SECURITIES
AND EXCHANGE COMMISSION





Washington,
D.C.  20549








FORM
10-K





Annual
Report Pursuant


to
Section 13 or 15(d) of the


Securities
Exchange Act of 1934





For the
fiscal year ended


December
31, 2009





Commission
file number


33-20582





VHGI
HOLDINGS, INC.


(Name of
registrant as specified in its charter)





Delaware
            75-2276137(State
      or other jurisdiction of incorporation)
            (IRS
      employer identification no.)325
      West Main St. Suite 240
              Lexington,
      Kentucky 40507
            (859)
      266-9772(Address
      of principal executive offices)
            (Registrant’s
      telephone number, including area
code)





Securities
registered pursuant to Section 12(b) of the Act: None


Securities
registered pursuant to Section 12(g) of the Act: Common Stock, $.0001 Par
Value




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes o  No x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes o  No x




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (check
one)




Large
      accelerated filer o
            Accelerated
      filer o
            Non-accelerated
      filer o
              (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes o  No x




As of
March 31, 2010, 63,735,254 shares of the registrant’s $.0001 par value common
stock were issued and outstanding. The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the registrant as of March
31, 2010 based upon the $.17 closing price as of such date was approximately
$4,334,351.








TABLE
OF CONTENTS TO ANNUAL REPORT


ON
FORM 10-K


YEAR
ENDED DECEMBER 31, 2009




PART
      I
                3Item
      1.  Business
                3Item
      1A.  Risk Factors
                4Item
      2.  Properties
                7Item
      3.  Legal Proceedings
                8Item
      4.  Removed and Reserved
                8PART
      II
                10Item
      5.   Market for Registrant’s Common Equity, Related
      Stockholder Matters and Registrant Purchases of Equity
      Securities
                10Item
      6.  Selected Financial Data
                11Item
      7.  Management’s Discussion and Analysis or Plan of
      Operation
                11Item
      8.   Financial Statements and Supplementary
      Data
                14Item
      9.   Changes In and Disagreements with Accountants on
      Accounting and Financial Disclosure
                27Item
      9A(T).  Controls and Procedures
                27Item
      9B.   Other Information
                27PART
      III
                28Item
      10.  Directors, Executive Officers and Corporate
      Governance
                28Item
      11.  Executive Compensation
                30Item
      12.  Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
                31Item
      13.  Certain Relationships and Related Transactions and Director
      Independence
                31Item
      14.  Principal Accountant Fees and Services
                33Item
      15.  Exhibits, Financial Statement Schedules
                33


2


PART
I




Item
1.  Business.




Background




VirtualHealth
Technologies, Inc., which has changed its name to VHGI Holdings, Inc. (“VHGI” or
“the Company”) was organized on March 4, 1988, as a Delaware corporation under
the name Sherry Lyn Corporation.  On December 6, 1988, the Company
changed its name to Equity Gold, Inc.  The original focus of the
Company was the gold mining and ore processing technology industries from
inception until the year 2000 when the Company elected to change its business
plan toward the development and marketing of internet prescription drug
technology.




On
December 15, 2000, the Company acquired all of the issued and outstanding common
stock of Verified Prescription Safeguards, Inc.  ("VPS") in exchange
for shares of the Company's Class B voting preferred stock.  At the
time the purchase was consummated, VPS held no assets or
liabilities.




Effective
August 25, 2006, the Company acquired MB Holding Corporation, a Nevada
corporation (“MB Holding”), from H.E.B., LLC, a Nevada limited liability company
(“HEB”), in exchange for 34,000 shares of the Company's common
stock.  MB Holding owned two subsidiaries, VPS Holding, LLC, a
Kentucky limited liability company (“VPSH”), and Envoii Healthcare, LLC, a
Nevada limited liability company, (“Envoii”).  In connection with the
acquisition of MB Holding and the new direction of the Company, the name was
changed to “VirtualHealth Technologies, Inc.”




VPSH
developed certain technologies related to real-time internet prescription drug
monitoring.  In addition, the Company has developed a proprietary
software solution tailored toward object security and this software is utilized
in products and services offered under the name Veriscrip.




Secure
eHealth, LLC (“eHealth”), formerly known as Envoii Healthcare, LLC, provides a
suite of products to the healthcare industry that enhance an existing platform’s
ability to provide users access to their most critical and confidential
information, quickly and securely. Its flagship product, the System Tray
NotifierTM introduced in 2008, is designed to revolutionize the communication of
sensitive healthcare information by providing “single click access” to important
messages from within the user’s system tray without interrupting workflow and
securely displaying the images, documents or messages directly from its
server.





On
October 6, 2006, the Company consummated a Stock Exchange Agreement with New
Market Technology, Inc., a Nevada corporation, pursuant to which the Company
acquired the outstanding shares of Medical Office Software, Inc., a Florida
corporation (“MOS”).  Prior to the acquisition, the Company owned
forty-nine percent (49%) of MOS’ outstanding shares.




Business
Description





In
November 2009 the Company formed a new subsidiary VHGI Gold, LLC (“VHGI Gold”),
a Nevada corporation, for the purpose of accelerating the Company’s reentry into
the gold mining industry.    The Company entered into a
Lease-Purchase Option Agreement for the Treasure Gulch Gold Mine (“Gulch Mine”)
situated in Arizona.  See “Item 2 – Properties” below for a more
detailed description of the mining property.





VHGI Gold
is currently conducting due-diligence on the subject property, and, pending
results, hopes to announce details of a proposed mining development schedule,
with the intent of maximizing initial outcomes while limiting VHGI Gold’s
financial commitment.  Details under consideration include a
laboratory analysis of surface ore deposits, an evaluation of the underground
mine workings and an evaluation of refining and processing options subject to
the results of these tests and analysis which could lead to full scale gold
production.




3




Also in
November 2009, the Company announced the execution of a letter of intent to sell
some of the healthcare technology assets of the Company to Wound Management
Technologies, Inc. (“WMT”).  The sale of these assets was completed on
February 1, 2010 for a total purchase price of $500,000, consisting of $100,000
in cash and a promissory note in the amount of $400,000.  In addition,
a royalty agreement was executed which provides for a three-year 10% royalty to
be paid to VHGI on all revenues received by eHealth or any affiliate of eHealth
from the sale of the VPS technology.





The
assets sold by VHGI to WMT consisted of (a) VHGI subsidiary Secure eHealth, LLC
(“eHealth”)  (b) VHGI $1.5 million Senior Secured Convertible
Promissory Note issued by Private Access, Inc. and the related debt incurred to
secure the funds and (c) all of the intellectual property assets of the
prescription monitoring business VPS. VHGI will retain the MOS
subsidiary.





During
2009 the Company’s primary business focus was healthcare technology; however,
the Company was still in the development stage with the technology products
offered by eHealth and VPS not yet generating revenue and requiring debt
financing to raise needed capital to meet contractual obligations.  By
disposing of certain assets, the Company hopes to generate funds to pursue other
lease purchase opportunities, acquisitions and joint ventures for the goal of
enhanced shareholder value as the focus shifts toward the Precious Metals/
Energy Resources industries.




