As filed with the Securities and Exchange Commission on January 16, 2001
Registration No. 333- _____
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
MEDI-HUT CO., INC.
(Name of issuer in its charter)
Delaware 5122 222-436-721
(State of incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
1935 Swarthmore Ave.
Lakewood, New Jersey 08701
(732) 901-0606
(Address and telephone number of registrant's principal executive offices
and principal place of business)
---------------
Joseph Sanpietro, President
1935 Swarthmore Ave.
Lakewood, New Jersey 08701
(732) 901-0606
(Name, Address and telephone number of agent for service)
---------------
Copies to:
Cindy Shy, Attorney
Cindy Shy, P.C.
525 South 300 East
Salt Lake City, Utah 84111
(801) 323-2392
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the registration statement becomes effective.
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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
Proposed
Amount Maximum Proposed Maximum Amount of
Title of Each Class of To be Offering Price Aggregate Offering Registration
Securities to be Registered Registered (1) Per Unit (2) Price Fee
--------------------------- -------------- -------------- ----------------- ------------
Common Stock 2,250,000 $ 6.96875 $15,679,687.50 $4,139.44
-------------------------------------------------------------------------------------------------
(1) This registration statement covers the resale by certain selling stockholders of
up to an aggregate of 2,250,000 shares of common stock, par value $0.001, of the
Company; 475,000 shares acquired by certain selling stockholders; and 1,775,000
shares which may be acquired by certain of the selling stockholders upon the
exercise of warrants. If there is a stock split, stock dividend or similar
transaction involving the Company's common stock, in order to prevent dilution,
the number of shares registered hereunder will automatically be increased to cover
the additional shares in accordance with Rule 416(a) under the Securities Act.
(2) Estimated solely for the purpose of calculating the registration fee in accordance
with Rule 457(g) under the Securities Act, based on the average of the bid and
asked prices of the Company's common stock on January 10, 2001.
</TABLE>
Medi-Hut hereby amends the registration statement on such date or dates as may
be necessary to delay its effective date until we shall file a further
amendment which specifically states that this registration statement shall
become effective in accordance with Section 8(a) of the Securities Acts of
1933 or until the registration statement shall become effective on such date
as the Commission, acting pursuant to Section 8(a), may determine.
ii
<PAGE>
PROSPECTUS
_____________________________________________________________________________
SUBJECT TO COMPLETION
The information in this prospectus is not complete and may be changed. We may
not sell these securities 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.
_____________________________________________________________________________
MEDI-HUT CO., INC.
a Delaware corporation
2,250,000 shares of common stock, par value $.001
___________
------------------------------------
| Trading Symbol | We are registering for resale 2,250,000
| | common shares of Medi-Hut common stock.
| NASD OTC Bulletin Board | Of these shares,475,000 shares are being
| "MHUT" | sold to a certain selling stockholder by
| High bid and low asked prices | Medi-Hut and 1,775,000 shares will be
|as reported by NASDAQ Trading and | acquired by selling stockholders upon
| Market Services | exercise of warrants. The selling
| On January 10, 2001: | stockholders are identified in this
| $7.19 and $6.75, respectively | prospectus.
| |
------------------------------------ We will not receive the proceeds from
the resale of the 2,250,000 common
shares sold by the selling stockholders.
We will receive the exercise price of
the warrants, which may result in
proceeds up to $6,706,250 if the selling
stockholders exercise all warrants.
Investing in the common stock involves a high degree of risk.
See "Risk Factors" beginning on page 4.
______________
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if
this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
__________________
Prospectus dated January ___, 2001
<PAGE>
TABLE OF CONTENTS
Prospectus Summary..........................................................3
Risk Factors................................................................4
Transactions Effected in Connection With The Offering.......................6
Use of Proceeds.............................................................7
Determination of Offering Price.............................................8
Selling Stockholders........................................................8
Plan of Distribution........................................................8
Description of Securities...................................................9
Interest of Named Experts And Counsel.......................................9
Commission's Position on Indemnification For Securities Act Liability.......10
Business....................................................................11
Market For Common Equity....................................................16
Management's Discussion And Analysis........................................16
Property....................................................................20
Management..................................................................20
Executive Compensation......................................................21
Security Ownership of Certain Beneficial Owners And Management..............22
Certain Relationships And Related Transactions..............................22
Changes In And Disagreements With Accountants...............................22
Legal Proceedings...........................................................22
Index to Financial Statements...............................................23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Medi-Hut has filed this a registration statement on Form SB-2 to register
the Medi-Hut common stock to be issued in these transactions. As allowed by
the SEC rules, the prospectus does not contain all the information provided in
the registration statement. That information is available without charge to
you upon written or oral request. In addition, Medi-Hut undertakes to respond
to requests for the information within one business day of receipt of the
request. Medi-Hut will send the copies of the document by first class mail or
other equally prompt means. You must address your request to:
Investor Relations
Medi-Hut Co., Inc.
1935 Swarthmore Ave.
Lakewood, New Jersey 08701
_________________
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PROSPECTUS SUMMARY
Medi-Hut Co., Inc.
1935 Swarthmore Ave.
Lakewood, New Jersey 08701
(732) 901-0606
The Offering. Medi-Hut is registering for resale 2,250,000 common
shares as a result of a registration rights agreement, dated November 30,
2000, between Medi-Hut and Mid-West First National, Inc., Columbia Financial
Group, Inc. and Mutual Ventures Corporation, the selling stockholders. The
shares being registered are underlying common shares for warrants or units
which Medi-Hut issued or sold to the selling stockholders in certain
transactions. In November 2000, we agreed to sell 475,000 units, comprised of
common shares and warrants, in a private placement to Mid-West for $1,995,000.
As part of the negotiations, we agreed to register for resale by Mid-West the
unit shares and shares to be issued upon exercise of the unit warrants. In
1998, 1999 and 2000 we entered into consultant agreements with Columbia
Financial, our investor relations firm. We agreed to register 1,300,000
common shares to be issued upon the exercise of warrants we issued to Columbia
Financial for services rendered to us under the agreements. Mutual Ventures
is an assignee of a portion of the warrants originally issued to Columbia
Financial. These transactions and the terms of the agreements are described
in more detail in the "Transactions Effected in Connection with the Offering"
section starting on page 6.
We will receive $1,995,000 from Mid-West for the private placement of the
475,000 units, but we will not receive any of the proceeds from the resale of
the 2,250,000 shares which are being registered. These shares will be sold
from time to time and at the total discretion of the selling stockholders.
See, the "Plan of Distribution" starting on page 8 for further details on the
rights of the selling stockholders in regards to the manner of any sales.
However, we may receive proceeds from the exercise of any and all of the
1,775,000 warrants. If all of the warrants are exercised we may receive
proceeds of approximately $6,706,250. We intend to use these proceeds for
working capital.
The Company. We wholesale name brand drugs, medical products, our Elite
Safety Syringe, our "Elite" brand and private label medical products and our
"Tru-Choice" over-the-counter drugs. These products are provided to us by
various suppliers. We sell our products through drug wholesalers who then sell
the products to pharmacies and through mail order. Our Elite Safety Syringe,
an anti-stick safety syringe, incorporates a transparent sleeve into which the
needle automatically retracts after use. Further discussions of our business
and operations can be found in the "Business" section starting on page 11 and
the "Management's Discussion and Analysis" starting on page 16.
We have recorded net income for the fiscal year 2000 and a net loss for
the fiscal year 1999. 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 expects with the introduction of our new Elite
Safety Syringe and financing we will meet our present requirements for working
capital and capital expenditures for the next twelve months. The following
table sets forth certain selected financial data of Medi-Hut for the fiscal
year ended October 31, 2000, and 1999. The information contained in the
following table should be read in conjunction with the "Management's
Discussion and Analysis" starting on page 16 and the historical financial
statements and related notes included elsewhere in this prospectus.
YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------ -----------------
(Restated)
Revenues $ 8,130,696 $ 4,758,268
Net income (loss) 235,000 (87,186)
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Net income (loss) per common
share basic and diluted 0.02 (0.01)
Total assets $ 3,572,298 $ 1,839,200
RISK FACTORS
Risks related to our business
We have recorded net income in our most recent fiscal year, but
consistently incurred net losses in prior years. For fiscal year 2000 we
posted a net income of $235,000, however, we had posted net losses for
previous years. We have financed ourselves through revenues, loans and sales
of our common stock. We anticipate that we will require additional equity or
debt financing from third parties to finance our operations, which may not be
available to us or on terms which are acceptable to us. Please refer to the
"Liquidity and Capital Resources" section on page 18 for a more detailed
description.
Our quarterly results could fluctuate and we cannot be certain that
future results will be similar to past results. We do not believe that
period-to-period comparisons of our results of operations will necessarily
provide investors with meaningful data for the foreseeable future because of
variations in our operations. We recently acquired and consolidated
operations with our wholly owned subsidiary which has resulted in restated
financial statements that reflect the consolidation. Our operating results in
the future may vary significantly, depending on factors such as revenue from
product sales, variations in product revenues line, changes in our operating
expenses, changes in our business strategy, and general economic factors. Our
revenues will also be difficult to forecast because the markets for our
products are evolving and our revenues in any period could be significantly
affected by new product announcements or product launches by our competitors.
We will need additional capital and may be unable to raise it. We
believe, based on our current expenditure rate and future commitments, that we
will need $1.4 million additional financing for fiscal year 2001. If we fail
to obtain funds on acceptable terms, we might be forced to delay or abandon
some or all of our business plans, which could have a material adverse effect
on our operations. Our success will depend upon our ability to increase
revenues from our product sales, access equity capital markets and borrow on
terms that are financially advantageous to us. If we are unable to obtain
additional capital, we may not have sufficient working capital to develop our
new product lines, finance acquisitions, pursue business opportunities, or
meet reporting requirements. If we borrow funds, we could be forced to use a
large portion of our cash reserves to repay principal and interest on those
funds. If we issue our common stock for capital, the interests of investors
and stockholders could be diluted.
We are subject to intense competition and we may not be able to compete
successfully in the market. We estimate that we have only a 1% market share of
our markets. We compete with companies large and small which wholesale name
brand drugs and medical products. Many of these companies have brand name
recognition and significantly greater financial, technical, marketing, and
managerial resources. The primary factors which allow us to remain in the
market is the price and quality of our products. We expect competition to
persist, increase, and intensify in the future as the markets for our products
develop and as additional competitors enter our market.
We depend upon our patent and proprietary rights, none of which can be
completely safeguarded against infringement. Our ability to compete
effectively will depend, in part, upon our ability to protect our Elite Safety
Syringe patent. (See "Patent, Trademark, License and Intellectual Property,"
on page 13.) Competition in our market is intense and our competitors may
independently develop or obtain patents on syringes that are substantially
equivalent or superior to ours. Intellectual property rights, by their
nature, are uncertain and involve complex legal and factual questions. We may
unknowingly infringe upon the proprietary rights of others, thereby exposing
us to significant liability and/or damages. We are not aware of any third
party intellectual property rights which would prevent us from marketing and
developing our Elite Safety Syringe although such rights may exist. If we
were to inadvertently infringe upon the intellectual property of another
party, we could be forced to seek a
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<PAGE>
license to those intellectual property rights, alter the products or processes
so they no longer infringe upon those rights, or engage in litigation. If we
were required to attempt to obtain a license to another party's proprietary
rights, our efforts would be expensive, and might be unsuccessful.
Our directors and officers are able to exercise significant influence
over matters requiring stockholder approval. Currently, our directors and
executive officers and their affiliates collectively own approximately 35.3%
of our outstanding shares. This concentration of ownership may have the
effect of delaying or preventing a change in control. Pursuant to Delaware
corporate statutes, the holders of a majority of our common stock may
authorize or take corporate action without notice to or the consent of the
stockholders. Our minority stockholders may not have the opportunity to
approve or consent to our involvement in an acquisition or other transaction,
or to the terms of that transaction. A shareholder vote may not be made
available, and in any event, a shareholder vote would be controlled by the
majority stockholders.
We will be dependent upon customers which may leave us at any time. We
expect to derive revenues from our major customers. In the event one or more
of our major customers were to use other wholesalers, we could experience a
substantial drop in revenues. Our success in establishing our Elite Safety
Syringe, Elite name brand medical products and Tru-Choice Drugs as a
recognized brand name and achieving their acceptance in the market will depend
in part on our ability to continually deliver a quality product at a
competitive price.
