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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to____________
Commission file number 0-7473
Amexdrug Corporation
(Exact name of registrant as specified in its charter)
NEVADA 95-2251025
--------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
8909 West Olympic Boulevard, Suite 208
Beverly Hills, California 90211
-------------------------------
(Address of principal executive offices)
Registrant's telephone number: (310) 855-0475
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [ ] No [ ]
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 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [ X ]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 6, 2009, there were
8,470,481 shares of the issuer's common stock issued and outstanding.
1
AMEXDRUG CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited)...................................3
Consolidated Balance Sheets -- As of June 30, 2009 (Unaudited)
and December 31, 2008 (Audited)...................................5
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2009 and 2008 (Unaudited)...................6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2009 and 2008 (Unaudited)..........................7
Notes to Consolidated Financial Statements (Unaudited)..............8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk........15
Item 4. Controls and Procedures...........................................15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................15
Item 1A. Risk Factors.......................................................15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.......15
Item 3. Defaults Upon Senior Securities...................................15
Item 4. Submission of Matters to a Vote of Security Holders...............15
Item 5. Other Information.................................................16
Item 6. Exhibits..........................................................16
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The consolidated balance sheets of Amexdrug Corporation, a Nevada
corporation, and subsidiaries as of June 30, 2009 (unaudited) and December 31,
2008 (unaudited), the related unaudited consolidated statements of operations
for the three and six month periods ended June 30, 2009 and June 30, 2008, the
related unaudited consolidated statements of cash flows for the six month
periods ended June 30, 2009 and June 30, 2008 and the notes to the unaudited
consolidated financial statements follow. The consolidated 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
consolidated financial statements included in Amexdrug's annual report on Form
10-K for the year ended December 31, 2008.
The accompanying consolidated 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., Dermagen, Inc., and BioRx Pharmaceuticals,
Inc., its wholly owned subsidiaries, 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 June 30, 2009, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2009.
3
AMEXDRUG CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets - June 30, 2009 (Unaudited)
and December 31, 2008 (Audited)...........................................5
Consolidated Statements of Operations (Unaudited) for the Three
and Six Months Ended June 30, 2009 and 2008..............................6
Consolidated Statements of Cash Flows (Unaudited) for the Six
Months Ended June 30, 2009 and 2008......................................7
Notes to Consolidated Financial Statements..................................8
4
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2009 2008
------------ ------------
Assets
Current Assets
Cash and cash equivalents $ 123,144 $ 96,390
Investment 275 2,681
Accounts receivable, net of allowance
of $22,100 501,330 314,397
Inventory 215,543 211,538
Deferred tax asset 12,000 16,345
Other receivable 7,038 8,288
Advances officer 1,504 5,360
Prepaid insurance - 7,900
------------ ------------
Total Current Assets 860,834 662,899
------------ ------------
Property and Equipment, at cost
Office and computer equipment 191,763 182,880
Leasehold improvements 15,700 15,700
------------ ------------
207,463 198,580
Less accumulated depreciation (187,421) (183,350)
------------ ------------
Net Property and Equipment 20,042 15,230
------------ ------------
Other Assets
Other deposits 12,158 12,158
Intangibles
Customer base, net of accumulated
amortization of $18,259 - -
Trademark, net of accumulated
amortization of $340 1,268 1,351
Goodwill 17,765 17,765
------------ ------------
Total Other Assets 31,191 31,274
------------ ------------
Total Assets $ 912,067 $ 709,403
============ ============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 415,180 $ 430,818
Accrued liabilities 17,635 14,286
Corporate tax payable 34,097 9,270
Notes payable related parties 109,202 109,202
Business lines of credit 178,282 91,287
------------ ------------
Total Current Liabilities 754,396 654,863
------------ ------------
Shareholders' Equity
Common stock, $0.0001 par value;
50,000,000 authorized common
shares 8,470,481 shares issued
and outstanding 8,471 8,471
Additional paid in capital 83,345 83,345
Treasury stock at cost (6,551) -
Accumulated deficit 72,406 (37,276)
------------ ------------
Total Shareholders' Equity 157,671 54,540
------------ ------------
Total Liabilities and
Shareholders' Equity $ 912,067 $ 709,403
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
5
