SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: July 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No. 000-27119 MEDI-HUT CO., INC (Exact name of registrant as specified in its charter) Delaware 222-436-721 (State of incorporation) (I.R.S. Employer Identification No.) 1935 Swarthmore Avenue Lakewood, New Jersey 08701 (732) 901-0606 (Address and telephone number of principal executive offices and principal place of business) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of September 11, 2000, the Registrant had a total of 10,829,800 shares of common stock issued and outstanding. TABLE OF CONTENTS PART I: FINANCIAL INFORMATION Item 1: Financial Statements..............................................3 Item 2: Management's Discussion and Analysis or Plan of Operations........11 PART II: OTHER INFORMATION Item 6: Exhibits and Reports filed on Form 8-K............................15 Signatures.................................................................16 2 PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS Medi-Hut Co., Inc. Consolidated Financial Statements July 31, 2000. Balance Sheet July 31, 2000 F-1 Cash Flow Statement July 31, 2000 and 1999 F-3 Income statement July 31, 2000 and 1999 F-4 Notes F-5 3 Medi-Hut Co., Inc. Consolidated Condensed Interim Balance Sheet July 31, 2000 July 31, 2000 ------------- ASSETS CURRENT ASSETS Checking account $ 17,670 Money market account 614,850 Investment - Commercial Paper 600,000 Accounts Receivable 614,582 Accrued Interest Receivable 1,133 Prepaid Insurance 7,676 Merchandise Inventory 270,810 ------------- TOTAL CURRENT ASSETS 2,126,721 PROPERTY AND EQUIPMENT, NET OF 1,590 ACCUMULATED DEPRECIATION OTHER ASSETS Patent, Net of Amortization 32,857 Deposits on Equipment 138,389 ------------- TOTAL OTHER ASSETS 171,246 ------------- TOTAL ASSETS $ 2,299,557 ============= See Notes to Consolidated Condensed Interim Financial Statements ** Unaudited ** F-1 4 Medi-Hut Co., Inc. Consolidated Condensed Interim Balance Sheet July 31, 2000 July 31, 2000 ------------- LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts Payable $ 663,015 Payroll Taxes Payable 3,198 Accrued Expenses 2,865 Accrued Income Taxes Payable 80,252 ------------- TOTAL CURRENT LIABILITIES 749,330 EQUITY Capital Stock 10,543 Additional paid in capital 2,847,040 Prepaid Expenses- Current (59,073) Retained (Deficit)/Earnings (1,248,283) ------------- TOTAL EQUITY 1,550,227 ------------- TOTAL LIABILITIES AND EQUITY $ 2,299,557 ============= See Notes to Consolidated Condensed Interim Financial Statements. ** Unaudited ** F-2 5 Medi-Hut Co., Inc. Consolidated Condensed Interim Cash Flow Statements For the Nine Months Ended July 31, 2000 & July 31, 1999 RESTATED Nine Months Nine Months Ended Ended Description July 31, 2000 July 31, 1999 - ----------- ------------- ------------- Net Cash Provided by Operating Activities 353,644 (119,906) Cash Flows from Investing Activities - Purchases of patent and licensing costs (8,238) (300) Deposits on equipment (138,389) Purchase of equipment (1,808) 0 ------------- ------------- Net Cash (Used) by Investing Activities (148,435) (300) Cash Flows from Financing Activities - Issuance -of warrants for consulting fees 23,500 Issuance of Common Stock 34,793 0 ------------- ------------- Net Cash Provided by Financing Activities 34,793 23,500 Net Increase (Decrease) in Cash 240,002 (96,706) Cash at Beginning of Period 392,518 236,577 ------------- ------------- Cash at End of Period $ 632,520 $ 139,870 ============= ============= See Notes to Consolidated Condensed Interim Financial Statements. **UNAUDITED** F-3 6 Medi-Hut Co., Inc. Consolidated Condensed Interim Income Statement For the Quarters Ended and Nine Months Ended July 31, 2000 and July 31, 1999 RESTATED RESTATED May 1, 2000 May 1, 1999 November 1,1999 November 1,1998 to to to to July 31, 2000 July 31, 1999 July 31, 2000 July 31, 1999 ------------- ------------- --------------- --------------- SALES Sales $ 1,978,620 $ 1,041,087 $ 5,475,643 $ 3,162,334 Sales discounts (3,104) (350) (5,077) (3,457) ------------- ------------- --------------- --------------- Total SALES 1,975,516 1,040,737 5,470,566 3,158,877 COST OF SALES BEGINNING INVENTORY 175,362 105,250 28,500 24,558 Purchases 1,769,675 918,362 5,068,126 2,891,525 Purchases discounts (26,258) (778) (26,321) (6,916) Freight In 0 0 2,167 1,520 Ending Inventory (270,810) (82,468) (270,810) (82,468) Freight out 2,246 81 5,770 998 ------------- ------------- --------------- --------------- Total COST OF SALES 1,650,215 940,447 4,807,432 2,829,217 ------------- ------------- --------------- --------------- Total GROSS PROFIT 325,301 100,290 663,134 329,660 GENERAL & ADMINISTRATIVE 111,028 139,271 389,603 451,583 ------------- ------------- --------------- --------------- Total NET OPERATING INCOME (LOSS) $ 214,273 $ (38,981) $ 273,531 $ (121,923) OTHER (INCOME) AND EXPENSES Interest Income (16,415) (420) (45,271) (1,779) Interest Expense 0 1,420 0 3,082 Depreciation Expense 144 0 218 263 Amort of Organization Expense 601 (568) 1,881 711 ------------- ------------- --------------- --------------- Total OTHER (INCOME) AND EXPENSES (15,670) 432 (43,172) 2,277 ------------- ------------- --------------- --------------- NET INCOME (LOSS) BEFORE TAX 229,943 (39,413) 316,703 (124,200) INCOME TAXES Provision for Income Taxes 80,252 1,656 85,033 2,511 ------------- ------------- --------------- --------------- INCOME TAXES 80,252 1,656 85,033 2,511 ------------- ------------- --------------- --------------- NET INCOME (LOSS) $ 149,691 $ (41,069) $ 231,670 $ (126,711) ============= ============= =============== =============== INCOME/(LOSS) PER COMMON SHARE 0.014 (0.005) 0.022 (0.015) ============= ============= =============== =============== INCOME /(LOSS) PER COMMON SHARE ASSUMING DILUTION 0.013 0.021 ============= =============== See Notes to Consolidated Condensed Interim Financial Statements. **Unaudited** F-4 7 Medi-Hut Co., Inc. Notes to the Consolidated Condensed Interim Financial Statements July 31, 2000 and 1999 NATURE OF ORGANIZATION Medi-Hut Co., Inc. (the Company), is a company in the business of selling wholesale medical supplies. The Company was incorporated on November 22, 1982 in the State of New Jersey. On January 28, 1998, the Company entered into an Agreement and Plan of Reorganization (APR) with a public company Indwest, Inc. (Indwest), a Utah company incorporated on August 20, 1981 (formerly known as Gibraltor Energy, Gibraltor Group, Computermall of Philadelphia, Inc. and Steering Control Systems, Inc.) Pursuant to the APR, Medi-Hut's shareholders exchanged 100% of their common shares for 4,295,000 newly issued shares of Indwest on March 3, 1998. For accounting purposes, the acquisition has been treated as an acquisition of Indwest by Medi-Hut and a recapitalization of Medi-Hut. The historical financial statements prior to January 28, 1998 are those of Medi-Hut. Pro-forma information is not presented since the combination is considered a recapitalization. Subsequent to the exchange, Medi-Hut merged with Indwest whereby Medi-Hut ceased to exist and Indwest, the surviving corporation, changed its name to Medi-Hut Company, Inc. On February 2, 1998 Medi-Hut Company, Inc. changed its state of domicile from Utah to Delaware. The surviving corporation's operations are entirely those of the former and new Medi-Hut. Acquisition of Vallar Consulting Group and Restatement - ------------------------------------------------------- On April 4, 2000, the Company acquired Vallar Consulting Group in a business combination accounted for as a pooling of interests. Vallar Consulting Group, which engages in the sales of medical supplies, became a wholly owned subsidiary of the Company through the exchange of 350,000 restricted shares of the Company's common stock for all of the outstanding stock of Vallar Consulting Group. The accompanying financial statements for July 31, 1999 and 2000 are based on the assumption that the companies were combined for the three months and nine months ended July 31, 1999 and 2000 and financial statements of prior years have been restated to give effect to the combination. Following is a reconciliation of the amounts of net sales and net income previously reported for the 3 month and 9 month periods ending July 31, 1999 with restated amounts: May 1, 1999 November 1, 1998 to to July 31, 1999 July 31, 1999 --------------- --------------- Net sales As previously reported $ 169,275 $ 544,491 Vallar Consulting Group 871,462 2,614,386 --------------- --------------- As restated $ 1,040,737 $ 3,158,877 =============== =============== **UNAUDITED** F-5 