Since its
inception, MOS has been engaged in the physician practice management system
("PMS") market.  Having completed more than 1,500 installations, MOS
has established a strong presence and brand throughout Southeastern Florida as
the premier provider of physician practice solutions.  MOS began as a
developer and marketer of its own PMS solution.  At present, however,
MOS focuses almost exclusively on reselling and supporting products developed by
other parties.  The increased interest by the physician practice
market to have a fully integrated Practice Management and Electronic Medical
Record (“EMR”) solution places a great opportunity in front of MOS. The Federal
Government is now providing financial incentives and subsidies to practices that
incorporate EMR systems, which softens the barrier that MOS has faced in recent
years to upgrade and expand the current base.




Item
1A.  Risk Factors




Risks
Related to Our Business




The
following factors affect our business and the industry in which we operate. The
risks and uncertainties described below are not the only ones we face.
Additional risks and uncertainties not presently known or which we currently
consider immaterial may also have an adverse effect on our business. If any of
the matters discussed in the following risk factors were to occur, our business,
financial condition, results of operations, cash flows, or prospects could be
materially adversely affected.





We
are shifting our business strategy towards mining operations and away from the
healthcare industry.





With the
formation of VHGI Gold and its entry into the Lease-Purchase Option Agreement
for the Gulch Mine, we have undertaken a shift in our business strategy toward
mining production and away from healthcare products.   We may not
be successful in implementing this shift in strategy. Any business acquired, may
be difficult to integrate into our existing operations or may not perform as
well as expected. If we are unable to successfully implement our business
strategy, this could have a material adverse effect on our financial condition
and results of operations.





Our shift
in business strategy could strain our managerial, financial and other resources.
We also cannot assure you that this shift in business strategy will not
interfere with our existing operations. The operation of the Gulch Mine demands
substantial management resources and the shifting of our management focus away
from other business opportunities.




4




We
expect to incur losses in the future and may not achieve or maintain
profitability.




We have
not generated any profits and the Company has incurred significant operating
losses.  We expect to incur additional operating losses for the
foreseeable future. Our sources of revenue are limited and we may not have
additional sources of revenue in the foreseeable future.




If
we cannot meet our future capital requirements, our business will
suffer.




We expect
to make significant investments in acquiring revenue based assets resulting in a
substantial increase in needed capital and operating
expenses.  Consequently, we anticipate that we will need to raise
additional capital before reaching profitability.  We cannot predict
when we will operate profitably, if at all.  We will need additional
financing to continue operating our business.  We need to raise
additional funds in the future through public or private debt or equity
financings in order to:




*
            fund
      operating losses;





*
            scale
      sales and marketing to address our targeted
  markets;





*
            take
      advantage of opportunities, including expansion or acquisitions of
      complementary businesses or
technologies;





*
            hire,
      train and retain employees;





*
            develop
      new products or professional services;
or





*
            respond
      to economic and competitive
pressures.





If our
capital needs are met through the issuance of equity or convertible debt
securities, the percentage ownership of our stockholders will be
reduced.  Our future success may be determined in large part by our
ability to obtain additional financing, and we can give no assurance that we
will be successful in obtaining adequate financing on favorable terms, if at
all.  If adequate funds are not available or are not available on
acceptable terms, our operating results and financial condition may
suffer.




Increased
costs could affect our financial condition.





We
anticipate that costs at our mining projects will frequently be subject to
variation from one year to the next due to a number of factors, such as changing
ore grade, metallurgy and revisions to mine plans in response to the physical
shape and location of the ore body. In addition, costs are affected by the price
of commodities such as fuel and electricity. Such commodities are at times
subject to volatile price movements, including increases that could make
production at certain operations less profitable. A material increase in costs
at any significant location could have a significant effect on our profitability
and could result in impairment.





We
cannot be certain that our acquisition, exploration and development activities
will be commercially successful.





We
currently have no properties that produce gold in commercial quantities.
Substantial expenditures are required to acquire existing gold properties, to
establish mineral reserves through drilling and analysis, to develop
metallurgical processes to extract metal from the ore and, in the case of new
properties, to develop the mining and processing facilities and infrastructure
at any site chosen for mining. We cannot be assured that any mineral reserves or
mineralized material acquired or discovered will be in sufficient quantities to
justify commercial operations or that the funds required for development can be
obtained on a timely basis.




5




We
face intense competition in the mining industry.





The
mining industry is intensely competitive in all of its phases. As a result of
this competition, some of which is with large established mining companies with
substantial capabilities and with greater financial and technical resources than
ours, we may be unable to acquire additional attractive mining claims or
financing on terms we consider acceptable. We also compete with other mining
companies in the recruitment and retention of qualified managerial and technical
employees. If we are unable to successfully compete for qualified employees, our
exploration and development programs may be slowed down or suspended. We compete
with other gold companies for capital. If we are unable to raise sufficient
capital, our exploration and development programs may be jeopardized or we may
not be able to acquire, develop or operate gold projects.





There
are a number of risks inherent in exploration and mining
operations.





Mineral
exploration is highly speculative and capital intensive. Most exploration
efforts are not successful, in that they do not result in the discovery of
mineralization of sufficient quantity or quality to be profitably mined. These
risks include insufficient ore reserves, fluctuations in production costs that
may make mining of reserves uneconomical; significant environmental and other
regulatory restrictions; and the risks of injury to persons, property or the
environment. In particular, the profitability of gold mining operations is
directly related to the price of gold. The price of gold fluctuates widely and
is affected by numerous factors that are beyond the control of any mining
company. These factors include expectations with respect to the rate of
inflation, the exchange rates of the dollar and other currencies, interest
rates, global or regional political, economic or banking crises, and a number of
other factors. If the price of gold should drop dramatically, the value of our
mining projects could also drop dramatically, and the Company might then be
unable to recover its investment in those interests or properties. Selection of
a property for exploration or development; the determination to construct a mine
and to place it into production, and the dedication of funds necessary to
achieve such purposes, are decisions that must be made long before the first
revenues from production will be received. Price fluctuations which occur while
decisions are made can drastically affect the economics of a mine. The
volatility of gold prices represents a substantial risk, generally, which no
amount of planning or technical expertise can eliminate.





Mining
exploration, development and operating activities are inherently
hazardous.





Mineral
exploration involves many risks that even a combination of experience, knowledge
and careful evaluation may not be able to overcome. Operations in which we have
direct or indirect interests will be subject to all the hazards and risks
normally incidental to exploration, development and production of gold and other
metals, any of which could result in work stoppages, damage to property and
possible environmental damage. The nature of these risks is such that
liabilities might exceed any liability insurance policy limits. It is also
possible that the liabilities and hazards might not be insurable, or, we could
elect not to be insured against such liabilities due to high premium costs or
other reasons, in which event, we could incur significant costs that could have
a material adverse effect on our financial condition.





Our
exploration and development operations are subject to environmental regulations,
which could result in our incurring additional costs and operational
delays.





All
phases of our operations are subject to environmental regulation. Environmental
legislation is evolving in some countries or jurisdictions in a manner which
will require stricter standards and enforcement, increased fines and penalties
for non-compliance, more stringent environmental assessments of proposed
projects and a heightened degree of responsibility for companies and their
officers, directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect our projects. We are
currently subject to U.S. federal and state government environmental
regulations.





