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, 2005
[ ] 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
--------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 95-2251025
------------------------------- --------------------------
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
8909 West Olympic Boulevard, Suite 208
Beverly Hills, California 90211
--------------------------------------------
(Address of Principal Executive offices)
Issuer's Telephone Number: (310) 855-0475
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [X] No [ ]
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 12, 2005, there were
8,473,866 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)......................................3
Condensed Consolidated Balance Sheets --
As of March 31, 2005 and December 31, 2004 (Unaudited)...............4
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)...............5
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)...............6
Notes to Condensed Consolidated Financial Statements (Unaudited)......7
Item 2. Management's Discussion and Analysis or Plan of Operations............9
Item 3. Controls and Procedures..............................................12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................12
Item 2. Changes in Securities................................................13
Item 3. Defaults Upon Senior Securities......................................13
Item 4. Submission of Matters to a Vote of Security Holders..................13
Item 5. Other Information....................................................13
Item 6. Exhibits and Reports on Form 8-K.....................................13
-2-
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, 2005 and
December 31, 2004, the related unaudited condensed consolidated statements of
operations for the three month periods ended March 31, 2005 and March 31, 2004,
the related unaudited condensed consolidated statements of cash flows for the
three month periods ended March 31, 2005 and March 31, 2004 and the notes to the
unaudited condensed consolidated financial statements follow. 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's annual
report on Form 10-KSB for the year ended December 31, 2004.
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, 2005, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2005.
-3-
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
2005 2004
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 63,466 $ 4,693
Investments in securities available for sale 1,600 --
Accounts receivable, net of allowance for doubtful
accounts of $19,500 and $39,494, respectively 237,981 297,310
Inventory 37,277 73,493
- --------------------------------------------------------------------------------
Total Current Assets 340,324 375,496
- --------------------------------------------------------------------------------
Property and Equipment
Office and computer equipment 133,641 133,641
Leasehold improvements 15,700 15,700
- --------------------------------------------------------------------------------
Total Property and Equipment 149,341 149,341
Less: Accumulated depreciation (111,182) (105,834)
- --------------------------------------------------------------------------------
Net Property and Equipment 38,159 43,507
Deposits 1,100 1,100
- --------------------------------------------------------------------------------
Total Assets $ 379,583 $ 420,103
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 294,157 $ 427,487
Payables - related parties 13,140 29,674
Accrued liabilities 4,915 4,252
Accrued income taxes 800 800
Current portion of capital lease obligations 10,714 10,747
- --------------------------------------------------------------------------------
Total Current Liabilities 323,726 472,960
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Long-Term Liabilities
Deferred income taxes 6,326 --
Capital lease obligations, net of current portion 24,772 27,495
- --------------------------------------------------------------------------------
Total Long-Term Liabilities 31,098 27,495
- --------------------------------------------------------------------------------
Stockholders' Equity (Deficit)
Common Stock - $0.001 par value; 50,000,000 shares
authorized; 8,473,866 and 8,052,783 shares issued
and outstanding, respectively 8,474 8,053
Additional paid-in capital 83,342 7,969
Accumulated deficit (67,057) (96,374)
- --------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 24,759 (80,352)
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity (Deficit) $ 379,583 $ 420,103
================================================================================
See accompanying notes to condensed consolidated financial statements
-4-
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended March 31,
----------------------------
2005 2004
- --------------------------------------------------------------------------------
Sales $ 1,017,921 $ 2,238,753
Cost of Goods Sold 961,068 2,142,924
- --------------------------------------------------------------------------------
Gross Profit 56,853 95,829
Operating Expenses
Selling, general and administrative expense (46,748) (74,573)
Interest expense (929) (1,245)
Interest and other income 33 --
- --------------------------------------------------------------------------------
Income From Operations 9,209 20,011
Gain (Expense) on Settlement 27,234 (140,000)
- --------------------------------------------------------------------------------
Income (Loss) Before Income Taxes 36,443 (119,989)
Benefit from (Provision for) Income Taxes (7,126) 1,004
- --------------------------------------------------------------------------------
Net Income (Loss) $ 29,317 $ (118,985)
================================================================================
Basic Loss Per Common Share $ -- $ (0.01)
================================================================================
