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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
[ ] TRANSITION REPORT PURSUANT TO 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
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(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 4, 2010, there were
8,457,881 shares of the issuer's common stock issued and outstanding, and an
additional 12,600 shares held as treasury shares.
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, 2010 (Unaudited)
and December 31, 2009 (Audited)...................................5
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2010 and 2009 (Unaudited)...............6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2010 and 2009 (Unaudited)..........................7
Consolidated Statement of Stockholders Equity for the Six Months
Ended June 30, 2010 (Unaudited)..................................8
Notes to Consolidated Financial Statements (Unaudited)..............9
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..................................................16
Item 1A. Risk Factors.......................................................16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds........16
Item 3. Defaults Upon Senior Securities....................................16
Item 4. (Removed and Reserved).............................................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 June 30, 2010 (unaudited) and December 31,
2009 (audited), the related unaudited consolidated statements of operations for
the three and six month periods ended June 30, 2010 and June 30, 2009, the
related unaudited consolidated statements of cash flows for the six month
periods ended June 30, 2010 and June 30, 2009, the related unaudited
consolidated statement of stockholders equity for the six month period ended
June 30, 2010 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, 2009.
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, 2010, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2010.
3
Amexdrug Corporation and Subsidiaries
index to financial statements
Page
----
Consolidated Balance Sheets - June 30, 2010 (Unaudited)
and December 31, 2009 (Audited)...........................................5
Consolidated Statements of Operations (Unaudited) for
the Three and Six Months Ended June 30, 2010 and 2009.....................6
Consolidated Statements of Cash Flows (Unaudited) for
the Six Months Ended June 30, 2010 and 2009...............................7
Consolidated Statement of Stockholders Equity for
the Six Months Ended June 30, 2010 (Unaudited)............................8
Notes to Consolidated Financial Statements...................................9
4
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2010 2009
------------- --------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 135,021 $ 121,182
Investment 10,870 7,490
Accounts receivable, net of allowance
of $32,253, respectively 648,813 430,184
Inventory 261,146 157,810
Deferred tax asset 28,111 13,778
Other receivable 7,646 18,274
Advances officer 2,836 1,057
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Total Current Assets 1,094,443 749,775
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Property and Equipment, at cost
Office and computer equipment 195,710 192,257
Leasehold improvements 15,700 15,700
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211,410 208,957
Less accumulated depreciation (196,560) (191,426)
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Net Property and Equipment 14,850 17,531
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Other Assets
Other deposits 14,462 12,158
Intangibles
Customer base, net of accumulated
amortization of $18,259 - -
Trademark, net of accumulated amortization
of $505 and $464, respectively 1,104 1,186
Goodwill 17,765 17,765
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Total Other Assets 33,331 31,109
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Total Assets $ 1,142,624 $ 798,415
============= ==============
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 479,451 $ 406,585
Accrued liabilities 8,318 10,157
Corporate tax payable 83,417 5,167
Notes payable related parties 108,023 108,023
Business lines 252,705 204,881
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Total Current Liabilities 931,914 734,813
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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 (10,719) (9,284)
Retained earnings/(accumulated deficit) 129,613 (18,930)
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Total Shareholders' Equity 210,710 63,602
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Total Liabilities and Shareholders' Equity $ 1,142,624 $ 798,415
============= ==============
The accompanying notes are an integral part of these
consolidated financial statements
5
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2010 2009 2010 2009
------------- -------------- ------------- ---------------
Sales $ 2,937,900 $ 2,435,174 $ 5,687,586 $ 4,377,709
Cost of Goods Sold 2,667,627 2,178,246 5,182,322 3,922,204
------------- -------------- ------------- ---------------
Gross Profit 270,273 256,928 505,264 455,505
------------- -------------- ------------- ---------------
Operating Expenses
Selling, general and
administrative expense 143,827 115,493 272,507 207,603
Research and development - 28,147 - 89,795
------------- -------------- ------------- ---------------
Total Operating Expenses 143,827 143,640 272,507 297,398
------------- -------------- ------------- ---------------
Income before depreciation expense 126,446 113,288 232,757 158,107
