U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to____________
Commission File No. 0-7473
Amexdrug Corporation
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(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA 95-2251025
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
Incorporation or Organization)
8909 West Olympic Boulevard, Suite 208
Beverly Hills, California 90211
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(Address of Principal Executive offices)
Issuer's Telephone Number: (310) 855-0475
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: As of August 4, 2005, there were
8,473,866 shares of the issuer's common stock issued and outstanding.
AMEXDRUG CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements (Unaudited) .................................. 3
Condensed Consolidated Balance Sheets -- As of
June 30, 2005 and December 31, 2004 (Unaudited) .................. 4
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30, 2005
and 2004 (Unaudited) ............................................. 5
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2005 and 2004 (Unaudited) .......... 6
Notes to Condensed Consolidated Financial Statements
(Unaudited) ...................................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 9
Item 3. Controls and Procedures ........................................... 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ................................................. 12
Item 2. Changes in Securities ............................................. 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ................................................. 13
Item 4. Submission of Matters to a Vote of Securities
Holders ........................................................... 13
Item 5. Other Matters ..................................................... 13
Item 6. Exhibits and Reports on Form 8-K .................................. 16
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited condensed consolidated balance sheets of Amexdrug
Corporation, a Nevada corporation, and subsidiary as of June 30, 2005 and
December 31, 2004, the related unaudited condensed consolidated statements of
operations for the three and six month periods ended June 30, 2005 and June 30,
2004, the related unaudited condensed consolidated statements of cash flows for
the six month periods ended June 30, 2005 and June 30, 2004, and the notes to
the condensed consolidated financial statements follow. The consolidated
financial statements have been prepared by Amexdrug's management, and are
condensed; therefore they do not include all information and notes to the
financial statements necessary for a complete presentation of the financial
position, results of operations and cash flows, in conformity with accounting
principles generally accepted in the United States of America, and should be
read in conjunction with the annual consolidated financial statements included
in Amexdrug Corporation's annual report on Form 10-KSB for the year ended of
December 31, 2004.
The accompanying condensed consolidated financial statements reflect
all adjustments which are, in the opinion of management, necessary to present
fairly the results of operations and financial position of Amexdrug Corporation
consolidated with Allied Med, Inc., its wholly owned subsidiary, and all such
adjustments are of a normal recurring nature. The names "Amexdrug", "we@, "our@
and "us@ used in this report refer to Amexdrug Corporation.
Operating results for the quarter ended June 30, 2005, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2005.
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AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
2005 2004
--------------------------------------------------------------------------------
Cash $ 125,092 $ 4,693
ASSETS
Current Assets
Cash $ 125,092 $ 4,693
Investments in securities available for sale 1,600 -
Accounts receivable, net of allowance for
doubtful accounts of $19,500 and
$39,494, respectively 188,092 297,310
Inventory 116,728 73,493
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Total Current Assets 431,512 375,496
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Property and Equipment
Office and computer equipment 133,641 133,641
Leasehold improvements 15,700 15,700
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Total Property and Equipment 149,341 149,341
Less: Accumulated depreciation (116,529) (105,834)
--------------------------------------------------------------------------------
Net Property and Equipment 32,812 43,507
Deposits 1,100 1,100
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Total Assets $ 465,424 $ 420,103
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 348,858 $ 427,487
Payables - related parties 13,140 29,674
Accrued liabilities 2,842 4,252
Accrued income taxes 18,693 800
Current portion of capital lease obligations 9,925 10,747
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Total Current Liabilities 393,458 472,960
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Long-Term Liabilities
Deferred income taxes 5,888 -
Capital lease obligations, net of current portion 22,512 27,495
--------------------------------------------------------------------------------
Total Long-Term Liabilities 28,400 27,495
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Stockholders' Equity (Deficit)
Common Stock - $0.001 par value; 50,000,000
shares authorized; 8,473,866 and 8,052,783
shares issued and outstanding, respectively 8,474 8,053
Additional paid-in capital 83,342 7,969
Accumulated deficit (48,250) (96,374)
