U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For Quarter Ended: April 30, 2001
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 000-27119
MEDI-HUT CO., INC
(Exact name of registrant as specified in its charter)
Delaware 222-436-721
(State of incorporation) (I.R.S. Employer
Identification No.)
1935 Swarthmore Avenue
Lakewood, New Jersey 08701
(732) 901-0606
(Address and telephone number of principal executive offices and principal
place of business)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
As of May 31, 2001, Medi-Hut had a total of 12,708,800 shares of common
stock issued and outstanding.
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements. . . . . . . . . . . . . . . . . .3
Item 2: Management's Discussion and Analysis. . . . . . . . . 14
PART II: OTHER INFORMATION
Item 2: Changes in Securities and Use of Proceeds . . . . . . 16
Item 4: Submission of Matters to a Vote of Security Holders. . 17
Item 6: Exhibits and Reports filed on Form 8-K . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
The financial information set forth below with respect to Medi-Hut's
statements of operations for the six months ended April 30, 2001 and 2000 is
unaudited. This financial information, in the opinion of Medi-Hut's
management, includes all adjustments consisting of normal recurring entries
necessary for the fair presentation of such data. The results of operations
for the six months ended April 30, 2001 are not necessarily indicative of
results to be expected for any subsequent period.
Medi-Hut Co., Inc.
Balance Sheet
April 30, 2001
April 30, 2001
ASSETS
CURRENT ASSETS
Checking account $ 1,398,787
Money Market account 3,683
Investment-Commercial Paper 2,250,000
Accounts Receivable 1,619,360
Accrued Interest Receivable 14,863
Deferred Insurance 58,255
Deferred Consulting Services 89,319
Merchandise Inventory 191,011
TOTAL CURRENT ASSETS 5,625,278
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 409,711
OTHER ASSETS
Joint Venture Investment at Equity 1,000,000
Patent, Net of Amortization 36,603
TOTAL OTHER ASSETS 1,036,603
TOTAL ASSETS $7,071,592
See Notes to Interim Financial Statements
**Unaudited**
F-1
Medi-Hut Co., Inc.
Balance Sheet
April 30, 2001
April 30, 2001
LIABILITIES AND EQUITY
CURRENT LIABILTIES
Accounts Payable $1,262,931
Payroll Taxes Payable 3,175
Accrued Expenses 29,222
Accrued Income Taxes Payable 98,404
Deferred Income Taxes Payable 36,018
Due to Joint Venture Investment 250,000
TOTAL CURRENT LIABILITIES 1,679,750
EQUITY
Capital Stock 12,109
Additional Paid in capital 8,585,974
Consultant services to be Provided (2,106,000)
Deferred Charges (57,506)
Retained (Deficit)/Earnings (1,042,735)
TOTAL EQUITY 5,391,842
TOTAL LIABILITIES AND EQUITY $7,071,592
See Notes to Interim Financial Statements
**Unaudited**
F-2
Medi-Hut Co., Inc.
