As
filed with the Securities and Exchange Commission on May 22, 2008
Registration No. 333-138250
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 2
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMDL, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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33-0413161
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2492 Walnut Avenue, Suite 100
Tustin, California 92780-7039
(714) 505-4460
(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)
Gary L. Dreher, President
AMDL, Inc.
2492 Walnut Avenue, Suite 100
Tustin, California 92780-7039
(714) 505-4460
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copy to:
Randolf W. Katz, Esq.
Bryan Cave LLP
1900 Main Street, Suite 700
Irvine, California 92614
(949) 223-7103
Richard H. Bruck, Esq.
19100 Von Karman, Suite 950
Irvine, California 92612
(949) 975-8181
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement
If the only securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box:
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If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box:
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If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering:
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If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering:
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If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective
amendment thereto that shall become effective upon filing with the Commission pursuant to rule
462(e) under the Securities Act, check the following:
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If this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following:
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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The registrant hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until the registrant shall file a further amendment which specifically
states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may determine.
EXPLANATORY NOTE
Registrant is filing this
Post-Effective Amendment No. 2 (the Post-Effective Amendment No. 2) to the Registration Statement on Form S-3
(Registration No. 333-138250) (the Original Filing) to correct an error in the EDGAR submission of Post-Effective Amendment No.
1 to the Original Filing which incorrectly tagged Post-Effective Amendment No. 1 as having been
filed pursuant to Rule 462(c) under the Securities Act of 1933, instead of as a general amendment
to the Original Filing. In addition to correcting the Edgar tag, this Post-Effective Amendment No.
2 updates the information set forth on the cover page and in the Summary, Risk Factors, and
Incorporation of Certain Documents by Reference sections of the Prospectus.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED May 22, 2008
PROSPECTUS
AMDL, INC.
3,458,000 SHARES
OF COMMON STOCK
This prospectus relates to shares of common stock of AMDL, Inc. that may be offered for sale
for the account of the selling stockholders identified in this prospectus. The selling
stockholders may offer and sell from time to time up to 3,458,000 shares of our common stock, of
which 515,000 shares will be issued to the selling stockholders only if and when they exercise
warrants or options held by them.
The selling stockholders may sell all or any portion of their shares of common stock in one or
more transactions on the American Stock Exchange, NASDAQ or in private, negotiated transactions.
Each selling stockholder will determine the prices at which it sells its shares. Although we will
incur expenses in connection with the registration of the common stock, we will not receive any of
the proceeds from the sale of the shares of common stock by the selling stockholders. However, we
will receive gross proceeds of up to approximately $54,750 from the exercise of the warrants and up
to approximately $1,475,000 from the exercise of options, if and when the warrants and options are
exercised.
On
May 21, 2008, there were 15,731,516 shares of common stock outstanding. Our common stock
is listed on the American Stock Exchange and traded under the symbol
ADL. On May 21, 2008, the
closing price of the common stock on the American Stock Exchange was
$3.00 per share.
We may amend or supplement this prospectus from time to time by filing amendments or
supplements as required. You should read this entire prospectus and any amendments or supplements
carefully before you make your investment decision.
The shares of common stock offered or sold under this prospectus involve a high degree of
risk. See Risk Factors beginning at Page 4 of this prospectus to read about certain factors you
should consider before deciding whether to invest in our common stock.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is ___, 2008
TABLE OF CONTENTS
We have not authorized any person to give you any supplemental information or to make any
representations for us. You should not rely upon any information about our company that is not
contained in this prospectus or in one of our public reports filed with the Securities and Exchange
Commission (SEC) and incorporated into this prospectus. Information contained in this prospectus
or in our public reports may become stale. You should not assume that the information contained in
this prospectus, any prospectus supplement or the documents incorporated by reference are accurate
as of any date other than their respective dates, regardless of the time of delivery of this
prospectus or of any sale of the shares. Our business, financial condition, results of operations
and prospects may have changed since those dates. The selling stockholders are offering to sell,
and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales
are permitted.
In this prospectus, AMDL, Company, we, us, and our refer to AMDL, Inc., a Delaware
corporation, and its subsidiaries. In this prospectus, unless otherwise specified or unless the
context otherwise requires, all references to $ or dollars are to U.S. dollars.
ABOUT FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 which reflect our current view (as of the date such forward-looking statement is made) with
respect to future events, prospects, projections or financial performance. These forward-looking
statements are subject to certain uncertainties and other factors that could cause actual results
to differ materially from those made, implied or projected in such statements. The words
believe, expect, anticipate, project, and similar expressions identify forward-looking
statements which speak only as of the date of the statement made. Except as required by law, we
undertake no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
SUMMARY
We
are a vertically integrated specialty pharmaceutical company. In combination with
our subsidiary Jade Pharmaceutical Inc. (JPI), we engage in the research, development,
manufacture,
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and marketing of diagnostic, pharmaceutical, nutritional supplement, and cosmetic products
currently in the Peoples Republic of China (China). We currently employ approximately 320
people, of which 311 are located in China.
AMDL was founded in 1987 as a bio-tech research and development firm that had one product, its
proprietary cancer diagnostic test: AMDL-ELISA DR-70® (FDP). In 2001, we acquired a proprietary
cancer vaccine Combination Immunogene therapy (CIT). CIT is a U.S. patented technology (patent
issued May 25, 2004). In September 2006, we acquired JPI in order to dramatically broaden our
business into a multi segmented China-centric pharmaceutical business.
