S-3

As filed with the Securities and Exchange Commission on             , 2004 Registration No. 333-            

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM S-3

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

DRUGMAX, INC.

(Exact name of registrant as specified in its charter)

NEVADA	5122	34-1755390
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

25400 US Highway 19 North, Suite 137

Clearwater, FL 33763

(727) 533-0431

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Jugal K. Taneja

Chairman and Chief Executive Officer

DrugMax, Inc.

25400 US Highway 19 North, Suite 137

Clearwater, FL 33763

(727) 533-0431

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a Copy to:

Shumaker, Loop & Kendrick, LLP

101 E. Kennedy Blvd., Suite 2800

Tampa, Florida 33602

Attention: Gregory C. Yadley, Esq.

Approximate date of commencement of proposed sale to the public:    From time to time after the effective date of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. ¨

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit (1)		Proposed Maximum Aggregate Offering Price		Amount of Registration Fee
Common Stock, par value $.001 per share	1,000,000	$	4.29	$	4,290,000	$	543.54

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act based on the average of the high and low prices for common stock of DrugMax, Inc. as reported on the Nasdaq SmallCap Market on April 27, 2004.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

PROSPECTUS

THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD TO YOU UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS SUBJECT TO COMPLETION, DATED             , 2004

DRUGMAX, INC.

1,000,000 SHARES OF COMMON STOCK

DrugMax, Inc. is registering 1,000,000 shares of its common stock for resale by the selling stockholders identified on page              of this prospectus. The shares may be offered through public or private transactions, at prevailing market prices or at privately negotiated prices. DrugMax will not receive any portion of the proceeds from the sale of these shares.

DrugMax’s common stock is quoted on the Nasdaq SmallCap Market under the symbol “DMAX.”

On             , 2004, the last reported closing price of the common stock on the Nasdaq SmallCap Market was $             per share.

Our principal executive offices are located at 25400 US Highway 19 North, Suite 137, Clearwater, Florida 33763, and our telephone number is (727) 533-0431.

YOU SHOULD CAREFULLY CONSIDER THE “RISK FACTORS” REFERENCED ON PAGES              IN DETERMINING WHETHER TO PURCHASE DRUGMAX COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is             , 2004.

TABLE OF CONTENTS

	PAGE
RECENT DEVELOPMENTS	1
RISK FACTORS	2
FORWARD-LOOKING STATEMENTS	10
OTHER INFORMATION	11
USE OF PROCEEDS	11
SELLING SECURITYHOLDERS	11
PLAN OF DISTRIBUTION	13
LEGAL MATTERS	13
EXPERTS	13
INCORPORATION OF DOCUMENTS BY REFERENCE	14
WHERE YOU CAN FIND MORE INFORMATION	14

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RECENT DEVELOPMENTS

On March 18, 2004, DrugMax sold 1,000,000 shares of its common stock in a private placement to accredited investors for $3.21 million. The expenses related to this offering approximated $360,000. Maxim Group LLC, a New York-based investment firm, acted as the placement agent for DrugMax in the private placement. Net proceeds will be used for working capital and general corporate purposes. The private placement was made under an exemption from the registration requirements of the Securities Act of 1933, as amended, and the investors purchasing shares in the private placement may not offer or sell the securities sold in the offering in the absence of an effective registration statement or exemption from registration requirements. DrugMax is filing the registration statement of which this prospectus is a part in order to register the resale of the shares sold in the private placement, as is required by the subscription agreements between the investors and DrugMax.

On March 19, 2004, DrugMax entered into an Agreement and Plan of Merger with Familymeds Group, Inc., a Connecticut Company (“FMG”), pursuant to which FMG would be merged with and into DrugMax, with DrugMax being the surviving company. The merger is subject to various closing conditions, including the approval of the merger by the stockholders of DrugMax and FMG and the obtainment of adequate financing, and there can be no assurance that the merger will be consummated. See, “Risk Factors.”

DrugMax’s special meeting of stockholders relating to the merger currently is scheduled to be held in late June, although this date is subject to change based upon various factors. DrugMax has filed a preliminary Proxy Statement on Schedule 14A with the Securities and Exchange Commission relating to the merger and other matters to be voted upon at the special meeting of stockholders.

FMG is a pharmacy chain with a strategy of locating pharmacies at or near a patient’s point of medical care. The company owns and operates more than 80 pharmacies in 14 states. Many of these pharmacies are located at or near the point of care between physicians and patients, many times inside or near medical office buildings. Across these distribution channels, FMG annually services over 400,000 acute and chronically ill patients, many with complex specialty and medical product needs. During 2003, revenues generated by FMG’s senior patient base accounted for over 58% of total revenues. FMG has a prescription compliance program called Reliable Refill and a discount plan called Senior Save15. The principal executive offices of FMG are located at 312 Farmington Avenue, Farmington, CT 06032, and its telephone number is (860) 676-1222.

If the merger is consummated, we expect that current DrugMax stockholders will, as a group, own approximately 40%, and FMG stockholders, employees and directors will, as a group, own approximately 60%, of the issued and outstanding shares of DrugMax immediately after the merger.

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RISK FACTORS

An investment in DrugMax involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained or incorporated by reference in this prospectus, before you decide to invest in DrugMax. If any of the following risks actually occur, our business, financial condition or results of operations would likely suffer. In this case, the market price of our common stock could decline, and you could lose all or part of your investment.

Risk Factors Relating to Proposed Merger

The combined company may fail to realize all of the anticipated benefits of the merger.

DrugMax intends to merge with Familymeds Group, Inc., who we will refer to in this prospectus as FMG. See “Recent Transactions.” The merger is significant to both companies and is expected to generate cost savings and expense reductions and to increase revenues. The expense reductions are intended to be achieved through purchasing efficiencies and by eliminating certain redundant costs. The revenue increases are intended to be achieved by increasing the number of products offered to customers and by expanding the combined company’s customer base through distribution directly to the growing managed care and alternate site markets and by taking advantage of the growing specialty prescription and generic pharmaceutical markets.

However, the merger is subject to various closing conditions, including stockholder approval, regulatory consents and financing, and there can be no assurance that the merger will be consummated. Further, even if consummated, the combined company may fail to realize some or all of the anticipated revenue opportunities, cost savings and other benefits of the transaction as a result of, among other things, vendor constraints, unanticipated costs, deterioration in the U.S. economy and other factors. In addition, the integration of FMG’s business and operations with those of DrugMax, including systems conversions, may take longer than anticipated, may be more costly than anticipated and may have unanticipated adverse results relating to FMG’s or DrugMax’s existing businesses or customer base.

The value of the combined company following the merger and the benefits of the merger principally depend on the successful integration of the two companies and the implementation of their business plan. There is little business precedent for the integration of a pharmaceutical wholesaler, such as DrugMax, and a retail pharmacy chain, such as FMG, and therefore, while management believes there are significant benefits to the merger, the combined company’s ability to capitalize on these opportunities is uncertain. There can be no assurance that management will be able to successfully integrate the companies. If the post-merger management fails to achieve the business plan or is delayed in doing so, the combined company’s results of operations and financial condition following the merger would be materially adversely affected.

DrugMax’s stock price may be volatile after the merger.

As recently as January 16, 2004, our common stock traded below $2.00. By the time we announced the merger with FMG on March 22, 2004, our price had risen to over $4.50. There can be no assurance that DrugMax’s stock price will remain near its recent highs. DrugMax’s ability to integrate FMG’s business, announcement of developments related to the combined company’s business after the merger, announcements by competitors, quarterly fluctuations in the company’s financial results and general economic conditions in the highly-competitive pharmaceutical industry in which the company will compete could cause the price of the our common stock to continue to fluctuate, perhaps substantially.

In addition to the resale of the 1,000,000 shares which we are registering in connection with this prospectus in connection with the merger, we agreed to register for resale the 11,480,507 shares issued for the FMG stock along with the shares of DrugMax owned by Jugal K. Taneja and William L. LaGamba, our CEO and COO, respectively. As a result of such registration, the holders of such shares may use the registrations to sell the shares publicly or privately, resulting in further downward pressure on the stock price. These factors and fluctuations could have a significantly harmful effect on the market price of our common stock after the merger.

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If not managed efficiently, DrugMax’s rapid growth may divert management’s attention from the operation of its business which could hinder its ability to operate successfully.

DrugMax’s growth has placed, and its anticipated continued growth (including as a result of the merger) will continue to place, significant demands on its managerial and operational resources. DrugMax’s failure to manage its growth efficiently may divert management’s attention from the operation of its business and render DrugMax unable to keep pace with its customers’ demands.

The combined company’s working capital and credit facilities may be insufficient.

DrugMax and FMG require substantial working capital to fund their operations. After the merger, the combined company may not be able to generate sufficient funds from operations to fund its business, in which case it may need to raise additional capital, including the issuance of debt or equity securities, the issuance of which may result in additional dilution to its stockholders. We cannot assure you that we will be able to raise additional capital in the future upon acceptable terms, if at all.

In anticipation of the merger, management expects to obtain a new credit facility, which will become effective immediately after the merger. The new credit facility will be an asset-based facility that provides a revolving line of credit of $60,000,000. It will be used to repay DrugMax’s and FMG’s current credit facilities, to pay certain merger transaction expenses and for future working capital of the surviving company.

While management presently believes that the new credit facility will be sufficient to allow the surviving company to integrate the businesses of FMG and DrugMax and to fund its business plan for the next 12 months, if the company fails to realize some or all of the anticipated revenue opportunities or cost savings and other benefits of the merger, or if the costs of the merger or the integration of the companies exceeds what is anticipated, the surviving company may need to seek alternate or additional financing. DrugMax’s future capital requirements will depend upon many factors, including, but not limited to:

• the cost of the merger and of integrating the businesses of DrugMax and FMG;

• the frequency with which DrugMax can make future acquisitions;

• the rate at which DrugMax can hire additional personnel;

• the rate at which DrugMax can expand the services that it offers; and

• the extent to which DrugMax can develop and upgrade its technology.

Because of these factors, the surviving company’s actual revenues and costs are uncertain and may vary considerably. These variations may significantly affect its future need for capital. The actual amount and timing of the company’s future capital requirements may differ materially from its estimates. In particular, DrugMax’s estimates may be inaccurate as a result of changes and fluctuations in its revenues, operating costs and development expenses. DrugMax’s actual financing needs will depend on the amount of post-merger operating losses, development expenses, working capital needs and other factors. Adequate funds may not be available when needed or may not be available on favorable terms. If adequate financing is not raised, DrugMax may not be able to execute its business plan and the post-merger financial condition and results of operations of the combined company may be materially adversely affected.

The synergies anticipated from the merger may not be sufficient to overcome the pressures on our revenues and profit margins.

Over the past decade, participants in the wholesale pharmaceutical distribution industry have experienced declining gross and operating margin percentages. Prior to the merger, our gross margin percentage decreased from approximately 3.11% in 2001 to approximately 2.77% in 2002. In addition, brand name drug manufacturers recently have started to require drug wholesalers to reduce or eliminate forward buying, which may result in further downward pressure on the combined company’s gross margins.

