-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SjuVr2GUYVcKHEDXZJ0B0V97Vlzn+Bwf9sTMocE2xrl3yxD7qBSeXKInZ/Clt/3i zjvzFHoVNAGYSoByzV9W+A== 0001331275-08-000038.txt : 20081113 0001331275-08-000038.hdr.sgml : 20081113 20081113145218 ACCESSION NUMBER: 0001331275-08-000038 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20080731 FILED AS OF DATE: 20081113 DATE AS OF CHANGE: 20081113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Vital Products, Inc. CENTRAL INDEX KEY: 0001331275 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-127915 FILM NUMBER: 081184600 BUSINESS ADDRESS: STREET 1: 35 ADESSO ROAD CITY: CONCORD STATE: A6 ZIP: L4K 3C7 BUSINESS PHONE: 416 650 5711 MAIL ADDRESS: STREET 1: 35 ADESSO ROAD CITY: CONCORD STATE: A6 ZIP: L4K 3C7 10KSB 1 vital10ksb.txt VITAL 10KSB JULY 31 2008 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2008. [ ] TRANSITION REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 333-127915 VITAL PRODUCTS, INC. (Name of small business issuer in its charter) DELAWARE 98-0464272 ---------------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 245 DRUMLIN CIRCLE, CONCORD ONTARIO, CANADA L4K 3E4 (Address of principal executive offices) (Zip Code) Issuer's telephone number: (905) 482-0200 Securities registered under Section 12(b) of the Exchange Act: NONE. Securities registered under Section 12(g) of the Exchange Act: NONE. Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ] Check whether the issuer (1) 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 [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] State issuer's revenues for its most recent fiscal year: $ 15,208 As of November 7, 2008, the aggregate market value of the issuer's common stock held by non-affiliates was $4,377,447 (based on the closing price of $0.195 per share of common stock on November 7, 2008, as reported by the Over-the-Counter Bulletin Board). The issuer had 36,450,000 shares of common stock outstanding as of November 7, 2008. Documents incorporated by reference: None. Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X] --------------------------------------- VITAL PRODUCTS, INC. FORM 10-KSB TABLE OF CONTENTS PAGE NO. PART I ITEM 1. DESCRIPTION OF BUSINESS.........................................3 ITEM 2. DESCRIPTION OF PROPERTY........................................ 9 ITEM 3. LEGAL PROCEEDINGS.............................................. 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 9 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES....... 9 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION......10 ITEM 7. FINANCIAL STATEMENTS...........................................F1 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................................17 ITEM 8A(T). CONTROLS AND PROCEDURES.....................................17 ITEM 8B. OTHER INFORMATION..............................................17 PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT...............................................18 ITEM 10. EXECUTIVE COMPENSATION.........................................20 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.....................21 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE..........................................22 ITEM 13. EXHIBITS.......................................................23 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................23 PART I FORWARD LOOKING STATEMENTS DISCLAIMER This report contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this annual report on Form 10-KSB and other filings we make from time to time filed with the Securities and Exchange Commission. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law. ITEM 1. DESCRIPTION OF BUSINESS HISTORICAL DEVELOPMENT We incorporated in the State of Delaware on May 27, 2005. We commenced business, under the Vital Products name, in June 2005, having purchased assets from Metro One Development, Inc. (formerly On The Go Healthcare, Inc.) OUR BUSINESS As of July 31, 2008, our sole business was to manufacture two products under the On The Go name: a padded training seat that helps toddlers with potty training, and a baby bath with a contoured shape to cradle babies 0-6 months old. As of July 31, 2008, these two products have not produced enough revenue for us to cover our expenses. After evaluating the market for baby care products, we determined that the industry does not offer enough opportunity for a small company to create products that are affordable develop, price competitive for the consumer and that we can introduce into distribution channels without significant expense. As a result, we determined to not invest further funds developing our baby products line. However, we intend to continue to manufacture and sell the two products we currently have through the channels we have already developed. In September 2008, we changed our business plan, we intend to pursue a new line of business as a developer and distributor of industrial packaging products. We are in the very early stage of this change in business model however and we may not be able to pursue our plans due to our lack of capital. EMPLOYEES As of October 31, 2008 we had two full-time employees and one part-time employee. CUSTOMERS Rather than depending on one or even a few major customers, we sell our products to small, independent businesses across Canada with further distribution into the United States and the United Kingdom. In general, the dealers and retailers to whom we market our products also sell other similar products, some of which compete with our products. During the year ended July 31, 2007, approximately $15,550 or 30% of our income was derived from one customer. No one customer accounted for more than 10% of our revenues in 2008. DISTRIBUTION/DEALER NETWORK We provide same-day and next-day services to all of our customers. Our products are delivered via couriers such as FedEx, UPS and Purolator to meet our delivery commitments. We believe that our ability to continue to grow our revenue base depends in part upon our ability to provide our customers with efficient and reliable service. We distribute our products through one primary point of distribution located in Concord, Ontario, Canada. We plan to distribute our products from other distribution facilities if and when required. However, we have not committed our resources at this time for any additional distribution facilities. 3 COMPETITION In our child care line, we compete with other manufacturers and distributors who offer one or more products competitive with the products we sell. However, we believe that no single competitor serving our markets offers as competitive a price as we do. Our principal means of competition are our quality, reliability, and value-added services, including delivery and service alternatives. The childcare products industry is highly competitive, characterized by the frequent introduction of new products and includes numerous domestic and foreign competitors, some of which are substantially larger and have greater financial and other resources than we do. Our competition includes: * Ginsey Inc. * Dorel Juvenile Group * RC2 Corporation * Mommy's Helper, Inc. PRODUCT DEVELOPMENT We are only developing products in our new packaging line We have approximately four products under development. All of the products are in the initial stages of development. We do not intend to further develop the products until we raise additional funding. We have been working with the University of Toronto, Kansas State University and the research and development arm of the U.S. Agricultural Department to develop new environmentally appropriate industrial packing products. Our products currently under development are as follows: Biofill is a bio-based foam-in-place packaging material used as cushioning in electronic, giftware, automotive and machine parts. E-coplank a bio-based packaging foam plank used in fabrication of cushion packaging for high-end products currently in development. E-Foam is a flexible bio-based foam used in automotive components such as head rests. Enviro-fill is a bio-based loosefill packaging foam used in void fill packaging in gift ware and electronics markets. MANUFACTURING AND PRODUCT SOURCING We manufacture our child care products. Our operations rely on a just-in-time manufacturing processes. With just-in-time, our production is triggered by immediate customer demand and our inventories of finished goods are either nonexistent or kept to a minimum. We only build products to meet a customer's shipment schedule. All other supplies used in the manufacturing process are readily available from any number of local suppliers, at competitive prices and delivered within 24 hours in most cases. We rely on the performance and cooperation of independent suppliers and vendors of raw materials for our childcare line whose services are and will be a material part of our products. We rely on these subcontractors to manufacture the components of our products which are all based on purchase orders which the subcontractors can accept or reject. We purchase all of the parts from the subcontractors and perform the final assembly in our facility. Six Points Plastics, Inc. supplies us with molded plastic. Our foam supplier, 4 Valle Foam Industries, is one of the few companies in Canada that supplies the foam used in the padded toddler training seat. The key products purchased from these subcontractors are utilized in the final assembly of our products. The nature of the relationship with these subcontractors is that the subcontractor holds our proprietary tools so that the products are exclusively those of our Company and cannot be used for other companies. GOVERNMENTAL REGULATION Our childcare products are subject to various laws, rules and regulations in the United States, including the Federal Consumer Product Safety Act, the Federal Hazardous Substances Act, as amended, the Federal Flammable Fabrics Act, the Child Safety Protection Act, and the regulations promulgated under each of these Acts. These laws empower the Consumer Product Safety Commission to protect children from hazardous toys and other articles. The Consumer Product Safety Commission has the authority to exclude from the market products that are found to be hazardous and to require a manufacturer to repurchase these products under certain circumstances. In addition, the Federal Flammable Fabrics Act empowers the Consumer Product Safety Commission to regulate and enforce flammability standards for fabrics used in consumer products. Similar laws and regulations exist in various international markets in which our products may be sold, including Canada. While we design our products to ensure that they comply with laws and regulations, it is possible that defects may be found in our products, resulting in product liability claims, recalls of a product, loss of revenue, diversion of resources, damage to our reputation or increased warranty costs, any of which could have a material adverse effect on our business, financial condition, and results of operation. RISK FACTORS RISKS RELATED TO OUR BUSINESS WE ARE NOT CURRENTLY PROFITABLE AND WE MAY NEVER BECOME PROFITABLE. Our future operations may not be profitable if we are unable to develop our business. Our ability to raise revenues and profits, if any, will depend upon various factors, including whether we will be able to raise funding to develop and market new products or find additional businesses to operate and/or acquire. We may not achieve our business objectives and the failure to achieve these goals would have an adverse impact on our business. WE HAVE A LIMITED OPERATING HISTORY AND YOU MAY LOSE YOUR INVESTMENT IF WE ARE UNABLE TO MARKET OUR CHILDCARE PRODUCTS OR SUCCESSFULLY CHANGE OUR BUSINESS MODEL. We commenced operations in June 2005 and have engaged in limited business activities manufacturing and marketing childcare products. We will face demands typically faced by start-up companies. We may experience problems, delays, expenses and difficulties, which are typically encountered by companies in an early stage of development, many of which may be beyond our control. These include, but are not limited to, unanticipated problems and costs related to development, regulatory compliance, production, marketing, economic and political factors and competition. We may not be able to develop, provide at reasonable cost, or market successfully, any of our products. Therefore, we could go out of business and you may lose your investment. 5 WE GRANTED METRO ONE DEVELOPMENT, INC. A SECURITY INTEREST IN SUBSTANTIALLY ALL OF OUR ASSETS AND, IF WE DEFAULT ON OUR FINANCING ARRANGEMENT WITH THEM, THEY HAVE THE RIGHT TO TAKE SUBSTANTIALLY ALL OF OUR ASSETS. In order to satisfy our obligation on our Notes Payable as part of our acquisition of assets from Metro One Development, Inc., (formerly On The Go Healthcare Inc.), in July 2005 we issued two promissory notes totaling $1,005,000. In February 2006, we replaced the two promissory notes with two new Secured Promissory Notes totaling $1,206,000 which included $201,000, the amount which would be due in accrued interest for one full year. We must repay the Secured Promissory Notes one year from March 11, 2008 which was the date the Company's registration statement was declared effective by the Securities and Exchange Commission. Until that time, on July 3, 2006 and each anniversary thereafter, the face value of the Secured Promissory Notes will increase by 20% until the Secured Promissory Notes are paid in full. The Secured Promissory Notes pay 20% simple annual interest. We may prepay the Secured Promissory Notes at any time with accrued interest and without penalty. The Secured Promissory Notes had a principal balance of $1,447,200 and $ 1,740,640 for the years ended July 31, 2007 and July 31, 2008 respectively. To secure these Secured Promissory Notes, we granted to Metro One Development, Inc. a security interest in our assets. If we do not repay the Secured Promissory Notes according to their terms, Metro One Development, Inc. will have the right to seize substantially all of our assets. Additionally, Metro One Development, Inc. could liquidate our assets and retain any and all of the funds from the liquidation. If this happens, it is extremely likely our business will end and you will lose your whole investment. WE MAY NOT BE ABLE TO OBTAIN RAW MATERIALS FOR OUR CHILDCARE LINE AT AN ACCEPTABLE COST TO MAKE OUR PRODUCTS, AND THEREFORE, WE MAY NOT BE ABLE TO GENERATE REVENUES. We rely on the performance and cooperation of independent suppliers and vendors of raw materials for our childcare line whose services are and will be a material part of our products. We do not have, nor will we have, any direct control over these third parties. Furthermore, we do not have any formal agreements with our suppliers. Our President, Michael Levine, has established relationships with the suppliers of our foam, plastic, cardboard and flexible PVC raw materials. If these relationships end and we are unable to obtain raw materials at an acceptable cost, we will not be able to produce our products, and therefore, we may not be able to generate revenues. Six Points Plastics, Inc. supplies us with the plastic molded parts. We could find a replacement should we lose this supplier, however, it would be at some expense. Our foam supplier, Valle Foam Industries, is one of the few companies in Canada who supplies the foam used in the padded toddler training seat, therefore it would be difficult to find a cost-effective replacement. Any other suppliers, however, can be replaced at no cost and therefore do not pose any risk. WE NEED EXTERNAL FUNDING TO SUSTAIN AND GROW OUR BUSINESS AND IF WE CANNOT FIND THIS FUNDING ON ACCEPTABLE TERMS, WE MAY HAVE TO CURTAIL OUR OPERATIONS AND WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN WHICH WOULD REDUCE OUR REVENUES. We may not be able to generate sufficient revenues from our existing operations to fund our capital requirements. We will require additional funds to enable us to operate profitably and grow our business. We believe we will need $300,000 to $350,000 to run our business for the next twelve months. 