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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report under Section 13 OR 15(d) of the Securities Exchange Act of
1934 [Fee Required] for the fiscal year ended December 31, 1996
[_] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required] for the transition period from ________ to
__________
Commission file number 33-23786-LA
AMDL, Inc.
(Name of small business issuer in its charter)
Delaware 87-0188822
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14272 Franklin Ave., Suite 106
Tustin, California 92780
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(Address of principal executive offices) (Zip Code)
Issuers's telephone number: (714) 505-4460
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the preceding 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 ___
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State Issuer's revenues for its most recent fiscal year - None
The aggregate market value of the approximately 29,952,210 shares of the
Company's voting stock held by non-affiliates, computed at the bid price of such
stock of $0.22 in the over-the-counter market, as quoted on the Electronic
Bulletin Board on April 11, 1997, was $6,589,486. Such figures do not take into
account the limited nature of the trading market for the Company's common stock
or apply any discount to the current market price for volume. See Item 5.
As of April 11, 1997, the Registrant had outstanding 33,629,903 shares of its
common stock, par value $0.001.
Documents Incorporated by Reference: None
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TABLE OF CONTENTS
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Item Number and Caption Page
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GLOSSARY OF MEDICAL AND SCIENTIFIC TERMS................................... 1
PART I..................................................................... 9
1. DESCRIPTION OF BUSINESS................................................ 9
2. DESCRIPTION OF PROPERTY................................................ 13
3. LEGAL PROCEEDINGS...................................................... 13
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................... 14
PART II.................................................................... 14
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS............... 14
6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............. 17
7. FINANCIAL STATEMENTS................................................... 19
8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE................................ 19
PART III................................................................... 20
9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT..................... 20
10. EXECUTIVE COMPENSATION................................................ 23
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................................. 24
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................ 25
13. EXHIBITS AND REPORTS ON FORM 8-K...................................... 28
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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GLOSSARY OF MEDICAL AND SCIENTIFIC TERMS
AFP:
Alpha-fetoprotein, a plasma protein reaching elevated levels indicating liver
diseases such as cancer, cirrhosis and viral hepatitis. A marker for liver
cancer.
Allergy:
A state of hypersensitivity induced by exposure to a particular antigen
(allergen) resulting in harmful immunologic reactions on subsequent exposures;
the term is usually used to refer to hypersensitivity to an environmental
antigen or to drug allergy.
Amino:
The monovalent chemical group NH\\2\\
Amino acid:
Any organic compound containing an amino (-NH\\2\\) and a carboxyl (-COOH)
group.
Anaplasia:
A loss of differentiation of cells and of their orientation to one another and
to their axial framework and blood vessels, a characteristic of tumor tissue.
Anaplastic:
Undifferentiated, characterized by anaplasia or reversed development; said of
cells.
Antibody:
An immunoglobulin molecule that has a specific amino acid sequence by virtue of
which it interacts only with the antigen that induced its synthesis in cells of
the lymphoid series (especially plasma cells), or with antigen closely related
to it.
Antigen:
Any substance which is capable, under appropriate conditions, of inducing a
specific immune response and of reacting with the products of that response.
Bacteria:
Plural of bacterium.
Bacterium:
Any of the unicellular prokaryotic microorganisms that commonly multiply by cell
division (fission) and whose cell is typical contained within a cell wall.
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Benign:
Not malignant; not recurrent; favorable for recovery.
Beta-2-Microglobulin:
Tumor-marker for certain blood cancers.
Cancer:
A new and abnormal cell growth the natural course of which is fatal. Cancer
cells, unlike benign tumor cells, exhibit the properties of invasion and
metastasis and are highly anaplastic.
Carcinoma:
A malignant new growth made up of epithelial cells tending to infiltrate the
surrounding tissues and give rise to metastases.
CEA:
Carcinoembryonic antigen. A tumor-marker used in detection of colorectal,
gastric, breast and bronchial cancer.
Clinical:
Used in the treatment of patients as opposed to academic or theoretical
applications.
CMV:
Cytomegalovirus. A virus associated with various diseases such a mononucleosis,
hepatitis and pneumonitis. May be transmitted to fetus during pregnancy.
Diabetes:
A chronic syndrome of impaired carbohydrate, protein and fat metabolism owing to
insufficient secretion of insulin or to target tissue insulin resistance.
Diagnosis:
The determination of the nature of the disease. The art of distinguishing one
disease from another.
Diagnostic:
Pertaining to or subserving diagnosis; distinctive of or serving as a criterion
of a disease, as signs and symptoms.
DR-70/(TM)/:
The name of the Company's lung cancer tumor-marker.
ELISA:
Enzyme-Linked Immuno Sorbent Assay.
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Endocrinology:
The study of the endocrine system. Pertaining to internal hormonal secretions
applied to organs and structures that release their products into the blood or
lymph, and to substances that exert specific effects on other organs.
Enzyme:
A protein molecule that catalyzes chemical reactions of other substances without
itself being destroyed or altered upon completion of the reactions.
Ferritin:
Iron transport and storage protein, also a tumor-marker for liver, lung, breast
and leukemia.
FSH:
Follicle-stimulating hormone.
GAD auto-antibodies:
Antibodies produced in human body to glutamic acid decarboxylase (GAD) of
pancreas. A marker for the development of diabetes.
HCG:
Human chorionic gonadotropin. A marker for pregnancy. Also used as a marker
for testicular tumors.
Helicobacter Pylori (H. Pylori):
A gram-negative, helical shaped bacteria that colonize the mucus lining of the
stomach and is associated with gastric and peptic ulcers.
Hepatitis:
Inflammation of the liver. Several categories exist, i.e., A, B, C, D and E,
varying in seriousness and symptoms.
Herpes 1:
Refers to herpes simplex virus type 1 which causes common oral infection.
Herpes 2:
Refers to herpes simplex virus type 2 which is associated with genital
infection.
HGH:
Human growth hormone. Promotes growth of bone and muscle.
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Hormone:
A chemical substance, produced in the body by an organ, by cells of an organ, or
by scattered cells, carried by the blood, which has a specific regulatory effect
on the activity of a certain organ or organs on cell types.
HPL:
Human placental lactogen. Promotes growth of mammary glands and initiates milk
secretion.
IgG:
Immunoglobulin, G class.
IgE:
Immunoglobulin E class.
IgM:
Immunoglobulin, M class.
Immune:
Protected against infectious disease by either specific or nonspecific
mechanisms.
Immunoassay:
Any of several methods for the quantitative determination of chemical substances
that utilize the highly specific binding between an antigen or hapten and
homologous antibodies, including radioimmunoassay, enzyme immunoassay, and
fluoroimmunoassay.
Immunodiagnosis:
Diagnosis based on blood serum reactions to antigens.
Immunoglobulin:
Any of the structurally related glycoproteins that function as antibodies,
protecting the body's defense system against foreign substances, divided into
five classes, (M,G,A,D,E).
Insulin:
A substance produced in the pancreas that controls the blood sugar level.
Insulin auto-antibodies:
Antibodies produced in the human body to insulin. A marker of diabetes
development.
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LH:
Luteinizing hormone. Causes ovulation.
Lymphoid:
Resembling or pertaining to lymph or tissue of the lymphoid system.
Lymphoma:
Any neoplastic disease of the lymphoid tissue.
Malignant:
Cancerous, having the properties of uncontrolled growth, invasion, and the
ability to move within the body and grow in new locations.
Malignant cells:
Cancer cells.
Metastasis:
The transfer of disease from one organ or part to another not directly connected
with it.
Micro-Albumin:
Low level of albumin in urine. Urinary micro-albumin measurement can assist in
the early detection of diabetic renal disease.
Myeloma:
A tumor composed of cells of the type normally found in the bone marrow.
Nephrology:
Scientific study of the kidney, its anatomy, physiology, pathology and
pathophysiology.
Nanometer:
A unit of linear measure equal to one-billionth of a meter.
Nm:
Nanometer.
Non-invasive:
Does not involve puncture or incision of the skin or insertion of an instrument
or foreign material into the body.
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Peroxidase labeled goat anti-human IgG:
Enzymes of the oxidoreductase class that catalyze the oxidation of organic
substrates by hydrogen peroxide, which is reduced to water.
Pipette:
Liquid transferring device having specific or adjustable volume capacities.
Pipette Tip:
Disposable reservoir device attached to pipette.
Placental lactogen:
A polypeptide hormone secreted by the placenta that enters the maternal
circulation and disappears from the circulation immediately after delivery. It
has growth-promoting activity, is immunologically similar to human growth
hormone, and inhibits maternal insulin activity during pregnancy.
Plasma:
The fluid portion of the blood in which the particulate components are
suspended. Plasma is to be distinguished from serum, which is the cell-free
portion of the blood from which the fibrinogen has been separated in the process
of clotting.
Prokaryotic:
Cellular organisms lacking a true nucleus and nuclear membrane. Their nuclear
material consists of a single double-stranded DNA molecule, not associated with
basic proteins.
Prolactin:
A protein hormone that promotes proliferation of mammary glands and milk
secretion.
Protein:
Any of a group of complex organic compounds which contain carbon, hydrogen,
oxygen, nitrogen, and usually sulfur, the characteristic element being nitrogen.
Proteins are the principal constituents of the protoplasm of all cells.
PSA:
Prostate specific antigen. A marker for prostate cancer.
PyloriProbe/(TM)/:
A trademark for AMDL's ELISA kit for measuring antibody to Helicobacter pylori.
An indicator of infection caused by H. pylori bacteria.
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Reagent:
A substance employed to produce a chemical reaction so as to detect, measure,
produce, etc., other substances.
Ring-shaped particle (RSP):
High molecular weight substance believed to be released in significant amounts
by all malignant cells but not by non-malignant cells.
Rubella:
A virus that causes upper respiratory symptoms. There is a high risk of this
disease to fetuses of women in the early stages of pregnancy.
Sarcoma:
Any group of tumors usually arising from connective tissue.
Sensitivity:
The lowest concentration of tumor-marker a given test can detect. When used in
the context of analyzing cancer testing data, the percentage of malignant
samples correctly identified as malignant.
Serum:
Clear liquid that separates from blood on clotting.
Specificity:
When used in the context of analyzing cancer testing data, the percentage of
non-malignant samples correctly identified as non-malignant.
Substrate:
A substance upon which an enzyme acts.
Syphilis:
A sexually transmitted disease caused by a spirochete bacterium.
TORCH:
An abbreviation for Toxoplasmosis, Rubella, Cytomegalovirus and Herpes.
Total IgE:
Measurement for total immunoglobulin E level. An elevated level IgE indicates
an allergic condition.
Toxin:
A poison. Frequently used to refer specifically to a protein produced by some
higher plants, certain animals, and pathogenic bacteria, which is highly toxic
for other living organisms.
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Toxoplasmosis:
A disease caused by the single cell parasite, toxoplasma gondii.
TSH:
Thyroid stimulating hormone thyrotropin that promotes the growth of, sustains,
and stimulates the hormonal secretion of the thyroid gland. Indicates patient's
thyroid status.
Tumor:
Swelling, one of the cardinal signs of inflammation, morbid enlargement. A new
growth of tissue in which the multiplication of cells is uncontrolled and
progressive; called also neoplasm.
Tumor-marker:
A biochemical substance indicative of neoplasia, ideally specific, sensitive,
and proportional to tumor load, used variously to screen, diagnose, assess
prognosis, follow response to treatment, and monitor for recurrence.
Virus:
One of a group of minute infectious agents, with certain exceptions not resolved
in the light microscope, and characterized by a lack of independent metabolism
and by the ability to replicate only within living host cells.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business
AMDL, Inc., the Registrant (hereinafter referred to as "AMDL" or the "Company")
offers for sale various immunodiagnostic kits, reagents and diagnostic
accessories. Since the founding of the Company in 1989 until 1996, the Company
was primarily engaged in the commercial development of, and obtaining various
governmental regulatory approvals for the marketing of a proprietary diagnostic
tumor-marker test kit to detect the presence of lung cancer. The Company's
diagnostic test kit, DR-70/(TM)/, was designed to permit physicians to detect
the early presence of the disease through an analysis of non-invasive blood
serum samples, in advance of clinical symptoms, when early treatment should
result in a higher probability of patient recovery. The DR-70/(TM)/ test kit
would also be an effective resource for a physician to confirm the clinical
symptoms of lung cancer.
In 1997, the Company broadened its scope and product line and has a selection of
diagnostic test kits for several types of cancer, infectious diseases,
endocrinology, diabetes, nephrology and allergy. In addition the Company offers
accessory products consisting of pipettes and pipette tips.
The Company is in the development stage and has not generated any revenues from
product sales. The Company has accumulated a significant deficit since
inception and expects to incur a significant loss during 1997 fiscal year. The
Company will require substantial additional funding for continuing research and
development, obtaining regulatory approval and for commercialization of its
products.
Products
DR-70/(TM)/
AMDL's product line includes diagnostic kits for cancer, infectious diseases,
endocrinology, diabetes, nephrology, allergy and accessories. Currently all
products are only available for distribution outside the United States. AMDL's
lead cancer product is its proprietary lung cancer tumor-marker diagnostic kit,
DR-70/(TM)/. The Company believes DR-70/(TM)/ could provide a rapid, inexpensive
and non-invasive method of confirming and monitoring lung cancer in patients.
The Company's DR-70/(TM)/ lung cancer tumor-marker diagnostic test involves
testing a small amount of blood serum after it has been drawn from the patient.
The format for the DR-70/(TM)/ tumor-marker test is an ELISA-based test, a
standard procedure accepted by the medical diagnostic industry. The ELISA test
is a sensitive analytical technique in which an immunological reaction of
antibodies specific for DR-70/(TM)/ are used to bind the DR-70/(TM)/ in
patients' serum in reaction wells. A second antibody also specific for
DR-70/(TM)/ but tagged with an enzyme reacts with the bound DR-70/(TM)/ thereby
forming an antibody sandwich of the DR-70/(TM)/. The enzyme reacts with a
substrate to produce a visible color in proportion to the amount of bound
DR-70/(TM)/ which is proportional to the amount of cancer in the patient.
PyloriProbe/(TM)/
AMDL's lead infectious disease diagnostic kit, PyloriProbe/(TM)/, detects
infection caused by H. pylori. H. pylori is a bacterium associated with chronic
gastritis (stomach inflammation) and gastric and duodenal ulcers which can
eventually lead to stomach cancer. PyloriProbe/(TM)/, which is non-proprietary,
is a direct enzyme immunoassay (EIA) designed to detect the presence of H.
pylori antibodies in blood samples. AMDL believes PyloriProbe's/(TM)/
competitive price and consistent assay procedures should enable AMDL to capture
a share of this market.
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The Company's PyloriProbe/(TM)/ is an ELISA-based test. The test entails the use
of an H. pylori antigen coated plate. Patients infected with Helicobacter pylori
would have anti-H. pylori antibodies capable of binding to the antigen. The
amount of antigen bound antibodies is quantified with peroxidase labeled goat
anti-human IgG. A similar principle is used in the TORCH test kits.
Other Products
In addition to the DR-70/(TM)/ lung cancer tumor-marker diagnostic kit, the
Company offers a full range of established non-proprietary cancer tumor-marker
test kits including CEA for colon cancer, PSA for prostate cancer, HCG for
testicular cancer and AFP and Ferritin for liver cancer.
Additional non-proprietary infectious disease diagnostic products include test
kits for toxoplasmosis, rubella, CMV, Herpes 1 and 2 in both the IgG and IgM
series and syphilis. Diagnostic kit products for endocrinology include HGH, LH,
FSH, TSH, HPL and Prolactin. Diagnostic products for diabetes and kidney
diseases eventually will include Micro-Albumin (urine), Beta-2-Macroglobulin,
GAD Autoantibodies and Insulin Autoantibodies. Diagnostic products for
nephrology include AMDL's allergy diagnostic kit is for Total IgE. Accessories
include a line of pipettes and pipette tips.
All endocrinology and allergy test kits used sandwich ELISA techniques similar
to those described for the DR-70/(TM)/ test. The CRP and Micro Albumin tests are
based on light scattering principles.
Marketing
AMDL's strategy is to provide, to under served international markets through
distributor relationships, an assortment of high quality diagnostic products for
select medical categories. AMDL intends to gain exposure for its products
thorough trade shows and industry journal advertising in addition to the
marketing efforts of its distributors. ICD, L.L.C., ("ICD") AMDL's joint
venture with Briana Bio-Tech Inc., is responsible for marketing DR-70/(TM)/
worldwide with the exception of the United States and Canada. AMDL has retained
the marketing rights for the United States and Briana has retained the marketing
rights for Canada. ICD has signed nine exclusive agreements as of December 31,
1996, for the distribution of DR-70/(TM)/ to the following countries: Indonesia,
Brazil, China, Philippines, Poland, Argentina and Chile, Mexico, Taiwan and
Malaysia.
Each of the agreements require the distributor to purchase minimum quantities of
DR-70/(TM)/ to remain as exclusive distributor for a given territory, however,
there is no firm commitment by any distributor to purchase any kits. The
agreements specify the distributor is responsible for obtaining any necessary
government approval for DR-70/(TM)/ at distributor expense. ICD is to provide
the DR-70/(TM)/ test kits required for regulatory approval at no charge. No
regulatory approvals, if required, have yet been received. There is no assurance
that regulatory approvals, if required, will be received or received within a
time frame conforming to the Company's projections. The distributors, in some
instances, are not experienced in the marketing of this type of test kit. No
revenues have been received as a result of these agreements and there can be no
assurance given of any revenues from the sale of DR-70/(TM)/ test kits from
these distribution agreements.
AMDL intends to pursue both exclusive and non-exclusive distribution
relationships to market other products. AMDL seeks market share with
competitive prices with some products having streamlined assay procedures. In
some instances, ICD's distributors may market AMDL's other products. No
revenues have been received from any diagnostic product sales and there can be
no assurance of any future revenues.
Production
AMDL's facility in Tustin, California includes approximately 3,000 square feet
of manufacturing area. The Company intends to produce only DR-70/(TM)/, its
lung cancer tumor-marker diagnostic kit and PyloriProbe/(TM)/, its H. pylori
bacterium detection diagnostic kit at its Tustin facility. AMDL intends to
subcontract on an 'private label' basis, to established manufacturers, its other
products with packaging, quality control and labeling functions occurring at the
Tustin facility.
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AMDL is applying to the U.S. Food and Drug Administration for a Good
Manufacturing Practices ("GMP") manufacturing credential for its Tustin
facility. The GMP credential is required by various countries seeking to
import AMDL's products. There can be no assurance of AMDL receiving the
credential or receiving the credential within a period of time acceptable to
customers ordering products.
Regulation
The Company's products, to the extent they may be deemed medical devices or
biologics, are governed by the Federal Food, Drug and Cosmetics Act and by the
regulations promulgated thereunder by the FDA as well as the regulations of
state agencies and various foreign government agencies.
DR-70/(TM)/
The Company has not yet submitted an application to the FDA to sell DR-70/(TM)/
in the United States. It is anticipated that DR-70/(TM)/ will require a formal
clearance route known as the Premarket Approval Application, or "PMA", in order
to obtain a Biologic Product License to market such a product in the United
States. A PMA for DR-70/(TM)/ would describe the components and the
manufacturing process of the test system, summarize clinical studies which
establish consistent and acceptable specificity and sensitivity levels and
provide other data which demonstrate the efficacy and stability of the product.
The Company has received approval to sell DR-70/(TM)/ in Canada. A clinical
trial protocol for lung cancer was approved in 1993 by the Cross Cancer
Institute in Edmonton, Alberta, Canada under the auspices of the Alberta Cancer
Board. The objective of the clinical trial at the Cross Cancer Institute was to
evaluate the sensitivity and specificity of the AMDL DR-70/ lung cancer tumor-
marker and to determine if the level of the tumor-marker correlates with the
stage of lung cancer development and determine its usefulness for monitoring
response to treatment and for predicting recurrence of cancer.
In this clinical trial, 237 patients with newly diagnosed lung cancer and 244
volunteers with no clinical evidence of disease were selected. The DR-70/(TM)/
tumor-marker was measured in blood serum samples collected from cancer patients.
The control group was composed of smokers and non-smokers. The results showed
sensitivity of the lung cancer test was 66% and specificity was 92%. The
Company believes that the data reported in continued studies of the Cross Cancer
Institute demonstrated the value of the DR-70/(TM)/ lung cancer tumor-marker
diagnostic test for detecting lung cancer.