--------------------------------------------------------------------------------
Total Stockholders' Equity (Deficit) 43,566 (80,352)
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Total Liabilities and Stockholders' Equity (Deficit) $ 465,424 $ 420,103
================================================================================
See accompanying notes to condensed consolidated financial statements
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AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
------------------------- ------------------------
2005 2004 2005 2004
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Sales $ 1,127,397 $ 1,997,336 $ 2,145,318 $ 4,236,089
Cost of Goods Sold 1,019,389 1,795,682 1,980,457 3,938,606
--------------------------------------------------------------------------------------
Gross Profit 108,008 201,654 164,861 297,483
Operating Expenses
Selling, general and
administrative expense (60,927) (89,257) (107,676) (163,830)
Interest expense (850) (937) (1,779) (2,182)
Interest and other income 32 - 65 -
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Income From Operations 46,263 111,460 55,471 131,471
Gain (Expense) on Settlement (10,000) - 17,234 (140,000)
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Income (Loss) Before
Income Taxes 36,263 111,460 72,705 (8,529)
Benefit from (Provision for)
Income Taxes (17,455) - (24,581) 1,004
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Net Income (Loss) $ 18,808 $ 111,460 $ 48,124 $ (7,525)
======================================================================================
Basic Loss Per Common Share $ - $ 0.01 $ 0.01 $ -
======================================================================================
Basic Weighted-Average Common
Shares Outstanding 8,473,866 8,052,783 8,301,711 8,052,783
======================================================================================
See accompanying notes to condensed consolidated financial statements
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AMEXDRUG CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months
Ended June 30,
-----------------------
2005 2004
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Cash Flows from Operating Activities:
Net income (loss) $ 48,124 $ (7,525)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 10,695 11,486
Adjustment to bad debt (19,994) -
Expense from (Gain on) settlement - 140,000
Deferred income taxes 5,888 (1,004)
Changes in operating assets and liabilities:
Accounts receivable 129,212 89,644
Inventory (43,235) 53,840
Accounts payable and accrued liabilities (62,146) (133,613)
--------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 68,544 152,828
--------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of investments (1,600) -
--------------------------------------------------------------------------------
Net Cash Used in Investing Activities (1,600) -
--------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Payment of checks written in excess of cash in bank - (41,024)
Payment for lawsuit settlement - -
Proceeds from borrowings from related party 59,260 -
Principal payments on capital lease obligations (5,805) (12,145)
--------------------------------------------------------------------------------
Net Cash Provided by (Used in) Financing Activities 53,455 (53,169)
--------------------------------------------------------------------------------
Net Increase in Cash 120,399 99,659
Cash at Beginning of Period 4,693 1,185
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Cash at End of Period $ 125,092 $ 100,844
================================================================================
Supplemental Cash Flow Information:
Cash paid for interest $ 1,779 $ 2,182
--------------------------------------------------------------------------------
Conversion of notes payable to common stock $ 75,794 $ -
--------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements
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NOTE 1 -- Organization and Nature of Operations
Condensed Financial Statements -- The accompanying condensed financial
statements have been prepared by the Company and are unaudited. In the opinion
of management, the accompanying unaudited financial statements contain all
necessary adjustments for fair presentation, consisting of normal recurring
adjustments except as disclosed herein.
The accompanying unaudited interim financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange Commission;
therefore, certain information and disclosures generally included in financial
statements have been condensed or omitted. The condensed financial statements
should be read in connection with the Company's annual financial statements
included in its annual report on Form 10-KSB as of December 31, 2004. The
financial position and results of operations for the six months ended June 30,
2005 are not necessarily indicative of the results to be expected for the full
year ending December 31, 2005.
Use of Estimates -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
Investment in Debt and Equity Securities--Investment in equity securities are
classified as available-for-sale and are carried at fair value. Net unrealized
gains and losses are reported in accumulated other comprehensive income, which
is a separate component of shareholder's equity, net of applicable deferred
taxes. Realized gains and losses on sales of securities and impairment losses
from other-than-temporary declines in market value are included in earnings with
the cost of securities sold determined on a specific cost basis. Investment in
debt securities are classified as held-to-maturity and carried at cost.
