As filed with the Securities and Exchange Commission
on June 6, 2002.
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
VITAL HEALTH TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
MINNESOTA 41-1618186
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
855 VILLAGE CENTER DRIVE SUITE 315
NORTH OAKS MINNESOTA 55127
(651) 238-8636
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
STEPHEN MUSCANTO
DIRECTOR
VITAL HEALTH TECHNOLOGIES, INC.
855 VILLAGE CENTER DRIVE SUITE 315
NORTH OAKS MINNESOTA 55127
(651) 238-8636
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies of communications to:
GREGG E. JACLIN, ESQ.
ANSLOW & JACLIN, LLP
4400 ROUTE 9, 2ND FLOOR
FREEHOLD, NEW JERSEY
TELEPHONE NO.: (732) 409-1212
FACSIMILE NO.: (732) 577-1188
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF AMOUNT TO BE REGISTERED PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
- --------------------------- ------------------------ ----------------
Common Stock, par value $.01 per share 1,532,474 $781,562 $71.90
Calculated solely for the purpose of determining the registration fee pursuant
to Rule 457(c) based on the average of the bid and asked price of the common
stock on the over- the-counter electronic bulletin board maintained by the
National Association of Securities Dealers on June 6, 2002.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION DATED JUNE , 2002
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
VITAL HEALTH TECHNOLOGY, INC.
1,532,474 SHARES OF COMMON STOCK
Our selling stockholders are offering to sell 1,532,474 shares of our common
stock.
THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING "RISK FACTORS"
BEGINNING ON PAGE 3.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is June , 2002
Our Common Stock (also known as the "Securities")is traded on the OTC Electronic
Bulletin Board ("OTC BB") under the symbol "VHLT."
TABLE OF CONTENTS
SUMMARY FINANCIAL DATA. 2
ABOUT OUR COMPANY 3
RISK FACTORS. 3
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS 15
USE OF PROCEEDS. 15
MARKET PRICE OF OUR COMMON STOCK 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATION. 16
BUSINESS 22
MANAGEMENT 32
PRINCIPAL STOCKHOLDERS 36
DILUTION 37
SELLING STOCKHOLDERS 39
PLAN OF DISTRIBUTION 41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 42
DESCRIPTION OF SECURITIES. 42
MINNESOTA BUSINESS COMBINATION PROVISIONS 45
INDEMNIFICATION OF DIRECTORS AND OFFICERS. 45
WHERE YOU CAN FIND MORE INFORMATION. 46
TRANSFER AGENT. 47
LEGAL MATTERS 47
EXPERTS. 47
INDEX TO FINANCIAL STATEMENTS f-1
About Our Company
We are a development stage company owning a technology called Variance
Cardiography ("Variance Cardiography" or "Variance Cardiograph") for detecting
heart disease. Heart disease is the number one killer among all diseases and is
responsible for over one million deaths per year. Statistically, almost one in
every two Americans will develop coronary artery disease and one in seven will
die from sudden cardiac arrest. Further, it is estimated that 5 million
Americans have a non-symptomatic form of heart disease known as "silent
ischemia." Currently there does not exist an effective methodology to detect
coronary artery disease that can be utilized on a wide scale basis. Management
believes that the Variance Cardiograph may become that methodology by providing
a state of the art tool to detect coronary artery disease.
We intend to license or sell the Variance Cardiography technology to another
medical technology company with the resources required to effectively market,
manufacture and distribute it to the United States and other foreign markets. We
will also be seeking merger opportunities with existing operating companies,
which will generate on-going revenues for us.
How We Are Organized
We were incorporated in the State of Minnesota on April 11, 1960 under the name
of Cherne Test Ball, Inc. Starting in December of 1961 through May of 1992, we
effectuated several name changes: Cherne Industrial, Inc.; Cherne Enterprises,
Inc.; Cherne Medical, Inc.; and Vital Heart Systems, Inc. In 1984, we began
research into the science of the electrophysiology of coronary artery disease.
As a result, we began selling off our non- medical activities and focusing on
providing effective technologies and resources to promote heart disease
detection and prevention. In 1991, we obtained financing to begin the
commercialization of a product that utilized electrophysiology to detect heart
disease. However, due to numerous factors, we ceased a majority of our
operations in November of 1993. On January 1, 1994, we reentered the development
stage with limited operations, and in 1996 we ceased all operations. In 1998, we
again revived. On September 26, 2000 we changed our name to Vital Health
Technologies, Inc. and on December 1, 2000, we acquired all of the assets of
Vital Health Technologies, LLC ("Vital Health LLC").
We have not been involved in any bankruptcy, receivership or similar proceeding.
We have not been involved in any material reclassification, merger,
consolidation, or purchase or sale of a significant amount of assets not in the
ordinary course of business.
Where You Can Find Us
Our corporate offices are located at 855 Village Center Drive Suite 315, North
Oaks Minnesota 55127. Our corporate staff consists of two part time directors
and a consultant with experience in our industry. Our telephone number is (651)
238-8636.
Summary Financial Data
The following summary financial data should be read in conjunction with
"Management's Discussion and Analysis or Plan of Operation" and the Financial
Statements and Notes thereto, included elsewhere in this Prospectus.
The following table sets forth our summary historical financial information for
the years ended December 31, 2001 and 2000 and the three months ending March 31,
2002 and 2001. The summary historical financial data should be read in
conjunction with our financial
statements, notes "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus. The operating
results for the period ended March 31, 2002 are not necessarily indicative of
the results to be expected for the full year or for any future period.
Three Months Year Ended Year Ended
Ended March December 31, December 31,
31, 2002 2001 2000
-------- ---- ----
STATEMENT OF OPERATIONS
Revenues $ 0 $2,906 $457
Net Income(loss) $ (44,544) $(247,532) $(89,968)
Net Income(loss)per share $ (.10) $(.87) $5.28
Number of Shares used in
calculation of net income 2,594,460 284,460 66,066
(loss) per share
Three Months Year Ended Year Ended
Ended March December 31, December 31,
31, 2002 2001 2000
-------- ---- ----
BALANCE SHEET DATA
Working Capital $2,447 $1,379 $9,143
Total Assets $2,447 $1,379 $26,013
Total Shareholder's Equity $(122,645) $(111,201) $15,781
Risk Factors
You should carefully consider the following risk factors and other information
in this prospectus before deciding to become a shareholder of our common stock.
Your investment in our common stock is highly speculative and involves a high
degree of risk. You should not invest in our common stock unless you can afford
to lose your entire investment and you are not dependent on the funds you are
investing.
Please note that throughout this prospectus, the words "we", "our" or "us" refer
to Vital Health Technology, Inc. and not to the selling stockholders.
Risks related to our business
We will rely upon the sale and license of our Variance Cardiography technology
for substantially all of our revenue.
Our results of operations will materially depend on the success of the Variance
Cardiography technology. A failure to sell or license the Variance Cardiography
technology for any reason, including the introduction of additional competing
products, would have a material adverse effect on us. If we develop additional
products, we would need to obtain regulatory approval before we could sell them.
Given the time-consuming nature of the regulatory clearance process, we do not
expect to be able to sell such additional products in the foreseeable future.
We cannot assure you that our Variance Cardiography technology will gain
physician acceptance.
A limited number of cardiovascular surgeons and cardiologists can influence
medical technology selection and purchase decisions for a large portion of the
target cardiovascular surgery patient population. We cannot assure you that our
Variance Cardiography technology, or any of the products that we may develop,
will gain any significant degree of physician acceptance, or that users will
accept these products as preferable to alternative products or methods of
treatment. Physician acceptance of our Variance Cardiography technology will
depend upon our ability to demonstrate the clinical advantages of lower
complication rates and cost-effectiveness of Variance Cardiography technology
when compared to other similar products or technology. Negative publicity
involving Variance Cardiography technology or other similar products could
adversely affect the overall acceptance of our product. Any of the foregoing
factors, among others, could limit or detract from physician acceptance of our
product and have a negative effect on our business, financial condition,
operating results and cash flows.
We may need to fund multiple research studies throughout the lifecycle of each
of our products, providing statistically significant scientific data to
regulatory agencies and cost effectiveness data to third party payers.
The FDA, foreign regulatory agencies and third party health care payers may
require scientific clinical outcomes data and cost effectiveness data. We will
need to provide this data throughout our products' lifecycles. Payers and
governmental agencies may change the frequency and breadth of clinical research
required, potentially significantly increasing our costs. Without adequate
positive outcomes data that demonstrate advantages from the use of our Variance
Cardiography technology, we may not achieve any significant market penetration.
We cannot assure you that our outcomes data will be adequate to meet present or
future medical device utility requirements. If our outcomes data does not meet
such requirements, we may be unable to sell our products or obtain third party
reimbursement for the costs of our products.
Intense competition in the cardiography industry could prevent us from
successfully marketing our products or render our products obsolete.
We compete in mature, highly competitive markets in which many of our
competitors have
well-known and established products. To compete successfully in these markets,
we must maintain competitive pricing and demonstrate the advantages of our
Variance Cardiography technology. It is possible that technological advances by
our competitors could render our Variance Cardiography technology noncompetitive
or obsolete.
Our primary competitors such as GE Medical Systems, Hewlette Packard, Burdick,
Siemens and Spacelabs are all in the electrocardiogram market. Such companies
dominate the market and control most of the electrocardiogram worldwide. There
is no other company marketing Variance Cardiography technologies. Our
competitors have extensive clinical data demonstrating the performance of their
electrocardiogram capabilities. If these companies commence marketing the
Variance Cardography technology, they will have many additional competitive
advantages over us, including:
o greater name recognition and product market acceptance; o more established
physician relationships; o broader product lines; o greater distribution
capabilities; o greater regulatory compliance capabilities; o larger marketing,
research and development staffs and facilities; and o greater financial
resources.
We cannot assure you that we will be able to compete against such competitors or
their products.
We anticipate future losses and negative cash flows, which may limit or delay
our ability to become profitable.
We have net losses since reentrance into the development stage of $766,974 as of
March 31, 2002. As of March 31, 2002, we had an accumulated deficit of
$11,793,637. We expect to incur additional net losses until we are able to
generate and sustain substantially higher revenues while maintaining reasonable
expense levels, both of which involve uncertainty. We also must continue to make
significant expenditures on research and development in connection with our
technology. We cannot assure you that our revenues will grow in future periods
or that we will ever become profitable. If we do achieve profitability, we
cannot assure you that we would be able to sustain or increase profitability on
a quarterly or annual basis in the future.
Substantial government regulation in the U.S. and abroad may restrict our
ability to sell or license our Variance Cardiography technology.
The FDA and comparable regulatory authorities in foreign countries extensively
and rigorously regulate our products, product development activities and
manufacturing processes. In the U.S., the FDA regulates the introduction of
medical devices as well as the manufacturing, labeling and record-keeping
procedures for such products. We are required to:
o obtain clearance before we can market and sell medical devices;
o satisfy content requirements applicable to our labeling, sales and
promotional materials;
o comply with manufacturing and reporting requirements; and
o undergo rigorous inspections.
The process of obtaining marketing clearance for new medical devices from the
FDA can be costly and time consuming. For example, the premarket clearance
process, which our medical devices must undergo, can require a number of years
to complete. Although we obtained FDA clearance for our Variance Cardiography
technology, we cannot assure you that our future products will obtain FDA
clearance on a timely basis, or at all. Our products must also comply with laws
and regulations in foreign countries in which we market such products. In
general, the extent and complexity of medical device regulation is increasing
worldwide. This trend may continue, and the cost and time required to obtain
marketing clearance in any given country may increase as a result. We cannot
assure you that our products will
obtain any necessary foreign clearances on a timely basis, or at all.
