-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K3OTfKYT+mETfErZoA75KIv5w72PkFTTilFjNEptM75Je1HDNS8zowJZUocJygnw C26Ugk4V2POceBfFi+6mng== 0001144204-06-054035.txt : 20061222 0001144204-06-054035.hdr.sgml : 20061222 20061221204601 ACCESSION NUMBER: 0001144204-06-054035 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040131 FILED AS OF DATE: 20061222 DATE AS OF CHANGE: 20061221 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDI HUT CO INC CENTRAL INDEX KEY: 0001093285 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 222436721 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-27119 FILM NUMBER: 061294665 BUSINESS ADDRESS: STREET 1: 215 MORRIS AVENUE CITY: SPRING LAKE STATE: NJ ZIP: 07762 BUSINESS PHONE: (732) 919-2799 MAIL ADDRESS: STREET 1: 215 MORRIS AVENUE CITY: SPRING LAKE STATE: NJ ZIP: 07762 10QSB 1 v060996_10qsb.htm Unassociated Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-QSB

(Mark One)
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  For the quarterly period ended January 31, 2004 
   
o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
  For the transition period from ______ to ______ 
   
 
Commission file number 0-27119
 
MEDI-HUT CO., INC. 
(Exact name of small business issuer as specified in its charter) 
 
 
Nevada 
  
22-2436721 
(State or other jurisdiction of
 incorporation or organization) 
  
(I.R.S. Employer Identification No.) 

215 Morris Avenue, Spring Lake, New Jersey 07762 
(Address of principal executive offices)
 

(732) 282-1620 
(Issuer’s telephone number)
 
 
                                                                                                       
(Former name, former address and former fiscal year, if changed since last report) 
 
 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 o No x 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x
 
As of November 30, 2006, there were 21,701,090 shares of the Issuer’s common stock, par value $.001 per share, outstanding.
 
Transitional Small Business Disclosure Format (Check one): Yes o No x
MEDI-HUT CO., INC.

INDEX TO FORM 10-QSB
 
   
Page 
     
PART I
FINANCIAL INFORMATION
  
     
Item 1.
Financial Statements
1
     
 
Consolidated Balance Sheets as of January 31, 2004 (unaudited) and October 31, 2003
1
     
 
Consolidated Statements of Operations (unaudited) for the three months ended January 31, 2004 and 2003
2
     
 
Consolidated Statements of Cash Flows (unaudited) for the three months ended Janaury 31, 2004 and 2003
3
 
  
 
 
Notes to the Unaudited Consolidated Financial Statements
4
   
 
     
Item 2.
Management Discussion and Analysis or Plan of Operation
19
     
Item 3.
Controls and Procedures
23
     
     
PART II
OTHER INFORMATION
  
     
     
Item 1.
Legal Proceedings
23
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
31
     
Item 3.
Defaults Upon Senior Securities
31
     
Item 4.
Submission of Matters to a Vote of Security Holders
31
     
Item 5.
Other Information
31
     
Item 6.
Exhibits
31
     
Signatures
32
     
Index of Exhibits
E-1
 
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Medi-Hut Co., Inc. and Subsidiary
Consolidated Balance Sheets
 
   
January 31,
2004
(Unaudited)
  
 
October 31,
2003
  
Assets
          
Current assets:
          
Cash and cash equivalents
  
$
814,515
  
$
1,343,560
  
Accounts receivable
    
209,174
    
74,385
  
Inventories
    
6,055
   
101,875
 
Prepaid insurance
    
39,331
   
138,724
  
Restricted cash
    
400,000
    
—
  
Income tax refund
    
255,388
    
—
  
Prepaid expenses and other
    
68,326
   
10,254
  
               
Total current assets
    
1,792,789
   
1,668,798
  
               
Other assets:
              
Note receivable - related party, less reserve of $475,014 and
$470,477, respectively
    
—
    
—
  
Distribution rights
    
1,000,000
   
1,000,000
  
Income tax refund
    
32,000
   
287,388
  
Restricted cash
    
—
    
400,000
  
Security deposit
    
33,388
    
33,388
  
Other
    
76,626
   
80,866
  
               
Total other assets
    
1,142,014
   
1,801,642
  
               
Total assets
  
$
2,934,803
  
$
3,470,440
  
               
Liabilities
              
Current liabilities:
              
Accounts payable
  
$
196,302
  
$
138,857
  
Accounts payable - related party
    
280,231
   
4,115
  
Accrued expenses
    
73,790
   
159,049
  
Reserve for class action lawsuit settlement
    
529,299
   
529,299
  
Note payable
    
5,381
    
10,645
  
Deferred revenue
    
52,200
    
34,209
  
               
Total current liabilities
    
1,137,203
   
876,174
  
Commitments and contingencies
              
Stockholders' Equity
              
Common stock, $.001 par value; 100,000,000 shares authorized;
14,558,800 shares issued; 14,366,500 shares outstanding
    
14,559
   
14,559
  
Additional paid in capital
    
19,450,292
   
19,438,104
  
Treasury stock at cost, 192,300 shares
    
(419,523
)
  
(419,523
)
Stock subscription receivable
    
(300,000
)
  
(300,000
)
Deferred compensation
    
(114,546
)
  
(134,098
)
Accumulated deficit
    
(16,833,182
)
  
(16,004,776
)
               
Total stockholders' equity
    
1,797,600
   
2,594,266
  
               
Total liabilities and stockholders' equity
  
$
2,934,803
  
$
3,470,440
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
1
Medi-Hut Co., Inc. and Subsidiary
Consolidated Statements of Operations
(Unaudited)


   
Three Months Ended
January 31,
 
   
2004
  
2003
  
           
Net sales
  
$
223,752
  
$
5,001,003
  
Cost of sales
    
156,440
   
3,741,632
  
Gross profit
    
67,312
   
1,259,371
 
               
Operating expenses:
              
Selling and marketing
    
2,761
   
133,871
 
General and administrative
    
892,763
   
759,174
 
               
Total operating expenses
    
895,524
   
893,045
  
               
(Loss) income from operations
    
(828,212
)
  
366,326
  
               
Interest income
    
—
    
8,473
  
Interest expense
    
(194
)
  
(15,307
)
             
Net (loss) income
  
$
(828,406
)
$
359,492
  
               
Net (loss) income per common share, basic and diluted
 
$
(0.06
)
$
0.02
  
               
Weighted average number of common shares outstanding, basic and diluted
    
14,366,500
    
14,413,900
  
 
The accompanying notes are an integral part of these consolidated financial statements.
2
Medi-Hut Co., Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)

   
Three Months Ended
January 31,
  
   
2004
  
2003
  
Cash flows from operating activities:
          
Net (loss) income
  
$
(828,406
)
$
359,492
  
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
              
Depreciation
    
4,240
   
4,495
 
Amortization of deferred compensation
    
19,552
   
5,610
 
Consulting expense related to warrants
    
12,188
    
—
  
Reserve on accounts receivable
    
—
    
236,340
 
Changes in operating assets and liabilities:
              
Accounts receivable
    
(134,789
)
  
1,855,227
 
Accounts receivable - related party
    
—
    
466,226
 
Inventories
    
95,820
   
(1,361,962
)
Prepaid insurance
    
99,393
    
(528,285
)
Prepaid expenses and other
    
(58,072
)
  
120,925
 
Accounts payable
    
57,445
    
(4,587,075
)
Accounts payable - related party
    
182,366
    
69,884
 
Accrued expenses
    
8,491
    
28,729
  
Deferred revenue
    
17,991
    
—
  
               
Net cash used in operating activities
    
(523,781
)
  
(3,330,394
)
               
Cash flows from investing activities:
              
Purchases of other assets
    
—
    
(59,276
)
Proceeds from sale of other assets
    
—
    
11,787
 
               
Net cash used in investing activities
    
—
    
(47,489
)
               
Cash flows from financing activities:
              
Proceeds from line of credit
    
—
    
1,500,000
  
Repayment of note payable
    
(5,264
)
  
—
  
               
Net cash (used in) provided by financing activities
    
(5,264
)
  
1,500,000
  
               
Decrease in cash and cash equivalents
    
(529,045
)
  
(1,877,883
)
Cash and cash equivalents - beginning of period
    
1,343,560
   
3,695,890
 
               
Cash and cash equivalents - end of period
  
$
814,515
  
$
1,818,007
  
               
Supplemental disclosure of cash flow information:
              
               
Cash paid during the period for interest
  
$
194
  
$
9,119
  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
3
Medi-Hut Co., Inc. and Subsidiary
Notes to the Unaudited Consolidated Financial Statements


1.
Basis of Presentation

The financial statements included herein have been prepared by Medi-Hut Co., Inc. (“Medi-Hut” or the “Company”) and are unaudited; however, such information reflects all adjustments (consisting of those of a normal recurring nature), which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim period to which this report relates. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of October 31, 2003 and notes thereto included in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2003, which was filed with the Securities and Exchange Commission (the “SEC”).

The Company currently does not have any recurring revenue from the sale of products. On November 10, 2006, the Company acquired the exclusive world-wide rights to develop, make and sell certain proprietary technologies known as the Hickey Cardiac Monitoring System (the “HCMS”), a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The HCMS is currently in the development stage and the Company anticipates that it will take approximately 18 months to complete development and related clinical trials. In addition, the Company must also receive the appropriate regulatory approvals before the HCMS can be marketed in the United States or abroad. No assurance can be given that the Company will receive the appropriate regulatory approvals to market the HCMS.

Management believes the funds received in connection with the issuance of the convertible debentures on May 26, 2005 and the sale of common stock on August 25, 2005 and the proceeds received from the settlement agreements with: (1) Breckenridge Pharmaceutical Inc. (“Breckenridge”); (2) Rosenberg, Rich, Baker, Berman & Company (“Rosenberg”); and (3) Syntho Pharmaceuticals Inc. (“Syntho”) and its principal owner, Muhammed Malik (collectively, the “Syntho Group”), together with funds currently available to the Company, will be sufficient to support planned operations through January 1, 2008 (see Notes 14 and 16). Management believes that the Company will require additional capital to complete the development of the HCMS and to be able to acquire additional products and technologies.

2.
Limitation on Financial Reporting

On March 21, 2003, the Company terminated the employment of its four senior officers as follows: Joseph A. Sanpietro, President and Chief Executive Officer; Vincent J. Sanpietro, Chief Operating Officer; Laurence M. Simon, Chief Financial Officer; and Lawrence P. Marasco, Vice President of Sales (collectively, the “Former Officers”) due to corporate mismanagement in the form of accounting irregularities and securities fraud during the fiscal years ended October 31, 2002 and 2001. At the time of their termination, each of the former officers was the subject of an investigation by the United States Department of Justice (“USDJ”) and the SEC. As a result of the investigation by the USDJ, on August 19, 2003, each of the Former Officers pled guilty to conspiring to inflate the revenue and earnings of the Company and/or obstruction of justice. In addition, on August 19, 2003, each of the Former Officers agreed to a consent decree with the SEC.