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The Three Months Ended The Six Months Ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
--------------------------- ---------------------------
Sales $ 2,435,174 $ 1,469,772 $ 4,377,709 $ 2,772,986
Cost of Goods Sold 2,178,246 1,386,701 3,922,204 2,570,287
------------ ------------ ------------ ------------
Gross Profit 256,928 83,071 455,505 202,699
------------ ------------ ------------ ------------
Operating Expenses
Selling, general and administrative expense 115,493 94,657 207,603 177,832
Research and development 28,147 1,050 89,795 2,063
------------ ------------ ------------ ------------
Total Operating Expenses 143,640 95,707 297,398 179,895
------------ ------------ ------------ ------------
Income/(Loss) before depreciation expense 113,288 (12,636) 158,107 22,804
Depreciation and amortization expense 2,097 5,882 4,154 9,484
------------ ------------ ------------ ------------
Income/(Loss) before Other Income/(Expenses) 111,191 (18,518) 153,953 13,320
------------ ------------ ------------ ------------
Other Income/(Expenses)
Penalty - - (268) (344)
Unrealized gain/(loss) (2,306) (327) (2,406) (327)
Interest expense (5,519) (3,333) (10,825) (6,233)
------------ ------------ ------------ ------------
Total Other Income/(Expenses) (7,825) (3,660) (13,499) (6,904)
------------ ------------ ------------ ------------
Income/(Loss) before Provision for Income Taxes 103,366 (22,178) 140,454 6,416
Income tax benefit/(expense) (24,207) 12,832 (30,772) 6,412
------------ ------------ ------------ ------------
Net Income/(Loss) $ 79,159 $ (9,346) $ 109,682 $ 12,828
============ ============ ============ ============
BASIC AND DILUTED INCOME/(LOSS) PER SHARE $ 0.01 $ (0.00) $ 0.01 $ 0.00
============ ============ ============ ============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC AND DILUTED 8,470,481 8,470,481 8,470,481 8,470,481
============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
6
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
The Six Months Ended
June 30, June 30,
2009 2008
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 109,682 $ 12,828
Adjustment to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 4,154 9,484
Unrealized gain/(loss) on investment 2,406 -
(Increase) Decrease in:
Accounts receivable (186,933) (70,499)
Allowance for doubtful accounts - -
Inventory (4,005) 58,781
Prepaid expenses 7,900 (1,397)
Account settlement receivable 1,250 -
Deferred tax asset 4,345 (3,200)
Increase (Decrease) in:
Accounts payable and accrued liabilities (12,289) (223,084)
Corporate income tax payable 24,827 173
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (48,663) (216,914)
------------ ------------
Net CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of fixed assets (8,883) (50,064)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (8,883) (50,064)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance, officer 3,856 -
Loan payable, Dell - 1,005
Loan payable, AFS/IBEX - 437
Purchase of treasury stock (6,551) -
Proceeds from credit line 86,995 12,044
Proceeds from related parties - 60,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 84,300 73,486
------------ ------------
NET INCREASE (DECREASE) IN CASH 26,754 (193,492)
CASH, BEGINNING OF PERIOD 96,390 217,549
------------ ------------
CASH, END OF PERIOD $ 123,144 $ 24,057
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 6,457 $ 3,848
============ ============
Income taxes $ 800 $ 800
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
7
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2009
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all normal recurring
adjustments considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2009. For further information refer to the financial
statements and footnotes thereto included in the Company's Form 10-K for
the year ended December 31, 2008.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of AmexDrug Corporation is
presented to assist in understanding the Company's financial statements.
The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity.
These accounting policies conform to accounting principles generally
accepted in the United States of America and have been consistently
applied in the preparation of the financial statements.
Income per Share Calculations
-----------------------------
The Company adopted Statement of Financial Standards ("SFAS") No. 128 for
the calculation of "Income per Share". SFAS No. 128 dictates the
calculation of basic earnings per share and diluted earnings per share.
Basic earnings per share are computed by dividing income available to
common shareholders by the weighted-average number of common shares
available. Diluted earnings per share is computed similar to basic
earnings per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common
shares were dilutive. The Company's diluted income per share is the same
as the basic income per share for the six months ended June 30, 2009,
because there are no outstanding dilutive instruments.
Recently Issued Accounting Pronouncements
-----------------------------------------
In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS
165"), which establish general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued. SFAS 165 is for interim or annual periods ending
after June 15, 2009. The adoption of SFAS 165 did not have a material
effect on the Company's financial statements.
