U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission File No. 000-15243
VITAL HEALTH TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1618186
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9454 Wilshire Blvd., Suite 600, Beverly Hills, CA 90212
(Address of Principal Executive Offices)
(310) 278-3108
(Issuer's telephone number, including area code)
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 13, 2004: 12,601,317 shares of common stock.
VITAL HEALTH TECHNOLOGIES, INC.
PARTI FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2 Management Discussion and Analysis of Financial Condition
and Plan Of Operation
Item 3 Controls and Procedures
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on form 8-K
Signatures
CERTIFICATION STATEMENTS
Item I Financial statements
VITAL HEALTH TECHNOLOGIES, INC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
June 30, December 31,
ASSETS 2004 2003
------ --------------------- ---------------------
Current assets:
Cash and Cash Equivalents $ 972,505 $ 969,562
Prepaid expenses - -
Accounts receivable 93,001 93,001
--------------------- ---------------------
Total current assets 1,065,506 1,062,563
Other assets: 16,663 16,663
--------------------- ---------------------
Total assets $ 1,082,169 $ 1,079,226
===================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 89,340 $ 19,362
Notes payable 212,581 420,013
--------------------- ---------------------
Total current liabilities 301,921 439,375
Long term liabilities 1,000,000 1,000,000
Total Liabilities 1,301,921 1,439,375
--------------------- ---------------------
Stockholders' equity:
Undesignated stock: 5,000,000 shares authorized
none issued and outstanding - -
Common stock $.01 par value; 50,000,000 shares authorized;
shares issued and outstanding 12,601,317 in 2004 and
4,334,269 in 2003 126,013 43,342
Paid-in capital 12,182,673 11,969,681
Subscription receivable (6,660) (6,660)
Accumulated deficit (11,793,637) (11,793,637)
Deficit accumulated during the development stage (728,141) (572,845)
--------------------- ---------------------
Total stockholders' equity (219,752) (360,119)
--------------------- ---------------------
Total liabilities and stockholders' equity $ 1,082,169 $ 1,079,256
===================== =====================
See accompanying notes to the financial statements.
3
VITAL HEALTH TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended Reentrance to development
June 30, June 30, stage to
2004 2003 2004 2003 June 30, 2004
----------- ----------- ----------- ----------- -------------------------
Revenues $ -- $ -- $ 1,000 $ -- $ 107,861
Cost of sales -- -- -- -- (38)
General and administrative expenses (54,123) (40,596) (96,226) (78,368) (1,043,949)
Interest expense (30,000) (56,123) (60,105) (56,123) (219,336)
Other income (expense) -- -- 1 -- (7,393)
Debt forgiveness -- -- -- -- 435,243
Income tax expense -- -- -- -- (529)
----------- ----------- ----------- ----------- -----------
Net in Total other income (84,123) (96,719) (155,330) (134,491) (728,141)
Other comprehensive income -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Comprehensive income (loss) $ (84,123) $ (96,719) $ (155,330) $ (134,491) $ (728,141)
=========== =========== =========== =========== ===========
Basic earnings (loss) per share $ (0.02) $ (0.03) $ (0.03) $ (0.04) $ (0.13)
=========== =========== =========== =========== ===========
Weighted average number of shares
outstanding 5,601,317 3,741,250 4,671,284 3,741,250 5,601,317
=========== =========== =========== =========== ===========
See accompanying notes to the financial statements.
