4th Quarter and Year End Report on AMDL

 

 

 

   

 

 

 

 

 

 

 

SUMMARY

 

AMDL has had another profitable quarter, making it two in a row, a trend we feel a long way towards reaffirming our current projections that by the end of 2008, revenues from Jade alone will reach or exceed $38 million.

 

We also believe that despite the seemingly never-ending hurdles necessary to be jumped as the company continues to work towards the approval by the FDA of DR-70^®, that this too will come to pass in early 2008. While we recognize that success in this endeavor continues to remain just out of reach, we continue to keep the faith. At the same time, we are reducing slightly our 12 month projected share price to $23.

 

COMPANY OVERVIEW

 

Headquartered in Tustin, California, AMDL’s mission is to develop and commercialize cost effective products for the monitoring, detection and treatment of cancerous tumors in humans. Its product lines include pharmaceutical products for treating disease, a diagnostic test for diagnosing disease and nutraceuticals for promoting wellness.

 

Tests, such as those under development by AMDL, can influence a therapeutic decision; thereby assisting physicians in determining which therapy will be most beneficial to a patient, and then allowing them to monitor the patient’s progress.

 

AMDL develops, manufactures, markets and sells various immunodiagnostic kits for the detection of cancer and other diseases. Its products may be used by hospital, clinical, research and forensic laboratories and doctor's offices to obtain precise and rapid identification of certain types of cancer and other diseases.

 

Its DR-70 test kit is used to assist in the detection of at least 13 different types of cancer, including lung (small and non-small cell), stomach, breast, rectal colon and liver has received approvals to import and market DR-70 in Canada (for lung cancer), Australia and the United Kingdom. It has also received certification for EN ISO 13485, within the medical and diagnostic device industry.

 

Segment Summary

 

As of September 30, 2007, the Company had three reportable segments. In China, there are two segments, (i) wholesale distribution to distributors, hospitals, clinics and similar institutional entities (“China-Wholesale”); and (ii) wholesale sales to operators of Jade Healthy Supermarkets which sell to consumers directly (“China-Direct Distribution”). In the United States there is only one segment, sales to distributors and institutional entities (“Corporate”). The Company evaluates performance based on sales, gross profit and net income (loss).

 

RECENT EVENTS

DR-70^®

On November 13, 2007, AMDL received a letter of deficiency noting four areas of concern in its application and the application was put on hold pending the FDA’s receipt of AMDL’s responses to the FDA’s concerns. The company was granted a 180-day extension to May 12, 2008 to respond in full and it intends to respond by that deadline. We cannot predict the length of time it will take for the FDA to review AMDL’s response documentation or whether pre-market approval will ultimately be obtained. However, we continue to firmly believe that AMDL will prevail in obtaining its long sought after approval and our latest projection is that the approval will come in the first half of 2008.

While AMDL is certainly subject to the risk of failure to obtain the FDA regulatory approval of DR-70^®, as well as the uncertainty and delay until receipt of such approval, we hold to our original opinion that approval is imminent because the company efforts in completing this task are considerably more sophisticated than they have been in the past. Therefore, we feel that the company has finally enabled the FDA to see that the merits of approving DR-70^® far outweigh the risk or its redundancy to other tests.

JPI submitted an application to the SFDA (Chinese version of our FDA) for approval to market the DR-70® test kit in China. The SFDA has begun the approval process with the DR-70^® test kit undergoing standard product review by the Beijing Institute of Medical Device Quality Supervision and Inspection Center. However, in June 2007, the Chinese approval process fundamentally changed.Under the new SFDA guidelines, the SFDA is unlikely to approve the marketing of DR-70^® without one of the following: approval by the U.S. FDA, sufficient clinical trials in China, and/or product approval from a country where DR-70^® is registered and approved for marketing and export. JPI intends to proceed with all of these options in an attempt to meet the new SFDA guidelines, but there can be no assurances that JPI will obtain approval for DR-70^® or what the timing thereof may be.

Human Papilloma Virus (HPV)

On April 3, 2008 AMDL announced that it has entered into an exclusive sublicense agreement with MyGene International for the MyGene MYHPV Chip^® Kit, a diagnostic product for in-vitro genotype testing in women with the Human Papilloma Virus (HPV). The agreement between MGI and AMDL is an exclusive sublicense to use the patents, trademark, and technology in manufacturing, promoting, marketing, distributing, and selling the MYHPV Chip^® Kit in the countries of China (including Hong Kong), Taiwan, Singapore, Malaysia, Thailand, Cambodia, and Vietnam. MGI owns an exclusive worldwide license (excluding Korea) for the MYHPV Chip^® Kit.