8 Medi-Hut Co., Inc. Notes to the Consolidated Condensed Interim Financial Statements July 31, 2000 and 1999 May 1, 1999 November 1, 1998 to to July 31, 1999 July 31, 1999 --------------- ---------------- Net Income As previously reported $ (37,888) $ (117,168) Vallar Consulting Group (3,181) (9,543) --------------- ---------------- As Restated $ (41,069) $ (126,711) =============== ================ PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Medi-Hut Co., Inc. and all of its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated. Prior to April 4, 2000, the company and Vallar Consulting Group, in the normal course of business, entered into certain transactions for the purchase and sale of merchandise. These inter-company transactions have been eliminated in the accompanying financial statements. BASIS OF PRESENTATION The accompanying unaudited consolidated condensed interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended July 31, 2000 and 1999 are not necessarily indicative of the results that may be expected for the years ended October 31, 2000 and 1999, respectively. NOTES PAYABLE The Company has in place a $ 50,000 working capital line of credit under which the bank has agreed to make loans at 2% above the prime interest rate. As of July 31, 2000 there was $ 0 outstanding. **UNAUDITED** F-6 9 Medi-Hut Co., Inc. Notes to the Consolidated Condensed Interim Financial Statements July 31, 2000 and 1999 EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share, in accordance with the provisions of Financial Accounting Standards Board No. 128, "Earnings per Share", is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (warrants) have not been included in this computation as of July 31, 1999 since the effect would be anti-dilutive. At July 31, 2000, the following amounts were used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock. The number of shares used in the calculations for July 31, 2000 reflect of the common stock equivalents (warrants) if exercised: Qtr Ended 9 Mos. Ended 7/31/00 7/31/00 -------------- -------------- Weighted average number of common shares used in basic EPS 10,829,800 10,626,954 Effect of Dilutive Securities: Warrants 375,926 375,926 -------------- -------------- Weighted average number of common shares and dilutive potential common stock used in diluted EPS 11,205,726 10,878,493 ============== ============== **UNAUDITED** F-7 10 In this quarterly report references to "Medi-Hut," "we," "us," and "our" refer to Medi-Hut Co., Inc. FORWARD LOOKING STATEMENTS This Form 10-QSB contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within Medi-Huts' control. These factors include but are not limited to economic conditions generally and in the industries in which Medi-Hut may participate; competition within Medi-Huts' chosen industry, including competition from much larger competitors; technological advances and failure by Medi-Hut to successfully develop business relationships. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS We private label condoms, alcohol prep pads, over-the-counter drugs and medical devices through various suppliers, as well as, wholesale name brand drugs and medical devices. We sell our own "Elite" brand of medical supplies and Tru-Choice brand of over-the-counter drugs. We also hold a patent for a passive device safety syringe, an anti-stick syringe, which we hope to introduce into the market in the coming fiscal year. We sell our products through drug wholesalers who then sell the products to pharmacies and through mail order. Results of Operations The following table summarizes the results of our operations for the three and nine month periods ended July 31, 2000 and 1999. The July 31, 2000 and 1999 numbers are based on the assumption that we and our wholly-owned subsidiary, Vallar Consulting, Inc., have been combined for the nine months ended July 31, 2000 and 1999. Our fiscal year ends October 31st. 11 Three Months Ended Nine Months Ended July 31, July 31, 1999 2000 1999 2000 ------------ ------------ ------------ ------------ Total Sales $ 1,040,737 $ 1,975,516 $ 3,158,877 $ 5,470,566 Cost of Sales 940,447 1,650,215 2,829,217 4,807,432 Gross Profit 100,290 325,301 329,660 663,134 General & Administrative Expenses 139,271 111,028 451,583 389,603 Net Operating Income