Delaware
|
75-2276137
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer Identification No.)
|
Large accelerated filer o
|
Accelerated filer o
|
Non-accelerated filer o
|
Smaller reporting company x
|
PART I – FINANCIAL INFORMATION
|
|
Item 1: Financial Statements
|
|
Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited)
|
3
|
and December 31, 2011 (audited)
|
|
Unaudited Condensed Consolidated Statements of Operations
|
4
|
for the three months ended March 31, 2012and 2011
|
|
Unaudited Condensed Consolidated Statements of Cash Flows
|
5
|
for thethree months ended March 31, 2012and 2011
|
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
6
|
Item 2: Management’s Discussion and Analysis of Financial Condition
|
13
|
and Results of Operations
|
|
Item 3: Quantitative and Qualitative Disclosures about Market Risk
|
15
|
Item 4: Controls and Procedures
|
15
|
PART II – OTHER INFORMATION
|
|
Item 1: Legal Proceedings
|
16
|
Item 1A: Risk Factors
|
16
|
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
|
16
|
Item 3: Defaults upon Senior Securities
|
16
|
Item 4: Mine Safety Disclosures
|
16
|
Item 5: Other Information
|
16
|
Item 6: Exhibits
|
17
|
Signatures
|
17
|
VHGI HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||||
March 31, 2012 (Unaudited) and December 31, 2011 (Audited)
|
||||||||
March 31, 2012
|
December 31, 2011
|
|||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash
|
$ | - | $ | 13,030 | ||||
Accounts Receivable, net
|
264,804 | 25,340 | ||||||
Prepaid Expenses
|
465,420 | 100,874 | ||||||
Deposits
|
69,240 | 29,240 | ||||||
Deferred Charges
|
15,535 | 90,477 | ||||||
Notes Receivable
|
50,000 | - | ||||||
Interest Receivable
|
83 | - | ||||||
Total Current Assets
|
865,082 | 258,961 | ||||||
OTHER ASSETS:
|
||||||||
Property Plant and Equipment, net
|
46,666,350 | - | ||||||
Notes Receivable - Related Parties
|
- | 5,302,621 | ||||||
Interest Receivable - Related Parties
|
- | 129,413 | ||||||
Mining Lease Rights
|
1,529,536 | 1,529,536 | ||||||
Deferred Charges, long term
|
7,356 | - | ||||||
TOTAL ASSETS
|
$ | 49,068,324 | $ | 7,220,531 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Bank Overdraft
|
$ | 61,853 | $ | - | ||||
Accounts Payable
|
5,871,658 | 431,753 | ||||||
Unearned Revenue
|
45,590 | 47,087 | ||||||
Accrued Payroll and Payroll Taxes
|
344,665 | 18,794 | ||||||
Other Accrued Liabilities
|
3,063 | 1,093 | ||||||
Dividends Payable
|
33,750 | 33,750 | ||||||
Notes Payable, net of discount
|
13,700,000 | 2,393,467 | ||||||
Notes Payable - Related Parties
|
21,136,967 | 3,543,184 | ||||||
Accrued Interest
|
195,791 | 17,774 | ||||||
Accrued Interest - Related Parties
|
524,143 | 399,595 | ||||||
Derivative Liabilities
|
3,658,669 | 2,227,425 | ||||||
Stock Subscription Payable
|
1,001,408 | 5,299 | ||||||
Total Current Liabilities
|
46,577,557 | 9,119,221 | ||||||
LONG TERM LIABILITIES:
|
||||||||
Notes Payable, long term
|
1,935,274 | - | ||||||
Debentures, net of discount
|
31,387 | - | ||||||
1,966,661 | - | |||||||
TOTAL LIABILITIES
|
48,544,218 | 9,119,221 | ||||||
STOCKHOLDERS' EQUITY
|
||||||||
Preferred stock, Series A - $10 par value, 700,000
issued and outstanding as of March 31, 2012 and zero
issued and outstanding December 31, 2011.
