-----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, On7GdkqMsPY5WEc1mz3cnak7cuK9xCcVk+Tf4W7PNC/gsK6U8qE8A+FgUgSlcNAh wK0OoFRFQxxKFCyCoIqnIw== 0001096906-05-000422.txt : 20050810 0001096906-05-000422.hdr.sgml : 20050810 20050809181948 ACCESSION NUMBER: 0001096906-05-000422 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050810 DATE AS OF CHANGE: 20050809 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: 051011322 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 amexdrug10qsb063005.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 June 30, 2005 [ ] 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 95-2251025 ------------------------------- -------------------------- (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 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 l2, 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 August 4, 2005, there were 8,473,866 shares of the issuer's common stock issued and outstanding. AMEXDRUG CORPORATION FORM 10-QSB TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements (Unaudited) .................................. 3 Condensed Consolidated Balance Sheets -- As of June 30, 2005 and December 31, 2004 (Unaudited) .................. 4 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited) ............................................. 5 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (Unaudited) .......... 6 Notes to Condensed Consolidated Financial Statements (Unaudited) ...................................................... 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............................... 9 Item 3. Controls and Procedures ........................................... 12 PART II - OTHER INFORMATION Item 1. Legal Proceedings ................................................. 12 Item 2. Changes in Securities ............................................. 13 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................................. 13 Item 4. Submission of Matters to a Vote of Securities Holders ........................................................... 13 Item 5. Other Matters ..................................................... 13 Item 6. Exhibits and Reports on Form 8-K .................................. 16 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The unaudited condensed consolidated balance sheets of Amexdrug Corporation, a Nevada corporation, and subsidiary as of June 30, 2005 and December 31, 2004, the related unaudited condensed consolidated statements of operations for the three and six month periods ended June 30, 2005 and June 30, 2004, the related unaudited condensed consolidated statements of cash flows for the six month periods ended June 30, 2005 and June 30, 2004, and the notes to the condensed 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 Corporation's annual report on Form 10-KSB for the year ended of December 31, 2004. The accompanying condensed 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., 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 June 30, 2005, are not necessarily indicative of the results that can be expected for the year ending December 31, 2005. -3- AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, 2005 2004 - -------------------------------------------------------------------------------- Cash $ 125,092 $ 4,693 ASSETS Current Assets Cash $ 125,092 $ 4,693 Investments in securities available for sale 1,600 - Accounts receivable, net of allowance for doubtful accounts of $19,500 and $39,494, respectively 188,092 297,310 Inventory 116,728 73,493 - -------------------------------------------------------------------------------- Total Current Assets 431,512 375,496 - -------------------------------------------------------------------------------- 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 (116,529) (105,834) - -------------------------------------------------------------------------------- Net Property and Equipment 32,812 43,507 Deposits 1,100 1,100 - -------------------------------------------------------------------------------- Total Assets $ 465,424 $ 420,103 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities Accounts payable $ 348,858 $ 427,487 Payables - related parties 13,140 29,674 Accrued liabilities 2,842 4,252 Accrued income taxes 18,693 800 Current portion of capital lease obligations 9,925 10,747 - -------------------------------------------------------------------------------- Total Current Liabilities 393,458 472,960 - -------------------------------------------------------------------------------- Long-Term Liabilities Deferred income taxes 5,888 - Capital lease obligations, net of current portion 22,512 27,495 - -------------------------------------------------------------------------------- Total Long-Term Liabilities 28,400 27,495 - -------------------------------------------------------------------------------- Stockholders' Equity (Deficit) Common Stock - $0.001 par value; 50,000,000 shares authorized; 8,473,866 and 8,052,783 shares issued and outstanding, respectively 8,474 8,053 Additional paid-in capital 83,342 7,969 Accumulated deficit (48,250) (96,374) - -------------------------------------------------------------------------------- Total Stockholders' Equity (Deficit) 43,566 (80,352) - -------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity (Deficit) $ 465,424 $ 420,103 ================================================================================ See accompanying notes to condensed consolidated financial statements -4-
AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the Three Months For the Six Months Ended June 30, Ended June 30, ------------------------- ------------------------ 2005 2004 2005 2004 - -------------------------------------------------------------------------------------- Sales $ 1,127,397 $ 1,997,336 $ 2,145,318 $ 4,236,089 Cost of Goods Sold 1,019,389 1,795,682 1,980,457 3,938,606 - -------------------------------------------------------------------------------------- Gross Profit 108,008 201,654 164,861 297,483 Operating Expenses Selling, general and administrative expense (60,927) (89,257) (107,676) (163,830) Interest expense (850) (937) (1,779) (2,182) Interest and other income 32 - 65 - - -------------------------------------------------------------------------------------- Income From Operations 46,263 111,460 55,471 131,471 Gain (Expense) on Settlement (10,000) - 17,234 (140,000) - -------------------------------------------------------------------------------------- Income (Loss) Before Income Taxes 36,263 111,460 72,705 (8,529) Benefit from (Provision for) Income Taxes (17,455) - (24,581) 1,004 - -------------------------------------------------------------------------------------- Net Income (Loss) $ 18,808 $ 111,460 $ 48,124 $ (7,525) ====================================================================================== Basic Loss Per Common Share $ - $ 0.01 $ 0.01 $ - ====================================================================================== Basic Weighted-Average Common Shares Outstanding 8,473,866 8,052,783 8,301,711 8,052,783 ====================================================================================== See accompanying notes to condensed consolidated financial statements -5-
AMEXDRUG CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, ----------------------- 2005 2004 - -------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income (loss) $ 48,124 $ (7,525) Adjustments to reconcile net income to net cash used in operating activities: Depreciation 10,695 11,486 Adjustment to bad debt (19,994) - Expense from (Gain on) settlement - 140,000 Deferred income taxes 5,888 (1,004) Changes in operating assets and liabilities: Accounts receivable 129,212 89,644 Inventory (43,235) 53,840 Accounts payable and accrued liabilities (62,146) (133,613) - -------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 68,544 152,828 - -------------------------------------------------------------------------------- Cash Flows from Investing Activities: Purchase of investments (1,600) - - -------------------------------------------------------------------------------- Net Cash Used in Investing Activities (1,600) - - -------------------------------------------------------------------------------- Cash Flows from Financing Activities: Payment of checks written in excess of cash in bank - (41,024) Payment for lawsuit settlement - - Proceeds from borrowings from related party 59,260 - Principal payments on capital lease obligations (5,805) (12,145) - -------------------------------------------------------------------------------- Net Cash Provided by (Used in) Financing Activities 53,455 (53,169) - -------------------------------------------------------------------------------- Net Increase in Cash 120,399 99,659 Cash at Beginning of Period 4,693 1,185 - -------------------------------------------------------------------------------- Cash at End of Period $ 125,092 $ 100,844 ================================================================================ Supplemental Cash Flow Information: Cash paid for interest $ 1,779 $ 2,182 - -------------------------------------------------------------------------------- Conversion of notes payable to common stock $ 75,794 $ - - -------------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements -6- 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, 2004. The financial position and results of operations for the six months ended June 30, 2005 are not necessarily indicative of the results to be expected for the full year ending December 31, 2005. 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. Investment in Debt and Equity Securities--Investment in equity securities are classified as available-for-sale and are carried at fair value. Net unrealized gains and losses are reported in accumulated other comprehensive income, which is a separate component of shareholder's equity, net of applicable deferred taxes. Realized gains and losses on sales of securities and impairment losses from other-than-temporary declines in market value are included in earnings with the cost of securities sold determined on a specific cost basis. Investment in debt securities are classified as held-to-maturity and carried at cost. Accounts Receivable -- 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. Concentrations -- During the six months ended June 30, 2005, purchases from two vendors accounted for 37% and 30% of total purchases. As of June 30, 2005, accounts payable to these vendors accounted for 64% and 0% 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. 