6 The financing we need may not be available on terms acceptable to us or at all. We currently have no bank borrowings and we may not be able to arrange any debt financing. Additionally, we may not be able to successfully consummate offerings of stock or other securities in order to meet our future capital requirements. If we cannot raise additional capital through issuing stock or creating debt, we may not be able to sustain or grow our business which may cause our revenues and stock price to decline. OUR ORIGINAL SHAREHOLDERS HAVE CONTROL OVER OUR POLICIES AND AFFAIRS AND THEY MAY TAKE CORPORATE ACTIONS THAT COULD NEGATIVELY IMPACT OUR BUSINESS AND STOCK PRICE. Our original shareholders own approximately 65% of our voting securities. The original shareholders will control our policies and affairs and all corporate actions requiring shareholder approval, including the election of directors. Additionally, these holdings may delay, deter or prevent transactions, such as mergers or tender offers, that would otherwise benefit investors. WE DO NOT OWN PATENTS ON OUR CHILDCARE PRODUCTS AND, IF OTHER COMPANIES COPY OUR PRODUCTS, OUR REVENUES MAY DECLINE WHICH MAY RESULT IN A DECREASE IN OUR STOCK PRICE. We do not own patents on our childcare products and we do not intend to file for patent protection on those products. We do not currently have the capital required to register any patent and would not be able to expend the funds necessary to defend a patent if it was infringed. At this time, we believe that the benefit of obtaining patents would be outweighed by their expense. Therefore, another company could recreate our products and could compete against us, adversely affecting our revenues. WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR PLANNED GROWTH, WHICH WOULD ADVERSELY AFFECT OUR BUSINESS AND COULD RESULT IN INCREASING COSTS AS WELL AS A DECREASE IN OUR STOCK PRICE. As of October 31, 2008 we had two full-time employees and one part-time employee. We intend to develop new products. To manage our anticipated growth, we must continue to improve our operational and financial systems and expand, train, retain and manage our employee base. Because of the registration of our securities, we are subject to reporting and disclosure obligations, and we anticipate that we will hire additional finance and administrative personnel to address these obligations. In addition, the anticipated growth of our business will place a significant strain on our existing managerial and financial resources. If we cannot effectively manage our growth, our business may be harmed. IF WE LOSE THE RESEARCH AND DEVELOPMENT SKILLS AND MANUFACTURING CAPABILITIES OF OUR FOUNDER, OUR ABILITY TO ATTAIN PROFITABILITY MAY BE IMPEDED AND IF WE DO NOT ATTAIN PROFITABILITY, OUR STOCK PRICE MAY DECREASE AND YOU COULD LOSE PART OR ALL OF YOUR INVESTMENT. Michael Levine founded our Company. He invested the necessary start-up costs from his personal finances and he is our chief product engineer. In addition, Mr. Levine has relationships with our key raw material suppliers. These relationships with our raw material suppliers afford us access to valuable resources that help ensure raw product availability on time that is competitively priced. Our success depends in large part upon Mr. Levine's contacts in this industry. If we were to lose the benefit of his services, our ability to obtain raw materials at an affordable price would be adversely effected which would have a negative impact on our operations. We presently have no employment agreement with Mr. Levine. 7 OUR INDEPENDENT AUDITORS HAVE EXPRESSED DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN, WHICH MAY HINDER OUR ABILITY TO OBTAIN FUTURE FINANCING. In their report dated October 27, 2008, our independent registered public accounting firm has expressed doubt about our ability to continue as a going concern in our financial statements for the fiscal year ended July 31, 2008. The auditors raised concerns about our ability to continue as a going concern as a result of losses during the year and working capital deficit. The auditors also raised concerns about our need to obtain additional financing to continue our operations. We may not be able to obtain sufficient additional funds in the future. The auditors also state that these conditions cause substantial doubt about our ability to continue as a going concern. A failure to continue as a going concern would require that stated amounts of assets and liabilities be reflected on a liquidation basis that could differ from the going concern basis. RISKS RELATED TO THIS OFFERING AND OUR STOCK A TRADING MARKET MAY NOT DEVELOP FOR OUR COMMON STOCK AND YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO SELL YOUR SHARES FOR THE FORESEEABLE FUTURE. Our common stock currently trades on the Over-the-Counter Bulletin Board. If a trading market does not develop for our common stock, you may find it difficult or impossible to sell your shares. "PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT WHICH MAY MAKE OUR STOCK LESS LIQUID AND MAKE IT HARDER FOR INVESTORS TO BUY AND SELL OUR SHARES. Trading in our securities is subject to the SEC's "penny stock" rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities. WE ARE EXPOSED TO FOREIGN CURRENCY RISKS. Significantly all of our operations are located in Canada and most of our transactions are in the local currency. In the future, we intend to expand our operations, possibly into the U.S. and therefore we may be exposed to interest rate fluctuations. We do not trade in hedging instruments and a significant change in the foreign exchange rate between the Canadian Dollar and U.S. Dollar could have a material adverse effect on our business, financial condition and results of operations. 8 ITEM 2. DESCRIPTION OF PROPERTY We are headquartered in Concord, Ontario, Canada where we have a 4,000 square foot facility. We have a month-to-month arrangement and pay $3,000 CDN per month in rent. We do not have a written lease. We believe this facility is adequate for our needs for at least the next year and we believe this facility will be available for our use as long as we need it. We manufacture and ship our products directly from our head office. ITEM 3. LEGAL PROCEEDINGS We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against our Company or our officers and directors in their capacity as such that could have a material impact on our operations or finances. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. During the fiscal year ended July 31, 2008 we did not submit any matters to a vote of security holders. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has traded over the counter and has been quoted on the Over-The-Counter Bulletin Board since June 16, 2008. The stock currently trades under the symbol "VTLP.OB." Bid and ask quotations for our common shares are routinely submitted by registered broker dealers who are members of the National Association of Securities Dealers on the NASD Over-the-Counter Electronic Bulletin Board. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. The high and low bid information for our shares for each quarter for the last two years, so far as information is reported, through the quarter ended July 31, 2008, as reported by the Bloomberg Financial Network, are as follows: QUARTER ENDED HIGH LOW July 31, 2008 $ 0.50 $ 0.015 Holders The number of record holders of our common stock as of October 31, 2008 was approximately 350, not including nominees of beneficial owners. Dividends Since our inception, we have not paid dividends on our common stock. We do not expect to pay dividends on our common stock in the foreseeable future; rather we intend to retain any earnings for use in our business activities. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS As of July 31, 2008, we do not have any securities authorized for issuance under equity compensation plans. 9 SECURITIES ISSUED UNDER STOCK OPTION PLANS During the fiscal year ended July 31, 2008, we did not issue securities under any Stock Option Plans. RECENT SALES OF UNREGISTERED SECURITIES On October 2, 2008, we issued 10,000,000 restricted shares of common stock to Michael Levine as a deposit on the acquisition of Den Packaging Inc., valued at $900,000. On October 2, 2008, we issued 500,000 restricted shares of common stock to Downshire Capital as compensation for investor relation services valued at $100,000. Between October 14, 2008 and October 24, 2008, an existing investor converted $1,710,000 principal and interest amount of a promissory note into an aggregate of 15,200,000 shares of our common stock, at a conversion rate of $0.1125 per share. Payments under the note are convertible into shares of our common stock at seventy five percent of the lowest closing best bid prices of our common stock for the fifteen trading days prior to the conversion date. With respect to the sales of our securities described above, we relied on the Section 4(2) exemption from securities registration under the federal securities laws for transactions not involving any public offering. No advertising or general solicitation was employed in offering the securities. The securities were sold to accredited investors. The securities were offered for investment purposes only and not for the purpose of resale or distribution, and the transfer thereof was appropriately restricted by us. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. INTRODUCTION The following discussion is intended to provide an analysis of our financial condition and should be read in conjunction with our financial statements and the accompanying notes. OVERVIEW We incorporated in the State of Delaware on May 27, 2005 and commenced business under the Vital Products name in July 2005. We manufacture products under the "Vital Products" name and we also manufacture and market products under the "On The Go" name. Our fiscal year end is July 31. MANAGEMENT'S STRATEGIC VISION Our overall business strategy primarily rests on our ability to secure additional capital through financing activities. In September 2008, we changed our business plan to pursue a new line of business as a developer and distributor of industrial packaging products. We are in the very early stage of this change in business model. We will not be able to predict when we will move forward with our business plan until we can raise additional capital. Challenges and Uncertainties We currently have no bank borrowings and we may not be able to arrange any debt financing. Additionally, we may not be able to successfully consummate offerings of stock or other securities in order to meet our future capital requirements. If we cannot raise additional capital through issuing stock or creating debt, we may not be able to sustain or grow our business which may cause our revenues and stock price to decline. 10 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Estimates are used for, but not limited to, the accounting for the allowance for doubtful accounts, inventories, impairment of long-term assets, income taxes and loss contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies, among others, may be impacted significantly by judgment, assumptions and estimates used in the preparation of the Financial Statements: Foreign Currency Translation We consider the functional currency to be the local currency and, accordingly, our financial information is translated into U.S. dollars using exchange rates in effect at year-end for assets and liabilities and average exchange rates during each reporting period for the results of operations. Adjustments resulting from translation of foreign exchange are included as a component of other comprehensive income (loss) within stockholders' deficit. Significantly all of our operations are located in Canada. 11 Intangibles In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," which was adopted in its entirety on May 27, 2005, we evaluate the carrying value of intangible assets annually as of July 31 and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. When evaluating whether or not the asset is impaired, we compare the fair value of the reporting unit to which the asset is assigned to its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of the reporting unit to its carrying amount. The initial evaluation of our intangible assets, completed as of July 31, 2005 in accordance with (SFAS) No. 142 resulted in an impairment loss of $150,000. Our management performed an evaluation of our intangible assets as at July 31, 2006 which revealed an impairment of $250,000 which is reflected in our financial statements. Revenue Recognition We recognize revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, or SAB 101, "Revenue Recognition in Financial Statements" as modified by Securities and Exchange Commission Staff Accounting Bulletin No. 104. Under SAB 101, revenue is recognized at the point of passage to the customer of title and risk of loss, there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured. We generally recognize revenue at the time of delivery of goods. Sales are reflected net of discounts and returns. Comprehensive Income We have adopted Statement of Financial Accounting Standards No. 130, or SFAS 130, "Reporting Comprehensive Income", which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners or distributions to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is displayed in the statement of shareholders' deficit and in the balance sheet as a component of shareholders' deficit. New Accounting Pronouncements In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - - - - Including an Amendment of FASB Statement No. 115." This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements." We do not expect the adoption of this statement to have a material effect on our future reported financial position or results of operations. 