Through JPI, we manufacture and distribute generic, homeopathic, over-the-counter
pharmaceutical products and supplements. JPI manufactures and distributes its products through two
wholly-owned Chinese subsidiaries, Yangbian Yiqiao Bio-Chemical Pharmacy Company Limited (YYB)
and Jiangxi Jiezhong Bio-Chemical Pharmacy Company Limited (JJB). JPI acquired the businesses
currently conducted by YYB and JJB in 2005 along with certain assets and liabilities of a
predecessor to JJB (JiangXi Shangrao KangDa Biochemical Pharmacy Co. Ltd). YYBs facilities are
located in Tuman City, Jilin Province, China and JJB is located in Shangrao, Jiangxi Province,
China. JPI currently manufactures and markets 48 products. Of these products, 24 are JJB branded
generic western drug formulations and there are 24 YYB branded Chinese traditional medicine and
nutritional products. JPI is also researching and developing other pharmaceutical products which
will require the approval of the Peoples Republic of China State Federal Drug Agency (SFDA).
Both JJB and YYB are wholly-foreign owned enterprises (WFOEs). WFOEs are limited liability
companies established under Chinese Company Law that are exclusively owned by foreign investors.
WFOEs are used to, among other things: enable local China based entities to carry on business in
China, rather than operate in a representative capacity; acquire land use certificates to own and
operate facilities in China; employ persons in China; hold intellectual property rights; protect
intellectual property and proprietary technology; and issue invoices to their customers in Renminbi
and record revenues in Renminbi, but convert the profits into U.S. dollars for distribution to
their parent company outside China. There are also potential disadvantages of operating as a WFOE,
including, but not limited to, unlimited liability claims arising from the operations in China and
potentially less favorable treatment from governmental agencies than would be afforded to those
entities operating with a Chinese partner.
We are in the process of establishing another series of entities, including another WFOE that
will manage and operate a chain of clinics to be known as JPGreen Health and Beauty Clinics
(JPGreen Clinics), if acquired. The JPGreen Clinics will offer, in addition to a number of Esmond brand and
Jade brand generic pharmaceuticals, anti-aging injectibles and skin care products containing a
human placental solution named Goodnak. Initially, the JPGreen Clinics will be established in
Shanghai, China.
We also sell OEM products and test kits which are manufactured by others. Our products may be
used by hospital, clinical, research and forensic laboratories and doctors offices to obtain
precise and rapid identification of certain types of cancer and other diseases. Our proprietary
DR-70® test kit may be used to assist in the detection of at least 14 different types of cancer,
including: lung (small and non-small cell); stomach; breast; rectal; colon; and liver. As DR-70® is
a non-invasive blood test, there are no side effects to the administration of our test. As with
other cancer diagnostic products, false negative and false positive results could pose a small risk
to patient health if their physician is not vigilant in following up on the DR-70® results with
other modalities that are standard of care for these patients. DR-70® is not yet available for sale
in the United States (U.S.). Our DR-70® test kit cannot be sold in the U.S. until we receive
premarket approval for the DR-70® from the U.S. Food and Drug Administration (USFDA). We have submitted a 510(k) application to the
USFDA to obtain premarket approval for the DR-70® as a Class II regulated device and such
application is currently under review by the USFDA.
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Our executive offices are located at 2492 Walnut Avenue, Suite 100, Tustin, California 92780,
telephone number (714) 505-4460. In September 2001, we registered our common stock under the
Securities Exchange Act of 1934 and listed on the American Stock Exchange under the symbol ADL. You
may review any of our public reports or information on file with the SEC at the SECs Public
Reference Room at 100 F Street N.E., Room 1580, Washington, D.C., 20549. You may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330 or review our
reports at http://www.sec.gov or http://www.amdlcorporate.com. Information on, or accessible
through, our website is not incorporated into this prospectus unless this prospectus specifically
indicates otherwise.
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully the following
risk factors, as well as the other information contained in this prospectus and the documents
incorporated by reference into this prospectus, in evaluating an investment in our common stock.
Limited product development activities; our product development efforts may not result in
commercial products.
We intend to continue to pursue USFDA and SFDA approval of DR-70® and licensing of our CIT
technology. Due to limited cash resources, we are limited in the number of additional products we
can develop at this time. Successful cancer detection and treatment product development is highly
uncertain, and very few research and development projects produce a commercial product. Product
candidates like DR-70® or the CIT technology that appear promising in the early phases of
development, such as in early animal or human clinical trials, may fail to reach the market for a
number of reasons, such as:
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the product candidate did not demonstrate acceptable clinical trial results even though
it demonstrated positive preclinical trial results;
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the product candidate was not effective in treating a specified condition or illness;
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the product candidate had harmful side effects on humans;
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the necessary regulatory bodies, such as the USFDA or SFDA, did not approve our product
candidate for an intended use;
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the product candidate was not economical for us to manufacture and commercialize; and
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the product candidate is not cost effective in light of existing therapeutics.
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Of course, there may be other factors that prevent us from marketing a product including, but
not limited to, our limited cash resources. We cannot guarantee we will be able to produce
commercially successful products. Further, clinical trial results are frequently susceptible to
varying interpretations by scientists, medical personnel, regulatory personnel, statisticians and
others, which may delay, limit or prevent further clinical development or regulatory approvals of a
product candidate. Also, the length of time that it takes for us to complete clinical trials and
obtain regulatory approval for product marketing may vary by product and by the intended use of a
product. We cannot predict the length of time to complete necessary clinical trials and obtain
regulatory approval.
