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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 September 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 [ ] (Do not check if a smaller reporting company) Smaller
reporting company [ X ]
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 November 6, 2009, there were
8,458,581 shares of the issuer's common stock issued and outstanding, and an
additional 11,900 shares held as treasury shares.
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 September 30,
2009 (Unaudited) and December 31, 2008 (Audited)................5
Consolidated Statements of Operations for the Three
and Nine Months Ended September 30, 2009 and 2008
(Unaudited).....................................................6
Consolidated Statements of Cash Flows for the Nine Months
Ended September 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..................................16
Item 4. Submission of Matters to a Vote of Security Holders..............16
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 September 30, 2009 (unaudited) and December
31, 2008 (unaudited), the related unaudited consolidated statements of
operations for the three and nine month periods ended September 30, 2009 and
September 30, 2008, the related unaudited consolidated statements of cash flows
for the nine month periods ended September 30, 2009 and September 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 September 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 - September 30, 2009 (Unaudited)
and December 31, 2008 (Audited)...........................................5
Consolidated Statements of Operations (Unaudited) for the
Three and Nine Months Ended September 30, 2009 and 2008...................6
Consolidated Statements of Cash Flows (Unaudited) for the
Nine Months Ended September 30, 2009 and 2008.............................7
Notes to Consolidated Financial Statements..................................8
4
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2009 2008
-------------- ---------------
Assets
Current Assets
Cash and cash equivalents $ 42,464 $ 96,390
Investment 10,071 2,681
Accounts receivable, net of allowance of
$22,100 477,310 314,397
Inventory 402,228 211,538
Deferred tax asset 17,281 16,345
Other receivable 7,325 8,288
Advances officer 1,023 5,360
Prepaid insurance - 7,900
-------------- ---------------
Total Current Assets 957,702 662,899
-------------- ---------------
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 (189,476) (183,350)
-------------- ---------------
Net Property and Equipment 17,987 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 1,227 1,351
Goodwill 17,765 17,765
-------------- ---------------
Total Other Assets 31,150 31,274
-------------- ---------------
Total Assets $ 1,006,839 $ 709,403
============== ===============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 437,464 $ 430,818
Accrued liabilities 15,655 14,286
Corporate tax payable 33,170 9,270
Notes payable related parties 109,202 109,202
Business lines 283,026 91,287
-------------- ---------------
Total Current Liabilities 878,517 654,863
-------------- ---------------
Shareholders' Equity
Common stock, $0.0001 par value;
50,000,000 authorized common shares
8,458,581 shares issued and outstanding 8,471 8,471
Additional paid in capital 83,345 83,345
Treasury stock (9,284) -
Retained earnings/(accumulated deficit) 45,790 (37,276)
-------------- ---------------
Total Shareholders' Equity 128,322 54,540
-------------- ---------------
Total Liabilities and Shareholders'
Equity $ 1,006,839 $ 709,403
============== ===============
The accompanying notes are an integral part of
these consolidated financial statements.
