UPDATE: VITAL LIVING PRODUCTS, INC. (OTCBB: VLPI) – 10 THINGS TO THINK ABOUT
stockpatrol.com
December 15, 2001
As we first reported on October 26, 2001, Vital Living Products has been promoting plans to market a home testing kit for anthrax. (See Vital Living Products, Inc. – Just the Anthrax Ma’am). But questions began to surface almost immediately after the initial announcement. First, merchants like ACE Hardware and Meijer, Inc. (a supermarket chain that operates 152 outlets), denied Vital Living’s claim that they had agreed to carry the kit in their stores. Then word came out that the FBI had raided the Company’s headquarters. (See Update: Vital Living Products, Inc. – On Life Support?). That was probably enough to discourage most thoughtful investors. Now there’s more.
On December 13th, the Vital Living Products filed an amended Registration Statement in connection with efforts by a group of Selling Shareholders to sell more than 14.3 million shares of the Company’s stock. It provides a textbook example of why investors should always read the Risk Factor section in a Registration Statement. Consider the following:
1. Soon after it announced plans for the anthrax testing kit, the Company learned that its effort to market the kit was being investigated by the Federal Trade Commission (FTC) and the North Carolina Department of Justice's Consumer Protection Division.
2. At about the same time, the Company learned that the Securities and Exchange Commission and the National Association of Securities Dealers had initiated their own investigations into the Company’s claims for the testing kit. The SEC and NASD also indicated they were looking into possible unlawful insider trading of Vital Living shares.
3. Each of these investigations is still pending.
4. On November 30th, the FTC informed the Company that it planned to file a complaint in federal court seeking an injunction that would prevent Vital Living from marketing the testing kit. The Company is presently negotiating a possible consent order with the FTC.
5. On December 4, 2001 the SEC Staff informed the Company of its intention to recommend a civil enforcement action charging both the Company and its Chief Executive Officer Donald R. Podrebarac with securities fraud.
6. The SEC action would likely seek an order barring Mr. Podrebarac from working for any public company, including Vital Living Products.
7. The U.S. Attorney’s Office for the Southern District of New York has opened an investigation into whether efforts to develop and market the home testing kit for anthrax were part of a fraudulent criminal scheme. On November 29, 2001 the FBI executed a search warrant at the Vital Living Products offices in connection with this investigation. While no indictments have been issued so far, Vital Living concedes that both the Company and Mr. Podrebarac may be indicted in the future.
8. The Company acknowledges that negative publicity relating from these various investigations could have an adverse impact on the sale of its existing products.
9. The Company claims that it retained Sani-Pure Food Laboratories to conduct independent tests of the home testing kit – using anthrax in those tests. In fact, in a November 27th press release, Vital Living represented that the tests had been conducted using anthrax bacteria. Sani-Pure has denied that any anthrax bacteria were used in its tests.
10. Vital Living warns that its stock price is volatile and that the Company may face additional civil litigation alleging violations of the securities laws.
Does an investment in Vital Living seem risky enough? Or, to put it in other words, who wants to help relieve the Selling Shareholders of those 14.3 million shares?
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