<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- ----
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 OR
____ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER 33-23786-LA
AMDL, INC.
-----------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 87-0188822
---------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
14272 FRANKLIN AVE., SUITE 106
TUSTIN, CALIFORNIA 92680-7017
- ------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
(714) 505-4460
------------------------------------------------------
(Issuer's telephone number, including area code)
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X__ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 10 1996, the Registrant had outstanding 26,238,281 shares of its
common stock, par value $.001.
<PAGE>
Item 1. FINANCIAL STATEMENTS
See Pages 5-31.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Since inception, the Company has been in the development stage and has
devoted its resources to research and development of its proposed cancer
monitoring products. To date, the Company has not received any revenues from the
sale of any products. The Company has incurred losses since inception and
expects to incur a significant operating loss during 1996.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company's cash expenditures have exceeded its income.
Operations have been funded principally through sales of its equity securities,
and income received from the sale of licenses, royalties and options to acquire
marketing rights. The Company expects to incur continued losses in the near-term
as it continues development of its test kit systems and undertakes clinical
trials and other actions necessary to obtain regulatory approvals. The Company
also expects to incur substantial administrative and commercialization
expenditures in the future. From December 31, 1995 to March 31, 1996, the
Company's cash and cash equivalents increased to approximately $1,133,000. The
Company is also hopeful of obtaining revenues from product sales, but there is
no commitment by any person for purchase of any of these products. The Company
plans to finance its cash needs principally through additional financings.
However, it is not known whether the Company will be able to obtain additional
funding. The Company has no firm commitments for other capital. The Company can
make no prediction as to when, if ever, it will be profitable.
Although improved in recent months, the Company's liquidity and financial
condition remain poor. The Company believes that its present cash and cash
equivalents will be sufficient for approximately the next nine months of
operations, which would also depend upon the Company's ability to extend
forbearance of collection efforts on its outstanding indebtedness. The Company's
efforts during the next 12 months will be dedicated principally to providing
assistance to ICD in connection with international market development, domestic
and international clinical testing programs, manufacturing of the DR-70(TM) test
kits and planning for commercialization of other products. ICD has entered into
five exclusive distribution agreements for marketing of the test kits in the
countries of Brazil, China, Indonesia, the Philippines and Poland, respectively.
In order to retain exclusivity, the
-2-
<PAGE>
distributors in these respective countries will be required to make minimum
purchases of the Company's test kits from ICD. However, there is no firm
commitment by any distributor to purchase any kits. Inasmuch as the kits
constitute a new product, regulatory approvals have not been finalized, and the
distributors, in some instances, are not experienced in the sale of this type of
test, no assurance can be given of any revenues from these distribution
arrangements. The Company intends for ICD to expand its marketing efforts to
other countries. There can be no assurance as to the success of these efforts.
The Company anticipates incurring approximately $150,000 for additional
equipment to be used in the U.S. and approximately $75,000 for relocation costs
and tenant improvements for a new facility. The Company does not anticipate any
significant changes in the number of employees, but this again is dependant upon
financing. The Company may not be able to retain its present employees if
additional financing is not obtained. If such financing is obtained, the Company
may seek to add employees to further its efforts to commercialize its products.
On March 31, 1996, the Company had total notes payable outstanding of
$259,500, plus accrued interest, which is past due and in default. At March 31,
1996, the Company also had aggregate accrued salaries payable to officers and
other employees and former employees of $956,926. The Company has had various
communications with these persons concerning possible alternative arrangements.
There can be no assurance as to the success of these efforts. The Company does
not have sufficient funds to repay these loans and salaries and to continue
operations.
In February, 1995, the Company and a subsidiary of Briana formed ICD.
Briana is obligated to pay a $1,000,000 marketing rights fee to the Company in
connection with this venture. As of Mach 31, 1996, the Company has received
$367,254 of this fee from Briana. The Company and Briana are considering various
possibilities regarding payment of the balance of this marketing rights fee. The
Company does not believe that Briana has the present ability to pay the balance
owed.
During the quarter ended March 31, 1996, the Company received gross cash
proceeds of approximately $800,000 from the sale of approximately 2,250,000
shares of its common stock and warrants to purchase approximately 1,125,000
shares of common stock at $0.70 per share. In addition, warrants issued in 1995
to purchase 10,500 shares of common stock were exercised for an aggregate of
$2,625.
Subsequent to March 31, 1996, the Company issued 1,750,000 shares of common
stock and warrants to purchase 875,000 shares of its common stock for $650,000.
The warrants are exercisable at $0.70 per share. Warrants issued in 1995 to
purchase 19,500 shares of common stock were exercised for an aggregate of
$4,875.
-3-
<PAGE>
Results of Operations
Three Month Period Ended March 31, 1996, Compared to Three Month Period
-----------------------------------------------------------------------
Ended March 31, 1995
--------------------
During the three month period ended March 31, 1996, the Company received no
revenues from product sales. The Company received a partial payment of the ICD
marketing rights fees of $43,138 from Briana which was recorded as other income.
Total expenses for the three month period ended March 31, 1996, were $391,107,
resulting in a net loss of $347,969. Expense categories reflecting increases
over the equivalent period in the prior year included legal and other
professional fees, laboratory and research expenses and administrative payroll.
During the three month period ended March 31, 1995, the Company received a
partial payment of the ICD marketing rights fees of $92,264 from Briana which
was recorded as other income. Total expenses for the three month period ended
March 31, 1995 were $541,254, including a $300,000 expense recorded to reflect
the cancellation of a raw materials royalty agreement with Briana which occurred
incident to the formation of ICD. The Company incurred a net loss of $448,990
during this period.
Accordingly, the Company's loss for the three month period ended March 31,
1996 was $347,969 compared to a loss of $448,990 for the three month period
ended March 31, 1995.
-4-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1996 1995
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 1,133,376 $ 726,406
-------------- --------------
TOTAL CURRENT ASSETS 1,133,376 726,406
-------------- --------------
TOTAL ASSETS $ 1,133,376 $ 726,406
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Notes payable (Note 3) $ 259,500 $ 281,500
Due to related party 22,331 43,646
Accounts payable and accrued expenses 252,503 250,753
Accrued payroll 956,926 955,610
Accrued interest 100,430 97,808
Current portion of capital lease obligation 31,895 33,145
-------------- --------------
TOTAL CURRENT LIABILITIES 1,623,585 1,662,462
-------------- --------------
LONG-TERM DEBT (Note 7)
Capital lease obligation, net of current portion 12,092 20,902
-------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 1 and 8):
Preferred stock, 10,000,000 shares authorized, no shares issued
or outstanding at March 31, 1996 and 1995 - -
Common stock, $0.001 par value 50,000,000 shares authorized,
24,468,781 and 22,208,281 shares issued and outstanding at
March 31, 1996 and December 31, 1995, respectively 24,469 22,208
Common stock subscribed - 500,000 shares 00,000 300,000
Additional paid-in capital 7,446,108 6,645,743
Deficit accumulated during the development stage (8,272,878) (7,924,909)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (502,301) (956,958)
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,133,376 $ 726,406
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
-5-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From Inception
On July 10,
For the Three Months 1987 Through
Ended March 31, March 31,
1996 1995 1996
------------- ------------- -------------
<S> <C>
REVENUES $ - $ - $ -
EXPENSES 391,107 541,254 9,924,414
OTHER INCOME (Note 5) 43,138 92,264 1,651,536
------------- ------------- -------------
NET LOSS $ (347,969) $ (448,990) $ (8,272,878)
============= ============= =============
EARNINGS (LOSS)
PER SHARE (Note 1) $ (0.02) $ (0.02) $ (0.59)
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial staements.