4
VITAL HEALTH TECHNOLOGIES, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(Unaudited)
Six months ended From reentrance to
June 30, development stage to
2004 2003 June 30, 2004
----------- ----------- -------------
Cash flows from operating activities:
Net income (loss) $ (155,330) $ (134,491) $ (728,141)
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Debt forgiveness -- (88,920) (435,243)
Indebtedness incurred for services and storage -- -- 400,000
Implied compensation under SABS-T -- -- 130,000
Stock issued for services -- -- 23,100
Warrents issued for consulting services -- -- 2,012
Depreciation -- -- 1,946
Valuation allowance -- -- 6,878
Inventory -- -- 38
Accounts receivable -- (87,077) (93,001)
Organization expenses -- (16,663) (16,663)
Prepaid expenses -- 235 --
Accounts payable and other current liabilities 154,273 29,361 482,795
----------- ----------- -----------
Net cash (used in) operating activities (1,057) (297,555) (226,279)
----------- ----------- -----------
Cash flows used for investing activities:
-- -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities -- -- --
----------- ----------- -----------
Cash flows from financing activities:
Stock proceeds 4,000 14,641 (60,811)
Decrease (increase) in subscriptions receivable -- 103,340 96,680
Issuance of convertible notes payable -- -- 167,038
Principal payments -- (15,000)
Increase in long term debt -- 208,441 1,000,000
----------- ----------- -----------
Net cash provided by (used in) financing activities 4,000 326,422 1,187,907
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 2,943 28,867 961,628
Cash and cash equivalents at beginning of year 969,562 11,019 10,877
----------- ----------- -----------
Cash and cash equivalents at end of year $ 972,505 $ 39,886 $ 972,505
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 105 $ -- $ 56,123
=========== =========== ===========
Income taxes paid $ -- $ -- $ 1,081
=========== =========== ===========
See accompanying notes to the financial statements.
5
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2003 AND 2004
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). In 2001The
company changed its direction from trying to market the variance cardiograph
technology to actively seeking a merger candidate to license or purchase the
variance cardiograph technology. In 2002, the company concentrated its efforts
on finding a merger candidate. Some monies were raised through a stock offering,
but these monies were not sufficient to revitalize the Company marketing of the
variance cardiograph technology. Instead these monies were used to maintain the
Company's public reporting status.
In March 2003, the Company entered into an agreement to merge with an operating
company, Caribbean American Health Resorts, Inc.
Cash Equivalents
- ----------------
For purposes of reporting cash flows, cash equivalents include investment
instruments purchased with a maturity of three months or less. There were no
cash equivalents in 2004 or 2003.
F-7
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Authorized Number of Shares
---------------------------
The Company enacted a 1 for 10 reverse stock split as reflected in these
financial statements (see Note 3). 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.
F-8
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Risks, Estimates and Uncertainties (Continued)
- ----------------------------------------------
Lender Concentration/Continued Existence
----------------------------------------
The Company has been fully dependent on certain stockholders 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 (based on quoted market prices at the date of grant and/or as
earned).
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.
F-9
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
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, 2002 and 2001, net income and comprehensive income were
equivalent.
Financial Instruments
- ---------------------
Financial Instruments consist of the following:
Short-Term Assets and Liabilities: The fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses and
short-term debt approximate their carrying values 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.
F-10
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 2 - GOING CONCERN/DEVELOPMENT STAGE COMPANY (Continued)
In 2003 and 2002 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.
In 2002, the Company concentrated its efforts on finding a merger candidate.
Some monies were raised through a stock offering, but these monies were not
sufficient to revitalize the Company's marketing of the variance cardiography
technology. Instead these monies were used to maintain the Company's public
reporting status.
In March 2003, the Company entered into an agreement to merge with an operating
company, Caribbean American Health Resorts, Inc. If this merger is unsuccessful
or if the combined companies are unable to obtain profitable operations, the
Company might be 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.
F-11
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 3 - NOTES PAYABLE
In 2002 and 2001, the Company issued $10,000 and $102,500, respectively, in
convertible notes payable maturing between January 29, 2002 and February 5,
2003. 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.
$15,000 of these notes were repaid in May 2002. $97,500 were repaid in March
2003.
Certain note holders were also issued warrants (see Note 4).
LONG-TERM DEBT:
June 30, 2004
Long-term debt consists of the following:
Note payable with interest payable at a rate
of 12% per annum, interest only until
January 31, 2005 when principal is due in full $1,000,000
Maturities of long-term debt for the years subsequent to June 30, 2004 are as
follows:
2004 $ 0
2005 1,000,000
----------
$1,000,000
==========
NOTE 4 - 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.
