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EX-10.17 - LEASE AGREEMENT BETWEEN FULLERTON BUSINESS CENTER, LLC, LESSOR, AND ALLIED MED, INC., LESSEE, DATED JULY 8, 2009 (UNIT H) - AMEXDRUG CORPamexdrug10qexh1017.pdf
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AMEXDRUG CORPamexdrug10qexh312.txt
EX-32.2 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - AMEXDRUG CORPamexdrug10qexh322.txt
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - AMEXDRUG CORPamexdrug10qexh311.txt
EX-10.18 - GUARANTY OF LEASE BY JACK AMIN (UNIT H) - AMEXDRUG CORPamexdrug10qexh1018.txt
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 - AMEXDRUG CORPamexdrug10qexh321.txt
EX-10.17 - LEASE AGREEMENT BETWEEN FULLERTON BUSINESS CENTER, LLC, LESSOR, AND ALLIED MED, INC., LESSEE, DATED JULY 8, 2009 (UNIT H) - AMEXDRUG CORPamexdrug10qexh1017.txt

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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 -------------------------------------------------------------------------------