FORWARD-LOOKING STATEMENTS
Except for statements of historical fact, some information in this document contains “forward-looking statements” that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this registration statement because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. The factors listed in the sections captioned “Risk Factors” and “Description of Business,” as well as other cautionary language in this registration statement and events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this registration statement are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).
As used in this Annual Report on Form 10-K, unless the context otherwise requires, the terms the “Company,” “Registrant,” “we,” “us,” “our,” “Medinotec,” “Medinotec Group of Companies” or “MDNC” refer to Medinotec, Inc., a Nevada corporation, and its wholly owned subsidiaries.
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Company Overview
Medinotec Inc. was formed on April 26, 2021, in the State of Nevada. With an effective date of April 26, 2022, we acquired DISA Medinotec Propriety Limited, a South African corporation, from Minoan Medical Proprietary Limited ("Minoan"), a company incorporated in South Africa, and owner of all the capital stock of DISA Medinotec Propriety Limited. We accomplished the acquisition pursuant to the terms and conditions of a Share Exchange Agreement under common control with Minoan whereby we acquired all the capital stock of DISA Medinotec Proprietary Limited in exchange for the issuance of stock at par value and the transfer of the outstanding loan account. The consideration payable of $11 for the outstanding equity and the Medinotec Group of Companies would take on the responsibility of the loan account payable to Minoan at that time of $1,583,661.
This Purchase was concluded between Minoan and a local newly established investment vehicle of Medinotec Inc. called Medinotec Capital Proprietary Limited in South Africa after Medinotec Inc. registered the company as a shelf company by injecting $10,000 into it on December 18, 2021. Medinotec Capital Proprietary Limited serves as the acquisition vehicle for Medinotec Inc on the continent of Africa.
Combined these companies now form the Medinotec Group of Companies.
Our History
Prior to the above, in 2015, DISA Vascular Distribution, an innovative medical device company that specialized in vascular technology for the treatment of coronary artery disease, was established. It was subsequently renamed DISA Medinotec Proprietary Limited. DISA Medinotec Proprietary Limited was situated in Cape Town, South Africa and within walking distance from Groote Schuur Hospital, had been developing stents for the international market since 1998. It has since produced high-quality medical devices through in-depth research and development capabilities (“R&D”) and a total commitment to patient care. Today the products are sold via a network of distributor partners both in South Africa and internationally.
A professional team consisting of our CEO and CFO was recruited to implement and execute the strategy, and an infrastructure of a large manufacturing facility was established, substantially increasing our manufacturing and warehousing capabilities.
Various distributors were appointed, and rights obtained to grow sales internationally, especially in Namibia and Mauritius, as well as the Middle East, Europe, South America and portions of Asia. We plan to establish various networks to export and distribute our products in North America and other FDA comparable countries such as, Australia, Japan and China. The FDA approval that was granted for the Trachealator in November 2021 together with the recent concluded private placement allows for the roll out in the United States to start during the 2023 fiscal year. In addition, we are finalizing multiple patent and trademark applications in several territories, which we believe will give us the ability not only to maintain our intellectual property but also to market our products aggressively.
The manufacture of medical devices for the treatment of vascular and airway diseases is now done from our facility in Johannesburg, South Africa. Raw materials and components used in manufacture are sourced from a number of local and international suppliers to ensure continuity of supply while maintaining high quality and reliability. Procedures and processes are in place to ensure that these materials meet the regulatory requirements and comply to specifications, and suppliers are regularly evaluated to monitor their quality performance.
The core values of care, learning, continuous improvement, innovation, outstanding delivery, and relationship building are important to the success of the business. The quality of the manufactured products is achieved through careful selection of suppliers and the maintenance of good manufacturing practices, thereby guaranteeing the mitigation of risk.
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Employees
As of February 28, 2023, the Medinotec Group of Companies employed a total of 29 full-time employees.
These functions are backed up by various back-office functions including, but not limited to, Quality, Finance, Admin and Regulatory staff.
Attracting the right employees is vital to the success of the Medinotec Group of Companies, and the contribution they make to the business is highly valued. Focus on attracting the most competent and suitable people to operate in a rewarding work environment is a priority, particularly in the highly competitive labor market in which we operate.
The below table shows the approximate number of employees, the employment status as full or part time, and the employer within the Medinotec Group of Companies. None of our employees are represented by a labor union with respect to their employment with us. We have not experienced any work stoppages, and we consider our relations with our employees to be good.
* Executives employed in Medinotec Inc. and Medinotec Capital Proprietary Limited are the same individuals.
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Group Contractors
Two of the most valuable assets the Group has are its long-term customer relationships and its strong distribution and marketing network. Through its distribution partnership, the Group has a network of over 100 sales representatives, who cover approximately 60% of all hospital theatre floors on a weekly basis in South Africa. The Group plans to replicate such a network in the US.
The Group has historical reliance on two related parties for sales into South Africa: there is reliance on DISA Lifesciences as a customer; and for exports out of South Africa there was historical reliance on Minoan Medical. These relationships provide the Group with more than 100 sales representatives in the South African Market.
The sales relationship with Minoan Medical ceased to exist in FY 2022, when the Medinotec Group took the export functions in house. Any sales in the future between the two entities, if any, will be on an ad hoc basis when opportunities arise.
Sales between DISA Lifesciences and the Medinotec Group will continue into the future due to the vast distribution arm of DISA Lifesciences within South Africa. The Group’s expectation is to reduce reliance on the South African markets for customers and accounts as the Group endeavors to expand and enter into international first world markets. However, there is no guarantee that our plan will result in a decrease in reliance on DISA Lifesciences for customers and accounts. As with any expansion effort, there are barriers to entry and outside factors, such as regulatory approval, competition, among others, that may prevent us from entering into such markets. As such, and there is a risk that the concentration of customer issue will remain an ongoing issue unless we are successful in overcoming barriers to entry, competing with those in our markets and achieving regulatory approvals, none of which can be guaranteed.
The Medinotec Group of Companies is in the process of retaining additional independent consulting companies within the Medinotec Group of Companies of which DISA Lifesciences Proprietary Limited and Minoan Medical Proprietary Limited both incorporated in South Africa are the largest. The Medinotec Group of Companies operate in countries where the market is dominated by certain players and this creates a sales concentration risk which also causes an accounts receivable concentration risk.
Seasonality
Sales reflect the cyclical nature of the business, as the number of procedures incorporating our products does decrease in the summer holiday months of December and January within the South African market, which is currently the predominant market in the Medinotec Group of Companies. This cyclical nature has been enhanced by the Covid-19 pandemic, which has resulted in an unprecedented decline in healthcare utilization, largely due to the postponement of elective surgeries and patient aversion to exposure to the potential risk of infection in some healthcare settings.
Reliance on Other Parties
DISA Medinotec Proprietary Limited in the past focused solely on product development and manufacturing and therefore outsourced its sales function to two parties namely Minoan Medical Proprietary Limited and DISA Vascular Distribution Proprietary limited t/a DISA Lifesciences. This was done to preserve funds for R&D and manufacturing and to ensure the products that get developed are launched effectively.