Registration Statement

RISK FACTORS

The value of your investment will be subject to the significant risks inherent in our business. Before you invest in our common stock, you should be aware that there are various risks, including those described below. You should carefully consider these risk factors, which we believe are all the risks to our business that are material, together with all of the other information included in this prospectus. If any of the events described below occur, our business and financial results could be adversely affected in a material way, and you therefore may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that are currently deemed immaterial may also impair our business operations.

R isks Related To Our Business

Our operating results may fluctuate due to factors outside of management’s control.

Our future revenues and results of operations may significantly fluctuate due to a combination of factors, many of which are outside of management’s control. The most notable of these factors include:

·                   vendor rebates based upon attaining certain growth goals;

·                   changes in or availability of vendor rebate programs;

·                   changes in the way vendors introduce products to market;

·                   the recall of a significant product by one of our vendors;

·                   extended shortage or backorder of a significant product by one of our vendors;

·                   seasonality;

·                   the impact of general economic trends on our business;

·                   the timing and effectiveness of marketing programs offered by our vendors;

·                   the timing of the introduction of new products and services by our vendors; and

·                   competition.

These factors could adversely impact our results of operations and financial condition. We may be unable to reduce operating expenses quickly enough to offset any unexpected shortfall in revenues or gross profit. If we have a shortfall in revenues or gross profit without a corresponding reduction to expenses, operating results may suffer. Our operating results for any particular fiscal year or quarter may not be indicative of future operating results. You should not rely on year-to-year or quarter-to-quarter comparisons of results of operations as an indication of our future performance.

An adverse change in vendor rebates could negatively affect our business.

The terms on which we purchase or sell products from many vendors of animal health products entitle us to receive a rebate based on the attainment of certain growth goals. Vendors may adversely change the terms of some or all of these rebate programs. Because the amount of rebates we earn is directly related to the attainment of pre-determined sales growth goals, and because the nature of the rebate programs and the amount of rebates available are determined by the vendors, there can be no assurance as to the

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amount of rebates that we will earn in any given year. Historically, we have been successful in achieving most rebate growth goals and have not experienced any material adverse impact on our results of operations and financial condition due to a change in a rebate program. Changes to any rebate program initiated by our vendors may have a material effect on our gross profit and our operating results in any given quarter or year. Vendors may reduce the amount of rebates offered under their programs, or increase the growth goals or other conditions we must meet to earn rebates to levels that we cannot achieve. During calendar year 2006, certain of our vendors modified their rebate programs with us. These rebate program modifications changed the revenue growth targets from annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications will result in rebates previously expected to be earned and recognized in our first fiscal quarter 2007 ending on December 31 (or the fourth calendar quarter) to be recognized earlier in our fiscal year 2006.

Additionally, factors outside of our control, such as customer preferences or vendor supply issues, can have a material impact on our ability to achieve the growth goals established by our vendors, which may reduce the amount of rebates we receive. The occurrence of any of these events could have an adverse impact on our results of operations.

Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.

Our quarterly revenues and operating results have varied significantly in the past, and may continue to do so in the future. While we accrue rebates from vendors as they are earned, our rebates have historically been highest during the quarter ended December 31, since most of our vendors’ rebate programs were designed to include targets to be achieved during the calendar year. During calendar year 2006, certain of our vendors modified their rebate programs with us. These rebate program modifications changed the revenue growth targets from annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications will result in rebates previously expected to be earned and recognized in our first fiscal quarter 2007 ending on December 31 (or the fourth calendar quarter) to be recognized earlier in our fiscal year 2006. Historically, our revenues have been seasonal, with peak sales in the spring and fall months. The seasonal nature of our business is directly tied to the buying patterns of veterinarians for production animal health products used for certain medical procedures performed on production animals during the spring and fall months. These buying patterns can also be affected by vendors’ and distributors’ marketing programs launched during the summer months, particularly in June, which can cause veterinarians to purchase production animal health products earlier than those products are used. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. While companion animal products tend to have a different product use cycle than production animal health products, and approximately two-thirds of our revenues have been generated from the sale of companion animal products, we cannot assure you that our revenues and operating results will not continue to fluctuate on a quarter-to-quarter basis. We believe period-to-period comparisons of our results of operations are not necessarily meaningful as our future revenue and results of operations may vary substantially. It is also possible that in future quarters our results of operations will be below the expectations of securities analysts and investors. In either case, the price of our common stock could decline, possibly materially.

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Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business, financial condition and results of operations.