8
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2009
3. CAPITAL STOCK
During the six months ended June 30, 2009, the Company issued no shares of
common stock.
4. INCOME TAXES
The Company files income tax returns in the U.S. Federal jurisdiction, and
the state of California. With few exceptions, the Company is no longer
subject to U.S. federal, state and local, or non-U.S. income tax
examinations by tax authorities for years before 2000.
The Company adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, on January 1, 2007. FIN 48
clarifies the accounting for uncertainty in tax positions by prescribing a
minimum recognition threshold required for recognition in the financial
statements. FIN 48 also provides guidance on de-recognition, measurement
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
The Company's policy is to recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in operating
expenses.
5. SUBSEQUENT EVENTS
Management has evaluated subsequent events as of August 7, 2009, and has
determined there are no subsequent events to be reported.
9
Item 2. 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) 855-0475. Its
fax number is (310) 855-0477. Its website is www.amexdrug.com. Shares of
Amexdrug common stock are traded on the OTC Bulletin Board under the symbol
AXRX.OB. The President of Amexdrug has had experience working in the
pharmaceutical industry for the past 26 years.
Amexdrug Corporation, through its wholly-owned subsidiaries, Dermagen,
Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc.
is a rapidly growing pharmaceutical and cosmeceutical company specializing in
the research and development, manufacturing and distribution of pharmaceutical
drugs, cosmetics and distribution of prescription and over-the-counter drugs,
private manufacturing and labeling and a quality control laboratory. At Amexdrug
Corporation, it is our anticipation to give our clientele the opportunity to
purchase cost effective products while maximizing the return of investments to
our shareholders.
Amexdrug Corporation distributes its products through its subsidiaries,
Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx
Pharmaceuticals, Inc. primarily to independent pharmacies and secondarily to
small and medium-sized pharmacy chains, alternative care facilities and other
wholesalers and retailers in the state of California.
We have introduced five pharmaceutical over the counter (OTC) and
natural products in 2008 and plan to add three more products, in various stages
of development, in 2009. We presently market twelve products under the Sponix
name. Our team of professionals fully pledges the effectiveness of our distinct
products.
At this time, we have certain distribution channels with suppliers and
customers whom we know and trust, such as CVS, Target, Amazon, and hundreds of
independent pharmacies. Of the estimated 100,000 retailers (drug stores and food
mass), we expect to have 25,000 stores carry our products in 2009. Our mission
is to expand the sales of our products to more than 40,000 stores in 2010.
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.
References in this report to "we," "our," "us," the "company" and
"Amexdrug" refer to Amexdrug Corporation and also to our subsidiaries, Dermagen,
Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc.
Amexdrug currently has 50,000,000 shares of authorized common stock
$.001 par value, of which 8,470,481 are issued and outstanding as of June 30,
2009.
Allied Med, Inc.
----------------
On December 31, 2001, Amexdrug acquired all of the issued and
outstanding common shares of Allied Med, Inc., an Oregon corporation, ("Allied
Med") in a related party transaction.
10
Allied Med was formed as an Oregon corporation in October 1997, to
operate in the pharmaceutical wholesale business of selling a full line of brand
name and generic pharmaceutical products, over the counter (OTC) drug and
non-drug products and health and beauty products to independent and chain
pharmacies, alternative care facilities and other wholesalers.
Amexdrug has assumed the operations of Allied Med, and Amexdrug intends
to build on the pharmaceutical wholesale operations of Allied Med.
The accompanying financial information includes the operations of
Allied Med for all periods presented and the operations of Amexdrug Corporation
from April 25, 2000.
Dermagen, Inc.
--------------
Amexdrug completed its purchase of Dermagen, Inc. on October 7, 2005.
Dermagen, Inc. is now an operating subsidiary of Amexdrug. The acquisition of
Dermagen, Inc. is not considered to be an acquisition of a significant amount of
assets which would require audited financial statements of Dermagen, Inc.
Dermagen, Inc. is a growing manufacturing company specializing in the
manufacturing and distribution of certain pharmaceuticals, medical devices,
health and beauty products. Dermagen, Inc. has a U.S.-FDA registered and state
FDA approved manufacturing facility licensed to develop high margin skin and
novel health and beauty products for niche markets. Dermagen's competitive
advantage is in its superior product research and development for large leading
domestic and international companies.