 

HPV is the most common sexually transmitted infection. Globally there are approximately 330 million women presently infected with HPV, with 70% of existing infections in Asian populations. The virus infects the skin and mucous membranes. There are more than 30 important HPV types that can infect the genital areas of men and women.

 

Most people who become infected with certain types of HPV do not even know they have it. Cervical cancer is third leading cancer in women and the second leading cause of cancer deaths in women worldwide. It is well known that certain HPV types are the primary cause of cervical cancer. If HPV infection is detected early, cervical cancer could be prevented. Early diagnosis of HPV infection, which could lead to cervical cancer, is recommended for every woman.

 

According to recent clinical trial assessments in Medical News Today (medicalnewstoday.com), the global market for HPV testing is projected to be $250 million in 2008 with the total available market valued at $1 billion.

 

Studies are underway evaluating the use of HPV tests as a primary screen for cervical cancer in women, replacing PAP testing. Preventive Oncology International notes that worldwide cervical cancer remains the second most common malignancy in both incidence and mortality, it is the greatest cause of death from cancer in women in the developing world yet HPV screening is lowest there (see Figure 2). Forty percent of the world’s cervical cancer occurs in India and China alone. In developing countries, most of the limited medical funding is spent on disease treatment instead of prevention.
 
Fortunately, the GAVI Alliance (formerly known as the Global Alliance for Vaccines and Immunization) — a partnership of national governments, the World Health Organization, the World Bank, the Bill and Melinda Gates Foundation, the vaccine industry, public health institutions, and nongovernmental organizations — provides technical assistance and financial support for screening and vaccines in countries with a gross national income of less than $1,000 per capita, as well as in China, India, and Indonesia.

 This pro-active funding is an important way to get in front of the growing crisis. In PRC China alone, at an extremely conservative estimate of 1,000,000 (there are approximately 455,960,489 women between 15 and 64 years old, 2007 CIA Factbook) with HPV screening at a cost of approximately $50 (price quoted in Forbes Magazine, 1/28/08) there is a $50,000,000 million USD annual market potential for a product that actually saves lives, saves human suffering, and saves precious medical financial resources.

MyGene International, an international biotech company, estimates HPV testing in PRC China to grow from approximately 16 million tests in 2009 to over 25 million by 2025. Recent advances in vaccines are also proving valuable in the struggle to prevent HPV and possibility of cervical cancer. 2006 saw the launch of Gardasil from Merck and Co., the first vaccine protecting against HPV (human papilloma virus) and the development of cervical cancer. Another HPV vaccine, Cervarix, from Glaxo-Smith Kline, was launched in 2007.

 

According to Visiongain report “World Market for Cancer Vaccines 2007-2012” these two vaccines are  predicted to generate sales of more than $4 billion by 2012, which could see them becoming top selling vaccines on a global level.

 

Because of the infection rate, many public health experts recommend mandatory HPV vaccination and screenings (George Washington University Report, 12/07). Condoms do not provide comprehensive protection against HPV. Both men and women are carriers of HPV. It is reasonable that those at risk in both sexes should get regular screenings and/or vaccines.

 

HPV Screening Tests: Extremely Important Tool As a primary tool, HPV screening has evolved beyond the Pap smear test (developed in 1941) into a more efficient and precise scientific endeavor in the last decade. As stated in a recent Forbes Magazine health report (“The Cancer That Shouldn't Be” 1/28/08), it borders on the scandalous that cervical cancer, among the few cancers that are preventable, kills 310,000 women a year worldwide.

 

In 2007, 11,150 women in the U.S. were diagnosed with it. Half of them had not had a recent Pap test. Another third did get tested but got false negatives from the 65-year-old Papanicolaou (Pap test) biopsy. The Pap test is valuable; having cut the rate of cervical cancer by 70%, but it is archaic. It calls on a lab technician or machine to peer at a daub of cervical cells under a microscope to spot the abnormal precancerous ones. This approach yields false negatives between 13% and 45% of the time.”

 

Furthermore in China, Qiao Youlin, Director for the Department of Cancer Epidemiology at the Chinese Academy of Medical Sciences in Beijing, said, “In developing countries, most of the limited medical funding is spent on disease treatment instead of prevention…as a result, developing countries account for 80 per cent of the total number of the world's cases of cervical cancer.”

 

Pap smear test results in developing countries are often unreliable, with poor techniques of obtaining the samples and analyzing them. Unlike Pap smears with lab intensive microscopic evaluations and lab analysis, new biotech companies are developing more efficient and precise HPV testing kits. At the forefront of HPV detection test kits are companies such as MyGene, German diagnostic tools firm Qiagen, and Digene Biotech of Gaithersburg, Maryland (recently acquired by Qiagen).