We may be subject to risks associated with global operations, including
fluctuating currency exchange rates and political instability. We have
entered into agreements with suppliers located in Korea and may establish
similar arrangements in other countries. As a result, our future revenues may
be affected by the economies of such countries. In addition, international
operations are subject to a number of risks, longer payment cycles, unexpected
changes in regulatory environments, import and export restrictions and
tariffs, difficulties in staffing and managing international operations,
greater difficulty or delay in accounts receivable collection, potentially
adverse recessionary environments and economies outside the United States, and
political and economic instability.
Risks related to the offering
The future sale of common stock could pose investment risks, including
substantial dilution to our stockholders. The market price of our common
stock could drop as a result of sales of the common stock in the market after
the effective date of this registration statement or the perception that such
sales could occur. These factors could also make it more difficult for us to
raise funds through future offerings of our common stock. After the purchase
of units by Mid-West, there will be a total of approximately 11,404,800 shares
of common stock outstanding. If all warrants are exercised shortly after the
effective date of this registration statement, it is possible that we will
have 13,179,800 shares outstanding, with approximately 8,852,094 shares freely
transferable without restriction or further registration under the Securities
Act of 1933 (the "Securities Act"). Approximately 3,859,000 shares of our
common stock will be held by our "affiliates," as defined in Rule 144 under
the Securities Act, and will be "restricted securities," as defined in Rule
144. The Rule 144 common stock held by our affiliates may be sold in the
future without further registration under the Securities Act to the extent
those sales are permitted by Rule 144 or any other exemption under the federal
securities laws.
Investors may have difficulty selling our shares. There has not been a
large public market for our common stock and it has traded on the
over-the-counter market only since February 1998. We do not know the extent
to which investor interest in our stock will lead to the development of an
active trading market for our stock or how liquid that market might be.
Investors may be unable to resell their Medi-Hut common stock at or above the
price they paid for their Medi-Hut common stock.
Also, our stock may qualify as a "penny stock" under the Penny Stock
Suitability Reform Act of 1990. The SEC generally defines penny stock to be
any equity security that has a market price less than $5.00 per share, subject
to certain exceptions. If our shares are deemed to be a penny stock, trading
in the shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established
5
customers and accredited investors.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such security and must have
received the purchasers written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock. A broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities.
Finally, monthly statements must be sent disclosing recent price information
for the penny stocks held in the account and information on the limited market
in penny stocks. Consequently, these rules may restrict the ability of
broker-dealers to trade and/or maintain a market in our common stock and may
affect the ability of shareholders to sell their shares.
We have not paid dividends. We have never paid a dividend on our common
stock. We intend to retain future earnings to finance our growth and
development and do not plan to pay cash or stock dividends in the foreseeable
future.
Note About Forward Looking Statements
This prospectus 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 prospectus 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.
TRANSACTIONS EFFECTED IN CONNECTION WITH THE OFFERING
On November 30, 2000, Medi-Hut entered into a registration rights
agreement with Mid-West First Financial, Inc., Mutual Ventures Corporation and
Columbia Financial Group, Inc., the selling stockholders. (See the "Selling
Stockholders," below.) We agreed to file a registration statement with the
SEC to register for resale an aggregate of 2,250,000 common shares, these
shares include 475,000 purchased by Mid-West, and 1,775,000 shares to be
acquired by the selling stockholders upon exercise of certain warrants, which
are described below. The warrants are not being registered for sale, only the
shares that the selling stockholders may obtain upon exercise of the warrants
are being registered for sale.
Under the terms of the registration rights agreement we agreed to file
a registration statement by December 31, 2000 and use our best efforts to
cause the registration statement to be effective by February 15, 2001. If we
fail to file a registration statement by January 16, 2001, or the registration
statement is not declared effective by February 15, 2001, we may be liable for
liquidated damages. We will bear the costs of the registration and are
required to keep the registration statement current until all the shares are
sold, the shares can be sold under the provisions of Rule 144 without
limitation, or five years after the subscription date. The registration
agreement will terminate upon the earliest of the following:
* all of the shares are registered;
* all of the registered shares have been sold by the selling
stockholders;
* the selling stockholders may sell the shares under the provisions
of Rule 144 without volume limitation; or
* five years from issuance of the shares.
We have agreed to indemnify each selling stockholder for liabilities
arising under the Securities Act in
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relation to this registration statement and prospectus, as amended. (See,
"Commission's Position on Indemnification for Securities Act Liability.")
The shares to be registered under the registration rights agreement are
related to separate transactions between Medi-Hut and each selling
stockholder. In an arms-length transaction, we entered into a Unit Purchase
Agreement, dated November 30, 2000, with Mid-West, an accredited investor.
Mid-West agreed to purchase 475,000 units, at $4.20 per unit, for $1,995,000.
Each unit consists of one share of Medi-Hut common stock and one warrant for
the right to purchase one additional common share at an exercise price of
$5.25. The units were sold in reliance on an exemption from the registration
requirements provided by Section 4(2) of the Securities Act of 1933. However,
we granted registration rights for the shares we sold to Mid-West and the
shares to be issued upon exercise of the warrants. In addition, Mid-West
agreed not to acquire or own more than 4.99% of our outstanding common stock
at any time.
Columbia Financial has been our investors relation firm since March of
1998. We have entered into three consultant agreements with Columbia
Financial since 1998. Columbia Financial provides consulting and services for
investor relations, public relations, publishing, advertising, fulfillment, as
well as, Internet related services. Columbia Financial provides such services
for a specified term, usually a year, for a set fee, but agreed to accept
warrants to purchase common shares in consideration for the services they
provide to us.
In connection with the consultant agreement with Columbia Financial in
March 1998, we issued warrants valued at $26,625 to purchase 200,000 common
shares at various exercise prices. Subsequently, Columbia assigned the
warrants to Mutual Ventures Corporation on April 10, 2000. In June 1999 we
issued warrants valued at $23,500 to purchase 500,000 common shares at various
exercise prices. In October 2000 we issued warrants valued at $2,041,000 to
purchase 600,000 common shares at an exercise price of $5.00. The warrants
issued to Columbia Financial in consideration for their services were
exercisable on the date of each agreement. None of the warrants issued have
been exercised as of the date of this filing.
The following chart describes the warrants issued in connection with the
transactions described above.
<TABLE>
<CAPTION>
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Number of
Selling Date Warrant Underlying Exercise Expiration Potential
Stockholder Exercisable Shares Price Date Proceeds
<S> <C> <C> <C> <C> <C>
------------ ----------------- ---------- -------- ------------------ ------------
Mutual March 2, 1998 50,000 $ 3.00 March 2, 2001 $ 150,000
Ventures " 50,000 3.50 " 175,000
" 50,000 4.00 " 200,000
" 50,000 5.00 " 250,000
------------ ----------------- ---------- -------- ------------------ ------------
Columbia
Financial June 1, 1999 125,000 $ 0.50 June 1, 2002 $ 62,500
" 125,000 0.75 " 93,750
" 125,000 1.00 " 125,000
" 125,000 1.25 " 156,250
------------ ----------------- ---------- -------- ------------------ ------------
Columbia
Financial October 1, 2000 600,000 $ 5.00 October 1,2005 $ 3,000,000
------------ ----------------- ---------- -------- ------------------ ------------
Mid-West November 30, 2000 475,000 $ 5.25 November 30, 2005 $ 2,493,750
-------------------------------------------------------------------------------------
</TABLE>
USE OF PROCEEDS
We are registering the shares for the benefit of the selling
stockholders and they will sell the shares from time to time under this
prospectus. We will not receive the proceeds from the resale of the 2,250,000
shares to be
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sold by the selling stockholders. The selling stockholders are not obligated
to exercise their warrants, and there can be no assurance that they will
exercise all or any of them. If they exercise all of the warrants we could
receive approximately $6,706,250 in proceeds. We intend to use these proceeds
for working capital, which may include payment of salaries, rent, research and
development, investigation of business opportunities, purchase of inventory
and marketing expenses. We will pay all the costs of this offering, with the
exception of the costs incurred by the selling stockholders for their legal
counsel and the costs they may incur for brokerage commissions on the sale of
their shares.
DETERMINATION OF OFFERING PRICE
We relied on the market price of our common stock to determine the
offering price of the units and the exercise price of the warrants issued in
the transactions described above. Due to the volatility in the price of our
common stock and the variations in the trading volume, we surveyed the quoted
trading price of our common stock on the NASD OTC Bulletin Board for
approximately 90 days prior to the transactions and used that information to
establish the price of the units and warrants. The quotations for the OTC
Bulletin Board represent prices between dealers and may not include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions. The range of the high and low bid prices of our stock as
reported by the Nasdaq Trading and Market Services can be found on page 16.
SELLING STOCKHOLDERS
The following table sets forth the name, number of shares of common
stock and the number of shares which may be purchased by the warrants owned by
each selling stockholder. Since the selling stockholders may sell all, a
portion or none of their shares, no estimate can be made of the aggregate
number of shares that are being offered or that will be owned by each selling
stockholder upon completion of the offering to which this prospectus relates.
The shares offered by this prospectus may be offered from time to time by the
selling stockholders named below:
NUMBER OF SHARES PERCENTAGE OF
RELATIONSHIP HELD PRIOR TO NUMBER OF OWNERSHIP
NAME TO MEDI-HUT OFFERING SHARES (1) AFTER OFFERING(2)
-------------- ------------- -------------- ---------- -----------------
Mid-West Accredited
investor 0 950,000 7.2%
Columbia Investor
Financial relations
firm 100 1,100,000 8.4%
Mutual Warrant
Ventures Holder 0 200,000 1.5%
(1) Includes ownership of shares issuable upon exercise of warrants.
(2) Estimated percentage assumes ownership percentage based on
13,179,800 shares, which include 10,929,800 shares which are
currently outstanding shares, plus the 475,000 common shares
issued with the units and assumes all 1,775,000 warrants are
exercised.
PLAN OF DISTRIBUTION
We have agreed to register these shares, but the registration of these
shares does not necessarily mean that any of them will be offered or sold by
the selling stockholders. The selling stockholders will have absolute
discretion as to the manner and timing of sales of the shares, when and
whether the warrants are exercised and the sale of the shares issued upon
exercise of the warrants. They may sell all or a portion of the shares
through public
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or private transactions, on or off established markets, or in negotiated
transactions or otherwise. The sales may be at prevailing prices or related
to the current market price or at negotiated prices. The shares may be sold
directly or through brokers or dealers, or in a distribution by one or more
underwriters on a firm commitment or best-efforts basis. The methods by which
the shares may be sold include:
* a block trade, which may involve crosses, in which the broker or dealer
will attempt to sell the securities as agent but may position and resell
a portion of the block as principal to facilitate the transaction;
* purchases by a broker or dealer as principal and resale by the broker or
dealer for its own account;
* ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
* privately negotiated transactions;
* The selling stockholders may deliver all or a portion of the shares to
cover a short sale or sales made after the date of this prospectus, or a
call equivalent position or a put equivalent position entered or
established after the date of this prospectus; and/or
* The selling stockholders may also sell all or any portion of the shares in
reliance upon Rule 144 under the Securities Act.
The distribution of the shares is not subject to any underwriting
agreement. The selling stockholders and any broker-dealers participating in
the distribution of the shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any profit on the sale of the shares by the
selling stockholders and any commissions received by any broker-dealers may be
deemed to be underwriting commissions or discounts under the Securities Act.
We will be subject to applicable provisions of the Securities Exchange
Act of 1934 and the rules and regulations promulgated under it, including,
without limitation, Regulation M, which may limit the timing of purchases and
sales of the shares by the selling stockholders and any other person.
Furthermore, Regulation M may restrict the ability of any person engaged in
the distribution of the shares to engage in market-making activities with
respect to the particular shares being distributed for a period of up to 5
business days prior to the commencement of the distribution. All of the
foregoing may affect the marketability of our shares and the ability of any
person or entity to engage in market-making activities with respect to the
shares.
In the event a particular offer of these shares is made we will
distribute a prospectus supplement, if required, that will identify the name
of any dealers or agents and any commissions and other terms constituting
compensation from the selling stockholders and any other required information.
These shares may be sold at varying prices determined at the time of sale or
at negotiated prices. In order to comply with the securities laws of certain
states, if applicable, these shares may be sold only through registered or
licensed brokers or dealers. In addition, in certain states, these shares may
not be sold unless they have been registered or qualified for sale in that
state or an exemption from the registration or qualification requirement of
that state is available and is complied with.
DESCRIPTION OF SECURITIES
We have 100,000,000 authorized common shares, par value $.001, of which
10,929,800 common shares are issued and outstanding as of December 18, 2000.