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As a result of these pressures, although we continue to distribute brand products as requested by our customers, beginning in fiscal 2003, we began to focus our efforts on higher-margin products, including generic and over-the-counter products. Additionally, from time-to-time, we seek to acquire additional complementary product lines, as we did with the acquisition of Avery and Infinity. As a result, our gross margin stabilized to approximately 2.78% for the year ended March 31, 2003. Our net profit margin, as a percentage of revenue, was 4.1% for the three months ended December 31, 2003, compared to 2.2% for the three months ended December 31, 2002, and our net profit margin, as a percentage of revenue, was 3.6% for the nine months ended December 31, 2003, compared to 2.8% for the nine months ended December 31, 2002.

In part because of this recent strategy of focusing on higher-margin products, during the nine-months ended December 31, 2003, DrugMax achieved a modest but positive net income. However, in turn, our revenues have significantly decreased. For the nine months ended December 31, 2003, our net income was approximately $8,400 on revenues of $171.1 million, compared to a net loss (including a write down of goodwill totaling $12.5 million) of approximately $12.9 million based on revenues of $222.1 million for the nine months ended December 31, 2002. In addition to management’s focus on higher-margin products and markets as summarized above, the decrease in revenues primarily resulted from the continued decrease in the number of special buy-in programs offered by our suppliers and the complaint filed against us by QK Healthcare. Management does not expect the number of special buy-in programs to materially increase in the near future. The QK Healthcare law suit relates to the sale by us to QK Healthcare of twenty bottles of allegedly counterfeit Lipitor, which we purchased from Alliance Wholesale Distributors.

The merger with FMG is intended to strengthen our revenues and profit margins. However, there can be no assurances that the combined company will be able to maintain or increase revenues and margins. Growth in higher-margin products requires significant marketing and sales efforts, which may not be successful. Low demand for higher-margin products could prevent the combined company from increasing its sales of these products, and increased competition in higher-margin products could reduce the margins on those products. Further, the cost of the merger may exceed what is anticipated and the combined company may not achieve the expected synergies related to the merger. In general, the profitability of wholesale distributors, including DrugMax, is largely dependent upon earning volume incentives, cash discounts and rebates from pharmaceutical manufacturers, and there can be no assurance that we will be able to sustain the recent upward trend in its profit margins.

Our profitability is also increasingly dependent on our ability to purchase inventory in advance of anticipated or known manufacturer price increases. Although investment buying opportunities may enable the combined company to increase its gross margin percentage when manufacturers increase prices, such buying requires subjective assessments of future price changes as well as significant working capital. If the combined company’s gross margin percentages decline significantly, or if our assessments of future price changes are incorrect, or if we do not have the necessary working capital to take advantage of buying opportunities, our profitability could be materially adversely affected.

The implementation of the combined company’s business plan is dependent upon the continued employment of its management team and attracting and retaining qualified pharmacists.

The combined company’s success will depend to a large extent on its executive management team, key employees and pharmacists. After the merger, it is expected that Edgardo A. Mercadante will become the combined company’s Co-Chairman and CEO, Dale Ribaudo will become the combined company’s CFO, Jugal Taneja will remain as Co-Chairman and William LaGamba will remain as President and COO of the combined company, and Ronald Patrick will remain as Chief Financial Officer of Valley Drug Company, a subsidiary of DrugMax. Although we intend to retain each of the these executive officers, it is possible that members of the surviving company’s management team may leave, and these departures could have a negative impact on our ability to implement the merger and the combined company’s business plan. The loss of any of these individuals, as well as certain other key employees and pharmacists, could have a material adverse effect on the combined

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company’s business, results of operations and financial condition. DrugMax generally does not carry life insurance policies on the lives of its key senior managers or key purchasing or sales personnel. With the exception of Mr. Mercadante, FMG does not have “key person” life insurance covering any of FMG’s employees. As is generally true in the industry, if any of our senior management or key personnel with an established reputation within the industry were to leave our employment, there can be no assurance that our customers or suppliers who have relationships with such person would not purchase products from such person’s new employer, rather than from us. Further, there is currently a national shortage of pharmacists. As a result, after the merger, the combined company may not be able to attract and retain an adequate number of pharmacists required in order to maintain FMG’s existing level of customer service.

The combined company’s business could be adversely affected if relations with any of DrugMax’s significant suppliers are terminated.

After the merger, FMG will increase its dependence on DrugMax for the supply of its pharmaceutical products. DrugMax’s ability to purchase pharmaceuticals, or to expand the scope of pharmaceuticals purchased, from a particular supplier is largely dependent upon such supplier’s assessment of DrugMax’s creditworthiness and DrugMax’s ability to resell the products it purchases. DrugMax is also dependent upon its suppliers’ continuing need for, and willingness to utilize, DrugMax’s services to help them manage their inventories. If DrugMax ceases to be able to purchase pharmaceuticals from any of its significant suppliers, such occurrence could have a material adverse effect on DrugMax’s business, results of operations and financial condition because many suppliers own exclusive patent rights and are the sole manufacturers of certain pharmaceuticals. If DrugMax becomes unable to purchase patented products from any such supplier, it could be required to purchase such products from other distributors on less favorable terms, and DrugMax’s profit margin on the sale of such products could be reduced or eliminated. Substantially all of DrugMax’s agreements with suppliers are terminable by either party upon short notice and without penalty.

Risk Factors Relating to FMG

If the merger is completed, FMG will merge with and into DrugMax. Accordingly, the surviving company will inherit the risks of FMG’s business, operations and industry, several of which are listed below.

FMG has a history of losses and negative cash flow.

FMG has incurred significant losses and negative cash flow in the past. Further, unless restructured in connection with the merger, FMG’s senior collateralized revolving credit facility will mature on August 31, 2004. These facts raise doubt about FMG’s ability to continue as a going concern. FMG’s auditor has issued a going concern opinion, in part as a result of its credit facility having a maturity date of less than one year. However, FMG believes a renewal of its existing credit facility beyond August 31, 2004 is likely. The merger presents synergies and other opportunities to improve FMG’s results significantly; however, FMG’s results will continue to be affected by the events and conditions both within and beyond its control, including the successful implementation of the combined company’s growth strategy, performance of FMG’s existing retail, mail order and online pharmacies, competition and economic, financial, business and other conditions. Familymeds Inc., FMG’s operating subsidiary, will become DrugMax’s subsidiary after the closing. If Familymeds, Inc. is unable to continue as a going concern, DrugMax will be unable to obtain the benefits of the merger and its working capital and financial condition will be materially negatively impacted. Further, as a result of the merger, if Familymeds, Inc. is unable to remain a going concern, DrugMax’s assets also will be exposed to FMG’s creditors.

FMG’s growth is dependent upon its ability to expand by acquiring more retail pharmacies.

We cannot ensure that FMG will be successful in its strategy to acquire or open more retail pharmacies. FMG faces competition from other chain drugstores in its attempt to locate and acquire additional pharmacies.

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Even if it is able to locate potential pharmacy targets, we do not know if it will be able to acquire or open these pharmacies on commercially reasonable terms. If FMG is not able to continue to expand by acquiring or opening more retail pharmacies, FMG’s ability to increase revenues will be diminished.

FMG’s success is dependent upon entering into and maintaining contracts with health insurers, managed care organizations and pharmacy benefit managers.

FMG derives a majority of its revenue from health insurers, managed care organizations and pharmacy benefit managers. FMG’s contracts with these organizations enable it to obtain reimbursement on behalf of FMG’s customers for the prescription products that they purchase at FMG’s pharmacies. However, we do not know if FMG will be successful in maintaining these contracts. If it is unable to maintain existing contracts or obtain additional contracts, FMG’s customers may not be able to obtain reimbursement for prescription products purchased at FMG’s retail, mail order and online pharmacies, which would decrease the demand for FMG’s services and products and impair FMG’s ability to retain and expand its customer base.

Competition in the pharmacy markets in which FMG competes is intense and could have a negative effect on the combined company’s earnings.

FMG, like DrugMax, conducts business in competitive markets, and we expect competition to intensify in the future. Increased competition may result in price reductions, reduced gross margins and loss of market share, any of which could harm the combined company’s earnings. FMG’s competitors, many of which have significantly greater financial, technical, marketing and other resources than FMG, include:

• Chain drugstores including CVS, Rite Aid and Walgreen’s;

• Mass marketers including Target and Wal-Mart;

• Warehouse clubs including BJ’s, Costco and Sam’s Club;

• Mail order prescription providers including Express Scripts and Medco;

• Online drugstores including drugstore.com; and

• Specialty medication providers including Accredo Health and Priority Healthcare.

In addition, FMG faces competition from online pharmacies outside the United States.

The demand for the combined company’s services and products is affected by regulatory and other changes in the health care industry.

Like DrugMax, FMG’s revenues from prescription drug sales may be affected by health care reform initiatives of federal and state governments, including proposals designed to significantly reduce spending on Medicare, Medicaid and other government programs. The demand for the combined company’s services and products may also be affected by changes in programs providing for reimbursement for the cost of prescription drugs by third party plans and regulatory changes relating to the approval process for prescription drugs. These initiatives could lead to the enactment of federal and state regulations that may adversely impact our prescription drug sales and, accordingly, our results of operations.

Managed care organizations are increasingly challenging the price and cost-effectiveness of medical products and services. While the combined company may be successful in continuing its contracts for insurance reimbursement, the efforts of managed care organizations to contain costs will likely place downward pressures on its gross margins from sales of prescription drugs. We cannot be certain that our products and services will be considered cost effective or that adequate managed care organization reimbursement will be available to enable it to maintain price levels sufficient to realize adequate profit margins on prescription drugs. Our failure to realize and maintain adequate profit margins on prescription drugs would adversely affect its operating results.

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The combined company’s operations are subject to extensive regulations and failure to comply with those regulations could result in severe penalties and damages.

FMG, like DrugMax, is subject to extensive federal, state and local licensing and registration laws and regulations with respect to its business, including its pharmacy and franchise operations and the pharmacists it employs. Regulations in these areas often involve subjective interpretation and we do not know if our attempts to comply with these regulations will be deemed sufficient by the appropriate regulatory agencies. We believe the combined company has satisfied its licensing and registration requirements and continues to actively monitor its compliance with these requirements. However, violations of any of these regulations could result in various penalties, including suspension or revocation of the combined company’s licenses or registrations, and seizure of its inventory or monetary fines, any of which could adversely affect our operations and damage our brand.

FMG, like DrugMax, also is subject to requirements under the Controlled Substances Act and Federal Drug Enforcement Agency regulations, as well as state and local laws and regulations related to FMG’s pharmacy operations such as registration, security, record keeping and reporting requirements related to the purchase, storage and dispensing of controlled substances, prescription drugs and certain over-the-counter drugs. Under the Food, Drug & Cosmetic Act of 1938, the distribution of adulterated or misbranded homeopathic remedies or other drugs is prohibited. Violations could result in substantial fines and other monetary penalties, seizure of the misbranded or adulterated items, and/or criminal sanctions. FMG also is required to comply with the Dietary Supplement Health and Education Act when selling dietary supplements and vitamins.