4
The Company’s current management commenced an extensive review of the financial statements and information disclosed in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2001 and the Company’s quarterly reports on Forms 10-Q and 10-QSB filed with the SEC in 2002 and 2001, respectively. As a result, the current management of the Company concluded that the financial statements and other information disclosed in the Company’s quarterly reports on Forms 10-Q and 10-QSB filed with the SEC in 2002 and 2001, respectively, and disclosed in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2001, could not be relied upon due to the Company’s inability to adequately verify such information because of incomplete or missing data. Consequently, the Company amended its quarterly reports for the quarters ended January 31, 2001, April 30, 2001, July 31, 2001, January 31, 2002, April 30, 2002 and July 31, 2002, and its 2001 annual report, by removing all of the information previously contained therein. In addition, the financial statement and notes thereto for the fiscal year ended October 31, 2002, included in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2002, consisted only of a balance sheet as of October 31, 2002 and the related footnotes. Since a complete set of financial statements for the above noted periods were not presented by the Company, no assurance can be given that the SEC will not take an enforcement action or other action against the Company. Any such action by the SEC could have significant adverse consequences to the Company.

In addition, as a result of the above noted limitations on financial reporting, the Company’s quarterly reports on Form 10-QSB for the quarters ended January 31, 2003, April 30, 2003 and July 31, 2003 and the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2003, do not include the required comparative financial information related to the fiscal year ended October 31, 2002. Since those reports do not contain the required comparative financial information, no assurance can be given that the SEC will not take an enforcement action or other action against the Company. Any such action by the SEC could have significant adverse consequences to the Company.

3.
Discontinuance of Product Lines

The Company discontinued all product sales during the fiscal year ended October 31, 2004 and currently does not have any recurring revenue from the sale of products. The Company is currently developing the HCMS. See Note 1.

4.
Concentration

The Company extends credit to its customers pursuant to contract terms in the normal course of business and performs ongoing credit evaluations. The Company generally has not experienced any material losses related to trade receivables from individual customers.

As of January 31, 2004, Rugby Laboratories, Inc. (“Rugby”) and the University Radiology Group PC (“University Radiology”) accounted for approximately 87% and 11%, respectively, of accounts receivable. Subsequent to January 31, 2004, all accounts receivable had been collected in full. As of October 31, 2003, Rugby accounted for approximately 90% of accounts receivable. Subsequent to October 31, 2003, all accounts receivable had been collected in full.

For the three months ended January 31, 2004, Rugby and University Radiology accounted for approximately 67% and 12%, respectively, of net sales. For the three months ended January 31, 2003, McKesson Corporation, 824 Drug Inc. and Eckerd Corporation accounted for approximately 43%, 22% and 15%, respectively, of net sales.

As of January 31, 2004 and October 31, 2003, the Company had no suppliers with balances greater than 10% of accounts payable. For the three months ended January 31, 2004, Triad Group, Inc. and Medical Products, Inc. accounted for approximately 67% and 10%, respectively, of total purchases. For the three months ended January 31, 2003, Syntho and Kinray Inc. (“Kinray”) accounted for approximately 62% and 19%, respectively, of total purchases.

5
 
5.
Accounts Receivable

As of January 31, 2004 and October 31, 2003, the accounts receivable reserves for doubtful accounts and the reserve for sales returns and allowances on product sales were $0.

6.
Inventories

Inventory is stated at the lower of cost (first-in, first-out basis) or market. Inventory that is deemed obsolete or defective is written off. A provision is made for any excess or potentially obsolete inventories. As of January 31, 2004 and October 31, 2003, inventory consisted solely of finished goods.

7.
Note Receivable - Related Party

In June 2002 and February 2003, the Company provided Medi-Hut International (Mfg.) Co., Ltd. (“Medi-Hut International”), a related party, with $300,000 and $150,000, respectively, in working capital to fund Medi-Hut International’s operations. Effective June 7, 2002, the Company and Medi-Hut International entered into a loan agreement (the “MHI Loan Agreement”) pursuant to which Medi-Hut International agreed to repay the principal plus accrued interest to the Company as follows: $75,000 on December 31, 2004; $125,000 on December 31, 2005, $125,000 on December 31, 2006 and $125,000 on or before December 31, 2007. As of January 31, 2004 and October 31, 2003, the Company had reserved for the entire principal balance of $450,000 and interest of $25,014 and $20,477, respectively, due to the financial condition of Medi-Hut International.

8.
Related Party Transactions

David R. LaVance, the Company’s Chairman, President and Chief Executive Officer and Thomas S. Gifford, the Company’s Executive Vice President, Chief Financial Officer (Treasurer) and Secretary are Principals of Century Capital Associates LLC (“Century Capital”). Effective February 1, 2003, the Company entered into a Consulting Services Agreement with Century Capital pursuant to which Mr. LaVance and Mr. Gifford provided services to the Company as executive management. For the three months ended January 31, 2004, the Company was billed $225,000 for consulting services rendered by Century Capital. The Company also reimbursed Century Capital for expenses incurred in conjunction with performing the consulting services. In addition, during the three months ended January 31, 2004, the Company accrued $181,250 related to the annual bonus due to Century Capital, pursuant to the Consulting Services Agreement, for the one year period commencing February 1, 2003 and ending January 31, 2004. As of January 31, 2004, the Company owed Century Capital $280,231 for unpaid bonuses and expenses, which amount was paid in full by the Company during the fiscal year ended October 31, 2004. As of October 31, 2003, the Company owed Century Capital $97,865 for unpaid bonuses and expenses, which amount was paid in full by the Company during the fiscal years ended October 31, 2004 and 2005.

6
James G. Aaron, a member of the Company’s Board of Directors as of January 31, 2003, is a shareholder of the law firm of Ansell Zaro Grimm & Aaron, P.C. During the three months ended January 31, 2003, the Company was billed $11,509 for legal services rendered by Ansell Zaro Grimm & Aaron, P.C. As of January 31, 2004 and October 31, 2003, there were no accounts payable to Ansell Zaro Grimm & Aaron, P.C.

The Company has a 44% stock ownership interest in Medi-Hut International, a Korean based joint venture company established to manufacture the Company’s Elite Safety Syringe. During the three months ended January 31, 2003, the Company purchased Elite Safety Syringes from Medi-Hut International for a total purchase price of $100,002. As of January 31, 2004 and October 31, 2003, there were no accounts payable to Medi-Hut International.

Lawrence P. Marasco, the Company’s Vice President of Sales and Marketing during the three months ended January 31, 2003, was the sole officer, director and shareholder of Larval Corporation (“Larval”), a privately held wholesaler of pharmaceutical products, until February 12, 2002, when he transferred his ownership in Larval to his sister-in-law. During the three months ended January 31, 2003, the Company purchased product with a total purchase price of $2,256 from Larval and sold product to Larval for a total sales price of $411,929. As of January 31, 2004 and October 31, 2003, there were no accounts payable to Larval by the Company and no accounts receivable by the Company from Larval.

9.
Line of Credit

On February 26, 2002, the Company entered into a loan agreement (the “Loan Agreement”) with PNC Bank (“PNC”). Pursuant to the Loan Agreement, the Company secured a $750,000 note (the “Note”) under which the Company was permitted to draw-down money until February 1, 2003. In addition, the Company secured a $2,000,000 line of credit (“Line of Credit”) for a term of one year ending February 1, 2003. On November 13, 2002, the Company borrowed $1,500,000 pursuant to the Line of Credit. On December 13, 2002, the Company was notified by PNC that it was in technical default on the Note and the Line of Credit, and, in February 2003, it was notified that PNC would not extend the expiration date of the Note or the Line of Credit, at which time the outstanding balance on the Line of Credit was $1,500,000. As a result, in February and March 2003, the Company paid PNC $1,500,000 related to the Line of Credit and $159,404 related to a letter of credit and certain fees. Since the payment of amounts owed to PNC, the Company has not had a lending relationship with a bank.

7
 
10. 
 Stock-Based Compensation

As permitted under the Financial Accounting Standards Board (the “FASB”) Statement of Financial Accounting Standard (“SFAS”) No. 123R “Share-Based Payment” (“SFAS 123R”), which replaced SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), the Company applies the intrinsic value method prescribed in APB 25 to measure compensation expense for stock-based awards to employees and, thus, recognizes no stock-based compensation expense for options granted with exercise prices equal to or greater than the fair value of the Company’s common stock on the date of grant. The Company records deferred stock-based compensation when the deemed fair value of the Company’s common stock for financial accounting purposes exceeds the exercise price of the stock options on the date of grant. Any such deferred stock-based compensation is amortized over the vesting period of the individual options.

The Company accounts for options granted to non-employees under SFAS 123 and Emerging Issues Task Force Consensus No. 96-18, “Accounting for Equity Investments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling Goods or Services” (“EITF 96-18”), and may be subject to periodic re-valuation over their vesting terms. The resulting stock-based compensation expense is recorded over the service period in which the non-employee provides services to the Company.

During the three months ended January 31, 2004, the Company granted 185,000 options to employees. No stock-based compensation is reflected in the net loss for the three months ended January 31, 2004 as all options granted had an exercise price equal to the market value of the underlying common stock on the date of grant. During the three months ended January 31, 2004, the Company recognized a total of $12,188 of consulting expense related to the warrant issued to Century Capital on February 1, 2003 (see Note 13). During the three months ended January 31, 2004, the Company recognized a total of $19,552 of amortization expense related to the warrants issued to the Company’s directors, other than David R. LaVance and Thomas S. Gifford, on July 24, 2003 (see Note 13).
 
The following table illustrates the effect on net (loss)/income and net (loss)/income per share if the fair value based method had been applied to all awards:

   
Three Months Ended
January 31,
  
   
2004
  
2003
  
Reported net (loss) income
  
$
(828,406
)
$
359,492
  
Stock-based employee compensation expense included in net (loss) income,
net of related tax effects
    
—
    
5,610
  
Stock-based employee compensation determined under the fair value based method,
net of related tax effects
    
(376
)
  
(6,947
)
Pro forma net (loss) income
  
$
(828,782
)
$
358,155
  
Basic and diluted net (loss) income per share:
             
As reported
 
$
(0.06
)
$
0.02
  
               
Pro forma
  
$
(0.06
)
$
0.02
  

 
8
 
11.
 Net (Loss) Income Per Common Share

Basic net (loss) income per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants provided that the exercise price of the stock options and warrants is less than the fair market value of the common stock. In periods where a net loss exists, diluted net loss per share is calculated using basic common shares outstanding since including potential common shares from the exercise of stock options and warrants would be anti-dilutive.

During the three months ended January 31, 2004, the Company incurred a net loss. Accordingly, the weighted average number of shares outstanding for both the basic and the diluted net loss per share computation is the same. As of January 31, 2004, total potential dilutive securities included 2,880,000 shares of common stock subject to warrants and 198,200 shares of common stock subject to options.

