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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, 2011
[ ] 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
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(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.)
7251 Condor Street
Commerce, California 90040
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(Address of principal executive offices)
Registrant's telephone number: (323) 725-3100
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 8, 2011, there were
8,457,109 shares of the issuer's common stock issued and outstanding, and an
additional 13,372 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, 2011 (Unaudited)
and December 31, 2010 (Audited)....................................5
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2011 and 2010 (Unaudited)...........................6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2011 and 2010 (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. (Removed and Reserved)..............................................15
Item 5. Other Information...................................................15
Item 6. Exhibits............................................................15
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, 2011 (unaudited) and December 31,
2010 (audited), the related unaudited consolidated statements of operations for
the three and six month periods ended June 30, 2011 and June 30, 2010, the
related unaudited consolidated statements of cash flows for the six month
periods ended June 30, 2011 and 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, 2010.
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
BioRx Pharmaceuticals, Inc., Allied Med, Inc., and Dermagen, Inc., and 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, 2011, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2011.
3
Amexdrug Corporation and Subsidiaries
index to financial statements
Page
----
Consolidated Balance Sheets - June 30, 2011(Unaudited)
and December 31, 2010 (Audited)....................................5
Consolidated Statements of Operations (Unaudited) for the
Three and Six Months Ended June 30, 2011 and 2010..................6
Consolidated Statements of Cash Flows (Unaudited) for the
Six Months Ended June 30, 2011 and 2010............................7
Notes to Consolidated Financial Statements...........................8
4
AMEXDRUG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2011 2010
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(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 151,159 $ 443,703
Investment 5,652 7,649
Accounts receivable, net of allowance
of $37,000 and $37,000, respectively 897,520 473,983
Prepaid expenses - 8,079
Inventory 339,403 304,186
Deferred tax asset 45,087 53,140
Advances officer 11,620 3,918
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Total Current Assets 1,450,441 1,294,658
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Property and Equipment, at cost
Office and computer equipment 208,586 197,295
Leasehold improvements 15,700 15,700
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224,286 212,995
Less accumulated depreciation (201,453) (199,364)
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Net Property and Equipment 22,833 13,631
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Other Assets
Other deposits 28,212 14,462
Intangibles
Customer base, net of accumulated
amortization of $18,259 - -
Trademark, net of accumulated amortization
of $711 and $629, respectively 939 1,021
Goodwill 17,765 17,765
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Total Other Assets 46,916 33,248
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Total Assets $ 1,520,190 $ 1,341,537
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Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 508,351 $ 534,337
Accrued liabilities 23,810 29,776
Deferred operating lease liability 9,778 -
Corporate tax payable 102,123 108,304
Notes payable related parties 108,023 108,023
Business lines 283,085 310,590
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Total Current Liabilities 1,035,170 1,091,030
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Shareholders' Equity
Common stock, $0.001 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 (12,545) (11,441)
Retained earnings 405,749 170,132
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Total Shareholders' Equity 485,020 250,507
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Total Liabilities and Shareholders'
Equity $ 1,520,190 $ 1,341,537
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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,
2011 2010 2011 2010
------------- -------------- ------------- --------------
Sales $ 3,621,079 $ 2,937,900 $ 6,461,797 $ 5,687,586
Cost of Goods Sold 3,299,702 2,667,627 5,709,115 5,182,322
------------- -------------- ------------- --------------
Gross Profit 321,377 270,273 752,682 505,264
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Operating Expenses
Selling, general and administrative expense 191,006 143,827 341,639 272,507
Research and development - - - -
------------- -------------- ------------- --------------
Total Operating Expenses 191,006 143,827 341,639 272,507
------------- -------------- ------------- --------------
Income before depreciation expense 130,371 126,446 411,043 232,757
Depreciation and amortization expense 1,215 3,617 2,171 5,216
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Income before Other Income/(Expenses) 129,156 122,829 408,872 227,541
------------- -------------- ------------- --------------
Other Income/(Expenses)
Interest and other income 3 1,666 3 1,666
Penalty (3,877) - (4,098) -
Realized gain/(loss) - (702) - (1,740)
Unrealized gain/(loss) (418) (1,740) (892) (372)
Interest expense (7,642) (6,756) (14,068) (13,035)
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Total Other Income/(Expenses) (11,934) (7,532) (19,055) (13,481)