 

MYHPV Chip^® Kit (see Figure 1) was approved as diagnostic reagent for in-vitro testing for HPV by the KFDA (Korean Food and Drug Administration). The test can diagnose HPV infection and each genotype of HPV at the same time. Features of the highly portable MYHPV Chip^® Kit include:

 

• Pre-Diagnosis of cervical cancer
• Diagnosis of HPV Infection and the Genotype of HPV Infection
• Diagnosis for low copy of HPV Infection
• Diagnosis of Multiple HPV Infection
• Simple and Easy Sample Collecting
• Accurate and prompt Results
• Identifying total 24 types of HPV Infections (16 types of high-risk, 8 types of low-risk)

 

 

 

 Figure 1

 

Medical News Today reported that the global market for HPV testing is projected to be $250 million in 2008, with the total available market valued at $1 billion. There are more than 10 million HPV tests being performed annually in the United States alone, with only 28% market penetration.

 

The 2007 CIA Factbook indicated that in China there are approximately 455 million women between the ages of 15 and 64 years old. In China alone, at an extremely conservative estimate of 1 million possible patients, with HPV screening at a cost of approximately $50, there is a $50 million annual market potential for HPV testing in China. Estimates indicate that HPV testing in China could grow from approximately 16 million tests in 2009 to over 25 million by 2025.

 

Company Objectives

 

AMDL has delineated the following objectives for the coming year:

 

•    Obtain USFDA and SFDA clearance and international approvals for our DR-70® product.

•    Expand JPI’s business through new distribution channels, including, but not limited to the JPGreen Clinics.

•    Distribute greater quantities of DR-70® kits in approved markets.

•    Develop DR-70® distribution channels in new markets.

•    Pursue one or more strategic partners to license and develop our combination immunogene therapy technology.

•    License North American drugs for manufacture and sales in China and Asia

•    Fully utilize Chinese Good Manufacturing Practices (“GMP”) recognition manufacturing facilities to foster worldwide sales.

 

OVERVIEW OF JPI’s BUSINESS

 

JPI is currently the major engine for AMDL in terms of both revenue and profit. The division manufactures and distributes its products through two wholly-owned Chinese subsidiaries, JJB and YYB.  Historically, JJB has primarily been a manufacturer and distributor of large and small volume injectable fluids as well as other products for external use, while YYB primarily manufacturers tablets, capsules and other over-the-counter pharmaceutical products.  Sales of JPI’s products are approximated to be 40% over-the-counter and 60% to hospitals and other institutional customers.

 

JJB’s facilities in Shangrao, Jilin Province, China are located on approximately 24 acres of land housing its 250,000 square foot manufacturing facility.  YYB is located in Tuman City, Jilin Province, China, and operates a 150,000 square foot facility on approximately 3.45 acres of land there.

 

The management of JJB was notified by the Chinese Military Department of its intent to annex part of JJB’s plant located near a military installation.  The proposed area to be annexed contains the facilities that are used to manufacture large and small volume parenteral solutions, i.e. those administered by injection, infusion or implantation.  Management has lodged claims against surrendering the plant to the Chinese Military Department but has not received a response as of yet.  If such annexation were to occur, the expectation is that JJB will be compensated fairly for the facility, although JJB will have to spend significant time and resources finding another location and restarting those operations a fresh.  In addition, a new location will likely need to obtain GMP certification.

 

JJB’s GMP certification has expired for the small volume parenteral solutions injection plant currently manufacturing Goodnak, and JJB has ceased operations at this facility while modifications are made to the facility to bring operations in compliance.  The cost of these modifications is estimated at approximately $1,000,000 and JBB hopes to resume operations at that location by the second quarter of 2008.  There can be no assurances that the project will be within budget or that the GMP certificate will be received by the second quarter of 2008.

 

Both JJB and YYB utilize the services of more than 200 small suppliers.  No raw materials are imported for their pharmaceutical manufacturing operations and no finished products are currently exported out of China.  All raw materials are stored at the facilities and neither JJB nor YYB has experienced any difficulty in obtaining raw materials for their manufacturing operations. JJB has 57 production licenses for large volume injection fluids, small volume injection fluids, tablets and tinctures and related products.

