-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oa7FAvM22C6HpKtJwhnM//LNR3GoEGvxigNnkXqq4gOwtDllifOOxrrZYWhtmuV3 8yCjZb1UiVWljuVJNxDZlA== 0001096906-04-000220.txt : 20040517 0001096906-04-000220.hdr.sgml : 20040517 20040514190422 ACCESSION NUMBER: 0001096906-04-000220 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040330 FILED AS OF DATE: 20040517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEXDRUG CORP CENTRAL INDEX KEY: 0000045621 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 952251025 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-10304 FILM NUMBER: 04809495 BUSINESS ADDRESS: STREET 1: 369 SOUTH DOHENY DR SUITE 326 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3108550475 MAIL ADDRESS: STREET 1: 369 SOUTH DOHENY DR SUITE 326 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10QSB 1 amex10qsbmarch04.txt U. S. Securities and Exchange Commission Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to____________ Commission File No. 0-7473 Amexdrug Corporation --------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) NEVADA 90-0017017 ------------------------ --------------------- (State or Other Jurisdiction of (I.R.S. Employer I.D. No.) Incorporation or Organization) 8909 West Olympic Boulevard, Suite 208 Beverly Hills, California 90211 ------------------------------- (Address of Principal Executive offices) Issuer's Telephone Number: (310) 855-0475 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. (1) Yes X No (2) Yes X No ----- ----- ------ ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes X No ----- ---- APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of May 6, 2004, there were 8,052,783 shares of the issuer's common stock issued and outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The unaudited condensed consolidated balance sheets of Amexdrug Corporation, a Nevada corporation, and subsidiary as of March 31, 2004 and December 31, 2003, and the related unaudited condensed consolidated statements of operations and cash flows for the three month periods ended March 31, 2004 and March 31, 2003, and the notes to the condensed consolidated financial statements appear below. The 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 financial statements included in Amexdrug Corporation's annual report on Form 10-KSB for the year ended December 31, 2003. The accompanying 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., its wholly owned subsidiary, 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 March 31, 2004, are not necessarily indicative of the results that can be expected for the year ending December 31, 2004. 3 AMEXDRUG CORPORATION FORM 10-QSB TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements (Unaudited).....................................5 Condensed Consolidated Balance Sheets -- As of March 31, 2004 and December 31, 2003 (Unaudited)...................................5 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and 2003 (Unaudited)...........................6 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (Unaudited)...........................7 Notes to Condensed Consolidated Financial Statements (Unaudited)......8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................10 Item 3. Controls and Procedures.............................................13 PART II - OTHER INFORMATION Item 1. Legal Proceedings...................................................13 Item 2. Changes in Securities...............................................14 Item 3. Defaults Upon Senior Securities.....................................14 Item 4. Submission of Matters to a Vote of Security Holders.................14 Item 5. Other Information...................................................14 Item 6. Exhibits and Reports on Form 8-K....................................15 4 AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, 2004 2003 - --------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash $ 211,486 $ 1,185 Accounts receivable, net of allowance for doubtful accounts of $95,000 and $95,000, respectively 310,423 405,224 Inventory 106,037 137,948 - --------------------------------------------------------------------------------------------------------------- Total Current Assets 627,946 544,357 - --------------------------------------------------------------------------------------------------------------- Property and Equipment Office and computer equipment 133,641 133,641 Leasehold improvements 15,700 15,700 - --------------------------------------------------------------------------------------------------------------- Total Property and Equipment 149,341 149,341 Less: Accumulated depreciation (88,605) (82,863) - --------------------------------------------------------------------------------------------------------------- Net Property and Equipment 60,736 66,478 Investment in real estate - - Deposits 1,100 1,100 - --------------------------------------------------------------------------------------------------------------- Total Assets $ 689,782 $ 611,935 - --------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities Checks written in excess of cash in bank $ - $ 41,024 Accounts payable 689,066 586,116 Accrued liabilities 17,355 14,972 Accrued settlement obligation 129,886 - Accrued income taxes - - Current portion of capital lease obligations 24,712 24,545 - --------------------------------------------------------------------------------------------------------------- Total Current Liabilities 861,019 666,657 - --------------------------------------------------------------------------------------------------------------- Long-Term Liabilities Accrued settlement obligation, net of current portion 10,114 - Deferred income taxes - 1,004 Capital lease obligations, net of current portion 28,436 35,076 - --------------------------------------------------------------------------------------------------------------- Total Long-Term Liabilities 38,550 36,080 - --------------------------------------------------------------------------------------------------------------- Stockholders' Deficit Common Stock - $0.001 par value; 50,000,000 shares authorized; 8,052,783 shares issued and outstanding 8,053 8,053 Additional paid-in capital 7,969 7,969 Accumulated deficit (225,809) (106,824) - --------------------------------------------------------------------------------------------------------------- Total Stockholders' Deficit (209,787) (90,802) - --------------------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Deficit $ 689,782 $ 611,935 - ---------------------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements 5 AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, --------------------------------- 2004 2003 - --------------------------------------------------------------------------------------- Sales $ 2,238,753 $ 3,836,246 Cost of Goods Sold 2,142,924 3,604,970 - --------------------------------------------------------------------------------------- Gross Profit 95,829 231,276 Operating Expenses Selling, general and administrative expense (74,573) (134,793) Interest expense (1,245) (1,325) - --------------------------------------------------------------------------------------- Income From Operations 20,011 95,158 Settlement Expense (140,000) - - --------------------------------------------------------------------------------------- Income (Loss) Before Income Taxes (119,989) 95,158 Provision for Income Taxes 1,004 (31,204) - --------------------------------------------------------------------------------------- Net Income (Loss) $(118,985) $ 63,954 - --------------------------------------------------------------------------------------- Basic Income (Loss) Per Common Share $ (0.01) $ 0.01 - --------------------------------------------------------------------------------------- Basic Weighted-Average Common Shares Outstanding 8,052,783 8,052,783 - ---------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements 6 AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31, ------------------------------- 2004 2003 - ---------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income (loss) $ (118,985) $ 63,954 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 5,742 4,475 Bad debt expense - 39,917 Settlement expense 140,000 - Changes in operating assets and liabilities: Accounts receivable 94,801 (185,159) Inventory 31,911 285,351 Accounts payable and accrued liabilities 105,333 (188,225) Accrued income taxes - Deferred income taxes (1,004) 4,459 - ---------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 257,798 24,772 - ---------------------------------------------------------------------------------------------------- Net Cash Provided by Investing Activities - - - ---------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Payment of checks written in excess of cash in bank (41,024) - Principal payments on capital lease obligations (6,473) (4,361) - ---------------------------------------------------------------------------------------------------- Net Cash Used in Financing Activities (47,497) (4,361) - ---------------------------------------------------------------------------------------------------- Net Increase in Cash 210,301 20,411 Cash at Beginning of Period 1,185 338,529 - ---------------------------------------------------------------------------------------------------- Cash at End of Period $211,486 $358,940 - ---------------------------------------------------------------------------------------------------- Supplemental Cash Flow Information: Cash paid for interest $ 1,245 $ 1,325 - ----------------------------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements 7 AMEXDRUG CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS NOTE 1 -- Organization and Nature of Operations Condensed Financial Statements -- The accompanying condensed financial statements have been prepared by the Company and are unaudited. In the opinion of management, the accompanying unaudited financial statements contain all necessary adjustments for fair presentation, consisting of normal recurring adjustments except as disclosed herein. The accompanying unaudited interim financial statements have been condensed pursuant to the rules and regulations of the Securities and Exchange Commission; therefore, certain information and disclosures generally included in financial statements have been condensed or omitted. The condensed financial statements should be read in connection with the Company's annual financial statements included in its annual report on Form 10-KSB as of December 31, 2003. The financial position and results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year ending December 31, 2004. Use of Estimates -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The Company's historical revenues and receivables have been derived solely from the pharmaceutical industry. Although the Company primarily sells products on a cash basis, some sales are made under credit terms. The Company performs ongoing credit evaluations of its customers' financial condition and usually requires a delayed check depository from its customers at the date products are shipped. The Company maintains an allowance for uncollectible accounts receivable based upon the expected collectibility of all accounts receivable. During the three months ended March 31, 2004, purchases from three vendors accounted for 45%, 20%, and 15% of total purchases. As of March 31, 2004, accounts payable to these vendors accounted for 47%, 23%, and 16% of the total accounts payable, respectively. Fair Value of Financial Instruments -- The carrying amount of capital lease obligations approximate fair value based on current interest rates available to the Company. Investment in Real Estate -- On December 19, 2002, Jack Amin and his wife contributed four parcels of real estate to the Company. On September 29, 2003, another four parcels were contributed. The real estate has been recorded at its historical cost of $0. The real estate is not used in the Company's operations and is held for sale. Revenue Recognition -- The Company generates revenues from the resale of pharmaceuticals, over-the-counter products, health and beauty care products and nutritional supplements. The Company accounts for these revenues at the time of shipment to and acceptance by the customer. Basic Income (Loss) Per Common Share -- Basic income loss per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. No agreements or contracts exist that have created any potentially issuable common shares. 