Royal Health Care Company
-------------------------
In October 2003, Allied Med acquired 100% of the assets of Royal Health
Care Company. Royal Health Care Company is a health and beauty company which has
sold specially manufactured facial and body creams, arthritic pain relief
medications and an exclusive patented hair care product to pharmacies, beauty
salons, beauty supply stores and other fine shops. Royal Health Care Company
uses the highest quality ingredients for the finest quality products. Each
product has been formulated with the essential ingredients and plant extracts to
achieve optimum potential and quality. Royal Health Care Company products are
manufactured by Dermagen, Inc., in an FDA approved manufacturing facility.
The Royal Health Care Company assets acquired include the "Royal Health
Care Company" name, logo, and related trademarks, all formulas to products
manufactured for sale under the Royal Health Care Company name, and the Royal
Health Care Company list of customers. These intellectual property rights were
acquired without cost from a company in which Jack Amin's wife is a principal
shareholder. Mr. Amin is the CEO and Chairman of Amexdrug Corporation and Allied
Med, Inc. Management believes this acquisition will provide the Company with an
opportunity to increase the number of products sold by the Company, and expand
the Company's customer base.
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.
BioRx Pharmaceuticals
---------------------
On November 8, 2004, Amexdrug formed a new subsidiary, BioRx
Pharmaceuticals, Inc. as a Nevada corporation. BioRx Pharmaceuticals, Inc. is
committed to offer over the counter (OTC) products that are recommended with
trust and faith by physicians, primarily podiatrists and dermatologists. The
focus and mission of BioRx Pharmaceuticals, Inc. is to create, develop and
manufacture products to help ease pain and restore and maintain the overall
well-being of our customers. We strive for high performance and quality. Our
commitment is to offer natural and OTC products that are recommended with
confidence by doctors and pharmacists and that the customer can use with
pleasure. Our compliance program is diligently followed through the Company.
BioRx Pharmaceuticals, Inc. maintains high ethics for animal welfare and our
products are never tested on animals. All products are made in the USA.
11
A total of twelve products have been manufactured for sale by BioRx
Pharmacenticals, Inc., and a total of ten products are currently under different
stages of development, three of which should be available in 2009. These
over-the-counter and natural products are effective for treatment of fungus,
arthritis, sunburn protection and for healthy feet and nails. BioRx
Pharmaceuticals is planning to sell these products to national chain drugstores,
sport chain stores, natural food markets and other mass markets. These products
will be marketed under the names of Sponix and Bactivex, and will be sold under
the name of BioRx Pharmaceuticals.
Lease Agreements and Certain Other Contracts
--------------------------------------------
The Company has a written lease agreement covering the property in
Fullerton, California leased by the Company which is filed as an exhibit. The
Beverly Hills property leased by the Company is under a month to month verbal
lease since the original lease on the property has expired. The Company's
Manila, Philippines location is also leased under a verbal lease agreement. The
Company's loan agreement with Nora Amin is verbal. The Company does not have
written contracts with its major suppliers or buyers. The Company has a written
line of credit agreement with National Bank of California which is filed as an
exhibit.
Results of Operations
---------------------
For the Three Months Ended June 30, 2009.
----------------------------------------
Revenues.
For the three months ended June 30, 2009, Amexdrug reported sales of
$2,435,174, comprised of $2,369,486 of sales from the Company's pharmaceutical
wholesale business of selling brand name and generic pharmaceutical products and
over the counter (OTC) health and beauty products, and $65,688 of sales of
health and beauty products manufactured by the Company. This is $965,402 more
than the $1,469,772 of sales reported for the three months ended June 30, 2008,
which was comprised primarily of $1,344,436 sales from the Company's
pharmaceutical wholesale distribution business of selling brand name and generic
pharmaceutical products and over the counter (OTC) health and beauty products,
and $125,336 of sales of health and beauty products manufactured by the Company.
During the three month period ended June 30, 2009, Amexdrug experienced an
increase in total sales due, in part, to the increased marketing efforts of the
Company.
Costs of Goods Sold.
Cost of goods sold for the three months ended June 30, 2009 was
$2,178,246, an increase of $791,545 from the $1,386,701 cost of goods sold for
the three months ended June 30, 2008.
Gross Profit.
During the three months ended June 30, 2009 gross profit increased by
$173,857 to $256,928, or 10.6% of sales, from the $83,071, or 5.7% of sales
recorded for the three months ended June 30, 2008. The change in gross profit
margin is attributable to an increase in sales as well as an increased
percentage of sales made from higher gross margin products manufactured and sold
in the three month period ended June 30, 2009.
