UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      DC 20549





**FORM
      10-KSB**





(Mark
      One)


x
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934


For
      the
      fiscal year ended October 31, 2003





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.**(Name
                of small business issuer in its
                charter)




Nevada
              (State
                or other jurisdiction of
              incorporation
                or organization)
            
            22-2436721
              (I.R.S.
                Employer Identification No.)




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





Issuer’s
      telephone number: (732)
      919-2799





Securities
      registered under Section 12(b) of the Exchange Act: None





Securities
      registered under Section 12(g) of the Exchange Act:




Common
                Stock, par value $0.001(Title
                of class)





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







Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of the Registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. [    ]




Revenues
      for the fiscal year ended October 31, 2003: Revenues for the fiscal year ended
      October 31, 2003 were $7,643,340.




The
      aggregate market value of the shares of the Registrant’s common stock, par value
      $0.001 per share, held by non-affiliates of the Registrant, as of April 30,
      2006, was approximately $562,380. The Registrant has no other class of capital
      stock outstanding.




As
      of
      April 30, 2006, 21,276,090 shares of the Registrant’s common stock were
      outstanding .




DOCUMENTS
      INCORPORATED BY REFERENCE




None.




Transitional
      Small Business Disclosure Format (check one): Yes o No x




SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS




Certain
      information included in this annual report on Form 10-KSB and other filings
      of
      the Registrant 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 Registrant may participate; competition within the Registrant’s chosen
      industry, including competition from much larger competitors; technological
      advances; available capital; and failure by the Registrant to successfully
      develop products and business relationships.




In
      some
      cases, forward-looking statements can be identified by terminology such as
      “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential” or “continue” or the negative of such terms
      or other comparable terminology. Although the Registrant believes that the
      expectations reflected in the forward-looking statements contained herein are
      reasonable, the Registrant cannot guarantee future results, levels of activity,
      performance or achievements. Moreover, neither the Registrant, nor any other
      person assumes responsibility for the accuracy and completeness of such
      statements. The Registrant is under no duty to update any of the forward-looking
      statements contained herein after the date of this annual report on Form
      10-KSB .







**MEDI-HUT
      CO., INC.**





**INDEX
      TO FORM 10-KSB**




**PART
                I**Item
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            19Item
                3.
            Legal
                Proceedings
            20Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            27**PART
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters
            28Item
                6.
            Management’s
                Discussion and Analysis or Plan of Operation
            30Item
                7.
            Financial
                Statements
            41Item
                8.
            Changes
                In and Disagreements With Accountants on Accounting andFinancial
                Disclosure
            41**PART
                III**Item
                9.
            Directors,
                Executive Officers, Promoters and Control Persons; Compliancewith
                Section 16(a) of the Exchange Act
            43Item
                10.
            Executive
                Compensation
            46Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            53Item
                12.
            Certain
                Relationships and Related Transactions
            61Item
                13.
            Exhibits
                and Reports on Form 8-K
            62Item
                14.
            Controls
                and Procedures
            62SIGNATURES
            
            64







*NOTE* *:
      This annual report on Form 10-KSB for the fiscal year ended October 31, 2003
      is
      being prepared and filed by the Company’s current management. The information
      presented herein is for and as of the fiscal year ended October 31, 2003, unless
      otherwise indicated. On March 21, 2003, Medi-Hut terminated the employment
      of
      its four senior 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, all of these former
      officers were the subject of an investigation by the United States Department
      of
      Justice and three were the subject of an investigation by the Securities and
      Exchange Commission. On August 19, 2003, three of the former officers pled
      guilty in an action brought by the United States Department of Justice to
      conspiring to inflate the revenue and earnings of the Company and for lying
      to
      investigators and the fourth former officer pled guilty to obstruction of
      justice. Also on August 19, 2003, the Company, as well as three of the former
      officers who were under investigation by the Securities and Exchange Commission,
      agreed to a consent decree with the Securities and Exchange Commission. As
      a
      result of the actions of the former officers of the Company, and due to the
      Company’s inability to adequately verify the results of the Company’s operations
      for the year ended October 31, 2002 because of incomplete or missing data,
      the
      Company was not able to prepare complete and accurate financial statements
      for
      the fiscal year ended October 31, 2002, except for the balance sheet dated
      as of
      October 31, 2002. Since the Company does not have complete and accurate
      financial statements for 2002, certain portions of this report do not contain
      the required comparison to the results of operations in 2002. Medi-Hut’s current
      management and its Board of Directors are continuing to work aggressively to
      bring the Company into compliance with the requirements of the Securities and
      Exchange Commission and other regulatory bodies.*




**PART
      I**




**Item
      1.**  **Description
      of Business**




**General**




Medi-Hut
      Co., Inc. (“Medi-Hut” or the “Company”) is a Nevada corporation that was
      headquartered in Wall Township, New Jersey until May 2004 when it relocated
      its
      headquarters to Spring Lake, New Jersey. Medi-Hut
      was incorporated in the State of New Jersey on November 29, 1982. On January
      28,
      1998, Medi-Hut entered into an Agreement and Plan of Reorganization with
      Indwest, Inc., a Utah corporation, whereby Medi-Hut changed its domicile to
      the
      State of Utah and became subject to the reporting requirements of the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”). On February 2, 1998,
      Medi-Hut completed a second change of domicile transaction and became a Delaware
      corporation, and, on October 31, 2001, completed a third and final change of
      domicile transaction and became a Nevada corporation.




On
      October 17, 2003, the Company formed Scivanta Corporation (“Scivanta”), a New
      Jersey corporation and a wholly-owned subsidiary of the Company. Scivanta was
      formed to be an operating subsidiary of the Company, but is currently
      inactive.




During
      the fiscal year ended October 31, 2003, Medi-Hut’s business included the
      distribution of over the counter medical devices and supplies, such as condoms
      and alcohol preparation pads, and generic and name brand pharmaceuticals. The
      Company’s business for the fiscal year ended October 31, 2003 also included the
      sale of hormone replacement therapy drugs (Syntest Double-Strength and
      Half-Strength), which were manufactured and supplied to the Company by a third
      party manufacturer. The Company’s products generally were sold directly to
      distributors or wholesalers who sold the products to pharmacies, drug store
      chains or other wholesalers. Occasionally, the Company sold directly to
      physicians and other healthcare providers.




1


During
      the fiscal year ended October 31, 2003, Medi-Hut continued to develop the
      patented Elite Safety Syringe, a passive anti-stick safety syringe and the
      Solo-SafeTM Safety Syringe. For the fiscal year ended October 31, 2003, there
      were no sales of the Elite Safety Syringe or the Solo-SafeTM Safety Syringe due
      to development, manufacturing and marketing issues which prevented the
      introduction of the syringes to the United States market. See “Principal
      Products - Elite Safety Syringe” and “Principal Products - Solo-SafeTM Safety
      Syringe.”




In
      March
      2003, the Company exited from the business of selling branded and generic
      pharmaceuticals to wholesalers due to the low margins attributed to such sales.
      In addition, in March 2003, the Company was unable to continue the sale of
      Syntest, its hormone replacement therapy product line, due to a dispute with
      the
      manufacturer of and contract sales representative for such product line. This
      dispute resulted in the commencement of litigation by the Company against the
      manufacturer and contract sales representative as well as other related
      litigation involving the Company. See “Item 3. Legal Proceedings - Syntest
      Litigation.”




From
      March 2003 through September 2004, the only recurring revenue generated from
      the
      Company’s operations was from the continuing sale of condoms, alcohol preps and
      disposable clinical supplies to physicians and wholesalers. In October 2004,
      the
      Company stopped selling these products due to reduced profit margins and the
      decline of the customer base.




During
      May 2004, the Company’s current management team completed its evaluation of the
      Solo-SafeTM Safety Syringe. Due to the early development stage of the product,
      the fact that a manufacturing prototype had not been created, the cost
      associated with developing the product as compared to the overall market
      opportunity and the Company’s limited financial resources, the Company decided
      to stop any further development of this product.




During
      December 2004, the Company completed its evaluation of the Elite Safety Syringe
      product line. As a result of this evaluation, the Company’s current management
      decided not to pursue any further development or marketing of the Elite Safety
      Syringe due to the cost associated with correcting the product design, the
      cost
      associated with establishing sufficient manufacturing capabilities to support
      a
      market launch and the lack of a market for safety syringes sufficient to support
      the product launch. See “Principal Products - Elite Safety Syringe” and
“Manufacturing; Principal Suppliers.”




Currently,
      the Company does not have any recurring revenue from the sale of products.
      The
      Company is in the process of identifying new products for acquisition and
      development. However, no assurances can be given that the Company will have
      the
      financial and other resources necessary for it to acquire and develop any new
      product. See “Strategy for Business Development.”




2


**Strategy
      for Business Development**




The
      Company’s strategy for business development focuses on the acquisition, through
      licensing or purchasing, of technologies or products that are sold or are
      capable of being sold in a specialty or niche market. Technologies or products
      of interest include, but are not limited to, medical devices, pharmaceuticals
      and other proprietary technologies or patented products. Specialty or
      niche-market technologies or products, as opposed to commodities, generally
      offer greater margins. These products are distributed through specialty
      distributor networks or manufacturer representatives to the original equipment
      manufacturer (“OEM”) market, supplier and provider markets and to the general
      marketplace.




In
      an
      effort to implement its acquisition strategy, the Company has begun to identify
      and review manufacturers of specialty technologies or products. The companies
      under review generally have sole product lines or orphan products with annual
      sales, if any, of less than $5 million. The Company believes that the
      technologies or products generally offered by these companies are not attractive
      to the larger companies because they do not represent opportunities that would
      be material to those companies. Many of the technologies and products suffer
      from lower sales because of inadequate distribution channels, lack of companion
      products or insufficient capital.




Following
      is a listing of criteria being utilized by the Company in identifying and
      reviewing potential technology or product acquisitions:




·
            Whether
                the technology or product is a specialty or niche-market product
                which is
                distributed through specialty
                distributors.




·
            Whether
                the technology or product is unique or
                patented.




·
            Whether
                the technology or product has an attractive gross margin, usually
                in
                excess of 35%.




·
            Whether
                the prospective seller is receptive to receiving equity as part of
                the
                purchase price.




·
            Whether
                the market for the technology or product is expanding, but not to
                such a
                degree as to attract larger manufacturers or result in the technology
                or
                product achieving commodity status.




·
            Whether
                the Company can access marketing channels to sell and distribute
                the
                technology or product.




The
      Company anticipates funding its acquisition strategy and the development of
      its
      business through equity and/or debt financing and a favorable settlement or
      judgment in the pending Syntest litigation. See “Item 3. Legal Proceedings -
      Syntest Litigation.”




The
      Company has not entered into any definitive agreements to acquire any
      technologies or products and no assurances can be given that the Company will
      obtain a favorable settlement or judgment in its pending Syntest litigation
      or
      otherwise have the financial and other resources necessary for it to acquire
      any
      technologies or products or implement any part of its business development
      strategy. In addition, no assurances can be given that if the Company effects
      any technology or product acquisition, or implements any other part of its
      business development strategy, such acquisition or business development will
      be
      profitable.




3


**Company
      Developments**




*Government
      Proceedings and Investigations Involving the Company*




SEC
      Investigation - See
“Item 3. Legal Proceedings - SEC Investigation.”




Incomplete
      Periodic Reports - See
“Item 3. Legal Proceedings - Incomplete Periodic Reports.”




FBI
      Investigation - SEC
“Item 3. Legal Proceedings - FBI Investigation.”




NASDAQ
      Delisting - See
“Item 3. Legal Proceedings - NASDAQ Delisting.”




*Litigation*




Class
      Action Lawsuits - See
“Item 3. Legal Proceedings - Class Action Lawsuits.”




Syntest
      Litigation - See
“Item 3. Legal Proceedings - Syntest Litigation.”




Litigation
      Against Certain Former Officers and Directors and Others - See
“Item 3. Legal Proceedings - Litigation Against Certain Former Officers and
      Directors and Others.”




Litigation
      Against Former Accounting Firms - See
“Item 3. Legal Proceedings - Litigation Against Former Accounting
      Firms.”




Lexington
      Insurance Lawsuit - See
“Item 3. Legal Proceedings - Lexington Insurance Lawsuit.”




Loures
      Lawsuit - See
“Item 3. Legal Proceedings - Loures Lawsuit.”




*Guilty
      Pleas of Former Officers and Directors*




On
      August
      19, 2003, Joseph A. Sanpietro, Laurence M. Simon and Lawrence P. Marasco pled
      guilty to conspiracy to inflate the revenue and earnings of the Company and
      lying to investigators. In addition, Vincent J. Sanpietro, the Company’s former
      Chief Operating Officer and Secretary and a former director, pled guilty to
      obstruction of justice.




*New
      Management and Board Members*




On
      February 21, 2003, the Company entered into a Consulting Services Agreement
      with
      Century Capital Associates LLC (“Century Capital”) whereby Century Capital would
      provide general corporate and strategic business advisory services to the
      Company. The Consulting Services Agreement was amended and restated as of
      February 1, 2005. See “Item 10. Executive Compensation - Consulting Services
      Agreement.” On March 21, 2003, David R. LaVance of Century Capital replaced
      Joseph A. Sanpietro as the President and Chief Executive Officer of Medi-Hut
      and
      Thomas S. Gifford of Century Capital replaced Laurence M. Simon as the Chief
      Financial Officer of Medi-Hut. Mr. LaVance and Mr. Gifford also were elected
      to
      the Company’s Board of Directors. In addition, at such time, Vincent J.
      Sanpietro, the Chief Operating Officer of Medi-Hut and Joseph Sanpietro, Jr.,
      an
      employee of Medi-Hut, were terminated by the Company. Shortly thereafter, Joseph
      A. Sanpietro and Vincent J. Sanpietro resigned from the Company’s Board of
      Directors. See “Guilty Pleas of Former Offices and Directors” and “Item 3. Legal
      Proceedings - Litigation Against Certain Former Officers and Directors and
      Others.”




4


In
      May
      2003, Salvatore J. Badalamenti, John A. Moore and Richard E. Otto joined James
      G. Aaron, Thomas S. Gifford and David R. LaVance on the Board of Directors
      of
      Medi-Hut. At such time, James G. Aaron, a member of the Board since April 3,
      2001, agreed to remain on the Board of Directors for the primary purpose of
      assisting the transition of management. After assisting the transition of
      management, effective February 5, 2004, Mr. Aaron resigned from the Board.
      On
      January 1, 2005, due to various business and personal commitments, Salvatore
      J.
      Badalamenti resigned from the Board. See “Item 9. Directors, Executive Officers,
      Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
      Act.”




*Dismissal
      of Independent Auditors; Deficient Periodic Report*




On
      March
      28, 2003, the Company dismissed Rosenberg, Rich, Baker, Berman & Company
      (“Rosenberg”) as its independent auditors. The Company reported the dismissal of
      the Rosenberg firm as its independent auditors in a current report on Form
      8-K,
      dated March 28, 2003 and amended on April 4, 2003. On April 8, 2003, the SEC
      provided comments to the Company with respect to the disclosures in the
      Company’s current report on Form 8-K, dated March 28, 2003 and amended on April
      4, 2003. Current management could not adequately respond to the SEC’s comments
      due to the incomplete and unverifiable information left behind by prior
      management. Consequently, the Company’s current report on Form 8-K, dated March
      28, 2003 and amended on April 4, 2003, has been deemed deficient by the SEC.
      See
“Item 8. Changes In and Disagreements With Accountants on Accounting and
      Financial Disclosure.”




*New
      Independent Auditors*




On
      May
      15, 2003, the Company engaged the accounting firm Eisner, LLP (“Eisner”), as its
      independent auditors to perform an audit of the Company’s financial statements
      as of the fiscal years ended October 31, 2002 and October 31, 2001. On March
      3,
      2005, the Company replaced Eisner as its independent auditors with the
      accounting firm, Weiser LLP (“Weiser”). See “Item 8. Changes In and
      Disagreements With Accountants on Accounting and Financial
      Disclosure.”




*Repayment
      of 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”) at a rate of prime plus .75% for a
      term of one year ending February 1, 2003. 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 paid PNC $1,500,000 related to the Line of Credit and $159,404 related
      to a letter of credit and certain fees. See “Item 6. Management’s Discussion and
      Analysis or Plan of Operation - Liquidity and Capital Resources.”




5


*No
      Established Public Trading Market*




Since
      March 21, 2003, no established public trading market has existed for Medi-Hut’s
      common stock and shares of Medi-Hut’s common stock are neither listed on any
      national securities exchange, nor presently traded on any public stock exchange
      or in any other public market. Although quotations for shares of Medi-Hut’s
      common stock may be obtained through the over-the counter (“OTC”) “Pink Sheets”
maintained by Pink Sheets LLC (a centralized quotation service that collects
      and
      publishes market maker quotes for OTC securities), because secondary market
      activity for shares of Medi-Hut’s common stock has been limited and sporadic,
      such quotations may not accurately reflect the price or prices at which
      purchasers or sellers would be currently willing to purchase or sell shares
      of
      Medi-Hut common stock. See “Item 5. Market for Common Equity and Related
      Stockholder Matters.”




*Relocation
      of Corporate Offices and Settlement with Former Landlord*




In
      May
      2004, the Company relocated its principal offices to 215 Morris Avenue, Spring
      Lake, New Jersey 07762 in order to reduce its monthly operating expenses and
      to
      more appropriately accommodate its current operations. In connection with the
      relocation of its principal offices, the Company and Monmouth/Atlantic Realty
      Associates, L.L.C., the landlord of the Company’s former office space in Wall
      Township, New Jersey, reached an agreement to terminate the remaining term
      of
      the existing lease (44 months resulting in a lease obligation of approximately
      $454,000 plus an additional $154,000 for common area charges) for a one-time
      payment by the Company of $100,000 plus the forfeiture of a $33,338 security
      deposit.




*Private
      Placements of Securities*




On
      May
      26, 2005, the Company closed on a private placement of convertible debentures
      (the “Debentures”). The gross proceeds received in connection with this private
      placement were $300,000. The Debentures have a 5 year term maturing on April
      30,
      2007 and bear interest at a rate of 8% per annum. Up to 50% of the aggregate
      principal amount of the Debentures are immediately convertible into the
      Company’s common stock at the option of the holders at a conversion price of
      $0.10 per share. The remaining 50% of the aggregate principal amount of the
      Debentures are convertible into common stock at the option of the holders at
      any
      time after May 1, 2006 at a conversion price of $0.20 per share. The market
      price of the common stock on the date of closing the transaction was $.06 per
      share. In connection with the issuance of the Debentures, the Company relied
      on
      an exemption from registration for a private transaction not involving a public
      distribution provided by Section 4(2) of the Securities Act of 1933, as amended
      (the “Securities Act”).




On
      August
      25, 2005, the Company closed on a private placement of 4,000,000 shares of
      common stock. The gross proceeds received in connection with this private
      placement were $200,000 ($.05 per share). 3,000,000 shares of common stock
      were
      purchased by Richard Rimer, a private investor, for $150,000. 1,000,000 shares
      of Common Stock were purchased by John A. Moore, a director of the Company,
      for
      $50,000. The market price of the Common Stock on the date of closing the
      transaction was $.04 per share. In connection with the issuance of these shares,
      the Company relied on an exemption from registration for a private transaction
      not involving a public distribution provided by Section 4(2) of the Securities
      Act.




6


**Product
      Acquisitions**




On
      February 25, 2002, the Company purchased certain intellectual property from
      Spectrum Biotech, Inc., a Nevada corporation (“Spectrum”), relating to the
      Solo-Safe TM
Safety
      Syringe .
      In
      consideration for Spectrum’s safety syringe patents and patents pending and
      related U.S. Food and Drug Administration (the “FDA”) 510(k) premarket
      notification clearance, the Company issued to the shareholders of Spectrum
      700,000 restricted shares of its common stock, which at the time were valued
      at
      approximately $3,500,000. In addition, the Company granted certain registration
      rights to Spectrum and its shareholders. See “Principal Products -
      Solo-Safe TM
Safety
      Syringe.”




On
      May
      29, 2002, the Company entered into a letter of intent with Owens-Illinois
      Closure Inc. (“Owens-Illinois”) in which the parties agreed to negotiate in good
      faith an agreement that would allow Owens-Illinois to become the contract
      manufacturer of the Solo-SafeTM Safety Syringe. The Company and Owens-Illinois
      ceased discussions regarding the manufacture of the Solo-SafeTM Safety Syringe in
      May 2003.




On
      July
      1, 2002, the Company entered into a license agreement with Cuppy Medical
      Products, Inc. (“Cuppy”), which had a five year term. Pursuant to this license
      agreement, Cuppy granted Medi-Hut the exclusive, non-transferable license to
      manufacture, use, sell and distribute a patented safety engineered intravenous
      catheter system (the “Cuppy Catheter”) within the United States, United States
      Possessions, Canada and Mexico. The Company agreed to pay Cuppy an annual
      royalty of 6% of net sales of the Cuppy Catheter for a period of five years
      commencing July 1, 2002. In addition, upon execution of the license agreement,
      the Company paid $125,000 as an advance against future royalty payments, of
      which $85,000 was non-refundable and $40,000 was refundable in the event the
      Cuppy Catheter did not receive 510(k) premarket notification clearance from
      the
      FDA. See “Government Regulation.” Further, the Company agreed to make annual
      non-refundable payments as advances against future royalties as follows: $25,000
      on July 1, 2003, $40,000 on July 1, 2004, $65,000 on July 1, 2005 and $85,000
      on
      July 1, 2006.




The
      license agreement also provided that, upon the notification of receipt of 510(k)
      premarket notification clearance from the FDA, the Company would grant and
      issue
      to Cuppy restricted shares of the Company’s common stock with a total fair
      market value of $125,000 and afford the holder of the restricted shares with
      certain registration rights.




The
      Company did not make the $25,000 payment due July 1, 2003, and, as a result,
      on
      November 7, 2003, Cuppy terminated the license agreement with the Company.
      The
      Company does not believe it has any further payment or other obligations under
      the terminated license agreement nor does it believe it will receive any refunds
      thereunder.




7


On
      July
      26, 2002, the Company entered into a letter of intent with Owens-Illinois in
      which the parties agreed to negotiate in good faith an agreement that would
      allow Owens-Illinois to become the exclusive contract manufacturer of the Cuppy
      Catheter. This letter of intent was extended on February 4, 2003 and, on March
      14, 2003, the Company countersigned a proposal from Owens-Illinois for the
      manufacture of 100 prototypes of the Cuppy Catheter. However, due to the
      Company’s decision not to pursue the development and sale of the Cuppy Catheter,
      the Company and Owens-Illinois ceased discussions in June 2003 regarding this
      product.




**Principal
      Products**




*Name
      Brand and Generic Drugs*




For
      a
      portion of the fiscal year ended October 31, 2003, the Company was a wholesaler
      of name brand and generic drugs, which are drugs that are protected by patent
      or
      licensure. In March 2003, the Company exited this line of business due to the
      low margins attributed to such sales of name brand and generic
      drugs.




*Condoms*




For
      the
      fiscal year ended October 31, 2003 and through September 2004, the Company
      was a
      wholesaler of condoms under the brand name “Elite” and on a private label basis.
      The condoms were manufactured by third parties. The Company stopped selling
      condoms in October 2004 due to reduced profit margins and the decline in the
      customer base.




*Elite
      Safety Syringe*




During
      the fiscal year ended October 31, 2003 and through December 2004, the Company
      was developing the Elite Safety Syringe and attempted to secure appropriate
      manufacturing and distribution for the product. As discussed below, due to
      development, manufacturing and marketing issues, sales of the Elite Safety
      Syringe have not been material and, as a result, the Company has determined
      that
      it will not pursue any further development or marketing of the Elite Safety
      Syringe.




The
      Elite
      Safety Syringe is an anti-stick safety syringe that incorporates features
      designed to safely cover the sharp needle with minimal effort and to minimize
      danger to the user by preventing accidental needle sticks. There are two types
      of anti-stick syringes, active devices (this type of product demands that the
      user in some way make a physical movement to activate the device after the
      injection and prior to disposal) and passive devices (this type of product
      activates automatically after injection and should be designed not to interfere
      with the normal injection procedure). The Elite Safety Syringe is a passive
      device that incorporates a transparent sleeve into which the needle
      automatically retracts after use and is designed to decrease accidental needle
      sticks of medical service providers. The Elite Safety Syringe is also designed
      to be activated using a one hand technique.




The
      Elite
      Safety Syringe was originally manufactured at two facilities located
      in the Republic of Korea. One facility is operated by Medi-Hut International
      (Mfg.) Co., Ltd. (“Medi-Hut International”), a Korean corporation in which
      Medi-Hut has a 44% ownership interest, and the other facility is operated by
      Sam
      Woo, a Korean corporation (collectively, the “Korean Facilities”) independent of
      the Company. Medi-Hut International was formed pursuant to a joint venture
      between the Company and COA International Industries, Inc. (“COA”), a Korean
      corporation which manufactures and exports medical disposable products,
      including disposable syringes. However, the Company has determined that the
      costs associated with the further development and marketing of the Elite Safety
      Syringe exceed the overall market opportunity that exists for the product.
      Accordingly, the Company has decided that it will no longer develop or market
      the Elite Safety Syringe. The Company is currently seeking a third party
      interested in acquiring the product. See “Manufacturing; Principal Suppliers.”




8


Medi-Hut
      and Medi-Hut International entered into a loan agreement, effective June 7,
      2002, to memorialize certain financial assistance that Medi-Hut had been
      providing to Medi-Hut International. Medi-Hut International acknowledged that
      it
      had received loan installments from Medi-Hut during the period from June 7,
      2002
      through February 28, 2003 in the total amount of $450,000. The loan amount
      is to
      be repaid over time with interest as follows plus any and all accrued interest:
      $75,000 on or before December 31, 2004; $125,000 on or before December 31,
      2005;
      $125,000 on or before December 31, 2006; and $125,000 on or before December
      31,
      2007. As of March 31, 2006, the Company had not received the $75,000 payment
      due
      on or before December 31, 2004 or the $125,000 payment due on or before December
      31, 2005 and is currently evaluating whether to institute action to recover
      same.




*Disposable
      Medical Products*




During
      the fiscal year ended October 31, 2003, disposable medical products sold by
      the
      Company, other than the Elite Safety Syringe, were manufactured for the Company
      by third parties. These products included syringes, hot and cold packs, gauze
      bandages, adhesive bandages, paper products, alcohol preparation pads and
      condoms, as discussed above. The Company sold alcohol preparation pads on a
      private-label basis as well as under the Company’s Elite brand name. The Company
      stopped selling these products in October 2004 due to reduced profit margins
      and
      the decline in the customer base.




*Solo-SafeTM
      Safety Syringe*




On
      February 25, 2002, the Company acquired certain intellectual property owned
      by
      Spectrum relating to the Solo-SafeTM Safety Syringe. The Company acquired patents
      in the United States relating to the Solo-SafeTM Safety Syringe and has acquired
      the rights to patents in New Zealand, Australia, Brazil and Japan and patents
      pending in five other foreign countries. Medi-Hut also holds a 510(k) premarket
      notice clearance from the FDA to market the Solo-SafeTM Safety Syringe in the
      United States. See “Government Regulation.”




The
      Solo-SafeTM Safety Syringe is an active type safety syringe designed for
      intra-muscular injections. When the needle is retracted after injection the
      design forces the needle back into the syringe barrel and off to one side.
      The
      plunger handle then snaps off at an engineered point, resulting in the syringe
      barrel enclosing the used needle. The purpose of the design is to prevent
      accidental needle sticks of healthcare personnel administering injections to
      patients.




The
      Solo-SafeTM Safety Syringe is in early development and a manufacturing prototype
      has not been created. The Company does not intend to further develop this
      product or maintain its patents due to the significant amount of development
      costs that would have to be incurred in order to bring the product to market,
      the limited market opportunity that exists for the product and the Company’s
      limited financial resources.




9


*Tru-Choice
      Product Line*




During
      a
      portion of the fiscal year ended October 31, 2003, Medi-Hut distributed its
      Tru-Choice product line, which primarily consisted of generic medications which
      are sold over-the-counter in pharmacies. The distribution of the Tru-Choice
      product line was ceased in March 2003 due to the low margins attributed to
      sales
      of the Tru-Choice products.




*Hormone
      Replacement Therapy Drugs - Syntest*




In
      November 2001, the Company entered into an agreement with Syntho Pharmaceuticals
      Inc. (“Syntho”) for the exclusive distribution rights of esterified
      estrogen/methyl testosterone based prescription hormone replacement therapy
      drugs: Syntest Double-Strength (DS) and Half-Strength (HS). Beginning in October
      2002 through February 2003, the Company sold Syntest on a recurring basis.
      However, in March 2003, the Company was unable to continue the sale of Syntest
      products due to a dispute with the manufacturer and contract sales
      representative for such products. This dispute resulted in the commencement
      of
      litigation against the manufacturer and contract sale representative as well
      as
      other related litigation involving the Company. During July and August 2003,
      the
      Company sold all of its remaining Syntest inventory. See “Item 3. Legal
      Proceedings - Syntest Litigation.”




**Patents
      and Trademarks**




The
      Company holds two United States patents (5,562,626 and 6,692,470) on the Elite
      Safety Syringe. The patent and the patent application for the Elite Safety
      Syringe were assigned to the Company by Joseph A. Sanpietro, the Company’s
      former Chairman and Chief Executive Officer, on April 30, 2003. The Company
      holds no foreign patents or patent applications for the Elite Safety
      Syringe.




The
      Company holds two United States patents (6,129,710 and 5,382,235) on the
      Solo-Safe TM Safety
      Syringe. The Company also holds one foreign patent, Japan (3,422,025), with
      respect to the Solo-Safe TM
Safety
      Syringe.