In addition, FMG’s pharmacy compounding services are subject to Food and Drug Administration regulation. The Food and Drug Administration also regulates drug advertising and promotion, including direct-to-patient advertising, done by or on behalf of manufacturers and marketers. If we expand FMG’s product and service offerings, more of FMG’s products and services will likely be subject to Food and Drug Administration regulation. Failure to comply with these regulations could result in significant penalties which may be material. FMG also is subject to federal statutes and state legislation that prohibit the offer, payment, solicitation, or receipt of any remuneration directly or indirectly in exchange for, or intended to induce, the referral of patients or the sale or purchase of services and supplies covered by certain governmental programs (Anti-Kickback Laws). It also is subject to the Ethics in Patient Referrals Act of 1989, commonly referred to as “Stark Law,” which prohibits the billing of federally-funded health care programs for certain health care services provided by entities with which the referring physician has certain financial arrangements. Violations of these laws are punishable by civil sanctions, including significant monetary penalties and exclusion from participation in the Medicare and Medicaid programs, and criminal sanctions in the case of the Anti-Kickback Law. Due to the breadth and complexity of these laws, there can be no assurance that FMG, any of its personnel, or any of its significant customers or business partners, will not become subject to sanctions that could have a material adverse effect on FMG’s business, financial condition and results of operations. Additionally, the sanctioning or exclusion of a manufacturer or recipient of FMG’s products or services, even for activities unrelated to us, could also have a material adverse effect on FMG’s business, financial condition and results of operations.

Pursuant to the Omnibus Budget and Reconciliation Act of 1990 and similar state and local laws and regulations, FMG’s pharmacists are required to offer counseling to FMG’s customers about medication, dosage, delivery systems, common side effects, adverse effects or interactions and therapeutic contraindications, proper storage, prescription refill and other information deemed significant by FMG’s pharmacists. In the event that FMG’s pharmacists or FMG’s mail order and online pharmacies provide erroneous or misleading information to its customers, FMG may be subject to liability or negative publicity that could have an adverse impact on its business. Although FMG carries general, professional and product liability insurance, FMG’s insurance may not cover potential claims of this type or may not be adequate to protect us from all liability that may be imposed.

The Health Insurance Portability and Accountability Act of 1996, and regulations promulgated thereunder (collectively “HIPAA”), require health care providers such as FMG to comply with specified standards for electronic billing and other transactions and to adopt and comply with policies and procedures to protect the security and privacy of an individual’s protected health information consistent with HIPAA requirements, and

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prohibit the use or dissemination of an individual’s protected health information without the individual’s consent. There are significant civil monetary and criminal penalties for failure to comply.

Although FMG does not offer franchises for sale at this time, in the case of renewing franchisees, FMG is subject to the disclosure requirements of the Federal Trade Commission and may be subject to pre-sale disclosure requirements and registration requirements of various state laws regulating the offer and sale of franchises. In addition, with respect to FMG’s existing franchisees, it also may be subject to certain state laws regulating the franchisor-franchisee relationship. Failure to comply with these regulations could result in substantial financial penalties.

FMG also is subject to laws governing its relationship with employees, including minimum wage requirements, overtime and working conditions. Increases in the federal minimum wage rate, employee benefit costs or other costs associated with employees could adversely affect FMG’s results of operations.

Other legislation being considered at the federal and state level could affect FMG’s business including state legislation related to the regulation of nonresident pharmacists.

The demand for FMG’s services and products at many of its retail pharmacies is dependent upon the continued operation of medical groups to which they are proximate.

A significant element of FMG’s business plan is operating retail pharmacies in or near medical buildings occupied by medical groups such as HMOs. Some of those buildings are occupied by only one medical group. In the event these medical groups or a significant number of physicians cease to operate in these locations, the demand for FMG’s services at these locations will likely decrease and may result in the closing of one or more of FMG’s pharmacies.

FMG may experience significant fluctuations in its operating results and rate of growth.

FMG’s revenue and operating profit growth depend on the continued growth of demand for its products and services. In addition, FMG’s business is affected by general economic and business conditions. A decrease in demand, may result in decreased revenue or growth. FMG’s revenues and operating results may vary significantly from quarter to quarter due to a number of factors, including:

• Its ability to retain and increase sales to existing customers;

• the quantity and mix of products FMG’s customers purchase;

• the extent to which FMG offers delivery, shipping or other promotional discounts to its customers;

• changes in FMG’s pricing policies or the pricing policies of FMG’s competitors;

• the extent of reimbursements available from third-party payors;

• FMG’s ability to acquire products, manage inventory and fulfill orders;

• disruptions in service by FMG’s vendors;

• timing and costs of upgrades and developments in FMG’s systems and infrastructure to support future growth;

• technical difficulties, system downtime or interruptions;

• the effects of strategic alliances, potential acquisitions and other business combinations, and FMG’s ability to successfully integrate them into FMG’s business; and

• changes in government regulation.

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Any errors in filling prescription drugs may expose FMG to liability and negative publicity.

Errors relating to prescriptions may produce liability for FMG that its insurance may not cover. FMG’s pharmacists are required by law to offer counseling, without additional charge, to FMG’s customers about medication, dosage, common side effects and other information deemed significant by the pharmacists. FMG’s pharmacists may have a duty to warn customers regarding any potential adverse effects of a prescription drug if the warning could reduce or negate such effects. Providing information on pharmaceutical and other products creates the potential for claims to be made against us for negligence, personal injury, wrongful death, product liability, malpractice, invasion of privacy or other legal theories based on FMG’s product or service offerings. FMG’s general liability, product liability and professional liability insurance may not cover potential claims of this type or may not be adequate to protect us from all liabilities that may be imposed if any such claims were to be successful.

FMG may be subject to product liability claims if people or property are harmed by the products it sells.

Like DrugMax, some of the products FMG sells may expose it to product liability claims relating to personal injury, death or property damage caused by such products and may require FMG to take actions such as product recalls. Any such product liability claim or product recall may result in adverse publicity regarding FMG and the products it sells. If FMG is found liable under product liability claims, it could be required to pay substantial monetary damages. Further, it could be forced to spend a substantial amount of money in litigation expenses, management time other resources to defend against these claims. As a result of these claims, whether or not FMG successfully defends them, its reputation could suffer, any of which could harm FMG’s business. Any imposition of product liability that is not covered by manufacturer indemnification or FMG’s insurance could harm FMG’s business, financial condition and operating results.

Additional Risk Factors Related to DrugMax.

In addition to those risk factors set forth in DrugMax’s Form 10-K for the year ended March 31, 2003, which is incorporated hereby by reference, you should consider the following:

DrugMax’s business could be adversely affected if relations with any of its significant suppliers are terminated.

DrugMax’s ability to purchase pharmaceuticals, or to expand the scope of pharmaceuticals purchased, from a particular supplier is largely dependent upon such supplier’s assessment of DrugMax’s creditworthiness and DrugMax’s ability to resell the products it purchases. DrugMax is also dependent upon its suppliers’ continuing need for, and willingness to utilize, DrugMax’s services to help them manage their inventories. If DrugMax ceases to be able to purchase pharmaceuticals from any of its significant suppliers, such occurrence could have a material adverse effect on DrugMax’s business, results of operations and financial condition because many suppliers own exclusive patent rights and are the sole manufacturers of certain pharmaceuticals. If DrugMax becomes unable to purchase patented products from any such supplier, it could be required to purchase such products from other distributors on less favorable terms, and DrugMax’s profit margin on the sale of such products could be reduced or eliminated. Substantially all of DrugMax’s agreements with suppliers are terminable by either party upon short notice and without penalty.

The loss of one or more of DrugMax’s largest customers or a significant decline in the level of purchases made by one or more of DrugMax’s largest customers could hurt DrugMax’s business by reducing DrugMax’s revenues and earnings.

As is customary in DrugMax’s industry, DrugMax’s customers are generally permitted to terminate DrugMax’s relationship or reduce purchasing levels on relatively short notice and without penalty. Termination of a relationship by a significant customer, such as QK Healthcare or Supreme Distributors, or a significant decline in the level of purchases made by a significant customer could have a material adverse effect on

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DrugMax’s business, results of operations and financial condition. Additionally, an adverse change in the financial condition of a significant customer, including an adverse change as a result of a change in governmental or private reimbursement programs, could have a material adverse effect on DrugMax’s ability to collect its receivables from the customer and the volume of its sales to the customer.

DrugMax’s markets are highly competitive and it may be unable to compete effectively.

The pharmaceutical and over-the-counter product industries are intensely competitive. To strategically respond to changes in the competitive environment, DrugMax may sometimes make pricing, service or marketing decisions or acquisitions that could materially hurt its business. DrugMax cannot guarantee that it can compete successfully against current and future competitors.

FORWARD-LOOKING STATEMENTS

Some of the statements in this prospectus and the documents incorporated herein by reference constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our business or our industry’s actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Such statements include, in particular, statements about our plans, strategies, prospects, changes and trends in our business and the markets in which we operate as described in this prospectus, the documents incorporated herein by reference and any supplement to this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “forecast,” “predict,” “propose,” “potential” or “continue” or the negative of those terms or other comparable terminology. These statements are only predictions.

Important factors that could cause actual results to differ materially from our forward-looking statements are set forth in the section of this prospectus entitled “Risk Factors” as well as in other documents that we subsequently incorporate by reference into this prospectus, and in the section entitled “Risk Factors” in any supplements to this prospectus. These factors are not intended to represent a complete list of the general or specific factors that may affect us. It should be recognized that other factors, including general economic factors and business strategies, may be significant, now or in the future, and the factors set forth in this prospectus may affect us to a greater extent than indicated. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth in this prospectus and in other documents that we subsequently incorporate by reference in this prospectus. Except as required by law, we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

We caution the reader that the risk factors contained in or incorporated into this prospectus may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time to time. Management cannot predict these new risk factors, nor can it assess the impact, if any, of these new risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those projected in any forward-looking statements. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results. In addition, management’s estimates of future operating results are based on our current business, which is constantly subject to change.

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OTHER INFORMATION

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The selling stockholders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.

USE OF PROCEEDS

We will not receive any proceeds from the sale of the shares of common stock offered by the selling stockholders under this prospectus.

SELLING SECURITY HOLDERS

The selling stockholders acquired 1,000,000 shares, in the aggregate, of our common stock in a private placement on March 17, 2004, at a price of $3.21 per share. The aggregate purchase price for these shares of common stock was $3,210,000. The closing bid price for the shares of our common stock on March 16, 2004, the last trading day immediately preceding the closing of the private placement, was $5.09.

Maxim Group LLC acted as placement agent in connection with the private placement, and as compensation for its services, we paid Maxim Group LLC $256,800 and reimbursed it for $10,000 of expenses and fees incurred, and additionally, we paid approximately $100,000 in other expenses in connection with the private placement.

In connection with the private placement, we entered into a subscription agreement with each selling stockholder. These subscription agreements require us to file a registration statement covering the resale of all of the shares of common stock issued to the selling stockholders in the private placement no later than the earlier of (i) 10 days following the date that we filed our preliminary proxy statement related to our merger with Familymeds Group, Inc., a Connecticut company, and (ii) June 15, 2004. Failure to meet this deadline requires us to pay the selling stockholders $32,100 in the aggregate. In addition, we are required to use commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days of the filing of the registration statement.