As of January 31, 2003, stock options and warrants to purchase 20,000 and 580,000 shares of common stock, respectively, were outstanding at exercise prices that were in excess of the fair market value of the Company’s common stock. Accordingly, the weighted average number of shares outstanding for both the basic and diluted net income per share computation is the same.

12.
 Income Taxes

The Company has approximately $5,145,388 and $5,131,321 in federal and state net operating loss carryovers, respectively, that were generated through October 31, 2003 and are available to offset future taxable income in fiscal years 2004 through 2023. The net operating losses for federal income tax purposes begin to expire in 2021 and for state income tax purposes begin to expire in 2008. The valuation allowance increased $330,802 during the three months ended January 31, 2004, attributable primarily to net operating losses.

The components of the Company’s deferred tax assets as of January 31, 2004 and October 31, 2003 are as follows:

   
January 31,
2004
  
October 31,
2003
  
           
Net operating loss
  
$
2,158,334
  
$
1,839,403
  
Write-down of impaired assets
    
2,106,569
    
2,106,569
  
Reserve on note receivable - related party
    
189,721
    
187,909
  
Accrual for class action lawsuit settlement
    
211,402
    
211,402
  
Other reserves
    
18,038
    
18,038
  
Depreciation and amortization
    
33,920
    
27,555
 
Consulting expense related to warrants
    
276,897
    
272,029
 
Other
    
28,415
   
29,589
 
Total gross deferred tax assets
    
5,023,296
    
4,692,494
  
Valuation allowance
    
(5,023,296
)
  
(4,692,494
)
Net deferred tax assets
  
$
—
  
$
—
  
 
 
9
The deferred tax asset is fully offset by a valuation allowance as it was determined by management that the realization of the deferred tax asset was not likely to occur in the foreseeable future.

13.
 Stockholders’ Equity

Warrants to Purchase Common Stock

Century Capital Warrant Dated February 1, 2003. On February 1, 2003, the Company issued a warrant to purchase 1,500,000 shares of common stock to Century Capital pursuant to the Consulting Services Agreement dated February 1, 2003. The warrant had a ten year term and was originally exercisable at $1.34 per share (“Underlying Purchase Price”) subject to certain pricing adjustments which included an adjustment if the average closing price of the Company’s common stock over a period of thirty days was less than the existing Underlying Purchase Price. Based upon the underlying features of the warrant agreement, management determined that the best estimate of fair value was to utilize the intrinsic value method using the ultimate lowest exercise price to account for the value of this warrant issuance. As such, the Company will record consulting expense as the warrant shares vest with the initial vesting of 375,000 warrant shares on February 1, 2003 and 46,875 warrant shares vesting at the end of each month from February 28, 2003 through January 31, 2005. During the three months ended January 31, 2004, the Company recorded $12,188 of consulting expense associated with the warrant shares that had vested pursuant to the warrant.

Director Warrants Dated July 24, 2003. On July 24, 2003, a warrant to purchase 200,000 shares of common stock of the Company was issued to each of its directors, other than Mr. LaVance and Mr. Gifford. An aggregate amount of 800,000 shares of common stock could be issued pursuant to these warrants. Each warrant has a five year term and is exercisable at $.26 per share until July 24, 2008. The shares of common stock underlying each warrant vest equally on and after the date of issue (66,666 shares), on and after the first anniversary date (66,666 shares) and on and after the second anniversary date (66,668 shares). In the event of a change in control of the Company, each warrant becomes fully vested as of ten days prior to the change in control. The fair value of the warrants were estimated on the date of issuance using the Black-Scholes pricing model with the following weighted average assumptions: dividend yield of 0%; risk free interest of 3.08%; volatility of 105.64%; and an expected life of 5 years. The warrants had a fair value of approximately $155,138 at the date of issuance which the Company recorded as deferred compensation to be amortized over the vesting period of the warrants. During the three months ended January 31, 2004, the Company recorded $19,552 of amortization expense associated with the warrant shares that had vested pursuant to the warrants.

14.
 Government Proceedings and Litigation

Due to certain events that occurred prior to October 31, 2002 and the actions of the Company’s Former Officers, the Company, the Former Officers and/or certain former directors became involved in several separate legal proceedings.

10
SEC Investigation 

On February 21, 2002, the SEC commenced an investigation and review of Medi-Hut’s filings with the SEC and its financial disclosures in general, as well as the sufficiency of the Company’s system of internal accounting controls. On August 19, 2003, the SEC’s investigation into the Company resulted in the commencement of an action against Medi-Hut and the Company’s former President and Chief Executive Officer, Joseph A. Sanpietro, former Chief Financial Officer, Laurence M. Simon, and former Vice President of Sales, Lawrence P. Marasco. Without admitting or denying the allegations of the complaint, the Company consented to a final judgment against it and is permanently restrained from making any untrue or misleading disclosures, whether such disclosures are in a report filed with the SEC or are contained in a press release or other general public disclosure, and must make and keep accurate books, records and accounts and maintain a system of internal accounting control sufficient to ensure fair and accurate financial disclosure.

Class Action Lawsuits 

Beginning in February 2002, the Company and certain of its former officers and directors were named in an aggregate of eleven class action lawsuits filed in the United States District Court for the District of New Jersey. The lawsuits alleged that, among other contentions, the Company and certain of its former officers and directors failed to disclose a related party transaction between the Company and the Company’s former Vice President of Sales, in its periodic reports filed with the SEC. On January 13, 2003, the class action lawsuits filed against the Company in 2002 were consolidated.

On July 11, 2003, the Company and Executive Risk Indemnity, Inc. (“Executive Risk”), the insurance company that provided the Company with its director and officer insurance coverage for a portion of the class period, reached an agreement whereby Executive Risk paid $475,000 to the Company. In exchange for the $475,000 payment, the Company agreed to terminate the director and officer insurance coverage provided by Executive Risk and release and hold harmless Executive Risk for any claims for coverage which could be made by any former director or officer.

On August 18, 2003, the Company reached settlement of the consolidated class action lawsuit, which was subject to the approval of the United States District Court for the District of New Jersey. As part of the settlement, the Company agreed to pay $400,000 in cash to the plaintiffs and issue 861,990 shares of Medi-Hut common stock (fair value of approximately $129,299 as of August 18, 2003) which was equivalent to six percent of Medi-Hut’s issued and outstanding shares of the Company’s common stock on the date the settlement was reached. The Company utilized the $475,000 received from Executive Risk to fund the settlement and to offset a portion of the legal costs and expenses incurred by the Company in connection with the consolidated class action lawsuit.

On September 12, 2003, the complaint filed in the consolidated class action lawsuit against the Company and the other defendants was amended. The amended class action complaint included additional information, including information regarding the alleged improper conduct of certain former officers and directors of the Company.

11
On January 12, 2004, the United States District Court for the District of New Jersey issued a Preliminary Approval Order and issued its final approval of the settlement on May 3, 2004.

FBI Investigation

On November 22, 2002, the Federal Bureau of Investigation (“FBI”) executed a search warrant and removed certain documents and computers from the Company’s premises. The Company was not advised of the reasons for the FBI’s actions. As of November 30, 2006, no indictments or charges have been issued against the Company.

Guilty Pleas of Former Officers and Directors  

On August 19, 2003, the USDJ investigation resulted in the guilty pleas of Joseph A. Sanpietro, Laurence M. Simon and Lawrence P. Marasco to conspiracy to inflate the revenue and earnings of the Company and lying to investigators. In addition, Vincent J. Sanpietro pled guilty to obstruction of justice. The Company no longer has any business relationships with these former officers and directors.

Syntest Litigation

On April 18, 2003, Scott Schrader (“Schrader”) and his affiliates, namely Schrader & Associates, LLC (“Schrader Associates”), Bluegrass Drug LLC (“Bluegrass”) and Medpharm Corporation (“Medpharm”) (collectively, the “Schrader Group”) commenced three separate actions in Kentucky against the Company alleging, among other things, that the Company breached the brokerage agreement entered into by the Company and members of the Schrader Group. In its complaint, the Schrader Group sought unspecified monetary damages.

On May 12, 2003, the Company commenced an action in the United States District Court for the Eastern District of New York against the Syntho Group, Breckenridge and its principal owner, Larry Runsdorf (collectively, the “Breckenridge Group”), and the Schrader Group relating to the Company’s exclusive right to distribute the hormone replacement therapy drug, Syntest, under an agreement with Syntho which expires no earlier than November 2006 (the “Syntest Agreement”). In its complaint, the Company alleged, among other things, that Syntho permitted Breckenridge, Medpharm and Bluegrass to distribute Syntest in violation of the Syntest Agreement and that Schrader Associates, which had been appointed by the Company as the exclusive broker with respect to sales of Syntest to drug wholesalers, chain drug stores and managed care companies, offered discounts, incentives and rebates to customers of the Company without the Company’s authorization.

On May 12, 2003, Breckenridge commenced an action against the Company in the United States District Court for the Southern District of Florida, alleging that the Company was interfering with plaintiff’s alleged exclusive rights to distribute Syntest. This action was later moved to the United States District Court for the Eastern District of New York.

In June 2003, the Syntho Group filed an answer to the Company’s complaint which contained counterclaims against the Company for alleged: (1) breach of contract, (2) failure to pay for product, (3) tortious interference with Syntho’s agreement with Breckenridge, and (4) conversion of property. See Note 16.
 
12
Litigation Against Certain Former Officers and Directors and Others

On December 4, 2003, the Company commenced litigation in the Superior Court of New Jersey against the Former Officers and a former director, Healthgen Distributors, Inc. (formerly known as Larval Corp.), Kinray, Inc. and Santi Grieco, an officer of Kinray, Inc. In its complaint, the Company alleged that the Former Officers caused the Company to suffer significant damage and incur substantial costs by engaging in a scheme to overstate the Company’s revenues and earnings through fraudulent accounting practice. The Company also alleged in its complaint that these former officers and directors, in furtherance of their scheme to defraud, filed materially false and misleading documents with the SEC and disseminated materially false and misleading information to the general public, investors and financial advisors and brokers. In addition to the foregoing, the Company alleged in its complaint that the Former Officers, with the assistance of Larval, an entity controlled by Lawrence P. Marasco, Kinray, Inc., a New York based pharmaceutical distributor, and Santi Grieco, an officer of Kinray, Inc., committed violations of state and federal laws prohibiting forgery and fraudulent practices and otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1.

In addition, as set forth in the complaint, the Company sought payment of a promissory note in the principal amount of $575,000 issued to it by former officer and director, Robert S. Russo, plus all accrued interest thereon. The promissory note, due and payable on October 24, 2003, was issued by Mr. Russo as payment for 100,000 shares of the Company’s common stock which he purchased in a private placement by the Company during the fall of 2001. The Company also sought to recover damages from Mr. Russo for his alleged breach of fiduciary duties to the Company during the time he was serving as an officer of the Company. See Note 16.