Our
cash position as of May 12, 2008 of approximately $2,004,000 is not sufficient to
conduct significant clinical trials for DR-70® or to market our products internationally by
ourselves. With or without additional financing (or cash generated from our pharmaceutical
operations in China), we will
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likely engage outside distributors and license our products to others, although there can be
no assurances that our products can be successfully licensed.
Our operations in China involve significant risk.
JJB and YYB operate as WFOEs in China. Risks associated with operating as a WFOE include
unlimited liability for claims arising from operations in China and potentially less favorable
treatment from governmental agencies in China than JJB and YYB would receive if JJB and YYB
operated through a joint venture with a Chinese partner.
JJB and YYB are subject to the Pharmaceutical Administrative Law, which governs the licensing,
manufacture, marketing and distribution of pharmaceutical products in China and sets penalty
provisions for violations of provisions of the Pharmaceutical Administrative Law. Compliance with
changes in law may require us to incur additional expenditures which could have a material impact
on our consolidated financial position, results of operations and cash flows.
As in the case of JJB, the Chinese government has the right to annex or take facilities it
deems necessary. Currently, a portion of JJBs facility that produces large and small volume
parenteral solutions has been identified for annexation by the Chinese Military Department. JJB has
objected to the Chinese Military Departments annexation. The outcome of this event cannot be
predicted at this time, but if the Chinese government takes this facility, although we expect that
JJB will be compensated fairly for the facility, JJB will may have to spend significant time and
resources finding another location and restarting those operations in another area. In addition,
such new location will need to obtain GMP certification. Such annexation, or the threat of such
annexation, may negatively impact our results of operation and financial condition.
The value of the RMB fluctuates and is subject to changes in Chinas political and economic
conditions. Historically, the Chinese government has benchmarked the RMB exchange ratio against the
U.S. dollar, thereby mitigating the associated foreign currency exchange rate fluctuation risk;
however, no assurances can be given that the risks related to currency deviations of the RMB will
not increase in the future. Additionally, the RMB is not freely convertible into foreign currency
and all foreign exchange transactions must take place through authorized institutions.
We may not be able to continue to operate our business if we are unable to attract additional
operating capital.
The current level of our revenues is not sufficient to finance all of our intended operations
on a long-term basis. Currently, our operations do not produce sufficient cash to offset the cash
drain of the USFDA approval process for DR-70® and our other general operating and administrative
expenses. Accordingly, our business and operations are substantially dependent on our ability to
raise additional working capital to: (i) finance the costs of USFDA approval of DR-70® in the U.S.
and SFDA in China; (ii) supply additional working capital to JPI for expansion of manufacturing
capabilities for new and existing products; and (iii) fund ongoing selling, general and
administrative expenses of our business. As of March 31, 2008, we had warrants outstanding that
are exercisable for up to an aggregate of 4,687,306 shares of our common stock at a
weighted-average exercise price of $4.01 per share. Included within that amount are (i) warrants to
purchase a total of 367,137 shares (including broker warrants) which were issued at an average
exercise price of $5.51 per share in our December 2006 private placement, (ii) warrants to purchase
a total of 1,205,632 shares at an average exercise price of $3.68 per share which were issued in
April and May of 2007, and (iii) warrants to purchase a total of 1,204,506 shares which were issued
at an average exercise price of $4.74 per share in our most recent private placement conducted in
November 2007. An additional 161,813 warrants were issued in February 2008 in connection with a
private placement. In addition, any future equity financing may involve substantial dilution to our
stockholders.
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At
May 12, 2008, we had cash on hand of approximately $2,004,000 and cash is being depleted
at the rate of approximately $445,000 per month. Assuming (i) the current level of revenue from the
sale of DR-70® kits does not increase in the near future, (ii) we do not require new cancer samples
to satisfy the USFDA concerns on our pending 510(k) application, (iii) we do not conduct any full
scale clinical trials for
DR-70 ® or our CIT technology in the U.S. or China, (iv) JPI generates
sufficient cash to meet or exceed its cash requirements, and (v) no outstanding warrants are
exercised, the amount of cash on hand is expected to be sufficient to meet our projected operating
expenses through November 2008.
Our independent registered public accounting firm has included a going concern paragraph in their
report on our financial statements.
While our independent registered public accounting firm expressed an unqualified opinion on
our consolidated financial statements, our independent registered
public accounting firm did include an explanatory
paragraph indicating that there is substantial doubt about our ability to continue as a going
concern due to our significant operating losses, negative cash flows from operations and accumulated deficit at December 31, 2007. Our ability to continue as an
operating entity currently depends, in large measure, upon our ability to generate additional
capital resources. In light of this situation, it is not likely that we will be able to raise
significant equity. While we seek ways to continue to operate by securing additional financing resources or
alliances or other partnership agreements, we do not at this time have any commitments or
agreements that provide for additional capital resources. Our financial condition and the going
concern emphasis paragraph may also make it more difficult for us to maintain existing customer
relationships and to initiate and secure new customer relationships.
Our current products cannot be sold in certain countries if we do not obtain and maintain
regulatory approval.