Basic Weighted-Average Common
Shares Outstanding 8,127,642 8,052,783
================================================================================
See accompanying notes to condensed consolidated financial statements
-5-
AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months
Ended March 31,
-----------------------
2005 2004
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income (loss) $ 29,317 $(118,985)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 5,348 5,742
Recovery of bad debt (19,994) --
Expense from (Gain on) settlement (27,234) 140,000
Deferred income taxes 6,236 (1,004)
Changes in operating assets and liabilities:
Accounts receivable 79,323 94,801
Inventory 36,216 31,911
Accounts payable and accrued liabilities (100,433) 105,333
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 8,779 257,798
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of investments (1,600) --
- --------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,600) --
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Payment of checks written in excess of cash in bank -- (41,024)
Payment for lawsuit settlement (5,000) --
Proceeds from borrowings from related party 59,260 --
Principal payments on capital lease obligations (2,756) (6,473)
- --------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 51,504 (47,497)
- --------------------------------------------------------------------------------
Net Increase in Cash 58,683 210,301
Cash at Beginning of Period 4,693 338,529
- --------------------------------------------------------------------------------
Cash at End of Period $ 63,376 $ 548,830
================================================================================
Supplemental Cash Flow Information:
Cash paid for interest $ 929 $ 1,325
- --------------------------------------------------------------------------------
Conversion of notes payable to common stock $ 75,794 $ --
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
-6-
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, 2004. The
financial position and results of operations for the three months ended March
31, 2005 are not necessarily indicative of the results to be expected for the
full year ending December 31, 2005.
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.
Investment in Debt and Equity Securities--Investment in equity securities are
classified as available-for-sale and are carried at fair value. Net unrealized
gains and losses are reported in accumulated other comprehensive income, which
is a separate component of shareholder's equity, net of applicable deferred
taxes. Realized gains and losses on sales of securities and impairment losses
from other-than-temporary declines in market value are included in earnings with
the cost of securities sold determined on a specific cost basis. Investment in
debt securities are classified as held-to-maturity and carried at cost.
Accounts Receivable -- 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.
Concentrations -- During the three months ended March 31, 2005, purchases from
two vendors accounted for 41% and 32% of total purchases. As of March 31, 2005,
accounts payable to these vendors accounted for 25% and 40% of the total
accounts payable, respectively.
Fair Value of Financial Instruments -- The carrying amount of capital lease
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.
Basic Loss Per Common Share -- Basic loss per common share is computed by
dividing net loss by the weighted-average number of common shares outstanding.
No agreements or contracts exist that have created any potentially issuable
common shares.
-7-
AMEXDRUG CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2004, the Company purchased inventory
totaling $34,304 from Amrx Corporation, a corporation owned by the president of
the Company. As of March 31, 2005 and 2004, accounts payable to Amrx totaled
$13,140 and $0, respectively.
In December 2004, the Company borrowed $16,534 from the wife of the president of
the Company. In January 2005, the Company borrowed an additional $59,260 from
this person. On March 15, 2005, the loans were converted into 421,083 shares of
common stock at the market price of $0.18 per share.
NOTE 3 -- CONTINGENCIES
On June 9, 2003 a lawsuit was filed in the Superior Court of the State of
California, County of Los Angeles against the Company, its predecessor
corporation, Harlyn Products, Inc., a California corporation, the Company's
wholly owned subsidiary, Allied Med, Inc., and the Company's principal
shareholder, Jack Amin. The plaintiffs alleged in the complaint that the parties
entered into a one page finder's agreement on April 10, 2000 relating to the
acquisition of Harlyn Products, Inc., and that the plaintiffs were entitled to
receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully
diluted shares of the Company with a value not less than $600,000 and
unspecified lost profits. The plaintiffs alleged causes of action for breach of
contract, for specific performance, for services rendered and for unjust
enrichment. The plaintiffs sought compensation for damages, legal fees, costs
and interest. Although management had determined, with the advice of its legal
counsel, that there was some likelihood that a loss from the claim may have been
incurred, on October 26, 2004, the trial court entered a decision in favor of
the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of
intent of move for a new trial, which was denied by the court on December 13,
2004. The plaintiffs then filed a notice of appeal. The appeal of the trial
court's decision is now pending in the California Court of Appeal, Second
District. Management is currently unable to predict or speculate on the
likelihood of an unfavorable outcome from the appeal; therefore, no amounts have
been accrued in the accompanying financial statements for any losses that may
result from the outcome of the appeal.