or (Loss) (38,981) 214,273 (121,923) 273,531 Total Other (Income) and Expenses 432 (15,670) 2,277 (43,172) Income taxes 1,656 80,252 2,511 85,033 Net Income (Loss) (41,069) 149,691 (126,711) 231,670 We realize revenue when products are shipped and title passes to our wholesalers. Total sales increased $2,311,689 for the nine month period and $934,779 for the third quarter ended July 31, 2000 compared to the comparable periods of 1999. This increase in sales for the nine month period was primarily the result of our acquisition of Vallar and adding name brand pharmaceuticals to our product line. Costs of sales primarily consist of the cost of the products purchased from third-party vendors and shipping costs. Cost of sales decreased to 83.5% of total sales for the 2000 third quarter and 87.9% of total sales for the 2000 nine month period compared to 90.4% and 89.6%, respectively, for the comparable 1999 periods. Our gross profit increased $225,011 for the 2000 third quarter and $333,474 for the 2000 nine month period compared to the 1999 periods. As a result, our gross profit increased to 12.1% of total sales for the 2000 nine month period compared to 10.4% for the 1999 nine month period. General and administrative expenses include employee salaries and benefits, employee travel expenses, selling expenses, office expenses and occupancy costs and legal and accounting fees. General and administrative expenses decreased $28,243 for the 2000 third quarter compared to the 1999 third quarter and $61,980 for the 2000 nine month period compared to the nine month period for 1999. The decrease for these expenses resulted primarily from lower officer salaries and related payroll expenses in the 2000 time periods. As a result of our increased sales we have recorded a net income for the 2000 periods versus operating losses for the 1999 periods. We had earnings per share of $.022 for the 2000 nine month period compared to a loss per share of $.015 for the 1999 nine month period. 12 Liquidity and Capital Resources We have funded our cash requirements primarily through revenues and sales of our common stock. We have required little short term debt financing and management anticipates we will meet our present requirements for working capital and capital expenditures for the next twelve months if we do not build our own syringe manufacturing facility. Our working capital was $1,377,391 for the 2000 nine month period. For that period we recorded $632,520 in cash reserves with total current assets of $2,126,721 and total current liabilities of $749,330. 28.2% of our total currents assets for the 2000 nine month period were allocated to marketable securities, 28.9% to accounts receivable and 12.7% to inventory. The marketable debt securities had a maturity date of August 21, 2000 with a 6.5% fixed interest rate, are unsecured and roll over each month. They have no termination or redemptive provisions. Our principal commitments consist of office and warehouse space with future annual minimum rental payments of $10,757 through the year 2000. We are also committed to provide $210,000 in funding for the development of our Elite Safety Syringe. Net cash provided by our operating activities was $353,644 for the 2000 nine month period compared to cash used by operating activities of $119,907 for the 1999 nine month period. As discussed above this increase is due to increased sales. Net cash used by investing activities for the 2000 nine month period was $148,435 compared to $300 for the 1999 nine month period. The majority of the funds have been invested in our Elite Safety Syringe. We expended $88,389 for the safety syringe molds, $8,238 was spent for new product patent and licensing costs, and $50,000 was spent on assembly equipment. We also invested $1,808 in computer equipment during our second quarter of 2000. We are working toward bringing the Elite Safety Syringe to market within the next fiscal year. (See, Part II: Item 5, below.) As of August 18, 2000, sixteen states have passed safety needle legislation which requires that health care workers be provided with anti-stick needles for their protection. Management believes these developments will enhance the market for our Elite Safety Syringe. Net cash provided by financing activities was $34,793 for the nine month period of 2000 compared to $23,500 for the 1999 nine month period. These amounts were related to the issuance of shares and warrants in exchange for consulting services. Financing - ---------- We have a working capital line of credit for $50,000 with PNC Bank, N.A. with an interest rate of 2% above the prime interest rate, which we expect to be renewed within the next 30 days. We also have a $150,000 revolving line of credit we obtained in October of 1997. 