The
price of gold is subject to fluctuations, which could adversely affect the
realizable value of our assets and potential future results of operations and
cash flow.





Our
principal assets are mineral reserves and mineralized material. We intend to
attempt to acquire additional properties containing mineral reserves and
mineralized material. The price that we pay to acquire these properties will be,
in large part, influenced by the price of gold at the time of the acquisition.
Our potential future revenues are expected to be, in large part, derived from
the mining and sale of gold from these properties or from the outright sale or
joint venture of some of these properties. The value of these mineral reserves
and mineralized material, and the value of any potential gold production there
from, will vary in proportion to variations in gold prices. The price of gold
has fluctuated widely, and is affected by numerous factors beyond our control
including, but not limited to, international, economic and political trends,
expectations of inflation, currency exchange fluctuations, central bank
activities, interest rates, global or regional consumption patterns and
speculative activities. The effect of these factors on the price of gold, and
therefore the economic viability of any of our projects, cannot accurately be
predicted. Any drop in the price of gold would adversely affect our asset
values, cash flows, potential revenues and profits.


6


“Penny
Stock” Limitations.





The SEC
has adopted regulations that generally define "penny stock" to be an equity
security that has a market price of less than $5.00 per share. Our common stock
may be subject to rules that impose additional sales practice requirements on
broker-dealers who sell these securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000, or annual incomes exceeding $200,000 or $300,000 together with their
spouse). For transactions covered by these rules, the broker–dealer must make a
special suitability determination for the purchase of these securities and have
received the purchaser's prior written consent to the transaction.





Additionally,
for any transaction, other than exempt transactions, involving a penny stock,
the rules require the delivery, prior to the transaction, of a risk disclosure
document mandated by the SEC relating to the penny stock market. The
broker–dealer also must disclose the commissions payable to both the
broker–dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker–dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker–dealers to sell our common stock and may affect
the ability to sell our common stock in the secondary market.





Risks
Related to Our Securities





There is
currently a limited market for our securities, and any trading market that
exists in our securities may be highly illiquid and may not reflect the
underlying value of our net assets or business prospects.  There is
currently a limited market for our securities and there can be no assurance that
an improved market will ever develop. Investors are cautioned not to rely on the
possibility that an active trading market may develop.





Forward-Looking
Statements





When used
in this Form 10-K or other filings by the Company with the Securities and
Exchange Commission, in the Company’s press releases or other public or
shareholder communications, or in oral statements made with the approval of an
authorized officer of the Company’s executive officers, the words or phrases
“would be”, “will allow”, “intends to”, “will likely result”, “are expected to”,
“will continue”, “is anticipated”, “estimate”, “project”, or similar expressions
are intended to identify “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995.




The
Company cautions readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made, and advises readers that
forward-looking statements involve various risks and
uncertainties.  Our management believes its assumptions are based upon
reasonable data derived from and known about our business and
operations.  No assurances are made that our actual results of
operations or the results of our future activities will not differ materially
from these assumptions.  The Company does not undertake, and
specifically disclaims any obligation to update any forward-looking statements
to reflect occurrences or unanticipated events or circumstances after the date
of such statement.




Item
2.  Properties.




Location
of Executive Offices





The
Company’s executive offices are located at 325 West Main Street, Suite 240,
Lexington, Kentucky 40507.  These offices occupy approximately 796
square feet and are held under a month to month lease with Regency Financial,
LLC. The aggregate rental for these office leases is $948 per month. MOS’s
executive offices are located at 790 E. Broward, Suite 400, Fort Lauderdale, FL
33301.   MOS occupies approximately 1,000 square feet of space
leased by H.E.B. LLC, which is controlled by Mr. Scott Haire, the Chief
Executive Officer of the Company.  MOS is not charged rent for this
space, and a capital contribution by Mr. Haire has been recorded for 2009 in the
amount of $26,000 for the value of space occupied.




7




Location
and Ownership of Mining Properties





The Gulch
Mine properties are situated in the Hassayampa Mining District of Arizona,
approximately 10 miles south of Prescott.  Access is via improved
County and National Forest dirt road.





A
required payment of $25,000 is scheduled for May 1, 2010 for the initial
assignment and assumption of the Gulch Mine lease purchase
option.   Payments to the former leaseholder of the Gulch Mine
have been made to secure the lease extension option term through February
2013.  Renewal options exist through 2023 and require VHGI to pay an
extension fee of $20,000 per year for each subsequent annual
extension.





Mining
Development Plan


The plan
calls for surface ore deposits to be sent to an analytical laboratory to
determine the best possible gold extraction methodology, as well as a short-term
structure sampling program to determine the value of the subterranean holdings
as to the possible quantity and grade of Gold Bearing Ore that could be
extracted.  According to the proposal, the existing tunnels and
surface cuts would suffice to provide the ore body.  These options
could potentially produce first gold in 30 to 60 days on a laboratory
scale.





Production
Options


Based on
the outcome of that effort, a small pre-production extraction plant could be
used to test the economics and provide certification for a final mining
plan.  While smaller production efforts could possibly support a
profit orientated enterprise, the real commercial value of the Treasure Gulch
Mine could be found in the development of the ore reserves at depth and on
strike.  The Company is also considering a potential joint venture for
the development of a centralized mill site to process the ore from the Treasure
Gulch Mine and other mines within the adjacent parcels which could form the
basis to transition VHGI from an acquisition and exploration company to revenue
based gold and silver production company.




Item
3.  Legal Proceedings




MOS was
engaged in a lawsuit by a former employee for unpaid commissions on
sales.  This lawsuit was settled in June of 2009 for
$3,000.




The
Company is currently a defendant in a Florida state court lawsuit regarding the
alleged nonpayment of certain brokerage commissions.  Management
considers the claim to be without merit and is vigorously defending the
suit.




Item
4.  Removed and Reserved




8




[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


9




PART
II




Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and
Registrant Purchases of Equity Securities.




Share
Price History




The
Company’s common stock is traded in the Over-the-Counter Bulletin Board under
the trading symbol “VHGI.”  The following table sets forth the high
and low bid information of Company’s common stock for the periods indicated as
reported by NASDAQ.





Quarter Ended
                                              
                                              High
                                              
                                              
                                              Low2009March
      31
                                              
                                              $
                                              0.24
                                              
                                              
                                              $
                                              0.20June
      30
                                              
                                              $
                                              0.23
                                              
                                              
                                              $
                                              0.18September
      30
                                              
                                              $
                                              0.26
                                              
                                              
                                              $
                                              0.26December
      31
                                              
                                              $
                                              0.21
                                              
                                              
                                              $
                                              0.172008March
      31
                                              
                                              $
                                              0.73
                                              
                                              
                                              $
                                              0.05June
      30
                                              
                                              $
                                              0.60
                                              
                                              
                                              $
                                              0.49September
      30
                                              
                                              $
                                              0.51
                                              
                                              
                                              $
                                              0.35December
      31
                                              
                                              $
                                              0.21
                                              
                                              
                                              $
                                              0.19




Holders
of Record




As of
March 31, 2010 there were approximately 457 holders of record of the Company’s
common stock.  The number of holders of record was calculated by
reference to the Company’s stock transfer agent’s books.




