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EX-32.2 - AMEXDRUG CORPamexdrug10qexh322.txt
EX-31.2 - AMEXDRUG CORPamexdrug10qexh312.txt
EX-31 - AMEXDRUG CORPamexdrug10qexh311.txt

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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
                              --------------------
             (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.)

                               7251 Condor Street
                           Commerce, California 90040
                           --------------------------
                    (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 ------------- -------------- (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 ------------- -------------- Total Current Assets 1,450,441 1,294,658 ------------- -------------- Property and Equipment, at cost Office and computer equipment 208,586 197,295 Leasehold improvements 15,700 15,700 ------------- -------------- 224,286 212,995 Less accumulated depreciation (201,453) (199,364) ------------- -------------- Net Property and Equipment 22,833 13,631 ------------- -------------- 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 ------------- -------------- Total Other Assets 46,916 33,248 ------------- -------------- Total Assets $ 1,520,190 $ 1,341,537 ============= ============== 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 ------------- -------------- Total Current Liabilities 1,035,170 1,091,030 ------------- -------------- 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 ------------- -------------- Total Shareholders' Equity 485,020 250,507 ------------- -------------- Total Liabilities and Shareholders' Equity $ 1,520,190 $ 1,341,537 ============= ============== 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 ------------- -------------- ------------- -------------- 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 ------------- -------------- ------------- -------------- 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) ------------- -------------- ------------- -------------- 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) ------------- -------------- ------------- -------------- Net Income $ 71,549 $ 72,608 $ 235,664 $ 148,543 ============= ============== ============= ============== 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 ------------- -------------- 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 ------------- -------------- NET CASH USED IN OPERATING ACTIVITIES (246,046) (22,826) ------------- -------------- 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) ------------- -------------- NET CASH USED IN INVESTING ACTIVITIES (10,187) (7,945) ------------- -------------- 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 ------------- -------------- NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES (36,311) 44,610 ------------- -------------- NET INCREASE/(DECREASE) IN CASH (292,544) 13,839 CASH, BEGINNING OF PERIOD 443,703 121,182 ------------- -------------- CASH, END OF PERIOD $ 151,159 $ 135,021 ============= ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 9,747 $ 8,754 ============= ============== Income taxes $ 43,977 $ 800 ============= ============== 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 ------------- ------------- -------------- 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. ---------------- 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. -------------- 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 --------------------------------------------------------------------------------