Attached files
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| EX-31.1 - VHGI HOLDINGS, INC. | v186118_ex31-1.htm |
| EX-32.1 - VHGI HOLDINGS, INC. | v186118_ex32-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
(Amendment
No. 1)
x
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
quarterly period ended: March 31, 2010
o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission
File Number 000-17520
VHGI
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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75-2276137
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(State
or other jurisdiction of
incorporation
or organization)
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(IRS
Employer Identification No.)
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325 West
Main Street, Suite 240
Lexington,
Kentucky 40507
(Address
of principal executive offices)
(Zip
Code)
(859) 266-9772
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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 o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes þ No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (check
one)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller
reporting company x
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o No x
Shares
issued and outstanding of the registrant’s common stock as of March 31,
2010: 63,735,254 shares.
1
EXPLANATORY
NOTE
This Form
10-Q/A for the three months ended March 31, 2010, is being amended solely to
reflect changes made to Note 9 under “Notes to Unaudited Condensed Consolidated
Financial Statements” and certain corrections to Item 6, Exhibits.
The other items of this Quarterly Report are being reproduced as part of the
amendment solely for the convenience of the reader.
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PART
I – FINANCIAL INFORMATION
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Item
1: Financial Statements
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Condensed
Consolidated Balance Sheets as of March 31, 2010
(unaudited)
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and
December 31, 2009 (audited)
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1
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Unaudited
Condensed Consolidated Statements of Operations
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for
the three months ended March 31, 2010 and 2009
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2
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Unaudited
Condensed Consolidated Statements of Cash Flows
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for
the three months ended March 31, 2010 and 2009
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3
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Notes
to Unaudited Condensed Consolidated Financial Statements
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4
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Item
2: Management’s Discussion and Analysis of Financial
Condition
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and
Results of Operations
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5
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Item
3: Quantitative and Qualitative Disclosures about Market
Risk
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6
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Item
4T: Controls and Procedures
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7
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PART
II – OTHER INFORMATION
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Item
1: Legal Proceedings
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15
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Item
1A: Risk Factors – not required
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15
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Item
2: Unregistered Sales of Equity Securities and Use
of Proceeds
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15
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Item
3: Defaults upon Senior Securities
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15
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Item
4: Removed and reserved
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15
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Item
5: Other Information
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15
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Item
6: Exhibits
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16
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Signatures
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16
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2
VHGI
HOLDINGS, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2010
(UNAUDITED)
NOTE
1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The terms
“VHGI,” “we,” the “Company,” and “us” as used in this report refer to VHGI
Holdings, Inc. The accompanying unaudited condensed consolidated
balance sheet as of March 31, 2010 and unaudited condensed consolidated
statements of operations for the three months ended March 31, 2010 and 2009 have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of
management of VHGI, 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, 2010 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2010 or any other period. These
financial statements and notes should be read in conjunction with the financial
statements for the years ended December 31, 2009 and 2008, included in the
Company’s Annual Report on Form 10-K. The accompanying condensed
consolidated balance sheet as of December 31, 2009 has been derived from audited
financial statements at that date.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of VHGI and
its wholly-owned subsidiaries: VPS Holding, LLC dba Veriscrip
(“VPS”), Secure eHealth LLC, (“eHealth”), Medical Office Software, Inc. (“MOS”),
VHGI Gold, LLC (“VHGI Gold”) and VHGI Energy, LLC. eHealth and VPS are only
included for the period January 1, 2010 thru January 31, 2010 due to the sale of
eHealth and the assets of VPS on February 1, 2010 (see Note 4 – “Asset
Dispositions”). The remaining liabilities of VPS were transferred to
VHGI because the entity became inactive as of this same
date. VHGI Energy, LLC, a Delaware limited liability
corporation, was formed in February 2010. All intercompany accounts
and transactions have been eliminated.
NOTE
2 – GOING CONCERN
The
Company has current liabilities in excess of current assets and has incurred
losses since inception. The Company has had limited operations and has not been
able to develop an ongoing, reliable source of revenue to fund its
existence. The Company’s day-to-day expenses have been covered by
proceeds obtained, and services paid by, the issuance of stock and notes
payable. The adverse effect on the Company’s results of operations
due to its lack of capital resources can be expected to continue until such time
as the Company is able to generate additional capital from other
sources. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
These
unaudited interim condensed consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty. The continuation of
the Company as a going concern is dependent upon the success of the Company in
obtaining additional funding and the success of its future operations. The
Company’s ability to achieve these objectives cannot be determined at this
time.