All shares of common stock have equal rights and privileges with respect to
voting, liquidation and dividend rights. Each share of common stock entitles
the holder thereof (i) to one non-cumulative vote for each share held of
record on all matters submitted to a vote of the stockholders, (ii) to
participate equally and to receive any and all such dividends as may be
declared by the Board of Directors out of funds legally available; and (iii)
to participate pro rata in any distribution of assets available for
distribution upon liquidation of Medi-Hut.
INTERESTS OF NAMED EXPERTS AND COUNSEL
We are not aware of any expert or legal counsel named in this prospectus
who will receive a direct or indirect substantial interest in the offering.
Our counsel, Cindy Shy, P.C., will pass on the legality of the shares to
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be issued pursuant to the sale of units and exercise of warrants. Our
financial statements for the fiscal years ended October 31, 2000 and 1999 have
been audited by Rosenberg, Rich, Baker & Berman, independent auditors. We
have included our financial statements in the prospectus in reliance on
Rosenberg, Rich, Baker & Berman's report, given on their authority as experts
in accounting and auditing.
COMMISSION'S POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY
In the registration rights agreement we have agreed to indemnify each selling
stockholder, its officers, directors and each person controlling them within
the meaning of the Securities Act. We have agreed to reimburse each selling
stockholder, for all costs and attorney's fees incurred in connection with
investigation or defense of any action which arises out of or is based upon:
* any untrue statement or alleged untrue statement of a material fact
contained in any prospectus or any related registration statement
incident to this registration; or
* any omission or alleged omission to state a material fact required to
be stated or necessary to make the statements not misleading;
* however, we will not indemnify a selling stockholder if the untrue
statement or omission, or alleged untrue statement or omission, was
provided to Medi-Hut in writing by the selling stockholder for use in
the preparation of any registration statement or prospectus.
Each selling stockholder has agreed to indemnify and reimburse Medi-Hut,
it officers and directors and persons who control Medi-Hut for any claims or
actions based on a material misstatement or omission, or alleged untrue
statement or omission, as described above. However, the selling stockholder
is not required to indemnify Medi-Hut if the action or claim is related to our
failure to supply a copy of the prospectus to a person we are obligated to
provide a copy to.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to our directors, officers or persons controlling us, we
have been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
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BUSINESS
The following description of Medi-Hut's business should be read in
conjunction with the information included elsewhere in this prospectus. This
section contains certain forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from the results
discussed in the forward-looking statements as a result of certain of the risk
factors set forth below and elsewhere in this prospectus.
Our Business
We wholesale name brand drugs, medical products, our anti-stick safety
syringe, our "Elite" brand and private label medical products and our
"Tru-Choice" over-the-counter drugs which are provided to us by various
suppliers. We sell our products through drug wholesalers who then sell the
products to pharmacies and through mail order. In April of 1999 we introduced
our own "Elite" brand of medical products and in September of 1999 we launched
our Tru-Choice brand of over-the-counter drugs ("Tru-Choice drugs"). Then in
October 2000 we introduced our Elite Safety Syringe, our anti-stick safety
syringe.
Principal Products.
Name Brand Drugs. We wholesale name brand drugs which are drugs that
are protected by patent or licensure; for example "Viagra". When a drug is
patented, no other person can produce or sell that drug for twenty years
without the patent owner's permission. In September of 1999 we began to
wholesale Certia XT Caps, Nubain, Terazosin ACL Caps and Viagra. These name
brand drugs were 71.2%, or $5,790,185, of our total revenues for the 2000
fiscal year.
Medical Products. Our medical products include syringes, hot and cold
packs, gauze bandages, adhesive bandages and paper products, which accounted
for approximately 22.2%, or $1,803,605, of our revenues during fiscal year
2000.
Elite Safety Syringe. Our Elite Safety Syringe is our newest product.
Safety syringes are defined as those products that incorporate features
designed to safely cover the sharp needle with minimal effort and minimize
danger to the user by preventing accidental needle sticks. There are two
types of anti-stick syringes: 1) Active device - this product demands that the
user in some way make a physical movement to activate the device after the
injection and prior to disposal; 2) Passive device - this product activates
automatically after injection and should be designed not to interfere with the
normal injection procedure.
Our Elite Safety Syringe is a passive device which incorporates a
transparent sleeve into which the needle will automatically retract after use.
The Elite Safety Syringe had a 90% acceptance rating in its clinical
evaluations. We hold a patent for this syringe and in June of 1995 we
received a 510(k) Food and Drug Administration (the "FDA") approval to market
this syringe. In December of 1999 we improved our original design by reducing
the number of parts and including a lock tip which allows changing of a needle
to facilitate drawing medications from a medicine vial. Unlike many
anti-stick syringes that are now in the marketplace, our Elite Safety Syringe
can be activated using a one hand technique. We believe our Elite Safety
Syringe will decrease accidental needle sticks of medical service providers.
In October of 2000 we started production of the Elite Safety Syringe in
a FDA registered and ISO 9002 approved facility in Korea. In January 2001 we
received shipments of 1cc safety syringes and we anticipate shipments of 3cc
safety syringes before August 2001. As of December 31, 2000 we have sold
$11,020 of this product. We believe the Elite Safety Syringe is manufactured
using sophisticated, patented, high-tech machinery which allows production of
a precise quality product. We intend to contract out the manufacture of the
Elite Safety Syringe at least for the first 18 months so that we can enter the
marketplace in an orderly and timely manner. We expect to market our Elite
Safety Syringe through hospital distributors that will handle the selling, in
house training of users, warehousing and distribution of this product.
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Other Products. During our fiscal year 2000, our Elite brand and
private label products, which include alcohol prep pads and condoms, have
accounted for approximately 5.2% of our revenues and our Tru-Choice drugs were
1.4% of our revenues. The alcohol preps complement our syringe product line
because they are primarily used as a topical antiseptic, anti-infective prior
to administering injections. Each soft, absorbent, non-woven pad is
impregnated with 70% isopropyl alcohol, USP. Our alcohol preps are made under
strict quality control guidelines in the United States. We produce our alcohol
preps in two sizes and package them 100 or 200 per box.
Our condoms are made of natural rubber latex and are silicone lubricated
with a reservoir tip. Our latex condoms are made to exacting specifications,
with each condom electrically tested for holes during the manufacturing
process, dimensional checks are performed and leak tests using water are also
conducted. Our condoms are manufactured in Korea at a plant that is ISO 9002
approved, but they are tested by the FDA prior to entering the United States
marketplace. (See, "Government Regulation," below.) In 1999 the FDA adopted
a requirement that each individually wrapped condom have a lot number and
expiration date. We have been using lot numbers and expiration dates on our
condom packages for the last ten years. We have not had any recalls or product
complaints regarding our condoms.
Distribution
Our products are sold through large drug wholesale chains in the United
States who then sell them through pharmacies and mail order. We do not use a
large sales force. We conduct our sales to wholesale distributors from our
office located in Lakewood, New Jersey. We use three employees who contact
the wholesalers by telephone or make periodic visits. Once we have made a
sale to a wholesaler, we place a purchase order with one of our third-party
suppliers. Usually, the purchase order provides shipping instructions to the
third-party supplier for delivery of the product to the wholesaler. In the
event the product is not shipped by the third-party supplier, we have the
product delivered to our warehouse and then ship it directly from our
warehouse inventory to the wholesaler.
Our policy is to have at least 80% of a product in inventory prior to
generating a purchase order for the product. We carry a one month inventory
of products which are warehoused at the third-party manufacturer or assembly
facilities we use. Our customary business practice is for our large buyers to
place purchase orders several months in advance. This allows us to notify our
third-party suppliers in advance of needed product. All sales are on thirty
(30) day credit. Returned merchandise is minimal due to the vigorous tests
that our products endure prior to shipment.
Principal Suppliers
Our ordinary course of business is to place a purchase order with our
third-party suppliers when we want to order product. We do not enter into
long term formal contracts with our third-party suppliers in regards to the
private brand labeling or manufacture of our products. However, we do require
such third-party suppliers to agree not to disclose confidential information
regarding the identity of our customers to third parties, to not directly or
indirectly compete with us, nor to contact our customers. We also require the
third-party supplier to agree to follow our delivery instructions in the
purchase order.
We purchase products internationally from FDA registered and ISO 9002
approved medical device facilities, as well as from manufacturers here in the
United States. We are dependent upon these suppliers and the loss of any one
of these suppliers would have a material adverse effect on our operations.
However, we believe any of our suppliers could be replaced within sixty (60)
days. Kinray Inc. located in New York supplies our name brand drugs. Banta
Health Care Products, Inc., located in Michigan, produces our miscellaneous
paper products. Sam Woo Corporation located in Seoul, Korea supplies our
Elite Safety Syringe. We have teamed up with Packaging Electronics and Device
Corporation for production of our hot & cold packs. Packaging Electronics and
Device Corporation holds the patent to the hot and cold pack we sell and
allows us to distribute and use our Elite brand label on their unique product.
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On November 16, 2000, we entered into a joint venture with COA International
Industries, Inc., a Korean corporation. COA International manufactures and
exports medical disposable products, including disposable syringes. The
purpose of the joint venture is to establish a new syringe production facility
located in the Republic of Korea. We are currently seeking Korean government
validation or approvals for the formation of the joint venture company,
Medi-Hut International (Mfg.) Co., Ltd. We may be unable to obtain such
validations and approvals which would result in the joint venture agreement
being terminated. Management believes we will have better control over the
manufacture and distribution of the Elite Safety Syringe if we have an
ownership interest in the manufacturing facility.
Principal Customers.
We do not enter into long term written agreements with our customers. We
accept orders from these customers by telephone, fax, mailed purchase orders,
or in person and immediately place the order with our suppliers. The loss of
any one of these customers would have a material adverse effect on our results
of operations.
During fiscal year 2000 we relied on four major customers who are drug
wholesale distributors for 69.4%, or $5,641,930, of our total revenues. These
customers purchased name brand drugs and medical products. Jomar Marketing
accounted for $2,287,981, or 28.1%, of our revenues. 824 Drug Corp. accounted
for $1,235,661, or 15.2%; Colora accounted for $1,060,199, or 13.0%; and
Larval Corp. accounted for $1,058,089 or 13%.
During fiscal year 1999, we relied on three major customers for 41.3%,
or $1,962,808, of our revenues. 824 Drug Corp accounted for $723,137, or 15.2%
of our revenues. Jomar Marketing and Larval Corp. accounted for 13.0% each of
our revenues with $620,453 and $619,218, respectively.
Product Development.
We are committed to search out and develop safety products for the
health care profession and to supply the consumer with quality medical
products for a reasonable price. We incurred approximately $32,201 in
research and development costs during 1995 for FDA registration and patent
protection of our Elite Safety Syringe. We have not had any other research
and development costs since that time. We currently are in the process of
filing for another patent for our Elite Safety Syringe.
Competition
We compete with companies large and small which wholesale name brand
drugs and medical products. We believe we have less than a 1% share of such
markets. We maintain our competitive stance by offering a quality product for
less money. We believe our products are priced lower than products sold by
the market leaders, which allows our third party wholesalers to realize
greater profits. We price our products based upon available data regarding
the selling prices of products being sold by the companies in our markets.
Based on that data, management establishes a price for a product which is
lower than the price of the market leaders.
The safety syringe market is dominated by Becton Dickinson and Sherwood
Medical. Both of these companies manufacture an active device which requires
two hands and activates manually after the injection. Our Elite Safety
Syringe can be activated using a one hand technique and is priced lower than
our competitor's products. Retractable Technology, a Texas Corporation, has
entered the market place recently with a passive device similar to our Elite
Safety Syringe. However, we intend to price our Elite Safety Syringe
approximately 15% less than this competitor's passive syringe device.
Patent, Trademark, License and Intellectual Property
Our Elite Safety Syringe holds United States Patent No. 5,562,626,
issued October 8, 1996. In December of 1999 we filed an updated patent for
the Elite Safety Syringe. Then in January 2001 we made another application
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for a new patent for our Elite Safety Syringe. We believe that this patent is
of material importance to the future growth of our business because of the
anticipated growth in the safety syringe markets. The Elite Safety Syringe is
classified as a passive anti-stick safety syringe and is one of the few that
can be activated with the ease of use of a normal plastic disposable syringe.