We conduct research and clinical trials and we manufacture, distribute and market our products
for their approved indications. These activities are subject to extensive regulation by numerous
state and federal governmental authorities in the U.S., such as the USFDA and the Centers for
Medicare and Medicaid Services (formerly Health Care Financing Administration) and the SFDA in
China as well as by certain foreign countries, including some in the European Union. Currently, we
(or our distributors) are required in the U.S. and in foreign countries to obtain approval from
those countries regulatory authorities before we can market and sell our products in those
countries. Obtaining regulatory approval is costly and may take many years, and after it is
obtained, it remains costly to maintain. The USFDA and foreign regulatory agencies have substantial
discretion to terminate clinical trials, require additional testing, delay or withhold registration
and marketing approval and mandate product withdrawals. In addition, later discovery of unknown
problems with our products or manufacturing processes could result in restrictions on such products
and manufacturing processes, including potential withdrawal of the products from the market. If
regulatory authorities determine that we have violated regulations or if they restrict, suspend or
revoke our prior approvals, they could prohibit us from manufacturing or selling our products until
we comply, or indefinitely.
USFDA approval for marketing DR-70® is not assured.
On November 13, 2007, we received a letter of deficiency noting four areas of concern with our
pending 510(k) application for our DR-70® test kit and the application was put on hold pending the
USFDAs receipt of our response to the USFDAs concerns. We submitted our response in full on May 12, 2008. The USFDA has sixty days to respond. While we intend to revise our application to address the USFDAs concerns,
the USFDAs response to the revised application cannot be anticipated and no assurances can be
given that we will ever receive USFDA clearance for the commercial sale of DR-70® in the U.S.
Furthermore, if USFDA approval is granted, although the approval has no expiration date, if we are
found in violation, the USFDA may impose fines, terminate the approval or seize our products, at
its discretion. In addition, the loss of previously received approvals, or failure to comply with existing
or future regulatory requirements would have a material adverse effect on our business, financial
condition and results of operations.
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Our future prospects will be negatively impacted if we are unsuccessful in pending litigation over
the combination immunogene therapy technology.
We are engaged in litigation with AcuVector and with the Governors of the
University of Alberta over our CIT technology. Although theses cases are still in the early stages
of discovery, we believe they are without merit and that we will receive a favorable judgment in
both. However, if either AcuVector or the University is successful in their claims, we may be
liable for substantial damages, our rights to the technology will be adversely affected, and our
future prospects for exploiting or licensing the CIT technology will be significantly impaired.
The value of intangible assets may not be equal to their carrying values.
One of our intangible assets includes the CIT technology, which we acquired from Dr. Chang in
August 2001. We also purchased certain intangible assets in our acquisition of JPI. Whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable, we are
required to evaluate the carrying value of such intangibles, including the related amortization
periods. Whenever events or changes in circumstances indicate that the carrying value of an
intangible asset may not be recoverable, we determine whether there has been impairment by
comparing the anticipated undiscounted cash flows from the operation and eventual disposition of
the product line with its carrying value. If the undiscounted cash flows are less than the carrying
value, the amount of the impairment, if any, will be determined by comparing the carrying value of
each intangible asset with its fair value. Fair value is generally based on either a discounted
cash flows analysis or market analysis. Future operating income is based on various assumptions,
including regulatory approvals, patents being granted, and the type and nature of competing
products.
Patent approval for eight original claims related to the CIT technology was obtained in May
2004 and a continuation patent application was filed in 2004 for a number of additional claims. No
regulatory approval has been requested for our CIT technology and we do not have the funds to
conduct the clinical trials which would be required to obtain regulatory approval for our CIT
technology. Accordingly, we are seeking a strategic partner to license the CIT technology from us.
If we cannot attract a large pharmaceutical company to license our CIT technology and conduct the
trials required to obtain regulatory approval, or if regulatory approvals or patents are not
obtained or are substantially delayed, or other competing technologies are developed and obtain
general market acceptance, or market conditions otherwise change, our CIT and other intangible
technology may have a substantially reduced value, which could be material. As intangible assets
represent a substantial portion of assets in our consolidated balance sheet, any substantial
deterioration of value would significantly impact our reported consolidated financial position and
our reported consolidated operating results.
If our intellectual property positions are challenged, invalidated or circumvented, or if we fail
to prevail in future intellectual property litigation, our business could be adversely affected.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and
often involve complex legal, scientific and factual questions. To date, there has emerged no
consistent policy regarding breadth of claims allowed in such companies patents. Third parties may
challenge, invalidate or circumvent our patents and patent applications relating to our products,
product candidates and technologies. In addition, our patent positions might not protect us against
competitors with similar products or technologies because competing products or technologies may
not infringe our patents.
We face substantial competition, and others may discover, develop, acquire or commercialize
products before or more successfully than we do.
We operate in a highly competitive environment. Our products compete with other products or
treatments for diseases for which our products may be indicated. Additionally, some of our
competitors
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market products are actively engaged in research and development in areas where we are
developing product candidates. Large pharmaceutical corporations have greater clinical, research,
regulatory and marketing resources than we do. In addition, some of our competitors may have
technical or competitive advantages over us for the development of technologies and processes.
These resources may make it difficult for us to compete with them to successfully discover, develop
and market new products.
Our U.S. operations have limited sales of DR-70® and are reliant on our distributors for sales of
our products.