12 In June 2007, the Emerging Issues Task Force ("EITF") ratified its conclusion on EITF Issue No. 06-11 "Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards" ("EITF 06-11"). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. We are currently evaluating the impact that the adoption of EITF 06-11 will have on our financial position, results of operation and cash flows. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements for how a company recognizes assets acquired, liabilities assumed, contractual contingencies and contingent consideration measured at fair value at the acquisition date. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effect of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact that the adoption of SFAS 141R will have on our financial position, results of operation and cash flows. In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS 160"). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 160 to have any impact on our financial position, results of operation or cash flows. In March 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. We are currently evaluating the impact of SFAS No. 161 on its financial statements, and the adoption of this statement is not expected to have a material effect on our financial statements. In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". We are currently evaluating the impact of SFAS No. 162 on our financial statements, and the adoption of this statement is not expected to have a material effect on our financial statements. 13 In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163,"Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60". SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15,2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. We are currently evaluating the impact of SFAS No. 163 on our financial statements, and the adoption of this statement is not expected to have a material effect on our financial statements. RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED JULY 31, 2008 COMPARED TO 2007 Revenues: For the year ended July 31, 2008, our revenues decreased by 70.4%, or $36,182, to $15,208 as compared to $51,390 for the fiscal year ended July 31, 2007. The decrease in revenues was primarily the result of our not having enough sales people selling our child care products, which resulted in fewer sales to existing customers. In addition, as a result of the foreign currency exchange, we were less competitive to customers located in the United States. Cost of Sales: Our cost of sales for the year ended July 31, 2008 decreased by 76.1%, or $26,379, to $8,300 as compared to $34,679 for the fiscal year ended July 31, 2007. This decrease in cost of sales was directly related to the decrease in sales. Selling, General and Administrative Expenses: Our selling, general and administrative expenses were $70,366 for the year ended July 31, 2008, a decrease of 44.8%, or $57,215, compared to $127,581 for the year ended July 31, 2007 . The decrease in selling, general and administrative expenses was primarily the result of a reduction of staff. Impairment on Intangible and Fixed Assets: Our net impairment expenses on intangible and fixed assets for the year ended July 31, 2008 totaled $ 0, as compared to an impairment of $438,007 for the year ended July 31, 2007. This $438,007 decrease in net impairment expenses was primarily attributable to the fact that during the year ended July 31, 2007, we had written off certain equipment and molds acquired from the Childcare Division of Metro One Development, Inc., (formerly On The Go Healthcare, Inc.), which we believe had no future economic benefit. Net income (loss): Our net loss for the year ended July 31, 2008 was $318,399, as compared to a loss of $924,793 for the year ended July 31, 2007. The $606,394 decrease in net loss compared to the prior year was primarily attributable to less depreciation and impairment on fixed assets. 14 Our total assets for the year ended July 31, 2008 were $37,958, a decrease of 39%, or $24,620, as compared to $62,578 for the fiscal year ended July 31, 2007. The decrease in total assets compared to the prior year was primarily the result of a decrease in inventory and accounts receivable. Our total liabilities for the year ended July 31, 2008 were $2,155,893, an increase of $357,499 as compared to $1,798,394 for the year ended July 31, 2007. The increase in our total liabilities compared to the prior year was primarily the result of $294,368 in additional interest accrued on our note payable to Metro One Development, Inc. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements to report for the fiscal year ended July 31, 2008. LIQUIDITY AND CAPITAL RESOURCES As of July 31, 2008, we had total current assets of $2,802 and total current liabilities of $2,155,893, resulting in a working capital deficit of $2,153,091. As of that date, we had cash of $2,802. Our cash flow from operating activities for the year ended July 31, 2008 resulted in a deficit of $4,772 which was primarily the result of a reduction in overall sales, which thereby decreased our ability to generate cash flow from our operations. As of July 31, 2007, we had total current assets of $15,709 and total current liabilities of $1,798,394, resulting in a working capital deficit of $1,782,685. As of that date, we had cash of $2,599. Our cash flow from operating activities for the fiscal year ended July 31, 2007 resulted in a deficit of $49,391 which was primarily the result of a reduction in overall sales, which thereby decreased our ability to generate cash flow from our operations. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow from financing activities for the year ended July 31, 2008 resulted in a surplus of $6,202 which was primarily the result of loans we received from Metro One Development, Inc. Our cash flow from financing activities for the fiscal year ended July 31, 2007 resulted in a surplus of $46,473 which was also primarily the result of loans we received from Metro One Development, Inc. We will need to raise capital of approximately $300,000 to $350,000, through either debt or equity instruments to fund our operations. However, we may not be successful in raising the necessary capital to fund our operations. In addition to amounts needed to fund our operations, we may need to generate an additional $2,155,893 to cover our current liabilities. As of July 31, 2008, we had a $1,766,210 note payable and a $292,083 advance to Metro One Development, Inc., payable on demand. We do not know when Metro One Development, Inc. will demand payment on this advance. However, should Metro One Development, Inc. demand payment, we would need additional capital to repay this obligation. As part of our acquisition of assets from Metro One Development, Inc. (formerly On The Go Healthcare, Inc.), we agreed to issue $250,000 worth of our common stock and two promissory notes in the aggregate amount of $1,005,000. On February 23, 2006, we replaced the original promissory notes and issued to Metro One Development, Inc. two Secured Promissory Notes with a face value of $1,206,000. The increase from $1,005,000 to $1,206,000 represents a full year of accrued interest. Although a full year of interest had not yet accrued, we agreed to include interest of $201,000 as opposed to $128,860 as consideration for replacing the original note. We must repay the Secured Promissory Notes one year from March 11, 2008, the date our registration statement was declared effective by the Securities and Exchange Commission. Until that time, on July 3, 2006 and each anniversary thereafter, the face value of the Secured Promissory Notes will increase by 20% until such time as the Secured Promissory Notes are paid in full. The Secured Promissory Notes pay 20% simple annual interest. We may prepay the Secured Promissory Notes at any time, with accrued interest and without penalty. At the year ended July 31, 2007, the Secured Promissory Notes had a principal balance of $1,447,200. 15 To secure both of the Secured Promissory Notes described immediately above, we granted to Metro One Development, Inc. a security interest in our assets. If we do not repay the Secured Promissory Notes according to their terms, Metro One Development, Inc. will have the right to seize substantially all of our assets. Additionally, Metro One Development, Inc. could liquidate our assets and retain any and all of the funds from the liquidation. Until such a time when we are able to generate positive cash flows from operations in an amount sufficient to cover our current liabilities and debt obligations as they become due, we will remain reliant on borrowing funds or selling equity. We intend to raise funds through the issuance of debt or equity. Raising funds in this manner typically requires significant time and effort to find accredited investors, and the terms of such an investment must be negotiated for each investment made. We cannot guarantee that we will be able to raise sufficient funds to meet our obligations. If we do not raise sufficient funds, our operations will be curtailed or will cease entirely and you may lose all of your investment. 16 ITEM 7. FINANCIAL STATEMENTS. The financial statements and related notes are included as part of this Annual Report. VITAL PRODUCTS, INC. INDEX July 31, 2008 and 2007 Page REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.............. F1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.............. F2 FINANCIAL STATEMENTS Balance Sheets....................................................... F3 Statements of Operations............................................. F4 Statement of Change in Shareholders' Deficit ........................ F5 Statements of Cash Flows............................................. F6 NOTES TO FINANCIAL STATEMENTS.................................. F7 - F15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Vital Products, Inc. We have audited the accompanying balance sheet of Vital Products, Inc. as of July 31, 2008 and the related statements of operations, stockholders' equity and cash flows for the year then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vital Products, Inc. as of July 31, 2008, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. We also have audited the adjustments described in Note 12 that were applied to restate the 2007 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2007 financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2007 financial statements taken as a whole. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred significant losses from operations, anticipates additional losses in the next fiscal year, and has insufficient working capital as of July 31, 2008 to fund the anticipated losses. These conditions raise substantial doubt as to the ability of the Company to continue as a going concern. Managements' plans in regards to these matters are described in Note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/MSCM LLP - ------------------------ MSCM LLP Toronto, Canada November 12, 2008 F1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Vital Products, Inc. We have audited, before the effects of the adjustments for the restatement described in Note 12, the balance sheet of Vital Products, Inc. as of July 31, 2007 and the related statements of operations, stockholders' equity and cash flows for the year then ended. The 2007 financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, except for the restatement described in Note 12, the 2007 financial statements present fairly, in all material respects, the financial position of Vital Products, Inc. as of July 31, 2007 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles in the United States of America. We were not engaged to audit, review, or apply any procedures to the adjustments for the restatement described in Note 12 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments have been audited by MSCM LLP. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred significant losses from operations, anticipates additional losses in the next fiscal year, and has insufficient working capital as of July 31, 2007 to fund the anticipated losses. These conditions raise substantial doubt as to the ability of the Company to continue as a going concern. Managements' plans in regards to these matters are described in Note 2. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Danziger Hochman Partners LLP - ----------------------------------- Danziger Hochman Partners LLP Toronto, Canada September 19, 2007 F2 VITAL PRODUCTS, INC. Balance Sheets As at July 31, 2008 and 2007 July 31, July 31, 2008 2007 ---------- ---------- ASSETS Current Cash $ 2,802 $ 2,599 Accounts receivable - 8,885 Inventory - 4,225 ---------- ---------- 2,802 15,709 ---------- ---------- Other Equipment, net of accumulated depreciation 35,156 46,869 ---------- ---------- 35,156 46,869 ---------- ---------- $ 37,958 $ 62,578 ========== ========== LIABILITIES Current Accounts payable and accrued liabilities $ 97,600 $ 52,024 Advances from Metro One Development, Inc. 292,083 274,528 Notes payable to Metro One Development, Inc. 1,766,210 1,471,842 ---------- ---------- 2,155,893 1,798,394 ---------- ---------- SHAREHOLDERS' DEFICIT Capital stock 1,075 1,075 Additional paid-in capital 334,475 334,475 Accumulated other comprehensive income (loss) (176,598) (112,878) Accumulated deficit (2,276,887) (1,958,488) ---------- ---------- (2,117,935) (1,735,816) ---------- ---------- $ 37,958 $ 62,578 ========== ========== See Accompanying Notes to Financial Statements F3 VITAL PRODUCTS, INC. Statements of Operations For the years ended July 31, 2008 and 2007 For The For The Year Ended Year Ended July 31, July 31, 2008 2007 ---------- ---------- Sales $ 15,208 $ 51,390 Cost of sales 8,300 34,679 ---------- ---------- Gross profit 6,908 16,711 ---------- ---------- Operating expenses Depreciation 13,947 192,121 Selling, general and administrative expenses 70,366 127,581 ---------- ---------- Total operating expenses 84,313 319,702 ---------- ---------- Net operating loss ( 77,405) ( 302,991) Other revenues (expenses) Financing costs ( 294,368) ( 264,866) Gain (loss) on currency exchange 53,374 81,071 Impairment on fixed assets - ( 438,007) ---------- ---------- Net loss for year ( 318,399) ( 924,793) ========== ========== Net loss per common share ($ 0.03) ($ 0.09) ========== ========== Weighted average number of common shares outstanding 10,750,000 10,750,000 ========== ========== See Accompanying Notes to Financial Statements F4 VITAL PRODUCTS, INC. Statement of Changes in Shareholders' Deficit For the years ended July 31, 2008 and 2007 Accumulated Other Additional Compreh- Common Stock Paid-In ensive Number Amount Capital Deficit Income Total (Loss) - ------------------------------------------------------------------------------- Balance, July 31, 2006 10,750,000 $1,075 $334,475 ($1,033,695)($105,249) ($803,394) Foreign currency translation - - - - (7,629) (7,629) Net loss for the year - - - ( 924,793) - ( 924,793) - ------------------------------------------------------------------------------- Balance, July 31, 2007 10,750,000 $ 1,075 $ 334,475 ($1,958,488)($112,878)($1,735,816) Foreign currency translation - - - - (63,720) (63,720) Net loss for the year - - - (318,399) - (318,399) - ------------------------------------------------------------------------------- Balance, July 31, 2008 10,750,000 $ 1,075 $ 334,475 ($2,276,887)($176,598)($2,117,935) =============================================================================== See Accompanying Notes to Financial Statements F5 VITAL PRODUCTS, INC. Statements of Cash Flows For the years ended July 31, 2008 and 2007 For The For The Year Ended Year Ended July 31, July 31, 2008 2007 ---------- ---------- Operating activities Net loss for the year ($ 318,399)($ 924,793) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 13,947 192,121 Interest on notes payables 294,368 265,842 Gain(loss)on currency exchange (53,374) (81,071) Impairment of equipment - 438,007 Change operating assets and liabilities: Accounts receivable 8,885 1,394 Inventory 4,225 39,471 Accounts payable and accrued liabilities 45,576 19,638 ---------- ---------- Net cash used in operating activities (4,772) ( 49,391) ---------- ---------- Financing activities Payment on advances - (17,251) Proceeds from advances 6,202 63,724 ---------- ---------- Net cash provided by financing activities 6,202 46,473 ---------- ---------- Foreign currency translation effect (1,227) (724) ---------- ---------- Net increase (decrease) in cash 203 (3,642) Cash, beginning of period 2,599 6,241 ---------- ---------- Cash, end of period $ 2,802 $ 2,599 ========== ========== See Accompanying Notes to Financial Statements F6 VITAL PRODUCTS, INC. Notes to Financial Statements July 31, 2008 and 2007 1. NATURE OF OPERATIONS AND BASIS FOR PRESENTATION Vital Products, Inc. (the "Company") was incorporated in the State of Delaware on May 27, 2005. On July 5, 2005, the Company purchased the Childcare Division of Metro One Development, Inc., (formerly On The Go Healthcare, Inc.) which manufactured and distributed infant care products. 