In June 1995, the Company received approval from the Cross Cancer Institute to
apply for marketing clearance for its DR-70/(TM)/ lung cancer tumor-marker from
the Health Protection Branch in Ottawa, Canada. In August 1995, the Company
received marketing clearance from the Health Protection Branch. In September
1995, the U.S. Food and Drug Administration ("FDA") certified the Company for
clearance to export the DR-70/(TM)/ lung cancer tumor-marker diagnostic kit to
Canada.
PyloriProbe/(TM)/
In July 1996, the Company filed a 510(k) Premarket Notification with the FDA
requesting approval to sell PyloriProbe/(TM)/ in the United States. In November
1996, the FDA requested a withdrawal of AMDL's 510(k) Premarket Notification
Application for PyloriProbe/(TM)/ until additional clinical data is secured. The
Company intends to resubmit the Application to the FDA as soon as the additional
data is collected although there can be no assurance that the Company will
receive the regulatory approval required to market PyloriProbe/(TM)/ or that the
FDA will review the product within a predictable period of time.
Other Products
The Company's other diagnostic products have not been approved by the FDA for
sale in the United States.
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Patents
The Company's success depends in part on its ability to obtain United States and
foreign patent protection for its products, preserve its trade secrets, and
operate without infringing upon the proprietary rights of third parties. The
Company has four patent applications pending in the United States with respect
to its methodology and probe technology for detecting the presence of the ring
shaped particle and DR-70/(TM)/ tumor-markers as reliable indicators of the
presence of cancer. The Company's patent claiming a unique chemistry for
measuring ring-shaped particles in extracellular fluid as a method for detecting
cancer was recently allowed and a U.S. patent for the ring-shaped particle
technology has been granted and issued by the United States Patent and Trademark
Office. Patents have also issued directed to this technology in Taiwan, South
Africa, Australia, India, New Zealand, Philippines, Russia, Israel and Japan.
There can be no assurance that any additional patents will be issued to the
Company or that, if issued, the breadth or degree of protection of these patents
will be adequate to protect the Company's interests. In addition, there can be
no assurance that others will not independently develop substantially equivalent
proprietary information or obtain access to the Company's know-how or that
others will not be issued patents which may prevent the sale of the Company's
test kits or require licensing and the payment of significant fees or royalties
by the Company in order for it to be able to carry on its business. Further,
there can be no guarantee that any patents issued to or licensed by the Company
will not be infringed by the products of others. Defense and prosecution of
patent claims can be expensive and time consuming, even in those instances in
which the outcome is favorable to the Company. If the outcome is adverse, it
could subject the Company to significant liabilities to third parties, require
the Company to obtain licenses from third parties or require the Company to
cease its research and development activities or sales.
Competition
A large number of companies are in both direct and indirect competition with the
Company, many of which are larger, more firmly established, have significant
marketing and development budgets and have greater capital resources than the
Company. Therefore, there can be no assurance that the Company will be able to
achieve and maintain a competitive position in the diagnostic test industry.
There are over 20 companies, including major medical device manufacturers such
as Abbott Diagnostics, Baxter Healthcare Corp., Beckman Diagnostics, Boehringer
Mannheim, Behringwerke AG, Centocor, Diagnostic Products Corporation, Bio-Rad
Laboratories, Roche Diagnostic Systems, Smith Kline Diagnostics, Sigma
Diagnostics and others, which currently manufacture and market various products
designed to (1) detect the presence of specific tumor-markers for the purpose of
monitoring and detecting specific types of cancer, (2) detect antibodies to
specific infectious agents, (3) detect antibodies to auto-antigens in auto-
immune diseases and (4) to measure levels of hormones. Such companies are
continuously attempting to develop new and improved diagnostic products.
Further, a number of well-established medical companies, both in the United
States and abroad, are engaged in research designed to better understand and
treat cancer, infectious and auto-immune diseases. The Company is not aware of
any efforts currently being devoted to development of products such as the
Company's DR-70/(TM)/; however, there can be no assurance that such efforts are
not being undertaken without the Company's knowledge. In addition, such
companies could develop products similar to the Company's proposed products
which are superior to those of the Company and could also prove to be more
successful than the Company in the marketing and manufacturing of their
products.
The Company is aware of at least 14 tumor-markers which have been or are being
utilized in connection with marketable diagnostic products. Each of these
tumor-markers is associated with one or several specific types of cancer; none
of them is considered a "universal" tumor-marker. The Company believes that, if
its proposed test system is developed and gains acceptance as a device useful in
detecting several types of cancer, it would have a competitive advantage over
more specific test systems; however, there can be no assurance that such a
product will be developed or that such competitive advantage will ever be
realized.
The Company is aware of at least six other companies producing products
competing with the Company's non-tumor-marker test kits. These competing
products and others introduced in the future may be superior to those of the
Company and the competitors could prove to be more capable in selling their
products.
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Environmental Considerations
Compliance with federal, state and local provisions regulating the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, are not anticipated to have a material effect on the capital
expenditures, earnings or competitive position of the Company. The Company's
premises and waste disposal practices are designed to comply with all federal,
state and local statutes applicable to the discharge of materials into the
environment.
Product Liability Insurance
The Company currently produces products for clinical studies and for
investigational purposes. The Company anticipates producing its products in
commercial sale quantities as it receives various regulatory approvals in the
future. There can be no assurance that users will not claim that effects other
than those intended may result from the Company's products, including, but not
limited to claims alleged to be related to incorrect diagnoses leading to
improper or lack of treatment in reliance on test results. In the event that
liability claims arise out of allegations of defects in the design or
manufacture of the products of the Company, one or more claims for damages may
require the expenditure of funds in defense of such claims or one or more
substantial awards of damages against the Company, and may have a material
adverse effect on the Company by reason of its inability to defend against or
pay such claims. The Company is investigating the availability of product
liability insurance for its products and intends to obtain product liability
coverage if it is available on terms acceptable to the Company. However, there
can be no assurance that product liability insurance will be available to the
Company on terms that it can afford, or at all, or that the Company will ever
obtain such insurance.
Employees
The Company currently has ten full-time and one part-time employee. The Company
from time to time supplements its permanent staff with temporary laboratory
personnel. None of the employees of the Company is represented by a union or is
subject to a collective bargaining agreement, and the Company considers its
relations with its employees to be favorable. The Company has entered into
certain agreements with its employees regarding their services. See Item 12
below. The Company also utilizes the services of consultants for research,
testing and other services.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's offices, research laboratory and manufacturing facilities
consisting of approximately 6,000 square feet are located at 14272 Franklin
Avenue, Tustin, California. The Company leases such facilities from a non-
affiliate at a rental rate of $9,400 per month, including property taxes,
insurance and maintenance. The lease term is for three years and terminates
November 30, 1999. The lessor has the unilateral right to terminate the lease
at any time on or after March 1, 1998 by giving the Company a minimum of nine
months' notice.
ITEM 3. LEGAL PROCEEDINGS
In February 1996, the Company instituted litigation in the U.S. District
Court for the Central District of California against Roger L. Lallone, Ph.D.
("Lallone") and Dr. Edward L. Stephen ("Stephen") and their corporate affiliates
for misappropriation of trade secrets, breach of contract, conversion and
violation of the Lanham Act relating to Lallone's activities and in particular
the production of a monoclonal antibody using DR-70/(TM)/. The Company is
seeking delivery of proprietary technology arising out of a Consulting Agreement
and subsequently an Assignment Agreement with Lallone, as well as injunctive
relief and a determination that the royalty provisions of the Assignment
Agreement be deemed revoked. Stephen, a former employee of the Company, entered
into a business relationship with Lallone to develop medical diagnostic products
and the Company claims, among other things, that Stephen deceived the Company
during his employment with the Company by utilizing and exploiting the Company's
proprietary information for his own purposes.
13
<PAGE>
Stephen filed a motion to compel arbitration and to stay the U.S. District
Court proceedings against him and his related companies. That motion was denied
and Stephen and his related companies filed an Answer denying the material
allegations of the Company's complaint. In addition, Stephen asserted
counterclaims against the Company for alleged breach of his employment contract
and interference with prospective economic advantage, claiming damages in excess
of $100,000, as well as punitive damages. In March, 1997, the Company settled
its action against Stephen and his related companies by obtaining a consent
judgment permanently enjoining Stephen from any use of the Company's technology,
and requiring return of the Company's technology and proprietary information.
The Company also settled Stephen's counterclaim by paying Stephen $50,000 in
complete settlement of all salary, expense and other claims asserted by Stephen
against the Company.
Lallone has filed an answer to the Company's complaint and a cross-
complaint for breach of contract, fraud and trade secret misappropriation.
Lallone seeks compensatory and punitive damages from the Company. The
litigation with Lallone is still pending. Although the parties have been
engaged in settlement discussions, no settlement has as yet been reached.
Pending settlement, the Company is vigorously prosecuting its claim and
defending the cross-complaint.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the Registrant's fourth fiscal quarter ended December 31, 1996, no
matters were submitted to a vote of security holders of the Registrant.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded in the over-the-counter market, and is
quoted and is listed on the Electronic Bulletin Board under the symbol "AMDD".
The market for the Company's common stock must be characterized as a limited
market due to the relatively low trading volume. Set forth in the following
table are high and low bid quotations for the Company's common stock for the
fiscal years ended December 31, 1995 and 1996 and first quarter 1997. The
quotations represent inter-dealer quotations without retail markups, markdowns
or commissions and may not represent actual transactions:
<TABLE>
<CAPTION>
Quarter Ended High Low
-------------------- ----- -----
<S> <C> <C>
March 31, 1995 $0.69 $0.13
June 30, 1995 2.00 0.31
September 30, 1995 2.00 0.50
December 31, 1995 1.19 0.25
March 31, 1996 1.00 0.63
June 30, 1996 1.50 0.63
September 30, 1996 1.50 0.59
December 31, 1996 0.59 0.32
March 31, 1997 0.49 0.28
</TABLE>
14
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
The table below sets forth the Company's securities transactions made pursuant
to Regulation S during the twelve month period ended December 31, 1996. None of
the sales involved an underwriter and there were no commissions or discounts
paid.
<TABLE>
<CAPTION>
Number of
Shares of Warrant Warrant
Common Number of Exercise Expiration Cash Holding
Date Stock Warrants(1) Price Date Proceeds Period (2)
- -------- ------------- ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Purchaser: Euro-American GmbH
01/16/96 500,000 250,000 $0.70 03/31/96 $ 175,000 6 months
01/25/96 500,000 250,000 0.70 09/15/96 175,000 6 months
02/26/96 500,000 250,000 0.70 09/15/96 175,000 6 months
03/06/96 250,000 125,000 0.70 11/26/96 100,000 6 months
04/04/96 750,000 375,000 0.70 11/26/96 300,000 6 months
04/29/96 1,000,000 500,000 0.70 11/26/96 350,000 6 months
05/23/96 1,000,000 500,000 0.70 10/31/96 350,000 6 months
06/04/96 1,000,000 500,000 0.70 10/31/96 350,000 6 months
07/12/96 4,000,000 2,000,000 1.22 11/26/96 1,900,000 12 months
08/05/96 250,000 warrant exercise 155,000 6 months
08/05/96 250,000 warrant exercise 155,000 6 months
08/05/96 125,000 warrant exercise 77,500 6 months
08/05/96 500,000 warrant exercise 310,000 6 months
Purchaser: Lake Forest Partners, L.P.
03/15/96 500,000 250,000 0.70 9/15/96 $ 175,000 6 months
- -------------------------
</TABLE>
(1) Each warrant is exercisable for one share of common stock.
(2) Refers to the minimum period from the date of issuance before transfers may
be made to a U.S. person as that term is defined in Regulation S.
15
<PAGE>
The following table sets forth the Company's securities transactions made
pursuant to exemptions from the Securities Act of 1933, as amended, under
Regulation D or Section 4(2) during the past three (3) years. Except as noted,
none of such sales involved any underwriters, nor the payment of any
underwriting commissions or discounts.
<TABLE>
<CAPTION>
Number of Amount
Shares of of Amount of
Date Common Stock Cash Proceeds Cancellation of Debt Explanation
- -------- ------------ ------------- -------------------- --------------------------------
<S> <C> <C> <C> <C>
01/11/94 150,000 $ 37,500 Exercise of outstanding warrants
02/23/94 100,000 89,400 Issuance to control person
03/11/94 100,000 89,400 Issuance to control person
03/29/94 66,053 $ 59,051 Issuance to creditor
03/29/94 39,543 35,351 Issuance to creditor
03/29/94 19,575 17,500 Issuance to creditor
03/29/94 19,575 17,500 Issuance to creditor
04/04/94 13,982 12,500 Issuance to creditor
04/18/94 100,000 89,400 Issuance to control person
05/11/94 100,000 89,400 Issuance to control person
05/11/94 16,000 16,000 Exercise of outstanding option
05/12/94 535,000 26,750 Exercise of outstanding option
05/16/94 34,768 31,083 Issuance to noteholder
05/17/94 34,275 30,642 Issuance to noteholder
05/17/94 34,714 31,034 Issuance to noteholder
05/19/94 138,218 119,827 Issuance to noteholder
05/24/94 69,258 61,917 Issuance to noteholder
05/24/94 34,778 31,092 Issuance to noteholder
05/27/94 100,000 89,400 Issuance to control person
07/07/94 20,000 20,000 Exercise of outstanding warrants
08/09/94 20,000 20,000 Exercise of outstanding warrants
10/21/94 120,000 30,000 Issuance to control person
11/16/94 60,000 15,000 Issuance to control person
07/06/95 32,737 32,266 Exercise of outstanding warrants
09/19/95 65,000 3,250 Exercise of outstanding option
10/24/95 133,000 100,000 Issuance to investor*
11/13/95 10,000 2,500 Exercise of outstanding warrants
12/31/95 89,127 22,282 Issuance to noteholder**
12/31/95 11,200 2,800 Issuance to noteholder
12/31/95 65,800 16,450 Issuance to noteholder
12/31/95 44,800 11,200 Issuance to noteholder**
12/31/95 44,800 11,200 Issuance to noteholder**
12/31/95 44,182 11,046 Issuance to noteholder**
12/31/95 43,867 10,967 Issuance to noteholder
12/31/95 43,722 10,931 Issuance to noteholder
12/31/95 44,800 11,200 Issuance to noteholder**
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
12/31/95 110,948 27,735 Issuance to noteholder**
03/15/96 10,500 2,625 Exercise of outstanding warrants
04/22/96 19,500 4,875 Exercise of outstanding warrants
05/20/96 89,127 22,282 Issuance to noteholder**
06/11/96 16,778 15,000 Issuance to creditor
07/09/96 13,384 11,933 Issuance to creditor
09/30/96 47,333 11,833 Issuance to control person
03/31/97 80,000 20,000 Exercise of outstanding warrants
03/31/97 20,000 5,000 Exercise of outstanding warrants
</TABLE>
- ---------------
*5% commission paid in cash and 6,667 warrants exercisable at $1.00
**10% commission paid in cash and various warrants exercisable at $.25 per share
Holders
There were approximately 1,081 holders of record of the common stock as of April
11, 1997, including shares held of record by brokerage houses and clearing
corporations on behalf of their customers.
Dividends
The Company has not paid dividends with respect to its common stock and does not
anticipate that it will pay dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" should be read in conjunction with the Company's annual audited
financial statements, the notes thereto and the other financial data included
elsewhere herein and includes forward-looking statements which involve risks and
uncertainties which are based upon the Company's beliefs, as well as assumptions
made by and information currently available to the Company. The Company's
actual results may differ materially from the results predicted by such forward-
looking statements due to various factors, including, but not limited to, those
risks and uncertainties which are discussed below.
General
Since inception, the Company has been in the development stage and has devoted
its resources to research and development, obtaining regulatory approval and the
commercialization of its proposed diagnostics for cancer and other diseases. As
of April 11, 1997, the Company had 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 the fiscal year ending December 31,
1997. The Company will require substantial additional funding for continuing
research and development, obtaining regulatory approval and for
commercialization of its products. There can be no
17
<PAGE>
assurances that the Company will be able to obtain such funding when needed or
at all, or if available, what the terms thereof will be.
Liquidity and Capital Resources
The Company has generated no revenues from sales of products and its only income
has come from the sale of licenses, royalties and options to purchase marketing
rights. Operations have been funded principally through private placements 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,
undertakes clinical trials and other actions necessary to obtain regulatory
approvals and engages in marketing and sales activities. The Company also
expects to incur substantial administrative and commercialization expenditures
in the future. The availability of such sources is presently unknown. From
December 31, 1995 to December 31, 1996, the Company's cash, cash equivalents and
short-term investments increased to approximately $3,504,000 as a result of
sales of the Company's securities. The Company is also hopeful of obtaining
revenues from product sales, but there is no commitment by any person for
purchase of any of the Company's products. In the absence of significant sales
and profits, the Company may seek to raise additional funds to meet its working
capital needs principally through the additional sales of its securities.
However, 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. The Company can make no
prediction as to when, if ever, it will be profitable.
The Company believes that its present cash, cash equivalents and short-term
investment balances to be sufficient for the next twelve months of operations,
assuming the Company is able to extend forbearance of collection efforts on its
outstanding indebtedness. However, certain scheduled activities will be
curtailed after four months unless additional operating capital is obtained.
The Company's efforts during the next 12 months will be dedicated principally to
providing assistance to ICD in connection with international market development
for DR-70/(TM)/, international market development for the Company's other
diagnostic products, development and commercialization of new products and
obtaining the required regulatory approvals. There can be no assurance as to the
success of these efforts.
During the next seven months, the Company anticipates incurring approximately
$35,000 in expenditures for the purchase of additional equipment. Currently,
the Company does not anticipate any significant changes in the number of
employees. 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 also seek to add employees to further its efforts to commercialize
its products.
At December 31, 1996, the Company was indebted for $796,203 for accrued salaries
payable to six persons who are officers and other employees and former
employees. The Company has made payment arrangements with four persons who are
current or former employees who are owed an aggregate of $467,333 at December
31, 1996. The Company has agreed to pay each of these persons their
proportionate share of 5% of sales revenues, if any, of the Company, but not
less than $500 per month per person. In addition, if a person currently
employed by the Company is terminated under certain circumstances, the minimum
monthly payment would be increased. All amounts must be paid no later than
February 28, 2001. In January 1997, the Company paid the accrued salary of an
officer as part of a separation agreement. The Company has had various
communications with the other employee concerning possible alternative
arrangements. There can be no assurance as to the success of these efforts. On
December 31, 1996, the Company also had total notes payable outstanding of
$25,000.
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 December 31, 1996, the Company had received $367,253
of this fee from Briana. See Item 12.
18
<PAGE>
During the 12 months ended December 31, 1996, the Company received gross cash
proceeds of approximately $4,050,000 from the sale of approximately 10,000,000
shares of its common stock and warrants to purchase approximately 5,000,000
shares of common stock and the Company received an aggregate of $705,000 from
the exercise of outstanding warrants. During 1996, the Company also issued
approximately 30,000 shares of common stock to extinguish other indebtedness of
approximately $27,000 and 136,460 shares for convertible promissory notes of
$30,000 and accrued interest of $4,115.
Results of Operations
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995. During
- ---------------------------------------------------------------------
the year ended December 31, 1996, the Company received no revenues for product
sales. The Company received a $43,138 partial payment of the ICD marketing
rights fees from Briana. The Company also received $85,134 interest income on
short-term investments. Total operating expenses for the year ended December
31, 1996 were $1,750,652 compared to total operating expenses for the year ended
December 31, 1995 of $1,734,027. Operating expenses in 1995 included
recognition of $300,000 to reflect the cancellation of a raw materials royalty
agreement with Briana which occurred incident to the formation of ICD. Expense
categories reflecting increases over the prior year include payroll and
laboratory expense. Expense categories reflecting decreases over the prior
period include interest expense, amortization and depreciation expense.
In 1996, the Company's loss was $1,622,380, compared to a loss of $1,457,470 in
1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994. During
- ---------------------------------------------------------------------
the years ended December 31, 1995 and 1994, the Company received no revenues for
product sales. Operating expenses for the year ended December 31, 1995 were
$1,734,027 and for the year ended December 31, 1994 were 1,563,003. During
1995, the Company received a partial payment of ICD marketing rights fees of
$324,115 from Briana. Also in 1995, the Company recorded a $300,000 expense to
reflect the cancellation of a raw materials royalty agreement with Briana which
occurred incident to the formation of ICD. Expense categories reflecting
increases in 1995 were professional fees, amortization and depreciation expense.