Accounts Receivable -- The Company's historical revenues and receivables have
been derived solely from the pharmaceutical industry. Although the Company
primarily sells products on a cash basis, some sales are made under credit
terms. The Company performs ongoing credit evaluations of its customers'
financial condition and usually requires a delayed check depository from its
customers at the date products are shipped. The Company maintains an allowance
for uncollectible accounts receivable based upon the expected collectibility of
all accounts receivable.
Concentrations -- During the six months ended June 30, 2005, purchases from two
vendors accounted for 37% and 30% of total purchases. As of June 30, 2005,
accounts payable to these vendors accounted for 64% and 0% of the total accounts
payable, respectively.
Fair Value of Financial Instruments -- The carrying amount of capital lease
obligations approximate fair value based on current interest rates available to
the Company.
Revenue Recognition -- The Company generates revenues from the resale of
pharmaceuticals, over-the-counter products, health and beauty care products and
nutritional supplements. The Company accounts for these revenues at the time of
shipment to and acceptance by the customer.
Basic Loss Per Common Share -- Basic loss per common share is computed by
dividing net loss by the weighted-average number of common shares outstanding.
No agreements or contracts exist that have created any potentially issuable
common shares.
-7-
NOTE 2 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 2004, the Company purchased inventory
totaling $34,304 from Amrx Corporation, a corporation owned by the president of
the Company. As of June 30, 2005 and 2004, accounts payable to Amrx totaled
$13,140 and $0, respectively.
In December 2004, the Company borrowed $16,534 from the wife of the president of
the Company. In January 2005, the Company borrowed an additional $59,260 from
this person. On March 15, 2005, the loans were converted into 421,083 shares of
common stock at the market price of $0.18 per share.
NOTE 3 -- CONTINGENCIES
On June 9, 2003 a lawsuit was filed in the Superior Court of the State of
California, County of Los Angeles against the Company, its predecessor
corporation, Harlyn Products, Inc., a California corporation, the Company's
wholly owned subsidiary, Allied Med, Inc., and the Company's principal
shareholder, Jack Amin. The plaintiffs alleged in the complaint that the parties
entered into a one page finder's agreement on April 10, 2000 relating to the
acquisition of Harlyn Products, Inc., and that the plaintiffs were entitled to
receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully
diluted shares of the Company with a value not less than $600,000 and
unspecified lost profits. The plaintiffs alleged causes of action for breach of
contract, for specific performance, for services rendered and for unjust
enrichment. The plaintiffs sought compensation for damages, legal fees, costs
and interest. Although management had determined, with the advice of its legal
counsel, that there was some likelihood that a loss from the claim may have been
incurred, on October 26, 2004, the trial court entered a decision in favor of
the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of
intent of move for a new trial, which was denied by the court on December 13,
2004. The plaintiffs then filed a notice of appeal. Effective June 7, 2005, both
parties executed a settlement agreement whereby the Company paid $10,000 in
exchange for a release of all claims and dismissal of the plaintiff's appeal.
On October 9, 2004 a vendor filed suit to collect on an account in the amount of
$32,234. The Company reached a settlement whereby it paid $5,000 for a full and
broad release of all claims. A gain of $27,234 was recognized upon payment.
NOTE 4--SUBSEQUENT EVENTS
On July 22, 2005, Amexdrug's wholly-owned subsidiary, Allied Med, Inc., entered
into an agreement to acquire all of the shares of stock of Dermagen, Inc., a
California corporation ("Dermagen") for $120,000 cash. Dermagen has a US-FDA
registered and state FDA approved facility licensed to manufacture.
-8-
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Overview
--------
Amexdrug Corporation is located at 8909 West Olympic Boulevard, Suite
112, Beverly Hills, California 90211. Its phone number is (310) 855-0475. Its
fax number is (310) 855-0477. Its website is www.amexdrug.com. Shares of
Amexdrug common stock are traded on the OTC Bulletin Board under the symbol
AXRX. The President of Amexdrug has had experience working in the pharmaceutical
industry for the past 20 years.
Through its wholly-owned subsidiary, Allied Med, Inc., Amexdrug is
engaged in the pharmaceutical wholesale business of selling brand name and
generic pharmaceutical products, over-the-counter (OTC) and health and beauty
products in 7 or 8 states. Amexdrug is expanding its business, and it would like
to eventually sell and distribute products in all 50 states.
