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 Quarter Ended: July 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 000-27119
MEDI-HUT CO., INC
(Exact name of registrant as specified in its charter)
Delaware 222-436-721
(State of incorporation) (I.R.S. Employer
Identification No.)
1935 Swarthmore Avenue
Lakewood, New Jersey 08701
(732) 901-0606
(Address and telephone number of principal executive offices and principal
place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
As of September 11, 2000, the Registrant had a total of 10,829,800
shares of common stock issued and outstanding.
<PAGE>
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements..............................................3
Item 2: Management's Discussion and Analysis or Plan of Operations........11
PART II: OTHER INFORMATION
Item 6: Exhibits and Reports filed on Form 8-K............................15
Signatures.................................................................16
<PAGE> 2
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
Medi-Hut Co., Inc. Consolidated Financial Statements July 31, 2000.
Balance Sheet July 31, 2000 F-1
Cash Flow Statement July 31, 2000 and 1999 F-3
Income statement July 31, 2000 and 1999 F-4
Notes F-5
<PAGE> 3
Medi-Hut Co., Inc.
Consolidated Condensed Interim Balance Sheet
July 31, 2000
July 31, 2000
-------------
ASSETS
CURRENT ASSETS
Checking account $ 17,670
Money market account 614,850
Investment - Commercial Paper 600,000
Accounts Receivable 614,582
Accrued Interest Receivable 1,133
Prepaid Insurance 7,676
Merchandise Inventory 270,810
-------------
TOTAL CURRENT ASSETS 2,126,721
PROPERTY AND EQUIPMENT, NET OF 1,590
ACCUMULATED DEPRECIATION
OTHER ASSETS
Patent, Net of Amortization 32,857
Deposits on Equipment 138,389
-------------
TOTAL OTHER ASSETS 171,246
-------------
TOTAL ASSETS $ 2,299,557
=============
See Notes to Consolidated Condensed Interim Financial Statements
** Unaudited **
F-1
<PAGE> 4
Medi-Hut Co., Inc.
Consolidated Condensed Interim Balance Sheet
July 31, 2000
July 31, 2000
-------------
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts Payable $ 663,015
Payroll Taxes Payable 3,198
Accrued Expenses 2,865
Accrued Income Taxes Payable 80,252
-------------
TOTAL CURRENT LIABILITIES 749,330
EQUITY
Capital Stock 10,543
Additional paid in capital 2,847,040
Prepaid Expenses- Current (59,073)
Retained (Deficit)/Earnings (1,248,283)
-------------
TOTAL EQUITY 1,550,227
-------------
TOTAL LIABILITIES AND EQUITY $ 2,299,557
=============
See Notes to Consolidated Condensed Interim Financial Statements.
** Unaudited **
F-2
<PAGE> 5
Medi-Hut Co., Inc.
Consolidated Condensed Interim Cash Flow Statements
For the Nine Months Ended July 31, 2000 & July 31, 1999
RESTATED
Nine Months Nine Months
Ended Ended
Description July 31, 2000 July 31, 1999
----------- ------------- -------------
Net Cash Provided by Operating Activities 353,644 (119,906)
Cash Flows from Investing Activities -
Purchases of patent and licensing costs (8,238) (300)
Deposits on equipment (138,389)
Purchase of equipment (1,808) 0
------------- -------------
Net Cash (Used) by Investing Activities (148,435) (300)
Cash Flows from Financing Activities -
Issuance -of warrants for consulting fees 23,500
Issuance of Common Stock 34,793 0
------------- -------------
Net Cash Provided by Financing Activities 34,793 23,500
Net Increase (Decrease) in Cash 240,002 (96,706)
Cash at Beginning of Period 392,518 236,577
------------- -------------
Cash at End of Period $ 632,520 $ 139,870
============= =============
See Notes to Consolidated Condensed Interim Financial Statements.
**UNAUDITED**
F-3
<PAGE> 6
Medi-Hut Co., Inc.