5
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
The Three Months Ended The Nine Months Ended
September 30, September 30, September 30, September 30,
2009 2008 2009 2008
------------------------------- ---------------------------------
Sales $ 2,615,387 $ 1,331,654 $ 6,993,096 $ 4,104,641
Cost of Goods Sold 2,508,212 1,190,200 6,430,416 3,760,487
-------------- -------------- --------------- ---------------
Gross Profit 107,175 141,454 562,680 344,154
-------------- -------------- --------------- ---------------
Operating Expenses
Selling, general and
administrative expense 113,001 92,725 320,601 269,561
Research and development 9,297 1,050 99,092 3,309
-------------- -------------- --------------- ---------------
Total Operating Expenses 122,298 93,775 419,693 272,870
-------------- -------------- --------------- ---------------
Income/(Loss) before
depreciation expense (15,123) 47,679 142,987 71,284
Depreciation and
amortization expense 2,096 3,601 6,250 13,085
-------------- -------------- --------------- ---------------
Income/(Loss) before Other
Income/(Expenses) (17,219) 44,078 136,737 58,199
-------------- -------------- --------------- ---------------
Other Income/(Expenses)
Interest and other income - 266 - 266
Penalty (244) - (512) (344)
Unrealized gain/(loss) 278 (470) (2,128) (797)
Interest expense (6,845) (4,714) (17,671) (10,947)
-------------- -------------- --------------- ---------------
Total Other Income/
(Expenses) (6,811) (4,918) (20,311) (11,822)
-------------- -------------- --------------- ---------------
Income/(Loss) before
Provision for Income Taxes (24,030) 39,160 116,426 46,377
Income tax benefit/(expense) (2,588) (14,188) (33,360) (8,575)
-------------- -------------- --------------- ---------------
Net Income/(Loss) $ (26,618) $ 24,972 $ 83,066 $ 37,802
============== ============== =============== ===============
BASIC AND DILUTED INCOME/
(LOSS) PER SHARE $ (0.00) $ 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
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30, September 30,
2009 2008
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,066 $ 37,802
Adjustment to reconcile net income to
net cash used in operating activities
Depreciation and amortization 6,250 13,085
Unrealized (gain)/loss on investment 2,128 -
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable (162,913) (108,203)
Allowance for doubtful accounts - -
Inventory (190,690) 58,534
Prepaid expenses 7,900 (1,397)
Other receivable 963 -
Deferred tax asset (936) (4,500)
Increase (Decrease) in:
Accounts payable and accrued liabilities 8,015 (176,091)
Corporate income tax payable 23,900 13,487
-------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES (222,317) (167,283)
-------------- ---------------
Net CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of investments (9,518) -
Purchase of fixed assets (8,883) (50,064)
-------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (18,401) (50,064)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advance, officer 4,337 -
Loan payable, Dell - 714
Purchase of treasury stock (9,284) -
Proceeds from credit line 191,739 34,051
Proceeds from related parties - 60,000
-------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 186,792 94,765
-------------- ---------------
NET INCREASE (DECREASE) IN CASH (53,926) (122,582)
CASH, BEGINNING OF PERIOD 96,390 217,549
-------------- ---------------
CASH, END OF PERIOD $ 42,464 $ 94,967
============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ 6,457 $ 2,464
============== ===============
Income taxes $ 800 $ 2,974
============== ===============
The accompanying notes are an integral part of
these consolidated financial statements.
7
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
SEPTEMBER 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 nine months ended September
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 the accounting rules for the calculation of "Income
per Share". These rules dictate 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 nine months ended September 30, 2009, because there are
no outstanding dilutive instruments.
Recently Issued Accounting Pronouncements
-----------------------------------------
In May 2009, the FASB issued rules which establish general standards of
accounting for and disclosure of events that occur after the balance
sheet date but before financial statements are issued.
3. CAPITAL STOCK
During the nine months ended September 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 Accounting for Uncertainty in
Income Taxes, on January 1, 2007. This accounting clarifies the
accounting for uncertainty in tax positions by prescribing a minimum
recognition threshold required for recognition in the financial
statements. It also provides guidance on de-recognition, measurement
classification, interest and penalties, accounting in interim periods,
disclosure and transition.
8
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 November 9, 2009, the
date the financial statements were available to be issued, 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 8,458,581 are issued and outstanding with an additional
11,900 shares held as treasury shares as of September 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 three written lease agreements covering different
portions of the property in Fullerton, California leased by the Company. 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.
Results of Operations
---------------------
For the Three Months Ended September 30, 2009.
----------------------------------------------
Revenues.
For the three months ended September 30, 2009, Amexdrug reported sales
of $2,615,387, comprised of $2,507,052 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 $108,335 of sales of health and beauty products manufactured by the Company.
This is $1,283,733 more than the $1,331,654 of sales reported for the three
months ended September 30, 2008, which was comprised primarily of $1,294,357
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 $37,298 of sales of health and beauty
products manufactured by the Company. During the three month period ended
September 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 September 30, 2009 was
$2,508,212, an increase of $1,318,012 from the $1,190,200 cost of goods sold for
the three months ended September 30, 2008.
Gross Profit.
During the three months ended September 30, 2009 gross profit decreased
by $34,279 to $107,175, or 4.1% of sales, from the $141,454, or 10.6% of sales
recorded for the three months ended September 30, 2008. The change in gross
profit margin is attributable to an increased percentage of sales made from
lower gross margin products sold in the three month period ended September 30,
2009.