The uncertainty of third party reimbursements and possible health care reforms
may adversely affect us.
Our ability to market products successfully in the U.S. will depend in part on
the extent to which reimbursement for the cost of such products and related
treatment will be available from government health administration authorities,
private health insurers, health maintenance organizations and other third-party
payers. Payers increasingly challenge the need for, and prices of, medical
products and services. Payers may deny reimbursement for procedures that they
deem experimental or for devices used in ways other than as cleared by the FDA
or stated in their indications for use. With respect to our products, some
payers could deny coverage until the devices become generally accepted by the
medical profession. The inability of hospitals and other providers to obtain
reimbursement from third- party payers for our products would have a material
adverse impact on our business, financial condition, operating results and cash
flows. Health care reform may also impact sales of new products in the U.S.
Reforms may include:
o mandated basic health care benefits;
o controls on health care spending through limiting the growth of
private health insurance premiums and Medicare and Medicaid spending;
and
o fundamental changes to the health care delivery system.
We anticipate that Congress and state legislatures will continue to review and
assess alternative health care delivery systems and payment methodologies, and
that public debate of these issues will likely continue in the future. Due to
uncertainties regarding the ultimate features of reform initiatives and their
enactment and implementation, we cannot predict which, if any, of such reform
proposals will be adopted, when they may be adopted or what impact they may have
on our ability to market our current and proposed new products. Laws resulting
from such reform initiatives could adversely impact our business, financial
condition, operating results and cash flows.
We will require additional funds to achieve our current business strategy and
our inability to obtain additional financing could have a material adverse
effect on our ability to maintain business operations.
We will need to raise additional funds through public or private debt or sale of
equity to achieve our current business strategy of licensing or selling the
Variance Cardiography technology to another medical technology company. This
financing may not be available when needed. Even if this financing is available,
it may be on terms that we deem unacceptable or are materially adverse to your
interests with respect to dilution of book value, dividend preferences,
liquidation preferences, or other terms. Our inability to obtain financing would
have a material adverse effect on the our ability to implement our development
strategy, and as a result, could require us to diminish or suspend our
development strategy and possibly cease our operations.
If we are unable to obtain financing on reasonable terms, we could be forced to
delay, scale back or eliminate certain product and service development programs.
In addition, such inability to obtain financing on reasonable terms could have a
material adverse effect on our business, operating results, or financial
condition to such extent that we are forced to restructure, file for bankruptcy,
sell assets or cease operations, any of which could put your investment dollars
at significant risk.
We lack an operating history and have losses which we expect to continue into
the future.
Although we were incorporated in 1960, we ceased operations in 1996 and only
recommenced operations in December 1,2000 upon the purchase of the assets of
Vital Health Technologies, LLC. To date, we have not started our proposed and
revised business operations or realized any revenues. Based upon our new
operations, we have no operating history upon which an evaluation of our future
success or failure can be made. Our net loss since our reentrance into the
development stage is $766,974. Our ability to achieve
and maintain profitability and positive cash flow is dependent upon:
- our ability to license or sell the Variance Cardiography technology to
medical technology companies with the resources required to
effectively market, manufacture and distribute it to the United States
and other foreign markets.
- our ability to generate revenues
- our ability to raise the capital necessary to manufacture and
distribute the technology.
Based upon current plans, we expect to incur operating losses in future periods.
This will happen because there are expenses associated with marketing and
development of the technology. We cannot guarantee that we will be successful in
generating revenues in the future. Failure to generate revenues may cause us to
go out of business.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to use information that we regard as proprietary. We also run the risk
of infringing the proprietary rights of third parties.
We have patent protection for our Variance Cardiography technology and we also
rely upon a combination of trade secrets, know-how and confidentiality
agreements to protect the proprietary aspects of our technology, including
aspects of manufacturing. Our success will depend, in part, on our ability to
protect our products and to manufacture and sell them without infringing the
rights of third parties. The validity and breadth of claims covered in medical
technology patents involve complex legal and factual questions and, therefore,
are highly uncertain. In addition, the laws of many countries do not protect our
proprietary rights to as great an extent as do the laws of the U.S. We cannot
assure you that:
o any pending patent applications or any future patent applications will result
in the issuance of patents; o the scope of any patent protection will be
effective to exclude competitors or to provide competitive advantages to us; o
we will be able to commercially exploit any issued patents before they expire; o
any of our patents will be held valid if subsequently challenged; o others will
not claim rights in, or ownership of, the patents and other proprietary rights
we hold; o our products and processes will not infringe, or be alleged to
infringe, the proprietary rights of others; or o we will be able to protect
meaningful rights in proprietary technology over which we do not hold patents.
Furthermore, we cannot assure you that others have not developed or will not
develop products which may duplicate any of our products or manufacturing
processes, or that others will not design around our patents. Other parties may
independently develop or otherwise acquire substantially equivalent techniques,
gain access to our proprietary technology or disclose such technology. In
addition, whether or not we obtain additional patents, others may hold or
receive patents covering components of products we independently develop in the
future. We cannot assure you that third parties will not claim infringement by
us, and seek substantial damages, with respect to current or future products. If
we were to become involved in a dispute regarding intellectual property, whether
ours or that of another company, we may be involved in legal proceedings. Any
such claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays and require us to:
o cease manufacturing and selling our product, which would seriously harm us; o
enter into royalty or licensing agreements; or o design commercially acceptable
non-infringing alternative products.
We cannot assure you that we would be able to obtain royalty or licensing
agreements, if required, on terms acceptable to us or at all, or that we would
be able to develop
commercially acceptable non-infringing alternative products. Our failure to do
so could have a material adverse effect upon our business, financial condition,
operating results and cash flows.
If patients allege that the use of Variance Cardiography technology adversely
affected them, we may face substantial product liability claims.
Substantial product liability litigation exists within the medical device
industry. We cannot assure you that future product liability claims will not
exceed the limits of our insurance coverage or that such insurance will continue
to be available on commercially reasonable terms, or at all. Consequently, a
product liability claim or other claim with respect to uninsured liabilities, or
in excess of insured liabilities, could have a material adverse effect on our
business, financial condition, operating results and cash flows. In addition,
adverse publicity resulting from product liability litigation may materially
adversely affect us regardless of whether the claims are valid or whether we are
liable. These claims may divert our financial and management resources that
would otherwise be used to benefit the future performance of our operations.
Minnesota Anti-takeover Law and Certain Provisions of Our Articles of
Incorporation May Discourage Attempts to Effect a Change in Control of Our
Company, Which May Adversely Affect the Value of Our Common Stock.
We are governed by the provisions of Section 302A.673 of the Minnesota Business
Corporation Act ("MBCA"). In general, the law prohibits a public Minnesota
corporation from engaging in a "business combination" (with an "interested
shareholder") for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. "Business Combination" includes
mergers, share exchanges, asset sales, plan or proposal of liquidation or
dissolution, recapitalization, issuance and transfers of shares in excess of 5%
or more of the Company's shares. "Interested Shareholder" means any person who
owns directly or indirectly 10% or more of a public corporation's outstanding
voting stock or an affiliate or associate of a public corporation which owns, or
within four years did own, 10% or more of the public corporation's outstanding
voting stock. These provisions regarding certain business combinations under the
MBCA could have the effect of delaying, deferring, or preventing a change in
control of the company or the removal of existing management. We have no control
over, and therefore cannot predict, what effect these impediments to the ability
of third parties to acquire control of us might have on the market price of our
common stock. In addition, we are authorized to 5,000,000 shares of undeisgnated
stock which may be issued by our Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Depending upon
the rights, preferences and designations assigned to it, issuance of shares of
preferred stock could delay, deter or prevent a change in control of our company
to the detriment of our shareholders.
We Depend on Our Directors and consultant and Need Additional Marketing and
Technical Personnel to Successfully Market Our Technology. We Can Not Assure You
That We Will Be Able to Retain or Attract Such Persons.
We are presently dependent to a great extent upon the experience, abilities and
continued services of Lloyd Woelfle, Stephen Muscanto, our directors and William
Kieger, our consultant. The loss of services of these individuals could have a
material adverse effect on our business, financial condition or results of
operation. The development and execution of our business plan depends upon these
individuals. We do not have employment agreements with most of our key
employees. The departure of key people could adversely affect our business,
financial condition, operating results and cash flows.
We may be unable to recruit, motivate and retain qualified employees.
Our success depends upon our ability to attract, motivate and retain a
sufficient number of qualified employees, including those who concentrate in
research and development,
sales, marketing and manufacturing, to keep pace with our product development
schedules. Even though we have not experienced shortages of qualified people to
date, qualified individuals needed to fill these positions could be in short
supply in our market. Our inability to recruit, motivate and retain such
individuals may delay the planned launch of new products or result in high
employee turnover, either of which could have a material adverse effect on our
business, financial condition, operating results and cash flows. Additionally,
competition for qualified employees could require us to pay higher wages and
provide additional benefits to attract sufficient employees.
Risks related to our securities
Fluctuations in our operating results may result in decreases in the price of
our securities.
Our operating results have and will continue to fluctuate significantly because
of several factors, including the timing of FDA clearance, government policies
regarding payment for our products and new technology. Consequently, our
operating results may fall below the expectations of public market analysts and
investors. In that event, the price of our securities would likely decrease.
Our existing shareholders will retain significant control after this offering,
which could reduce your ability to receive a premium for your securities through
a change in control.
Upon completion of this offering, our officers, directors and principal
shareholders will beneficially own 88% of our shares of common stock. As a
result, they may be able to control our company and direct our affairs,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership could also delay, defer or prevent
a change in control of our company, and make some transactions more difficult or
impossible without their support. These transactions might include proxy
contests, tender offers, open market purchase programs or other share purchases
that could give our shareholders the opportunity to realize a premium over the
then prevailing market price of our securities. As a result, this concentration
of ownership could depress the price of our securities.
The Trading Price of Our Common Stock and Our Ability to Raise Additional
Financing May Be Adversely Effected by the Influx into the Market of the
Substantial Number of Shares Covered by this Prospectus.
This prospectus covers the public sale of 1,532,474 shares of our common stock.
This significant increase in the number of shares available for public sale may
have a negative impact on the trading price of our shares.
The Trading Price of Our Common Stock May Be Volatile.
The trading price of our shares has from time to time fluctuated widely and in
the future may be subject to similar fluctuations. The trading price may be
affected by a number of factors including the risk factors set forth in this
prospectus as well as our operating results, financial condition, announcements
of innovations or new products by us or our competitors, general conditions in
our industry, and other events or factors. Although we believe that
approximately six registered broker dealers currently make a market in our
common stock, we can not assure you that any of these firms will continue to
serve as market makers or have the financial capability to stabilize or support
our common stock. A reduction in the number of market makers or the financial
capability of any of these market makers could also result in a decrease in the
trading volume of and price of our shares. In recent years broad stock market
indices, in general, and the securities of technology companies, in particular,
have experienced substantial price fluctuations. Such broad market fluctuations
may adversely affect the future-trading price of our common stock.
Certain states may not allow sales of our common shares and investors may be
required to
hold their common shares indefinitely.
The common shares offered are intended to be qualified or exempt for sale only
in a limited number of states. Purchasers of the common shares may move to
jurisdictions in which the common shares are not qualified or exempt. No
assurances can be given that we will be able to effect any required
qualification or that any exemption will be available permitting a purchaser to
sell his common shares, and, as a result, such common shares may be required to
be held indefinitely.
A business combination with a third party will probably result in a change in
control and of management.