The
      Company’s decision to maintain existing patents and continue the prosecution of
      patent applications depends upon management’s continual analysis of the patent
      and development costs associated with the product versus the market opportunity
      that each product provides and the financial resources available to the Company.
      Currently, the Company is maintaining the patents related to the Elite Safety
      Syringe but is not maintaining the patents related to the Solo-Safe Safety
      Syringe.




Solo-SafeTM
      Safety Syringe is currently the Company’s only trademark.




**Manufacturing;
      Principal Suppliers**




The
      Company does not have any internal manufacturing capabilities and therefore
      outsourced all of its manufacturing requirements with respect to products
      previously sold by the Company. The Company purchased some of the products
      previously sold by it at wholesale and others directly from the manufacturer.




10


Many
      of
      the disposable medical products previously sold by the Company were purchased
      directly from wholesalers. Moreover, the brand and generic pharmaceuticals
      sold
      by the Company in the fiscal year ended October 31, 2003 also were purchased
      directly from wholesalers. Accordingly, the Company traditionally did not have
      any contracts with the manufacturers of the disposable medical products or
      brand
      and generic pharmaceuticals sold by the Company nor does it have any such
      contracts currently in effect.




The
      condoms and alcohol preparation pads previously sold by the Company were
      purchased directly from third party manufacturers and, during the fiscal year
      ended October 31, 2003, the Company’s Tru-Choice products also were purchased
      directly from third party manufacturers. Traditionally, the Company had not
      entered into formal manufacturing agreements with these third party
      manufacturers but rather placed purchase orders with them when product was
      required. During the fiscal year ended October 31, 2003 and through September
      2004, the Company purchased condoms from a third-party manufacturer located
      in
      the Republic of Korea and contracted with a third-party company in the United
      States to package the condoms. Also during this period, the Company purchased
      the alcohol preparation pads as a finished product from third party
      manufacturers located in the United States.




The Company
      purchased Syntest as a finished product directly from the manufacturer, Syntho,
      which is located in the United States, pursuant to a distribution agreement
      dated November 20, 2001, as amended on February 7, 2002 and April 3, 2002.
      The
      Company paid Syntho $2.5 million and agreed to purchase the Syntest product
      at a
      price per unit as agreed upon by the parties in exchange for the exclusive
      rights to distribute the product over a five year period commencing on the
      first
      commercial sale of the Syntest product which occurred on October 14, 2002.
      Regular sales of the Syntest product ceased in March 2003 due to Syntho’s
      refusal, beginning in January 2003, to sell any additional product to the
      Company. As a result, the Company commenced litigation against Syntho and other
      parties on May 12, 2003. See “Item 3. Legal Proceedings - Syntest
      Litigation.”




On
      November 16, 2000, the Company entered into a joint venture
      agreement  with
      COA
      pursuant to which the Company and COA formed Medi-Hut International for the
      purpose of manufacturing disposable syringes. In order to fund Medi-Hut
      International, the Company made a capital contribution of $1,000,000 to Medi-Hut
      International and COA made a capital contribution of $400,000. In exchange
      for
      their respective capital contributions, the Company received a 44% ownership
      interest in Medi-Hut International and COA received a 46% ownership interest.
      The remaining 10% ownership interest in Medi-Hut International was granted
      to
      Inben Brothers Company as compensation for its actions as coordinator-negotiator
      and agent for both the Company and COA. The agreement between the parties
      continues indefinitely until terminated as provided for therein.




During
      fiscal year ended October 31, 2003, the Elite Safety Syringe was manufactured
      in
      the Republic of Korea by Medi-Hut International and Sam Woo. In May 2003, the
      Company determined that the product quality of the Elite Safety Syringe being
      manufactured by Medi-Hut International and Sam Woo was not sufficient for the
      United States market. Sam Woo was not able to correct its manufacturing
      deficiencies. Medi-Hut International instituted a corrective action plan in
      June
      2003 which was monitored by the Company. As a result, the Company believes
      that
      Medi-Hut International has corrected a majority of the manufacturing issues
      uncovered in May 2003 and that Medi-Hut International is now capable of
      manufacturing the Elite Safety Syringe at a quality sufficient for the United
      States market. However, the Company has determined that the cost associated
      with
      adequately equipping Medi-Hut International to support a market launch of the
      product combined with the cost associated with correcting certain design issues
      exceed the overall market opportunity that exists for the product. Accordingly,
      the Company has decided that it will no longer develop or market the Elite
      Safety Syringe. The Company is currently seeking a third party interested in
      acquiring the product.




11


On
      September 18, 2003, the Company, COA and Medi-Hut International entered into
      an
      agreement under which the Company granted a non-exclusive license to Medi-Hut
      International to make, manufacture and export the Elite Safety Syringe. The
      territorial boundary of this license is limited to within the Republic of Korea.
      In accordance with the license, Medi-Hut International must obtain the Company’s
      permission prior to any sales to a third party. Medi-Hut International is to
      pay
      to the Company a royalty based upon the total net sales under the license.
      The
      royalty amount is to be negotiated in good faith at the time of such sales.
      For
      the purpose of calculating royalty payments, Medi-Hut International is to
      provide Medi-Hut with a report setting forth the total net sales during the
      previous quarter. The agreement remains in full force and effect until the
      expiration of the last to expire of Medi-Hut’s United States patent with respect
      to the Elite Safety Syringe or upon the voluntary termination of either party
      for any reason with six months notice. As of March 31, 2006, the Company has
      not
      collected any royalties from Medi-Hut International and the Company is not
      aware
      of any sales of the Elite Safety Syringe by Medi-Hut International.




**Distribution,
      Sales and Marketing**




Prior
      to
      the termination of the name brand and generic drug product line and the
      Tru-Choice product line in March 2003, the Company distributed the products
      through drug wholesalers and distributors in the United States who then sold
      the
      product to other drug wholesalers, distributors, pharmacies and/or drug store
      chains. Upon receipt of an order from a customer, the Company would place an
      order with the supplier of the product. The product generally would be shipped
      directly from the supplier to the Company’s customer or another third party as
      directed by the Company’s customer. The Company typically inventoried very
      little product at its warehouse located at its corporate headquarters. On
      occasion, product was shipped directly to the Company’s warehouse and the
      Company arranged delivery to the appropriate customer.




Prior
      to
      Syntho’s decision to stop selling the Syntest products to the Company in January
      2003, the Company primarily sold the Syntest products through a third party
      contract sales representative, Schrader & Associates LLC (“Schrader
      Associates”), which brokered the sale of the Syntest product directly to
      national distributors and drug store chains. The Company and Schrader Associates
      entered into a three year brokerage agreement dated April 1, 2002 in which
      Schrader Associates agreed to market and sell the Syntest products to certain
      drug wholesalers, drug store chains and managed care companies on an exclusive
      basis, in exchange for a commission that ranged from $3.50 to $4.00 per bottle
      sold by Schrader Associates. This agreement was terminated by Schrader
      Associates by letter dated March 12, 2003. As a result of this termination,
      the
      Company and Schrader Associates each filed lawsuits against one another on
      April
      18, 2003 and May 14, 2003, respectively. These lawsuits were settled by the
      parties on April 21, 2004. See “Item 3. Legal Proceedings - Syntest Litigation.”
The Company also utilized the services of a third party warehousing and
      logistics company, Making Distribution Intelligent, LLC (“MDI”), which was
      responsible for warehousing Syntest, shipping the product pursuant to the
      Company’s instructions, billing the Company’s customers and providing customer
      service. The Company and MDI entered into a three year logistics services
      agreement commencing March 25, 2002, as amended on June 17, 2002, pursuant
      to
      which Medi-Hut agreed to pay MDI a one-time fee of $15,000, a base monthly
      fee
      of $14,750 and a series of variable fees based on a per unit/case/pallet basis
      for receiving product, storing product, shipping product, invoicing customers
      and accepting returns. The Company and MDI entered into a termination and mutual
      release agreement on August 29, 2003 in which the parties agreed to terminate
      the remaining term of the March 25, 2002 logistics services agreement (21 months
      resulting in an obligation of $257,250) for a one-time payment of $50,000 from
      Medi-Hut to MDI. The parties also agreed to a mutual release of all potential
      claims against each other. In July 2003, the Company sold the majority of its
      remaining Syntest inventory to Breckenridge for $1,032,000. The remaining
      Syntest inventory was sold to Breckenridge Pharmaceutical Inc. (“Breckenridge”)
      in August 2003 for $14,000. The Company and Breckenridge each filed lawsuits
      against one another in May 2003 regarding the distribution rights to the Syntest
      products. See “Item 3. Legal Proceedings - Syntest Litigation.”




12


During
      the fiscal year ended October 31, 2003 and through September 2004, the Company
      sold its condoms and alcohol preparation pads directly to distributors on a
      private label basis and also to wholesalers under the Company’s Elite brand
      name. The other disposable clinical supplies distributed by the Company were
      sold directly to physicians and wholesalers.




Prior
      to
      its decision to no longer develop or market the Elite Safety Syringe, the
      Company did not anticipate directly marketing or distributing the Elite Safety
      Syringe due to the high cost of establishing a sales force, the financial
      resources available to the Company and the difficulty in penetrating the
      relevant market. The Company intended to sell the Elite Safety Syringe through
      a
      distributor capable of executing a successful market launch in the United
      States, Europe and/or other international markets. The Company entered into
      an
      agreement with Bond-Brown Sales Design, LLC (“Bond-Brown”) on December 14, 2001
      to assist the Company in the identification and establishment of relationships
      with distributors for the Elite Safety Syringe. The agreement required the
      Company to pay Bond-Brown a minimum fee of $10,600 per month for a minimum
      of
      six months. The Company terminated the agreement with Bond-Brown in August
      2003.
      In addition, the Company hired an Executive Vice President of Sales and
      Marketing in January 2003 to spear-head the then contemplated market launch
      of
      the Elite Safety Syringe. The Company terminated this employee in August 2003
      due to the Company’s inability to determine when the Elite Safety Syringe would
      be available for launch in the United States market and its decision to seek
      a
      partner to distribute the product.




The
      Company currently does not maintain a dedicated sales force and currently does
      not sell any products. During fiscal year ended October 31, 2003 through
      September 2004 when the Company was selling products, the Company’s personnel
      involved in the sales process also maintained other duties within the Company.
      The Company dedicated the equivalent of approximately two full time employees
      to
      sales during this period. These individuals worked out of the Company’s
      corporate headquarters and contacted wholesalers, distributors and physicians
      by
      phone or periodic visits. During the fiscal year ended October 31, 2003, all
      sales by the Company were made on thirty day credit terms. In addition, the
      Company generally required an upfront payment from customers on their purchases
      of private label products.




13


With
      the
      exception of the Syntest products, the Company historically kept a very low
      amount of inventory since the majority of its sales were shipped directly by
      the
      supplier of the product to either the Company’s customer or to another third
      party as directed by the Company’s customer. Prior to Syntho’s decision to stop
      selling the product to the Company, the Company would generally warehouse one
      month of inventory of the Syntest product at MDI, a third party warehousing
      company.




**Competition**




The
      competition for the Company’s name brand and generic drug products and
      Tru-Choice products was generally with numerous large and small companies that
      wholesale drugs and medical products. Management believes that the Company
      had
      an insignificant percentage of the markets for these products prior to the
      Company’s decision to exit from these business lines in March 2003.




The
      Company’s competition in the disposable medical supply business, which included
      alcohol preparation pads, was with numerous large and small manufacturers and
      wholesalers. Management believes that the Company had an insignificant
      percentage of these markets prior to the Company’s decision to exit from this
      business line in October 2004.




The
      condom market is dominated by three major companies; Church & Dwight Co.,
      Inc. (Trojan brand), Ansell Healthcare Products Inc. (Lifestyles brand) and
      SSL
      International plc (Durex brand). Management believes that the Company had an
      insignificant percentage of the market prior to the Company’s decision to exit
      from the business line in October 2004.




In
      general, the Syntest products compete against the many other hormone-replacement
      therapy drugs available in the United States. However, the Syntest products
      specifically compete against Estratest, a hormone-replacement therapy
      manufactured by Solvay Pharmaceuticals, Inc. (“Solvay”). The two products are
      very similar in that they both are a combination of esterified estrogens and
      methyltestosterone. The Company believes that Solvay controls a majority of
      this
      specific market.




The
      safety syringe market is dominated by four major companies; Becton Dickinson
      and
      Company (“Becton Dickinson”), Tyco International Ltd., Terumo Medical
      Corporation and Retractable Technologies, Inc. These four companies control
      a
      majority of the worldwide market for safety syringes. In addition, when
      assessing the competition for the safety syringe market, the Company believes
      that it is necessary to consider the suppliers of standard syringes. The Company
      believes that safety syringes currently account for approximately 25% of the
      total worldwide market for injection needles and standard syringes account
      for
      the remaining 75%. The Company believes that Becton Dickinson is the worldwide
      leader in the sale of standard syringes .




14


**Government
      Regulation**




*Medical
      Devices*




As
      a
      former developer and distributor of medical devices, the Company was subject
      to
      regulation by, among other governmental entities, the FDA, and the corresponding
      agencies of the states and foreign countries in which the Company sold its
      products. These regulations govern the introduction of new medical devices,
      the
      observance of certain standards with respect to the manufacture, testing and
      labeling of such devices, the maintenance of certain records, the tracking
      of
      devices, and other matters, and could have a material impact on the Company’s
      future operations in the event the Company acquires existing medical devices
      and
      related products. See “Strategy for Business Development.”




All
      medical device manufacturing establishments are required to be registered with
      the FDA. Similarly, all categories of medical devices marketed by a company
      in
      the United States are required to be listed. This listing information must
      be
      updated pursuant to FDA regulations. The FDA can take regulatory action against
      a company that does not provide or update its registration and listing
      information. Pursuant to the Food, Drug and Cosmetic Act (the “FDC Act”),
      medical devices intended for human use are classified into three categories,
      Classes I, II and III, on the basis of the controls deemed necessary by the
      FDA
      to reasonably assure their safety and effectiveness. Class I devices are subject
      to general controls (for example, labeling, premarket notification and adherence
      to good manufacturing practice regulations) and Class II devices are subject
      to
      general and special controls (for example, performance standards, postmarket
      surveillance, patient registries, and FDA guidelines). Generally, Class III
      devices are those which must receive premarket approval (“PMA”) from the FDA to
      ensure their safety and effectiveness (for example, life-sustaining,
      life-supporting and implantable devices, or new devices which have not been
      found substantially equivalent to legally marketed devices).




Some
      Class I devices and most Class II devices require premarket notification
      (510(k)) clearance pursuant to Section 510(k) of the FDC Act. Most Class III
      devices are required to have an approved PMA application. Obtaining PMA approval

      can take up to several years or more and involve preclinical studies and
      clinical testing. In contrast, the process of obtaining a 510(k) premarket
      notification clearance typically requires the submission of substantially less
      data and generally involves a shorter review period, although obtaining a 510(k)
      premarket notification clearance may involve the submission of a substantial
      volume of data, including clinical data, and may require a substantial review
      period. A 510(k) premarket notification clearance indicates that the FDA agrees
      with an applicant’s determination that the product for which clearance has been
      sought is substantially equivalent in terms of safety and effectiveness to
      another medical device that has been previously marketed, but does not indicate
      that the product is safe and effective. The Elite Safety Syringe and Solo-SafeTM
Safety Syringe have obtained 510(k) premarket notification clearances. Both
      of
      these 510(k) premarket notification clearances are owned by the Company.




In
      addition to requiring clearance or approval for new products, the FDA may
      require clearance or approval prior to marketing products that are modifications
      of existing products. FDA regulations provide that new 510(k) premarket
      notification clearances are required when, among other things, there is a major
      change or modification in the intended use of the device or a change or
      modification to a legally marketed device that could significantly affect its
      safety or effectiveness. The developer and/or manufacturer is expected to make
      the initial determination as to whether a proposed change to a cleared device
      or
      to its intended use is of a kind that would necessitate the filing of a new
      510(k) notification. The Company believes that no such changes have occurred
      with the Elite Safety Syringe or the Solo-SafeTM Safety Syringe since the
      original 510(k) premarket notice clearances were obtained.




15


In
      order
      to conduct clinical trials of an uncleared or unapproved device, companies
      generally are required to comply with the FDA’s Investigational Device
      Exemptions regulations (“IDE regulations”). For significant risk devices, the
      IDE regulations require FDA approval of an investigational device before a
      clinical study may begin. In its approval letter for significant risk
      investigational device studies, the agency may limit the number of patients
      that
      may be treated with the device and/or the number of institutions at which the
      device may be used. Device studies subject to the IDE regulations, including
      both significant risk and non-significant risk device studies, are subject
      to
      various restrictions imposed by the FDA. Patients must give informed consent
      to
      be treated with an investigational device. The institutional review board of
      each institution where a study is being conducted must also approve the clinical
      study. The device generally may not be advertised or otherwise promoted.
      Unexpected adverse experiences must be reported to the FDA. The company
      sponsoring the investigation must ensure that the investigation is being
      conducted in accordance with the IDE regulations.




Some
      of
      the Company’s products, namely the Elite Safety Syringe, the Solo-SafeTM Safety
      Syringe and the condoms have received FDA marketing clearances through the
      510(k) process (each of these products are no longer sold nor being developed
      by
      the Company). Certain future product applications, however, could require
      approval through the PMA process. There can be no assurance that all necessary
      501(k) premarket notification clearances or PMA approvals will be granted on
      a
      timely basis or at all. In addition, future products may have to comply with
      the
      IDE regulations. The FDA review process may delay the Company’s product
      introductions in the future. It is possible that delays in receipt of or failure
      to receive any necessary clearance or approval could have a material adverse
      effect on the Company’s future operations.




Pursuant
      to the FDA’s Good Manufacturing Practices under the Quality System Regulations
      (“GMP/QSR”), the medical device manufacturer must manufacture products and
      maintain records in a prescribed manner with respect to manufacturing, testing
      and control activities. Further, the manufacturer, distributor and/or owner
      of a
      product is required to comply with FDA requirements for labeling and promotion
      of its products. For example, the FDA prohibits cleared or approved devices
      from
      being marketed or promoted for uncleared or unapproved uses. The medical device
      reporting regulations requires that a company provide information to the FDA
      whenever there is evidence to reasonably suggest that one of the company’s
      devices may have caused or contributed to a death or serious injury, or that
      there has occurred a malfunction that would be likely to cause or contribute
      to
      a death or serious injury if the malfunction were to recur. Additionally, the
      FDA imposes other requirements on medical device manufacturers, including
      reporting and record keeping requirements for device corrections and removals
      (recalls).




Medical
      device manufacturers and distributors are generally subject to periodic
      inspections by the FDA. If the FDA determines that a company is not in
      compliance with applicable laws and regulations, it can, among other things,
      issue a warning letter apprising the company of violative conduct, detain or
      seize products, issue a recall, enjoin future violations and assess civil and
      criminal penalties against the company, its officers or its employees. In
      addition, it is possible that clearances or approvals could be withdrawn in
      certain circumstances. Failure to comply with regulatory requirements or any
      adverse regulatory action could have a material adverse effect on the Company’s
      future business, financial condition and results of operations.




16


Medical
      device laws and regulations are also in effect in many of the countries in
      which
      the Company may conduct business outside the United States. These range from
      comprehensive device approval requirements for certain medical device products
      to simple requests for product data or certifications. The number and scope
      of
      these requirements are increasing. Medical device laws and regulations are
      also
      in effect in many of the states in which the Company may conduct business in
      the
      future. State and foreign medical device laws and regulations may have a
      material impact on the Company. In addition, international sales of certain
      medical devices manufactured in the United States but not cleared or approved
      by
      the FDA for distribution in the United States are subject to FDA export
      requirements and policies, including a policy whereby the Company provides
      a
      statement to FDA certifying that the product to be exported meets certain
      criteria and FDA issues a certificate to facilitate device export.




Federal,
      state and foreign laws and regulations regarding the manufacture, sale and
      distribution of medical devices are subject to future changes. For example,
      the
      Congress enacted the Medical Device User Fee and Modernization Act of 2002,
      which included several significant amendments to the prior law governing medical
      devices. Additionally, the FDA made significant changes to its GMP/QSR
      regulations in 1996 and may make changes to other regulations as well. The
      Company cannot predict what impact, if any, such changes might have on its
      future business; however, such changes could have a material impact on the
      Company and its business, financial condition and operating
      results.




*Pharmaceutical
      Products*




In
      addition to manufacturing, developing and distributing medical devices, the
      Company distributed name brand and generic drugs during the fiscal year ended
      October 31, 2002, including the hormone
      replacement therapy drugs, Syntest Double-Strength and Half-Strength. See “Item
      1. Description of Business - General.” The
      FDA
      and comparable regulatory agencies in state and local jurisdictions and in
      foreign countries impose substantial requirements upon the clinical development,
      manufacture and marketing of pharmaceutical products. These agencies and other
      federal, state and local entities regulate research and development activities
      and the testing, manufacture, quality control, safety, effectiveness, labeling,
      storage, record keeping, approval, advertising and promotion of such products.
      Under the FDC Act, all drugs require FDA approval before marketing, with certain
      limited exceptions. This approval requires that the drug company establish
      that
      the drug is safe and effective for its labeled use. These regulations could
      have
      a material impact on the Company’s future ability to distribute pharmaceutical
      products.




Syntest
      is an alternate form of Estratest, a product that has been marketed by Solvay
      since approximately 1964. Estratest has never received FDA approval for
      distribution. Prior to 1962, the FDC Act required drug companies to obtain
      pre-approval by the FDA before marketing a new drug in order to establish that
      the drug to be marketed was safe. In 1962, the FDC Act was amended to require
      that drug companies establish that drugs were not only safe, but also effective
      for their intended purpose. At the time the FDA established a program called
      the
“Drug Efficacy Study Implementation” (“DESI”) program in order to establish
      efficacy of drugs which had already been approved by the FDA as safe. As
      Estratest was not approved as safe prior to 1962, the DESI program does not
      apply to Estratest or Syntest and since Estratest has never received FDA
      approval, Syntest is unable to avail itself of the piggyback provision allowing
      a drug which is identical, similar or related to use an Abbreviated New Drug
      Application. As a result, Syntest is also a drug that has never been approved
      for marketing by the FDA.




17


In
      April
      2003, the FDA published a proposal in the Federal Register in which the FDA
      announced the commencement of a formal administrative process to examine the
      effectiveness of estrogen/androgen combination products for the treatment of
      hot
      flashes associated with menopause. Both Estratest and Syntest are
      estrogen/androgen combination products. Pursuant to the FDA’s announcement, any
      company producing such products could request a formal hearing with the FDA.
      In
      June 2003, both Solvay and Syntho submitted documents requesting such a hearing.
      Typically, when the FDA has decided that a class of marketed drug products
      must
      be the subject of approved applications, the FDA will require the company to
      obtain a premarket approval application at a set date in the future, thereby
      giving the affected company a reasonable length of time to obtain approvals
      and
      stay on the market. Syntho has not informed Medi-Hut as to the status of Syntest
      in the approval process. If Syntho fails to obtain a premarket approval within
      the FDA’s prescribed timeline, Syntest could be removed from the market.




Additionally,
      products that contain controlled substances are subject to the requirements
      of
      the Drug Enforcement Administration (“DEA”) relating to the manufacturing,
      marketing and selling of such products. Syntest contains methyltestosterone
      (an
      anabolic steroid), which is a Schedule III controlled substance. Under the
      DEA’s
      scheme, there are two ways in which a product can be legally manufactured,
      marketed and sold: registration or exemption. Under the registration scheme,
      a
      company that wishes to produce or market any product containing a controlled
      substance can register to manufacture, market and sell such product and this
      registration is done by schedule and not by product. Further, if a company
      is
      registered to produce products containing substances at a certain schedule
      level, the registration also includes the right to produce products containing
      ingredients on a “higher” numbered schedule. Under the exemption scheme, a
      product can be exempted from DEA requirements and can be legally manufactured,
      marketed and distributed. Exemptions are given on a product by product basis.




Initially,
      Syntest was subject to an interim rule from the DEA, dated January 15, 2003,
      in
      which the DEA designated Syntest as an exempt product. The comment period for
      this interim ruling expired on March 17, 2003. The exemption applied to all
      parties that “handle” the exempt product and permits the Company to market and
      distribute Syntest without any concerns from the DEA. The exemption did not
      apply retroactively. The Company cannot confirm whether there will be any
      negative ramifications from the DEA as a result on any sales of Syntest prior
      to
      the date of the exemption.




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 to Syntest to Breckenridge. See “Item 3. Legal Proceedings -
      Syntest Litigation.”




18


When
      offering for sale medical devices and pharmaceutical products, the Company
      may
      also have to comply with federal and state anti-kickback and other healthcare
      fraud and abuse laws. Moreover, approval must be obtained for a pharmaceutical
      product by comparable governmental regulatory authorities in foreign countries
      prior to the commencement of clinical trials and subsequent marketing of such
      product in those countries. The approval procedure varies from country to
      country, and the time required may be longer or shorter than that required
      for
      FDA approval.




The
      regulatory policies of the FDA and other regulatory bodies may change and
      additional governmental regulations may be enacted which could prevent or delay
      regulatory approval of the products the Company distributes. The Company cannot
      predict the likelihood, nature or extent of adverse governmental regulation
      that
      might arise from future legislative or administrative action, within the United
      States or abroad.




**Insurance**




The
      Company maintains insurance in such amounts and against such risks as it deems
      prudent, although no assurance can be given that such insurance will be
      sufficient under all circumstances to protect the Company against significant
      claims for damages. The occurrence of a significant event not fully insured
      could materially and adversely affect the Company’s business, financial
      condition and results of operations. Moreover, no assurance can be given that
      the Company will be able to maintain adequate insurance in the future at
      commercially reasonable rates or on acceptable terms.




**Employees**




As
      of
      April 30, 2006, David R. LaVance (President and Chief Executive Officer) and
      Thomas S. Gifford (Executive Vice President, Chief Financial Officer (Treasurer)
      and Secretary) are the only executive officers of the Company. Mr. LaVance
      and
      Mr. Gifford are engaged by Medi-Hut pursuant to the amended and restated
      Consulting Services Agreement, dated as of February 1, 2005, between Medi-Hut
      and Century Capital. See “Item 10. Executive Compensation - Consulting Services
      Agreement.” Excluding Messrs. LaVance and Gifford, who are consultants to the
      Company, the Company currently has one full-time employee. The
      Company’s ****** employee
      is not currently covered by any collective bargaining agreement. Medi-Hut has
      not experienced any work stoppages to date and management believes that the
      Company’s relationship with its employee is good.




**Item
      2.**  **Description
      of Property**




In
      May
      2004, the Company relocated its principal offices to 215 Morris Avenue, Spring
      Lake, New Jersey 07762 in order to reduce its monthly operating expenses and
      to
      more appropriately accommodate its current operations. The Company and Century
      Capital entered into a Shared Services Agreement whereby the Company rented
      three fully furnished, business equipped offices approximating 340 square feet
      inside Century Capital’s existing offices. This agreement commenced on May 1,
      2004 and has a month to month term that requires sixty day written notice to
      terminate. The monthly rental is $2,500. Century Capital is owned by David
      R.
      LaVance and Thomas S. Gifford, Medi-Hut’s executive management team. See “Item
      12. Certain Relationships and Related Transactions.”




19


From
      November 2002 through April 2004, the Company’s corporate offices and warehouse
      facilities consisted of 11,718 square feet in Wall Township, which is located
      in
      central New Jersey. The Company leased this property from Monmouth/Atlantic
      Realty Associates, L.L.C. The lease for this property commenced on November
      25,
      2002, had a five year term, and an option to renew for an additional five year
      term. The annual rent for years 1 and 2 of the lease was $114,485. In years
      three, four and five of the lease, the annual rent would have increased to
      $125,969. Additional monthly charges include the Company’s portion of common
      area charges relating to taxes, operating costs, repairs and maintenance and
      other expenses. Medi-Hut provided the landlord with a $33,388 security deposit.
      In connection with the relocation of its principal offices, the Company and
      Monmouth/Atlantic Realty Associates, L.L.C. reached an agreement to terminate
      the remaining term of the existing lease (44 months resulting in a lease
      obligation of approximately $454,000 plus an additional $154,000 for common
      area
      charges) for a one-time payment by the Company of $100,000 plus the forfeiture
      of the security deposit.




**Item
      3.**  **Legal
      Proceedings**




**SEC
      Investigation** **




On
      February 21, 2002, the SEC issued a formal order directing a private
      investigation of Medi-Hut. 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 a the sufficiency of the Company’s
      system of internal accounting controls. The SEC’s investigation of Medi-Hut
      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. 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 Medi-Hut’s revenues
      through fictitious period-end invoices and other accounting irregularities
      and
      concealed that Mr. Marasco owned and controlled one of Medi-Hut’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.




**Incomplete
      Periodic Reports**




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 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.