|
7,000,000 | - | ||||||
Preferred stock, Class B - $0.001 par value, 300,000
shares designated, 70,000 issued and outstanding as
of March 31, 2012 and December 31, 2011
|
70 | 70 | ||||||
Common stock - $0.001 par value, 100,000,000 shares
authorized, 99,059,786 and 97,192,187 issued and outstanding
as of March 31, 2012 and December 31, 2011
|
99,060 | 97,192 | ||||||
Additional Paid-in Capital
|
10,571,587 | 9,699,150 | ||||||
Stock Subscription Receivable
|
(24,000 | ) | (24,000 | ) | ||||
Retained Deficit
|
(17,122,611 | ) | (11,671,102 | ) | ||||
TOTAL STOCKHOLDERS' EQUITY
|
524,106 | (1,898,690 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS'
|
$ | 49,068,324 | $ | 7,220,531 | ||||
EQUITY
|
||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
VHGI HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
|
||||||||
March 31, 2012
|
March 31, 2011
|
|||||||
Restated
|
||||||||
Total Revenue
|
$ | 449,032 | $ | 112,966 | ||||
Cost of Sales
|
(45,268 | ) | (30,635 | ) | ||||
Gross Profit
|
403,764 | 82,331 | ||||||
OPERATING EXPENSES:
|
||||||||
Selling, General and Administrative
|
(2,132,315 | ) | (265,113 | ) | ||||
LOSS FROM CONTINUING OPERATIONS
|
(1,728,551 | ) | (182,782 | ) | ||||
OTHER INCOME (EXPENSES):
|
||||||||
Interest Income
|
687 | 15,311 | ||||||
Loss on Settlement
|
(754,247 | ) | (40,091 | ) | ||||
Change in fair value of Derivative Liability
|
(1,089,918 | ) | (22,431 | ) | ||||
Debt Related Expense
|
(1,720,206 | ) | - | |||||
Interest Expense
|
(159,274 | ) | (16,628 | ) | ||||
Other Income (Expenses)
|
(3,722,958 | ) | (63,839 | ) | ||||
NET LOSS BEFORE TAXES
|
(5,451,509 | ) | (246,621 | ) | ||||
Current Tax Expense
|
- | - | ||||||
Deferred Tax Expense
|
- | - | ||||||
NET LOSS
|
$ | (5,451,509 | ) | $ | (246,621 | ) | ||
Basic gain (loss) per common share
|
$ | (0.06 | ) | $ | (0.00 | ) | ||
Weighted average number of common shares
|
98,677,458 | 85,115,102 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
VHGI HOLDINGS, INC. AND SUBSIDIARIES
|
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
|
||||||||
March 31, 2012
|
March 31, 2011
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
Restated
|
|||||||
Net loss
|
$ | (5,451,509 | ) | $ | (246,621 | ) | ||
Adjustments to reconcile net loss to net cash used
|
||||||||
in operating activities:
|
||||||||
Depreciation and amortization
|
173,176 | 2,621 | ||||||
Amortization of deferred financing costs
|
605,015 | - | ||||||
Non-cash expenses
|
55,233 | 25,419 | ||||||
Loss on debt settlement
|
- | 40,091 | ||||||
Loss on derivatives
|
179,415 | - | ||||||
Warrant expense
|
637,941 | - | ||||||
Change in fair value of stock subscription payable
|
767,362 | 22,431 | ||||||
Change in fair value of derivative liability
|
874,828 | - | ||||||
Forgiveness of debt
|
(223,500 | ) | - | |||||
Stock issued for debt related costs
|
396,518 | - | ||||||
Changes in assets and liabilities:
|
||||||||
(Increase) decrease in accounts receivable
|
(62,343 | ) | 16,081 | |||||
(Increase) decrease in prepaids and other assets
|
(371,212 | ) | 1,500 | |||||
(Increase) decrease in interest receivable - related parties
|
- | (15,311 | ) | |||||
(Increase) decrease in interest receivable
|
129,330 | - | ||||||
Increase (decrease) in deferred revenue
|
(1,497 | ) | - | |||||