A business combination with a third party involving the issuance of our common
stock will, in all likelihood, result in shareholders of another company
obtaining a controlling interest in us. The resulting change in control will
likely result in removal of our present officer and director and a corresponding
reduction in or elimination of his/her participation in our future affairs.
"Penny Stock" rules may make buying or selling our common stock difficult.
Trading in our securities is subject to the "penny stock" rules. The SEC has
adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. These rules require that any broker-dealer who recommends
our securities to persons other than prior customers and accredited investors,
must, prior to the sale, make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated with trading
in the penny stock market. In addition, broker-dealers must disclose commissions
payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon
broker-dealers by such requirements may discourage broker-dealers from effecting
transactions in our securities, which could severely limit their market price
and liquidity of our securities. Broker-dealers who sell penny stocks to certain
types of investors are required to comply with the Commission's regulations
concerning the transfer of penny stock. These regulations require broker-dealers
to:
- Make a suitability determination prior to selling a penny stock to the
purchaser;
- Receive the purchaser's written consent to the transaction; and
- Provide certain written disclosures to the purchaser.
These requirements may restrict the ability of broker-dealers to sell our common
stock and may affect your ability to resell our common stock.
We do not expect to pay dividends and investors should not buy our common stock
expecting to receive dividends
We have not paid any dividends on our common stock in the past, and do not
anticipate that we will declare or pay any dividends in the foreseeable future.
Consequently, you will only realize an economic gain on your investment in our
common stock if the price appreciates. You should not purchase our common stock
expecting to receive cash dividends.
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Some of the statements in this prospectus under "Risk Factors," Plan of
Operation," "Business," and elsewhere are "forward- looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements involve known and unknown risks, uncertainties and other factors
which may cause our or our industry's
actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by these
forward-looking statements. These factors include, among others, the factors set
forth above under "Risk Factors."
In some cases, you can identify forward-looking statements by the words
"believe," "expect," "anticipate," "intend" and "plan" and similar expressions
or the negative of these terms or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance or achievements. We caution you not to place undue
reliance on these forward- looking statements.
USE OF PROCEEDS
The selling stockholders are selling shares of common stock covered by this
prospectus for their own account. We will not receive any of the proceeds from
the resale of these shares. We have agreed to bear the expenses relating to the
registration of the shares for the selling security holders.
DIVIDENDS
To date, we have not declared or paid any dividends on our common stock. We
currently do not anticipate paying any cash dividends in the foreseeable future
on our common stock, when issued pursuant to this offering. Although we intend
to retain our earnings, if any, to finance the development and growth of our
business, our Board of Directors will have the discretion to declare and pay
dividends in the future. Payment of dividends in the future will depend upon our
earnings, capital requirements, and other factors, which our Board of Directors
may deem relevant.
PENNY STOCK CONSIDERATIONS
Broker-dealer practices in connection with transactions in "penny stocks" are
regulated by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of less
than $5.00. Penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of our results of
operations and financial condition. The discussion should be read in conjunction
with our financial statements and notes thereto appearing in this prospectus.
The following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. Our actual results may differ significantly
from the results, expectations and plans discussed in these forward-looking
statements.
We are a development stage company which has not commenced our principal
operation of
distributing the Variance Cardiograph and related services. Due to economic and
market conditions we were unable to secure sufficient financing to complete the
plan of development for 2001. Consequently, management has changed our strategic
direction to focus on the sale or licensing of the Variance Cardiography
technology and seek potential merger-acquisition opportunities. We are utilizing
Focus Tech Investments, Houston, Texas to provide services that include locating
and negotiating merger-acquisition agreements with existing operating companies.
Three Months Ended March 31, 2002 and 2001
We generated no revenue for the three months ended March 31, 2002, as compared
to $560 revenue for the three months ended March 31, 2001. Cost of sales for the
three months ended March 31, 2002 and 2001 were $0 and $38, respectively.
General and administrative expenses for the three months ended March 31, 2002
were $41,817, as compared to $67,289 in the same period of 2001.
We had interest expense in the amount of $2,727 for the three months ended March
31, 2002, as compared to $533 interest expense for the three months ended March
31, 2001.
As a result of the foregoing, we realized a net loss of $44,544 for the three
months ended March 31, 2002, as compared to net $67,655 for the same period in
2001.
Liquidity and Capital Resources
At March 31, 2002, we had a working capital deficit of $122,645, as compared to
a working capital deficit of $57,352 at March 31, 2001. The change is primarily
due to us using convertible notes to fund current operations.
We received a loan from our President at the time, William Kieger in the amount
of $5,000 on January 25, 2002 and another $5,000 loan from Focus Tech
Investments, Inc. on February 6, 2002. Both loans are for a period of 12 months
and accrue at 10% interest. At March 31, 2002 the Company had $112,500 in
outstanding convertible promissory notes accruing at 10% interest. Several of
the notes where due during the past three months and are now in default. At the
present time the note-holders have verbally agreed to allow the interest to
continue to accrue until we have the capital to pay the notes off; or, until the
board of directors declares a conversion to stock option that is acceptable to
the note-holders.
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 President and sole officer
William Kieger submitted his resignation effective January 31, 2002 as our
officer and director. We currently have no corporate officers.
On March 5, 2002 William Kieger entered into a consulting agreement in which we
issued 300,000 shares of Vital Health Technologies common stock for his services
as a liaison between us and evaluation sites for the Variance Cardiograph,
trouble shooting and training, advise directors in maintaining accounting and
business reporting, advise regarding merger/acquisition proposals and assistance
in maintaining relationships with development team members, in particular;
engineers, physicians and regulatory professionals. The period of the agreement
is for 12 months. Each of the two directors has agreed to serve on the board for
5,000 shares of Vital Health Technologies common stock.
Vital Health Technologies, Inc. 2002 Employee Stock Option Plan
On March 5, 2002 the board of directors of Vital Health approved and adopted the
Vital Health Technologies, Inc. 2002 Employee Stock Option Plan in order to
retain the services of key management and consultants. Simultaneous with the
approval of the plan we filed an appropriate Form S-8 registration with the U.S.
Securities and Exchange Commission to register the shares. The 5,000 shares of
common stock issued to each of the two directors
and 300,000 shares of common stock issued to William Kieger where issued as part
of the plan and Form S-8 registration.
Agreement with Focus Tech Investments, Inc.
On January 30, 2002 we entered into an agreement with Texas finance and
consulting firm Focus Tech Investments, Inc. (FTI) whereas FTI will provide from
time to time financing in order for us to meet its ongoing financial
responsibilities to vendors who provide legal, accounting, transfer agent
services, storage space and other miscellaneous services. FTI provided a $5,000
loan in conjunction with signing the agreement and had provided loans totaling
$10,000 prior to the agreement.
FTI will identify and contact merger candidates who are qualified to merge with
Vital Health and present candidates to the board of directors for preliminary
approval. Following preliminary approval FTI will continue to conclude
negotiations until final closure and approval from the board of directors and
Aurora Capital Management, L.L.C. is obtained.
As consideration for the services performed, we issued FTI 2,000,000 shares of
common stock restricted under Rule 144. In the event FTI is not able to conclude
a merger agreement, for any reason prior to August 30, 2002, FTI has agreed to
cancel the entire amount of stock issued. In the event the stock is cancelled
any loans will continue to be valid as stated in the loan agreements.
FTI also has the right to present candidates to serve as a director until the
board of directors approves one such candidate. As of March 31, 2002 FTI has not
presented any director candidates.
Plan for the next 12 months.
Our plan for the next 12 months is to handle the administrative and reporting
requirements of a public company and to seek merger/acquisition opportunities
while maintaining evaluation sites for the Variance Cardiograph. In addition, we
intend to target and approach potential candidates who will purchase or license
the variance cardiography technology.
As of this date we have not presented or received any proposals or entered into
any negotiations regarding the purchase or licensing of the Variance
Cardiography technology. In addition, we have not entered into any proposals or
negotiations with potential merger-acquisition candidates. We implemented a 1
for 10 reverse stock split early in the year 2002 to be more attractive for
merger-acquisition candidates. However, there can be no assurance that we will
be successful with either of the two initiatives, and if so; we cannot
accurately predict the value of any agreement to us.
We have relied on loans and internal sources for funding our expenses. Since we
presently have no revenue from operations, we cannot rely on internal sources of
capital to fund our ongoing expenses. If we are unable to locate candidates for
the purchase or licensing of the Variance Cardiography technology or complete a
merger or acquisition agreement, our ability to continue as a going concern is
unlikely.
BUSINESS - OUR COMPANY
We are a development stage company that owns a technology called Variance
Cardiography ("Variance Cardiography" or "Variance Cardiograph") for detecting
heart disease. Heart disease is the number one killer among all diseases and is
responsible for over one million deaths per year. Statistically, almost one in
every two Americans will develop coronary artery disease and one in seven will
die from sudden cardiac arrest. Further, it is estimated that 5 million
Americans have a non-symptomatic form of heart disease known as "silent
ischemia." Currently there does not exist an effective methodology to detect
coronary artery disease that can be utilized on a wide scale basis. Management
believes that the Variance Cardiograph may become that methodology by providing
a state of
the art tool to detect coronary artery disease.
We intend to license or sell the Variance Cardiography technology to another
medical technology company with the resources required to effectively market,
manufacture and distribute it to the United States and other foreign markets. We
will also be seeking merger opportunities with existing operating companies,
which will generate on-going revenues for us.
Principal Product
The Variance Cardiograph
Our primary product is the Variance Cardiograph. The Variance Cardiograph is a
medical device designed to assist in the diagnosis of coronary artery disease by
measuring the electro-physiological behavior of heart tissue while the patient
is at rest. If heart cells are unhealthy they are not able to conduct the
electric current that the heart generates each time it beats. Just as the water
flow in a river will vary due to obstacles such as boulders and logs, the flow
of the electric current in the heart will vary due to cell deterioration.
Traditional evaluation for the coronary artery disease begins with a personal
history review, physical examination, routine lab studies, chest x-rays and
electrocardiograms ("ECG"). However, the accuracy of the ECG, particularly a
resting ECG, is much lower than desired for detecting coronary artery disease.
The accuracy of the stress ECG test is higher than that of the resting ECG, but
many patients cannot be stressed. For example, non-ambulatory individuals and
individuals with health problems such as obesity, asthma or arthritis cannot be
stressed. The exercise ECG test is limited in its accuracy to detect coronary
artery disease, especially when its results are equivocal as is usually the case
in patients without heart disease symptoms and in patients with intermediate
risk (i.e., patents with or without symptoms but having high blood pressure,
high cholesterol levels, tobacco use, family history or diabetes). The medical
community recognizes that stress ECGs often have high false positive results,
particularly in women, which leads to more invasive tests and more expense.
The Variance Cardiograph and the ECG are both designed to detect abnormal
electric activity of the heart, but there are significant differences in the
methods used to record and analyze this electric activity. We believe that the
Variance Cardiograph's manner of collecting data with respect to the heart's
electrical activity allows it to gather data with a higher resolution and
fidelity than the conventional ECG. The Variance Cardiograph uses up to 22
surface electrodes, compared to 10 for the ECG. The Variance Cardiograph uses a
wider frequency range and increased sample rate, which allows the higher
frequency components to be measured and analyzed. These components are normally
lost in standard 12-lead ECGs. Increasing the sample rate improves the
resolution of collected data. High frequency changes in the waveforms cannot be
detected by the standard ECG due to its the narrow frequency response and
limited sample rate. The Variance Cardiographs higher analog to digital
conversion resolution allows measurement of smaller variations in
electrophysiological voltage, down to about 1/6th of a microvolt, compared to
about 10 microvolts achieved by the standard 12-lead ECG.