Dividend
Policy




We have
never declared or paid any cash dividends on our common stock and we do not
intend to pay cash dividends in the foreseeable future. We currently expect to
retain any future earnings to fund the operation and expansion of our
business.




Recent
Sales of Unregistered Securities




Set forth
below is information regarding the issuance and sales of the Company’s
securities without registration for the past fiscal year.  No such
sales involved the use of an underwriter, no advertising or public solicitation
were involved, the securities bear a restrictive legend and no commissions were
paid in connection with the sale of any securities.




In March
2009 the Company issued 100,000 shares of common stock in payment of consulting
fees at a price of $0.20 per share.




In 2009
July the Company issued 330,000 shares of common stock in payment of consulting
fees at a price of $0.20 per share.




In August
2009 the Company issued 2,473,684 shares of common stock in payment of debt at a
price of $0.29 per share.




10




In August
and September 2009 the Company issued 1,350,000 shares of stock in payment of
debt at  prices of $0.20 to $0.26 per share.




In August
and September 2009 the Company issued 1,100,751 shares of common stock in
payment of debt at  prices of $0.26 to $0.28 per share.




In August
2009 the Company issued 293,232 shares of common stock in payment of consulting
fees at a price of $0.28 per share.




In
September 2009 the Company issued 26,000 shares of common stock in payment of
consulting fees at a price of $0.26 per share.




In
September 2009 the Company issued 195,000shares of common stock in payment of
consulting fees at prices of $0.26 to $0.30 per share.




In
September 2009 the Company issued 1,200,000 shares of common stock in payment of
debt at a price of $0.26 per share.




In
December 2009 the Company issued 3,777,444 shares of common stock in payment of
debt at  prices of $0.19 to $0.22 per share.




In
December 2009 the Company issued 55,000 shares of common stock in payment of
consulting fees at a price of $0.20 per share.




The
issuances described above were made in private transactions or private
placements intending to meet the requirements of one or more exemptions from
registration.  In addition to any noted exemption below, we relied
upon Section 4(2) of the Securities Act of 1933, as amended (the
“Act”).  The investors were not solicited through any form of general
solicitation or advertising, the transactions being non-public offerings, and
the sales were conducted in private transactions where the investor identified
an investment intent as to the transaction without a view to an immediate resale
of the securities; the shares were “restricted securities” in that they were
both legended with reference to Rule 144 as such and the investors identified
they were sophisticated as to the investment decision and in most cases we
reasonably believed the investors were “accredited investors” as such term is
defined under Regulation D based upon statements and information supplied to us
in writing and verbally in connection with the transactions.  We have
never utilized an underwriter for an offering of our securities and no sales
commissions were paid to any third party in connection with the above-referenced
sales.




Item
6.  Selected Financial Data




As a
smaller reporting company, we are not required to provide this
information.




Item
7.  Management’s Discussion and analysis of financial condition and
results of operations




The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related footnotes that appear in this document.




Organizational
overview




Our
current focus is shifting toward new industries which take the Company in a
different direction.  New business segments will consist of (a)
precious metals (b) oil and gas (c) medical technology.  The year 2010
marks a major milestone in the history of the Company as a result of the
recently initiated steps to leverage the Company’s operating history and
corporate resources within these new business segments. Although Gold is selling
at 25 year high prices and Oil & Gas continue to be trading at significant
premiums, global economic events have created significant opportunities within
these markets. Assets can be acquired at significant discounts, and VHGI intends
to pursue these opportunities through Lease-Purchase opportunities, Property
Acquisitions and Joint Ventures.


11




Critical
Accounting Policies




Our
discussion and analysis of our financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities
and expenses. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. We believe the footnotes to the consolidated financial statements
provide the description of the significant accounting policies necessary in
fully understanding and evaluating our consolidated financial condition and
results of operations.




Results
of Operations




Comparison of Year ended
December 31, 2009 Compared to Year ended December 31, 2008





Revenues.  The
Company generated revenues for the year ended December 31, 2009 of $766,735
compared to revenues of $739,708 for the year ended December 31, 2008,
or  a  3.7% increase in revenues.  Revenues in
2008 consisted of sales of software support where in 2009 the revenues were
generated by software sales.




Cost of revenues. Costs of
revenues for the year ended December 31, 2009 were $194,690 compared to costs of
revenues of $88,281 for the year ended December 31, 2008, or a 121% increase in
costs of revenues.




The
increase in costs was primarily due to the increase in costs associated with the
software sold by MOS which was not sold in 2008.  In addition, the
type of sales costs changed in 2009 due to the change in the type of revenue
being generated in 2008 and 2009.




General and administrative expenses
(“G&A"). G&A expenses for the year ended December 31, 2009 were
$1,495,881 compared to G&A expenses of $1,351,111 for the year ended
December 31, 2008, or a 10.7% increase in G&A expenses.  The
increase in expenses is primarily due to an increase in consulting fees paid
between 2008 and 2009.




Interest
Income.   Interest income was $212,554 for the year ended
December 31, 2009 compared to $63,620 for the year ended December 31,
2008, or an increase of 234%. The increase was primarily due to the $100,000
interest payment received in August 2009 on the $1,500,000 note receivable with
Private Access.




Interest
Expense.   Interest expense was $302,326 for the year
ended December 31, 2009, compared to $253,806 for the year ended
December 31, 2008, or an increase of 19%.  Interest expense for
2009 increased due to the increase in debt during 2009 compared to
2008.




Net loss. We had a net loss
for the year ended December 31, 2009, of $1,485,513 compared with a net
loss of $889,870 for the year ended December 31, 2008, or a increase in
loss of 66.9%. The increase in loss is primarily due to the loss on settlement
of $ 471,905 recognized in 2009 as a result of stock issued for payment of
debt.


12




Liquidity
and Capital Resources




Historically,
we have financed our operations primarily from the sale of debt and equity
securities. Our net cash flows from financing activities generated $323,000
for the year ended December 31, 2009, compared to $1.9 million for the year
ended December 31, 2008.




We will
need to raise additional capital in fiscal year 2010 to fund our business plan
and support our operations. As our prospects for funding, if any, develop during
the fiscal year, we will assess our business plan and make adjustments
accordingly. The report of our independent auditors with regard to our financial
statements for the fiscal year ended December 31, 2009, includes a going concern
qualification. Although we have successfully funded our operations to date by
attracting additional equity investors, there is no assurance that our capital
raising efforts will be able to attract additional necessary capital for our
operations. If we are unable to obtain additional funding for operations at any
time now or in the future, we may not be able to continue operations as
proposed, requiring us to modify our business plan, curtail various aspects of
our operations or cease operations.




Off-Balance
Sheet Arrangements




None.




Contractual
Commitments




According
to the Lease-Purchase Option Agreement for the Gulch Mine, the $25,000 balance
due on lease is due on May 1, 2010.





In
December 2009, the Company entered into a Services Agreement with Western Sierra
Mining Corporation (“WSMC”) for certain due diligence and production analysis
services to be performed for the Gulch Mine.  A consulting fee of
$10,000 is to be paid upon invoice by WSMC.




