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, 2003
[ ] 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 90-0017017
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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
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(Address of Principal Executive offices)
Issuer's Telephone Number: (310) 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 13, 2003, there were
8,052,783 shares of the issuer's common stock issued and outstanding.
AMEXDRUG CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited).........................................4
Condensed Consolidated Balance Sheets-- As of March 31, 2003
and December 31, 2002 (Unaudited).......................................5
Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2003 and 2002 (Unaudited)...............................6
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2003 and 2002 (Unaudited)...............................7
Notes to Condensed Consolidated Financial Statements (Unaudited)..........8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................9
Item 3. Controls and Procedures.................................................11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................12
Item 2. Changes in Securities...................................................12
Item 3. Defaults Upon Senior Securities.........................................12
Item 4. Submission of Matters to a Vote of Security Holders.....................12
Item 5. Other Information.......................................................12
Item 6. Exhibits and Reports on Form 8-K........................................12
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited condensed consolidated balance sheets of Amexdrug
Corporation, a Nevada corporation, and subsidiary as of March 31, 2003 and
December 31, 2002, and the related unaudited condensed consolidated statements
of operations and cash flows for the three month periods ended March 31, 2003
and March 31, 2002, 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 Amexdrug
Corporation's annual report on Form 10-KSB for the year ended December 31, 2002.
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, 2003, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2003.
4
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
2003 2002
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 358,940 $ 338,529
Accounts receivable, net of allowance for doubtful accounts of $192,000
and $152,083 , and allowance for sales returns of $0 and 166,741, respectively 827,869 682,627
Inventory, plus allowance for sales returns of $0 and
$162,255, respectively 110,588 395,939
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Total Current Assets 1,297,397 1,417,095
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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 (66,695) (62,220)
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Net Property and Equipment 68,833 73,308
Investment in real estate - -
Deposits 200 200
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Total Assets $ 1,366,430 $ 1,490,603
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 1,318,569 $ 1,535,684
Accrued liabilities 5,289 2,344
Accrued income taxes 25,945 -
Current portion of capital lease obligations 18,367 18,373
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Total Current Liabilities 1,368,170 1,556,401
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Long-Term Liabilities
Deferred income taxes 4,459 -
Capital lease obligations, net of current portion 45,670 50,025
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Total Long-Term Liabilities 50,129 50,025
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Stockholders' Equity (Deficit)
Common Stock - $0.001 par value; 50,000,000 shares authorized;
8,052,783 shares issued and outstanding 8,053 8,053
Additional paid-in capital 7,969 7,969
Accumulated deficit (67,891) (131,845)
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Total Stockholders' Equity (Deficit) (51,869) (115,823)
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity (Deficit) $ 1,366,430 $ 1,490,603
- ----------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
5
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 2003 2002
- -----------------------------------------------------------------------------------------
Sales $ 3,836,246 $ 6,020,888
Cost of Goods Sold 3,604,970 5,848,464
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Gross Profit 231,276 172,424
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Operating Expenses
Selling, general and administrative expense (134,793) (126,271)
Interest expense (1,325) (2,780)
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Income Before Income Taxes 95,158 43,373
Provision for Income Taxes 31,204 --
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Net Income 63,954 43,373
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Basic and Diluted Income Per Common Share $ 0.01 $ 0.01
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Basic and Diluted Weighted-Average Common Shares Outstanding 8,052,783 8,052,783
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See accompanying notes to condensed consolidated financial statements.
6
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 2003 2002
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Cash Flows from Operating Activities:
Net income $ 63,954 $ 43,373
Adjustments to reconcile net income to net cash provided by (used in)
operating activities
Depreciation 4,475 4,434
Bad debt expense 39,917 22,385
Changes in operating assets and liabilities:
Accounts receivable (185,159) (442,349)
Inventory 285,351 (351,963)
Accounts payable and accrued liabilities (188,225) 347,042
Accrued settlement obligations -- (33,464)
Deferred income taxes 4,459 --
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Net Cash Provided by (Used in) Operating Activities 24,772 (410,542)
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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 (4,361) (5,094)
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Net Cash Used in Financing Activities (4,361) (5,094)
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Net Increase (Decrease) in Cash 20,411 (412,994)
Cast at Beginning of Period 338,529 562,004
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Cash at End of Period $ 358,940 $ 149,010
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Supplemental Cash Flow Information:
Cash paid for interest $ 1,325 $ 2,780
- -----------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
7
AMEXDRUG CORPORATION AND SUBSIDIARY
NOTES TO CONSDENSED 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, 2002. The
financial position and results of operations for the three months ended March
31, 2003 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2003.