We also hold the FDA 510(k) #K933569 which allows us to assign the
manufacturing rights of the Elite Safety Syringe. (See, "Government
Regulation," below.) The 510(k) is listed as an initial distributor of a
Class II Special Controls device. We do not have any licenses, franchise or
concessions agreements in place for this product at this time. We believe our
future success will depend, in part, on our ability to protect our Elite
Safety Syringe patent, however, if a third party infringes upon our patent we
could expend substantial costs in its protection.
Government Regulation
Our medical products are subject to regulation by the federal FDA and
various other federal and state agencies as well as by a number of foreign
governmental agencies. Our third-party manufacturers are primarily
responsible for our products meeting these regulations. We believe they are
in compliance in all material respects with the regulations based on the fact
that our third-party manufacturers are FDA registered and their products meet
FDA standards. Compliance with these regulations has not had, and is not
expected to have, a material adverse effect on our business.
Manufacturers in the United States, as well as our foreign
manufacturers, that manufacture our products must be registered with the FDA.
Our contract manufacturers must comply with an FDA registration process and
are subject to random and unannounced on-site FDA periodic inspections. After
registration with the FDA, the FDA will inspect the facility for compliance
with the general controls. The general controls provisions require annual
registration, listing of devices, good manufacturing practice, and labeling.
It also prohibits misbranding and adulteration. Our foreign suppliers'
finished products are analyzed and tested by the FDA either once the product
enters the United States, or when it is taken off the shelf of a pharmacy or
hospital. If the FDA has questions at the time of an inspection, we will have
a reasonable time to answer and comply with the necessary governmental
concerns.
Our third party manufacturers are responsible for education of their
employees regarding FDA requirements and receive all changes of rules
applicable either to product compliance or good manufacturing procedures as
announced in the Federal Register. We notify our suppliers of changes that we
deem necessary or we are aware of that are being discussed within the
governmental agencies. By keeping our third party manufacturers informed we
help them remain on the cutting edge of governmental changes in laws.
We filed a Section 510(k) notification of intent to market our Elite
Safety Syringe and on March 14, 1995 the FDA granted approval to manufacture
and market the Elite Safety Syringe in the United States. This 510(k)
approval is not FDA approval of the Elite Safety Syringe, but approval to
market the syringe. The purpose of a 510(k) approval is to demonstrate that
the medical device is substantially equivalent to a legally marketed device
that was or is currently on the United States market. A device is
substantially equivalent if, in comparison to a legally marketed device it:
(a) has the same intended use as a legally marketed device and has the same
technological characteristics as such device; or (b) has the same intended use
as such device; and has different technological characteristics that have to
be proved safe.
In the case of our Elite Safety Syringe, we were required to perform a
clinical evaluation study to prove that the Elite Safety Syringe, as intended
for use, was similar to devices on the market that had no spring activation.
We then met with the FDA after the clinical evaluation. The FDA inquired about
the number of syringes used in the evaluation and where in the hospitals the
evaluations were located. After this meeting the FDA granted the 510(k)
without further inquiry.
We purchase product from international suppliers who we require to be
ISO 9002 approved. ISO 9002, the International Quality System Standard, is a
quality assurance program with a principle focus on management
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responsibility, planning, monitoring, corrective action, and documentation.
These principles are applied to the production and the installation aspects of
a business. ISO 9002 applies in situations when:
a) The specified requirements for product are stated in terms of an
established design or specification, and
b) Confidence in product conformance can be attained by adequate
demonstration of a supplier's capabilities in production,
installation and servicing.
An ISO 9002 facility uses procedures that include management, quality plans,
contracts, document/data, purchasing, traceability, process control,
correct/prevent, storage/handle, quality records, auditing, training,
servicing, and statistics.
Employees
We have five full-time employees, two of which are directors and
officers.
Business Development
Indwest, Inc. was incorporated in the state of Utah on August 20, 1981
as Gibraltor Energy. Indwest did not have operations since its inception.
Medi-Hut Co., Inc. was incorporated in the state of New Jersey on November 22,
1982 and was involved in the business of selling wholesale medical supplies
("Medi-Hut, New Jersey"). On January 28, 1998, Medi-Hut, New Jersey entered
into an Agreement and Plan of Reorganization with Indwest. Indwest was the
surviving corporation of the merger and changed its name to Medi-Hut Co. Inc.,
a Utah corporation ("Medi-Hut, Utah"). Pursuant to the merger agreement, the
directors and officers of Indwest resigned and the management of Medi-Hut, New
Jersey filled the vacancies, and the former shareholders of Medi-Hut, New
Jersey obtained 55.4% of the voting power.
On February 2, 1998 Medi-Hut Co., Inc. was incorporated in the state of
Delaware. On February 27, 1998, Medi-Hut, Utah completed a change of
domicile merger with Medi-Hut, Delaware. We currently are a Delaware
corporation holding a Certificate of Authority to do business in the state of
New Jersey.
Reports to Security Holders
We are required to comply with the reporting requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). We must file
annual, quarterly and other reports with the Securities and Exchange
Commission ("SEC"). We also are be subject to the proxy solicitation
requirements of the Exchange Act and, accordingly, will furnish an annual
report with audited financial statements to our stockholders.
Available Information
Copies of this registration statement may be inspected, without charge,
at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington D.C.
20549 and at the Northeast Regional offices of the SEC located at 7 World
Trade Center, Suite 1300, New York, New York 10048. The public may obtain
information on the operation of the Public Reference Room by calling the SEC
at 1-800-SEC-0300. Copies of this material also should be available through
the Internet by using the SEC's EDGAR Archive, the address of which is
http://www.sec.gov.
We currently use an investor relations firm, Columbia Financial Group,
("Columbia Financial") and interested persons may call at (888) 301-6271.
Columbia Financial has provided consulting and services for investor
relations, public relations, publishing, advertising, fulfillment, as well as
Internet related services to Medi-Hut for the past three years. In October
2000 we entered into another consultant agreement with Columbia Financial.
Columbia Financial provides such services for a term of twelve (12) months for
a set fee. Columbia Financial agreed to accept $1.2 million and warrants to
purchase 600,000 common shares for its services under the new agreement.
These warrants were valued at $2,041,000, have an exercise price of $5.00 and
expire October 1, 2005. None of the warrants related to this agreement have
been exercised as of the date of this filing. We have recorded $20,833 for
such consulting expenses as of October 31, 2000. We do not reimburse Columbia
Financial
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for expenses incurred for its services. Either party may terminate the
agreement with 30 days written notice with certain conditional repayments. The
agreement may be terminated within the first four months and, in that event,
we are not obligated to make payments to Columbia Financial for services
rendered. Columbia Financial has also entered into an agreement on our behalf
with Internet Stock Market Resources for dissemination of our company
information to its subscribers.
MARKET FOR COMMON EQUITY
Our common stock is traded over-the-counter and quoted on the NASD OTC
Electronic Bulletin Board under the symbol "MHUT." The following table
presents the range of the high and low bid prices of our stock as reported by
the Nasdaq Trading and Market Services for each fiscal quarter for the last
two fiscal years ending October 31. Such quotations represent prices between
dealers and may not include retail markups, markdowns, or commissions and may
not necessarily represent actual transactions.
Fiscal Year Quarter Ended High Low
------------ ------------- ----- -----
1999 January 31st 0.53 0.13
April 30th 0.41 0.23
July 31st 0.94 0.20
October 31st 2.75 0.84
2000 January 31st 4.69 1.53
April 30th 6.81 3.53
July 31st 5.63 3.00
October 31st 6.31 2.75
There were approximately 240 stockholders of record as of December 18,
2000. We have not declared dividends on our common stock and do not
anticipate paying dividends on our common stock in the foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjunction with
our financial statements and notes which are included at the end of this
prospectus. (See, "Financial Statements.") We realize revenue when products
are shipped and title passes to our wholesalers. Our inventory consists of
finished products which are warehoused at the third-party manufacturer's or
supplier's facility or when necessary at our own warehouse. Revenue is net of
returns, which have historically been less than 2% of gross sales. Our fiscal
year ends on October 31st and the following discussions are based on the
consolidated financial statements of Medi-Hut and Vallar for the 2000 fiscal
year and restated financial statements for the 1999 fiscal year.
Acquisition Treatment
In April 2000, in an arm's length transaction, Medi-Hut acquired Vallar
Consulting, a privately held New York corporation in the business of selling
over-the-counter and name brand pharmaceuticals to distributors and
wholesalers nationwide. Vallar had been one of our major customers during our
1999 fiscal year representing $120,211, or 9.4%, of our total revenues.
Pursuant to the agreement, dated January 10, 2000, we issued 350,000 common
shares valued at $1,340,500 to Lawrence Marasco, the sole owner of Vallar.
The parties negotiated the acquisition price for Vallar rather than using
typical valuation models. Vallar's value was established at approximately $1.3
million based upon posted revenues in excess of 3.5 million during its 1999
fiscal year, anticipated sales over a five year period, Mr. Marasco's 26 to 27
years of experience in the industry and the value of Vallar's client base.
The assets involved in the transaction were primarily accounts receivable
since Vallar did not
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own physical plants, equipment or property.
The acquisition was treated as a pooling of interests for accounting
purposes and Vallar became our wholly-owned subsidiary. The acquisition was
structured as a tax free stock-for-stock exchange pursuant to Section
368(a)(1)(B) of the Internal Revenue Code of 1986 as amended. Subsequently,
Vallar was dissolved and all assets, liabilities and equity were recorded on
our books and our financial statements have been restated to reflect these
allocations.
Results of Operations
The following table summarizes our results of operations for the fiscal
years ended October 31, 2000 and 1999.
Years Ended October 31,
2000 1999
------------- --------------
(Restated)
Net Sales $ 8,130,696 $ 4,758,268
Cost of Sales 7,396,343 4,267,363
Gross Profit 734,353 490,905
Selling, General &
Administrative Expenses 498,835 581,346
Operating Income or (Loss) 235,518 (90,441)
Other Income (Expense) 62,146 3,555
Provision for Income Taxes 62,664 300
Net Income (loss) 235,000 (87,186)
Earnings (Loss) per
common share $ 0.02 $ (0.01)
YEARS ENDED OCTOBER 31, 2000 AND 1999
Sales. Sales increased $3,372,428 from fiscal year 1999 to 2000 This
increase in sales was a result of increased sales of name brand drugs and
medical products.
Cost of Goods Sold. Costs of goods sold primarily consists of the cost
of the products purchased from third-party vendors and shipping costs. During
fiscal year 2000 as sales have increased the cost of goods sold has also
increased from 89.7% of sales in 1999 to 91.% of sales in 2000. The increased
costs are due to the smaller profit margin of the name brand drugs which
accounted for 71.2% of our revenues.
Selling, General and Administrative. Selling, general and
administrative expenses include employee salaries and benefits, employee
travel expenses, advertising, office expenses and occupancy costs. In fiscal
year 2000 these expenses decreased $82,511 from fiscal year 1999. The
decrease in expenses resulted primarily from reduced travel and office
expenses and occupancy costs.
Other Income (Expense). We recorded interest income of $62,146 for
fiscal year 2000 compared to $8,109 for the 1999 fiscal year. This income is
primarily from investments in commercial paper. We also incurred $4,554 of
interest expense on our line of credit during fiscal year 1999.
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Income Taxes. We had $127,931 available net operating loss carry
forwards as of October 31, 2000. We may use these carry forwards to reduce
our Federal taxable income and tax liabilities in future years. The carry
forwards will be used in full on the October 31, 2000 corporate tax return.
Net Income (Loss). We posted a net income for the year 2000 compared
to a net loss for the 1999 fiscal year. The acquisition of Vallar and sales
of name brand drugs coupled with a reduction in selling, general and
administrative expenses were the primary reasons for the net income.
Management believes the following factors will affect our future results
of operations: 1) Maintenance of our market share due to pricing our products
below our competitors prices; 2) continued concern of the public and
government entities about sexually transmitted diseases; and 3) changes in
federal and state regulations which will require use of safety syringes by
health care workers. In addition, management expects our Elite Safety Syringe
to provide new sources of revenue during fiscal year 2001 as user demand for
safety syringes increases. Management believes the enactment of the
Needlestick Safety and Prevention Act and legislation in 16 states requiring
the use of anti-stick syringes will increase demand for such devices.
YEARS ENDED OCTOBER 31, 1999 AND 1998
Due to the acquisition and consolidation of Vallar, the financial
statements for the fiscal year ended 1999 reflect the combined entities
whereas the financial statements for the fiscal year 1998 are Medi-Hut's only.
The following discussions reflect this consolidation. Accordingly, we believe
a comparison of the results of our operations on a year-by-year basis is of
limited benefit.
Sales. Sales increased from $779,537 in 1998 to $4,758,268 in 1999.