------------- -------------- ------------- --------------
Income before Provision for Income Taxes 117,222 115,297 389,817 214,060
Income tax expense (45,673) (42,689) (154,153) (65,517)
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Net Income $ 71,549 $ 72,608 $ 235,664 $ 148,543
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BASIC AND DILUTED INCOME PER SHARE $ 0.01 $ 0.01 $ 0.03 $ 0.02
============= ============== ============= ==============
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,
2011 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 235,664 $ 148,543
Adjustment to reconcile net income to
net cash used in operating activities
Depreciation and amortization 2,171 5,216
Allowance for doubtful accounts - -
Unrealized (gain)/loss on investment 893 372
Realized loss on sale of investment - 1,740
Change in Assets and Liabilities
(Increase) Decrease in:
Accounts receivable (423,537) (218,629)
Inventory (35,217) (103,336)
Prepaid expenses 8,079 -
Other receivable - 10,628
Deferred tax asset 8,053 (14,333)
Other assets (13,750) (2,304)
Increase (Decrease) in:
Accounts payable and accrued liabilities (31,999) 71,027
Deferred operating lease liability 9,778 -
Corporate income tax payable (6,181) 78,250
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NET CASH USED IN OPERATING ACTIVITIES (246,046) (22,826)
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Net CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from the sale of investment 1,104 1,515
Purchase of investments - (7,007)
Purchase of fixed assets (11,291) (2,453)
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NET CASH USED IN INVESTING ACTIVITIES (10,187) (7,945)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Advances to officer (7,702) (1,779)
Purchase of treasury stock (1,104) (1,435)
Proceeds (payments) from credit line (27,505) 47,824
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NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES (36,311) 44,610
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NET INCREASE/(DECREASE) IN CASH (292,544) 13,839
CASH, BEGINNING OF PERIOD 443,703 121,182
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CASH, END OF PERIOD $ 151,159 $ 135,021
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 9,747 $ 8,754
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Income taxes $ 43,977 $ 800
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The accompanying notes are an integral part of
these consolidated financial statements
7
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2011
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, 2011 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2011. 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, 2010.
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 six
month period ended June 30, 2011, because there are no outstanding
dilutive instruments.
3. CAPITAL STOCK
During the six month period ended June 30, 2011, 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 2009.
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. BUSINESS SEGMENT INFORMATION
Beginning in 2005, the Company has 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.
8
AMEXDRUG CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS-UNAUDITED
JUNE 30, 2011
The following tables describe information regarding the operations and
assets of these reportable business segments:
Health and
Beauty
Distributions Products Total
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For the period ended June 30,
2011
Sales to external customers $ 5,712,283 $ 749,514 $ 6,461,797
Depreciation and amortization 1,617 554 2,171
Segment income (loss) before
taxes 314,093 75,724 389,817
Segment assets 959,010 563,987 1,522,997
For the period ended June 30,
2010
Sales to external customers $ 5,195,474 $ 492,112 $ 5,687,586
Depreciation and amortization 1,912 3,304 5,216
Segment income (loss) before
taxes 102,659 111,401 214,060
Segment assets 667,984 471,689 1,139,673
6. SUBSEQUENT EVENT
Management has evaluated subsequent events according to the requirements
of ASC TOPIC 855, and has determined there are no subsequent events to be
reported.
7. COMMITMENTS AND CONTINGENCIES
Operating Leases
----------------
The Company moved to a new facility and signed a new operating lease for
three years as of March 1, 2011. The monthly lease payments per month are
$7,600. There are future minimum rental payments required under the
operating leases for the facility. The lease of the facility expires in
2014.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
--------
Amexdrug Corporation is located at 7251 Condor Street, Commerce,
California 90040. Its phone number is (323) 725-3100. Its fax number is (323)
725-3133. 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
29 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 attempting to maximize 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-sized
pharmacy chains, alternative care facilities and other wholesalers and retailers
in the state of California.
BioRx Pharmaceuticals, Inc. is a proud member of the National Association
of Chain Drug Stores (NACDS). BioRx Pharmaceuticals, Inc. has developed numerous
unique innovative products in the industry under the name Sponix.
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 Amazon, and hundreds of independent
pharmacies. Of the estimated 100,000 retailers (drug stores and food mass), our
goal is to have 20,000 stores carry our products in 2011.
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 8,457,109 are issued and outstanding as of June 30, 2011,
with an additional 13,372 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.
A total of fourteen innovative health and wellness products have been for
sale by BioRx Pharmaceuticals, Inc. 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 name of Sponix, and will
be sold under the name of BioRx Pharmaceuticals.
10
Allied Med, Inc.