Expenses.
Selling, general and administrative expense was $115,493 for the three
months ended June 30, 2009, an increase of $20,836 from the $94,657 of selling,
general and administrative expense recorded for the three months ended June 30,
2008. This increase in selling, general and administrative expense is
attributable to increases in certain administrative expenses.
12
Net Income.
During the three months ended June 30, 2009, Amexdrug earned net income
of $79,159, as compared to the net loss of $9,346 experienced in the three
months ended June 30, 2008. Amexdrug's improvement during the three month period
ended June 30, 2009 is attributable largely to the significant increase in sales
and resulting increase in gross profits in the later period.
For the Six Months Ended June 30, 2009.
--------------------------------------
Revenues.
For the six months ended June 30, 2009, Amexdrug reported sales of
$4,377,709, comprised of $4,256,428 of sales from the Company's pharmaceutical
wholesale business of selling brand name and generic pharmaceutical products and
over the counter (OTC) health and beauty products, and $121,281 of sales of
health and beauty products manufactured by the Company. This is $1,604,723 more
than the $2,772,986 of sales reported for the six months ended June 30, 2008
which was comprised primarily of $2,620,406 of sales from the Company's
pharmaceutical wholesale distribution business of selling brand name and generic
pharmaceutical products and over the counter (OTC) health and beauty products,
and $152,580 of sales of health and beauty products manufactured by the Company.
During the six month period ended June 30, 2009, Amexdrug experienced an
increase in total sales due, in part, to increased marketing efforts of the
Company.
Costs of Goods Sold.
Cost of goods sold for the six months ended June 30, 2009 was
$3,922,204, an increase of $1,351,917 from the $2,570,287 cost of goods sold for
the six months ended June 30, 2008.
Gross Profit.
During the six months ended June 30, 2009 gross profit increased by
$252,806 to $455,505, or 10.4% of sales, from the $202,699, or 7.3% of sales
recorded for the six months ended June 30, 2008. The change in gross profit
margin is attributable to an increase in sales as well as an increased
percentage of sales of higher gross margin products manufactured and sold in the
first six months of 2009.
Expenses.
Selling, general and administrative expense was $207,603 for the six
months ended June 30, 2009, an increase of $29,771 from the $177,832 of selling,
general and administrative expense recorded for the six months ended June 30,
2008. This increase in selling, general and administrative expense is
attributable to increases in certain administrative expenses.
Net Income.
During the six months ended June 30, 2009, Amexdrug earned net income
of $109,682, an increase of $96,854 from the net income of $12,828 experienced
in the six months ended June 30, 2008. Amexdrug's increase in net income during
the six month period ended June 30, 2009 is attributable largely to the increase
of sales and the resulting increase in gross profits earned in the later period.
Liquidity and Capital Resources - June 30, 2009
-----------------------------------------------
As of June 30, 2009, Amexdrug reported total current assets of
$860,834, comprised primarily of cash and cash equivalents of $123,144, accounts
receivable of $501,330, inventory of $215,543, a deferred tax asset of $12,000
and other receivable of $7,038. Total assets as of June 30, 2009 were $912,067,
which included total current assets, plus net property and equipment of $20,042,
other deposits of $12,158, customer base of $1,268, and goodwill of $17,765.
13
Amexdrug's liabilities as of June 30, 2009 consisted primarily of
accounts payable of $415,180, notes payables to related parties of $109,202,
business line of credit of $178,282, corporate tax payable of $34,097 and
accrued liabilities of $17,635.
During the six months ended June 30, 2009, Amexdrug used $48,663 cash
in operating activities compared to $216,914 cash used in operating activities
in the six months ended June 30, 2008. The primary adjustments to reconcile net
income to net cash used in operating activities during the six months ended June
30, 2009 were as follows: an increase in accounts receivable of $186,933, a
decrease in accounts payable and accrued liabilities of $12,289, and an increase
in corporate income tax payable of $24,827. Amexdrug had $123,144 in cash and
cash equivalents at June 30, 2009. Operations have primarily been funded through
cash generated from operations, and from loans made from the wife of our
President. Management does not anticipate that Amexdrug will need to seek
additional financing during the next twelve months.
