U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 0-7473
Amexdrug Corporation
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(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 95-2251025
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
8909 West Olympic Boulevard, Suite 112
Beverly Hills, California 90211
---------------------------------
(Address of Principal Executive offices)
Issuer's Telephone Number: (301) 855-0475
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: As of May 14, 2002, there were
8,052,783 shares of the issuer's common stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited condensed consolidated balance sheet of Amexdrug Corporation,
a Nevada corporation, and subsidiary as of March 31, 2002 and December 31, 2001,
and the related unaudited condensed consolidated statements of operations and
cash flows for the three month periods ended March 31, 2002 and March 31, 2001,
and the notes to the condensed consolidated financial statements are attached
hereto as Appendix "A" and incorporated herein by reference. The financial
statements have been prepared by Amexdrug's management, and are condensed;
therefore they do not include all information and notes to the financial
statements necessary for a complete presentation of the financial position,
results of operations, and cash flows, in conformity with accounting principles
generally accepted in the United States of America, and should be read in
conjunction with the annual financial statements included in the annual report
on Form-10KSB as of December 31, 2001.
The accompanying financial statements reflect all adjustments which
are, in the opinion of management, necessary to present fairly the results of
operations and financial position of Amexdrug Corporation consolidated with
Allied Med, Inc., its wholly owned subsidiary, and all such adjustments are of a
normal recurring nature. The names "Amexdrug", "we", "our" and "us" used in this
report refer to Amexdrug Corporation.
Operating results for the quarter ended March 31, 2002, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2002.
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
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Amexdrug Corporation is located 8909 West Olympic Boulevard, Suite 112,
Beverly Hills, California 90211. Its phone number is (310) 855-0475. Its fax
number is (310) 855-0477. Its website is www.amexdrug.com. The President of
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Amexdrug has had experience working in the pharmaceutical industry for the past
20 years.
Through its wholly-owned subsidiary, Allied Med, Inc., Amexdrug is
engaged in the pharmaceutical wholesale business of selling brand name and
generic pharmaceutical products, over-the-counter (OTC) and health and beauty
products in 7 or 8 states. Amexdrug is expanding its business, and it would like
to eventually sell and distribute products in all 50 states.
Amexdrug Corporation was initially incorporated under the laws of the
State of California on April 30, 1963 under the name of Harlyn Products, Inc.
Harlyn Products, Inc. was engaged in the business of selling jewelry to
department stores and retail jewelry stores until the mid-1990s.
The name of the Company was changed to Amexdrug Corporation in April
2000, and the domicile of the Company was changed from California to Nevada in
December 2001. At that time the Company changed its fiscal year end from June 30
to December 31.
On December 31, 2001, Amexdrug acquired all of the issued and
outstanding common shares of Allied Med, Inc. ("Allied") in a share exchange.
Amexdrug acquired all 50,000 issued and outstanding shares of Allied common
stock from its sole shareholder, Mr. Jack Amin, in exchange for 7,000,000
restricted common shares of Amexdrug and the assumption of a $100,000 promissory
note, and all accrued interest thereon owed by Mr. Amin to Allied. At all times
during the negotiations of the transaction, Mr. Amin was an officer, director
and controlling shareholder of both companies. Consideration for the acquisition
was determined through negotiations between the boards of directors of both
companies and was based on Allied's past operating history and future potential
growth.
Allied was formed as an Oregon corporation in October 1997, to operate
in the pharmaceutical wholesale business of selling brand name and generic
pharmaceutical products, over-the-counter (OTC) and health and beauty products.
In 1998, Allied's gross sales were approximately $2.8 million. In 1999, Allied's
gross sales exceeded $5 million. In 2000, Allied's gross sales exceeded $8
million. In 2001, Allied's gross sales were approximately $21.2 million.
Amexdrug has assumed the operations of Allied as its primary
operations, and Amexdrug intends to build on the wholesale operations of Allied.
The accompanying financial information includes the operations of
Allied Med, Inc. for all periods presented and the operations of Amexdrug
Corporation from April 25, 2000.
Results of Operations
---------------------
For the three months ended March 31, 2002, Amexdrug reported sales of
$6,020,888, comprised entirely of income from the Allied Med, Inc.
pharmaceutical wholesale business of selling brand name and generic
pharmaceutical products, and over-the-counter (OTC) and health and beauty
products. This was $1,954,155 more than the $4,066,733 of sales reported for the
three months ended March 31, 2001. Cost of goods sold for the three months ended
March 31, 2002 was $5,848,464, an increase of $1,850,987 over the $3,997,477
cost of goods sold for the three months ended March 31, 2001. As a result of the
cost of goods sold increasing less than sales, gross profit increased by
$103,168 to $172,424 or 2.9% of sales for the three months ended March 31, 2002,
from the $69,256 or 1.7% of sales recorded for the three months ended March 31,
2001.