Income Statement
For the Quarters and Six Months Ended April 30, 2001 and April 30, 2000
RESTATED RESTATED
February 1, February 1, November 1, November 1,
2001, to 2000 to 2000 to 1999 to
April 30, April 30, April 30, April 30,
2001 2000 2001 2000
SALES
Sales $ 2,315,528 $ 2,340,224 $4,520,674 $ 3,497,023
Sales discounts (1,022) (126) (6,688) (1,973)
Total SALES 2,314,506 3,340,098 4,513,986 3,495,050
COST OF SALES
BEGINNING INVENTORY 214,054 131,515 238,808 28,500
Purchases 1,885,757 2,133,778 3,802,956 3,298,451
Purchases discounts 0 (10) 0 (63)
Freight In 0 42 0 2,167
Ending Inventory (191,012) (175,362) (191,012) (175,362)
Freight Out 21,082 2,869 33,158 3,524
Total COST OF SALES 1,929,881 2,092,832 3,883,910 3,157,217
Total GROSS PROFIT 384,625 247,266 630,076 337,833
GENERAL & ADMINISTRATIVE 171,832 155,053 312,628 278,575
Total NET OPERATING INCOME
(LOSS) 212,793 92,213 317,448 59,258
OTHER (INCOME) AND EXPENSES
Interest Income (31,420) (15,279) (47,768) (28,856)
Interest Expense 861 0 1,461 0
Depreciation Expense 16,319 74 30,253 74
Amort of Patent Expenses 552 640 701 1,280
Total OTHER (INCOME) AND
EXPENSES (13,688) (14,565) (15,353) (27,502)
NET INCOME (LOSS) BEFORE
TAX 226,481 106,778 332,801 86,760
INCOME TAXES
Provision for Income Taxes 101,589 3,924 131,313 4,781
INCOME TAXES 101,589 3,924 131,313 4,781
NET INCOME (LOSS) $124,892 $102,854 $201,488 $81,979
INCOME/(LOSS) PER COMMON
SHARE 0.010 0.010 0.018 0.008
INCOME/(LOSS) PER COMMON
SHARE ASSUMING DILUTION 0.010 0.017
WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING 12,103,463 10,476,418 11,484,578 10,474,589
(AS DILUTED) 12,254,631 11,635,746
See Notes to Interim Financial Statements
**Unaudited**
F-3
Medi-Hut Co., Inc.
Condensed Cash Flow Statements
For the Six Months Ended April 30, 2001 and April 30, 2000
Six Months Six Months
Ended April 30, 2001 Ended April 30, 2000
Description
Net Cash Provided by Operating
Activities 88,289 104,024
Cash Flows from Investing Activities-
Investment in Joint Venture (750,000)
Purchase of marketable securities (1,850,000)
Purchase of Equipment (113,562) (16,808)
Net Cash (Used) by Investing Activities (2,713,562) (16,808)
Cash Flows from Financing Actitivies-
Issuance of stock in exchange for
insurance coverage 18,000
Exercise of Stock warrants 1,512,500
Redemption of marketable securities 200,000
Sale of Stock 1,995,000 34,793
Net Cash Provided by Financing
Activities 3,525,500 234,793
Net Increase (Decrease) in Cash 900,227 322,009
Cash at Beginning of Period 502,243 384,733
Cash at End of Period $1,402,470 $706,742
SCHEDULE OF NON-CASH FINANCING AND INVESTING ACTIVITIES
The Balance Sheet of Medi-Hut Co., Inc. presents a non-cash item at 4/30/01,
which is a $250,000 existing commitment to the Joint Venture Investment.
See Notes to Interim Financial Statements
**Unaudited**
F-4
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and six
months ended April 30, 2001 and April 30, 2000 are not necessarily indicative
of the results that may be expected for the years ended October 31, 2001 and
October 31, 2000 respectively.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Organization
Medi-Hut Co., Inc. (the Company), is a company in the business of
selling wholesale medical supplies. The Company was incorporated on November
22, 1982 in the State of New Jersey. On January 28, 1998, the Company entered
into an Agreement and Plan of Reorganization (APR) with a public company
Indwest, Inc. (Indwest), a Utah company incorporated on August 20, 1981
(formerly known as Gibraltor Energy, Gibraltor Group, Computermall of
Philadelphia, Inc. and Steering Control Systems, Inc.) Pursuant to the APR,
Medi-Hut's shareholders exchanged 100% of their common shares for 4,295,000
newly issued shares of Indwest on March 3, 1998.
For accounting purposes, the acquisition has been treated as an
acquisition of Indwest by Medi-Hut and a recapitalization of Medi-Hut. The
historical financial statements prior to January 28, 1998 are those of Medi-
Hut. Pro-forma information is not presented since the combination is
considered a recapitalization. Subsequent to the exchange, Medi-Hut merged
with Indwest whereby Medi-Hut ceased to exist and Indwest, the surviving
corporation, changed its name to Medi-Hut Company, Inc. On February 2, 1998
Medi-Hut Company, Inc. changed its state of domicile from Utah to Delaware.