Prior to the acquisition of JPI, virtually all of our operating revenues have come from sales
to two distributors in foreign countries of
DR-70® kits and from sales to a few domestic customers
of our OEM products. For the year ended December 31, 2007 and for the first quarter of 2008, almost all of the revenue related to our
U.S. operations was derived from sales of DR-70® and our U.S. operations had only nominal sales of
our OEM products. Historically, our U.S. operations have not received any substantial orders from
any of our customers or distributors of DR-70® or our OEM products. Moreover, none of our
distributors or customers are contractually required to buy any specific number of DR-70® kits or
OEM products from us. Accordingly, based upon this fact, historical sales, and the uncertainty of
USFDA approval for sale of DR-70® in the U.S., any projection of future orders or sales of DR-70®
kits or OEM products is unreliable. In addition, the amount of DR-70® purchased by our distributors
or customers can be adversely affected by a number of factors, including their budget cycles and
the amount of funds available to them for product promotion and marketing.
JPI is reliant on its distributors for sales of its products.
Most of JPIs products are sold to distributors. JPIs distributors are not required to
purchase any minimum quantity of products; however, many of JPIs distribution agreements are
subject to termination and cancellation if minimum quantities of specified products are not
purchased by the distributors. JPI has never terminated any distributor for failure to meet the
minimum quantity sales targets.
We are subject to risks associated with our foreign distributors.
Our business strategy includes the continued dependence on foreign distributors for our DR-70®
product and local distributors in China for JPIs products. To date, we have not been successful in
generating a significant increase in sales for DR-70® through distribution channels in existing
markets or in developing distribution channels in new markets. We are also subject to the risks
associated with our distributors operations, including: (i) fluctuations in currency exchange
rates; (ii) compliance with local laws and other regulatory requirements; (iii) restrictions on the
repatriation of funds; (iv) inflationary conditions; (v) political and economic instability; (vi)
war or other hostilities; (vii) overlap of tax structures; and (viii) expropriation or
nationalization of assets. The inability to manage these and other risks effectively could
adversely affect our business.
We do not intend to pay dividends on our common stock in the foreseeable future.
We currently intend to retain any earnings to support our growth strategy and do not
anticipate paying dividends in the foreseeable future.
If we fail to comply with the rules under the Sarbanes-Oxley Act related to accounting controls and
procedures or if material weaknesses or other deficiencies continue in our internal
accounting procedures, our stock price could decline significantly.
Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the
effectiveness of our internal controls over financial reporting commencing December 31, 2007 and a
report by our independent registered public accounting firm addressing the effectiveness of our
internal control over financial reporting for the year ending December 31, 2008.
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Management has concluded that the consolidated financial statements included in our Annual
Report on Form 10-K/A for the year ended December 31, 2007, and incorporated by reference into this
prospectus, fairly present in all material respects our financial condition, results in operations
and cash flows for the period ended December 31, 2007 in conformity with accounting principles
generally accepted in the U.S.
Our
management has evaluated the effectiveness of our internal control
over financial reporting as of December 31, 2007 based on the
control criteria established in a report entitled Internal Control
Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation,
our management has concluded that our internal control over financial
reporting was not effective as of December 31, 2007. During its
evaluation, our management identified material weaknesses in our internal control over financial reporting and
other deficiencies. As a result, our investors could lose confidence in us, which could result in
a decline in our stock price.
We are taking steps to remediate our material weaknesses. If we fail to achieve and maintain
the adequacy of our internal controls, we may not be able to ensure that we can conclude in the
future that we have effective internal controls over financial reporting in accordance with Section
404 of the Sarbanes-Oxley Act. Moreover, effective internal controls, particularly those
related to revenue recognition, are necessary for us to produce reliable financial reports and are
important to helping prevent financial fraud. If we cannot provide reliable financial reports or
prevent fraud, our business and operating results could be harmed, investors could lose confidence
in our reported financial information, and the trading price of our stock could drop significantly.
In addition, we cannot be certain that additional material weaknesses or significant deficiencies
in our internal controls will not be discovered in the future.
Loss of our listing on the American Stock Exchange could adversely affect the marketability and
price of our shares.
We are not currently in compliance with the standards for continued listing on AMEX, although
AMEX has not yet taken any action to delist our securities. Unless we meet the standards for
continued listing, AMEX could at any time (i) commence a proceeding to delist our securities or
(ii) include us in the list of companies that are not in compliance with AMEXs continued listing
standards and require that the indicator .BC be added as an extension to our symbol which will be
transmitted with any quotation or trade of our shares. In June 2006, we submitted a plan to become
compliant with AMEXs continued listing standards which plan included the acquisition of JPI. The
JPI acquisition closed on September 28, 2006. On November 10, 2006 AMEX advised us that the plan
period would remain open until we have been able to demonstrate compliance with the continued
listing standards for two consecutive fiscal quarters. As of the date hereof, AMEX has not yet
issued its final letter stating that we are in compliance with the Continued Listing Standards.
Delisting from AMEX may impact our ability to raise capital in the future. The loss of listing on
AMEX could adversely affect the marketability and/or price of our shares because some brokers and
other traders might refrain from purchasing or trading our shares if we were delisted or if they
perceived that a delisting might occur in the near future. Additionally, delisting from AMEX may
adversely impact our ability to raise capital in the future.
Our stock price is volatile, which could adversely affect your investment.