Expenses.
Selling, general and administrative expense was $113,001 for the three
months ended September 30, 2009, an increase of $20,276 from the $92,725 of
selling, general and administrative expense recorded for the three months ended
September 30, 2008. This increase in selling, general and administrative expense
is attributable to increases in certain administrative expenses. Research and
development expense was $9,297 for the three months ended September 30, 2009, an
increase of $8,247 from the $1,050 of research and development expense recorded
for the three months ended September 30, 2008. Interest expense was $6,845 for
the three months ended September 30, 2009, an increase of $2,131 from the $4,714
of interest expense recorded for the three months ended September 30, 2008.
12
Net Income (Loss).
During the three months ended September 30, 2009, Amexdrug incurred net
loss of $26,618 as compared to the net income of $24,972 earned in the three
months ended September 30, 2008. Amexdrug's change from net income to a net loss
during the three month period ended September 30, 2009 is attributable largely
to the significant increase in sales of products with lower profit margins
resulting in a decrease of gross profit, as well as an increase in general and
administrative expense and an increase in research and development expense, in
the later period.
For the Nine Months Ended September 30, 2009.
Revenues
For the nine months ended September 30, 2009, Amexdrug reported sales
of $6,993,096 , comprised of $6,763,480 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 $229,616,of sales of health and beauty products manufactured by the Company.
This is $2,888,455 more than the $4,104,641 of sales reported for the nine
months ended September 30, 2008 which was comprised primarily of $6,241,587
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 $115,017 of sales of health and beauty
products manufactured by the Company. During the nine month period ended
September 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 nine months ended September 30, 2009 was
$6,430,416, an increase of $2,669,929 from the $3,760,487 cost of goods sold for
the nine months ended September 30, 2008.
Gross Profit.
During the nine months ended September 30, 2009 gross profit increased
by $218,526 to $562,680, or 8.0% of sales, from the $344,154, or 8.4% of sales
recorded for the nine months ended September 30, 2008. The change in gross
profit margin is attributable to a modest increased percentage of sales of lower
gross margin products sold in the first nine months of 2009.
Expenses.
Selling, general and administrative expense was $320,601for the nine
months ended September 30, 2009, an increase of $51,040 from the $269,561 of
selling, general and administrative expense recorded for the nine months ended
September 30, 2008. This increase in selling, general and administrative expense
is attributable to increases in certain administrative expenses. Research and
development expense was $99,092 for the nine months ended September 30, 2009, an
increase of $95,783 from the $3,309 of research and development expense recorded
for the nine months ended September 30, 2008. Interest expense was $17,671 for
the nine months ended September 30, 2009, an increase of $6,724 from the $10,947
of interest expense recorded for the nine months ended September 30, 2008.
13
Net Income.
During the nine months ended September 30, 2009, Amexdrug earned net
income of $83,066, an increase of $45,264 from the net income of $37,802
experienced in the nine months ended September 30, 2008. Amexdrug's increase in
net income during the nine month period ended September 30, 2009 is attributable
largely to the increase of sales and the resulting increase in gross profits
earned in the later period, partially offset by increases in general and
administrative expense and research and development expense, in the later
period.
Liquidity and Capital Resources - September 30, 2009
----------------------------------------------------
As of September 30, 2009, Amexdrug reported total current assets of
$957,702, comprised primarily of cash and cash equivalents of $42,464, accounts
receivable of $477,310, inventory of $402,228, and a deferred tax asset of
$17,281. Total assets as of September 30, 2009 were $1,006,839, which included
total current assets, plus net property and equipment of $17,987, other deposits
of $12,158, goodwill of $17,765, and trademark of $1,227.
Amexdrug's liabilities as of September 30, 2009 consisted primarily of
accounts payable of $437,464, notes payables to related parties of $109,202,
business line of credit of $283,026, corporate tax payable of $33,170 and
accrued liabilities of $15,655.