Twenty-four clinical studies have been completed with several studies published
that conclude Variance Cardiography has greater sensitivity, specificity and
accuracy than a standard ECG and exercise stress test. Additionally, we believe
the cost of a Variance Cardiograph is comparable, if not favorable, to
comparable tests.
We devoted $400,000 and 2 years to design a new version of the Variance
Cardiograph that replaces the Variance Cardiograph's current ISA (Industry
Standard Adapter) interface with a Universal Serial Bus data converter. The
Universal Serial Bus is the new I/O (Input/Output) standard for personal
computers and gives users simple, easy, plug-and-play connections for
peripherals. The new Variance Cardiograph is built as an outside the computer
device that provides potential advantages in flexibility and mobility by
allowing the Variance Cardiograph to interface with a laptop or desktop personal
computer. In
addition, the newer Variance Cardiograph can complete a test in 10-15 minutes,
compared to the 45-minute test of the previous design.
The first prototype for the Universal Serial Bus Variance Cardiograph was
completed in September of 2000. The new design requires that a new 510 (k) be
filed with the FDA in order to market the device to the medical community.
Patents
We hold and maintain seven US patents relating to Variance Cardiography with the
master patent being issued in 1993. We believe that it possesses all necessary
rights to the technology involved in the Variance Cardiograph. However, there is
no assurance the Variance Cardiograph will not infringe on patents held by
others, nor is there any assurance that the patents granted will provide
commercial benefit to us or adequate protection against competition. We require
our consultants to agree, in writing, to keep its proprietary information
confidential and, within certain limitations, to assign to us all inventions
relating to our business.
Plans for licensing or sale of technology
Do to the lack of available capital to successfully market the Variance
Cardiography, we changed our direction in 2001 from trying to market the
Variance Cardiograph technology to actively seeking candidates to license or
purchase the Variance Cardiograph technology. Types of companies that have been
targeted include ECG manufacturers, electrode manufacturers, large medical
device and pharmaceutical companies. We have contacted companies in the United
States, Europe and Japan. As of this date, there have not been any proposals
presented by us or any candidates that have been targeted. There can be no
assurance that we will have success in licensing or selling the Variance
Cardiograph technology. In the event that we sell the technology in exchange for
stock and/or a royalty, there can be no assurance that the stock will be
marketable or have future value or that royalty payments will be paid or have
any significant value.
Pursuit of acquisition and merger candidates
We have been receiving assistance from Focus Tech Investments located in Houston
Texas who has provided us with loans and assistance in locating a market maker
for our common stock. We have received approval from the NASD for our stock to
trade on the over-the-counter bulletin board. Focus Tech Investments is also
seeking operating companies that may be candidates for an acquisition or merger
with us. As of this date there have been no discussions with any potential
candidates for an acquisition or merger and there can be no assurance that
either will take place in the future or any agreement will be finalized if
discussions take place.
Reverse stock split
To better our position for a potential merger or acquisition our board of
directors considered and approved a reverse stock split on December 26, 2001.
For shareholders of record on January 7, 2002 each shareholder received one
share of Vital Health Technologies, Inc. common stock in exchange for each ten
shares held. For shareholders who will then hold less than one share of common
stock we purchased those shares at a price of .05 per fractional share. As the
reverse split was approved by the board of directors only, the Company may be
required under Minnesota law to amend its articles of incorporation to reduce
the number of authorized shares of common stock to 5,000,000 and increase the
par value per share to $0.10.
Governmental Regulation
The Variance Cardiograph is subject to government regulation by the Food and
Drug Administration ("FDA") under the Federal Food, Drug and Cosmetic Act. The
Company has submitted a 510(k) and received FDA clearance for the older model of
the Variance Cardiograph in 1986. The first prototype for the new Variance
Cardiograph was completed
in September 2000. With the new design, a new 510(k) must be filed with the FDA
before the device can be marketed to the medical community. Any company who
licenses or purchases the Variance Cardiography technology will need to file for
FDA clearance. However, FDA clearance is not certain, and such clearance will
require additional time, effort, and expense.
EMPLOYEES
We are a development stage company and currently have no employees. Executive
officers will devote such time to our affairs, as they deem appropriate. Our
management expects to use consultants, attorneys, and accountants as necessary,
and does not currently anticipate a need to engage any full-time employees. The
need for employees and their availability will be addressed in connection with
potential merger or acquisitions.
DESCRIPTION OF PROPERTY
To reduce operating expenses, we negotiated a lease termination agreement with
CSM Properties and we vacated the approximately 2,000 square foot facility at
our Roseville, Minnesota location on October 1, 2001 to save approximately
$3,500 in monthly expenses. We will continue to rent 420 square feet at our
Shoreview, Minnesota location, which is rented on a monthly basis.
LEGAL PROCEEDINGS
To the best of our knowledge, there are no known or pending litigation
proceedings against us.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information about our executive officers and
directors.
NAME AGE POSITION
- ---- --- --------
Stephen Muscanto 59 Director
Lloyd R. Woelfle 49 Director
Lloyd Woelfle has been our Director since August, 2000. For the past 23 years
American Express has employed Mr. Woelfle; most recently as a vice president
specializing in security compliance and systems management. He attended the
University of Oklahoma majoring in Microbiology from 1971 to 1973. He received a
CFP designation from the College for Financial Planning, Denver, Colorado, and
is a licensed principal.
Stephen Muscanto has been our Director since August, 2000. He is currently
self-employed as a business consultant specializing in operations and business
systems. From 1991 to May 1999, he was the President and CEO of Pneuseal
International Corporation, a manufacturer of heat sealing plastic film equipment
and tooling primarily for the health care market. He received a BA from Yale, an
MS from the California Institute of Technology, and an MBA from University of
Southern California in 1972.
All officers and directors listed above will remain in office until the next
annual meeting of our stockholders, and until their successors have been duly
elected and qualified. There are no agreements with respect to the election of
Directors. We have not
compensated our Directors for service on our Board of Directors, any committee
thereof, or reimbursed for expenses incurred for attendance at meetings of our
Board of Directors and/or any committee of our Board of Directors. Officers are
appointed annually by our Board of Directors and each Executive Officer serves
at the discretion of our Board of Directors.
We do not have any standing committees.
None of our Officers and/or Directors have filed any bankruptcy petition, been
convicted of or been the subject of any criminal proceedings or the subject of
any order, judgment or decree involving the violation of any state or federal
securities laws within the past five (5) years.
BOARD OF DIRECTORS
The board of directors consists of two directors.
BOARD COMMITTEES
The Board of Directors has established no committees.
EXECUTIVE COMPENSATION
We have no agreement or understanding, express or implied, with any officer or
principal stockholder, or their affiliates or associates, regarding compensation
in the form of salary, bonuses, stocks, options, warrants or any other form of
remuneration, for services performed on our behalf. Nor are there compensatory
plans or arrangements, including payments to any officer in relation to
resignation, retirement, or other termination of employment with us, or any
change in control, or a change in the officer's responsibilities following a
change in control The following table sets forth information concerning annual
and long-term compensation, on an annualized basis for the 2001 fiscal year, for
our Chief Executive Officer and for each of our executive officers (the "Named
Executive Officers") whose compensation on an annualized basis is anticipated to
exceed $100,000 during fiscal 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK UNDERLYING OPTIONS ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS (NO. OF SHARES) COMPENSATION
- -------- ---- ------ ----- ------------ ------ --------------- ------------
None
Our shareholders may in the future determine to pay Directors' fees and
reimburse Directors for expenses related to their activities.
STOCK OPTIONS
We did not grant stock options in 2001.
The following table sets forth information with respect to stock options granted
to the Named Executive Officers during fiscal year 2001:
OPTION GRANTS IN FISCAL 2001
(INDIVIDUAL GRANTS) (1)
NUMBER OF% OF TOTAL OPTIONS
SECURITIES UNDERLYING GRANTED TO EMPLOYEES IN EXERCISE EXPIRATION
NAME OPTIONS GRANTED FISCAL PRICE DATE
2001
None
No Executive Officer held options during the 2001 fiscal year. The following
table sets forth information as to the number of shares of common stock
underlying unexercised stock options and the value of unexercised in-the-money
stock options projected at the 2001 fiscal year end:
None
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of June 6, 2002, certain information with
respect to the beneficial ownership of the common stock by (1) each person known
by us to beneficially own more than 5% of our outstanding shares, (2) each of
our directors, (3) each Named Executive Officer and (4) all of our executive
officers and directors as a group. Except as otherwise indicated, each person
listed below has sole voting and investment power with respect to the shares of
common stock set forth opposite such person's name.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1)(2) BENEFICIAL OWNERSHIP OUTSTANDING SHARES
- -------------------- -------------------- ------------------
5% STOCKHOLDERS
William Kieger (3) 509,671 13.62%
855 Village Center Drive
Suite 315
North Oak, Minnesota 55127
Focus Tech Investments, Inc. 2,000,000 53.46%
179 Ruskin Drive East
Montgomery, Texas 77356
Templar Comptier, Ltd. 1,146,250 30.64%
PO Box 7555
Broadgate, London EC2M2QS
DIRECTORS AND NAMED EXECUTIVE
OFFICERS
Stephen Muscanto 5,000 *
2003 Skillman Avenue
Roseville, Minnesota 55113
Lloyd R. Woelfle 10,532 *
19555 Waterford Place
Shorewood, Minnesota 55331
Officers and Directors 15,532 1.38%
as a Group
* Less than one percent
(1) Under the rules of the SEC, a person is deemed to be the beneficial owner of
a security if such person has or shares the power to vote or direct the voting
of such security or the power to dispose or direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities if
that person has the right to acquire beneficial ownership within 60 days of the
date hereof. Unless otherwise indicated by footnote, the named entities or
individuals have sole voting and investment power with respect to the shares of
common stock beneficially owned.
(2) This table is based upon information obtained from our stock records. Unless
otherwise indicated in the footnotes to the above table and subject to community
property laws where applicable, we believe that each shareholder named in the
above table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned.
(3) William Kieger, our former President, owns and controls Aurora Capital
Management LLC, which directly owns 509,671 shares of our common stock.
Accordingly, Mr. Kieger may be deemed to have indirect voting and investment
control over the shares held by Aurora Capital Management.
SELLING STOCKHOLDERS
The shares being offered for resale by the selling stockholders consists of the
following:
(1) 1,146,250 shares issued to Templar Comptier, Ltd. for the payment of
$350,000. Such shares were issued pursuant to an exemption from registration at
Section 4(2) of the Securities Act of 1933; (2) 150,000 shares issued to Focus
Tech Investments, Inc. pursuant to an agreement dated January 30, 2002. Such
shares were issued pursuant to an exemption from registration at Section 4(2) of
the Securities Act of 1933; (3) 209,671 shares issued to Aurora Capital
Management LLC. pursuant to an exemption from registration at Section 4(2) of
the Securities Act of 1933; (4) 26,553 shares issued to shareholders of Aurora
Capital Management LLC pursuant to an exemption from registration at Section
4(2) of the Securities Act of 1933.
Except for William Kieger, our former President and Director and Lloyd Woelfle,
none of the stockholders have had within the past three years any position,
office or other material relationship with us or any of our predecessors or
affiliates.
The following table sets forth the name of the selling stockholders, the number
of shares of common stock beneficially owned by each of the selling stockholders
as of June 6, 2002 and the number of shares of common stock being offered by the
selling stockholders. The shares being offered hereby are being registered to
permit public secondary trading, and the selling stockholders may offer all or
part of the shares for resale from time to time. However, the selling
stockholders are under no obligation to sell all or any portion of such shares
nor are the selling stockholders obligated to sell any shares immediately upon
effectiveness of this prospectus. All information with respect to share
ownership has been furnished by the selling stockholders.