Increase (decrease) in accounts payable
|
(795,009 | ) | 13,096 | |||||
Increase (decrease) in accrued payroll and payroll taxes
|
112,996 | (19,569 | ) | |||||
Increase (decrease) in other accrued liabilities
|
1,970 | 1,194 | ||||||
Increase (decrease) in accrued interest
|
179,617 | 595 | ||||||
Increase (decrease) in accrued interest - related parties
|
13,065 | 16,033 | ||||||
Net cash provided (used) by operating activities
|
(2,778,604 | ) | (142,440 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchase of notes receivable-related parties
|
- | (453,100 | ) | |||||
Proceeds from notes receivable-related parties
|
5,302,621 | 402,700 | ||||||
Purchase of notes receivable
|
(50,000 | ) | - | |||||
Proceeds from notes receivable
|
- | - | ||||||
Purchase of property, plant, and equipment
|
(478,117 | ) | - | |||||
Purchase of mining lease rights
|
- | (4,536 | ) | |||||
Net cash provided (used) in investing activities
|
4,774,504 | (54,936 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net change in bank overdraft
|
61,853 | (45,654 | ) | |||||
Cash acquired in acquisition
|
36,693 | - | ||||||
Proceeds from notes payable
|
1,587,482 | - | ||||||
Payments on notes payable
|
(4,660,008 | ) | (40,000 | ) | ||||
Proceeds from notes payable - related parties
|
546,550 | 302,550 | ||||||
Payments on notes payable - related parties
|
- | (16,400 | ) | |||||
Proceeds from sale of stock
|
25,000 | - | ||||||
Proceeds from debentures
|
393,500 | - | ||||||
Net cash provided by financing activities
|
(2,008,930 | ) | 200,496 | |||||
NET INCREASE (DECREASE) IN CASH
|
(13,030 | ) | 3,120 | |||||
Cash, beginning of period
|
13,030 | - | ||||||
Cash, end of period
|
$ | - | $ | 3,120 | ||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | - | $ | - | ||||
Income Taxes
|
$ | - | $ | - | ||||
Supplemental Non-Cash Investing and Financing Activities:
|
||||||||
Common Stock issued in payment of debt related costs
|
$ | 396,518 | $ | - | ||||
Common Stock issued in payment of debt
|
$ | - | $ | 52,000 | ||||
Contributed rent as a capital contribution
|
$ | - | $ | 6,500 | ||||
Preferred Stock issued in acquisition
|
$ | 7,000,000 | $ | - | ||||
Note payable issued in acquisition
|
$ | 17,000,000 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
a)
|
VHGI’s membership interest in eHealth.
|
b)
|
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 payable) incurred by VHGI in conjunction with the Private Access Note transaction.
|
c)
|
VPS intellectual property assets of the real-time prescription drug monitoring business, including its “Veriscrip” technology.
|
Notes Receivable
|
Terms of Agreement
|
Principal
|
Interest
|
||||||
March 26, 2012 Promissory Note
|
Promissory note with interest accrued at 5% per annum, due June 30, 2012.
|
$ | 50,000 | $ | 83 | ||||
Total
|
$ | 50,000 | $ | 83 |
Related party
|
Nature of relationship
|
Terms of the agreement
|
Principal
|
Interest
|
H.E.B., LLC, a Nevada limited liability company
|
Scott Haire is the managing
member of HEB.
|
Unsecured $1,000,000 open line of credit, no maturity
date, and interest at 10% per annum. Aggregate amount
of line available at March 31, 2012 is $820,899.
|
$ 179,102
|
$ 232,275
|
SWCC
|
Investor in eHealth
|
Dated 7/21/06, no stated interest rate and no maturity date.