Amexdrug Corporation was initially incorporated under the laws of the
State of California on April 30, 1963 under the name of Harlyn Products, Inc.
Harlyn Products, Inc. was engaged in the business of selling jewelry to
department stores and retail jewelry stores until the mid-1990s.
The name of the Company was changed to Amexdrug Corporation in April
2000 to reflect the change in the Company's business to the sale of
pharmaceutical products. The officers and directors of the Company also changed
in April 2000. The domicile of the Company was changed from California to Nevada
in December 2001. At that time the Company changed its fiscal year end from June
30 to December 31.
On December 31, 2001, Amexdrug acquired all of the issued and
outstanding common shares of Allied Med, Inc. ("Allied") in a share exchange.
Amexdrug acquired all 50,000 issued and outstanding shares of Allied common
stock from its sole shareholder, Mr. Jack Amin, in exchange for 7,000,000
restricted common shares of Amexdrug and the assumption of a $100,000 promissory
note, and all accrued interest thereon owed by Mr. Amin to Allied. At all times
during the negotiations of the transaction, Mr. Amin was an officer, director
and controlling shareholder of both companies. Consideration for the acquisition
was determined through negotiations between the boards of directors of both
companies and was based on Allied's past operating history and future potential
growth.
Allied was formed as an Oregon corporation in October 1997, to operate
in the pharmaceutical wholesale business of selling brand name and generic
pharmaceutical products, over-the-counter (OTC) and health and beauty products.
-9-
Amexdrug has assumed the operations of Allied as its primary
operations, and Amexdrug intends to build on the wholesale operations of Allied.
On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health
Care, Inc. as a Nevada corporation. Royal Health Care, Inc. was formed to
manufacture and sell health and beauty products.
On November 8, 2004, Amexdrug formed a new subsidiary, Biorx
Pharmaceuticals, Inc. as a Nevada corporation. Biorx Pharmaceuticals, Inc. was
formed for the purpose of repacking and selling generic and branded
pharmaceuticals.
The accompanying financial information includes the operations of
Allied Med, Inc. for all periods presented and the operations of Amexdrug
Corporation from April 25, 2000.
Results of Operations
---------------------
For the three months ended June 30, 2005, Amexdrug reported sales of
$1,127,397, comprised entirely of income from the Allied Med, Inc.
pharmaceutical wholesale business of selling brand name and generic
pharmaceutical products, and over-the-counter (OTC) and health and beauty
products. This is $869,939 less than the $1,997,336 of sales reported for the
three months ended June 30, 2004. For the six months ended June 30, 2005, sales
reported by Amexdrug were $2,145,318, which is $2,090,771 less than the
$4,236,089 of sales reported for the six months ended June 30, 2004. During the
three and six month periods ended June 30, 2005, Amexdrug experienced a decline
in total sales due to increased competition and Amexdrug's search for better
discount products to sell. Cost of goods sold for the three months ended June
30, 2005 was $1,019,389, a decrease of $776,293 over the $1,795,682 cost of
goods sold for the three months ended June 30, 2004. Cost of goods sold for the
six months ended June 30, 2005 was $1,980,457, a decrease of $1,958,149 over the
$3,938,606 cost of goods sold for the six months ended June 30, 2004. During the
three months ended June 30, 2005 gross profit decreased by $93,646 to $108,008
or 9.6% of sales for the three months ended June 30, 2005, from the $201,654 or
10.1% of sales recorded for the three months ended June 30, 2004. For the six
months ended June 30, 2005 gross profit decreased by $132,622 to $164,861 or
7.7% of sales from the $297,483 or 7.0% of sales recorded for the six months
ended June 30, 2004. Although sales decreased during the three and six month
periods ended June 30, 2005 compared to sales in the three and six month periods
ended June 30, 2004, profit margins changed little during these same time
periods.