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 Loss Per Common Share -- Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. No agreements or contracts exist that have created any potentially issuable common shares. -7- NOTE 2 - RELATED PARTY TRANSACTIONS During the year ended December 31, 2004, the Company purchased inventory totaling $34,304 from Amrx Corporation, a corporation owned by the president of the Company. As of June 30, 2005 and 2004, accounts payable to Amrx totaled $13,140 and $0, respectively. In December 2004, the Company borrowed $16,534 from the wife of the president of the Company. In January 2005, the Company borrowed an additional $59,260 from this person. On March 15, 2005, the loans were converted into 421,083 shares of common stock at the market price of $0.18 per share. NOTE 3 -- CONTINGENCIES 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, Harlyn Products, Inc., a California corporation, the Company's wholly owned subsidiary, Allied Med, Inc., and the Company's principal shareholder, Jack Amin. The plaintiffs alleged 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 were 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. The plaintiffs sought compensation for damages, legal fees, costs and interest. Although management had determined, with the advice of its legal counsel, that there was some likelihood that a loss from the claim may have been incurred, on October 26, 2004, the trial court entered a decision in favor of the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of intent of move for a new trial, which was denied by the court on December 13, 2004. The plaintiffs then filed a notice of appeal. Effective June 7, 2005, both parties executed a settlement agreement whereby the Company paid $10,000 in exchange for a release of all claims and dismissal of the plaintiff's appeal. On October 9, 2004 a vendor filed suit to collect on an account in the amount of $32,234. The Company reached a settlement whereby it paid $5,000 for a full and broad release of all claims. A gain of $27,234 was recognized upon payment. NOTE 4--SUBSEQUENT EVENTS On July 22, 2005, Amexdrug's wholly-owned subsidiary, Allied Med, Inc., entered into an agreement to acquire all of the shares of stock of Dermagen, Inc., a California corporation ("Dermagen") for $120,000 cash. Dermagen has a US-FDA registered and state FDA approved facility licensed to manufacture. -8- 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 at 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. 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. 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. -9- Amexdrug has assumed the operations of Allied as its primary operations, and Amexdrug intends to build on the wholesale operations of Allied. 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. On November 8, 2004, Amexdrug formed a new subsidiary, Biorx Pharmaceuticals, Inc. as a Nevada corporation. Biorx Pharmaceuticals, Inc. was formed for the purpose of repacking and selling generic and branded pharmaceuticals. 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 June 30, 2005, Amexdrug reported sales of $1,127,397, 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 is $869,939 less than the $1,997,336 of sales reported for the three months ended June 30, 2004. For the six months ended June 30, 2005, sales reported by Amexdrug were $2,145,318, which is $2,090,771 less than the $4,236,089 of sales reported for the six months ended June 30, 2004. During the three and six month periods ended June 30, 2005, Amexdrug experienced a decline in total sales due to increased competition and Amexdrug's search for better discount products to sell. Cost of goods sold for the three months ended June 30, 2005 was $1,019,389, a decrease of $776,293 over the $1,795,682 cost of goods sold for the three months ended June 30, 2004. Cost of goods sold for the six months ended June 30, 2005 was $1,980,457, a decrease of $1,958,149 over the $3,938,606 cost of goods sold for the six months ended June 30, 2004. During the three months ended June 30, 2005 gross profit decreased by $93,646 to $108,008 or 9.6% of sales for the three months ended June 30, 2005, from the $201,654 or 10.1% of sales recorded for the three months ended June 30, 2004. For the six months ended June 30, 2005 gross profit decreased by $132,622 to $164,861 or 7.7% of sales from the $297,483 or 7.0% of sales recorded for the six months ended June 30, 2004. Although sales decreased during the three and six month periods ended June 30, 2005 compared to sales in the three and six month periods ended June 30, 2004, profit margins changed little during these same time periods. Selling, general and administrative expense was $60,927 for the three months ended June 30, 2005, a decrease of $28,330 from the $89,257 recorded for the three months ended June 30, 2004. For the