|
21,900
|
-
|
Commercial Holding AG, LLC
|
Commercial Holding AG, LLC
has provided previous lines
of credit to affiliates of VHGI.
|
Unsecured note with interest accrued at a rate of 10%
per annum with no maturity date.
|
43,830
|
102,353
|
MAH Holdings, LLC
|
MAH Holdings, LLC has
provided previous lines of
credit to affiliates of VHGI.
|
Unsecured $3,500,000 line of credit, no maturity date with
an interest rate of 10% per annum. Aggregate amount of
line available at March 31, 2012 is $0.
|
3,892,135
|
150,392
|
Paul R. Risinger
|
Mr. Risinger is the current
president of Lily Group Inc.
|
Note payable due March 31, 2012 with interest accrued at
3% per annum and 8% after the due date.
|
17,000,000
|
39,123
|
Total
|
$21,136,967
|
$524,143
|
Note Payable
|
Terms of Agreement
|
Principal
|
Discount
|
Interest
|
8% Notes, Convertible at 45% discount
|
Four convertible notes payable with principal and accrued interest at 8%
per annum due nine months from date of execution. The maturity dates
range from January 6, 2012 to June 12, 2012. Notes are convertible into
Common Stock at a 45% discount on the market price. As of March 31, 2012 $
30,000 of the principal balance has been paid and $40,000 of principal converted
into Common Stock (see note 13 “Subsequent Events”).
|
$ -
|
$ -
|
$ -
|
12% Notes, Convertible
|
Two convertible notes payable with principal and accrued interest, at 12%
per annum, due July 19, 2012. Notes are convertible into Common Stock at
a 50% discount on the market price.
|
200,000
|
60,109
|
16,701
|
July 1 Notes
|
Two notes payable due September 1, 2011 issued in exchange for a total of
625,000 shares of Common Stock. The maturity dates were extended to
December 31, 2011 in exchange for 256,000 shares of Common Stock issued as
extension fees. On December 15, 2011 the remaining note balances were
incorporated into two new notes payable of $125,000 and $50,000 respectively,
with maturity dates of February 15, 2012, in exchange for 175,000 shares of
Common Stock and 187,500 3-year warrants with an exercise price of $0.50.
The Company paid the notes in full on February 20, 2012 and the lenders
subsequently waived all rights to default shares and payments.
|
-
|
-
|
-
|
July 2011 Senior Notes
|
Six senior promissory notes payable with two to three month terms, with
maturity dates ranging from September 2, 2011 to December 31, 2011.
Proceeds are to be used to consummate the transaction described in the
May 27 letter of intent with Lily Group, Inc. (see note 5). As of March 31,
2012, one note in the principal amount of $150,000 is past due.
|
150,000
|
-
|
-
|
8% Notes, Convertible at 50% discount
|
Three convertible notes payable with principal and accrued interest at 8%
per annum due nine months from date of execution. The maturity dates range
from July 15, 2012 to September 15, 2012. Notes are convertible into Common
Stock at a 50% discount on the market price.
|
140,000
|
77,886
|
3,923
|
2011 4th Quarter Senior Notes
|
Twenty-nine notes payable with a total original principal amount of $1,232,500
and participation payments of $107,200 due on maturity dates ranging from
12/12/2011 to 2/6/2012. A total of 4,950,000 shares of Common Stock and
1,237,500 5-year warrants with an exercise price of $0.15 were issued to the
lenders upon execution of the note agreements. As of March 31, 2012, ten
of these notes, in the aggregate principal amount of $432,200 are past due
and default interest in the amount of $46,188 has been accrued.
|
432,200
|
-
|
46,188
|
November Notes
|
Two, two-month $50,000 notes payable, with $4,000 participation payments
each, with due dates of January 18 and 29, 2012. Each lender received 250,000
shares of Common Stock upon execution of the note agreement. As of
March 31, 2012 these notes are past due and $3,328 of default interest payable
has been accrued.