-6-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on July 10, 1987 Through March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
Common Stock Subscribed Paid-in Development
Shares Amount Shares Amount Capital Stage
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1987 - $ - - $ - $ - $ -
Common stock issued 1,275 1,275 - - - -
Net loss - - - - - (37,323)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1988 1,275 1,275 - - - (37,323)
Restatement due to merger
of common stock (Note 1) 8,865,307 7,591 - - 48,201 -
Common stock issued
(Note 8) 1,347,880 1,348 - - 54,994 -
Net loss - - - - - (241,479)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1989 10,214,462 10,214 - - 103,195 (278,802)
Common stock issued
(Note 8) 1,680,000 1,680 - - 565,147 -
Net loss - - - - - (107,415)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1990 11,894,462 11,894 - - 668,342 (386,217)
Common stock issued
(Note 8) 60,000 60 - - 8,440 -
Net loss - - - - - (1,044,395)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE,
December 31, 1991 11,954,462 11,954 - - 676,782 (1,430,612)
Warrants issued in connection
with debt offering - - - - 312,000 -
Warrants issued for services - - - - 546,199 -
Common stock issued
(Note 8) 2,061,581 2,062 - - 911,511 -
Net loss - - - - - (2,083,984)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1992 14,016,043 14,016 - - 2,446,492 (3,514,596)
Common stock issued
(Note 8) 1,732,516 1,733 - - 1,547,136 -
Net loss - - - - - (1,348,254)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1993 15,748,559 $ 15,749 - $ - $3,993,628 $(4,862,850)
---------- ---------- ---------- ---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements
-7-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
From Inception on July 10, 1987 Through March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
Common Stock Subscribed Paid-in Development
Shares Amount Shares Amount Capital Stage
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 15,748,559 $ 15,749 - $ - $3,993,628 $(4,862,850)
Common stock issued (Note 8) 1,925,739 1,925 - - 1,057,822 -
Net loss - - - - - (1,604,589)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1994 17,674,298 17,674 - - 5,051,450 (6,467,439)
Common stock issued (Note 8) 4,533,983 4,534 - - 1,594,293 -
Common stock subscribed
(Note 5) - - 500,000 300,000 - -
Net loss - - - - - (1,457,470)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, December 31, 1995 22,208,281 22,208 500,000 300,000 6,645,743 (7,924,909)
Common stock issued (Note 8) 2,260,500 2,261 - - 800,365 -
Net loss - - - - - (347,969)
---------- ---------- ---------- ---------- ---------- -----------
BALANCE, March 31, 1996 24,468,781 $ 24,469 500,000 $ 300,000 $7,446,108 $(8,272,878)
========== ========== ========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
-8-
<PAGE>
AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From Inception
On July 10,
For the Three Months 1987 Through
Ended March 31, March 31,
1996 1995 1996
-------------- -------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (347,969 ) $ (448,990 ) $ (8,272,878 )
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization - 19,571 799,288
Stock subscribed - - 300,000
Stock and warrants issued for services
and accrued interest - - 839,615
Change in operating assets and interest:
Increase (decrease) in amount due from related party (21,315 ) (51,506 ) 22,331
Increase (decrease) in accrued payroll 1,316 14,000 956,926
Increase (decrease) in other accrued liabilities 2,622 9,996 100,430
Increase (decrease) in accounts payable and
accrued expenses 1,750 (31,286 ) 251,025
-------------- --------------- -----------------
Net Cash Provided (Used) in Operating Activities (363,596 ) (488,215 ) (5,003,263 )
-------------- --------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (215,930 )
Expenditures for patents in process - - (154,682 )
-------------- --------------- -----------------
Net Cash Provided (Used) in Investing Activities - - (370,612 )
-------------- --------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under capital lease obligations (10,060 ) - (72,689 )
Proceeds from notes payable - 110,000 436,000
Repayment of notes payable (22,000 ) (7,175) (176,500 )
Proceeds from issuances of common stock 802,626 428,000 6,263,373
Net effect of merger with CVI - - 57,067
-------------- --------------- -----------------
Net Cash Provided (Used) in Financing Activities $ 770,566 $ 530,825 $ 6,507,251
-------------- --------------- -----------------
</TABLE>
The accompanying notes are an intergral part of these financial statements
-9-
<PAGE>
AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From Inception
On July 10,
For the Three Months 1987 Through
Ended March 31, March 31,
1996 1995 1996
---------------- ------------- ----------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 406,970 $ 42,610 $ 1,133,376
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 726,406 30,582 -
---------------- ------------- ----------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 1,133,376 $ 73,192 $ 1,133,376
================ ============= ================
NON-CASH FINANCING ACTIVITIES:
Common stock and warrants
issued for services $ - $ - $ 497,382
Debt converted to equity - - 660,913
Equipment purchased under capital lease - - 117,454
CASH PAID FOR:
Interest $ - $ - $ 95,530
Income taxes - - -
</TABLE>
The accompanying notes are an intergral part of these financial statements
-10-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization and Nature of Business
AMDL, INC. (formally Advanced Medical Diagnostic, Ltd.) (the Company)
was incorporated July 10, 1987, in the state of Delaware, however, no
financial activity occurred until 1988. The Company is a development-
stage company committed to the development of an accurate, dependable,
low-cost broad-based cancer detection technology (see Note 2).
On January 16, 1989, the officers/shareholders of the Company entered
into a share exchange agreement (the Agreement) with California
Ventures, Inc. (CVI) and its officers which provides for the combining
of the two companies in a transaction accounted for as a reverse
acquisition. CVI was a development-stage enterprise located in
Colorado that was formed on May 3, 1988, for the purpose of engaging
in mergers with or acquiring a single or small number of private
firms.
Under the Agreement, the principal officers/shareholders of the
Company exchanged all of their shares of common stock for 8,865,307
shares of previously unissued and unregistered shares of CVI common
stock. Subsequently, the domicile of CVI was changed to Delaware and
its name was changed to AMDL, Inc.