ITEM
7A.  Quantitative and qualitative disclosures about market
risk




As a
smaller reporting company, we are not required to provide this
information.




13




ITEM
8.  Financial statements and supplementary data


REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of
Directors
 VHGI
Holdings, Inc. and Subsidiaries
 Lexington,
Kentucky
 
 We have
audited the accompanying consolidated balance sheets of VHGI Holdings, Inc. and
Subsidiaries as of December 31, 2009 and 2008 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the years in the two-year period ended December 31, 2009. VHGI Holdings, Inc.
and Subsidiaries’ management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits 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 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 audits provide a reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of VHGI Holdings, Inc. and
Subsidiaries as of December 31, 2009 and 2008 and the results of its operations
and its cash flows for each of the years in the two-year period ended December
31, 2009 in conformity with accounting principles generally accepted in the
United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming VHGI
Holdings, Inc. and Subsidiaries will continue as a going concern. As discussed
in Note 3 to the consolidated financial statements, VHGI Holdings, Inc. and
Subsidiaries has incurred substantial losses and has a working capital
deficit.  These factors raise substantial doubt about the ability of
the Company to continue as a going concern.  Management’s plans in
regards to these matters are also described in Note 3.  The
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
 
 PRITCHETT,
SILER & HARDY, P.C.
 
 Salt Lake
City, Utah
 April 19,
2010
  14
  VHGI
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2009 and DECEMBER 31, 2008
 
 December 31, 2009
                                            
                                            
                                            December 31, 2008ASSETSCURRENT
      ASSETS:Cash
                                            
                                            $
                                            26,343
                                            
                                            
                                            $
                                            87,005Accounts
      Receivable, Net
                                            
                                            
                                            92,741
                                            
                                            
                                            
                                            72,115Interest
      Receivable
                                            
                                            
                                            172,197
                                            
                                            
                                            
                                            62,767Total
      current assets
                                            
                                            
                                            291,281
                                            
                                            
                                            
                                            221,887PROPERTY,
      PLANT, AND EQUPMENT (NET)
                                            
                                            
                                            910
                                            
                                            
                                            
                                            3,089OTHER
      ASSETS:Lease
      Purchase Option-Treasure Gulch Mine
                                            
                                            
                                            62,500
                                            
                                            
                                            
                                            -Notes
      Receivable - Related Parties
                                            
                                            
                                            75,000
                                            
                                            
                                            
                                            75,000Note
      Receivable
                                            
                                            
                                            1,500,000
                                            
                                            
                                            
                                            1,500,000Goodwill
                                            
                                            
                                            1,228,856
                                            
                                            
                                            
                                            1,228,856Deferred
      loan costs
                                            
                                            
                                            30,333
                                            
                                            
                                            
                                            41,750TOTAL
      ASSETS
                                            
                                            $
                                            3,188,880
                                            
                                            
                                            $
                                            3,070,582LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIENCY)CURRENT
      LIABILITIES:Accounts
      payable - Trade
                                            
                                            $
                                            451,053
                                            
                                            
                                            $
                                            393,796Accrued
      Payroll and Payroll Taxes
                                            
                                            
                                            37,749
                                            
                                            
                                            
                                            19,324Other
      accrued Liabilities
                                            
                                            
                                            4,135
                                            
                                            
                                            
                                            3,493Dividends
      payable
                                            
                                            
                                            33,750
                                            
                                            
                                            
                                            33,750Notes
      Payable
                                            
                                            
                                            95,000
                                            
                                            
                                            
                                            900,000Notes
      Payable - Related Parties
                                            
                                            
                                            1,395,896
                                            
                                            
                                            
                                            1,966,505Accrued
      Interest - Related Parties
                                            
                                            
                                            531,695
                                            
                                            
                                            
                                            384,303Total
      current liabilities
                                            
                                            
                                            2,549,278
                                            
                                            
                                            
                                            3,701,171LONG-TERM
      DEBT:Debentures
                                            
                                            
                                            275,362
                                            
                                            
                                            
                                            225,000TOTAL
      LIABILITIES
                                            
                                            
                                            2,824,640
                                            
                                            
                                            
                                            3,926,171STOCKHOLDERS'
      EQUITY (DEFICIENCY)Preferred
      stock, Class B - $0.001 par value, 300,000 shares designated, 70,000
      issued and outstanding as of  December 31, 2009 and December 31,
      2008
                                            
                                            
                                            70
                                            
                                            
                                            
                                            70Common
      stock  - $0.0001 par value, 100,000,000 shares authorized,
      57,352,644 and 46,451,533 issued and outstanding as of  December
      31, 2009 and December 31, 2008
                                            
                                            
                                            57,353
                                            
                                            
                                            
                                            46,452Additional
      paid-in capital
                                            
                                            
                                            4,961,822
                                            
                                            
                                            
                                            2,267,381Stock
      Subscription Receivable
                                            
                                            
                                            (89,904
                                            )
                                            
                                            
                                            (89,904
                                            )Retained
      Deficit
                                            
                                            
                                            (4,565,101
                                            )
                                            
                                            
                                            (3,079,588
                                            )TOTAL
      STOCKHOLDERS'  EQUITY (DEFICIENCY)
                                            
                                            
                                            364,240
                                            
                                            
                                            
                                            (855,589
                                            )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                            
                                            $
                                            3,188,880
                                            
                                            
                                            $
                                            3,070,582
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 15
 
 VHGI
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS  ENDED DECEMBER 31, 2009 AND 2008
 December 31, 2009
                                      
                                      
                                      December 31, 2008REVENUES:Total
      Revenue
                                      
                                      $
                                      766,735
                                      
                                      
                                      $
                                      739,708Cost
      of Sales
                                      
                                      
                                      (194,690
                                      )
                                      
                                      
                                      (88,281
                                      )Gross
      Profit
                                      
                                      
                                      572,045
                                      
                                      
                                      
                                      651,427OPERATING
      EXPENSES:Selling,
      General and Administrative
                                      
                                      
                                      (1,495,881
                                      )
                                      
                                      
                                      (1,351,111
                                      )LOSS
      FROM CONTINUING OPERATIONS
                                      
                                      
                                      (923,836
                                      )
                                      
                                      
                                      (699,684
                                      )OTHER
      INCOME (EXPENSES):Interest
      Income
                                      
                                      
                                      212,554
                                      
                                      
                                      
                                      63,620Loss
      on  Settlement
                                      
                                      
                                      (471,905
                                      )Interest
      (Expense)
                                      
                                      
                                      (302,326
                                      )
                                      
                                      
                                      (253,806
                                      )NET
      GAIN (LOSS)
                                      
                                      
                                      (1,485,513
                                      )
                                      
                                      
                                      (889,870
                                      )Current
      Tax Expense
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -Deferred
      Tax Expense
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -NET
      GAIN (LOSS)
                                      
                                      $
                                      (1,485,513
                                      )
                                      
                                      $
                                      (889,870
                                      )Basic
      gain (loss) per common share
                                      
                                      $
                                      (0.03
                                      )
                                      
                                      $
                                      (0.02
                                      )Weighted
      average number of common shares
                                      