Expense categories reflecting decreases in 1995 were payroll and consulting
fees.
Accordingly, the Company's loss in 1995 was $1,457,470 compared to a loss of
$1,604,589 in 1994.
ITEM 7. FINANCIAL STATEMENTS
See Financial Statements starting with page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
19
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Executive Officers and Directors
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
Year First
Became
Name Age Positions With the Company Director
- ----------------------------- --- -------------------------- ----------
<S> <C> <C> <C>
William M. Thompson III, M.D. 69 Chairman of the Board of 1989
Directors and Director
That T. Ngo, Ph.D. 53 President, Chief Executive 1994
Officer and Director
Harry Berk 56 Vice President - Finance --
and Chief Financial Officer,
Secretary and Director
Douglas C. MacLellan 41 Director 1992
John Tkachuk 50 Director 1993
Axel J. Kutcher 45 Director 1997
Edward R. Arquilla, M.D., Ph.D. 74 Director 1997
Ronald J. Moore, Ph.D. 56 Vice President - Operations --
</TABLE>
- -------------
A director's regular term is for a period of one year or until the next annual
meeting of stockholders and his successor is duly elected and qualified. An
officer's regular term is for a period of one year, expiring at the next annual
meeting of the board of directors or when his successor is elected and
qualified.
Dr. William M. Thompson, III has been a director of the Company since June 1989.
His responsibilities include corporate and scientific planning, liaison to the
clinical medicine community and advisor on FDA and medico-legal affairs. From
1969 to the present, Dr. Thompson has been a practicing General Surgeon in
Orange County, California. From October 1995 to the present, he also has been
Vice President for Medical Affairs and Medical Director of Beech Street, Irvine,
California. He has been a founder of two managed medical care companies, Beech
Street and August International, serving as National Medical Director and Board
member from 1980 to 1990. More recently he was Vice President of August
Healthcare Services from 1990-91. He was a founding Director of OSCAP, owner of
SCPIE, the physician-owned malpractice insurance carrier, and serves as Chairman
of the Claims Committee. He was the principal architect in organizing,
implementing and directing a county-wide emergency medical care system in Orange
County, California. He was the founding Director of the Trauma Service at
Fountain Valley Regional Hospital, serving from 1980 to 1989. He is Assistant
Clinical Professor of Surgery at the University of California, Irvine College of
Medicine. Prior to his medical career, Dr. Thompson worked for 13 years in the
pharmaceutical industry in research and development, law and senior management.
He was a research chemist and research manager at Armour and Company from 1949
to 1953; his research activities resulted in about 65 U.S. and foreign patents
covering the isolation and manufacture of such drugs as ACTH, insulin,
ribonuclease, deoxyribonuclease, acylase, intrinsic factor, hyaluronidase,
trypsin and chymotrypsin. He was a corporate patent attorney for Armour and
Company from 1953-1956, and was engaged in the private practice of patent law
from 1956 to 1961. He also was assistant to the president, Merck Sharp & Dohme
from 1961 to 1963. Dr. Thompson received his M.D. degree from Northwestern
University Medical School, Chicago, Illinois in 1960,
20
<PAGE>
and completed a Rotating Internship at Cook County Hospital, Chicago, Illinois
(1960-1961), and a General Surgery Residency at Mayo Clinic, Rochester,
Minnesota (1965-1969). He was engaged in the general practice of medicine in
Portland, Oregon and Orange County, California from 1962-1965. He received a
B.S. degree in 1949 from Roosevelt University, Chicago, Illinois, and the J.D.
degree from Loyola University Law School in 1954. He is a member of the
Illinois and Federal Bars and a Registered Patent Attorney and has extensive
legal experience in the fields of intellectual property, medical malpractice and
hospital medical staff. He has devoted almost 30 years to hospital medical
staff administration, serving as an officer or department chief at four
hospitals and having been elected president of a national organization of
hospital Chief-of-Staffs. He has also spent almost 30 years in service to
organized medicine as an officer, Board member, and Committee Chairman at the
county and state levels. He has served as an officer or Board member of
numerous charitable, professional and business organizations.
That T. Ngo, Ph.D., President, Chief Executive Officer and Director, brings to
AMDL nearly 20 years experience in research and development, general management,
manufacturing, marketing and sales. A leading international authority in
commercial applications of immunology, enzymology and bioprocessing, he was
previously Chairman and Chief Executive officer of StressGen Biotechnologies
Corp., Victoria, British Columbia. Before that he was founding President, Chief
Executive Officer, and most recently, Chairman of Tustin, California based
BioProbe International, Inc. until its sale in 1992 to UniSyn Fibertec of San
Diego, California. A Fellow of the American Institute of Chemists, Dr. Ngo has
published more than 130 scientific articles and has edited five books on
immunodiagnostics, bioseparation and plant biotechnology. He has served on the
editorial boards of five international journals. After earning a Ph.D. in
biochemistry from the University of Saskatchewan, Canada, he completed a
postdoctoral fellowship at the University of Ottawa, Albert Einstein College of
Medicine and Clinical Research Institute in Montreal. Dr. Ngo is currently a
Director of Sangui Biotech, Inc. of Santa Ana, California, a start-up biotech
company specializing in blood substitute products, esoteric immunodiagnostic
products and environmental sensors.
Harry Berk joined the Company in September 1992. From 1990 to 1992, Mr. Berk
was Chief Financial Officer for HQ Office Supplies Warehouse, a public
corporation operating multiple branch retail stores. From 1984 to 1990, Mr.
Berk was the Chief Financial Officer for Tam's Stationers, a privately-held
corporation operating multiple branch retail stores. Mr. Berk received his B.S.
degree in Accounting from the California State University at Northridge in 1973.
He also completed all graduate course requirements for a M.S. degree in
Management from the same University in 1978.
Douglas C. MacLellan became a Director of the Company in September 1992. Mr.
MacLellan is currently President, Chief Executive Officer and Director of
PortaCom Wireless, Inc. Mr. MacLellan has been President and Chief Executive
Officer of PortaCom since July 1995. From 1993 to 1995, Mr. MacLellan was a
founder and principal of Maroon Bells Capital Partners, Inc. (MBCP) a U.S. based
international merchant bank. In this position at MBCP, Mr. MacLellan
concentrated on the financing and governance of international and domestic
businesses. He has served as an advisor to senior management and corporate
board members on domestic and international trade, asset allocation, corporate
finance, restructuring and merger and acquisition activities. He is currently a
member of the board of directors of Great Bear Technology, Inc., a multi-media
software development company, and InterAmericas Communications Corporation, an
international telecommunications company which operates a competitive access
fiber and satellite network in Latin America. Mr. MacLellan is also on the
board of directors of Albion Offset Group, a private international trade
advisory firm. From March 1987 to March 1989, Mr. MacLellan was a Vice
President with the financial consulting firm of A.B. Laffer & Associates. Mr.
MacLellan was educated at the University of Southern California in economics and
finance, with advanced training in classical economic theory.
John Tkachuk became a director of the Company in March 1993. From 1989 to 1995,
Mr. Tkachuk served as Chairman of the Board of Directors and Chief Executive
Officer of Briana Bio-Tech Inc. Mr. Tkachuk currently serves as President AMDL
Canada, Inc., a subsidiary of Briana. In connection with Briana's purchase of
securities from the Company 1992, the Company agreed that until August 1995,
Briana would have the right to designate one person to serve as an advisory
member of the Company's Board of Directors. Mr. Tkachuk served as an advisor
until his election to the Board in March 1993. Prior to his association with
Briana, Mr. Tkachuk served as a business consultant, specializing in franchising
and real estate development.
21
<PAGE>
Ronald J. Moore, Ph.D. joined AMDL as Vice President, Operations, in October
1996 assuming responsibility for the manufacturing operations and product
development. Dr. Moore has extensive experience in both academic medical
research and in commercial immunodiagnostic product development and
manufacturing. Dr. Moore received his undergraduate education at Baylor
University and his graduate education at the University of Texas at Austin
(M.A.) and at Iowa State University (Ph.D.). Following his Ph.D. graduate
program, Dr. Moore completed a two-year postdoctoral fellowship at Southwestern
Medical School in Dallas (University of Texas Health Science Center at Dallas)
where he continued as a research scientist and faculty member in the department
of Internal Medicine, Division of Endocrinology (1970 - 1980). During this
career in academic research, Dr. Moore authored numerous publications on the
metabolism and mechanism of action of steroid hormones, particularly
testosterone and dihydrotestosterone. Dr. Moore subsequently has held a variety
of technical, managerial and executive positions at major diagnostic companies,
including Nuclear Medical Laboratories (Dallas) and Organon Teknika (Durham)
where he was awarded the Presidents Award for Meritorious Scientific
Achievement. He continued in technical management as the technical and plant
manager at the Becton Dickinson RIA facility (Orangeburg, NY; 1990 -1994).
Subsequently, he joined Diagnostic Products Corporation (Los Angeles) as
Director of Product Support (1995). Immediately prior to joining AMDL, Dr.
Moore founded Clinical Associates in Hermosa Beach, California, a provider of
clinical validation specimens to the medical diagnostics community.
Edward R. Arquilla, M.D. Ph.D. has been a director of the Company since February
1997. His responsibilities include corporate and scientific planning, and
liaison to the clinical and academic medical community. From 1959 until 1994
Dr. Arquilla was a full time faculty member of the Departments of Pathology at
USC, UCLA and UCI respectively. He served as Professor and Chair of Pathology
at UCI and Chief of Pathology services at UCIMC from 1968 until 1986. In this
capacity he established the UCI Pathology referral services. He has had an
active interest in the application of immunology to diagnostic tests for the
past fifty years and was among the first to develop immunological tests for the
measurement of proteins and hormones. Dr. Arquilla has been very active in the
two major volunteer diabetes organizations; the American Diabetes Association
and the Juvenile Diabetes Foundation International. In 1977 he was appointed to
a three year term as a charter member of the National Diabetes Advisory Board by
the Secretary of Health and Human Services. The Board was charged to review and
evaluate the implementation of a long range plan to combat Diabetes Mellitus.
He has also been on several National Institutes of Health Study sections
concerned with the extramural funding of Diabetes Research in general and the
immunology of Diabetes in particular. Dr. Arquilla's academic and professional
responsibilities, in addition to the Chair and Chief of Pathology Services at
UCI, include a two year term as Chief of Staff at UCIMC from 1975 to 1977 and
President of the Academic Senate of the College of Medicine at UCI from 1978 to
1980. His research interests have focused on the genetics of the immune
response to insulin, the measurement of insulin and insulin antibodies and the
structure function on insulin. He has published more than 80 scientific
articles. He received his undergraduate B.S. degree at Northern Illinois
University in 1947, and M.S. in Physiology from the University of Illinois in
1949, and M.D. from Western Reserve University in 1955, a Ph.D. in Anatomy from
Western Reserve University in 1957, completed his residency in Pathology in
1959 and was Board Certified in Anatomic Pathology in 1963. He is licensed to
practice Medicine in Ohio and California.
Axel J. Kutscher became a Director of the Company in January 1997. Mr. Kutscher
was a founding partner of EURO-AMERICAN Beteiligungsvermitlungsgesellschaft
GmbH, an investment banking firm investing in start-up biomedical companies and
is also a sales manager and Vice President of the firm. Mr. Kutscher currently
serves as the Chairman of the Board of Directors of GlukoMediTech, AG of Mainz,
Germany, a medical device company emphasizing the development of in vivo glucose
monitoring sensors, a Director of Sangui Biotech AG in Mainz, Germany, a company
dealing with blood substitute research and development and a Director of Sangui
Biotech, Inc. of Santa Ana, California, a start-up biotech company specializing
in blood substitute products, esoteric immuno-diagnostic products and
environmental sensors. Mr. Kutscher was a sales manager of Euro-Pacific
Securities Services GmbH of Dusseldorf, an account executive at Hetkamp und
Partner GmbH in Gelshenkirchen, Germany and a salesman at Deutsch-Amerikanische
Marketing Corp. and International Stock Broker Corp. of Essen, Germany.
22
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Officers' Compensation
The following table sets forth all cash compensation paid by the Company to its
only executive officer during the year ended December 31, 1996 whose
compensation exceeded $100,000:
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Name and Position Year Salary Bonus Other
- ---------------------- ---- -------- ----- ---------
<S> <C> <C> <C> <C>
That T. Ngo 1996 $185,000 -0- -0- /(1)/
President and Chief
Executive Officer
1995 $144,000 -0- -0- /(1)/
1994 $ 17,500 -0- -0- /(1)/
</TABLE>
- --------------------------
(1) Substantial salaries from prior years are accrued and represent a
substantial portion of the Company's current liabilities. In 1996 the
Company made payments on accrued unpaid salaries to Dr. Ngo of $4,750. The
current base salary of Dr. Ngo is $222,000 per annum.
Directors' Compensation
Certain members of the Board of Directors received cash compensation only for
their services on special committees. Total cash compensation paid to members
of the Board of Directors during 1996 was $6,000.
Stock Compensation Programs
On April 22, 1992, the Company adopted its 1992 Stock Option Plan (the "1992
Plan"). Effective April 22, 1992, the Company made specific option grants to
certain key employees and consultants to purchase an aggregate of 2,622,500
shares of the Company's Common Stock at a price of $0.25 per share (the
"Specified Options"). It was provided in the Specified Options that exercise
could occur if certain conditions were satisfied.
All of the Specified Options had option terms of three years and expired in
1995, except the options to purchase 380,000 shares to Richard Anderson, which
options have a ten-year term. Of the options to purchase 380,000 shares,
options to purchase 136,000 shares will become exercisable if the Company has
annual gross revenues from product sales of a minimum of $1,000,000. Options to
purchase 136,000 shares will become exercisable if the Company has annual net
income before taxes of a minimum of $1,000,000, and options to purchase 108,000
shares will become exercisable if the Company has annual net income before taxes
of a minimum of $5,000,000. In 1994, the Company terminated the 1992 Plan,
except with respect to options which had previously been granted.
Subsequent to the adoption of the 1992 Plan, the Company granted options and
warrants to various persons. Grants to officers and directors of the Company
are more particularly described in Item 11.
In 1995, the Company adopted its Stock Bonus Plan pursuant to which the Company
may select employees or consultants to receive a bonus of shares of the
Company's common stock. This Plan is to be administered by the Board of
Directors, or by a Committee selected by the Board (the "Administrators"). The
Administrators shall have the authority to select the persons to receive a bonus
of shares of Common Stock, the number of shares of Common Stock to be issued,
and the time in which the Common Stock is to be issued. The total number of
shares authorized is 500,000. The Administrators have reserved 100,000 shares
for issuance to That T. Ngo, the Company's President. The actual number of
shares to be issued to Dr. Ngo, and the timing for this occurrence are to be
determined by the Administrators. The Stock Bonus Plan will terminate on June
30, 1997.
In addition, the Company issued stock options pursuant to various employment
agreements and agreements for services. See "Certain Relationships and Related
transactions."
23
<PAGE>
Two other stock option plans, the 1994 Stock Option Plan and the 1988 Stock
Option Plan, were terminated on March 7, 1997. No options were issued under
either plan.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Set forth in the following table is information regarding beneficial ownership
of the Company's Common Stock as of April 11, 1997, by each person known to the
Company to be the beneficial owner of more than 5 percent of the Company's
Common Stock, by each officer and director, and by all officers and directors as
a group. Except as otherwise indicated, all shares are held beneficially and of
record, and each stockholder has sole voting, investment and dispositive power.
<TABLE>
<CAPTION>
Number of
Name Shares Owned Percent
- ------------------------------- ------------ -------
<S> <C> <C>
Principal Stockholders
Briana Bio-Tech Inc. 1,920,000(1) 5.7%
#2200 Canada Trust Tower
10104-103 Avenue
Edmonton, Alberta
Canada T5J 1W8
Officers and Directors
Edward R. Arquilla, M.D., Ph.D. 15,000 --
Harry Berk 281,250(2) 0.8%
Axel J. Kutscher 252,112(3) 0.7%
Douglas C. MacLellan 50,336 0.1%
Ronald J. Moore, Ph.D. 12,500(4) --
That T. Ngo, Ph.D. 1,730,000(5) 4.9%
William M. Thompson, III, M.D. 890,000(6) 2.6%
John Tkachuk 1,920,000(7) 5.7%
All Officers and Directors as a Group (8
persons) 5,151,198(2)-(7) 14.1%
</TABLE>
- ----------------------------
(1) Includes warrants to purchase 60,000 shares of common stock at $0.25 per
share exercisable until November 30, 1998.
(2) Includes options to purchase 150,000 shares of common stock at $1.25 per
share exercisable until December 31, 1997 and 6,250 shares of common stock
granted pursuant to an employment agreement. Also includes options to
purchase 100,000 shares of common stock at $0.97 per share exercisable until
December 31, 1999 and options to purchase 25,000 shares of common stock at
$0.44 per share exercisable until December 31, 2000.
(3) Mr. Kutscher does not own any shares of record of common stock, but may be
deemed to be the beneficial owner of the shares of Euro-American GMBH. Mr.
Kutscher is the Sales Manager and a Vice President of Euro-American GMBH.
(4) Includes options to purchase 12,500 shares of common stock at $0.563 per
share exercisable until September 30, 2001.
(5) Includes options to purchase 650,000 shares of common stock at $1.375 per
share and 150,000 shares of common stock at $1.25 exercisable until June 30,
1999. Also includes options to purchase 930,000 shares of common stock at
$0.657 per share exercisable until September 30, 2001.
(6) Includes options to purchase 800,000 shares of common stock at $1.25 per
share exercisable until December 31, 1997.
24
<PAGE>
(7) Mr. Tkachuk does not own any shares of record of common stock, but may be
deemed to be the beneficial owner of the shares of Briana Bio-Tech Inc. Mr.
Tkachuk is the President of AMDL Canada, Inc., a subsidiary of Briana.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June 1994, the Company entered into a two year employment agreement with Dr.
That T. Ngo, Executive Vice President and Chief Operating Officer. This
agreement with Dr. Ngo specified an annual base salary of $100,000 and provided
650,000 common stock options at $1.375 per share vesting over the term of the
employment agreement. In October 1994, Dr. That T. Ngo, with the Board's
approval, accepted the position of President, CEO and director. Dr. Ngo's
annual salary was increased to $144,000 effective October 1, 1994 and the
quantity of his common stock options increased to 800,000. Effective June 1996,
the Board of Directors approved an annual salary of $222,000 per year. Then, in
October 1996, the Company entered into a new two year employment with Dr. That
T. Ngo, President and Chief Executive Officer. The agreement specifies an
annual base salary of $222,000. Dr. Ngo also received options to purchase up to
1,500,000 shares of the Company's common stock at the exercise price of $0.657
per share exercisable until September 2001. Options to purchase 750,000 shares
vested upon execution of the agreement. The options to purchase the remaining
750,000 shares will vest in quarterly installments of 90,000 each over the next
seven calendar quarters and 120,000 in the eighth calendar quarter. The
agreement contains a severance provision. Dr. Ngo shall be entitled to a
severance payment equal to six months salary. The employment agreement also
includes provisions for customary medical insurance, vacation, sick leave,
nondisclosure and covenants not to compete. If the Company creates an executive
bonus plan, Dr. Ngo shall be entitled to participate in such a plan.
In January 1996, the Company entered into a one year employment agreement with
Harry Berk, Vice President and Chief Financial Officer. Mr. Berk received an
annual base salary of $80,000, and options to purchase up to 100,000 shares of
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 this
employment agreement and options to purchase the remaining 75,000 shares vested
in quarterly installments of 18,750 shares each. Effective as of January 1,
1997, the Company entered into a new one year employment agreement with Mr.
Berk. 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 an exercise price equal to the closing bid price on the date of approval of
the agreement, $0.44 per share, until December 31, 2000. The options vest in
installments of 25,000 each at the end of each of the following four calendar
quarters. The agreement contains a severance provision. Mr. Berk shall be
entitled to a severance payment equal to three months salary. The employment
agreement also includes provisions for customary medical insurance, vacation,
sick leave, nondisclosure and covenants not to compete. If the Company creates
an executive bonus plan, Mr. Berk shall be entitled to participate in such a
plan.