Depreciation and amortization
expense 3,617 2,097 5,216 4,154
------------- -------------- ------------- ---------------
Income before Other Income/(Expenses) 122,829 111,191 227,541 153,953
------------- -------------- ------------- ---------------
Other Income/(Expenses)
Interest and other income 1,666 - 1,666 -
Penalty - - - (268)
Realized gain/(loss) (702) (1,740) -
Unrealized gain/(loss) (1,740) (2,306) (372) (2,406)
Interest expense (6,756) (5,519) (13,035) (10,825)
------------- -------------- ------------- ---------------
Total Other Income/(Expenses) (7,532) (7,825) (13,481) (13,499)
------------- -------------- ------------- ---------------
Income before Provision for Income Taxes 115,297 103,366 214,060 140,454
Income tax expense (42,689) (24,207) (65,517) (30,772)
------------- -------------- ------------- ---------------
Net Income $ 72,608 $ 79,159 $ 148,543 $ 109,682
============= ============== ============= ===============
BASIC AND DILUTED INCOME PER SHARE $ 0.01 $ 0.01 $ 0.02 $ 0.01
============= ============== ============= ===============
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 CASH FLOWS
(Unaudited)
Six Months Ended
June 30, June 30,
2010 2009
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 148,543 $ 109,682
Adjustment to reconcile net income to net cash
used in operating activities
Depreciation and amortization 5,216 4,154
Unrealized (gain)/loss on investment 372 2,406
Realized loss on sales of investment 1,740 -
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable (218,629) (186,933)
Inventory (103,336) (4,005)
Prepaid expenses - 7,900
Other receivable 10,628 1,250
Deferred tax asset (14,333) 4,345
Other asset (2,304) -
Increase (Decrease) in:
Accounts payable and accrued liabilities 71,027 (12,289)
Corporate income tax payable 78,250 24,827
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NET CASH USED IN OPERATING ACTIVITIES (22,826) (48,663)
------------- --------------
NET CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sale of investment 1,515 -
Purchase of investments (7,007) -
Purchase of fixed assets (2,453) (8,883)
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NET CASH USED IN INVESTING ACTIVITIES (7,945) (8,883)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to officer (1,779) 3,856
Payments on related party loans - -
Purchase of treasury stock (1,435) (6,551)
Proceeds from credit line 47,824 86,995
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NET CASH PROVIDED BY FINANCING ACTIVITIES 44,610 84,300
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NET INCREASE/DECREASE IN CASH 13,839 26,754
CASH, BEGINNING OF PERIOD 121,182 96,390
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CASH, END OF PERIOD $ 135,021 $ 123,144
============= ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Interest paid $ 8,754 $ 6,457
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Income taxes $ 800 $ 800
============= ==============
The accompanying notes are an integral part of these
consolidated financial statements
7
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Retained
Additional Earnings/
Common stock Paid-in Treasury Accumulated
Shares Amount Capital Stock Deficit Total
-------------- ------------- -------------- ------------- --------------- --------------
Balance at December 31, 2009 8,470,481 $ 8,471 $ 83,345 $ (9,284) $ (18,930) $ 63,602
Treasury stock (unaudited) - - - (1,435) - (1,435)
Net income for the six months
ended June 30, 2010
(unaudited) - - - - 148,543 148,543
-------------- ------------- -------------- ------------- --------------- --------------
Balance at June 30, 2010
(unaudited) 8,470,481 $ 8,471 $ 83,345 $ (10,719) $ 129,613 $ 210,710
============== ============= ============== ============= =============== ==============
The accompanying notes are an integral part of these consolidated financial statements
8
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2010
1. Basis of Presentation
The accompanying unaudited 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 month period ended June 30, 2010 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2010. 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, 2009.
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
-----------------------------
Income per Share 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 period
ended June 30, 2010, because there are no outstanding dilutive
instruments.
3. CAPITAL STOCK
During the three months ended June 30, 2010, 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 2008.
The Company accounts for uncertainty in tax positions by recognition in
the financial statements.
The Company's policy is to recognize interest accrued related to
unrecognized tax benefits in interest expense and penalties in operating
expenses.
5. SUBSEQUENT EVENT
Management has evaluated subsequent events as required by FASB ASC Topic
855, 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 28 years.
Amexdrug Corporation, through its wholly-owned subsidiaries, BioRx
Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care,
Inc., is a 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,
BioRx Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health
Care, 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 plan to introduce three skin care over the counter (OTC) and natural
products in 2010, which are in various stages of development. 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), our goal is to have approximately 20,000 stores carry our products by the
end of 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, BioRx
Pharmaceuticals, Inc., Allied Med, Inc., Dermagen, Inc. and Royal Health Care.