|
108,000
|
-
|
3,328
|
December 15 Notes
|
Two notes payable in the amount of $25,000 and a third in the amount of $50,000
due on February 15, 2012. A total of 75,000 shares of Common Stock and 100,000
3-year warrants with an exercise price of $0.50 were issued to the lenders upon
execution of the note agreements. The Company failed to make payment by
February 15, 2012, but the entire principal balance of $100,000 and accrued interest
was paid by the end of February 2012, and the lenders subsequently waived their
rights to all default shares and payments. As of March 31, 2012 an additional 25,000
shares of Common Stock remains due to one lender.
|
-
|
-
|
-
|
December 30 Note
|
One $500,000 non-interest bearing note payable with a maturity date of February 15,
2012 and a participation payment of $50,000. The entire $550,000 balance was paid
in full in February of 2012.
|
-
|
-
|
-
|
January 10, 8% Convertible Note
|
Convertible note payable with principal and accrued interest at 8% per annum due
October 12, 2012, convertible into Common Stock at a 50% discount on the market price.
|
45,000
|
31,794
|
779
|
January 11, 2012 Senior Promissory Note
|
Note payable in the amount of $200,000 and a participation payment of $50,000
due March 31, 2012. As part of the note agreement, the lender received 400,000
stock purchase warrants with an exercise price of $0.60. As of the date of this
filing, the $250,000 balance of this note is past due.
|
250,000
|
-
|
-
|
January 2012 Notes
|
Six notes payable in aggregate principal amount of $440,000 due by the earlier of
July 30, 2012 or the closing of the Lily acquisition. The lenders received a total of
634,500 stock purchase warrants with an exercise price of $0.34. These notes were
paid in full as of March 31, 2012.
|
-
|
-
|
-
|
$500,000 Senior Promissory Note
|
Senior promissory note in the original principal amount of $500,000 due January 31,
2012. As of March 31, 2012 $200,000 of the note balance is past due and the lender
is owed 100,000 shares of Common Stock related to the original note agreement.
|
200,000
|
-
|
-
|
January 15, 2012 Senior Promissory Note
|
Senior promissory note in the original principal amount of $50,000 with a bonus
payment of $3,000 with a maturity date of February 28, 2012. Additionally, the
lender will received 100,000 shares of Common Stock and 50,000 warrants to
purchase Common Stock at an exercise price of $0.50. As of March 31, 2012
the 100,000 shares of commons stock have not been issued to the lender and
the balance of $53,000 is past due. Default interest in the amount of $789 has
been accrued.
|
53,000
|
-
|
789
|
January 30, 2012 Promissory Note
|
Promissory note in the amount of $250,000 with interest accrued at 16% per
annum due April 30, 2012. The note agreement entitles the lender to 200,000
stock purchase warrants with an exercise price of $1.00 and 200,000 shares of
Common Stock. As of March 31, 2012 the 200,000 shares of Common Stock
have not been issued. As of the date of this filing, this note and the related
interest payable is past due.
|
250,000
|
80,556
|
6,778
|
Platinum Partners Note
|
Promissory note in the amount of $13,000,000 with interest accrued at 12%
per annum due May 16, 2012 unless extended pursuant to terms of agreement
to August 16, 2012.
|
13,000,000
|
-
|
111,483
|
Lily Notes Payable
|
Various note payable agreements issued between July 14, 2011 and
September 16, 2011due within one to three years of issuance, secured by
interest in vehicles and equipment.
|
1,056,515
|
-
|
-
|
March 28, 2012 Promissory Note
|
Convertible note payable with a principal amount of up to 278,000 including
an approximate original issue discount of 10% with a maturity date of March 28,
2013. Note is convertible at the lesser of $0.57 or a 30% discount on the fair market
value of the Company’s Common Stock.