In October 1996, the Company entered into a two year employment agreement with
Dr. Ronald J. Moore, Vice President of Operations. The agreement specifies an
annual base salary of $80,000. Dr. Moore also received options to purchase up
to 100,000 shares of the Company's common stock at the exercise price of $0.563
per share exercisable until September 2001. The options will vest in
installments of 12,500 each at the end of each of the following eight calendar
quarters. The agreement contains a severance provision. Dr. Moore shall be
entitled to a severance payment equal to two months salary. The employment
agreement also includes provisions for customary medical insurance, vacation,
sick leave, nondisclosure and covenants not to compete. If the Company creates
an executive bonus plan, Dr. Moore shall be entitled to participate in such a
plan.
The Company has been unable to meet a substantial portion of the salary
obligations due to its employees, including officers and directors. At December
31, 1996, the Company had accrued salaries of $796,203, of which $619,000 was
owed to five persons who were then officers or directors of the Company. The
Company has made payment arrangements with four of these persons. The Company
has agreed to pay each of these persons their proportionate share of 5% of sales
revenues, if any, of the Company, but not less than $500 per month per person.
In addition, if a person currently employed by the Company is terminated under
certain circumstances, the minimum monthly payment would be increased. All
amount must be paid no later than February 28, 2001. In January 1997, the
25
<PAGE>
Company paid the accrued salary of an officer who had not agreed to a payment
arrangement as part of a separation agreement.
In January 1997, Robert R. Guerrero, Ph.D., Vice President of Research and
Development and a director, resigned his positions with the Company. In
February 1997, Axel J. Kutcher, a principal in Euro-American GMBH, and Edward R.
Arquilla, M.D., Ph.D, were invited to become members of the Company's Board of
Directors. Both individuals accepted the invitations and were approved by the
other members. In February 1997, Donald E. Rounds, Ph.D., the Company's former
Chief Scientist, resigned his position as a director. In February 1997, the
Company began cash compensation payments to certain directors for special
services to the Company, including Dr. Arquilla and Douglas MacLellan. The
payments range in monthly amounts from $1,000 per month to $2,500 per month and
will continue through December 1997. Payment arrangements to certain directors
were made retroactive to November 1996.
In January 1989, the Company entered into a licensing agreement (the "Licensing
Agreement") with AMDL Canada Inc. ("AMDL Canada"), a Canadian corporation and a
wholly-owned subsidiary of Briana, formed for the purpose of entering into the
Licensing Agreement. Pursuant to the terms of the Licensing Agreement, the
Company granted to AMDL Canada an exclusive license to market and sell the
Company's proposed cancer detection product, DR-70/(TM)/, in Canada directly or
through agents, distributors or other representatives. Pursuant to the terms of
the Licensing Agreement, as amended, AMDL Canada has paid the Company an
aggregate of $120,000 and agreed to pay the Company an additional $500,000 in
the form of a $1 surcharge on each of the first 500,000 test kits sold by or
through AMDL Canada in Canada. Dr. Robert R. Guerrero, then an officer and
director of the Company, was a director of Briana Resources, Ltd., an affiliate
of Briana, from February 1989 to August 1990, although he abstained from voting
with respect to the Licensing Agreement or the amendments thereto. In February
1995, the Company and Briana created a joint venture organized as a limited
liability company under Delaware law. The limited liability Company is named,
ICD, L.L.C. ("ICD"). ICD was formed to market and license the Company's
technology throughout the world, exclusive of the United States and its
territories and possessions and Canada. The Company and Briana are the two
members of ICD. Three managers conduct the business of ICD. The Company and
Briana each selected one manager. The manager selected by the Company is the
Company's President, That T. Ngo. The manager selected by Briana is John
Tkachuk, the President of AMDL Canada Inc. Mr. Tkachuk is also a director of
the Company. The third manager will be selected by the two managers at a later
date.
Initial capital contributions to ICD were made by the Company and Briana of $650
and $350, respectively. Additional contributions are to be made from the
members by unanimous consent. Any amounts in addition to the initial capital
contributions required by ICD are to be contributed in proportion to the
members' respective percentage interest. Profits and losses of ICD were to be
allocated in accordance with percentage interests, which are 65% to the Company
and 35% to Briana. The Company and Briana agreed that their percentage
interests in ICD would be changed to 50% each if the Company failed to satisfy
either of the two following tests as determined by the Cross Cancer Institute
and could not reverse such determination within nine months thereof. The first
requirement was that clinical trial testing done on DR-70/(TM)/ at the Cross
Cancer Institute result in a finding that DR-70/(TM)/ has a
sensitivity/specificity quotient sufficient to qualify DR-70/(TM)/ as a
commercial grade tumor-marker test for lung cancer to be approved for use in the
Canadian market by either the Cross Cancer Institute or the Health Protection
Branch. The second requirement was that within six months after the Company's
receipt of the second installment of the marketing rights fee from Briana (which
occurred in April, 1995), the Company shall cause its technology to (i) have
developed to the level where the Company can demonstrate the efficacy of such
technology with lung and ovarian tumors and/or (ii) be at a stage where the
Company can demonstrate marketable level accuracy on the basis of well
characterized sera test results to make a valid assessment. The Company believes
that these requirements were met on a timely basis.
The purchase price for each product developed from the Company's technology sold
to ICD will be equal to the costs incurred by the Company in producing such
product. The Company has agreed to supply Briana with sufficient product for
the Canadian market, as determined by Briana, as well as make all reasonable
efforts to supply ICD with sufficient product for markets outside Canada and the
United States on a timely basis. The Company cannot unreasonably withhold
supply of product to Briana or ICD. In the event that supply requirements
cannot be met to fill bona fide purchase orders for the product within a
reasonable time frame, product will be supplied
26
<PAGE>
to all markets on a pro-rata basis. If the Company cannot supply product then
Briana will have the right to have the product produced by an independent third
party.
Briana was required to make marketing rights fee installment payments totaling
$1,000,000 to the Company. If an installment was unpaid, Briana's percentage
interests were to be reduced. As of December 31, 1996, the Company had received
$367,253 of this fee from Briana. In January 1997, AMDL, Inc. provided Briana
Bio-Tech Inc., with written notice of default in payment of the marketing fee
affecting percentage ownership interest in ICD. In accordance with terms of the
Operating Agreement, Briana's percentage ownership interest in ICD, L.L.C. has
been reduced from 35 percent to 12.85 percent. AMDL's percentage ownership
interest in ICD, L.L.C. has been increased from 65 percent to 87.15 percent.
27
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Financial Statements
See Item 7.
Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate Of Incorporation of the Company, previously filed as an
Exhibit to the Company's Report On Form 10-K for the year ended
December 31, 1989, is incorporated herein by this reference.
3.2 Bylaws of the Company, previously filed as an Exhibit to the
Company's Report On Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference.
10.1 Amendments To License Agreement Between the Company and AMDL
Canada, Inc., Dated September 20, 1989, June 16, 1990 and July 5,
1990, previously filed as an Exhibit to the Company's Report on
Form 10-K for the year ended December 31, 1990, is incorporated
herein by this reference.
10.2 Option For Marketing Rights Between the Company and Biotech
Marketing Group, Inc., Dated June 29, 1990, As Amended November 20,
1990, previously filed as an Exhibit to the Company's Report On
Form 10-K for the year ended December 31, 1990, is incorporated
herein by this reference.
10.2(a) Second Amendment Between AMDL, Inc. and Biotech Marketing Group,
Inc., Dated February 4, 1991, previously filed as an Exhibit to the
Company's Report on Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference.
10.3 Agreement Between the Company and AMDL Canada, Inc., Dated January
21, 1992, previously filed as an Exhibit to the Company's Report on
Form 10-K for the year ended December 31, 1991, is incorporated
herein by this reference.
10.4 The Company's Incentive Stock Option Plan, adopted in 1988,
previously filed as an Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1990, is incorporated herein by
this reference.
10.5 The Company's 1992 Stock Option Plan, previously filed as an
Exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by this reference.
10.6 Research Agreement Between The Company, The Alberta Cancer Board
And AMDL Canada, Inc., Dated September 10, 1991, previously filed
as an Exhibit to the Company's Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein by this reference.
10.7 Employment Agreement Between The Company And Dr. Robert R.
Guerrero, Dated September 1, 1991, previously filed as an Exhibit
to the Company's Report on Form 10-K for the year ended December
31, 1991, is incorporated herein by this reference.
10.8 Employment Agreement Between The Company And Dr. Donald E. Rounds,
Dated September 1, 1991, previously filed as an Exhibit to the
Company's Report on Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference.
28
<PAGE>
10.9 Restated Employment Agreement Between The Company And Louis R.
Dilts, Dated August 22, 1991, previously filed as an Exhibit to the
Company's Report on Form 10-K for the year ended December 31, 1991,
is incorporated herein by this reference.
10.10 Agreement For The Termination Of Employment Between The Company And
Dr. Richard Anderson, Dated September 1, 1991, previously filed as
an Exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by this reference.
10.11 Agreement For The Termination Of Employment Between The Company And
Thomas V. Tilton, Dated September 1, 1991, previously filed as an
Exhibit to the Company's Report on Form 10-K for the year ended
December 31, 1991, is incorporated herein by this reference.
10.12 Contract for Performance of Services Between the Company and Glen
R. Justice, M.D., Dated May 15, 1991, is amended by letter dated
May 26, 1992, previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December 31, 1991, is
incorporated herein by this reference.
10.13 Contract for Performance of Services Between the Company and Sally
Ann Kraensel, Dated May 15, 1991, as amended by letter dated June
30, 1992, previously filed as an Exhibit to the Company Report on
Form 10-KSB for the year ended December 31, 1992, is incorporated
herein by this reference.
10.14 Employment Agreement between the Company and Edward L. Stephen,
D.V.M., dated January 15, 1993, previously filed as an Exhibit to
the Company Report on Form 10-KSB for the year ended December 31,
1992, is incorporated herein by this reference.
10.15 Employment Agreement between the Company and William M. Thompson,
III, M.D., dated February 22, 1993, previously filed as an Exhibit
to the Company Report on Form 10-KSB for the year ended December
31, 1992, is incorporated herein by this reference.
10.16 Employment Agreement between the Company and Harry Berk, dated
March 10, 1993, previously filed as an Exhibit to the Company
Report on Form 10-KSB for the year ended December 31, 1992, is
incorporated herein by this reference.
10.17 1994 Stock Option Plan, previously filed as an Exhibit to the
Company Report on Form 10-KSB for the year ended December 31, 1993,
is incorporated herein by this reference.
10.18 Independent Contract Agreement between the Company and Roger
Lallone doing business as Brookwood Biomed, previously filed as an
Exhibit to the Company Report on Form 10-KSB for the year ended
December 31, 1993, is incorporated herein by this reference.
10.19 Assignment Agreement between Roger Lallone, doing business as
Brookwood Biomedical, and the Company dated December 22, 1993,
previously filed as an Exhibit to the Company Report on Form 10-KSB
for the year ended December 31, 1993, is incorporated herein by
this reference.
10.20 Employment Agreement between the Company and That T. Ngo, dated
June 1, 1994.(1)
10.21 Employment Agreement between the Company and Robert R. Guerrero,
dated September 1, 1994.(1)
10.22 Employment Agreement between the Company and Harry R. Berk, dated
January 3, 1995.(1)
10.23 Operating Agreement of ICD, L.L.C.(1)
10.24 Letter Agreement between the Company and Briana Bio-Tech, Inc. and
AMDL Canada, Inc., dated February 7, 1995 (1)
29
<PAGE>
10.25 Sub-Lease Agreement between UniSyn Technologies, Inc., and the
Company, dated February 1, 1995, regarding the premises located at
14272 Franklin Avenue, Tustin, California.(1)
10.26 Nonstatutory Stock Option Agreement between the Company and Donald
E. Rounds, dated March 16, 1994.(1)
10.27 The Company's Stock Bonus Plan.(2)
10.28 Form of International Distribution Agreement of ICD, L.L.C.(2)
10.29 Employment Agreement Between the Company and Harry Berk, Dated
January 1, 1996.(2)
10.30 Form of Accrued Salary Payment Agreement Between the Company and
Various Employees and Former Employees Dated September 20, 1996.
10.31 Employment Agreement Between the Company and That T. Ngo, Dated
October 1, 1996.
10.32 Employment Agreement Between the Company and Ronald J. Moore, Dated
October 23, 1996.
10.33 Employment Agreement Between the Company and Harry Berk, Dated
January 1, 1997.
22 Subsidiaries.
27 Financial Data Schedule
- -----------------
(1) Previously filed as an Exhibit to the Company Report on Form 10-KSB for the
year ended December 31, 1994, is incorporated herein by this reference.
(2) Previously filed as an Exhibit to the Company Report on Form 10-KSB for the
year ended December 31, 1995, is incorporated herein by this reference.
Reports on Form 8-K
During the last quarter of the fiscal year ended December 31, 1996, the
Registrant filed no reports on form 8-K.
30
<PAGE>
SIGNATURES
In accordance with the requirements of Sections 13 or 15(d) of the Exchange
Act of 1934, as amended, the Registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
"Registrant"
AMDL, INC.
Dated: May 12, 1997 By: /s/ THAT T. NGO
-------------------------------------
That T. Ngo, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
<TABLE>
<S> <C> <C>
/s/ THAT T. NGO Chief Executive Officer, May 12, 1997
- ------------------------------- President and Director
That T. Ngo
/s/ HARRY R. BERK Vice President - Finance and May 12, 1997
- ------------------------------- Chief Financial Officer
Harry R. Berk
</TABLE>
Supplemental Information To Be Furnished With Reports Filed Pursuant To
Section 15(d) Of The Securities Exchange Act Of 1934, As Amended, By Non-
Reporting Issuers.
(c) No annual report or proxy material has been sent to security holders.
31
<PAGE>
INDEX TO FINANCIAL STATEMENTS
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F-1
Balance Sheets F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficit) F-4
Statements of Cash Flows F-7
Notes to Financial Statements F-8
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Shareholders of AMDL, Inc.:
We have audited the accompanying balance sheets of AMDL, INC. (a Delaware
corporation), a development stage company, as of December 31, 1996 and 1995, and
the related statements of operations and cash flows for each of the three years
ended December 31, 1996, 1995 and 1994 and for the period of inception (July 10,
1987) to December 31, 1996, and the related statements of stockholders' equity
(deficit) from inception to date. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AMDL, INC. as of December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years ended December 31, 1996, 1995 and 1994 and for the period from
inception (July 10, 1987) to December 31, 1996, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying
financial statements, the Company is a development stage company which has
experienced significant losses since inception and historically has no revenues
and had significant working capital and stockholders' deficits. These factors
and other factors discussed in Note 1 to the financial statements raise a
substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regard to these matters are described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
ARTHUR ANDERSEN LLP
Orange County, California
March 6, 1997
-F-1-
<PAGE>
AMDL, INC.
----------
(A development stage company)
-----------------------------
BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
-------------------------------------------
ASSETS
------
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,072,249 $ 726,406
Short-term investments 2,432,411 -
---------- -----------
Total current assets 3,504,660 726,406
---------- -----------
OTHER ASSETS 7,863 -
---------- -----------
$3,512,523 $ 726,406
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Notes payable $ 25,000 $ 281,500
Accounts payable and accrued expenses 192,736 250,753
Accrued payroll and related expenses 924,079 955,610
Due to related party - 43,646
Current portion of capital lease obligation 18,668 33,145
Accrued interest - 97,808
----------- -----------
Total current liabilities 1,160,483 1,662,462
CAPITAL LEASE OBLIGATION, net of
current portion - 20,902
----------- -----------
1,160,483 1,683,364
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, 10,000,000 shares
authorized, no shares issued or
outstanding at December 31, 1996 and 1995 - -
Common stock, $.001 par value-
50,000,000 shares authorized, 33,529,903
and 22,208,281 shares issued and outstanding
at December 31, 1996 and 1995, respectively 33,530 22,208
Common stock subscribed - 500,000 shares - 300,000
Additional paid-in capital 11,865,799 6,645,743
Deficit accumulated during the development stage (9,547,289) (7,924,909)
----------- -----------
2,352,040 (956,958)
----------- -----------
$ 3,512,523 $ 726,406
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
-F-2-
<PAGE>
AMDL, INC.
----------
(A development stage company)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994, AND THE PERIOD
--------------------------------------------------------------------
FROM INCEPTION (JULY 10, 1987) TO DECEMBER 31, 1996
---------------------------------------------------
<TABLE>
<CAPTION>
Inception
(July 10, 1987)
Year Ended Year Ended Year Ended To
December 31, December 31, December 31, December 31,
1996 1995 1994 1996
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ -
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Research and
development 863,875 574,845 900,781 4,986,824
General and
administrative 886,777 1,159,182 662,222 5,738,769
----------- ----------- ----------- -----------
1,750,652 1,734,027 1,563,003 10,725,593
----------- ----------- ----------- -----------
LOSS FROM
OPERATIONS 1,750,652 1,734,027 1,563,003 10,725,593
----------- ----------- ----------- -----------
OTHER INCOME
(EXPENSE):
Interest expense - (47,558) (41,586) (561,016)
Interest income 85,134 - - 87,784
Other 43,138 324,115 - 1,651,536
----------- ----------- ----------- -----------
128,272 276,557 (41,586) 1,178,304
----------- ----------- ----------- -----------
Net Loss $(1,622,380) $(1,457,470) $(1,604,589) $(9,547,289)
=========== =========== =========== ===========
NET LOSS PER SHARE $ (0.06) $ (0.07) $ (0.09)
=========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 29,134,105 20,041,548 16,988,511
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-F-3-
<PAGE>
AMDL, INC.