During the nine months ended September 30, 2009, Amexdrug used $222,317
cash in operating activities compared to $167,283 cash used in operating
activities in the nine months ended September 30, 2008. The primary adjustments
to reconcile net income to net cash used in operating activities during the nine
months ended September 30, 2009 were as follows: an increase in accounts
receivable of $162,913, an increase in inventory of $190,690, an increase in
accounts payable and accrued liabilities of $8,015, and an increase in corporate
income tax payable of $23,900. Amexdrug had $42,464 in cash and cash equivalents
at September 30, 2009. Operations have primarily been funded through cash
generated from operations, an increase in the amount owing on the business line
of credit, 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.
Stock Repurchases
Between approximately June 2007 and August 3, 2009, Amexdrug repurchased a
total of 11,900 shares of its common stock at prices ranging from a low of $0.20
per share to a high of $2.39 per share. These shares are held by Amexdrug as
treasury shares.
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 $0 and $0 on capital expenditures during the three
month periods ended September 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.
14
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.
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 September 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 September 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 September 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.
15
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.
(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 ******
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005 (Unit K)
10.2 Lease Agreement between Fullerton Business ******
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005 (Units I & J)
10.3 Third Amendment to Lease Agreement between *****
Fullerton Business Center, Lessor, and Allied
Med, Inc., Lessee, dated November 5, 2008
(Units I and J)
10.4 Promissory Note with National Bank of *****
California dated June 23, 2008
10.5 Change in Terms Agreement with National *****
Bank of California dated June 9, 2009
10.6 First Amendment to Lease Agreement between ******
Fullerton Business Center, Lessor, and
Allied Med, Inc., Lessee, dated September 11,
2006 (Unit K)
10.7 First Amendment to Lease Agreement between ******
Fullerton Business Center, Lessor, and
Allied Med, Inc., Lessee, dated September 11,
2006 (Units I & J)
16
10.8 Second Amendment to Lease Agreement between ******
Fullerton Business Center, Lessor, and Allied
Med, Inc., Lessee, dated October 25, 2007
(Unit K)
10.9 Second Amendment to Lease Agreement between ******
Fullerton Business Center, Lessor, and Allied
Med, Inc., Lessee, dated October 25, 2007
(Units I & J)
10.10 Third Amendment to Lease Agreement between ******
Fullerton Business Center, Lessor, and Allied
Med, Inc., Lessee, dated November 5, 2008
(Unit K)
10.11 Change in Terms Agreement with National Bank ******
of California dated March 3, 2009
10.12 Subordination Agreement between Nora Y. Amin, ******
National Bank of California, Amexdrug and its
subsidiaries dated June 9, 2009
10.13 Business Loan Agreement between National Bank ******
of California, Amexdrug and its subsidiaries
dated June 23, 2008
10.14 Commercial Security Agreement between National ******
Bank of California, Amexdrug and its
subsidiaries dated June 23, 2008
10.15 Commercial Guarantee between National Bank ******
of California, Jack N. Amin, Amexdrug and
its subsidiaries
10.16 Commercial Guarantee between National Bank ******
of California, Nora Y. Amin, Amexdrug and
its subsidiaries
10.17 Lease Agreement between Fullerton Business This Filing
Center, LLC, Lessor, And Allied Med, Inc.,
Lessee, dated July 8, 2009 (Unit H)
10.18 Guaranty of Lease by Jack Amin (Unit H) This Filing
14.1 Code of Ethics ****
21.1 List of Subsidiaries of Amexdrug ******
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
17
Summaries of all exhibits contained within this report are
modified in their entirety by reference to these Exhibits.
* 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 reference from Amexdrug's Form
10-K for the year ended December 31, 2008 filed April 13, 2009
***** Exhibits 10.3, 10.4 and 10.5 are incorporated by reference
From Amexdrug's Form 10-Q for the period ended June 30, 2009
filed August 14, 2009
****** Exhibits 10.1, 10.2, 10.6 through 10.16, and 21.1 are
incorporated by reference From Amexdrug's Form 10-Q/A for the
period ended June 30, 2009 filed September 18, 2009
18
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: November 10, 2009 By: /s/ Jack Amin
--------------
Jack Amin
Director, President, Chief
Executive Officer, Chief
Financial Officer and
Chief Accounting Officer
19
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