NOTE
3 – MINING CLAIM LEASE
In
November 2009, the Company entered into an agreement to assume the lease
purchase option of the Gulch Mine properties, situated in the Hassayampa Mining
District of Arizona, approximately 10 miles south of Prescott. As
mentioned in Note 6, the initial Gulch Mine lease assumption had been recorded
at $50,000, the cost of the initial lease assumption as of December 31, 2009,
and the $12,500 cost of extending the term of the lease through February 15,
2012. At March 31, 2010, $5,000 had been paid to extend the lease
through February 15, 2013 and the additional amount owed on the extension was
paid subsequent to March 31. In addition, the value of the
lease was increased by $360,000 in February 2010 for the issuance of 2,000,000
shares of the Company’s stock to the assignor of the mining claim
lease.
3
According
to the terms of the Amendment and Extension to Lease Purchase Option Agreement
(“the Amendment”), the Gulch Mine original lessor (“the Lessor”), an unrelated
party, consented to the assignment of the lease to VHGI and granted options for
extending the term of the Gulch Mine lease for up to twelve (12) years. Renewal
options exist through 2023 and require VHGI to pay an extension fee of $20,000
per year for each subsequent annual extension.
NOTE
4 – ASSET DISPOSITIONS
On
February 1, 2010, the Company entered into a purchase agreement (the “Purchase
Agreement”) with Wound Management Technologies, Inc. (“WMT”), a Texas
corporation, pursuant to which WMT purchased from VHGI—for a total
purchase price of $500,000, consisting of $100,000 in cash and a promissory note
in the principal amount of $400,000 (the “WMT Note”) -- the
following:
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a)
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VHGI
membership interest in the wholly-owned subsidiary, Secure eHealth, LLC, a
Nevada limited liability company
(“eHealth”).
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b)
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VHGI
interest in a $1,500,000 Senior Secured Convertible Promissory Note issued
by Private Access, Inc. (the “Private Access Note”), certain agreements
related thereto, and a note payable obligation of $1,000,000 (including
accrued interest) incurred by VHGI in conjunction with the
Private Access Note transaction.
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c)
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VPS
intellectual property assets of the real-time prescription drug monitoring
business, including its “Veriscrip”
technology.
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In
addition, a royalty agreement was executed which provides for a three-year 10%
royalty to be paid to VHGI on all revenues received by eHealth or any affiliate
of eHealth from the sale of the VPS technology.
Scott A.
Haire, the Company's Chief Executive Officer and Chairman, also serves as the
Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and a director
of WMT. Based on shares outstanding as of the Annual Report on Form 10-K filed
by WMT for the year ended December 31, 2009, Mr. Haire beneficially owns,
through H.E.B., LLC, a Nevada limited liability company of which Mr. Haire is
the managing member, 25% of the outstanding common stock of WMT.
NOTE
5- NOTES RECEIVABLE
As
mentioned above, the Company has a note receivable in the amount of $400,000
from WMT. The note bears interest at 9% per annum and the maturity
date of the note is February 1, 2011. The note may be extended at the
option of VHGI for one year provided that, at the effective time of such
extension, all accrued but unpaid interest is paid by WMT to
VHGI. Accrued interest was $5,900 at March 31, 2010.
The
Company has a note receivable from a related party in the amount of
$75,000. The note bears interest at 10% per annum and is due on
demand. Accrued interest was $9,583 and $8,562 at March 31, 2010 and
December 31, 2009, respectively.
NOTE
6- NOTES PAYABLE AND LONG-TERM DEBT
Notes Payable - Related
Parties
Funds are
advanced to the Company from various related parties including from Scott Haire,
the Company's CEO and CFO and entities controlled by him. Other
shareholders may fund the Company as necessary to meet working capital
requirements and expenses. The following is a summary of amounts due
to related parties, including terms of the debt and the interest
accrued.
4
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March
31,
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2010
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H.E.B.,
LLC, Scott Haire is the managing member of H.E.B., LLC:
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Unsecured,
two separate $1,000,000 open lines of credit, no maturity date, and
interest at 10% per annum. Accrued interest at March 31, 2010
and December 31, 2009 is $347,991 and $331,949,
respectively. Unsecured lines available at March 31, 2010 are
$1,668,105. .