Even though CVI is the legal entity surviving the transaction, the
Company is considered to be the acquiring company for accounting
purposes because the former shareholders of the company hold the
majority of the outstanding shares of the combined companies. This
transaction was treated as a reverse acquisition for financial
reporting purposes, wherein substantively the Company acquired CVI
with the accounts of CVI reflected at their book value from the date
of acquisition forward. No goodwill was recorded at the acquisition
date.
In connection with the transaction, the Company received approximately
$57,000 in cash, which was used for working capital and to expand the
business.
The Company is in the development stage and has not generated any
revenues from operations and has no assurance of future revenues.
Additionally, the Company has minimal liquid assets. In order to
finance the operations of the Company and further development,
additional capital is required. There is no assurance that the Company
will be able to obtain sufficient additional funds when needed, or
that such funds, if available, will be obtainable on terms
satisfactory to the Company.
In February 1995, the Company and AMDL Canada, a related party,
executed a joint venture agreement forming, ICD, L.L.C., to pursue
world-wide marketing relationships excluding Canada and the United
States. The operating agreement set up the initial capital
contribution for the Company at 65 percent and requires AMDL Canada to
pay the Company a marketing rights fee of $1,000,000. As of March 31,
1996, the Company had received $367,253 of the $1,000,000 marketing
rights fee. The operations of IDC, L.L.C. during fiscal 1995 and the
first quarter of 1996 were insignificant and are therefore not
consolidated in the accompanying financial statements.
-11-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Management has taken action to address these matters. They include:
- Retention of experienced management personnel with particular
skills in the successful completion of cash generating licensing
agreements, etc.
- Attainment of technology to detect cancer (see Note 2).
Additionally, the Company has unsecured notes payable which were due
in April 1992, March 1993, and unsecured convertible notes payable
which were due in July, August, October and November 1995. The Company
is currently in default on its principal and interest payments.
Management is currently attempting to renegotiate the loans.
The Company plans to seek additional debt or equity financing,
although no commitments have been received.
These circumstances raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
b. Licensing Agreements
The Company recognizes as income the sale of options to purchase the
marketing rights of its proposed cancer detection products when cash
is collected or collection is certain. The proceeds from the sale of
the options are non-refundable.
c. Equipment
Prior to 1995, equipment was depreciated on a straight-line basis over
five years, which was the estimated useful life of the related assets.
In 1995, the Company elected to depreciate the remaining book value
($155,956) on its equipment.
d. Patents
The Company has expended funds for patents that are in various stages
of the filing and approval process. Prior to 1995, patents were
amortized on the straight-line basis over an estimated useful life of
10 years. In 1995, the Company elected to amortize the remaining book
value ($92,792) on its patents.
e. Common Stock
The Company periodically issues common stock for services rendered
(see Note 8). Common stock issued is valued at the estimated fair
market price, as determined by management and the board of directors
of the Company. Management and the board of directors consider market
price quotations and other factors in determining fair market price
for purposes of valuing the common stock.
-12-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Loss per Share
Loss per share was computed based on the weighted average number of
shares outstanding for the period. The effect of stock options and
warrants on loss per share is antidilutive and thus not included in
the loss per share calculation.
g. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
h. Income Taxes
The Company accounts for income taxes using the liability method as
prescribed by Statement of Financial Accounting Standards (SFAS) No.
109.
i. Post-Employment and Post-Retirement Benefits
The Company does not provide post-employment or post-retirement
benefits to employees. Accordingly, statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Post-employment
Benefits" and Statement of Financial Accounting Standards No.106,
"Employers' Accounting for Post-retirement Benefits" have no impact on
the Company's financial statement.
j. Accounting for Stock Based Compensation
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-
Based Compensation." Under SFAS No. 123, companies have the option to
implement a fair value-based accounting method or continue to account
for employee stock options and stock purchase plans as prescribed by
Accounting Principles Board Opinion No. 25 "Accounting for Stock
issued to Employees." SFAS No. 123 is effective for financial
statements for fiscal years beginning after December 15, 1995. The
Company has not made a determination nor assessed the impact on net
income (loss) and earnings (loss) per share of adopting the new fair
value accounting rules.
k. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
-13-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 2 - ASSIGNMENT OF TECHNOLOGY
During October 1988, the Company received an assignment of all rights,
title and interest in a particular technology invented and developed
for the detection of cancer. The Company paid $1.00 for such
technology and no costs related thereto were previously incurred by
the inventor.
The Company's products, to the extent they may be deemed medical
devices or biologics, are governed by the U.S. Federal Food, Drug and
Cosmetics Act (FDA) and by the regulations of state agencies and
various foreign government agencies. The Company's proposed test
system and other clinical products intended for diagnostic or
therapeutic use in humans are subject to certain clearance procedures
administered by the above regulatory agencies. The Company has
received permission from the Health Protection Branch in Ottawa,
Canada to market its DR-70 cancer tumor-marker detection test as a
lung cancer detection kit in Canada. The Company has also received
permission from the U.S. Food and Drug Administration to export the
lung cancer detection kit to Canada. The Company has not yet applied
for regulatory approval of its proposed products in countries other
than Canada. There can be no assurance that the Company will receive
the regulatory approvals required to market its proposed products
elsewhere or that the regulatory authorities will review the product
within the average period of time.
NOTE 3 - NOTES PAYABLE
Notes payable at March 31, 1996 and December 31, 1995, consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Unsecured notes payable to individuals,
corporations and trusts, interest accruing
at ten percent per annum, principal and
interest due in April 1992. The note,
principal and accrued interest, is
convertible into shares of common stock of
the Company upon request of the note holder
at a price of $1.31 per share. $ 33,500 $ 43,500
Unsecured notes payable to individuals and
corporations, interest accruing at twelve
percent per annum, principal and interest
due in March 1993. 26,000 38,000
Convertible demand note payable to an officer
and director of the Company. The note was
non interest bearing until June 1992, after
which interest accrues at eight percent. The
note, principal and accrued interest, is
convertible into shares of common stock of
the Company upon request of the Company upon
request of the note holder at a price of
$0.42 per share. 60,000 60,000
-14-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 3 - NOTES PAYABLE (Continued)
</TABLE>
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Convertible demand notes payable to an
employee of the Company. The notes were non
interest bearing until July and August 1992,
after which interest accrues at eight
percent. The notes, principal and accrued
interest, are convertible into shares of
common stock of the Company upon request of
the note holder at a price of $0.42 per
share. 50,000 50,000
Convertible notes payable to an employee of
the Company. The one year notes are interest
bearing at ten percent per annum and were
due July and August 1995. The notes,
principal and accrued interest, are
convertible, upon request of the note
holder, on or before maturity, into shares
of common stock plus an equal number of
warrants to purchase additional shares of
common stock at $0.894 per share. The
warrants expire November 1998. 50,000 50,000
Convertible notes payable to an officer and
director of the Company. The one year notes
are interest bearing at ten percent per
annum and were due October and November
1995. The notes, principal and accrued
interest, are convertible, upon request of
the note holder, on or before maturity, into
shares of common stock plus an equal number
of warrants to purchase additional shares of
common stock at $0.25 per share. The
warrants expire November 1998. 20,000 20,000
Convertible notes payable to individuals,
interest accruing at twelve percent per
annum, principal and interest due December
1995. The notes, principal and accrued
interest, are convertible, upon request of
the note holder, on or before maturity, into
shares of common stock at $0.25 per share. 20,000 20,000
As of March 31, 1996, all of the above notes
payable were in default. ------------ -----------
$ 259,500 $ 281,500
============ ===========
</TABLE>
-15-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 4 - INCOME TAXES
The Company has experienced net losses since inception. As such, no
provision for income tax has been made for the three years ended
December 31, 1995. At December 31, 1995, the Company has available for
federal and state income tax purposes, net operating loss
carryforwards of approximately $7,912,000 and $3,769,000,
respectively, which expire in the years 2003 through 2010, and 1996
through 2000, respectively. These net operating loss carryforwards are
also available for financial reporting purposes.