Amexdrug currently has 50,000,000 shares of authorized common stock $.001
par value, of which 8,457,881 are issued and outstanding as of June 30, 2010,
with an additional 12,600 shares held as treasury shares.
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.
10
A total of twelve products have been manufactured for sale by BioRx
Pharmaceuticals, Inc., and a total of three products are under different stages
of development. 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. BioRx Pharmaceuticals
also distributes pharmacy supplies.
Allied Med, Inc.
- ----------------
On December 31, 2001, Amexdrug acquired all of the issued and outstanding
common shares of Allied Med, Inc., an Oregon corporation, in a share exchange in
a related party transaction.
Allied Med, Inc., 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 assumed the operations of Allied Med, and Amexdrug has been
building on the wholesale pharmaceutical 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 an 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, Inc. 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.
11
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.
Lease Agreements and Certain Other Contracts
--------------------------------------------
The Company has five written lease agreements covering 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 operated a Manila, Philippines sales
office under a verbal lease agreement until June 2010 when that office was
closed. 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. Copies of the
Company's written lease agreements and material contracts have been filed as
exhibits to certain of its quarterly and annual reports. See the Exhibit Index
for a description of these agreements and for information on where copies can be
found.
Business Segments
- -----------------
Since 2005, Amexdrug has had operations in two segments of its business,
namely: Distribution and Health and Beauty Products. Distribution consists of
the wholesale pharmaceutical distribution and resale of brand and generic
pharmaceutical products, over-the-counter drugs and non-drug products and health
and beauty products. Health and Beauty Products consist of the manufacture and
distribution of primarily health and beauty products.
Results of Operations
---------------------
For the Three Months Ended June 30, 2010.
-----------------------------------------
Revenues.
For the three months ended June 30, 2010, Amexdrug reported sales of
$2,937,900, comprised of $2,668,884 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 $269,016 of sales of
health and beauty products manufactured by the Company. This is $502,726 more
than the $2,435,174 of sales reported for the three months ended June 30, 2009,
which was comprised primarily of $2,369,486 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 $65,688 of sales of health and beauty products manufactured by the Company.
During the three month period ended June 30, 2010, 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 three months ended June 30, 2010 was
$2,667,627, an increase of $489,381 from the $2,178,246 cost of goods sold for
the three months ended June 30, 2009.
Gross Profit.
During the three months ended June 30, 2010 gross profit increased by
$13,345 to $270,273 or 9.2% of sales, from the $256,928, or 10.6% of sales
recorded for the three months ended June 30, 2009. The change in gross profit
margin is largely attributable to an increase in sales of lower gross margin
products manufactured and sold in the three month period ended June 30, 2010.
12
Expenses.
Total operating expenses for the three months ended June 30, 2010 were
$143,827, an increase of $187 from the total operating expenses of $143,640
recorded for the three months ended June 30, 2010. Selling, general and
administrative expense was $143,827 for the three months ended June 30, 2010, an
increase of $28,329 from the $115,493 of selling, general and administrative
expense recorded for the three months ended June 30, 2009. This increase in
selling, general and administrative expense is attributable to increases in
rent, professional fees and outside services expenses. Research and development
expense was $0 for the three months ended June 30, 2010, a decrease of $28,147
from the $28,147 of research and development expense recorded for the three
months ended June 30, 2009. The Company anticipates that it may spend a modest
amount of funds on research and development expenses during the remainder of
2010, but such expenses, on a quarterly basis, will be less than the amount
spent in the same period of 2009.
Net Income.
During the three months ended June 30, 2010, Amexdrug earned net income of
$72,608, as compared to the net income of $79,159 earned in the three months
ended June 30, 2009. Amexdrug's slight decrease in net income during the three
month period ended June 30, 2010 is attributable largely an increase in income
tax expense in the later period, partially offset by an increase in gross
profits in the later period.
For the Six Months Ended June 30, 2010.
---------------------------------------
Revenues.
For the six months ended June 30, 2010, Amexdrug reported sales of
$5,687,586, comprised of $5,195,474 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 $492,112 of sales of
health and beauty products manufactured by the Company. This is $1,309,877 more
than the $4,377,709 of sales reported for the six months ended June 30, 2009
which was comprised primarily of $4,256,428 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 $121,281 of sales of health and beauty products manufactured by the Company.