Selling, general and administrative expense was $126,271 for the three
months ended March 31, 2002, an increase of $45,586 from the $80,685 recorded
for the three months ended March 31, 2001. This increase in selling, general and
administrative expense is attributable to an increase in expenses related to the
increase in the Company's operations.
During the three months ended March 31, 2002, Amexdrug experienced net
income of $43,373, as compared to the $11,197 net loss incurred for the three
months ended March 31, 2001. Amexdrug attributes this improvement primarily to
improved profit margins earned in the three month period ended March 31, 2002.
Liquidity and Capital Resources - March 31, 2002
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Assets
As of March 31, 2002, Amexdrug reported total current assets of
$2,077,195, comprised of cash of $148,828, accounts receivable, net of
$1,340,680 and inventory of $587,687. Total assets as of March 31, 2002 were
$2,177,143, which included total current assets, plus net property and equipment
of $99,748 and deposits of $200.
Liabilities
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Amexdrug's liabilities as of March 31, 2002 consist of accounts payable
of $2,114,898, accrued liabilities of $2,129, current accrued settlement
obligations of $21,816, current portion of capital lease obligations of $17,971,
and total long-term liabilities of $74,739.
Forward-looking statements
--------------------------
This document includes various forward-looking statements with respect
to future operations of Amexdrug that are subject to risks and uncertainties.
Forward-looking statements include the information concerning expectations of
future results of operations and such statements preceded by, followed by or
that otherwise include the words "believes," "expects," "anticipates,"
"intends," "estimates" or similar expressions. For those statements, Amexdrug
claims the protection of the safe harbor for forward-looking statements
contained in the Private Litigation Reform Act of 1995. Actual results may vary
materially.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Amexdrug during the
quarter ended March 31, 2002.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMEXDRUG CORPORATION
Date: May 15, 2002 By:/s/ Jack Amin
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Jack Amin
Director, President, Chief Executive Officer,
Chief Financial Officer and Chief
Accounting Officer
APPENDIX "A"
FINANCIAL STATEMENTS
AMEXDRUG CORPORATION AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets-- March 31, 2002
and December 31, 2001 (Unaudited)..........................................2
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2002 and 2001 (Unaudited)..................................3
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and 2001 (Unaudited)..................................4
Notes to Condensed Consolidated Financial Statements (Unaudited).............5
1
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, December 31,
2002 2001
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Current Assets
Cash ................................................................. $ 148,828 $ 562,004
Accounts receivable, net of allowance for doubtful accounts of $83,747
and $61,362, respectively ......................................... 1,340,680 920,716
Inventory ............................................................ 587,687 235,724
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Total Current Assets ............................................. 2,077,195 1,718,444
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Property and Equipment
Office and computer equipment ........................................ 119,828 119,828
Leasehold improvements ............................................... 15,700 15,700
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Total Property and Equipment ..................................... 135,528 135,528
Less accumulated depreciation ........................................ (35,780) (31,346)
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Net Property and Equipment ....................................... 99,748 104,182
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Deposits .................................................................. 200 2,842
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Total Assets .............................................................. $ 2,177,143 $ 1,825,468
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable ..................................................... $ 2,114,898 $ 1,768,264
Accrued liabilities .................................................. 2,129 1,720
Accrued settlement obligations ....................................... 21,816 50,737
Current portion of capital lease obligations ......................... 17,971 18,369
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Total Current Liabilities ........................................ 2,156,814 1,839,090
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Long-Term Liabilities
Accrued settlement obligations, net of current portion ............... 3,150 7,875
Capital lease obligations, net of current portion .................... 71,589 76,285
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Total Long-Term Liabilities ...................................... 74,739 84,160
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Commitments And Contingencies
Stockholders' Deficit
Common stock, $0.001 par value; 50,000,000 shares authorized
and 8,052,783 issued and outstanding ................................. 8,053 8,053
Additional paid in capital ........................................... 7,969 7,969
Accumulated deficit .................................................. (70,432) (113,805)
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Total Stockholder's Deficit ...................................... (54,410) (97,782)
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Total Liabilities and Stockholders' Deficit ............................... $ 2,177,143 $ 1,825,468
=========== ===========
See accompanying notes to condensed consolidated financial statements.
