<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-27689
AMDL, Inc.
--------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 87-0188822
--------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2492 Walnut Avenue, Suite 100, Tustin, California 92780
--------------------------------------------------------------------------------
(Address of principal executive offices)
(714) 505-4460
---------------------------
(Issuer's telephone number)
Not Applicable
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of August 10, 2000, the Company had 1,651,124 shares of its $.001
par value common stock issued and outstanding.
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 - FINANCIAL INFORMATION.............................................2
ITEM 1.Financial Statements
Balance Sheets at June 30, 2000 (unaudited) and December 31, 1999..........2
Unaudited Statements of Operations for the three
and six month periods ended June 30, 2000 and 1999 and cumulative
from July 10, 1987 (date of inception) to June 30, 2000..................3
Unaudited Statements of Cash Flows for the
six month periods ended June 30, 2000 and 1999 and cumulative
from July 10, 1987 (date of inception) to June 30, 2000..................4
Notes to Condensed Consolidated Financial Statements.......................6
ITEM 2. Management's Discussion and Analysis...............................8
PART II OTHER INFORMATION.................................................9
</TABLE>
1
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 8,997 $ 75,867
Accounts receivable, net of allowance for doubtful
accounts of $13,547 and $4,000 at June 30, 2000
and December 31, 1999, respectively 22,570 15,401
Other current assets 3,471 9,007
------------ ------------
Total current assets 35,038 100,275
Other assets 5,758 5,758
------------ ------------
$ 40,796 $ 106,033
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable $ 25,000 $ 25,000
Accounts payable and accrued expenses 396,700 325,845
Accrued payroll and related expenses 261,373 124,318
Customer deposits 5,800 5,800
------------ ------------
Total current liabilities 688,873 480,963
------------ ------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value; 10,000,000 shares -- --
authorized;
482 shares issued and outstanding:
Common stock, $0.001 par value; 50,000,000 shares
authorized; 1,651,124 shares issued and outstanding
at June 30, 2000 and December 31, 1999 1,651 1,651
Additional paid in capital 13,429,464 13,144,252
Deficit accumulated during development stage (14,079,192) (13,520,833)
------------ ------------
Total stockholders' deficit (648,077) (374,930)
------------ ------------
$ 40,796 $ 106,033
============ ============
</TABLE>
See accompanying notes to financial statements.
2
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 10, 1987
THREE MONTHS ENDED SIX MONTHS ENDED (DATE OF INCEPTION)
-------------------------------- ---------------------------------- THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
------------- ------------- ------------- ------------- -------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 9,245 $ 7,539 $ 11,830 $ 21,765 $ 292,136
Cost of sales 6,961 8,979 8,967 21,742 211,321
----------- --------- ----------- ------------ ------------
Gross profit (loss) 2,284 (1,440) 2,863 23 80,815
----------- --------- ----------- ------------ ------------
Operating expenses:
Research and development 65,830 113,645 132,563 173,599 7,020,734
General and administrative 187,863 375,384 425,938 596,941 9,008,098
----------- --------- ----------- ------------ ------------
253,693 489,029 558,501 770,540 16,028,832
----------- --------- ----------- ------------ ------------
Loss from operations (251,409) (490,469) (555,638) (770,517) (15,948,017)
----------- --------- ----------- ------------ ------------
Other income (expense):
Interest expense (1,765) -- (3,531) -- (598,384)
Interest income 282 11,336 810 10,315 258,343
Gain on debt forgiveness -- -- -- -- 499,930
Other -- -- -- -- 1,708,936
----------- --------- ----------- ------------ ------------
(1,483) 11,336 (2,720) 10,315 1,868,825
----------- --------- ----------- ------------ ------------
Net income (loss) $ (252,892) $(479,133) $ (558,359) $ (760,202) $(14,079,192)
=========== ========= =========== ============ ============
Basic and diluted income (loss)
per share $ (0.15) $ (1.54) $ (0.34) $ (2.89)
=========== ========= =========== ============
Weighted average shares
outstanding 1,651,124 310,420 1,651,124 262,983
=========== ========= =========== ============
</TABLE>
See accompanying notes to financial statements.