We have filed the registration statement of which this prospectus is a part to register the resale of the shares issued to the selling stockholders in the private placement in compliance with the foregoing subscription agreements.

We are required to keep the registration effective until the later of the date (i) the selling stockholders have distributed all of the shares subject to this prospectus and (ii) the selling stockholders’ common stock becomes eligible for sale pursuant to Rule 144 under the Securities Act of 1933. We have agreed to pay all registration expenses in connection with the registration. However, the selling stockholders are required to pay all selling expenses relating to the sale of their shares of DrugMax common stock.

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Ownership Table

The table below sets forth other information regarding the beneficial ownership of common stock by the selling stockholders. The second column lists the number of shares of common stock beneficially owned by the selling stockholders as of             , 2004. The third column lists the shares of common stock being offered by this prospectus by the selling stockholders. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to outstanding voting securities, as well as any voting securities which the person has the right to acquire within 60 days, through the conversion or exercise of any security or other right. The information as to the number of shares of our common stock owned by each selling security holder is based upon our books and records and the information provided by our transfer agent.

We may amend or supplement this Prospectus, from time to time, to update the disclosures set forth in the following table. Because the selling stockholders identified in the table may sell some or all of the shares owned by them which are included in this Prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of any of the shares, no estimate can be given as to the number of shares available for resale hereby that will be held by the selling stockholders upon termination of this offering. Therefore, we have assumed for the purposes of the following table that the selling stockholders will sell all of the shares owned beneficially by them, which are covered by this Prospectus, but will not sell any other shares of our common stock, if any, that they presently own.

NAME OF SELLING SECURITY HOLDER (1)	NUMBER SHARES BENEFICIALLY OWNED BEFORE OFFERING	MAXIMUM NUMBER OF SHARES TO BE SOLD PURSUANT TO THIS OFFERING	NUMBER OF SHARES OWNED AFTER OFFERING
Grossman Family Trust	31,153	31,153	0
Gerald W. Shike	31,153	31,153	0
Wayne Saker	15,576	15,576	0
Donald Asher Family Trust dated 7/11/01	31,153	31,153	0
Heritage Bank & Trust	165,000	165,000	0
Visana Versicherungen AG	250,000	250,000	0
Sujata Sachdeva	15,576	15,576	0
Judith Barclay	77,882	77,882	0
David L. Sparks	44,334	44,334	0
Thaddeus J. Derynda	31,153	31,153	0
Paragon Pkg. Inc.	31,153	31,153	0
Hare & Co. Nominee for Vereins-Und Westbank	50,000	50,000	0
Rajoo B. Sharma	15,576	15,576	0
John Viney	15,576	15,576	0
Bart Halpern Inc. Defined Benefit Pension Plan	31,153	31,153	0
The Russell Family Investments LP	37,383	37,383	0
Todd Hill Trust	10,280	10,280	0
Michelle Jaigobind	13,181	13,181	0
Prem C. Chatpar	31,153	31,153	0
Leo Long	24,836	24,836	0
Jerold and Lilli Weinger	46,729	46,729	0

(1) The selling stockholders purchased the shares being offered under this prospectus in the ordinary course of business, and at the time of the purchase, the selling stockholders had no agreements or understandings, directly or indirectly, with any person to distribute these shares.

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PLAN OF DISTRIBUTION

We are registering the shares of common stock issued to the selling stockholders to permit the resale of these shares of common stock by the holders of the common stock from time to time after the date of this prospectus.

The selling stockholders may sell all or a portion of the common stock offered under this prospectus from time to time directly or through one or more underwriters, broker-dealers or agents. If the common stock is sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. The selling stockholders may use any one or more of the following methods when selling shares:

• ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

• block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

• purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

• an exchange distribution in accordance with the rules of the applicable exchange;

• privately negotiated transactions;

• broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

• through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

• a combination of any such methods of sale; or

• any other method permitted pursuant to applicable law.

The selling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, if available, rather than under this Prospectus. Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933. The selling stockholders have informed us that there are no agreements or understandings, directly or indirectly, with any person to distribute the Common Stock.

LEGAL MATTERS

Shumaker, Loop & Kendrick, LLP will review the validity of the common stock offered by this prospectus. Shumaker, Loop & Kendrick, LLP is located at 101 E. Kennedy Blvd., Suite 2800, Tampa, Florida 33602.

EXPERTS

The consolidated financial statements and the related financial statement schedules of DrugMax and its subsidiaries as of March 31, 2003, and for the year ended March 31, 2003, incorporated in this proxy by

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reference to DrugMax’s Annual Report on Form 10-K for the year ended March 31, 2003, have been audited by BDO Seidman, LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

The consolidated financial statements and the related financial statement schedule of DrugMax and its subsidiaries as of March 31, 2002 and for the years ended March 31, 2002 and 2001, incorporated in this proxy by reference to DrugMax’s Annual Report on Form 10-K for the year ended March 31, 2003, have been audited by Deloitte & Touche LLP, independent auditors, given on the authority of said firm as experts in auditing and accounting.

INCORPORATION OF DOCUMENTS BY REFERENCE

The Commission allows us to “incorporate by reference” in this prospectus reports that we file with them, which means that we can disclose important information to you by referring you to those reports. Accordingly, we are incorporating by reference in this prospectus the documents listed below and any future filings we make with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934:

(1) our Annual Report on Form 10-K for the fiscal year ended March 31, 2003, filed with the Commission on July 15, 2003, and amended on Form 10-K/A filed with the Commission on July 29, 2003;

(2) our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 2003, September 30, 2003 and December 31, 2003, filed with the Commission on August 14, 2003, November 14, 2003, February 17, 2004, respectively;

(3) the description of our shares contained in our Registration Statement on Form SB-2, filed November 1, 2000, File No. 0-24362; and

(4) all other reports we filed pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, since the end of the fiscal year covered by our Annual Report on Form 10-K for the fiscal year ended March 31, 2003.

The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information contained directly in this prospectus. Any information that we file later with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 will automatically update and supersede this information.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission under the Securities Exchange Act of 1934. You may read and copy any of those reports, proxy statements or other documents at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549. Please call the Commission at 1-800-SEC-0330 for further information on its public reference facilities. These filings are also available to the public from commercial document retrieval services and at the Commission’s Web site at www.sec.gov. You may also read and copy our annual and quarterly reports from our website at www.drugmax.com.

Our common stock is quoted on the Nasdaq SmallCap Market. Reports, proxy statements and other information concerning DrugMax that we file with Nasdaq can be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. In addition, we maintain a website at www.drugmax.com that contains additional information, including news releases, about our business and operations. Information contained in this website does not constitute, and shall not be deemed to constitute, part of this prospectus.

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You may also request a copy of any of our filings with the Commission, or any of the agreements or other documents that constitute exhibits to those filings, at no cost, by writing or telephoning us at the following address or phone number:

DrugMax, Inc.

25400 US Highway 19 North, Suite 137

Clearwater, FL 33763

(727) 533-0431

Attn: William L. LaGamba, Corporate Secretary

This prospectus constitutes a part of a registration statement on Form S-3 filed by us with the Commission under the Securities Act. This prospectus does not contain all the information that is contained in the registration statement, some of which we are allowed to omit under the rules and regulations of the Commission. We refer to the registration statement and to the exhibits filed with the registration statement for further information with respect to DrugMax. Copies of the registration statement and the exhibits to the registration statement are on file at the offices of the Commission and may be obtained upon payment of the prescribed fee or may be examined without charge at the public reference facilities of the Commission described above. Statements contained in this prospectus concerning the provisions of documents are summaries of the material provisions of those documents, and each of those statements is qualified in its entirety by reference to the copy of the applicable document filed with the Commission. Since this prospectus may not contain all of the information that you may find important, you should review the full text of these documents.

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated costs and expenses, other than underwriting discounts and commissions, all of which are payable by DrugMax (the “Registrant”), in connection with the sale of the common stock being offered by the selling stockholders.

SEC registration fee	$
Legal fees and expenses	$	.00
Accounting fees and expenses	$	.00
Printing expenses	$	.00
Miscellaneous	$	.00
Total	$	.00

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 78.7502 of the Nevada General Corporation Law provides that:

1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he:

(a) Is not liable pursuant to Section 78.138 of the Nevada General Corporation Law; or

(b) Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:

(a) Is not liable pursuant to Section 78.138; or

(b) Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation.

Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

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3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.

Section 78.138 of the Nevada General Corporation Law provides, in part, that:

1. Directors and officers shall exercise their powers in good faith and with a view to the interests of the corporation.; and

2. A director or officer is not individually liable to the corporation or its stockholders for any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that:

(a) His act or failure to act constituted a breach of his fiduciary duties as a director or officer; and

(b) His breach of those duties involved intentional misconduct, fraud or a knowing violation of law.

Further, DrugMax’s amended and restated articles of incorporation limit the personal liability for a breach of duty as a director of each member on its board of directors to DrugMax and its stockholders to the amount of compensation, if any, received by the director for serving DrugMax as a director during the year in which the breach of duty occurred. Further, the amended and restated articles of incorporation provide for mandatory indemnification by DrugMax of its directors and officers and permissive indemnification of its employees and agents.

DrugMax maintains directors’ and officers’ liability insurance for all its directors and officers. Further, we may enter into indemnification agreements with its directors and executive officers.

ITEM 16. EXHIBITS

EXHIBIT NUMBER	EXHIBIT DESCRIPTION
4.1	Form of Subscription Agreement dated as of March 17, 2004, between DrugMax and each of the selling stockholders.
5.1	Opinion of Shumaker, Loop & Kendrick, LLP with respect to the validity of the securities being offered.
23.1	Consent of Shumaker, Loop & Kendrick, LLP (included in Exhibit 5.1).
23.2	Consent of BDO Seidman, LLP, independent accountants.
23.3	Consent of Deloitte & Touche LLP, independent accountants.*
24	Power of Attorney (included on the signature page of this registration statement).

* To be filed by amendment.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(a) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

(b) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the

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aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(c) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (1)(a) and (1)(b) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of this offering.

(4) That, for purposes of determining any liability under the Securities Act, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described under Item 15, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Clearwater, Florida on April 29, 2004.

DRUGMAX, INC.
By:	/s/    JUGAL K. TANEJA
	Name: Jugal K. Taneja Title: Chief Executive Officer

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POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose name appears below hereby constitutes and appoints each of Jugal K. Taneja and William L. LaGamba, or either of them, each acting alone, such person’s true and lawful attorney-in-fact, with full power of substitution to sign for such person and in such person’s name and capacity indicated below, in connection with this Registrant’s registration statement on Form S-3, including to sign this registration statement and any and all amendments to this registration statement, including Post-Effective Amendments, and to file the same with the Securities and Exchange Commission, hereby ratifying and confirming such person’s signature as it may be signed by said attorneys-in-fact to any and all amendments.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities indicated on this 29^th day of April, 2004.