The market for veterinary distribution services is highly competitive, continually evolving and subject to technological change. We compete with numerous vendors and distributors based on customer relationships, service and delivery, product selection, price and e-business capabilities including:

·                   Butler Animal Health Supply;

·      Henry Schein, Inc.;

·                   Lextron Animal Health, Inc.;

·                   Professional Veterinary Products, Ltd.;

·                   Vet Pharm, Inc.;

·                   Walco International, Inc.;

·                   Webster Veterinary Supply, a division of Patterson Companies, Inc.; and

·                   other national, regional, local and specialty distributors.

Some of our competitors may have more customers, stronger brand recognition or greater financial and other resources than we do. Most of our products are available from several sources, including other distributors and vendors, and our customers typically have relationships with several distributors and vendors. Many of our competitors have comparable product lines, technical expertise or distribution strategies that directly compete with us. Our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products. The entry of new distributors in the industry could also have a material adverse effect on our ability to compete. Additionally, some of our vendors may decide to compete with us by selling their products directly to our customers. If we do not compete successfully against these organizations, it could have a material and adverse effect on our business, financial condition and results of operations.

Consolidation in the veterinary distribution business and veterinary practices may decrease our revenues and profitability.

Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing power, decrease our revenues and profitability, and increase the competition for customers. Consolidation of the many small, privately-held veterinary practices would result in an increasing number of larger veterinary practices, which could have increased purchasing leverage and the ability to negotiate lower product costs. This could reduce our operating margins and negatively impact our revenues and profitability. Any of these developments could result in increased marketing expenses and have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations depend upon maintaining our relationships with vendors.

At March 31, 2006 we distributed more than 10,000 products sourced from more than 400 vendors to over 15,000 veterinary practices. We currently do not manufacture any of our products and are

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dependent on these vendors for our supply of products. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 45% of our revenues for our fiscal year ended September 30, 2005 and 47% for the six-months ended March 31, 2006. Our ten largest vendors supplied products that accounted for approximately 73% of our revenues for our fiscal year ended September 30, 2005 and 72% for the six-months ended March 31, 2006.

Our ability to sustain our gross profits has been, and will continue to be, dependent in part upon our ability to obtain favorable terms and access to new and existing products from our vendors. These terms may be subject to changes from time to time by vendors, such as changing from a “buy/sell” to an agency relationship, or from an agency to a “buy/sell” relationship. In a “buy/sell” transaction, we purchase or take inventory of products from our vendors. Under an agency relationship, when we receive orders for products from a customer, we transmit the order to the vendor who then picks, packs and ships the products. Any changes from “buy/sell” to agency or from agency to “buy/sell” could adversely affect our revenues and operating income. The loss of one or more of our large vendors, a material reduction in their supply of products to us or material changes in the terms we obtain from them could have a material adverse effect on our business, financial condition and results of operations.

Some of our current and future vendors may decide to compete with us in the future by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, veterinarians or animal owners may elect to purchase animal health products directly from these vendors. Increased competition from any vendor of animal health products could significantly reduce our market share and adversely impact our financial results.

In addition, we may not be able to establish relationships with key vendors in the animal health industry if we have established relationships with competitors of these key vendors. We have written agreements with approximately 30 of our vendors, including Fort Dodge and Pfizer. Some of our agreements with vendors are for one-year periods. Upon expiration, we may not be able to renew our existing agreements on favorable terms, or at all. If we lose the right to distribute products under such agreements, we may lose access to certain products and lose a competitive advantage. Potential competitors could sell products from vendors that we fail to continue with and erode our market share.

We rely substantially on third-party vendors, and the loss of products or delays in product availability from one or more third-party vendors could substantially harm our business.

We must contract for the supply of current and future products of appropriate quantity, quality and cost. These products must be available on a timely basis and be in compliance with any regulatory requirements. Failure to do so could substantially harm our business.

We often purchase products from our vendors under agreements that typically have a term of one year and can be terminated on a periodic basis. There can be no assurance, however, that our vendors will be able to meet their obligations under these agreements or that we will be able to compel them to do so. Risks of relying on vendors include:

·                   If an existing agreement expires or a certain product line is discontinued or recalled, then we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer unless we are able to find an alternate supply of a similar product.

·                   Agreements we may negotiate in the future may commit us to certain minimum purchase levels or other spending obligations. It is possible we will not be able to create the market

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demand to meet such obligations, which would create an increased drain on our financial resources and liquidity.

·                   If market demand for our products increases suddenly, our current vendors might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements or fund new sources of supply, and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given vendor is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are more readily available.

·                   We may not be able to control or adequately monitor the quality of products we receive from our vendors. Poor quality products could damage our reputation with our customers.