20


As
        a
        result of the above noted limitations on financial reporting, the financial
        statements and notes thereto for the fiscal year ended October 31, 2003 do
        not
        include any comparative financial information related to the fiscal year
        ended
        October 31, 2002 other than the balance sheets. See “Item 6. Management’s
        Discussion and Analysis or Plan of Operation” and “Item 7. Financial
        Statements.” Since a comparative set of financial statements are not included
        herein, 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.
  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 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
        Medi-Hut 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 its legal costs and expenses incurred by the Company in connection
        with the class action lawsuit.
  21
  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 lawsuits 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 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 May
        22, 2006, no indictments or charges have been issued against the
        Company.
  **NASDAQ
        Delisting**
  On
        March
        21, 2003, trading of Medi-Hut’s shares of common stock on the NASDAQ SmallCap
        Market was halted. The Company’s common stock was later delisted from the NASDAQ
        SmallCap Market on March 28, 2003 for, among other things, failure by the
        Company to file with the SEC its annual report on Form 10-KSB for the fiscal
        year ended October 31, 2002.
  **Syntest
        Litigation**
  On
        May
        12, 2003, Medi-Hut commenced an action in the United States District Court
        for
        the Eastern District of New York against Syntho and its President, Muhammed
        Malik (the “Syntho Group”), Breckenridge and its principal owner, Larry Rumsdorf
        (the “Breckenridge Group”), Scott Schrader (“Schrader”) and his affiliates,
        namely Schrader Associates, Bluegrass Drug LLC (“Bluegrass”) and Medpharm
        Corporation (“Medpharm”) (collectively, 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, among other things, that Syntho
        permitted Breckenridge, Medpharm and Bluegrass to distribute Syntest in
        violation of the its agreement with Syntho and that Schrader and 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.
  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.
  22
  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 has 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.
  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.
        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.
  23
  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. The Company does not believe there is any
        merit
        to these counterclaims and will vigorously defend same.
  The
        Company is continuing its action against the Syntho Group in the Syntest
        litigation pending in the United States District Court for the Eastern District
        of New York. The Company plans to vigorously pursue this matter through trial.
  **Litigation
        Against Certain Former Officers and Directors and Others**
  On
        December 4, 2003, Medi-Hut 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, Medi-Hut 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 Medi-Hut’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.
  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 Medi-Hut 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.
  24
  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 Pharmaceuticals, Inc. 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 Pharmaceuticals, Inc. 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. 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. The motion with respect to this request has not yet been heard by
        the
        court.
  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.
  25
  **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 auditor and principal 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 Medi-Hut
        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, Medi-Hut 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 Medi-Hut’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.
  In
        connection with the settlement of the Company’s separate action against Robert
        S. Russo in the Superior Court of New Jersey (see “Litigation Against Certain
        Officer, Directors and Others”), 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 Medi-Hut 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, the plaintiff alleged that the Company owed the
        plaintiff $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.
  26
  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 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.
        The Company intends to vigorously defend this action. No accrual has been
        provided for this lawsuit.
  **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders**
 ****
 No
        matters were submitted to a vote of the Company’s shareholders during the fourth
        quarter of fiscal 2003.
  27
  **PART
        II**
  **Item
                  5.**
              **Market
                  for Common Equity and Related Stockholder
                  Matters**
  On
        March
        21, 2003, trading of the Company’s shares of common stock on the NASDAQ SmallCap
        Market was halted. The Company’s common stock was later delisted from the NASDAQ
        SmallCap Market on March 28, 2003 for, among other things, failure by the
        Company to file with the SEC its annual report on Form 10-KSB for the fiscal
        year ended October 31, 2002. Since that time, no established public trading
        market has existed for the Company’s common stock and shares of the Company’s
        common stock are neither listed on any national securities exchange, or
        presently traded on any public stock exchange or in any other public market.
        Although quotations for shares of the Company’s common stock may be obtained
        through the Pink Sheets maintained by Pink Sheets LLC, because secondary
        market
        activity for shares of the Company’s common stock has been limited and sporadic,
        such quotations may not actually reflect the price or prices at which purchasers
        and sellers would currently be willing to purchase or sell such shares.
  The
        following table shows the range of high and low closing bid prices for the
        Company’s common stock for the periods indicated, as reported by NASDAQ and the
        NASDAQ Trading and Market Services under the symbol “MHUT” for the period
        commencing November 1, 2001 to March 20, 2003, and in the Pink Sheets under
        the
        symbol “MHUT” for the period commencing March 21, 2003 through April 30, 2006.
        These quotations represent prices between dealers and may not include retail
        markups, markdowns, or commissions that may not necessarily represent actual
        transactions.
  **Year
                  Ending October 31, 2006**
              
              
              **High**
              
              
              **Low**First
                  Quarter
              
              $
              .15
              
              $
              .07Second
                  Quarter
              
              
              .08
              
              
              .03**Year
                  Ended October 31, 2005**
              
              
              **High**
              ****
              ****
              **Low**First
                  Quarter
              
              $
              .15
              
              $
              .02Second
                  Quarter
              
              
              .14
              
              
              .03Third
                  Quarter
              
              
              .11
              
              
              .05Fourth
                  Quarter
              
              
              .10
              
              
              .04**Year
                  Ended October 31, 2004**
              
              
              **High**
              ****
              
              **Low**First
                  Quarter
              
              $
              .24
              
              $
              .06
              ****Second
                  Quarter
              
              
              .22
              
              
              .06Third
                  Quarter
              
              
              .13
              
              
              .02Fourth
                  Quarter
              
              
              .05
              
              
              .02**Year
                  Ended October 31, 2003**
              
              
              **High**
              ****
              ****
              **Low**First
                  Quarter
              
              $
              3.53
              
              $
              1.21Second
                  Quarter
              
              
              1.65
              
              
              .45Third
                  Quarter
              
              
              .80
              
              
              .14Fourth
                  Quarter
              
              
              .25
              
              
              .13**Year
                  Ended October 31, 2002**
              
              
              **High**
              ****
              ****
              **Low**First
                  Quarter
              
              $
              13.85
              
              $
              6.94Second
                  Quarter
              
              
              6.70
              
              
              2.27Third
                  Quarter
              
              
              5.40
              
              
              1.70Fourth
                  Quarter
              
              
              4.32
              
              
              2.19
  28
  Pink
        Sheets LLC is an electronic quotation and information service that collects
        and
        publishes market maker quotes for OTC securities and thereby enables National
        Association of Securities Dealers (NASD) broker-dealer firms to more efficiently
        deal in OTC securities. The Company’s common stock is currently classified as an
        OTC security. An investment in an OTC security is speculative and involves
        a
        degree of risk. Many OTC securities are relatively illiquid, or “thinly traded,”
which can enhance volatility in the share price and make it difficult for
        investors to buy or sell without dramatically affecting the quoted price
        or may
        be unable to sell a position at a later date.
  **Shareholders**
  As
        of
        April 30, 2006, there were approximately 420 shareholders of record of the
        Company’s common stock and 21,276,090 shares of common stock
        outstanding **.**
  **Dividends**
  The
        Company has not paid cash or stock dividends on its common stock and does
        not
        intend to pay cash or stock dividends in the foreseeable future. ******
  **Sales
        of Unregistered Securities for the Fiscal Year Ended October 31,
        2003**
  *Century
        Capital Warrant Dated February 1, 2003*
  On
        February 1, 2003, a warrant to purchase 1,500,000 shares of common stock
        of the
        Company was issued to Century Capital. The warrant has a ten year term and
        was
        exercisable at $1.34 per share (the “Underlying Purchase Price”) until February
        1, 2013. The per share purchase price was 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 then existing
        Underlying Purchase Price. 375,000 shares of common stock underlying the
        warrant
        vested immediately upon issuance with another 46,875 shares vesting on and
        after
        the last day of each month commencing February 28, 2003 and ending January
        31,
        2005. The warrant contains limited registration rights and the shares of
        common
        stock issued upon the exercise of the warrant shall be restricted securities.
  As
        a
        result of the application of the pricing adjustment, the Underlying Purchase
        Price adjusted to $.08 per share as of May 14, 2004, the date when Century
        Capital exercised its right to purchase 937,500 shares of the Company’s common
        stock underlying the warrant. The $75,000 due from Century Capital to the
        Company as a result of the purchase of the 937,500 shares was forgiven by
        the
        Company as part of Century Capital’s bonus for the period February 1, 2003
        through January 31, 2004. The Underlying Purchase Price adjusted to $.02
        per
        share as of November 1, 2004 when Century Capital exercised its right to
        purchase 421,876 shares of the Company’s common stock underlying the warrant.
        The $8,438 due to the Company from Century Capital as a result of this exercise
        was offset by the Company against monthly consulting fees due and owing to
        Century Capital that had been deferred for payment. On February 25, 2005,
        Century Capital exercised its right to purchase 140,624 shares of the Company’s
        common stock underlying the warrant at $.02 per share. The $2,812 due to
        the
        Company from Century Capital as a result of this exercise was offset by the
        Company against monthly consulting fees due and owing to Century Capital
        that
        had been deferred for payment. As of February 28, 2005, all 1,500,000 shares
        underlying the warrant had been purchased.
  29
  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
        warrants 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. For the fiscal year ended October 31,
        2003,
        the Company recorded $681,094 of consulting expense associated with warrants
        that vested pursuant to the warrant agreement.
  In
        connection with the issuance of the warrant to purchase 1,500,000 shares
        of
        common stock to Century Capital and the subsequent issuances of shares of
        common
        stock upon the exercises of such warrant, the Company relied on the exemption
        from registration for a private transaction not involving a public distribution
        provided by Section 4(2) of the Securities Act.
  *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, subject to adjustment. The shares of common stock
        underlying each warrant vest equally on and after the date of issue (66,666),
        on
        and after the first anniversary date (66,666) and on and after the second
        anniversary date (66,668). Each warrant contains standard anti-dilution
        provisions and limited registration rights. The shares of common stock issued
        upon the exercise of each warrant shall be unregistered securities. As of
        March
        31, 2006, an aggregate of 599,998 shares of the Company’s common stock are
        available for purchase under the warrants and an aggregate of 200,002 shares
        underlying the warrants have been cancelled. The warrants had an aggregate
        fair
        value of approximately $155,138 at the date of issuance.
  In
        connection with the issuance to its directors of the warrants to purchase
        an
        aggregate of 800,000 shares of common stock, the Company relied on the exemption
        from registration for a private transaction not involving a public distribution
        provided by Section 4(2) of the Securities Act.
  No
        other
        sale of unregistered securities took place during the fiscal year ended October
        31, 2003, which were not previously disclosed in a quarterly report on Form
        10-QSB.
  **Item
                  6.**
              **Management’s
                  Discussion and Analysis or Plan of
                  Operation**
  The
        following discussion of the financial condition and results of operations
        of the
        Company should be read in conjunction with the Company’s audited financial
        statements for the fiscal year ended October 31, 2003 and the related notes
        thereto appearing elsewhere in this annual report on Form 10-KSB.
  **Background**
  30
  Medi-Hut
        Co. is a Nevada corporation headquartered in Spring Lake, New Jersey. Medi-Hut
        was incorporated in the State of New Jersey on November 29, 1982. On January
        28,
        1998, Medi-Hut entered into an Agreement and Plan of Reorganization with
        Indwest, Inc., a Utah corporation, whereby Medi-Hut changed its domicile
        to the
        State of Utah and became subject to the reporting requirements of the Exchange
        Act. On February 2, 1998, Medi-Hut completed a second change of domicile
        transaction and became a Delaware corporation, and, on October 31, 2001,
        completed a third and final change of domicile transaction and became a Nevada
        corporation.
  On
        October 17, 2003, the Company formed Scivanta, a New Jersey Corporation and
        a
        wholly-owned subsidiary of the Company. Scivanta was formed to be an operating
        subsidiary of the Company, but is currently inactive.
  During
        the fiscal year ended October 31, 2003, Medi-Hut’s business included the
        distribution of over the counter medical devices and disposable clinical
        supplies, such as condoms and alcohol preparation pads, and generic and name
        brand pharmaceuticals. The Company’s business for the fiscal year ended October
        31, 2003 also included the sale of hormone replacement therapy drugs (Syntest
        Double-Strength and Half-Strength) which were manufactured and supplied to
        the
        Company by Syntho pursuant to the Company’s exclusive distribution agreement
        with Syntho. The Company’s products generally were sold directly to distributors
        or wholesalers who sold the products to pharmacies, drug store chains or
        other
        wholesalers. Occasionally the Company sold directly to physicians and other
        healthcare providers.
  During
        the fiscal year ended October 31, 2003, Medi-Hut continued to develop the
        patented Elite Safety Syringe, a passive anti-stick safety syringe, and the
        Solo-SafeTM Safety Syringe. For the fiscal year ended October 31, 2003, there
        were no sales of the Elite Safety Syringe or the Solo-SafeTM Safety Syringe due
        to development, manufacturing and marketing issues.
  In
        March
        2003, the Company exited from the business of selling branded and generic
        pharmaceuticals to wholesalers due to the low margins attributed to such
        sales.
        In addition, in March 2003, the Company was unable to continue the sale of
        Syntest, its hormone replacement therapy product line, due to a dispute with
        the
        manufacturer of and contract sales representative for such product line,
        which
        resulted in the commencement of litigation by the Company against such parties
        as well as other related litigation involving the Company.
  Commencing
        March 2003 through September 2004, the Company’s operations focused on the sale
        of condoms to wholesalers and distributors and the sale of disposable clinical
        supplies (e.g. alcohol preparation pads) directly to distributors, physicians
        and other medical providers. The
        Company stopped selling these products in October 2004 due to reduced profit
        margins and the decline in the customer base.
  During
        May 2004, the Company’s current management team completed its evaluation of the
        Solo-SafeTM Safety Syringe. Due to the early development stage of the product,
        the fact that a manufacturing prototype had not been created, the cost
        associated with developing the product as compared to the overall market
        opportunity and the Company’s limited financial resources, the Company decided
        to stop any further development of this product or the maintenance of the
        related patents.
  31
  During
        December 2004, after evaluating the various development, manufacturing and
        marketing issues surrounding the Elite Safety Syringe, the Company determined
        that the cost associated with creating sufficient manufacturing capabilities
        to
        support a market launch of the product combined with the cost associated
        with
        correcting certain design issues exceeded the overall market opportunity
        that
        exists for the product. Accordingly, the Company decided that it will no
        longer
        develop or market the Elite Safety Syringe.
  Currently,
        the Company does not have any recurring revenue from the sale of products.
        The
        Company is in the process of identifying new products for acquisition and
        development. However, no assurances can be given that the Company will have
        the
        financial and other resources necessary for it to acquire and develop any
        new
        product. See “Item 1. Description of Business - Strategy for Business
        Development.”
  **Results
        of Operations**
  Medi-Hut
        was subjected to corporate mismanagement in the form of accounting
        irregularities and securities fraud during the fiscal years ended October
        31,
        2002 and 2001 due to the actions of the Company’s former management team. As a
        result of the actions of the former officers of the Company, and due to the
        Company’s inability to adequately verify the results of the Company’s operations
        for the year ended October 31, 2002 because of incomplete or missing data,
        the
        Company was not able to prepare complete and accurate financial statements
        for
        the fiscal year ended October 31, 2002, except for the balance sheet dated
        as of
        October 31, 2002. Since the Company does not have complete and accurate
        financial statements for 2002, certain portions of this report do not contain
        the required comparison to the results of operations in 2002. Medi-Hut’s current
        management and its Board of Directors are continuing to work to bring the
        Company into compliance with the requirements of the SEC and other regulatory
        bodies. **
  *Net
        Sales.* The
        Company discontinued all product sales during the fiscal years ended October
        31,
        2003 and 2004. The
        Company does not have any recurring revenue from the sale of products and
        is in
        the process of identifying a product or company to acquire in order to develop
        a
        new business.
  For
        the
        fiscal year ended October 31, 2003, net sales were $7,643,340. For the fiscal
        year ended October 31, 2003, net sales by product category were as
        follows:
 
 Syntest
              
              $
              5,573,539Name
                  Brand and Generic Drugs
              
              
              1,361,018Condoms
              
              
              502,057Disposable
                  Medical Products and Other
              
              
              206,726$
              7,643,340
  32
 
 During
        the fiscal year ended October 31, 2003, sales of Syntest, a hormone replacement
        therapy drug, represented approximately 73% of net sales and sales of
        pharmaceutical products represented approximately 18% of net sales. Recurring
        sales of Syntest ceased in March 2003 due to a dispute with the manufacturer
        of
        Syntest. See “Item 3. Legal Proceedings - Syntest Litigation.” The sale of name
        brand and generic drugs ceased in March 2003 as a result of the Company’s
        decision to exit the business due to low margins attributed to such
        sales.
 
 *Cost
        of Sales.* During
        the fiscal year ended October 31, 2003, the cost of sales were $5,624,789
        or
        approximately 74% of net sales.
 
 *Selling
        and Marketing.* For the
        fiscal year ended October 31, 2003, selling and marketing expenses were
        $486,801, or approximately 6% of net sales.
 
 *General
        and Administrative.* For the
        fiscal year ended October 31, 2003, general and administrative expenses were
        $4,433,266, or approximately 58% of net sales. The Company incurred significant
        general and administrative expenses, approximately $985,351, related to the
        SEC
        investigation, the NASDAQ investigation and the class action lawsuit during
        the
        fiscal year ended October 31, 2003. See “Item 3. Legal Proceedings - SEC
        Investigation; Class Action Lawsuits.” In addition, the Company incurred
        consulting expenses related to new management and other professionals engaged
        to
        evaluate the Company’s business and to assist in the turn around of the
        Company’s operations during the fiscal year ended October 31, 2003 which
        amounted to approximately $1,580,744. This amount included $681,094 of
        consulting expense related to the issuance of warrants to purchase commons
        stock. The Company also incurred approximately $550,929 of expense related
        to
        the obtainment of director and officer liability insurance and product liability
        insurance during the fiscal year ended October 31, 2003.
 
 *Other
        Income (Expenses).* During
        the fiscal year ended October 31, 2003, the Company incurred interest expense
        of
        $21,839 and earned interest income of $11,319. During the fiscal year ended
        October 31, 2003, the Company recorded other income in the amount of $475,000
        related to the agreement between the Company and Executive Risk whereby
        Executive Risk paid $475,000 to the Company in exchange for the Company’s
        agreement to terminate the director and officer insurance coverage provided
        by
        Executive Risk during a portion of the fiscal years ended October 31, 2003
        and
        2002. See “Item 3. Legal Proceedings - SEC Investigation; Class Action
        Lawsuits.”
 
 *Net
        Loss.* For
        the
        fiscal year ended October 31, 2003, the Company had a net loss of $2,437,036,
        or
        $0.17 per share (basic and diluted).
 
 **Liquidity
        and Capital Resources**
 
 *Operating
        Activities.* During
        the fiscal year ended October 31, 2003, the Company utilized $2,094,171 of
        cash
        flow in operations. Cash for the fiscal year ended October 31, 2003 related
        to
        operating activities was increased primarily due to a reduction in accounts
        receivable and related party accounts receivable of $5,347,349, a decrease
        in
        prepaid expenses of $138,006, a decrease in inventories of $176,849, an increase
        in the reserve on the related party note receivable of $150,000, consulting
        expense of $681,094 related to the issuance of warrants to purchase common
        stock
        and amortization of deferred compensation of $28,520. The Company’s cash
        position during the fiscal year ended October 31, 2003 was reduced primarily
        due
        to an increase in prepaid insurance of $138,724, a decrease in accounts payable
        of $5,206,600, a decrease in the reserve on accounts receivable of $471,210,
        an
        increase in restricted cash of $400,000 and a net loss of $2,437,036. The
        increase in restricted cash was due to the Company’s agreement to reserve
        $400,000 of the proceeds received from Executive Risk, related to the agreement
        to terminate the director and officer insurance coverage issued by Executive
        Risk, for payment to the plaintiffs in the consolidated class action lawsuits.
        See “Item 3. Legal Proceedings - SEC Investigation; Class Action Lawsuits.” The
        decrease in inventories was primarily due to the decreased sales of Syntest
        due
        to a dispute with the manufacturer of Syntest. See “Item 3. Legal Proceedings -
        Syntest Litigation.” The decrease in accounts payable was primarily related to
        payments to the manufacturer of Syntest.
  33
 
 *Investment
        Activities.* During
        the fiscal year ended October 31, 2003, the Company utilized $212,998 of
        cash
        flow in investing activities. Cash utilized in investment activities consisted
        of the purchase of office equipment of $74,785 and an increase in the loan
        to a
        related party (Medi-Hut International) of $150,000. This was offset by the
        sale
        of an automobile which generated $11,787 of cash proceeds.
 
 *Financing
        Activities.* During
        the fiscal year ended October 31, 2003, cash flows used in financing activities
        were $45,161 which consisted of $1,500,000 of borrowings under the Company’s
        Line of Credit and the subsequent repayment of the $1,500,000 as well as
        proceeds from a note payable of $15,797 used to pay product liability insurance
        and payments on the note payable of $5,152 and the purchase of the Company’s
        common stock in the open market totaling $55,806.
 
 *Liquidity
        and Capital Resources*  As
        of the
        fiscal year ended October 31, 2003, the Company had a working capital balance
        of
        $792,624. At that date, cash and cash equivalents totaled $1,343,560.
  On
        February 26, 2002, the Company entered into the 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.
        As of
        October 31, 2002, there was no outstanding balance on the Note or the Line
        of
        Credit. 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 paid PNC
        $1,500,000 related to the Line of Credit and $159,404 related to a letter
        of
        credit and certain fees. The Company currently does not have any lending
        or
        credit relationships with banks or other lending institutions and does not
        anticipate establishing such a relationship in the foreseeable future due
        to the
        Company’s limited operations and assets.
  34
  On
        May
        26, 2005, the Company closed on a private placement of 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.
        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.
        The proceeds from the sale of the Debentures, the sale of common stock, the
        settlement with Breckenridge and the settlement with Rosenberg will be used
        to
        fund the Company’s pending litigation against Syntho and for other business
        development and operational purposes.
  No
        revenue is currently generated from the sale of the Company’s products. As of
        April 30, 2006, the Company’s cash position was approximately $833,000 and
        $450,000 is due from Breckenridge payable in $50,000 monthly installments
        through January 1, 2007 pursuant to the purchase and settlement agreement
        entered into on October 17, 2005 by the Company and Breckenridge. See “Item 3.
        Legal Proceedings - Syntest Litigation.” The Company currently projects
        expending approximately $105,000 of its cash per month to continue operations
        and maintain the various lawsuits it has instituted. The Company anticipates
        that its future monthly expenses will include lease costs of approximately
        $3,000, accounting fees of approximately $3,500, payment of a portion
        (approximately $35,000) of the $50,000 monthly fee payable to Century Capital
        pursuant to the amended and restated Consulting Services Agreement between
        the
        Company and Century Capital, insurance costs of $8,000, legal expenses of
        approximately $30,000 and general administrative expenses of approximately
        $25,500.
  Management
        believes that the Company will require additional capital to be able to obtain
        other medical devices and products and otherwise implement its strategy for
        business development and increased revenues discussed elsewhere herein. Although
        a favorable outcome or settlement of the Syntest litigation could increase
        the
        capital position of the Company, no assurance can be given that such action
        will
        result in a favorable outcome or settlement to the Company or that if such
        action is favorably decided or settled, such decision or settlement will
        occur
        in the near future.
  Management
        believes that the Company will have to focus on obtaining additional capital
        through the private placement of its securities and the favorable outcome
        or
        settlement of the Syntest litigation.
  **Inflation
        and Seasonality**
  Inflation
        has had no material effect on the operations or financial condition of the
        Company’s business. In addition, the Company’s operations are not considered
        seasonal in nature.
  35
  **Critical
        Accounting Policies**
  The
        discussion and analysis of the Company’s financial condition is based upon the
        financial statements contained elsewhere herein, which have been prepared
        in
        accordance with accounting principles generally accepted in the United States.
        The preparation of these financial statements required the Company to make
        estimates and judgments that affect the reported amounts of assets, liabilities,
        revenue and expenses, and related disclosure of contingent assets and
        liabilities. On an on-going basis, the Company evaluates its estimates,
        including those related to revenue recognition, 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
        Company believes the following critical accounting policies affect the more
        significant judgments and estimates used in preparation of the financial
        statements contained elsewhere herein.
  ***Inventory***
  As
        included in the Company’s balance sheet as of October 31, 2003, inventory
        consists of finished goods and is stated at the lower of cost (first-in,
        first-out basis) or market. As a distributor of medical products during the
        fiscal year ended October 31, 2003, the Company was exposed to a number of
        economic and industry factors that resulted in portions of the inventory
        becoming either obsolete or in excess of anticipated usage. These factors
        included, but are not limited to, technological changes in the market, the
        Company’s ability to meet changing customer requirements, competitive pressures
        in products and prices, reliability and replacement of product from the
        Company’s suppliers. During the fiscal year ended October 31, 2003, the
        Company’s policy was to establish inventory reserves when conditions existed
        that suggested the inventory may be in excess of anticipated demand or was
        obsolete based upon assumptions about future demand for the Company’s products
        or market conditions. The Company evaluated its ability to realize the value
        of
        its inventory based on a combination of factors including the following:
        historical usage rates, forecasted sales or usage, product end of life dates,
        estimated current and future market values and new product introductions.
        Assumptions used in determining the Company’s estimates of future product demand
        may sometimes prove to be inaccurate, in which case the provision required
        for
        excess and obsolete inventory would have to be adjusted in the future. Although
        every effort is made to ensure the accuracy of the Company’s forecasts of future
        product demand, any significant unanticipated changes in demand could have
        a
        significant negative impact on the value of the Company’s inventory.
        Additionally, purchasing requirements and alternative usage avenues are explored
        within these processes to mitigate inventory exposure. When recorded, the
        Company’s reserves are intended to reduce the carrying value of its inventory to
        its net realizable value. As of the fiscal years ended October 31, 2003 and
        2002, the Company recorded a reserve of $10,000 for potentially obsolete
        inventory.
  ***Accounts
        Receivable Reserves***
  36
  During
        the fiscal year ended 2003 and 2002, the Company recorded a provision for
        estimated sales returns and allowances on product sales of $0 and $471,210,
        respectively. These estimates were based on the specific facts and circumstances
        of particular orders, analysis of credit memo data and other known factors.
        If
        the data the Company uses to calculate these estimates did not properly reflect
        reserve requirements, then a change in the allowances would be made in the
        period in which such a determination was made and revenues in that period
        could
        be adversely affected.
  ***Revenue
        Recognition***
  The
        Company recognizes product revenue upon shipment, provided that there was
        persuasive evidence of a sales arrangement, there were no uncertainties
        regarding acceptance, the sales price was fixed or determinable and collection
        of the resulting receivable was probable.
  ***Valuation
        of Intangible Assets and Other Long-Lived Assets***
  Intangible
        assets with a defined life and other long-lived assets were reviewed for
        impairment in accordance with Statement of Financial Accounting Standards
        (“SFAS”) No. 144, *Accounting
        for the Impairment or Disposal of Long-Lived Assets* .
        Impairment reviews are based on a cash flow approach that requires significant
        management judgment with respect to future volume, revenue and expense growth
        rates, changes in working capital use, appropriate discount rates and other
        assumptions and estimates. The use of alternative estimates and assumptions
        could increase or decrease the estimated fair market value of the asset,
        and
        potentially result in different impacts to the Company’s results of operations.
        Actual results may differ from management’s estimates.
  Based
        on
        the Company’s financial performance during the fiscal year ended October 31,
        2002, the Company undertook an analysis of the likelihood of recovering the
        carrying amount of its intangible assets with a defined life. This impairment
        analysis indicated, based on the Company’s estimated future undiscounted cash
        flows, the Company would not be able to recover the full carrying amount
        of
        intangible assets related to the Solo-SafeTM Safety Syringe technology acquired
        by the Company on January 9, 2002 for $3,500,000. As a result, for the fiscal
        year ended October 31, 2002, the Company recognized an impairment loss of
        $3,500,000. Prior to this impairment loss, the Company had classified as
        intangible assets: $3,450,000 related to the cost of the Solo-SafeTM Safety
        Syringe issued United States Patents; and $50,000 related to the cost of
        the
        Solo-SafeTM Safety Syringe FDA 510(k) premarket notification.
  The
        Company also determined that the molds and assembly equipment related to
        the 1cc
        version of the Elite Safety Syringe were impaired as of the fiscal year ended
        October 31, 2002. The molds and the equipment were both located at Sam Woo,
        the
        Company’s third party contract manufacturer of the 1cc Elite Safety Syringe
        located in Korea. Sam Woo ceased operations in 2003 and was not able to complete
        the Company’s 1cc assembly machine. The partially completed machine was deemed
        to have no value to the Company. In addition, the Company determined that
        the
        molds being used by Sam Woo to manufacture the 1cc Elite Safety Syringe were
        defective. Prior to this impairment loss, the Company had classified as
        equipment: $182,129 related to the molds; and $163,867 related to the assembly
        machine. The molds and assembly machine were being depreciated on a straight
        line method over a period of three and seven years, respectively.
  37
  The
        Company acquired the exclusive distribution rights to Syntest, a hormone
        replacement therapy drug manufactured by Syntho, pursuant to an exclusive
        license agreement dated November 20, 2001, as amended on February 7, 2002
        and
        April 3, 2002, between the Company and Syntho. The Company paid Syntho
        $2,500,000 and agreed to purchase Syntest at a price per unit as agreed upon
        by
        the parties. The term of the agreement was for a period of five years commencing
        with the first commercial sale of the Syntest product, which occurred in
        October
        2002. In March 2003, regular sales of Syntest ceased when Syntho refused,
        beginning in January 2003, to sell any additional product to the Company
        resulting in the commencement of litigation by the Company against Syntho
        and
        other parties on May 12, 2003. The Company’s initial investment of $2,500,000
        was to be amortized over the five year life of the exclusive distribution
        agreement, commencing on the date of the first commercial sale of the product
        which occurred on October 14, 2002. On October 17, 2005, the Company sold
        its
        distribution and other rights and business with respect to Syntest, to
        Breckenridge. In consideration for the sale of such rights and the other
        benefits provided under the purchase and settlement agreement between
        Breckenridge and the Company,  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. The
        difference between the original purchase price of $2,500,000 and the amount
        received through the sale of the distribution rights to Breckenridge has
        been
        written off as of the fiscal year ended October 31, 2002. See “Item 3. Legal
        Proceedings - Syntest Litigation.”
  ***Income
        Taxes***
  The
        Company accounts for income taxes under SFAS No. 109, *Accounting
        for Income Taxes* .
        This
        statement requires that the Company recognize a current tax liability or
        asset
        for current taxes payable or refundable and a deferred tax liability or asset
        for the estimated future tax effects of temporary differences and carryforwards
        to the extent they are realizable. The Company records a valuation allowance
        to
        reduce the Company’s deferred tax assets to the amount that is more likely than
        not to be realized. While the Company has considered future taxable income
        and
        ongoing prudent and feasible tax planning strategies in assessing the need
        for
        the valuation allowance, in the event the Company was to determine that it
        would
        be able to realize the deferred tax assets in the future in excess of the
        net
        recorded amount, an adjustment to the deferred tax asset would increase income
        in the period such determination was made. Likewise, should the Company
        determine that it would not be able to realize all or part of its net deferred
        tax asset in the future, an adjustment to the deferred tax asset would be
        charged to income in the period such determination was made.
  The
        valuation allowance as of the fiscal years ended October 31, 2003 and 2002
        primarily relates to net operating losses for which the Company can only
        realize
        a benefit through the generation of future taxable income for which realization
        is uncertain. The Company’s net deferred tax asset was $0 as of fiscal year
        ended October 31, 2003.
  ***Stock-based
        Compensation***
  *Stock
        Option Grants to Employees* . Stock-based compensation charges represent the difference between the exercise
        price of options granted to employees and the fair value of the Company’s common
        stock on the date of grant for financial statement purposes in accordance
        with
        Accounting Principles Board Opinion No. 25, *Accounting
        for Stock Issued to Employees* ,
        and its
        related interpretations. The Company recognizes this compensation charge
        over
        the vesting periods of the shares purchasable upon exercise of options and
        applies a straight-line amortization policy for the deferred compensation.
        Should the Company’s assumptions of fair value change, the amount recorded as
        intrinsic value may increase or decrease in the future. During the fiscal
        year
        ended October 31, 2003, the Company recorded $7,480 of amortization expense
        related to the grant of stock options to the Company’s employees.
  38
  *Stock
        Option Grants to Non-Employees.* 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 fiscal year ended October 31, 2003, the Company recorded $702,134 of
        amortization expense related to the grant of stock options and warrants to
        the
        Company’s non-employees.
  ***Legal
        Contingencies***
  The
        Company is currently involved in certain legal proceedings. In connection
        with
        these legal proceedings, management periodically reviews estimates of potential
        costs to be incurred by the Company in connection with the adjudication or
        settlement, if any, of these proceedings. These estimates are developed in
        consultation with outside counsel and are based on an analysis of potential
        litigation outcomes and settlement strategies. In accordance with the Financial
        Accounting Standards Board (the “FASB”) Statement No. 5, *Accounting
        for Contingencies* ,
        loss
        contingencies are accrued if, in the opinion of management, an adverse outcome
        is probable and such outcome can be reasonably estimated. The Company does
        not
        believe that these proceedings will have a material adverse effect on its
        financial position; however, it is possible that future results for any
        particular quarter or annual period may be materially affected by changes
        in
        management’s assumptions or the effectiveness of the Company’s strategies
        relating to these proceedings. See “Item 3. Legal Proceedings.”
  As
        of the
        fiscal years ended October 31, 2003 and 2002, the Company accrued $529,299
        and
        $589,299, respectively, related to the settlement of the class action lawsuits
        filed against the Company in 2002. The Company agreed to settle the class
        action
        litigation on August 18, 2003 and the United States District Court for the
        District of New Jersey approved the settlement on May 3, 2004. The $529,299
        accrual as of the fiscal year ended October 31, 2003 represented a $400,000
        cash
        payment made by the Company in conjunction with the settlement as well as
        the
        fair market value, on the date the settlement was executed (August 18, 2003),
        of
        the 861,990 shares of the Company’s common stock issued in conjunction with the
        settlement ($129,299). The $589,299 accrual as of the fiscal year ended October
        31, 2002 represented the above referenced cash payment made by the Company
        ($400,000), the fair market value of the stock issued by the Company in
        conjunction with the settlement ($129,299) and $60,000 of legal fees related
        to
        the settlement. See “Item 3. Legal Proceedings - Class Action
        Lawsuits.”
  39
  **Recent
        Accounting Pronouncements**
  In
        January 2003, the FASB issued Interpretation No. 46, *Consolidation
        of Variable Interest Entities* ,
        which
        is an interpretation of Accounting Research Bulletin No. 51, *Consolidated
        Financial Statements* to
        expand
        upon and strengthen accounting guidance that addresses when a company should
        include in its financial statements the assets, liabilities and activities
        of
        another entity. The consolidation requirements of FIN 46 apply immediately
        to
        variable interest entities created after January 31, 2003 and to older entities
        in the first fiscal year or interim period beginning after December 15, 2003.
        Certain of the disclosure requirements apply in all financial statements
        issued
        after January 31, 2003, regardless of when the variable interest entity was
        established.
  In
        May 2003, SFAS No. 150, *Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity* (“SFAS
        150”) was issued. This statement requires redeemable preferred stock to be
        classified, in certain circumstances, as a liability upon adoption by a public
        company at the beginning of the first interim period beginning after June
        15,
        2003. SFAS 150 provides that mandatory redeemable preferred stock should
        be
        classified as a liability if it embodies an unconditional obligation requiring
        the issuer to redeem the shares by transferring its assets at a specified
        or
        determinable date or upon an event certain to occur. The Company has not
        issued
        mandatory redeemable preferred stock. The Company does not believe that the
        provisions of SFAS 150 will have a material impact on the Company’s results of
        operations or financial position.
  In
        October 2004, the FASB concluded that the proposed Statement 123R *,
        Share-Based Payment* ,
        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
        will not have to adopt Statement 123R until the fiscal year ending October
        31,
        2007.
  In
        November of 2004, the FASB issued SFAS No. 151, *Inventory
        Costs* (“SFAS
        151”), which amends the guidance in Accounting Research Bulletin No. 43, Chapter
        4, *Inventory
        Pricing* (“ARB
        No. 43”), 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 No. 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 believe that
        the
        adoption of SFAS 153 will have a material impact on the Company’s consolidated
        results of operations or financial condition.
  40