Shares of common Percent of Common Shares of common Shares of common
Stock owned prior Stock owned stock to be Stock owned
Name of selling stockholder to offering(1) prior to offering sold After offering Percent(1)
---------------- ----------------- --------------- ---------------- ----------
Aurora Capital(2) 209,671 5.61% 209,671 0 0
Management LLC
Focus Tech(3) 2,000,000 53.47% 150,000 1,850,000 49.45%
Investments, Inc.
Templar Comptier, Ltd.(4) 1,146,250 30.64% 1,146,250 0 0
Lloyd R. Woelfle 10,532 * 5,532 5,000 *
William and 5,532 * 5,532 0 0
Joyce E. Bezdichek
Douglas A. Lennick 11,064 * 11,064 0 0
John C. Greiber 3,319 * 3,319 0 0
David Breen 1,106 * 1,106 0 0
(1) Assumes that all of the shares of common stock offered in this prospectus
are sold and no other shares of common stock are sold or issued during the
offering period.
(2) William Kieger is a representative of Aurora Capital Management LLC and has
investment control of our shares owned by Aurora Capital Management LLC.
(3) Michael Fearnow is a representative of Focus Tech Investments, Inc. and has
investment control of our shares owned by Focus Tech Investments, Inc.
(4) Donald Goree is a representative of Templar Comptier, Ltd. and has
investment control of our shares owned by Templar Comptier, Ltd.
PLAN OF DISTRIBUTION
The shares may be sold or distributed from time to time by the selling
stockholders or by pledgees, donees or transferees of, or successors in interest
to, the selling stockholders, directly to one or more purchasers (including
pledgees) or through brokers or dealers who act solely as agents or may acquire
shares as principals, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at negotiated prices or at fixed
prices, which may be changed. The distribution of the shares may be effected in
one or more of the following methods:
o ordinary brokers transactions, which may include long or short sales,
o transactions involving cross or block trades on any securities or
market where our common stock is trading,
o purchases by brokers or dealers as principal and resale by such
purchasers for their own accounts pursuant to this prospectus,
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents,
o through transactions in options, swaps or other derivatives (whether
exchange listed or otherwise), or
o any combination of the foregoing, or by any other legally available
means.
In addition, the selling stockholders may enter into hedging transactions with
broker- dealers who may engage in short sales, if short sales were permitted, of
shares in the course of hedging the positions they assume with the selling
stockholders. The selling stockholders may also enter into option or other
transactions with broker-dealers that require the delivery by such
broker-dealers of the shares, which shares may be resold thereafter pursuant to
this prospectus.
Brokers, dealers, or agents participating in the distribution of the shares may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholders and/or the purchasers of shares for whom such
broker-dealers may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Neither the selling stockholders nor we can presently
estimate the amount of such compensation. We know of no existing arrangements
between the selling stockholders and any other stockholder, broker, dealer or
agent relating to the sale or distribution of the shares. We do not anticipate
that either our shareholders will engage an underwriter in the selling or
distribution of our shares.
We will not receive any proceeds from the sale of the shares of the selling
security holders pursuant to this prospectus. We have agreed to bear the
expenses of the registration of the shares, including legal and accounting fees,
and such expenses are estimated to be approximately $20,000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
DESCRIPTION OF SECURITIES
The following is a summary description of our capital stock and certain
provisions of our certificate of incorporation and by- laws, copies of which
have been incorporated by reference as exhibits to the registration statement of
which this prospectus forms a part. The following discussion is qualified in its
entirety by reference to such exhibits.
GENERAL
Our Articles of Incorporation authorize us to issue up to 50,000,000 Common
Shares, $0.01 par value per common share and 5,000,000 shares of undesignated
stock. As of June 6, 2002, there were 3,740,709 shares of our common stock
outstanding.
COMMON STOCK
The holders of the common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Our certificate of
incorporation and by-laws do not provide for cumulative voting rights in the
election of directors. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to receive
ratably such dividends as may be declared by the Board out of funds legally
available therefor. In the event of our liquidation, dissolution or winding up,
holders of common stock are entitled to share ratably in the assets remaining
after payment of liabilities. Holders of common stock have no preemptive,
conversion or redemption rights. All of the outstanding shares of common stock
are fully-paid and non-assessable.
Liquidation Rights.
Upon our liquidation or dissolution, each outstanding Common Share will be
entitled to share equally in our assets legally available for distribution to
shareholders after the payment of all debts and other liabilities.
Dividend Rights.
We do not have limitations or restrictions upon the rights of our Board of
Directors to declare dividends, and we may pay dividends on our shares of stock
in cash, property, or our own shares, except when we are insolvent or when the
payment thereof would render us insolvent subject to the provisions of the
Minnesota Statutes. We have not paid dividends to date, and we do not anticipate
that we will pay any dividends in the foreseeable future.
Voting Rights.
Holders of our Common Shares are entitled to cast one vote for each share held
of record at all shareholders meetings for all purposes.
Other Rights.
Common Shares are not redeemable, have no conversion rights and carry no
preemptive or
other rights to subscribe to or purchase additional Common Shares in the event
of a subsequent offering.
There are no other material rights of the common shareholders not included
herein. There is no provision in our charter or by-laws that would delay, defer
or prevent a change in control of us. We have not issued debt securities.
MINNESOTA BUSINESS COMBINATION PROVISIONS
We are governed by the provisions of Section 302A.673 of the Minnesota Business
Corporation Act ("MBCA"). In general, the law prohibits a public Minnesota
corporation from engaging in a "business combination" (with an "interested
shareholder") for a period of four years after the date of the transaction in
which the person became an interested shareholder, unless the business
combination is approved in a prescribed manner. "Business Combination" includes
mergers, share exchanges, asset sales, plan or proposal of liquidation or
dissolution, recapitalization, issuance and transfers of shares in excess of 5%
or more of the Company's shares. "Interested Shareholder" means any person who
owns directly or indirectly 10% or more of a public corporation's outstanding
voting stock or an affiliate or associate of a public corporation which owns, or
within four years did own, 10% or more of the public corporation's outstanding
voting stock. These provisions regarding certain business combinations under the
MBCA could have the effect of delaying, deferring, or preventing a change in
control of the company or the removal of existing management. We have no control
over, and therefore cannot predict, what effect these impediments to the ability
of third parties to acquire control of us might have on the market price of our
common stock. In addition, we are authorized to 5,000,000 shares of undesignated
stock which may be issued by our Board of Directors on such terms and with such
rights, preferences and designations as the Board may determine. Depending upon
the rights, preferences and designations assigned to it, issuance of shares of
such stock could delay, deter or prevent a change in control of our company to
the detriment of our shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation limit the personal liability of our officers and
directors for monetary damages for breach of their fiduciary duty as directors,
except for liability that cannot be eliminated under the Minnesota Business
Corporation Act. Our Bylaws also provide for us to indemnify directors and
officers to the fullest extent permitted by the Minnesota Business Corporation
Act.
The indemnification provisions described above would provide coverage for claims
arising under the Securities Act and the Exchange Act. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to our
Articles of Incorporation, Bylaws, the Minnesota Business Corporation Act, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statement or other information that we file with the Commission at
the Commission's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. These Commission filings are also
available to the public from commercial document retrieval services and at the
Internet World Wide Web site maintained by the Commission at
"http://www.sec.gov."
This prospectus is part of a registration statement we filed with the Securities
and Exchange Commission. The prospectus and any accompanying prospectus
supplement do not contain all of the information included in the registration
statement. We have omitted a
few parts of the registration statement according to the rules and regulations
of the Securities and Exchange Commission. For further information, we refer you
to the registration statement, including its exhibits and schedules. Statements
contained in this prospectus and any accompanying prospectus supplement about
the provisions or contents of any contract, agreement or any other document
referred to are not necessarily complete. For each of these contracts,
agreements or documents filed as an exhibit to the registration statement, we
refer you to the actual exhibit for a more complete description of the matters
involved. You should not assume that the information in this prospectus or any
supplement is accurate as of any date other than the date on the front of those
documents. We do not intend to distribute annual reports or audited financial
statements to our shareholders. This information may be found in our filings
with the Securities and Exchange Commission.
TRANSFER AGENT
The Transfer Agent and Registrar for our common stock is Signature Stock
Transfer, 14675 Midway Road #221, Addison, Texas 75001. Its telephone number is
(972)788-4193.
LEGAL MATTERS
The validity of the shares of common stock offered in this prospectus has been
passed upon for us by Anslow & Jaclin, LLP, 4400 Route 9, 2nd Floor, Freehold,
New Jersey 07728. Its telephone number is (732) 409-1212.
EXPERTS
The financial statements included in this prospectus included elsewhere in the
registration statement have been audited by Callahan, Johnston & Associates,
LLC, as stated in their report appearing herein and elsewhere in the
registration statement (which report expresses an unqualified opinion and
includes an explanatory paragraph referring to our recurring losses from
operations which raise substantial doubt about its ability to continue as a
going concern), and have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
INDEX
CONDENSED BALANCE SHEETS
CONDENSED STATEMENTS OF OPERATIONS
CONDENSED STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
i
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
CONDENSED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2002 2001
----------- --------
ASSETS
Current assets:
Cash $ 2,447 $ 1,379
Inventory, net of valuation allowance 0 0
------------ ------------
Total current assets 2,447 1.379
------------ ------------
Furniture and equipment 6,677 6,677
Less accumulated depreciation 2,471 2,108
Less accumulated depreciation 4,206 4,569
------------ ------------
Net furniture and equipment 0 0
------------ ------------
Total assets $ 2,447 $ 1,379
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 12,592 $ 10,080
Notes payable - convertible 112,500 102,500
------------ ------------
Total current liabilities 125,092 112,580
------------ ------------
Stockholders' equity (deficit):
Undesignated stock: 5,000,000 shares
authorized; none issued and outstanding 0 0
Common stock: $.01 par value; 50,000,000
shares authorized; shares issued and
outstanding 2,594,460 in 2002 and 284,460 in 2001 25,945 2,845
Additional paid-in capital 11,976,778 11,966,778
Accumulated deficit (11,793,637) (11,793,637)
Deficit accumulated during the
development stage (331,731) (287,187)
------------ ------------
Total stockholders' equity (deficit) (122,645) (111,201)
------------ ------------
Total liabilities and
Stockholders' equity (deficit) $ 2,447 $ 1,379
------------ ------------
See Notes to Financial Statements.
F-1
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Reentrance Into
Three Months Ended Development
March 31, Stage
--------------------------- to
2002 2001 March 31, 2002
----------- --------- --------------
Revenue $ 0 $ 560 $ 96,361
Cost of sales 0 (38) (38)
General and administrative expenses (41,817) (67,289) (760,663)
Interest expense (2,727) (533) (94,701)
Other income (expense) 0 0 (7,404)
Income tax expense 0 (355) (529)
--------- --------- ---------
Net income (loss) (44,544) (67,655) (766,974)
Other comprehensive income (loss) 0 0 0
--------- --------- ---------
Comprehensive income (loss) $ (44,544) $ (67,655) $(766,974)
--------- --------- ---------
Basic earnings (loss) per share $ (.10) $ (.24) $ (7.54)
--------- --------- ---------
Weighted average number of
shares outstanding $ 449,008 $ 284,460 $ 101,725
--------- --------- ---------
See Notes to Financial Statements.