3
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 10, 1987
SIX MONTHS ENDED (DATE OF INCEPTION)
------------------------------- THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
------------- ------------- -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(558,359) $(760,202) $(14,079,192)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization -- -- 497,743
Amortization of deferred interest -- -- 312,000
Common stock issued for services -- -- 312,541
Warrants and options issued for
services 74,212 71,499 832,083
Equity loss in investment in SAM -- -- 7,500
Gain on forgiveness of debt -- -- (499,930)
Changes in operating assets and
liabilities:
Accounts receivable, net (7,169) 2,129 (22,570)
Prepaid expenses -- -- --
Other current assets 5,536 -- (3,472)
Other assets -- -- (5,758)
Accounts payable and accrued expenses 70,855 172,789 337,288
Accrued payroll and related expenses 137,055 150,596 1,126,730
Customer deposit -- (3,465) 5,800
--------- --------- ------------
Net cash used in operating activities (277,870) (366,654) (11,179,237)
--------- --------- ------------
Cash flows from investing activities:
Purchase of equipment -- -- (225,930)
Expenditures for patents -- -- (154,682)
Investment in SAM -- -- (7,500)
--------- --------- ------------
Net cash used in investing activities -- -- (388,112)
--------- --------- ------------
</TABLE>
See accompanying notes to financial statements.
4
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 10, 1987
SIX MONTHS ENDED (DATE OF INCEPTION)
------------------------------- THROUGH
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000
------------- ------------- -------------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of common stock $ -- 310,250 $ 11,365,840
Proceeds from issuance of preferred stock,
net of offering costs of $15,000 211,000 -- 211,000
Borrowings (repayments) under notes
payable, net -- -- 59,115
Repayments under capital lease
obligation -- -- (116,676)
Net effect of merger with CVI -- -- 57,067
--------- --------- ------------
Net cash provided by financing activities 211,000 310,250 11,576,346
--------- --------- ------------
Net change in cash (66,870) (56,404) 8,997
Cash at beginning of period 75,867 74,566 --
--------- --------- ------------
Cash at end of period $ 8,997 $ 18,162 $ 8,997
========= ========= ============
</TABLE>
See footnotes for supplemental disclosures of non-cash investing and financing
activities.
See accompanying notes to financial statements.
5
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD JULY 10, 1987 (DATE OF INCEPTION)
THROUGH JUNE 30, 2000
NOTE 1 - MANAGEMENT'S REPRESENTATION
The financial statements included herein have been prepared by AMDL, Inc. (the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information normally included in the
financial statements prepared in accordance with generally accepted accounting
principles has been omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that the financial statements be read
in conjunction with the audited financial statements and notes for the fiscal
year ended December 31, 1999 included in the Company's Annual Report on Form
10-KSB. The interim results are not necessarily indicative of the results for
the full year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is in the development stage and has not generated significant
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.
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; and
- 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.
The Company hopes to obtain revenues from product sales, but there is no
commitment by any party for the 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.
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.
NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin "SAB" 101, "Revenue Recognition", which outlines the basic criteria
that must be met to recognize revenue and provides guidance for presentation or
revenue and for disclosure related to revenue recognition policies in financial
statements filed with the Securities and Exchange Commission. The effective date
of this pronouncement is the fourth quarter of the fiscal year beginning after
December 15, 1999. The Company believes that adopting SAB 101 will not have a
material impact on its financial position and results of operations.
In March 2000, the FASB issued FASB Interpretation No. 44 "FIN 44" Accounting
for Certain Transactions involving Stock Compensation, an interpretation of APB
Opinion 25 FIN 44 clarifies the application of Opinion 25 for (a) the definition
of employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a noncompensatory
6
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AMDL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE PERIOD JULY 10, 1987 (DATE OF INCEPTION)
THROUGH JUNE 30, 2000
plan, (c) the accounting consequence for various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 is effective
July1, 2000, but certain provisions cover specific events that occur after
either December 15, 1998, or January 12, 2000. The adoption of certain other
provisions of FIN 44 prior to March 31, 2000 did not have a material effect on
the financial statements. The Company does not expect that the adoption of the
remaining provisions will have a material effect on the financial statements.