·                   Some of our third party vendors are subject to ongoing periodic unannounced inspection by regulatory authorities, including the Food and Drug Administration (“FDA”), the US Department of Agriculture (“USDA”), the Environmental Protection Agency (“EPA”), the Drug Enforcement Agency (“DEA”) and other federal and state agencies for compliance with strictly enforced regulations. We do not have control over our vendors’ compliance with these regulations and standards. Violations could potentially lead to interruptions in supply that could lead to lost sales to competitive products that are more readily available.

Potential problems with vendors such as those discussed above could substantially decrease sales of our products, lead to higher costs and damage our reputation with our customers.

We rely upon third parties to ship products to our customers and interruptions in their operations could harm our business, financial condition and results of operations.

We use United Parcel Service, Inc., or UPS, as our primary delivery service for our air and ground shipments of products to our customers. If there were any significant service interruptions, there can be no assurance that we could engage alternative service providers to deliver these products in either a timely or cost-efficient manner, particularly in rural areas where many of our customers are located. Any labor disputes, slowdowns, transportation disruptions or other adverse conditions in the transportation industry experienced by UPS could impair or disrupt our ability to deliver our products to our customers on a timely basis, and could have a material adverse effect upon our customer relationships, business, financial condition and results of operations. For example, during the strike by members of the International Brotherhood of Teamsters against UPS in August 1997, many of our sales representatives, some traveling hundreds of miles, were required to make deliveries to customers for which no alternative delivery service provider was available on a timely basis. In addition, rising fuel costs may result in continued increases in shipping costs charged by UPS, or other delivery service providers, and could have an adverse effect on our financial condition and results of operations.

The loss of one or more significant customers could adversely affect our profitability.

Banfield — The Pet Hospital (“Banfield”) and Feeders’ Advantage L.L.C. (“Feeders’ Advantage”), a related party, our two largest customers, accounted for approximately 10% and 6% of our product sales for our fiscal year ended September 30, 2005, respectively, and 9% and 6% for the six-months ended March 31, 2006, respectively. Our ten largest customers, excluding Banfield and Feeders’ Advantage, accounted for approximately 6% of our product sales for our fiscal year ended September 30, 2005 and 6% for the six-months ended March 31, 2006. Our business and results of operations could be adversely affected if the business of these customers was lost. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at

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current levels. Banfield, Feeders’ Advantage and other customers may seek to purchase some of the products that we currently sell directly from the vendors or from one or more of our competitors. Furthermore, our customers are not required to purchase any minimum amount of products from us. The loss of Banfield or Feeders’ Advantage or a deterioration in our relations with either of them could significantly affect our financial condition and results of operations. Additionally, a deterioration in the financial condition of one or more of our customers could have a material adverse effect on our results of operations.

Failure to effectively manage growth could impair our business.

Since fiscal 2000, we have experienced rapid growth and expansion, largely due to internal growth initiatives. Our revenues increased from $195.6 million for our fiscal year ended September 30, 2000 to $496.7 million for our fiscal year ended September 30, 2005. Our number of employees increased by approximately 300 individuals during the same period.

It may be difficult to manage such rapid growth in the future, and our future success depends on our ability to implement and/or maintain:

·                   sales and marketing programs;

·                   customer service levels;

·                   current and new product and service lines and vendor relationships;

·                   technological support which equals or exceeds our competitors;

·                   recruitment and training of new personnel; and

·                   operational and financial control systems.

Our ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. We expect that we will need to continue to improve our financial and managerial controls and reporting systems and procedures and to expand the training of our work force. While we believe our current systems have sufficient capacity to meet our projected needs, we may need to increase the capacity of our current systems to meet additional or unforeseen demands.

If we are not able to manage our rapid growth, there is a risk our customer service quality could deteriorate which may in turn lead to decreased sales or profitability. Also, the cost of our operations could increase faster than growth in our revenues, negatively impacting our profitability.

Difficulties with the integration of acquisitions may impose substantial costs and delays and cause other unanticipated problems for us.

Acquisitions involve a number of risks relating to our ability to integrate an acquired business into our existing operations. The process of integrating the operations of an acquired business, particularly its personnel, could cause interruptions to our business. Some of the risks we face include:

·                   the need to spend substantial operational, financial and management resources in integrating new businesses, technologies and products, and difficulties management may encounter in integrating the operations, personnel or systems of the acquired business;

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·                   retention of key personnel, customers and vendors of the acquired business;

·                   the occurrence of a material adverse effect on our existing business relationships with customers or vendors, or both, resulting from future acquisitions or business combinations could lead to a termination of or otherwise affect our relationships with such customers or vendors;

·                   impairments of goodwill and other intangible assets; and

·                   contingent and latent risks associated with the past operations of, and other unanticipated costs and problems arising in, an acquired business.

If we are unable to successfully integrate the operations of an acquired business into our operations, we could be required to undertake unanticipated changes. These changes could have a material adverse effect on our business.