F-2
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash
(Unaudited)
Reentrance
Three Months Ended Development
March 31 Stage to
2002 2001 March 31, 2002
--------- --------- --------------
Cash flows from operating activities:
Net income (loss) $ (44,544) $ (67,655) $(331,731)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Debt forgiveness 0 0 (435,243)
Indebtedness incurred for services
and storage 0 0 400,000
Implied compensation under SABS-T 10,000 0 130,000
Stock issued for services 23,100 0 23,100
Warrants issued for consulting services 0 550 2,012
Depreciation 363 0 2,309
Valuation allowance (363) 0 7,241
Inventory 0 38 38
Prepaid expenses 0 7,081 0
Accounts payable and other current liabilities 2,512 (5,953) (8,082)
Cash flows from operating activities (8,932) 65,452 (210,356)
Cash flows from financing activities:
Stock proceeds 0 0 34,888
Issuance of convertible notes payable 10,000 90,000 167,038
--------- ---------
Cash flows from investing activities 10,000 90,000 201,926
--------- --------- ---------
Increase (decrease) in cash 1,068 24,548 (8,430)
Cash:
Beginning of year 1,379 9,143 10,877
--------- --------- ---------
End of year $ 2,447 $ 33,691 $ 2,447
--------- --------- ---------
Supplemental cash flow information:
Interest paid $ 0 $ 0 $ 0
========= ========= =========
Income taxes paid $ 0 $ 0 $ 1,081
========= ========= =========
See Notes to Financial Statements.
F-3
NOTES TO FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002. For further information, refer to the financial statements
and footnotes thereto included in the Company's Form 10-KSB for the year ended
December 31, 2001.
Nature of Business
The Company was incorporated on April 1, 1960, under the laws of the State of
Minnesota. On September 26, 2000, the Company changed its name to Vital Health
Technologies, Inc. Formerly the Company was known as Vital Heart Systems, Inc.
In November 1993, the Company ceased the majority of its operations. At January
1, 1994, the Company was deemed to have reentered the development stage. From
1994 to 1997 the Company had only limited operations as it tried to complete the
design and marketing of a non- invasive, stress-free coronary artery disease
(CAD) detection device called a Variance Cardiograph. In 1997 the Company ceased
all operations.
In 1998 and 1999 the Company worked with a Minnesota venture capital firm,
Aurora Capital Management, LLC (Aurora) and a Minnesota entity with compatible
business operations, Vital Health Technologies, LLC (VHT-LLC) in an effort to
revitalize the Company. These dealings ultimately led to the acquisition of
VHT-LLC's assets on December 1, 2000.
Development Stage Company
On January 1, 1994, the Company was deemed to have reentered the development
stage. Since that date the Company has devoted the majority of its efforts to:
maintenance of the corporate status; settlement of liabilities; technology
development and the search for a viable method of operations and/or merger
candidate.
In 1998, 1999, 2000 and 2001 the Company was fully dependent on VHT-LLC and
Aurora for the maintenance of its corporate status and to provide all managerial
assistance and working capital support for the Company.
In 2001 the Company successfully developed a new prototype for its Variance
Cardiograph heart disease testing device that shortens the test time from the
original 45-minute version to 10- minutes, while at the same time reducing the
cost of manufacturing significantly. The Company completed field-testing and has
systems installed at two locations in the St. Paul/Minneapolis area for
evaluation purposes.
During 2001, there were several unsuccessful efforts to secure $2,000,000 in
financing in order to complete plans to fully develop and market the Variance
Cardiograph. Due to lack of capital the Company decided to focus its efforts
towards reducing expenses and position itself for merger/acquisition
opportunities. On December 26, 2001 the board of directors approved a 1 for 10
reverse stock split for shareholders of record as of January 7, 2002 and on
January 30, 2002 the company entered into an agreement with a Texas based
finance and consulting firm, Focus Tech Investments, Inc. (FTI) whereas FTI will
provide periodic financing and will seek out potential merger/acquisition
candidates for the Company. Vital Health Technologies has provided FTI 2,000,000
shares of Vital Health Technologies common stock as a retainer for the services.
In the event no merger or acquisition takes place by August 30, 2002 FTI has
agreed to cancel the 2,000,000 shares of common stock.
NOTES TO FINANCIAL STATEMENTS
Failure of the company to secure a merger/acquisition agreement and/or adequate
financing could result in it being unable to continue as a going concern. No
estimate can be made of the range of loss that is reasonably possible should the
Company be unsuccessful.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
TABLE OF CONTENTS
Page
Independent Auditors' Report...........................................13
Financial Statements:
Balance Sheets...................................................14
Statements of Operations.........................................15
Statements of Stockholders" Equity (Deficit).....................16
Statements of Cash Flows.........................................17
Notes to Financial Statements....................................18
Callahan, Johnston & Associates, LLC
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Vital Health Technologies, Inc.
(A Development Stage Company)
Minneapolis, Minnesota
We have audited the accompanying balance sheets of Vital Health Technologies,
Inc. (f/k/a/ Vital Heart Systems, Inc.) as of December 31, 2001 and 2000, and
the related statements of operations, stockholders' equity (deficit), and cash
flows for the years then ended and the period from reentrance into development
stage (January 1, 1994) to December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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
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 financial statements referred to above present fairly, in
all material respects, the financial position of Vital Health Technologies, Inc.
as of December 31, 2001 and 2000, and the results of operations and cash flows
for the years then ended and the period from reentrance into development stage
(January 1, 1994) to December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
As described in Note 2 to the financial statements, the accompanying financial
statements have been prepared assuming that the Company will continue as a going
concern. The Company's significant operating losses raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Callahan, Johnston & Associates, LLC
CALLAHAN, JOHNSTON & ASSOCIATES, LLC
Minneapolis, Minnesota
January 19, 2002
7850 Metro Parkway, Suite 207, Minneapolis, MN 55425 Telephone: (952)858-7207
Fax: (952)858-7202 Email: callahan_johnston@msn.com
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31,
-------------------------
2001 2000
----------- -----------
ASSETS
Current assets:
Cash $ 1,379 $ 9,143
Inventory - 3,073
Prepaid expenses - 7,282
----------- -----------
Total current assets 1,379 19,498
----------- -----------
Furniture and equipment 6,677 6,677
Less accumulated depreciation 2,108 162
Less valuation allowance 4,569 -
----------- -----------
Net furniture and equipment - 6,515
----------- -----------
Total assets $ 1,379 $ 26,013
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 10,080 $ 10,232
Convertible notes payable 102,500 -
Note payable - related party - -
----------- -----------
Total current liabilities 112,580 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 (see Note 1);
shares issued and outstanding
284,459 in 2001 and 2000 2,845 2,845
Additional paid-in capital 11,966,778 11,846,228
Accumulated deficit (11,793,637) (11,793,637)
Deficit accumulated during the
development stage (287,187) (39,655)
----------- -----------
Total stockholders'
equity (deficit) (111,201) 15,781
----------- -----------
Total liabilities and
Stockholders' equity (deficit) $ 1,379 $ 26,013
=========== ===========
The accompanying notes are an integral part of these financial statements.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Reentrance Into
Development
Stage To
Years Ended December 31, December 31,
------------------------
2001 2000 2001
---------- ---------- ----------
Revenues $ 2,906 $ 457 $ 96,361
Cost of goods sold (38) - (38)
Administrative expenses (234,790) (86,102) (718,846)
Other income (expense) (7,604) - (7,404)
Interest expense (7,651) (4,323) (91,974)
Income tax expense (benefit) (355) - (529)
---------- ---------- ----------
Operating income (loss) (247,532) (89,968) (722,430)
Gain on debt forgiveness/
collection, net of income
taxes of $-0-, and $-0-,
respectively - 438,942 435,243
---------- ---------- ----------
Net income (loss) (247,532) 348,974 (287,187)
Other comprehensive income (loss) - - -
---------- ---------- ----------
Comprehensive income (loss) $ (247,532) $ 348,974 $ (287,187)
========== ========== ==========
Basic earnings (loss) per share:
Continuing operations $ (.87) $ (1.36) $ (9.56)
Extraordinary item - 6.64 5.76
---------- ---------- ----------
$ (.87) $ 5.28 $ (3.80)
========== ========== ==========
Weighted average number of
shares outstanding 284,459 66,066 75,533
========== ========== ==========
Diluted earnings (loss) per share:
Continuing operations $ (.87) $ (1.36) $ (9.56)
Extraordinary item - 6.64 5.76
---------- ---------- ----------
$ (.87) $ 5.28 $ (3.80)
========== ========== ==========
Weighted average number of
shares outstanding 284,459 66,066 75,533
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Accumulated
Common Stock Deficit
------------------- Additional During
Number of Paid-In Accumulated Development
Shares Amount Capital Deficit Stage Total
------------------- ----------- ------------- ----------- -----------
Balances, January 1, 1994 41,900 $ 419 $11,779,532 $(13,896,096) $ - $(2,116,145)
Issuance of common stock in 1994 553 6 14,994 - - 15,000
Net income (loss) - 1994 - - - 5,503(1) (89,747)
(84,244)
Net income (loss) - 1995 - - - - (62,874)
(62,874)
Net income (loss) - 1996 - - - - (71,513)
(71,513)
Net income (loss) - 1997 - - - - (70,000)
(70,000)
Net income (loss) - 1998 - - - 488,491(1) 264,570(1) 753,061
Net income (loss) - 1999 - - - 1,300,012(1) (50,612) 1,249,400
--------- --------- ----------- ----------- ------------ -----------
Balances, December 31, 1999 42,433 425 11,794,526 (12,102,090) (80,176) (387,315)
Issuance of common stock and warrants in
in settlement of debt in September 2000 181 2 234 - - 236
Exercise of warrant in September 2000 1,451 14 712 - - 726
Issuance of common stock and warrants for
services in September 2000 275 3 534 - - 537
Issuance of common stock in settlement of
debt in October 2000 40,099 401 19,649 - - 20,050
Issuance of warrants for services - - 925 - - 925
Issuance of common stock as part of asset
purchase agreement 200,000 2,000 29,648 - - 31,648
Net income (loss) - 2000 - - - 308,453 40,521 348,974
--------- ---------- ----------- ----------- ------------ -----------
Balances, December 31, 2000 284,459 2,845 11,846,228 (11,793,637) (39,655) 15,781
Contributed capital from donated services - - 120,000 - - 120,000
Issuance of warrants for services - - 550 - - 550
Net income (loss) - 2001 - - - - (247,532)
(247,532)
--------- ---------- ----------- ----------- ------------ -----------
Balances, December 31, 2000 284,459 $ 2,845 $11,966,778 $(11,793,637) $ (209,187) $ (111,201)
========= ========== =========== ============ ============ ===========
(1) Debt forgiveness applied to accumulated deficit and or deficit accumulated
during development stage based on period forgiven liabilities were initially
incurred.
The accompanying notes are an integral part of these financial statements.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash
Reentrance Into
Development
Stage To
Years Ended December 31, December 31,
------------------------
2001 2000 2001
---------- ---------- ------------
Cash flows from operating activities:
Net income (loss) $ (247,532) $ 348,974 $ (287,187)
Adjustments to reconcile net income
(loss) to cash flows from
operating activities:
Debt forgiveness/cancellation - (438,942) (435,243)
Stock and warrants issued for
services 550 1,462 2,012
Donated officer compensation 120,000 - 120,000
Valuation allowances 7,604 - 7,604
Depreciation 1,946 - 1,946
Inventory 38 - 38
Indebtedness incurred
for services and storage - 55,000 400,000
Prepaid expenses 7,282 (7,282) -
Accounts payable and
accrued expenses (152) (14,970) (10,594)
---------- ---------- ----------
Cash flows from operating activities (110,264) (55,758) (201,424)
---------- ---------- ----------
Cash flows from financing activities:
Stock proceeds - 19,888 34,888
Proceeds of note payable 102,500 45,013 157,038
---------- ---------- ----------
Cash flows from financing activities 102,500 64,901 191,926
---------- ---------- ----------
Increase (decrease) in cash (7,764) 9,143 (9,498)
Cash:
Beginning of year 9,143 - 10,877
---------- ---------- -----------
End of year $ 1,379 $ 9,143 $ 1,379
========== ========== ===========
Cash paid for:
Interest $ - $ - $ -
========== ========== ===========
Income taxes $ 1,081 $ - $ 1,081
========== ========== ===========
Summary of non cash activity:
In 2000 the Company issued common stock and warrants with a fair value of
$20,286 as partial settlement of accounts payable and other accrued expenses and
note payable - related party.