The
      FASB
      has issued SFAS No. 154, *Accounting
      Changes and Error Corrections* (“SFAS
      No. 154”), replacing 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 presently does not believe there will be any impact from the adoption
      of
      this new statement on its financial statements.




**Item
      7.**  **Financial
      Statements** ****




The
      financial statements and supplementary data of the Company called for by this
      item are submitted under a separate section of this report. Reference is made
      to
      the Index of Financial Statements contained on page F-1 and to the Note
      contained on page 1 herein.




**Item
      8.**  **Changes
      In and Disagreements With Accountants on Accounting and****Financial
      Disclosure**




On
      January 28, 2002, the Company engaged Grant Thornton LLP as its independent
      auditors and dismissed Rosenberg. The decision to change auditors was
      recommended by the Audit Committee (the “Audit Committee”) of the Board of
      Directors of the Company. On February 15, 2002, Grant Thornton LLP resigned
      as
      the Company’s independent auditors. On February 20, 2002, the Company reengaged
      Rosenberg as its independent auditors. The decision to reengage Rosenberg was
      recommended by the Audit Committee. The Company did not have any disagreement
      with either of these accounting firms concerning the first dismissal of
      Rosenberg and the resignation of Grant Thornton LLP.




On
      March
      28, 2003, the Company dismissed Rosenberg as its independent auditors for a
      second and final time. The Company reported the dismissal of the Rosenberg
      firm
      as its independent auditors in a current report on Form 8-K, dated March 28,
      2003. In that current report on Form 8-K, the Company stated that in connection
      with its audits for the fiscal years ended October 31, 2002 and 2001,
      respectively, and during any subsequent periods preceding the date of dismissal,
      there were no disagreements with Rosenberg in any matter regarding accounting
      principles or practices, financial statement disclosure, or auditing scope
      or
      procedure. Pursuant to the procedure outlined in SEC Regulation S-K, Item 304,
      the Company amended its current report on Form 8-K, dated March 28, 2003, to
      include a letter from Rosenberg in which the accounting firm disagreed with
      the
      Company’s statements. On April 8, 2003, the SEC provided comments to the Company
      with respect to the disclosures in the Company’s current report on Form 8-K,
      dated March 28, 2003 and amended on April 4, 2003. Current management could
      not
      adequately respond to the SEC’s comments due to the incomplete and unverifiable
      information left behind by prior management. Consequently, the Company’s current
      report on Form 8-K, dated March 28, 2003 and amended on April 4, 2003, has
      been
      deemed deficient by the SEC. Although the SEC has not commenced an enforcement
      action against the Company for such deficient current report on Form 8-K, no
      assurance can be given that the SEC will not do so in the future. Any such
      action by the SEC could have significant adverse consequences to the
      Company.




41


On
      May
      15, 2003, the Company engaged the accounting firm Eisner as its independent
      auditors to perform an audit of the Company’s financial statements as of the
      fiscal years ended October 31, 2002 and October 31, 2001. Since that time,
      the
      Company has made exhaustive efforts to complete its audits of the 2002 and
      2001
      financial statements. As a result of these efforts, management determined that
      due to incomplete records, among other issues, they could not file complete
      audited financial statements for these periods. However, management determined
      that it would be able to file an audited balance sheet as of October 31, 2002.
      Further, management intends to file the required interim period and annual
      audited financial statements up to and including the fiscal year ended October
      31, 2005 as soon as practical.




On
      March
      3, 2005, the Company replaced Eisner as its independent auditors with the
      accounting firm, Weiser LLP. Management believed that it was in the best
      interest of the Company to change auditors in order to facilitate the completion
      of the audit of the Company’s balance sheet as of October 31, 2002. The change
      in auditing firms was reviewed and recommended by the Company’s Audit Committee
      and approved by the Company’s Board of Directors. The Company reported the
      dismissal of the Eisner firm as its independent auditors in a current report
      on
      Form 8-K, dated March 3, 2005. In that current report on Form 8-K, the Company
      stated that in connection with its audits as of and for the fiscal years ended
      October 31, 2002 and 2001, respectively, and during any subsequent interim
      periods preceding the date of dismissal, there were no disagreements with Eisner
      on any matter regarding accounting principles or practices, financial statement
      disclosure, or auditing scope or procedure. In addition, during its engagement
      by the Company, Eisner did not issue any report on the financial statements
      or
      review any financial statements of the Company.




Pursuant
      to the procedure outlined in SEC Regulation S-B, Item 304, the Company included
      in the current report on Form 8-K a letter from Eisner in which the accounting
      firm agreed with the Company’s statements that there were no disagreements
      between the Company and Eisner on any matter regarding accounting principles
      or
      practices, financial statement disclosure, or auditing scope or
      procedure.




42





**PART
      III**




**Item
      9.**  **Directors,
      Executive Officers, Promoters and Control Persons; Compliance****with
      Section 16(a) of the Exchange Act**




The
      Company’s current executive officers and directors who also served as the
      Company’s executive officers and directors during the fiscal year ended October
      31, 2003, their respective ages, positions with the Company and biographical
      information, including business experience, are set forth below.




Name
            
            Age
            
            Position
                HeldDavid
                R. LaVance
            
            52
            
            Chairman
                of the Board, President and Chief Executive OfficerThomas
                S. Gifford
            
            37
            
            Executive
                Vice President, Chief Financial Officer (Treasurer), Secretary and
                DirectorJohn
                A. Moore
            
            41
            
            DirectorRichard
                E. Otto
            
            56
            
            Director





There
      are
      no family relationships among the current executive officers and directors
      of
      Medi-Hut. None of the current executive officers or directors of Medi-Hut are
      directors of any company with a class of securities registered pursuant to
      Section 12 of the Exchange Act or subject to the requirements of Section 15(d)
      of the Exchange Act or any company registered as an investment company under
      the
      Investment Company Act of 1940, as amended, except for Mr. LaVance who serves
      as
      a director of Hologic, Inc. (NASDAQ: HOLX), Mr. Otto who serves as a director
      of
      Corautus Genetics Inc. (AMEX: VEGF) and Mr. Moore who serves as a director
      of
      Data Systems & Software, Inc. (OTCBB: DSSI).




*David
      R. LaVance* *:* Mr.
      LaVance became Medi-Hut’s President and Chief Executive Officer and the Chairman
      of its Board of Directors on March 21, 2003. He also is the President and
      co-founder of Century Capital which was founded in 1997. Mr. LaVance was a
      Managing Director of KPMG Health Ventures, an advisory group providing
      investment banking services to healthcare service providers from 1995 through
      1997. Prior to joining KPMG Health Ventures, Mr. LaVance was a founder of
      Physicians Data Corporation, a startup health informatics company formed in
      1994, and served as the President of Nuclear Care, Inc., a nuclear imaging
      clinical services provider from 1992 through 1995. Mr. LaVance currently is
      a
      member of the Board of Directors of Hologic, Inc. (NASDAQ: HOLX), a medical
      device company specializing in digital imaging. Mr. LaVance received a B.A.
      degree from Furman University in 1976 and a J.D. degree from Washington College
      of Law of the American University in 1979.




*Thomas
      S. Gifford* :
      Mr.
      Gifford became Medi-Hut’s Executive Vice President, Chief Financial Office
      (Treasurer) and a director on March 21, 2003. He later became the Secretary
      of
      Medi-Hut on July 22, 2003. Mr. Gifford is also the Vice President and co-founder
      of Century Capital. He is a licensed attorney in New York and New Jersey and
      is
      a Certified Public Accountant. He was formerly a Manager and Associate Director
      of KPMG Health Ventures. Prior to KPMG Health Ventures, Mr. Gifford was an
      accountant for KPMG Peat Marwick LLP from 1990 through 1994, where he provided
      auditing and financial due diligence services to various publicly traded and
      privately held emerging technology companies. Mr. Gifford currently serves
      on
      the Board of Directors of Maloy Risk Services, Inc., a privately held insurance
      brokerage. Mr. Gifford received a B.S. degree from Rutgers University in 1990
      and a J.D. degree from Seton Hall University School of Law in 1995.




43


*John
      A. Moore* :
      Mr.
      Moore was elected as a director of the Company on May 6, 2003. Since July 2002,
      he has been the President of Edson Moore Healthcare Ventures, an investment
      entity that owns securities in various public and private life science
      companies. Mr. Moore is also the President and Chief Executive Officer and
      a
      director of Data Systems Software Inc., a publicly traded provider of software
      consulting and development services (OTCBB:DSSI). From 1994 through June 2002,
      Mr. Moore was the Chairman and Chief Executive Officer of Optimer, Inc., a
      research based polymer development company. Prior thereto, he worked for a
      number of Wall Street firms including Lehman Brothers and Hambrecht & Quist.
      Mr. Moore has been a director of Optimer since 1994. He is also a director
      of
      ImaRx Therapeutics, a privately-held company engaged in medical technology
      development. Mr. Moore received a B.A. degree from Rutgers
      University.




*Richard
      E. Otto* :
      Mr.
      Otto was elected as a director of the Company on May 6, 2003. He has been the
      Chief Executive Officer and a director of Corautus Genetics Inc. (formerly
      GenStar Therapeutics Corporation), a publicly traded biopharmaceutical company
      (AMEX: VEGF) dedicated to the development of innovative gene therapy products
      for the treatment of cardio and vascular disease, since the merger of Corautus
      and Vascular Genetics Inc. on February 5, 2003. Prior to the merger, he served
      as Chief Executive Officer and a director of Vascular Genetics Inc., a developer
      of gene therapy for the treatment of severe cardiovascular disease, since
      January, 2002. From June 1995 through April 1998, he was Chief Executive Officer
      and director of CardioDynamics International Corporation (NASDAQ: CDIS), a
      publicly traded company that develops, manufactures and markets noninvasive
      heart-monitoring devices. Mr. Otto has served as a consultant to the founder
      of
      WebMD and as a consultant to key management positions with Cardiac Pacemakers
      Inc. (now a Guidant company). Mr. Otto also held positions at Intermedics,
      Inc.,
      Medtronic Inc., and Eli Lilly and Company. Mr. Otto currently serves as a
      director and Chairman of ImaRx Therapeutics, a privately-held company engaged
      in
      medical technology development. He received a B.S. degree from the University
      of
      Georgia.




All
      of
      the following individuals served as either executive officers and/or directors
      of the Company during the fiscal year ended October 31, 2003 but are no longer
      with the Company.




*Joseph
      A. Sanpietro* *:* ****** Joseph
      A. Sanpietro served as the President and Chief Executive Officer of Medi-Hut
      from January 1998 through March 21, 2003, and as director from January 1998
      through March 28, 2003. He served as the President of the Company’s predecessor
      from 1982 to 1998. Mr. Sanpietro was terminated by the Company as its President
      and Chief Executive Officer on March 21, 2003 and resigned as a director of
      Medi-Hut on March 28, 2003.




*Vincent
      J. Sanpietro* *:* ****** Vincent
      J. Sanpietro served as the Chief Operating Officer of Medi-Hut from January
      1998
      through March 21, 2003. Mr. Sanpietro also had been the Secretary of Medi-Hut
      from January 1998 through March 21, 2003 and served as a director for such
      period. He served as Secretary of the Company’s predecessor from 1982 through
      1998. Mr. Sanpietro was terminated by the Company as its Chief Operating Officer
      and Secretary on March 21, 2003 and resigned as a director of the Company on
      March 28, 2003.




44


*Craig
      S. Arnold* *:* Craig
      S.
      Arnold served as the Executive Vice President - Sales and Marketing of Medi-Hut
      from January 2003 through September 5, 2003, when he resigned.




*Laurence
      M. Simon* *:* Mr.
      Simon
      served as Medi-Hut’s Chief Financial Officer from April 20, 2001 through March
      21, 2003, and also served as the Company’s Treasurer from May 14, 2002 through
      March 21, 2003, when he was terminated by the Company.




*Lawrence
      P. Marasco* :
      Mr.
      Marasco served as Medi-Hut’s Vice President of Sales and Marketing from April
      2000 until March 12, 2003, when he was terminated by the Company.




*James
      S. Vaccaro* :
      Mr.
      Vaccaro served as a director of the Company from April 3, 2001 through January
      25, 2003, when he resigned.




*Robert
      S. Russo* *:* ****** Mr.
      Russo ****** served
      as
      the Company’s Treasurer from March 1998 through May 14, 2002 and served as a
      director of Medi-Hut from March 1998 through March 6, 2003, when he
      resigned.




*Edward
      J. Suozzo* :
      Mr.
      Suozzo served as a director of the Company from January 6, 2003 until May 9,
      2003, when he resigned.




*James
      F. Mollica* :
      Mr.
      Mollica served as a director of the Company from January 6, 2003 until May
      9,
      2003, when he resigned.




*James
      G. Aaron* *:* Mr.
      Aaron served as a director of Medi-Hut from April 3, 2001 through February
      5,
      2004, when he resigned.




*Salvatore
      J. Badalamenti* :
      Mr.
      Badalamenti served as a director of the Company from May 12, 2003 through
      January 1, 2005, when he resigned.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act requires the Company’s directors, executive officers
      and persons who own more than 10% of the Company’s common stock, to file with
      the SEC initial reports of ownership and reports of changes in ownership of
      the
      Company common stock and other equity and derivative securities. Officers,
      directors and greater than 10% beneficial owners are required by SEC regulations
      to furnish Medi-Hut with copies of all Section 16(a) reports they file. To
      the
      knowledge of current management, based upon review of the copies of the forms
      furnished to the Company during the fiscal year ended October 31, 2003, all
      filings required to be made by the Company’s executive officers and directors
      pursuant to Section 16(a) of the Exchange Act for the fiscal year ended October
      31, 2003 were filed within the time periods prescribed, except that the Forms
      3
      required to be filed by Mr. LaVance and Mr. Gifford in March 2003, when they
      were named to the Board of Directors and as executive officers of Medi-Hut,
      were
      filed in May 2004, the Forms 3 required to be filed by Mr. Badalamenti, Mr.
      Moore and Mr. Otto in May 2003, when they were named to the Board of Directors
      of Medi-Hut, were filed in May 2004, the Form 4 required to be filed by each
      of
      Mr. Aaron, Mr. Badalamenti, Mr. Moore and Mr. Otto in connection with the
      issuance of a warrant to him in July 2003, when they were named to the Board
      of
      Directors of Medi-Hut, were filed in May and July 2004.




45


**Item
      10.**  **Executive
      Compensation**




**Compensation
      of Executive Officers**




The
      following table sets forth information concerning the annual and long-term
      compensation for services in all capacities to the Company for the fiscal years
      ended October 31, 2003, 2002 and 2001 of the Company’s President and Chief
      Executive Officer and each other executive officer of the Company whose total
      annual salary and bonus for the fiscal year ended October 31, 2003 exceeded
      $100,000 (the “Named Executive Officers”).





**SUMMARY
                  COMPENSATION TABLE****Annual
                  Compensation**
              
              **Long
                  Term Compensation****Awards**
              
              **Payouts****Name
                  and Position**
              
              **Year**
              
              **Salary
                  ($)**
              
              **Bonus
                  ($)**
              
              **Other
                  Annual Compensa -tion ($)**
              
              **Restricted
                  Stock Award(s) ($)**
              
              **Securities
                  Underlying**
                **Options
                  #**
              
              **LTIP**
                **Payouts
                  ($)**
              
              **All
                  Other Compensa-tion ($)**David
                  R. LaVance,
              
              
              2003
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —President
                  and Chief
              
              
              2002
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —Executive
                  Officer (1)
              
              
              2001
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —Thomas
                  S. Gifford,
              
              
              2003
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —Executive
                  Vice President
              
              
              2002
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —and
                  Chief Financial Officer (1)
              
              
              2001
              
              $
              —
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              —Craig
                  S. Arnold,
              
              
              2003
              
              $
              107,558
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              5,000
              (2)Executive
                  Vice President
              
              
              2002
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —-
                  Sales and Marketing
              
              
              2001
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Joseph
                  A. Sanpietro,
              
              
              2003
              
              $
              78,598
              
              $
              —
              
              $
              —
              
              $
              —
              
              
              —
              
              $
              —
              
              $
              23,225
              (3)former
                  President and
              
              
              2002
              
              
              205,833
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              7,837
              (4)Chief
                  Executive Officer
              
              
              2001
              
              
              93,555
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10,454
              (4)







(1)
            The
                Company has entered into a Consulting Services Agreement, as amended,
                with
                Century Capital, pursuant to which the Company pays consulting fees
                and
                other remuneration to Century Capital for the services provided
                thereunder. Mr. LaVance and Mr. Gifford are members of Century Capital.
                Neither Mr. LaVance nor Mr. Gifford receives any direct compensation
                from
                the Company. See “Consulting Services Agreement” and “Item 12. - Certain
                Relationships and Related
                Transactions.”




(2)
            On
                September 5, 2003, the Company agreed to issue 25,000 shares of common
                stock pursuant to the Company’s separation agreement with Mr. Arnold. The
                fair market value of the shares of common stock on that date was
                $5,000
                ($0.20 per share).




46


(3)
            $20,815
                was paid to Mr. Sanpietro as a consultant after his employment with
                the
                Company was terminated and $2,410 was paid to Mr. Sanpietro as
                transportation allowances.




(4)
            Represents
                amounts received in transportation
                allowances




**Stock
      Option Grants in Last Fiscal Year**




The
      following table sets forth the stock options and/or warrants granted to the
      Company’s Named Executive Officers during the fiscal year ended October 31,
      2003.





**Name**
            
            **Number
                of Securities Underlying Options Granted**
            
            **%
                of Total Options Granted to Employees/Officers in Fiscal
                Year**
            
            **Exercise
                Price**
              **($
                per Share)**
            
            **Expiration
                Date**David
                R. LaVance
            
            
            1,500,000
                (1)
            
            
            100%
            
            $
            0.18
                        (2)
            
            
            2/1/2013Thomas
                S. Gifford
            
            
            1,500,000
                (1)
            
            
            100%
            
            $
            0.18
                        (2)
            
            
            2/1/2013





(1)
                Includes
                    1,500,000 shares subject to the warrants issued on February 1,
                    2003 to
                    Century Capital. Mr. LaVance and Mr. Gifford have an ownership
                    interest in
                    Century Capital and serve as the President and Vice President,
                    respectively, of Century Capital. Both Mr. LaVance and Mr. Gifford
                    disclaim beneficial ownership of these securities except to the
                    extent of
                    their respective ownership interests in Century
                    Capital.




(2)
                The
                    Underlying Purchase Price at the date of grant was $1.34. The
                    Underlying
                    Purchase Price was 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 Underlying Purchase
                    Price.
                    As of October 31, 2003, the Underlying Purchase adjusted to $0.18
                    per
                    share.




**Year
      End Option Values**




The
      following table provides certain information with respect to options and/or
      warrants to purchase the Company’s common stock held by the Named Executive
      Officers at October 31, 2003.




****
              **Number
                  of Shares of Common Stock Underlying Unexercised Options/Warrants
                  at
                  October 31, 2003**
              
              **Value
                  of Unexercised In-the-Money Options/Warrants at October 31, 2003
                  ($)**
              ******Name**
              ****
              **Exercisable**
              
              **Unexercisable**
              
              **Exercisable**
              
              **Unexercisable**
              ********
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****
              ****David
                  R. LaVance
              
              
              796,875
                  (1)
              
              
              703,125
                  (1)
              
              $
              15,938
                      (1)(3)
              
              $
              14,063
                      (1)(3)Thomas
                  S. Gifford
              
              
              796,875
                  (2)
              
              
              703,125
                  (2)
              
              $
              15,938
                      (2)(3)
              
              $
              14,063
                      (2)(3)Joseph
                  A. Sanpietro
              
              
              —
              
              
              —
              
              $
              —
              
              $
              —







(1)
                Includes
                    1,500,000 shares subject to the warrants issued on February 1,
                    2003 to
                    Century Capital. 796,875 shares were available for purchase at
                    October 31,
                    2003 and 703,125 shares were not vested at October 31, 2003.
                    Mr. LaVance
                    has an ownership interest in and serves as President of Century
                    Capital.
                    Mr. LaVance disclaims beneficial ownership of these securities
                    except to
                    the extent of his ownership interest in Century
                    Capital.




47


(2)
                Includes
                    1,500,000 shares subject to the warrants issued on February 1,
                    2003 to
                    Century Capital. 796,875 shares were available for purchase at
                    October 31,
                    2003 and 703,125 shares were not vested at October 31, 2003.
                    Mr. Gifford
                    has an ownership interest in and serves as Vice President of
                    Century
                    Capital. Mr. Gifford disclaims beneficial ownership of these
                    securities
                    except to the extent of his ownership interest in Century Capital.




(3)
                The
                    exercise price of these warrants was $ 0.18 per share and the
                    per share
                    market price of the Company’s common stock on October 31, 2003 was $ 0.20.
                    The value of the unexercised in-the-money warrants at October
                    31, 2003 is
                    the difference between the exercise price and the fair market
                    value of the
                    Company’s common stock on October 31,
                    2003.




No
      options or warrants were exercised by the Named Executive Officers during the
      fiscal year ended October 31, 2003.




**Compensation
      of Directors**




Currently,
      the Company does not provide any cash compensation to its directors. However,
      each of the outside directors that participated on the board during 2003, which
      excludes David R. LaVance and Thomas S. Gifford, received a warrant, dated
      July
      24, 2003, to purchase 200,000 shares of the Company’s common stock. See “Item 5.
      Market for Common Equity and Related Stockholder Matters - Sales of Unregistered
      Securities for the Fiscal Year Ended October 31, 2003.”




Each
      of
      the outside directors that participated on the board during 2004, which excludes
      Mr. LaVance and Mr. Gifford, received a warrant dated May 14, 2004 to purchase
      200,000 shares of the Company’s common stock. See “Item 11. Security Ownership
      of Certain Beneficial Owners and Management and Related Stockholder Matters
      -
      Warrants.”




Each
      of
      the outside directors that participated on the board during 2005, which excludes
      Mr. LaVance and Mr. Gifford, received a warrant dated February 25, 2005 to
      purchase 200,000 shares of the Company’s common stock. See “Item 11. Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters - Warrants.”




For
      the
      fiscal year ended October 31, 2002, the Company paid its directors $500 for
      each
      meeting of the Board a director attended and $300 for each Board committee
      meeting a director attended.




**Employment
      Agreements**




On
      November 1, 2001, Medi-Hut entered into an employment agreement with its former
      Chief Financial Officer, Laurence M. Simon. The term of the employment agreement
      was two years and two months. The employment agreement provided that Mr. Simon
      would receive an annual salary of $100,000 and the following benefits:
      insurance, vacation, sick leave and use of a company vehicle. In addition,
      pursuant to the employment agreement, Medi-Hut granted stock options to Mr.
      Simon to purchase an aggregate of 20,000 shares of common stock at $6.75 per
      share. Options for 3,680 shares vested on December 31, 2001 and the remainder
      vested at a rate of 680 common shares each month through December 31, 2003.
      Of
      these options, 6,800 shares that were not vested terminated upon the Company’s
      termination of Mr. Simon’s employment on March 21, 2003. The agreement provided
      that Mr. Simon could be terminated for gross negligence or willful misconduct
      in
      the performance of his duties, if he is convicted of a felony or if the Board
      of
      Directors determines it is in the Company’s best interest not to continue his
      employment.




48


On
      August
      1, 2002, Mr. Simon purportedly entered into a new employment agreement with
      the
      Company. However, inasmuch as the new employment agreement was never formally
      approved by the Company’s Board of Directors, the Company did not recognize the
      validity of such agreement and as such no accrual was deemed necessary as of
      October 31, 2002.




Mr.
      Simon
      was terminated by the Company on March 21, 2003 for, among other things,
      participating in various fraudulent schemes which resulted in significant damage
      to the Company. On August 19, 2003, Mr. Simon pled guilty to conspiracy to
      inflate the revenue and earnings of the Company and lying to investigators.
      On
      December 4, 2003, the Company commenced an action against Mr. Simon and certain
      other former officers and directors of the Company to recover damages
      attributable to their fraudulent behavior. On November 29, 2004 the Company
      and
      Mr. Simon entered into a settlement and release agreement which, among other
      consideration, included the cancellation of the outstanding options held by
      him
      and a release related to any claim Mr. Simon may have had pursuant to the
      November 1, 2001 employment agreement or the August 1, 2002 purported
      agreement.