This increase in sales was a result of the acquisition of Vallar. However,
sales were low during fiscal year 1998 because we lost a major customer, due
to that company's change in ownership and the new management's decision to use
a manufacturer who produced syringes in the United States. The loss of this
customer represented approximately $375,000 in sales.
Cost of Goods Sold. During fiscal year 1999 costs of goods sold were
$4,267,363 compared to $552,173 in 1998. Cost of goods sold were 70.8% of
sales in 1998 compared to 89.7% of sales in 1999. The increased costs are due
to the smaller profit margin of the name brand drugs.
Selling, General and Administrative. In fiscal year 1999, selling,
general and administrative expenses were $581,346 compared to $271,162 in
1998. The increase in expenses resulted primarily from increased accounting
and legal expenses, increased officer and employee salaries and increased
insurance expenses.
Net Income (Loss). We posted a net loss of $45,997 in 1998 compared to
a net loss of $87,186 in 1999. Despite an increase in revenues, the gross
profit was decreased due to the costs of goods sold.
Quarterly Trends
We do not anticipate experiencing seasonal fluctuations in our
operations because sales of medical supplies is not seasonal in nature.
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 expects our revenues and sales of stock to satisfy our present
requirements for working capital and capital expenditures for the next twelve
months. Our working capital at October 31, 2000 was $1,192,188 compared to
$1,335,107 at October 31, 1999.
A summary of our audited balance sheets for the years ended October 31,
2000 and 1999 are as follows:
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Years Ended October 31,
2000 1999
-------------- --------------
(Restated)
Cash/Cash Equivalents $ 502,243 $ 384,733
Current Assets 2,908,632 1,812,701
Total Assets 3,572,298 1,839,200
Total Current Liabilities 2,016,444 477,594
Total Stockholder's Equity 1,555,854 1,361,606
Total Liabilities & Stockholder Equity $ 3,572,298 1,839,200
For the fiscal year 2000, total assets increased $1,733,098 from fiscal
year 1999 primarily due to prepaid consulting expenses related to our
agreement with our investor relations firm, Columbia Financial, and
acquisition of equipment and molds. Total current liabilities increased
$1,538,850 from fiscal year 1999 to fiscal year 2000. The increase was
primarily due to a deferred consulting payable of $900,000.
Net cash used by our operating activities was $37,749 for the 2000
fiscal year, compared to $170,865 net cash provided by operating activities
for 1999. Net cash provided by investing activities was $157,259 for fiscal
year 2000 compared to net cash used by investing activities of $900,000 for
fiscal year 1999. We purchased marketable debt securities in 1999 for
$900,000 which had a fixed interest rate of 5.26% and 5.29% per annum and were
unsecured. We redeemed $500,000 of the marketable debt securities during
fiscal year 2000. As of October 31, 2000, the debt securities held have a
fair value of $400,000, are due November 30, 2000 with a fixed interest rate
of 6.49% per annum and are unsecured.
Net cash used for financing activities during fiscal year 2000 was
$2,000, which were deferred charges related to costs incurred for seeking
small business loan financing. Financing activities provided net cash of
$938,592 for fiscal year 1999 which were primarily proceeds from sales of our
common stock. In August of 1999 we raised $1,000,000 from the sale of
2,200,000 common shares, which we used to commence the production of our Elite
Safety Syringe. While we received the stated amount of consideration for
those shares, we have revised the amounts stated in our financial statements
to reflect the average high and low market price of the common shares on the
date of issuance. We then applied a modest discount for lack of marketability.
The difference between the average high and low market price and issue price
has been reflected as common stock dividend. As a result of these change, we
posted a constructive dividend of $866,250 for this issuance.
As of October 31, 2000, our principal commitments consisted of office
and warehouse space and an automobile lease. Monthly rental payments are
approximately $2,025 per month with total future minimum rental payments of
$16,183 through the fiscal year 2003. In the event we are able to form a
Korean corporation for the joint venture with COA International, we will be
committed to provide capital funding of $1,000,000 for that entity.
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 expires August 31, 2001. We also have a $150,000 revolving line of
credit which expires October 10, 2001. PNC Bank, N.A. makes loans to us at 3%
above the prime interest rate for the revolving line of credit. Both lines of
credit are secured by all the assets of Medi-Hut and personal guarantees of
our executive officers. As of the fiscal years ended 2000 and 1999 there were
no amounts outstanding on either line of credit.
Management anticipates that we may seek additional funding through
future securities offerings which will be effected pursuant to applicable
exemptions under federal and state laws. We will determine the purchasers and
manner of issuance according to our financial needs and the available
exemptions. We have no plans to make a
19
<PAGE>
public offering of our common stock at this time. 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 for the short term.
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.
PROPERTY
We lease 3500 square feet of office and warehouse space located in
Lakewood, New Jersey. The leased premises are part of a 35,000 square foot
industrial park. The initial term of the lease was for five years with the
right to renew the lease for a period of five (5) years after the initial
term. We have renewed the lease for an additional year and it will expire in
February of 2001. We currently pay $2,025.21 per month, but the monthly rent
payment is contingent upon increases in taxes, insurance and common area
maintenance expense. We may cancel the lease with a 90 days written notice to
the landlord.
MANAGEMENT
Our directors, executive officers and key employees and their respective
ages and positions with us are set forth below. Biographical information for
each of those persons is also presented below. Our bylaws provide for a Board
of Directors consisting of three directors. Our directors serve for terms of
one year. Our executive officers are chosen by our Board of Directors and
serve at its discretion. Joseph Sanpietro and Vincent Sanpietro are brothers.
Directors and Officers
Name Age Position Held
---- ----- -----------------
Joseph A. Sanpietro 50 President, Director
Vincent J. Sanpietro 53 Secretary, Director
Robert Russo 41 Treasurer, Director
Joseph A. Sanpietro. President and Director of Medi-Hut since January 1998.
Since 1982 Mr Sanpietro served as President of Medi-Hut, New Jersey. He
graduated from Hofstra University in 1972, with a Bachelor of Science degree
in chemistry and he continued his education at Seton Hall University with
studies in chemistry and law. Mr. Sanpietro has had challenging careers with
Cooper Laboratories, as a front line analytical chemist; Schering-Plough as an
international analytical chemist leader where he was the youngest assistant
manager with both BS and MS chemists reporting directly to him. Mr. Sanpietro
was a project manager at Johnson & Johnson heading a multi-million dollar
relocation startup project.
Vincent Sanpietro. Secretary and Director of Medi-Hut since January 1998.
Mr. Sanpietro served as Secretary for Medi-Hut, New Jersey, since 1982. He
graduated with a B.S. degree in Business Administration from New York
20
<PAGE>
Institute of Technology. He held managerial positions in Wells Recruiting
Personnel and he was President of Focus Personnel, an Illinois Corporation.
Mr. Sanpietro was also Vice President of Sales of Focus Medical Products, Inc.
Robert Russo. Treasurer and a Director of Medi-Hut since March 1998. He is
the Managing Senior Partner of Koenig, Russo and Associates, LLC and has been
employed with that firm since 1982. Mr. Russo graduated from Seton Hall
University, New Jersey, with a degree in accounting and received his Masters
in Business Administration in business finance. He has extensive experience
in accounting, auditing, and business management. Mr. Russo has concentrated
his work in the field of taxes, employee benefit programs, business,
financial, estate and retirement planning. Mr. Russo is also a member of the
New Jersey Society of Certified Public Accountants and the American Institute
of Certified Public Accountants.
EXECUTIVE COMPENSATION
The following table shows the compensation paid to our named executive
officers in all capacities during the past three fiscal years.
SUMMARY COMPENSATION TABLE
Annual Compensation
----------------------------
Fiscal
Name and Principal Position Year Salary ($) Bonus Other
------------------------------ ------ ----------- ---------- ------------
Joseph A. Sanpietro, President 2000 $ 77,225 $ 0 $6,000 (1)
and Director 1999 85,200 0 0
1998 83,940 0 0
Vincent J. Sanpietro, Secretary 2000 51,428 0 5,000 (1)
and Director 1999 63,700 0 0
1998 47,353 0 0
Robert Russo 2000 0 0 23,302(2)
Treasurer and Director 1999 0 0 5,635(2)
1998 0 0 6,260(2)
(1) Personal benefits: Lease payments for automobile.
(2) Paid to Koenig, Russo & Associates for accounting services performed
for Medi-Hut by Mr. Russo.
Compensation of Directors
We do not have any standard arrangement for compensation of our
directors for any services provided as director, including services for
committee participation or for special assignments.
Employment Contracts
We have not entered into employment contracts with our current executive
officers. The entire Board of Directors, using their business judgment,
determines the yearly salary for each officer. We believe the salaries paid
to our executive officers are reasonable based on their experience and
responsibilities.
21
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding common stock of: (i) each person or group known by us to own
beneficially more than 5% of our outstanding common stock, (ii) each of our
executive officers, (iii) each of our director's and (iv) all executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Except as indicated by footnote,
the persons named in the table below have sole voting power and investment
power with respect to the shares of common stock shown as beneficially owned
by them. The percentage of beneficial ownership is based on 10,929,800 shares
of common stock outstanding as of December 18, 2000.
MANAGEMENT
Common Stock Beneficially Owned
--------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
------------------------------ ------------------- --------------------
Joseph A. Sanpietro 3,279,200 30.0 %
1935 Swarthmore Avenue
Lakewood, New Jersey 08701
Vincent J. Sanpietro 554,800 5.1 %
1935 Swarthmore Avenue
Lakewood, New Jersey 08701
Robert Russo 25,000 (1) * %
1935 Swarthmore Avenue
Lakewood, New Jersey 08701
All executive officers and
directors as a group 3,859,000 35.3 %
* Less than one percent
(1) Mr. Russo shares voting and investment power of 20,000 shares held by
his wife.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year 2000 and 1999, we paid $23,302 and $5,635,
respectively, to Koenig, Russo & Associates LLC for the accounting services
provided to us by Robert Russo, our Treasurer and Director. Mr. Russo owns
Keonig, Russo & Associates LLC.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have not had a change in or disagreement with our principal
independent accountant during the past two fiscal years.
LEGAL PROCEEDINGS
To the best of our knowledge we are not a party to any proceedings or
threatened proceedings as of the date of this filing.
22
<PAGE>
FINANCIAL STATEMENTS
Medi-Hut Company, Inc.
Financial Statements
October 31, 2000 and 1999 (Restated)
<PAGE> 23
Medi-Hut Company, Inc.
Index to the Financial Statements
October 31, 2000 and 1999 (Restated)
Page
Independent Auditors' Report on the Financial Statements....................1
Financial Statements
Balance Sheets........................................................2
Statements of Operations..............................................3
Statement of Stockholders' Equity.....................................4
Statements of Cash Flows............................................5-6
Notes to the Financial Statements..................................7-14
Independent Auditors' Report on the Additional Information...........15
Additional Information
Schedules of Selling, General and Administrative Expenses............16
<PAGE> 24
Rosenberg Rich
Baker Berman
& Company
A Professional Association of
Certified Public Accountants
380 Foothill Road * PO Box 6483 * Bridgewater NJ 08807-0483
908-231-1000 * Fax: 908-231-6894 * E-mail: [email protected]
Independent Auditors' Report
To the Board of Directors and Stockholders of
Medi-Hut Company, Inc.
We have audited the balance sheets of Medi-Hut Company, Inc. as of October 31,
2000 and 1999 and the related statements of operations, stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Medi-Hut Company, Inc. as of
October 31, 2000 and 1999, and the results of its operations, and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
December 20, 2000
<PAGE> 25
Medi-Hut Company, Inc.