 

JJB’s primary products in the large volume injectable category are:

 

• Glucose injection
• Glucose and Sodium Chloride injection
• Sodium Chloride injection
• Metroniadazole injection
• Metroniadazole and Glucose injection
• Destran 40 Glucose injection
• Heartleaf Houttuynia Herb Extracts injection

 

JJB’s facility has the capability to produce up to 18 million bottles of large volume injection fluids annually. JB’s primary products in the small volume injectable category are: 

 

• Human Placental Extracts injection
• Heartleaf Houttuynia Herb Extracts injection
• Chrondroitin Sulfate injection
• Amikacin Sulfate injection
• Muscle injection; Glucose injection
• Ribavirin injection
• Gentamycin Sulfate injection

 

JJB’s facility has the ability to produce 70 million bottles of small volume injection fluids annually. JJB’s primary products in the tablet category are:

 

• Metroniadazole tablets
• Domperidone tablets
• Piracetam tablets
• Inosine tablets
• Oryzanol tablets
• Compound Benzoic Acid tablets
• Camphor Solution tablets

 

JJB’s facility has the ability to produce 1.5 billion tablets annually.  JJB has licenses for tinctures and the principal product is compound Benzoic Acid. JJB has no significant licensing, royalty or other similar agreements or labor contracts other than standard individual employments contracts with all of JJB’s employees, which is customary in China.

 

In 2007, JJB introduced a number of new products including:

 

• Ondansetron Hydrochloride
• Domperidone tablets
• levofloxacin tablets
• Goodnak injectable solutions

Commencing in September 2007, JJB began selling Goodnak, an anti-aging skin care product containing human placental solutions.  Goodnak is currently sold in liquid injectible solutions; but, eventually JJB intends also to offer Goodnak in capsules, sprays and creams to a chain of eight existing and 200-to-be-established JPGreen Health and Beauty Clinics through a newly formed WFOE controlled by AMDL’s Hong Kong subsidiary.  JJB’s facility is currently unable to manufacture Goodnak, but will resume doing so when the facility becomes GMP re-certified.

 

Among other products, during the first half of 2008, JJB expects to also manufacture and distribute the following:

 

• Omeprazole sodium injectible solutions
• Balolloxacin tablets
• Prulifloxacin tablets
• Lomefloxacin Aspartate injectible solutions
• Roxethromycin tablets

 

YYB has 86 product licenses.  The following is a list of YYB’s principal products:

 

• Gu Yian Ling Pian
• Diaitamin Calcium Hydrogen Phosphate and Lysine tablets
• Compound Gentian and Sodium Bicarbonate tablets
• Compound Paracetamol and Amantadine Hydrochloride capsules
• Bear Bile tablets; Promethazine and Bile tablets
• Compound Declofenac Sodium and Chlorphenamine Maleate tablets
• Paracetamol Caffeine
• Artificial Cow bezoar and Chlorphenamine Maleate tablets
• Paracetamol Caffeine; Artificial Cow-bezoar and Chlorphenamine Maleate capsules
• Trivitamin and Calcium Gluconate Calcium Hydrogen Phosphate chewable tablets
• Calcium Hydrogen Phosphate chewable tablets
• Fenbufen capsules
• Nan Bao capsules
• Rhizoma Gastrodiane capsules
• Bererine Hydrochloride tablets

 

YYB’s plant facility was renovated and new manufacturing facilities were completed in July 2005.  YYB’s facilities have the capacity to produce more than an aggregate of one billion tablets and capsules per year.

 

Currently, although both JJB and YYB have approximately 140 product licenses, only eight products significantly contribute to JPI’s sales.  For the year ended December 31, 2007, the top selling JPI products (unaudited) were as follows. Note that approximately 40% were over-the-counter sales and 60% were sales to distributors.

  

 

Product	Sales $  (rounded)
Domperidone Tablet	$5,230,300
Human Placental Histosolution (GOODNAK)	3,706,400
Diavitamin, Calcium Hydrogen Phosphate and Lysine Tablets	1,420,500
Levofloxacin Lactate and Sodium Chloride Injection (concentration)	570,800
Glucose Injectable Solution  (250 ml Bottle)	480,140
GuYanLin Tablet	470,490
50% Glucose Injectable Solution (20 ml’s Amp)	416,980
Glucose Injectable Solution (500 ml Bottle)	295,700
Human Placental Histosolution	241,350
Compound Benzoic Acid and Camphor Solution I	193,250
Total	13,025,910

 

JJB is expected to release the following products in 2008:

• Epinastine Tablets                                 Allergy                    Third quarter 2008
• Creatine Phosphate Sodium Injectible        Heart/Angina            Third quarter 2008
• Doxtaxel                                              Cancer                    Third quarter 2008

 

JPGreen Health and Beauty Clinics

 

In order to capitalize on the Chinese interest in anti-aging products, nutritional supplements and cosmetic products, in July 2007, JPI began direct distribution of similar products through retail outlets owned and managed by others known as “Jade Healthy Supermarkets.” The are esentially small retail stores operated by others who sell JPI’s products at retail to consumers.

 

As a result of this experience, JPI has refocused these activities to concentrate on sales to beauty clinics who could offer anti-aging clinical treatments to its clients.  These clinics are now called “JPGreen Health and Beauty Clinics.”