Increases in over-the-counter sales of animal health products could adversely affect our business.

We rely, and will continue to rely, on animal owners who purchase their animal health products directly from veterinarians, which we refer to as the ethical channel. There can be no assurance that animal owners will continue to use the ethical channel with the same frequency as they have in the past, and will not increasingly purchase animal health products from sources other than veterinarians, such as the Internet and other over-the-counter channels. Increased competition from any distributor of animal health products making use of an over-the-counter channel could significantly reduce our market share and adversely impact our financial results.

If we fail to comply with or become subject to more onerous government regulations, our business could be adversely affected.

The veterinary distribution industry is subject to changing political and regulatory influences. Both state and federal government agencies regulate the distribution of certain animal health products and we are subject to regulation, either directly or indirectly, by the FDA, the USDA, the EPA, the DEA and state boards of pharmacy as well as comparable state agencies. The regulatory stance these agencies take could change. Our vendors are subject to regulation by the FDA, the USDA, the EPA and the DEA, as well as other federal and state agencies, and material changes to the applicable regulations could affect our vendors’ ability to manufacture certain products, which could adversely impact our product supply. In addition, some of our customers may rely, in part, on farm and agricultural subsidy programs. Changes in the regulatory positions that impact the availability of funding for such programs could have an adverse impact on our customers’ financial positions, which could lead to decreased sales.

We strive to maintain compliance with these and all other applicable laws and regulations. For example, we have hired a Manager of Regulatory Compliance and we have engaged an outside consultant to assist us in meeting and complying with the various state licensure requirements to which we are subject. If we are unable to maintain or achieve compliance with these laws and regulations, we could be subject to substantial fines or other restrictions on our ability to provide competitive distribution services, which could have an adverse impact on our financial condition.

We cannot assure you that existing laws and regulations will not be revised or that new, more restrictive laws will not be adopted or become applicable to us or the products that we distribute or dispense. We cannot assure you that the vendors of products that may become subject to more stringent laws will not try to recover any or all increased costs of compliance from us by increasing the prices at which we

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purchase products from them, or, that we will be able to recover any such increased prices from our customers. We also cannot assure you that our business and financial condition will not be materially and adversely affected by future changes in applicable laws and regulations.

Loss of key management or sales representatives could harm our business.

Our future success depends to a significant extent on the skills, experience and efforts of management, including our President and Chief Executive Officer, Mr. James F. Cleary, Jr. While we have not experienced problems in the past attracting and maintaining members of our management team, the loss of any or all of these individuals could adversely impact our business. We do not carry key-man life insurance on any member of management. In addition we do not have employment agreements with key members of our senior management team. We must continue to develop and retain a core group of individuals if we are to realize our goal of continued expansion and growth. We cannot assure you that we will be able to do so in the future.

Also, due to the specialized nature of our products and services, generally only highly qualified and trained sales representatives have the necessary skills to market our products and provide our services. These individuals develop relationships with our customers that could be damaged if these employees are not retained. We face intense competition for the hiring of these professionals. Any failure on our part to hire, train and retain a sufficient number of qualified professionals would damage our business. We do not generally enter into agreements that contain non-competition provisions with any of our employees, other than with members of our senior management team.

Failure of, or security problems with, our information systems could damage our business.

Our information systems are dependent on third party software, global communications providers, telephone systems and other aspects of technology and Internet infrastructure that are susceptible to failure. Though we have implemented security measures and some redundant systems, our customer satisfaction and our business could be harmed if we or our vendors experience any system delays, failures, loss of data, power outages, computer viruses, break-ins or similar disruptions. We currently process all customer transactions and data at our facilities in Meridian, Idaho. Although we have safeguards for emergencies, including, without limitation, sophisticated back-up systems, the occurrence of a major catastrophic event or other system failure at any of our distribution facilities could interrupt data processing or result in the loss of stored data. This may result in the loss of customers or a reduction in demand for our services. Only some of our systems are fully redundant and although we do carry business interruption insurance, it may not be sufficient to compensate us for losses that may occur as a result of system failures. If a disruption occurs, our profitability and results of operations may suffer.

The outbreak of an infectious disease within either the production animal or companion animal population could have a significant adverse effect on our business and our results of operations.

An outbreak of disease affecting animals, such as foot-and-mouth disease, avian influenza or bovine spongiform encephalopathy, commonly referred to as “mad cow disease,” could result in the widespread destruction of affected animals and consequently result in a reduction in demand for animal health products. In addition, outbreaks of these or other diseases or concerns of such diseases could create adverse publicity that may have a material adverse effect on consumer demand for meat, dairy and poultry products, and, as a result, on our customers’ demand for the products we distribute. The outbreak of a disease among the companion animal population which could cause a reduction in the demand for companion animals could also adversely affect our business. Although we have not been adversely impacted by the outbreak of a disease in the past, there can be no assurance that a future outbreak of an infectious disease will not have an adverse effect on our business.