Name	Title	Date
/s/    JUGAL K. TANEJA         Jugal K. Taneja	Chairman of the Board, Chief Executive Officer and Director	April 29, 2004

/s/    WILLIAM L. LAGAMBA         William L. LaGamba President, Chief Operating Officer and Director April 29, 2004

/s/    RONALD J. PATRICK         Ronald J. Patrick Chief Financial Officer and Director April 29, 2004

/s/    HOWARD L. HOWELL, DDS         Howard L. Howell, DDS Director April 29, 2004

/s/    ROBERT G. LOUGHREY         Robert G. Loughrey Director April 29, 2004

/s/    MARTIN SPERBER         Martin Sperber Director April 29, 2004

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EXHIBIT INDEX

EXHIBIT NUMBER	EXHIBIT DESCRIPTION
4.1	Form of Subscription Agreement dated as of March 17, 2004, between DrugMax and each of the selling stockholders.
5.1	Opinion of Shumaker, Loop & Kendrick, LLP with respect to the validity of the securities being offered.
23.1	Consent of Shumaker, Loop & Kendrick, LLP (included in Exhibit 5.1).
23.2	Consent of BDO Seidman, LLP, independent accountants.
24	Power of Attorney (included on the signature page of this registration statement).

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EX-4.1

Exhibit 4.1

Form of Subscription Agreement

SUBSCRIPTION AGREEMENT (this “Agreement”) made as of the date set forth on the signature page hereof between DrugMax, Inc., a Nevada corporation having a place of business at 25400 U.S. Highway 19 North, Suite 137, Clearwater, Florida 33763 (the “Company”) and the undersigned (the “Subscriber”).

W I T N E S S E T H:

WHEREAS, the Company is offering (the “Offering”) to a limited number of “accredited investors” as that term is defined by Rule 501(a) of Regulation D of the Securities Act of 1933, as amended (the “Act”), 1,000,000 shares of its common stock, par value $.001 per share (“Common Stock”), at a price per share equal to $3.21 (the “Offering Price”). The term “Shares” as used herein means the shares of Common Stock sold in the Offering;

WHEREAS, the Subscriber desires to purchase that number of Shares set forth on the signature page hereof on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the promises and the mutual representations and covenants hereinafter set forth, the parties hereto do hereby agree as follows:

I. SUBSCRIPTION FOR COMMON STOCK AND REPRESENTATIONS BY SUBSCRIBER

1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such number of shares of Common Stock and the Company agrees to sell such number of shares of Common Stock to the Subscriber as is set forth upon the signature page hereof at the Offering Price. The Offering Price is payable in immediately available funds by cashier’s check or money order made payable to Shumaker, Loop & Kendrick, LLP, (the “Escrow Agent,”) contemporaneously with the execution and delivery of this Agreement and Exhibit A by the Subscriber. Subscribers may also pay by wire transfer of immediately available funds to:

Shumaker, Loop & Kendrick, LLP

Send to: Northern Trust Bank

425 North Florida Avenue

Tampa, FL 33602

(813) 277-0900

ABA# 066009650

Shumaker, Loop & Kendrick, LLP IOTA Account

Account # 7510000146

Please request immediate credit of funds (Type Code 12).

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The certificates representing the Shares will be delivered by the Company within 10 days following the Closing of the Offering as set forth in Article III hereof.

1.2 The Subscriber recognizes that the purchase of the Shares involves a high degree of risk including, but not limited to, the following: (i) an investment in the Company is highly speculative, and only investors who can afford the loss of their entire investment should consider investing in the Company and the Shares; (ii) the Subscriber may not be able to liquidate his/its investment; (iii) transferability of the Shares is extremely limited; (iv) in the event of a disposition of the Shares, the Subscriber could sustain the loss of his/its entire investment; (v) the Company has not paid any dividends on its Common Stock since inception and does not anticipate the payment of dividends in the foreseeable future and (vi) the uncertainty related to the Merger (as defined below).

1.3 The Company has executed a letter of intent, in the form attached hereto as Exhibit A, regarding a possible merger (the “Merger”) of Familymeds, Inc., a private pharmacy chain based in Farmington, CT (“Familymeds”), with and into the Company. The parties are still in the preliminary stages of negotiating the proposed Merger and there can be no assurances that the Merger will be consummated. Both parties are currently conducting due diligence. The transaction is subject to various contingencies, including the completion of the due diligence, both parties’ satisfaction with the results of such due diligence, the negotiation of a mutually acceptable merger agreement (which is still in the early, preliminary stages), financing, regulatory approval, third-party approvals, board approval and stockholder approval. There can be no assurances that the Merger will be consummated, nor can there be any certainty regarding the timing of the Merger. If consummated, the Merger will have a material impact on the Company, but the Company cannot currently predict whether that impact will be positive or negative. Although DMAX will be the surviving corporation in the merger, from an accounting perspective, the Company expects that Familymeds will be considered to be the acquiror. The combined company will be materially different from the Company as it presently operates. There can be no assurances with regard to how the market will react to the Merger, nor can the Company assure you that it will be able to integrate the operations of Familymeds or that the combined company will be successful after the Merger. The Company has never operated in the markets that Familymeds operates and the Company’s management has no experience operating in these markets. It is currently contemplated that in the Merger, Familymeds Group, Inc., Familymeds’ sole shareholder (“Group”), will receive shares equal to 65% of the shares of the Company outstanding after the merger, which means that it will unilaterally control the Company. If the Merger is not consummated, you will be acquiring an interest in the Company only (as currently operated), and the Company’s stock price may decrease in value to the extent that the market views the abandonment of the Merger as a negative factor. The Company cannot currently inform you as to the details of the merger agreement because it has not yet been negotiated, but the Company believes that Group may distribute a certain portion of the shares of the Company that it receives in the Merger to certain of its executive officers. Familymeds is a private company. You hereby represent to the Company that you have not received any information about Familymeds from the Company or any of its representatives or agents, including the Placement Agent (as defined below), and that, in making an investment decision with regard to your investment in the Company, you have relied solely on your own due diligence with regard to Familymeds and the Merger.

1.4 The Subscriber represents that the Subscriber is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Act, as indicated by the Subscriber’s responses to the questions contained in Article VII hereof, and that the Subscriber is able to bear the economic risk of an investment in the Company. If the Subscriber is a natural person, the Subscriber has reached the age of majority in the state or other jurisdiction in which the Subscriber resides, has adequate means of providing for the Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an

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investment in the Shares for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

1.5 The Subscriber hereby acknowledges and represents that (i) the Subscriber has prior investment experience, including investment in securities which are non-listed, unregistered and/or not traded on the Nasdaq National or SmallCap Market, a national stock exchange nor on the National Association of Securities Dealers, Inc. (the “NASD”) automated quotation system for actively traded stocks (“Nasdaq”), or the Subscriber has employed the services of an investment advisor, attorney and/or accountant to read all of the documents furnished or made available by the Company to the Subscriber and to all other prospective investors in the Shares and to evaluate the merits and risks of such an investment on the Subscriber’s behalf; (ii) the Subscriber recognizes the highly speculative nature of this investment; and (iii) the Subscriber is able to bear the economic risk which the Subscriber hereby assumes.

1.6 The Subscriber hereby acknowledges receipt and careful review of the following documents filed by the Company with the Securities and Exchange Commission (collectively, the “SEC Filings”): (a) Annual Report on Form 10-K for the year ended March 31, 2003 (the “10-K”); (b) Quarterly Reports on Form 10-Q for each of the quarters ended June 30, 2003, September 30, 2003 and December 31, 2003, respectively; (c) all Current Reports on Form 8-K filed after the filing of the 10-K and (d) the Company’s most recent definitive proxy materials. Subscriber further represents that the Subscriber has been furnished by the Company during the course of this transaction with all information regarding the Company which the Subscriber, its investment advisor, attorney and/or accountant has requested or desired to know, including information about the Merger, has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the Offering, the Company and the Merger, and has received any additional information which the Subscriber has requested. The SEC Filings, this Subscription Agreement and the Summary of Terms are collectively referred to herein as the “Offering Documents.”

1.7 (a) The Subscriber has relied solely upon the information provided by the Company and Subscriber’s own independent investigation in making the decision to invest in the Shares. The Subscriber is familiar with and understands the terms of the Offering, including the rights to which the Subscriber is entitled under this Agreement. The Subscriber has been furnished with and has carefully read the SEC Filings. In evaluating the suitability of an investment in the Company, the Subscriber has not relied upon any representation or other information (whether oral or written) from the Company, or any agent, employee or affiliate of the Company other than as set forth in the Offering Documents and the results of Subscriber’s own independent investigation. To the extent necessary, the Subscriber has retained, at his/its sole expense, and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement and the purchase of the Shares hereunder.

(b) The Subscriber represents that no Shares or other securities were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith the Subscriber did not: (A) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising.

1.8 The Subscriber hereby represents that the Subscriber, either by reason of the Subscriber’s business or financial experience or the business or financial experience of the Subscriber’s professional advisors, has the capacity to protect the Subscriber’s own interests in connection with the transaction

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contemplated hereby.

1.9 The Subscriber hereby acknowledges that the Offering has not been reviewed by the United States Securities and Exchange Commission (the “SEC” or the “Commission”) or any state securities regulatory authority or other governmental body or agency, since the Offering is intended to be exempt from the registration requirements of Section 5 of the Act pursuant to Regulation D promulgated under the Act. The Subscriber shall not sell or otherwise transfer the Shares unless such transfer is registered under the Act or unless an exemption from such registration is available. The Subscriber understands that if required by the laws or regulations of any applicable jurisdictions, the Offering contemplated hereby will be submitted to the appropriate authorities of such state(s) for registration or exemption therefrom.

1.10 The Subscriber understands that the Shares have not been registered under the Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon the Subscriber’s investment intention. In this connection, the Subscriber hereby represents that the Subscriber is purchasing the Shares for the Subscriber’s own account for investment purposes only and not with a view toward the resale or distribution to others and has no contract, undertaking, agreement or other arrangement, in existence or contemplated, to sell, pledge, assign or otherwise transfer the Shares to any other person. The Subscriber, if an entity, also represents that it was not formed for the purpose of purchasing the Shares.

1.11 The Subscriber understands that although there currently is a public market for the Company’s Common Stock, Rule 144 promulgated under the Act (“Rule 144”) requires, among other conditions, a one-year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Act. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register any of the Shares under the Act or any state securities or “blue sky” laws or assist the Subscriber in obtaining an exemption from various registration requirements, other than as set forth in Article V herein. The Subscriber agrees to hold the Company and its directors, officers, employees, controlling persons and agents and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of (i) any misrepresentation made by the Subscriber contained in this Agreement (including the Confidential Investor Questionnaire contained in Article VII herein), (ii) any sale or distribution by the Subscriber in violation of the Act or any applicable state securities or “blue sky” laws or (iii) any untrue statement of a material fact made by the Subscriber and contained herein.

1.12 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Shares substantially as set forth below, that such Shares have not been registered under the Act or any state securities or “blue sky” laws and setting forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Subscriber is aware that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of the Shares.

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR

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RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

1.13 The Subscriber agrees to supply the Company, within five (5) days after the Subscriber receives the request therefore from the Company, with such additional information concerning the Subscriber as the Company deems necessary or advisable.