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$ | 309,995 | ||
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SWCC,
dated 7/21/06, no stated interest rate
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21,900 | |||
| $ | 331,895 | |||
Notes
Payable
On
November 1, 2009 the Company entered into an Assignment and Assumption of Lease
(“Lease Assumption”) with an unrelated party (“Assignor”) for $50,000 for the
assignment of a lease purchase option for the Treasure Gulch Gold Mine (“Gulch
Mine”). According to the terms of the Lease Assumption, the
Company will make two payments of $25,000 each to the Assignor in the year
2010. The first payment was made on February 8, 2010 and the second
payment of $25,000 has been recorded as a note payable at March 31,
2010. See Note 3 (“Mining Claim Lease”) for additional information on
the Gulch Mine.
On
December 7, 2009 the Company executed a convertible promissory note in the
amount of $45,000 to an unrelated party. The principal and accrued
interest, at 8% per annum, is due nine months from date of
execution. On February 4, 2010 and March 9, 2010 the Company
executed two additional convertible promissory notes with the same terms to the
same unrelated party in the amounts of $25,000 and $30,000,
respectively. The total amount of deferred loan costs
related to the notes is $7,500 and will be amortized over the term of each
loan.
Debentures
On
December 17, 2008 the Company issued convertible debentures which started
maturing in 2009 and continue maturing thru 2011. The debt balance at
March 31, 2010 and December 31, 2009 is $294,852 and $275,362,
respectively. Accrued interest at March 31, 2010 and December 31,
2009 is $28,758 and $26,231, respectively. Debt issuance costs of
$26,855 and $30,333 have been deferred at March 31, 2010 and December 31, 2009,
respectively.
The
Debentures may be converted into shares of the Company’s common stock at a
conversion price equal to seventy percent (70%) of the lowest closing bid price
per share for the twenty (20) trading days immediately preceding the date of
conversion; provided that no holder may convert Debentures into, nor shall the
Company issue to such holder, shares of common stock to the extent that the
conversion would result in a Holder and its affiliates together beneficially
owning more than 4.99% of the then issued and outstanding shares of the
Company’s common stock. This ownership may be waived, however,
by a holder upon sixty-one (61) days prior written notice.
The
Debentures may be redeemed by the Company at any time or from time to time at a
price equal to (x) one hundred twenty percent (120%) of the principal amount of
the Debenture if the Debenture is called for redemption prior to the expiration
of six months from the issuance date, or one hundred thirty one percent (131%)
if called for redemption thereafter, plus (y) interest accrued through the day
immediately preceding the date of redemption.
NOTE
7 - CAPITAL STOCK
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of Preferred Stock at a par
value of $.001 per share. The Company has designated 300,000 shares of Class B
voting Preferred stock and at December 31, 2009 and 2008 there were 70,000
shares outstanding. Accrued, but unpaid, dividends totaled $33,750 at
March 31, 2010 and December 31, 2009.
5
Common
Stock
The
Company is authorized to issue 100,000,000 common shares, at a par value of
$0.001 per share. These shares have full voting rights. At
March 31, 2010 there were 63,735,254 shares issued and
outstanding. At December 31, 2009, there were 57,352,644 shares
issued and outstanding.
During
the three month period ending March 31, 2010, the Company issued 3,207,610
shares in payment of debt, 2,000,000 shares for mining claim lease and 1,175,000
shares for payment of services resulting in a loss on settlement of
$188,194. During 2009 the Company issued 8,999,623 shares in payment
of debt and 1,901,488 shares for payment of services resulting in a loss on
settlement of $471,905.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
The
Company is currently a defendant in a Florida state court lawsuit regarding the
alleged non-payment of certain brokerage commissions. Management
considers the claim to be without merit and is vigorously defending the
suit.
NOTE
9 – SUBSEQUENT EVENTS
At March
31, 2010 the Company entered into an agreement to acquire certain pipeline
assets from a chapter 7 bankruptcy proceeding for $4,500,000, which required a
deposit payment of $250,000 during the auction and bidding
process. In April 2010, the bankruptcy court notified the Company
that they needed a higher bid and the Company decided not to bid for the assets,
therefore the deposit of $250,000 was returned to the Company. The Company, as
per previous announcement, still owns leases in the Texas state waters and
continues to move forward with its business plan.
On May 4,
2010 the Company paid $7,500 to extend the mining claim lease through February
15, 2013.
On May 7,
2010 the Company executed a convertible promissory note in the amount of $30,000
with an unrelated party. The principal and accrued interest at
8% per annum is due on February 7, 2011.