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We may be subject to product liability and other claims in the ordinary course of business.

Our business involves a risk of product liability and other claims in the ordinary course of business, for example arising from shipping mislabeled or outdated product. We maintain general liability insurance with policy limits of $1 million per incident and $2 million in the aggregate, and in many cases we have indemnification rights against such claims from the manufacturers of the products we distribute. We do not maintain a separate product liability insurance policy because we do not currently manufacture any of the products that we sell. Our ability to recover under insurance or indemnification arrangements is subject to the financial viability of the insurers and manufacturers. We cannot assure you that our insurance coverage or the manufacturers’ indemnity will be available or sufficient in any future cases brought against us.

A prolonged economic downturn could materially adversely affect our business.

Our business may be materially adversely affected by prolonged, negative trends in the general economy that could reduce consumer discretionary spending on animal health products. Our business ultimately depends on the ability and willingness of animal owners to pay for our products. This dependence could make us more vulnerable to any reduction in consumer confidence or disposable income than companies in other industries that are less reliant on consumer spending, such as the human health care industry, in which a large portion of payments are made by insurance programs.

We may not be able to raise needed capital in the future on favorable terms or at all.

We expect that our existing sources of cash, together with any funds generated from operations, will be sufficient to meet our anticipated capital needs for at least the next twelve months. However, we may require additional capital to finance our growth strategies or other activities in the future. Our capital requirements will depend on many factors, including the costs associated with our growth and expansion. Additional financing may not be available when needed and, if such financing is available, it may not be available on terms favorable to us. Our failure to raise capital when needed could have an adverse effect on our business, financial condition and results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Certain of our borrowings, primarily borrowings on the revolving credit facility under our amended credit agreement, are or will be at variable rates of interest and expose us to interest rate risk based on market rates. In the last year there has been a general increase in borrowing rates in the United States. If interest rates continue to increase, our debt service obligations on any future variable rate indebtedness we may incur on our revolving credit facility would increase even if the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease. Our variable rate debt as of March 31, 2006 was approximately $25.0 million (comprised of $24.7 million credit facility and $389,232 promissory note). Our interest expense for fiscal year 2005 was $2.5 million (excluding $4.1 million of accretion of our Series A preferred stock dividends) and was $1.1 million for the six-months ended March 31, 2006. A 1% increase in the average interest rate would increase future interest expense by approximately $250,000 per year assuming an average outstanding balance on our revolving credit facility of $25.0 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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The requirements of being a public company may strain our resources and distract our management.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These requirements place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls for financial reporting. We are in the process of documenting and testing our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accountants addressing these assessments. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. We will be required to comply with the requirements of Section 404 for our fiscal year ending September 30, 2006. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

As well, in order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight will be required. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Associated With This Offering

Concentration of ownership among our existing executives, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

Upon completion of this offering, Bruckmann, Rosser, Sherrill & Co. II, L.P., or BRS, and Agri Beef Co. will beneficially own approximately 15% and 6%, respectively, of our outstanding common stock, and our executives, directors and principal stockholders, including BRS and Agri Beef Co., will beneficially own, in the aggregate, approximately 30% of our outstanding common stock. As a result, these stockholders will be able to exercise influence over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions and will have significant control over our management and policies. The directors elected by these stockholders will be able to make decisions affecting our capital structure, including decisions to issue additional capital stock, implement stock repurchase programs and incur indebtedness. This influence may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of our other stockholders to approve transactions that they may deem to be in their best interest.

Management intends to use the proceeds of this offering in ways with which you may not agree and in ways that may not yield a return to you.

We intend to use the net proceeds from the offering of common stock by us in this offering to repay borrowings on our revolving credit facility under our amended credit facility and the remainder, if any, for general corporate purposes. See “Use of Proceeds.” After the repayment of borrowings under our revolving credit facility, none or a small portion of the net proceeds of the offering of common stock by us in this offering will be available for our operations or to further our business or growth strategies.

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The price of our common stock may be volatile.

The market price of our common stock has been subject to significant fluctuations and may continue to fluctuate or decline. From our initial public offering in August 2005 to July 5, 2006, the closing price of our common stock has ranged from a low of $17.00 to a high of $37.29. The stock market has from time to time experienced significant price and volume fluctuations that have affected the market prices of securities. These fluctuations often have been unrelated or disproportionate to the operating performance of publicly traded companies. In the past, following periods of volatility in the market price of a particular company’s securities, securities class-action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type is often expensive to defend and may divert management’s attention and resources from the operation of our business.