2. SIGNIFICANT ACCOUNTING POLICIES Liquidity and Going Concern During the years ended July 31, 2008 and 2007, the Company incurred losses of $318,399 and $924,793, respectively and cash provided by (used in) operations was $(4,772) and $(49,391), respectively. The Company financed its operations through loans payable and vendors' credit. Management believes that the current cash balances at July 31, 2008 and net cash proceeds from operations will not be sufficient to meet their cash requirements for the next twelve months. These financial statements have been prepared on a going concern basis and do not include any adjustments to the measurement and classification of the recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has experienced losses in the period and has negative working capital. The Company's ability to realize its assets and discharge its liabilities in the normal course of business is dependent upon continued support. The Company is currently attempting to obtain additional financing from its existing shareholders and other strategic investors to continue its operations. However, the Company may not obtain sufficient additional funds from these sources. These conditions cause substantial doubt about the Company's ability to continue as a going concern. A failure to continue as a going concern would require that stated amounts of assets and liabilities be reflected on a liquidation basis that could differ from the going concern basis. Accounting Principles The Company's accounting and reporting policies conform to generally accepted accounting principles and industry practice in the United States. The financial statements are prepared in United States dollars. Use of Estimates The preparation of financial statements in conformity with United States 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 the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. F7 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents Cash equivalents consist of highly liquid investments with maturities of three months or less when purchased. Cash and cash equivalents are on deposit with financial institutions without any restrictions. At July 31, 2008 and 2007, cash equivalents amounted to $-0-. Allowance for Doubtful Accounts The Company records an allowance for doubtful accounts as a best estimate of the amount of probable credit losses in its accounts receivable. Each month the Company reviews this allowance and considers factors such as customer credit, past transaction history with the customer and changes in customer payment terms when determining whether the collection of a receivable is reasonably assured. Past due balances over 90 days and over a specified amount are reviewed individually for collectibility. Receivables are charged off against the allowance for doubtful accounts when it becomes probable that a receivable will not be recovered. Fair Value of Financial Instruments The Company's financial instruments comprise cash, accounts receivable, accounts payable and accrued liabilities and advances from and notes payable to Metro One Development, Inc. The carrying value of Company's short-term instruments approximates fair value, unless otherwise noted, due to the short-term maturity of these instruments. In management's opinion, the fair value of notes payable is approximate to carrying value as the interest rates and other features of these instruments approximate those obtainable for similar instruments in the current market. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks in respect of these financial instruments. Inventory Inventory comprises finished goods held for sale and is stated at lower of cost or market value. Cost is determined by the average cost method. The Company estimates the realizable value of inventory based on assumptions about forecasted demand, market conditions and obsolescence. If the estimated realizable value is less than cost, the inventory value is reduced to its estimated realizable value. If estimates regarding demand and market conditions are inaccurate or unexpected changes in technology affect demand, the Company could be exposed to losses in excess of amounts recorded. F8 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Equipment Equipment is recorded at cost less accumulated depreciation. Depreciation of equipment is provided annually on a declining basis and straight line basis over the estimated useful life of the asset, except for current year additions on which 1/2 of the rates are applicable: Manufacturing equipment 20% declining balance Molds 3 years straight line The cost of repairs and maintenance is charged to expense as incurred. Expenditures for property betterments and renewals are capitalized. Upon sale or other disposition of a depreciable asset, cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in other revenues (expenses). The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability. For the year ended July 31, 2007, the Company wrote off certain equipment and molds that provided no future economic benefit. The value of the writedowns approximated $438,000. Foreign Currency Translation The Company considers the functional currency to be the local currency and, accordingly, their financial information is translated into U.S. dollars using exchange rates in effect at year-end. Adjustments resulting from translation of foreign exchange are included as a component of other comprehensive income (loss) within stockholders' deficit. Revenue Recognition The Company recognizes revenue in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101") as modified by Securities and Exchange Commission Staff Accounting Bulletin No. 104. Under SAB 101, revenue is recognized at the point of passage to the customer of title and risk of loss, there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured. The Company generally recognizes revenue at the time of delivery of goods. Sales are reflected net of discounts and returns. F9 2. SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes The Company accounts for its income taxes under the liability method specified by Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. As of July 31, 2008, the Company has available for income tax purposes a net operating loss carry forward of approximately $2,718,000, expiring in the years from 2015 to 2028, that may be used to offset taxes on future taxable income. As of July 31, 2008, the Company has provided a valuation reserve against the full amount of the net operating loss benefit, since, in the opinion of management, based upon the limited earning history of the Company, it is more likely than not that the benefits will not be realized. Basic Loss Per Share Basic net loss per share figures are calculated using the weighted average number of common shares outstanding computed on a daily basis. Comprehensive Income The Company has adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners or distributions to owners. Among other disclosures, SFAS No. 130 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income is displayed in the statement of shareholders' deficit and in the balance sheet as a component of shareholders' deficit. New Accounting Pronouncements In February 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - - - - Including an Amendment of FASB Statement No. 115." This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, "Fair Value Measurements." Management does not expect the adoption of this statement to have a material effect on the Company's future reported financial position or results of operations. F10 2. SIGNIFICANT ACCOUNTING POLICIES (continued) In June 2007, the Emerging Issues Task Force ("EITF") ratified its conclusion on EITF Issue No. 06-11 "Accounting for the Income Tax Benefits of Dividends on Share-Based Payment Awards" ("EITF 06-11"). EITF 06-11 provides that tax benefits associated with dividends on share-based payment awards be recorded as a component of additional paid-in capital. EITF 06-11 is effective, on a prospective basis, for fiscal years beginning after December 15, 2007. The Company is currently evaluating the impact that the adoption of EITF 06-11 will have on its financial position, results of operation and cash flows. In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"). SFAS 141R establishes principles and requirements for how a company recognizes assets acquired, liabilities assumed, contractual contingencies and contingent consideration measured at fair value at the acquisition date. The Statement also establishes disclosure requirements which will enable users to evaluate the nature and financial effect of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact that the adoption of SFAS 141R will have on its financial position, results of operation and cash flows. In December 2007, the FASB issued SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51" ("SFAS 160"). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interest of the parent and the interest of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of SFAS 160 to have any impact on its financial position, results of operation or cash flows. In March 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133". SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The Company is currently evaluating the impact of SFAS No. 161 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Company's financial statements. F11 2. SIGNIFICANT ACCOUNTING POLICIES (continued) In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles". The Company is currently evaluating the impact of SFAS No. 162 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Company's financial statements. In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No. 163,"Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60". SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15,2008, except for some disclosures about the insurance enterprise's risk-management activities. SFAS 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The Company is currently evaluating the impact of SFAS No. 163 on its financial statements, and the adoption of this statement is not expected to have a material effect on the Company's financial statements. 3. INVENTORY As of July 31, 2008 and 2007, inventory comprised the following: 2008 2007 ------------ ----------- Finished goods $ - $ 4,225 Raw materials - - ------------ ----------- $ - $ 4,225 ============ =========== 4. EQUIPMENT As of July 31, 2008 and 2007, equipment consists of the following: 2008 2007 ------------ ----------- Machinery and equipment $ 319,265 $ 306,456 Molds 219,355 210,555 ------------ ----------- 538,620 517,011 Less: Accumulated depreciation (503,464) (470,142) ------------ ----------- Equipment, net $ 35,156 $ 46,869 ============ =========== F12 5. ADVANCES FROM METRO ONE DEVELOPMENT, INC. Advances from Metro One Development, Inc. as of July 31, 2008 and 2007 are unsecured, non-interest bearing and have no fixed repayment terms. Accordingly, these advances are presented as current on the accompanying balance sheets as current liabilities. 6. NOTES PAYABLE TO METRO ONE DEVELOPMENT, INC. The notes payable were part of the consideration for the purchase of the assets of the Childcare Division of Metro One Development, Inc. (formerly On The Go Healthcare, Inc.) The notes bear interest at 20% per annum, allow for the lender to secure a portion of the Company assets up to 200% of the face value of the loan and mature one year from March 11, 2008, the date the Company's registration statement was declared effective by the Securities and Exchange Commission. As of July 31, 2008, the lender had not secured any of the Company's assets. As of July 31, 2008 and 2007, notes payable to Metro One Development, Inc. comprise the following: See note 11. 2008 2007 ------------ ----------- Principal $ 1,740,640 $ 1,447,200 Interest 25,570 24,642 ------------ ----------- $ 1,766,210 $ 1,471,842 ============ =========== 7. CAPITAL STOCK Capital stock consists of 1,000,000 authorized preferred shares with a $0.01 par value and 100,000,000 common shares with a $0.0001 par value. As of July 31, 2008 and 2007, there were no issued and outstanding preferred shares. 10,750,000 shares of common stock had been issued and outstanding for both years. F13 8. INCOME TAXES The following is a reconciliation comparing income taxes calculated at the statutory rates to the amounts provided in the accompanying financial statements as of July 31, 2008 and 2007: The Company's computation of income tax recovery is as follows: 2008 2007 ------------ ----------- Net loss for the period $( 318,399) $( 924,793) Enacted income tax rate 34.6% 36% ------------ ----------- Income tax recovery at enacted rate (110,140) (332,925) Non-deductible expenses - - Change in valuation allowance 110,140 332,925 ------------ ----------- Income tax expense / recovery $ - $ - ============ =========== Components of the Company's net future income tax assets are: 2008 2007 ------------ ----------- Non-capital loss carry forward $ 788,348 $ 677,636 Valuation allowance (788,348) (677,636) ------------ ----------- Net future income tax assets $ - $ - ============ =========== In assessing the realizability of future tax assets, management considers whether it is more likely than not that some portion or all of the future tax assets will not be realized. The ultimate realization of future tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of future tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has provided for a valuation allowance on all of its losses as there is no assurance that future tax benefits will be realized. See note 2. The non-capital losses expire in 2015 through 2028. 