Litigation Against Former Accounting Firms

On January 9, 2004, the Company commenced litigation against two of its former accounting firms, Rosenberg, Rich, Baker, Berman & Company (“Rosenberg”), which served as the Company’s independent registered public accounting firm from February 1998 to March 2003, excluding a three week period in early 2002, and Koenig, Russo & Associates (“Koenig”) an accounting consultant engaged by Medi-Hut to review various tax documents, financial statements and filings by the Company with the SEC. Robert S. Russo, a former officer and director of the Company and a defendant in a litigation commenced by the Company against certain of its former officers and directors in December 2003, is a principal of Koenig. In its complaint, the Company alleged that Rosenberg and Koenig, through their negligence and accounting malpractice, caused the Company to suffer significant damage and incur substantial costs. The Company alleged in its complaint that as a result of such negligence and accounting malpractice, Rosenberg and Koenig failed to detect or simply ignored a scheme by certain of the Company’s former officers and directors to overstate Medi-Hut’s revenues and earnings through fraudulent accounting practices, which had a devastating impact on the Company. The Company also alleged in its complaint that, as a result of their negligence and accounting malpractice, Rosenberg and Koenig failed to uncover and/or disclose the materially false and misleading financial information contained in the periodic reports filed by the Company with the SEC and otherwise disseminated to the general public, investors and financial advisors and brokers. See Note 16.
 
13
 
15.
 Recent Accounting Pronouncements

In October 2004, the FASB concluded that the proposed SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), which would require all companies to measure compensation cost for all share-based payments, including employee stock options, at fair value, would be effective for public companies (except small business issuers as defined in SEC Regulation S-B) for interim or annual periods beginning after June 15, 2005. The Company, as a small business issuer, will not have to adopt SFAS 123R until the fiscal year ended October 31, 2007. The Company does not expect SFAS 123R to have a material impact on its consolidated results of operations or financial condition.

In November of 2004, the FASB issued SFAS No. 151, “Inventory Costs” (“SFAS 151”), which amends the guidance in Accounting Research Bulletin No. 43 (“ARB 43”), Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal” as stated in ARB 43. Additionally, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The Company is required to adopt the provisions of SFAS 151 in the first quarter of 2006. The Company does not expect SFAS 151 to have a material impact on its consolidated results of operations or financial condition.

In December of 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29” (“SFAS 153”). SFAS 153 eliminates the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of 2006. The Company does not expect SFAS 153 to have a material impact on its consolidated results of operations or financial condition.

The FASB has issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS 154”), which replaced APB Opinion No. 20, “Accounting Changes.” Among other changes, SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. SFAS 154 also provides that (1) a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.” The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. The Company does not expect SFAS 154 to have a material impact on its consolidated results of operations or financial condition.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109” (“FIN 48”), which clarifies the accounting and disclosure for uncertain tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is assessing FIN 48 and has not yet determined the impact that the adoption of FIN 48 will have on its consolidated results of operations or financial condition.

14
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurement. Where applicable, this statement simplifies and codifies fair value related guidance previously issued within United States of America generally accepted accounting principles. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing SFAS 157 and has not yet determined the impact that the adoption of SFAS 157 will have on its consolidated results of operations or financial condition.

16.
 Subsequent Events

Litigation

Syntest Litigation. On April 21, 2004, the Company entered into a settlement agreement and limited release with the Schrader Group. Pursuant to this agreement, the Company and the Schrader Group agreed to dismiss with prejudice the actions which were pending in the United States District Court for the District of Kentucky and the actions against each other which were pending in the United States District Court for the Eastern District of New York. As part of the settlement reached by the Company and the Schrader Group, the Schrader Group paid to the Company a cash payment of $375,000. In addition, the parties released each other from certain claims arising out of the distribution and sale of Syntest.

On October 17, 2005, the Company and Breckenridge entered into a purchase and settlement agreement pursuant to which the Company sold its distribution and other rights and business with respect to the hormone replacement drug, Syntest, to Breckenridge. In consideration for the sale of such rights and the other benefits provided under the purchase and settlement agreement, Breckenridge agreed to pay the Company an aggregate of $1,000,000 as follows: (1) $250,000 was paid shortly after the execution of the purchase and settlement agreement, and (2) $50,000 will be paid on the first day of each month for a 15 month period commencing on November 1, 2005 and ending on January 1, 2007. Further, pursuant to the settlement agreement, the Company and Breckenridge dismissed their actions against each other and released each other from any further claims arising out of the distribution and sale of Syntest, except as provided under the purchase and settlement agreement. Pursuant to the purchase and settlement agreement, the Company reserved all of its rights to its claims for damages against the Syntho Group that were incurred by the Company as a result of the alleged breach by the Syntho Group of the Syntho Agreement and other wrongful actions by the Syntho Group. As of November 30, 2006, the Company received $900,000 of payments from Breckenridge pursuant to the purchase and settlement agreement.

On February 22, 2006, the Company amended its complaint in this action to, among other things, include claims that Muhammed Malik, in his capacity as a consultant to the Company and as president of Intermax Pharmaceuticals, Inc. (“Intermax”) and Syntho, provided substantial assistance to the former officers and certain former directors of the Company in carrying out the scheme to overstate Medi-Hut’s revenues and earnings through fraudulent accounting practices and committed violations of state and federal laws prohibiting forgery and fraudulent practices and otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1.

15
On April 10, 2006, the Syntho Group counterclaimed against Medi-Hut and Century Capital, David R. LaVance and Thomas S. Gifford, as agents of Medi-Hut, for allegedly violating the Lanham Act and tortiously interfering with Syntho’s contractual relationship with Breckenridge.

On November 22, 2006, the Company, Century Capital, David R. LaVance and Thomas S. Gifford entered into a settlement agreement and release with the Syntho Group and Intermax. Pursuant to the settlement agreement, the Company and the Syntho Group agreed to dismiss with prejudice the actions against each other which were pending in the United States District Court for the Eastern District of New York and in the Superior Court of New Jersey (see Litigation Against Certain Former Officers and Directors and Others). In addition, the Syntho Group agreed to dismiss with prejudice the related actions against Century Capital, David R. LaVance and Thomas S. Gifford which were pending in the United States District Court for the Eastern District of New York and the Company and Intermax agreed to dismiss with prejudice the related actions against each other which were pending in the United States District Court for the Eastern District of New York and in the Superior Court of New Jersey. As part of the settlement reached by the parties, the Syntho Group agreed to pay the Company an aggregate of $3,100,000 (the “Settlement Amount”) as follows: (1) $250,000 was paid upon the execution of the settlement agreement; (2) $100,000 will be paid on the 27th day of each month for a 3 month period commencing on December 27, 2006 and ending on February 27, 2007 and (3) $2,550,000 will be paid on or before March 27, 2007. A portion of the Settlement Amount, $2,850,000, is secured by a first priority mortgage on real property owned by the spouse of Muhammed Malik. In the event that the Syntho Group defaults on the settlement agreement, the Syntho Group and Intermax will be responsible for all reasonable costs and expenses incurred by the Company as a result of the default, including any foreclosure related expenses associated with the real property which secures the first priority mortgage. In addition, upon a default by the Syntho Group, a consent judgment in favor of the Company in the amount of $4,000,000 will be entered into in the Superior Court of New Jersey against the Syntho Group and Intermax.

Litigation Against Certain Former Officers and Directors and Others. On February 4, 2004, the Company entered into a settlement and release agreement with Vincent J. Sanpietro. In exchange for a one time payment of $20,000, the return of 554,800 shares of the Company’s common stock and certain other non-monetary considerations, the Company agreed to discharge its claims against Mr. Sanpietro.

On April 14, 2004, the Company entered into a settlement and release agreement with Joseph A. Sanpietro. In exchange for a one-time payment of $60,000 and the return of 3,179,200 shares of the Company’s common stock and certain other non-monetary consideration, the Company agreed to discharge its claims against Mr. Sanpietro.

On May 14, 2004, the Company entered into a settlement and release agreement with Mr. Russo. In exchange for a one-time payment of $300,000, the return of 125,000 shares of the Company’s common stock and other non-monetary consideration, the Company agreed to discharge its claims against Mr. Russo.

16
On July 6, 2004, the Company amended the complaint against certain of its former officers and directors and others and commenced litigation against Muhammed Malik, Intermax and Syntho. In its complaint, Medi-Hut alleges that Muhammed Malik, in his capacity as a consultant to the Company and as President of Intermax and Syntho: (1) provided substantial assistance to the former officers and certain former directors of the Company in carrying out the scheme to overstate Medi-hut’s revenues and earnings through fraudulent accounting practices; (2) committed violations of state and federal laws prohibiting forgery and fraudulent practices; and (3) otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1. The defendants in this action have counterclaimed against the Company for alleged: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) fraud, (4) misrepresentation, (5) fraudulent concealment, (6) violation of the New Jersey Consumer Fraud Act, (7) conversion, and (8) failure to pay for delivered product.

On September 16, 2004, the Company entered into a settlement agreement and release with Lawrence P. Marasco. As part of the settlement, Mr. Marasco paid to the Company the sum of $60,000, returned 405,000 shares of the Company’s common stock and agreed to provide certain other non-monetary consideration.

On November 29, 2004, the Company entered into a settlement agreement and release with Laurence M. Simon. In exchange for the return of 30,000 shares of the Company’s common stock and certain other non-monetary consideration, the Company agreed to dismiss its claims against Mr. Simon.

On January 19, 2005, the Company entered into a settlement agreement and release in connection with its action against Kinray, Inc. and its officer, Santi Greco. Kinray, Inc. agreed to pay to the Company the sum of $300,000. This settlement was entered into without any admission of liability or any inferences of wrongdoing by any settling party.

In late 2005 and early 2006, defendants Syntho and Muhammed Malik made motions to dismiss Medi-Hut’s claims based on the entire controversy doctrine and the principle of comity. These motions were denied. In April 2006, Syntho and Malik sought leave to appeal the denial of their motion to dismiss on the principle of comity. This motion was also denied.

On April 6, 2006, the Company filed a second amended complaint in which it alleges that, among other things, it has suffered significant damages as a result of the Syntho Group’s breach of the distribution agreement between Syntho and Medi-Hut, pursuant to which Medi-Hut had exclusive rights to distribute Syntest, and the Syntho Group’s related conduct.

On November 22, 2006, the Company entered into a settlement agreement and release with the Syntho Group and Intermax pursuant to which the Company, the Syntho Group and Intermax agreed to dismiss with prejudice the actions against each other which were pending in the Superior Court of New Jersey. See Syntest Litigation.

17
Litigation Against Former Accounting Firms. On May 14, 2004, the Company entered into a settlement and release agreement with Koenig. In exchange for mutual releases among other things, the Company agreed to discharge its claims against Koenig.