Selling, general and administrative expense was $60,927 for the three
months ended June 30, 2005, a decrease of $28,330 from the $89,257 recorded for
the three months ended June 30, 2004. For the six months ended June 30, 2005,
Amexdrug reported selling, general and administrative expense of $107,676, a
decrease of $56,154 from the $163,830 reported for the six months ended June 30,
2004. This decrease in selling, general and administrative expense is largely
attributable to a decrease in expenses related to the decline in sales and
resulting decreased in Amexdrug's operations. In addition, in late May the
Company began distributing products from Los Angeles, California, instead of
-10-
Portland, Oregon. This has resulted in some cost savings to the Company due to
lower shipping costs.
During the three months ended June 30, 2005, Amexdrug settled one
pending lawsuit against it by paying $10,000. No similar expense was incurred
during the three months ended June 30, 2004. During the six months ended June
30, 2005, Amexdrug recorded a nonrecurring gain from litigation settlement of
$17,234. This included the settlement expense of $10,000 incured during the
second quarter of 2005 and a gain of $27,234 achieved in a separate lawsuit in
the first quarter of 2005. In that lawsuit, the parties reached a settlement
under which Allied Med, Inc. paid a vendor $5,000 to settle a claim of $32,234.
A gain of $27,234 was recognized upon payment. During the six months ended June
30, 2004, Amexdrug reported incurring a settlement expense of $140,000
associated with the lawsuit which was eventually settled in June 2005 for a
payment of $10,000.
During the three months ended June 30, 2005, Amexdrug experienced net
income of $18,808, which is $92,652 less than the $111,460 net income earned in
the three months ended June 30, 2004. During the six months ended June 30, 2005,
Amexdrug experienced net income of $48,124, as compared to the $7,525 net loss
incurred during the six months ended June 30, 2004. Amexdrug attributes this
change primarily to decreases in sales during the later periods, partially off
set due to decreases in its selling, general and administrative expenses.
Liquidity and Capital Resources - June 30, 2005
-----------------------------------------------
As of June 30, 2005, Amexdrug reported total current assets of
$431,512, comprised of cash of $125,092, accounts receivable, net of $188,092
inventory of $116,728 and investments in securities available for sale of
$1,600. Total assets as of June 30, 2005 were $465,424, which included total
current assets, plus net property and equipment of $32,812 and deposits of
$1,100.
Amexdrug's liabilities as of June 30, 2005 consisted of accounts
payable of $348,858, payables to related parties of $13,140, accrued liabilities
of $2,842, accrued income taxes of $18,693, current portion of capital lease
obligations of $9,925, and total long-term liabilities of $28,400.
During the six months ended June 30, 2005, Amexdrug's operating
activities provided $68,544 cash compared to $152,828 cash provided by
Amexdrug's operating activities in the six months ended June 30, 2004. The
primary adjustments to reconcile net income to net cash provided by operating
activities during the first six months of 2005 were as follows: a decrease in
accounts receivable of $129,212, an increase in inventory of $43,235, a decrease
in accounts payable and accrued liabilities of $62,164, a gain on recovery of
bad debt of $19,994, depreciation expense of $10,695 and deferred income taxes
of $5,888. Cash increased during the six months ended June 30, 2005 by $120,399
compared to an increase during the six months ended June 30, 2004 of $99,659.
Cash from operating activities in the six months ended June 30, 2005 increased
primarily due to a decrease in accounts receivable. Operations have primarily
been funded through cash generated from operations and also from loans and/or
capital infusions from related parties. Management does not anticipate that
-11-
Amexdrug will need to seek additional financing during the next twelve months.
Forward-looking statements
--------------------------
This document includes various forward-looking statements with respect
to future operations of Amexdrug that are subject to risks and uncertainties.
Forward-looking statements include information concerning expectations of future
results of operations and such statements preceded by, followed by or that
otherwise include the words "believes," "expects," "anticipates," "intends,"
"estimates" or similar expressions. For those statements, Amexdrug claims the
protection of the safe harbor for forward-looking statements contained in the
Private Litigation Reform Act of 1995. Actual results may vary materially.
Item 3. Controls and Procedures.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how remote.
There has been no change in our internal control over financial
reporting during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, our internal control over
financial reporting.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT
REFLECT MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Amexdrug is a party to material pending legal proceedings which are
described below. To the best of Amexdrug's knowledge, no governmental authority
or other party has threatened or is contemplating the filing of any material
legal proceeding against Amexdrug, except as described below.