On October 9, 2004 a vendor filed suit to collect on an account in the amount of
$32,234. The Company reached a settlement whereby it paid $5,000 for a full and
broad release of all claims. A gain of $27,234 was recognized upon payment.
-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 at 8909 West Olympic Boulevard, Suite
208, Beverly Hills, California 90211. Its phone number is (310) 855-0477. Its
fax number is (310) 855-0475. Its website is www.amexdrug.com. Shares of
Amexdrug common stock are traded on the OTC Bulletin Board under the symbol
AXRX. 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 potential for
future 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.
Amexdrug has assumed the operations of Allied as its primary
operations, and Amexdrug intends to build on the pharmaceutical wholesale
operations of Allied.
On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health
Care, Inc. as a Nevada corporation. Royal Health Care, Inc. was formed to
manufacture and sell health and beauty products.
On November 8, 2004, Amexdrug formed a new subsidiary, Biorx
Pharmaceuticals, Inc. as a Nevada corporation. Biorx Pharmaceuticals, Inc. was
formed for the purpose of repacking and selling generic and branded
pharmaceuticals.
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, 2005, Amexdrug reported sales of
$1,017,921, 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 is $1,220,832 less than the $2,238,753 of sales reported for the
three months ended March 31, 2004. During the three month period ended March 31,
2005, Amexdrug experienced a decline in total sales due to increased competition
and Amexdrug's search for better discount products to sell. Cost of goods sold
for the three months ended March 31, 2005 was $961,068, a decrease of $1,181,856
over the $2,142,924 cost of goods sold for the three months ended March 31,
2004. During the three months ended March 31, 2005 gross profit decreased by
$38,976 to $56,853, or 5.6% of sales, from the $95,829, or 4.3% of sales,
recorded for the three months ended March 31, 2004.
Selling, general and administrative expense was $46,748 for the three
months ended March 31, 2005, a decrease of $27,825 from the $74,573 recorded for
the three months ended March 31, 2004. This decrease in selling, general and
administrative expense is attributable to a decrease in expenses related to the
decline in sales and resulting decrease in the Company's operations.
During the three months ended March 31, 2005, Amexdrug recorded a
nonrecurring gain from litigation settlement of $27,234. In a lawsuit, the
parties reached a settlement under which Allied Med, Inc. paid a vendor $5,000
to settle a claim of $32,234. A gain of $27,234 was recognized upon payment.
During the three months ended March 31, 2004, Amexdrug reported incurring a
settlement expense of $140,000 associated with a different lawsuit.
-10-
During the three months ended March 31, 2005, Amexdrug experienced net
income of $29,317, an improvement of $148,302 from the $118,985 loss recorded
for the three months ended March 31, 2004. Amexdrug's increase in net profits
during the three month period ended March 31, 2005 is attributable largely to
the nonrecurring $27,234 gain on litigation settlement achieved during the three
months ended March 31, 2005 and the nonrecurring $140,000 loss on litigation
settlement which was incurred during the three months ended March 31, 2004.
Allied Med, Inc. has obtained a California wholesaler license and it
now plans to also distribute products from its existing facility in the Los
Angeles, California area by the end of May, 2005. Amexdrug anticipates that it
will be able to save approximately 15% to 20% of certain expenses following this
change, including shipping expenses, employee labor costs, and related office
expenses.
Liquidity and Capital Resources - March 31, 2005
------------------------------------------------
As of March 31, 2005, Amexdrug reported total current assets of
$340,324, comprised of cash of $63,466, investments of $1,600, accounts
receivable, net of $237,981 and inventory of $37,277. Total assets as of March
31, 2005 were $379,583, which included total current assets, plus net property
and equipment of $38,159 and deposits of $1,100.