On February 21, 2006, the Company entered into a settlement agreement and release with Rosenberg. As part of the settlement, the parties released each other from all claims and Rosenberg paid the Company the sum of $425,000. This settlement was entered into without any admission of liability or any inferences of wrongdoing by any settling party.

Lexington Insurance Lawsuit. On April 14, 2004, a complaint was served on the Company by National Union Fire Insurance Co. (“National Union”) in the United States District Court for the District of New Jersey. On January 19, 2005, the complaint was amended by National Union in order to properly state the name of the plaintiff as Lexington Insurance Company (“Lexington”). In this action, Lexington alleged that the Company owes it $235,000, representing unpaid insurance premiums.

On March 10, 2005, the Company filed a third party complaint against Universal Business Insurance, Inc. (“Universal”) and Brett D. Mayer (“Mayer”) in the United States District Court for the District of New Jersey. Universal was the retail broker that advised the Company during the Company’s business dealings with Lexington and Mayer was the individual employed by Universal that dealt directly with the Company. In its complaint, the Company alleged that Universal and Mayer were negligent and breached their fiduciary duty to the Company in providing services related to the Company’s procurement of directors and officers insurance.

On September 28, 2005, the Company and Lexington entered into an agreement in which Lexington agreed to dismiss its complaint against the Company and both Lexington and the Company agreed to release each other from any and all claims which could have been asserted as a result of the Lexington lawsuit. On October 13, 2005, the Company, Universal and Mayer entered into an agreement in which the Company agreed to dismiss its third party complaint against Universal and Mayer in exchange for a one time payment from Universal and Mayer of $8,500.

Loures Lawsuit. On December 28, 2004, an action was commenced against the Company, its former officers and certain of its former directors, by James J. Loures, Jr. and Christine Loures in the Superior Court of New Jersey. The plaintiffs allege that the Company, its former officers and certain of its former directors engaged in a scheme to inflate the Company’s revenues and earnings through a series of accounting irregularities and fraudulent financial disclosures during the period June 2001 through March 2003 which resulted in the plaintiff’s loss of approximately $120,000. The plaintiffs allegations are the same as those raised in the class action lawsuits discussed above. The plaintiffs were one of eight parties that opted out of the settlement related to the class action lawsuits.

On October 4, 2006, the Company filed a motion to dismiss the plaintiffs’ complaint for failure to comply with discovery requests in the time required by the court. On November 3, 2006, the court granted the Company’s motion and dismissed the complaint without prejudice. 
 
18
Item 2.  Management Discussion and Analysis or Plan of Operation

General

Certain information included in this quarterly report on Form 10-QSB and other filings of the Company under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as information communicated orally or in writing between the dates of such filings, contains or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. Such statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from expected results. Among these risks, trends and uncertainties are economic conditions generally and in the industries in which the Company may participate; competition within the Company’s chosen industries, including competition from much larger competitors; technological advances; available capital; and failure by the Company to successfully develop or acquire products and form new business relationships.

Critical Accounting Policies and Estimates

The discussion and analysis of the Company’s financial condition and results of operations are based upon the interim financial statements contained elsewhere herein, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements required the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to product returns, bad debts, inventories, investments, intangible assets, income taxes, contingencies and litigation. The Company based its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The critical accounting estimates that the Company believes affect the more significant judgments and estimates used in preparation of the financial statements contained elsewhere herein are described in the Management’s Discussion and Analysis or Plan of Operation and in the Notes to the Financial Statements included in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2003. There have been no material changes to the critical accounting policies.

Results of Operations

Net Sales. The Company discontinued all product sales during the fiscal year ended October 31, 2004 and currently does not have any recurring revenue from the sale of products. On November 10, 2006, the Company acquired the exclusive world-wide rights to develop, make and sell the HCMS, a minimally invasive two-balloon esophageal catheter system used to monitor cardiac performance. The HCMS is currently in the development stage and the Company anticipates that it will take approximately 18 months to complete development and related clinical trials. In addition, the Company must also receive the appropriate regulatory approvals before the HCMS can be marketed in the United States or abroad. No assurance can be given that the Company will receive the appropriate regulatory approvals to market the HCMS.

19
For the three months ended January 31, 2004 and 2003, net sales were $223,752 and $5,001,003, respectively. During these periods, net sales by product category were as follows:

   
For the Three
Months Ended
January 31,
2004
  
For the Three
Months Ended
January 31,
2003
  
Syntest
  
$
—
  
$
3,525,111
  
Name Brand and Generic Drugs
    
—
    
1,342,050
  
Condoms
    
147,586
    
90,461
  
Disposable Medical Products
   
76,166
    
43,381
  
   
$
223,752
  
$
5,001,003
  

For the three months ended January 31, 2004, net sales decreased approximately 96% compared to the three months ended January 31, 2003. This decrease was primarily the result of the cessation of sales of Syntest in March 2003 due to a dispute with the manufacturer thereof (see Part II, Item 1. Legal Proceedings - Syntest Litigation) and the cessation of sales of name brand and generic drugs in March 2003 as a result of the Company’s decision to exit the business due to low margins attributed to such sales.

During the three months ended January 31, 2004, sales of condoms represented approximately 66% of net sales and sales of disposable medical products represented approximately 34% of net sales. During the three months ended January 31, 2003, sales of Syntest represented approximately 70% of net sales and sales of pharmaceutical products represented approximately 27% of net sales.

Cost of Sales. During the three months ended January 31, 2004 and 2003, the cost of sales was approximately 70% and 75%, respectively, of net sales. Cost of sales as a percentage of net sales decreased during the three months ended January 31, 2004, as compared to the three months ended January 31, 2003. This decrease was primarily the result of the Company’s decision to stop selling name brand and generic drugs due to low margins attributed to such sales.

Selling and Marketing. For the three months ended January 31, 2004 and 2003, selling and marketing expenses were $2,761 and $133,871, respectively, or approximately 1% and 3%, respectively, of net sales. The $131,110 decrease in selling and marketing expenses for the three months ended January 31, 2004 was primarily the result of a $99,398 decrease in sales and marketing consulting expenses, a $9,117 decrease in compensation and related benefits as a result of a reduction in personnel and a $21,968 decrease in marketing costs.

General and Administrative. For the three months ended January 31, 2004, general and administrative expenses were $892,763, as compared to $759,174 for the three months ended January 31, 2003. The $133,589, or 18%, increase in general and administrative expenses for the three months ended January 31, 2004 was primarily the result of a $38,273 increase in the cost of director and officer liability insurance and a $355,250 increase in consulting expenses related to new management. These increases were partially offset by a $129,390 decrease in legal expenses primarily attributable to a reduction in costs related to the consolidated class action lawsuit involving the Company and the investigation of and proceedings against the Company by the SEC and the NASD and a $134,424 decrease in compensation and related benefits as a result of a reduction in personnel. See Part II, Item 1. Legal Proceedings - SEC Investigation and Class Action Lawsuits.

20
Other Income (Expenses). During the three months ended January 31, 2004, the Company incurred interest expense of $194, as compared to $15,307 for the three months ended January 31, 2003. The $15,113 decrease in interest expense for the three months ended January 31, 2004 was primarily due to the repayment of the Line of Credit to PNC in February 2003. During the three months ended January 31, 2004, interest income decreased $8,473 as compared to the three months ended January 31, 2003.

Net (Loss) Income. For the three months ended January 31, 2004, the Company had a net loss of $828,406 or $0.06 per share (basic and diluted), as compared to net income of $359,492 or $0.02 per share (basic and diluted) for the three months ended January 31, 2003.

Liquidity and Capital Resources

Operating Activities. During the three months ended January 31, 2004, the Company utilized $523,781 of cash flow in operations. Cash for the three months ended January 31, 2004 was increased primarily due to a decrease in inventories of $95,820, an increase in accounts payable and related party accounts payable of $239,811, a decrease in prepaid insurance of $99,893, an increase in deferred revenue of $17,991, consulting expense of $12,188 related to the issuance of warrants to purchase common stock and amortization of deferred compensation of $19,552. The Company’s cash position during the three months ended January 31, 2004 was reduced primarily due to an increase in accounts receivable of $134,789, an increase in prepaid expenses and other of $58,072 and a net loss of $828,406. The increase in accounts payable and related party accounts payable was primarily due to consulting fees and expenses owed to Century Capital pursuant to the Consulting Services Agreement dated February 1, 2003. The increase in accrued expenses was related to an accrual for director and officer liability insurance.

Investment Activities. During the three months ended January 31, 2004, the Company did not utilize cash flow in investing activities nor was cash flow provided by investing activities.

Financing Activities. During the three months ended January 31, 2004, cash flow used in financing activities amounted to $5,264 which consisted of payments on a note payable.

Liquidity and Capital Resources. As of January 31, 2004, the Company had working capital of $655,586. At that date, cash and cash equivalents totaled $814,515.

On February 26, 2002, the Company entered into a Loan Agreement with PNC. Pursuant to the Loan Agreement, the Company secured a $750,000 Note under which the Company was permitted to draw-down money until February 1, 2003. Interest on the outstanding balance of the Note was charged at prime. In addition, the Company secured a $2,000,000 Line of Credit at a rate of prime plus .75% for a term of one year ending February 1, 2003. Pursuant to the terms of the Security Agreement entered into between the Company and PNC, both the Note and the Line of Credit were secured by all of the personal property of the Company including cash, accounts receivable, inventory, equipment and general intangibles. On November 13, 2002, the Company borrowed $1,500,000 on the Line of Credit. On December 13, 2002, the Company was notified by PNC that it was in default on the Note and the Line of Credit, and, in February 2003, it was notified that PNC would not extend the expiration date of the Note or the Line of Credit, at which time the outstanding balance on the Line of Credit was $1,500,000. As a result, in February and March 2003, the Company was required to repay $1,500,000 to PNC related to the Line of Credit and $159,404 related to a letter of credit and certain fees.

21
On May 26, 2005, the Company closed on a private placement of convertible debentures. The gross proceeds received in connection with this private placement were $300,000.

On August 25, 2005, the Company closed on a private placement of 4,000,000 shares of its common stock. The gross proceeds received in connection with this private placement were $200,000 ($.05 per share).

On October 17, 2005, the Company and Breckenridge entered into a purchase and settlement agreement whereby Breckenridge agreed to pay the Company an aggregate of $1,000,000 as follows: (1) $250,000 was paid shortly after the execution of the purchase and settlement agreement, and (2) $50,000 will be paid on the first day of each month for a 15 month period commencing on November 1, 2005 and ending on January 1, 2007. As of November 30, 2006, the Company received $900,000 of payments from Breckenridge pursuant to the purchase and settlement agreement. See “Part II, Item 1. Legal Proceedings - Syntest Litigation.”

On February 21, 2006, the Company entered into a settlement agreement and release with Rosenberg pursuant to which Rosenberg paid the Company the sum of $425,000. See “Part II, Item 1. Legal Proceedings - Litigation Against Former Accounting Firms.”