Our stock price, like that of other international bio-pharma cancer diagnostic and treatment
companies, is highly volatile. Our stock price may be affected by such factors as:
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clinical trial results;
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product development announcements by us or our competitors;
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regulatory matters;
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9
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announcements in the scientific and research community;
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intellectual property and legal matters;
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broader industry and market trends unrelated to our performance;
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economic markets in Asia; and
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competition in local Chinese markets where we sell JPIs product.
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In addition, if our revenues or operating results in any period fail to meet the investment
communitys expectations, there could be an immediate adverse impact on our stock price.
We have limited product liability insurance.
We currently produce products for clinical studies and for investigational purposes. We are
producing our products in commercial sale quantities, which will increase as we receive various
regulatory approvals in the future. There can be no assurance, however, that users will not claim
that effects other than those intended may result from our 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 our products, 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
us, and may have a material adverse effect on us by reason of our inability to defend against or
pay such claims. We carry product liability insurance for any such claims, but only in an amount
equal to $2,000,000 per occurrence, and $2,000,000 aggregate liability, which may be insufficient
to cover all claims that may be made against us.
USE OF PROCEEDS
We will not receive any of the proceeds from sales of common stock by any selling stockholder.
We will receive gross proceeds of up to approximately $54,750 from the exercise of the warrants to
purchase 15,000 shares of common stock if and when the warrants held by the selling stockholders
are exercised. We will receive gross proceeds of up to approximately $1,475,000 from the exercise
of the options to purchase 500,000 shares of common stock if and when the options held by the
selling stockholders are exercised.
We intend to use the proceeds from the exercise of the warrants and options for our general
working capital needs. There can be no assurance that all, or any, of the warrants or options will
be exercised. Neither the issuance of the common stock to the selling stockholders upon the
exercise of the warrants or options nor the transfer of the warrants or options is part of this
offering.
DETERMINATION OF OFFERING PRICE
This offering is being made solely to allow the selling stockholders to offer and sell shares
of our common stock to the public. The selling stockholders may offer for resale some or all of
their shares at the time and price that they choose. On any given day, the price per share is
likely to be based on the bid price for our common stock, as quoted on the American Stock Exchange
on the date of sale, unless shares are sold in private transactions. Consequently, we cannot
currently make a determination of the price at which shares offered for resale pursuant to this
prospectus may be sold.
10
SELLING STOCKHOLDERS
This prospectus relates to the offering and sale, from time to time, of up to 3,458,000 shares
of our common stock by the stockholders named in the table below. All of the selling stockholders
named below acquired their shares of our common stock and warrants directly from us in private
transactions.
The
following table sets forth certain information known to us, as of
May 21, 2008, and as
adjusted to reflect the sale of the shares offered hereby, with respect to the beneficial ownership
of common stock by the selling stockholders. The selling stockholders may sell all or some of the
shares of common stock they are offering, and may sell shares of our common stock otherwise than
pursuant to this prospectus. It also assumes that each of the stockholders who has options
exercises all of such options and sells all of the shares issued upon exercise thereof. The table
below assumes that the selling stockholders sell all of the shares offered by them in offerings
pursuant to this prospectus, and neither dispose of nor acquire any additional shares. We are
unable to determine the exact number of shares that will actually be sold or when or if these sales
will occur.
The shares of common stock being offered pursuant to this prospectus and included in the table
below include: (i) 15,000 shares of common stock that remain issuable upon the exercise of
warrants, and (ii) 500,000 shares of common stock that remain issuable upon the exercise of options
which expire September 28, 2009, and have been included in the number of shares beneficially owned
by such person before the offering.
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Number
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Shares
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of Shares
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Shares
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Beneficially Owned
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Being
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Beneficially Owned
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Before Offering
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Offered
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After Offering
(1)
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Name of Beneficial Owner
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Number
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Percentage
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Number
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Percentage
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That T. Ngo
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30,000
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*
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30,000
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X
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0
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0
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Ping Y. Ngo
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30,000
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*
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30,000
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X
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0
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0
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Lijuan Wang
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111,789
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*
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111,789
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X
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0
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0
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Fang Hao
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48,750
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*
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48,750
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X
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0
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0
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Li Ping
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43,191
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*
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43,191
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X
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0
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0
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Xiaoqing Ruan
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84,640
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*
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84,640
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X
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0
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0
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Xiaohong Chen
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50,083
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*
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50,083
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X
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0
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0
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Liang Zuoneng
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29,957
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*
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29,957
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X
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0
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0
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Huiling Shi
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40,000
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*
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40,000
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X
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0
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0
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Li Jianrong
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69,430
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*
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69,430
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X
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0
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0
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Kejia Liu
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32,488
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*
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32,488
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X
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0
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0
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(Frank) Fang Zheng
(2)
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1,792,672
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11.4
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%
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820,000
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X
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972,672
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6.2
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%
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(Henry) Minghui Jia
(3)
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1,792,672
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11.4
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%
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820,000
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X
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972,672
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6.2
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%
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Jade Capital Group Limited
(4)
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972,672
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6.2
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%
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972,672
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X
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0
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0
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Savannah Capital Management, Inc.
(5)
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15,000
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*
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15,000
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0
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0
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First International Capital Group, Ltd.