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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. At Allied Med our
sincere interest is our customers' needs. Our competitive discount pricing
allows our customers an advantage.
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.
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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.
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.
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 one written lease agreement covering the property leased
to the Company in Fullerton, California, and one lease agreement covering the
property leased to the Company in Commerce, California. 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.
11
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. Manufacturing includes
expertise in research and development for health care industry products,
including pharmacy supplies.
Results of Operations
---------------------
For the Three Months Ended June 30, 2011.
-----------------------------------------
Revenues.
For the three months ended June 30, 2011, Amexdrug reported sales of
$3,621,079, comprised of $3,265,594 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 $355,485 of sales of
health and beauty products manufactured by the Company. This is $683,179 more
than the $2,937,900 of sales reported for the three months ended June 30, 2010,
which was comprised primarily of $2,668,884 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 $269,016 of sales of health and beauty products manufactured by the Company.
During the three month period ended June 30, 2011, Amexdrug experienced an
increase in total sales due, in part, to increased marketing efforts of the
Company, as well as having an increased number of products to sell.
Costs of Goods Sold.
Cost of goods sold for the three months ended June 30, 2011 was
$3,299,702, an increase of $632,075 from the $2,667,627 cost of goods sold for
the three months ended June 30, 2010.
Gross Profit.
During the three months ended June 30, 2011 gross profit increased by
$51,104 to $321,377 or 8.9% of sales, from the $270,273, or 9.2% of sales
recorded for the three months ended June 30, 2010. The change in gross profit
margin is largely attributable to an increase in sales of slightly lower gross
margin products manufactured and sold in the three month period ended June 30,
2010.
Expenses.
Total operating expenses, consisting entirely of selling, general and
administrative expenses, for the three months ended June 30, 2011 were $191,006,
an increase of $47,179 from the total operating expenses of $143,827 recorded
for the three months ended June 30, 2010. The increase in selling, general and
administrative expense is primarily attributed to increased commissions payable
on the increased sales and increased amounts paid for outside services and
moving expenses.
12
Net Income.
During the three months ended June 30, 2011, Amexdrug earned net income of
$71,549, as compared to the net income of $72,608 earned in the three months
ended June 30, 2010. Amexdrug's slight decrease in net income during the three
month period ended June 30, 2011 is attributable largely an increase in
operating expenses in the later period, partially offset by an increase in gross
profits in the later period.
For the Six Months Ended June 30, 2011.
---------------------------------------
Revenues.
For the six months ended June 30, 2011, Amexdrug reported sales of
$6,461,797, comprised of $5,712,283 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 $749,514 of sales of
health and beauty products manufactured by the Company. This is $774,211 more
than the $5,687,586 of sales reported for the six months ended June 30, 2010
which was comprised primarily of $5,195,474 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 $492,112 of sales of health and beauty products manufactured by the Company.
During the six month period ended June 30, 2011, Amexdrug experienced an
increase in total sales due, in part, to increased marketing efforts of the
Company, as well as having an increased number of products to sell.
Costs of Goods Sold.
Cost of goods sold for the six months ended June 30, 2011 was $5,709,115,
an increase of $526,793 from the $5,182,322 cost of goods sold for the six
months ended June 30, 2010.
Gross Profit.
During the six months ended June 30, 2011 gross profit increased by
$247,418 to $752,682, or 11.6% of sales, from the $505,264, or 8.9% of sales
recorded for the six months ended June 30, 2010. The change in gross profit
margin is attributable to an increase in sales as well as an increased
percentage of sales with higher gross margin products sold in the first six
months of 2011.
Expenses.
Total operating expenses, consisting entirely of selling, general and
administrative expense, for the six months ended June 30, 2011 were $341,639, an
increase of $69,132 from the total operating expenses of $272,507 recorded for
the six months ended June 30, 2010. The increase in selling, general and
administrative expense is primarily attributed to increased commissions payable
on the increased sales and increased amounts paid for outside services and
moving expenses.
Net Income.
During the six months ended June 30, 2011, Amexdrug earned net income of
$235,664, an increase of $87,121 from the net income of $148,543 experienced in
the six months ended June 30, 2010Amexdrug's increase in net income during the
six month period ended June 30, 2011, is attributable largely to the increase of
sales of higher gross margin products sold and resulting increase in gross
profits earned in the later period, partially offset by an increase in operating
expenses in the later period.