                                      
                                      49,080,108
                                      
                                      
                                      
                                      46,451,533
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 16
 
 VHGI
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS  ENDED DECEMBER 31, 2009 AND 2008
 December 31 ,2009
                        
                        
                        December 31 ,2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                        
                        $
                        (1,485,513
                        )
                        
                        $
                        (889,870
                        )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                        
                        
                        2,179
                        
                        
                        
                        2,180Non-cash
      expenses
                        
                        
                        496,396
                        
                        
                        
                        305,999Gain
      on settlement
                        
                        
                        471,905
                        
                        
                        
                        -Changes
      in assets and liabilities:(Increase)
      decrease in accounts receivable
                        
                        
                        (20,626
                        )
                        
                        
                        28,468(Increase)
      decrease in other assets
                        
                        
                        26,672
                        
                        
                        
                        -(Increase)
      decrease in interest receivable
                        
                        
                        (109,430
                        )
                        
                        
                        (62,767
                        )Increase
      (decrease) in accounts payable
                        
                        
                        57,257
                        
                        
                        
                        (27,960
                        )Increase
      (decrease) in accrued payroll
                        
                        
                        18,425
                        
                        
                        
                        (14,230
                        )Increase
      (decrease) in accrued expenses
                        
                        
                        642
                        
                        
                        
                        1,156Increase
      (decrease) in accrued interest
                        
                        
                        220,910
                        
                        
                        
                        163,807Net
      cash used in operating activities
                        
                        
                        (321,183
                        )
                        
                        
                        (493,217
                        )CASH
      FLOWS FROM INVESTING ACTIVITIES:(Increase)
      decrease in lease purchase option
                        
                        
                        (62,500
                        )
                        
                        
                        -Proceeds
      (purchases) from note receivable
                        
                        
                        -
                        
                        
                        
                        (1,575,000
                        )Net
      cash used by investing activities
                        
                        
                        (62,500
                        )
                        
                        
                        (1,575,000
                        )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from  notes payable
                        
                        
                        395,368
                        
                        
                        
                        2,226,844Payments
      on notes payable
                        
                        
                        (667,647
                        )
                        
                        
                        (481,265
                        )Proceeds
      from debentures
                        
                        
                        670,310
                        
                        
                        
                        225,000Payments
      on Debenture
                        
                        
                        (75,010
                        )
                        
                        
                        -Deferred
      loan costs
                        
                        
                        -
                        
                        
                        
                        (41,750
                        )Net
      cash provided by financing activities
                        
                        
                        323,021
                        
                        
                        
                        1,928,829NET
      INCREASE (DECREASE) IN CASH
                        
                        
                        (60,662
                        )
                        
                        
                        (139,388
                        )CASH, beginning of
      period
                        
                        
                        87,005
                        
                        
                        
                        226,393CASH, end of
      period
                        
                        $
                        26,343
                        
                        
                        $
                        87,005SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during period for interest
                        
                        $
                        -
                        
                        
                        $
                        -Cash
      paid during period for income tax
                        
                        $
                        -
                        
                        
                        $
                        -Non-Cash
      Investing and Financing Activities:Interest
      converted to debt
                        
                        $
                        73,518
                        
                        
                        $
                        -Common
      Stock issued in payment of debt
                        
                        $
                        2,208,946
                        
                        
                        $
                        560,000Common
      Stock issued in consulting fees
                        
                        $
                        402,896
                        
                        
                        $
                        190,000Imputed
      Interest expensed as a capital contribution
                        
                        $
                        67,500
                        
                        
                        $
                        90,000Contributed
      rent as a capital contribution
                        
                        $
                        26,000
                        
                        
                        $
                        26,000
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
 
 17
 
 VHGI HOLDINGS, INC. AND
SUBSIDIARIES
 
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS' (DEFICIENCY)
 FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 Preferred
                    
                    
                    PreferredStock
                    
                    
                    Stock
                    
                    
                    Common
                    
                    
                    Common
                    
                    
                    Common
                    
                    
                    AdditionalClass B
                    
                    
                    Class B
                    
                    
                    Stock
                    
                    
                    Stock
                    
                    
                    Stock
                    
                    
                    Paid-in
                    
                    
                    Accumulated
                    
                    
                    TotalShares
                    
                    
                    Amount
                    
                    
                    Shares
                    
                    
                    Amount
                    
                    
                    Subscripton
                    
                    
                    Capital
                    
                    
                    Deficit
                    
                    
                    EquityBALANCES,
      DECEMBER 31, 2007
                    
                    
                    70,000
                    
                    
                    $
                    70
                    
                    
                    
                    42,701,533
                    
                    
                    $
                    42,702
                    
                    
                    
                    (89,904
                    )
                    
                    $
                    1,405,132
                    
                    
                    $
                    (2,189,718
                    )
                    
                    $
                    (831,718
                    )Common
      stock issued to Commerical Holding Inc.  for the cancellation of
      debt valued at $0.20 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,500,000
                    
                    
                    
                    1,500
                    
                    
                    
                    
                    
                    
                    
                    298,500
                    
                    
                    
                    
                    
                    
                    
                    300,000Common
      stock issued to Openshaw Co. for the payment of consulting fee at $0.20
      per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    250,000
                    
                    
                    
                    250
                    
                    
                    
                    
                    
                    
                    
                    49,750
                    
                    
                    
                    
                    
                    
                    
                    50,000Common
      stock issued to Jason Goldstein for the payment of consulting fee at
      $0.20  per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    337,500
                    
                    
                    
                    338
                    
                    
                    
                    
                    
                    
                    
                    67,163
                    
                    
                    
                    
                    
                    
                    
                    67,500Common
      stock issued to Danielle Hughes for the payment of consulting fee at $0.20
      per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    112,500
                    
                    
                    
                    112
                    
                    
                    
                    
                    
                    
                    
                    22,386
                    
                    
                    
                    
                    
                    
                    
                    22,498Common
      stock issued to Michael Tolson for the payment of consulting fee at $0.20
      per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    200,000
                    
                    
                    
                    200
                    
                    
                    
                    
                    
                    
                    
                    39,800
                    
                    
                    
                    
                    
                    
                    
                    40,000Common
      stock issued to T. Squared, LLC for the cancellation  of a note
      payable at $0.20 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,300,000
                    
                    
                    
                    1,300
                    
                    
                    
                    
                    
                    
                    
                    258,700
                    
                    
                    
                    
                    
                    
                    
                    260,000Common
      stock issued to Maxim Group for the payment of consulting fee at $0.20 per
      share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    50,000
                    
                    
                    
                    50
                    
                    
                    
                    
                    
                    
                    
                    9,950
                    
                    
                    
                    
                    
                    
                    
                    10,000Imputed
      interest contributed as additional paid-in  capital from a
      non-interest note to New Market Technology, Inc.
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    90,000
                    
                    
                    
                    
                    
                    
                    
                    90,000Rent
      contributed by an officer, or an entity related to an officer of the
      Company valued at $26,000
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    26,000
                    
                    
                    
                    
                    
                    
                    
                    26,000Net
      loss for the year ended December 31, 2008
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (889,870
                    )
                    