F-12
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
Warrants
The Company has issued warrants to purchase its common stock as follows:
Shares
UnderExercise
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
====== ==============
Subscription Receivable
- -----------------------
In April 2002, the Company entered into an agreement to issue 1,146,250 shares
of its common stock for $50,000 and a subscription receivable of $300,000 due
October 25, 2002. This subscription was not paid when due and went into default.
The Company ultimately transferred 1,000,000 of these shares to an investment
group who settled this subscription receivable for $110,000 in March 2003. This
subscription is reflected at the ultimate proceeds received of $110,000 in the
accompanying financial statements.
F-13
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 4 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
Other
- -----
The Company is obligated to issue 300 post reverse shares to a former creditor.
NOTE 5 - OPERATING LEASE
The Company lease approximately 500 square feet of office space in Beverly
Hills, California and pays approximately $1800.00 on a month to month basis.
NOTE 6 - INCOME TAXES
Income taxes benefit (expense) consisted of the following:
2004 2003
---- ----
Current:
Federal $ - $ -
State - (355)
------ ---------
- (355)
------ ---------
Deferred:
Federal - -
State - -
------ ---------
- -
------ ---------
Income tax benefit (expense) $ - $ (355)
====== =========
The reconciliation between expected federal income tax rates is as follows:
2002 2001
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
Expected federal tax $ (25,000) (34)% $ (57,000) (34.0)%
State income tax, net
of federal tax benefit (5,000) (7) (11,000) (7.0)
Valuation of net
operating loss
carryforwards 30,000 41 67,645 41
$ - - % $ (355) - %
F-14
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 6 - 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:
2003 2002
Deferred tax assets:
Net operating loss carryforwards 3,900,000 3,700,000
Gross deferred tax asset 3,912,500 3,701,100
---------- ----------
Valuation allowance (3,915,500) (3,701,100)
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.
F-15
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 6 - INCOME TAXES (Continued)
The Company has carryforwards available to offset future taxable income as
follows:
Federal State
NOL Credits NOL Credits
--- ------- --- -------
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 -
2017 72,000 - 72,000 -
2018 215,500 - 215,500 -
----------- --------- ----------- --------
$11,167,500 $ 71,100 $ 436,500 $ 10,000
=========== ========= =========== ========
VITAL HEALTH TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 3O, 2003 AND 2004
NOTE 7 - SUPPLEMENTAL CASH FLOW DISCLOSURES Summary of non cash activity:
In 2004 the Company issued common stock with a fair value of $291,662 as a
settlement of Notes payable.
NOTE 8 SUBSEQUENT EVENTS
On December 1, 2003 the Company entered an agreement with Royal Carribean Hotels
Ltd., to purchase ocean front property for $5,000,000. The company expects the
purchase to be completed by December 31, 2004.
F-16
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.
The Company has focused its efforts on the design and marketing of a
non-invasive, stress-free coronary artery disease (CAD) detection device called
a Variance Cardiograph.
From 1993 to 1998 the Company struggled with a variety of financial
difficulties, which limited operations. Since 1998 through March 2003 the
Company has worked with a Minnesota finance and business development firm,
Aurora Capital Management, LLC and its affiliates in an effort to revitalize the
Company.
In March 2003, the Company executed and entered into a Share Exchange Agreement
(the "Exchange Agreement"), with Caribbean American Health Resorts, Inc.
Pursuant to the Exchange Agreement, on the closing date, the Company will
acquire all of the issued and outstanding equity interests of Caribbean American
Health Resorts, Inc. As consideration for the shares Caribbean American Health
Resorts, Inc, the Company will issue 8,109,709 shares of its common stock to the
shareholders of Caribbean American Health Resorts, Inc. Subsequent to the
closing of this transaction, and a concurrent transaction whereby certain
shareholders of the Company are selling 1,640,709 common shares, the remaining
stockholders of the Company shall retain 250,000 shares, or 2 1/2% of the issued
and outstanding common stock of the Company on an anti-dilutive basis (only for
90 days after the closing). As part of this transaction, certain existing
shareholders of the Company shall form a separate entity for the sole purpose of
purchasing the heart screening technology of the Company in exchange for
returning to the Company 1,850,000 shares of Company common stock presently held
by such shareholders.