|
110,000
|
109,096
|
-
|
Total
|
$15,994,715
|
$359,441
|
$189,969
|
For the Year Ended December 31, 2011
|
For the Three Months Ended March 31, 2012
|
||||||||||||||||
Shares
|
Weighted Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
||||||||||||||
Outstanding at beginning of period
|
714,285 | $ | 0.07 |
Outstanding at beginning of period
|
3,125,000 | $ | 0.21 | ||||||||||
Granted
|
3,125,000 | 0.21 |
Granted
|
1,284,500 | 0.39 | ||||||||||||
Exercised
|
714,285 | 0.07 |
Exercised
|
1,250,000 | 0.08 | ||||||||||||
Forfeited
|
- | - |
Forfeited
|
- | - | ||||||||||||
Expired
|
- | - |
Expired
|
- | - | ||||||||||||
Outstanding at end of period
|
3,125,000 | $ | 0.2134 |
Outstanding at end of period
|
3,159,500 | $ | 0.39 |
As of March 31, 2012
|
As of March 31, 2012
|
|||||||||||||||||||||
Warrants Outstanding
|
Warrants Exercisable
|
|||||||||||||||||||||
Range of Exercise Prices
|
Number Outstanding
|
Weighted-Average
Remaining Contract Life
|
Weighted-Average
Exercise Price
|
Number Exercisable
|
Weighted-Average
Exercise Price
|
|||||||||||||||||
0.15 | 1,237,500 | 5.0 | $ | 0.15 | 1,237,500 | $ | 0.15 | |||||||||||||||
0.34 | 634,500 | 5.2 | 0.34 | 634,500 | 0.34 | |||||||||||||||||
0.50 | 437,500 | 3.0 | 0.50 | 437,500 | 0.50 | |||||||||||||||||
0.60 | 400,000 | 4.8 | 0.60 | 400,000 | 0.60 | |||||||||||||||||
0.75 | 250,000 | 2.8 | 0.75 | 250,000 | 0.75 | |||||||||||||||||
1.00 | 200,000 | 4.8 | 1.00 | 200,000 | 1.00 | |||||||||||||||||
0.15 - 1.00 | 3,159,500 | 4.5 | $ | 0.39 | 3,159,500 | $ | 0.39 |
Dividend yield:
|
1%
|
Expected volatility
|
292% to 504%
|
Risk free interest rate
|
.36% to .92%
|
Expected life (years)
|
1.00 to 5.00
|
Balance, December 31, 2010
|
$ | 0 | ||
Change in Fair Value of Warrant Derivative Liability
|
(1,582,963 | ) | ||
Change in Fair Value of Beneficial Conversion Liability
|
(644,462 | ) | ||
Balance, December 31, 2011
|
(2,227,425 | ) | ||
Adjustment to Warrant Derivative Liability
|
112,171 | |||
Adjustment to Beneficial Conversion Liability
|
38,260 | |||
Adjustment to Debenture Beneficial Conversion Liability
|
(360,010 | ) | ||
Change in Fair Value of Warrant Derivative Liability
|
(680,907 | ) | ||
Change in Fair Value of Beneficial Conversion Liability
|
(159,529 | ) | ||
Change in Fair Value of Debenture Beneficial Conversion Liability
|
(381,229 | ) | ||
Balance, March 31, 2012
|
$ | 3,658,669 |
Three Months Ended March 31, 2011
|
||||||||||||
As Previously
|
||||||||||||
Reported
|
Restated
|
|||||||||||
March 31,
|
March 31,
|
|||||||||||
2011
|
2011
|
Change
|
||||||||||
Total Assets
|
$ | 3,653,781 | $ | 3,653,781 | $ | - | ||||||
Total Liabilities
|
$ | (1,716,615 | ) | $ | (1,739,046 | ) | $ | (22,431 | ) | |||
Stockholders' Equity
|
$ | (1,937,166 | ) | $ | (1,914,735 | ) | $ | 22,431 | ||||
Net Income (Loss)
|
$ | (224,190 | ) | $ | (246,621 | ) | $ | (22,431 | ) | |||
Income (Loss) available to Common Stockholders
|
$ | (224,190 | ) | $ | (246,621 | ) | $ | (22,431 | ) | |||
Basic Loss per share
|
$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) |
Net working capital deficit
|
$ | (6,160,636 | ) | |
Property and equipment
|
46,361,409 | |||
Debt
|
(15,266,483 | ) | ||