                    
                    (889,870
                    )BALANCES,
      DECEMBER 31, 2008
                    
                    
                    70,000
                    
                    
                    $
                    70
                    
                    
                    
                    46,451,533
                    
                    
                    $
                    46,452
                    
                    
                    $
                    (89,904
                    )
                    
                    $
                    2,267,381
                    
                    
                    $
                    (3,079,588
                    )
                    
                    $
                    (855,589
                    )Common
      stock issued for services at a priceof
      $.30 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    75,000
                    
                    
                    
                    75
                    
                    
                    
                    
                    
                    
                    
                    22,425
                    
                    
                    
                    
                    
                    
                    
                    22,500Common
      stock issued for debt conversion ata
      price of $.35 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    71,054
                    
                    
                    
                    71
                    
                    
                    
                    
                    
                    
                    
                    24,798
                    
                    
                    
                    
                    
                    
                    
                    24,869Common
      stock issued for services at pricesfrom
      $.26 to $.29 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    341,488
                    
                    
                    
                    341
                    
                    
                    
                    
                    
                    
                    
                    95,355
                    
                    
                    
                    
                    
                    
                    
                    95,696Common
      stock issued for debt conversion atprices
      from $.26 to $.29 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    5,401,125
                    
                    
                    
                    5,401
                    
                    
                    
                    
                    
                    
                    
                    1,475,138
                    
                    
                    
                    
                    
                    
                    
                    1,480,539Common
      stock issued for services at pricesfrom
      $.19 to $.21 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1,485,000
                    
                    
                    
                    1,485
                    
                    
                    
                    
                    
                    
                    
                    283,215
                    
                    
                    
                    
                    
                    
                    
                    284,700Common
      stock issued for debt conversion atprices
      from $.19 to $.22 per share
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    3,527,444
                    
                    
                    
                    3,528
                    
                    
                    
                    
                    
                    
                    
                    700,010
                    
                    
                    
                    
                    
                    
                    
                    703,538Imputed
      interest contributed as additional paid-in capital from a non-interest
      note to New Market Technology, Inc.
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    67,500
                    
                    
                    
                    
                    
                    
                    
                    67,500Payment
      of rent by shareholdder recorded as capital contribution
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    26,000
                    
                    
                    
                    
                    
                    
                    
                    26,000Net
      loss for the year ended December 31, 2009
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (1,485,513
                    )
                    
                    
                    (1,485,513
                    )BALANCES,
      DECEMBER 31, 2009
                    
                    
                    -
                    
                    
                    $
                    70
                    
                    
                    
                    57,352,644
                    
                    
                    $
                    57,353
                    
                    
                    $
                    (89,904
                    )
                    
                    $
                    4,961,822
                    
                    
                    $
                    (4,565,101
                    )
                    
                    $
                    364,240
    18
  VHGI
HOLDINGS, INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2009
 
 NOTE
1 – NATURE OF OPERATIONS
 
 VirtualHealth
Technologies, Inc., which has changed its name to VHGI Holdings, Inc. (“VHGI” or
the “Company”), was organized on March 4, 1988.  During 2009 the
Company’s business focus was healthcare technology; however, during the fourth
quarter of 2009 the Company started the implementation of a new business plan
which shifts the focus toward the Precious Metals/ Energy Resources
industries
 
 NOTE
2 – SUMMARY OF ACCOUNTING POLICIES
 
 Basis of
presentation – The terms “the Company,” “we, “us” and “VHGI” are used in this
report to refer to VirtualHealth Technologies, Inc. The accompanying
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles.
 
 Principles
of consolidation – The accompanying consolidated financial statements include
the accounts of VHGI and its wholly-owned subsidiaries:  VPS Holding,
LLC dba Veriscrip, Secure eHealth LLC, (“eHealth”), Medical Office Software,
Inc. (“MOS”) and VHGI Gold, LLC (“VHGI Gold”).  MB Holding
Corporation, a subsidiary included in the prior year consolidation, has become
inactive and the assets and liabilities of this entity have been transferred to
VHGI.  VHGI Gold, a Nevada corporation, is a new subsidiary formed in
November 2009 for the purpose of accelerating the Company’s reentry into the
gold mining industry.   All intercompany accounts and
transactions have been eliminated.
 
 Use of
estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
 Cash and
cash equivalents - The Company considers all highly liquid investments with a
maturity  of three months or less from the date of  purchase
to be cash equivalents.  As of December 31, 2009 and 2008, the Company
had no cash equivalents.
 
 Fair
value of financial instruments – For certain of the Company’s financial
instruments, including cash and cash equivalents, accounts receivable, accounts
payable and other accrued liabilities, and amounts due to related parties, the
carrying amounts approximate fair value due to their short
maturities.
  Recently
Enacted Accounting Standards – In June 2009 the FASB established the Accounting
Standards Codification (“Codification” or “ASC”) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental
entities in the preparation of financial statements in accordance with generally
accepted accounting principles in the United States (“GAAP”).  Rules
and interpretive releases of the Securities and Exchange Commission (“SEC”)
issued under authority of federal securities laws are also sources of GAAP for
SEC registrants.  Existing GAAP was not intended to be changed as a
result of the Codification, and accordingly the change did not impact our
financial statements. The ASC does change the way the guidance is organized and
presented.The FASB no
longer issues new standards in the form of Statements, FASB Staff Positions, or
Emerging Issues Task Force Abstracts. Instead, amendments to the codification
are made by issuing “Accounting Standards Updates.” The Company has incorporated
the current codification in preparing its Form 10-K. There were various other
accounting standards and interpretations issued during 2009 and 2008, none of
which are expected to have a material impact on the Company’s financial
position, operations or cash flows.
  19
  Revenue
Recognition - The Companies’ revenues result primarily from sales of products to
doctors and medical billing companies.  Revenues are recognized upon
delivery of the products or services.
 
 Trade
Accounts and Allowance for Doubtful Accounts – Trade
accounts  receivables  and
other  receivables  are carried at
original  invoiced amounts  less
an  allowance  for  doubtful  accounts.
Accounts receivable are determined to be delinquent when the account has become
30 days past due. The allowance for doubtful accounts is calculated based on the
aggregate amount of accounts 60+ days old, or on a case by case
basis.  Management will occasionally review accounts receivable and
determine if the account should be written off. At December 31, 2009 and 2008
the allowance for doubtful accounts was $14,892 and $14,892
respectively.
 
 Property
and Equipment – Property and equipment are stated on the basis of historical
cost less accumulated depreciation. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. Major
renewals and improvements are capitalized, while minor replacements, maintenance
and repairs are charged to current operations. Impairment losses are recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets’ carrying amount. Fixed assets consist of $13,627 in 2009
and $13,627 in 2008. These assets have been fully depreciated except for the
remaining balances of $910 and $3,089 at December 31, 2009 and 2008
respectively.
 
 Goodwill
- Goodwill represents the excess purchase price paid by the Company over the
fair value of the tangible and intangible assets and liabilities of MOS at
October 6, 2006, the date of the acquisition. In accordance with ASC Topic No.
350 “Intangibles – Goodwill and Other”), the goodwill is not being amortized,
but instead will be subject to an annual assessment of impairment by applying a
fair-value based test. No impairment was recorded during the year ended December
31, 2009.
 