The
Company has evaluated all subsequent events from the balance sheet date through
the date of this filing.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The
following discussion of our financial condition and results of operations should
be read in conjunction with the “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” section and audited consolidated
financial statements and related notes thereto included in our Annual
Report on Form 10-K for the year ended December 31, 2009 and with the unaudited
consolidated financial statements and related notes thereto presented in this
Quarterly Report on Form 10-Q.
Forward-Looking
Statements
Some of
the statements contained in this report discuss future expectations, contain
projections of results of operations or financial condition, or state other
"forward-looking" information. The words "believe," "intend," "plan," "expect,"
"anticipate," "estimate," "project," "goal" and similar expressions identify
such a statement was made. These statements are subject to known and unknown
risks, uncertainties, and other factors that could cause the actual results to
differ materially from those contemplated by the statements. The forward-looking
information is based on various factors and is derived using numerous
assumptions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to the risks discussed in this and our other SEC
filings. We do not promise to update forward-looking information to reflect
actual results or changes in assumptions or other factors that could affect
those statements. Future events and actual results could differ materially from
those expressed in, contemplated by, or underlying such forward-looking
statements.
6
The
following discussion and analysis of our financial condition is as of March 31,
2010. Our results of operations and cash flows should be read in
conjunction with our unaudited financial statements and notes thereto included
elsewhere in this report and the audited financial statements and the notes
thereto included in our Form 10-K for the year ended December 31,
2009.
Business
Overview
Unless
otherwise indicated, we use “VHGI,” “the Company,” “we,” “our” and “us” in this
report to refer to the businesses of VHGI Holdings, Inc.
During
2009 the Company’s primary business focus was healthcare technology; however,
the Company was still in the development stage with the technology products
offered not yet generating revenue and requiring debt financing to raise needed
capital to meet contractual obligations. By disposing of certain
assets, the Company hopes to generate funds to pursue other lease purchase
opportunities, acquisitions and joint ventures for the goal of enhanced
shareholder value as the focus shifts toward the Precious Metals/ Energy
Resources industries.
On
February 1, 2010, the Company completed the sale of the healthcare technology
assets of the Company to Wound Management Technologies, Inc. (“WMT”) for a total
purchase price of $500,000, consisting of $100,000 in cash and a promissory note
in the amount of $400,000. The assets sold by VHGI to WMT consisted
of (a) VHGI subsidiary Secure eHealth, LLC (“eHealth”) (b) VHGI $1.5
million Senior Secured Convertible Promissory Note issued by Private Access,
Inc. and the related debt incurred to secure the funds and (c) all of the
intellectual property assets of the prescription monitoring business VPS
Holding, LLC (“VPS”). In addition, a royalty agreement was executed which
provides for a three-year 10% royalty to be paid to VHGI on all revenues
received by eHealth or any affiliate of eHealth from the sale of the VPS
technology.
VHGI
retained its ownership of Medical Office Software, Inc., a Florida corporation
(“MOS”). Since its inception, MOS has been engaged in the physician
practice management system ("PMS") market. Having completed more than
1,500 installations, MOS has established a strong presence and brand throughout
Southeastern Florida as the premier provider of physician practice
solutions. MOS began as a developer and marketer of its own PMS
solution. At present, however, MOS focuses almost exclusively on
reselling and supporting products developed by other parties. The
increased interest by the physician practice market to have a fully integrated
Practice Management and Electronic Medical Record (“EMR”) solution places a
great opportunity in front of MOS. The Federal Government is now providing
financial incentives and subsidies to practices that incorporate EMR systems,
which softens the barrier that MOS has faced in recent years to upgrade and
expand the base of physician practice customers; however, the government
involvement has slowed the decision making process which is having a negative
impact on sales at this time.
In
November 2009 the Company formed a new subsidiary, VHGI Gold, LLC (“VHGI Gold”),
a Nevada limited liability company, for the purpose of accelerating the
Company’s reentry into the gold mining industry. The
Company entered into a Lease-Purchase Option Agreement for the Treasure Gulch
Gold Mine (“Gulch Mine”) situated in the Hassayampa Mining District of Arizona,
approximately 10 miles south of Prescott. VHGI Gold is currently
conducting due-diligence on the subject property, and, pending results, hopes to
announce details of a proposed mining development schedule, with the intent of
maximizing initial outcomes while limiting VHGI Gold’s financial
commitment. Details under consideration include a laboratory analysis
of surface ore deposits, an evaluation of the underground mine workings, and an
evaluation of refining and processing options which, subject to the results of
these tests and analysis, could lead to full scale gold production.
