February 24, 2006
Delivered by electronic submission via EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E., Mail Stop 7010
Washington, DC 20549
Attn: Mr. Mark Shuman
Re: Vital Products, Inc.
Amendment No. 2 to Registration Statement on Form SB-2
Filed January 20, 2006
File Number: 333-127915
Dear Mr. Shuman:
I am securities counsel for Vital Products, Inc. (the "Company"). I enclose
for filing under the Securities Act of 1933, as amended, Amendment No. 3 to
Registration Statement No. 333-127915, together with certain exhibits thereto
(the "Registration Statement").
Amendment No. 3 to the Registration Statement contains revisions that have
been made in response to comments received from the staff of the Securities
and Exchange Commission (the "Staff") in their letter dated February 8, 2006.
Set forth below are the Company's responses to the Staff's comments. The
numbering of the responses corresponds to the numbering of comments in the
letter from the Staff.
General
Comment 1. We read your response to comment 1 of our letter dated
October 14, 2005. We acknowledge that you have provided updated
financial statements pursuant to Item 310(g). It is not
clear, however, why the historical financial statements
(including those of the predecessor, as previously filed)
have been removed. Please clarify.
Response 1. We have included the 2004/2003 audited financial statements in
the Registration Statement. They were removed in error.
Comment 2. We read your response to comment 2 of our letter dated
October 14, 2005. We do not however see where you have
responded to our comment in its entirety. Please provide
us with a narrative discussion detailing the course of events
(i.e., acquisition of the assets from On the Go Healthcare),
and provide us with an in-depth analysis of the accounting
transactions that transpired as a result of the acquisition.
Your analysis should cite the specific authoritative literature
you used to support your accounting conclusions. We may have
further comments.
Response 2. On July 5, 2005 Vital Products entered into a purchase and
sale agreement with On the Go Healthcare, Inc. to purchase
the equipment, moulds, dies and intangibles used in the
childcare division in exchange for a promissory note of
$750,000 and $250,000 of common shares. OGHC filed a 8-K
disclosing the sale on July 5, 2005 and included the sale
and purchase agreement Per the sale and agreement , notably
section 3.3 Allocation of Purchase price, the fair market
value of the specific equipment, moulds and dies being
acquired was $600,000 and Customer/Client Lists was valued
at $400,000, which totals $1,000,000. The accounting entry
recorded was as follows:
Equipment $ 600,000(DR)
Intangibles $ 400,000(DR)
Common stock $ 100(CR)
APIC $ 249,900(CR)
Note Payable $ 750,000(CR)
The accounting literature which was followed was SFAS 141and
specifically paragraph 5 which calls for acquisitions to be
recorded at the fair values exchanged. Paragraph 6 discusses
using the fair value of the consideration given or the fair
value of the assets acquired which is more clearly evident.
As this was an arms length transaction it was recorded at
the market value of the consideration given.
Management has chosen to follow the fair value of the
consideration given since it calls for $250,000 of common
stock and a promissory note of $750,000.
Risk Factors, page 4
We may not be able to raise sufficient funds- page 7
Comment 3. Considering the comment above, please provide us with a
detailed analysis (using both qualitative and quantitative
factors) of EITF 2-11 and APB 29 as it relates to the
acquisition and the basis of your accounting (i.e., fair
value) considering the fact that the shareholders of Vital
Products were and continue to be shareholders of On the Go
Healthcare. In addition, please ensure that the disclosure
within management's discussion and analysis beginning on
page 18 as in accordance with Item 303 of Regulation S-B
and Financial Reporting Codification Section 501.04.
Additional guidance is available on the SEC website at
www.sec.gov./rules/interp/33-8350.htm.
Response 3. Per review of EITF 02-11 and APB 29 , which has now been
replaced by SFAS 153, both these sections do not apply to
the Vital acquisition of OGHC childcare division. The
reasons for the are as follows:
EITF 02-11. Accounting for Reverse Spin-offs.
The EITF 02-11 has been reviewed and the transaction was
not a Reverse Spin-off. Per paragraph 1 " the entity(the
"spinner") may transfer assets into a new legal spun off
entity(the "spinnee") and distribute the shares of the
spinnee to it's shareholders, without the surrender by the
shareholders of any stock of the spinnor. Following this
definition of a spin-off, no spin-off off or reverse spin-off
occurred. The reasons are as follows: the shareholders of
OGHC did not receive any shares of the new corporation on a
pro-rata basis and OGHC took back a minor equity stake in
the new company. Secondly, the transaction was not done as
reorganization nor was it intended to be reorganization.
The transaction was for a sale of a division to a third party.
OGHC equity share of vital products is approximately 9.3%.
The two largest shareholders of Vital Products Inc before
the share issuance to OGHC amounted to over 56% and they are
not related to OGHC nor do they have an equity stake in OGHC.
EITF 02-11 does not apply to the transaction.
APB 29, Accounting for Nonmonterary assets and SFAS 153
Exchange of Nonmonetary assets. Per paragraph 4 of APB 29
which states "The opinion does not apply to the following
transactions". Item C of the paragraph states" acquisition
of nonmonetary assets or services on issuance of capital
stock of an enterprise and Item E states" A transfer of
assets to an entity in exchange for an equity interest in
that entity".
Following that paragraph, APB 29 can't be used relating
to the Vital Products Inc acquisition of the childcare division
of OGHC.
Selling Securityholders, page 10
Comment 4. We refer you to your statement on page 20 that the note to On
the Go Healthcare for the assets you acquired has not been
executed. As such note represents 75 percent of the
consideration for the acquisition of the childcare division
of On the Go Healthcare, please explain to us how the
transaction was closed in light of your deficiency in paying
a substantial portion of the consideration for the acquisition.
Please also advise us why such note has not been filed as an
exhibit to the registration statement.
Response 4. The Parties to the acquisition, On the Go Healthcare and the
Company, agreed at the time of the acquisition that the Note
would be issued after the acquisition closed. Although the
Note was not formally drafted at the time of the closing, the
Parties understood that the Company was obligated to issue the
Note. To satisfy its obligations pursuant to the acquisition,
on February 23, 2006, the Company issued the Note. The Note
has been included as an exhibit to the Registration Statement.
Comment 5. You state on page 20 that the note is due to be repaid upon the
effectiveness of the registration statement. Please provide a
complete discussion with respect to your capital resources and
liquidity for the next 12 months particularly in light of your
note obligation and cash requirements for operating your
business.
Response 5. The Company has added additional language to the risk factor
section and the MD&A describing the Note.
Comment 6. We note that exhibits 10.1 and 10.2 to your registration
statement relate to an equity line financing arrangement with
Dutchess Private Equities. We further refer you to comment 1
of our letter dated September 2, 2005 questioning the validity
of such equity line financing arrangement in your specific
context. Please advise us of the status of this equity line
financing arrangement.
Response 6. We respectfully advise the Staff that the equity line has been
cancelled and the agreements terminated.
If you have further questions or comments, please feel free to contact us.
We are happy to cooperate in any way we can.
Regards,
/s/ Amy M. Trombly
_______________________________
Amy M. Trombly
Counsel for Vital Products, Inc.
cc: Vital Products, Inc.