The primary timing difference is an asset related to the net operating
loss carryforwards which has been reserved at December 31, 1995 and
March 31, 1996.
NOTE 5 - LICENSING AGREEMENTS
Effective January 1989 and revised in May and October 1989, the
Company entered into a licensing agreement with a Canadian company to
market and sell the Company's proposed cancer detection products in
Canada, directly or through agents, distributors, etc. The Company has
the right to receive $1.00 each for the first 500,000 test kits sold
for a maximum of $500,000 in licensing fees. The Company received
approximately $120,000 as an initial non-refundable licensing fee in
1989.
In June 1990, the Company sold options to purchase the marketing
rights to Great Britain, Australia and New Zealand for $60,000, non-
refundable. The exercise period of the options is six months from the
time the Company files its patent applications for its test kits in
the countries within the subject regions and is prepared to test up to
100 human sera in a blind study designed to provide an evaluation of
the proposed products. The purchase price of the marketing rights
under option is $1,000,000 for Australia and New Zealand and
$2,000,000 for Great Britain. The purchase price entitles the
purchaser to purchase 1,000,000 units for Australia and New Zealand
and 2,000,000 units for Great Britain at a discount of $1.00 per unit
and thereby recoup the cost of the marketing rights.
In June 1990, the Company sold an option to purchase the marketing
rights for Europe for $300,000, non-refundable. The option period is
six months from the date the Company files its patent application and
is ready to perform up to 100 tests as explained above. The purchase
price of the marketing rights under option is $5,000,000. The exercise
of the option entitles the purchaser to purchase up to 5,000,000 units
of the Company's products at a discount of $1.00 per unit and thereby
recoup the cost of the marketing rights.
-16-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 5 - LICENSING AGREEMENTS (Continued)
In October 1990, the Company sold an option to acquire exclusive
marketing and distribution rights to the Company's proposed cancer
detection products for human application in all other countries in the
world except the U.S. and any countries previously optioned by the
Company. The optionee agreed to pay $500,000 for such option,
nonrefundable. The agreement provides that the optionee may exercise
separate options upon the payment of $2,500,000 for Japan, $1,000,000
for North and South Korea, $500,000 for China, $1,000,000 for South
America, $500,000 for Central America, $1,000,000 for the U.S.S.R.,
$500,000 for Taiwan, and $500,000 for the other countries in the world
except the U.S. and the countries previously optioned by the Company.
The options are exercisable for a single six-month period commencing
with the date the Company is prepared to perform up to 100 tests in
each region as described above. The agreement also provides that if
the options are exercised, the Company will discount the standard
wholesale per unit price of its products to the purchaser by $1.00 per
unit until it has sold a sufficient number of products in each region
to recoup the purchase price paid for that region.
All amounts collected for the sale of the above options are included
in other income on the accompanying statements of operations.
In February 1995, the Company and AMDL Canada, a related party,
entered into an agreement providing for the cancellation of all of the
existing licensing agreements except the 1989 agreement for marketing
the Company's cancer detection products in Canada. The new agreement
specifies the payment of a $1,000,000 marketing rights fee by AMDL
Canada to the Company.
The Company and AMDL Canada agreed that, in consideration for AMDL
Canada's cancellation of its royalty interest in sales to the United
Kingdom for which it paid $300,000 in 1993, the Company would issue
500,000 shares of the Company's common stock. AMDL Canada has agreed
to reserve these shares for incentives to executive officers of the
Company. Such shares are reflected as common stock subscribed at March
31, 1996. The Company recorded an expense of $300,000 in 1995 for this
transaction since the amount had previously been recognized as income
in 1993 when the rights were originally sold.
In December 1995, ICD, L.L.C., entered into an agreement for
distribution of AMDL's DR-70 cancer tumor-marker detection test
through a chain of reference laboratories in Indonesia. During the
first quarter of 1996, ICD, L.L.C. entered into agreements for the
distribution of AMDL's DR-70 cancer tumor-marker in Brazil and China.
-17-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 6 - RELATED PARTY TRANSACTIONS
1994
----
During the year ended December 31, 1994, advances of approximately
$90,200 were made on behalf of the Company by a related party for
expenses incurred in connection with pursuing regulatory approval.
Such advances were offset against the purchase of AMDL securities.
The Company borrowed $50,000 from an employee on a convertible debt
basis. The notes, payable one year from the date of the loan, with
interest at ten percent per annum, are convertible into units which
consists of one share of common stock and one warrant to purchase an
additional share of common stock at $0.894. The warrants expire 1998.
The Company borrowed $20,000 from an officer and director on a
convertible debt basis. The notes, payable one year from the date of
the loan, with interest at ten percent per annum, are convertible into
units which consists of one share of common stock and one warrant to
purchase an additional share of common stock at $0.25 per share. The
warrants expire November 1998.
The Company sold 120,000 shares of common stock and 80,000 warrants to
a related party. Each warrant is exercisable for one share of common
stock at $0.25 per share. The warrants expire October 1997. Proceeds
were $30,000.
The Company sold 60,000 units at $0.25 per unit to a related party. A
unit consists of one share of common stock and a warrant to purchase
an additional share of common stock at $0.25. The warrants expire
November 1998. Proceeds were $15,000.
On August 31, 1994, the employment agreement of Dr. Donald E. Rounds,
Chief Scientist and Director, terminated. On September 1, 1994, Dr.
Rounds entered into a month to month consulting arrangement at $1,000
per month with the Company. The consulting agreement was concluded
after twelve months.
The Company incurred approximately $20,000 of consulting fees to a
director of the Company. The unpaid balance of such fees at December
31, 1995, and March 31, 1996, was approximately $15,000 and is
reflected in accounts payable and accrued expenses in the accompanying
balance sheets.
