U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 000-15243
VITAL HEALTH TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1618186
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
3805 Centre Pointe Dr. North, Roseville, MN 55113
(Address of Principal Executive Offices)
(651) 697-9191
(Issuer's telephone number)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the issuer
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the
Exchange Act subsequent to the distribution of securities under
a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of March 31, 2001: 2,839,898 shares
of common stock.
Transitional Small Business Format: Yes [ ] No [ X ]
FORM 10-QSB
VITAL HEALTH TECHNOLOGIES, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION 3
Item 1 Financial Statements 4
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Plan of
Operation
PART II. OTHER INFORMATION 9
Item 2 Changes in Securities and Use of 9
Proceeds
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
PART I.
Item 1. Financial Information
In the opinion of management, the accompanying unaudited
financial statements included in this Form 10-QSB reflect all
adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of the results of operations for the periods
presented. The results of operations for the periods presented are
not necessarily indicative of the results to be expected for the full
year.
3
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
March 31, December 31,
2001 2000
ASSETS
Current assets:
Cash $ 33,691 $ 9,143
Inventory 3,035 3,073
Prepaid expenses 201 7,282
Total current assets 36,927 19,498
Furniture and equipment 6,677 6,677
Less accumulated depreciation 649 162
Net furniture and equipment 6,028 6,515
Total assets $ 42,955 $ 26,013
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 4,279 $ 10,232
Note payable - convertible 90,000 -
Total current liabilities 94,279 10,232
Stockholders' equity (deficit):
Undesignated stock: 5,000,000 shares
authorized; none issued and outstanding - -
Common stock: $.01 par value; 50,000,000
shares authorized; shares issued and
outstanding 2,839,898 in 2001 and 2000 28,399 28,399
Additional paid-in capital 11,821,224 11,820,674
Accumulated deficit (11,793,637) (11,793,637)
Deficit accumulated during the
development stage (107,310) (39,655)
Total stockholders' equity (deficit) (51,324) 15,781
Total liabilities and
Stockholders' equity (deficit) $ 42,955 $ 26,013
4
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended
March
31,
2001 2000
Revenues $ 560 $ -
Cost of sales (38) -
General and administrative expenses (67,289) (14)
Interest expense (533) -
Income tax expense (355) -
Net income (loss) (67,655) (14)
Other comprehensive income (loss) - -
Comprehensive income (loss) $ (67,655) $ (14)
Basic earnings (loss) per share $ (.02) $ -
Weighted average number of
shares outstanding 2,839,898 419,833
5
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash
(Unaudited)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net income (loss) $ (67,655) $ (14)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Warrants issued for consulting services 550 -
Depreciation 487 -
Inventory 38 -
Prepaid expenses 7,081 -
Accounts payable and other current liabilities (5,953) 14
Cash flows from operating activities (65,452) -
Cash flows from financing activities:
Issuance of convertible notes payable 90,000 -
Cash flows from investing activities - -
Increase (decrease) in cash 24,548 -
Cash:
Beginning of year 9,143 -
End of year $ 33,691 $ -
Supplemental cash flow information:
Interest paid $ - $ -
Income taxes paid $ - $ -
Summary of non cash activity:
Warrants to purchase 55,000 shares of the Company's common stock at
$.05 per share were issued by the Company in January and March 2001
as part of consulting agreements. These warrants were valued at $.01
per share.
6
Item 2. Managements Discussion and Analysis of Financial
Condition and Plan of Operation
Three Months Ended March 31, 2001 and 2000
The Company generated revenue of $560 for the three months
ended March 31, 2001, as compared to no revenue for the three
months ended March 31, 2000. Cost of sales for the three months
ended March 31, 2001 and 2000 were $38 and $0, respectively.
General and administrative expenses for the three months ended
March 31, 2001 were $67,655, as compared to $14 in the same
period of 2000. This large increase in expenses is attributable
primarily to technology development, plus the legal and
accounting expenses incurred to bring the Company current in its
reporting obligations under the Securities Exchange Act of 1934.
The Company had interest expense in the amount of $533 for the
three months ended March 31, 2001, as compared to no interest
expense for the three months ended March 31, 2000.
As a result of the foregoing, the Company realized a net loss
of $67,655 for the three months ended March 31, 2001, as compared
to a net loss of $14 for the same period in 2000.
Liquidity and Capital Resources
At March 31, 2001, the Company had a working capital deficit
of $57,352, as compared to working capital of $9,266 at December
31, 2000. The substantial change in working capital is
attributable to the Company's financing activities. On January
30 and March 15, 2001, the Company closed a bridge note
transaction with four individuals obtaining a total of $90,000.
The 12-month promissory notes accrue interest at 10% and are
convertible into the Company's common stock at the rate of $1.50
of principal and interest for each share. In addition, each note
includes a separate five-year warrant to purchase 2,500 shares of
common stock per $5,000 note increment. The exercise price is
$2.00 per share.
Since we presently have limited revenue from operations, we
cannot rely on internal sources of capital to fund operations.