The surviving corporation's operations are entirely those of the former and
new Medi-Hut.
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.
**UNAUDITED**
F-5
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued
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 three months ended April 30, 2001 and April, 30 2000.
Depreciation
Machinery and equipment are stated at cost. Depreciation is computed
using the straight-line method for financial reporting purposes, which
amounted to $16,319 and $74 for the three months ended April 30, 2001 and
April 30, 2000 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.
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 three months ended April 30, 2001 and April 30,
2000 were $552 and $640 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 realize.
**UNAUDITED**
F-6
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 2 - 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 3 - 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 4 - MARKETABLE SECURITIES
The Company had investments in Held-to maturity debt securities on April
30, 2001 and April 30, 2000 in the amount of $2,250,000 and $700,000
respectively. The securities had terms ranging from 30 to 90 days and fixed
interest rates ranging from 4.92% to 5.99% per annum and are unsecured.
NOTE 5 - INVENTORY
Inventory consists of purchased finished goods, which totaled $191,011 and
$175,362 at April 30, 2001 and April 30, 2000 respectively.
**UNAUDITED**
F-7
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 6 LINES OF CREDIT
On January 31, 2001 the Company received a bank commitment on a $750,000
revolving line of credit under which the bank has agreed to make loans at %
above the prime interest rate. The Company's business assets secure the note.
As of April 30, 2001 and April 30, 2000 there were $ 0 outstanding on lines of
credit.
NOTE 7 - EXERCISED WARRANTS
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. On January 31, 2001, 700,000 warrants were
exercised by two different warrant holders totaling $1,212,500 of proceeds to
the Company and the issuance of 700,000 shares of common stock.
NOTE 8 - REGISTRATION OF ADDITIONAL SECURITIES
On January 29, 2001 the Company registered an additional 2,250,000
shares of common stock with The Securities and Exchange Commission for the
purpose of raising additional working capital.
NOTE 9 - 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 April 30,
2001
Year Ending October 31,
2001 $ 3,907
2002 6,697
2003 2,789
------------
Total minimum payments required $13,393
Rent Expense for the three months ended April 30, 2001 and April 30, 2000
amounted to $7,408 and $6,484 respectively.
The office and warehouse lease contain provisions for contingent rental
payments based upon increases in taxes, insurance and common area maintenance
expense.
**UNAUDITED**
F-8
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 11 - INVESTMENTS
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 entity. The Korean Government approved the registration
of the new entity on February 15, 2001. The entity will provide a facility for
the production of the Company's patented safety syringe and allow for better
control over the manufacturing and distribution process. As of April 30, 2001
the Company had a liability of $250,000 to the entity.
NOTE 12 - ISSUANCE OF STOCK
On January 5, 2001 the Company issued 4,000 shares of common stock
valued at $18,000 to an insurance company in exchange for a Directors and
Officer's liability policy.
NOTE 13 SALE OF STOCK
On February 1, 2001 the Company sold 475,000 units to an investor in
accordance with the provisions of Section4(2) and Regulation D of the
Securities Act of 1933. Each unit had a price of $4.20 and was comprised of
one share of the Company's common stock and one warrant to purchase a share of
common stock in the Company, exercisable for a period of five years. The
aforementioned warrants grant the investor or holder the right to purchase one
additional share at a price of $5.25 per share.
**UNAUDITED**
F-9
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 14 - 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. At April 30, 2001,
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 reflects of the common stock
equivalents (warrants) if exercised:
3 Months Ended 6 Months Ended
4/30/01 4/30/01
Weighted average number of common
Shares used in basic EPS 12,103,463 11,484,578
Effect of Dilutive Securities:
Warrants 151,168 151,168
Weighted average number of common
Shares and dilutive potential
Common stock used in diluted EPS 12,254,631 11,635,746
NOTE 15 FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash, Accounts Receivable, Accounts Payable and Lines of Credit
The carrying amount approximates fair value because of the short
maturities 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 judgment and therefore cannot
be determined with precision. Changes in assumptions could
significantly affect the estimate.