NOTE 3 - STOCK ISSUANCE
The Company is authorized to issue 10,000,000 shares of $0.001 par
value preferred stock, of which the Board has designated 11,000 shares as Series
A Preferred Stock ("Preferred Stock"). On October 22, 1999 the board of
directors approved a private placement of the 11,000 shares of Series A
Preferred Stock at a price of $500 per share. Each share of the Preferred Stock
is convertible at the option of the shareholder into 250 shares of common stock
and all shares of Preferred Stock shall automatically convert at such time as
the common stock is listed for trading on the Nasdaq Small Cap Market or Nasdaq
National Market System and a registration statement covering the underlying
common stock has been declared effective by the SEC. The Preferred Stock will
pay a dividend of 20 shares of common stock twice per year. These shares of
common stock will be considered "restricted securities". The Preferred Stock is
redeemable at the option of the Company at any time upon thirty days written
notice at a redemption price of 110% of the Liquidation Preference plus all
accrued and unpaid dividends. The Liquidation Preference of the Preferred Stock
is $500 per share. During the period ended June 30, 2000, the Company raised
$211,000 (net of issuance costs of $15,000) from outside investors and issued
482 shares of preferred stock (including 30 shares issued to consultants for
finders' fees). The Company included the net proceeds in Additional Paid In
Capital on the accompanying Balance Sheet due to the par value of the Preferred
Stock issued being less than $1. Subsequent to quarter's end, the Company is to
issue a total of 9,640 shares of restricted common stock to its Preferred
Shareholders of record as of June 30, 2000. The stock is valued at approximately
$15,364 (based on its current market price).
NOTE 4 - STOCK OPTIONS
Effective June 30, 1999, the Company adopted its 1999 Stock Option Plan (the
"Plan"). Under the Plan, incentive stock options and nonqualified options may be
granted to officers and employees of the Company for the purchase of up to
750,000 shares of the Company's common stock. The exercise price per share under
the incentive stock option plan shall not be less than 110% of the fair market
value per share on the date of grant. The exercise price per share under the
non-qualified stock option plan shall not be less than 85% of the fair market
value per share on the date of grant. Expiration dates for the grants may not
exceed 10 years from the date of grant. The Plan terminates on June 30, 2009. On
January 17, 2000 the Board of Directors increased the total number of shares
issuable under the plan to 1,000,000. In the first quarter of 2000, the Company
granted options to its president to purchase 300,000 shares of the Company's
common stock and to its outside directors options to purchase an aggregate of
45,000 shares of the Company's common stock. All of these options have an
exercise price equal to the fair market value at the date of grant (estimated by
the Company to be $1.75 at January 17, 2000), vest immediately and expire five
years from the date of grant. Pursuant to SFAS 123, total compensation expense
to be recognized over the vesting period for options issued to directors is
$63,900, all of which was recognized as of June 30, 2000. The Company also
recognized compensation expense of $10, 312 pursuant to SFAS 123 for options
previously issued.
7
<PAGE> 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 raising of working capital. For the three months ended June 30, 2000,
the Company generated $11,830 in revenues from the sale of its products.
Historically, the Company's income has come from the sale of licenses, royalties
and options to purchase marketing rights. The Company has incurred losses since
inception, including an operating loss of $558,359 for the six months ended June
30, 2000. From July 10, 1987 (inception) through June 30, 2000 the Company has
had a cumulative loss of $14,079,192. The Company has commenced manufacturing of
and has received orders for its products. The Company is currently negotiating
for the distribution of its products in several Asian, South American, Central
American and European countries. Additionally, the Company is beginning
marketing of its DR-70(TM) cancer detection kits in the U.S. under "research
use" labeling.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant funding for continued operations,
development of its test kits, clinical trials and other actions necessary to
obtain regulatory approvals and to engage in continued marketing and sales
activities. The amount of expenditures required to maintain operations and to
continue product development far exceeds existing cash, which was $8,997 at June
30, 2000.
From December 31, 1999 to June 30, 2000, the Company's cash and cash
equivalents decreased $66,870. In addition, total outstanding indebtedness of
the Company, including accounts payable, was $688,873 at June 30, 2000. As of
August 1, 2000, cash is being depleted at the rate of approximately $87,000 per
month. The Company is hopeful of obtaining additional revenues from product
sales, but there is no commitment by any person for the purchase of any of the
Company's products. In the absence of significant sales and profits, the Company
shall seek to raise additional funds to meet its working capital needs
principally through the sales of its securities. The Company has started a $5.5
million private placement of shares of its Series A Preferred Stock. To date,
the Company has received $211,000 from the sale of its Series A Preferred Stock
in this offering net of issuance cost of $15,000. The Company believes that it
needs to raise at least $1,000,000 from its private placement of Series A
Preferred Stock in order to fund its operations for the rest of the calendar
year 2000. In the event the Company is unable to raise $1,000,000 from the
private placement, the Company will be required to raise money from other
sources, on whatever terms are available at the time. 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 available on terms
satisfactory to the Company.