On
      August
      1, 2002, Joseph A. Sanpietro, the Company’s former President and Chief Executive
      Officer, and Vincent J. Sanpietro, the Company’s former Chief Operating Officer
      and Secretary, purportedly entered into employment agreements with the Company.
      However, inasmuch as these employment agreements were never formally approved
      by
      the Company’s Board of Directors, the Company did not recognize the validity of
      such agreements. Any rights that Joseph A. Sanpietro and Vincent J. Sanpietro
      may have claimed pursuant to these purported employment agreements were
      terminated pursuant to the settlement and release agreement between the Company
      and Joseph A. Sanpietro dated April 14, 2004 and the settlement and release
      agreement between the Company and Vincent J. Sanpietro dated February 4,
      2003.




Currently,
      there exists no employment agreement with any of the Company’s executive
      officers other than the amended and restated Consulting Services Agreement
      with
      Century Capital related to the services of David R. LaVance and Thomas S.
      Gifford. See “Consulting Services Agreement.”




**Consulting
      Services Agreement**




*Original
      Agreement Dated February 1, 2003*




The
      Company entered into a Consulting Services Agreement with Century Capital,
      effective as February 1, 2003, in order to engage Century Capital to provide
      (1)
      general corporate and business advisory services, (2) strategic business
      advisory services, and (3) financial advisory services to the Company. The
      Consulting Services Agreement was approved by the Company’s Board of Directors.
      The initial term of the Consulting Services Agreement was two years, which
      ended
      on January 31, 2005.




Mr.
      LaVance and Mr. Gifford are the sole members of Century Capital. On March 21,
      2003, pursuant to the Consulting Services Agreement, the Board appointed Mr.
      LaVance as Chief Executive Officer of the Company, and Mr. Gifford as Executive
      Vice President and Chief Financial Officer of the Company. Mr. LaVance and
      Mr.
      Gifford were also appointed as directors of the Company to fill vacancies on
      the
      Board as of the same date. Mr. LaVance assumed the position of Chairman of
      the
      Board when he was appointed as a director.




49




During
      the initial term of the Consulting Services Agreement, Century Capital was
      entitled to receive a monthly consulting fee in the amount of $75,000 and was
      entitled to be reimbursed for all reasonable and customary business expenses.
      For each one year period commencing on February 1 and ending on January 31
      during the term of the Consulting Services Agreement, Century Capital was
      entitled to be paid a minimum annual cash bonus in an amount not less than
      $125,000. Century Capital was eligible to earn an annual bonus in excess of
      $125,000 at the discretion of the Company’s Board of Directors.




In
      addition, the Company issued Century Capital a ten year warrant to purchase
      1,500,000 shares of the Company’s common stock. See “Item 5. Market for Common
      Equity and Related Stockholder Matters - Sales of Unregistered Securities for
      the Fiscal Year Ended October 31, 2003.”




On
      May
      14, 2004, in lieu of the minimum annual cash bonus due Century Capital for
      the
      period that began on February 1, 2003 and ended on January 31, 2004, Century
      Capital agreed to accept the following: (1) $50,000 cash payment to be made
      on
      September 1, 2004; (2) 1,875,000 shares of the Company’s common stock and (3)
      the forgiveness of $75,000 due to the Company from Century Capital related
      to
      the purchase by Century Capital of 937,500 shares of the Company’s common stock
      underlying the warrant issued to it on February 1, 2003. On February 25, 2005,
      Century Capital agreed to accept 500,000 shares of the Company’s common stock as
      payment of the $50,000 due to Century Capital on September 1, 2004.




Also,
      on
      May 14, 2004, the Company issued Century Capital a ten year, non-cancelable
      warrant to purchase 700,000 shares of the Company’s common stock at a purchase
      price of $.04 per share. See “Item 11. Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters - Equity Compensation
      Plans.”




Commencing
      July 1, 2004, Century Capital agreed to defer $25,000 of its monthly consulting
      fee for a three month period (through September 30, 2004) in an effort to
      minimize the Company’s cash burn. Century Capital later agreed to continue the
      $25,000 monthly deferment through January 31, 2005, at which point the total
      amount due and owing to Century Capital related to the deferment of its monthly
      consulting fee was $175,000. On November 1, 2004, Century Capital exercised
      warrants to purchase 621,876 shares of the Company’s common stock (421,876
      shares pursuant to the warrant dated February 1, 2003 and 200,000 shares
      pursuant to the warrant dated May 14, 2004). The $16,438 due to the Company
      from
      Century Capital related to these warrant exercises were offset against the
      deferred monthly consulting fees due to Century Capital. On February 25, 2005,
      Century Capital agreed to forgive $60,000 of the monthly deferred consulting
      fees in exchange for 600,000 shares of the Company’s common stock. Further, on
      February 25, 2005, Century Capital exercised warrants to purchase 140,624 shares
      of the Company’s common stock pursuant to the warrant dated February 1, 2003.
      The $2,812 due to the Company from Century Capital as a result of this exercise
      was offset by the Company against the deferred monthly consulting fees due
      to
      Century Capital. On August 25, 2005, Century Capital agreed to forgive $50,000
      of the deferred monthly consulting fees in exchange for 1,000,000 shares of
      the
      Company’s common stock.




50


During
      the entire term of the original Consulting Services Agreement, Mr. LaVance
      and
      Mr. Gifford were treated as independent contractors for purposes of
      compensation, were not paid any salary or other compensation directly by the
      Company and neither of Mr. LaVance or Mr. Gifford participated in any of the
      Company’s employee benefit plans.




As
      provided in the original Consulting Services Agreement, Mr. LaVance and Mr.
      Gifford were added as covered parties under the Company’s directors’ and
      officers’ liability insurance policies (“D&O Policies”). The Company is
      required to maintain such D&O Policies while Mr. LaVance and Mr. Gifford
      hold positions as officers and/or directors of the Company and for a period
      of
      two years following termination of their service in such positions. The Company
      also agreed in the original Consulting Services Agreement to indemnify and
      hold
      harmless Century Capital and its representatives, including Mr. LaVance and
      Mr.
      Gifford, from and against any and all claims, demands, liabilities, obligations,
      losses, fines, and expenses, including reasonable attorneys’ and accountants’
fees and expenses incurred in connection with the Company’s failure to perform
      under the original Consulting Services Agreement or any threatened, pending
      or
      completed action, suit or proceeding arising out of Century Capital’s
      relationship, or the relationship of any Century Capital representative, with
      the Company.




*Amended
      and Restated Agreement Dated February 1, 2005*




Effective
      February 1, 2005, the original Consulting Services Agreement was replaced by
      an
      amended and restated Consulting Services Agreement. Pursuant to the amended
      and
      restated Consulting Services Agreement, Century Capital agreed to provide the
      services of Mr. LaVance and Mr. Gifford as the Company’s corporate officers. As
      provided in the amended and restated Consulting Services Agreement, Mr. LaVance
      will continue to serve as the Company’s President and Chief Executive Officer
      and Mr. Gifford will continue to serve as the Company’s Executive Vice
      President, Chief Financial Officer, Treasurer and Secretary. The amended and
      restated Consulting Services Agreement also provides that Mr. LaVance and Mr.
      Gifford will continue to be treated as independent contractors for the purposes
      of compensation, will not be paid any salary or other compensation directly
      by
      the Company and will not participate in the Company’s employee benefit plans.




The
      initial term of the amended and restated Consulting Services Agreement is one
      year, ending on January 31, 2006. Thereafter, the amended and restated
      Consulting Services Agreement shall continue until either party elects to
      terminate the amended and restated Consulting Services Agreement by providing
      sixty days written notice. As of April 30, 2006, such notice has not been given
      by either party. During the term of the amended and restated Consulting Services
      Agreement, Century Capital is entitled to receive a monthly consulting fee
      in
      the amount of $50,000 and is entitled to be reimbursed for all reasonable and
      customary business expenses. Century Capital is also entitled to receive an
      annual bonus in an amount not less than $125,000 upon the successful completion
      of the objectives which are established by the independent members of the
      Company’s Board of Directors and Century Capital.




The
      Company may terminate the amended and restated Consulting Services Agreement
      for
      cause if Century Capital fails to materially perform the consulting services
      and
      does not cure such non-performance within sixty days of receipt of written
      notice of such non-performance from the Board. Century Capital can terminate
      the
      amended and restated Consulting Services Agreement for cause for, among other
      reasons, (1) any breach of the amended and restated Consulting Services
      Agreement by the Company which is not cured within thirty days of receipt of
      written notice from Century Capital, (2) the failure of the Company to pay
      any
      compensation or bonus to Century Capital when due or payable, (3) the removal
      of
      David R. LaVance as President and Chief Executive Officer of the Company without
      the prior written approval of Century Capital, (4) the removal of Thomas S.
      Gifford as Executive Vice President, Chief Financial Officer (Treasurer) and
      Secretary of the Company, without the prior written approval of Century Capital
      (5) the removal of or failure to elect David R. LaVance and Thomas S. Gifford
      as
      members of the Company’s Board of Directors without the prior written approval
      of Century Capital, or (6) the Company becoming insolvent or
      bankrupt.




51


If
      the
      amended and restated Consulting Services Agreement is terminated by the Company
      for cause, Century Capital shall be paid all unpaid monthly fees and
      reimbursable expenses through the termination date. If the amended and restated
      Consulting Services Agreement is terminated by Century Capital for cause, then
      Century Capital shall be paid on the termination date a lump sum amount equal
      to
      the sum of all unpaid monthly fees and reimbursable expenses plus the full
      amount of the bonus target established for the year of termination and an amount
      equal to the product of Century Capital’s monthly fee multiplied by six
      months.




During
      the term of the amended and restated Consulting Services Agreement and for
      a
      period of twenty-four months after the termination of the amended and restated
      Consulting Services Agreement, Century Capital shall be entitled to receive
      a
      cash bonus upon the consummation by the Company of certain corporate
      transactions. The bonus compensation shall be an amount not less than 2.5%
      of
      the aggregate consideration to be paid in connection with a sale or acquisition
      of the Company or in connection with a change in control of the Company (which
      means a change in more than 50% of the issued and outstanding shares of the
      Company’s common stock). Century Capital shall be entitled to receive the bonus
      compensation for any corporate transaction which commences before, but is
      consummated after, the end of the twenty-four month period following the
      effective termination date of the amended and restated Consulting Services
      Agreement.




Upon
      the
      execution of the amended and restated Consulting Services Agreement, the Company
      issued Century Capital a ten year, non-cancelable warrant to purchase 500,000
      shares of the Company’s common stock at a purchase price of $.03 per share. See
“Item 11. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters - Equity Compensation Plans.” On February 25, 2005,
      Century Capital exercised its right to purchase 250,000 shares of the Company’s
      common stock underlying the warrant. The $7,500 due to the Company from Century
      Capital as a result of this exercise was offset by the Company against amounts
      due and owing to Century Capital related to the deferred monthly consulting
      fees
      related to the original Consulting Services Agreement. On both May 20, 2005
      and
      August 25, 2005, Century Capital exercised warrants to purchase 62,500 shares
      of
      the Company’s common stock (125,000 shares in total). The $3,750 due to the
      Company from Century Capital as a result of these exercises was offset by the
      Company against the deferred monthly consulting fees due to Century Capital
      related to the original Consulting Services Agreement.




As
      provided in the original Consulting Services Agreement the Company is obligated
      to maintain D&O Policies while Mr. LaVance and Mr. Gifford hold positions as
      officers and/or directors of the Company and for a period of two years following
      termination of their service in such positions. The Company also agreed to
      indemnify and hold harmless Century Capital and its representatives, including
      Mr. LaVance and Mr. Gifford, from and against any and all claims, demands,
      liabilities, obligations, losses, fines, and expenses, including reasonable
      attorneys’ and accountants’ fees and expenses incurred in connection with the
      Company’s failure to perform under the amended and restated Consulting Services
      Agreement or any threatened, pending or completed action, suit or proceeding
      arising out of Century Capital’s relationship, or the relationship of any
      Century Capital representative with, the Company.




52


Commencing
      July 2005, Century Capital began deferring a portion of its monthly consulting
      fee due pursuant to the amended and restated Consulting Services Agreement
      in
      order to minimize the Company’s cash burn. As of April 30, 2006, $180,000 is due
      to Century Capital related to deferred monthly consulting fees for the period
      commencing July 1, 2005 and ending April 30, 2006. In addition, as of April
      30,
      2006, $34,500 was due and owing to Century Capital related to deferred monthly
      consulting fees pursuant to the original Consulting Services Agreement, $125,000
      was due and owing to Century Capital related to the minimum annual bonus for
      the
      period beginning February 1, 2004 and ending January 31, 2005 and $125,000
      was
      due and owing to Century Capital related to the minimum annual bonus for the
      period beginning February 1, 2005 and ending January 31, 2006.




**Item
      11.**  **Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters**




**Security
      Ownership of Certain Beneficial Owners and Management**




The
      following table sets forth information as of April 30, 2006, with respect to
      the
      beneficial ownership of the Company’s outstanding common stock by (1) each of
      the Company’s current officers and directors, (2) each of the Named Executive
      Officers and directors for the fiscal year ended October 31, 2003, (3) all
      current executive officers and current directors as a group, and (4) each person
      or group of persons known by the Company to be the beneficial owner of 5% of
      the
      Company’s outstanding common stock. Beneficial ownership is determined in
      accordance with the rules of the SEC and generally includes voting or investment
      power with respect to securities. Except as indicated by footnote, the persons
      named in the table below have sole voting power and investment power with
      respect to the shares of common stock shown as beneficially owned by
      them.


**Beneficial
                Ownership of**
              **Medi-Hut’s
                Common Stock****Name
                of Beneficial Owner**
            
            **No.
                of Shares (1)**
            
            **Percent
                of Class**David
                R. LaVance (2)(3)(4)
            
            
            3,350,000
            
            
            15.51
            %Thomas
                S. Gifford (3)(5)(6)
            
            
            3,660,938
            
            
            16.95
            %John
                A. Moore (3)(7)
            
            
            1,600,000
            
            
            7.37
            %Richard
                E. Otto (3)(8)
            
            
            600,000
            
            
            2.74
            %Joseph
                A. Sanpietro (9)
            
            
            —
            
            
            —Richard
                S. Rimer (10)(11)
            
            
            3,375,000
            
            
            15.86
            %All
                current executive officers and directors as a group
                (4)(6)(7)(8)
            
            
            8,900,000
            
            
            38.76
            %







53


(1)
            In
                accordance with Rule 13d-3 of the Exchange Act, a person is deemed
                to be
                the beneficial owner, for purposes of this table, of any shares of
                Medi-Hut’s common stock if he or she has voting or investment power with
                respect to such security. This includes shares (1) subject to options
                and
                warrants exercisable within sixty days, and (2)(a) owned by a spouse,
                (b)
                owned by other immediate family members, or (c) held in trust or
                held in
                retirement accounts or funds for the benefit of the named individuals,
                over which shares the person named in the table may possess voting
                and/or
                investment power.




(2)
            Such
                person serves as the Company’s President and Chief Executive
                Officer.




(3)
            Such
                person serves as a director of the Company and maintains a mailing
                address
                of 215 Morris Avenue, Spring Lake, New Jersey
                07762.




(4)
            Includes
                325,000 shares subject to the warrants issued on May 14, 2004 and
                February
                25, 2005 to Century Capital which are available for purchase within
                sixty
                days of April 30, 2006. Mr. LaVance has an ownership interest in
                and
                serves as President of Century Capital. Mr. LaVance disclaims beneficial
                ownership of these securities except to the extent of his ownership
                interest in Century Capital. Also includes 310,938 shares held by
                the
                LaVance Trust for Children. Mr. LaVance disclaims beneficial ownership
                of
                these securities.




(5)
            Such
                person serves as the Company’s Executive Vice President, Chief Financial
                Officer (Treasurer) and Secretary.




(6)
            Includes
                325,000 shares subject to the warrants issued on May 14, 2004 and
                February
                25, 2005 to Century Capital which are available for purchase within
                sixty
                days of April 30, 2006. Mr. Gifford has an ownership interest in
                and
                serves as Vice President of Century Capital. Mr. Gifford disclaims
                beneficial ownership of these securities except to the extent of
                his
                ownership interest in Century Capital. Also includes 310,938 shares
                held
                by the LaVance Trust for Children. Mr. Gifford is the trustee for
                the
                LaVance Trust for Children. Mr. Gifford disclaims beneficial ownership
                of
                these securities.




(7)
            Includes
                433,400 shares currently available for purchase or which are available
                for
                purchase within sixty days of March 31, 2006 under the warrants issued
                by
                the Company to him on July 24, 2003, May 14, 2004 and February 25,
                2005.




(8)
            Represents
                the shares currently available for purchase or which are available
                for
                purchase within sixty days of April 30, 2006 under the warrants issued
                by
                the Company to him on July 24, 2003, May 14, 2004 and February 25,
                2005.




(9)
            As
                of October 31, 2003, Mr. Sanpietro, a former President and Chief
                Executive
                Officer of the Company, directly owned 3,179,200 shares of the Company’s
                common stock. In April 2004, as part of the settlement between the
                Company
                and Mr. Sanpietro related to litigation filed by the Company, Mr.
                Sanpietro returned the 3,179,200 shares of common stock to the Company.
                The last known mailing address for Mr. Sanpietro is 212 Stillhouse
                Road,
                Freehold, New Jersey 07728.




(10)
            Mr.
                Rimer maintains a mailing address at 17 Chemin De La Sapinere, 1253
                Vandoeuvres, Geneva, Switzerland.




(11)
            Includes
                375,000 shares subject to a convertible debenture issued as of May
                1,
                2005.




54


**Executive
      Compensation Plans**




The
      following table provides information on the number of securities to be issued
      upon the exercise of outstanding options, warrants and rights and the number
      of
      securities remaining available for future issuance under the Company’s 2002
      Equity Incentive Plan and certain other compensation arrangements entered into
      or established for the officers and directors of the Company.




**EQUITY
                COMPENSATION PLAN TABLE****Plan
                Category**
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
              **(a)**
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
              **(b)**
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))**
              **(c)**Equity
                Compensation Plans approved by security holders(1)
            370,000
                (2)(3)(4)
            $.07
            1,630,000Equity
                Compensation Plans not approved by security holders
            2,105,000
                (5)(6)(7)
              (8)(9)
            $.39
            —**Total**
            2,375,000
                (2)(3)(4)
              (5)(6)(7)
              (8)(9)
            $.36
            1,730,000







(1)
            Medi-Hut
                has no equity compensation plans other than the Company’s 2002 Equity
                Incentive Plan described herein which has been approved by the Company’s
                shareholders.




(2)
            Includes
                shares available for purchase at a price of $.08 per share pursuant
                to
                stock options granted to employees of Medi-Hut on December 23, 2003
                as
                follows: Allan J. Jones - 100,000 shares; Adele Ehlin - 75,000 shares;
                and
                Alan D. Jones - 10,000 shares.




(3)
            Includes
                50,000 shares available for purchase at a price of $.08 per share
                pursuant
                to stock options granted to Adele Ehlin, an employee of Medi-Hut,
                on May
                4, 2004, and shares available for purchase at a price of $.02 per
                share
                pursuant to stock options granted to employees of Medi-Hut on December
                23,
                2004 as follows: Allan J. Jones - 25,000 shares and Adele Ehlin -
                10,000
                shares.




(4)
            Includes
                100,000 shares available for purchase at a price of $.08 per share
                pursuant to stock options granted to Allan J. Jones, an employee
                of
                Medi-Hut, on December 23, 2005.




(5)
            Includes
                90,000 shares available for purchase at a price of $4.50 per share
                under a
                warrant issued to Muhammed Malik, a former consultant to the Company,
                on
                August 1, 2002, and 90,000 shares available for purchase at a price
                of
                $2.45 per share under a warrant issued to Mr. Malik on August 1,
                2002.




(6)
            Includes
                500,000 shares available for purchase at a price of $.04 per share
                under
                the warrant issued to Century Capital on May 14, 2004 and 125,000
                shares
                available for purchase at a price of $.03 per share under the warrant
                issued to Century Capital on February 25,
                2005.




(7)
            Includes
                400,000 shares available for purchase at a price of $.26 per share
                under
                warrants issued on July 24, 2003 (200,000 shares per warrant) to
                the
                current directors of the Company, John A. Moore and Richard E. Otto.
                Also
                includes 133,333 shares available for purchase at a price of $.26
                per
                share under the warrant granted on July 24, 2003 to Salvatore J.
                Badalamenti, a former director of the Company, and 66,666 shares
                available
                for purchase at a price of $.26 per share under the warrant granted
                on
                July 24, 2003 to James G. Aaron, a former director of the
                Company.




55


(8)
            Includes
                333,400 shares available for purchase at a price of $.04 per share
                under
                warrants issued on May 14, 2004 to the current directors of the Company,
                John A. Moore (133,400 shares available for purchase) and Richard
                E. Otto
                (200,000 shares available for purchase). Also includes 66,600 shares
                available for purchase at a price of $.04 per share under the warrant
                granted on May 14, 2004 to Salvatore J. Badalamenti, a former director
                of
                the Company.




(9)
            Includes
                100,000 shares available for purchase at a price of $.03 per share
                under
                the warrant issued on February 25, 2005 to John A. Moore, a current
                director of the Company, and 200,000 shares available for purchase
                at a
                price of $.03 per share under the warrant issued on February 25,
                2005 to
                Richard E. Otto, a current director of the
                Company.




*2002
      Equity Incentive Plan*




General




On
      July
      5, 2002, the shareholders approved the Company’s 2002 Equity Incentive Plan (the
“Equity Incentive Plan”) effective as of January 1, 2002. The Equity Incentive
      Plan was placed into effect in order to promote the long-term success of the
      Company and to (1) encourage employees, independent directors and consultants
      of
      the Company to focus on critical long-range objectives, (2) encourage the
      attraction and retention of employees, independent directors and consultants
      with exceptional qualifications, and (3) link employees, independent directors
      and consultants directly to shareholders’ interests through increased stock
      ownership.




The
      Equity Incentive Plan provides for awards in the form of restricted shares,
      incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”) (ISOs and
      NSOs are sometimes collectively referred to as “Options”) and stock appreciation
      rights (“SARs”). The aggregate number of shares of common stock which may be
      awarded under the Equity Incentive Plan is 2,000,000 shares.




Incentive
      Stock Options (ISOs)




Only
      employees of the Company or a parent or a subsidiary of the Company are eligible
      to receive grants of ISOs. Unless otherwise provided in a stock option
      agreement, the first $100,000 of optioned shares that are part of an option
      grant and can be exercised first in a given year shall be considered ISOs,
      and
      the remainder shall be considered NSOs. The exercise price of an ISO may not
      be
      less then 100% of the fair market value of a share of common stock on the date
      of grant. The term of an ISO shall in no event exceed ten years from the date
      of
      grant.




Non-Statutory
      Stock Options (NSOs)




Employees,
      independent directors and consultants of the Company are eligible to receive
      grants of NSOs. Option grants to any optionee in a single fiscal year of the
      Company cannot cover more than 500,000 shares of common stock (750,000 shares
      of
      common stock for new employees in the fiscal year of the Company in which
      service as an employee first commences). Each individual stock option agreement
      shall specify the exercise price for the awards as determined by the Board.
      Options may be awarded in combination with SARs.




56


Automatic
      Option Grants to Independent Directors




Upon
      the
      conclusion of each annual meeting of the Company’s shareholders commencing in
      2002, each independent director who continues to serve on the Board after such
      annual meeting shall receive an NSO at the discretion of the Board. All NSOs
      granted to an independent director shall also become exercisable in full in
      the
      event of: (1) the termination of such independent director’s service because of
      death, total and permanent disability or retirement at or after age 65; or
      (2) a
      change in control with respect to the Company, with certain exceptions. The
      exercise price under all NSOs granted to an independent director shall be equal
      to 100% of the fair market value of a share of common stock on the date of
      grant. All NSOs granted to an independent director shall terminate on the
      earlier of (a) the 6 th anniversary of the date of grant or (b) the date 12 months after the termination
      of such independent director’s service for any reason. The Board may permit an
      independent director to elect to receive his or her annual retainer payments,
      if
      any, and/or meeting fees from the Company in the form of cash, NSOs, or
      restricted shares or a combination thereof, as determined by the Board. As
      of
      January 31, 2005, no option grants have been made to any of the Company’s
      independent directors under the Equity Incentive Plan.




Stock
      Appreciation Rights




SARs
      granted to any optionee in a single fiscal year cannot cover more than 500,000
      shares of common stock (750,000 shares of common stock for new employees in
      the
      fiscal year of the Company in which service as an employee first commences).
      Each SAR agreement shall specify the exercise price. SARs may be awarded in
      combination with Options, which may vary in accordance with a predetermined
      formula while the SARs are outstanding. A SAR may be included in an ISO only
      at
      the time of grant but may be included in an NSO at the time of grant or
      thereafter. Upon exercise of an SAR, the optionee shall receive from the Company
      (a) shares of common stock, (b) cash, or (c) a combination of common stock
      and
      cash, as the Board shall determine.




Restricted
      Shares




The
      holders of restricted shares shall have the same voting, dividend and other
      rights as the Company’s shareholders, subject to any special restrictions
      contained in the restricted share agreement.




The
      Equity Incentive Plan also contains customary protection against dilution.
      Options and SARs shall terminate immediately prior to the dissolution or
      liquidation of the Company. Unless the applicable agreement provides otherwise,
      in the event of any change in control, the vesting and exercisability of each
      outstanding award shall automatically accelerate so that each such award shall,
      immediately prior to the effective date of the change in control, become fully
      exercisable for all of the shares of common stock at the time subject to such
      award and may be exercised for any or all of those shares as fully-vested common
      stock, except under certain circumstances.




A
      copy of
      the Equity Incentive Plan was attached as “Exhibit B” to the Company’s
      definitive proxy statement filed with the SEC on June 10, 2002. To date, options
      to purchase 370,000 shares of the Company’s common stock have been granted under
      the Equity Incentive Plan to employees of the Company.




57


**Warrants
      Issued to Century Capital**




*Warrant
      Dated February 1, 2003*




On
      February 1, 2003, a warrant to purchase 1,500,000 shares of common stock of
      the
      Company was issued to Century Capital. See “Item 5. Market for Common Equity and
      Related Stockholder Matters - Sales of Unregistered Securities for the Fiscal
      Year Ended October 31, 2003.”




*Warrant
      Dated May 14, 2004*




On
      May
      14, 2004, the Company issued Century Capital ten year, non-cancelable warrant
      to
      purchase 700,000 shares of the Company’s common stock at a purchase price of
      $.04 per share. 100,000 shares of the Company’s common stock underlying the
      warrant became available for purchase as of May 14, 2004, with the remaining
      shares underlying the warrant becoming available for purchase upon the
      achievement of specific milestones as follows: 100,000 shares shall be available
      for purchase upon the Company’s receipt of at least $2,000,000 in cumulative
      proceeds related to the Syntho litigation; 100,000 shares shall be available
      for
      purchase upon the filing of the Company’s annual report on Form 10-KSB for the
      fiscal year ended October 31, 2002; 100,000 shares shall be available for
      purchase upon the filing of the Company’s quarterly reports on Form 10-QSB for
      the quarters ended January 31, 2003, April 30, 2003 and July 31, 2003; 100,000
      shares shall be available for purchase upon the Company’s receipt of at least
      $500,000 in cumulative proceeds from the litigation against certain former
      officers, directors and others and/or the litigation against the Rosenberg
      and
      Koenig accounting firms; 100,000 shares shall be available for purchase upon
      the
      Company becoming eligible to register its common stock pursuant to the
      Securities Act; and 100,000 shares shall be available for purchase upon the
      acquisition by the Company of a product or line of business. In the event of
      a
      change in control of the Company, the warrant becomes fully vested as of ten
      days prior to the change in control. For purposes of the warrant, a change
      of
      control means any recapitalization, reorganization, reclassification,
      consolidation, merger, sale of all or substantially all of the Company’s assets
      to another individual, partnership, corporation or other such entity and any
      transaction which is effected in such a way that holders of more than 50% of
      the
      shares of common stock then outstanding are entitled to receive (either directly
      or upon subsequent liquidation) stock, securities or assets of another
      individual, partnership, corporation or other such entity with respect to or
      in
      exchange for their common stock. The warrant also contains standard
      anti-dilution provisions and limited registration rights. The shares of common
      stock issued upon the exercise of the warrant shall be unregistered securities.
      The warrant had a fair value of approximately $44,211 at the date of
      issuance.




On
      November 1, 2004, Century Capital exercised its right to purchase 200,000 shares
      of the Company’s common stock underlying the warrant. Of the shares purchased,
      100,000 shares became available for purchase on May 14, 2004, the issuance
      date
      of the warrant, and the other 100,000 shares became available for purchase
      prior
      to November 1, 2004 as a result of the Company’s receipt of $500,000 of
      cumulative proceeds from the litigation against certain former officers,
      directors and others which occurred in 2004. The $8,000 due to the Company
      from
      Century Capital as a result of this exercise was offset by the Company against
      monthly consulting fees due and owing to Century Capital that had been deferred
      for payment. As of March 31, 2006, 200,000 shares underlying the warrant had
      been purchased, 100,000 shares underlying the warrant are available for purchase
      because the Company filed its annual report on Form 10-KSB for the fiscal year
      ended October 31, 2002 with the SEC on November 25, 2005, and 400,000 shares
      underlying the warrant remain unvested and are not yet available for purchase.