The Company approved an extension of the expiration date of 150,000
options granted to an officer as part of an employment agreement. The
options now expire December 1997.
-18-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 6 - RELATED PARTY TRANSACTIONS (Continued)
1995
----
The Company received $20,000 and issued convertible notes payable to
an officer and director of the Company. The one year notes are
interest bearing at twelve percent per annum and were due December
1995. The notes, principal and accrued interest, were converted at the
request of the note holder, into shares of common stock at $0.25 per
share.
Also, the Company received $15,000 and issued convertible notes
payable to a related party. The one year notes are interest bearing at
twelve percent per annum and were due December 1995. The notes,
principal and accrued interest, were converted at the request of the
note holder, on or before maturity, into shares of common stock at
$0.25 per share.
The Company received $324,115 from Briana Bio-Tech, Inc. (the parent
of AMDL Canada) as partial payment of a joint venture international
marketing rights fee of $1,000,000.
1996
----
During the first quarter of 1996, advances of approximately $43,138
were made on behalf of the Company by Briana Bio-Tech for expenses
incurred in connection with pursuing regulatory approval and subsequent
longitudinal studies. Such advances were offset against the payment of
a joint venture marketing rights fee of $1,000,000.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a. Lease
The cost and net book value of leased equipment at March 31, 1996, was
$-0-. A schedule of future minimum lease payments together with the
net present value of the minimum lease payments under the capital
lease as of March 31, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31,
1996 $ 28,359
1997 22,057
----------
Future minimum payments 50,416
Less - Amount representing interest (6,429)
----------
Present value of minimum lease payments 43,987
Less - Current portion (31,895)
----------
$ 12,092
==========
</TABLE>
-19-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
b. Employment Agreements
In June 1994, the Company entered into a two year employment agreement
with Dr. That T. Ngo, Executive Vice President and Chief Operating
Officer. The agreement with Dr. Ngo specified an annual base salary of
$100,000 and provided 650,000 common stock options at $1.375. Options
for 50,000 shares vested upon execution of the agreement and the
balance at 25,000 options per month vest over the term of the
agreement. The options expire June 1999. The agreement contains a
severance provision indicating that if the agreement is terminated by
the Company without cause prior to its expiration date, Dr. Ngo shall
be entitled to a severance payment equal to six month's salary. The
agreement also provides for customary medical insurance, vacation sick
leave, nondisclosure provisions and covenants not to compete. If the
Company creates an executive bonus plan, then Dr. Ngo shall be
entitled to participate in such a plan.
In October 1994, the Board of Directors offered and Dr. Ngo accepted
the positions of President, Chief Executive Officer and Director. Dr.
Ngo's annual base salary was increased to $144,000 and the number of
common stock options increased to 800,000.
In January 1996, the Company entered into a one year employment
agreement with Harry Berk, Vice President. The agreement specifies an
annual base salary of $80,000. Mr. Berk also received options to
purchase up to 100,000 shares of the Company's common stock at the
exercise price of $0.97 per share exercisable until December 31, 1999.
Options to purchase 25,000 shares vested upon execution of the
agreement. The options to purchase the remaining 75,000 shares will
vest in quarterly installments of 18,750 shares each over one year.
The agreement contains a severance provision indicating that if the
agreement is terminated by the Company without cause prior to its
expiration date, Mr. Berk shall be entitled to a severance payment
equal to three months salary. The agreement also provides for
customary medical insurance, vacation sick leave, nondisclosure
provisions and covenants not to compete. If the Company creates an
executive bonus plan, Mr. Berk shall be entitled to participate in
such a plan.
-20-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS
a. Common Stock
CVI sold to the public 733,333 units of common stock prior to the
merger date. The units were offered at a purchase price of $0.15 per
unit. Each unit consisted of one share of the Company's $0.001 par
value common stock and two common stock purchase warrants. One warrant
(the A warrant) entitles the holder thereof to purchase one share of
common stock at $0.60 per share during the period commencing on the
date of the prospectus (October 11, 1988) and terminating two years
thereafter. The other warrant (the B warrant) entitles the holder
thereof to purchase one share of common stock at $1.05 per share
during the period commencing on the date of the prospectus (October
11, 1988) and terminating three years thereafter. The warrants are
separately transferable and tradeable from the common stock
immediately after the closing of the offering (December 1988). The
terms of the A and B warrants have been extended through December 31,
1996. However, neither the A or B warrants are exercisable in the
absence of a current registration statement under SEC regulations. As
of March 31, 1996, all A and B warrants were outstanding. The Company
has the right to redeem the A and/or B warrants upon thirty days
written notice to the holders thereof at $0.0015 per warrant.
In 1989, the shareholders approved a reverse split of the common stock
on a 1-for-15 basis. All common stock and loss per share data has been
adjusted to reflect the effects of the reverse split. In addition, the
number of shares of common stock authorized was reduced and the par
value was changed to $0.001 per share from $0.0001 per share.
The following common stock transactions occurred since the inception
of the Company:
1988
----
A total of 1,275 shares of common stock were issued resulting in
proceeds of $1,275.
1989
----
Between January 1, 1989, and the merger on January 16, 1989, a total
of 8,867,129 shares of common stock were issued.
Subsequent to the merger on January 16, 1989, an additional 1,346,058
shares of common stock were issued.
Total proceeds from the sale of common stock in 1989 were $112,134
with 10,214,462 shares outstanding at December 31, 1989.
-21-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
a. Common Stock (Continued)
1990
----
The Company issued 300,000 shares of restricted common stock at $0.25
per share to three officers as compensation for back salary owed by
the Company.
The Company issued 30,000 shares of restricted common stock at $1.00
per share for services rendered.
The Company issued 14,000 shares of common stock at $0.50 a share in
lieu of paying a $7,000 finder's fee.
The Company prepared a placement memorandum on September 21, 1989, to
authorize 1,000,000 shares from the original authorization of 400,000
shares and extended the expiration date to September 15, 1990. An
additional 451,000 shares were issued under this private placement
agreement.
The Company sold 230,000 shares in a negotiated transaction with three
parties at $0.25 per share.
The Company authorized and issued 90,000 shares of common stock at
$0.04 per share to a member of the board of directors.
The Company issued 15,000 shares at $0.04 per share to a private
party.
The Company issued 500,000 shares of common stock at $0.25 per share
for services rendered.
The Company authorized 200,000 shares of restricted common stock at
$1.00 per share as compensation under a consulting agreement, of which
50,000 shares were issued in fiscal year 1990. On April 16, 1991, the
consulting agreement was terminated and no further shares were issued.
Total proceeds from the sale of common stock in 1990 were $566,828
with 11,894,462 shares outstanding at December 31, 1990.
1991
----
The Company issued 50,000 shares of common stock at $0.12 per share as
compensation under a consulting agreement.