----------
(A development stage company)
-----------------------------
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------
FROM INCEPTION (JULY 10, 1987) TO DECEMBER 31, 1996
---------------------------------------------------
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
Common Stock Subscribed Additional during the
------------------- -------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
---------- ------- ------------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, Inception (July, 10, 1987) - $ - - $ - $ - $ - $ -
Common stock issued 1,275 1,275 - - - - 1,275
Net loss - - - - - (37,323) (37,323)
---------- ------- ------------ ------ -------- ----------- -----------
BALANCE, December 31, 1988 1,275 1,275 - - - (37,323) (36,048)
Restatement due to merger 8,865,307 7,591 - - 48,201 - 55,792
Common stock issued 1,347,880 1,348 - - 54,994 - 56,342
Net loss - - - - - (241,479) (241,479)
---------- ------- ------------ ------ -------- ----------- -----------
BALANCE, December 31, 1989 10,214,462 10,214 - - 103,195 (278,802) (165,393)
Common stock issued for cash at $0.114 451,000 451 - - 217,676 - 218,127
Common stock issued at $0.25 to three
officers in lieu of salary 300,000 300 - - 74,700 - 75,000
Common stock issued for services at $1.00 30,000 30 - - 29,970 - 30,000
Common stock issued for services at $0.50 14,000 14 - - 6,986 - 7,000
Common stock issued for cash at $0.25 230,000 230 - - 57,270 - 57,500
Common stock issued at $0.04 to a member
of the board of directors 90,000 90 - - 3,510 - 3,600
Common stock issued for cash at $0.04 15,000 15 - - 585 - 600
Common stock issued for services at $0.25 500,000 500 - - 124,500 - 125,000
Common stock issued for consulting
services at $1.00 50,000 50 - - 49,950 - 50,000
Net loss - - - - - (107,415) (107,415)
---------- ------- ------------ ------ -------- ----------- -----------
BALANCE, December 31, 1990 11,894,462 11,894 - - 668,342 (386,217) 294,019
Common stock issued for consulting
services at $0.12 50,000 50 - - 5,950 - 6,000
Common stock issued at $0.25 for payment
of loan 10,000 10 - - 2,490 - 2,500
Net loss - - - - - (1,044,395) (1,044,395)
---------- ------- ------------ ------ -------- ----------- -----------
BALANCE, December 31, 1991 11,954,462 11,954 - - 676,782 (1,430,612) (741,876)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-F-4-
<PAGE>
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
Common Stock Subscribed Additional during the
------------------- -------------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
---------- ------- ------------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued in exchange for
notes payable and accrued interest
at $0.25 1,363,019 $ 1,363 - $ - $ 339,393 $ - $ 340,756
Exercise of warrants at $0.001 1,422 1 - - - - 1
Exercise of warrants at $0.500 57,140 58 - - 28,512 - 28,570
Common stock issued to related party
pursuant to private placement at $0.894 640,000 640 - - 571,520 - 572,160
Warrants issued in connection with debt
offering - - - - 312,000 - 312,000
Warrants issued for services - - - - 518,285 - 518,285
Net loss - - - - - (2,083,984) (2,083,984)
---------- ------- ------------ ------ ---------- ----------- -----------
BALANCE, December 31, 1992 14,016,043 14,016 - - 2,446,492 (3,514,596) (1,054,088)
Common stock issued to related party and
others pursuant to a private placement
at $0.894 1,478,185 1,479 - - 1,320,012 - 1,321,491
Exercise of warrants at $0.894 11,184 11 - - 9,989 - 10,000
Common stock issued in exchange for
notes payable and accrued interest
at $0.894 243,147 243 - - 217,135 - 217,378
Net loss - - - - - (1,348,254) (1,348,254)
---------- ------- ------------ ------ ---------- ----------- -----------
BALANCE, December 31, 1993 15,748,559 15,749 - - 3,993,628 (4,862,850) (853,473)
Common stock issued to related party
pursuant to a private placement
at $0.894 500,000 500 - - 446,500 - 447,000
Exercise of warrants at $0.25 150,000 150 - - 37,350 - 37,500
Common stock issued to various creditors
at $0.894 158,728 158 - - 141,744 - 141,902
Exercise of options at $0.05 535,000 535 - - 26,215 - 26,750
Exercise of options at $1.00 16,000 16 - - 15,984 - 16,000
Common stock issued for note payable and
accrued interest at $0.894 346,011 346 - - 305,249 - 305,595
Exercise of warrants at $1.00 40,000 40 - - 39,960 - 40,000
Common stock issued to related party
pursuant to a private placement
at $0.25 180,000 180 - - 44,820 - 45,000
Net loss - - - - - (1,604,589) (1,604,589)
---------- ------- ------------ ------ ---------- ----------- -----------
BALANCE, December 31, 1994 17,674,298 17,674 - - 5,051,450 (6,467,439) (1,398,315)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-F-5-
<PAGE>
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
Common Stock Subscribed Additional during the
------------------- ----------------- Paid-in Development
Shares Amount Shares Amount Capital Stage Total
---------- ------- -------- -------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock issued for cash at $0.25 1,000,000 $ 1,000 - $ - $ 249,000 $ - $ 250,000
Exercise of warrants at $0.45 500,000 500 - - 224,500 - 225,000
Common stock issued for cash at $0.30 1,000,000 1,000 - - 299,000 - 300,000
Exercise of warrants at $0.50 500,000 500 - - 249,500 - 250,000
Exercise of warrants at $0.986 32,737 33 - - 32,233 - 32,266
Exercise of options at $0.05 65,000 65 - - 3,185 - 3,250
Common stock issued for cash at $0.752 133,000 133 - - 99,867 - 100,000
Exercise of warrants at $0.25 10,000 10 - - 2,490 - 2,500
Common stock issued for cash at $0.40 750,000 750 - - 299,250 - 300,000
Common stock issued in exchange for
convertible notes
payable and accrued interest at $0.25 543,246 543 - - 135,268 - 135,811
Common stock subscribed at $0.60
(Note 11) - - 500,000 300,000 - - 300,000
Net loss - - - - - (1,457,470) (1,457,470)
---------- ------- -------- --------- ----------- ----------- -----------
BALANCE, December 31, 1995 22,208,281 22,208 500,000 300,000 6,645,743 (7,924,909) (956,958)
Common stock issued for cash at $0.35 4,500,000 4,500 - - 1,570,500 - 1,575,000
Common stock issued for cash at $0.40 1,000,000 1,000 - - 399,000 - 400,000
Common stock issued for cash at $0.475 4,000,000 4,000 - - 1,896,000 - 1,900,000
Exercise of warrants at $0.62 1,125,000 1,125 - - 696,375 - 697,500
Common stock issued for cash at $0.35 500,000 500 - - 174,500 - 175,000
Exercise of warrants at $0.25 10,500 11 - - 2,614 - 2,625
Exercise of warrants at $0.25 19,500 20 - - 4,855 - 4,875
Common stock issued to various
creditors at $0.894 30,162 30 - - 26,903 - 26,933
Common stock issued at $0.25 for
converted notes payable
and accrued interest 136,460 136 - - 33,979 - 34,115
Warrants issued for services - - - - 115,330 - 115,330
Common stock subscribed at $0.60 (Note 11) - - (500,000) (300,000) 300,000 - -
Net loss - - - - - (1,622,380) (1,622,380)
---------- ------- -------- --------- ----------- ----------- -----------
BALANCE, December 31, 1996 33,529,903 $33,530 - $ - $11,865,799 $(9,547,289) $ 2,352,040
========== ======= ======== ========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-F-6-
<PAGE>
AMDL, INC.
----------
(A development stage company)
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------
AND THE PERIOD FROM INCEPTION (JULY 10, 1987) TO DECEMBER 31, 1996
------------------------------------------------------------------
<TABLE>
<CAPTION>
Inception
(July 10, 1987)
Year Ended Year Ended Year Ended To
December 31, December 31, December 31, December 31,
1996 1995 1994 1996
--------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,622,380) $(1,457,470) $(1,604,589) $(9,547,289)
Adjustments to reconcile net loss to net cash used in operating
activities-
Depreciation and amortization 10,000 267,265 78,289 497,288
Amortization of deferred interest - - - 312,000
Common stock subscribed - 300,000 - 300,000
Stock issued for services - - - 293,416
Warrants issued for services 115,330 - - 661,529
Increase in due from related party - - 28,175 -
Increase in other assets (7,863) - - (7,863)
Increase (decrease) in accounts payable and accrued expenses (31,084) (28,052) 331,856 218,191
Increase (decrease) in accrued payroll and related expenses (31,531) 87,610 498,355 924,079
Increase (decrease) in due to related party (43,646) (7,860) 51,506 -
Increase (decrease) in accrued interest (97,808) 30,925 (25,700) -
----------- ----------- ----------- -----------
Net cash used in operating activities (1,708,982) (807,582) (642,108) (6,348,649)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term investments, net (2,432,411) - - (2,432,411)
Purchases of equipment (10,000) (18,517) (40,000) (225,930)
Expenditures for patents - - - (154,682)
----------- ----------- ----------- -----------
Net cash used in investing activities (2,442,411) (18,517) (40,000) (2,813,023)
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under notes payable, net (222,385) (44,500) 102,500 59,115
Repayments under capital lease obligation (35,379) (32,404) (21,298) (98,008)
Proceeds from issuance of common stock 4,755,000 1,598,827 489,589 10,215,747
Net effect of merger with CVI - - - 57,067
----------- ----------- ----------- -----------
Net cash provided by financing activities 4,497,236 1,521,923 570,791 10,233,921
----------- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 345,843 695,824 (111,317) 1,072,249
CASH AND CASH EQUIVALENTS, beginning of period 726,406 30,582 141,899 -
----------- ----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,072,249 $ 726,406 $ 30,582 $ 1,072,249
=========== =========== =========== ===========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations of $22,140 was incurred for the purchase of
equipment during the year ending December 31, 1994.
Total interest paid was $99,073 for the year ended December 31, 1996.
During the years ended December 31, 1996, 1995 and 1994, the Company issued
136,460, 543,246 and 346,011 shares of common stock, respectively to cancel
notes payable and related accrued interest. During the year ended December 31,
1994, the Company issued 346,011 warrants to cancel notes payable and related
accrued interest. The fair market value of the stock and warrants issued was
less than the amount of the canceled notes payable and accrued interest. During
the year ended December 31, 1996, the Company issued 225,000 warrants to non-
employees for services. The fair value of the warrants issued was $115,330.
During the years ended December 31, 1996 and 1994, the Company repaid $26,933
and $320,158, respectively of accounts payable through the issuance of common
stock.
The accompanying notes are an integral part of these financial statements.
-F-7-
<PAGE>
AMDL, INC.
----------
(A development stage company)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996
-----------------
1. Nature of Business and Summary of Significant Accounting Policies
-----------------------------------------------------------------
a. Organization and Nature of Business
-----------------------------------
AMDL, INC. (formerly 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
biomedical company applying proprietary technology to develop novel
diagnostic tests for use in the early detection, diagnosis, prognosis and
treatment-monitoring of cancer and other diseases.
On January 16, 1989, the officers/stockholders 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/stockholders of the Company
exchanged all of their shares of common stock for 113,000,000 shares
(shares indicated do not reflect the reverse stock split on a 1-for-15
basis in 1989) 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 stockholders 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. No goodwill arose as a result of the
transaction.
In connection with the transaction, the Company received approximately
$57,000 in cash, which was used for working capital and to expand the
business.
-F-8-
<PAGE>
In February 1995, the Company and AMDL Canada Inc. (AMDL Canada), a Canadian
corporation and a wholly-owned subsidiary of Briana Bio Tech., Inc. (a
significant shareholder of the Company), executed a joint venture agreement
forming, ICD, L.L.C. (ICD), to pursue world-wide marketing relationships
excluding Canada and the United States. The operating agreement established 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 (see Note 7 for
additional discussion of the marketing rights fee). The operations of ICD
during fiscal years 1996 and 1995 were insignificant and are therefore not
consolidated in the accompanying financial statements.
b. Development Stage Company
-------------------------
The Company is in the development stage and has not generated any revenues
from operations and has no assurance of any future revenues. The Company
will require substantial additional funding for continuing research and
development, obtaining regulatory approval, and for the commercialization
of its products. 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.
Management has taken action to address these matters. They include:
- Retention of experienced management personnel with particular skills in
the commercialization of similar products.
- Attainment of technology to develop additional diagnostic products for
detecting cancer and other diseases.
- Raising additional funds through the sale of equity securities at terms
below market price quotations.
The Company's products, to the extent they may be deemed medical devices or
biologics, are governed by the Federal Food, Drug and Cosmetics Act and by
the regulations of state agencies and various foreign government agencies.
The Company's proposed diagnostic test systems for use with humans are
subject to certain clearance procedures administered by the above
regulatory agencies. 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.
From December 31, 1995 to December 31, 1996, the Company's cash, cash
equivalents and short-term investments increased to approximately
$3,505,000 as a result of sales of the Company's securities. The Company
is also hopeful of obtaining revenues from product sales, but there is no
commitment by any person for purchase of any of the Company's products. In
the absence of significant sales and profits, the Company may seek to raise
additional funds to meet its working capital needs principally through the
additional sales of its securities. However, 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.
-F-9-
<PAGE>
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
c. Cash Equivalents
----------------
The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents.
d. Short-term Investments
----------------------
The Company invests excess cash in four different money market funds with a
large bank and brokerage firm. The funds invest primarily in debt
securities such as commercial paper, time deposits, certificates of
deposit, bankers acceptances, and marketable direct obligations of the
United States Treasury. These funds are carried at cost, which
approximates fair market value.
e. 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
(approximately $156,000) on its equipment.
f. 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 on its
patents. During 1996, all expenditures for patents were expensed.
g. Common Stock Issued for Services Rendered
-----------------------------------------
The Company periodically issues common stock for services rendered. Common
stock issued is valued at the estimated fair market value, 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 value for purposes of valuing the common stock.
h. Accounting for Stock Based Compensation
---------------------------------------
The Company accounts for stock-based compensation issued to employees using
the intrinsic value based method as prescribed by APB Opinion No. 25
"Accounting for Stock Issued to Employees" (APB No. 25). Under the
intrinsic value based method, compensation is the excess, if any, of the
fair value of the stock at the grant date or other measurement date over
the amount an employee must pay to acquire the stock. Compensation, if
any, is recognized over the applicable service period, which is usually the
vesting period.
-F-10-
<PAGE>
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation" (SFAS No. 123). This standard, if fully adopted, changes the
method of accounting for employee stock-based compensation plans to the
fair value based method. For stock options and warrants, fair value is
determined using an option pricing model that takes into account the stock
price at the grant date, the exercise price, the expected life of the
option or warrant and the annual rate of quarterly dividends. Compensation
expense, if any, is recognized over the applicable service period, which is
usually the vesting period.
The adoption of the accounting methodology of SFAS No. 123 is optional and
the Company has elected to continue accounting for stock-based compensation
issued to employees using APB No. 25; however, pro forma disclosures, as if
the Company adopted the cost recognition requirements under SFAS No. 123,
are required to be presented (see Note 8).
i. Net Loss Per Share
------------------
Net 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 net loss per share is antidilutive and thus not included in the
net loss per share calculation.
j. Income Taxes
------------
The Company accounts for income taxes using the liability method as
prescribed by Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes".
k. Licensing Agreements
--------------------
The Company recognizes as other income the sale of options to purchase the
marketing rights of its proposed cancer detection products when cash is
collected or collection is certain and all obligations have been met. The
proceeds from the sale of the options are nonrefundable.
l. Use of Estimates
----------------
The preparation of financial statements in conformity with 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 revenues and expenses during the reporting period. Actual
results could differ from those estimates.
m. Reclassifications
-----------------
Certain reclassifications have been to the 1995, 1994 and inception to date
financial statements in order to conform to classifications used in the
current year.
-F-11-
<PAGE>
2. Notes Payable
-------------
Notes payable at December 31, 1996 and 1995, consists 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 notes, principal and accrued interest, were
convertible into shares of common stock of the
Company upon request of the note holder at a price
of $1.31 per share. The notes were repaid during 1996. $ - $ 43,500
Unsecured notes payable to individuals and
corporations, interest accruing at twelve percent per
annum, principal and interest due in March 1993.
During 1996, $13,000 was repaid. 25,000 38,000
Convertible demand note payable to an officer and
director of the Company. The note was noninterest
bearing until June 1992, after which interest
accrued at eight percent. The note, principal and
accrued interest, was convertible into shares of
common stock of the Company upon request of the
note holder at a price of $0.42 per share. The note
was repaid during 1996. - 60,000
Convertible demand notes payable to an employee of the
Company. The notes were noninterest bearing until
July and August 1992, after which interest accrued at
eight percent. The notes, principal and accrued
interest, were convertible into shares of common stock
of the Company upon request of the note holder at a
price of $0.42 per share. The notes were repaid during
1996. - 50,000
Convertible notes payable to an employee of the Company.
The one year notes were interest bearing at ten percent
per annum and were due July and August 1995. The notes,
principal and accrued interest, were convertible, upon
request of the note holder, on or before maturity, into
61,521 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. The notes were repaid during 1996. - 50,000
</TABLE>
-F-12-
<PAGE>
<TABLE>
<S> <C> <C>
Convertible notes payable to an officer and director
of the Company. The one year notes were interest
bearing at ten percent per annum and were due October
and November 1995. The notes, principal and accrued
interest, were convertible, upon request of the note
holder, on or before maturity, into 88,000 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. One
note, principal and interest, was converted into
47,333 shares of common stock at $0.25 per share plus
warrants (pursuant to the note payable agreement)
during 1996. The other note was repaid during
1996. $ - $ 20,000
Convertible note payable to an officer and director
of the Company, interest accruing at twelve percent
per annum, principal and interest due December 1995.
The note, principal and accrued interest, was
converted upon request of the note holder into 89,127
shares of common stock at $0.25 per share (pursuant
to the note payable agreement) during 1996. - 20,000
------- --------
$25,000 $281,500
======= ========
</TABLE>
3. Capital Lease Obligations
-------------------------
The Company leases various equipment which is accounted for as capital leases.
A schedule of future minimum lease payments together with the net present value
of the minimum lease payments as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Minimum lease payments for the year ending
December 31, 1997 $19,696
Less--Amount representing interest -
approximately 10% (1,028)
-------
Present value of minimum lease payments $18,668
=======
</TABLE>
-F-13-
<PAGE>
4. Commitments and Contingencies
-----------------------------
a. Operating Lease
---------------
In October 1996, the Company executed a three year real estate lease of
8,277 square feet of office, laboratory and manufacturing space at its
facility in Tustin, California. The lease commenced December 1, 1996 and
ends November 30, 1999. The minimum lease payments are as follows:
<TABLE>
<CAPTION>
Year
----
<S> <C>
1997 $ 94,358
1998 94,359
1999 86,495
--------
$275,212
========
</TABLE>
Rent expense was approximately $106,000, $92,000 and $68,000 for the years
ended December 31, 1996, 1995 and 1994, respectively
b. Employment Agreements
---------------------
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. Among other provisions, Mr. Berk 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 1999. The options vest
over a one year period. In January 1997, the Company entered into a
subsequent one year employment agreement with Mr. Berk with the same base
salary of $80,000 and options to purchase an additional 100,000 shares of
the Company's common stock at the exercise price of $0.44 per share
exercisable until December 2000. The options vest over a one year period.
The agreement contains a severance provision which provides for a severance
payment equal to three months salary.
In 1994, the Company entered into a two year employment agreement with Dr.
That T. Ngo, President and Chief Executive Officer. Among other
provisions, the agreement specified an annual base salary of $100,000 and
provided 650,000 options at $1.375 per share vesting over a two year period
and expires June 1999. In October 1996, the Company entered into a
subsequent two year employment with Dr. Ngo. The agreement specifies an
annual base salary of $222,000. Among other provisions, Dr. Ngo received
options to purchase up to 1,500,000 shares of the Company's common stock at
the exercise price of $0.657 per share exercisable until September 2001.
The options vest over a two year period. The agreement contains a
severance provision which provides a severance payment equal to six months
salary.
-F-14-
<PAGE>
In October 1996, the Company entered into a two year employment agreement
with Dr. Ronald J. Moore, Vice President of Operations. The agreement
specifies an annual base salary of $80,000. Among other provisions, Dr.
Moore received options to purchase up to 100,000 shares of the Company's
common stock at the exercise price of $0.563 per share exercisable until
September 2001. The options vest over a two year period. The agreement
contains a severance provision which provides a severance payment equal to
two months salary.
The stock options granted in the above employment agreements did not result
in compensation expense as the exercise price of the stock options was
equal to or greater than the quoted market price of the Company's stock on
the date of grant.
c. Accrued Payroll and related expenses
------------------------------------
Accrued payroll and related expenses consists primarily of amounts incurred
during the years ended December 31, 1995, 1994 and 1993 by officers and
other employees and former employees (collectively referred to as
"employees"). The Company has made payment arrangements with most of these
employees by agreeing to pay each employee their proportionate share of
five percent of sales revenues, if any, of the Company, but not less than
$500 per month per employee. In addition, if an employee currently
employed by the Company is terminated under certain circumstances, the
minimum monthly payment would be increased. All amounts must be paid no
later than February 28, 2001.
d. Legal Proceedings
-----------------
In February 1996, the Company instituted litigation against two former
employees for misappropriation of trade secrets and breach of contract.
Both employees asserted counterclaims against the Company for alleged
breach of contract and are claiming compensatory and punitive damages.
In March 1997, the Company settled with one of the employees by paying the
former employee $50,000. The $50,000 is included in accrued payroll and
related expenses in the accompanying balance sheets at December 31, 1996.
Litigation with respect to the other employee is still pending. The
Company is vigorously prosecuting its claim and defending the cross-
complaint. Management does not believe that the settlement will be
material to the financial statements.
-F-15-
<PAGE>
5. 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, 1996. At
December 31, 1996, the Company has available for federal and state income tax
purposes, net operating loss carryforwards of approximately $7,950,159 and
$3,993,586 which expire in the years 2003 through 2011 and 1997 through 2001,
respectively. The net operating loss carryforward is also available for
financial reporting purposes. Events which may cause limitations in the amount
of net operating losses that the Company may utilize in any one year include,
but are not limited to, a cumulative ownership change of more than 50 percent
over a three year period. At December 31, 1996, the effect of such limitations
if imposed, has not been determined.
6. Licensing Agreements
--------------------
Effective January 1989 and revised in May and October 1989, the Company entered
into a licensing agreement with AMDL Canada to market and sell the Company's
proposed cancer diagnostic test kit product in Canada, directly or through
agents, distributors, etc. The Company has the right to receive $1.00 for each
of 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, nonrefundable
licensing fee in 1989.
ICD is responsible for marketing DR-70 worldwide with the exception of the
United States and Canada (the Company and AMDL Canada retains the marketing
rights for the United States and Canada, respectively). ICD has signed nine
exclusive agreements as of December 31, 1996 for the distribution of DR-70 to
the following countries: Indonesia, Brazil, China, Philippines, Poland,
Argentina and Chile, Mexico, Taiwan and Malaysia.