58


*Warrant
      Dated February 25, 2005*




On
      February 25, 2005, a warrant to purchase 500,000 shares of common stock of
      the
      Company was issued to Century Capital. The warrant has a ten year term and
      is
      exercisable at $.03 per share until February 25, 2015. The warrant vests as
      follows: (a) 250,000 of the shares of the Company’s common stock underlying the
      warrant became available for purchase as of February 1, 2005; (b) an additional
      20,833 of the shares underlying the warrant become available for purchase on
      the
      last day of each month commencing February 28, 2005 and ending December 31,
      2005
      and (c) 20,837 of the shares underlying the warrant became available for
      purchase on January 31, 2006. The warrant has customary terms and provisions
      as
      set forth in a warrant certificate, dated as of February 1, 2005, including,
      without limitation, anti-dilution adjustments, registration rights, and
      acceleration of vesting upon a change in control of the Company. In the event
      of
      a change in control of the Company, the warrant becomes fully vested as of
      ten
      days prior to the change in control. For purposes of the warrant, a change
      of
      control means any recapitalization, reorganization, reclassification,
      consolidation, merger, sale of all or substantially all of the Company’s assets
      to another individual, partnership, corporation or other such entity and any
      transaction which is effected in such a way that holders of more than 50% of
      the
      shares of common stock then outstanding are entitled to receive (either directly
      or upon subsequent liquidation) stock, securities or assets of another
      individual, partnership, corporation or other such entity with respect to or
      in
      exchange for common stock. The warrant also contains standard anti-dilution
      provisions and limited registration rights. The shares of common stock issued
      upon the exercise of the warrant shall be unregistered securities. The warrant
      had a fair value of approximately $10,674 at the date of issuance.




On
      February 25, 2005, Century Capital exercised its right to purchase 250,000
      shares of the Company’s common stock underlying the warrant. The $7,500 due to
      the Company from Century Capital as a result of this exercise was offset by
      the
      Company against amounts due and owing to Century Capital related to deferred
      monthly consulting fees. On both May 20, 2005 and August 25, 2005, Century
      Capital exercised a portion of the warrant and purchased 62,500 shares of the
      Company’s common stock (125,000 shares in total). The $3,750 due to the Company
      from Century Capital as a result of these exercises was offset by the Company
      against deferred monthly consulting fees due to Century Capital. As of March
      15,
      2006, 375,000 shares underlying the warrant have been purchased and 125,000
      shares underlying the warrant are available for purchase.




59


**Warrants
      Issued to Directors**




*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 as of that date, other than Mr. LaVance
      and
      Mr. Gifford. An aggregate amount of 800,000 shares of common stock could be
      issued pursuant to these warrants. See “Item 5. Market for Common Equity and
      Related Stockholder Matters - Sales of Unregistered Securities for the Fiscal
      Year Ended October 31, 2003.”




*Warrants
      Dated May 14, 2004*




On
      May
      14, 2004, 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 600,000 shares of common stock could be issued pursuant
      to
      these warrants. Each warrant has a five year term and is exercisable at $.04
      per
      share until May 14, 2009. The shares of common stock underlying each warrant
      vest equally on and after the date of issue (66,600) and on and after the first
      anniversary date (133,400). Each warrant contains standard anti-dilution
      provisions and limited registration rights. The shares of common stock issued
      upon the exercise of each warrant shall be unregistered securities. As of March
      31, 2006, an aggregate of 66,600 shares of the Company’s common stock underlying
      the warrants have been purchased, an aggregate of 400,000 shares underlying
      the
      warrants are available for purchase and an aggregate of 133,400 shares
      underlying the warrants have been cancelled. The warrants had an aggregate
      fair
      value of approximately $32,137 at the date of issuance.




*Warrants
      Dated February 25, 2005*




On
      February 25, 2005, 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 400,000 shares of common stock could be issued
      pursuant to these warrants. Each warrant has a five year term and is exercisable
      at $.03 per share until February 25, 2010. The shares of common stock underlying
      each warrant vest equally on and after the date of issue (100,000) and on and
      after the first anniversary date (100,000). Each warrant contains standard
      anti-dilution provisions and limited registration rights. The shares of common
      stock issued upon the exercise of each warrant shall be unregistered securities.
      As of March 31, 2006, an aggregate of 100,000 shares underlying the warrants
      have been purchased and an aggregate of 300,000 shares underlying the warrants
      are available for purchase. The warrants had an aggregate fair value of
      approximately $6,378 at the date of issuance.




**Warrant
      Issued to Consultant**




On
      May
      11, 2005, a warrant to purchase 100,000 shares of common stock of the Company
      was issued to Dr. William Sear, a consultant to the Company, for consulting
      services rendered by Dr. Sear to the Company. The warrant has a five year term
      and is exercisable at $.05 per share until May 11, 2010. All of the shares
      of
      common stock underlying the warrant vested on the date of issuance, May 11,
      2005. On May 13, 2005, all 100,000 of the shares underlying the warrant were
      purchased. The warrant had a fair value of approximately $2,813 at the date
      of
      issuance.




60




**Item
      12.**  **Certain
      Relationships and Related 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. Effective
      February 1, 2005, the Company and Century Capital entered into an amended and
      restated Consulting Service Agreement, pursuant to which Messrs. LaVance and
      Gifford currently provide services to the Company as executive management.
      For
      the fiscal year ended October 31, 2003, the Company was billed $688,500 for
      consulting services rendered by Century Capital. The Company also reimbursed
      Century Capital for expenses incurred in conjunction with performing the
      consulting services and issued Century Capital a warrant to purchase 1,500,000
      shares of common stock. As of the fiscal year ended October 31, 2003, the
      Company owed Century Capital $4,115, which amount was paid in full by the
      Company in November 2003. See “Item 11. Security Ownership of Certain Beneficial
      Owners and Management and Related Stockholder Matters - Consulting Services
      Agreement.”




In
      May
      2004, the Company relocated its principal offices to 215 Morris Avenue, Spring
      Lake, New Jersey 07762, the location of Century Capital’s office, in order to
      reduce its monthly operating expenses and to more appropriately accommodate
      its
      current operations. The Company and Century Capital entered into a Shared
      Services Agreement whereby the Company rented three fully furnished, business
      equipped offices approximating 340 square feet inside Century Capital’s existing
      offices. This agreement commenced on May 1, 2004 and has a month to month term
      that requires sixty day written notice to terminate. The monthly rental is
      $2,500.




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 November 2002 and January 2003, the Company purchased
      Elite Safety Syringes from Medi-Hut International for a total purchase price
      of
      $100,002. This amount was paid by the Company during November 2002 and February
      2003. As of the fiscal year ended October 31, 2003, there were no accounts
      payable to Medi-Hut International.




Joseph
      A.
      Sanpietro is the Company’s founder and former Chief Executive Officer and
      Chairman whose employment was terminated by the Company on March 21, 2003.
      On
      March 28, 2003, the Company entered into a consulting agreement with Mr.
      Sanpietro in order to facilitate the transition of certain product knowledge
      and
      relationships to the Company’s new management team. The agreement had no term
      and services rendered by Mr. Sanpietro were billed to the Company at an hourly
      rate. The Company ceased using Mr. Sanpietro’s services in May 2003. For the
      fiscal year ended October 31, 2003, the Company was billed $20,815 for
      consulting services rendered by Mr. Sanpietro, which amounts were paid in full
      by the Company as of October 31, 2003. There were no amounts owed by the Company
      to Mr. Sanpietro as of October 31, 2003.




James
      G.
      Aaron, a member of the Company’s Board of Directors as of the fiscal year ended
      October 31, 2003, is a shareholder of the law firm of Ansell Zaro Grimm &
Aaron, P.C., which served as one of Medi-Hut’s attorneys during the fiscal year
      ended October 31, 2003. For the fiscal year ended October 31, 2003, the Company
      was billed $16,920 for legal services rendered by Ansell, Zaro, Grimm &
Aaron, PC, which amounts were paid in full by the Company as of October 31,
      2003. There were no amounts owed by the Company to Ansell, Zaro, Grimm &
Aaron, PC as of October 31, 2003 and neither Mr. Aaron nor his law firm
      currently provide any legal services to the Company.


61




Lawrence
      P. Marasco, the Company’s former Vice President of Sales and Marketing whose
      employment was terminated by the Company on March 12,2003, 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 fiscal year
      ended October 31, 2003, the Company purchased product with a total purchase
      price of $25,164 from Larval and sold product to Larval for a total sales price
      of $430,678. As of October 31, 2003, there were no accounts payable to Larval
      by
      the Company and no accounts receivable by the Company from Larval.




**Item
      13.**  **Exhibits
      and Reports on Form 8-K**




a)  Exhibits :




Reference
      is made to the Index of Exhibits beginning on page E-1 herein.




b)  Reports
      on Form 8-K :




Pursuant
      to a current report on Form 8-K dated August 18, 2003, the Company reported
      the
      settlement of the class action lawsuit and other corporate developments and
      the
      settlement of the action commenced by the SEC.




Pursuant
      to a current report on Form 8-K dated September 4, 2003, the Company reported
      that the Federal Court had denied the Company’s request for a preliminary
      injunction against Syntho which would have prevented Syntho from selling Syntest
      to anyone other than the Company.




Pursuant
      to a current report on Form 8-K dated September 16, 2003, the Company reported
      the filing of an amended class action complaint with respect to the consolidated
      class action lawsuit.




**Item
      14.**  **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.




62




In
      addition, as a result of the misconduct by prior management, the Company’s
      current management was unable to report on the Company’s results of operations
      for the fiscal years ended October 31, 2002 and 2001 and has not been able
      to
      file quarterly reports on Form 10-QSB for fiscal 2003, 2004, 2005 and 2006
      and
      the Company’s annual report on Form 10-KSB for the years ended October 31, 2003,
      2004 and 2005 in a timely manner. Once those reports are filed, current
      management anticipates full compliance by the Company of the requirements of
      Rule 13a-15 for all reports filed thereafter.


63


**SIGNATURES**





In
      accordance with Section 13 or 15(d) 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.**May
              25,
              2006
            By:
            /s/
              David R. LaVanceDavid
              R. LaVanceChairman
              of the Board of Directors,President and Chief Executive
              Officer




In
      accordance with the Exchange Act, this report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.


Signatures
              
              Title
              
              Date/s/
                  David R. LaVance
              
              Chairman
                  of the Board of
              
              May
                  25, 2006David
                  R. LaVance
              
              Directors,
                  President andChief
                  Executive Officer/s/
                  Thomas S. Gifford
              
              Executive
                  Vice President,
              
              May
                  25, 2006Thomas
                  S. Gifford
              
              Chief
                  Financial Officer,Secretary
                  and Director/s/
                  John A. Moore
              
              Director
              
              May
                  25, 2006John
                  A. Moore/s/
                  Richard E. Otto
              
              Director
              
              May
                  25, 2006Richard
                  E. Otto




64





**Medi-Hut
      Co., Inc. and Subsidiary**





**Financial
      Statements**





**Contents**


Report
                  of Independent Registered Public Accounting Firm
              F-1Consolidated:Balance
                  Sheets as of October 31, 2003 and 2002
              F-2Statement
                  of Operations for the Fiscal Year Ended October 31, 2003
              F-3Statement
                  of Stockholders’ Equity for the Fiscal Year Ended October 31,
                  2003
              F-4Statement
                  of Cash Flows for the Fiscal Year Ended October 31, 2003
              F-5Notes
                  to the Financial Statements
              F-6









REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and


Stockholders
      of Medi-Hut Co., Inc.





We
      have
      audited the accompanying consolidated balance sheets of Medi-Hut Co., Inc.
      and
      subsidiary (the “Company”) as of October 31, 2003 and 2002 and the related
      consolidated statements of operations, stockholders’ equity and cash flows for
      the year ended October 31, 2003. These consolidated financial statements are
      the
      responsibility of the Company’s management. Our responsibility is to express an
      opinion on these consolidated financial statements based upon our
      audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statement is free of material misstatement. An audit includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements. An audit also includes assessing the accounting
      principles used and the significant estimates made by management, as well as
      evaluating the overall financial statement presentation. We believe that our
      audits provide a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Medi-Hut Co.,
      Inc. and subsidiary as of October 31, 2003 and 2002 and the consolidated results
      of their operations and their consolidated cash flows for the year ended October
      31, 2003 in conformity with accounting principles generally accepted in the
      United States of America.





/s/
              Weiser
              LLPNew
              York, New
              YorkMay 19, 2006


F-1


**Medi-Hut
      Co., Inc. and Subsidiary**


**Consolidated
      Balance Sheets**




**October
                31,**
              **2003**
            
            **October
                31,**
              **2002****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            1,343,560
            
            $
            3,695,890Accounts
                receivable, less reserve of $0 and $471,210,
              respectively
            
            
            74,385
            
            
            4,471,185Accounts
                receivable - related party
            
            
            —
            
            
            479,339Inventories
            
            
            101,875
            
            
            278,724Prepaid
                insurance
            
            
            138,724
            
            
            —Prepaid
                expenses and other
            
            
            10,254
            
            
            148,260Total
                current assets
            
            
            1,668,798
            
            
            9,073,398Other
                assets:Note
                receivable - related party, less reserve of $470,477 and
              $304,318,
                respectively
            
            
            —
            
            
            —Distribution
                rights
            
            
            1,000,000
            
            
            1,000,000Income
                tax refund
            
            
            287,388
            
            
            287,388Restricted
                cash
            
            
            400,000
            
            
            —Security
                deposit
            
            
            33,388
            
            
            —Other
            
            
            80,866
            
            
            34,080Total
                other assets
            
            
            1,801,642
            
            
            1,321,468Total
                assets
            
            $
            3,470,440
            
            $
            10,394,866**Liabilities
                and stockholders' equity**Current
                liabilities:Accounts
                payable
            
            $
            138,857
            
            $
            5,345,457Accounts
                payable - related party
            
            
            4,115
            
            
            7,107Accrued
                expenses
            
            
            159,049
            
            
            135,509Reserve
                for class action lawsuit settlement
            
            
            529,299
            
            
            529,299Note
                payable
            
            
            10,645
            
            
            —Deferred
                revenue
            
            
            34,209
            
            
            —Total
                current liabilities
            
            
            876,174
            
            
            6,017,372Commitments
                and contingenciesStockholders'
                equityCommon
                stock, $.001 par value; 100,000,000 shares authorized;
              14,558,800
                shares issued; 14,366,500 and 14,413,900 shares outstanding,
              respectively
            
            
            14,559
            
            
            14,559Additional
                paid in capital
            
            
            19,438,104
            
            
            18,620,572Treasury
                stock at cost, 192,300 and 144,900 shares,
              respectively
            
            
            (419,523
            )
            
            (363,717
            )Stock
                subscription receivable
            
            
            (300,000
            )
            
            (300,000
            )Deferred
                compensation
            
            
            (134,098
            )
            
            (26,180
            )Accumulated
                deficit
            
            
            (16,004,776
            )
            
            (13,567,740
            )Total
                stockholders' equity
            
            
            2,594,266
            
            
            4,377,494Total
                liabilities and stockholders' equity
            
            $
            3,470,440
            
            $
            10,394,866




*The
        accompanying notes are an integral part of these consolidated financial
        statements.*
  F-2




**Medi-Hut
      Co., Inc. and Subsidiary**


**Consolidated
      Statement of Operations**


**(Note
      3)**





**Year
                Ended**
              **October
                31,**
              **2003**Net
                sales
            
            $
            7,643,340Cost
                of sales
            
            
            5,624,789Gross
                profit
            
            
            2,018,551Operating
                expenses:Selling
                and marketing
            
            
            486,801General
                and administrative
            
            
            4,433,266Total
                operating expenses
            
            
            4,920,067Loss
                from operations
            
            
            (2,901,516
            )Proceeds
                from settlement of litigation
            
            
            475,000Interest
                income
            
            
            11,319Interest
                expense
            
            
            (21,839
            )Net
                loss
            
            $
            (2,437,036
            )Net
                loss per common and common equivalent share, basic and
                diluted
            
            $
            (0
                .17
            )Weighted
                average number of common shares outstanding, basic and
                diluted
            
            
            14,384,811





*The
        accompanying notes are an integral part of these consolidated financial
        statements.*


F-3





**Medi-Hut
      Co., Inc. and Subsidiary**


**Consolidated
      Statement of Stockholders’ Equity**


**(Note
      3)**





**Common
                Stock**
            
            
            
            **Treasury
                Stock****Number
                of****Shares**
            
            **$0.001**
                **Par
                  Value**
            
            **Additional**
                  **Paid
                    in**
                  **Capital**
            
            **Number
                  of**
                **Shares**
            
            **Amount**
            
            **Stock**
                        **Subscription**
                        **Receivable**
            
            **Deferred**
                **Compensation**
            
            **Accumulated**
                **Deficit**
            
            **Total**
                    **Stockholders'**
                    **Equity**Balance
                at October 31, 2002
            
            
            14,558,800
            
            $
            14,559
            
            $
            18,620,572
            
            
            144,900
            
            $
            (363,717
            )
            $
            (300,000
            )
            $
            (26,180
            )
            $
            (13,567,740
            )
            $
            4,377,494Purchase
                of shares of Company common stock
            
            
            
            
            
            
            
            
            
            
            
            47,400
            
            
            (55,806
            )
            
            
            
            
            
            
            
            
            
            
            (55,806
            )Consulting
                expense related to warrants issued to Century Capital
            
            
            
            
            
            
            
            
            681,094
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            681,094Deferred
                compensation related to warrants issued to directors
            
            
            
            
            
            
            
            
            155,138
            
            
            
            
            
            
            
            
            
            
            
            (155,138
            )
            
            
            
            
            -Cancellation
                of stock options issued to a former employee
            
            
            
            
            
            
            
            
            (18,700
            )
            
            
            
            
            
            
            
            
            
            
            18,700
            
            
            
            
            
            -Amortization
                of deferred compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            28,520
            
            
            
            
            
            28,520Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,437,036
            )
            
            (2,437,036
            )Balance
                at October 31, 2003
            
            
            14,558,800
            
            $
            14,559
            
            $
            19,438,104
            
            
            192,300
            
            $
            (419,523
            )
            $
            (300,000
            )
            $
            (134,098
            )
            $
            (16,004,776
            )
            $
            2,594,266




*The
        accompanying notes are an integral part of these consolidated financial
        statements.*


F-4


**Medi-Hut
      Co., Inc. and Subsidiary**


**Consolidated
      Statement of Cash Flows**


**(Note
      3)**




**Year
                Ended**
              **October
                31,**
              **2003**Cash
                flows from operating activities:Net
                loss
            
            $
            (2,437,036
            )Adjustments
                to reconcile net income to net cash provided by
              (used
                in) operating activities:Depreciation
            
            
            16,212Amortization
                of deferred compensation
            
            
            28,520Consulting
                expense related to warrants
            
            
            681,094Reserve
                on accounts receivable
            
            
            (471,210
            )Reserve
                on note receivable - related party
            
            
            150,000Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            4,868,010Accounts
                receivable - related party
            
            
            479,339Inventories
            
            
            176,849Prepaid
                insurance
            
            
            (138,724
            )Prepaid
                expenses
            
            
            138,006Restricted
                cash
            
            
            (400,000
            )Security
                deposit
            
            
            (33,388
            )Accounts
                payable
            
            
            (5,206,600
            )Accounts
                payable - related party
            
            
            (2,992
            )Accrued
                expenses
            
            
            23,540Deferred
                revenue
            
            
            34,209Net
                cash used in operating activities
            
            
            (2,094,171
            )Cash
                flows from investing activities:Purchases
                of other assets
            
            
            (74,785
            )Proceeds
                from sale of other assets
            
            
            11,787Note
                receivable - related party
            
            
            (150,000
            )Net
                cash used in investing activities
            
            
            (212,998
            )Cash
                flows from financing activities:Proceeds
                from line of credit
            
            
            1,500,000Repayment
                of line of credit
            
            
            (1,500,000
            )Proceeds
                from note payable
            
            
            15,797Repayment
                of note payable
            
            
            (5,152
            )Purchase
                of Company common stock
            
            
            (55,806
            )Net
                cash used in financing activities
            
            
            (45,161
            )Decrease
                in cash and cash equivalents
            
            
            (2,352,330
            )Cash
                and cash equivalents - beginning of period
            
            
            3,695,890Cash
                and cash equivalents - end of period
            
            $
            1,343,560Supplemental
                disclosure of cash flow information:Cash
                paid during the period for interest
            
            $
            20,664




*The
        accompanying notes are an integral part of these consolidated financial
        statements.*




F-5




**Medi-Hut
      Co., Inc. and Subsidiary**


**Notes
      to the Consolidated Financial Statements**





**1.**
            **Organization
                and Description of
                Business**




Medi-Hut
      Co., Inc. and subsidiary (“Medi-Hut” or the “Company”) is a Nevada corporation
      headquartered in Spring Lake, New Jersey. The Company was incorporated in the
      State of New Jersey in November 1982. On January 28, 1998, the Company entered
      into an Agreement and Plan of Reorganization with Indwest, Inc., a Utah
      corporation, whereby the Company changed its domicile to the State of Utah
      and
      became subject to the reporting requirements of the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”). On February 2, 1998, the Company
      completed a second change of domicile transaction and became a Delaware
      corporation, and, on October 31, 2001, completed a third and final change of
      domicile transaction and became a Nevada corporation.




On
      October 17, 2003, the Company formed Scivanta Corporation (“Scivanta”), a New
      Jersey corporation and a wholly-owned subsidiary of the Company. Scivanta was
      formed to be an operating subsidiary of the Company, but is currently
      inactive.




During
      the fiscal year ended October 31, 2003, the Company’s business included the
      distribution of over-the-counter medical devices and disposable clinical
      supplies, such as condoms and alcohol preparation pads; generic and name brand
      pharmaceuticals; and a hormone replacement therapy drug named Syntest which
      was
      manufactured and supplied to the Company by a third party manufacturer pursuant
      to an exclusive distribution agreement. These products were generally sold
      by
      the Company to wholesalers, distributors, drug store chains and occasionally
      directly to physicians and other healthcare providers. The Company did not
      manufacture any of the products that it sold but rather purchased products
      from
      wholesalers or distributors or directly from the manufacturer.




In
      March
      2003, the Company exited from the business of selling branded and generic
      pharmaceuticals due to the low profit margins attributed to such sales. In
      addition, in March 2003, the Company ceased selling Syntest due to a dispute
      with the manufacturer and the Company’s contract sales representative for the
      product which resulted in the commencement of litigation by the Company against
      such parties as well as other related litigation involving the Company. See
      Notes 4, 7 and 15.




During
      the fiscal year ended October 31, 2003, the Company continued to develop the
      patented Elite Safety Syringe, a passive anti-stick safety syringe and the
      Solo-SafeTM Safety Syringe. For the fiscal year ended October 31, 2003, there
      were no sales of the Elite Safety Syringe or the Solo-SafeTM Safety Syringe due
      to development, manufacturing and marketing issues which prevented the
      introduction of either syringe to the United States market.




In
      May
      2004, the Company terminated further development of the Solo-Safe TM Safety
      Syringe due to the early development stage of the product, the fact that a
      manufacturing prototype had not been developed, the cost associated with
      developing the product as compared to the overall market opportunity and the
      Company’s limited financial resources. In December 2004, the Company terminated
      further development
      and marketing of the Elite Safety Syringe due to the cost associated with
      correcting certain product design issues, costs associated with establishing
      sufficient manufacturing capabilities to support a market launch and the lack
      of
      a sufficient market for safety syringes to support the product
      launch.




F-6




In
      October 2004, the Company stopped selling its condoms and other disposable
      medical supplies due to decreasing profit margins and the shrinkage of the
      customer base. Since the second quarter of 2003, the Company has not had any
      significant recurring revenue from the sale of products.




**2.**
            **Basis
                of Presentation**




The
      Company does not have any recurring revenue from the sale of products and is
      in
      the process of identifying a product or company to acquire in order to develop
      a
      new business. In
      May
      2004, as part of management’s efforts to reduce expenditures, the Company
      relocated its principal offices to 215 Morris Avenue, Spring Lake, New Jersey
      07762. In connection with the relocation of its principal offices, the Company
      and Monmouth/Atlantic Realty Associates, L.L.C., the landlord of the Company’s
      former office space in Wall Township, New Jersey, reached an agreement to
      terminate the remaining term of the existing lease (44 months resulting in
      a
      lease obligation of approximately $454,000 plus an additional $154,000 for
      common area charges) for a one-time payment by the Company of $100,000 plus
      the
      forfeiture of the $33,338 security deposit.




On
      May
      26, 2005, the Company closed on a private placement of 8% convertible debentures
      (the “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 Pharmaceutical Inc.
      (“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. On February
      21, 2006, the Company entered into a settlement agreement and release with
      of
      its former accounting firm, Rosenberg, Rich, Baker, Berman & Company
      (“Rosenberg”) pursuant to which Rosenberg paid the Company the sum of $425,000.
      The proceeds from the sale of the Debentures, the sale the Company’s common
      stock , the settlement with Breckenridge and the settlement with Rosenberg
      has
      been and will continue to be used to fund the Company’s pending litigation
      matters and for other business development and operational purposes.




Since
      the
      second quarter of 2003, the Company has not had any significant recurring
      revenue from the sale of products.


F-7




Management
      believes the funds received in connection with the issuance of the Debentures
      and sale of common stock and the proceeds received from the purchase and
      settlement agreement with Breckenridge, together with funds currently available
      to the Company, will be sufficient to support planned operations through June
      1,
      2007.




Management
      believes that the Company will require additional capital to be able to obtain
      other medical devices and products and otherwise implement its strategy for
      business development and increased revenues discussed elsewhere herein. Although
      a favorable outcome or settlement of the Company’s Syntest litigation could
      increase the capital position of the Company, no assurance can be given that
      such action will result in a favorable outcome or settlement to the Company
      or
      that if such action is favorably decided or settled, such decision or settlement
      will occur in the near future.




**3.**
            **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. Shortly thereafter, Joseph A. Sanpietro and Vincent J. Sanpietro
      resigned from the Company’s Board of Directors. 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 Securities and Exchange
      Commission (“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.




In
      March
      2003, the current management team commenced an extensive review of the Company’s
      financial statements for the fiscal years ended October 31, 2002 and 2001.
      In
      2005, the current management team of the Company concluded that insufficient
      documentation existed to adequately verify the financial information for the
      fiscal year ended October 31, 2001 and certain statement of operations and
      cash
      flow activities for the fiscal year ended October 31, 2002.




Accordingly,
      the Company only presented an audited balance sheet as of October 31, 2002
      and
      the related footnotes. Since a complete set of financial statements for the
      fiscal year ended October 31, 2002 are not included herein, 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.




**4.**
            **Legal
                Proceedings**




As
      a
      result of the actions of the Former Officers and other business matters, the
      Company, the Former Officers and/or certain former directors became involved
      in
      several separate legal proceedings.




F-8




***Government
      Proceedings and Investigations***




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.




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 March
      14, 2006, no indictments or charges have been issued against the
      Company.




NASDAQ
      Delisting. ****** On
      March
      21, 2003, trading of Medi-Hut’s shares of common stock on the NASDAQ SmallCap
      Market was halted. The Company’s common stock was later delisted from the NASDAQ
      SmallCap Market on March 28, 2003 for, among other things, failure by the
      Company to file with the SEC its annual report on Form 10-KSB for the fiscal
      year ended October 31, 2002.




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.





***Litigation***





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 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 its legal
      costs
      and expenses incurred by the Company in connection with the class action
      lawsuit. On September 12, 2003, the complaint and the pending consolidated
      class
      action lawsuit against the Company and the other defendants were 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 and
      issued its final approval of the settlement on May 3, 2004.




F-9




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 Syntho and its president, Muhammed
      Malik (collectively, 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
      15.





F-10




**5.** **Summary
      of Significant Accounting Policies**




***Principles
      of Consolidation***




The
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary. All significant intercompany accounts and transactions
      have been eliminated in consolidation.




***Use
      of Estimates***




The
      preparation of the balance sheet in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the balance sheet. Significant
      estimates relied upon in preparing the balance sheet include allowances for
      accounts receivable and for non-saleable inventory, expected future cash flows
      used to evaluate the recoverability of long-lived assets and investments, any
      contingent liabilities, and utilization of the Company’s net deferred tax assets
      and related valuation allowance.




Although
      the Company regularly assesses these estimates, actual results could differ
      materially from these estimates. Changes in estimates are recorded in the period
      in which they become known. The Company based its estimates on historical
      experience and various other assumptions that it believes to be reasonable
      under
      the circumstances. Actual results may differ from management’s estimates if past
      experience or other assumptions do not turn out to be substantially accurate.




***Cash
      and Cash Equivalents***




The
      Company considers all highly liquid investments with an original maturity (at
      date of purchase) of three months or less to be cash equivalents. Cash and
      cash
      equivalents consist of cash on deposit with banks and money market instruments.
      The Company places its cash and cash equivalents with high quality, U.S.
      financial institutions.




***Concentration
      of Credit Risk***




The
      Company has no significant off balance sheet risk such as foreign exchange
      contracts, option contracts or other foreign hedging arrangements. The Company’s
      financial instruments that are exposed to concentration of credit risks consist
      primarily of cash and cash equivalents, trade account receivables and notes
      receivable. The Company maintains its cash and cash equivalents in bank accounts
      which, at times, exceed federally insured limits. The Company invests its cash
      in high-quality money market instruments and  has
      not
      experienced any losses in such accounts and accordingly believes it is not
      exposed to significant credit risk on cash and cash equivalents.




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 October 31, 2003, Rugby Laboratories, Inc.
      accounted for approximately 90% of accounts receivable. Subsequent to October
      31, 2003, all accounts receivable, less reserves, have been collected in full.
      For the fiscal year ended October 31, 2003, McKesson Corporation, 824 Drug
      Inc.,
      Breckenridge and Eckerd Corporation accounted for approximately 28%, 14%, 14%
      and 13% of net sales, respectively.




F-11




As
      of
      October 31, 2002, 824 Drug Inc, McKesson Corporation and Eckerd Corporation
      accounted for approximately 35%, 28% and 9% of accounts receivable,
      respectively. Subsequent to October 31, 2002, all accounts receivable, less
      reserves, have been collected in full.