1.14 The Subscriber hereby represents that the address of the Subscriber furnished by Subscriber on the signature page hereof is the Subscriber’s principal residence if Subscriber is an individual or its principal business address if it is a corporation or other entity.

1.15 The Subscriber represents that the Subscriber has full power and authority (corporate, statutory and otherwise) to execute, deliver, and perform this Agreement and to purchase the Shares. This Agreement constitutes the legal, valid and binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms.

1.16 If the Subscriber is a corporation, partnership, limited liability company, trust, employee benefit plan, individual retirement account, Keogh Plan, or other entity (a) it is authorized and qualified to become an investor in the Company and the person signing this Agreement on behalf of such entity has been duly authorized by such entity to do so and (b) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

1.17 The Subscriber acknowledges that if he or she is a Registered Representative of an NASD member firm, he or she must give such firm the notice required by the NASD Rules of Fair Practice, receipt of which must be acknowledged by such firm in Section 7.4 below.

1.18 The Subscriber acknowledges and agrees that it shall not be entitled to seek any remedies with respect to the Offering from any party other than the Company.

1.19 The Subscriber understands, acknowledges and agrees with the Company that this Subscription may be rejected, in whole or in part, by the Company, in the sole and absolute discretion of the Company, at any time before any Closing Date notwithstanding prior receipt by the Subscriber of notice of acceptance of the Subscriber’s Subscription.

1.20 The Subscriber understands, acknowledges and agrees with the Company that, except as otherwise set forth herein, the subscription hereunder is irrevocable by the Subscriber, that, except as required by law, the Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of the Subscriber hereunder and that this Agreement and such other agreements shall survive the death or disability of the Subscriber and shall be binding upon and inure to the benefit of the parties and their heirs, executors, administrators, successors, legal representatives and permitted assigns. If the Subscriber is more than one person, the obligations of the Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his/her heirs, executors, administrators, successors, legal representatives and permitted assigns.

1.21 The Subscriber understands, acknowledges and agrees with the Company that the Offering is intended to be exempt from registration under the Act by virtue of Section 4(2) of the Act and the provisions of Regulation D thereunder, and/or the provisions of Regulation S which is in part dependent upon

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the truth, completeness and accuracy of the statements made by the Subscriber.

1.22 The Subscriber understands, acknowledges and agrees with the Company that there can be no assurance that the Subscriber will be able to sell or dispose of the Shares. It is understood that in order not to jeopardize the Offering’s exempt status under Section 4(2) of the Act and Regulation D, as well as Regulation S, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder.

1.23 The Subscriber agrees that during the period from the date that Subscriber was first contacted with respect to the Offering through the last date upon which Subscriber holds any Shares, the Subscriber will not directly or indirectly, through related parties, affiliates or otherwise sell “short” or “short against the box” (as those terms are generally understood) any equity security of the Company.

1.24 The Subscriber has executed and delivered to the Company a Non-Disclosure Agreement dated as of             , 2004 (the “Non Disclosure Agreement”) and hereby acknowledges that the information contained in this Agreement or otherwise made available to the Subscriber in connection herewith is confidential and non-public and agrees that all such information shall be kept in confidence by the Subscriber and neither used by the Subscriber for the Subscriber’s personal benefit (other than in connection with this Subscription) nor disclosed to any third party for any reason, notwithstanding that a Subscriber’s subscription may not be accepted by the Company, except as provided in the Non Disclosure Agreement.

1.25 If the Subscriber is purchasing the Shares in a fiduciary capacity for another person or entity, including without limitation a corporation, partnership, trust or any other entity, the Subscriber represents that Subscriber has been duly authorized and empowered to execute this Agreement and all other subscription documents, and such other person fulfills all the requirements for purchase of the shares as such requirements are set forth herein, concurs in the purchase of the Shares and agrees to be bound by the obligations, representations, warranties and covenants contained herein. Upon request of the Company, the Subscriber will provide true, complete and current copies of all relevant documents creating the Subscriber, authorizing its investment in the Company and/or evidencing the satisfaction of the foregoing.

1.26 Subscriber represents that no authorization, approval, consent or license of any person is required to be obtained for the purchase of the Shares by the Subscriber, other than as have been obtained and are in full force and effect. Subscriber represents that the execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, result in any violation of or constitute a default under any material agreement or other instrument to which the Subscriber is a party or by which the Subscriber or any of its properties are bound, or to the best of the Subscriber’s knowledge, any permit, franchise, judgment, order, decree, statute, rule or regulation to which the Subscriber or any of its businesses or properties is subject.

1.27 Subscriber represents that the representations, warranties and agreements of the Subscriber contained herein, in the Registration Questionnaire attached hereto as Exhibit A (the “Registration Questionnaire”) and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on and as of the Closing Date of the sale of the Shares to the Subscriber as if made on and as of such date and shall survive the execution and delivery of this Agreement and the purchase of the Shares.

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II. REPRESENTATIONS BY AND COVENANTS OF THE COMPANY

The Company hereby represents, warrants and covenants to the Subscriber that:

2.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada and has full corporate power and authority to conduct its business as currently conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the property owned or leased by it or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or in good standing would not have, individually or in the aggregate, a material adverse effect on the business, operations, conditions (financial or otherwise), assets, results of operations or prospects of that entity individually or of the Company and its subsidiaries as a whole.

2.2 Capitalization. (a) The authorized capital stock of the Company consists of 24,000,000 shares of Common Stock and 2,000,000 shares of undesignated preferred stock. There are currently 7,178,976 shares of Common Stock outstanding, all of which are duly authorized, validly issued, fully paid and non-assessable, free of any liens or encumbrances and are not subject to preemptive rights. There are no shares of preferred stock outstanding. All of the securities issued by the Company have been issued in accordance with all applicable federal and state securities laws. Other than as set forth in the SEC Filings, or as contemplated in this Agreement, there are no other options, warrants, calls, rights, commitments or agreements of any character to which the Company is a party or by which either the Company or any of its subsidiaries is bound or obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of the capital stock of the Company or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement. There are no preemptive rights or rights of first refusal or similar rights which are binding on the Company permitting any person to subscribe for or purchase from the Company shares of its capital stock pursuant to any provision of law, the Company’s Certificate of Incorporation as in effect on the date hereof (the “Certificate of Incorporation”) or the Company’s By-laws, as in effect on the date hereof (the “By-laws”) or by agreement or otherwise. There are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Shares as described in this Agreement and the Summary of Terms. The Company has made available to the Placement Agent true and correct copies of the Company’s Certificate of Incorporation and the Company’s By-laws.

(b) The Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and non-assessable. Other than as described in the SEC Filings, no stockholder of the Company has any right to request or require the Company to register the sale of any shares owned by such stockholder under the Act. The sale of the Shares is subject to the approval of the Board of Directors of the Company. No further approval or authority of the stockholders of the Company will be required for the issuance and sale of the Shares to be sold by the Company as contemplated herein.

2.3 Authorization; Enforceability. The Company has all corporate right, power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. All corporate action on the part of the Company, its directors and stockholders necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of the Shares contemplated herein and the performance of the Company’s obligations hereunder has been taken. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to laws of

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general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies, and to limitations of public policy. The issuance and sale of the Shares contemplated hereby will not give rise to any preemptive rights or rights of first refusal on behalf of any person.

2.4 No Conflict; Governmental and Other Consents.

(a) The execution and delivery by the Company of this Agreement and the consummation of the transactions contemplated hereby will not result in the violation of any law, statute, rule, regulation, order, writ, injunction, judgment or decree of any court or governmental authority to or by which the Company or any subsidiary is bound, or of any provision of the Certificate of Incorporation or By-Laws of the Company or any subsidiary, and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute (with due notice or lapse of time or both) a default under, any lease, loan agreement, mortgage, security agreement, trust indenture or other agreement or instrument to which the Company or any subsidiary is a party or by which it is bound or to which any of its properties or assets is subject, nor result in the creation or imposition of any lien upon any of the properties or assets of the Company or any subsidiary.

(b) No consent, approval, authorization or other order of any governmental authority or other third-party is required to be obtained by the Company or any subsidiary in connection with the authorization, execution and delivery of this Agreement or with the authorization, issue and sale of the Shares, except such filings as may be required to be made with the Commission, the NASD and the Nasdaq and with any state or foreign blue sky or securities regulatory authority.

2.5 Litigation. Other than as described in the SEC Filings, there is no pending or, to the actual knowledge of any officer or director of the Company, after due investigation, threatened legal or governmental proceedings to which the Company is a party which could materially adversely affect the business, property, financial condition or operations of the Company or the Company’s ability to perform its obligations under this Agreement.

2.6 Accuracy of Offering Documents. All reports required to be filed by the Company within the two years prior to the date of this Agreement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), have been duly filed with the Commission, complied at the time of filing in all material respects with the requirements of their respective forms and the rules and regulations thereunder, except to the extent updated or superseded by any subsequently filed report, were complete and correct in all material respects as of the dates at which the information was furnished, and such reports did not contain (as of their respective dates) any untrue statements of a material fact nor omitted to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading except to the extent updated or superseded by any subsequently filed report.

2.7 Investment Company. The Company is not an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder.

2.8 Use of Proceeds. The Company intends to use the net proceeds of the Offering for general corporate purposes.

2.9 Intellectual Property. Except as set forth in the SEC Filings, the Company and/or its subsidiaries owns or possesses adequate and enforceable rights to use all material patents, patent applications,

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trademarks, service marks, trade names, logos, corporate names, copyrights, trade secrets, processes, mask works, licenses, inventions, formulations, technology and know-how and other intangible property used or proposed to be used in the conduct of its business as described in or contemplated by the SEC Filings (the “Proprietary Rights”). Except as set forth in the SEC Filings, the Company and/or its subsidiaries or the entities from whom the Company or such subsidiaries has acquired rights has taken all necessary action to protect all of the Company’s and such subsidiary’s Proprietary Rights. Except as set forth in the Offering Documents, neither the Company nor any of its subsidiaries has received any notice of, and there are not any facts known to the Company or any subsidiary which indicate the existence of (i) any infringement or misappropriation by any third party of any of the Proprietary Rights, (ii) any claim by a third party contesting the validity of any of the Proprietary Rights or (iii) any infringement, misappropriation or violation by the Company or any subsidiary or any of their employees of any Proprietary Rights of third parties. To the best of the Company’s knowledge, neither the Company nor any subsidiary nor any of their employees has infringed, misappropriated or otherwise violated any Proprietary Rights of any third parties. To the Company’s knowledge, no infringement, illicit copying, misappropriation or violation of any intellectual property rights of any third party has occurred or will occur with respect to any products currently being sold by the Company or any subsidiary or with respect to any products currently under development by the Company or any subsidiary or with respect to the conduct of the business of the Company or any subsidiary as currently contemplated. Except as set forth in the SEC Filings, the Company is not aware that any of its employees, including the employees of its subsidiaries are obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of the employee’s best efforts to promote the interests of the Company and/or its subsidiaries or that would conflict with the business of the Company and/or its subsidiaries as currently conducted or as proposed to be conducted. To the Company’s knowledge, neither the execution and delivery of this Agreement, nor the carrying on of the business of the Company and its subsidiaries by the employees of the Company and its subsidiaries, nor the conduct of the business of the Company and its subsidiaries, as currently conducted or as proposed to be conducted, will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated.