Future sales of shares of our common stock in the public market by our stockholders or issuances of equity or convertible securities by us, may depress our stock price and make it difficult for you to recover the full value of your investment in our shares.

If our existing stockholders sell additional amounts of our common stock in the public market following this offering, if we issue additional shares of common stock or convertible debt securities to raise additional capital or if there is a perception that these sales or issuances may occur, the market price of our common stock could decline. In addition, if we issue additional shares of common stock, your percentage of ownership in us would be reduced. We cannot predict the size of future issuances or sales of common stock or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Upon completion of this offering we will have outstanding approximately 11,592,793 shares of common stock. The shares of common stock sold in this offering not purchased by affiliates will be freely tradable, without restriction, in the public market. After the lockup agreements pertaining to this offering expire 90 days from the date of this prospectus unless waived, an additional 3,360,359 shares will be eligible for sale in the public market at various times, subject to volume limitations under Rule 144 of the Securities Act of 1933, or the Securities Act.

You will incur immediate and substantial dilution as a result of this offering.

Investors purchasing shares of our common stock in this offering will pay more for their shares than the amount paid by stockholders who acquired shares prior to this offering. Investors in this offering will contribute 28% of our total capitalization but will only beneficially own, in the aggregate, approximately 8% of our outstanding common stock and control approximately 8% of the voting rights with respect to our common stock following completion of this offering. In addition, this offering price is substantially higher than the net tangible book value per share of our common stock immediately after this offering. As a result, you will pay a price per share that substantially exceeds the net tangible book value of our assets after subtracting our liabilities. At an offering price of $35.40, you will incur immediate and substantial dilution in an amount of $27.45 per share.

Takeover defense provisions may adversely affect the market price of our common stock.

Various provisions of Delaware corporation law and of our corporate governance documents may inhibit changes in control not approved by our board of directors and may have the effect of depriving you of an opportunity to receive a premium over the prevailing market price of our common stock in the event of an attempted hostile takeover. In addition, the existence of these provisions may adversely affect the market price of our common stock. These provisions include:

·                   a prohibition on stockholder action through written consents;

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·                   a requirement that special meetings of stockholders be called only by our board of directors;

·                   advance notice requirements for stockholder proposals and nominations; and

·                   availability of “blank check” preferred stock.

We do not intend to pay dividends in the foreseeable future.

We do not currently pay any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We intend to retain future earnings to fund our growth. Accordingly, you will receive a return on your investment in our common stock only if our common stock appreciates in value. You may therefore not realize a return on your investment even if you sell your shares.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others assumptions regarding demand for our products, the expansion of product offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results that differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

·                   vendor rebates based upon attaining certain growth goals;

·                   changes in or availability of vendor rebate programs;

·                   changes in the way vendors introduce products to market;

·                   the recall of a significant product by one of our vendors;

·                   extended shortage or backlog of a significant product by one of our vendors;

·                   seasonality;

·                   the impact of general economic trends on our business;

·                   the timing and effectiveness of marketing programs offered by our vendors;

·                   the timing of the introduction of new products and services by our vendors; and

·                   competition.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission, or SEC, we are under no obligation to publicly update or revise any forward-looking statements after we distribute this prospectus, whether as a result of any new information, future events or otherwise. Potential investors should not place undue reliance on our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this prospectus could harm our business, prospects, operating results, and financial condition. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

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USE OF PROCEEDS

We will not receive any proceeds from the sale of our common stock offered by the selling stockholders in this offering. We estimate that the net proceeds to us from the sale of the 869,565 shares of common stock offered by us in this offering will be approximately $28.5 million, or $32.9 million if the underwriters exercise their over-allotment option in full, after deducting underwriting discounts and commissions and our estimated fees and expenses. We intend to utilize our net proceeds from this offering to repay our borrowings outstanding on the revolving credit facility under our amended credit agreement and the remainder, if any, for general corporate purposes. We are not required to pay down the borrowings on our revolving credit facility prior to the maturity date of our amended credit agreement, which is June 18, 2007.

As of March 31, 2006, there were $24.7 million of borrowings outstanding under our amended credit agreement. The revolving credit facility bears interest at one of the following rates: the London Interbank Offered Rate, or LIBOR, plus a margin on the portion converted to LIBOR in accordance with our amended credit agreement, currently $20 million (6.3% at March 31, 2006); and the remaining $4.7 million bears interest at the prime rate (7.75% at March 31, 2006).