Amexdrug's liabilities as of March 31, 2005 consisted of accounts
payable of $294,157, payables to related parties of $13,140, accrued liabilities
of $4,915, accrued income taxes of $800, current portion of capital lease
obligations of $10,714, and total long-term liabilities of $31,098.
The primary adjustments to reconcile net income to net cash provided by
operating activities during the first quarter of 2005 were as follows: a
decrease in accounts receivable of $79,323, a decrease in inventory of $36,216,
a decrease in accounts payable and accrued liabilities of $100,433, a gain on
recovery of bad debt of $19,994, an increase in deferred income taxes of $6,326,
a depreciation expense of $5,348 and a gain on settlement expense of $27,234.
Amexdrug had $63,466 of cash at March 31, 2005. Operations have primarily been
funded through cash generated from operations and also from loans and/or capital
infusions from related parties. Management does not anticipate that Amexdrug
will need to seek additional financing during the next twelve months.
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 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.
-11-
Item 3. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.
(b) Changes in Internal Controls and Over Financial Reporting.
There has been no change in our internal control over financial
reporting during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT
REFLECT MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Amexdrug is a party to material pending legal proceedings which are
described below. To the best of Amexdrug's knowledge, no governmental authority
or other party has threatened or is contemplating the filing of any material
legal proceeding against Amexdrug, except as described below.
On June 9, 2003 a lawsuit was filed in the Superior Court of the State
of California, County of Los Angeles against the Company, its predecessor
corporation, Harlyn Products, Inc., a California corporation, the Company's
wholly owned subsidiary, Allied Med, Inc., and the Company's principal
shareholder, Jack Amin. The plaintiffs alleged in the complaint that the parties
entered into a one page finder's agreement on April 10, 2000 relating to the
acquisition of Harlyn Products, Inc., and that the plaintiffs were entitled to
receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully
diluted shares of the Company with a value not less than $600,000 and
unspecified lost profits. Plaintiffs alleged causes of action for breach of
contract, for specific performance, for services rendered and for unjust
-12-
enrichment. Plaintiffs sought compensation for damages, legal fees, costs and
interest. Although management had determined, with the advice of its legal
counsel, that there was some likelihood that a loss from the claim may have been
incurred, on October 26, 2004, the trial court entered a decision in favor of
the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of
intent to move for a new trial, which was denied by the court on December 13,
2004. The plaintiffs then filed a notice of appeal. The appeal of the trial
court's decision is now pending in the California Court of Appeal, Second
District. Management is currently unable to predict or speculate on the
likelihood of an unfavorable outcome from the appeal; therefore, no amounts have
been accrued in the accompanying financial statements for any losses that may
result from the outcome of the appeal.
On October 9, 2004 a vendor filed suit to collect on an account in the
amount of $32,234. The Company reached a settlement whereby it paid $5,000 for a
release of all claims. A gain of $27,234 was recognized upon payment.
Item 2. Changes in Securities.
In December 2004, the Company borrowed $16,534 from the wife of the
President of the Company. In January 2005, the Company borrowed an additional
$59,260 from this person. On March 15, 2005, the loans were converted into
421,083 shares of common stock at the market price of $0.18 per share. The
shares were sold directly by Amexdrug, and no underwriters were involved in the
transaction. Amexdrug relied on section 4(2) of the Securities Act of 1933 in
making the sale of securities. No advertising or general solicitation was
employed in offering the shares. The purchaser received disclosure information
concerning Amexdrug. She also had the opportunity to investigate Amexdrug, and
ask questions of its president and board of directors. The securities sold were
offered for investment purposes only and not for the purpose of resale or
distribution. The transfer of the shares sold was appropriately restricted by
Amexdrug.
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.
-13-
Exhibit
Number Description
------- -----------
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Amexdrug during the
quarter ended March 31, 2005.
-14-
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 13, 2005 By: /s/ Jack Amin
-----------------------
Jack Amin
Director, President, Chief Executive
Officer, Chief Financial Officer and
Chief Accounting Officer
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