The Company issued 10,000 share of restricted common stock at $0.25
per share pursuant to conversion of a $2,500 loan. The loan was
negotiated and made during 1990.
Total proceeds from the sale of common stock in 1991 were $8,500 with
11,954,462 shares outstanding at December 31, 1991.
-22-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
a. Common Stock (Continued)
1992
----
On June 25, 1992, the Company issued 1,363,019 shares of common stock
for notes payable of $305,500 plus accrued interest of $35,256. The
Company also issued 1,422 shares to the individuals who exercised
their short term warrants at $0.001.
In June 1992, the Company issued 57,140 shares of common stock for
$0.50 per share due to the exercise of some of the three year
warrants.
In July 1992, the Company issued 440,000 shares of common stock to
investors for $393,360. Deferred stock offering costs were offset
against additional paid-in capital when the offering was completed.
In December 1992, the Company sold 200,000 units, at $0.894 per unit,
of a private placement offering for $178,800, to a related party. A
unit consisted of a share of common stock, with a par value of $0.001,
and a warrant to purchase an additional share of common stock at
$0.894. The warrants expire December 31, 1996.
Total proceeds from the sale of common stock in 1992 were $913,573
with 14,016,043 shares outstanding at December 31, 1992
1993
----
During 1993, the Company sold 1,478,185 units of the private placement
offering to a related party and other investors. A unit consisted of a
share of common stock, with a par value of $0.001, and a warrant to
purchase an additional share of common stock at $0.894. The warrants
expire November 30, 1995 and December 31, 1996. Proceeds of $1,321,491
were used to finance the operations of the Company.
On November 8, 1993, an investor exercised 11,184 warrants issued in a
private placement. The Company issued 11,184 shares of common stock at
$0.894.
On December 17, 1993, the Company issued 243,147 shares of common
stock and warrants to purchase 243,147 shares of common stock at
$0.894 per share which cancels notes payable of $185,000 and related
accrued interest of $32,379. The warrants expired November 30, 1995.
Total proceeds from the sale of common stock in 1993 were $1,548,869
with 15,748,559 shares outstanding at December 31, 1993.
-23-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
a. Common Stock (Continued)
1994
----
During the quarter ending March 31, 1994, the Company sold 200,000
units of a private placement offering at $0.894 per unit to a related
party. A unit consisted of one share of common stock and a warrant to
purchase an additional share of common stock at $0.894. The warrants
expire December 1996.
A former note holder exercised 150,000 warrants at $0.25 each, granted
in the promissory note.
Creditors agreed to exchange amounts owed them totaling $141,902 for
158,728 units of a private placement offering at $0.894 per unit. A
unit consisted of one share of common stock and a warrant to purchase
an additional share of common stock at $0.894. The warrants expired
November 1995.
During the quarter ending June 30, 1994, the Company sold 300,000
units of a private placement offering at $0.894 per unit to a related
party. A unit consisted of one share of common stock and a warrant to
purchase an additional share of common stock at $0.894. The warrants
expire December 1996.
A holder of options exercised 535,000 options at $0.05 per share.
A holder of warrants exercised 16,000 warrants at $1.00 per share.
The Company issued 346,011 units to cancel notes payable of $250,000
and related accrued interest of $59,333. A unit consisted of one share
of common stock and a warrant to purchase an additional share of
common stock at $0.894. The warrants expired November 30, 1995.
During the quarter ending September 30, 1994, a holder exercised
40,000 warrants at $1.00 per share.
During the quarter ending December 31, 1994, the Company sold 120,000
shares of common stock and 80,000 warrants to a related party. Each
warrant is exercisable for one share of common stock at $0.25 per
share. The warrants expire October 1997.
The Company sold 60,000 units at $0.25 per unit to a related party. A
unit consists of one share of common stock and a warrant to purchase
an additional share of common stock at $0.25. The warrants expire
November 1998.
Total proceeds from the sale of common stock in 1994 were $489,589
with 17,674,298 shares outstanding at December 31, 1994.
-24-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
a. Common Stock (Continued)
1995
----
The Company received $125,000 cash proceeds from the sale of 500,000
shares of common stock and warrants to purchase 500,000 additional
shares of common stock at $0.45 per share. The warrants were exercised
prior to the expiration date of June 30, 1995 and resulted in cash
proceeds of $225,000.
The Company and AMDL Canada, a related party, agreed to cancel a 1992
agreement providing AMDL Canada with a royalty on sales of raw
materials in the United Kingdom. The Company and AMDL Canada agreed to
apply the $300,000 royalty advance received by the Company in 1992 to
500,000 shares of AMDL, Inc. common stock which will be reserved for
incentives to executive officers of the Company. Such shares are
reflected as common stock subscribed at March 31, 1996.
During the second quarter of 1995, the Company received $125,000 cash
proceeds from the sale of 500,000 shares of common stock at $0.25 per
share.
The Company received $150,000 cash proceeds from the sale of 500,000
shares of common stock at $0.30 per share and warrants to purchase
500,000 additional shares of common stock at $0.50 per share. The
warrants were exercised prior to the expiration date of October 31,
1995, and resulted in cash proceeds of $250,000.
The Company received $150,000 cash proceeds from the sale of 500,000
shares of common stock at $0.30 per share.
Cash proceeds of $32,266 were received in connection with the exercise
of 32,737 warrants at $0.894 per share. The warrants were part of
units exchanged to extinguish notes payable in 1993.
Cash proceeds of $3,250 were received in connection with the exercise
of 65,000 options at $0.05 per share.
The Company received $100,000 cash proceeds for the sale of 133,000
shares of common stock and warrants to purchase 66,667 additional
shares of common stock at $1.00 per share. The warrants expired March
22, 1996.
Cash proceeds of $2,500 were received in connection with the exercise
of 10,000 warrants at $0.25 per share. The warrants were issued in
1992 as part of a private placement.
The company received $300,000 cash proceeds from the sale of 750,000
shares of common stock and warrants to purchase 125,000 additional
shares of common stock at $0.75 per share and 250,000 additional
shares at $0.70 per share. The warrants expired March 31, 1996.
The Company issued 543,246 shares of common stock to cancel
convertible notes payable of $122,500 and related accrued interest of
$13,311.
-25-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
a. Common Stock (Continued)
1996
----
The Company received $800,000 cash proceeds from the sale of 2,250,000
shares of common stock and warrants to purchase 1,125,000 additional
shares of common stock at $0.70 per share. Warrants for 250,000 shares
of common stock expired March 31, 1995. Warrants for 750,000 shares of
common stock expire September 15, 1996. Warrants for 125,000 shares of
common stock expire November 26, 1996.
The Company received $2,625 cash proceeds from the exercise of
warrants for 10,500 shares of common stock. The warrants were issued
in 1995 to an investment banking firm.
b. Stock Options and Warrants
In October 1990, the Company issued three-year warrants to purchase up
to 300,000 shares of the Company's common stock at an exercise price
of $1.00 per share to its investment banking consultants. The warrants
were granted at an exercise price of not less than the estimated fair
market value of the common stock at the date of grant. The warrants
were extended through October 1995. As of March 31, 1996, 56,000
warrants had been exercised.