 

There are currently eight existing JPGreen Health and Beauty Clinics,  These JPGreen locations, typically 300-900 square feet in size, are being developed through in-house store openings and through the acquisition of existing beauty and spa businesses. The typical JPGreen Clinic is anticipated to generate, on average, approximately $400,000 to $700,000 in annual sales with an average net profit margin of at least 30%.

 

Numerous existing beauty and spa businesses have indicated their interest in being acquired and converted to JPGreen Clinics. Therefore, JPI currently anticipates, assuming successful funding for this new line of business is obtained, acquiring and converting up to 200 locations in fiscal year 2008.

 

Both JJB and YYB are developing educational programs for hospitals, doctors, clinics and distributors with respect to JJB and YYB’s product lines.  These educational programs are intended to improve sales and promotion of JJB and YYB’s products. 

 

Both JJB and YYB sell to hospitals, retail stores and distributors who act as agents.  One primary distributor has 29 retail outlets throughout the China.  In addition, JJB and YYB have a dedicated sales team that manages its own direct sales force and sells to retail outlets all over China.

 

In 2007, 82% of JPI’s revenues were derived from JJB’s products, 16% were from the sale of YYB’s products and 2% from other activities of JPI.  The cost to manufacture most products is approximately 50%, but the gross margins vary slightly from product to product.  JPI estimates that the gross profit on its products will be approximately 60% for 2008.

On the downside, the sale of one of JJB’s products, Yuxingcao, has been temporarily prohibited in China due to safety concerns.  Although JJB considers its products safe, the prohibition will remain in effect until such time as the Chinese government determines the source of the unsafe products. 

 

The Chinese authority has allowed the commercial sales of some Yuxingcao products in October 2006 but not the product manufactured by JJB.  None of the Yuxingcao products sold in 2006 was returned during the nine months ended September 30, 2007.  Due to the prohibition of sales of Yuxingcao products, there were no sales of Yuxingcao for the nine months ended September 30, 2007.  

 

Competition

 

JJB and YYB compete with different companies in different therapeutic categories.  For example, with regard to large and small volume injection fluids, JJB primarily competes with Jiangxi Zhuhu Pharmaceutical Company, located in Jiangxi Province, and Jiangxi Pharmaceutical Company, located in Jiangxi Province.

 

The manufacture of large and small volume injection fluids, small volume injection fluids, tablets and tinctures and related product include generics, over-the-counter and supplement pharmacy products.  There are at least 70 companies in China approved by the SFDA to manufacture large and small volume injection fluids.

 

JJB competes with numerous companies for distribution of JJB’s tablets as these are common over the counter pharmaceuticals.  YYB completes primarily with twenty other companies similar to YYB who are licensed to sell herbal extracts throughout China and Asia.  It shares the same markets in China as American Oriental Bioengineering, Tiens Biotech Group and China Medical Technologies, along with a number of other companies.

 

FINANCIALS

 

Summary

 

During the year ended December 31, 2007, the Company generated aggregated revenues of $14,930,100 from product sales and approximately $80,000 from the amortization of up front fees. The Company’s gross profit for 2007 was $8,769,143, of which JPI contributed $8,672,731.

 

AMDL’s comprehensive loss for 2007 was $2,351,754 or ($0.20) per share compared to fiscal year 2006 when the net loss was $5,867,428 or ($0.83) per share. This overall loss was offset by net income generated by JPI for the twelve months ended December 31, 2007 of approximately $5,119,496.

 

During 2008, sales of OEM products should be at about the same level as experienced in 2007. If we are correct in our assumption that FDA approval of DR-70^® will likely come sometime in 2008, it is unlikely that sales of DR-70^® will significantly impact operating results for 2008.

 

China-Direct Distribution

 

AMDL received $314,762 in up-front fees from sub-operators of the Jade Healthy Supermarkets. The Company deferred recognition of these fees until opening of these stores. Net revenue was approximately $80,000 of amortized up-front fees for the twelve months ended December 31, 2007.

  

Corporate

 

Net revenues for AMDL corporate were $115,801 in 2007 compared to $71,055 in 2006.

Gross profit increased approximately 131% to $96,412 for the year ended December 31, 2007 from $41,816 for 2006.

 

December 2007 Offering

 

In December, 2007, AMDL closed on a private placement for which it received approximately $7,203,000 in aggregate gross proceeds from the sale of 2,331,231 units priced at $3.09 per Unit. The exercise price of the four-year warrants embedded in each Unit was $4.74 per share. 

 

Total fees amounted to an aggregate of $720,000 and warrants to purchase 362,564 shares of our common stock.  The Company also paid the placement agents a non-accountable expense allowance of $150,000 and incurred $16,750 in other costs in connection with the December 2007 Offering.  Total costs were $885,908, which were netted against the proceeds received.