9. RELATED PARTY TRANSACTIONS As of and for the fiscal years ended July 31, 2008 and 2007, the Company had purchases totaling $3,473 and $9,789, respectively, rent expense totaling $35,864 and $32,143, respectively, and outstanding payables totaling $70,508 and $33,746, respectively, with a vendor to which the Company's Chief Executive Officer has a majority ownership interest. During the year ended July 31, 2008 and year ended July 31, 2007, Metro One Development, Inc.'s internal accountants provided bookkeeping services to the Company at no cost. The value of such bookkeeping is considered immaterial and therefore no amounts have been recorded. F14 10. CUSTOMER CONCENTRATION During the year ended July 31, 2007, approximately $15,550, or 30% of the Company's gross revenue, was derived from one customer. The Company did not have a similar concentration during the 2008 fiscal year. 11. SUBSEQUENT EVENTS On October 2, 2008, the Company issued 10,000,000 restricted shares of common stock to Michael Levine, CEO, President and Chairman of the Board as a deposit on the acquisition of Den Packaging Inc. valued at $900,000. On October 2, 2008, the Company issued 500,000 restricted shares of common stock to Downshire Capital for investor relation services valued at $100,000. Between October 14, 2008 and October 24, 2008, an existing investor converted $1,710,000 principal and interest amount of a promissory note into an aggregate of 15,200,000 shares of our common stock, at a conversion rate of $0.1125 per share. Payments under the note are convertible into shares of our common stock at seventy five percent of the lowest closing best bid prices of our common stock for the fifteen trading days prior to the conversion date. 12. RESTATEMENT Subsequent to the issuance of the financial statements for the year ended July 31, 2007 that were filed with the U.S. Securities and Exchange Commission, the Company made the following adjustments relating to foreign exchange translation gain (loss) as a result of the effect of exchange rate changes on the Note Payable to Metro One Development, Inc.: A summary of the effect of the restatement is as follows: Year Ended July 31, 2007 As Reported Restatement As Restated ------------- ----------- ------------ Statement of Operations Gain (loss) on currency exchange ($724) $81,795 $81,071 Net loss for year ($1,006,588) $81,795 ($924,793) Statement of Shareholders' Deficit Deficit, Opening Balance ($1,132,493) $98,798 ($1,033,695) Accumulated Other Comprehensive Income (Loss), Opening, Balance ($6,451) ($98,798) ($105,249) Accumulated Other Comprehensive Income (Loss), Foreign currency translation for year $74,166 ($81,795) ($7,629) F15 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. On July 25, 2008, we received notice that Danziger Hochman Partners LLP, our independent registered public accountants, would be merging with MSCM LLP, with MSCM LLP as the surviving entity. The merger was effective August 1, 2008. Effective September 29, 2008, our board of directors approved the engagement of MSCM LLP as our new independent accountant concurrent with their merger of Danziger Hochman Partners LLP for the fiscal year ended July 31, 2008. In connection with the audit for the past two fiscal years and through September 29, 2008, there were no disagreements with Danziger Hochman Partners LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Danziger Hochman Partners LLP, would have caused Danziger Hochman Partners LLP to make reference to the subject matter of the disagreements in connection with its audit reports on our financial statements. ITEM 8A(T). CONTROLS AND PROCEDURES. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-KSB. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met. INTERNAL CONTROL OVER FINANCIAL REPORTING This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by the rules of the Securities and Exchange Commission for newly public companies. CHANGES IN INTERNAL CONTROLS There was no change in our internal control over financial reporting, which are included within disclosure controls and procedures, that occurred during our fiscal quarter ended July 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 8B. OTHER INFORMATION. None. 17 PART III ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following table sets forth the name, age, positions and offices that each director and officer has held for the past five years as of July 31, 2008 . Members of the Board are elected and serve for one year terms or until their successors are elected and qualify. Our executive officers are elected annually by our Board of Directors. There are no family relationships among our directors and executive officers. Name Age Position - ----------------------------------------------------------------------------- Michael Levine (1) 48 President, Chairman, Chief Executive Officer and Director Henry Goldberg, C.A. CFE 55 Chief Financial Officer and Director Bram Lecker B.A. L.L.B 50 Director - ----------------------------------------------------------------------------- BIOGRAPHIES OF EXECUTIVE OFFICERS AND DIRECTORS Mr. Michael Levine has served as our Chief Executive Officer and Chairman of the Board since June 2005. Mr. Levine devotes a minimum of 25% of his working time to the affairs of our Company. Prior to joining us, Mr. Levine founded and was the President of Zynpak Packaged Products, Inc. for the past 20 years. Mr. Levine attended McGill University. Mr. Henry Goldberg has served as our Chief Financial Officer and a Director since June 2005. Mr. Goldberg devotes a minimum of 25% of his working time to the affairs of our Company. Prior to joining us, Mr. Goldberg has been a Partner of the Charter Accounting firm of Norman, Goldberg & Co. since 1979. Mr. Goldberg is also a Director of Noblehouse Communications Limited, a public corporation. Mr. Goldberg has earned the designations of Certified Financial Planner and Fraud Examiner, and Chartered Accountant. Mr. Bram Lecker has served as a Director since June 2005. Mr. Lecker has been in private practice since 1984 specializing in employment and commercial law. Mr. Lecker is also the co-founder of Yog'n'berries, a frozen yogurt and related products wholesale and retail business and is involved in the introduction of the "Mackenzie Method" spinal therapy pain relief and rehabilitation protocols to Ontario, Canada therapy centers. Mr. Lecker graduated from both York University in Toronto, Canada and University of Ottawa Law School. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS We are not aware of any material legal proceedings that have occurred within the past five years concerning any director, director nominee, or control person which involved a criminal conviction, a pending criminal proceeding, a pending or concluded administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations. 18 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE We do not have any securities registered under Section 12 of the Exchange Act, as amended. Accordingly, our directors, executive officers, and stockholders beneficially owning more than 10% of our common stock are not required to comply with the reporting requirements of Section 16(a) of the Exchange Act. CODE OF ETHICS We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics has been filed with this report as exhibit 14.1.In addition, we will provide a copy of our Code of Ethics to any person, free of charge, upon written request to Bram Lecker at Vital Products, Inc., 245 Drumlin Circle, Concord, Ontario, L4K 3E4. PROCEDURE FOR NOMINATING DIRECTORS There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. The Board of Directors will consider candidates for director positions that are recommended by any of our stockholders. Any such recommendation for the 2009 Annual Meeting of Stockholders should be provided to our corporate secretary by December 31, 2008. The recommended candidate should be submitted to us in writing addressed to 245 Drumlin Circle, Concord, Ontario, Canada L4K 3E4. The recommendation shall include the following information: name of candidate; address, phone, and fax number of candidate; a statement signed by the candidate certifying that the candidate wishes to be considered for nomination to our Board of Directors and stating why the candidate believes that he or she meets the director qualification criteria and would otherwise be a valuable addition to our Board of Directors; a summary of the candidate's work experience for the prior five years and the number of shares of our stock beneficially owned by the candidate. The Board shall evaluate the recommended candidate and shall determine whether or not to proceed with the candidate in accordance with our procedures. We reserve the right to change our procedures at any time to comply with the requirements of applicable laws. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has the responsibility for establishing broad corporate policies and reviewing our overall performance rather than day-to-day operations. The Board's primary responsibility is to oversee management of our company and, in so doing, serve the best interests of our company and our stockholders. Our full Board of Directors performs all of the functions normally designated to an Audit Committee, Compensation Committee and Nominating Committee. Audit Committee Although our Board does not have a separately-designated standing Audit Committee, our full Board of Directors performs the functions usually designated to an Audit Committee. As of July 31, 2008, Mr. Goldberg has been designated as the Board's "audit committee financial expert" as defined in Item 407(d)(5) of Regulation S-B. Mr. Goldberg's experience and background has provided him with an understanding of accounting principles generally accepted in the United States of America and financial statements prepared thereon. Mr. Goldberg has experience preparing, auditing, analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues comparable to the issues that can reasonably be expected to be raised by our financial statements. Mr. Goldberg has an understanding of audit committee functions. 19 ITEM 10. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION The following table shows the compensation paid or accrued during the fiscal years ended July 31, 2008 and 2007 to Michael Levine, our principal executive officer, also referred to as our "named executive officer." No other executive officer or employee earned over $100,000 in the last completed fiscal year. Summary Compensation Table - ------------------------------------------------------------------------------- Name and Year Base Bonus Stock Option Non- All Dollar Value Principal Ended Salary Awards Awards qualified Other of Total Position July Deferred Compensa- Compensation 31, compensa- tion for the tion Covered Earnings Fiscal Year $ $ $ $ $ $ $ (a) (b) (c) (d) (e) (f) (h) (i) (j) - ------------------------------------------------------------------------------- Michael Levine, Chief Executive Officer 2008 $ 0 $ 0 2007 $ 0 $ 0 - ------------------------------------------------------------------------------- NARRATIVE TO SUMMARY COMPENSATION TABLE EMPLOYMENT AGREEMENTS We do not currently have any employment agreements with our executive officers, including our named executive officer. On January 18, 2008, our executive officers agreed to work without compensation until our cash position improves. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END As of July 31, 2008, our named executive officer did not have any options outstanding. 20 NARRATIVE TO OUTSTANDING EQUITY AWARDS TABLE Retirement Benefits We do not have any qualified or non-qualified defined benefit plans. Non-qualified Deferred Compensation We do not have any non-qualified defined contribution plans or other deferred compensation plans. Potential Payments Upon Termination or Change of Control We do not have any potential payments upon termination or change of control. DIRECTOR COMPENSATION We do not currently have any formal arrangements to compensate our directors. From time to time, we may compensate our directors in shares of our common stock to preserve capital to grow our company. We did not compensate our directors for their services for the fiscal years ended July 31, 2007 and July 31, 2008. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information concerning the beneficial ownership of our outstanding common stock as of October 13, 2008, by each person known by us to be (i) the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each current director and nominee, (iii) our named executive officer named in the Summary Compensation Table who was serving as an executive officer at the end of the July 31, 2008 fiscal year and (iv) all of our directors and current executive officers as a group. Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of common stock except to the extent that authority is shared by spouses under applicable law. The calculation of percentage ownership for each listed beneficial owner is based upon the number of shares of common stock issued and outstanding on October 13, 2008, plus shares of common stock subject to options, warrants and conversion rights held by such person on October 13, 2008, and exercisable or convertible within 60 days thereafter. Title of class Name and address of Amount and Percent of beneficial owner (1) nature of class (2) beneficial owner Common Stock Michael Levine (3) 14,001,550 65.89 % Henry Goldberg, C.A. CFE 0 -0- Bram Lecker B.A. L.L.B 0 -0- Directors and executive officers as a group (3 persons) 14,001,550 65.89 % 21 (1) The address of all individual directors and executive officers is c/o Vital Products, Inc., 245 Drumlin Circle, Concord, Ontario, L4K 3E4. (2) The number of shares of common stock issued and outstanding on October 13, 2008 was 21,250,000 shares. (3) Michael Levine's beneficial ownership is comprised of 14,001,550 shares of common stock ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS As of July 31, 2008, we have accrued a total of $70,508 in rent to Michael Levine, our Chief Executive Officer, President and Chairman of the Board for use of a 4,000 square foot facility within a building he owns in Concord, Ontario, Canada. The lease is on a month-to-month basis and we pay $3,000 CDN per month. As of and for the fiscal year ended July 31, 2008 and 2007, we had purchases totaling $3,473 and $9,789, respectively, rent expense totaling $35,864 and $32,143, respectively, and outstanding payables totaling $70,508 and $33,746 with a vendor to which our Chief Executive Officer has a majority ownership interest. During the fiscal years ended July 31, 2008 and July 31, 2007, Metro One Development, Inc.'s internal accountants provided bookkeeping services to us at no cost. On October 2, 2008, we issued 10,000,000 restricted shares of common stock to Michael Levine as a deposit on the acquisition of Den Packaging Inc. valued at $900,000. The above related party transactions are not necessarily indicative of the amounts that would have been incurred had a comparable transaction been entered into with an independent party. The terms of these transactions were more favorable than would have been attained if the transactions were negotiated at arm's length. DIRECTOR INDEPENDENCE As of July 31, 2008, Michael Levine, Henry Goldberg and Bram Lecker served as our directors. Only Mr. Bram Lecker has been deemed by our board of directors to be an "independent" director, as defined under the standards of independence set forth in the Marketplace Rules of the NASDAQ Stock Market, Rule 4200(a)(15). We are currently traded on the Over-the-Counter Bulletin Board or OTCBB, which does not require that a majority of the board be independent. 