Balance Sheets
October 31,
---------------------------
2000 1999
------------- -------------
(Restated)
Assets
Current Assets
Cash $ 502,243 $ 384,733
Marketable securities 400,000 900,000
Accounts receivable 863,597 496,805
Inventory 238,808 28,975
Prepaid expenses 3,984 2,188
Deferred consulting fees 900,000 -
------------- -------------
Total Current Assets 2,908,632 1,812,701
------------- -------------
Machinery and Equipment 29,124 27,316
Molds 154,800 -
Less: Accumulated Depreciation (40,789) (27,316)
------------- -------------
Net Machinery and Equipment and Molds 143,135 -
Deposit on equipment 183,267 -
Deferred consulting fees, net of current portion 300,000 -
Capitalized Cost Reduction, net of accumulated
amortization of $4,796 and $4,164, respectively - 632
Patent and Licensing Costs, net of accumulated
amortization of $8,018 and $6,334, respectively 37,264 25,867
------------- -------------
Total Assets 3,572,298 1,839,200
============= =============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses 753,780 477,594
Deferred consulting payable 900,000 -
Income taxes payable 45,540 -
Deferred income taxes payable 17,124 -
------------- -------------
Total Current Liabilities 1,716,444 477,594
Deferred consulting payable, net of current portion 300,000 -
------------- -------------
Total Liabilities 2,016,444 477,594
------------- -------------
Stockholders' Equity
Common stock, voting $.001 par value; 100,000,000
shares authorized; 10,829,800 and 10,822,800
shares issued and outstanding, respectively 10,830 10,823
Additional paid-in capital 4,887,753 2,827,967
Consultant services to be provided (2,041,000) (13,708)
Deferred charges (57,506) (20,713)
Retained earnings (deficit) (1,244,223) (1,442,763)
------------- -------------
Total Stockholders' Equity 1,555,854 1,361,606
------------- -------------
Total Liabilities and Stockholders' Equity $ 3,572,298 $ 1,839,200
============= =============
See notes to the financial statements. 2
<PAGE> 26
Medi-Hut Company, Inc.
Statements of Operations
Year Ended October 31,
---------------------------
2000 1999
------------- -------------
(Restated)
Net Sales $ 8,130,696 $ 4,758,268
------------- -------------
Cost of Goods Sold
Beginning inventory 28,500 38,739
Net Purchases 7,593,591 4,250,730
Custom fees/freight 13,060 6,394
------------- -------------
Cost of Goods Available for Sale 7,635,151 4,295,863
Less: Ending Inventory 238,808 28,500
------------- -------------
Cost of Goods Sold 7,396,343 4,267,363
------------- -------------
Gross Profit 734,353 490,905
Selling, General and Administrative Expenses 498,835 581,346
------------- -------------
Income (Loss) from Operations 235,518 (90,441)
------------- -------------
Other Income (Expense)
Interest income 62,146 8,109
Interest expense - (4,554)
------------- -------------
Total Other Income (Expense) 62,146 3,555
------------- -------------
Income (Loss) Before Provision for Income Taxes 297,664 (86,886)
Provision for Income Taxes 62,664 300
------------- -------------
Net Income (Loss) $ 235,000 $ (87,186)
============= =============
Earnings (Loss) per Common Share $ 0.02 $ (0.01)
============= =============
Earnings (Loss) per Common Share-assuming dilution $ 0.02 $ (0.01)
============= =============
See notes to the financial statements. 3
<PAGE> 27
Medi-Hut Company, Inc.
Statement of Stockholders' Equity
Period from October 31, 1998 to October 31, 2000
<TABLE>
<CAPTION>
Common Stock
(No Par Value
Prior to Consultant
Common Recapitalization) Additional Services Retained
Shares ($.001 Par Paid-In To Be Deferred Earnings
Issued Value) Capital Provided Charges (Deficit) Total
------------- ---------------- ----------- ------------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, October 31, 1998 8,272,800 $ 8,273 $ 934,767 $ - $ - $ (564,345) $ 378,695
Issuance of Common Shares
Pursuant to a Private
Placement Memorandum
Shares Issued at
discounted market value 2,200,000 2,200 1,854,050 - - - 1,856,250
Dividend related to the
difference between the
issue price and
discounted market value - - - - - (866,250) (866,250)
Issuance of Warrants for
Services Provided - - 23,500 (23,500) - - -
Funds expended for
Deferred Charges - - - - (20,713) - (20,713)
Amortization of
Consultant Services - - - 9,792 - - 9,792
Net (Loss) Year Ended
October 31, 1999
(Restated) - - - - - (87,186) (87,186)
------------- ---------------- ----------- ------------- --------- ------------ -----------
Balances, October 31, 1999 10,472,800 10,473 2,812,317 (13,708) (20,713) (1,517,781) 1,270,588
Issuance of Common Shares
Pursuant to the acquisition
of Vallar Consulting Group 350,000 350 15,650 - - 75,018 91,018
------------- ---------------- ----------- ------------- --------- ------------ -----------
Balances, October 31, 1999
(as Restated) 10,822,800 10,823 2,827,967 (13,708) (20,713) (1,442,763) 1,361,606
Dissolution of Vallar
Consulting Group - - (16,000) - - (36,460) (52,460)
Funds expended for
Deferred Charges - - - - (2,000) - (2,000)
Stock issued to non-employee
for deferred charges 7,000 7 34,786 - (34,793) - -
Issuance of Warrants and
Payment Agreement for
Services to be Provided - - 2,041,000 (2,041,000) - - -
Amortization of
Consultant Services - - - 13,708 - - 13,708
Net Income Year Ended
October 31, 2000 - - - - - 235,000 235,000
------------- ---------------- ----------- ------------- --------- ------------ -----------
Balances, October 31, 2000 10,829,800 $ 10,830 $4,887,753 $ (2,041,000) $(57,506) $(1,244,223) $1,555,854
============= ================ =========== ============= ========= ============ ===========
See notes to the financial statements. 4
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
Medi-Hut Company, Inc.
Statements of Cash Flows
Year Ended October 31,
-----------------------------
2000 1999
-------------- --------------
(Restated)
<S> <C> <C>
Cash Flows From Operating Activities
Net Income (Loss) $ 235,000 $ (87,186)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Depreciation and amortization 15,789 2,821
Amortization of prepaid consulting expense 13,708 26,625
Deferred income taxes 17,124 -
Dissolution of Vallar Consulting Group (62,675) -
Decrease (Increase) in Assets
Accounts receivable (366,792) (231,428)
Inventory (209,833) 9,764
Prepaid expenses (1,796) 2,320
Increase (Decrease) in Liabilities
Accounts payable and accrued expenses 276,186 447,949
Income taxes payable 45,540 -
-------------- --------------
Net Cash Provided(Used) by Operating Activities (37,749) 170,865
-------------- --------------
Cash Flows From Investing Activities
Cash acquired from acquisition of Vallar 10,215 -
Purchases of marketable securities - (900,000)
Redemption of marketable securities 500,000 -
Cash paid for molds and equipment (156,608) -
Cash paid for patent and licensing costs (13,081) -
Cash paid for deposit on equipment (183,267) -
-------------- --------------
Net Cash Provided (Used) by Investing Activities 157,259 (900,000)
-------------- --------------
Cash Flows From Financing Activities
Proceeds from sale of common stock - 998,500
Repayment of lines of credit - (39,195)
Cash paid for deferred charges (2,000) (20,713)
-------------- --------------
Net Cash Provided (Used)by Financing Activities (2,000) 938,592
-------------- --------------
Net Increase in Cash 117,510 209,457
Cash at Beginning of Period 384,733 175,276
-------------- --------------
Cash at End of Period $ 502,243 $ 384,733
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest $ - $ 4,554
============== ==============
Income taxes $ 300 $ 300
============== ==============
See notes to the financial statements. 5
</TABLE>
<PAGE> 29
Medi-Hut Company, Inc.
Statements of Cash Flows,Continued
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Common stock purchase warrants ($2,041,000) and a payment schedule
($1,200,000) were issued by the Company during 2000 for consultant services to
be provided totaling $3,241,000.
Common stock purchase warrants were issued by the Company during 1999 for
consultant services to be provided amounting to $23,500.
Common stock dividends amounting to $866,250 during 1999 were recognized as to
the difference between the average high/low market price and issue price of
the 2,200,000 common shares issued in accordance with the private placement
memorandum.
Common stock was issued in 2000 for deferred charges amounting to $34,793.
The Company acquired Vallar Consulting Group in a business combination
accounted for under the pooling of interests method during 2000:
Assets $ 74,690
Liabilities (6,611)
Equity (78,294)
Cash Received $ 10,215
See notes to the financial statements 6
<PAGE> 30
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Medi-Hut Company, Inc. ("Medi-Hut" or "the Company"), a company in the
business of selling wholesale medical supplies, was originally incorporated in
the State of New Jersey on November 22, 1982. 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 (Vallar) 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. Vallar was subsequently dissolved and all
the assets, liabilities and equity was recorded on the books of Medi-Hut. The
accompanying financial statements for October 31, 2000 and 1999 are based on
the assumption that the companies were combined for the years ended October
31, 2000 and 1999 and financial statements of prior years have been restated
to give effect to the combination.
The following is a reconciliation of the amounts of net sales and net income
(loss) previously reported for the year ended October 31, 1999 with restated
amounts:
Net Sales
As previously reported $ 1,272,419
Vallar Consulting Group 3,485,849
----------------
As Restated $ 4,758,268
================
Net Income (Loss)
As previously reported $ (74,462)
Vallar Consulting Group (12,724)
----------------
As Restated $ (87,186)
================
7
<PAGE> 31
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Investments in Marketable Securities
The Company invests in debt securities which are classified at the date of
purchase as held-to-maturity securities. Held-to-maturity securities are
reported at amortized cost, as the Company has both the ability and intent to
hold such securities until maturity.
Accounts Receivable
No reserve for doubtful accounts has been established since management
believes that all accounts receivable are collectible in full.
Inventory
Inventory is stated at the lower of cost (determined on a first-in, first-out
basis) or market. Market values represent the lower of replacement cost or
estimated net realizable value.
Deferred Charges
Deferred charges are comprised of costs incurred by the Company for seeking
small business loan financing. These charges will be amortized over the loan
period when and if such financing is obtained or expensed in full should such
financing not be obtained. No amortization expense has been recognized during
the years ended October 31, 2000 and 1999.
Depreciation
Machinery and equipment are stated at cost. Depreciation is computed using
the straight line method for financial reporting purposes which amounted to
$13,473 and $263 for the years ended October 31, 2000 and 1999 respectively.
The estimated useful lives of the machinery and equipment assets for financial
statement purposes are five years. The estimated useful lives of molds for
financial statement purposes are three years. For income tax purposes,
recovery of capital costs for machinery and equipment and molds are made using
accelerated methods over the asset's class life. Repairs and maintenance
expenditures which do not extend the useful lives of the related assets are
expensed as incurred.
Amortization
The capitalized cost reduction on the auto lease is being amortized over the
life of the lease (24 months). Total amortization for the years ended October
31, 2000 and 1999 was $632 and $948, respectively.
Research and Development
The only research and development costs incurred relate to patent and
licensing costs which are being amortized over their remaining useful lives of
20 years on a straight line basis beginning on the patent application dates.
Total amortization for the years ended October 31, 2000 and 1999 was $1,685
and $1,610, respectively.
Revenue Recognition
Revenue from product sales is recognized at the time of shipment provided that
the resulting receivable is deemed probable of collection.
Income Taxes
In accordance with the provisions of Financial Accounting Standards Board
Statement No. 109, "Accounting for Income Taxes" (SFAS No. 109"), deferred
taxes are recognized for depreciation differences between book and tax methods
and for operating losses that are available to offset future taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to realized.
8
<PAGE> 32
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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 those estimates.
Securities Issued for Services
The Company accounts for common stock and common stock purchase warrants
issued for services by reference to the fair market value of the Company's
stock on the date of stock issuance or warrant grant in accordance with
Financial Accounting Standards Board Statement No. 123 "Accounting for
Stock-Based Compensation. (FASB 123)" Compensation/consultant expense is
recorded for the fair market value of the stock and warrants issued.
NOTE 2 - CONCENTRATIONS OF CREDIT AND BUSINESS RISK
The Company maintains cash balances in a financial institution. Accounts at
the institution are insured by the Federal Deposit Insurance Corporation up to
$100,000 per account, of which the Company's accounts may, at times, exceed
the federally insured limits.
The Company provides credit in the normal course of business to customers
located primarily in the northeastern portion of the U.S. The Company
performs ongoing credit evaluations of its customers.
NOTE 3 - MARKETABLE SECURITIES
Cost and fair value of the Company's investments in Held-to-maturity debt
securities are as follows:
October 31,
2000 1999
-------------- --------------
Amortized Cost $ 400,000 $ 900,000
Gross Unrealized Gains/Losses - -
-------------- --------------
Fair Value $ 400,000 $ 900,000
============== ==============
The debt securities held at October 31, 2000 are due November 30, 2000, have a
fixed interest rate of 6.49% per annum and are unsecured. The debt securities
held at October 31, 1999 were due between November 24, 1999 to November 26,
1999, had a fixed interest rate of 5.26% and 5.29% per annum and are
unsecured.
The amortized costs and fair values of debt securities Held-to-maturity at
October 31, 2000 and 1999 by expected maturity are all due in one year or
less.