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 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, 2003 purchases from two vendors
accounted for 32 and 29 percent of total purchases. As of March 31, 2003,
accounts payable to these vendors accounted for 45 and 39 percent of the total
accounts payable.
Fair Value of 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 adjusted net income (loss) by the weighted-average number of common
shares and the dilutive potential common share equivalents outstanding. As of
March 31, 2003 and 2002 the Company did not have any potential common share
equivalents.
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 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 through May 2003. During the three months
ended March 31, 2003 and 2002 the Company made payments of approximately $0 and
$33,646, respectively, on the agreements. The agreements were paid in full
during May of 2002.
8
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
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
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 to reflect the change in the Company's business to the sale of
pharmaceutical products. The officers and directors of the Company also changed
in April 2000. 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.
9
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. In
2002, Allied's gross sales were approximately $22.2 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, 2003, Amexdrug reported sales of
$3,836,246, 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 $2,184,642 less than the $6,020,888 of sales reported for the
three months ended March 31, 2002. During the three months ended March 31, 2003
Amexdrug concentrated its efforts in selling products with a higher profit
margin. As a result, total sales declined during the three months ended March
31, 2003 as compared to total sales during the three months ended March 31,
2002. However, Amexdrug sold a larger portion of higher profit margin products
in the later period. Cost of goods sold for the three months ended March 31,
2003 was $3,604,970, a decrease of $2,243,494 from the $5,848,464 cost of goods
sold for the three months ended March 31, 2002. Gross profit increased by
$58,852 to $231,276 or 6.0% of sales for the three months ended March 31, 2003,
from the $172,424 or 2.9% of sales recorded for the three months ended March 31,
2002.
Selling, general and administrative expense was $134,793 for the three
months ended March 31, 2003, an increase of $8,522 from the $126,271 recorded
for the three months ended March 31, 2002.
During the three months ended March 31, 2003, Amexdrug experienced net
income of $63,954, an increase of $20,581 from the $43,373 net income earned
during the three months ended March 31, 2002. Amexdrug attributes this
improvement primarily to improved profit margins earned in the three month
period ended March 31, 2003.
10
Liquidity and Capital Resources - March 31, 2003
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Assets
As of March 31, 2003, Amexdrug reported total current assets of
$1,297,397, comprised of cash of $358,940, accounts receivable, net of $827,869
and inventory of $110,588. Total assets as of March 31, 2003 were $1,366,430,
which included total current assets, plus net property and equipment of $68,833
and deposits of $200.
Liabilities
Amexdrug's liabilities as of March 31, 2003 consist of accounts payable
of $1,318,569, accrued liabilities of $5,289, accrued income taxes of $25,945,
current portion of capital lease obligations of $18,367, and total long-term
liabilities of $50,129.
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.
Item 3. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.
Jack Amin who serves as both Amexdrug Corporation's chief executive
officer and its chief financial officer, after evaluating the effectiveness of
Amexdrug Corporation's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c) as of a date within 90 days of the
filing date of the quarterly report (the "Evaluation Date") concluded that as of
the Evaluation Date, Amexdrug Corporation's disclosure controls and procedures
were adequate and effective to ensure that material information relating to
Amexdrug Corporation and its consolidated subsidiary would be made known to him
by others within those entities, particularly during the period in which this
quarterly report was being prepared.
(b) Changes in internal controls.
There were no significant changes in Amexdrug Corporation's internal
controls or in other factors that could significantly affect Amexdrug
Corporation's disclosure controls and procedures subsequent to the Evaluation
Date, nor any significant deficiencies or material weaknesses in such disclosure
controls and procedures requiring corrective actions. As a result, no corrective
actions were taken.
11
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.
Exhibit
Number Description
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99.1 906 Certifications
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Amexdrug during the
quarter ended March 31, 2003.
12
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 14, 2003 By: /s/ Jack Amin
--------------------
Jack Amin
Director, President, Chief Executive Officer,
Chief Financial Officer and Chief Accounting
Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Jack Amin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Amexdrug
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, the results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
14
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
/s/ Jack Amin
Date: May 14, 2003 ----------------------------------
Jack Amin, Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Jack Amin, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Amexdrug
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, the results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
14
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
/s/ Jack Amin
Date: May 14, 2003 ----------------------------------
Jack Amin, Chief Financial Officer