-12-
On June 9, 2003 a lawsuit was filed in the Superior Court of the State
of California, County of Los Angeles against the Company, its predecessor
corporation, Harlyn Products, Inc., a California corporation, the Company's
wholly owned subsidiary, Allied Med, Inc., and the Company's principal
shareholder, Jack Amin. The plaintiffs alleged in the complaint that the parties
entered into a one page finder's agreement on April 10, 2000 relating to the
acquisition of Harlyn Products, Inc., and that the plaintiffs were entitled to
receive a finder's fee equal to 7.5% (approximately 603,959 shares) of the fully
diluted shares of the Company with a value not less than $600,000 and
unspecified lost profits. Plaintiffs alleged causes of action for breach of
contract, for specific performance, for services rendered and for unjust
enrichment. Plaintiffs sought compensation for damages, legal fees, costs and
interest. Although management had determined, with the advice of its legal
counsel, that there was some likelihood that a loss from the claim may have been
incurred, on October 26, 2004, the trial court entered a decision in favor of
the Company disallowing the plaintiffs' claim. The plaintiffs filed a notice of
intent to move for a new trial, which was denied by the court on December 13,
2004. The plaintiffs then filed a notice of appeal. Effective June 7, 2005, the
parties executed a settlement agreement whereby the Company paid $10,000 in
exchange for a release of all claims and dismissal of the plaintiffs' appeal.
Item 2. Changes in Securities.
No unregistered securities were issued by Amexdrug during the three
month period ended June 30, 2005. For information concerning unregistered
securities issued by Amexdrug in the three months ended March 31, 2005, see
Amexdrug's quarterly report on Form 10-QSB for the three months ended March 31,
2005.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
On July 22, 2005, Amexdrug's wholly-owned subsidiary, Allied Med, Inc.,
entered into an agreement with Prakash "Mike" Charu to acquire all the business
assets and shares of stock of Dermagen, Inc., a California corporation
("Dermagen") for $120,000 cash. Mr. Charu and Muhammad Majeed are the only
shareholders of Dermagen. Mr. Charu executed the agreement on behalf of both
shareholders. Related escrow instructions were signed by the parties on August
5, 2005.
-13-
A copy of the Offer to Purchase Business and Stock dated July 22, 2005
is attached to this report as Exhibit 10.1. The agreement is subject to certain
contingencies, including an appraisal for not less than the purchase price. It
is anticipated that the agreement will be amended prior to closing so that
Dermagen will become a direct subsidiary of Amexdrug.
Dermagen has a US-FDA registered and state FDA approved facility
licensed to manufacture certain pharmaceutical products, medical devices and
cosmetic products. Dermagen has been owned and operated by pharmacists for over
10 years. Dermagen can provide complete development services including design,
risk analysis, qualification of raw material vendors, complete set of
specifications, and prepare stability data. Its staff has over 30 years of
experience in product development, pilot batches, commercial production and
distribution for large leading international companies.
Dermagen's clientele include companies outsourcing liquid
pharmaceuticals, diagnostics, biotech products, oral liquids, topical products,
sport drinks, ethnic topical preparations, and respiratory therapies. Contract
services range from blending, filling, packaging, repacking, and kit assembly.
Dermagen's facility is equipped to fill products in metal, multi-layer, or
plastic tubes; plastic, glass and special designed containers with closure
features.
Dermagen dispenses formulae prescribed by doctors that include topical
and oral products with herbs and botanical extracts. These specially formulated
products comprehend non-commercial concentration or combination of active drugs,
extemporaneous preparations, patient customized formulations, etc.
Dermagen stainless steel compounding and holding tanks feature DCI and
other major brands jacketed reactors with dual mixing & scrapers, sanitary
connection, and sanitary pump assisted transfer system.
Dermagen's water system complies with USP Purified Water requirements
and Dermagen offers a wide selection of final product filtration and
microenvironment possibilities to protect the filling operation. Dermagen can
deliver concentrate in bulk or as final.