NOTE 4 - INVENTORY
Inventory consists of purchased finished goods which totaled $238,808 and
$28,975 at October 31, 2000 and October 31, 1999 (Restated), respectively.
9
<PAGE> 33
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 5 - LINES OF CREDIT
On October 10, 1997, the Company obtained a $150,000 revolving line of credit
under which the bank has agreed to make loans at 3% above the prime interest
rate. The line expired on October 10, 2000 but was renewed until October 10,
2001 and may be used to support and finance the Company's commercial foreign
letters of credit. As of October 31, 2000 and October 31, 1999, there were $0
outstanding on this line of credit.
At October 31, 2000 and 1999, the Company had a $0 open letters of credit.
Also on October 10, 1997, the Company obtained a $50,000 working capital line
of credit under which the bank has agreed to make loans at 2% above the prime
interest rate. The line expired on August 30, 2000, but was renewed until
August 30, 2001. As of October 31, 2000 and October 31, 1999, there were no
amounts outstanding on this line of credit, respectively.
Both lines of credit are secured by all of the Company's assets and personal
guarantees of the Company's officers.
NOTE 6 - OPERATING LEASE COMMITMENTS
The Company leases certain office and warehouse space (90 days cancelable) and
an automobile under operating leases.
The following is a schedule of future minimum rental payments (exclusive of
common area charges) required under operating leases that have initial or
remaining non-cancelable lease terms in excess of one year as of October 31,
2000.
Year Ending October 31,
2001 $ 6,697
2002 6,697
2003 2,789
---------
Total minimum payments required $ 16,183
=========
Rent expense for the years ended October 31, 2000 and 1999 (Restated) amounted
to $27,347 and $27,713, respectively.
The office and warehouse lease contain provisions for contingent rental
payments based upon increases in taxes, insurance and common area maintenance
expense.
NOTE 7 - 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
October 31, 1999 since the effect would be anti-dilutive. At October 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 October 31, 2000
reflect of the common stock equivalents (warrants) if exercised:
10
<PAGE> 34
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 7 - EARNINGS (LOSS) PER COMMON SHARE, Continued
Year Ended October 31,
---------------------------
2000 1999
------------- -------------
(Restated)
Weighted average number of common shares
used in basic EPS 10,679,013 9,159,238
Effect of Dilutive Securities:
Warrants 1,400,000 -
------------- -------------
Weighted average number of common shares
and dilutive potential common stock used
in EPS - assuming dilution 12,079,013 9,159,238
============= =============
NOTE 8 - WARRANTS
Pursuant to a one year consulting agreement beginning on March 2, 1998 for
public relations services, the Company issued common stock purchase warrants
as follows:
Exercise
Price Exercise Term
No. of Per ---------------------------
Date of Grant Shares Share Start Expiration Vesting Rights
-------------- -------- -------- ------------- ------------- --------------
March 2, 1998 50,000 $ 3.00 March 2, 1998 March 2, 2001 Upon Issue
March 2, 1998 50,000 3.50 March 2, 1998 March 2, 2001 Upon Issue
March 2, 1998 50,000 4.00 March 2, 1998 March 2, 2001 Upon Issue
March 2, 1998 50,000 5.00 March 2, 1998 March 2, 2001 Upon Issue
Pursuant to another one year consulting agreement on June 1, 1999 for public
relations services, the Company additionally issued the following warrants:
Exercise
Price Exercise Term
No. of Per ---------------------------
Date of Grant Shares Share Start Expiration Vesting Rights
-------------- -------- -------- ------------- ------------- --------------
June 1, 1999 125,000 $ 0.50 June 1, 1999 June 1, 2002 Upon Issue
June 1, 1999 125,000 0.75 June 1, 1999 June 1, 2002 Upon Issue
June 1, 1999 125,000 1.00 June 1, 1999 June 1, 2002 Upon Issue
June 1, 1999 125,000 1.25 June 1, 1999 June 1, 2002 Upon Issue
On October 1, 2000, the Company executed an additional 16 month agreement for
public relations services to be provided that requires cash payments of
$100,000 per month, totaling $1,200,000 beginning February 1, 2001. Moreover,
600,000 warrants have also been included as part of the agreement which
entitles the holder to an exercise price of $5.00 per share, full vesting
rights upon issuance and an expiration date of October 1, 2005. The Company
has a four month trial period in which the entire agreement may be rendered
null and void by the Company up to February 1, 2001.
On October 18, 2000, the Company issued to a consultant 100,000 warrants for
future services to be provided over a three year period. The exercise price
is $3.00 per share, full vesting rights upon issuance and an expiration date
of October 18, 2003.
11
<PAGE> 35
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 8 - WARRANTS, Continued
Consultant expense of $20,883 and $26,625 for the years ended October 31, 2000
and 1999, respectively, has been recorded in accordance with FASB Statement
No. 123 as a part of selling, general and administrative expenses. The fair
value of each warrant issued is estimated on the grant date using the black
scholes pricing model with the following weighted-average assumptions used for
grants for the years ended October 31, 2000 and 1999; dividend yield of 0%,
risk-free interest of 5%, and expected lives of 3 years for the warrants.
Warrants issued for consultant services to be provided have been valued at
$2,041,000 and $23,500 at October 31, 2000 and 1999, respectively, and are
reflected as contra equity accounts on the balance sheets.
At October 31, 2000 and 1999, there were 1,400,000 and 700,000 shares eligible
for exercise, respectively, at prices ranging from $.50 to $5.00 per share.
The weighted average remaining contractual life of the warrants is one year,3
months and 2 years, respectively, for the years ended October 31, 2000 and
1999. The weighted average exercise price of the warrants is $3.22 and $1.73,
respectively, for the years ended October 31, 2000 and 1999.
NOTE 9 - MAJOR CUSTOMERS
For the years ended October 31, 2000 and 1999 (Restated), the Company had six
major customers, respectively, sales to which represented approximately 78%
($6,323,926) and 61% ($2,909,814), respectively, of the Company's revenues.
The Company had accounts receivable balances due from these customers of
$633,686 and $345,753 at October 31, 2000 and October 31, 1999 (Restated),
respectively. The loss of these customers would have a materially adverse
effect on the Company.
The following indicates the revenues from each of the major customers:
Year Ended October 31,
----------------------------
2000 1999
-------------- -------------
(Restated)
Major Customer #1 $ 402,109 $ 341,492
Major Customer #2 279,887 307,608
Major Customer #3 2,287,981 297,906
Major Customer #4 1,060,199 620,453
Major Customer #5 1,058,089 619,218
Major Customer #6 1,235,661 723,137
-------------- -------------
Total $ 6,323,926 $ 2,909,814
============== =============
NOTE 10 - RELATED PARTY TRANSACTIONS
Accounting services of $23,302 and $5,635 for years ended October 31, 2000 and
1999, respectively, were provided by a firm of which certain individuals in
that firm are shareholders/directors of the Company.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, Accounts Receivable, Accounts Payable and Lines of Credit
The carrying amount approximates fair value because of the short maturity of
these instruments.
Limitations
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgement and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimate.
12
<PAGE> 36
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 12 - INCOME TAXES
The income tax provision (benefit) is comprised of the following:
Federal State Total
------------ ----------- ------------
Year Ended October 31, 2000
Current $ 37,001 $ 8,539 $ 45,540
Deferred 13,913 3,211 17,124
------------ ----------- ------------
$ 50,914 $ 11,750 $ 62,664
============ =========== ============
Year Ended October 31, 1999
Current $ - $ 300 $ 300
Deferred - - -
------------ ----------- ------------
$ - $ 300 $ 300
============ =========== ============
Deferred taxes are recognized for temporary differences between the basis of
assets and liabilities for financial statement and income tax purposes. The
differences relate entirely to net operating loss carryforwards for both
Federal and State income tax purposes.
The differences between income tax provision (benefit) in the financial
statements and the tax expense (benefit) computed at the U.S. Federal
Statutory rate are as follows:
October 31,
----------------------------
2000 1999
------------- --------------
Federal statutory rate 39% -
State tax rate 9% -
Depreciation (27%) -
Benefit from net operating loss
carryforwards - (15)%
Valuation allowance - 15 %
------------- ---------------
Effective tax rate 21% -
============= ===============
The Company's total deferred tax (attributable to depreciation differences
in 2000 and net operating loss carry forwards in 1999) and valuation allowance
at October 31, 2000 is as follows:
October 31,
---------------------------
2000 1999
------------- -------------
Deferred tax asset $ - $ 15,000
Deferred tax liability (17,124) -
Less valuation allowance - (15,000)
------------- -------------
Net deferred tax asset (liability) $ (17,124) $ -
============= =============
The change in the valuation allowance amounted to $15,000 and $12,000 for the
years ended October 31, 2000 and 1999, respectively.
13
<PAGE> 37
Medi-Hut Company, Inc.
Notes to the Financial Statements
NOTE 13 - SUBSEQUENT EVENTS
On November 16, 2000, the Company entered into a joint venture agreement with
a South Korean company whereby Medi-Hut shall contribute $1,000,000 for a 44%
interest in the anticipated entity. The joint venture formation is subject to
approval by the South Korean government. The new entity will provide a
facility for production of the Company's patented safety syringe and allow for
better control over the manufacturing and distribution process.
On November 30,2000, the Company entered into an agreement to issue and sell
475,000 units to an investor in accordance with the provisions of Section 4(2)
and Regulation D of the Securities Act of 1933. Each unit will have a price of
$4.20 and shall be comprised of one share of the Company's common stock and
one warrant to purchase a share of common stock in the Company which shall be
exercisable beginning on the closing date of the transaction and extend over a
five year period thereafter and shall grant to the investor or holder the
right to purchase one additional share of the Company's common stock at a
price of $5.25 per share. If this transaction had occurred prior to the
October 31, 2000 balance sheet date, the weighted average of common shares
outstanding for purposes of calculating earnings per share-assuming dilution
would have increased by 950,000 common shares to 13,029,013 resulting in no
change to the presently calculated $.02 earnings per share-assuming dilution.
On December 18, 2000, 100,000 warrants were exercised by a warrant holder
totaling $300,000 of proceeds to the Company and the issuance of 100,000
shares of common stock.
14
<PAGE> 38
Rosenberg Rich
Baker Berman
& Company
A Professional Association of
Certified Public Accountants
380 Foothill Road * PO Box 6483 * Bridgewater NJ 08807-0483
908-231-1000 * Fax: 908-231-6894 * E-mail: [email protected]
Independent Auditors' Report on Additional Information
To the Board of Directors and Stockholders of
Medi-Hut Company, Inc.
Our report on the basic financial statements of Medi-Hut Company, Inc. as of
October 31, 2000 and 1999 appears on page 1. Those audits were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The additional information on the following page is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Rosenberg Rich Baker Berman & Company
Bridgewater, New Jersey
December 20, 2000
<PAGE> 39
Medi-Hut Company, Inc.
Schedules of Selling, General and Administrative Expenses
Year Ended
October 31,
---------------------------
2000 1999
------------- -------------
(Restated)
Officers' salaries $ 128,653 $ 148,900
Sales salaries 37,800 15,500
Office and warehouse salaries 24,900 13,500
Delivery expense 816 4,078
Advertising 513 5,552
License and permits 4,345 397
General insurance 29,001 40,794
Payroll taxes 17,049 13,615
Rent 27,347 27,713
Office supplies and expense 40,541 117,713
Postage 444 264
Accounting and legal 44,736 17,203
Consultant expense 20,883 26,625
Bank charges 2,605 366
Repairs and maintenance 294 101
Utilities 1,974 13,010
Depreciation 13,473 263
Employee welfare 32,136 16,914
Amortization 2,317 2,558
Garbage removal 351 960
Auto expense 19,948 18,696
Bad debts 35,235 -
Travel and entertainment 5,001 84,660
Telephone 4,806 4,581
Miscellaneous 3,667 7,682
------------- -------------
$ 498,835 $ 581,645
============= =============
<PAGE> 40
No dealer, salesman or any other person has been
authorized to give any information or to make
any representations not contained in this prospectus;
any information or representation not contained
herein must not be relied upon as having been
authorized by Medi-Hut. This prospectus does not
constitute an offer to sell, or a solicitation of
an offer to buy, any securities other than the
securities covered by this prospectus; nor does
it constitute an offer to sell, or a solicitation of
an offer to buy, any of the securities covered by ____________________
this prospectus by Medi-Hut or any person to whom
it is unlawful for Medi-Hut to make such offer or PROSPECTUS
solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under ____________________
any circumstances, create an implication that there
has been no change in the affairs of Medi-Hut since
the date of this prospectus.