22 ITEM 13. EXHIBITS. EXHIBIT NO. IDENTIFICATION OF EXHIBIT 3.1 Certificate of Incorporation (included as Exhibit 3.1 to the Form SB-2 filed August 29, 2005 and incorporated herein by reference). 3.2 By-laws (included as Exhibit 3.2 to the Form SB-2 filed August 29, 2005 and incorporated herein by reference). 4.1 Form of Stock Certificate (included as Exhibit 4.1 to the Form SB-2 filed October 26, 2006 and incorporated herein by reference). 10.1 Asset Sale Agreement between the Company and On The Go Healthcare, Inc., dated July 5, 2005 (included as Exhibit 10.3 to the Form SB-2 filed August 29, 2005 and incorporated herein by reference). 10.2 Secured Promissory Note between the Company and On The Go Healthcare, Inc., dated February 23, 2006 (included as exhibit 10.2 to the Form SB-2 filed February 24, 2006 and incorporated herein by reference). 10.3 Secured Promissory Note between the Company and On The Go Healthcare, Inc., dated February 23, 2006 (included as exhibit 10.3 to the Form SB-2 filed February 24, 2006 and incorporated herein by reference). 14.1 Code of Ethics (filed herewith). 23.1 Consent of Independent Auditors, MSCM LLP (filed herewith). 23.2 Consent of Independent Auditors, Danziger Hochman Partners LLP (filed herewith). 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. We engaged MSCM LLP as our independent auditors to report on our balance sheet as of July 31, 2008, and the related statements of income, stockholders' deficit and cash flows for the year then ended. We engaged Danziger Hochman Partners LLP as our independent auditors to report on our balance sheet as of July 31, 2007 and subsequent periods, and the related statements of income, stockholders' deficit and cash flows for the year then ended. Audit Fees The aggregate fees billed for each of the last two fiscal years ended July 31, 2008 and 2007 for professional services rendered by the principal accountant for the audit of our financial statements and review of financial statements included in our quarterly reports for those years: 2008: $10,000 2007: $26,250 23 Audit-Related Fees There were no fees billed in the last two fiscal years ended July 31, 2008 and 2007 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements which were not included in Audit Fees. Tax Fees There were no fees billed for each of the last two fiscal years ended July 31, 2008 and 2007 for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning. All Other Fees There were no fees billed in each of the last two fiscal years ended July 31 for products and services provided by the principal accountant, other than the services reported above. THE BOARD OF DIRECTORS PRE-APPROVAL POLICY AND PROCEDURES We do not have a separate audit committee. Our full board of directors performs the functions of an audit committee. Before an independent auditor is engaged by us to render audit or non-audit services, our board of directors shall pre-approve the engagement. We may not engage our independent auditors to render any audit or non-audit service unless either the service is approved in advance by our Board of Directors or the engagement to render the service is entered into pursuant to the Board of Director's pre-approval policies and procedures. On an annual basis, the Board of Directors may pre-approve services that are expected to be provided to us by the independent auditors during the following 12 months. At the time such pre-approval is granted, the Board of Directors must (1) identify the particular pre-approved services in a sufficient level of detail so that management will not be called upon to make judgment as to whether a proposed service fits within the pre-approved services and (2) establish a monetary limit with respect to each particular pre-approved service, which limit may not be exceeded without obtaining further pre-approval under the policy. The Board has considered whether the provision of the services described above under the caption "All Other Fees" is compatible with maintaining the auditor's independence. 24 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Vital Products, Inc. By:/s/ Michael Levine -------------------------- Michael Levine Principal Executive Officer Date: November 13, 2008 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. SIGNATURE TITLE DATE By:/s/ Michael Levine November 13, 2008 - ------------------------- President, Chief Executive Officer,---------------- Michael Levine Chairman and Director By:/s/ Henry Goldberg Chief Financial Officer, Principal November 13, 2008 - ------------------------- Accounting Officer and Director ---------------- Henry Goldberg By:/s/ Bram Lecker Director November 13, 2008 - ------------------------- ---------------- Bram Lecker 25 EX-14.1 2 vital10ksb_ex141.txt CODE OF ETHICS EXHIBIT 14.1 VITAL PRODUCTS, INC. CORPORATE CODE OF CONDUCT AND ETHICS FOREWORD This Corporate Code of Conduct and Ethics, referred to as the "Code," is intended to provide our associates, as defined below, with an understanding of the principles of business conduct and ethics that are expected of them. The standards set forth in the Code apply to us all. Every associate of Vital Products, Inc. is expected to comply with the Code as a condition of his or her relationship with the company. The term "associate" means every full and part-time employee of the company and its subsidiaries, all members of the company's senior management, including the company's Chief Executive Officer, and every member of the company's Board of Directors, even if such member is not employed by the company. The Code does not replace the company's existing Employee Handbook. The Code, the Handbook and the other company policies referenced herein set forth our mutual expectations regarding ethical standards and company procedures. The company has made the Code publicly available on its web site. If any breach of the Code is known to you, you should report violations to the Corporate Compliance Officer (who is Bram Lecker), as described in more detail below. Reports may be made anonymously and we have adopted a specific non-retaliation policy described herein to protect associates who make reports of potential violations. While it is impossible for this Code to describe every situation that may arise, the standards explained in this Code are guidelines that should govern our conduct. If you have questions regarding the matters that are addressed in the Code, you are urged to consult with the Corporate Compliance Officer, or another member of management. The provisions of the Code regarding the actions the company will take are guidelines which the company intends to follow. There may be circumstances, however, that in the company's judgment require different measures or actions and in such cases it may act accordingly while still attempting to fulfill the principles underlying this Code. Table of Contents Page I. IMPLEMENTATION OF THE CODE...........................................1 II. GENERAL REQUIREMENTS.................................................1 III. CONFLICTS OF INTEREST................................................1 IV. PROTECTION AND PROPER USE OF COMPANY ASSETS..........................3 A. Proper Use of Company Property................................3 B. Confidential Information......................................3 C. Accurate Records and Reporting................................4 D. Document Retention............................................4 E. Corporate Advances............................................5 V. FAIR DEALING WITH CUSTOMERS, SUPPLIERS, COMPETITORS, AND ASSOCIATES..5 A. Improper Influence............................................5 B. Unfair Competition............................................6 C. Unfair Practices in International Business....................6 VI. COMPLIANCE WITH LAWS, RULES AND REGULATIONS..........................6 A. Insider Trading Policy........................................6 B. Regulation FD.................................................7 C. Equal Employment Opportunity..................................7 D. Sexual and Other Unlawful Harassment Policy...................7 E. Health, Safety & Environment Laws.............................8 VII. REPORTING CONCERNS UNDER THE CODE: NON-RETALIATION POLICY............8 VIII. QUESTIONS UNDER THE CODE AND WAIVER PROCEDURES.......................9 IX. FREQUENTLY ASKED QUESTIONS AND ANSWERS..............................10 I. IMPLEMENTATION OF THE CODE The following questions and answers address the company's implementation of the Code. The company has attempted to design procedures that ensure maximum confidentiality, anonymity, and, most importantly, freedom from the fear of retaliation for complying with and reporting violations under the Code. Q: Who is responsible for administering, updating and enforcing the Code? A: The company's Board of Directors has appointed a Corporate Compliance Officer to administer, update and enforce the Code. Ultimately, the Board of Directors of the company must ensure that the Corporate Compliance Officer fulfill his responsibilities. The Corporate Compliance Officer has overall responsibility for overseeing the implementation of the Code. Q: How can I contact the Corporate Compliance Officer? A: The name and phone number of the Corporate Compliance Officer is listed below. This individual can assist you in answering questions or reporting violations or suspected violations under the Code. - ------------------------------------------------------------------------------- Bram Lecker (905) 482-0200 - ------------------------------------------------------------------------------- II. GENERAL REQUIREMENTS Each associate of the company is expected to be honest in all business dealings and obligations, and to try to ensure: o the ethical handling of conflicts of interest between personal and professional relationships; o accurate, timely and understandable disclosure in the reports required to be filed by the company with the Securities and Exchange Commission and in other public communications made by the company; and o compliance with applicable governmental laws, rules and regulations. III. CONFLICTS OF INTEREST Associates should be cautious in any situation that may involve, or even appear to involve, a conflict between their personal interests and the interests of the company. An actual or potential conflict of interest arises when an associate is in a position to influence a decision that may result in personal gain for that associate or for a relative of that associate as a result of the company's business dealings. For the purposes of this policy, a relative is any person who is related by blood or marriage, or whose relationship with the associate is similar to that of persons who are related by blood or marriage. In dealings with current or potential customers, suppliers, contractors, and competitors, each associate should act in the best interests of the company to the exclusion of personal advantage. In addition, business dealings with outside firms should not result in unusual gains for those firms, such as bribes, product bonuses, special fringe benefits, unusual price breaks, and other windfalls. For purposes of this section, a "significant" amount or interest shall be deemed to be any amount in excess of $5,000. Associates are prohibited from any of the following activities which could represent an actual or perceived conflict of interest: 1 o No associate or relative of an associate shall have a significant financial interest in, or obligation to, any outside enterprise which does or seeks to do business with the company or which is an actual or potential competitor of the company, without prior approval of the Compliance Officer, or in the case of executive officers or members of the Board of Directors, the full Board of Directors or a committee thereof. o No associate shall conduct a significant amount of business on the company's behalf with an outside enterprise which does or seeks to do business with the company if a relative of the associate is a principal or officer of such enterprise, or an employee of such enterprise who will play a significant role in the business done or to be done between the company and such enterprise, without prior approval of the Compliance Officer, or in the case of executive officers or members of the Board of Directors, the full Board of Directors or a committee thereof. o No executive officer or employee, or a relative of an executive officer or an employee, shall serve as a director, officer or in any other management or consulting capacity of any actual competitor of the company. o No director, or a relative of a director, shall serve as a director, officer or in any other management or consulting capacity of any actual competitor of the company, without the prior approval of the full Board of Directors or a committee thereof. o No associate shall engage in activities that are directly competitive with those in which the company is engaged. o No associate shall divert a business opportunity from the company to such individual's own benefit. If an associate becomes aware of an opportunity to acquire or profit from a business opportunity or investment in which the company is or may become involved or in which the company may have an existing interest, the associate should disclose the relevant facts to the Corporate Compliance Officer. The associate may proceed to take advantage of such opportunity only if the company is unwilling or unable to take advantage of such opportunity as notified in writing by the Compliance Officer. o No associate or relative of an associate shall receive any loan or advance from the company, or be the beneficiary of a guarantee by the company of a loan or advance from a third party, except