8 AMEXDRUG CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS NOTE 2 -- SETTLEMENT EXPENSE On June 9, 2003, a lawsuit was filed in the Superior Court of the State of California, County of Los Angeles, against the Company, its predecessor corporation Amexdrug Corporation, a California corporation, its wholly owned subsidiary Allied Med, Inc., and Jack Amin. The plaintiffs allege in the complaint that the parties entered into a one page finder's agreement on April 10, 2000 relating to the acquisition of Harlyn Products, Inc., and that the plaintiffs are entitled to receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully diluted shares of the Company with a value not less than $600,000 and unspecified lost profits. The plaintiffs alleged causes of action for breach of contract, for specific performance, for services rendered and for unjust enrichment. On May 10, 2004, the Company reached a settlement with the plaintiffs whereby Jack Amin will transfer 360,000 shares of common stock in the Company owned by him personally to the plaintiffs, the Company will pay $25,000 plus interest at 5% over 24 months, and the Company will transfer two of its parcels of real estate, that were recently transferred to the Company by Jack Amin, to the plaintiffs. A settlement expense of $140,000 was recorded as a result of the settlement. Jack Amin directly or indirectly provided approximately 82 percent of the total consideration. In calculating the settlement expense of $140,000, management estimates the value of the parcels of real estate to be approximately $40,000. Since the investment in the real estate is carried at zero value, a corresponding gain on the transfer will be recognized in the subsequent quarter when the transfer actually takes place. The Company estimated the fair value of common stock to be transferred directly by Jack Amin to be $75,000, or approximately $0.21 per share, base on the estimated discounted cash flows that could be realized from selling the common shares into the current thinly traded market for the common shares. The Company will recognize a corresponding capital contribution from Jack Amin in the amount of $75,000 when the common shares are transferred to the plaintiffs. NOTE 3 -- CONTINGENCIES In response to an action initiated by the Company against one of its vendors, the vendor filed a counterclaim for $365,603, plus costs and attorney fees. At dispute are pharmaceutical products the Company contends were nonconforming. In its action, the Company seeks damages for losses suffered as a result of the delivery of the non-conforming products. The case is in the early stages of discovery. The Company has not evaluated the likelihood of loss from the counterclaim, but intends to prosecute its action and defend the counterclaim vigorously. Accordingly, no liability relating to the counterclaim has been accrued in the accompanying financial statements. The Franchise Tax Board of the State of California has asserted that the Amexdrug Corporation (formerly Harlyn Products, Inc.) owes approximately $581,000 in franchise taxes from periods prior to April 2000, including accrued interest through March 31, 2004. However, as stipulated in the bankruptcy court's order dated April 25, 2000, Jack Amin purchased 1,000,000 common shares of Harlyn Products, Inc. free of any and all liens or encumbrances. Accordingly, management contends that the Company has no liability relating to the claim and no amounts have been accrued in the accompanying financial statements. 9 Item 2. Management=s Discussion and Analysis or Plan of Operation. (a) Plan of Operation. Not applicable. (b) Management=s Discussion and Analysis of Financial Condition and Results of Operations. Overview -------- Amexdrug Corporation is located 8909 West Olympic Boulevard, Suite 112, 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, and on the Frankfurt Stock Exchange in Germany under the symbol AZC. The President of Amexdrug has had experience working in the pharmaceutical industry for the past 20 years. Through its wholly-owned subsidiary, Allied Med, Inc., Amexdrug is engaged in the pharmaceutical wholesale business of selling brand name and generic pharmaceutical products, over-the-counter (OTC) and health and beauty products in 7 or 8 states. Amexdrug is expanding its business, and it would like to eventually sell and distribute products in all 50 states. 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. On December 31, 2001, Amexdrug acquired all of the issued and outstanding common shares of Allied Med, Inc. ("Allied") in a share exchange. Amexdrug acquired all 50,000 issued and outstanding shares of Allied common stock from its sole shareholder, Mr. Jack Amin, in exchange for 7,000,000 restricted common shares of Amexdrug and the assumption of a $100,000 promissory note, and all accrued interest thereon owed by Mr. Amin to Allied. At all times during the negotiations of the transaction, Mr. Amin was an officer, director and controlling shareholder of both companies. Consideration for the acquisition was determined through negotiations between the boards of directors of both companies and was based on Allied's past operating history and future potential growth. 