On
February 24, 2010 the Company formed VHGI Energy, LLC (“VHGI Energy”), a
Delaware limited liability company and a 100% owned subsidiary of
VHGI. VHGI Energy is currently performing due diligence on oil and
gas properties in the Texas Gulf Coast area. At March 31, 2010 the
Company entered into an agreement to acquire certain pipeline assets from a
chapter 7 bankruptcy proceeding for $4,500,000, which required a deposit payment
of $250,000 during the auction and bidding process. In April 2010,
the bankruptcy court notified the Company that a higher bid was accepted from
another company and the deposit was returned to us.
Our
current focus is shifting toward creating a holding company with revenue streams
from the following business segments: (a) precious metals (b) oil and gas (c)
medical technology. The year 2010 marks a major milestone in the
history of the Company as a result of the recently initiated steps to leverage
the Company’s operating history and corporate resources within these new
business segments. Although gold is selling at 25 year high prices and oil &
gas continue to be trading at significant premiums, global economic events have
created significant opportunities within these markets for assets to be acquired
at significant discounts. The strategy going forward is to add to the
Company’s holdings through a series of planned acquisitions of oil and natural
gas projects, as well as multiple lease holdings containing proven precious
metal reserves.
7
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the U.S. The
preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities
and expenses. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. The Company’s significant accounting policies are disclosed in the
Company’s Annual Report on Form 10-K for the year ended December 31,
2009. We believe the footnotes to the consolidated financial statements
provide the description of the significant accounting policies necessary in
fully understanding and evaluating our consolidated financial condition and
results of operations. The Company has not materially changed its
significant accounting policies.
Results
of Operations and Financial Condition
Three months ended March 31,
2010 compared with the three months ended March 31, 2009
Revenues. The
Company generated revenues for the three months ended March 31, 2010 of
$145,569, as compared to revenues of $194,339 for the three months ended March
31, 2009, or a 25% decrease in revenues.
The
decrease in revenues is a direct result of the impact of the Federal Government
financial incentives for practices incorporating EMR
systems. Over the long term, these incentives should help
generate revenue but in the short term they have slowed the decision making
process which has had a negative impact on sales of new
installations.
Cost of revenues. Costs of
revenues for the three months ended March 31, 2010 were $29,117, as compared to
costs of revenues of $49,271 for the three months ended March 31, 2009, or
a 41% decrease in costs of revenues. The decrease in cost of revenues is a
direct result of the reduction in sales as discussed above.
General and administrative expenses
(“G&A"). G&A expenses for the
three months ended March 31, 2010 were $432,623, as compared to G&A expenses
of $296,094 for the three months ended March 31, 2009, or a 46% increase in
G&A expenses. The increase in expenses is primarily due to an
increase in consulting fees paid between 2009 and 2010.
Interest Income.
Interest income was $19,212 for the three months ended March 31,
2010, as compared to $36,858 for the three months ended March 31, 2009, or
a decrease of 48%. The decrease is the result of the sale of the $1,500,000 note
receivable with Private Access on February 1, 2010 and the decrease in the
accrual of related interest income associated with the note.
Interest Expense.
Interest expense was $22,907 for the three months ended March 31, 2010, as
compared to $78,597 for the three months ended March 31, 2009, or a decrease of
71%. Interest expense decreased as a result of the sale debt related
to the Private Access note.
Net loss. We had a net loss
for the three months ended March 31, 2010 of $508,060, as compared with a net
loss of $192,765 for the three months ended March 31, 2009, or an increase in
net loss of 164%. The increase in loss is primarily due to the increase in
consulting fees for 2010 incurred as the Company shifts the focus into new
industries. In addition, there was a loss on settlement recognized in
the first quarter 2010 which had not been recorded in the first quarter of
2009.
Liquidity
and Capital Resources
Historically,
we have financed our operations primarily from the sale of debt and equity
securities. Our financing activities generated $250,751 for the three
months ended March 31, 2010 and approximately $150,900 for the three months
March 31, 2009.