***Fair
      Value of Financial Instruments***




The
      Company’s financial instruments mainly consist of cash and cash equivalents,
      accounts receivable, a note receivable, accounts payable and accrued expenses.
      The carrying amounts of the Company’s cash and cash equivalents, accounts
      receivable, accounts payable and accrued expenses approximate fair value due
      to
      the short-term nature of these instruments. The Company has reserved for 100%
      of
      the outstanding balance of the note receivable due from Medi-Hut International
      (Mfg.) Co., Ltd. (“Medi-Hut International”), a related party, due to the
      Company’s potential inability to collect on the note resulting from the
      financial condition of Medi-Hut International. See Note 6.




***Accounts
      Receivable and Revenue Recognition***




The
      Company records trade receivables when revenue is recognized. Trade receivables
      are periodically evaluated for collectibility based upon past credit history
      with customers and their current financial condition. Those accounts that are
      doubtful of collection are included in the allowance. Trade receivables are
      charged off when there is certainty as to their being uncollectible. Trade
      receivables are considered delinquent when payment has not been made within
      sales terms.




The
      Company also records a provision for estimated sales returns and allowances
      on
      product sales in the same period as the related revenues are recorded. These
      estimates are based on the specific facts and circumstances of particular
      orders, analysis of credit memo data and other known factors. If the data the
      Company uses to calculate these estimates does not properly reflect reserve
      requirements, then a change in the allowances would be made in the period in
      which such a determination is made.




The
      accounts receivable reserves amounted to $0 for doubtful accounts and for sales
      returns and allowances on product sales at October 31, 2003.




The
      accounts receivable reserves amounted to $0 for doubtful accounts at October
      31,
      2002. The reserve for sales returns and allowances on product sales was $471,000
      at October 31, 2002.




The
      Company recognizes product revenue upon shipment, provided that there is
      persuasive evidence of an arrangement, there are no uncertainties regarding
      acceptance, the sales price is fixed or determinable and collection of the
      resulting receivable is probable.




F-12




***Inventory***




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 October 31, 2003 and 2002,
      inventory consisted solely of finished goods.




***Concentration
      of Suppliers***




As
      of
      October 31, 2003, the Company had no suppliers with balances greater than 10%
      of
      accounts payable. For the fiscal year ended October 31, 2003, Syntho and Kinray,
      Inc. accounted for approximately 60% and 19%, respectively, of the Company’s
      purchases of product.




As
      of
      October 31, 2002, the Company had accounts payable to two suppliers, Kinray
      Inc.
      and Syntho, of $2,309,905 (43% of total accounts payable) and $2,475,135 (46%
      of
      total accounts payable), respectively.




***Property
      and Equipment***




Property
      and equipment are stated at cost, less accumulated depreciation and
      amortization. Depreciation is computed using the straight-line method over
      the
      estimated useful lives of the respective assets which average from 3-7 years.
      Leasehold improvements are amortized over the lesser of the lease term or the
      estimated useful lives of the related assets, generally 5 years. Expenditures
      for repairs and maintenance are expensed as incurred. Gross assets as of October
      31, 2003 and 2002 amounted to approximately $103,787 and $74,000, respectively,
      and accumulated depreciation amounted to approximately $22,921 and $39,920,
      respectively. The net book value as of October 31, 2003 and 2002 of $80,866
      and
      $34,080, respectively, is included in other assets.




***Intangible
      Assets and Other Long-Lived Assets***




The
      Company assesses the impairment of its intangible assets that have a defined
      life and other long-lived assets in accordance with Statement of Financial
      Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets” (“SFAS 144”). Pursuant to SFAS 144, the Company
      identifies and records impairment losses, as circumstances dictate, on
      long-lived assets used in operations when events and circumstances indicate
      that
      the assets might be impaired and the discounted cash flows estimated to be
      generated by those assets are less than the carrying amounts of those assets.
      In
      the event that assets are found to be carried at amounts which are in excess
      of
      estimated future cash flows, the assets will be adjusted for impairment to
      a
      level commensurate with the discounted cash flow analysis of the underlying
      assets. The Company determined that the Solo-Safe Safety Syringe was impaired
      as
      of October 31, 2002 and, as a result, wrote the carrying value of the asset
      down
      to zero. See Note 8.




***Income
      Taxes***




The
      Company provides for deferred income taxes in accordance with SFAS No. 109,
      “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires an asset and
      liability approach for financial accounting and reporting for income taxes
      based
      on tax effects of differences between the financial statement and tax bases
      of
      assets and liabilities, based on enacted rates expected to be in effect when
      such basis differences reverse in future periods. Deferred tax assets are
      periodically reviewed for realizability. Valuation allowances are recorded
      when
      realizability of deferred tax assets is not likely.




F-13




***Foreign
      Currency Translation and Comprehensive Income (Loss)***




The
      financial statements of the Company’s joint venture company, Medi-Hut
      International, are translated in accordance with Statement of Financial
      Accounting Standards No. 52, “Foreign Currency Translation.” ** The
      reporting currency for the Company is the U.S. dollar. The functional currency
      of Medi-Hut International is the South Korean Won. Accordingly, the assets
      and
      liabilities of the Company’s investment are translated into U.S. dollars using
      the exchange rate in effect at each balance sheet date. Revenue and expense
      accounts generally are translated using an average rate of exchange during
      the
      period. Foreign currency translation adjustments are accumulated as a component
      of other comprehensive loss as a separate component of stockholders’ equity.




***Stock-Based
      Compensation***




As
      permitted under the SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”), which
      replaces 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.




The
      Company did not grant any options to employees during the fiscal year ended
      October 31, 2003. During the fiscal year ended October 31, 2003, the Company
      recognized $681,094 of consulting expense related to the warrant issued to
      Century Capital on February 1, 2003 (see Note 12). In addition, during the
      fiscal year ended October 31, 2003, the Company recognized $21,040 of consulting
      expense related to the warrants issued to the Company’s directors, other than
      David R. LaVance and Thomas S. Gifford, on July 24, 2003 and $7,480 of
      compensation expense related to options granted to an employee in the prior
      fiscal year. See Note 12.




F-14


The
      following table illustrates the effect on net loss and loss per share if the
      fair value based method had been applied to all awards made prior to the fiscal
      year ended October 31, 2003.




**Year
                Ended October 31,****2003**Reported
                net loss
            
            $
            (2,437,036
            )Stock-based
                employee compensation expense included in net income, net of related
                tax
                effects
            
            
            7,480Stock-based
                employee compensation determined under the fair value based method,
                net of
                related tax effects
            
            
            (9,263
            )Pro
                forma net loss
            
            $
            (2,438,819
            )Basic
                and diluted net loss per share:As reported
            
            $
            (0.17
            )Pro forma
            
            $
            (0.17
            )





***Net
      Loss Per Common Share***




Basic
      net
      loss per share is computed by dividing 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 fiscal year ended October 31, 2003,
      the Company incurred a net loss. Accordingly, the weighted average number of
      shares outstanding for both the basic and the diluted income per share
      computation is the same. As of October 31, 2003, total potential dilutive
      securities included 2,880,000 warrants and 13,200 options.




A
      reconciliation between the numerators and denominators of the basic and diluted
      income per common share is as follows:




**Year
                Ended October 31,**
              **2003**Net
                loss (numerator)
            
            $
            (2,437,036
            )Weighted
                average common shares (denominator for basic income per
                share)
            
            
            14,384,811Effect
                of dilutive securities:Stock
                options
            
            
            —Warrants
            
            
            —Weighted
                average common and potential common shares outstanding
            
            
            14,384,811Basic
                and diluted net loss per share
            
            $
            (0.17
            )




F-15


***Recent
      Accounting Pronouncements***




In
      January 2003, the Financial Accounting Standards Board (the “FASB”) issued
      Interpretation No. 46, “Consolidation of Variable Interest Entities,” which
      is an interpretation of Accounting Research Bulletin No. 51, “Consolidated
      Financial Statements.” to expand upon and strengthen accounting guidance that
      addresses when a company should include in its financial statements the assets,
      liabilities and activities of another entity. The consolidation requirements
      of
      FIN 46 apply immediately to variable interest entities created after January
      31,
      2003 and to older entities in the first fiscal year or interim period beginning
      after December 15, 2003. Certain of the disclosure requirements apply in all
      financial statements issued after January 31, 2003, regardless of when the
      variable interest entity was established.




In
      May 2003, SFAS No. 150, “Accounting for Certain Financial Instruments
      with Characteristics of both Liabilities and Equity” (“SFAS 150”) was issued.
      This statement requires redeemable preferred stock to be classified, in certain
      circumstances, as a liability upon adoption by a public company at the beginning
      of the first interim period beginning after June 15, 2003. SFAS 150 provides
      that mandatory redeemable preferred stock should be classified as a liability
      if
      it embodies an unconditional obligation requiring the issuer to redeem the
      shares by transferring its assets at a specified or determinable date or upon
      an
      event certain to occur. The Company has not issued mandatory redeemable
      preferred stock. The Company does not believe that the provisions of SFAS 150
      will have a material impact on the Company’s results of operations or financial
      position.




In
      October 2004, the FASB concluded that the proposed Statement 123R *,* “Share-Based
      Payment,” 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 will not have to adopt Statement 123R until the fiscal year ending
      October 31, 2007.




In
      November of 2004, the FASB issued SFAS No. 151, “Inventory Costs” (“SFAS 151”),
      which amends the guidance in Accounting Research Bulletin No. 43, Chapter 4,
      “Inventory Pricing” (“ARB No. 43”), 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 No. 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 believe that the adoption of SFAS 153 will have
      a
      material impact on the Company’s consolidated results of operations or financial
      condition.




F-16




The
      FASB
      has issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No.
      154”), replacing 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 presently does not
      believe there will be any impact from the adoption of this new statement on
      its
      financial statements.




**6.**  **Medi-Hut
      International**




***Investment
      in Joint Venture***




On
      November 16, 2000, the Company entered into a joint venture agreement (the
      “JVA”) with COA International Ind., Inc. (“COA”), a corporation organized and
      existing under the laws of the Republic of Korea (“Korea”), to establish
      Medi-Hut International. Medi-Hut International, a corporation organized and
      existing under the laws of the Korea, was created by the parties in order to
      construct a manufacturing facility in Korea capable of manufacturing the
      Company’s Elite Safety Syringe and other standard syringes. The Company
      contributed $1,000,000 for a 44% stock ownership interest in Medi-Hut
      International and COA contributed $400,000 for a 56% stock ownership in Medi-Hut
      International. The Company accounts for this investment under the equity method
      of accounting. The Company evaluates its equity method investment for loss
      in
      value on an annual basis. The carrying value of the equity investee would be
      reduced if impairment in value is deemed to be other than temporary. Based
      upon
      management’s evaluation of certain criteria, the Company has concluded that the
      investment in this joint venture has been impaired and has written down the
      value of the investment to $0 as of October 31, 2003 and 2002.




***Note
      Receivable - Related Party***




On
      September 18, 2003, the Company entered into a loan agreement with Medi-Hut
      International, its joint venture partner, to memorialize certain financial
      assistance that Medi-Hut had been providing to Medi-Hut International during
      the
      period from June 7, 2002 through February 28, 2003. In June 2002 and February
      2003, the Company provided Medi-Hut International with $300,000 and $150,000,
      respectively, in working capital to fund the Medi-Hut International 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.
      Interest accrues at a rate of 4% per annum through December 31, 2004; 5% per
      annum for the period January 1, 2005 through December 31, 2005 and 6% per annum
      after January 1, 2006. As of October 31, 2003, the Company had reserved for
      the
      entire balance of principal ($450,000) and interest ($20,477) due to the
      financial condition of Medi-Hut International. As of October 31, 2002, the
      Company had reserved for the entire balance of principal ($300,000) and interest
      ($4,318) due to the financial condition of Medi-Hut International.




F-17




***Return
      of Defective Inventory***




On
      September 18, 2003, the Company entered into an agreement with Medi-Hut
      International to return to Medi-Hut International certain 3cc Elite Safety
      Syringes manufactured by Medi-Hut International that were determined to be
      defective. Pursuant to the agreement, the Company returned $220,855 of Elite
      Safety Syringes to Medi-Hut International. Medi-Hut International agreed to
      reimburse the Company $220,855 by granting the Company a 5% discount off of
      the
      purchase price for each future shipment of Elite Safety Syringe products until
      the obligation was repaid by Medi-Hut International. As of October 31, 2003,
      none of the $220,855 had been reimbursed to the Company since the Company had
      not ordered any Elite Safety Syringes. As of October 31, 2002, the Company
      had
      written-off $98,244 of inventory related to the defective 3cc Elite Safety
      Syringes, which represented 100% of the Elite Safety Syringe inventory as of
      that date.




***Non-Exclusive
      License Agreement***




On
      September 18, 2003, the Company, COA and Medi-Hut International entered into
      an
      agreement under which the Company granted a non-exclusive license to Medi-Hut
      International to make, manufacture and export the Elite Safety Syringe. The
      territorial boundary of this license is limited to within Korea. In accordance
      with the license, Medi-Hut International must obtain the Company’s permission
      prior to any sales to a third party. Medi-Hut International is to pay to the
      Company a royalty based upon the total net sales under the license. The royalty
      amount is to be negotiated in good faith at the time of such sales.




**7.**  **Distribution
      Rights**




On
      November 20, 2001, as amended on February 7, 2002 and April 3, 2002, the Company
      entered into an exclusive license agreement with Syntho. Pursuant to the Syntest
      Agreement, the Company acquired the exclusive distribution rights to Syntest,
      a
      hormone replacement therapy drug manufactured by Syntho. The Company paid Syntho
      $2,500,000 and agreed to purchase the Syntest product at a price per unit as
      agreed upon by the parties. The term of the Syntest Agreement was for a period
      of five years commencing with the first commercial sale of the Syntest product,
      which occurred on October 14, 2002.




In
      March
      2003, regular sales of Syntest ceased when Syntho refused, beginning in January
      2003, to sell any additional product to the Company resulting in the
      commencement of litigation by the Company against Syntho and other parties
      on
      May 12, 2003. The Company’s initial investment of $2,500,000 was to be amortized
      over the five year life of the Syntest Agreement, commencing on October 14,
      2002
      which was the date of the first commercial sale of the product. On October
      17,
      2005, the Company sold its distribution and other rights and business with
      respect to Syntest, to Breckenridge. In consideration for the sale of such
      rights and the other benefits provided under the purchase and settlement
      agreement between Breckenridge and the Company,  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. The
      difference between the original purchase price of $2,500,000 and the amount
      received through the sale of the distribution rights to Breckenridge has been
      written off as of the fiscal year ended October 31, 2002. See Note
      15.




F-18




**8.**  **Product
      Acquisition**




On
      February 25, 2002, the Company acquired certain intellectual property related
      to
      the Solo-Safe TM Safety
      Syringe from Spectrum Biotech, Inc. (“Spectrum”). In consideration for the
      issued patents, patents pending and the U.S. Food and Drug Administration
      (“FDA”) 510(k) premarket notification related to the Solo-Safe TM Safety
      Syringe, the Company issued 700,000 shares of restricted common stock to the
      shareholders of Spectrum based on a price per share of $5.00 for a total
      purchase price of $3,500,000. The Company recorded the purchase as an intangible
      asset as follows: $3,450,000 related to the cost of the Solo-Safe TM Safety
      Syringe issued United States Patents and $50,000 related to the cost of the
      Solo-Safe TM Safety
      Syringe FDA 510(k) premarket notification.




Based
      on
      the Company’s financial performance in fiscal 2002, the Company undertook an
      analysis of the likelihood of recovering the carrying amount of the Solo-Safe
      intangible assets in accordance with SFAS 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets.” The Company engaged a third party asset
      valuation firm to conduct the analysis. The impairment analysis indicated,
      based
      on the Company’s estimated future undiscounted cash flows, the Company would not
      be able to recover any of the carrying amount of intangible assets related
      to
      the Solo-Safe TM Safety
      Syringe technology acquired by the Company on February 26, 2002 for $3,500,000.
      As a result, as of October 31, 2002, the Company recognized an impairment loss
      of $3,500,000 against its previously recorded intangible assets.




**9.**  **Investment
      in Private Company**




In
      August
      2002, the Company completed a $195,000 investment in a development stage medical
      technology company, A.L. Tech Biomedical, Inc. (“AL Tech)”). In exchange for its
      investment, the Company received a 6.7% interest in AL Tech in the form of
      common shares. Due to a number of factors, including the early development
      stage
      of AL Tech’s technology and the insolvent financial state of AL Tech, the
      Company recognized an impairment loss of the entire $195,000 investment as
      of
      October 31, 2002.




**10.**  **Income
      Taxes**




Significant
      components of the Company’s deferred tax assets as of October 31, 2003 and 2002
      are shown below. In determining the realizability of the Company’s deferred tax
      assets, the Company considered numerous factors, including historical
      profitability, estimated future taxable income and the industry in which it
      operates. At October 31, 2003 and 2002, a valuation allowance was recorded
      to
      fully offset the net deferred tax asset, as it was determined by management
      that
      the realization of the deferred tax asset was not likely to occur in the
      foreseeable future. The change in the valuation allowance for fiscal 2003 was
      an
      increase of $972,791 attributable primarily to net operating losses.




F-19




**October
                31,**
            ****
            **October
                31,**
            ********
            ****
            **2003**
            ****
            **2002**Net
                operating loss
            
            $
            1,839,403
            
            $
            560,057Write-down
                of impaired assets
            
            
            2,106,569
            
            
            2,106,569Reserve
                on note receivable - related party
            
            
            187,909
            
            
            121,545Reserve
                on accounts receivable - related party
            
            
            —
            
            
            303,063Accrual
                for class action lawsuit settlement
            
            
            211,402
            
            
            211,402Accrual
                for sales discounts
            
            
            —
            
            
            188,201Other
                reserves
            
            
            18,038
            
            
            18,038Depreciation
                and amortization
            
            
            27,555
            
            
            19,759Consulting
                expense
            
            
            —
            
            
            176,135Consulting
                expense related to warrants
            
            
            272,029
            
            
            —Other
            
            
            29,589
            
            
            14,934Total
                gross deferred tax assets
            
            
            4,692,494
            
            
            3,719,703Valuation
                allowance
            
            
            (4,692,494
            )
            
            (3,719,703
            )Net
                deferred tax assets
            
            $
            —
            
            $
            —





As
      of
      October 31, 2003, the Company had federal and state operating losses of
      approximately $5,145,388 and $5,131,321, respectively, which will expire as
      follows:





**Federal**
            
            **State****Year
                expiring**
            
            **Amount**
            
            **Year
                expiring**
            
            **Amount**2021
            
            $
            980,973
            
            
            2008
            
            $
            966,9062022
            
            
            1,402,246
            
            
            2009
            
            
            1,402,2462023
            
            
            2,762,169
            
            
            2010
            
            
            2,762,169$
            5,145,388
            
            
            
            
            $
            5,131,321





Utilization
      of the net operating loss carryforwards may be subject to a substantial annual
      limitation due to the ownership change limitations provided by the Internal
      Revenue Code of 1986, as amended (the “Internal Revenue Code”), and similar
      state provisions. The Company has not performed a detailed analysis to determine
      whether an ownership change under Section 382 of the Internal Revenue Code
      occurred. The effect of an ownership change would be the imposition of an annual
      limitation on the use of net operating loss carryforwards attributable to
      periods before the change.




**11.**  **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, 2005, the Company and Century
      Capital entered into an amended and restated Consulting Service Agreement,
      pursuant to which Messrs. LaVance and Gifford provide services to the Company
      as
      executive management. For the fiscal year ended October 31, 2003, the Company
      was billed $688,500 for consulting services rendered by Century Capital.




F-20




The
        Company also reimbursed Century Capital for expenses incurred in conjunction
        with performing the consulting services and issued a warrant to purchase
        1,500,000 shares of common stock to Century Capital (see Note 12). As of
        the
        fiscal year ended October 31, 2003, the Company owed Century Capital $4,115,
        which amount was paid in full by the Company in November 2003. In addition,
        as
        of the fiscal year ended October 31, 2003 the Company accrued $93,750 related
        to
        the minimum 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 (see Note 14). This amount was paid in full by the
        Company during the fiscal years ended October 31, 2004 and 2005.


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 November 2002 and January 2003, the Company purchased
      Elite Safety Syringes from Medi-Hut International for a total purchase price
      of
      $100,002. This amount was paid by the Company during November 2002 and February
      2003. As of the fiscal year ended October 31, 2003, there were no accounts
      payable to Medi-Hut International.




Joseph
      A.
      Sanpietro is the Company’s founder and former Chief Executive Officer and
      Chairman whose employment was terminated by the Company on March 21, 2003.
      On
      March 28, 2003, the Company entered into a consulting agreement with Mr.
      Sanpietro in order to facilitate the transition of certain product knowledge
      and
      relationships to the Company’s new management team. The agreement had no term
      and services rendered by Mr. Sanpietro were billed to the Company at an hourly
      rate. The Company ceased using Mr. Sanpietro’s services in May 2003. For the
      fiscal year ended October 31, 2003, the Company was billed $20,815 for
      consulting services rendered by Mr. Sanpietro, which amounts were paid in full
      by the Company as of October 31, 2003. There were no amounts owed by the Company
      to Mr. Sanpietro as of October 31, 2003.




On
      April
      30, 2003, Mr. Sanpietro, assigned to the Company certain intellectual property
      owned by Mr. Sanpietro related to the Company’s Elite Safety Syringe. In
      exchange for nominal consideration, Mr. Sanpietro assigned to the Company patent
      number 5,562,626 and patent application number 09/488807.




James
      G.
      Aaron, a member of the Company’s Board of Directors as of the fiscal year ended
      October 31, 2003 and 2002, is a shareholder of the law firm of Ansell Zaro
      Grimm
& Aaron, P.C., which provided legal services to Medi-Hut during the fiscal
      year ended October 31, 2003. For the fiscal year ended October 31, 2003, the
      Company was billed $16,920 for legal services rendered by Ansell, Zaro, Grimm
      & Aaron, PC, which amounts were paid in full by the Company as of October
      31, 2003. There were no amounts owed by the Company to Ansell, Zaro, Grimm
&
Aaron, PC as of October 31, 2003. As of October 31, 2002, the Company owed
      Ansell Zaro Grimm & Aaron, P.C. $7,107 for legal services rendered during
      fiscal 2002. This amount was paid in full by the Company during its fiscal
      year
      ended October 31, 2003.




Lawrence
      P. Marasco, the Company’s former Vice President of Sales and Marketing whose
      employment was terminated by the Company on March 12,2003, 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 fiscal
      year
      ended October 31, 2003, the Company purchased product with a total purchase
      price of $25,164 from Larval and sold product to Larval for a total sales price
      of $446,074. As of October 31, 2003, there were no accounts payable to Larval
      by
      the Company and no accounts receivable by the Company from Larval. During fiscal
      year ended October 31, 2002, the Company purchased product and sold product
      to
      Larval. The actual amount of products purchased from Larval and sold to Larval
      cannot be definitively determined due to the limitation on financial reporting
      discussed above in Note 3. As of October 31, 2002, accounts receivable from
      Larval was $479,339 which was collected in full during fiscal year ended October
      31, 2003. The Company ceased all business with Larval during the year ended
      October 31, 2003.




F-21




Robert
      Russo, director of the Company during the fiscal year ended October 31, 2002,
      provided accounting services to the Company through his accounting firm, Koenig,
      Russo & Associates LLC (“Koenig”). Mr. Russo is the managing member of
      Koenig. As of October 31, 2002, the Company owed Koenig $138 for Mr. Russo’s
      services rendered during fiscal 2002. This amount was paid in full by the
      Company during its fiscal year ended October 31, 2003.




**12.**  **Stockholders’
      Equity**




***Stock
      Option Plan***




On
      July
      5, 2002, the shareholders approved the Company’s 2002 Equity Incentive Plan (the
“Equity Incentive Plan”), effective as of January 1, 2002. The Equity Incentive
      Plan was placed into effect in order to promote the long-term success of the
      Company and to (1) encourage employees, independent directors and consultants
      of
      the Company to focus on critical long-term objectives, (2) encourage the
      attraction and retention of employees, independent directors and consultants
      with exceptional qualifications, and (3) link employees, independent directors
      and consultants directly to shareholders’ interests through increased stock
      ownership.




The
      Equity Incentive Plan provides for awards in the form of restricted shares,
      incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”) (ISOs and
      NSOs are sometimes collectively referred to as “Options”) and stock appreciation
      rights (“SARs”). The aggregate number of shares of common stock which may be
      awarded under the Equity Incentive Plan is two million (2,000,000).




Incentive
      Stock Options (ISOs)




Only
      employees of the Company are eligible to receive grants of ISOs. Unless
      otherwise provided in a stock option agreement, the first $100,000 of optioned
      shares that are part of an option grant and can be exercised first in a given
      year shall be considered ISOs, and the remainder shall be considered NSOs.
      The
      exercise price of an ISO may not be less then 100% of the fair market value
      of a
      share of common stock on the date of grant. The term of an ISO shall in no
      event
      exceed ten years from the date of grant.




Non-Statutory
      Stock Options (NSOs)




Employees,
      independent directors and consultants of the Company are eligible to receive
      grants of NSOs. Option grants to any optionee in a single fiscal year of the
      Company cannot cover more than 500,000 shares of common stock (750,000 shares
      of
      common stock for new employees in the fiscal year of the Company in which
      service as an employee first commences). Each individual stock option agreement
      shall specify the exercise price for the awards as determined by the Company’s
      Board of Directors (the “Board”). Options may be awarded in combination with
      SARs.




F-22




Automatic
      Option Grants to Independent Directors




Upon
      the
      conclusion of each annual meeting of the Company’s shareholders commencing in
      2002, each independent director who continues to serve on the Board after such
      annual meeting shall receive an NSO at the discretion of the Board. All NSOs
      granted to an independent director shall also become exercisable in full in
      the
      event of: (a) the termination of such independent director’s service because of
      death, total and permanent disability or retirement at or after age 65; or
      (b) a
      change in control with respect to the Company, with certain exceptions. The
      exercise price under all NSOs granted to an independent director shall be equal
      to 100% of the fair market value of a share of common stock on the date of
      grant. All NSOs granted to an independent director shall terminate on the
      earlier of (1) the 6 th anniversary of the date of grant or (2) the date 12 months after the termination
      of such independent director’s service for any reason. The Board may permit an
      independent director to elect to receive his or her annual retainer payments,
      if
      any, and/or meeting fees from the Company in the form of cash, NSOs, or
      restricted shares or a combination thereof, as determined by the
      Board.




Stock
      Appreciation Rights




SARs
      granted to any optionee in a single fiscal year cannot cover more than 500,000
      shares of common stock (750,000 shares of common stock for new employees in
      the
      fiscal year of the Company in which service as an employee first commences).
      Each SAR agreement shall specify the exercise price. SARs may be awarded in
      combination with Options, which may vary in accordance with a predetermined
      formula while the SARs are outstanding. A SAR may be included in an ISO only
      at
      the time of grant but may be included in an NSO at the time of grant or
      thereafter. Upon exercise of a SAR, the optionee shall receive from the Company
      (a) shares of common stock, (b) cash, or (c) a combination of common stock
      and
      cash, as the Board shall determine.




Restricted
      Shares




The
      holders of restricted shares shall have the same voting, dividend and other
      rights as the Company’s shareholders, subject to any special restrictions
      contained in the restricted share agreement.




The
      Equity Incentive Plan also contains customary protection against dilution.
      Options and SARs shall terminate immediately prior to the dissolution or
      liquidation of the Company. Unless the applicable agreement provides otherwise,
      in the event of any change in control, the vesting and exercisability of each
      outstanding award shall automatically accelerate so that each such award shall,
      immediately prior to the effective date of the change in control, become fully
      exercisable for all of the shares of common stock at the time subject to such
      award and may be exercised for any or all of those shares as fully-vested common
      stock, except under certain circumstances.




As
      of
      October 31, 2003 and 2002, the Company had available to issue 2,000,000 options
      under the Equity Incentive Plan.




F-23




Prior
      to
      the adoption of the Equity Incentive Plan, the Company granted stock options
      to
      Laurence M. Simon, the Company’s former Chief Financial Officer, to purchase an
      aggregate of 20,000 shares of common stock at $6.75 per share. Options for
      3,680
      shares vested on December 31, 2001 and the remainder vested at a rate of 680
      common shares each month through December 31, 2003. Of these options, 6,800
      shares that were not vested terminated upon the Company’s termination of Mr.
      Simon’s employment on March 21, 2003.





The
      following table summarizes information about vested stock options
      outstanding.





**October
                31,**
              **2003**
            
            **October
                31,**
              **2002**Vested
                stock options
            
            
            13,200
            
            
            10,480Weighted
                average exercise price
            
            $
            6.75
            
            $
            6.75





The
      following table summarizes information about stock options outstanding at
      October 31, 2003. These options were subsequently terminated in 2004 by the
      Company (see Note 15).





**Exercise
                Price**
            
            **Options
                Outstanding**
            
            **Options
                Vested**
            
            **Weighted
                AverageRemaining Contractual Life
                (Years)**$6.75
            
            20,000
            
            13,200
            
            1.1




***Warrants
      to Purchase Common Stock***




On
      October 5, 2001, the Company entered into an agreement to sell 600,000 units
      to
      Empire Fund Managers, LLC (“Empire”) in accordance with the provisions of
      Section 4(2) and Regulation D of the Securities Act of 1933, as amended (the
      “Securities Act”). The purchase price of each unit was $5.30. Each unit was
      comprised of one share of the Company's common stock and one warrant to purchase
      a share of common stock at a purchase price of $6.75. The warrants were
      exercisable beginning on the closing date of the transaction and extended over
      a
      two year period ending October 5, 2003. Upon the closing of the transaction,
      the
      Company recorded a stock subscription receivable, reflected as a contra-equity
      account on the balance sheet, for $3,000,000 ($3,180,000 less a 6% commission).
      During fiscal year ended October 31, 2002, the Company received payment for
      400,000 units or $2,000,000. On June 17, 2002, the Company cancelled the
      remaining 200,000 units issued due to Empire’s failure to make payment on the
      remaining $1,000,000 of receivable. The 200,000 shares within the cancelled
      units were retired by the Company on October 29, 2002. As of October 31, 2003
      and 2002, 400,000 warrants with an exercise price of $6.75 were
      outstanding.