The Company's common stock currently trades on the NASD's OTC Bulletin Board
exchange under the ticker symbol CAHR.
Development Stage Company
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.
Since 1998 the Company has been fully dependent on Aurora and its affiliates 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.
The Company holds and maintains a patent on its Variance Cardiography technology
that was issued in 1993.
On January 30, 2002 the Company entered into an agreement with a Texas based
finance and consulting firm, Focus Tech Investments, Inc. (FTI) where FTI will
provide periodic financing and will seek out potential merger/acquisition
candidates for the Company. The original agreement with FTI was to expire on
August 30, 2002. The Company and FTI have agreed to an extension for an
additional 180 days as the Company is having discussions with candidates FTI has
introduced.
On April 23, 2002 the Company entered into a stock purchase agreement with
Templar Comptier, Ltd whereas the Company sold 1,146,250 shares of its common
stock for $350,000. Templar Comptier has paid $50,000 in cash for 146,250 shares
that have been delivered and the Company holds a 180-day note for $300,000 with
the remaining 1,000,000 shares being held as collateral against the note.
The Company utilized the proceeds for ongoing administrative costs, debt payment
and to finance merger/acquisition expenses. The Company filed an SB-2
registration with the SEC for the shares issued to Templar Comptier, Ltd. And
386,224 shares that were previously issued to shareholders of Vital Health
Technologies.
In March 2003, the Company executed and entered into a Share Exchange Agreement
(the "Exchange Agreement"), with Caribbean American Health Resorts, Inc.
Pursuant to the Exchange Agreement, on the closing date, the Company will
acquire all of the issued and outstanding equity interests of Caribbean American
Health Resorts,Inc. As consideration for the shares Caribbean American Health
Resorts, Inc, the Company will issue 8,109,709 shares of its common stock to the
shareholders of Caribbean American Health Resorts, Inc. Subsequent to the
closing of this transaction, and a concurrent transaction whereby certain
shareholders of the Company are selling 1,640,709 common shares, the remaining
stockholders of the Company shall retain 250,000 shares, or 2 1/2% of the issued
and outstanding common stock of the Company on an anti-dilutive basis (only for
90 days after the closing). As part of this transaction, certain existing
shareholders of the Company shall form a separate entity for the sole purpose of
purchasing the heart screening technology of the Company in exchange for
returning to the Company 1,850,000 shares of Company common stock presently held
by such shareholders.
The company's stock currently trades on the NASD's Bulletin Board Exchange under
the ticker symbol CAHR.OB
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statement Notice
This Form 10-QSB contains forward-looking statements regarding the Company and
its market as defined in section 21E of the Securities Exchange Act of 1934.
These forward-looking statements involve a number of risks and uncertainties,
including (1) the Company's ability to implement its business plan; (2) the
Company's ability to raise funds on acceptable terms to finance its operations,
(3) the Company's ability to recruit and retain qualified officers and
directors, (4) the Company's ability to sell its services to its target
clientele, (5) effects of competition, (6) local and state levels of health and
environmental regulation, and other factors disclosed below and throughout this
report. The actual results that the Company achieves may differ materially from
any forward-looking statements due to such risks and uncertainties. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may arise after the date of this report.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report, including the discussion set forth below and in
the Company's other reports filed with the Securities and Exchange Commission
from time to time that attempt to advise interested parties of the risks and
factors that may affect the Company's business and results of operations.
Unanticipated events are likely to occur.