DIVIDEND POLICY

We have never paid or declared any dividends on our common stock. We do not anticipate paying any dividends on our common stock in the foreseeable future. Our amended credit agreement prohibits us from declaring or paying dividends on our common stock. We currently intend to retain future earnings to finance the ongoing operations and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on then existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

PRICE RANGE OF COMMON STOCK

Our common stock has been quoted on the Nasdaq National Market under the symbol “MWIV” since August 3, 2005. Prior to that date there was no public market for our common stock. The following table sets forth, for the period indicated, the high and low sales prices of our common stock reported by the Nasdaq National Market.

		Common Stock Price
		High					Low
Fiscal Year Ended September 30, 2005
Fourth Quarter (from August 3, 2005)			$	24.18				$	19.78
Fiscal Year Ended September 30, 2006
First Quarter			$	26.49				$	19.87
Second Quarter			$	36.31				$	23.79
Third Quarter			$	37.29				$	29.25
Fourth Quarter (through July 5, 2006)			$	36.02				$	34.74

 

On July 5, 2006, the last reported sale price of our common stock on the Nasdaq National Market was $35.40 per share. As of March 31, 2006 there were approximately 15 holders of record of our common stock.

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Equity Compensation Plan Information

The following table provides information as of March 31, 2006 about the common stock that may be issued under all of our existing equity compensation plans, including the 2002 Stock Option and 2005 Stock-Based Incentive Compensation Plans. Both of these plans have been approved by our stockholders.

		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			559,048				$	3.84				1,130,394
Equity compensation plans not approved by security holders			—				—					—
Total			559,048				$	3.84				1,130,394

 

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CAPITALIZATION

The following table sets forth as of March 31, 2006 our consolidated cash and our consolidated capitalization on an actual basis and as adjusted to give effect to the sale of the shares of our common stock offered by us hereby and the anticipated use of the net proceeds thereof as if these events had been completed on March 31, 2006. This table should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our selected consolidated financial data and our consolidated financial statements and the related notes to those statements included in this prospectus.

		As of March 31, 2006
		Actual			As Adjusted
		(unaudited)
		(in thousands, except per share amounts)
Cash		$	34			$	3,928
Long-term debt:
Revolving credit facility		24,654				—
Term debt including current portion		389				389
Total long-term debt		25,043				389
Stockholders’ equity:
Common stock, $0.01 par value; 20,000 shares authorized, 10,593 shares issued and outstanding, actual; 20,000 shares authorized and 11,462 shares issued and outstanding, as adjusted		106				115
Additional paid-in capital		78,721				107,260
Retained earnings		14,986				14,986
Total stockholders’ equity		93,813				122,361
Total capitalization (excluding cash)		$	118,856			$	122,750

 

The outstanding share information in the table above is based on the number of shares outstanding as of March 31, 2006. This table excludes 559,048 shares of common stock issuable upon exercise of outstanding options as of March 31, 2006 at a weighted average exercise price of $3.84 per share.

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SELECTED FINANCIAL DATA

The selected consolidated financial and operating data below are derived from the following sources:

·                   The consolidated financial statements of our company while it was operated by Agri Beef Co. (which we refer to as our Predecessor) for the fiscal year ended September 30, 2001 and for the period from October 1, 2001 to June 17, 2002. Our Predecessor’s financial statements, which have been audited by an independent registered public accounting firm, represent our results of operations for those periods.

·                   Our consolidated financial statements for the period from June 18, 2002 to September 30, 2002 and as of and for our fiscal years ended September 30, 2003, 2004 and 2005, which have been audited by an independent registered public accounting firm.

·                   Our unaudited interim condensed consolidated financial statements as of March 31, 2006 and for the six-months ended March 31, 2005 and 2006, which in the opinion of management reflect all adjustments necessary, to present fairly, in accordance with generally accepted accounting principles in the United States, the information for such periods and which have been reviewed by an independent registered public accounting firm. The operating results of the interim periods are not necessarily indicative of results for a full year.

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The selected consolidated financial and operating data below represent portions of our financial statements and are not complete. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes to these statements included in this prospectus. Historical results are not necessarily indicative of future performance.