The Company can make no prediction as to when, if ever, it will be able
to conduct its operations on a profitable basis. The report of the Company's
independent accountants for the fiscal year ended December 31, 1999 states that
due to recurring losses from operations, the absence of significant operating
revenues and the Company's limited capital resources, there is substantial doubt
about the Company's ability to continue as a going concern.
Although 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. The loss of the Company's key employees
could have a material adverse effect upon the operations of the Company.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999.
During the three months ended June 30, 2000, the Company generated
$9,245 from product sales compared to revenues for the three months ended June
30, 1999 of $7,539. The increase in revenues is due mainly to an additional
number of orders for OEM products. Total operating expenses for the three months
ended June 30, 2000 were $253,693 compared to total operating expenses for the
three months ended June 30, 1999 of $489,029. The decrease in expenses for the
three months ended June 30, 2000 is the result of the Company's decision to
curtail its marketing efforts and to focus its efforts on the raising of working
capital. In the three months ended June 30, 2000, the Company's net loss was
$252,892 compared to a loss of $479,133 for the prior year period.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999.
During the six months ended June 30, 2000, the Company generated
revenues of $11,830 from product sales compared to revenues for the six months
ended June 30, 1999 of $21,765. Total operating expenses for the six months
ended June 30, 2000 were $558,501 compared to total operating expenses for the
six months ended June 30, 1999 of $770,540. The
8
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decrease in revenues and expenses during the six months ended June 30, 2000 is
the result of the Company's decision to curtail its marketing efforts and to
focus its efforts on the raising of working capital. In the six months ended
June 30, 2000, the Company's net loss was $558,359, compared to a loss of
$760,202 for the prior year period.
Total assets have decreased $65,237 from $106,033 at December 31, 1999
to $40,796 at June 30, 2000 mainly from the use of cash to maintain minimal
operations. Total liabilities have increased $207,910 from $480,963 at December
31, 1999 to $688,873 at June 30, 2000 resulting from increases in accrued
payroll and other liabilities due to the lack of funds to pay such obligations
in a timely manner.
FORWARD LOOKING STATEMENTS
This Form 10-QSB contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements made by the Company involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially from
the forward looking statements include, but are not limited to, risks associated
with lack of significant operating history, demand for the Company's products,
international business operations, dependence on licensees, governmental
regulations, technological changes, intense competition and dependence on
management. Given these uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements. The Company's management disclaims
any obligation to forward-looking statements contained herein to reflect any
change in the Company's expectation with regard thereto or any change in events,
conditions, circumstances or assumptions underlying such statements.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Inapplicable.
Item 2. Changes in Securities.
In February 2000, the Company commenced a private placement of shares
of its Series A Preferred Stock. To date, the Company has sold 482 shares
(including 30 shares issued for finders fee) of its Series A Preferred Stock for
gross proceeds of $226,000. The Company has also paid finders' fees of $15,000
in cash and 30 shares of Series A Preferred Stock. Each share of Series A
Preferred Stock is convertible at any time at the option of the holder, into 250
shares of Common Stock.
Item 3. Defaults Upon Senior Securities.
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Stockholders held on June 30, 2000, the
following matters were voted on and approved by the stockholders:
(i) Four directors, namely Douglas C MacLellan, Gary L.
Dreher, Edward R. Arquilla, M.D., and William M.
Thompson, M.D. were elected directors, to serve until
their successors are duly elected and qualify;
(ii) The appointment of Corbin & Wertz LLP as the Company's
independent public accountants for the fiscal year
ending December 31, 2000 by a vote of 880,375 shares in
favor and 190 shares opposed;
(iii) The Company's 199 Stock Option Plan by a vote of 866,932
shares in favor and 12,721 shares opposed.
Item 5. Other Information.
Inapplicable.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit Number
27 Financial Data Schedule
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMDL, Inc.
Dated: August 10, 2000 By: /s/ GARY L. DREHER
------------------------------------
GARY L. DREHER,
President
10
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EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
27 Financial Data Schedule
