AXRX AmexDrug Corporation (CE)

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.

Amexdrug Corporation is located at 8909 West Olympic Boulevard, Suite 208, 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.OB. The President of Amexdrug has had experience working in the pharmaceutical industry for the past 26 years.

Amexdrug Corporation, through its wholly-owned subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc. is a rapidly growing pharmaceutical and cosmeceutical company specializing in the research and development, manufacturing and distribution of pharmaceutical drugs, cosmetics and distribution of prescription and over-the-counter drugs, private manufacturing and labeling and a quality control laboratory. At Amexdrug Corporation, it is our anticipation to give our clientele the opportunity to purchase cost effective products while maximizing the return of investments to our shareholders.

Amexdrug Corporation distributes its products through its subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc. primarily to independent pharmacies and secondarily to small and medium-sized pharmacy chains, alternative care facilities and other wholesalers and retailers in the state of California.

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.

References in this report to "we," "our," "us," the "company" and "Amexdrug" refer to Amexdrug Corporation and also to our subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc.

Amexdrug currently has 50,000,000 shares of authorized common stock $.001 par value, of which 8,470,481 are issued and outstanding.

On December 31, 2001, Amexdrug acquired all of the issued and outstanding common shares of Allied Med, Inc., an Oregon corporation, ("Allied Med") in a related party transaction.

Allied Med was formed as an Oregon corporation in October 1997, to operate in the pharmaceutical wholesale business of selling a full line of brand name and generic pharmaceutical products, over-the-counter (OTC) drug and non-drug products and health and beauty products to independent and chain pharmacies, alternative care facilities and other wholesalers.

Amexdrug has assumed the operations of Allied Med, and Amexdrug intends to build on the pharmaceutical wholesale operations of Allied Med.

The accompanying financial information includes the operations of Allied Med for all periods presented and the operations of Amexdrug Corporation from April 25, 2000.

Amexdrug completed its purchase of Dermagen, Inc. on October 7, 2005. Dermagen, Inc. is now an operating subsidiary of Amexdrug. The acquisition of Dermagen, Inc. is not considered to be an acquisition of a significant amount of assets which would require audited financial statements of Dermagen, Inc.

Dermagen, Inc. is a growing manufacturing company specializing in the manufacturing and distribution of certain pharmaceuticals, medical devices, health and beauty products. Dermagen, Inc. has a U.S.-FDA registered and state FDA approved manufacturing facility licensed to develop high margin skin and novel health and beauty products for niche markets. Dermagen's competitive advantage is in its superior product research and development for large leading domestic and international companies.

In October 2003, Allied Med acquired 100% of the assets of Royal Health Care Company. Royal Health Care Company is a health and beauty company which has sold specially manufactured facial and body creams, arthritic pain relief medications and an exclusive patented hair care product to pharmacies, beauty salons, beauty supply stores and other fine shops. Royal Health Care Company uses the highest quality ingredients for the finest quality products. Each product has been formulated with the essential ingredients and plant extracts to achieve optimum potential and quality. Royal Health Care Company products are manufactured by Dermagen, Inc., in an FDA approved manufacturing facility.

The Royal Health Care Company assets acquired include the "Royal Health Care Company" name, logo, and related trademarks, all formulas to products manufactured for sale under the Royal Health Care Company name, and the Royal Health Care Company list of customers. These intellectual property rights were acquired without cost from a company in which Jack Amin's wife is a principal shareholder. Mr. Amin is the CEO and Chairman of Amexdrug Corporation and Allied Med, Inc. Management believes this acquisition will provide the Company with an opportunity to increase the number of products sold by the Company, and expand the Company's customer base.

On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health Care, Inc. as a Nevada corporation. Royal Health Care, Inc. was formed to manufacture and sell health and beauty products.

On November 8, 2004, Amexdrug formed a new subsidiary, BioRx Pharmaceuticals, Inc. as a Nevada corporation. BioRx Pharmaceuticals, Inc. is committed to offer over the counter (OTC) products that are recommended with trust and faith by physicians, primarily podiatrists and dermatologists. The focus and mission of BioRx Pharmaceuticals, Inc. is to create, develop and manufacture products to help ease pain and restore and maintain the overall well-being of our customers. We strive for high performance and quality. Our commitment is to offer natural and OTC products that are recommended with confidence by doctors and pharmacists and that the customer can use with pleasure. Our compliance program is diligently followed through the Company. BioRx Pharmaceuticals, Inc. maintains high ethics for animal welfare and our products are never tested on animals. All products are made in the USA.