We will seek additional financing from outside sources to fund
operations. If we are unable to locate financing, our ability to
further implement our business plan and sustain operations will
be substantially impaired and our continuation as a going concern
is unlikely.
Until Vital Health receives additional outside financing to
fund its capital commitments, its operations will be limited to
those that can be effected through its officers, directors and
consultants. Our primary officer has agreed to perform services
without compensation until the Company has sufficient resources
to pay him. He is providing services on a full time basis. Many
of our outside consultants have accepted warrants for services
rendered, but there is no assurance they will continue to do so
in the future. In the event Vital Health generates revenue from
product sales and financing from outside sources sufficient to
fund operations, Vital Health expects to enter into more formal
compensation arrangements with it officers and seek employees
with abilities that will advance our business objectives.
Our plan for the next 12 months is to handle the
administrative and reporting requirements of a public company;
and:
7
Medical Application
Work with HealthEast Midway Clinic to perfect clinical
application of Variance Cardiograph,
Conduct a longitudinal study of the previously tested
subjects over the past eight to 12 years to assess
predictability of Variance Cardiography,
Apply for FDA market clearance of the Variance Cardiograph
in medical diagnostic applications,
Seek out a strategic partnership with a medical devise
distributor to implement manufacturing and marketing of the
Variance Cardiograph to health care providers, and
Apply for health care provider reimbursement through
insurance and government programs for the Variance
Cardiograph diagnostic procedure to facilitate marketing.
Fitness Application
Continue marketing the LifeFit Health program to businesses
in the St. Paul/ Minneapolis area,
Begin placing Variance Cardiograph heart screen systems at
health clubs and other health fitness oriented facilities
while perfecting revenue model.
Vital Health is going to seek up to $2,000,000 in financing
over the next 12 months to fund its proposed operations over the
next 12 to 24 months. Of this amount, $1,350,000 represents
general and administrative expenses and working capital reserves,
which is intentionally high because of the uncertainties we face
in implementing this new business. The estimated use of the
remaining $650,000 is as follows:
Legal and $50,000
Professional fees
FDA Application $100,000
Research and $200,000
Development
Marketing $200,000
Clinical Studies $100,000
The foregoing figures are only estimates, and actual use of any
capital we obtain may vary substantially as the implementation of
our business unfolds.
Forward-Looking Statement Notice
When used in this report, the words "may," "will," "expect,"
"anticipate," "continue," "estimate," "project," "intend," and
similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934 regarding events, conditions, and financial trends that may
affect the Company's future plans of operations, business
strategy, operating results, and financial position. Persons
reviewing this report are cautioned that any forward-looking
statements are not guarantees of future performance and are
subject to risks and uncertainties and that actual results may
differ materially from those included within the forward-looking
statements as a result of various factors. Such factors are
discussed above and also include general economic factors and
conditions that may directly or indirectly impact the Company's
financial condition or results of operations.
8
PART II. OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds
In January and March 2001, the Company obtained $90,000 in
cash by issuing convertible notes to four individual investors.
The notes bear interest at 10% per annum and are due in January
and March 2002. The notes are convertible, at the holders'
option, at a rate of $1.50 of principal and interest for each
share of common stock. In connection with the notes, a five-year
warrant to purchase 2,500 shares of common stock at an exercise
price of $2.00 per share was issued for each $5,000 note
increment. The table below provides relevant information on the
notes and warrants issued.
Also during first quarter 2001, the Company issued warrants to
purchase 60,000 shares of Vital Health's common stock,
exercisable over a term of five years at a price of $0.05 per
share. The following table provides relevant information on each
of the warrants issued.
Name Warrant Exercise Consideration Expiration
Shares Price
Robert Johnson 5,000 $0.05 Consulting Services 3/07/2006
Ehssan 50,000 $0.05 Consulting Services 1/15/2006
Taghizadeh
Gary Knudsen MD 5,000 $0.05 Consulting Services 1/09/2006
Aurora Capital 7,500 $2.00 Attached to $15,000 1/29/2006
Management, LLC Convertible Note
Douglas Lennick 25,000 $2.00 Attached to $50,000 3/14/2006
Convertible Note
Gary and Shirley 2,500 $2.00 Attached to $5,000 3/14/2006
Kerkow Convertible Note
Daniel Kuplic 10,000 $2.00 Attached to $20,000 3/14/2006
Convertible Note
Item 6 - Exhibits and Reports on Form 8-K
Reports on Form 8-K
None
Exhibits
Copies of the following documents are included as exhibits
to this report pursuant to Item 601 of Regulation S-B.
SEC Ref. Title of Document Location
No.
10.1 Convertible Promissory Note with Aurora Attached
Capital Management, LLC
9
10.2 Convertible Promissory Note with Douglas Lennick Attached
10.3 Convertible Promissory Note with Gary and Attached
Shirley Kerkow
10.4 Convertible Promissory Note with Daniel Kuplic Attached
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Vital Health Technologies,Inc.
Date: May 10, 2001 By /s/ William Kieger
William Kieger, President
Chief Executive and Financial Officer