8
We will
need to raise additional capital in fiscal year 2010 to fund our business plan
and support our operations. As our prospects for funding, if any, develop during
the fiscal year, we will assess our business plan and make adjustments
accordingly. The report of our independent auditors with regard to our financial
statements for the fiscal year ended December 31, 2009 included a going concern
qualification. Although we have successfully funded our operations to date by
attracting additional equity investors, there is no assurance that our capital
raising efforts will be able to attract additional necessary capital for our
operations. If we are unable to obtain additional funding for operations at any
time now or in the future, we may not be able to continue operations as
proposed, requiring us to modify our business plan, curtail various aspects of
our operations or cease operations.
Off-Balance
Sheet Arrangements
None.
Recent
Accounting Pronouncements
For the
period ended March 31, 2010, there were no other changes to our critical
accounting policies as identified in our Annual Report on Form 10-K for the year
ended December 31, 2009.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a
smaller reporting company, we are not required to provide this
information.
ITEM
4T. CONTROLS AND PROCEDURES
Disclosure
Controls and Procedures.
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
to the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized, and reported within the
time periods specified by the Securities and Exchange Commission’s rules and
forms, and that information is accumulated and communicated to our management,
including our principal executive and principal financial officer (whom we refer
to in this periodic report as our Certifying Officer), as appropriate to allow
timely decisions regarding required disclosure. Our management evaluated, with
the participation of our Certifying Officer, the effectiveness of our disclosure
controls and procedures as of March 31, 2010, pursuant to
Rule 13a-15(b) under the Securities Exchange Act. Based upon that
evaluation, our Certifying Officer concluded that, as of March 31, 2010, our
disclosure controls and procedures were effective.
Changes
in Internal Control over Financial Reporting.
There
were no changes in our internal control over financial reporting that occurred
during our most recently completed fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting. We will continue to evaluate the effectiveness
of internal controls and procedures on an on-going basis.
PART
II — OTHER INFORMATION
Item
1. Legal Proceedings
The
Company is currently a defendant in a Florida state court lawsuit regarding the
alleged non-payment of certain brokerage commissions. Management
considers the claim to be without merit and is vigorously defending the
suit.
Item
1A. Risk Factors
As a
smaller reporting company, we are not required to provide this
information.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
In
January 2010 the Company issued 25,000 shares of stock at $0.18 per share for
consulting fees.
9
In
February 2010 the Company issued 670,000 shares of stock at $0.18 per share for
payment of debt.
In
February 2010 the Company issued 2,000,000 shares of stock at $0.18 per share
for payment on an investment.
In
February 2010 the Company issued 1,000,000 shares of stock at $0.17 per share
for consulting fees.
In
February 2010 the Company issued 2,537,610 shares of stock at $0.17 per share
for payment of debt.
In March
2010 the Company issued 150,000 shares of stock at $0.15 per share for payment
of consulting.
Item
3. Defaults upon Senior Securities
None
Item
4. Removed and Reserved
Item
5. Other Information
None
Item
6. Exhibits
The
following documents are filed as part of this Report:
EXHIBIT
INDEX
|
EXHIBIT
NO.
|
DESCRIPTION OF
EXHIBIT
|
|
|
3(i)
|
Amended
and Restated Certificate of Incorporation
|
|
|
3(ii)
|
By-Laws
(Incorporated by reference to Exhibit 3(ii).1 of the Company’s Form
10-KSB, dated December 31, 2003)
|
|
|
10.1
|
Purchase
Agreement, dated February 1, 2010, by and between VirtualHealth
Technologies, Inc., Wound Management Technologies, Inc., and VPS Holdings,
LLC (Incorporated by reference to Exhibit 10.4 of the Company's
Current Report on Form 8-K filed with the Commission on
February 9, 2010)
|
|
|
10.2
|
Promissory
Note dated February 1, 2010 (Incorporated by reference to Exhibit 10.4 of
the Company's Current Report on Form 8-K filed with the
Commission on February 9, 2010)
|
|
|
10.3
|
Veriscrip
Royalty Agreement, dated February 1, 2010, between Virtual Health
Technologies, Inc. and Secure eHealth, LLC(Incorporated by reference to
Exhibit 10.4 of the Company's Current Report on Form 8-K filed with the
Commission on February 9, 2010)
|
|
|
31.1*
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
32.1*
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
|
|
*Filed
herewith
10
SIGNATURES
Pursuant
to the requirements of the Exchange Act of 1934, the registrant duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| VHGI HOLDINGS, INC. | |||
| (Registrant) | |||
|
Date:
May 20, 2010
|
By:
|
/s/ James M. Renfro, | |
| James M. Renfro, | |||
| President | |||
11