six months ended June 30, 2005, Amexdrug reported selling, general and administrative expense of $107,676, a decrease of $56,154 from the $163,830 reported for the six months ended June 30, 2004. This decrease in selling, general and administrative expense is largely attributable to a decrease in expenses related to the decline in sales and resulting decreased in Amexdrug's operations. In addition, in late May the Company began distributing products from Los Angeles, California, instead of -10- Portland, Oregon. This has resulted in some cost savings to the Company due to lower shipping costs. During the three months ended June 30, 2005, Amexdrug settled one pending lawsuit against it by paying $10,000. No similar expense was incurred during the three months ended June 30, 2004. During the six months ended June 30, 2005, Amexdrug recorded a nonrecurring gain from litigation settlement of $17,234. This included the settlement expense of $10,000 incured during the second quarter of 2005 and a gain of $27,234 achieved in a separate lawsuit in the first quarter of 2005. In that lawsuit, the parties reached a settlement under which Allied Med, Inc. paid a vendor $5,000 to settle a claim of $32,234. A gain of $27,234 was recognized upon payment. During the six months ended June 30, 2004, Amexdrug reported incurring a settlement expense of $140,000 associated with the lawsuit which was eventually settled in June 2005 for a payment of $10,000. During the three months ended June 30, 2005, Amexdrug experienced net income of $18,808, which is $92,652 less than the $111,460 net income earned in the three months ended June 30, 2004. During the six months ended June 30, 2005, Amexdrug experienced net income of $48,124, as compared to the $7,525 net loss incurred during the six months ended June 30, 2004. Amexdrug attributes this change primarily to decreases in sales during the later periods, partially off set due to decreases in its selling, general and administrative expenses. Liquidity and Capital Resources - June 30, 2005 ----------------------------------------------- As of June 30, 2005, Amexdrug reported total current assets of $431,512, comprised of cash of $125,092, accounts receivable, net of $188,092 inventory of $116,728 and investments in securities available for sale of $1,600. Total assets as of June 30, 2005 were $465,424, which included total current assets, plus net property and equipment of $32,812 and deposits of $1,100. Amexdrug's liabilities as of June 30, 2005 consisted of accounts payable of $348,858, payables to related parties of $13,140, accrued liabilities of $2,842, accrued income taxes of $18,693, current portion of capital lease obligations of $9,925, and total long-term liabilities of $28,400. During the six months ended June 30, 2005, Amexdrug's operating activities provided $68,544 cash compared to $152,828 cash provided by Amexdrug's operating activities in the six months ended June 30, 2004. The primary adjustments to reconcile net income to net cash provided by operating activities during the first six months of 2005 were as follows: a decrease in accounts receivable of $129,212, an increase in inventory of $43,235, a decrease in accounts payable and accrued liabilities of $62,164, a gain on recovery of bad debt of $19,994, depreciation expense of $10,695 and deferred income taxes of $5,888. Cash increased during the six months ended June 30, 2005 by $120,399 compared to an increase during the six months ended June 30, 2004 of $99,659. Cash from operating activities in the six months ended June 30, 2005 increased primarily due to a decrease in accounts receivable. Operations have primarily been funded through cash generated from operations and also from loans and/or capital infusions from related parties. Management does not anticipate that -11- Amexdrug will need to seek 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," "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, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our 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. There has been no change in our internal control over financial reporting during the period covered by this report 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. -12- 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, Harlyn Products, Inc., a California corporation, the Company's wholly owned subsidiary, Allied Med, Inc., and the Company's principal shareholder, Jack Amin. The plaintiffs alleged 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 were 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. Plaintiffs alleged causes of action for breach of contract, for specific performance, for services rendered and for unjust enrichment. Plaintiffs sought compensation for damages, legal fees, costs and interest. Although management had determined, with the advice of its legal counsel, that there was some likelihood that a loss from the claim may have been incurred, on October 26, 2004, the trial court entered a decision in favor of the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of intent to move for a new trial, which was denied by the court on December 13, 2004. The plaintiffs then filed a notice of appeal. Effective June 7, 2005, the parties executed a settlement agreement whereby the Company paid $10,000 in exchange for a release of all claims and dismissal of the plaintiffs' appeal. Item 2. Changes in Securities. No unregistered securities were issued by Amexdrug during the three month period ended June 30, 2005. For information concerning unregistered securities issued by Amexdrug in the three months ended March 31, 2005, see Amexdrug's quarterly report on Form 10-QSB for the three months ended March 31, 2005. 