During the six month period ended June 30, 2010, 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, 2010 was $5,182,322,
an increase of $1,260,118 from the $3,922,204 cost of goods sold for the six
months ended June 30, 2009.
Gross Profit.
During the six months ended June 30, 2010 gross profit increased by
$49,759 to $505,264, or 8.9% of sales, from the $455,505, or 10.4% of sales
recorded for the six months ended June 30, 2009. The change in gross profit
margin is attributable to an increase in sales as well as an increased
percentage of sales of lower gross margin products manufactured and sold in the
first six months of 2010.
Expenses.
Total operating expenses for the six months ended June 30, 2010 were
$272,507, a decrease of $24,891 from the total operating expenses of $297,398
recorded for the six months ended June 30, 2010. Selling, general and
administrative expense was $272,507 for the six months ended June 30, 2010, an
increase of $64,904 from the $207,603 of selling, general and administrative
expense recorded for the six months ended June 30, 2009. This increase in
13
selling, general and administrative expense is attributable to increases in
rent, professional fees and outside services expenses. . Research and
development expense was $0 for the six months ended June 30, 2010, a decrease of
$89,795 from the $89,795 of research and development expense recorded for the
six months ended June 30, 2009. The Company anticipates that it may spend a
modest amount of funds on research and development expenses during the remainder
of 2010, but such expenses, on a quarterly basis, will be less than the amount
spent in the same period in 2009.
Net Income.
During the six months ended June 30, 2010, Amexdrug earned net income of
$148,543, an increase of $38,861 from the net income of $109,682 experienced in
the six months ended June 30, 2009. Amexdrug's increase in net income during the
six month period ended June 30, 2010 is attributable largely to the increase of
sales and gross profits earned in the later period as well as a decrease in
total operating expenses in the later period, partially offset by an increase in
income tax expense in the later period.
Liquidity and Capital Resources - June 30, 2010
-----------------------------------------------
As of June 30, 2010, Amexdrug reported total current assets of $1,094,443,
comprised primarily of cash and cash equivalents of $135,021, accounts
receivable of $648,813, inventory of $261,146, a deferred tax asset of $28,111,
investment of $10,870 and other receivable of $7,646. Total assets as of June
30, 2010 were $1,142,624, which included total current assets, plus net property
and equipment of $14,850, other deposits of $14,462, Trademark of $1,104, and
goodwill of $17,765.
Amexdrug's liabilities as of June 30, 2010 consisted primarily of accounts
payable of $479,451, notes payables to related parties of $108,023, business
line of credit of $252,705, corporate tax payable of $83,417 and accrued
liabilities of $8,318.
During the six months ended June 30, 2010, Amexdrug used $22,826 cash in
operating activities compared to $48,663 cash used in operating activities in
the six months ended June 30, 2009. The primary adjustments to reconcile net
income to net cash used in operating activities during the six months ended June
30, 2010 were as follows: an increase in accounts receivable of $218,629, an
increase in inventory of $103,336, a decrease in accounts payable and accrued
liabilities of $71,027, and an increase in corporate income tax payable of
$78,250. Amexdrug had $135,021 in cash and cash equivalents at June 30, 2010.
Operations have primarily been funded through cash generated from operations,
and from an increase in the business line of credit. Management does not
anticipate that Amexdrug will need to seek additional financing during the next
twelve months.
Stock Repurchases
Between approximately June 2007 and June 30, 2010, Amexdrug repurchased a
total of 12,600 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. Amexdrug anticipates that it may make additional small
purchases of its shares throughout the remainder of 2010.
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 $8,883 on capital expenditures during the
three month periods ended June 30, 2010 and 2009, respectively. The Company has
no current plans for any significant capital expenditures.
14
Critical Accounting Policies
In the notes to the audited consolidated financial statements for the year
ended December 31, 2009, 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.
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, 2010. 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, 2010, 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.
15
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, 2010, 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, 2006.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. (Removed and Reserved).
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits.
(a) Exhibits.
The following exhibits are filed as part of this report.