On November 22, 2006, the Company, Century Capital, David R. LaVance, Thomas S. Gifford, the Syntho Group and Intermax entered into a settlement agreement and release whereby the Syntho Group agreed to pay the Company an aggregate of $3,100,000 as follows: (1) $250,000 was paid upon the execution of the settlement agreement; (2) $100,000 will be paid on the 27th day of each month for a 3 month period commencing on December 27, 2006 and ending on February 27, 2007 and (3) $2,550,000 will be paid on or before March 27, 2007. See “Part II, Item 1. Legal Proceedings - Syntest Litigation.”

No revenue is currently generated by the Company. As of November 30, 2006, the Company’s cash position was approximately $815,000 and $100,000 is due from Breckenridge pursuant to the purchase and settlement agreement entered into on October 17, 2005 by the Company and Breckenridge and $2,850,000 is due from the Syntho Group pursuant to the settlement agreement and release entered into on November 22, 2006 by the Company, Century Capital, David R. LaVance, Thomas S. Gifford, the Syntho Group and Intermax. The Company estimates that the combination of the cash on hand and the monies due from Breckenridge and the Syntho Group is sufficient in order to fund the Company’s operations and the development of the HCMS for at least the next 12 months.
 
22
Management believes that the Company will require additional capital in order to complete the development of the HCMS, to acquire additional products and technologies and to otherwise implement its strategy for business development. The Company currently does not have any lending relationships with commercial banks and does not anticipate establishing such a relationship in the foreseeable future due to the Company’s limited operations and assets. Consequently, management believes that the Company will have to focus on obtaining additional capital through the private placement of its securities.

Item 3.   Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing of this report with the SEC, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s current management, including the Company’s President and Chief Executive Officer along with the Company’s Executive Vice President, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer), who concluded that the Company’s disclosure controls and procedures are effective. There have been no significant changes in the Company’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and the Chief Financial Officer (Principal Financial and Accounting Officer), as appropriate, to allow timely decisions regarding required disclosure.

PART II
Item 1.  Legal Proceedings

SEC Investigation 

On February 21, 2002, the SEC issued a formal order directing a private investigation of the Company. According to this formal order, the SEC investigated, among other things, the accuracy of the Company’s filings with the SEC and its financial disclosures in general, as well as the sufficiency of the Company’s system of internal accounting controls. The SEC’s investigation of the Company resulted in the commencement of an action against the Company and the Company’s former President and Chief Executive Officer, Joseph A. Sanpietro, former Chief Financial Officer, Laurence M. Simon, and former Vice President of Sales, Lawrence P. Marasco. In its complaint, filed by the SEC in the United States District Court for the District of New Jersey on August 19, 2003, the SEC alleged that these three former corporate officers inflated the Company’s revenues through fictitious period-end invoices and other accounting irregularities and concealed that Mr. Marasco owned and controlled one of the Company’s largest customers. On August 19, 2003, without admitting or denying the allegations of the complaint, the Company consented to a final judgment against it. Pursuant to the final judgment, the Company is permanently restrained from making any untrue or misleading disclosures, whether such disclosures are in a report filed with the SEC or are contained in a press release or other general public disclosure. The Company also must make and keep accurate books, records and accounts and maintain a system of internal accounting control sufficient to ensure fair and accurate financial disclosure.

23
Incomplete Periodic Reports

As discussed in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2002, the Company’s current management commenced an extensive review of the financial statements and information disclosed in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2001 and the Company’s quarterly reports on Forms 10-Q and 10-QSB filed with the SEC in 2002 and 2001, respectively. As a result, the current management of the Company concluded that the financial statements and other information disclosed in the Company’s quarterly reports on Forms 10-Q and 10-QSB filed with the SEC in 2002 and 2001, respectively, and disclosed in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2001, could not be relied upon due to the Company’s inability to adequately verify such information because of incomplete or missing data. Consequently, the Company amended its quarterly reports for the quarters ended January 31, 2001, April 30, 2001, July 31, 2001, January 31, 2002, April 30, 2002 and July 31, 2002, and its 2001 annual report, by removing all of the information previously contained therein. In addition, the financial statement and notes thereto for the fiscal year ended October 31, 2002, included in the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2002, consisted only of a balance sheet as of October 31, 2002 and the related footnotes. Since a complete set of financial statements for the above noted periods were not presented by the Company, no assurance can be given that the SEC will not take an enforcement action or other action against the Company. Any such action by the SEC could have significant adverse consequences to the Company.

In addition, as a result of the above noted limitations on financial reporting, the Company's quarterly reports on Form 10-QSB for the quarters ended January 31, 2003, April 30, 2003 and July 31, 2003 and the Company’s annual report on Form 10-KSB for the fiscal year ended October 31, 2003, do not include the required comparative financial information related to the fiscal year ended October 31, 2002. Since those reports do not contain the required comparative financial information, no assurance can be given that the SEC will not take an enforcement action or other action against the Company. Any such action by the SEC could have significant adverse consequences to the Company.

Class Action Lawsuits

Beginning in February 2002, the Company and certain of its former officers and directors were named in an aggregate of eleven class action lawsuits filed in the United States District Court for the District of New Jersey. In these lawsuits the plaintiffs alleged that, among other contentions, the Company and certain of its former officers and directors failed to disclose a related party transaction between the Company and Lawrence P. Marasco, the Company’s former Vice President of Sales, in the Company’s periodic reports filed with the SEC. The lawsuits against the Company and certain of its officers and directors were consolidated on January 13, 2003.

24
On July 11, 2003, the Company and Executive Risk, the insurance company that provided the Company with its director and officer insurance coverage for a portion of the class period, reached an agreement whereby Executive Risk paid $475,000 to the Company. In exchange for the $475,000 payment, the Company agreed to terminate the director and officer insurance coverage provided by Executive Risk and release and hold harmless Executive Risk for any claims for coverage which could be made by any former director or officer.

On August 18, 2003, the Company reached an agreement to settle the consolidated class action lawsuits, which was subject to the approval of the United States District Court for the District of New Jersey. As part of the settlement, the Company agreed to pay $400,000 in cash to the plaintiffs and issue 861,990 shares of the Company’s common stock (fair value of approximately $129,299 as of August 18, 2003), which equaled 6% of the Company’s issued and outstanding shares of common stock on the date the settlement agreement was reached. The Company utilized the $475,000 received from Executive Risk to fund the settlement and to offset a portion of the legal costs and expenses incurred by the Company in connection with the consolidated class action lawsuit.

On September 12, 2003, the complaint filed in the consolidated class action lawsuit against the Company and the other defendants was amended. The amended class action complaint included additional information, including information regarding the alleged improper conduct of certain former officers and directors of the Company.

On January 12, 2004, the United States District Court for the District of New Jersey issued a Preliminary Approval Order preliminarily approving the settlement of the consolidated class action lawsuit and issued its final approval of the settlement on May 3, 2004. For purposes of the settlement only, the United States District Court for the District of New Jersey certified a class on behalf of all persons or entities who purchased or otherwise acquired shares of the Company’s common stock during the period from October 7, 1999 through August 19, 2003, inclusive, and who were damaged thereby. Excluded from the class, among others, were the defendants and the members of their immediate families, any entity in which any defendant has a controlling interest and the current and former directors and officers of the Company.

FBI Investigation

On November 22, 2002, the FBI executed a search warrant and removed certain documents and computers from the Company’s premises. The Company was not advised of the reasons for the FBI’s actions. As of November 30, 2006, no indictments or charges have been issued against the Company.

Syntest Litigation

On May 12, 2003, the Company commenced an action in the United States District Court for the Eastern District of New York against the Syntho Group, the Breckenridge Group and the Schrader Group relating to the Company’s exclusive right to distribute the hormone replacement therapy drug, Syntest, under an agreement with Syntho which expires no earlier than November 2006. In its complaint, the Company alleged that Syntho permitted Breckenridge, Medpharm and Bluegrass to distribute Syntest in violation of the Syntest Agreement and that Schrader Associates, which had been appointed by the Company as the exclusive broker with respect to sales of Syntest to drug wholesalers, chain drug stores and managed care companies, and Schrader offered discounts, incentives and rebates to customers of the Company without the Company’s authorization.

25
On April 18, 2003, three separate actions were filed against the Company in Kentucky state court by different members of the Schrader Group; one by Schrader Associates alleging breach of the brokerage agreement with the Company and seeking monetary damages; one by Medpharm seeking a declaratory judgment that it is entitled to credits or goods from the Company under an oral agreement to purchase product from the Company; and one by Bluegrass alleging breach of an agreement to pay compensation and provide free goods and failure to accept returns. These actions were later moved from the state court in Frankfort, Kentucky to the United States District Court for the Eastern District of Kentucky.

The Company was served on May 12, 2003 with a summons and complaint by Breckenridge, filed in the United States District Court for the Southern District of Florida, in which Breckenridge alleges that the Company was interfering with its alleged exclusive rights to distribute Syntest. In this action, Breckenridge was seeking monetary damages of an unspecified amount. This action was later moved to the United States District Court for the Eastern District of New York.

In June 2003, the Syntho Group filed an answer to the Company’s complaint which contained counterclaims against the Company for alleged: (1) breach of contract, (2) failure to pay for product, (3) tortious interference with Syntho’s agreement with Breckenridge, and (4) conversion of property.

On April 21, 2004, the Company entered into a settlement agreement and limited release with the Schrader Group. Pursuant to this agreement, the Company and the Schrader Group agreed to dismiss with prejudice the actions which were pending in the United States District Court for the District of Kentucky, and the actions against each other which were pending in the United States District Court for the Eastern District of New York. As part of the settlement reached by the Company and the Schrader Group, the Schrader Group paid to the Company a cash payment of $375,000. In addition, the parties released each other from certain claims arising out of the distribution and sale of Syntest.

On October 17, 2005, the Company and Breckenridge entered into a purchase and settlement agreement pursuant to which the Company sold its distribution and other rights and business with respect to the hormone replacement drug, Syntest, to Breckenridge. In consideration for the sale of such rights and the other benefits provided under the purchase and settlement agreement, Breckenridge agreed to pay the Company an aggregate of $1,000,000 as follows: (1) $250,000 was paid shortly after the execution of the purchase and settlement agreement, and (2) $50,000 will be paid on the first day of each month for a 15 month period commencing on November 1, 2005 and ending on January 1, 2007. Further, pursuant to the settlement agreement, the Company and Breckenridge dismissed their actions against each other and released each other from any further claims arising out of the distribution and sale of Syntest, except as provided under the purchase and settlement agreement. Pursuant to the purchase and settlement agreement, the Company reserved all of its rights to its claims for damages against the Syntho Group that were incurred by the Company as a result of the alleged breach by the Syntho Group of the Syntho Agreement and other wrongful actions by the Syntho Group. As of November 30, 2006, the Company received $900,000 of payments from Breckenridge pursuant to the purchase and settlement agreement.