The Company granted options to members of the board of directors and
legal counsel to purchase 100,000 shares each of common stock at $1.00
per share. The options were granted at an exercise price of not less
than the estimated fair market value of the common stock at the date
of grant. The warrants were extended through October 1995. The
warrants expired October 31, 1995.
The Company has outstanding options to purchase an aggregate of
600,000 shares of common stock at $0.05 per share. The options were
originally issued in 1991 to two individuals involved in research and
testing for the Company. During 1992, the Company increased the number
of shares subject to option to 600,000 and reduced the exercise price
from $1.75 to $0.05. In connection, therewith, the Company has
recorded research and development expenses related to this change of
approximately $506,000. Prior to the expiration date in 1995, all
600,000 options had been exercised.
In April 1991, the Company issued unsecured promissory notes in the
amount of $390,000. The notes, until repaid, were convertible into
shares of common stock at $1.31 per share. As of March 31, 1996 the
unpaid principal relating to these notes was $43,500 convertible into
33,207 shares.
The Company issued warrants to purchase 16,800 shares of the Company's
common stock to a financial consultant in 1992. These warrants are
exercisable at $0.25 per share and expire in March 1997. In connection
with the issuance of these warrants, the Company has recorded
consulting expense of approximately $11,000.
-26-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
b. Stock Options and Warrants (Continued)
In 1992, the Company borrowed $485,000 and issued promissory notes in
that amount and warrants to purchase 485,000 shares of the Company's
common stock. The warrants are exercisable at $0.25 per share and
expire March 1997. In connection therewith, the Company recorded
deferred interest expense of approximately $312,000 which was
amortized over the term of the notes payable through March 1993. At
March 31, 1996, 160,000 warrants had been exercised.
In 1992, the Company also issued warrants to purchase 200,000 shares
of its common stock in connection with a financial advisory
arrangement. The warrants were exercisable at $1.25 per share between
February 1993 and August 1995.
In 1991 and 1992, the Company borrowed an aggregate of $110,000 from
two employees of the Company, one of whom is an officer and director
of the Company. The loans have not been repaid as of March 31, 1996.
At the option of the lenders, the amount due may be converted into the
Company's common stock at $0.42 per share.
In 1992, the Company issued warrants to purchase 640,000 shares of
common stock at $0.894 as part of the units sold during a private
placement offering (see Note 8 a). The warrants expire on December 31,
1996. Also during 1992, the Company issued stock options for 100,000
shares of common stock to investor relations firms; 50,000 options at
$1.875 per share and 50,000 options at $2.25 per share. The options
expire December 31, 1995.
During 1993, the Company issued warrants to purchase 1,478,185 shares
of common stock at $0.894 as part of the units sold, including sales
to a related party, of a private placement offering. During November
1993, 11,184 of these warrants were exercised. The remaining warrants
expire in December 1996 and expired November 1995. On December 17,
1993, the Company issued warrants to purchase 243,147 share of common
stock at $0.894 per share in connection with the extinguishment of
notes payable (see Note 8 a). The warrants expired November 30, 1995.
During 1993, the Company issued warrants to purchase 3,909 shares of
common stock at $0.894 per share to investment banking firms. The
warrants expired November 30, 1995. During 1993, the Company also
issued a total of 80,000 options at $1.25 per share to a scientific
advisory board member and a former employee. The options expire
February 1998 and expired June 30, 1995, respectively.
-27-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
b. Stock Options and Warrants (Continued)
1994
----
During the quarter ending March 31, 1994, the Company issued warrants
to purchase 200,000 shares of common stock at $0.894 as part of the
units sold to a related party during a private placement offering. The
warrants expire December 1996.
Creditors agreed to exchange amounts owed them totaling $141,902 for
158,728 units of a private placement offering at $0.894 per unit. A
unit consisted of one share of common stock and a warrant to purchase
an additional share of common stock at $0.894. The warrants expired
November 30, 1995.
The Company granted options to the Company's Chief Scientist who is
also a Director to purchase 1,600,000 shares of common stock at $0.894
per share. The options expire March 1999.
The Company granted options to consultants to purchase 225,000 and
90,000 shares of common stock at $1.25 and $1.50 per share,
respectively. Options for 115,000 and 200,000 shares expire March 1997
and March 1999, respectively.
During the quarter ending June 30, 1994, the Company issued warrants
to purchase 300,000 shares of common stock at $0.894 as part of the
units sold to a related party during a private placement offering. The
warrants expire December 1996.
Noteholders agreed to exchange amounts owed them totaling $309,333 for
346,011 units of a private placement offering at $0.894 per unit. A
unit consisted of one share of common stock and a warrant to purchase
an additional share of common stock at $0.894. The warrants expired
November 30, 1995.
The Company also issued warrants to purchase 200,000 shares of its
common stock in connection with a financial advisory arrangement. The
warrants were exercisable at $1.25 per share between February 1994 and
August 1995.
The Company, as an inducement to a warrant holder to exercise warrants
to provide cash proceeds, offered to replace warrants at the rate of
1.5 warrants for every warrant exercised. The Company issued 24,000
warrants to purchase common stock at $0.894 per share to replace
16,000 exercised warrants. The warrants expire May 1997.
During the quarter ending September 30, 1994, the Company, as an
inducement to a warrant holder to exercise warrants to provide cash
proceeds, offered to replace warrants at the rate of 1.5 warrants for
every warrant exercised. The Company issued 60,000 warrants to
purchase common stock at $0.894 per share to replace 40,000 exercised
warrants. The warrants expire in May 1997 and August 1997.
The Company issued 80,000 warrants as part of sale of common stock to
a related party. Each warrant is exercisable for one share of common
stock at $0.25 per share. The warrants expire October 1997.
-28-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
b. Stock Options and Warrants (Continued)
During the quarter ending December 31, 1994, the Company issued
warrants to purchase 60,000 shares of common stock at $0.25 as part of
the units sold to a related party. The warrants expire November 1998.
The Company reserved 500,000 options for 500,000 shares of common
stock to be granted to members of AMDL's Scientific Advisory Board.
Price of the options will be fair market value on the date of the
individual grant.
As of March 31, 1996, no options for this reserve had been granted to
members of AMDL's Scientific Advisory Board.
1995
----
The Company issued warrants to purchase 42,000 shares of common stock
at $0.25 per share to an investment banking firm. The warrants expired
March 1996.
The Company issued warrants, as part of a sale of units, to purchase
500,000 shares of common stock at $0.45 per share. The warrants were
exercised prior to the expiration date of June 30, 1995.
