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U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 0-27689
 AMDL, Inc.
 
  Delaware
    
    33-0413161(State or other jurisdiction
of incorporation or organization)
    
    (IRS Employer
Identification No.)
  
   
   
   o þ
  þ o




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##### 



PAGEPART I  FINANCIAL INFORMATION
    
    
    2Item 1. Financial Statements
    
    
    2Balance Sheet at March 31, 2006 (unaudited)
    
    
    2Unaudited Statements of Operations for the three months ended March 31, 2006 and 2005
    
    
    3Unaudited Statements of Cash Flows for the three months ended March 31, 2006 and 2005
    
    
    4Notes to Condensed Financial Statements (unaudited)
    
    
    5Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    15Item 3. Controls and Procedures
    
    
    18PART II  OTHER INFORMATION
    
    
    20EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMDL, INC.
 
 BALANCE SHEET
 March 31,2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    861,543Inventories
    
    
    84,560Prepaid consulting
    
    
    179,032Other prepaid expenses
    
    
    231,736Total current assets
    
    
    1,356,871Intellectual property, net
    
    
    1,533,333Equipment, net
    
    
    17,038Other assets
    
    
    5,757$
    2,912,999LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    167,585Accrued payroll and related expenses
    
    
    101,179Customer deposits
    
    
    9,450Total current liabilities
    
    
    278,214Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value; 10,000,000
shares authorized; no shares issued and
outstanding
    
    
    Common stock, $0.001 par value; 50,000,000 shares
authorized; 27,813,080 shares issued and
outstanding
    
    
    27,813Additional paid in capital
    
    
    32,186,601Accumulated deficit
    
    
    (29,579,629
    )Total stockholders equity
    
    
    2,634,785$
    2,912,999
  2




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AMDL, INC.
 
 STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedMarch 31,2006
    
    2005Net revenues
    
    $
    15,375
    
    
    $
    22,875Cost of sales
    
    
    5,772
    
    
    
    4,828Gross profit
    
    
    9,603
    
    
    
    18,047Operating expenses:Research and development
    
    
    47,648
    
    
    
    81,444General and administrative
    
    
    881,870
    
    
    
    500,957Total expenses
    
    
    929,518
    
    
    
    582,401Loss from operations
    
    
    (919,915
    )
    
    
    (564,354
    )Other income:Interest income
    
    
    8,002
    
    
    
    9,376Net loss
    
    $
    (911,913
    )
    
    $
    (554,978
    )Basic and diluted loss
per share
    
    $
    (0.03
    )
    
    $
    (0.02
    )Weighted average common shares outstanding
- basic and diluted
    
    
    27,707,524
    
    
    
    23,499,489
  3




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AMDL, INC.
 
 STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2006
    
    2005Cash flows from operating activities:Net loss
    
    $
    (911,913
    )
    
    $
    (554,978
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    27,091
    
    
    
    26,710Fair market value of options and warrants issued for services
    
    
    241,967
    
    
    
    2,333Fair market value of common stock issued for services
    
    
    141,190
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (1,600
    )Inventories
    
    
    (5,889
    )
    
    
    (11,558
    )Prepaid expenses
    
    
    (108,066
    )
    
    
    21,111Accounts payable and accrued expenses
    
    
    70,250
    
    
    
    14,380Accrued payroll and related expenses
    
    
    1,183
    
    
    
    9,361Customer deposits
    
    
    9,450
    
    
    
    Net cash used in operating activities
    
    
    (534,737
    )
    
    
    (494,241
    )Cash flows used in investing activities:Purchase of equipment
    
    
    (1,812
    )
    
    
    (5,575
    )Net change in cash and cash equivalents
    
    
    (536,549
    )
    
    
    (499,816
    )Cash and cash equivalents at beginning of period
    
    
    1,398,092
    
    
    
    2,605,537Cash and cash equivalents at end of period
    
    $
    861,543
    
    
    $
    2,105,721Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    
    
    
    $
    Income taxes
    
    $
    
    
    
    $
    
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AMDL, INC.
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
 NOTE 1  MANAGEMENTS REPRESENTATION
   NOTE 2  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  ®
 Going Concern
 ® ®
 ®
  5




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
   Revenue Recognition
  Advertising
  Research and Development
  Cash Equivalents
  Inventories
  Equipment
  6




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
  Intangible Assets
   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; and
    
    potential for strategic partnerships for the development of its patented technology.
  Issuance of Stock for Non-Cash Consideration
   7




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
 Risks and Uncertainties
 â
 ® ® ® ® ® ® ® ®
  Accounting for Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock Based Compensation
 Share Based Payments
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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
     2006
    
    2005Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility
    
    
    108.0
    %
    
    
    83.0
    %Risk-free interest rate
    
    
    4.76
    %
    
    
    3.12
    %Expected lives
    
    1.0 years
    
    1.0 years
    9




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
  Net loss, as reported
    
    $
    (554,978
    )Add: Stock-based employee compensation expense included in
reported net loss, net of related tax effects
    
    
    Deduct: Total stock-based employee compensation expense
determined under fair value based method for awards,
net of related tax effects
    
    
    (72,000
    )Pro forma net loss
    
    $
    (626,978
    )Net loss per
common share  basic and diluted:As reported
    
    $
    (0.02
    )Pro forma
    
    $
    (0.03
    )
  WeightedAverageExerciseNumber
    
    
    
    
    
    
    Price PerOf Shares
    
    
    Price Per Share
    
    
    ShareOptions outstanding at December 31, 2005
    
    
    4,083,185
    
    
    
    
    
    
    $
    1.40Granted
    
    
    890,000
    
    
    $
    0.57
    
    
    