Consolidated Condensed Interim Income Statement
For the Quarters Ended and Nine Months Ended July 31, 2000 and July 31, 1999
<TABLE>
<CAPTION>
RESTATED RESTATED
May 1, 2000 May 1, 1999 November 1,1999 November 1,1998
to to to to
July 31, 2000 July 31, 1999 July 31, 2000 July 31, 1999
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
SALES
Sales $ 1,978,620 $ 1,041,087 $ 5,475,643 $ 3,162,334
Sales discounts (3,104) (350) (5,077) (3,457)
------------- ------------- --------------- ---------------
Total SALES 1,975,516 1,040,737 5,470,566 3,158,877
COST OF SALES
BEGINNING INVENTORY 175,362 105,250 28,500 24,558
Purchases 1,769,675 918,362 5,068,126 2,891,525
Purchases discounts (26,258) (778) (26,321) (6,916)
Freight In 0 0 2,167 1,520
Ending Inventory (270,810) (82,468) (270,810) (82,468)
Freight out 2,246 81 5,770 998
------------- ------------- --------------- ---------------
Total COST OF SALES 1,650,215 940,447 4,807,432 2,829,217
------------- ------------- --------------- ---------------
Total GROSS PROFIT 325,301 100,290 663,134 329,660
GENERAL & ADMINISTRATIVE 111,028 139,271 389,603 451,583
------------- ------------- --------------- ---------------
Total NET OPERATING
INCOME (LOSS) $ 214,273 $ (38,981) $ 273,531 $ (121,923)
OTHER (INCOME) AND
EXPENSES
Interest Income (16,415) (420) (45,271) (1,779)
Interest Expense 0 1,420 0 3,082
Depreciation Expense 144 0 218 263
Amort of Organization
Expense 601 (568) 1,881 711
------------- ------------- --------------- ---------------
Total OTHER (INCOME)
AND EXPENSES (15,670) 432 (43,172) 2,277
------------- ------------- --------------- ---------------
NET INCOME (LOSS)
BEFORE TAX 229,943 (39,413) 316,703 (124,200)
INCOME TAXES
Provision for
Income Taxes 80,252 1,656 85,033 2,511
------------- ------------- --------------- ---------------
INCOME TAXES 80,252 1,656 85,033 2,511
------------- ------------- --------------- ---------------
NET INCOME (LOSS) $ 149,691 $ (41,069) $ 231,670 $ (126,711)
============= ============= =============== ===============
INCOME/(LOSS)
PER COMMON SHARE 0.014 (0.005) 0.022 (0.015)
============= ============= =============== ===============
INCOME /(LOSS) PER COMMON
SHARE ASSUMING DILUTION 0.013 0.021
============= ===============
See Notes to Consolidated Condensed Interim Financial Statements.
**Unaudited**
F-4
</TABLE>
<PAGE> 7
Medi-Hut Co., Inc.
Notes to the Consolidated Condensed Interim Financial Statements
July 31, 2000 and 1999
NATURE OF ORGANIZATION
Medi-Hut Co., Inc. (the Company), is a company in the business of selling
wholesale medical supplies. The Company was incorporated on November 22, 1982
in the State of New Jersey. On January 28, 1998, the Company entered into an
Agreement and Plan of Reorganization (APR) with a public company Indwest, Inc.
(Indwest), a Utah company incorporated on August 20, 1981 (formerly known as
Gibraltor Energy, Gibraltor Group, Computermall of Philadelphia, Inc. and
Steering Control Systems, Inc.) Pursuant to the APR, Medi-Hut's shareholders
exchanged 100% of their common shares for 4,295,000 newly issued shares of
Indwest on March 3, 1998.
For accounting purposes, the acquisition has been treated as an
acquisition of Indwest by Medi-Hut and a recapitalization of Medi-Hut. The
historical financial statements prior to January 28, 1998 are those of
Medi-Hut. Pro-forma information is not presented since the combination is
considered a recapitalization. Subsequent to the exchange, Medi-Hut merged
with Indwest whereby Medi-Hut ceased to exist and Indwest, the surviving
corporation, changed its name to Medi-Hut Company, Inc. On February 2, 1998
Medi-Hut Company, Inc. changed its state of domicile from Utah to Delaware.
The surviving corporation's operations are entirely those of the former and
new Medi-Hut.