26
On February 22, 2006, the Company amended its complaint in this action to, among other things, include claims that Muhammed Malik, in his capacity as a consultant to the Company and as president of Intermax and Syntho, provided substantial assistance to the former officers and certain former directors of the Company in carrying out the scheme to overstate Medi-Hut’s revenues and earnings through fraudulent accounting practices and committed violations of state and federal laws prohibiting forgery and fraudulent practices and otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1.

On April 10, 2006, the Syntho Group counterclaimed against Medi-Hut and Century Capital, David R. LaVance and Thomas S. Gifford, as agents of Medi-Hut, for allegedly violating the Lanham Act and tortiously interfering with Syntho’s contractual relationship with Breckenridge.

On November 22, 2006, the Company, Century Capital, David R. LaVance and Thomas S. Gifford entered into a settlement agreement and release with the Syntho Group and Intermax. Pursuant to the settlement agreement, the Company and the Syntho Group agreed to dismiss with prejudice the actions against each other which were pending in the United States District Court for the Eastern District of New York and in the Superior Court of New Jersey. See “Litigation Against Certain Former Officers and Directors and Others.” In addition, the Syntho Group agreed to dismiss with prejudice the related actions against Century Capital, David R. LaVance and Thomas S. Gifford which were pending in the United States District Court for the Eastern District of New York and the Company and Intermax agreed to dismiss with prejudice the related actions against each other which were pending in the United States District Court for the Eastern District of New York and in the Superior Court of New Jersey. As part of the settlement reached by the parties, the Syntho Group agreed to pay the Company an aggregate of $3,100,000 (the “Settlement Amount”) as follows: (1) $250,000 was paid upon the execution of the settlement agreement; (2) $100,000 will be paid on the 27th day of each month for a 3 month period commencing on December 27, 2006 and ending on February 27, 2007 and (3) $2,550,000 will be paid on or before March 27, 2007. A portion of the Settlement Amount, $2,850,000, is secured by a first priority mortgage on real property owned by the spouse of Muhammed Malik. In the event that the Syntho Group defaults on the settlement agreement, the Syntho Group and Intermax will be responsible for all reasonable costs and expenses incurred by the Company as a result of the default, including any foreclosure related expenses associated with the real property which secures the first priority mortgage. In addition, upon a default by the Syntho Group, a consent judgment in favor of the Company in the amount of $4,000,000 will be entered into in the Superior Court of New Jersey against the Syntho Group and Intermax.

Litigation Against Certain Former Officers and Directors and Others

On December 4, 2003, the Company commenced litigation in the Superior Court of New Jersey against certain of its former officers and directors, Healthgen Distributors, Inc. (formerly known as Larval Corp.), Kinray, Inc. and Santi Greco, an officer of Kinray, Inc. In its complaint, the Company alleged that Joseph A. Sanpietro, a former director and the former President and Chief Executive Officer of the Company, Vincent J. Sanpietro, a former director and the former Chief Operating Officer and Secretary of the Company, Laurence M. Simon, the former Chief Financial Officer of the Company, and Lawrence P. Marasco, the former Vice President of Sales of the Company, caused the Company to suffer significant damage and incur substantial costs by engaging in a scheme to overstate the Company’s revenues and earnings through fraudulent accounting practices. The Company also alleged in its complaint that these former officers and directors, in furtherance of their scheme to defraud, filed materially false and misleading documents with the SEC and disseminated materially false and misleading information to the general public, investors and financial advisors and brokers. In addition to the foregoing, the Company alleged in its complaint that these former officers and directors, with the assistance of Larval Corp., an entity controlled by Mr. Marasco, Kinray, Inc., a New York based pharmaceutical distributor, and Santi Greco, an officer of Kinray, Inc., committed violations of state and federal laws prohibiting forgery and fraudulent practices and otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1.

27
In addition, as set forth in the complaint, the Company sought payment of a promissory note in the principal amount of $575,000 issued to it by former officer and director, Robert S. Russo, plus all accrued interest thereon. The promissory note, due and payable on October 24, 2003, was issued by Mr. Russo as payment for 100,000 shares of the Company’s common stock which he purchased in a private placement by the Company during the fall of 2001. The Company also sought to recover damages from Mr. Russo for his alleged breach of fiduciary duties to the Company during the time he was serving as an officer of the Company.

On January 20, 2004, Mr. Russo filed his answer to the Company’s complaint along with a counterclaim for compensatory and punitive damages, attorneys’ fees and costs and a declaration that the promissory note described above be declared null and void. Mr. Russo also filed a crossclaim for indemnification from the other defendants in the litigation should he be adjudged to be liable on any of the counts in the Company’s complaint.

On February 4, 2004, the Company entered into a settlement and release agreement with Vincent J. Sanpietro. In exchange for a one time payment of $20,000, the return of 554,800 shares of the Company’s common stock and certain other non-monetary considerations, the Company agreed to discharge its claims against Mr. Sanpietro.

On April 14, 2004, the Company entered into a settlement and release agreement with Joseph A. Sanpietro. In exchange for a one-time payment of $60,000 and the return of 3,179,200 shares of the Company’s common stock and certain other non-monetary consideration, the Company agreed to discharge its claims against Mr. Sanpietro.

On May 14, 2004, the Company entered into a settlement and release agreement with Robert S. Russo. In exchange for a one-time payment of $300,000, the return of 125,000 shares of the Company’s common stock and other non-monetary consideration, the Company agreed to discharge its claims against Mr. Russo.

On July 6, 2004, the Company amended the complaint against certain of its former officers and directors and others and commenced litigation against Muhammed Malik, Intermax and Syntho. In its complaint, the Company alleges that Muhammed Malik, in his capacity as a consultant to the Company and as president of Intermax and Syntho, provided substantial assistance to the former officers and certain former directors of the Company in carrying out the scheme to overstate the Company’s revenues and earnings through fraudulent accounting practices and committed violations of state and federal laws prohibiting forgery and fraudulent practices and otherwise participated in “racketeering activity” as that term is defined in 18 U.S.C. §1961(1) and N.J.S.A. 2C:41-1. The defendants in this action have counterclaimed against the Company for alleged: (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, (3) fraud, (4) misrepresentation, (5) fraudulent concealment, (6) violation of the New Jersey Consumer Fraud Act, (7) conversion, and (8) failure to pay for delivered product.

28
On September 16, 2004, the Company entered into a settlement agreement and release with Lawrence P. Marasco. As part of the settlement, Mr. Marasco paid to the Company the sum of $60,000, returned 405,000 shares of the Company’s common stock and agreed to provide certain other non-monetary consideration.

On November 29, 2004, the Company entered into a settlement agreement and release with Laurence M. Simon. In exchange for the return of 30,000 shares of the Company’s common stock and certain other non-monetary consideration, the Company agreed to dismiss its claims against Mr. Simon.

On January 19, 2005, the Company entered into a settlement agreement and release in connection with its action against Kinray, Inc. and its officer, Santi Greco. Kinray, Inc. agreed to pay to the Company the sum of $300,000. This settlement was entered into without any admission of liability or any inferences of wrongdoing by any settling party.

In late 2005 and early 2006, defendants Syntho and Muhammed Malik made motions to dismiss Medi-Hut’s claims based on the entire controversy doctrine and the principle of comity. These motions were denied. In April 2006, Syntho and Malik sought leave to appeal the denial of their motion to dismiss on the principle of comity. This motion was also denied.

On April 6, 2006, the Company filed a second amended complaint in which it alleges that, among other things, it has suffered significant damages as a result of the Syntho Group’s breach of the distribution agreement between Syntho and Medi-Hut, pursuant to which Medi-Hut had exclusive rights to distribute Syntest, and the Syntho Group’s related conduct.

On November 22, 2006, the Company entered into a settlement agreement and release with the Syntho Group and Intermax pursuant to which the Company, the Syntho Group and Intermax agreed to dismiss with prejudice the actions against each other which were pending in the Superior Court of New Jersey. See “Syntest Litigation.”

Litigation Against Former Accounting Firms 

On January 9, 2004, the Company commenced litigation in the Superior Court of New Jersey against two of its former accounting firms, Rosenberg, which served as Medi-Hut’s independent registered public accounting firm from February 1998 to March 2003, excluding a three week period in early 2002, and Koenig, an accounting consultant engaged by the Company to review various tax documents, financial statements and filings by the Company with the SEC. Robert S. Russo, a former officer and director of the Company and a defendant in a litigation commenced by the Company against certain of its former officers and directors on December 4, 2003, is a principal of Koenig. In its complaint, the Company alleges that Rosenberg and Koenig, through their negligence and accounting malpractice, caused the Company to suffer significant damage and incur substantial costs. The Company alleges in its complaint that as a result of such negligence and accounting malpractice, Rosenberg and Koenig failed to detect or simply ignored a scheme by certain of the Company’s former officers and directors to overstate the Company’s revenues and earnings through fraudulent accounting practice, which had a devastating impact on the Company. The Company also alleges in its complaint that, as a result of their negligence and accounting malpractice, Rosenberg and Koenig failed to uncover and/or disclose the materially false and misleading financial information contained in the periodic reports filed by the Company with the SEC and otherwise disseminated to the general public, investors and financial advisors and brokers.

29
In connection with the settlement of the Company’s separate action against Robert S. Russo in the Superior Court of New Jersey on May 14, 2004, the Company entered into a settlement and release agreement with Koenig. In exchange for certain non-monetary consideration, the Company agreed to discharge its claims against Koenig.

On February 21, 2006, the Company entered into a settlement agreement and release with Rosenberg. As part of the settlement, the parties released each other from all claims and Rosenberg paid the Company the sum of $425,000. This settlement was entered into without any admission of liability or any inferences of wrongdoing by any settling party.

Lexington Insurance Lawsuit 

On April 14, 2004, a complaint was served on the Company by National Union in the United States District Court for the District of New Jersey. On January 19, 2005, the complaint was amended by National Union in order to properly state the name of the plaintiff as Lexington. In this action, Lexington alleged that the Company owed the plaintiff $235,000, representing unpaid insurance premiums related to directors and officers insurance for the period January 2003 through December 2003. While the Company did receive a proposal from Lexington, the Company secured directors and officers insurance from another carrier under better terms and at a lower cost. No written binder, policy forms, endorsements nor any other indicia of a Lexington policy were ever delivered to the Company.

On March 10, 2005, the Company filed a third party complaint against Universal and Mayer in the United States District Court for the District of New Jersey. Universal was the retail broker that advised the Company during the Company’s business dealings with Lexington and Mayer was the individual employed by Universal that dealt directly with the Company. In its complaint, the Company alleged that Universal and Mayer were negligent and breached their fiduciary duty to the Company in providing services related to the Company’s procurement of directors and officers insurance.