 

As of March 20, 2008, AMDL had cash on hand of approximately $4,675,000 and cash is being depleted at the rate of approximately $450,000 per month.  Assuming that: 

• The current level of revenue from the sale of DR-70^® kits does not increase in the near future
• The company does not require new cancer samples to satisfy the FDA concerns on its pending 510(k) application
• The company does not conduct any full scale clinical trials for DR-70^® or its combination immunogene therapy technology
• JPI generates sufficient cash to meet or exceed its cash requirements
• No outstanding warrants are exercised

Then the amount of cash AMDL currently has on hand should be to be sufficient to meet their projected operating expenses through March, 2009.

 

However, the only source of additional funds is an additional sale of securities. Therefore, AMDL is in the process of lining up additional capital via this route. The downside is some additional dilution to current shareholders. Nonetheless, the potential for DR-70® sales worldwide and the continuing increase in the level of growth of AMDL’s operations in China would appear to make an inevitable dilution worthwhile.

 

AMDL vs. Peers in the United States

Company	Market Cap	YTD Price    Performance
ADL AMDL, Inc.	56.0M	-12.3%
ABT Abbott Laboratories	78.4B	-9.7%
BAX Baxter International Inc.	38.6B	+5.6%
BEC Beckman Coulter, Inc.	3.9B	-13.7%
BIO Bio-Rad Laboratories, Inc.	2.3B	-18.7%

 

 

 

 

AMDL PEER GROUP COMPARISON & VALUATION ANALYSIS

April 11, 2007

 

 

Figure 4

 

 

Profitability

Gross Margin (TTM)  54.0% Net Profit Margin (TTM) -15.7%

Valuation

P/E excluding extraordinary items (TTM) -- P/E Normalized (MRFY) -- P/Sales (TTM) 3.7x P/Tangible book (MRQ) 2.8x P/Cash Flow (TTM) --

 

Management Effectiveness

Return on Assets (TTM) -  9.0% Return on Equity (TTM) -12.2% Return on Investments (TTM) -11.8%

 

Income Statement

Revenue (MRQ)   5.4M EBITDA (MRQ)   1.1M Earnings before taxes (MRQ) 970.0K Net Income (MRQ) 915.0K Normalized earnings before taxes (MRQ) 966.0K Normalized Net Income (MRQ) 915.0K

Operating Margin (TTM) -11.9% Pretax Margin (TTM) -14.6%

Financial Strength

Current Ratio (MRQ) 1.70 Quick Ratio (MRQ) 1.57 LT Debt/Equity (MRQ) 0.00 Total Debt/Equity (MRQ) 0.20

Growth

Sales (5Yr) 142.5% Earnings Per Share (EPS)(TTM) 69.5%

Per Share Data

EPS excluding extraordinary items (TTM) -0.23 EPS Normalized (MRFY) -0.20 Rev per share (TTM)  1.27 BV per share (MRQ)  1.72 Tangible BV per share (MRQ)   1.34 Cash per share (MRQ)   0.41 Cash flow per share (TTM) - 0.09 Indicated Annual Dividend (US)   0.00

 

OUR OPINION

 

In looking at AMDL’s performance, we reiterate the point that the Company’s profitability during the third and fourth quarters exceeded our expectations. More importantly, it reaffirms our revenue projection of $38 million in 2008 from Jade alone. At this time we cannot project the revenues from the new JPGreen Health & Beauty Centers until AMDL receives its license to operate retail facilities in China.

 

Assuming the current net profit margin remains at approximately 25%, Jade should contribute minimum net earnings of approximately $9.5 million in 2008, or about $0.81 per share, assuming a weighted average 11.72 million shares outstanding.

 

As we have stated previously, we do not believe that DR-70^® will have an appreciable effect on AMDL’s earnings in this calendar year. In light of the FDA’s latest request for additional information and data, we now strongly believe that approval will come sometime during first quarter of 2008 and possibly even later.

 

However, we want to stress that while we continue to believe that receiving FDA for approval for DR-70® is certainly an important factor to the company’s ongoing success and continue to believe that an approval will eventually be forthcoming, we also continue to stand by our opinion that the importance of FDA approval has diminished somewhat in light of the company’s current and projected performance in China.

 

Nonetheless, because we feel AMDL will receive FDA approval for DR-70^® sometime during the first half of 2008, we feel it is also likely that DR-70^® will result in about $4 million in gross profits during the second half of 2008, of which at least $3 million will fall to the bottom line providing about $0.25 per share in 2008, assuming a weighted average 11.72 million shares outstanding.

 

Therefore, the two divisions of AMDL would show total net earnings for 2008 of about $12.5 million, or about $1.06 per share. Using a conservative industry multiple of 22 times earnings, results in a 2008 target for AMDL’s shares of $23 per share.