7. Related-Party Transactions
--------------------------
In 1995, the Company received $324,115 from Briana Bio-Tech., Inc. (parent of
AMDL Canada) as partial payment for the $1,000,000 marketing rights fee (with
respect to the ICD joint venture, see Note 1). In 1996, advances of $43,138
were made on behalf of the Company by Briana Bio-Tech Inc. in connection with
pursuing regulatory approval and subsequent longitudinal studies. This amount
was applied against the $1,000,000 marketing rights fee. These amounts are
included in other income in the accompanying statements of operations.
On January 13, 1997, the Company provided AMDL Canada with written notice of
default in payment of a marketing fee affecting percentage ownership interest in
ICD. In accordance with terms of the joint venture agreement, AMDL Canada's
percentage ownership interest in ICD has been reduced from 35 percent to 12.85
percent. The Company's percentage ownership interest in ICD has subsequently
been increased from 65 percent to 87.15 percent. This change had no material
effect on the financial statements for the Company for the year ended December
31, 1996.
-F-16-
<PAGE>
Axel J. Kutscher became a Director of the Company in January 1997. Mr. Kutscher
is a sales manager and Vice President of Euro-American GMBH (Euro-America), a
German investment banking firm investing in start-up biomedical companies.
During the year ended December 31, 1996 and 1995, the Company received
$4,572,500 and $1,625,000 from the sale of 10,625,000 and 4,250,000 shares,
respectively, of common stock to Euro-America.
8. Stock Based Compensation Plans
------------------------------
In 1992, the Company adopted the 1992 Stock Option Plan (the 1992 Plan). Under
the 1992 Plan, incentive stock options and nonqualified options may be granted
to officers and key employees of the company for the purchase of up to 2,622,500
shares of the Company's common stock. Additionally, specific option grants may
also be made. Expiration dates for the grants may not exceed 10 years from the
date of grant. In October 1994, the Company terminated the 1992 Plan. However,
380,000 options to purchase common stock were outstanding under the 1992 Plan
and the Company elected not to cancel these options prior to their expiration
dates.
In 1995, the Company adopted its Stock Bonus Plan (the 1995 Plan) pursuant to
which the Company may select employees or consultants to receive a bonus of
shares of the Company's common stock. The 1995 Plan is administered by the
Board of Directors (the Administrators). The Administrators shall have the
authority to select the persons to receive a bonus of shares of common stock,
the number of shares of common stock to be issued, and the time in which the
common stock is to be issued. The total number of shares authorized is 500,000.
The Stock Bonus Plan will terminate in June 1997. As of December 31, 1996 no
stock has been granted under the 1995 Plan.
Two other stock option plans, the 1994 Stock Option Plan and the 1988 Stock
Option Plan, were terminated on March 7, 1997. No options were issued under
either plan.
In addition to the 1992 and 1995 Plans discussed above, the Company issues stock
options pursuant to various employment agreements (see Note 4) and other
compensatory arrangements. The following is a status of the stock options
outstanding at December 31, 1994, 1995 and 1996 and the changes during the years
then ended:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------ ------------------
Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg
(000) Ex Price (000) Ex Price (000) Ex Price
------ --------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beg.
of year 3,910 $1.022 7,033 $0.801 4,853 $0.563
Granted 1,700 0.670 - - 2,715 1.078
Exercised - - (65) 0.050 (535) 0.050
Expired/forfeited - - (3,058) 0.533 - -
------ ------ ------ ------ ----- ------
Outstanding, end
of year 5,610 $0.915 3,910 $1.022 7,033 $0.801
====== ====== ====== ====== ===== ======
Exercisable at
end of year 4,850 $0.958 3,760 $1.008 6,583 $0.761
====== ====== ====== ====== ===== ======
Wtd avg fair value
of options granted $0.507
======
</TABLE>
-F-17-
<PAGE>
3,725,000 of the options outstanding at December 31, 1996 have exercise prices
between $0.25 and $1.00, with a weighted average exercise price of $0.718 and a
weighted average remaining contractual life of 3.7 years. 2,965,000 stock
options are exercisable and have a weighted average exercise price of $0.737.
The remaining 1,885,000 options have exercise prices between $1.01 and $1.50,
with a weighted average exercise price of $1.305 and a weighed average remaining
contractual life of 1.6 years. All of these options are exercisable.
The fair value of each option granted during 1996 to employees and directors is
estimated using the Black-Scholes option-pricing model on the date of grant
using the following assumptions: (i) no dividend yield, (ii) average volatility
of 96.7 percent, (iii) weighted-average risk-free interest rate of approximately
6.3 percent, and (iv) expected life of 5 years.
Had compensation cost for the Company's 1996 options and been determined
consistent with SFAS No. 123, the Company's net loss and net loss per share for
the year ended December 31, 1996 would approximate the pro forma amounts below:
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- -----------
<S> <C> <C>
Net loss $(1,622,380) $(2,118,584)
=========== ===========
Net loss per
common share $ (0.06) $ (0.07)
=========== ===========
</TABLE>
9. Warrants
--------
The following represents a summary of the warrants outstanding for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------- ------------------
Shares Wtd Avg Shares Wtd Avg Shares Wtd Avg
(000) Ex Price (000) Ex Price (000) Ex Price
------ -------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beg.
of year 5,282 $0.793 5,790 $0.818 4,473 $0.828
Granted 5,272 0.898 1,605 0.580 1,373 0.795
Exercised (1,145) 0.614 (1,053) 0.484 (56) 1.000
Expired/forfeited (7,183) 0.930 (1,060) 0.918 - -
------ ------- ------ ------ ----- ------
Outstanding, end
of year 2,226 $0.632 5,282 $0.793 5,790 $0.818
====== ====== ======= ====== ===== ======
</TABLE>
The warrants outstanding at December 31, 1996 have exercise prices between
$0.250 and $1.375 with a weighted average exercise price of $0.704. All of the
warrants are exercisable and have a weighted average remaining contractual life
of 1.1 years.
The outstanding warrants at December 31, 1996 are held by consultants and other
service providers, shareholders, and current and former note holders. Pursuant
to SFAS No. 123, compensation expense of $115,330 has been recorded for warrants
issued to non-employees beginning January 1, 1996.
-F-18-
<PAGE>
10. Common Stock Issued
-------------------
During the year ended December 31, 1996, the Company received $4,050,000 cash
proceeds from the sale of 10,000,000 shares of common stock, subject to certain
restrictions, and warrants to purchase 5,000,000 additional shares of common
stock between $0.62 and $0.70 per share. The Company received $697,500 for the
exercise of 1,125,000 of these warrants. The expiration dates of these warrants
were between March 31 and November 26, 1996.
11. Common Stock Subscribed
-----------------------
In 1995, the Company and AMDL Canada agreed that in consideration of AMDL
Canada's cancellation of its royalty interest in sales to the United Kingdom for
which it paid $300,000 (under a previous licensing agreement), the Company would
issue 500,000 shares of the Company's common stock. AMDL Canada had agreed to
reserve these shares for incentives to executive officers of the Company under
the 1995 Stock Bonus Plan (see Note 8). For the year ended December 31, 1995,
the Company recorded an expense of $300,000 for this transaction since the
amount had previously been recognized as income in 1993 when the rights were
originally sold. An offsetting entry of $300,000 was recorded to common stock
subscribed as the shares had not been issued as of December 31, 1995.
During 1996, the Company and AMDL Canada agreed not to issue the 500,000 shares
of the Company's common stock to AMDL Canada. As a result, the Company credited
additional paid-in capital for $300,000 as of December 31, 1996.
-F-19-
<PAGE>
Exhibit 10.30
Form of Accrued Salary Payment Agreement Between the Company
and Various Employees and Former Employees Dated September 20, 1996
<PAGE>
AGREEMENT
This Agreement (the "Agreement") is made effective the 20th day of September,
1996 by and between AMDL, Inc., a Delaware corporation ("AMDL" or the "Company")
and those persons listed on the attached "Schedule A", each of whom is
currently, or was previously, an employee of the Company (individually the
"Employee", and collectively the "Employees").
RECITALS
--------
1. AMDL is in the development stage, and has not yet received revenues from
sales of its proposed products.
2. The Employees have assisted AMDL in preparing to market AMDL's products and
are familiar with AMDL's products, its history and its current and past
financial condition.
3. The Employees have provided service to AMDL, but have not received full
compensation for their services. AMDL recognizes the services performed by
the Employees and the amounts due to the Employees for their services in
the amounts listed opposite their respective names in Schedule A which is
attached hereto and incorporated herein by this reference (the "Salary
Amount"). Those persons who are currently employed by the Company are
referred to hereinafter and on Schedule A as "Current Employees". The
terms "Employee" and "Employees" refer to both "Current Employees" and
Donald E. Rounds and William M. Thompson, who were previously employed by
the Company.
4. AMDL and the Employees mutually desire to arrange for a payment program by
AMDL to the Employees, which is designed to compensate fully the Employees
for their past services and to assist AMDL in bringing its products to
market.
5. AMDL is a member of ICD, L.L.C. ("ICD"). AMDL expects that its initial
marketing efforts will be made through ICD.
NOW, THEREFORE, to that end and in consideration of the terms and conditions of
this Agreement, as well as the mutual benefits to be derived from the Agreement,
AMDL and the Employees agree as follows:
AGREEMENT
1. In partial satisfaction of the Salary Amount owed to each Employee, AMDL
shall make a payment of $3,500 to each Employee on or about September 30,
1996. AMDL shah thereafter make payments of $500 per month to each
Employee, payable in accordance with the Company's customary payroll
practices. The first payment shall be made on or about October 15. 1996.
2. The Employees shall also be entitled to receive five percent of any
distributions received by the Company from ICD or from the sale directly by
the Company of marketing rights, of test kits, or from any other sources of
revenue of the Company. The term "revenue" as used in this Agreement shall
be interpreted in accordance with generally accepted accounting principles.
In the event of any disagreement, the determination of an independent
accounting firm selected by the Company shall be determinative. Each
Employee shall be entitled to that percentage of the proceeds set forth
opposite his or her respective name on Schedule A. Distributions will be
made for any calendar month in which such proceeds are available.
Distributions will be made within 20 days of the end of each month,
commencing October 20, 1996 for the month of September, 1996.
<PAGE>
3. The Company may take such steps as it deems necessary or appropriate for
the withholding of any taxes which the Company is required by any law or
regulation or any governmental authority, whether federal, state or local.
domestic or foreign, to withhold in connection with any payments made
pursuant to this Agreement.
4. Nothing contained in this Agreement shall confer upon the Employee any
right with respect to a continuance of employment by, or operation or
affiliation with, or relationship to, the Company, or interfere in any way
with the Company's right at any time, to terminate the Employee's
affiliation with, or relationship to, the Company.
5. Each of the Current Employees shall be entitled to receive the "Minimum
Monthly Payment Pursuant to Section 5" from the Company in the amounts set
forth opposite his or her respective name on Schedule A, in the event the
Company terminates the Current Employee's employment with the Company for
any reason other than the following events: (i) the resignation of the
Current Employee; (ii) the Current Employee is convicted of any crime; or
(iii) the Current Employee engages in conduct amounting to fraud,
dishonesty or other acts of moral turpitude inimical to the interests of
the Company or any acts or omissions to act which are determined by the
Board of Directors of the Company to constitute gross negligence, or
flagrant misconduct, or the continuous failure to follow instructions of
the Board of Directors of the Company. The amount to be paid to such
Current Employee pursuant to this Section 5 shall be the greater of the
amount specified in Schedule A or the amount the Current Employee would
have otherwise received pursuant to Section 2 of this Agreement; provided
that the Current Employee shall not then be entitled to receive any amounts
pursuant to Section l of this Agreement. For example, if in any particular
month a Current Employee were entitled to receive $1,000 pursuant to
Section 2, and the minimum payment amount pursuant to Schedule A were
$2,000, then the Current Employee would be entitled to receive a total of
$2,000 for that month. If the Current Employee were entitled to receive
$2,500 pursuant to Section 2, and $2,000 as a minimum payment pursuant to
Schedule A, then the total amount to be paid in that month would be $2,500.
6. If an Employee has been granted an option, warrant or other similar right
to purchase the Company's common stock, the Employee may elect to apply any
or all of the Salary Amount then owed to the Employee by the Company to the
purchase price of the Company's common stock pursuant to exercise of the
option, warrant or other similar right. By way of example, if the then
Salary Amount owed to the Employee pursuant to this Agreement was $50,000
and the Employee had an option to purchase 50,000 shares at $1 per share,
the Employee could elect to apply the $50,000 owed to the purchase price of
the 50,000 shares. In that event, the Company would issue a certificate for
50,000 shares to the Employee, no other amounts would be due to the
Employee pursuant to this Agreement and the Company would make no further
payments to the Employee pursuant to this Agreement. The Employee's
election pursuant to this Section 6 is subject to compliance with
applicable law, as determined by the Company, including securities and tax
laws. In no event will the Company be required to issue any shares unless
assurances adequate to the Company have been provided of compliance with
any securities law restrictions and tax withholding requirements.
7. During the term of this Agreement no Employee shall be entitled to receive
an amount greater than the "Salary Amount" listed opposite his or her
respective name on Schedule A.
8. The term of this Agreement shall extend until the earlier to occur of
payments of all the "Salary Amounts" listed on Schedule A or February 28,
2001. In the event that the Company has not paid all of the "Salary
Amounts" to the Employees by February 28, 2001, then the Company shall pay
all remaining balances owed to the Employees by that date.
<PAGE>
9. The Employees, and each of them, do hereby release and forever discharge
each of the Company, its officers, directors, agents, attorneys and
employees, of and from all manner of actions, causes of action, suits,
debts, covenants, contracts, agreements, damages. judgments, liabilities,
losses, costs, expenses and claims of any nature whatsoever, in law or
equity, whether or not now or hereafter known, suspected or claimed which
the Employee shall or may have or allege against the Company, its officers,
directors, agents, attorneys and employees in connection with the
Employee's employment by. and services rendered to, the Company on or
before September 20, 1996. This release shall not affect the right of any
Employee to commence an action pursuant to this Agreement against the
Company for any breach by the Company of its obligations pursuant to this
Agreement. This release shall not affect any outstanding options or
warrants granted to Employees to purchase the Company's common stock or any
outstanding employment agreements for amounts to be paid for services to be
rendered to the Company on or after September 20, 1996.
10. The Employees, and each of them, recognize that they may have some claim,
demand, or cause of action against the Company, its officers, directors,
agents, attorneys and employees, of which they are totally unaware and
unsuspecting which they are relinquishing by execution of this Agreement.
It is the intention of the Employees that it will deprive them of each such
claim and prevent them from asserting it. In furtherance of this intention,
the Employees, and each of them, expressly waive any and all rights
conferred upon them by the provisions of Section 1542 of the California
Civil Code or any similar law of any state or territory of the United
States or any foreign country. The text of Section 1542 is as follows:
"1542. Certain claims not affected by General Release. A General
Release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the Release,
which if known by him must have materially affected his settlement
with the debtor."
11. The waiver by the Company or any Employee of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a
waiver of any subsequent breach by that party.
12. This document contains the entire agreement between the parties and
supersedes all oral agreements, if any, and may not be changed orally, but
only by agreement in writing, signed by the Company and Employee.
13. This Agreement, its validity, interpretation and enforcement, shall be
governed by the laws of the state of California.
14. Any notice pursuant to this Agreement shall be validly given or served if
that notice is made in writing and delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the addresses
set forth below each party's signature to this Agreement.
15. This Agreement shall be binding upon and inure to the benefit of the
undersigned parties and their respective legal representatives, heirs,
successors and assigns.
16. If any controversy or claim shall arise with regard to the performance or
interpretation of any of the terms of this Agreement, the parties shall use
their best efforts to settle any such dispute. If the dispute cannot be
resolved by the parties, then upon 10 days prior written notice from the
Employee to the Company or the Company to the Employee setting forth the
alleged breach or other dispute to be resolved, the action shall be
submitted to an arbitrator in Orange County, California, selected in
accordance with the rules of the American Arbitration Association. All
costs shall be shared equally by the parties to the dispute, excluding
attorneys' fees. The decision of the arbitrator shall be binding and the
arbitrator shall have discretion to award attorneys' fees to the prevailing
party in the event the arbitrator determines that the nonprevailing party
acted in bad faith.
<PAGE>
17. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one
and the same instrument. The failure of one or more Employees to enter into
this Agreement shall not affect the validity and enforceability of this
Agreement as between the Company and those Employees who entered into this
Agreement.
18. Each Employee has had the opportunity to consult his or her own legal
counsel and other advisors and has entered into this Agreement after due
consideration of his or her respective rights.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the
day and year first above written.
AMDL, INC.
By: ___________________________________
Authorized Officer
14272 Franklin Avenue, Suite 106
Tustin, California 92680-7017
_______________________________________
(Signature of Employee)
_______________________________________
(Print name of Employee)
_______________________________________
Street Address
<PAGE>
Exhibit 10.31
Employment Agreement Between the Company and
That T. Ngo Dated October 1, 1996
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of October 1,
1996 by and between AMDL, Inc. (the "Company") and That T. Ngo ("Employee").
WITNESSETH:
WHEREAS, the Company and Employee desire to enter into this Agreement to assure
the Company of the continuing and exclusive service of Employee and to set forth
the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein, the parties agree as follows:
1. Term. The Company agrees to employ Employee and Employee hereby accepts
----
such employment, in accordance with the terms of this Agreement, commencing
October 1, 1996 and ending September 30, 1998, unless this Agreement is
earlier terminated as provided herein.
2. Services and Exclusivity of Services. So long as this Agreement shall
------------------------------------
continue in effect. Employee shall devote Employee's full business time,
energy and ability exclusively to the business, affairs and interests of
the Company and its affiliates or subsidiaries ("Affiliates") and matters
related thereto, shall use Employee's best efforts and abilities to promote
the Company's interests and shall perform the services contemplated by this
Agreement in accordance with policies established by and under the
direction of the Board of Directors of the Company
Employee may serve as a director or in any other capacity of any business
enterprise whose activities involve or relate to the business of the Company,
provided in each case that such service is expressly approved by the Board of
Directors and does not in any material way interfere with Employee's duties
hereunder. The Company also hereby consents to the service of Employee as a
director of Sangui Biotech Inc. for so long as Sangui Biotech is not engaged in
business competitive with the company's business, and Employee does not share
any confidential or proprietary information with Sangui Biotech.
Employee represents to the Company that Employee has no other outstanding
commitments inconsistent with any of the terms of this Agreement or the services
to be rendered hereunder.
3. Duties and Responsibilities. Employee shall serve as President and Chief
---------------------------
Executive Officer of the Company for the duration of this Agreement. In the
performance of Employee's duties, Employee shall report directly to the
Board of Directors of the Company and shall be subject to the direction of
the Board and to such limits on Employee's authority as the Board may from
time to time impose.
Employee agrees to observe and comply with the rules and regulations of the
Company as adopted by the Board respecting the performance of Employee's duties
and agrees to carry out and perform orders, directions and policies of the
Company and its Board as they may be, from time to time, stated either orally or
in writing. Employee shall have such corporate power and authority as shall
reasonably be required to enable Employee to perform the duties required in any
office that may be held.
4. Compensation.
------------
(a) Base Compensation. During the term of this Agreement, the Company agrees
-----------------
to pay Employee a base salary at the rate of $18,500 per month, payable
in accordance with the Company's practices in effect from time to time
(the "Base Salary").
<PAGE>
(b) Additional Benefits. Employee shall also be entitled to all rights and
-------------------
benefits for which Employee is otherwise eligible under any bonus plan,
incentive, participation or extra compensation plan, pension plan,
profit-sharing plan, life, medical, dental, disability, or insurance plan
or policy or other plan or benefit that the Company or its Affiliates may
provide for Employee as from time to time in effect, during the term of
this Agreement (collectively, "Additional Benefits").
(c) Stock Options. The Company shall grant to Employee options to acquire one
-------------
million five hundred thousand (1,500,000) shares of the Company's common
stock with an exercise price equal to the closing bid price, as reported
by the NASD Electronic Bulletin Board, on the date of approval of this
Agreement by the Board of Directors. Such options are to be exercised
within 5 years of the date of grant. Seven hundred and fifty thousand
(750,000) of the options will vest immediately and will be registered by
the Company on Form S-8, with the remaining seven hundred and fifty
thousand (750,000) options vesting at the rate of ninety thousand
(90,000) options per calendar quarter for the next seven calendar
quarters and one hundred and twenty thousand (120,000) in the eighth
calendar quarter, and the Company will grant Employee piggyback
registration rights covering the shares issuable upon exercise of such
options.