On September 28, 2005, the Company and Lexington entered into an agreement in which Lexington agreed to dismiss its complaint against the Company and both Lexington and the Company agreed to release each other from any and all claims which could have been asserted as a result of the Lexington lawsuit. On October 13, 2005, the Company, Universal and Mayer entered into an agreement in which the Company agreed to dismiss its third party complaint against Universal and Mayer in exchange for a one time payment from Universal and Mayer of $8,500.

30
Loures Lawsuit 

On December 28, 2004, an action was commenced in the Superior Court of New Jersey by James J. Loures, Jr. and his wife, Christine Loures, against the Company and certain of its former officers and directors. The plaintiffs allege that the Company, its former officers and certain of its former directors engaged in a scheme to inflate the Company’s revenues and earnings through a series of accounting irregularities and fraudulent financial disclosures during the period June 2001 through March 2003 which resulted in the plaintiffs’ loss of approximately $120,000. The plaintiffs allegations are the same as those alleged in the class action lawsuits discussed above. The plaintiffs were one of eight parties that opted out of the settlement related to the class action lawsuit.

On October 4, 2006, the Company filed a motion to dismiss the plaintiffs’ complaint for failure to comply with discovery requests in the time required by the court. On November 3, 2006, the court granted the Company’s motion and dismissed the complaint without prejudice.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds
 
Not Applicable.
 
Item 3.   Defaults Upon Senior Securities
 
Not Applicable.

Item 4.   Submission of Matters to a Vote of Security Holders
 
Not Applicable.

Item 5.   Other Information
 
None.
 
Item 6.   Exhibits
 
See Index of Exhibits Commencing on Page E-1. 
 
31
SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
DATE:  MEDI-HUT CO., INC.
 
 		  
 		  
 
December 21, 2006:  By:   /s/ David R. LaVance
 
David R. LaVance
  President and Chief Executive Officer
 
     
 
 		  
 		  
 
December 21, 2006:  By:   /s/ Thomas S. Gifford
 
Thomas S. Gifford
 
Executive Vice President,
Chief Financial Officer and
Secretary

32
INDEX OF EXHIBITS

Exhibit No.
  
Description of Exhibit
     
2.1
  
Agreement and Plan of Reorganization between Medi-Hut Co., Inc. (“Medi-Hut”) and Indwest, Inc. dated January 28, 1998 (Incorporated by reference to Exhibit 2 to Medi-Hut’s Registration Statement on Form 10-SB, File No. 0-27119, filed with the Securities and Exchange Commission (the “SEC”) on August 23, 1999).
     
2.2
  
Agreement and Plan of Reorganization between Medi-Hut and Vallar Consulting Corp., dated January 10, 2000 (Incorporated by reference to Exhibit 2.1 to Medi-Hut’s Current Report on Form 8-K, filed with the SEC on January 24, 2000).
     
3.1
  
Articles of Incorporation of Medi-Hut, filed in the office of the Secretary of State of Nevada on October 31, 2001 (Incorporated by reference to Exhibit 3.1 to Medi-Hut’s Registration Statement on Form SB-2/A, Registration No. 333-72504, filed with the SEC on November 27, 2001).
     
3.2
  
Bylaws of Medi-Hut (Incorporated by reference to Exhibit 3.4 to Medi-Hut’s Registration Statement on Form 10-SB, File No. 0-27119, filed with the SEC on August 23, 1999).
     
4.1
  
Specimen stock certificate representing Medi-Hut’s common stock. (Incorporated by reference to Exhibit 4.1 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
4.2
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Manor Oaks Capital Management (Incorporated by reference to Exhibit 4.2 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
4.3
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Chartwell Partners, LLP (Incorporated by reference to Exhibit 4.3 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
4.4
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Glenwood Partners, L.P. (Incorporated by reference to Exhibit 4.4 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
4.5
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Radiology for South Philadelphia Profit Sharing Plan (Incorporated by reference to Exhibit 4.5 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
4.6
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Mark W. Cooper (Incorporated by reference to Exhibit 4.6 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
 
 
E-1
 
4.7
  
Convertible Debenture for $50,000, dated May 1, 2005, issued to Richard Rimer (Incorporated by reference to Exhibit 4.7 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.1
  
Joint Venture Agreement between Medi-Hut and COA International Industries, Inc., dated November 16, 2000 (Incorporated by reference to Exhibit 10.8 to Medi-Hut’s Registration Statement on Form SB-2, Registration No. 333-72504, filed with the SEC on October 30, 2001).
     
10.2
  
Distribution Agreement between Medi-Hut and Syntho Pharmaceuticals, Inc., dated November 20, 2001 (Incorporated by reference to Exhibit 10.2 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.3
  
Amendment, dated February 7, 2002, to the Distribution Agreement, dated November 20, 2001, between Medi-Hut and Syntho Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 10.3 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.4
  
Amendment, dated April 3, 2002, to the Distribution Agreement, dated November 20, 2001, between Medi-Hut and Syntho Pharmaceuticals, Inc. (Incorporated by reference to Exhibit 10.4 to Medi-Hut’s Annual Report on Form 10-KSB, for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.5
  
Medi-Hut Co., Inc. 2002 Equity Incentive Plan, adopted and effective January 1, 2002 (Incorporated by reference to Exhibit B of Medi-Hut’s definitive proxy statement, filed with the SEC on June 10, 2002).
     
10.6
  
Consulting Services Agreement, dated as of February 1, 2003, between Medi-Hut and Century Capital Associates, LLC (Incorporated by reference to Exhibit 10.1 to Medi-Hut’s Current Report on Form 8-K filed with the SEC on March 3, 2003).
     
10.7
  
Amended and Restated Consulting Services Agreement, dated as of February 1, 2005, between Medi-Hut and Century Capital Associates, LLC (Incorporated by reference to Exhibit 10.7 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.8
  
Warrant to purchase 1,500,000 shares of Medi-Hut common stock, dated February 1, 2003, issued to Century Capital Associates, LLC (Incorporated by reference as Exhibit 4.1 to Medi-Hut’s Current Report on Form 8-K filed with the SEC on March 3, 2003).
     
10.9
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated July 24, 2003, issued to James G. Aaron. (Incorporated by reference to Exhibit 10.9 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
 
E-2
 
10.10
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated July 24, 2003, issued to Richard E. Otto. (Incorporated by reference to Exhibit 10.10 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.11
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated July 24, 2003, issued to John A. Moore. (Incorporated by reference to Exhibit 10.11 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.12
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated July 24, 2003, issued to Salvatore J. Badalamenti. (Incorporated by reference to Exhibit 10.12 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.13
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated May 14, 2004, issued to Richard E. Otto. (Incorporated by reference to Exhibit 10.13 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.14
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated May 14, 2004, issued to John A. Moore. (Incorporated by reference to Exhibit 10.14 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.15
  
Warrant to purchase 200,000 shares of common stock of Medi-Hut, dated May 14, 2004, issued to Salvatore J. Badalamenti. (Incorporated by reference to Exhibit 10.15 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.16
  
Warrant to Purchase 700,000 shares of common stock of Medi-Hut, dated May 14, 2004, issued to Century Capital Associates, LLC. (Incorporated by reference to Exhibit 10.16 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.17
  
Warrant to Purchase 500,000 shares of common stock of Medi-Hut, dated February 25, 2005, issued to Century Capital Associates, LLC. (Incorporated by reference to Exhibit 10.17 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.18
  
Warrant to Purchase 200,000 shares of common stock of Medi-Hut, dated February 25, 2005, issued to John A. Moore. (Incorporated by reference to Exhibit 10.18 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.19
  
Warrant to Purchase 200,000 shares of common stock of Medi-Hut, dated February 25, 2005, issued to Richard E. Otto. (Incorporated by reference to Exhibit 10.19 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
 
E-3
 
10.20
  
Loan Agreement between Medi-Hut and Medi-Hut International, dated June 7, 2002. (Incorporated by reference to Exhibit 10.20 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.21
  
Non-Exclusive License Agreement between Medi-Hut, COA International Industries, Inc., Medi-Hut International and Young-Kil Shin, dated September 18, 2003. (Incorporated by reference to Exhibit 10.21 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.22
  
Memorandum of Understanding between Medi-Hut and Medi-Hut International Co., Ltd, dated September 18, 2003. (Incorporated by reference to Exhibit 10.22 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.23
  
Shared Services Agreement, dated May 1, 2004, between Medi-Hut and Century Capital Associates LLC. (Incorporated by reference to Exhibit 10.23 to Medi-Hut’s Annual Report on Form 10-KSB for the fiscal year ended October 31, 2002, filed with the SEC on November 25, 2005).
     
10.24
  
Technology License Agreement between The Research Foundation of State University of New York for and on behalf of University of Buffalo and Medi-Hut dated November 10, 2006 (Incorporated by reference to Exhibit 10.24 to Medi-Hut’s Current Report on Form 8-K filed with the SEC on November 14, 2006).
     
31.1
  
Section 302 Certification of Chief Executive Officer.
     
31.2
  
Section 302 Certification of Chief Financial Officer.
     
32.1
  
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
     
32.2
  
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.


 
E-4
 EX-31.1 2 v060996_ex31-1.htm

EXHIBIT 31.1

CERTIFICATION

I, David R. LaVance, certify that:

1.  I have reviewed this report on Form 10-QSB of Medi-Hut Co., Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.  The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.  The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 
 
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

     
Date: December 21, 2006 By:   /s/ David R. LaVance
 
David R. LaVance
  President and Chief Executive Officer

 
 
 
 
 EX-31.2 3 v060996_ex31-2.htm
EXHIBIT 31.2

CERTIFICATION

I, Thomas S. Gifford, certify that:

1. I have reviewed this report on Form 10-QSB of Medi-Hut Co., Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4.  The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.  The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

 
 
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

     
December 21, 2006 By:   /s/ Thomas S. Gifford
 
Thomas S. Gifford
 
Executive Vice President,
Chief Financial Officer and
Secretary

  
 
 
 
 
 EX-32.1 4 v060996_ex32-1.htm
EXHIBIT 32.1



CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medi-Hut Co., Inc. (the “Company”) on Form 10-QSB for the period ended January 31, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, David R. LaVance, President and Chief Executive Officer of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78m or 78o(d), and,

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
     
Date: December 21, 2006 By:   /s/ David R. LaVance
 
David R. LaVance
  President and Chief Executive Officer


 
 
 
 
 EX-32.2 5 v060996_ex32-2.htm
EXHIBIT 32.2



CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Medi-Hut Co., Inc. (the “Company”) on Form 10-QSB for the period ended January 31, 2004, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas S. Gifford, Executive Vice President, Chief Financial Officer and Secretary of the Company, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §78m or 78o(d), and,

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
     
December 21, 2006 By:   /s/ Thomas S. Gifford
 
Thomas S. Gifford
 
Executive Vice President,
Chief Financial Officer and
Secretary

 
 
 
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