for advances in connection with the company's tuition reimbursement plan, other customary advances or corporate credit in the ordinary course of business or otherwise approved by the Compliance Officer. Please see Section IV.E. below, "Corporate Advances", for more information on permitted corporate advances. In addition, the Board of Directors will review and approve, in advance, all related-party transactions, as required by the Securities and Exchange Commission or any other regulatory body to which the company is subject. Each associate should make prompt and full disclosure in writing to the Corporate Compliance Officer of any situation that may involve a conflict of interest. Failure to disclose any actual or perceived conflict of interest is a violation of the Code. 2 IV. PROTECTION AND PROPER USE OF COMPANY ASSETS Proper protection and use of company assets and assets entrusted to it by others, including proprietary information, is a fundamental responsibility of each associate of the company. Associates should comply with security programs to safeguard such assets against unauthorized use or removal, as well as against loss by criminal act or breach of trust. The provisions hereof relating to protection of the company's property also apply to property of others entrusted to it (including proprietary and confidential information). A. Proper Use of Company Property The removal from the company's facilities of the company's property is prohibited, unless authorized by the company. This applies to furnishings, equipment, and supplies, as well as property created or obtained by the company for its exclusive use - such as client lists, files, personnel information, reference materials and reports, computer software, data processing programs and data bases. Neither originals nor copies of these materials may be permanently removed from the company's premises or used for purposes other than the company's business without prior written authorization from the Compliance Officer. The company's products and services are its property; contributions made by any associate to their development and implementation are the company's property and remain the company's property even if the individual's employment or directorship terminates. Each associate has an obligation to use the time for which he or she receives compensation from the company productively. Work hours should be devoted to activities directly related to the company's business. B. Confidential Information The company provides its associates with confidential information relating to the company and its business with the understanding that such information is to be held in confidence and not communicated to anyone who is not authorized to see it, except as may be required by law. The types of information that each associate should safeguard include (but are not limited to): o account balances, o customer finances and credit, o anticipated changes in management, o patents, o new products under development, o compensation data, o customer lists, o customer preferences, o company financial information, o marketing strategies, o new materials research, o pending projects and proposals, and o all other sensitive information regarding company affairs. These are costly, valuable resources developed for the exclusive benefit of the company. 3 C. Accurate Records and Reporting Under law, the company is required to keep books, records and accounts that accurately reflect all transactions, dispositions of assets and other events that are the subject of specific regulatory record keeping requirements, including generally accepted accounting principles and other applicable rules, regulations and criteria for preparing financial statements and for preparing periodic reports filed with the Securities and Exchange Commission. All company reports, accounting records, sales reports, expense accounts, invoices, purchase orders, and other documents should accurately and clearly represent the relevant facts and the true nature of transactions. Reports and other documents should state all material facts of a transaction and not omit any information that would be relevant in interpreting such report or document. No payment on behalf of the company may be approved or made with the intention, understanding or awareness that any part of the payment is to be used for any purpose other than that described by the documentation supporting the payment. In addition, intentional accounting misclassifications (e.g., expense versus capital) and improper acceleration or deferral of expenses or revenues are unacceptable reporting practices that are expressly prohibited. The company has developed and maintains a system of internal controls to provide reasonable assurance that transactions are executed in accordance with management's authorization, are properly recorded and posted, and are in compliance with regulatory requirements. The system of internal controls within the company includes written policies and procedures, budgetary controls, supervisory review and monitoring, various other checks and balances, and other safeguards. The company has also developed and maintains a set of disclosure controls and procedures to ensure that all of the information required to be disclosed by the company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms. Associates are expected to be familiar with, and to adhere to, these internal controls and disclosure controls and procedures. Responsibility for compliance with these internal controls and disclosure controls and procedures rests not solely with the company's accounting personnel, but with all associates involved in approving transactions, supplying documentation for transactions, and recording, processing, summarizing and reporting of transactions and other information required by periodic reports filed with the Securities and Exchange Commission. Any associate who believes the company's books and records are not in accord with these requirements should immediately report the matter to the Corporate Compliance Officer. The company has adopted explicit non-retaliation policies with respect to these matters, as described in Section VIII below. D. Document Retention Numerous federal and state statutes require the proper retention of many categories of records and documents that are commonly maintained by companies. In consideration of those legal requirements and the company's business needs, all associates must maintain records in accordance with applicable law and policies adopted by the company from time to time. 4 In addition, any record, in paper or electronic format, relevant to a threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit may not be discarded, concealed, falsified, altered, or otherwise made unavailable, once an associate has become aware of the existence of such threatened, anticipated or actual internal or external inquiry, investigation, matter or lawsuit. When in doubt regarding retention of any record, an associate must not discard or alter the record in question and should seek guidance from the Corporate Compliance Officer. Associates should also direct all questions regarding issues of document retention and related procedures to the Corporate Compliance Officer. E. Corporate Advances Under law, the company may not loan money to associates except in limited circumstances. It shall be a violation of the Code for any associate to advance company funds to any other associate or to himself or herself except for advances in connection with the company's tuition reimbursement plan or other usual and customary business advances for legitimate corporate purposes which are approved by a supervisor or pursuant to a corporate credit card for usual and customary, legitimate business purposes. It is the company's policy that any advance to an associate over $5,000, other than in connection with the company's tuition reimbursement plan, be approved in advance by the Compliance Officer. Company credit cards are to be used only for authorized, legitimate business purposes. An associate will be responsible for any unauthorized charges to a company credit card. V. FAIR DEALING WITH CUSTOMERS, SUPPLIERS, COMPETITORS, AND ASSOCIATES The company does not seek to gain any advantage through the improper use of favors or other inducements. Offering, giving, soliciting or receiving any form of bribe to or from an employee of a customer or supplier to influence that employee's conduct is strictly prohibited. A. Improper Influence The company expects all of its associates to refrain from any illegal conduct to achieve improper influence. Among other types of improper influence which are prohibited are the following: 1. No associate of the company shall make illegal contributions, bribes, kick-backs, or any type of illegal payment to anyone in connection with the obtaining of orders or favored treatment. 2. The accepting of gifts, entertainment, or any other personal favor or preferment from anyone with whom the company has or is likely to have any business dealings, other than a Holiday gift of nominal value (under $15), is forbidden. If a situation should arise in which you are unable to discern whether a course of conduct would violate these rules, please contact the Compliance Officer to discuss the situation in advance of any course of action. 5 B. Unfair Competition Although the free enterprise system is based upon competition, rules have been imposed stating what can and what cannot be done in a competitive environment. The following practices can lead to liability for "unfair competition" and should be avoided. They are violations of the Code. Disparagement of Competitors. It is not illegal to point out weaknesses in a competitor's service, product or operation; however, associates may not spread false rumors about competitors or make misrepresentations about their businesses. For example, an associate may not pass on anecdotal or unverified stories about a competitor's products or services as the absolute truth (e.g., the statement that "our competitors' diagnostic testing procedures have poor quality control"). Disrupting a Competitor's Business. This includes bribing a competitor's employees or using deceptive practices such as enticing away employees in order to obtain secrets or destroy a competitor's organization. C. Unfair Practices in International Business Under the Foreign Corrupt Practices Act ("FCPA"), associates of the company are prohibited from making certain gifts to foreign officials. "Foreign officials" include not only persons acting in an official capacity on behalf of a foreign government, agency, department or instrumentality, but also representatives of international organizations, foreign political parties and candidates for foreign public office. The gift is "corrupt" under the FCPA if it is made for the purpose of: o Influencing any act or decision of a foreign official in his official capacity; o Inducing a foreign official to do or omit to do any act in violation of his lawful duty; o Inducing a foreign official to use his position to affect any decision of the government; or o Inducing a foreign official to secure any "improper advantage." A gift is still "corrupt" even when paid through an intermediary. Any associate who has any questions whatsoever as to whether a particular gift might be "corrupt" under the FCPA, please contact the Corporate Compliance Officer. VI. COMPLIANCE WITH LAWS, RULES AND REGULATIONS A. Insider Trading Policy The company expressly forbids any associate from trading on material nonpublic information or communicating material nonpublic information to others in violation of the law. This conduct is frequently referred to as "insider trading." This policy applies to every associate of the company and extends to activities both within and outside their duties to the company, including trading for a personal account. Trading on inside information is not a basis for liability unless the information is material. This is information that a reasonable investor would consider important in making his or her investment decisions, or information that is likely to have a significant effect on the price of a company's securities. 6 Information is nonpublic until it has been effectively communicated to the marketplace. Tangible evidence of such dissemination is the best indication that the information is public. For example, information found in a report filed with the Securities and Exchange Commission or appearing in a national newspaper would be considered public. Each associate should be familiar with and abide by the company's Insider Trading Policy. A copy of this policy is given to all new associates of the company and is available from the Corporate Compliance Officer. B. Regulation FD The company is subject to the securities laws of the United States and the regulations adopted by the Securities and Exchange Commission, including Regulation FD, with respect to the disclosure of material information to the public. The company is committed to fair disclosure to investors in compliance with the law. The company's policy, which reflects these legal requirements, is that no one associated with the company may make any disclosure of material nonpublic information about the company to anyone outside of the company who trades in or may be expected to trade in our securities, unless we disclose such information to the public at the same time. Only the Chief Executive Officer or other individuals expressly authorized by the Chief Executive Officer may discuss material information with analysts, financial professionals, stockholders and other members of the public. No other company personnel are authorized to discuss material information relating to the company with analysts, financial professionals, stockholders and other members of the public. Any requests for such information regarding the company must be forwarded to one of the officers listed above. C. Equal Employment Opportunity The company is committed to a policy of nondiscrimination and equal opportunity in employment decisions for all employees and qualified applicants without regard to race, color, creed, religion, sex, age, ancestry, national origin, sexual orientation, marital status, veteran's status, physical or mental handicap or disability or any other characteristic protected by law. "Employment decisions" generally mean decisions relating to hiring, recruiting, training, promotions and compensation, but the term may encompass other employment actions as well. Each associate should be familiar with and abide by the company's Equal Employment Opportunity policy, as described in the Employee Handbook. A copy of the Handbook is made available to all new associates of the company and can also be obtained from the Corporate Compliance Officer. The company encourages its associates to bring any problem, complaint or concern regarding any alleged employment discrimination to the attention of the Corporate Compliance Officer. D. Sexual and Other Unlawful Harassment Policy The company is committed to maintaining a working environment that is free of unlawful discrimination. In keeping with this commitment, we will not tolerate harassment of our employees, directors and officers by anyone, including any coach, co-worker, vendor, client or customer. 