(6)
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300,000
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1.9
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%
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200,000
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100,000
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*
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Zuhe Xiao
(7)
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40,000
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*
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40,000
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X
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0
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0
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Bing Zhu Zha
(8)
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10,000
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*
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10,000
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X
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0
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0
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Zu Dong Ziao
(9)
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10,000
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*
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10,000
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X
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0
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0
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* Denotes less than 1%.
X
All of these shares are subject to a Lock-up Agreement, which only permits that
20,000
of such shares may be sold by the holder in each calendar month.
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(1)
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Assumes that all shares offered hereby are sold.
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11
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(2)
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Of the 1,792,672 shares beneficially owned by Mr. Zheng: (i) 972,672 of the shares are held
by Jade Capital Group Limited of which Mr. Zheng is an officer, director and shareholder; and
(ii) 220,000 of the shares underlie options which are currently exercisable.
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(3)
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Of the 1,792,672 shares beneficially owned by Mr. Jia: (i) 972,672 of the shares are held by
Jade Capital Group Limited of which Mr. Jia is an officer, director and shareholder; and (ii)
220,000 of the shares underlie options which are currently exercisable.
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(4)
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100,000 of the shares are held in escrow pursuant to an Escrow Agreement which are subject to
cancellation if the SFDA China has not issued approval to market DR-70® on or before March
28, 2009. Messrs. (Frank) Fang Zheng and (Henry) Minghui Jia have joint investment and voting
power with respect to all shares beneficially owned by Jade Capital Group Limited.
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(5)
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Mr. Lauren Rudd, sole stockholder, has sole investment and voting power with respect to these
shares.
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(6)
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Mr. Benjamin Levi, attorney and beneficial owner, has sole voting and investment power with
respect to these shares. 100,000 of these shares were previously registered for resale and
are included in the number of shares beneficially owned by First International Capital Group
after the offering.
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(7)
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The shares beneficially owned by Mr. Zuhe Xiao underlie options which are currently
exercisable.
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(8)
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The shares beneficially owned by Mr. Bing Zhu Zha underlie options which are which are
currently exercisable.
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(9)
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The shares beneficially owned by Mr. Zu Dong Ziao underlie options which are which are
currently exercisable.
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All of the selling stockholders, other than Savannah Capital Management, Inc. and First
International Capital Group, Ltd., were affiliated with Jade Capital Group Limited, or its
affiliates or subsidiaries, within the past three years. Except as indicated in the footnotes to
the table, the selling stockholders possess sole voting and investment power with respect to the
shares shown.
The selling stockholders will sell their shares in one or more market transactions on the
American Stock Exchange or in privately negotiated transactions at standard terms, including
commissions at market rates for similar transactions.
PLAN OF DISTRIBUTION
Shares of common stock covered hereby may be offered and sold from time to time by the selling
stockholders. Each selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale. Each selling stockholder may sell the shares
being offered hereby (i) on the American Stock Exchange, or otherwise at prices and at terms then
prevailing or at prices related to the then current market price or (ii) in private sales at
negotiated prices or by a combination of such methods of sale.
Any broker-dealer participating in such transactions as agent may receive commissions from
each selling stockholder (and, if acting as agent for the purchaser of such shares, from such
purchaser). Usual and customary brokerage fees will be paid by each selling stockholder.
Broker-dealers may agree with each selling stockholder to sell a specified number of shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for each selling stockholder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to each selling stockholder. Broker-dealers who
acquire shares as principal may thereafter resell such shares from time to time in transactions
(which may involve crosses and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) on the American Stock
Exchange, in negotiated transactions or by a combination of such methods of sale or otherwise at
market prices prevailing at the time of sale or at negotiated prices, and in connection with such
resales may pay to or receive from the purchasers of such shares commissions computed as described
above.
Each selling stockholder and any underwriter, dealer or agent who participates in the
distribution of such shares may be deemed to be underwriters under the Securities Act of 1933,
and any discount, commission or concession received by such persons might be deemed to be an
underwriting discount or
12
commission. Each selling stockholder may indemnify any broker-dealer who participates in
transactions involving the sale of the shares against certain liabilities, including liabilities
arising under the Securities Act of 1933.
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed upon by Bryan Cave
LLP, Irvine, California.
EXPERTS
The consolidated financial statements as of December 31, 2007 and 2006 and for each of the
three years in the period ended December 31, 2007 incorporated in this prospectus by reference from
AMDL, Inc.s Annual Report on Form 10-K/A for the year ended December 31, 2007 have been audited by KMJ Corbin & Company LLP, an
independent registered public accounting firm, as stated in their report (which report expresses an
unqualified opinion and includes explanatory paragraphs relating to the Companys adoption of
Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and the substantial
doubt about the Companys ability to continue as a going concern), which is incorporated herein by
reference, and has been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other documents with the
SEC. You may read and copy any document we file at the SECs public reference room at 100 F Street
N.E., Room 1580, Washington, D.C. 20549. You should call (202) 551-8090 for more information on
the public reference room. The SEC maintains an internet site at
http://www.sec.gov
where certain
reports, proxy and information statements, and other information regarding issuers (including AMDL)
may be found. In addition, such material concerning the Company may be inspected at the offices of
the American Stock Exchange, 86 Trinity Place, New York, New York 10006.