13 Under this loan PNC Bank, N.A. makes loans to us at 3% above the prime interest rate. This line of credit expires October 10, 2000, but we have received notice that it will be approved for another year. Both lines of credit are secured by all the assets of Medi-Hut and personal guarantees of our executive officers. We had a $0 balance on both lines of credit at the end of the nine month period. Management anticipates that we will seek additional funding through future securities offerings which will be effected pursuant to applicable exemptions under federal and state laws. We have not entered into any agreement with any person at the time of this filing for such offerings. We will determine the purchasers and manner of issuance according to our financial needs and the available exemptions. We also note that if we issue more shares of our common stock our shareholders may experience dilution in the value per share of their common stock. On October 4, 1999, we received preliminary approval from the New Jersey Economic Development Authority for $5.75 million in financial assistance to build a manufacturing facility in New Jersey for our Elite safety syringe. However, the New Jersey Authority may not be able to allocate tax-exempt private activity bonds if it receives financing requests which exceed its private activity bond caps or if it determines that other projects should have priority over Medi-Hut's project. We are currently seeking an underwriter for the bonds. We anticipate that we will rely on Sam Woo Corporation to manufacture our Elite Safety Syringe until we are able to complete the funding and construction of a New Jersey facility. If additional funds are needed for our future growth, we can not assure that funds will be available from any source, or, if available, that we will be able to obtain the funds on terms agreeable to us. The acquisition of funding through the issuance of debt could result in a substantial portion of our cash flows from operations being dedicated to the payment of principal and interest on the indebtedness, and could render us more vulnerable to competitive and economic downturns. PART II: OTHER INFORMATION ITEM 5: OTHER INFORMATION Elite Safety Syringe In August 2000 we received for our inspection the first six production molds of the Elite Safety Syringe from Sam Woo Corporation. Minor changes were required for three of the six molds. During our second and third quarter we advanced $88,389 to pay for production of the prototype molds. Upon our approval of the prototype molds, Sam Woo agreed to produce an assembling machine within 180 days. In May 2000 we advanced $50,000 for production of the assembling machine and anticipate its completion within the next 90 days. We have agreed to pay the remaining half of the assembling machine costs, $101,000, after we have inspected and approved the samples produced by the assembling machine. We hope to complete the remaining steps required to begin full production of the Elite Safety Syringe within the next twelve months. 14 ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Part I Exhibits. Exhibit Description --------- --------------- 10.1 Memorandum between Medi-Hut and Sam Woo Corporation dated July 1, 1999. 27 Financial Data Schedule (b) Reports on Form 8-K. On August 25, 2000, we filed an 8-K announcing the termination of the private offering to Midwest First Financial. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned who are duly authorized. Medi-Hut Co., Inc. 9/12/00 /s/ Joseph Sanpietro Date: __________________________ By:__________________________________ Joseph Sanpietro, President 9/12/00 /s/ Vincent Sanpietro Date: __________________________ By: _________________________________ Vincent Sanpietro, Secretary 9/12/00 /s/ Robert Russo Date: ___________________________ By:____________________________________ Robert Russo, Treasurer