    0.57Cancelled
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Options outstanding at March 31, 2006
    
    
    4,973,185
    
    
    
    
    
    
    $
    1.25
   Options Outstanding
    
    
    
    
    
    
    
    
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted-
    
    
    
    
    
    
    
    
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Aggregate
    
    
    Number of
    
    
    Average
    
    
    AggregateRange of
    
    
    of Shares
    
    
    Contractual
    
    
    Exercise
    
    
    Intrinsic
    
    
    Shares
    
    
    Exercise
    
    
    IntrinsicExercise Prices
    
    
    Outstanding
    
    
    Life (years)
    
    
    Price
    
    
    Value
    
    
    Exercisable
    
    
    Price
    
    
    Value$
    0.48
    
    
    $
    0.57
    
    
    
    1,585,000
    
    
    
    3.36
    
    
    $
    0.53
    
    
    $
    14,400
    
    
    
    1,585,000
    
    
    $
    0.53
    
    
    $
    14,400$
    0.83
    
    
    $
    0.97
    
    
    
    775,000
    
    
    
    3.41
    
    
    $
    0.89
    
    
    
    
    
    
    
    775,000
    
    
    $
    0.89
    
    
    
    $
    1.10
    
    
    $
    1.23
    
    
    
    1,911,185
    
    
    
    2.91
    
    
    $
    1.19
    
    
    
    
    
    
    
    1,911,185
    
    
    $
    1.19
    
    
    
    $
    2.25
    
    
    $
    2.39
    
    
    
    227,000
    
    
    
    0.85
    
    
    $
    2.28
    
    
    
    
    
    
    
    227,000
    
    
    $
    2.28
    
    
    
    $
    4.00
    
    
    
    
    
    
    
    475,000
    
    
    
    0.42
    
    
    $
    4.00
    
    
    
    
    
    
    
    475,000
    
    
    $
    4.00
    
    
    
    4,973,185
    
    
    
    
    
    
    $
    1.25
    
    
    $
    14,400
    
    
    
    4,973,185
    
    
    $
    1.25
    
    
    $
    14,400
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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
  Basic and Diluted Loss Per Share
  Income Taxes
 Accounting for Income Taxes
 Use of Estimates
  Comprehensive Income
 Reporting Comprehensive Income
 Segments of an Enterprise and Related Information
  11




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
 Concentration of Risk
  Recent Accounting Pronouncements
 Accounting Changes and Error Corrections. Accounting
Changes Reporting Accounting Changes in Interim Financial Statements
 NOTE 3  NON-CASH FINANCING ACTIVITIES
      12




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
 NOTE 4  COMMITMENTS AND CONTINGENCIES
 Litigation
    Indemnities and Guarantees
  NOTE 5  SUBSEQUENT EVENTS
  13




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AMDL, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
 For the Three Months Ended March 31, 2006 and 2005
     14




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Liquidity and Capital Resources
 Total assets decreased from $3,181,841 at December 31, 2005 to $2,912,999 at March 31, 2006. The
decrease is a result of cash used in operating activities and losses.Our total outstanding current liabilities increased from $197,331 at December 31, 2005 to $278,214
at March 31, 2006. The increase resulted primarily from the increase in general accounts payable
and accrued vacation pay.From December 31, 2005 to March 31, 2006, our cash and cash equivalents decreased by $536,549,
primarily as a result of cash used in operating activities. As of May 12, 2006, cash is being
depleted at the rate of approximately $200,000 per month, including expected costs related to (i)
the application for approval of DR-70® by the FDA (ii) litigation with AcuVector and
the University of Alberta and (iii) the estimated costs to complete
the acquisition of Jade Pharmaceutical, Inc. (Jade
Acquisition). As of May 12, 2006, our cash on hand was approximately $2,264,000.
Subsequent to the quarter ended March 31, 2006 (and included in the May 12, 2006 cash position),
the Company was successful in selling common stock in a private offering which generated
approximately $1.5 million in net cash proceeds which will be used for operations. Cash was
utilized at an increased amount during the quarter ended March 31, 2006 as a result of increased
legal, accounting and travel, all related to the Jade Acquisition. Assuming (i) the current
level of revenue from the sale of DR-70®kits to our distributors and our principal OEM
product do not increase in the near future, (ii) we do not conduct any full scale clinical trials,
and (iii) no outstanding warrants are exercised, the amount of cash on hand is expected to be
sufficient to meet our projected operating expenses through
April 2007.In addition, approximately $116,000 of costs have been capitalized with respect to the proposed
acquisition of Jade Pharmaceutical, Inc. during the three months ended March 31, 2006 and are included in prepaid expenses.
 ®
 ® ®
   15




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Critical Accounting Policies
   Allowance for Doubtful Accounts
 Inventory
 Sales Allowances.
 16




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Valuation of Intangibles
 Deferred Taxes
 Litigation Accounting for
Contingencies
 Stock-based Compensation Expense
 Accounting for Stock-Based Compensation
  Results of Operations
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 Net Revenue
 ® ® ®
 ® ®
 17




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Research and Development. ®
 General and Administrative Expenses
 Net Loss and Loss from Operations.
 Assets and Liabilities
   Forward Looking Statements
  
 Item 3. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  18




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Changes in Internal Controls
  19




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PART II  OTHER INFORMATION
 Item 1. Legal Proceedings
  Item 2. Unregistered Sales of Equity Securities Use of Proceeds
    th
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  20




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Item 6. Exhibits
  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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SIGNATURES
  AMDL, Inc.Dated: May 12, 2006
    
    By:
    
    /s/ Gary L. DreherGARY
L. DREHER, Chief Executive Officer
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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
 23