Dermagen is well equipped to formulate, compound, fill and pack topical
cream, lotion and ointment; oral liquids and nutrition supplements containing
herbal extracts.
Research and Development Department of Dermagen- Board of Directors and
Advisory Board of Chemists and Pharmacists include the following personnel:
Management- Board of Directors
* President- Mike Charu, MS; R. Ph.
* Operations Manager - Valentin Baltazar
Advisory Board
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* M. Majeed, Ph.D.
* F. H. Boehm, III Ph. D.
* Jasbir Dhanjal, MSc.
* Charles F. Lustick, R. Ph.
* Humberto Zardo, B.S. Ind. Pharm., MSc.
Board of Directors
------------------
President - Mike Charu
Mr. Charu has over 30 years of experience in the dermatology field.
Before starting Dermagen, he was the Senior Scientist of Products Development at
Herbert Labs, a division of SmithKline Beecham, and previously worked for Boots
Drugs Company of England. He holds a Master Degree in industrial pharmacy from
Long Island University in New York. In addition, Mr Charu is a Registered
Pharmacist in New York. Also, he received High Honors for works with natural
products, and is the author of US-Patent No.5,914,334 "Stable gel formulation
for topical treatment of skin conditions" (22 JUN 1999).
Operations Manager - Valentin Baltazar
Mr. Baltazar has over 15 years of experience in managing dermatology
and cosmetic operations. Before joining Dermagen, he was the Production Manager
for Hearth Science.
Advisory Board
--------------
M. Majeed, Ph.D. Dr. Majeed received his Ph. D. in Pharmaceutics from
St. Johns University, New York. He is the co-founder of Dermagen and is
considered a "guru" of herbal products. Dr. Majeed is the author of several US
Patents on bioavailability enhancers, bioprotectants, and nutritional products
(5,536,506 (16 JUL 2996); 5,744,161 ( 28 APR 1998); 5,783,603 ( 21 JUL 1998);
5,804,596 (08 Sep 1998); 5,861,415 (19 JAN 1999); and 5,972,382 (26 OCT 1999).
He also has European/World Patents published, and Patents pending on
Tetrahydrocurcinoids, Boswellin?, Berberine, and Citrin? K.
F. H. Boehm, III Ph. D. Dr. Boehm has over 20 years of experience in
managing marketing studies and product introduction in the pharmaceutical, OTC
and nutraceuticals fields.
Jasbir Dhanjal, MSc. Mr. Dhanjal is the Vice President of Operations of
K C Pharmaceuticals, California - USA. He has over 30 years of progressive
management responsibilities within the pharmaceutical industry, including
Director of Operations for Herbert Labs, a division of SmithKline Beecham. Mr.
Dhanjal has also provided technical assistance for health care projects in
Argentina, Brazil, Canada, China, Colombia, Indonesia, Ireland, Mexico, New
Zealand, Puerto Rico and Thailand. He holds degrees in Biology and Chemistry.
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Charles F. Lustick, R. Ph. Mr. Lustick has over 20 years of practicing
pharmacy and is a well respected professional in this field. He has intimate
contact with patients and coordinates the development of new products. Through
his practice he gained significant experience on how natural products actual
work on patients.
Humberto Zardo, B.S. Ind. Pharm., MSc. Mr. Zardo is an independent
consultant in International Pharmaceutical Development to private and public
organizations within the health care business. His previous jobs in the industry
include Technical Director for the Program for Appropriate Technology in Heath,
Seattle, WA - USA and Director of Operations for Allergan (Brazil and
International). Mr. Zardo has contributed to the success of more than 25 health
care organizations in over 20 different countries. He holds a degree and
Industrial Pharmacy and post-graduation (Masters) in Biotechnology.
The current owners and the Board of Advisors will continue in their
capacities with Dermagen.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
------- -----------
10.1 Offer to Purchase Business and Stock of Dermagen,
Inc. dated July 22, 2005
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Amexdrug during the
quarter ended June 30, 2005.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
AMEXDRUG CORPORATION
Date: August 9, 2005 By: /s/ Jack Amin
---------------------------
Jack Amin
Director, President,
Chief Executive Officer,
Chief Financial Officer and
Chief Accounting Officer
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