Acquisition of Vallar Consulting Group and Restatement
-------------------------------------------------------
On April 4, 2000, the Company acquired Vallar Consulting Group in a
business combination accounted for as a pooling of interests. Vallar
Consulting Group, which engages in the sales of medical supplies, became a
wholly owned subsidiary of the Company through the exchange of 350,000
restricted shares of the Company's common stock for all of the outstanding
stock of Vallar Consulting Group. The accompanying financial statements for
July 31, 1999 and 2000 are based on the assumption that the companies were
combined for the three months and nine months ended July 31, 1999 and 2000 and
financial statements of prior years have been restated to give effect to the
combination.
Following is a reconciliation of the amounts of net sales and net income
previously reported for the 3 month and 9 month periods ending July 31, 1999
with restated amounts:
May 1, 1999 November 1, 1998
to to
July 31, 1999 July 31, 1999
--------------- ---------------
Net sales
As previously reported $ 169,275 $ 544,491
Vallar Consulting Group 871,462 2,614,386
--------------- ---------------
As restated $ 1,040,737 $ 3,158,877
=============== ===============
**UNAUDITED**
F-5
<PAGE> 8
Medi-Hut Co., Inc.
Notes to the Consolidated Condensed Interim Financial Statements
July 31, 2000 and 1999
May 1, 1999 November 1, 1998
to to
July 31, 1999 July 31, 1999
--------------- ----------------
Net Income
As previously reported $ (37,888) $ (117,168)
Vallar Consulting Group (3,181) (9,543)
--------------- ----------------
As Restated $ (41,069) $ (126,711)
=============== ================
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Medi-Hut
Co., Inc. and all of its wholly owned subsidiaries. All significant
inter-company balances and transactions have been eliminated. Prior to April
4, 2000, the company and Vallar Consulting Group, in the normal course of
business, entered into certain transactions for the purchase and sale of
merchandise. These inter-company transactions have been eliminated in the
accompanying financial statements.
BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed interim financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to item
310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three
months ended July 31, 2000 and 1999 are not necessarily indicative of the
results that may be expected for the years ended October 31, 2000 and 1999,
respectively.
NOTES PAYABLE
The Company has in place a $ 50,000 working capital line of credit under
which the bank has agreed to make loans at 2% above the prime interest rate.
As of July 31, 2000 there was $ 0 outstanding.
**UNAUDITED**
F-6
<PAGE> 9
Medi-Hut Co., Inc.
Notes to the Consolidated Condensed Interim Financial Statements
July 31, 2000 and 1999
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share, in accordance with the provisions of
Financial Accounting Standards Board No. 128, "Earnings per Share", is
computed by dividing net income (loss) by the weighted average number of
shares of common stock outstanding during the period. Common stock
equivalents (warrants) have not been included in this computation as of July
31, 1999 since the effect would be anti-dilutive. At July 31, 2000, the
following amounts were used in computing earnings per share and the effect on
the weighted average number of shares of dilutive potential common stock. The
number of shares used in the calculations for July 31, 2000 reflect of the
common stock equivalents (warrants) if exercised:
Qtr Ended 9 Mos. Ended
7/31/00 7/31/00
-------------- --------------
Weighted average number of common
shares used in basic EPS 10,829,800 10,626,954
Effect of Dilutive Securities:
Warrants 375,926 375,926
-------------- --------------
Weighted average number of common
shares and dilutive potential
common stock used in diluted EPS 11,205,726 10,878,493
============== ==============
**UNAUDITED**
F-7
<PAGE> 10
In this quarterly report references to "Medi-Hut," "we," "us," and "our" refer
to Medi-Hut Co., Inc.
FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-QSB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Medi-Huts' control. These factors include but are not limited to economic
conditions generally and in the industries in which Medi-Hut may participate;
competition within Medi-Huts' chosen industry, including competition from
much larger competitors; technological advances and failure by Medi-Hut to
successfully develop business relationships.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
We private label condoms, alcohol prep pads, over-the-counter drugs and
medical devices through various suppliers, as well as, wholesale name brand
drugs and medical devices. We sell our own "Elite" brand of medical supplies
and Tru-Choice brand of over-the-counter drugs. We also hold a patent for a
passive device safety syringe, an anti-stick syringe, which we hope to
introduce into the market in the coming fiscal year. We sell our products
through drug wholesalers who then sell the products to pharmacies and through
mail order.