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. On July 22, 2005, Amexdrug's wholly-owned subsidiary, Allied Med, Inc., entered into an agreement with Prakash "Mike" Charu to acquire all the business assets and shares of stock of Dermagen, Inc., a California corporation ("Dermagen") for $120,000 cash. Mr. Charu and Muhammad Majeed are the only shareholders of Dermagen. Mr. Charu executed the agreement on behalf of both shareholders. Related escrow instructions were signed by the parties on August 5, 2005. -13- A copy of the Offer to Purchase Business and Stock dated July 22, 2005 is attached to this report as Exhibit 10.1. The agreement is subject to certain contingencies, including an appraisal for not less than the purchase price. It is anticipated that the agreement will be amended prior to closing so that Dermagen will become a direct subsidiary of Amexdrug. Dermagen has a US-FDA registered and state FDA approved facility licensed to manufacture certain pharmaceutical products, medical devices and cosmetic products. Dermagen has been owned and operated by pharmacists for over 10 years. Dermagen can provide complete development services including design, risk analysis, qualification of raw material vendors, complete set of specifications, and prepare stability data. Its staff has over 30 years of experience in product development, pilot batches, commercial production and distribution for large leading international companies. Dermagen's clientele include companies outsourcing liquid pharmaceuticals, diagnostics, biotech products, oral liquids, topical products, sport drinks, ethnic topical preparations, and respiratory therapies. Contract services range from blending, filling, packaging, repacking, and kit assembly. Dermagen's facility is equipped to fill products in metal, multi-layer, or plastic tubes; plastic, glass and special designed containers with closure features. Dermagen dispenses formulae prescribed by doctors that include topical and oral products with herbs and botanical extracts. These specially formulated products comprehend non-commercial concentration or combination of active drugs, extemporaneous preparations, patient customized formulations, etc. Dermagen stainless steel compounding and holding tanks feature DCI and other major brands jacketed reactors with dual mixing & scrapers, sanitary connection, and sanitary pump assisted transfer system. Dermagen's water system complies with USP Purified Water requirements and Dermagen offers a wide selection of final product filtration and microenvironment possibilities to protect the filling operation. Dermagen can deliver concentrate in bulk or as final. Dermagen is well equipped to formulate, compound, fill and pack topical cream, lotion and ointment; oral liquids and nutrition supplements containing herbal extracts. Research and Development Department of Dermagen- Board of Directors and Advisory Board of Chemists and Pharmacists include the following personnel: Management- Board of Directors * President- Mike Charu, MS; R. Ph. * Operations Manager - Valentin Baltazar Advisory Board -14- * M. Majeed, Ph.D. * F. H. Boehm, III Ph. D. * Jasbir Dhanjal, MSc. * Charles F. Lustick, R. Ph. * Humberto Zardo, B.S. Ind. Pharm., MSc. Board of Directors - ------------------ President - Mike Charu Mr. Charu has over 30 years of experience in the dermatology field. Before starting Dermagen, he was the Senior Scientist of Products Development at Herbert Labs, a division of SmithKline Beecham, and previously worked for Boots Drugs Company of England. He holds a Master Degree in industrial pharmacy from Long Island University in New York. In addition, Mr Charu is a Registered Pharmacist in New York. Also, he received High Honors for works with natural products, and is the author of US-Patent No.5,914,334 "Stable gel formulation for topical treatment of skin conditions" (22 JUN 1999). Operations Manager - Valentin Baltazar Mr. Baltazar has over 15 years of experience in managing dermatology and cosmetic operations. Before joining Dermagen, he was the Production Manager for Hearth Science. Advisory Board - -------------- M. Majeed, Ph.D. Dr. Majeed received his Ph. D. in Pharmaceutics from St. Johns University, New York. He is the co-founder of Dermagen and is considered a "guru" of herbal products. Dr. Majeed is the author of several US Patents on bioavailability enhancers, bioprotectants, and nutritional products (5,536,506 (16 JUL 2996); 5,744,161 ( 28 APR 1998); 5,783,603 ( 21 JUL 1998); 5,804,596 (08 Sep 1998); 5,861,415 (19 JAN 1999); and 5,972,382 (26 OCT 1999). He also has European/World