2.10 Non-Disclosure Agreement. The Company has entered into a Non-Disclosure Agreement with Maxim Group LLC (the “Placement Agent”) and the Subscriber. The Registration Statement will contain, at the time of filing, all material information required to be contained in the Registration Statement and will not omit to state a material fact required to be stated therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading.

III. TERMS OF SUBSCRIPTION

3.1 The Company reserves the right to reject the subscription made hereby in its sole discretion. The Offering shall terminate at 11:59 p.m. New York City time on             , 2004 (subject to extension(s) at the Company’s discretion without notice to investors for up to 30 days) (the “Expiration Date”) or such earlier date on which all of the Shares are sold (the “Termination Date”). The Company will conduct a closing (the “Closing”) promptly following receipt and acceptance by the Company of subscriptions for the 1,000,000 Shares. The date on which the Closing occurs shall be referred to as the “Closing Date”.

3.2 Pending the sale of the Shares, all funds paid hereunder shall be deposited by the Company in escrow with the Escrow Agent.

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3.3 The Subscriber hereby authorizes and directs the Company to deliver the Shares to be issued to the Subscriber pursuant to this Agreement to the residential or business address indicated on the signature page hereto.

3.4 The Subscriber hereby authorizes and directs the Company to return, without interest, any funds for unaccepted subscriptions to the same account from which the funds were drawn, including any customer account maintained with the Placement Agent.

3.5 The Company’s agreement with each Subscriber is a separate agreement and the sale of the Shares to each Subscriber is a separate sale.

IV. CONDITIONS TO CLOSING

4.1 Conditions to Obligations of the Subscribers. The Subscribers’ obligation to purchase the Shares at the Closing is subject to the fulfillment on or prior to the Closing of the following conditions, which conditions may be waived at the option of each Subscriber to the extent permitted by law:

(a) Representations and Warranties Correct. The representations and warranties made by the Company in Article II hereof shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.

(b) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to such purchase shall have been performed or complied with in all material respects.

(c) No Legal Order Pending. There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

(d) No Law Prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person which shall not have been obtained to issue the Shares (except as otherwise provided in this Agreement).

4.2 Conditions to Obligations of the Company. The Company’s obligation to sell the Shares at the Closing is subject to the fulfillment on or prior to the Closing of the following conditions, which conditions may be waived at the option of each Subscriber to the extent permitted by law:

(a) Representations and Warranties Correct. The representations and warranties made by the Investor herein shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date.

(b) Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Investor on or prior to such purchase shall have been performed or complied with in all material respects.

(c) No Legal Order Pending. There shall not then be in effect any legal or other order enjoining or restraining the transactions contemplated by this Agreement.

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(d) No Law Prohibiting or Restricting Such Sale. There shall not be in effect any law, rule or regulation prohibiting or restricting such sale or requiring any consent or approval of any person which shall not have been obtained to issue the Shares (except as otherwise provided in this Agreement).

(e) Minimum Investment. The Company shall have received and accepted subscriptions for at least 1,000,000 shares. The Subscriber understands that the Company has no obligation to accept any subscriptions.

V. REGISTRATION RIGHTS

5.1 As used in this Agreement, the following terms shall have the following meanings:

(a) “Affiliate” shall mean, with respect to any Person (as defined below), any other Person controlling, controlled by or under direct or indirect common control with such Person (for the purposes of this definition “control,” when used with respect to any specified Person, shall mean the power to direct the management and policies of such person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing).

(b) “Business Day” shall mean a day Monday through Friday on which banks are generally open for business in New York.

(c) “Holders” shall mean the Subscribers and any person holding Registrable Securities or any person to whom the rights under Article V have been transferred in accordance with Section 5.9 hereof.

(d) “Person” shall mean any person, individual, corporation, limited liability company, partnership, trust or other nongovernmental entity or any governmental agency, court, authority or other body (whether foreign, federal, state, local or otherwise).

(e) The terms “register,” “registered” and “registration” refer to the registration effected by preparing and filing a registration statement in compliance with the Act, and the declaration or ordering of the effectiveness of such registration statement.

(f) “Registrable Securities” shall mean the Shares; provided, however, that Shares shall only be treated as Registrable Securities if and only for so long as they (A) have not been disposed of pursuant to a registration statement declared effective by the Commission; (B) have not been sold in a transaction exempt from the registration and prospectus delivery requirements of the Act so that all transfer restrictions and restrictive legends with respect thereto are removed upon the consummation of such sale; (C) are held by a Holder or a permitted transferee pursuant to Section 5.9; or (D) have not become eligible for sale pursuant to Rule 144 (or any successor thereto) under the Act.

(g) “Registration Expenses” shall mean all expenses incurred by the Company in complying with Section 5.2 hereof, including, without limitation, all registration, qualification and filing fees, printing expenses, escrow fees, fees and expenses of counsel for the Company, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration.

(h) “Registration Statement” shall have the meaning ascribed to such term in Section 5.2.

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(i) “Registration Period” shall have the meaning ascribed to such term in Section 5.2.

(j) “Selling Expenses” shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and, except to the extent set forth in the definition of Registration Expenses, all fees and expenses of legal counsel for any Holder.

5.2 Subject to the terms herein, the Company will, as soon as practicable but not later than the earlier of (A) 10 days following the date that the Company files its preliminary proxy statement related to the Merger with and into the Company or (B) 90 days following the Closing Date (the “Outside Filing Date”), (a) file a registration statement on the appropriate form (the “Registration Statement”) to allow the resale of the Registrable Securities with the SEC, and use its commercially reasonable efforts to have such Registration Statement declared effective by the SEC prior to the date which is 90 days after the Outside Filing Date; and (b) cause such Registration Statement to remain effective (the “Registration Period”) until the earlier of (i) such date as the holders of the Registrable Securities have completed the distribution described in the Registration Statement or (ii) at such time that such Registrable Securities have become eligible for sale pursuant to Rule 144 (or any successor thereto) under the Act. If the Company has not filed such Registration Statement on or before the Filing Date, then the Company shall pay each investor as liquidated damages one percent (1%) of its initial investment, provided, further, that the investors will have no other right to damages for failure of the Company to file the Registration Statement on the Filing Date other than the right of the investors to sue the Company for specific performance of the filing of the Registration Statement in accordance with the terms herein.

To the extent permissible, such Registration Statement also shall cover, to the extent allowable under the Act and the rules promulgated thereunder (including Rule 416 under the Act), such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions with respect to the Registrable Securities.

5.3 All Registration Expenses incurred in connection with any registration, qualification, exemption or compliance pursuant to Section 5.2 shall be borne by the Company. All Selling Expenses relating to the sale of securities registered by or on behalf of Holders shall be borne by such Holders.

5.4 In the case of the registration, qualification, exemption or compliance effected by the Company pursuant to this Agreement, the Company shall, upon reasonable request, inform each Holder as to the status of such registration, qualification, exemption and compliance. At its expense the Company shall:

(a) use its best efforts to keep such registration, and any qualification, exemption or compliance under state or federal securities laws which the Company determines to obtain, continuously effective until the termination of the Registration Period; and

(b) advise the Holders as soon as practicable:

(i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective;

(ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information;

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(iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for such purpose;

(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities included therein for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(v) of the happening of any event that requires the making of any changes in the Registration Statement or the prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in the light of the circumstances under which they were made) not misleading;

(c) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time;

(d) furnish to each Holder, without charge, at least one copy of such Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference) in the form filed with the Commission;

(e) during the Registration Period, deliver to each Holder, without charge, as many copies of the prospectus included in such Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use, consistent with the provisions hereof, of the prospectus or any amendment or supplement thereto by each of the selling Holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the prospectus or any amendment or supplement thereto. In addition, upon the reasonable request of the Holder and subject in all cases to confidentiality protections reasonably acceptable to the Company, the Company will meet with a Holder or a representative thereof at the Company’s headquarters to discuss all information relevant for disclosure in the Registration Statement covering the Registrable Securities, and will otherwise cooperate with any Holder conducting an investigation for the purpose of reducing or eliminating such Holder’s exposure to liability under the Act, including the reasonable production of information at the Company’s headquarters;

(f) prior to any public offering of Registrable Securities pursuant to any registration statement, use its best efforts to register or qualify or obtain an exemption for offer and sale under the securities or blue sky laws of up to ten states designated in writing by the majority of the Holders within ten days after the Closing; provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the Registrable Securities covered by such Registration Statement;

(g) cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to any Registration Statement free of any restrictive legends to the extent not required at such time and in such denominations and registered in such names as Holders may request at least five (5) business days prior to sales of Registrable Securities pursuant to such Registration Statement;

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(h) upon the occurrence of any event contemplated by Section 5.4(b)(v) above, the Company shall promptly prepare a post-effective amendment to the Registration Statement or a supplement to the related prospectus, or file any other required document so that, as thereafter promptly delivered to purchasers of the Registrable Securities included therein, the prospectus will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and

(i) use its best efforts to comply with all applicable rules and regulations of the Commission, and use its best efforts to make generally available to the Holders not later than 45 days (or 90 days if the fiscal quarter is the fourth fiscal quarter) after the end of its fiscal quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earnings statement satisfying the provisions of Section 11(a) of the Act.

5.5 The Holders shall have no right to take any action to restrain, enjoin or otherwise delay any registration pursuant to Section 5.2 hereof as a result of any controversy that may arise with respect to the interpretation or implementation of this Agreement.

5.6 (a) To the extent permitted by law, the Company shall indemnify each Holder, each underwriter of the Registrable Securities and each person controlling such Holder within the meaning of Section 15 of the Act, with respect to which any registration, qualification or compliance has been effected pursuant to this Agreement, against all claims, losses, damages and liabilities (or action in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 5.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in the Registration Statement, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse each Holder, each underwriter of the Registrable Securities and each person controlling such Holder, for reasonable legal and other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred; provided that the Company will not be liable in any such case to the extent that any untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided, further, that the Company will not be liable in any such case where the claim, loss, damage or liability arises out of or is related to the failure of the Holder to comply with the covenants and agreements contained in this Agreement respecting sales of Registrable Securities.

(b) Each Holder will severally, if Registrable Securities held by such Holder are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors and officers, each underwriter of the Registrable Securities and each person who controls the Company within the meaning of Section 15 of the Act, against all claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened (subject to Section 5.6(c) below), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus or offering circular, or any amendment or supplement thereof, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in light of the circumstances in which they were made, and will reimburse the Company, such directors and officers, each underwriter of the Registrable

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Securities and each person controlling the Company for reasonable legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action as incurred, in each case to the extent, but only to the extent, that such untrue statement or omission or allegation thereof is made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Holder and stated to be specifically for use in preparation of such registration statement, prospectus or offering circular; provided that the indemnity shall not apply to the extent that such claim, loss, damage or liability results from the fact that a current copy of the prospectus was not made available to the Holder and such current copy of the prospectus would have cured the defect giving rise to such loss, claim, damage or liability. Notwithstanding the foregoing, in no event shall a Holder be liable for any such claims, losses, damages or liabilities in excess of the net proceeds received by such Holder in the offering, except in the event of fraud by such Holder.