Results of Operations
The following table summarizes the results of our operations for the
three and nine month periods ended July 31, 2000 and 1999. The July 31, 2000
and 1999 numbers are based on the assumption that we and our wholly-owned
subsidiary, Vallar Consulting, Inc., have been combined for the nine months
ended July 31, 2000 and 1999. Our fiscal year ends October 31st.
<PAGE> 11
Three Months Ended Nine Months Ended
July 31, July 31,
1999 2000 1999 2000
------------ ------------ ------------ ------------
Total Sales $ 1,040,737 $ 1,975,516 $ 3,158,877 $ 5,470,566
Cost of Sales 940,447 1,650,215 2,829,217 4,807,432
Gross Profit 100,290 325,301 329,660 663,134
General & Administrative
Expenses 139,271 111,028 451,583 389,603
Net Operating Income
or (Loss) (38,981) 214,273 (121,923) 273,531
Total Other (Income)
and Expenses 432 (15,670) 2,277 (43,172)
Income taxes 1,656 80,252 2,511 85,033
Net Income (Loss) (41,069) 149,691 (126,711) 231,670
We realize revenue when products are shipped and title passes to our
wholesalers. Total sales increased $2,311,689 for the nine month period and
$934,779 for the third quarter ended July 31, 2000 compared to the comparable
periods of 1999. This increase in sales for the nine month period was
primarily the result of our acquisition of Vallar and adding name brand
pharmaceuticals to our product line.
Costs of sales primarily consist of the cost of the products purchased
from third-party vendors and shipping costs. Cost of sales decreased to 83.5%
of total sales for the 2000 third quarter and 87.9% of total sales for the
2000 nine month period compared to 90.4% and 89.6%, respectively, for the
comparable 1999 periods.
Our gross profit increased $225,011 for the 2000 third quarter and
$333,474 for the 2000 nine month period compared to the 1999 periods. As a
result, our gross profit increased to 12.1% of total sales for the 2000 nine
month period compared to 10.4% for the 1999 nine month period.
General and administrative expenses include employee salaries and
benefits, employee travel expenses, selling expenses, office expenses and
occupancy costs and legal and accounting fees. General and administrative
expenses decreased $28,243 for the 2000 third quarter compared to the 1999
third quarter and $61,980 for the 2000 nine month period compared to the nine
month period for 1999. The decrease for these expenses resulted primarily
from lower officer salaries and related payroll expenses in the 2000 time
periods.
As a result of our increased sales we have recorded a net income for the
2000 periods versus operating losses for the 1999 periods. We had
earnings per share of $.022 for the 2000 nine month period compared to a loss
per share of $.015 for the 1999 nine month period.
<PAGE> 12
Liquidity and Capital Resources
We have funded our cash requirements primarily through revenues and sales
of our common stock. We have required little short term debt financing and
management anticipates we will meet our present requirements for working
capital and capital expenditures for the next twelve months if we do not build
our own syringe manufacturing facility. Our working capital was $1,377,391
for the 2000 nine month period. For that period we recorded $632,520 in cash
reserves with total current assets of $2,126,721 and total current liabilities
of $749,330.
28.2% of our total currents assets for the 2000 nine month period were
allocated to marketable securities, 28.9% to accounts receivable and 12.7% to
inventory. The marketable debt securities had a maturity date of August 21,
2000 with a 6.5% fixed interest rate, are unsecured and roll over each month.
They have no termination or redemptive provisions.
Our principal commitments consist of office and warehouse space with
future annual minimum rental payments of $10,757 through the year 2000. We
are also committed to provide $210,000 in funding for the development of our
Elite Safety Syringe.
Net cash provided by our operating activities was $353,644 for the 2000
nine month period compared to cash used by operating activities of $119,907
for the 1999 nine month period. As discussed above this increase is due to
increased sales.
Net cash used by investing activities for the 2000 nine month period was
$148,435 compared to $300 for the 1999 nine month period. The majority of
the funds have been invested in our Elite Safety Syringe. We expended $88,389
for the safety syringe molds, $8,238 was spent for new product patent and
licensing costs, and $50,000 was spent on assembly equipment. We also
invested $1,808 in computer equipment during our second quarter of 2000.