Inflation
In the opinion of management, inflation has not and will not have a
material effect on our operations in the immediate future. Management will
continue to monitor inflation and evaluate the possible future effects of
inflation on our business and operations.
Capital Expenditures
The Company expended $8,883 and $50,064 on capital expenditures during
the three month periods ended June 30, 2009 and 2008, respectively. The Company
has no current plans for any significant capital expenditures.
Critical Accounting Policies
In the notes to the audited consolidated financial statements for the
year ended December 31, 2008, included in the Company's Annual Report on Form
10-K, the Company discusses those accounting policies that are considered to be
significant in determining the results of operations and its financial position.
The Company believes that the accounting principles utilized by it conform to
accounting principles generally accepted in the United States of America.
The preparation of financial statements requires Company management to
make significant estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. By their nature, these judgments are
subject to an inherent degree of uncertainty. On an on-going basis, the Company
evaluates estimates. The Company bases its estimates on historical experience
and other facts and circumstances that are believed to be reasonable, and the
results form the basis for making judgments about the carrying value of assets
and liabilities. The actual results may differ from these estimates under
different assumptions or conditions.
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.
14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A "smaller reporting company" (as defined by Item 10 of the Regulation
S-K) is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Under the supervision and with the participation of management, our
principal executive officer and principal financial officer evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 ("Exchange Act"), as of June 30, 2009. Based on this
evaluation, our principal executive officer and our principal financial officer
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective and adequately designed to
ensure that the information required to be disclosed by us in the reports we
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the applicable rules and forms and that
such information was accumulated and communicated to our chief executive officer
and chief financial officer, in a manner that allowed for timely decisions
regarding required disclosure.
During the last fiscal quarter ended June 30, 2009, there has been no
change in internal control over financial reporting 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-Q 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 not presently a party to any material pending legal
proceedings. 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.
Item 1A. Risk Factors.
A "smaller reporting company" (as defined by Item 10 of the Regulation
S-K) is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three month period ended June 30, 2009, the Company did not
issue any shares of its unregistered common stock. For a description of any
sales of shares of the Company's unregistered stock made in the past three
years, please refer to the Company's Annual Reports on Form 10-KSB or Form 10-K,
and the Company's Quarterly Reports on Form 10-QSB or Form 10-Q filed since
December 31, 2005
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
15
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits.
(a) Exhibits.
EXHIBIT INDEX
Exhibit Exhibit
Number Description Location
- ------- ----------- --------
2.1 Agreement and Plan of Merger *
(to change domicile from California
2.2 Agreement and Plan of Reorganization **
3.1 Articles of Incorporation ***
3.2 By-Laws ***
10.1 Lease Agreement between Fullerton Business This Filing
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005
10.2 Lease Agreement between Fullerton Business This Filing
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005
10.3 Third Amendment to Lease Agreement between This Filing
Fullerton Business Center, Lessor, and
Allied Med, Inc., Lessee, dated November 5,
2008
10.4 Promissory Note with National Bank of This Filing
California dated June 23, 2008
10.5 Change in Terms Agreement with National This Filing
Bank of California dated June 9, 2009
14.1 Code of Ethics ****
21.1 List of Subsidiaries of Amexdrug This Filing
Corporation
31.1 Certification of Chief Executive Officer This Filing
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
31.2 Certification of Chief Financial Officer This Filing
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
32.1 Certification of Chief Executive Officer This Filing
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
32.2 Certification of Chief Financial Officer This Filing
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Summaries of all exhibits contained
within this report are modified in their
entirety by reference to these Exhibits.
16
* Exhibit 2.1 is incorporated by
reference from Amexdrug's Form 8-K
Current Report filed December 21, 2001
as Exhibit No. 10.01.
** Exhibit 2.2 is incorporated by
reference from Amexdrug's Form 8-K
Current Report filed January 15, 2002
as Exhibit No. 10.01.
*** Exhibit 3.1 and 3.2 are incorporated
by reference from Amexdrug's Form
10-KSB for the years ended December
31, 2001 filed on April 1, 2002.
**** Exhibit 14.1 is incorporated by
retference from Amexdrug's Form 10-K
for the year ended December 31, 2008
filed April 13, 2009
17
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: August 10, 2009 By: /s/ Jack Amin
----------------------------
Jack Amin
Director, President, Chief Executive
Officer, Chief Financial Officer and
Chief Accounting Officer
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