**UNAUDITED**
F-10
Medi-Hut Co., Inc.
Notes to the Interim Financial Statements
April 30, 2001
NOTE 16 WARRANTS/ CONSULTANT SERVICES TO BE PROVIDED
On October 1, 2000 the Company executed an agreement for public
relations services to be provided. The original terms of the agreement
required cash payments of $100,000 per month, totaling $1,200,000 and 600,000
warrants entitling the holder to an exercise price of $5.00 per share. The
requirements of the agreement were amended to provide no cash payments and the
600,000 warrants to be adjusted to an exercise price of $2.50 per share, The
warrants have full vesting rights upon issuance and an expiration date of
October 1, 2005
NOTE 17 PLANNED MERGER
On March 5, 2001 the Company announced it's signing of a letter of
intent to enter into an Agreement and Plan of Reorganization with a competing
sales and marketing organization. The Company will enter into the agreement
through a stock-for-stock exchange.
**UNAUDITED**
F-11
In this quarterly report references to "Medi-Hut," "we," "us," and "our"
refer to Medi-Hut Co., Inc.
FORWARD LOOKING STATEMENTS
This Form 10-QSB contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. For this
purpose any statements contained in this Form 10-QSB that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Medi-Hut's 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-Hut's chosen industry, including competition from much
larger competitors; technological advances and failure by Medi-Hut to
successfully develop business relationships.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
Medi-Hut wholesales name brand drugs, medical products, our "Elite"
brand medical products and our "Tru-Choice" over-the-counter drugs. These
products are provided to us by various suppliers. We also manufacture and
market our Elite Safety Syringe. The following discussion and analysis should
be read in conjunction with the financial statements and notes included with
this report. 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.
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. 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 acquisition was treated as a pooling of interests
for accounting purposes and Vallar became our wholly-owned subsidiary.
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
Six Months Ended April 30, 2001 Compared to Six Months Ended April 30, 2000
The following table summarizes the results of our operations for the six
months ended April 30, 2001 and 2000.
Three Months Ended April 30, Six Months Ended April 30,
2001 2000 2001 2000
(Restated) (Restated)
Total sales $2,314,506 2,340,098 $4,513,986 $3,495,050
Total cost of sales 1,929,881 2,092,832 3,883,910 3,157,217
Gross profit 384,625 247,266 630,076 337,833
General &
administrative expenses 171,832 155,053 312,628 278,575
Net operating income 212,793 92,213 371,448 59,258
Total other (income)
and expenses (13,688) (14,565) (15,353) (27,502)
Income taxes 101,589 3,924 131,313 4,781
Net income $ 124,892 $ 102,854 $ 201,488 $ 81,979
Total sales were $2,314,506 for the second quarter of 2001 and
$4,513,986 for the six month period ended April 30, 2001. The six month
figure represents a $1,018,936 increase over the same period last year. The
increase in sales was primarily the result of sales of name brand
pharmaceuticals and our Elite Safety Syringe.
Total cost of sales as a percentage of total sales decreased for the
comparable quarter and the six month period. Such costs were 83.4% of total
sales for the second quarter of 2001 compared to 89.4% of total sales for the
second quarter of 2000, and were 86.0% for the 2001 six month period compared
to 90.3% for the six month period of 2000. The improved costs of sales are
reflective of the greater profit margin of The Elite Safety Syringe. As a
result of reductions in costs of sales and increased revenues, our gross
profit increased by $137,359 in the second quarter of 2001 compared to the
second quarter of 2000, and increased $292,243 in the 2001 six month period
compared to the 2000 six month period.