__________ Medi-Hut Co., Inc.
TABLE OF CONTENTS 2,250,000 Common Shares
Page
Prospectus Summary.........................3
Risk Factors...............................4
Transactions Effected in Connection with
the Offering..............................6
Use of Proceeds............................7
Determination of Offering Price............8
Selling Stockholders.......................8
Plan of Distribution.......................8
Description of Securities .................9
Interest of Named Experts and Counsel......9
Commission Position on Indemnification
For Securities Act Liability..............10
Business...................................11
Market for Common Equity ..................16
Management's Discussion and Analysis.......16
Property...................................20
Management.................................20
Executive Compensation.....................21 January __, 2001
Security Ownership of Certain
Beneficial Owners And Management..........22
Certain Relationships and Related
Transactions..............................22
Changes in and Disagreements with
Accountants...............................22
Legal Proceedings..........................22
Financial Statements.......................23
<PAGE> 41
PART II
ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation and bylaws do not provide for
indemnification of our directors and officers. However, pursuant to Delaware
General Corporate Law Section 145 we must indemnify a present and former
director and officer of Medi-Hut who is successful on the merits, or
otherwise, in defense of an action or claim. We will indemnify such person
for actual and reasonable expenses incurred by such person only if we
determine that such indemnification is authorized. Such determination will be
based upon whether such person conducted himself in good faith and reasonably
believed that his conduct was in, or not opposed to, the our best interests.
In a criminal action the person must not have had a reasonable cause to
believe his conduct was unlawful. We may advance expenses if the person
provides a written affirmation that he will repay the advance if he is
adjudged not to have met the standard of conduct. Also, we are authorized to
purchase insurance on behalf of an individual for liabilities incurred whether
or not we would have the power or obligation to indemnify him.
ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by us in connection
with the sale of the shares. All the amounts shown are estimates except for
the registration fee:
Securities and Exchange Commission Registration Fee.................$ 4,139.
Printing and Engraving Expenses..................................... 500.
Legal and Accounting Fees and Expenses.............................. 9,000.
Transfer Agent and Registrar Fees and Expenses...................... 250.
Miscellaneous....................................................... 250.
Total.........................................................$14,139.
ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities sold by us within the
past three years without registration:
On January 23, 1998, Indwest issued an aggregate of 1,751,251 common
shares to twelve persons for $33,333 in costs paid for or on behalf of Indwest
and for services rendered to Indwest in connection with the merger with
Medi-Hut, New Jersey. We relied on an exemption from registration under the
Securities Act of 1933 by reason of Section 4(2) as a private transaction not
involving a public distribution. The twelve persons had unrestricted access
to detailed material information regarding Indwest due to personal
relationships with Indwest's management and Indwest reasonably believed that
each possessed sufficient sophistication to evaluate the information provided
and was able to bear the economic risk of the purchase.
On March 2, 1998 we issued warrants to Columbia Financial Group to
purchase 200,000 shares of our common stock at an aggregate exercise price of
$775,000 in consideration for its public relations services. Such services
were valued at $50,500. We relied on an exemption from registration under the
Securities Act of 1933 by reason of Section 4(2) as a private transaction not
involving a public distribution. Columbia Financial was provided the same
kind of information regarding Medi-Hut as would be available in a registration
statement and Medi-Hut reasonably believed it possessed sufficient
sophistication to evaluate the information provided.
In March 17, 1998, we sold an aggregate of 27,000 common shares for
$67,500 to eight persons. We relied on an exemption from registration under
the Securities Act of 1933 by reason of Section 4(2) as a private transaction
not involving a public distribution. The eight persons had unrestricted
access to detailed material information regarding Medi-Hut due to personal
relationships with Medi-Hut's management and Medi-Hut reasonably believed that
each possessed sufficient
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<PAGE> 42
sophistication to evaluate the information provided and was able to bear the
economic risk of the purchase.
On June 4, 1998, pursuant to Rule 504 of Regulation D, we sold 500,000
common shares to two accredited persons for $225,000. A 10% commission was
paid for this offering. We relied on an exemption from the registration
requirements under the Securities Act by reason of Section 3(b) and such
offering did not exceed the $1 million aggregate limitation for sales of
securities pursuant to Section 3(b) for the prior twelve months.
On June 1, 1999 we issued an aggregate of 500,000 warrants to Columbia
Financial in consideration for its consulting and investor relations services
as our public relations consultant. The warrants are exercisable upon
issuance for a period of three years, ending June 1, 2002, with an aggregate
exercise price of $437,500. Such services were valued at $26,625. (See,
"Description of Securities - Warrants," below.) We relied on an exemption
from registration under the Securities Act of 1933 by reason of Section 4(2)
as a private transaction not involving a public distribution. Mid-West First
was provided the same kind of information as would be available in a
registration statement regarding Medi-Hut and Medi-Hut reasonably believed it
possessed sufficient sophistication to evaluate the information provided.
On August 4, 1999, we offered an aggregate of 2,200,000 common shares
for $1,000,000 pursuant to Rule 504 of Regulation D. Five accredited
investors purchased 2,200,000 common shares for the $1 million aggregate
offering price A 10% commission was paid for this offering. We relied on an
exemption from the registration requirements under the Securities Act by
reason of Section 3(b) and such offering did not exceed the $1 million
aggregate limitation for sales of securities pursuant to Section 3(b) for the
prior twelve months.
On March 14, 2000 we issued 7,000 common shares to John E. Strydesky for
consulting services valued at $34,792.50. We relied on an exemption from
registration under the Securities Act by reason of Section 4(2) as a private
transaction not involving a public distribution. Mr. Strydesky had
unrestricted access to detailed material information regarding Medi-Hut due to
personal relationships with Medi-Hut's management and Medi-Hut reasonably
believed that he possessed sufficient sophistication to evaluate the
information provided and was able to bear the economic risk of the purchase.
On April 4, 2000 we agreed to issue 350,000 common shares valued at
$1,340,500 to Lawrence Marasco in exchange for the one outstanding share of
Vallar Consulting. We relied on an exemption from the registration under the
Securities Act by reason of Section 4(2). Mr. Marasco was provided the same
kind of information as would be available in a registration statement
regarding Medi-Hut and Medi-Hut reasonably believed that he possessed
sufficient sophistication to evaluate the information provided and was able to
bear the economic risk of the exchange.
On October 1, 2000 we issued warrants to purchase 600,000 common shares
to Columbia Financial in consideration for its consulting and investor
relations services as our public relations consultant. The warrants were
valued at $2,041,000. The warrants are exercisable upon issuance for a period
of five years, ending October 1, 2005, with an exercise price of $5.00. We
relied on an exemption from registration under the Securities Act of 1933 by
reason of Section 4(2) as a private transaction not involving a public
distribution. Columbia was provided the same kind of information as would be
available in a registration statement regarding Medi-Hut and Medi-Hut
reasonably believed it possessed sufficient sophistication to evaluate the
information provided.
On October 18, 2000 we agreed to issued warrants to purchase 100,000
common shares to John Clayton in consideration for his consulting services
rendered related to development of a business and management plan. Such
services were valued at $109,000. And the warrants had an exercise price of
$3.00 for a period of three years, ending October 18, 2003. We relied on an
exemption from registration under the Securities Act of 1933 by reason of
Section 4(2) as a private transaction not involving a public distribution.
Mr. Clayton was provided the same kind of information as would be available in
a registration statement regarding Medi-Hut and Medi-Hut reasonably believed
he possessed sufficient sophistication to evaluate the information provided.
On November 30, 2000 we agreed to sell, in a private placement, 475,000
units for $1,995,000 to Mid-West First Financial, Inc., an accredited
investor. Each unit consists of one common share and one warrant to purchase
one common
II-2
<PAGE> 43
share. The warrants are exercisable for a period of five years at an exercise
price of $5.25. We relied on an exemption from registration under the
Securities Act of 1933 by reason of Section 4(2) as a private transaction not
involving a public distribution. Mid-West First Financial was provided the
same kind of information as would be available in a registration statement
regarding Medi-Hut and Medi-Hut reasonably believed it possessed sufficient
sophistication to evaluate the information provided.
In each of the private transactions above we believe that each purchaser
(i) was aware that the securities had not been registered under federal
securities laws; (ii) acquired the securities for his/her/its own account for
investment purposes of the federal securities laws; (iii) understood that the
securities would need to be indefinitely held unless registered or an
exemption from registration applied to a proposed disposition; and (iv) was
aware that the certificate representing the securities would bear a legend
restricting its transfer. We believe that, in light of the foregoing, the
sale of our securities to the respective acquirers did not constitute the sale
of an unregistered security in violation of the federal securities laws and
regulations by reason of the exemptions provided under 4(2) of the Securities
Act, and the rules and regulations promulgated thereunder.
ITEM 27: EXHIBITS
Exhibits
-------
Exhibit
Number Description
2.1 Agreement and Plan of Reorganization between Indwest, Inc. and
Medi-Hut Co., Inc., New Jersey, dated January 28, 1998 (Incorporated
by reference to exhibit 2.1 to Medi-Hut's Form 10-SB as amended, file
No. 0-27119, filed August 23, 1999.)
2.2 Agreement and Plan of Reorganization between Medi-Hut and Vallar
Consulting, dated January 10, 2000. (Incorporated by reference to
Medi-Hut's 10-KSB, as amended, filed January 26, 2000)
3.1 Articles of Incorporation of Medi-Hut (Incorporated by reference to
exhibit 3.1 to Medi-Hut's Form 10-SB as amended, file No. 0-27119,
filed August 23, 1999.)
3.2 Articles of Merger filed February 20, 1998 (Incorporated by reference
to exhibit 3.2 to Medi-Hut's Form 10-SB as amended, file No. 0-27119,
filed August 23, 1999.)
3.3 Articles of Merger filed February 27, 1998 (Incorporated by reference
to exhibit 3.3 to Medi-Hut's Form 10-SB as amended, file No. 0-27119,
filed August 23, 1999.)
3.4 Bylaws of Medi-Hut (Incorporated by reference to exhibit 3.4 to
Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed August 23,
1999.)
5.1 Opinion of Cindy Shy, P.C. (To be filed by amendment)
10.1 Lease between Medi-Hut and Stamos & Sommers, LLC, dated December 12,
1997 (Incorporated by reference to exhibit 10.1 to Medi-Hut's Form
10-SB as amended, file No. 0-27119, filed August 23, 1999.)
10.2 Form of Confidential Agreement (Incorporated by reference to exhibit
10.2 to Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed
August 23, 1999.)
10.3 Promissory Note between Medi-Hut and PNC Bank, N.A., dated October
10, 1997 (Incorporated by reference to exhibit 10.3 to Medi-Hut's
Form 10-SB as amended, file No. 0-27119, filed August 23, 1999.)
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<PAGE> 44
10.4 Promissory Note between Medi-Hut and PNC Bank, N.A., dated October
10, 1997 (Incorporated by reference to exhibit 10.4 Medi-Hut's
10-KSB, as amended, filed January 26, 2000.)
10.5 Consultant Agreement between Columbia Financial Group and Medi-Hut,
dated October 1, 2000
10.6 Registration Rights Agreement between Medi-Hut, Mid-West, Columbia
Financial and Mutual Ventures, dated November 30, 2000.
21.1 Subsidiaries of Medi-Hut
23.1 Consent of Rosenberg, Rich, Baker & Berman, dated January 13, 2001.
23.2 Consent of Cindy Shy, P.C. (See exhibit 5.1)
ITEM 28: UNDERTAKINGS
Pursuant to Rule 415 the undersigned registrant hereby undertakes to:
(1) file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement which will include any
prospectus required by Section 10(a)(3) of the Securities Act; reflect in the
prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement; and
include any additional or changed material information on the plan of
distribution.
(2) For the purpose of determining any liability under the Securities
Act, to treat each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
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 foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange 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 these 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 any director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether this indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of this issue.
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<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused the registration statement to be signed on its
behalf by the undersigned, duly authorized, in the city of Lakewood, state of
New Jersey.
MEDI-HUT CO., INC.
/s/ Joseph Sanpietro 01/15/01
By: _________________________________ Date: ___________________
Joseph Sanpietro, President
and Director
/s/ Vincent Sanpietro 01/15/01
By:_______________________ __________ Date:_____________________
Vincent Sanpietro, Secretary
and Director
/s/ Robert Russo 01/15/01
By:__________________________________ Date:______________________
Robert Russo, Treasurer
and Director
II-5