(d) Perquisites. Employee shall be entitled to 4 weeks of paid vacation each
-----------
twelve-month period, which shall accrue on a pro rata basis from the date
employment commences under this Agreement. Vacation time will continue to
accrue so long as Employee's total accrued vacation does not exceed 8
weeks. Should Employee's accrued vacation time reach 8 weeks (the accrual
cap), Employee will cease to accrue further vacation until Employee's
accrued vacation time fails below this level.
(e) Overall Qualification. The Company reserves the right to modify, suspend
---------------------
or discontinue any and all of the above referenced benefit plans,
practices, policies and programs at any time whether before or after
termination of employment without notice to or recourse by Employee.
5. Termination. This Agreement and all obligations hereunder, except the
-----------
obligations contained in Sections 7, 8, 9, 10, 11 and 12 which shall survive
any termination hereunder, shall terminate upon the earliest to occur of any
of the following:
(a) Expiration of Term. The expiration of the term provided for in Section 1
------------------
or the voluntary termination by Employee or retirement from the Company
in accordance with the normal retirement policies of the Company.
(b) Death or Disability of Employee. For the purposes of this Agreement.
-------------------------------
disability shall mean the absence of Employee performing Employee's
duties with the Company on a full-time basis for a period of 6 months, as
a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to Employee or Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably). If Employee shall become disabled, Employee's employment
may be terminated by written notice from the Company to Employee.
(c) For Cause. The Company may terminate Employee's employment and all of
---------
Employee's rights to receive Base Salary and any Additional Benefits
hereunder for cause. For purposes of this Agreement, the term "cause"
shall be defined as any of the following:
(i) Employee's material breach of any of the duties and
responsibilities under this Agreement (other than as a result of
incapacity due to Employee's disability);
(ii) Employee's conviction by, or entry of a plea of guilty or nolo
contendere in, a court of competent jurisdiction for a felony or
misdemeanor (other than minor traffic violations or similar
offenses) or any crime which in the Company's sole discretion
materially adversely affects the Company and/or its reputation in
the community;
<PAGE>
(iii) Employee's commission of an act of fraud upon the Company or any
personal dishonesty, incompetence, negligence, or willful or
negligent misconduct;
(iv) Employee's willful failure or refusal to perform Employee's duties
or responsibilities under this Agreement or Employee's material
violation of any duty of loyalty to the Company or a breach of
Employee's fiduciary duty.
Notwithstanding the foregoing, Employee shall not be terminated for cause
pursuant to clauses (i) through (iv) of this Section 5(c) unless and until
Employee has received notice of a proposed termination for cause and Employee
has had an opportunity to be heard before at least a majority of members of the
Board Employee shall be deemed to have had such an opportunity if given written
or telephonic notice at least 72 hours in advance of a meeting.
(d) Without Cause. Notwithstanding any other provision of this Section 5, the
-------------
Board shall have the right to terminate Employee's employment with the
Company without cause at any time, provided that the Company shall pay the
Employee severance pay equal to 6 months of Base Salary.
(e) Exclusive Remedy. Employee agrees that the payments expressly provided and
----------------
contemplated by this Agreement shall constitute the sole and exclusive
obligation of the Company in respect of Employee's employment with and
relationship to the Company and that the payment thereof shall be the sole
and exclusive remedy for any termination of Employee's employment.
Employee covenants not to assert or pursue any other remedies, at law or
in equity, with respect to any termination of employment.
6. Business Expenses. During the term of this Agreement, to the extent that such
-----------------
expenditures satisfy the criteria under the Internal Revenue Code for
deductibility by the Company (whether or not fully deductible by the Company)
for federal income tax purposes as ordinary and necessary business expenses,
the Company shall reimburse Employee promptly for reasonable business
expenditures (including travel, entertainment, parking, business meetings,
and professional dues but not the costs of or dues associated with
maintaining club memberships) made and substantiated in accordance with
policies, practices and procedures established from time to time by the
Company
7. Confidential Information. Employee acknowledges that the nature of Employee's
------------------------
engagement by the Company is such that Employee shall have access to
information of a confidential and/or trade secret nature which has great
value to the Company and which constitutes a substantial basis and foundation
upon which the business of the Company is based. Such information includes
financial, manufacturing and marketing data, techniques, processes, formulas,
developmental or experimental work, work in process, methods, trade secrets
(including, without limitation, customer lists and lists of customer
sources), or any other secret or confidential information relating to the
products, services, customers, sales or business affairs of the Company or
its Affiliates (the "Confidential Information"). Employee shall keep all such
Confidential Information in confidence during the term of this Agreement and
at any time thereafter and shall not disclose any of such Confidential
Information to any other person, except to the extent such disclosure is (i)
necessary to the performance of this Agreement and in furtherance of the
Company's best interests, (ii) required by applicable law, (iii) lawfully
obtainable from other sources, or (iv) as authorized in writing by the
Company. Upon 'termination of Employee's employment with the Company,
Employee shall deliver to the Company all documents. records, notebooks, work
papers, and all similar material containing any of the foregoing information,
whether prepared by Employee, the Company or anyone else.
8. Inventions and Patents. Except as may be limited by Section 2870 of the
----------------------
California Labor Code, all inventions, designs, improvements, patents,
copyrights and discoveries conceived by Employee during the term of this
Agreement which are useful in or directly or indirectly related to the
business of the Company or to any experimental work carried on by the
Company, shall be the property of the Company. Employee will promptly and
fully disclose to the Company all such inventions, designs, improvements,
patents, copyrights and discoveries (whether developed individually or with
other persons) and shall take all steps necessary and reasonably required to
assure the Company's ownership thereof and to assist the Company in
protecting or defending the Company's proprietary rights therein. Note:
Certain governmental contracts may require assignment of these rights to the
appropriate governmental agency.
<PAGE>
Employee acknowledges hereby receipt of written notice from the Company
pursuant to California Labor Code Section 2872 that this Agreement (to the
extent it requires an assignment or offer to assign rights to any invention
of Employee) does not apply fully to an invention which qualifies fully
under California Labor Code Section 2870.
9. Non-Competition. In order to protect the Confidential Information, Employee
---------------
agrees that during the term of Employee's employment, and for a period of
one year thereafter, Employee shall not directly, or indirectly, whether as
an owner, partner, shareholder, agent, employee, creditor, or otherwise,
promote, participate or engage in any activity or other business competitive
with the Company's business or the business of any present Affiliate of the
Company.
10. Non-Solicitation of Customers. Employee agrees that for a period of one year
-----------------------------
after the termination of employment with the Company, Employee will not, on
behalf of Employee or on behalf of any other individual, association or
entity, call on any of the customers of the Company or any Affiliate of the
Company for the purpose of soliciting or inducing any of such customers to
acquire (or providing to any of such customers) any product or service
provided by the Company or any Affiliate of the Company, nor will Employee
in any way, directly or indirectly, as agent or otherwise, in any other
manner solicit, influence or encourage such customers to take away or to
divert or direct their business to Employee or any other person or entity by
or with which Employee is employed, associated, affiliated or otherwise
related.
11. Noninterference with Employees. In order to protect the Confidential
------------------------------
Information, Employee agrees that during the term hereof and for a period of
one year thereafter, Employee will not, directly or indirectly, induce or
entice any employee of the Company or its Affiliates with access to or
possession of Confidential Information. to leave such employment or cause
anyone else to leave such employment.
12. Assistance in Patent Applications. Employee agrees to assist the Company in
---------------------------------
obtaining United States or foreign letters patent and copyright
registrations covering inventions assigned hereunder to the Company and that
Employee's obligation to assist the Company shall continue beyond the
termination of Employee's employment but the Company shall compensate
Employee at a reasonable rate for time actually spent by Employee at the
Company's request with respect to such assistance. If the Company is unable
because of Employee's mental or physical incapacity or for any other reason
to secure Employee's signature to apply for or to pursue any application for
any United States or foreign letters patent or copyright registrations
covering inventions assigned to the Company, then Employee hereby
irrevocably designates and appoints the Company and its duly authorized
officers and agents as Employee's agent and attorney-in-fact to act for and
in Employee's behalf and stead to execute and file any such applications and
to do all other lawfully permitted acts to further the prosecution and
issuance of letters patent or copyright registrations thereon with the same
legal force and effect as if executed by Employee. Employee hereby waives
and quitclaims to the Company any and all claims, of any nature whatsoever,
which Employee now or hereafter may have for infringement of any patent or
copyright resulting from any such application for letters patent or
copyright registrations assigned hereunder to the Company. Employee will
further assist the Company in every way to enforce any copyrights or patents
obtained including, without limitation, testifying in any suit or proceeding
involving any of the copyrights or patents or executing any documents deemed
necessary by the Company, all without further consideration but at the
expense of the Company. If Employee is called upon to render such assistance
after the termination of Employee's employment, then Employee shall be
entitled to a fair and reasonable per diem fee in addition to reimbursement
of any expenses incurred at the request of the Company.
13. Indemnity. To the fullest extent permitted by applicable law and the bylaws
---------
of the Company, as from time to time in effect, the Company shall indemnify
Employee and hold Employee harmless for any acts or decisions made in good
faith while performing services for the Company, and the Company shall use
its best efforts to obtain coverage for Employee (provided the same may be
obtained at reasonable cost) under any liability insurance policy or
policies now in force or hereafter obtained during the term of this
Agreement that cover other officers of the Company having comparable or
lesser status and responsibility. To the same extent, the Company will pay
all expenses, including reasonable attorneys' fees and costs of court
approved settlements, actually and necessarily incurred by Employee in
connection with the defense of any action, suit or proceeding
<PAGE>
and in connection with any appeal thereon, which has been brought against
Employee by reason of Employee's service as an officer or agent of the
Company or of any Affiliate of the Company.
14. Remedies. The parties hereto agree that the services to be rendered by
--------
Employee pursuant to this Agreement, and the rights and privileges granted
to the Company pursuant to this Agreement, are of a special, unique,
extraordinary and intellectual character, which gives them a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that a breach by Employee of any of the terms of
this Agreement will cause the Company great and irreparable injury and
damage. Employee hereby expressly agrees that the Company shall be entitled
to the remedies of injunction, specific performance and other equitable
relief to prevent a breach of this Agreement by Employee. This Section 15
shall not be construed as a waiver of any other rights or remedies which the
Company may have for damages or otherwise.
15. Severability. If any provision of this Agreement is held to be unenforceable
------------
for any reason, it shall be adjusted rather than voided, if possible, to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to
the extent possible.
16. Succession. This Agreement shall inure to the benefit of and be binding upon
----------
the Company and its successors and assigns and any such successor or
assignee shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" and "assignee" shall
include any person, firm, corporation or other business entity which at any
time, whether by purchase, merger or otherwise, directly or indirectly
acquires the stock of the Company or to which the Company assigns this
Agreement, by operation of law or otherwise. The obligations and duties of
Employee hereunder are personal and otherwise not assignable. Employee's
obligations and representations under this Agreement will survive the
termination of Employee's employment, regardless of the manner of such
termination.
17. Notices. Any notice or other communication provided for in this Agreement
-------
shall be in writing and sent if to the Company to its principal office at:
AMDL, Inc.
14272 Franklin Avenue, Suite 106
Tustin, CA 92680-7017
Attention: Mr. Tom Tilton
or at such other address as the Company may from time to time in writing
designate, and if to Employee at such address as Employee may from time to
time in writing designate. Each such notice or other communication shall be
effective (i) if given by telecommunication, when transmitted to the
applicable number so specified in this Section 18 and a verification of
receipt is received, (ii) if given by mail, three days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when actually
delivered at such address.
18. Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties relating to the subject matter hereof and supersedes any prior
agreements, undertakings, commitments and practices relating to Employee's
employment by the Company.
19. Amendments. No amendment or modification of the terms of this Agreement
----------
shall be valid unless made in writing and duly executed by both parties.
20. Waiver. No failure on the part of any party to exercise or delay in
------
exercising any right hereunder shall be deemed a waiver thereof or of any
other right, nor shall any single or partial exercise preclude any further
or other exercise of such right or any other right.
21. Governing Law. This Agreement, and the legal relations between the parties,
-------------
shall be governed by and construed in accordance with the laws of the State
of California.
<PAGE>
22. Attorneys' Fees. If any litigation shall occur between Employee and the
---------------
Company which litigation arises out of or as a result of this Agreement or
the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, each party in such litigation shall bear
its own expenses, including attorneys' fees and costs.
23. Waiver of Jury Trial.
--------------------
THE COMPANY AND EMPLOYEE HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE EMPLOYMENT RELATIONSHIP BETWEEN THEM OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR SUCH RELATIONSHIP.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court or that relate to the subject matter
of this Agreement, including without limitation, contract claims, tort
claims, breach of duty claims, wrongful termination claims, claims for
discharge in violation of public policy, claims of discrimination and all
other common law and statutory claims, to the maximum extent permitted by
law. The Company and Employee each acknowledge that this waiver is a
material inducement to enter into this Agreement, that each has already
relied on the waiver in entering into this Agreement, and that each will
continue to rely on the waiver in their related future dealings. THE COMPANY
AND EMPLOYEE FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT MODIFICATIONS TO OR
EXTENSIONS OF THIS AGREEMENT. In the event of litigation, this Agreement may
be filed as a written consent to a trial by the court.
24. Withholding. All compensation payable hereunder, including salary and other
-----------
benefits, shall be subject to applicable taxes, withholding and other
required, normal or elected employee deductions.
25. Counterparts. This Agreement and any amendment hereto may be executed in one
------------
or more counterparts. All of such counterparts shall constitute one and the
same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
26. Headings. Section and other headings contained in this Agreement are for
--------
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
27. Representation By Counsel; Interpretation. The Company and Employee each
-----------------------------------------
acknowledge that each party to this Agreement has been represented by
counsel in connection with this Agreement and the matters contemplated by
this Agreement. Accordingly, any rule of law, including but not limited to
Section 1654 of the California Civil Code, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against
the party that drafted it, has no application and is expressly waived. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the intent of the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY
AMDL, Inc.
By:______________________________________
William M. Thompson, M.D.
Its Chairman of the Board of Directors
EMPLOYEE
_________________________________________
That T. Ngo
<PAGE>
SCHEDULE A
----------
LIST OF COUNTIES, CITIES AND OTHER TERRITORIES
IN WHICH COMPETITION IS PROHIBITED
[Counties [or portions thereof] within California]
- --------------------------------------------------
[To be completed]
[Cities [or parts thereof] in California but outside the Counties specified
- ---------------------------------------------------------------------------
above]
- ------
[To be completed]
[Counties, Cities or Regions of other States]
- ---------------------------------------------
[To be completed]
[Cities or Regions of Foreign Countries]
- ----------------------------------------
[To be completed]
<PAGE>
Exhibit 10.32
Employment Agreement Between the Company and
Ronald J. Moore Dated October 23, 1996
<PAGE>
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between AMDL,
Inc. (the "Company") and Ronald J. Moore, Ph.D. ("Employee"), as of the ____ day
of October 1996.
WITNESSETH:
WHEREAS, the Company and Employer desire to enter into this Agreement to
assure the Company of the continuing and exclusive service of Employee and to
set forth the terms and conditions of Employee's employment with the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
I. TERM.
----
The Company hereby employs Employee and Employee hereby accepts such
employment, upon the terms and conditions hereinafter set forth, from October
16, 1996, to and including September 30, 1998. Upon expiration of this
Agreement, if Employee remains employed by the Company and no subsequent
employment agreement is entered into by and between the Employee and the
Company, he shall be employed as an at-will employee, terminable at any time,
with or without cause.
II. DUTIES.
------
A. Employee shall serve during the course of his employment as Vice
President of Operations of the Company, shall supervise the Research and
Development, the Manufacturing, and the Quality Control and Quality Assurance
Departments, and shall have such other duties and responsibilities as the Chief
Executive Officer of the Company shall determine from time to time. Employee
agrees to observe and comply with the rules and regulations of the Company as
adopted by the Board of Directors of the Company (the "Board") respecting the
performance of Employee's duties and agrees to carry out and perform orders,
directions and policies of the Company and its Board as they may be, from time
to time, stated either orally or in writing. Employee shall have such corporate
power and authority as shall reasonably be required to enable Employee to
perform the duties required in any office that may be held.
B. Employee agrees to devote all of his time, energy and ability to the
business of the Company. Employer shall use his best efforts and abilities to
promote the Company's interests and shall perform the services contemplated by
this Agreement in accordance with policies established by and under the
direction of the Board.
C. Without the prior express written authorization of the CEO, or Board,
Employee shall not, directly or indirectly, during the term of this Agreement:
(a) render services to any other person or firm for compensation or (b) engage
in any activity competitive with or adverse to the Company's business, whether
alone, as a partner, officer, director, employee or significant investor of or
in any other entity. (An investment of greater than 5% of the outstanding
capital or equity securities of an entity shall be deemed significant for these
purposes.)
D. Employee represents to the Company that, except for activities
disclosed in Exhibit B attached hereto, Employee has no other outstanding
commitments inconsistent with any of the terms of this Agreement or the services
to be rendered hereunder.
E. For the term of this Agreement, Employee shall report to the Chief
Executive Officer of the Company or his designee.
<PAGE>
I. COMPENSATION.
------------
A. The Company will pay to Employee a base salary at the rate of Eighty
Thousand Dollars and No Cents ($80,000.00) per year. Such salary shall be
earned monthly and shall be payable in periodic installments no less frequently
than monthly in accordance with the Company's customary practices. Amounts
payable shall be reduced by standard withholding and other authorized
deductions. The Company will review Employee's salary at least annually. The
Company may in its discretion increase Employee's salary but it may not reduce
it during the time he serves as Vice President of Operations.
B. Annual Bonus, Incentive, Savings and Retirement Plans. Employee shall
-----------------------------------------------------
be entitled to participate in all annual bonus, incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company.
C. Welfare Benefit Plans. Employee and/or his family, as the case may
---------------------
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, employee life,) to the
extent applicable generally to other peer executives of the Company.
D. During the term of his employment, Employee shall be reimbursed for
reasonable expenses incurred by him for the benefit of the Company. Any direct
payment of reimbursement of expenses shall be made only upon presentation of an
itemized accounting conforming in form and content to standards prescribed by
the Internal Revenue Service relative to the substantiation of the deductibility
of business expenses.
E. Fringe Benefits. Employee shall be entitled to fringe benefits in
---------------
accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.
F. Vacation. Employee shall be entitled to three (3) weeks of paid
--------
vacation each twelve-month period, which shall accrue on a pro rata basis from
--- ----
the date employment commences under this Agreement. Vacation time will continue
to accrue so long as Employee's total accrued vacation does exceed six (6)
weeks. Should Employee's accrued vacation time reach six (6) weeks (the accrual
cap), Employee will cease to accrue further vacation until Employee's accrued
vacation time falls below this level. Employee shall be entitled to paid
vacation in accordance with the plans, policies, programs and practices as in
effect generally with respect to other peer executives of the Company.
G. Stock Options. The Company shall grant to Employee options to acquire
-------------
one hundred thousand (100,000) shares of the Company's common stock with an
exercise price equal to the closing bid price, as reported by the NASD
Electronic Bulletin Board, on the date of approval of this Agreement by the
Board. Twelve thousand five hundred, (12,500), of these options shall vest upon
completion of the first three, (3), calendar months of employment hereunder. An
additional twelve thousand five hundred, (12,500), options shall vest at the end
of each succeeding three, (3), month period of continuous employment hereunder,
until the entire one hundred thousand, (100,000), options have vested to
employee. Such options are to be exercised within three (3) years of the date
of vesting. The options and all other rights hereunder, to the extent not
exercised, shall terminate and become null and void if the Employee is
discharged for Cause under Section IV-B of this Agreement, upon such termination
of services or employment. If the Employee or the Company terminates this
Agreement for any reason other than discharge for Cause, the Employee may
exercise the options to the extent the options were exercisable at the date of
such termination.
H. The Company reserves the right to modify, suspend or discontinue any
and all of the above plans, practices, policies and programs at any time without
recourse by Employee so long as such action is taken generally with respect to
other similarly situated peer executives and does not single out Employee.