General and administrative expenses increased $16,779 in the second
quarter of 2001 compared to the second quarter of 2000 and increased $34,053
in the six month period of 2001 compared to the six month period of 2000.
Such expenses were 6.9% of total sales in the 2001 six month period compared
to 8.0% of total sales for the comparable 2000 period. The increase in sales
resulted in our net operating income increasing $120,580 in the 2001 second
quarter compared to the 2000 second quarter, and an increase of $258,190 in
the 2001 six month period compared to the same period in 2000.
We recorded total other income, net of other expenses, of $13,688 for
the 2001 second quarter compared to $14,565 for the second quarter of 2000.
For the six month period of 2001 we recorded total other income, net of other
expenses, of $15,353 compared to $27,502 for the same period in 2000. The
reductions in 2001 compared to 2000 were due primarily to depreciation expense
from the new syringe molds we placed into service.
Our income taxes increased $97,665 in the second quarter of 2001 and
$126,532 for the six month period as a result of our increased net income.
Our net income, after tax, increased $22,038 in the 2001 second quarter
and $119,509 in the 2001 six month period compared to 2000 comparable periods.
As a result, we posted a net income per share of $0.018 compared to an income
per share of $0.008 for the 2000 six month period.
Liquidity and Capital Resources
We have funded our cash requirements primarily through revenues and
sales of our common stock. Management anticipates we will continue to meet
our present requirements for working capital and capital expenditures for the
next twelve months from revenues and equity transactions. For the period
ended April 30, 2001, we had $1,402,470 in cash and working capital of
$3,945,529 compared to cash of $502,243 and working capital of $1,192,888 at
the year ended October 31, 2000. We had total current assets of $5,625,278
with total current liabilities of $1,679,749 as of April 30, 2001, compared to
$2,908,632 total current assets and $1,716,444 total current liabilities for
the fiscal year ended October 31, 2000.
Net cash provided by our operating activities was $88,289 for the 2001
six month period ended April 30, 2001, compared to $104,024 net cash provided
by operating activities for the comparable 2000 six month period. Net cash
used by investing activities was $2,713,562 for the 2001 period compared to
$16,808 net cash used by investing activities for the same period in 2000.
$750,000 of this amount is related to our investment of capital funding in
Medi-Hut International (Mfg.) Co., Ltd. under our joint venture agreement with
COA Industrial. In addition, we invested $1,850,000 to purchase marketable
securities, which are unsecured, with terms ranging from 30 to 90 days and
fixed interest rates ranging from 4.92% to 5.99% per annum.
Net cash provided by financing activities was $3,525,500 for the 2001
period compared to $234,793 for the 2000 period. The 2001 increase was
primarily related to proceeds of $1,512,500 from the exercise of 800,000
warrants. The warrants were granted under various agreements and the
underlying common shares were registered under the Securities Act of 1933 on
January 29, 2001. 1,075,000 warrants remain outstanding and if all of the
remaining warrants are exercised we could receive up to $5,493,750.
In addition, $1,995,000 in proceeds were realized from the sale of
common stock during the 2001 six month period. 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 consisted of one
common share and one warrant to purchase one common share. The warrants are
exercisable for a period of five years at an exercise price of $5.25.
As of April 30, 2001, 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
$13,393 through the fiscal year 2003. We also are committed to contribute an
additional $250,000 to our joint venture with COA Industrial.
Financing. We have a $750,000 revolving line of credit which expires
January 31, 2002. PNC Bank, N.A. makes loans to us at % above the prime
interest rate for the revolving line of credit. This line of credit is
secured by all the assets of Medi-Hut. As of the fiscal year ended 2000 and
the second quarter ended April 30, 2001 there were no amounts outstanding on
the line of credit.
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. We
continue to seek an underwriter for the bonds, 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 anticipate that we will rely on manufacturing facilities located
in Korea to produce our Elite Safety Syringe for the present.
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 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.