 

Furthermore, we believe that if AMDL performs in accordance with our projections, the market will allow the company a higher multiple than 22. We also want to stress that we have not taken into account earnings that will accrue from the new JPGreen Health & Beauty Centers.

 

FINANCIAL STATEMENTS

 

Income Statement

Quarter Period Ending:	Q1 2007 03/31/2007	Q2 2007 06/30/2007	Q3 2007 09/30/2007	Q4 2007 12/31/2007
Revenue and Gross Profit
Total Revenue	1,424	2,414	5,808	5,363
Operating Expenses
Cost of Revenue, Total	697	1,262	2,227	2,717
Sell/Gen/Admin Expenses Total	1,996	3,245	3,090	1,538
Research & Development	12	1	2	14
Total Operating Expense	2,705	4,508	5,319	4,269
Operating Income	(1,281)	(2,094)	489	1,094
Non-Operating Income & Expenses
Interest Expense, Net Non-Oper	(91)	(98)	(87)	(101)
Inter/Invest Inc, Non-Oper	4	2	2	--
Inter Inc (Exp), Net Non-Oper	(87)	(96)	(85)	(109)
Gain(Loss)on Sale of Assets	0	(2)	(2)	4
Other, Net	--	--	--	(19)
Income Before Tax	(1,368)	(2,192)	402	970
Income Taxes
Income Tax - Total	18	71	19	55
Income After Tax	(1,386)	(2,263)	383	915
Minority Interest and Equity in Affiliates
Net Inc Before Extra Items	(1,386)	(2,263)	383	915
Net Income	(1,386)	(2,263)	383	915
Adjustments to Net Income
Income Available to Common Excl. Extra. Items	(1,386)	(2,263)	383	915
Income Available to Common Incl. Extra. Items	(1,386)	(2,263)	383	915
EPS Reconciliation
Basic/Primary Weighted Average Shares	10,096	11,415	12,551	12,813
Basic/Primary EPS Excl. Extra. Items	(0.14)	(0.20)	0.03	0.07
Basic/Primary EPS Incl. Extra. Items	(0.14)	(0.20)	0.03	0.07
Dilution Adjustment	0	0	0	0
Diluted Weighted Average Shares	10,096	11,415	12,774	12,169
Diluted EPS Excl. Extra. Items	(0.14)	(0.20)	0.03	0.07
Diluted EPS Incl. Extra. Items	(0.14)	(0.20)	0.03	0.07
Common Stock Dividends
Div/Share-ComStockPrimIssue	0.00	0.00	0.00	0.00
Gross Divid - Common Stock	0	0	0	0
Pro Forma Income
Pro Forma Net Income	--	--	--	--
Supplemental Items
Interest Expense, Suppl	91	98	87	101
Depreciat/Amort, Suppl	103	369	173	184
Normalized Income
Total Special Items	0	2	2	(4)
Normalized Income Before Tax	(1,368)	(2,190)	404	966
EffectSpecItemsInclTax(STEC)	0	1	0	0
InclTaxExcl/ImpactSpecItems	18	72	19	55
Normalized Income After Tax	(1,386)	(2,262)	385	911
Normalized Inc Avail to Common	(1,386)	(2,262)	385	911
Basic Normalized EPS	(0.14)	(0.20)	0.03	0.07
Diluted Normalized EPS	(0.14)	(0.20)	0.03	0.07

() = Negative Value
Values are displayed in Thousands

 

Balance Sheet

Quarter Period Ending:	Q1 2007 03/31/2007	Q2 2007 06/30/2007	Q3 2007 09/30/2007	Q4 2007 12/31/2007
Assets
Cash & Equivalents	469	3,259	1,228	6,157
Short Term Investments	--	--	--	--
Cash and Short Term Inv	469	3,259	1,228	6,157
Trade Accts Recvble, Gross	--	--	3,094	--
Prov. for Doubtful Accts	--	--	(38)	--
Trade Accts Recvble, Net	1,276	1,339	3,056	2,955
Other Receivables	--	--	--	--
Total Receivables, Net	1,276	1,339	3,056	2,955
Total Inventory	638	581	836	921
Prepaid Expenses	2,099	2,785	2,787	2,122
Total Current Assets	4,482	7,964	7,907	12,155
Prop./Plant/Equip. - Net	8,956	9,244	10,995	11,672
Intangibles, Gross	4,475	4,562	5,972	6,392
Accum. Intangible Amort.	(670)	(747)	(834)	(777)
Intangibles, Net	3,805	3,815	5,138	5,615
Other Long Term Assets	1,641	2,131	2,117	3,425
Total Assets	18,884	23,154	26,157	32,867
Liabilities
Accounts Payable	895	1,004	1,395	--
Payable/Accrued	--	--	--	1,680
Accrued Expenses	2,010	359	1,298	--
Notes Payable/ST Debt	0	0	0	0
Curr. Port. LT Dbt/Cap Ls.	3,061	3,203	3,249	5,160
Customer Advances	--	315	279	247
Income Taxes Payable	17	170	558	59
Other Curr. Lblts, Total	17	485	837	306
Total Current Liabilities	5,983	5,051	6,779	7,146
Total Long Term Debt	1,607	1,865	1,892	0
Total Debt	4,668	5,068	5,141	5,160
Total Liabilities	7,590	6,916	8,671	7,146
Shareholder Equity
Common Stock	10	12	13	15
Additional Paid-In Capital	47,210	54,087	54,705	61,525
Ret. Earn (Accum Deficit)	(35,921)	(38,185)	(37,802)	(36,887)
Other Equity, Total	(5)	322	570	1,068
Total Equity	11,294	16,236	17,486	25,721
Total Liabilities & Shareholders Equity	18,884	23,152	26,157	32,867
Total Comm. Shares Outs.	10,096	12,479	12,579	14,980
Treasury. Shares-Common Primary Iss.	100	100	100	100