(c) Each party entitled to indemnification under this Section 5.6 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such Indemnified Party’s expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement, unless such failure is materially prejudicial to the Indemnifying Party in defending such claim or litigation. An Indemnifying Party shall not be liable for any settlement of an action or claim effected without its written consent (which consent will not be unreasonably withheld).

(d) If the indemnification provided for in this Section 5.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, in no event shall a Holder be liable for any such claims, losses, damages or liabilities pursuant to this paragraph 5.6(d) in excess of the net proceeds received by such Holder in the Offering, except in the event of fraud by such Holder.

5.7 (a) Each Holder agrees that, upon receipt of any notice from the Company of the happening of any event requiring the preparation of a supplement or amendment to a prospectus relating to Registrable Securities so that, as thereafter delivered to the Holders, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, each Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement contemplated by Section 5.2 until its receipt of copies of the supplemented or amended prospectus from the Company, such prospectus to be forwarded promptly to the Subscriber by the Company, and, if so directed by the Company, each Holder shall deliver to the Company all copies, other than

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permanent file copies then in such Holder’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

(b) Each Holder shall suspend, upon request of the Company, any disposition of Registrable Securities pursuant to the Registration Statement and prospectus contemplated by Section 5.2 during (i) any period not to exceed two 30-day periods within any one 12-month period the Company requires in connection with a primary underwritten offering of equity securities and (ii) any period, not to exceed two 90-day periods within any one 12-month period, when the Company determines in good faith that offers and sales pursuant thereto should not be made by reason of the presence of material undisclosed circumstances or developments with respect to which the disclosure that would be required in such a prospectus is premature, would have an adverse effect on the Company or is otherwise inadvisable.

(c) As a condition to the inclusion of its Registrable Securities, each Holder shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing or as shall be required in connection with any registration, qualification or compliance referred to in this Article V.

(d) Each Holder hereby covenants with the Company not to make any sale of the Registrable Securities without effectively causing the prospectus delivery requirements under the Act and any state securities laws to be satisfied and agrees not to make any sale of the Registrable Securities in jurisdictions other than those designated pursuant to Section 5.2(f).

(e) Each Holder acknowledges and agrees that the Registrable Securities sold pursuant to the Registration Statement described in this Section are not transferable on the books of the Company unless the stock certificate submitted to the transfer agent evidencing such Registrable Securities is accompanied by a certificate reasonably satisfactory to the Company to the effect that (i) the Registrable Securities have been sold in accordance with such Registration Statement and (ii) the requirement of delivering a current prospectus has been satisfied.

(f) Each Holder agrees not to take any action with respect to any distribution deemed to be made pursuant to such Registration Statement which would constitute a violation of Regulation M under the Exchange Act or any other applicable rule, regulation or law.

(g) At the end of the period during which the Company is obligated to keep the Registration Statement current and effective as described above, the Holders of Registrable Securities included in the Registration Statement shall discontinue sales of shares pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and such Holders shall notify the Company of the number of shares registered which remain unsold immediately upon receipt of such notice from the Company.

5.8 With a view to making available to the Holders the benefits of certain rules and regulations of the Commission which at any time permit the sale of the Registrable Securities to the public without registration, the Company shall use its reasonable best efforts to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144 under the Act, at all times;

(b) file with the Commission in a timely manner all reports and other documents required of the Company under the Exchange Act; and

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(c) so long as a Holder owns any unregistered Registrable Securities, furnish to such Holder, upon any reasonable request, a written statement by the Company as to its compliance with Rule 144 under the Act, and of the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents of the Company as such Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing a Holder to sell any such securities without registration.

5.9 The rights to cause the Company to register Registrable Securities granted to the Holders by the Company under Section 5.1 may be assigned in full by a Holder in connection with a transfer by such Holder of its Registrable Securities, provided, however, that (i) such transfer may otherwise be effected in accordance with applicable securities laws; (ii) such Holder gives prior written notice to the Company; (iii) such transferee agrees to comply with the terms and provisions of this Agreement, and (iv) such transfer is otherwise in compliance with this Agreement. Except as specifically permitted by this Section 5.9, the rights of a Holder with respect to Registrable Securities as set out herein shall not be transferable to any other Person, and any attempted transfer shall cause all rights of such Holder therein to be forfeited.

5.10 The Company shall use best efforts to cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation system or other market on which similar securities issued by the Company are then listed.

5.11 With the written consent of the Company and the Holders holding at least a majority of the Registrable Securities that are then outstanding, any provision of this Article V may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely) or amended. Upon the effectuation of each such waiver or amendment, the Company shall promptly give written notice thereof to the Holders, if any, who have not previously received notice thereof or consented thereto in writing.

VI. MISCELLANEOUS

6.1 Any notice or other communication to the Company given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, or delivered by hand against written receipt therefore, addressed to DrugMax, Inc., 25400 U.S. Highway 19 North, Suite 137, Clearwater, Florida 33763, Attn: Chief Financial Officer, and to the Subscriber at the Subscriber’s address indicated on the signature page of this Agreement. Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address, which shall be deemed to have been given or delivered when received.

6.2 Except as provided in Section 5.9 above, this Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged.

6.3 Subject to the provisions of Section 5.9 and 6.13, this Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

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6.4 Upon the execution and delivery of this Agreement by the Subscriber, this Agreement shall become a binding obligation of the Subscriber with respect to the purchase of the Shares as herein provided; subject, however, to any applicable state laws providing rescission rights to the Investor and to the right hereby reserved to the Company to revoke this subscription in accordance with Section 1.18, enter into the same agreements with other subscribers and to add and/or delete other persons as subscribers.

6.5 NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. IN THE EVENT THAT A JUDICIAL PROCEEDING IS NECESSARY, THE EXCLUSIVE FORUMS FOR RESOLVING DISPUTES ARISING OUT OF OR RELATING TO THIS AGREEMENT ARE EITHER THE SUPREME COURT OF THE STATE OF FLORIDA IN AND FOR THE COUNTY OF HILLSBOROUGH OR THE FEDERAL COURTS FOR SUCH STATE AND COUNTY, AND ALL RELATED APPELLATE COURTS. THE PARTIES HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF SUCH COURTS AND AGREE TO SAID VENUE.

6.6 The holding of any provision of this Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Agreement, which shall remain in full force and effect. If any provision of this Agreement shall be declared by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced in whole or in part, such provision shall be interpreted so as to remain enforceable to the maximum extent permissible consistent with applicable law and the remaining conditions and provisions or portions thereof shall nevertheless remain in full force and effect and enforceable to the extent they are valid, legal and enforceable, and no provisions shall be deemed dependent upon any other covenant or provision unless so expressed herein.

6.7 It is agreed that a waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party.

6.8 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

6.9 This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together constitute one and the same instrument.

6.10 (a) The Subscribers severally agree not to issue any public statement with respect to the Subscribers’ investment or proposed investment in the Company or the terms of any agreement or covenant between them and the Company without the Company’s prior written consent, except such disclosures as may be required under applicable law or under any applicable order, rule or regulation.

(b) The Company agrees not to disclose the names, addresses or any other information about the Subscribers, except as required by law and to satisfy its obligations under Article V.

6.11 The Subscriber represents and warrants that it has not engaged, consented to nor authorized any broker, finder or intermediary to act on its behalf, directly or indirectly, as a broker, finder or intermediary in connection with the transactions contemplated by this Agreement. Subscriber hereby severally agrees to indemnify and hold harmless the Company from and against all fees, commissions or other payments owing to

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any such person or firm acting on behalf of such Subscriber hereunder.

6.12 Nothing in this Agreement shall create or be deemed to create any rights in any person or entity not a party to this Agreement, except for the holders of Registrable Securities.

6.13 The Company acknowledges and agrees that irreparable damage would occur in the event that any of the provisions of Article V of this Agreement were not performed in accordance with its specific terms or were otherwise breached and that such damage would not be compensable in money damages and that it would be extremely difficult or impracticable to measure the resultant damages. Accordingly, any Subscriber shall be entitled to an injunction or injunctions with respect to the provisions of this Agreement and to enforce specifically the terms and provisions hereof, in addition to any other remedy to which it may be entitled at law or in equity, and the Company expressly waives any defense that a remedy in damages would be adequate and expressly waives any requirement in an action for specific performance for the posting of a bond by the Subscriber bringing such action.

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EX-5.1

Exhibit 5.1

Opinion of Shumaker, Loop & Kendrick, LLP

                                , 2004

DrugMax, Inc.

25400 US Highway 19 North, Suite 137

Clearwater, FL 33763

Ladies and Gentlemen:

At your request, we have examined the Registration Statement on Form S-3 (the “Registration Statement”), filed by DrugMax, Inc., a Nevada corporation (the “Company”), with the Securities and Exchange Commission in connection with the registration pursuant to the Securities Act of 1933, as amended (the “Act”), of up to 1,000,000 shares of the Company’s common stock, $0.001 par value per share, which have been previously issued to the selling stockholders named therein (the “Shares’). The Shares are to be sold from time to time as set forth in the Registration Statement and the Prospectus contained therein (the “Prospectus”).

In connection with the following opinion, we have examined and have relied upon such documents, records, certificates, statements and instruments as we have deemed necessary and appropriate to render the opinion herein set forth.

Based upon the foregoing and subject to the limitations and qualifications set forth below, it is our opinion that the Shares covered by the Registration Statement have been authorized and are fully paid and non-assessable.

The opinion expressed above is limited by and subject to the following qualifications:

(a) To the extent our opinion set forth above is governed by the laws of the State of Nevada, we have based such opinion exclusively upon a reading of applicable provisions of the General Corporation Law of Nevada without taking into account any legislative, judicial or administrative interpretations thereof. Except as set forth in the immediately preceding sentence, we express no opinion other than as to the federal securities laws of the United States of America.

(b) The opinion expressed herein is as of the date hereof, and we assume no obligation to update this opinion.

We hereby consent to the filing of this opinion as an exhibit to the above-referenced Registration Statement and to the use of our name wherever it appears in the Registration Statement, the Prospectus, and in any amendment or supplement thereto. In giving such consent, we do not believe that we are “experts” within the meaning of such term as used in the Act or the rules and regulations of the Securities and Exchange Commission issued thereunder with respect to any part of the Registration Statement, including this opinion as an exhibit or otherwise.

Very truly yours,

/s/ Shumaker, Loop & Kendrick, LLP

Shumaker, Loop & Kendrick, LLP

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

DrugMax, Inc.

Tampa, Florida

We hereby consent to the incorporation by reference in the Prospectus constituting a part of this Registration Statement of our reports dated July 2, 2003, relating to the 2003 consolidated financial statements and schedule of DrugMax, Inc. appearing in the Company’s Annual Report on Form 10-K for the year ended March 31, 2003.

We also consent to the reference to us under the caption “Experts” in the Prospectus.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

Miami, Florida

May 3, 2004