Asset retirement obligation
|
(934,290 | ) | ||
Total purchase consideration
|
$ | 24,000,000 |
As Reported
2012
|
As Reported, 2011
|
Pro Forma
2012
|
Pro Forma
2011
|
|||||||||||||
Total revenue
|
449,032 | 112,996 | $ | 630,427 | $ | 112,966 | ||||||||||
Net loss
|
5,451,509 | 246,621 | 8,593,354 | 584,329 | ||||||||||||
Net loss per share
|
||||||||||||||||
Basic
|
(0.06 | ) | (0.00 | ) | (0.10 | ) | (0.01 | ) | ||||||||
Diluted
|
(0.06 | ) | (0.00 | ) | (0.10 | ) | (0.01 | ) |
Section
|
Section
|
Section
|
Section
|
Section
|
Proposed
|
||||||||
104(a)
|
104(b)
|
104(d)
|
107(a)
|
110(b)(2)
|
MSHA
|
||||||||
Month
|
Citations
|
Orders
|
Citation/Orders
|
Orders
|
Violations
|
Assessments
|
|||||||
(in thousands)
|
|||||||||||||
January
|
1
|
0
|
0
|
0
|
|
0
|
$0.176
|
||||||
February
|
2
|
0
|
1
|
0
|
0
|
$2.678
|
|||||||
March
|
15
|
0
|
4
|
0
|
0
|
$5.5
|
|||||||
April
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
May
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
June
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
July
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
August
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
September
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
October
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
November
|
0
|
0
|
0
|
0
|
0
|
$0
|
|||||||
December
|
0
|
0
|
0
|
0
|
0
|
$0
|
EXHIBIT NO.
|
DESCRIPTION OF EXHIBIT
|
2.1
|
Certificate of Ownership Merging VHGI Holdings, Inc. into VirtualHealth Technologies, Inc., effective March 23, 2010 (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 29, 2010)
|
3(i)
|
Amended and Restated Certificate of Incorporation, dated August 24, 2006 (Incorporated by reference to Exhibit 3(i) to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 15, 2011)
|
3(ii)
|
By-Laws (Incorporated by reference to Exhibit 3(ii).1 of the Company’s Form 10-KSB, dated December 31, 2003)
|
4.1
|
Certificate of Designations, Preferences, Rights and Limitations of Series C Convertible Preferred Stock (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 4, 2012)
|
10.1
|
First Amendment to Stock Purchase Agreement dated February 1, 2012 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on February 22, 2012)
|
10.2
|
Note Purchase Agreement dated February 16, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on February 22, 2012).
|
10.3
|
Mortgage, Security Agreement, Assignment of Production and Proceeds, Financing Statement and Fixture Filing, dated February 16, 2012 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on February 22, 2012).
|
10.4
|
Promissory Note dated February 16, 2012 (Incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on February 22, 2012).
|
10.5
|
Guaranty Agreement dated February 16, 2012 (Incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on February 22, 2012.
|
31.1*
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2*
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32.1*
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2*
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
*Filed herewith
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T
|
Date: May 21, 2012
|
VHGI HOLDINGS, INC.