If additional funds are needed for our future growth, we can not assure
that funds will be available from any source, or, if available, that we will
be able to obtain the funds on terms agreeable to us. The acquisition of
funding through the issuance of debt could result in a substantial portion of
our cash flows from operations being dedicated to the payment of principal and
interest on the indebtedness, and could render us more vulnerable to
competitive and economic downturns.
PART II: OTHER INFORMATION
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) Recent Sales of Unregistered Securities
The following discussion describes all securities sold by us without
registration during the quarter ended April 30, 2001 and as of a recent date.
On February 1, 2001, we sold 475,000 units to Mid-West First Financial,
Inc., an accredited investor, for $1,995,000 pursuant to a private placement
agreement dated November 30, 2000. Each unit consisted of one common share
and one warrant to purchase one common 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 provided by
Section 4(2) as a private transaction not involving a public distribution.
(d) Use of Proceeds
Our registration statement on Form SB-2, file No. 333-53718, was
declared effective January 29, 2001. We have issued 1,279,000 shares of the
2,250,000 Medi-Hut common shares registered under this registration statement.
We will not receive proceeds from the sale of the registered shares and these
shares will be sold from time to time and at the total discretion of the
selling stockholders. We have received proceeds of $1,512,500 from the
exercise of warrants to purchase 800,000 of the registered shares. We have
used these proceeds for business development.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 3, 2001, we held an annual meeting of shareholders at which the
following persons were elected as directors and the following proposals were
approved by the shareholders:
Election of directors: Votes for Votes against Votes withheld
Joseph A. Sanpietro 12,100,000 0 8,800
Vincent J. Sanpietro 12,100,000 0 8,800
Robert Russo 12,100,000 0 8,800
James G. Aaron 12,100,000 0 8,800
James S. Vaccaro 12,100,000 0 8,800
Proposal to transact other 12,100,000 0 8,800
business before the meeting
Proposal to approve 12,099,350 350 9,100
reorganization
between Medi-Hut and
WJL Enterprises, Inc.
Proposal to complete 12,099,350 350 9,100
statutory merger to change
domicile from Delaware to
Nevada
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Part II Exhibits
Exhibit Number Description
2.1 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.)
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.)
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. (Incorporated by reference to the
Form SB-2, filed January 16, 2001.)
10.6 Amendment to Consultant Agreement between Columbia Financial
Group and Medi-Hut, dated October 1, 2000.
10.7 Registration Rights Agreement between Medi-Hut, Mid-West,
Columbia Financial and Mutual Ventures, dated November 30, 2000.
(Incorporated by reference to exhibit 10.6 to the Form SB-2,
filed January 16, 2001.)
______________________
(b) Reports on Form 8-K.
On February 5, 2001, we filed an 8-K under Item 5 regarding our
registration statement on Form SB-2 being declared effective on January 29,
2001. No financial statements were filed.
On February 16, 2001, we filed an 8-K under Item 5 regarding the Korean
governmental approval and registration of Medi-Hut International (Mfg.) Co.,
Ltd. No financial statements were filed.
On March 6, 2001, we filed an 8-K under Item 5 regarding the signing of
a letter of intent to enter into an Agreement and Plan of Reorganization with
WJL Enterprises, Inc. No financial statements were filed.
On April 24, 2001, we filed an 8-K under Item 5 regarding appointment of
Laurence M. Simon as Chief Financial Officer and the creation of our audit
committee. Interim financial statements for the five month period ended March
31, 2001 were filed.
On May 10, 2001, we filed an 8-K under Item 5 regarding the modification
of our reorganization with WJL Enterprises, Inc. No financial statements were
filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Medi-Hut Co., Inc.
Date: 6/1/01 By:/S/Joseph A. Sanpietro
Joseph A. Sanpietro, President and
Director
Date: 6/1/01 By:/s/Vincent J. Sanpietro
Vincent J. Sanpietro, Secretary and
Director
Date: 6/1/01 By:/s/Robert Russo
Robert Russo, Treasurer and Director