
    %82.22
    %
   Gross Profit.
 Corporate
 ®
 China-Wholesale
   China-Direct
Distribution
  36




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##### Table of Contents



Research and Development.
 Corporate
 ® ®
 China-Wholesale
and China-Direct Distribution
  Selling,
General and Administrative Expenses
 Corporate
  Nine months endedSeptember 30,2007Investor relations (including value of warrants/options)
    
    $
    1,789,668Salary and wages (including value of options)
    
    $
    2,025,126Directors fees (including value of options)
    
    $
    826,859Consulting fees
    
    $
    220,654Accounting and other professional fees
    
    $
    329,000Legal
    
    $
    216,871
 China-Wholesale
  China-Direct
Distribution
   Net Loss.
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##### Table of Contents



Item 3A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   
    
    The Company did not maintain effective internal control over financial reporting
relating to accurate recording and presentation of certain routine and non-routine
accounting transactions in accordance with GAAP; and
    
    The Company did not have adequate controls to properly determine and account for (i) the
contractual arrangements with Shenzhen JieKang Technologies Ltd., or (ii) our business
arrangement with Shanghai XiangEn Food Company Ltd. relating to the Retail Stores.
   Changes in Internal Controls
  38




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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
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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
    
    
    10,092,618
    
    
    
    283,085Gary L. Dreher
    
    
    10,112,190
    
    
    
    263,513Edward R. Arquilla
    
    
    10,204,032
    
    
    
    171,671Douglas C. MacLellan
    
    
    10,013,473
    
    
    
    362,230Minghui Jia
    
    
    10,184,760
    
    
    
    490,493
   
 Item 5. Other Information.
 ®
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®
 ®
 
 Item 6. Exhibits.
 (a)
    
    Exhibits
 10.44
    
    Amendment No. 1 to Escrow Agreement dated August 10, 2007 between the Company
and Jade Capital Group Limited, et al.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Certification Pursuant to 18 U.S.C. § 1350 of Chief Executive Officer32.2
    
    Certification Pursuant to 18 U.S.C. § 1350 of Chief Financial Officer
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##### Table of Contents



SIGNATURES
  AMDL, Inc.Dated: November 19, 2007
    By:
    /s/ Gary L. DreherGARY L. DREHER, Chief Executive Officer 42




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##### Table of Contents



Exhibit No.
    
    Description10.44
    
    Amendment No. 1 to Escrow Agreement dated August 10, 2007 between
the Company and Jade Capital Group Limited, et al.31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Executive Officer32.2
    
    Certification Pursuant to 18 U.S.C. §1350 of Chief Financial Officer
 43