Liquidity and Capital Resources - June 30, 2011
-----------------------------------------------
As of June 30, 2011, Amexdrug reported total current assets of $1,450,441,
comprised of cash and cash equivalents of $151,159, accounts receivable of
$897,520, inventory of $339,403, a deferred tax asset of $45,087, investment of
$5,652 and advances officer of $11,620. Total assets as of June 30, 2011 were
$1,520,190 which included total current assets, plus net property and equipment
of $22,883, other deposits of $28,212, Trademark of $939, and goodwill of
$17,765.
13
Amexdrug's liabilities as of June 30, 2011 consisted primarily of accounts
payable of $508,351, notes payables to related parties of $108,023, business
line of credit of $283,085, corporate tax payable of $102,123 and accrued
liabilities of $23,810.
During the six months ended June 30, 2011, Amexdrug used $246,046 cash in
operating activities compared to $22,826 cash used in operating activities in
the six months ended June 30, 2010. The primary adjustments to reconcile net
income to net cash used in operating activities during the six months ended June
30, 2011 were as follows: an increase in accounts receivable of $423,537, an
increase in inventory of $35,217, a decrease in accounts payable and accrued
liabilities of $31,999, and an increase in deferred operating lease liability of
$9,778. Amexdrug had $151,159 in cash and cash equivalents at June 30, 2011.
Operations have primarily been funded through cash generated from operations.
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, 2011, Amexdrug repurchased a
total of 13,372 shares of its common stock at prices ranging from a low of $0.20
per share to a high of $3.03 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 2011.
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 $3,801 and $0 on capital expenditures during the
three month periods ended June 30, 2011 and 2010, 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, 2010, 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, 2011. 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, 2011, 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, 2011, 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, 2007.
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 *
(to change domicile from California)
2.2 Agreement and Plan of Reorganization **
3.1 Articles of Incorporation ***
3.2 By-Laws ***
10.1 Promissory Note with National Bank of California *****
dated June 23, 2008
10.2 Change in Terms Agreement with National Bank of *****
California dated June 9, 2009
10.3 Change in Terms Agreement with National Bank of ******
California dated March 3, 2009
10.4 Subordination Agreement between Nora Y. Amin, ******
National Bank of California, Amexdrug and its
subsidiaries dated June 9, 2009
10.5 Business Loan Agreement between National Bank of ******
California, Amexdrug and its subsidiaries dated
June 23, 2008
10.6 Commercial Security Agreement between National ******
Bank of California, Amexdrug and its subsidiaries
dated June 23, 2008
10.7 Commercial Guarantee between National Bank of ******
California, Jack N. Amin, Amexdrug and its
Subsidiaries
10.8 Commercial Guarantee between National Bank of ******
California, Nora Y. Amin, Amexdrug and its
subsidiaries
15
10.9 Lease Agreement between Fullerton Business *******
Center, LLC, Lessor, and Allied Med, Inc.,
Lessee, dated March 1, 2011 (Units I & J)
10.10 Guaranty of Lease by Jack Amin (Units I & J) *******
10.11 Lease Agreement between Condor Associates, LLC, *******
Lessor, and Allied Med, Inc.,
Lessee, dated February 22, 2011
10.12 Guaranty of Lease by Jack Amin and Nora Amin *******
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
101.INS XBRL Instance Document ********
101.SCH XBRL Taxonomy Extension Schema ********
101.CAL XBRL Taxonomy Extension ********
Calculation Linkbase
101.DEF XBRL Taxonomy Extension ********
Definition Linkbase
101.LAB XBRL Taxonomy Extension ********
Label Linkbase
101.PRE XBRL Taxonomy Extension ********
Presentation Linkbase
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 year
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 10.1 and 10.2 are incorporated
by reference From Amexdrug's Form 10-Q for the
period ended June 30, 2009 filed August 14, 2009
****** Exhibits 10.3 through 10.8 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
******* Exhibits 10.9 through 10.12 are incorporated by
reference from Amexdrug's Form 10-K for the
year ended December 31, 2010 filed March 31,
2011
****** Pursuant to Rule 406T of Regulation S-T, these
interactive data files are deemed "furnished" and
not "filed" or part of a registration statement or
prospectus for purposes of Sections 11 and 12 of
the Securities Act of 1933, or deemed "furnished"
and not "filed" for purposes of Section 18 of the
Securities and Exchange Act of 1934, and otherwise
is not subject to liability under these sections.
16
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 12, 2011 By: /s/ Jack Amin
------------------------------------------
Jack Amin
Director, President, Chief Executive Officer,
Chief Financial Officer and Chief Accounting
Officer
17
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