BUSINESS STRATEGY
VITAL Health/CAHR's objective is to maximize its profitability by providing high
quality Spa treatment and elective/reconstructive surgical services as well as
by providing luxurious condominium units to its targeted customer base. The
Company is a development stage company. The key elements of our strategy are:
- - Establish a World-Class Health Resort
VITAL HEALTH/CAHR'S is engaged in active discussions to identify surgical and
recuperation facilities on the island of Barbados for the resort intended to
cater to the spa treatment, constructive/elective surgical and other alternative
medical needs of athletes, musicians, actors, entertainment artists and business
executives through out the world. VITAL HEALTH/CAHR will combine the ideal
climate on the island of Barbados with the expertise of leading surgeons and
physicians from the United States to deliver high quality health services to
these targeted clients in the comfort of a luxury resort. The Barbados Medical
Council has recently approved the license for the surgeons to operate on the
island. Our resort will provide an environment that is very conducive to rapid
recuperation after reconstructive/elective surgical procedures. VITAL
HEALTH/CAHR believe that it will be in a strong position to capitalize on
opportunities in this growing market.
- - Develop well-designed Luxury Condominiums for Targeted Premium
Customers
VITAL Health/CAHR's condominiums will be developed in the heart of Barbados'
most famous hotel strip, recently renamed the "Golden Mile." This location is in
the Hastings region, which is situated along the south coast of Barbados, only
20 minutes from The Grantley Adams International Airport and 10 minutes from
Bridgetown, the capital city. Golf courses and scuba diving as well as the Queen
Elizabeth Hospital are within minutes. This ideal location boasts easy access to
many of the trendy shops and boutiques in the area. Our condominiums will be
located directly on the beautiful beach of the Caribbean Sea and the Atlantic
Ocean. The visual style of the condominium complex will embrace a modern,
distinctive architecture style. Our goal in creating a sophisticated environment
was to ensure that it was also highly spirited and lively. As previously
disclose by Vital Health on Form 8-K, Vital Health has entered an agreement to
purchase the beachfront property. This agreement is expected to be closed by
December 31, 2004.
- - Market Our Products and Services Aggressively to Target Customers
VITAL HEALTH/CAHR will market its health services aggressively to business
executives, sports and entertainment clients worldwide. It will position VITAL
HEALTH as a world-class health and longevity resort with a private, secure and
relaxed environment in which clients can escape from stress and fatigue as well
as recuperate quickly after reconstructive/elective surgical procedures. It will
also highlight the attractiveness of our location on the island of Barbados,
where temperatures range typically from 66 to 85 degrees, as an extremely
desirable vacation destination year around. A marketing strategy will focus on
patient/client recruitment through referrals from doctors/specialists and
hospitals. It will market stress reduction programs to executives from major
corporations.
Additionally, VITAL HEALTH/CAHR will offer special programs in conjunction with
vacation packages to accommodate family oriented clients. It is believed that
this marketing strategy will establish the VITAL HEALTH/CAHR brand and generate
significant demand for the health services.
VITAL HEALTH/CAHR will market its condominiums primarily to Barbadians returning
nationals throughout North America and Europe. There is a strong trend of
reverse migration taking place throughout the Caribbean. Many Caribbean natives
who have migrated in the past to major cities in North America and Europe are
returning to their native countries to spend their retirement years. This trend
is especially pronounced on the island of Barbados, where there is excellent
climate all year and a long history of political and economic stability. This
trend has stimulated the demand for homes on this Caribbean island with a
landmass of only 166 square miles. This has lead to a shortage of land for home
development. We believe that these structural conditions in Barbados' housing
market, combined with the desire of many returning nationals to live in gated
communities, has created and enormous opportunity for the sale of condominiums
and would enable us to achieve our anticipated pricing goals. VITAL HEALTH/CAHR
has actively tested this market and intends to market the properties
aggressively to these individuals. We will utilize a combination of direct
marketing, media presentation and trade fairs to reach this audience and
capitalize on the significant revenue opportunity.
- - Implement a Discipline Financial Strategy
VITAL Health/CAHR's financial strategy will be focused on maximizing
profitability and minimizing financial risks. To this end, it will focus on
achieving the right balance between equity and debt in its capital structure to
ensure that VITAL HEALTH/CAHR maintains adequate financial flexibility to adjust
successfully to changes in the market place. It is believed that a disciplined
financial approach will also enable VITAL HEALTH/CAHR to capitalize on
opportunistic expansion opportunities throughout the Caribbean.