7 Harassment consists of unwelcome conduct, whether verbal, physical or visual, that is based upon a person's protected status, such as race, color, creed, religion, sex, age, ancestry, national origin, sexual orientation, marital status, veteran's status, physical or mental handicap or disability or any other characteristic protected by law. Each associate should be familiar with and abide by the company's Sexual and Other Unlawful Harassment Policy, as included in the Employee Handbook. The policy sets forth specific examples of harassment that our associates must avoid and provides guidelines for the reporting of violations. A copy of the Handbook is made available to all associates of the company and can also be obtained from the Corporate Compliance Officer. E. Health, Safety & Environment Laws Health, safety, and environmental responsibilities are fundamental to the company's values. Associates are responsible for ensuring that the company complies with all provisions of the health, safety, and environmental laws of the United States and of other countries where the company does business. The penalties that can be imposed against the company and its associates for failure to comply with health, safety, and environmental laws can be substantial, and include imprisonment and fines. VII. REPORTING CONCERNS UNDER THE CODE: NON-RETALIATION POLICY Reporting Concerns/Receiving Advice Communication Channels Be Proactive. Every employee is encouraged to act proactively by asking questions, seeking guidance and reporting suspected violations of the Code and other policies and procedures of the Company, as well as any violation or suspected violation of applicable law, rule or regulation arising in the conduct of the Company's business or occurring on the Company's property. If any employee believes that actions have taken place, may be taking place, or may be about to take place that violate or would violate the Code, he or she should bring the matter to the attention of the Company. Seeking Guidance. The best starting point for an officer or employee seeking advice on ethics-related issues or reporting potential violations of the Code will usually be his or her supervisor. However, if the conduct in question involves his or her supervisor, if the employee has reported the conduct in question to his or her supervisor and does not believe that he or she has dealt with it properly, or if the officer or employee does not feel that he or she can discuss the matter with his or her supervisor, the employee may raise the matter with the Compliance Officer. Communication Alternatives. Any officer or employee may communicate with the Compliance Officer by any of the following methods: o In writing (which may be done anonymously as set forth below under "Reporting; Anonymity; Retaliation"), addressed to the Compliance Officer, either by facsimile to (905) 660-5738 or by U.S. mail to 85 Corstate Ave., Unit #1, Concord Ontario L4K 4Y2; or o By e-mail addressed to the Compliance Officer at his e-mail address noted above on page 3 (anonymity cannot be maintained) 8 Misuse of Reporting Channels. Employees must not use these reporting channels in bad faith or in a false or frivolous manner. Reporting; Anonymity; Retaliation When reporting suspected violations of the Code, the Company prefers that officers and employees identify themselves in order to facilitate the Company's ability to take appropriate steps to address the report, including conducting any appropriate investigation. However, the Company also recognizes that some people may feel more comfortable reporting a suspected violation anonymously. If an officer or employee wishes to remain anonymous, he or she may do so, and the Company will use reasonable efforts to protect the confidentiality of the reporting person subject to applicable law, rule or regulation or to any applicable legal proceedings. In the event the report is made anonymously, however, the Company may not have sufficient information to look into or otherwise investigate or evaluate the allegations. Accordingly, persons who make reports anonymously should provide as much detail as is reasonably necessary to permit the Company to evaluate the matter(s) set forth in the anonymous report and, if appropriate, commence and conduct an appropriate investigation. No Retaliation The Company expressly forbids any retaliation against any officer or employee who, acting in good faith, reports suspected misconduct. Any person who participates in any such retaliation is subject to disciplinary action, including termination. VIII. QUESTIONS UNDER THE CODE AND WAIVER PROCEDURES Associates are encouraged to consult with the Corporate Compliance Officer about any uncertainty or questions they may have under the Code. If any situation should arise where a course of action would likely result in a violation of the Code but for which the associate thinks that a valid reason for the course of action exists, the associate should contact the Corporate Compliance Officer to obtain a waiver prior to the time the action is taken. No waivers will be granted after the fact for actions already taken. Except as noted below, the Compliance Officer will review all the facts surrounding the proposed course of action and will determine whether a waiver from any policy in the Code should be granted. Waiver Procedures for Executive Officers and Directors. Waiver requests by an executive officer or member of the Board of Directors shall be referred by the Compliance Officer, with his recommendation, to the Board of Directors or a committee thereof for consideration. If either (i) a majority of the independent directors on the Board of Directors, or (ii) a committee comprised solely of independent directors agrees that the waiver should be granted, it will be granted. The company will disclose the nature and reasons for the waiver on a Form 8-K to be filed with the Securities and Exchange Commission within four days. If the Board denies the request for a waiver, the waiver will not be granted and the associate may not pursue the intended course of action. It is the company's policy only to grant waivers from the Code in limited and compelling circumstances. 9 IX. FREQUENTLY ASKED QUESTIONS AND ANSWERS The following questions and answers address each associate's obligation to comply with the Code. The company has attempted to design procedures that ensure maximum confidentiality and, most importantly, freedom from the fear of retaliation for complying with and reporting violations under the Code. Q: Do I have a duty to report violations under the Code? A: Yes, participation in the Code and its compliance program is mandatory. You must immediately report any suspected or actual violation of the Code to the Corporate Compliance Officer. The company will keep reports confidential to the fullest extent required by applicable law. Failure to report suspected or actual violations is itself a violation of the Code and may subject you to disciplinary action, up to and including termination of employment or legal action. Q: I'm afraid of being fired for raising questions or reporting violations under the Code. Will I be risking my job if I do? A: The Code contains a clear non-retaliation policy, meaning that if you in good faith report a violation of the Code by the company, or its agents acting on behalf of the company, to the Corporate Compliance Officer, the company will undertake to protect you from being fired, demoted, reprimanded or otherwise harmed for reporting the violation, even if the violation involves you, your supervisor, or senior management of the company. You are entitled to make the report on a confidential and anonymous basis. To the extent an investigation must be initiated, the company will keep confidential any report you make to the Corporate Compliance Officer to the extent required by applicable law. In addition, if you report a suspected violation under the Code which you reasonably believe constitutes a violation of a federal statute by the company, or its agents acting on behalf of the company, to a federal regulatory or law enforcement agency, you may not be reprimanded, discharged, demoted, suspended, threatened, harassed or in any manner discriminated against in the terms and conditions of your employment for reporting the suspected violation, regardless of whether the suspected violation involves you, your supervisor or senior management of the company. Q: How are suspected violations investigated under the Code? A: When a suspected violation is reported to the Corporate Compliance Officer, the Compliance Officer will gather information about the allegation by interviewing the associate reporting the suspected violation (if permissible, in the case of a non-anonymous report), the associate who is accused of the violation and/or any co-workers or associates of the accused associates to determine if a factual basis for the allegation exists. The reporting associate's immediate supervisor will not be involved in the investigation if the reported violation involved that supervisor. The company will keep the identity of the reporting associate confidential to the fullest extent required by applicable law. If the report is not substantiated, the reporting associate will be informed and at that time will be asked for any additional information not previously communicated. If there is no additional information, the Corporate Compliance Officer will close the matter as unsubstantiated. 10 If the allegation is substantiated, the Compliance Officer will make a judgment as to the degree of severity of the violation and the appropriate disciplinary response. In more severe cases, the Compliance Officer will make a recommendation to the Board of Directors of the company for its approval. The Board's decision as to disciplinary and corrective action will be final. The Compliance Officer shall provide a summary of all matters considered under the Code to the Board of Directors or a committee thereof at each regular meeting thereof, or sooner if warranted by the severity of the matter. Q: Do I have to participate in any investigation under the Code? A: Your full cooperation with any pending investigation under the Code is a condition of your continued relationship with the company. The refusal to cooperate fully with any investigation is a violation of the Code and grounds for discipline, up to and including termination. Q: What are the consequences of violating the Code? A: As explained above, associates who violate the Code may be subject to discipline, up to and including termination of employment. Associates who violate the Code may simultaneously violate federal, state, local or foreign laws, regulations or policies. Such associates may be subject to prosecution, imprisonment and fines, and may be required to make reimbursement to the company, the government or any other person for losses resulting from the violation. They may be subject to punitive or treble damages depending on the severity of the violation and applicable law. Q: What if I have questions under the Code or want to obtain a waiver under any provision of the Code? A: The Corporate Compliance Officer can help answer questions you may have under the Code. In addition, Section IX of the Code provides information on how you may obtain a waiver from the Code; waivers will be granted only in very limited circumstances. You should never pursue a course of action that is unclear under the Code without first consulting the Corporate Compliance Officer, and if necessary, obtaining a waiver from the Code. 11 EX-23.1 3 vital10ksb_ex231.txt CONSENT OF INDEPENDENT AUDITORS, MSCM LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Vital Products, Inc for the year ended July 31, 2008 and 2007 of our report dated November 12, 2008 included in its Registration Statement on Form S-1/A (No. 333-127915) dated February 27, 2008 relating to the financial statements and financial statement schedules for the year ended July 31, 2008 listed in the accompanying index. /s/MSCM LLP - ------------------------ MSCM LLP November 13, 2008 EX-23.2 4 vital10ksb_ex232.txt CONSENT OF INDEPENDENT AUDITORS, DANZIGER HOCHMAN PARTNERS LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We hereby consent to the incorporation by reference in this Annual Report on Form 10-K of Vital Products, Inc for the year ended July 31, 2007 of our reports dated September 19, 2007 included in its Registration Statement on Form S-1/A (No. 333-127915) dated February 27, 2008 relating to the financial statements and financial statement schedules for the year ended July 31, 2007 listed in the accompanying index. /s/ Danziger Hochman Partners LLP - ----------------------------------- Danziger Hochman Partners LLP November 13, 2008 EX-31.1 5 vital10ksb_ex311.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Michael Levine, certify that: 1. I have reviewed this annual report of Vital Products, Inc.; 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer 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)) for the small business issuer 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 small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Dated: November 13, 2008 /s/ Michael Levine - ---------------------- Michael Levine President and Chief Executive Officer EX-31.2 6 vital10ksb_ex312.txt CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) I, Henry Goldberg, certify that: 1. I have reviewed this annual report of Vital Products, Inc.; 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer 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)) for the small business issuer 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 small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer'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 small business issuer'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 small business issuer's internal control over financial reporting. Dated: November 13, 2008 /s/ Henry Goldberg - -------------------------------- Henry Goldberg Chief Financial Officer, Principal Accounting Officer EX-32.1 7 vital10ksb_ex321.txt CERTIFICATION OF OFFICERS EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Vital Products, Inc., a Delaware corporation (the "Company"), does hereby certify, to such officer's knowledge, that: The Annual Report on Form 10-KSB for the year ended July 31, 2007 (the "Form 10-KSB") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-KSB fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 13, 2008 By: /s/ Michael Levine - ------------------------------------ Michael Levine President and Chief Executive Officer Date: November 13, 2008 By: /s/ Henry Goldberg - ------------------------------------ Henry Goldberg Chief Financial Officer, Principal Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----