In 2000 the Company issued common stock and warrants for services totaling
$1,462.
On December 1, 2000, the Company acquired assets, including cash of $19,162, in
exchange for 2,000,000 shares of the Company's common stock.
In 2001, $120,000 in value was assigned to donated officer services under SAB
5-T.
The accompanying notes are an integral part of these financial
statements.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company was incorporated on April 1, 1960, under the laws of the State of
Minnesota. On September 26, 2000, the Company changed its name to Vital Health
Technologies, Inc. Formerly the Company was known as Vital Heart Systems, Inc.
In November 1993, the Company ceased the majority of its operations. At January
1, 1994, the Company was deemed to have reentered the development stage. From
1994 to 1997 the Company had only limited operations as it tried to complete the
design and marketing of a non-invasive, stress-free coronary artery disease
(CAD) detection device. In 1997 the Company ceased all operations.
In 1998 and 2000 the Company worked with a Minnesota venture capital firm,
Aurora Capital Management, LLC (Aurora) and a Minnesota entity with compatible
business operations, Vital Health Technologies, LLC (VHT-LLC) in an effort to
revitalize the Company (see Notes 2 and 5). These dealings ultimately led to the
acquisition of VHT-LLC's assets on December 1, 2000 (see Note 5).
Risks, Estimates and Uncertainties
Use of Estimates
The preparation of financial statements in conformity with 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 financial statements and
reported amounts of revenues and expenses during the reporting period.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Risks, Estimates and Uncertainties
Authorized Number of Shares
The Company enacted a 1 for 10 reverse stock split as reflected in these
financial statements (see Note 5). A provision in Minnesota Statutes might
require reduction of the authorized shares of the Company from 50,000,000 to
5,000,000 and adjustment of the par value from $.01 to $.10. The ultimate
resolution of this matter cannot be determined at this time.
Inventory
Inventory is recorded at the lower of cost (determined on a first-in, fist-out
basis) or market. Inventory levels significantly exceed the Company's current
requirements. The estimated loss that management believes is probable is
included in the inventory valuation allowance. Due to uncertainties, however, it
is at least reasonably possible that management's estimate will change during
the next year. That amount cannot be estimated.
Inventory is as follows:
2001 2000
-------- --------
Finished goods inventory $ 3,035 $ 3,073
Valuation allowance (3,035) -
-------- --------
$ - $ 3,073
======== ========
Furniture and Equipment
Furniture and equipment are recorded at cost. Depreciation is calculated using
the straight-line method over estimated useful lives of 2 to 5 years. The
Company's ability to utilize these fixed assets in on-going operations is
uncertain (see Note 2). The estimated loss that management believes is probable
is included in the furniture and equipment valuation allowance. Due to
uncertainties, however, it is at least reasonably possible that management's
estimate will change during the next year. That amount cannot be estimated.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Risks, Estimates and Uncertainties (Continued)
Lender Concentration/Continued Existence
The Company has been fully dependent on VHT-LLC and Aurora for the maintenance
of its corporate status and to provide all managerial assistance and working
capital support for the Company.
Continued Existence
Management is uncertain if current agreements will allow it to remain as an
operating business (see Note 2).
Earnings Per Share
The Company implemented FASB 128: Earnings Per Share. Basic EPS excludes
dilution and is computed by dividing net income by the weighted-average number
of common shares outstanding for the year. Diluted EPS reflects the potential
dilution from stock options and warrants and is computed using the treasury
stock method. Under the treasury stock method stock options and warrants are
assumed to have been exercised at the beginning of the period if the exercise
price exceeds the average market price during the period. Stock options and
warrants are excluded from the EPS calculation due to their antidultitive
effect.
Stock-Based Consideration
The Company has applied the fair value-based method of accounting for employee
and nonemployee stock-based consideration and/or compensation in accordance with
FASB Statement 123.
Contributed Services
Management services contributed by a principal stockholder have been reflected
at their fair value in the accompanying financial statements in accordance with
Staff Accounting Bulletin (SAB) 5-T: Accounting For Expenses or Liabilities Paid
By Principal Stockholders.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
SFAS No. 130 establishes standards for the reporting and disclosure of
comprehensive income and its components which will be presented in association
with a company's financial statements. Comprehensive income is defined as the
change in a business enterprise's equity during a period arising from
transactions, events or circumstances relating to non-owner sources, such as
foreign current translation adjustments and unrealized gains or losses on
available-for-sale securities. It includes all changes in equity during a period
except those resulting from investments by or distributions to owners. For the
years ended December 31, 2001 and 2000, net income and comprehensive income were
equivalent.
Fair Values
The Company's agreements with Aurora and VHT-LLC (see Note 5) approximated their
fair value due to the short-term nature of these financial instruments.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" which requires the
use of the "liability method" of accounting for income taxes.
NOTE 2 - GOING CONCERN/DEVELOPMENT STAGE COMPANY
On January 1, 1994, the Company was deemed to have reentered the development
stage. Since that date the Company has devoted the majority of its efforts to:
maintenance of the corporate status; settlement of liabilities; and the search
for a viable method of operations and/or merger candidate.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 2 - GOING CONCERN/DEVELOPMENT STAGE COMPANY (Continued)
In 2001 and 2000 the Company has been fully dependent on its stockholders and
Aurora for the maintenance of its corporate status and to provide all managerial
assistance and working capital support for the Company.
In November 2000, the Company satisfied the last of its judgment creditors (see
Note 6). In October 2000, the Company reached an agreement with VHT-LLC to
settle its indebtedness to VHT-LLC for 40,099 shares of the Company's common
stock (see Note 6). On December 1, 2000, the Company acquired all of the assets
of VHT-LLC for 200,000 shares of the Company's common stock (see Note 6). In
2001, the Company attempted to move forward with development of its core
technology (variance cardiography). The Company attempted to raise capital
through a private placement or rights offering of the Company's common stock to
move forward with product development, but was unsuccessful. Due to the lack of
available capital to successfully market variance cardiography, the Company
changed its direction in 2001 from trying to market the variance cardiography
technology to actively seeking candidates to license or purchase the variance
cardiograph technology.
During 2002, management will continue to:
* Attempt to raise monies,
* Maintain the administrative and reporting requirements of a public
company,
* Target and approach potential candidates who will purchase or license
the variance cardiography technology, and
* Position the Company; and pursue potential merger-acquisition
opportunities with existing operating companies.
Failure of the company to achieve these goals could result in it being unable to
continue as a going concern. No estimate can be made of the range of loss that
is reasonably possible should the Company be unsuccessful.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 3 - GAIN ON DEBT CANCELLATION/SETTLEMENT
From 1999 to 2000, the Company successfully negotiated settlements of various
obligations for:
* Partial payments
* Equity issuances
* Creditor releases
Other obligations of the Company were statutorily canceled due to the expiration
of the statute of limitations on these obligations. At December 1, 2000, these
cancellations and or settlements resulted in reduction of the Company's
liabilities to only current trade payables.
NOTE 4 - CONVERTIBLE NOTES PAYABLE
In 2001, the Company issued $102,500 in convertible notes payable maturing
between January 29, 2002 and October 7, 2002. These notes are unsecured, bear
interest at 10% per annum, and are convertible into common stock of the Company
at the option of the note holders at a price equal to the next stock offering
price.
Certain note holders were also issued warrants (see Note 5).
NOTE 5 - STOCKHOLDERS' EQUITY (DEFICIT)
Authorized Shares/Reverse Split
At the Company's August 28, 2000 Special Meeting of Shareholders, the Company
approved Amended and Restated Articles of Incorporation which increased the
authorized capitalization of the Company to fifty million (50,000,000) shares of
$.01 par value common shares and five million (5,000,000) shares of undesignated
stock. At this meeting a one for sixty consolidation of the Company's issued and
outstanding shares was also approved. At its December 26, 2001 Board of
Directors meeting, the Company approved a reverse split on a 1 for 10 basis
effective January 7, 2002.
All references to stockholders' equity (deficit) in the accompanying financial
statements have been restated to reflect these amendments retroactively.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 5 - OTHER AGREEMENTS
Warrants
The Company has issued warrants to purchase its common stock as follows:
Shares
Under Exercise
Warrant Price Exercise Period
------ -------------- -----------------------------
Issued for services
in 2000 and 2001 17,050 $.49 to $20.00 January 2001 to January 2006
Attachment to
convertible notes 4,500 $20.00 January 2001 to October 2006
------ --------------
21,550 $.50 to $20.00
====== ==============
Other
The Company is obligated to issue 300 post reverse shares to a former creditor.
NOTE 6 - OTHER AGREEMENTS
Aurora Agreements
In 1997, Aurora Capital Management, LLC (Aurora) agreed to loan the Company
$60,000 under a primary note and entered into a business agreement with the
Company. These agreements were secured by all of the Company's tangible and
intangible assets. This note bore interest at 6% per annum and was due December
30, 1998. The Company defaulted on these agreements and Aurora retained the
collateral in satisfaction of these agreements on November 12, 1998.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERI OD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 6 - OTHER AGREEMENTS (Continued)
VHT-LLC Agreements
In 1998, the Company entered into similar loans and business management
agreements with Vital Health Technologies, LLC (VHT-LLC). VHT-LLC is related to
Aurora through common principals. These agreements were also secured by all of
the Company's tangible and intangible assets, bore interest at 10%, and matured
August 31, 1999.
VHT-LLC expended monies and provided managerial and consulting services under
these agreements from 1999 to September 30, 2000 as follows:
Advances to and expenses paid on
behalf of the Company $ 54,538
Staff and consulting charges 84,500
Storage fees/rent 11,500
---------
$ 150,538
On October 27, 2000, the Company reached an agreement to settle its obligation
to VHT-LLC for 40,099 shares of the Company's common stock with a fair value of
$20,050. The Company recorded a gain on debt forgiveness of $131,214 on this
transaction.
On December 1, 2000, the Company acquired all of the assets of VHT-LLC valued at
$31,648 in exchange for 200,000 shares of the Company's common stock. The
Company accounted for this transaction at VHT-LLC's historical basis in
accordance with SAB 48.
Debt Settlement
In November 2000, the Company received notification that its purchase of a
judgment against the Company had been approved. Satisfaction of this $244,590
judgment for $20,000 resulted in a gain on debt forgiveness of $224,590 on this
transaction.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 7 - OPERATING LEASE
The Company assumed VHT-LLC's office lease at the time of the acquisition of
VHT- LLC's assets (see Note 6). In 2001, the Company vacated this space and was
able to terminate its obligation under this lease. The Company incurred rent
expense of $28,795 in 2001 and $3,372 in 2000.