() = Negative Value
Values are displayed in Thousands

 

Cash Flow

Quarter Period Ending:	Q1 2007 03/31/2007	Q2 2007 06/30/2007	Q3 2007 09/30/2007	Q4 2007 12/31/2007
Cash From (used by) Operating Activities
Net Income	(1,385)	(3,650)	(3,267)	(2,352)
Depreciation/Depletion	180	631	885	1,266
Unusual Items	4	2	4	--
Other Non-Cash Items	697	2,320	3,322	3,686
Non-Cash Items	701	2,322	3,326	3,686
Accounts Receivable	255	321	(1,177)	(986)
Inventories	103	160	(95)	(155)
Prepaid Expenses	(924)	(2,119)	(1,928)	(1,600)
Other Assets	--	(479)	(465)	--
Cust. Dep.	11
Deferred Revenue		(170)	(279)	(59)
Income Tax Payable		(315)	(358)	(239)
Payable/Accrued	(64)	(547)	(35)	(281)
Changes in Working Capital	262	(3,714)	(1,346)	(2,228)
Total Cash from Operations	(1,123)	(2,876)	(1,919)	(124)
Plus: Cash From (used by) Investing Activities
Purchase of Fixed Assets	(9)	(49)	(1,947)	(2,536)
Purchase/Acq of Intangibles	--	--	(1,341)	(2,562)
Capital Expenditures	(9)	(49)	(3,288)	(5,098)
Acquisition of Business	--	--	0	0
Other Investing Cash Flow	--	--	--	(574)
OtherInvestCashFlowItms,Tot	--	--	0	(574)
Total Cash from Investing	(9)	(49)	(3,288)	(5,672)
Plus: Cash From (used by) Financing Activities
Common Stock, Net	--	4,573	4,572	9,990
Options Exercised	--	31	271	419
Warrants Converted	--	--	0	--
Iss (Retirmnt) of Stock,Net	--	4,604	4,843	10,409
Iss (Retirmnt) of Debt, Net	--	--	--	(135)
Total Cash From Financing	--	4,604	4,843	10,274
Equals: Increase (Decrease) in Cash
Foreign Exchange Effects	17	(5)	6	96
Net Change in Cash	(1,116)	1,674	(356)	4,573
NetCash-BeginBal/RsvdforFutUse	1,585	1,585	1,585	1,585
NetCash-EndBal/RsrvforFutUse	469	3,259	1,228	6,157
Depreciation, Supplemental	180	631	885	1,266

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEET

(unaudited)

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

 

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited) 

 

 

 

AMDL, Inc.

2492 Walnut Avenue

Suite 100

Tustin, CA 92780 

Gary L. Dreher, President and CEO 

http://www.amdl.com

 

                  

Market Capitalization:                             $44 million

Shares Outstanding: (as of 12/31/07)       11.7 million

                                     

 

Disclaimer

 

This disclaimer is an integral part of our service. Please read it before investing in any security on which we report.

 

Opinions are solely those of the staff of The Rudd Report and are subject to change without notice. Our reports are for information only and we do not offer securities or solicit the offer of securities of any company. Our reports are to inform the public and not to promote any company or its securities. We do not inform any company in advance of the nature or conclusions of our reports nor can a company change what we write. In the case of AMDL we received a fee for coverage up through April 30, 2008 in the amount of $6,000. Our reports contain factual statements and opinions. We derive these factual statements from sources that we believe are accurate. However, we do not represent that the facts presented are accurate or complete. Furthermore, the information contained in this report may become inaccurate because of the passage of time and should therefore be read for historical information only.