<PAGE>
II. TERMINATION.
-----------
A. Death or Disability. Employee's employment shall terminate
-------------------
automatically upon Employee's death. If the Company determines in good faith
that the Disability of Employee has occurred (pursuant to the definition of
Disability set forth below), it may give to Employee written notice in
accordance with Section XVII of its intention to terminate Employee's
employment. In such event, Employee's employment with the Company shall
terminate effective upon receipt of such notice by Employee, provided that, upon
receipt, Employee shall not have returned to full-time performance of his
duties. For purposes of this Agreement, "Disability" shall mean a physical or
mental impairment which substantially limits a major life activity of Employee
and which renders Employee unable to perform the essential functions of his
position, even with reasonable accommodation which does not impose an undue
hardship on the Company. The Company reserves the right, in good faith, to make
the determination of disability under this Agreement based upon information
supplied by Employee and/or his medical personnel, as well as information from
medical personnel (or others) selected by the Company or its insurers.
"Incapacity" as used herein shall be limited only to such Disability which
substantially prevents the Company from availing itself of the services of
Employee.
B. Cause. The Company may terminate Employee's employment for Cause.
-----
For purposes of this Agreement, "Cause" shall mean that the Company, acting in
good faith based upon the information then known to the Company, determines that
Employee has engaged in or committed: willful misconduct; gross negligence;
theft, fraud or other illegal conduct; refusal or unwillingness to perform his
duties; sexual harassment; conduct which reflects adversely upon, or making any
remarks disparaging of, the Company, its Board, officers, directors, advisors or
employees or its affiliates or subsidiaries; insubordination; any willful act
that is likely to and which does in fact have the effect of injuring the
reputation, business or a business relationship of the Company; violation of any
fiduciary duty; violation of any duty of loyalty; and breach of any term of this
Agreement.
C. Other than Cause or Death or Disability. The Company may terminate
---------------------------------------
Employee's employment at any time, with or without cause.
D. Obligations of the Company Upon Termination.
-------------------------------------------
1. Death or Disability. If Employee's employment is terminated by
-------------------
reason of Employee's Death or Disability, this Agreement shall terminate without
further obligations to Employee or his legal representatives under this
Agreement, other than for (a) payment of the sum of (i) Employee's annual base
salary through the date of termination to the extent not theretofore paid and
(ii) any compensation previously deferred by Employee (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in clauses (i) and
(ii) shall be hereinafter referred to as the "Accrued Obligations"), which shall
be paid to Employee or his estate or beneficiary, as applicable, in a lump sum
in cash within 30 days of the date of termination; and (b) payment to Employee
or his estate or beneficiary, as applicable, any amounts due pursuant to the
terms of any applicable welfare benefit plans.
2. Cause. If Employee's employment is terminated by the Company for
-----
Cause, this Agreement shall terminate without further obligations to Employee
other than for the timely payment of Accrued Obligations. If it is subsequently
determined that the Company did not have Cause for termination under this
Section IV-D-2, then the Company's decision to terminate shall be deemed to have
been made under Section IV-D-3 and the amounts payable thereunder shall be the
only amounts Employee may receive for his termination.
3. Other than Cause or Death or Disability. If the Company
---------------------------------------
terminates Employee's employment for other than Cause or Death or Disability,
this Agreement shall terminate without further obligations to Employee other
than (a) the timely payment of Accrued Obligations and (b) payment to Employee
of a lump sum of two (2) months salary in the amount of Thirteen Thousand Three
Hundred Thirty-Four Dollars and No Cents ($13,334.00), less standard
withholdings and other authorized deductions except that:
Employee shall be given a performance evaluation within six (6) months
of execution of this Agreement. Based upon the results of Employee's
performance evaluation, the Company may terminate Employee's employment at that
time, with no further obligations other than his Accrued Obligations.
<PAGE>
4. Exclusive Remedy. Employee agrees that the payments contemplated
----------------
by this Agreement shall constitute the exclusive and sole remedy for any
termination of his employment and Employee covenants not to assert or pursue any
other remedies, at law or in equity, with respect to any termination of
employment.
III. ARBITRATION.
-----------
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Civil Procedure Code (S)(S) 1282-1284.2. In the event either party
institutes arbitration under this Agreement, the party prevailing in any such
litigation shall be entitled, in addition to all other relief, to reasonable
attorneys' fees relating to such arbitration. The nonprevailing party shall be
responsible for all costs of the arbitration, including but not limited to, the
arbitration fees, court reporter fees, etc.
IV. NONCOMPETITION.
--------------
A. Employee agrees that during the term of this Agreement or for a period
of one year thereafter, he will not, directly or indirectly, without the prior
written consent of the Board, provide consultative service with or without pay,
own, manage, operate, join, control, participate in, or be connected as a
stockholder, partner, or otherwise with, any business, individual, partner,
firm, corporation, or other entity which is then in competition with the
business of the Company or any present affiliate of the Company. It is not the
intent of this provision to prevent Employee from obtaining employment in the
diagnostic industry in the event that his employment with Company ceases.
However, Employee hereby expressly represents to Company that he will not seek
employment or pursue a business for the purpose of directly competing with
Company after his employment with Company ceases. Company has relied upon such
representation in entering into this Agreement.
B. It is expressly agreed that the Company will or would suffer
irreparable injury if Employee were to compete with the business of the Company
or any subsidiary or affiliate of the Company in violation of this Agreement and
that the Company would by reason of such competition be entitled to injunctive
relief in a court of appropriate jurisdiction. Employee consents and stipulates
to the entry of such injunctive relief in such a court prohibiting him from
competing with the Company or any subsidiary or affiliate of the Company in
violation of this Agreement.
V. ANTISOLICITATION.
----------------
Employee promises and agrees that during the term of this Agreement he will
not influence or attempt to influence customers of the Company or any of its
present or future subsidiaries or affiliates, either directly or indirectly, to
divert their business to any individual, partnership, firm, corporation or other
entity then in competition with the business of the Company, or any subsidiary
or affiliate of the Company.
VI. SOLICITING EMPLOYEES.
--------------------
Employee promises and agrees that he will not, for a period of one year
following termination of his employment or the expiration of this Agreement,
directly or indirectly, solicit any of the Company employees who earned annually
Twenty-Five Thousand Dollars and No Cents ($25,000.00) or more as a Company
employee during the last six months of his or her own employment to work for any
business, individual, partnership, firm, corporation, or other entity then in
competition with the business of the Company or any subsidiary or affiliate of
the Company.
VII. PROPRIETARY INFORMATION AND INVENTIONS.
--------------------------------------
A. Employee agrees to the terms and conditions set forth in the AMDL,
Inc. Proprietary Information and Inventions Agreement (the "Proprietary
Agreement"), a copy of which is attached hereto as Exhibit A and which has been
executed concurrently herewith.
<PAGE>
VIII. SUCCESSORS.
----------
A. This Agreement is personal to Employee and shall not, without the
prior written consent of the Company, be assignable by Employee.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
IX. WAIVER.
------
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
X. MODIFICATION.
------------
This Agreement may not be amended or modified other than by a written
agreement executed by Employee and the Chief Executive Officer or his successor
or immediate superior.
XI. SAVINGS CLAUSE.
--------------
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
XII. COMPLETE AGREEMENT.
------------------
This Agreement constitutes and contains the entire agreement and final
understanding concerning Employee's employment with the Company and the other
subject matters addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of their agreement.
It supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable against either party. This is a fully
integrated agreement.
XIII. GOVERNING LAW.
-------------
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
XIV. CONSTRUCTION.
------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XV. COMMUNICATIONS.
--------------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to Employee at 14272
Franklin Ave., Suite 106, Tustin, CA 92780-7017. Either party may change the
address at which notice shall be given by written notice given in the above
manner.
<PAGE>
XVI. EXECUTION.
---------
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
XVII. LEGAL COUNSEL.
-------------
Employee and the Company recognize that this is a legally binding contract
and acknowledge and agree that they have had the opportunity to consult with
legal counsel of their choice.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
AMDL, INC. Ronald J. Moore, Ph.D.
By:_________________________ By:____________________________
That T. Ngo, Ph.D. Ronald J. Moore, Ph.D.
Its: Chief Executive Officer
<PAGE>
Exhibit 10.33
Employment Agreement Between the Company and
Harry Berk Dated January 1, 1997
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into this
1st day of January 1997, by and between AMDL, Inc.. a Delaware corporation (the
"Company") and Harry Berk ("Berk").
In consideration of the mutual covenants, promises and agreements herein
contained, the Company and Berk hereby covenant, promise and agree to and with
each other as follows:
1. Employment. The Company shall employ Berk and Berk shall be employed
----------
by the Company upon the terms and conditions set forth in this Agreement.
2. Positions and Duties of Employment. Berk shall be required to devote
----------------------------------
substantially all his business time to the furtherance of his duties to the
Company. Subject to the direction of the President and the Board of Directors,
Berk shall perform and discharge well and faithfully the duties which may be
assigned to him from time to time by the Company in connection with the conduct
of the Company's business. While serving in any corporate capacities, Berk shall
have the responsibilities, duties, obligations, rights, benefits and requisite
authority as is customary for his positions and as may be determined by the
President.
3. Term. The term of this Agreement shall commence on the date of this
----
Agreement and terminate on December 31, 1997, unless earlier terminated as
provided below.
4. Compensation. Berk shall receive the following as compensation:
------------
(a) During the term of this Agreement, Berk shall receive a monthly
salary of $6,667. The Company, through action of the Company's President, may at
any time during the term hereof increase Berk's salary up to a maximum of ten
percent for the remainder of the term. Any greater increase shall be subject to
Board of Director approval.
(b) The Company is considering adopting an incentive compensation
bonus plan for its senior executives and other key personnel. If the Company
adopts such a plan, Berk shall be entitled to participate in such plan and to
receive additional amounts as an incentive compensation bonus. If a plan is
adopted by the Company, it is anticipated that the plan will provide for bonuses
based upon a percentage of the Company's annual net income. Berk acknowledges
that the Company presently has no net income and has never achieved net income
from operations. He further acknowledges that the Company presently has no
incentive compensation bonus plan, and that such plan to be adopted must be
approved by the Board of Directors of the Company.
(c) The Company shall, at the Company's sole cost and expense, provide
Berk and spouse coverage in any group plans or agreements maintained by the
Company relating to health insurance or other related benefits in accordance
with their respective terms.
(d) Berk shall be entitled to sick leave, holidays and four week's
vacation for each full year of his employment by the Company to be taken in
accordance with the regular policies of the Company. Berk's total accrued
vacation shall not exceed four weeks and any accrued vacation in excess of four
weeks shall be forfeited unless taken prior to the expiration of the term of
this agreement.
(e) Any payment which the Company shall make to Berk pursuant to this
Agreement shall be reduced by any amounts required to be withheld with respect
to those amounts under and for the purposes of any of the Company's employee
benefit plans in which Berk may be participating, or under present and future
social security, income tax and other applicable laws or regulations.
(f) During the term of his employment, Berk shall be reimbursed for
reasonable expenses incurred by him for the benefit of the Company. Any direct
payment or reimbursement of expenses shall be made only upon presentation of an
itemized accounting conforming in form and content to standards prescribed by
the Internal Revenue Service relative to the substantiation of the deductibility
of business expenses.
<PAGE>
5. Stock Options. The Company shall grant Berk options to purchase up to
-------------
100,000 shares of the Company's common stock at an exercise price equal to the
closing bid price on the date of approval of this agreement by the Board of
Directors of the Company. All of such 100,000 options be part of and granted
under the proposed 1997 Employee Stock Option Plan ("Plan") being considered by
the Corporation. Berk understands that the Plan, in order to be effective is
subject to shareholder approval. The Plan is intended to qualify under Internal
Revenue Code Sections 421 and 422. The options, which are intended to be
"Incentive Stock Options" under the Internal Revenue Code, will vest in
quarterly installments of 25,000 options at the end of each calendar quarter
over the one year term. Not withstanding the foregoing, and in addition to any
requirements of the Plan, any unvested options shall vest immediately upon
termination of this Agreement, unless such termination is pursuant to Sections 8
(ii) or 8 (iii), in which event any options which are not vested at that time
shall not vest. The options shall be exercisable until December 31, 2000. These
terms and conditions shall be incorporated into the form of Incentive Stock
Options granted to Berk under the Plan. The understanding of the parties
regarding the stock options are independent of the other terms and conditions of
this Agreement and the grant of stock options to Berk shall not be deemed
additional compensation to Berk.
6. Life Insurance. The Company may, but shall not be obligated to apply
--------------
for and procure as owner and for its own benefit or the benefit of any lender of
the Company, insurance on Berk's life, in any amount and form or forms that the
Company may choose. Berk shall, at the Company's request, submit to all medical
examinations, supply all information and execute all documents required by the
insurance company or companies to whom the Company has applied for the
insurance.
7. Confidentiality.
---------------
(a) Confidentiality and Confidential Information. Berk agrees to
--------------------------------------------
regard and preserve as confidential all information obtained by him relating or
pertaining to the Company's businesS, including projects, products. customers,
trade secrets, confidential information (including business and financial
information), and any computer programs and software or unpublished know-how,
whether patented or unpatented, related to such business, and not to !publish or
disclose any part of such information to others or use the same for my own
purposes or the purposes of others, during the term of this employment or
thereafter. Any information of the Company which is deemed a "trade secret" by
the California Uniform Trade Secret Act shall be considered to be confidential
information and therefore within the scope of this Agreement, unless the Company
advises Berk otherwise in writing ('~Confidential Information"). Berk further
agrees to preserve as confidential the Confidential Information of any third
party to which he may have access and to treat such information as though it
were Company Confidential Information.
(b) Prevention of Unauthorized Release of Company Information. Berk
---------------------------------------------------------
agrees to promptly advise the Company of any knowledge which he may have of any
unauthorized release or use of any Company Confidential Information, and shall
take reasonable measures to prevent unauthorized persons or entities from having
access to, obtaining or being furnished with any Company Confidential
Information.
(c) Confidential Information of Third Parties. Berk agrees not to
-----------------------------------------
disclose to the Company and not to use in any way in connection with his
employment any confidential information or trade secrets of any kind, or any
embodiments thereof, of any previous employer or other third party.
Specifically, and without limitation, Berk agrees to use only his general
knowledge, experience and skill in connection with his employment with the
Company and acknowledges that this is the purpose for which he has been hired by
the Company.
(d) Termination of Employment. Berk agrees that, upon termination of
-------------------------
his employment with the Company (voluntary or otherwise), that he will return to
the Company all things belonging to the Company, and that all documents,
records, notebooks, and tangible articles containing or embodying Confidential
Information, including copies thereof, then in his possession or control,
whether prepared by Berk or others, will be left with the Company. Berk
recognizes that the unauthorized taking of any of the Company's trade secrets is
a crime under Section 499(c) of the California Penal Code, and is punishable by
imprisonment in a state prison or in a county jail for a time not exceeding one
year, or by a fine not exceeding five thousand dollars ($5,000), or by both such
fine and such imprisonment. Berk further recognizes that such unauthorized
taking of the Company's trade secrets may
<PAGE>
also result in civil liability under California Civil Code Section 3426, et
seq., and that a willful taking may result in an award against Berk for the
Company' s attorney's fees and triple the amount of the Company's damages.
8. Termination. The Company shall have the right at any time to
-----------
terminate Berk's employment under this Agreement without further liability or
obligation pursuant to this Agreement upon the occurrence of any of the
following events:
(i) Berk dies, shall become physically or mentally disabled or
impaired so as to prevent him from continuing the normal and proper performance
of his duties and responsibilities hereunder for a period of three consecutive
months; or
(ii) Berk is convicted of any crime constituting a felony under the
law of the United States or any State; or
(iii) If Berk is in "Material Breach" of this Agreement as determined
by the Board of Directors of the Company. The exercise of the right of the
Company to terminate this Agreement shall not abrogate the rights and remedies
of the Company in respect of the breach giving rise to such termination. For
purposes of this subsection, "Material Breach" shall mean conduct amounting to
fraud, dishonesty, or engaging in other acts of moral turpitude inimicable to
the interests of the Company, or any acts or omissions to act which are
determined by the Board of Directors to constitute gross negligence, or flagrant
misconduct. or the continuous failure to follow instructions of the Board of
Directors. The "Material Breach" shall be specified in a notice of termination
to be delivered by the Company no later than the date as of which the
termination is effective.
If Berk's employment is terminated by the Company for any reason other than
by mutual agreement or any of the reasons set forth in subsections (i) through
(iii) above, then the Company shall pay Berk the balance, if any due as salary
for the month in which termination occurred, plus three additional months'
salary and any earned, but unpaid incentive compensation bonus if a plan as
specified in Section 4(c) of this Agreement has been adopted by the Company (the
"Termination Pay") in full settlement of any and all claims of Berk arising out
of or in connection with his employment by the Company. Such Termination Pay
shall also include the unpaid, deferred portion of the Base Salary as specified
in Section 4 (a) of this Agreement, if any, for each full month of his
employment prior to termination.
Berk shall have the right to terminate this Agreement in the event of a
default by the Company of any material provision of this Agreement but only if
Berk shall have first given written notice of the default to the Company and if
within thirty days after receipt of that notice the Company has not cured that
default. Upon termination neither Berk nor the Company shall have any further
obligations under any of the provisions of this Agreement except that Berk shall
be entitled to termination pay as specified in the immediate preceding
paragraph.
This Agreement may also be terminated by mutual agreement or the parties.
In such event, no termination pay will be due Berk.
9. Remedies. If there is a breach or threatened breach of the provisions
--------
of Section 2 or 7 of this Agreement, the Company shall be entitled to an
injunction restraining Berk from such breach. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies for such breach or
threatened breach.
10. Severability. It is the clear intention of the parties to this
------------
Agreement that no term, provision or clause of this Agreement shall be deemed to
be invalid, illegal or unenforceable in any respect, unless such term provision
or clause cannot be otherwise construed, interpreted, or modified to give effect
to the intent of the parties and to be valid, legal or enforceable. In the event
that such a term, provision. or clause cannot be so construed, interpreted or
modified, the validity, legality and enforceability of the remaining provisions
contained herein and other application(s) thereof shall not in any way be
affected or impaired thereby and shall remain in full force and effect.
11. Waiver of Breach. The waiver by the Company or Berk of the breach of
----------------
any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by that party.
<PAGE>
12. Entire Agreement. This document contains the entire agreement between
----------------
the parties, supersedes all prior oral agreements, if any, and may not be
changed orally, but only by agreement in writing signed by the parties.
13. This Agreement, its validity, interpretation and enforcement, shall be
governed by the laws of the State of California.
14. Notices. Any notice pursuant to this Agreement shall be validly given
-------
or served if that notice is made in writing and delivered personally or sent by
certified mail, return receipt requested, postage prepaid, to the following
addresses:
If to Company: AMDL, Inc.
14272 Franklin Avenue
Suite 106
Tustin, California 92680-7017
Attn: Chief Executive Officer
If to Berk: Post Office Box 921527
Sylmar, California 91392
All notices so given shall be given effective upon receipt. Either party, by
notice so given, may change the address to which his or its future notices shall
be sent.
15. Assignment and Binding Effect.
-----------------------------
(a) This Agreement shall be binding upon Berk and the Company and
shall benefit the Company and its successors and assign.
(b) This Agreement shall not be assignable by Berk.
16. Headings. The headings in this Agreement are for convenience only;
--------
they form no part of this Agreement and shall not affect its interpretation.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first above written.
AMDL, Inc.
By:_______________________________
Executive Officer
__________________________________
Harry Berk
<PAGE>
Exhibit 22
Subsidiaries
<TABLE>
<CAPTION>
Name of Subsidiary State of Organization
- -------------------------------------- --------------------------------------
<S> <C>
Advanced Medical Diagnostics, Ltd. Delaware
ICD, L.L.C. Delaware
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10KSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,072,249
<SECURITIES> 2,432,411
<RECEIVABLES> 7,863
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,512,523
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,512,523
<CURRENT-LIABILITIES> 1,160,483
<BONDS> 0
0
0
<COMMON> 33,530
<OTHER-SE> 2,318,510
<TOTAL-LIABILITY-AND-EQUITY> 3,512,523
<SALES> 0
<TOTAL-REVENUES> 128,272
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,750,652
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,622,380)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> 0
</TABLE>