10 Allied was formed as an Oregon corporation in October 1997, to operate in the pharmaceutical wholesale business of selling brand name and generic pharmaceutical products, over-the-counter (OTC) and health and beauty products. Amexdrug has assumed the operations of Allied as its primary operations, and Amexdrug intends to build on the wholesale operations of Allied. The accompanying financial information includes the operations of Allied Med, Inc. for all periods presented and the operations of Amexdrug Corporation from April 25, 2000. Results of Operations --------------------- For the three months ended March 31, 2004, Amexdrug reported sales of $2,238,753, comprised entirely of income from the Allied Med, Inc. pharmaceutical wholesale business of selling brand name and generic pharmaceutical products, and over-the-counter (OTC) and health and beauty products. This was $1,597,493 less than the $3,836,246 of sales reported for the three months ended March 31, 2003. Cost of goods sold for the three months ended March 31, 2004 was $2,142,924, a decrease of $1,462,046 from the $3,604,970 cost of goods sold for the three months ended March 31, 2003. Gross profit decreased by $135,447 to $95,829 or 4.3% of sales for the three months ended March 31, 2004, from the $231,276 or 6.0% of sales recorded for the three months ended March 31, 2003. Amexdrug attributes its decrease in sales for the three month period ended March 31, 2004 to increased competition (both domestic and foreign) and Amexdrug's search for better discount products to sell. Amexdrug believes that some consumers are purchasing larger quantities of drugs from Canadian or other foreign services, and this has adversely impacted the Company's sales to domestic pharmacies. Selling, general and administrative expense was $74,573 for the three months ended March 31, 2004, a decrease of $60,220 from the $134,793 recorded for the three months ended March 31, 2003. Interest expense decreased slightly to $1,245 for the three months ended March 31, 2004 from $1,325 for the three months ended March 31, 2003. The decrease in operating expenses is largely attributable to a decrease in shipping expenses related to the decline in sales and resulting decrease in Amexdrug's operations. Income from operations for the three months ended March 31, 2004 was $20,011, a decrease of $75,147 from the $95,158 recorded for the three months ended March 31, 2003. The decrease in income from operations is associated with the decrease in sales partially offset by the associated decreases in cost of goods sold and operating expenses. Although income from operations decreased during the three months ended March 31, 2004, Amexdrug's operating activities provided $257,798 cash during the three months ended March 31, 2004 compared to $24,772 cash provided by operating activities during the three months ended March 31, 2003. 11 Amexdrug incurred a non-recurring non-cash settlement expense of $140,000 during the three months ended March 31, 2004 in order to settle litigation commenced in June 2003. In the settlement, Jack Amin agreed to transfer 360,000 shares of Amexdrug common stock owned personally by him to the plaintiffs, and the Company agreed to transfer two parcels of its real estate that were recently transferred to the Company by Jack Amin with an estimated value of $40,000 and pay $25,000 with interest at five percent per annum over twenty four months, to the plaintiffs. During the three months ended March 31, 2004, Amexdrug earned approximately $20,000 of income prior to the non-recurring settlement expense of $140,000, as compared to the $63,954 net income earned during the three months ended March 31, 2003. Amexdrug attributes this decrease in net income primarily to a settlement expense of $140,000 associated with settling a lawsuit described in Part II, Item 1 "Legal Proceedings" of this report and also in Note 2 of the financial statements, and also to the decreases in sales and gross profits during the same period. Liquidity and Capital Resources - March 31, 2004 ------------------------------------------------ As of March 31, 2004, Amexdrug reported total current assets of $627,946, comprised of cash of $211,486, net accounts receivable of $310,423 and inventory of $106,037. Total assets as of March 31, 2004 were $689,782, which included total current assets, plus net property and equipment of $60,736 and deposits of $1,100. Amexdrug=s liabilities as of March 31, 2004 consist of accounts payable of $689,066, accrued settlement obligation of $129,886, accrued liabilities of $17,355, current portion of capital lease obligations of $24,712, and total long-term liabilities of $38,550. During the three months ended March 31, 2004, Amexdrug's operating activities provided $257,798 cash compared to $24,772 cash provided by Amexdrug's operating activities in the three months ended March 31, 2003. The primary adjustments to reconcile net loss to net cash provided by operating activities during the first quarter of 2004 were as follows: an increase from a non-cash settlement expense of $140,000, a decrease in accounts receivable of $94,801, a decrease in inventory of $31,911, and an increase in accounts payable and accrued liabilities of $105,333. Cash increased during the three months ended March 31, 2004 by $210,301 compared to an increase during the three months ended March 31, 2003 of $20,411. Amexdrug had $211,486 of cash at March 31, 2004, and management anticipates that operations will use cash during the next twelve months. However, management estimates that cash currently available will be sufficient to sustain operations and does not anticipate that Amexdrug will need to obtain additional financing during the next twelve months. 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," 12 "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. Controls and Procedures. As of the end of the period covered by this report, Amexdrug carried out an evaluation, under the supervision and with the participation of its chief executive officer and chief financial officer, Jack Amin, of the effectiveness of the design and operation of Amexdrug's disclosure controls and procedures. Based on this evaluation, Mr. Amin who is our chief executive officer and chief financial officer concluded that Amexdrug's disclosure controls and procedures are effective in timely alerting him to material information required to be included in Amexdrug's periodic SEC reports. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. In addition, there has been no change in our internal control over financial reporting during the most recent fiscal quarter 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-QSB 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 a party to material pending legal proceedings which are described below. 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, except as described below. On June 9, 2003 a lawsuit was filed in the Superior Court of the State of California, County of Los Angeles against the Company, its predecessor corporation Amexdrug Corporation, a California corporation, its wholly owned subsidiary Allied Med, Inc., and Jack Amin. The plaintiffs allege in the complaint that the parties entered into a one page finder's agreement on April 10, 2000 relating to the acquisition of Harlyn Products, Inc., and that the plaintiffs are entitled to receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully diluted shares of the Company with a value not less than $600,000 and unspecified profits. Plaintiffs allege causes of action for breach of contract, for specific performance, for services rendered and for 13 unjust enrichment. Plaintiffs seek compensation for damages, legal fees, costs and interest. The parties reached a settlement of this matter on May 10, 2004 pursuant to which Jack Amin has agreed to transfer 360,000 shares of Amexdrug common stock owned personally by him to the plaintiffs, the Company has agreed to pay $25,000 over twenty-four months with five percent interest and transfer two parcels of undeveloped real property, that were recently transferred to the Company by Jack Amin, to the plaintiffs, and the parties will execute a mutual release of all claims. The plaintiffs are to provide a legal opinion from a reputable securities attorney or law firm that the 360,000 shares being transferred by Jack Amin are unrestricted. A settlement expense of $140,000 was recorded as a result of the settlement. Jack Amin directly or indirectly provided approximately 82 percent of the total consideration. In response to an action initiated by the Company against one of its vendors, the vendor filed a counterclaim for $365,603, plus costs and attorney fees. At dispute are pharmaceutical products the Company contends were nonconforming. In its action, the Company seeks damages for losses suffered as a result of the delivery of non-conforming products. The case is in the early stages of discovery. The Company intends to prosecute its action and defend the counterclaim vigorously. The Company may incur substantial costs to defend this action, and the action may result in a substantial judgment against the Company and/or its wholly-owned subsidiary, Allied Med, Inc. This case, Allied Med, Inc. vs. Alliance Wholesale Distribution, (case no. 0310-11570) is filed in Multnomah County, Oregon Circuit Court. The Franchise Tax Board of the State of California has asserted that Amexdrug Corporation (formerly Harlyn Products, Inc.) owes approximately $581,000 in franchise taxes from periods prior to April 2000, including accrued interest through March 31, 2004. However, as stipulated in the bankruptcy court's order dated April 25, 2000, Jack Amin purchased 1,000,000 common shares of Harlyn Products, Inc. free of any and all liens and encumbrances. Accordingly, management contends that the Company has no liability relating to this claim. Item 2. Changes in Securities. None; not applicable. 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. 14 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit Number Description ------ ----------- 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. No Current Reports on Form 8-K were filed by Amexdrug during the quarter ended March 31, 2004. 15 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: May 13, 2004 By: /s/ Jack Amin ------------------------------------- Jack Amin Director, President, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer 16 EX-31.1 2 amexdrug10qsbmarch04ex31-1.txt EXHIBIT 31.1 SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Jack Amin, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Amexdrug Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, the results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Jack Amin Date: May 13, 2004 ---------------------------------- Jack Amin, Chief Financial Officer EX-31.2 3 amexdrug10qsbmarch04ex31-2.txt EXHIBIT 31.2 SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Jack Amin, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Amexdrug Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, the results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Jack Amin Date: May 13, 2004 ---------------------------------- Jack Amin, Chief Financial Officer EX-32.1 4 amexdrug10qsbmarch04ex32-1.txt EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amexdrug Corporation (the "Company") on Form 10-QSB for the period ending March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jack Amin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of the operation of the Company. /s/ Jack Amin - ------------------------------------ Jack Amin Chief Executive Officer May 13, 2004 EX-32.2 5 amexdrug10qsbmarch04ex32-2.txt EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amexdrug Corporation (the "Company") on Form 10-QSB for the period ending March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jack Amin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of the operation of the Company. /s/ Jack Amin - ------------------------------------- Jack Amin Chief Financial Officer May 13, 2004 -----END PRIVACY-ENHANCED MESSAGE-----