2
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three
Months Ended
March 31,
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2002 2001
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Sales ...................................................... $ 6,020,888 $ 4,066,733
Cost of Goods Sold ......................................... 5,848,464 3,997,477
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Gross Profit ............................................... 172,424 69,256
Selling, General and Administrative Expense ................ (126,271) (80,685)
Interest Expense ........................................... (2,780) --
Interest and Other Income .................................. -- 232
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Net Income (Loss) .......................................... $ 43,373 $ (11,197)
=========== ===========
Basic and Diluted Income (Loss) Per Common Share ........... $ -- $ --
=========== ===========
Basic and Diluted Weighted-Average Common Shares Outstanding 8,052,783 8,052,783
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three
Months Ended
March 31,
2002 2001
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Cash Flows From Operating Activities
Net income (loss) ........................................ $ 43,373 $ (11,197)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation ........................................... 4,434 1,191
Bad debt expense ....................................... 22,385 5,007
Changes in operating assets and liabilities:
Accounts receivable .................................. (442,349) 62,747
Inventory ............................................ (351,963) (86,218)
Related party advances ............................... -- (8,901)
Accounts payable and accrued liabilities ............. 347,042 (468,637)
Accrued settlement obligations ....................... (33,646) (20,038)
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Net Cash Used In Operating Activities ............. (410,724) (526,046)
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Cash Flows From Investing Activities
Decrease in other assets ................................. 2,642 --
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Net Cash Provided By Investing Activities ......... 2,642 --
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Cash Flows From Financing Activities
Principal payments on capital lease obligations .......... (5,094) --
Capital contributions by shareholder ..................... -- 8,901
Distributions to shareholders ............................ -- (4,100)
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Net Cash Provided By (Used In) Financing Activities (5,094) 4,801
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Net Decrease in Cash .......................................... (413,176) (521,245)
Cash at Beginning of Period ................................... 562,004 455,286
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Cash at End of Period ......................................... $ 148,828 $ (65,959)
========= =========
Supplemental Cash Flows Information
Cash paid for interest ................................... $ 2,780 $ --
========= =========
See accompanying notes to condensed consolidated financial statements.
4
AMEXDRUG CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- Organization and Nature of Operations
Condensed Financial Statements -- The accompanying condensed financial
statements have been prepared by the Company and are unaudited. In the opinion
of management, the accompanying unaudited financial statements contain all
necessary adjustments for fair presentation, consisting of normal recurring
adjustments except as disclosed herein.
The accompanying unaudited interim financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange Commission;
therefore, certain information and disclosures generally included in financial
statements have been condensed or omitted. The condensed financial statements
should be read in connection with the Company's annual financial statements
included in its annual report on Form 10-KSB as of December 31, 2001. The
financial position and results of operations for the three months ended March
31, 2002 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2002.
Use of Estimates --The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
The Company's historical revenues and receivables have been derived solely from
the pharmaceutical industry. Although the Company primarily sells products on a
cash basis, some limited sales are made under credit terms. The Company performs
ongoing credit evaluations of its customers' financial condition and usually
requires a delayed check depository from its customers at the date products are
shipped. The Company maintains an allowance for uncollectible accounts
receivable based upon the expected collectibility of all accounts receivable.
During the three months ended March 31, 2002 purchases from two vendors
accounted for 65 and 12 percent of total purchases. As of March 31, 2002,
accounts payable to these vendors accounted for 58 and 38 percent of the total
accounts payable. During the three months ended March 31, 2001 purchases from
one vendor accounted for 54 percent of total purchases.
Concentration of Credit Risk and Fair Value of Financial Instruments -- At March
31, 2002, the Company had cash in excess of federally insured limits of $48,828.
The carrying amounts reported in the accompanying financial statements for cash,
accounts receivable and accounts payable approximate fair values because of the
immediate or short-term maturities of these financial instruments. The carrying
amounts of the Company's debt obligations approximate fair value based on
current interest rates available to the Company.
Revenue Recognition --The Company generates revenues from the resale of
pharmaceuticals, over-the-counter products, health and beauty care products and
nutritional supplements. The Company accounts for these revenues at the time of
shipment to and acceptance by the customer.
Net Income (Loss) Per Common Share--Basic income (loss) per common share is
computed by dividing net income (loss) by the weighted-average number of common
shares outstanding. Diluted income (loss) per common share is computed by
dividing net income (loss) by the weighted average number of common shares and
the dilutive potential common share equivalents outstanding. As of March 31,
2002 and 2001 the Company did not have any potential common share equivalents.
5
AMEXDRUG CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- ACCRUED SETTLEMENT OBLIGATIONS
In 1999, the Company entered into settlement agreements with numerous vendors
due to the Company's inability to pay the vendors. Under these settlement
agreements the Company agreed to pay these vendors a total of $588,140. The
Company was required to pay a large a portion at the initial execution of the
agreement and the remaining balance based on various payment plans. The payment
plans ranged from 24 to 36 months. The agreements are to be satisfied during May
2002 and one in May 2003. The Company has classified future payments of $3,150
due one year from March 31, 2002 as a long-term liability in the accompanying
financial statements. As of March 31, 2002 the remaining balance on these
settlement agreements was $24,966. During the three months ended March 31, 2002
and 2002 the Company made payments of $33,646 and $20,038 on the agreements.
6