We are working toward bringing the Elite Safety Syringe to market within
the next fiscal year. (See, Part II: Item 5, below.) As of August 18, 2000,
sixteen states have passed safety needle legislation which requires that
health care workers be provided with anti-stick needles for their protection.
Management believes these developments will enhance the market for our Elite
Safety Syringe.
Net cash provided by financing activities was $34,793 for the nine month
period of 2000 compared to $23,500 for the 1999 nine month period. These
amounts were related to the issuance of shares and warrants in exchange for
consulting services.
Financing
----------
We have a working capital line of credit for $50,000 with PNC Bank, N.A.
with an interest rate of 2% above the prime interest rate, which we expect to
be renewed within the next 30 days. We also have a $150,000 revolving line
of credit we obtained in October of 1997.
<PAGE> 13
Under this loan PNC Bank, N.A. makes loans to us at 3% above the prime
interest rate. This line of credit expires October 10, 2000, but we have
received notice that it will be approved for another year. Both lines of
credit are secured by all the assets of Medi-Hut and personal guarantees of
our executive officers. We had a $0 balance on both lines of credit at the
end of the nine month period.
Management anticipates that we will seek additional funding through
future securities offerings which will be effected pursuant to applicable
exemptions under federal and state laws. We have not entered into any
agreement with any person at the time of this filing for such offerings. We
will determine the purchasers and manner of issuance according to our
financial needs and the available exemptions. We also note that if we issue
more shares of our common stock our shareholders may experience dilution in
the value per share of their common stock.
On October 4, 1999, we received preliminary approval from the New Jersey
Economic Development Authority for $5.75 million in financial assistance to
build a manufacturing facility in New Jersey for our Elite safety syringe.
However, the New Jersey Authority may not be able to allocate tax-exempt
private activity bonds if it receives financing requests which exceed its
private activity bond caps or if it determines that other projects should have
priority over Medi-Hut's project. We are currently seeking an underwriter for
the bonds. We anticipate that we will rely on Sam Woo Corporation to
manufacture our Elite Safety Syringe until we are able to complete the funding
and construction of a New Jersey facility.
If additional funds are needed for our future growth, we can not assure
that funds will be available from any source, or, if available, that we will
be able to obtain the funds on terms agreeable to us. The acquisition of
funding through the issuance of debt could result in a substantial portion of
our cash flows from operations being dedicated to the payment of principal and
interest on the indebtedness, and could render us more vulnerable to
competitive and economic downturns.
PART II: OTHER INFORMATION
ITEM 5: OTHER INFORMATION
Elite Safety Syringe
In August 2000 we received for our inspection the first six production
molds of the Elite Safety Syringe from Sam Woo Corporation. Minor changes
were required for three of the six molds. During our second and third quarter
we advanced $88,389 to pay for production of the prototype molds. Upon our
approval of the prototype molds, Sam Woo agreed to produce an assembling
machine within 180 days. In May 2000 we advanced $50,000 for production of
the assembling machine and anticipate its completion within the next 90 days.
We have agreed to pay the remaining half of the assembling machine costs,
$101,000, after we have inspected and approved the samples produced by the
assembling machine. We hope to complete the remaining steps required to begin
full production of the Elite Safety Syringe within the next twelve months.
<PAGE> 14
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Part I Exhibits.
Exhibit Description
--------- ---------------
10.1 Memorandum between Medi-Hut and Sam Woo Corporation
dated July 1, 1999.
27 Financial Data Schedule
(b) Reports on Form 8-K.
On August 25, 2000, we filed an 8-K announcing the termination of
the private offering to Midwest First Financial.
<PAGE> 15
SIGNATURES
Pursuant to 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 who are duly authorized.
Medi-Hut Co., Inc.
9/12/00 /s/ Joseph Sanpietro
Date: __________________________ By:__________________________________
Joseph Sanpietro, President
9/12/00 /s/ Vincent Sanpietro
Date: __________________________ By: _________________________________
Vincent Sanpietro, Secretary
9/12/00 /s/ Robert Russo
Date: ___________________________ By:____________________________________
Robert Russo, Treasurer