																										Six-Months Ended March 31,
		2001			2002												2003			2004			2005			2005			2006
		Predecessor										Successor
					Oct. 1, 2001 - Jun. 17, 2002							Jun. 18, 2002 - Sept. 30, 2002
		(in thousands, except per share data)
Revenues:
Product sales		$	219,407			$	177,135						$	84,467			$	315,738		$	367,863		$	463,272		$	210,148		$	260,303
Product sales to related party		—				9,947							7,329				22,960			22,163			28,473			12,947			17,356
Commissions		2,006				1,268							1,009				3,011			4,256			4,910			2,309			3,506
Total revenues		221,413				188,350							92,805				341,709			394,282			496,655			225,404			281,165
Cost of product sales		188,260				161,840							80,032				294,692			338,684			426,709			192,308			238,485
Gross profit		33,153				26,510							12,773				47,017			55,598			69,946			33,096			42,680
Selling, general and administrative expenses (1)		25,009				20,082							11,115				35,886			41,872			52,647			23,819			29,712
Depreciation and amortization		835				577							285				976			1,146			1,528			727			915
Operating income		7,309				5,851							1,373				10,155			12,580			15,771			8,550			12,053
Other income (expense):
Interest expense (2)		(1,255		)		(731		)					(644		)		(3,034		)	(6,098		)	(6,515		)	(3,545		)	(1,133		)
Other income (expense)		(146		)		203							59				324			322			399			183			309
Total other income (expense)		(1,401		)		(528		)					(585		)		(2,710		)	(5,776		)	(6,116		)	(3,362		)	(824		)
Income before taxes		5,908				5,323							788				7,445			6,804			9,655			5,188			11,229
Income taxes		(2,246		)		(2,043		)					(297		)		(3,116		)	(4,280		)	(5,098		)	(2,937		)	(4,435		)
Net income		3,662				3,280							491				4,329			2,524			4,557			2,251			6,794
Accretion of redeemable preferred stock		—				—							(995		)		(2,714		)	—			—			—			—
Income (loss) available to common stockholders		$	3,662			$	3,280						$	(504	)		$	1,615		$	2,524		$	4,557		$	2,251		$	6,794
Earnings (loss) per common share:
Basic		NM				NM							$	(0.10	)		$	0.32		$	0.50		$	0.76		$	0.44		$	0.64
Diluted		NM				NM							$	(0.10	)		$	0.28		$	0.43		$	0.68		$	0.38		$	0.62
Shares used in computing earnings per share:
Basic		NM				NM							4,978				5,013			5,038			5,970			5,062			10,582
Diluted		NM				NM							4,978				5,745			5,878			6,697			5,880			10,873

 

		As of September 30,																	As of March 31,
		2001					2002			2003			2004			2005			2006
		Predecessor					Successor
Cash			$	33			$	36		$	36		$	28		$	31			$	34
Working capital (3)			16,000				(6,694		)	(1,027		)	5,853			47,899				54,156
Total assets			79,715				115,070			122,270			146,565			188,244				189,080
Total debt			14,155				41,719			33,972			50,149			25,177				25,043
Redeemable preferred stock			—				27,495			31,494			35,733			—				—
Total stockholders’ equity			17,962				353			2,113			4,632			86,694				93,813

 

footnotes on the following page

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		Year Ended September 30,																								Six Months Ended March 31,
		2001				2002								2003				2004				2005				2005				2006
		Predecessor								Successor
						October 1, 2001 - June 17, 2002				June 18, 2002 - September 30 , 2002
Other Data:
Product sales from Internet as a percentage of sales (4)			—				16	%			19	%			18	%			18	%			21	%			21	%			23	%
Field sales representatives (at end of period)			71				82				82				94				111				134				135				142
Telesales representatives (at end of period)			47				63				69				75				79				93				90				95
Warehouses			7				8				8				8				9				10				10				10
Fill rate (5)			98	%			98	%			98	%			98	%			98	%			98	%			98	%			98	%

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(1)                                         Includes management fees expense of $250, $386 and $2,456 for our fiscal years ended September 30, 2003, 2004 and 2005, respectively, and $266 and $0 for the six-months ended March 31, 2005 and 2006, respectively as a result of payments to BRS and Agri Beef Co. The management and consulting services agreement was terminated in August 2005 for a termination fee of $2,000 that is included in the management fee expense of $2,456 for fiscal year ended September 30, 2005.

(2)                                         Includes accretion of our Series A preferred stock dividends beginning on July 1, 2003, which is nondeductible for income tax purposes. Accretion expense included as a component of interest expense was $999, $4,239 and $4,055 for fiscal years ended September 30, 2003, 2004 and 2005, respectively and $2,315 and $0 for the six-months ended March 31, 2005 and 2006, respectively. We used a portion of the proceeds from our initial public offering in August 2005 to redeem all the Series A preferred stock.

(3)                                         Defined as current assets minus current liabilities.

(4)                                         Information for our fiscal year ended September 30, 2001 is not readily available.

(5)                                         Defined as, for any period, the dollar value of orders shipped the same day they were placed from any warehouse expressed as a percentage of the total dollar value of the orders placed by customers in the period.

“NM,” as used in the table above, means not meaningful because of the substantial changes to our capital structure resulting from our acquisition of MWI Veterinary Supply Co. from Agri Beef Co. effective as of June 18, 2002.

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