By /s/ Douglas P. Martin
Douglas P. Martin,
Chief Executive Officer
|
1.
|
I have reviewed the quarterly report on Form 10-Q of VHGI Holdings, Inc. for the period ended March 31, 2012.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
1.
|
I have reviewed the quarterly report on Form 10-Q of VHGI Holdings, Inc. for the period ended March 31, 2012.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
ASSET ACQUISITIONS
|
3 Months Ended |
---|---|
Mar. 31, 2012
|
|
ASSET ACQUISITIONS | |
ASSET ACQUISITIONS | NOTE 4 ASSET ACQUISITIONS
On August 15, 2011 the Company (VHGI Energy) entered into an agreement with Outdoor Resources, Inc. of Crossville, Tennessee (Outdoor Resources) to drill an initial oil well within 120 days. The well is to be located in the "Upper Cumberland Region" of north central Tennessee (Morgan, Fentress and/or Scott Counties). The plan is for a shallow drilling program with a target of the Monteagle formation (750'); traditionally Tennessee's top gas and oil producing formation. The Monteagle is the most wide spread oil and gas producing formation in the Cumberland Plateau. This is a single well "Turnkey" drilling agreement allowing VHGI Energy a 65% "Overriding Royalty" while Outdoor Resources and the land owners will hold the remaining interest. Outdoor Resources will hold 100% of the "Working Interest". VHGI Energy has retained the right to acquire up to an additional four (4) wells upon completion of this initial effort. The "Turnkey" drilling costs are to be $150,000 per well. There can be no assurances as to whether or not the transactions within this agreement shall come to fruition. But if such a transaction is completed, the Company will be engaged through Outdoor Resources in the licensed drilling and operation of oil and natural gas wells in the State of Tennessee.
On May 27, 2011, the Company entered into a letter of intent (the Letter of Intent) with the sole shareholder of Lily to purchase all of the stock of Lily, which owns a coal mining operation in Indiana. Though the terms of the Letter of Intent were non-binding (excluding customary standstill and confidentiality provisions), the Letter of Intent required the Company to loan Lily $500,000 pursuant to a convertible promissory note dated as of June 28, 2011 (the Lily Note). The Lily Note had a one-year term and accrues interest at a rate of 10% per annum. In addition, if the closing of the Lily transaction did not occur on or before June 28, 2012, all outstanding principal and accrued but unpaid interest under the Lily Note would automatically convert into 2.5% of the fully diluted capital stock of Lily. The Company funded the principal under the Lily Note in multiple installments between July 1, 2011, and July 19, 2011. On August 31, 2011 the Company and Lily entered into an agreement to extend the Letter of Intent expiration date from September 1, 2011 to September 30, 2011. This letter of intent was replaced on October 2, 2011 by a second letter of intent.
In relation to the May 27, 2011 Letter of intent, the Company executed an additional five convertible notes receivable with Lily in the third quarter of 2011 in the total amount of $1,125,000. The notes matured one year from the date of execution and accrued interest at 10% per annum. In the event of default, the interest rate would increase to 12% per annum. If the closing of the Lily transaction did not occur on or before September 30, 2012, all outstanding principal and accrued but unpaid interest under these Lily notes would automatically convert into a total of 5.63% of the fully diluted capital stock of Lily.
On October 2, 2011, the Company entered into a second letter of intent (the Second Letter of Intent) with Lily reiterating the Companys plans to purchase all of the stock of Lily. The second Letter of Intent, which terminated on November 15, 2011, required the Company to provide Lily with a line of credit for working capital. The loan, with a term of one year, accrued interest at 12% per annum. If for any reason the transaction did not close, the loan would be converted into 7.5% non-diluted equity in Lily.
On December 29, 2011, VHGI Coal entered into a definitive stock purchase agreement with Paul Risinger to purchase 100% of the capital stock of Lily. Lily was owned and controlled by its sole shareholder, Paul Risinger, who now serves as President of VHGI Coal post-transaction. Paul Risinger was issued 700,000 shares of Series A Convertible Preferred stock, par value $10 per share, of VHGI Coal bearing a 5.0% annual dividend rate. Each Preferred Share is convertible into one share of Common Stock of VHGI Coal, representing 7.0% of the shares outstanding of VHGI Coal upon full conversion. On February 16, 2012, VHGI Coal closed its announced acquisition of Lily. |