- - Capitalize on Strategic Business Alliances
The development of resort facilities in the Caribbean creates substantial
benefits for the economy of the Caribbean region. VITAL HEALTH/CAHR intends to
develop several strategic relationships (political and economic) with the
government and business leaders of the region. The strategic relationships will
focus on joint marketing and promotions initiatives to increase the tourism
traffic to the region as well as establishing VITAL Health'/CAHR's resort
facilities as highly desirable attractions of this paradise region. VITAL
HEALTH/CAHR will also develop a business relationship with the movie and
entertainment industry, as these industries have a need to utilize such
facilities to service the needs of their actors and personnel.
Liquidity
The company expects that its cash and the cash generated from operations will be
insufficient to meet its operating cash needs. The revenue in 2003 came from the
licensing fees for the doctors. Even though it is expected that these fees will
increase, the company will continue to rely on Mr. Martin for working capital
support for the company. The company will attempt to raise capital for its
acquisitions and development through a private placement or rights offering of
the company's common stock. There can be no assurance that the company will be
able to raise the required amount of capital to successfully complete its plan.
Three Months Ended June 30, 2004 and June 30, 2003
The company generated $00 for three months ended June 30, 2004 as compared to $0
revenue for the same period June 30, 2003. Cost of Sales for the three months
ended June 30, 2004 and 2003 were $0 and $0 respectively.
General and Administrative expenses for the three months ended June 30, 2004
were $54,123 as compared to $40,596 in the same period of 2003.
The company had interest expense in the amount of $30,000 for the three months
ended June 30, 2004 as compared to the interest expense of $56,123 for the three
months ended June 30 2003. This interest expenses related to the long term debt
of $ 1,000,000 borrowed.
As result of the foregoing, the company realized a net loss of $84,123 for the
three months ended June 30, 2004 as compared to a net loss of $96,719 for the
same period 2003.
Off-Balance Sheet Arrangements
None.
Plan for the next 12 months
The management of the company plans for the next 12 months are to continue to
handle administrative and reporting requirements of a public company. The
Company also plans to acquire beachfront hotel properties on the island of
Barbados. It has entered an agreement in principle with Royal Caribbean Hotels
for the purchase of approximately 21/2 acres of beachfront property at Hastings,
Christ Church, Barbados. It is now expected that the purchase agreement for
acquisition of property will be completed by December 31, 2004. The Company was
granted permission form the Medical Council of Barbados allowing the physicians
and surgeons to perform services on the island of Barbados. The doctors are
expected to begin the performance of such services before the end of the year.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer has conducted
an evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to Rule 15d-15 under the Securities
Exchange Act of 1934 (the "1934 Act") as of the end of the period covered by
this report. Based on that evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that the Company's disclosure controls and
procedures are effective in ensuring that information required to be disclosed
by the Company in the reports it files or submits under the 1934 Act is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms.
There have been no changes in internal control over financial reporting during
the fiscal quarter ended June 30, 2004 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Small Business Issuer Purchases
of Equity Securities
During the first quarter of fiscal 2004, the Company did not repurchase any of
its equity securities.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-B
Exhibit 3.1 Articles of Incorporation.*
Exhibit 3.2 Bylaws.*
Exhibit 4.1 Agreement and Plan of Share Exchange.**
Exhibit 14 Code of Ethics.***
Exhibit 31.1 Certification pursuant to Section 302 of Sarbanes Oxley
Act of 2002
Exhibit 32.1 Certification pursuant to Section 906 of Sarbanes Oxley
Act of 2002
* These items were filed as exhibits to the Company's annual report on Form
10-KSB for the year ended December 31, 2000, and are incorporated herein by
this reference.
** These items were filed as exhibits to the Company's annual report on Form
10-KSB for the year ended December 31, 2002, and are incorporated herein by
this reference.
*** This item was filed as an exhibit to the Company's annual report on Form
10-KSB for the year ended December 31, 2003, and is incorporated herein by
this reference.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Vital Health Technologies, Inc.
Date: August 16, 2004 By: /s/ Halton Martin
=================================
Halton Martin, Director,
Chief Financial Officer and
Chief Executive Officer