Patents published, and Patents pending on Tetrahydrocurcinoids, Boswellin?, Berberine, and Citrin? K. F. H. Boehm, III Ph. D. Dr. Boehm has over 20 years of experience in managing marketing studies and product introduction in the pharmaceutical, OTC and nutraceuticals fields. Jasbir Dhanjal, MSc. Mr. Dhanjal is the Vice President of Operations of K C Pharmaceuticals, California - USA. He has over 30 years of progressive management responsibilities within the pharmaceutical industry, including Director of Operations for Herbert Labs, a division of SmithKline Beecham. Mr. Dhanjal has also provided technical assistance for health care projects in Argentina, Brazil, Canada, China, Colombia, Indonesia, Ireland, Mexico, New Zealand, Puerto Rico and Thailand. He holds degrees in Biology and Chemistry. -15- Charles F. Lustick, R. Ph. Mr. Lustick has over 20 years of practicing pharmacy and is a well respected professional in this field. He has intimate contact with patients and coordinates the development of new products. Through his practice he gained significant experience on how natural products actual work on patients. Humberto Zardo, B.S. Ind. Pharm., MSc. Mr. Zardo is an independent consultant in International Pharmaceutical Development to private and public organizations within the health care business. His previous jobs in the industry include Technical Director for the Program for Appropriate Technology in Heath, Seattle, WA - USA and Director of Operations for Allergan (Brazil and International). Mr. Zardo has contributed to the success of more than 25 health care organizations in over 20 different countries. He holds a degree and Industrial Pharmacy and post-graduation (Masters) in Biotechnology. The current owners and the Board of Advisors will continue in their capacities with Dermagen. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit Number Description ------- ----------- 10.1 Offer to Purchase Business and Stock of Dermagen, Inc. dated July 22, 2005 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 June 30, 2005. -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 9, 2005 By: /s/ Jack Amin --------------------------- Jack Amin Director, President, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer -17- EX-10.1 2 amexdrug10qsb063005ex10-1.txt EXHIBIT 10.1 OFFER TO PURCHASE BUSINESS AND STOCK ------------------------------------ ALLIED MED INC., Oregon corporation ("Buyer") offers to purchase all shares and business assets including but not limited to, equipment, inventory, customer lists, and books and records of DERMAGEN, INC., a California corporation, from Praku "Mike" Charu represents 100% shareholders ("Seller") on the following terms: 1. Sale to be through Escrow. Parties to open escrow with a recognized reputable business escrow company in Los Angeles or Orange County. Customary escrow instructions to be signed in accordance with the terms of this Agreement, Escrow to close 30 days from opening, parties to split escrow fees equally; 2. Price to be One Hundred Twenty Thousand Dollars $120,000.00 payable at close of escrow less escrow fees and any approved adjustments. 3. Contingencies. Sale and close of escrow subject to Buyer's written approval of the following contingencies (time computed from date Escrow is opened). Seller to cooperate with Buyer's inspection and appraiser, Buyer to pay inspection and appraisal costs: a. Inspection of Dermagen's Books, Records and licenses - 21 days; b. Inspection of Dermagen's physical plant, inventory and equipment - 21 days; c. Appraisal of assets to be transferred by reputable independent business appraiser - Appraisal must be not less than purchase price - 28 days. 4. Seller to deliver all assets/shares free and clear of liens, loans, claims and debts. All licenses and permits to be current. Bulk Sale Notice requirements to be complied with at Seller's expense. All applicable taxes, insurance, rent and employee salaries to be prorated to close of escrow. 5. Notices. Approvals/Notices to be sent to the parties by fax and US mail at the following address: Buyer: Fax 310-855-0477, 369 S. Doheny Dr. #326, Beverly Hills, CA 90211. Seller: Fax 714-283-1165, 445 S. Peralta Hills Dr., Anaheim, CA 92807. ALLIED MED, INC. /s/Jack Amin /s/ Prakash Charu - ----------------------------- ----------------------------------- Authorized Signature Prakash "Mike" Charu 7/22/2005 7/22/05 EX-31.1 3 amexdrug10qsb063005ex31-1.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. Date: August 9, 2005 /s/ Jack Amin ---------------------------------- Jack Amin, Chief Executive Officer EX-31.2 4 amexdrug10qsb063005ex31-2.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. Date: August 9, 2005 /s/ Jack Amin ---------------------------------- Jack Amin, Chief Financial Officer EX-32.1 5 amexdrug10qsb063005ex32-1.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 June 30, 2005, 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 August 9, 2005 EX-32.2 6 amexdrug10qsb063005ex32-2.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 June 30, 2005, 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 August 9, 2005 -----END PRIVACY-ENHANCED MESSAGE-----