A total of nine products have been manufactured for sale by BioRx Pharmaceuticals, Inc., and a total of ten products are under different stages of development. These over-the-counter and natural products are effective for treatment of fungus, arthritis, sunburn protection and for healthy feet and nails. BioRx Pharmaceuticals is planning to sell these products to national chain drugstores, sport chain stores, natural food markets and other mass markets. These products will be marketed under the names of Sponix and Bactivex, and will be sold under the name of BioRx Pharmaceuticals.

For the three months ended September 30, 2007, Amexdrug reported sales of $1,248,547, comprised entirely of income from the Company's pharmaceutical wholesale business of selling brand name and generic pharmaceutical products, and over-the-counter (OTC) and health and beauty products. This is $276,426 more than the $972,121 of sales reported for the three months ended September 30, 2006. For the nine months ended September 30, 2007, sales reported by Amexdrug were $4,721,093, which is $1,313,692 more than the $3,407,401 of sales reported for the nine months ended September 30, 2006. During the three and nine month periods ended September 30, 2007, Amexdrug experienced an increase in total sales due, in part, to an increase in sales of Dermagen products and to an increased customer base. Cost of goods sold for the three months ended September 30, 2007 was $1,165,679, an increase of $266,387 over the $899,292 cost of goods sold for the three months ended September 30, 2006. Cost of goods sold for the nine months ended September 30, 2007 was $4,361,981, an increase of $1,287,419 over the $3,074,562 cost of goods sold for the nine months ended September 30, 2006. During the three months ended September 30, 2007 gross profit increased by $10,039 to $82,868 or 6.6% of sales for the three months ended September 30, 2007, from the $72,829 or 7.5% of sales recorded for the three months ended September 30, 2006. For the nine months ended September 30, 2007 gross profit increased by $26,273 to $359,112 or 7.6% of sales from the $332,839 or 9.8% of sales recorded for the nine months ended September 30, 2006.

Selling, general and administrative expense was $144,752 for the three months ended September 30, 2007, an increase of $66,997 from the $77,755 recorded for the three months ended September 30, 2006. For the nine months ended September 30, 2007, Amexdrug reported selling, general and administrative expense of $381,706, an increase of $54,817 from the $326,889 reported for the nine months ended September 30, 2006. Interest and other income was $55,415 for the three months ended September 30, 2007, compared to $0 recorded for the three months ended September 30, 2006. For the nine months ended September 30, 2007, Amexdrug earned interest and other income of $110,862, compared to $0 recorded for the nine months ended September 30, 2006.

During the three months ended September 30, 2007, Amexdrug experienced a net loss of $8,284, as compared to a net loss of $5,283 experienced in the three months ended September 30, 2006. During the nine months ended September 30, 2007, Amexdrug experienced net income of $84,786, which is $81,475 greater than the $3,311 of net income earned during the nine months ended September 30, 2006.

As of September 30, 2007, Amexdrug reported total current assets of $596,460, comprised of cash of $72,115, accounts receivable of $304,128, inventory of $87,909, inventory - BioRx of $112,220, deferred tax asset of $11,800 and an account settlement receivable of $8,288. Total assets as of September 30, 2007 were $652,719, which included total current assets, plus net property and equipment of $18,722, lease deposits of $12,158, customer base of $6,084 trademark of $1,530 and goodwill of $17,765.

Amexdrug's liabilities as of September 30, 2007 consisted of accounts payable of $390,740, notes payable to related parties of $62,343, accrued liabilities of $6,138, accrued income taxes of $19,724 and business line of credit balance of $58,217.

During the nine months ended September 30, 2007, Amexdrug's operating activities used $35,511 cash compared to $86,898 cash used in Amexdrug's operating activities in the nine months ended September 30, 2006. The primary adjustments to reconcile net income to net cash used in operating activities during the first nine months of 2007 were as follows: an increase in inventory of $58,280, an increase in accounts receivable of $99,918, an increase of accounts payable and accrued liabilities of $51,840, depreciation expense of $21,233, an increase in allowance for doubtful accounts of $29,788, an increase of $13,954 in deferred income tax liability. Cash decreased during the nine months ended September 30, 2007 by $16,902 compared to a decrease during the nine months ended September 30, 2006 of $74,817. Cash from operating activities in the nine months ended September 30, 2007 decreased primarily due to increases in accounts receivable and inventory. Operations have primarily been funded through loans and/or capital infusions from related parties, and from drawing upon the Company's line of credit. Management does not anticipate that Amexdrug will need to seek additional financing during the next twelve months.

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.