NOTE 8 - INCOME TAXES
Income taxes consisted of the following:
2001 2000
--------- ---------
Current:
Federal $ - $ -
State 355 -
--------- ---------
355 -
Deferred:
Federal - -
State - -
--------- ---------
- -
--------- ---------
Income tax benefit (expense) $ 355 $ -
========= =========
The reconciliation between expected federal income tax rates is as follows:
2001 2000
-------------------- ---------------------
Amount Percent Amount Percent
Expected federal tax $ (57,000) (34.0) $ 119,000 34.0
State income tax, net
of federal tax benefit (11,000) (7.0) 23,000 6.6
Exclusion of debt
forgiveness from gross
income under insolvency
exclusion - - (178,000) (50.9)
Valuation of net
operating loss
carryforwards 67,645 41 36,000 10.3
--------- ------- --------- ---------
$ 355 - $ - -
========= ======= ========= =========
The Company excluded debt forgiveness from gross income for income tax purposes
in 1999, and 2000 under the insolvency exception allowed for under IRS
Publication 908. Net operating loss carryforwards have been reduced for this
exclusion.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO DECEMBER 31, 2001
NOTE 8 - INCOME TAXES (Continued)
Differences between accounting rules and taw laws cause differences between the
bases of certain assets and liabilities for financial reporting purposes and tax
purposes. The tax effects of these differences, to the extent they are
temporary, are recorded as deferred tax assets and liabilities under SFAS 109,
and consisted of the following:
2001 2000
---------- ----------
Deferred tax assets:
Inventory valuation allowance $ 100 $ -
Fixed asset valuation
allowance 2,000 -
Net operating loss
carryforwards 3,670,000 3,658,000
---------- ----------
Gross deferred tax asset 3,672,100 3,658,000
Valuation allowance (3,672,100) (3,658,000)
---------- ----------
Net deferred tax asset - -
Deferred tax liability - -
---------- ----------
Net deferred tax asset
(liability) $ - $ -
========== ==========
Utilization of these losses is limited under Section 382 of the Internal Revenue
Code due to current and historical changes in the Company's ownership. The
Company's net operating loss carryforwards are fully allowed for due to
questions regarding the Company's ability to utilize these losses before they
expire.
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
AND THE PERIOD FROM REENTRANCE INTO
DEVELOPMENT STAGE
(JANUARY 1, 1994) TO December 31, 2001
NOTE 8 - INCOME TAXES (Continued)
The Company has carryforwards available to offset future taxable income as
follows:
Federal State
NOL Credits NOL Credits
----------- --------- ----------- ---------
2002 $ - $ 96,600 $ - $ 10,000
2003 - 60,700 - 10,000
2004 - 71,100 - -
2005 2,615,000 - - -
2006 1,729,000 - - -
2007 3,295,000 - - -
2008 2,939,000 - - -
2009 14,000 - - -
2010 - - - -
2011 2,000 - - -
2012 - - - -
2013 25,000 - - -
2014 50,000 - - -
2015 90,000 - 28,000 -
2016 121,000 - 121,000 -
----------- --------- ----------- ---------
$10,880,000 $ 228,400 $ 149,000 $ 20,000
=========== ========= =========== =========
VITAL HEALTH TECHNOLOGIES, INC.
1,532,474 Shares of Common Stock
PROSPECTUS
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT WE
HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS PROSPECTUS IS NOT AN OFFER TO SELL COMMON
STOCK AND IS NOT SOLICITING AN OFFER TO BUY COMMON STOCK IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
June 6, 2002
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
Section 302A.521 of the Minnesota Business Corporation Act generally provides
for the indemnification of directors, officers or employees of a corporation
made or threatened to be made a party to a proceeding by reason of the former or
present official capacity of the person against judgments, penalties and fines
(including attorneys' fees and disbursements) if such person, among other
things, has not been indemnified by another organization, acted in good faith,
received no improper personal benefit and with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.
As permitted under the Minnesota Business Corporation Act, our Articles of
Incorporation provide that directors shall have no personal liability to us or
to our shareholders for monetary damages arising from breach of the director's
duty of care in our affairs. The Minnesota Business Corporation Act does not
permit elimination of liability for breach of a director's duty of loyalty to us
or with respect to certain enumerated matters, including payment of illegal
dividends, acts not in good faith and acts resulting in an improper personal
benefit to the director. Our By-Laws provide that we shall indemnify any person,
who was or is a party to a proceeding by reason of the fact that he is or was
our director, officer, employee or agent against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with such proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to our best interest, in accordance with and to the full extent
permitted by, the Minnesota Business Corporation Act.
Reference is made to Item 28 for the undertakings of the Registrant with respect
to indemnification of liabilities arising under the Securities Act of 1933, as
amended (the "Act").
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the registrant; none shall be borne by any selling stockholders.
Securities and Exchange
Commission registration fee $ 100
Legal fees and expenses (1) $ 10,000
Accounting fees and expenses (1) $ 5,000
Miscellaneous (1) $ 0
Total (1) $ 15,100
(1) Estimated.
Item 26. RECENT SALES OF UNREGISTERED SECURITIES.
On January 30, 2002, we issued 2,000,000 common shares to Focus Tech
Investments, Inc. pursuant to an consulting agreement. Such shares were issued
pursuant to an exemption from registration at Section 4(2) of the Securities Act
of 1933;
In March, 2002, we issued a total of 1,146,250 common shares to Templar
Comptier, Ltd. for the payment of $350,000. Such shares were issued pursuant to
an exemption from registration at Section 4(2) of the Securities Act of 1933.
In July 2001, the Company issued 470 shares of common stock to Prudential
Securities to correct an error from December of 1996 in which the Company issued
a certificate to Prudential Securities but did not record it on the Company
shareholder list. The mistake was identified by Prudential Securities when they
presented the certificate to the transfer agent to exchange for a post stock
split certificate.
In December 2000, the Company issued 2,400,989 shares of restricted common stock
to Vital Health LLC in exchange for all of its assets and cancellation of
$151,264 in debt owed by the Company. The shares were issued in a private
transaction, not involving any public solicitation or commissions, and without
registration in reliance on the exemption provided by Section 4(2) of the
Securities Act. The shares were distributed by Vital Health LLC, pro-rata, to
its unit owners as follows.
Name Shares Received
Aurora Capital Management L.L.C. 2,096,718
William A. and Joyce E. Bezdicheck 55,322
David Breen 11,064
John Greiber 33,193
Douglas Lennick 110,645
Desta G. Lachner 27,661
Lloyd Woelfle 55,322
Nicholas Strenglis as custodian for
Sara Strenglis under the MN UGMA 5,532
Nicholas Strenglis as custodian
for Nicole Strenglis under the MN UGMA 5,532
From September through December 2000, the Company issued warrants to purchase
110,540 shares of Vital Health's restricted common stock, exercisable on or
before five years and at prices ranging from $0.049 to $0.05 per share. All
warrants were issued in a private transaction, not involving any public
solicitation or commissions, and without registration in reliance on the
exemption provided by Section 4(2) of the Securities Act. The following table
provides information on the warrants issued.
Warrant Exercise Consideration
Name Shares Price Paid Expiration
SRC Funding 40,000 $.049 Consulting services 11/26/2005
North Pole Engineering 40,504 $.05 Consulting services 11/06/2005
Mark Ungs 5,000 $.05 Consulting services 10/31/2005
Lloyd Woelfle 10,000 $.05 Consulting services 10/26/2005
Dr. Daniel Carey 5,000 $.05 Consulting services 10/23/2005
Stephen Muscanto 10,000 $.05 Service as director 10/26/2005
In September 2000 the Company issued a warrant to purchase 14,509 shares at an
exercise price of $0.05 to William Wustenberg in exchange for cancellation of a
debt in the amount
of $18,512. Mr. Wustenberg immediately exercised the warrant. The warrant and
shares were issued in a private transaction, not involving any public
solicitation or commissions, and without registration in reliance on the
exemption provided by Section 4(2) of the Securities Act.
In September 2000, the Company issued 19,076 shares of restricted common stock
in exchange for cancellation of debt owed by the Company. All shares were issued
in a private transaction, not involving any public solicitation or commissions,
and without registration in reliance on the exemption provided by Section 4(2)
of the Securities Act. The following table provides information on debt
cancelled.
Name Shares Issued Debt Cancelled
Sylvan R. Lewis,M.D. 250 $25,100
Alexander M. Rosenfield 167 $43,790
Snow Communications,Inc. 1,400 $13,539
John A. Halpern 2,750 Creditor's attorney's fees
Please note that pursuant to Section 4(2), all shares issued pursuant to this
exemption were restricted in accordance with Rule 144 of the Securities Act of
1933. We qualified for exemption under Section 4(2) of the Securities Act of
1933 since the issuance of the shares was not involving a public offering. The
offering was not a "public offering" as defined in Section 4(2) due to the
insubstantial number of persons involved in the deal, size of the offering,
manner of the offering and number of shares offered. We did not undertake an
offering in which it sold a high number of shares to a high number of investors.
In addition, the shareholders had the necessary investment intent as required by
Section 4(2) since it agreed to and received a share certificate bearing a
legend stating that such shares are restricted pursuant to Rule 144 of the 1933
Securities Act. These restrictions ensure that these shares would not be
immediately redistributed into the market and therefore not be part of a "public
offering." Based on an analysis of the above factors, we have met the
requirements to qualify for exemption under Section 4(2) of the Securities Act
of 1933 for this transaction.
We have never utilized an underwriter for an offering of our securities. Other
than the securities mentioned above, we have not issued or sold any securities.
Item 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed as part of this registration statement:
EXHIBIT DESCRIPTION
3.1(i) Amended and Restated Articles of Incorporation of Vital Heart
Systems, Inc.
3.1(ii) Amended and Restated Articles of Incorporation of Cherne Medical,
Inc.
3.1(iii) Articles of Amendment of Articles of Incorporation of Cherne
Enterprises, Inc.
3.1(iv) Certificate of Amendment Restated Articles of Incorpoartion of
Cherne Industrial, Inc.
3.1(v) Chertificate of Amendment of Restated Articles of Incrorpoate of
Cherne Test Ball, Inc.
3.1(vi) Amended Articles of Incorporation for Cherne Test Ball, Inc.
3.1(vii) Articles of Incorporation for Cherne Tets Ball, Inc.
3.2 Restated Byl;aws of Cherne Industries, Inc.
5.1 Opinion of Anslow & Jaclin LLP
23.1 Consent of Callahan, Johnston & Associates, LLC
23.2 Consent of Anslow & Jaclin LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on page II-6 of the registration
statement)
Item 28. UNDERTAKINGS.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information
set forth in the registration statement; and
(iii)Include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(B) Undertaking Required by Regulation S-B, Item 512(e).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or controlling persons pursuant
to the foregoing provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C) Undertaking Required by Regulation S-B, Item 512(f)
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be deemed
to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of North Oaks,
State of Minnesota, on the day of June 6, 2002.
Vital Health Technologies, Inc.
By: /s/ Stephen Muscanto
----------------------------------
STEPHEN MUSCANTO
Director
POWER OF ATTORNEY
The undersigned directors and officers of Vital Health Technologies, Inc.
hereby constitute and appoint Stephen Muscanto, with full power to act without
the other and with full power of substitution and resubstitution, our true and
lawful attorneys-in-fact with full power to execute in our name and behalf in
the capacities indicated below any and all amendments (including post-effective
amendments and amendments thereto) to this registration statement under the
Securities Act of 1933 and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission
and hereby ratify and confirm each and every act and thing that such
attorneys-in-fact, or any them, or their substitutes, shall lawfully do or cause
to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Stephen Muscanto Director June 6, 2002
- ------------------------------
Stephen Muscanto
/s/ Lloyd Woelfle Director June 6, 2002
- ------------------------------
Lloyd Woelfle