This prospectus is part of a registration statement filed with the SEC. The registration
statement contains more information than this prospectus regarding our company and its common
stock, including certain exhibits filed. You can get a copy of the registration statement from the
SEC at the address listed above or from the SECs internet site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate into this prospectus information we file with it in other
documents. This means that we can disclose important information to you by referring to other
documents that contain that information. The information incorporated by reference is considered
to be part of this prospectus, and information we file later with the SEC will automatically update
and supersede this information. We incorporate by reference the documents listed below, except to
the extent information in those documents is different from the information contained in this
prospectus, and all future documents filed with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Securities Exchange Act of 1934 until we terminate the offering of these shares (File No.
1-16695):
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Registrants Annual Report on Form 10-K for the year ended December 31, 2007, filed
March 31, 2008, as amended by Amendment No. 1 on Form
10-K/A filed April 14, 2008;
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Registrants Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2008, filed May 15, 2008;
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Registrants Current Report on Form 8-K filed
April 11, 2008 and March 7, 2008 and portions of
Registrants Current Report on Form 8-K filed April 3, 2008; and
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13
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The description of the Registrants common stock contained in its Registration
Statement on Form 8-A filed September 21, 2001.
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We will provide without charge to each person, including any beneficial owner of common stock,
to whom this prospectus is delivered, upon the written or oral request of such person, a copy of
any and all of the documents that have been incorporated by reference in this prospectus (not
including exhibits to such documents unless such exhibits are specifically incorporated by
reference therein). Requests should be directed to: AMDL, Inc., 2492 Walnut Avenue, Suite 100,
Tustin, California 92780-7039, Attention: Gary L. Dreher, Chief Executive Officer, Telephone (714)
505-4460.
14
PART II
INFORMATION NOT REQUIRED
IN PROSPECTUS
Item 14. Itemized Statement of Expenses.
The table below sets forth the estimated expenses (except the SEC registration fee, which is
an actual expense) in connection with the offer and sale of the shares of common stock of the
registrant covered by this Registration Statement.
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SEC Registration Fee
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$
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1,365
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Legal Fees and Expenses
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10,000
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Accounting Fees and Expenses
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5,000
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Printing Fees and Expenses
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500
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Miscellaneous
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500
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Total
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$
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17,365
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Item 15. Indemnification of Directors and Officers.
Delaware law and AMDLs certificate of incorporation and bylaws provide that AMDL shall, under
certain circumstances and subject to certain limitations, indemnify any director, officer, employee
or agent of the corporation made or threatened to be made a party to a proceeding, by reason of the
former or present official capacity of the person, against judgments, fines, settlements and
reasonable expenses incurred by the person in connection with the proceeding if certain statutory
standards are met. Any such person is also entitled, subject to certain limitations, to payment or
reimbursement of reasonable expenses in advance of the final disposition of the proceeding.
Proceeding means a threatened, pending or completed civil, criminal, administrative, arbitration
or investigative proceeding, including one by or in the right of the corporation.
AMDLs directors, officers, agents and employees are entitled to indemnification by each of
the Selling Stockholders against any losses arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in this registration statement and
the prospectus contained herein made in reliance upon written information furnished to AMDL by such
Selling Stockholder for use in this registration statement or the prospectus.
AMDL has also entered into indemnification agreements with its directors whereby AMDL has
agreed to indemnify and hold them harmless from and against any claims, liability, damages or
expenses incurred by them in or arising out of their status, capacities and activities with respect
to AMDL to the maximum extent permitted by Delaware law. AMDL believes that these agreements are
necessary to attract and retain qualified persons as directors and executive officers.
AMDL also maintains a directors and officers insurance policy with aggregate limits of
$5,000,000 pursuant to which directors and officers of the company are insured against liability
for certain actions in their capacity as directors and officers.
Item 16. Exhibits.
The exhibits to this registration statement are listed in the Index to Exhibits on Page II-4.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
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(1)
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To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
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(i)
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To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
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II-1
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(ii)
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To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the Calculation of Registration Fee
table in the effective registration statement;
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(iii)
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To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
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provided, however
, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not
apply if the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
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(2)
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That, for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering thereof.
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(3)
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To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
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(b) The undersigned registrant hereby undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the registrants annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
provisions described under Item 15 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1933, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Post Effective Amendment No. 1 to the registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tustin, State of
California on May 22, 2008.
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AMDL, INC.
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By:
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/s/ Gary L. Dreher
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Gary L. Dreher, President
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Pursuant to the requirements of the Securities Act of 1933, this Post Effective Amendment No.
1 to the registration statement has been signed by the following
persons in the capacities on May 22, 2008.
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Signature
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Title
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/s/ Gary L. Dreher
GARY L. DREHER
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President, Chief Executive Officer and
Director
(Principal Executive Officer)
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/s/ Akio Ariura
AKIO ARIURA
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Chief Financial Officer (Principal Financial
Officer
and Principal Accounting Officer)
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/s/ *
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Director
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/s/ *
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Director
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/s/ *
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Director
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/s/ *
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Director
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*By:
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/s/ Gary L. Dreher
Gary L. Dreher
(Attorney-in-fact for
Persons so indicated.)
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II-3
INDEX TO EXHIBITS
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Exhibit
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5.1
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+Opinion and Consent of Bryan Cave LLP
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23.1
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+Consent of Bryan Cave LLP (included in Exhibit 5.1)
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23.2
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*Consent of KMJ Corbin & Company LLP
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24.1
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+Power of Attorney (included on Page II-3 of the original Registration Statement)
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*
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Filed herewith
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+
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Previously Filed
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II-4
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