The Company issued warrants, as part of a sale of units, to purchase
500,000 shares of common stock at $0.50 per share. The warrants were
exercised prior to the expiration date of October 31, 1995.
The Company issued warrants, as part of a sale of common stock, to
purchase 125,000 shares of common stock at $0.75 per share and 250,000
shares at $0.70 per share. The warrants expired March 31, 1996.
The Company issued warrants, as part of a sale of common stock, to
purchase 66,667 shares of common stock at $1.00 per share. The
warrants expired March 22, 1996.
The Company issued warrants to purchase 6,667 shares of common stock
at $1.00 per share to an investment banking firm. The warrants expire
October 24, 1997.
The Company granted warrants to a consultant to purchase 100,000
shares of common stock at $0.813 per share. The warrants expire
November 3, 1998.
The Company granted warrants to a consultant to purchase 10,000 shares
of common stock at $1.375 per share and 5,000 shares at $0.938 per
share. The warrants expire August 7, 1998, and October 19, 1998,
respectively.
-29-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 8 - CAPITAL TRANSACTIONS (Continued)
1996
----
The Company issued warrants, as part of the sale of common stock, to
purchase 1,125,000 additional shares of common stock at $0.70 per
share. Warrants for 250,000 shares of common stock expired March 31,
1996. Warrants for 750,000 shares of common stock expire September 15,
1996. Warrants for 125,000 shares of common stock expire November 26,
1996.
c. Benefit Plans
On May 3, 1988, the Company adopted an Incentive Stock Option Plan
(the Stock Option Plan) under which options granted are intended to
qualify as "incentive stock options" under Section 422A of the
Internal Revenue Code of 1954, as amended. Pursuant to the Stock
Option Plan, options to purchase up to 266,667 shares of the Company's
common stock may be granted to employees of the Company. The Stock
Option Plan is administered by the board of directors, which is
empowered to determine the terms and conditions of each option,
subject to the limitation that the exercise price cannot be less than
the market value of the common stock on the date of the grant (110
percent of the market value in the case of options granted to an
employee who owns 10 percent or more of the Company's common stock)
and no option can have a term in excess of 10 years (five years in the
case of options granted to employees who own 10 percent or more of the
Company's common stock). As of March 31, 1996 there were no options
outstanding under this plan.
During 1992, the Company adopted the 1992 Stock Option Plan (the
Plan). Under the plan, incentive stock options and nonqualified
options may be granted to officers and key employees of the Company
for the purchase of up to 3,622,500 shares of the Company's common
stock. Additionally, specific option grants may also be made.
Expiration dates for the options may not exceed 10 years from the date
of grant. In connection with the adoption, specific option grants for
the purchase of 2,622,500 shares with an exercise price of $0.25 per
share were granted.
The 1992 Plan will terminate at midnight on April 22, 2002. No options
may be granted after the date on which the 1992 Plan terminates. The
1992 Plan may be eliminated or terminated at an earlier time by the
Company's Board of Directors, except with respect to any options the
outstanding under the 1992 Plan. The option agreements for all but
45,000 of the granted options contain restrictions on the exercise of
the options until certain events have occurred, which, as of March 31,
1996, had not occurred. In October 1994, the Company terminated the
Plan cancelling 2,197,500 options.
In 1994 the Company adopted its 1994 Stock Option Plan (the "1994
Plan"). Options to purchase up to 5,000,000 shares of the Company's
Common Stock may be granted to employees, directors and consultants of
the Company. Options which are intended to qualify as "incentive"
stock options under Section 422 of Internal Revenue Code may be
granted only to employees who render services which contribute to the
success of the Company. Non statutory stock options may be granted
only to employees, directors and consultants who render services which
contribute to the success of the Company. Grants of options under the
1994 Plan are subject to the approval, by stockholders, of the 1994
Plan. If approved by the stockholders, the 1994 Plan will terminate on
March 14, 2004.
-30-
<PAGE>
AMDL, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1995 and March 31, 1996
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to March 31, 1996, the following transactions occurred.
a. Licensing Agreements
--------------------
In April 1996, ICD, L.L.C. entered into agreements for the
distribution of AMDL's DR-70 cancer tumor-marker detection test in
Poland, the Philippines and Brunei.
b. Common Stock and Warrants
-------------------------
The Company received $650,000 cash proceeds from the sale of 1,750,000
shares of common stock and warrants to purchase 875,000 additional
shares of common stock at $0.70 per share. The warrants expire
November 26, 1996.
A holder of warrants exercised 19,500 warrants at $0.25 per share.
Cash proceeds were $4,875.
-31-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
As reported in the Company's Report on Form 10-KSB for the year ended
December 31, 1995, the Company instituted litigation in February 1996 against
Roger L. Lallone and Edward L. Stephen and their corporate affiliates for
misappropriation of trade secrets, breach of contract, conversion and violation
of the Lanham Act. The action was filed in the U.S. District Court for the
Central District of California (Case No. SACV 96-37). Defendant Lallone filed an
Answer denying generally the material allegations of the Company's Complaint. In
addition, he asserted counterclaims against the Company for breach of contract,
fraud and trade secret misappropriation, pursuant to which he is seeking
compensatory damages and punitive damages against the Company. The Company has
denied the material allegation of Defendant Lallone's Counterclaim. The Company
intends to vigorously defend itself against the Counterclaim of Defendant
Lallone. Defendant Stephen filed a motion to compel arbitration and to stay the
court proceedings. In May 1996, the Court denied this Motion. Defendant Stephen
has not yet filed an answer to the Company's Complaint.
Item 3. Defaults Upon Senior Securities.
-------------------------------
In early 1991, the Company borrowed an aggregate of $390,000 from
purchasers of the Company's unsecured convertible notes in a private placement.
The notes bear interest at 10% per annum. The notes were due in April 1992, but
were unpaid when due. Most of the notes were converted into shares of common
stock in 1992. At March 31, 1996, the principal amount outstanding was $33,500.
In early 1992, the Company borrowed $485,000 which became due on March 31,
1993. Most of these notes were converted into Units of common stock and warrants
to purchase common stock of the Company. At March 31, 1996, the principal amount
outstanding was $26,000 plus interest which accrues at 12% per annum.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMDL, INC.
May 13, 1996
By:/s/Harry R. Berk
-------------------------------
Chief Accounting Officer
May 13, 1996
By:/s/ Robert R. Guerrero
-------------------------------
Vice President, Secretary
and Treasurer
-33-
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,133,376
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,133,376
<PP&E> 0
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<TOTAL-ASSETS> 1,133,376
<CURRENT-LIABILITIES> 1,623,585
<BONDS> 12,092
0
0
<COMMON> 24,469
<OTHER-SE> (526,720)
<TOTAL-LIABILITY-AND-EQUITY> 1,133,376
<SALES> 0
<TOTAL-REVENUES> 43,138
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 391,107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
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<NET-INCOME> (347,969)
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