EXHIBIT INDEX
Exhibit Exhibit
Number Description Location
- ------- ----------- --------
2.1 Agreement and Plan of Merger (1)
(to change domicile from California)
2.2 Agreement and Plan of Reorganization (2)
3.1 Articles of Incorporation (3)
3.2 By-Laws (3)
10.1 Lease Agreement between Fullerton Business (6)
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005 (Unit K)
16
10.2 Lease Agreement between Fullerton Business (6)
Center, Lessor, and Allied Med, Inc., Lessee,
dated September 23, 2005 (Units I & J)
10.3 Third Amendment to Lease Agreement between (5)
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 (5)
dated June 23, 2008
10.5 Change in Terms Agreement with National Bank of (5)
California dated June 9, 2009
10.6 First Amendment to Lease Agreement between Fullerton (6)
Business Center, Lessor, and Allied Med, Inc.,
Lessee, dated September 11, 2006 (Unit K)
10.7 First Amendment to Lease Agreement between Fullerton (6)
Business Center, Lessor, and Allied Med, Inc.,
Lessee, dated September 11, 2006 (Units I & J)
10.8 Second Amendment to Lease Agreement between Fullerton (6)
Business Center, Lessor, and Allied Med, Inc.,
Lessee, dated October 25, 2007 (Unit K)
10.9 Second Amendment to Lease Agreement between Fullerton (6)
Business Center, Lessor, and Allied Med, Inc., Lessee,
dated October 25, 2007 (Units I & J)
10.10 Third Amendment to Lease Agreement between Fullerton (6)
Business Center, Lessor, and Allied Med, Inc.,
Lessee, dated November 5, 2008 (Unit K)
10.11 Change in Terms Agreement with National Bank of (6)
California dated March 3, 2009
10.12 Subordination Agreement between Nora Y. Amin, (6)
National Bank of California, Amexdrug and its
subsidiaries dated June 9, 2009
10.13 Business Loan Agreement between National Bank of (6)
California, Amexdrug and its subsidiaries dated
June 23, 2008
10.14 Commercial Security Agreement between National (6)
Bank of California, Amexdrug and its subsidiaries
dated June 23, 2008
10.15 Commercial Guarantee between National Bank of (6)
California, Jack N. Amin, Amexdrug and its
Subsidiaries
17
10.16 Commercial Guarantee between National Bank of (6)
California, Nora Y. Amin, Amexdrug and its
subsidiaries
10.17 Lease Agreement between Fullerton Business (7)
Center, LLC, Lessor, and Allied Med, Inc.,
Lessee, dated July 8, 2009 (Unit H)
10.18 Guaranty of Lease by Jack Amin (Unit H) (7)
10.19 Lease Agreement between Fullerton Business (8)
Center, LLC, Lessor, and Allied Med, Inc.,
Lessee, dated November 9, 2009 (Unit I at
2488 E. Fender Avenue)
10.20 Third Amendment to Lease Agreement between (8)
Fullerton Business Center, Lessor, and
Allied Med, Inc., Lessee, dated November 5,
2008 (Unit I & J)
10.21 Lease Agreement between Fullerton Business (9)
Center, Lessor, and Allied Med, Inc., Lessee,
dated March 16, 2010 (Unit E)
14.1 Code of Ethics (4)
21.1 List of Subsidiaries of Amexdrug Corporation (6)
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.
(1) Exhibit 2.1 is incorporated by reference from
Amexdrug's Form 8-K Current Report filed December
21, 2001 as Exhibit No. 10.01.
18
(2) Exhibit 2.2 is incorporated by reference from
Amexdrug's Form 8-K Current Report filed January
15, 2002 as Exhibit No. 10.01.
(3) 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.
(4) Exhibit 14.1 is incorporated by reference from
Amexdrug's Form 10-K for the year ended
December 31, 2008 filed April 13, 2009
(5) 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
(6) 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
(7) Exhibits 10.17 and 10.18 are incorporated by
reference from Amexdrug's Form 10-Q for the period
ended September 30, 2009 filed November 12, 2009
(8) Exhibits 10.19 and 10.20 are incorporated by
reference from Amexdrug's Form 10-K for the year
ended December 31, 2009 filed March 31, 2010
(9) Exhibit 10.21 is incorporated by reference from
Amexdrug's Form 10-Q for the period ended
March 31, 2010 filed May 11, 2010
19
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 4, 2010 By: /s/ Jack Amin
------------------------------------
Jack Amin
Director, President, Chief Executive
Officer, Chief Financial Officer and
Chief Accounting Officer
20
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