On
      August
      1, 2002, the Company engaged Muhammed Malik, a consultant, to provide assistance
      in adding products to the Company’s distribution pipeline. The term of the
      agreement was for thirty-six months commencing on August 1, 2002 and ending
      on
      July 31, 2005, unless terminated sooner by either of the parties. As
      compensation for these future services, on August 1, 2002, the Company issued
      to
      Mr. Malik a warrant to purchase 90,000 shares of common stock of the Company,
      exercisable at $4.50 per share and a warrant to purchase 90,000 shares of common
      stock of the Company, exercisable at $2.45 per share. Each warrant was fully
      vested on the date of issuance and each is exercisable until October 31, 2006.
      The fair value of each warrant issued was estimated on the grant date using
      the
      Black-Scholes pricing model with the following weighted average assumptions;
      dividend yield of 0%, risk-free interest of 3.03%; volatility of 75.97%; and
      an
      expected life of 4.25 years for the warrants. The warrants had a fair value
      of
      approximately $215,122 on the date of issuance. Such amount was expensed as
      of
      October 31, 2002.





F-24




Pursuant
      to the Consulting Services Agreement, effective as of February 1, 2003, between
      the Company and Century Capital, on February 1, 2003 a warrant to purchase
      1,500,000 shares of common stock of the Company was issued to Century Capital.
      The warrant had a ten year term and was exercisable at $1.34 per share (the
      “Underlying Purchase Price”). The per share purchase price was 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 then existing Underlying Purchase Price. 375,000 shares of common stock
      underlying the warrant vested immediately upon issuance with another 46,875
      shares vesting on and after the last day of each month commencing February
      28,
      2003 and ending January 31, 2005. 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 warrants 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. For
      the
      fiscal year ended October 31, 2003, the Company recorded $681,094 of consulting
      expense associated with warrants that vested pursuant to the warrant
      agreement.




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, subject to adjustment. The shares of common stock
      underlying each warrant vest equally on and after the date of issue (66,666),
      on
      and after the first anniversary date (66,666) and on and after the second
      anniversary date (66,668). The fair value of the warrant was 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.




As
      of
      October 31, 2003, none of the warrants had been exercised and warrants to
      purchase 2,880,000 shares of the Company’s common stock were outstanding at a
      weighted average exercise price of $1.32 per share (see Note 15).





***Treasury
      Stock***




On
      June
      6, 2002, the Company’s Board of Directors authorized the Company to purchase up
      to 1,500,000 shares of its common stock in the open market. As of October 31,
      2003 and 2002, the Company had purchased 192,300 and 144,900 shares,
      respectively, for total consideration of $419,523 and $363,717,
      respectively.




F-25




***Notes
      Receivable on Exercised Warrants***




On
      October 1, 2000, as amended on February 5, 2001, the Company entered in an
      agreement with Columbia Financial Group (“Columbia”), a public relations firm.
      As part of the compensation to Columbia, the Company issued a warrant to
      purchase 600,000 shares of common stock of the Company at an exercise price
      of
      $2.50 per share. The fair value of the warrant issued was estimated on the
      grant
      date using the Black-Scholes pricing model with the following weighted average
      assumptions: dividend yield of 0%; risk free interest of 4.8%; volatility of
      33.3% and an expected life of 6 months. The warrant had a fair value of
      approximately $2,512,942 on the date of grant.




On
      May 1,
      2001, the warrant was fully exercised and 600,000 shares of the Company’s common
      stock were issued to Columbia in exchange for a $1,500,000 promissory note
      bearing interest at 8% per annum due May 1, 2002, subject to certain
      acceleration provisions. The Company recorded the note as a contra-equity
      account. On March 5, 2002, pursuant to the terms of the promissory note, the
      Company demanded payment in full by March 15, 2002. Columbia failed to make
      payment on the note by March 15, 2002 and on March 26, 2002, the Company filed
      a
      civil complaint against Columbia in the United States District Court for the
      District of New Jersey. On May 31, 2002, the Company and Columbia entered into
      a
      settlement agreement whereby, among other provisions, a principal amount of
      $1,620,000 bearing interest at 3% per annum would be paid by Columbia to the
      Company pursuant to a payment schedule commencing May 31, 2002 and ending
      November 1, 2004. Columbia paid two scheduled payments totaling $50,000 and
      then
      defaulted on the remaining payments in July 2002. In October 2002, the Company
      was informed that Columbia filed for bankruptcy. As a result, the Company
      determined that it was unlikely that the promissory note issued by Columbia
      would be paid. Accordingly, the Company wrote-off the receivable as of October
      31, 2002.




**13.**  **Credit
      Facilities**




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. Interest on the outstanding balance
      of
      the Note was charged at prime. In addition, the Company secured a $2,000,000
      line of credit (“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 under 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. As of October 31, 2003, the Company does not have
      a
      lending relationship with a commercial bank.




F-26




**14.**  **Commitments**




***Consulting
      Agreement with Century Capital***




The
      Company entered into a Consulting Services Agreement with Century Capital,
      effective as of February 1, 2003, in order to engage Century Capital to provide
      (1) general corporate and business advisory services, (2) strategic business
      advisory services, and (3) financial advisory services to the Company. The
      Consulting Services Agreement was approved by the Board. The initial term of
      the
      Consulting Services Agreement was two years, which ended on January 31, 2005.
      All fees related to the Consulting Services Agreement were expensed by the
      Company during the period of the agreement. See Note 15 - Amended and Restated
      Agreement Dated February 1, 2005.




David
      R.
      LaVance and Thomas S. Gifford are the sole members of Century Capital. On March
      21, 2003, pursuant to the Consulting Services Agreement, the Board appointed
      Mr.
      LaVance as Chief Executive Officer of the Company, and Mr. Gifford as Executive
      Vice President and Chief Financial Officer of the Company. Mr. LaVance and
      Mr.
      Gifford were also appointed as directors of the Company to fill vacancies on
      the
      Board as of the same date. Mr. LaVance assumed the position of Chairman of
      the
      Board when he was appointed as a director.




During
      the initial term of the Consulting Services Agreement, Century Capital received
      a monthly consulting fee in the amount of $75,000 and was reimbursed for all
      reasonable and customary business expenses. The Company also issued Century
      Capital a ten year warrant to purchase 1,500,000 shares of the Company’s common
      stock (see Notes 12 and 15). In addition, for each one year period commencing
      on
      February 1 and ending on January 31 during the term of the Consulting Services
      Agreement, Century Capital was entitled to be paid a minimum annual cash bonus
      in an amount not less than $125,000. Century Capital was eligible to earn an
      annual bonus in excess of $125,000 at the discretion of the Board. As of October
      31, 2003, the Company accrued $93,750 related to the minimum annual bonus due
      to
      Century Capital.




During
      the entire term of the Consulting Services Agreement, Mr. LaVance and Mr.
      Gifford were treated as independent contractors for purposes of compensation,
      were not be paid any salary or compensation directly by the Company and did
      not
      participate in any of the Company’s employee benefit plans.




As
      provided in the original Consulting Services Agreement, Mr. LaVance and Mr.
      Gifford were added as covered parties under the Company’s directors’ and
      officers’ liability insurance policies (“D&O Policies”). The Company is
      required to maintain such D&O Policies while Mr. LaVance and Mr. Gifford
      hold positions as officers and/or directors of the Company and for a period
      of
      two years following termination of their service in such positions. The Company
      also agreed in the original Consulting Services Agreement to indemnify and
      hold
      harmless Century Capital and its representatives, including Mr. LaVance and
      Mr.
      Gifford, from and against any and all claims, demands, liabilities, obligations,
      losses, fines, and expenses, including reasonable attorneys’ and accountants’
fees and expenses incurred in connection with the Company’s failure to perform
      under the original Consulting Services Agreement or any threatened, pending
      or
      completed action, suit or proceeding arising out of Century Capital’s
      relationship, or the relationship of any Century Capital representative, with
      the Company.




F-27




***Operating
      Leases***




In
      July
      2002, the Company leased an office facility under a non-cancelable operating
      lease that commenced on November 24, 2002 and was due to expire on November
      24,
      2007, with an option to renew for an additional five year term. The Company
      moved its corporate headquarters to this facility located in Wall Township,
      New
      Jersey in December 2003. On May 6, 2004, the Company reached an agreement with
      the owner of the office facility to terminate the lease (see Note 15). Annual
      future minimum lease obligations for the office facility through the date of
      termination as well as other property and equipment leased by the Company,
      as of
      October 31, 2003, are as follows:




Fiscal
                Year Ended October 31,2004
            
            $
            188,3542005
            
            
            4,2962006
                and thereafter
            
            
            749Total
                Minimum Lease Payments
            
            $
            193,399




***Other
      Commitments***




On
      November 1, 2001, the Company entered into an employment agreement with its
      former Chief Financial Officer, Laurence M. Simon. The term of the employment
      agreement was two years and two months. The employment agreement provided that
      Mr. Simon would receive an annual salary of $100,000. In addition, Medi-Hut
      granted stock options to purchase an aggregate of 20,000 shares of common stock
      at $6.75 per share. Options for 3,680 shares vested on December 31, 2001 and
      the
      remainder vested at a rate of 680 common shares each month through December
      31,
      2003. Of these options, 6,800 terminated upon the Company’s termination of Mr.
      Simon’s employment on March 21, 2003. The Company’s common stock had a fair
      value of $9.50 on the date the options were issued. Accordingly, pursuant to
      APB
      25, the options had an intrinsic value of $55,000, which represents the
      difference between the fair market value of the Company’s stock on the date the
      options were issued and the exercise price of the options. The Company recorded
      the intrinsic value of the options as deferred compensation and amortized the
      deferred compensation pro rata in accordance with the vesting schedule of the
      options until Mr. Simon’s termination on March 21, 2003.




On
      December 14, 2001, the Company entered into an agreement with Bond-Brown Sales
      Design, LLC (“Bond-Brown”) to assist the Company in the identification and
      establishment of relationships with distributors for the Elite Safety Syringe.
      The agreement required the Company to pay Bond-Brown a minimum fee of $10,600
      per month for a minimum of six months commencing on January 21, 2002.
      Thereafter, the agreement continued on a month-to- month basis and was
      terminated by the Company in August 2003. As of October 31, 2003, there were
      no
      amounts owed by the Company pursuant to this agreement.




On
      July
      1, 2002, the Company entered into a license agreement with Cuppy Medical
      Products, Inc. (“Cuppy”), which had a five year term. Pursuant to this license
      agreement, Cuppy granted Medi-Hut the exclusive, non-transferable license to
      manufacture, use, sell and distribute a patented safety engineered intravenous
      catheter system (the “Cuppy Catheter”) within the United States, United States
      Possessions, Canada and Mexico. The Company agreed to pay Cuppy an annual
      royalty of 6% of net sales of the Cuppy Catheter for a period of five years
      commencing July 1, 2002. In addition, upon execution of the license agreement,
      the Company paid $125,000 as an advance against future royalty payments, of
      which $85,000 was non-refundable and $40,000 was refundable in the event the
      Cuppy Catheter did not receive 510(k) premarket notification clearance from
      the
      FDA. Further, the Company agreed to make annual non-refundable payments as
      advances against future royalties as follows: $25,000 on July 1, 2003, $40,000
      on July 1, 2004, $65,000 on July 1, 2005 and $85,000 on July 1, 2006. The
      license agreement also provided that, upon the notification of receipt of 510(k)
      premarket notification clearance from the FDA, the Company would grant and
      issue
      to Cuppy restricted shares of the Company’s common stock with a total fair
      market value of $125,000 and afford the holder of the restricted shares with
      certain registration rights. On November 7, 2003, Cuppy terminated the license
      agreement with the Company due to the Company’s failure to make the $25,000
      license payment that was due on July 1, 2003. The Company does not believe
      it
      has any further payment or other obligations under the terminated license
      agreement nor does it believe it will receive any refunds thereunder. As of
      October 31, 2003 and 2002, the Company had not accrued for any further payments
      due under this license agreement.




F-28




On
      March
      25, 2002, the Company and Making Distribution Intelligent, LLC (“MDI”) entered
      into a logistics services agreement pursuant to which MDI was engaged to
      warehouse the Company’s hormone replacement therapy drug, Syntest, ship the
      product pursuant to the Company’s instructions, bill the Company’s customers and
      provide customer service. The agreement, which commenced on March 25, 2002
      and
      was amended on June 17, 2002, required the Company to pay MDI a one-time fee
      of
      $15,000, a base monthly fee of $12,250 and a series of variable fees based
      on a
      per unit/case/pallet basis for receiving product, storing product, shipping
      product, invoicing customers and accepting returns. On August 29, 2003, the
      Company and MDI entered into a termination and mutual release agreement in
      which
      the parties agreed to terminate the remaining term of the March 25, 2002
      logistics services agreement (21 months resulting in an obligation of $257,250)
      for a one-time payment of $50,000. The parties also agreed to a mutual release
      of all potential claims against each other. As of October 31, 2003 and 2002,
      $0
      and $29,376, respectively, were accrued by the Company related to this
      agreement.




On
      April
      1, 2002, the Company and Schrader Associates entered into a three year brokerage
      agreement in which Schrader Associates agreed to market and sell the Syntest
      products to certain drug wholesalers, drug store chains and managed care
      companies on an exclusive basis, in exchange for a commission that ranged from
      $3.50 to $4.00 per bottle sold by Schrader Associates. There were no fixed
      monthly fees associated with this agreement. All amounts due under this
      agreement related to fiscal 2002 were paid as of October 31, 2002.




**15.**  **Subsequent
      Events**




***Consulting
      Agreements with Century Capital***




Original
      Agreement Dated February 1, 2003 . ** On
      May
      14, 2004, in lieu of the minimum annual cash bonus due Century Capital for
      the
      period that began on February 1, 2003 and ended on January 31, 2004, Century
      Capital agreed to accept the following: (1) $50,000 cash payment to be made
      on
      September 1, 2004; (2) 1,875,000 shares of the Company’s common stock (fair
      market value on the date of issuance was $150,000 based on the closing price
      of
      the Company’s common stock on that date) and (3) the forgiveness of $75,000
      (representing the exercise price) due to the Company from Century Capital
      related to the purchase by Century Capital of 937,500 shares of the Company’s
      common stock underlying the warrant issued to it on February 1, 2003 (see Note
      15 - Warrants to Purchase Common Stock). On February 25, 2005, Century Capital
      agreed to accept 500,000 shares of the Company’s common stock as payment of the
      $50,000 due to Century Capital on September 1, 2004 (fair market value on the
      date of issuance was $15,000 based on the closing price of the Company’s common
      stock on that date).




F-29




Commencing
      July 1, 2004, Century Capital agreed to defer $25,000 of its monthly consulting
      fee for a three month period (through September 30, 2004) in an effort to
      minimize the Company’s cash burn. Century Capital later agreed to continue the
      $25,000 monthly deferment through January 31, 2005, at which point the total
      amount due and owing to Century Capital related to the deferment of its monthly
      consulting fee was $175,000. On November 1, 2004, Century Capital exercised
      warrants to purchase 621,876 shares of the Company’s common stock (421,876
      shares pursuant to the warrant dated February 1, 2003 and 200,000 shares
      pursuant to the warrant dated May 14, 2004 - see Subsequent Events: Warrants
      to
      Purchase Common Stock). The $16,438 due to the Company from Century Capital
      related to these warrant exercises were offset against deferred monthly
      consulting fees due to Century Capital. On February 25, 2005, Century Capital
      agreed to forgive $60,000 of the monthly deferred consulting fees in exchange
      for 600,000 shares of the Company’s common stock (fair market value on the date
      of issuance was $18,000 based on the closing price of the Company’s common stock
      on that date). In addition, on February 25, 2005, Century Capital exercised
      warrants to purchase 390,624 shares of the Company’s common stock (140,624
      shares pursuant to the warrant dated February 1, 2003 and 250,000 shares
      pursuant to the warrant dated February 25, 2005 - see Subsequent Events:
      Warrants to Purchase Common Stock). The $10,312 due to the Company from Century
      Capital as a result of this exercise was offset by the Company against deferred
      monthly consulting fees due to Century Capital. On both May 20, 2005 and August
      25, 2005, Century Capital exercised warrants to purchase 62,500 shares of the
      Company’s common stock (125,000 shares in total) pursuant to the warrant dated
      February 25, 2005. The $3,750 due to the Company from Century Capital as a
      result of these exercises was offset by the Company against deferred monthly
      consulting fees due to Century Capital. In addition, on August 25, 2005, the
      Company issued 1,000,000 shares of the Company’s common stock to Century Capital
      as payment of $50,000 of the deferred monthly consulting fees (fair market
      value
      of the common stock on the date of issuance was $40,000). See Note 15 - Amended
      and Restated Agreement dated February 1, 2005.




During
      the entire term of the original Consulting Services Agreement, Mr. LaVance
      and
      Mr. Gifford were treated as independent contractors for purposes of
      compensation, were not paid any salary or other compensation directly by the
      Company and neither of Mr. LaVance or Mr. Gifford participated in any of the
      Company’s employee benefit plans.




Amended
      and Restated Agreement Dated February 1, 2005 .
      Effective February 1, 2005, the original Consulting Services Agreement was
      replaced by an amended and restated Consulting Services Agreement. Pursuant
      to
      the amended and restated Consulting Services Agreement, Century Capital agreed
      to provide the services of Mr. LaVance and Mr. Gifford as the Company’s
      corporate officers. As provided in the amended and restated Consulting Services
      Agreement, Mr. LaVance will continue to serve as the Company’s President and
      Chief Executive Officer and Mr. Gifford will continue to serve as the Company’s
      Executive Vice President, Chief Financial Officer, Treasurer and Secretary.
      The
      amended and restated Consulting Services Agreement also provides that Mr.
      LaVance and Mr. Gifford will continue to be treated as independent contractors
      for the purposes of compensation, will not be paid any salary or other
      compensation directly by the Company and will not participate in the Company’s
      employee benefit plans.




F-30




The
      initial term of the amended and restated Consulting Services Agreement is one
      year, ending on January 31, 2006. Thereafter, the amended and restated
      Consulting Services Agreement shall continue until either party elects to
      terminate the amended and restated Consulting Services Agreement by providing
      sixty days written notice. As of March 31, 2006, neither the Company nor Century
      Capital has provided notice of termination. During the term of the amended
      and
      restated Consulting Services Agreement, Century Capital is entitled to receive
      a
      monthly consulting fee in the amount of $50,000 and is entitled to be reimbursed
      for all reasonable and customary business expenses. Century Capital is also
      entitled to receive an annual bonus in an amount not less than $125,000 upon
      the
      successful completion of to be determined objectives which are established
      by
      the independent members of the Board and Century Capital.




During
      the term of the amended and restated Consulting Services Agreement and for
      a
      period of twenty-four months after the termination of the amended and restated
      Consulting Services Agreement, Century Capital shall be entitled to receive
      a
      cash bonus upon the consummation by the Company of certain corporate
      transactions. The bonus compensation shall be an amount not less than 2.5%
      of
      the aggregate consideration to be paid in connection with a sale or acquisition
      of the Company or in connection with a change in control of the Company (which
      means a change in more than 50% of the issued and outstanding shares of the
      Company’s common stock). Century Capital shall be entitled to receive the bonus
      compensation for any corporate transaction which commences before, but is
      consummated after, the end of the twenty-four month period following the
      effective termination date of the amended and restated Consulting Services
      Agreement.




Upon
      the
      execution of the amended and restated Consulting Services Agreement, the Company
      issued Century Capital a ten year, non-cancelable warrant to purchase 500,000
      shares of the Company’s common stock at a purchase price of $.03 per share (see
      Note 15 - Warrants to Purchase Common Stock). The warrant had a fair value
      of
      $10,674 on the date of issuance.




Commencing
      July 2005, Century Capital began deferring a portion of its monthly consulting
      fee due pursuant to the amended and restated Consulting Services Agreement
      in
      order to minimize the Company’s cash burn.




***Warrants
      to Purchase Common Stock***




Century
      Capital Warrant Dated February 1, 2003 . ** As
      a
      result of the application of the pricing adjustment, the Underlying Purchase
      Price adjusted to $.08 per share as of May 14, 2004, the date when Century
      Capital exercised its right to purchase 937,500 shares of the Company’s common
      stock underlying the warrant. The $75,000 due from Century Capital to the
      Company as a result of the purchase of the 937,500 shares was forgiven by the
      Company as part of Century Capital’s bonus for the period February 1, 2003
      through January 31, 2004. The Underlying Purchase Price adjusted to $.02 per
      share as of November 1, 2004 when Century Capital exercised its right to
      purchase 421,876 shares of the Company’s common stock underlying the warrant.
      The $8,438 due to the Company from Century Capital as a result of this exercise
      was offset by the Company against monthly consulting fees due and owing to
      Century Capital that had been deferred for payment. On February 25, 2005,
      Century Capital exercised its right to purchase 140,624 shares of the Company’s
      common stock underlying the warrant at $.02 per share. The $2,812 due to the
      Company from Century Capital as a result of this exercise was offset by the
      Company against monthly consulting fees due and owing to Century Capital that
      had been deferred for payment. As of February 28, 2005, all 1,500,000 shares
      underlying the warrant had been purchased.




F-31




Century
      Capital Warrant Dated May 14, 2004 . ** On
      May
      14, 2004, the Company issued Century Capital ten year, non-cancelable warrant
      to
      purchase 700,000 shares of the Company’s common stock at a purchase price of
      $.04 per share. 100,000 shares of the Company’s common stock underlying the
      warrant became available for purchase as of May 14, 2004, with the remaining
      shares underlying the warrant becoming available for purchase upon the
      achievement of specific milestones as follows: 100,000 shares shall be available
      for purchase upon the Company’s receipt of at least $2,000,000 in cumulative
      proceeds related to the Syntho litigation; 100,000 shares shall be available
      for
      purchase upon the filing of the Company’s annual report on Form 10-KSB for the
      fiscal year ended October 31, 2002; 100,000 shares shall be available for
      purchase upon the filing of the Company’s quarterly reports on Form 10-QSB for
      the quarters ended January 31, 2003, April 30, 2003 and July 31, 2003; 100,000
      shares shall be available for purchase upon the Company’s receipt of at least
      $500,000 in cumulative proceeds from the litigation against certain former
      officers, directors and others and/or the litigation against the Rosenberg,
      Rich, Baker, Berman & Company and Koenig accounting firms; 100,000 shares
      shall be available for purchase upon the Company becoming eligible to register
      its common stock pursuant to the Securities Act; and 100,000 shares shall be
      available for purchase upon the acquisition by the Company of a product or
      line
      of business. The warrant had a fair value of approximately $44,211 on the date
      of issuance.




On
      November 1, 2004, Century Capital exercised its right to purchase 200,000 shares
      of the Company’s common stock underlying the warrant. Of the shares purchased,
      100,000 shares became available for purchase on May 14, 2004, the issuance
      date
      of the warrant, and the other 100,000 shares became available for purchase
      prior
      to November 1, 2004 as a result of the Company’s receipt of $500,000 of
      cumulative proceeds from the litigation against certain former officers,
      directors and others that was commenced on December 4, 2003. The $8,000 due
      to
      the Company from Century Capital as a result of this exercise was offset by
      the
      Company against monthly consulting fees due and owing to Century Capital that
      had been deferred for payment.




Century
      Capital Warrant Dated February 25, 2005 .
      Pursuant to the amended and restated Consulting Services Agreement, on February
      25, 2005, a warrant to purchase 500,000 shares of common stock of the Company
      was issued to Century Capital. The warrant has a ten year term and is
      exercisable at $.03 per share until February 25, 2015. The warrant vests as
      follows: (a) 250,000 of the shares of the Company’s common stock underlying the
      warrant became available for purchase as of February 1, 2005; (b) an additional
      20,833 of the shares underlying the warrant became available for purchase on
      the
      last day of each month commencing February 28, 2005 and ending December 31,
      2005
      and (c) 20,837 of the shares underlying the warrant became available for
      purchase on January 31, 2006. The warrant had a fair value of approximately
      $10,674 on the date of issuance.




On
      February 25, 2005, Century Capital exercised its right to purchase 250,000
      shares of the Company’s common stock underlying the warrant. The $7,500 due to
      the Company from Century Capital as a result of this exercise was offset by
      the
      Company against amounts due and owing to Century Capital related to deferred
      monthly consulting fees. On both May 20, 2005 and August 25, 2005, Century
      Capital exercised warrants to purchase 62,500 shares of the Company’s common
      stock (125,000 shares in total). The $3,750 due to the Company from Century
      Capital as a result of these exercises was offset by the Company against
      deferred monthly consulting fees due to Century Capital.




F-32




Director
      Warrants Dated May 14, 2004 .
      On May
      14, 2004, 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 600,000 shares of common stock could be issued pursuant
      to
      these warrants. Each warrant has a five year term and is exercisable at $.04
      per
      share until May 14, 2009. The shares of common stock underlying each warrant
      vest equally on and after the date of issue (66,600) and on and after the first
      anniversary date (133,400). The warrants had an aggregate fair value of
      approximately $32,137 at the date of issuance.




Director
      Warrants Dated February 25, 2005 .
      On
      February 25, 2005, 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 400,000 shares of common stock could be issued
      pursuant to these warrants. Each warrant has a five year term and is exercisable
      at $.03 per share until February 25, 2010. The shares of common stock underlying
      each warrant vest equally on and after the date of issue (100,000) and on and
      after the first anniversary date (100,000). The warrants had an aggregate fair
      value of approximately $6,378 at the date of issuance.




Consultant
      Warrant Dated May 11, 2005 .
      On May
      11, 2005, a warrant to purchase 100,000 shares of common stock of the Company
      was issued to Dr. William Sear, a consultant to the Company, for consulting
      services rendered by Dr. Sear to the Company. The warrant has a five year term
      and is exercisable at $.05 per share until May 11, 2010. All of the shares
      of
      common stock underlying the warrant vested on the date of issuance, May 11,
      2005. As of May 15, 2005, all 100,000 of the shares underlying the warrant
      had
      been purchased. The warrant had a fair value of approximately $2,847 at the
      date
      of issuance.




***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. The Company has 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.




F-33




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.
      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
      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. The Company does not believe there is any merit
      to these counterclaims and will vigorously defend same.




Litigation
      Against Certain Former Officers and Directors and Others . ** On
      December 4, 2003, Medi-Hut 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, Medi-Hut alleged that
      the
      Former Officers caused the Company to suffer significant damage and incur
      substantial costs by engaging in a scheme to overstate Medi-Hut’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 Corp., 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 Medi-Hut 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 .




F-34




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.




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
      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 Pharmaceuticals, Inc. 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 Pharmaceuticals, Inc. 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. The motion with respect to this request has not yet been heard by the
      court.




F-35





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.




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 auditor and principal accounting firm
      from February 1998 to March 2003, excluding a three week period in early 2002,
      and 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.




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 Medi-Hut 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.




F-36




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
      January 18, 2005, a complaint was served on 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. The Company
      intends to vigorously defend this action.




***Other
      Agreements and Events***




Shared
      Services Agreement with Century Capital .
      On May
      1, 2004, the Company relocated its principal offices to 215 Morris Avenue,
      Spring Lake, New Jersey 07762 in order to reduce its monthly operating expenses
      and to more appropriately accommodate its current operations. The Company and
      Century Capital entered into a Shared Services Agreement whereby the Company
      rented three fully furnished, business equipped offices approximating 340 square
      feet inside Century Capital’s existing offices. This agreement commenced on May
      1, 2004 and has a month to month term that requires sixty day written notice
      to
      terminate. The monthly rental is $2,500. Century Capital is owned by David
      R.
      LaVance and Thomas S. Gifford, Medi-Hut’s executive management
      team.




Termination
      of Monmouth/Atlantic Lease .
      On May
      6, 2004, in connection with the relocation of its principal offices, the Company
      and Monmouth/Atlantic Realty Associates, L.L.C. reached an agreement to
      terminate the remaining term of the existing lease (44 months resulting in
      a
      lease obligation of approximately $454,000 plus an additional $154,000 for
      common area charges) for a one-time payment by the Company of $100,000 plus
      the
      forfeiture of the $33,338 security deposit.




Private
      Placement of Convertible Debentures .
      On May
      26, 2005, the Company closed on a private placement of Debentures. The gross
      proceeds received in connection with this private placement were $300,000.
      The
      Debentures have a 5 year term maturing on April 30, 2007 and bear interest
      at a
      rate of 8% per annum. Up to 50% of the aggregate principal amount of the
      Debentures are immediately convertible at the option of the holders at a
      conversion price of $0.10 per share. The remaining 50% of the aggregate
      principal amount of the Debentures are convertible at the option of the holders
      at any time after May 1, 2006 at a conversion price of $0.20 per share. The
      market price of the Common Stock on the date of closing the transaction was
      $.06
      per share.




F-37




Private
      Placement of Common Stock .
      On
      August 25, 2005, the Company closed on a private placement of 4,000,000 shares
      of common stock. The gross proceeds received in connection with this private
      placement were $200,000 ($.05 per share). 3,000,000 shares of common stock
      were
      purchased by Richard Rimer, a private investor, for $150,000. 1,000,000 shares
      of common stock were purchased by John A. Moore, a director of the Company,
      for
      $50,000. The market price of the common stock on the date of closing the
      transaction was $.04 per share.


F-38




**INDEX
      OF EXHIBITS**




Exhibit
                No.
            Description
                of Exhibit2.1
            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).14.1
            Chief
                Executive and Senior Financial Officer Code of Ethics (Incorporated
                by
                reference to Exhibit 14.1 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).21.1
            List
                of Subsidiaries of Medi-Hut.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.




*Constitutes
      a management contract under Section 601 of Regulation S-B.




**The
      text of this exhibit has been omitted. Please see the explanatory note under
      the
      corresponding exhibit number.




E-4