 Deferred
loan cost – The costs of issuing debentures or other debt instruments have been
deferred as other loan assets and are being amortized to expense over the term
of the debt.
 
 NOTE
3 - GOING CONCERN
 
 The
Company has continuously incurred losses from operations, has a working capital
deficit, and has a significant accumulated deficit. The appropriateness of using
the going concern basis is dependent upon the Company's ability to obtain
additional financing or equity capital and, ultimately, to achieve profitable
operations. These conditions raise substantial doubt about its ability to
continue as a going concern.
 
 In this
regard, management is proposing to raise any necessary additional funds through
loans or through additional sales of its common stock.   There is
no assurance that the Company will be successful in raising additional capital
to support the financial needs of the Company or that the Company will ever
produce profitable operations.  The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
 
 NOTE
4 – NOTES RECEIVABLE
 
 The
Company has advanced as a note receivable, $1,500,000 to Private Access, Inc. an
unrelated company.  The loan bears interest at 9% per annum from day
of advance, with $140,243 and $59,892 accrued as of December 31, 2009 and
December 31, 2008 respectively.  On August 12, 2009, the Company
received a payment of $100,000 under the terms of the Restructuring Agreement,
for interest under the Note and restructuring fees, as the result of the capital
provided to Private Access, Inc. by Pfizer Inc. (“Pfizer”) under a Notes
Purchase Agreement dated August 3, 2009 (the “Pfizer Agreement”). Under an
Amendment to Convertible Promissory Notes and Note Restructuring Agreement, the
Company agreed to extend the term of the Note from January 15, 2011, until July
31, 2013, and received an enhanced conversion premium in the event that the Note
is converted to equity. Additionally, the Company agreed, until the Note is paid
in full, to modify its right of first offer to purchase new securities in
Private Access so as to be pro rata with Pfizer’s right of first refusal under
the Pfizer Agreement. The Pfizer Agreement makes corresponding allowances for
the Company’s pro rata right of first offer, with pro rata interests being based
on the outstanding principal amounts owed under (i) notes issued to the Company
and other investors under the Restructuring Agreement and (ii) notes held by
Pfizer under the Pfizer Agreement. The Company also agreed to become the
collateral agent for the collateral pledged as security by Private Access, Inc.
under a Security Agreement dated August 3, 2009, with the Company and Pfizer,
along with other investors under the Restructuring Agreement, holding pro rata
security interests in all property of Private Access, Inc. including its
intellectual property.
  20
 
 The
company has a note receivable from a related party in the amount of
$75,000.  The note bears interest at 10% per annum and is due on
demand.  Accrued interest was $10,479 and $2,875 at December 31, 2009
and December 31, 2008, respectively.
 
 NOTE
5- NOTES PAYABLE AND LONG-TERM DEBT
 
 Notes Payable - Related
Parties
 
 Funds are
advanced from various related parties including the Company's president and
CEO/CFO and entities controlled by him.  Other shareholders may fund
the Company as necessary to meet working capital requirements and
expenses.  The advances are made pursuant to note agreements that bear
interest at 10% per annum, with various maturity dates. All notes are current
liabilities. Accrued interest to related parties totaled $531,695 and $384,303
at December 31, 2009 and December 31, 2008, respectively.
 
 December
      31,2009
                            
                            
                            2008Scott
      Haire, Company Chairman, CEO, and CFO:Unsecured,
      payable on December 31, 2008, including interest at 10% per
      annum.  Accrued interest at December 31, 2009 and December 31,
      2008 is $11,994 and $9,723, respectively.
                            
                            $
                            22,400
                            
                            
                            $
                            22,400HEB
      LLC, Scott Haire owner, Chairman, CEO, and CFO:Unsecured,
      two separate $1,000,000 open lines of credit, no maturity date, and
      interest at 10% per annum.  Accrued interest at December 31,
      2009 and December 31, 2008 is $331,949 and $281,009,
      respectively.  Unsecured lines available at December 31, 2009
      are $1,643,323.
                            
                            
                            430,196
                            
                            
                            
                            727,205Commercial
      and Financial Holdings, LLC:This
      note is considered to be a related party note.  Unsecured,
      payable on demand, including interest at 10% per annum.  Accrued
      interest at December 31, 2009 and December 31, 2008 is $167,524 and
      $54,446, respectively.
                            
                            
                            911,400
                            
                            
                            
                            1,185,000SWCC,
      dated 7/21/06, no stated interest rate
                            
                            
                            21,900
                            
                            
                            
                            21,900Anthony
      Chamblin, investor  in Secure eHealth, LLC:This
      note is considered to be a related party note.  Unsecured,
      payable on demand, including interest at 10% per annum.  Accrued
      interest at December 31, 2009 and December 31, 2008 is $6,636 and $5,622
      respectively.
                            
                            
                            10,000
                            
                            
                            
                            10,000$
                            1,395,896
                            
                            
                            $
                            1,966,505
  21
 
 Notes
Payable
 
 On
September 30, 2009 the convertible promissory note with New Market Technology,
Inc., which had no stated interest rate and was unsecured, was exchanged for
1,000,751 shares of the Company’s common stock.   The note
balance at December 31, 2008 was $900,000 and the debt had been incurred with
the purchase of MOS in October 2006.
 
 On
November 1, 2009 the Company entered into an Assignment and Assumption of Lease
(“Lease Assumption”) with an unrelated party (“Assignor”) for $50,000 for the
assignment of a lease purchase option for the Treasure Gulch Gold Mine (“Gulch
Mine”).   According to the terms of the Lease Assumption, the
Company will make two payments of $25,000 each to the Assignor on February 1,
2010 and May 1, 2010.  The first payment was made on February 8,
2010.  See Note 6 for additional information on the Gulch
Mine.
 
 On
December 7, 2009 the Company executed a convertible promissory note in the
amount of $45,000 to an unrelated party.  The principal and accrued
interest, at 8% per annum, is due on September 7, 2010.  The note is
convertible starting June 7, 2010 and deferred loan costs are $2,500 to be
amortized over the nine month term of the loan.  Interest is 10% after
the due date and the conversion rate is 65% of asking price 10 days prior to the
conversion.
 
 Debentures
 
 On
December 17, 2008 the Company issued convertible debentures which started
maturing in 2009 and continue maturing thru 2011.  The debt balance at
December 31, 2009 and December 31, 2008 is $275,362 and $225,000,
respectively.  Accrued interest at December 31, 2009 and December 31,
2008 is $26,231 and $764, respectively.  Debt issuance costs of
$73,752 and $30,333 have been deferred at December 31, 2009 and December 31,
2008, respectively. During the twelve months ended December 31, 2009 $10,438 of
debt issuance costs were amortized.
 
 The
Debentures may be converted into shares of the Company’s common stock at a
conversion price equal to seventy percent (70%) of the lowest closing bid price
per share for the twenty (20) trading days immediately preceding the date of
conversion; provided that no holder may convert Debentures into, nor shall the
Company issue to such holder, shares of common stock to the extent that the
conversion would result in a Holder and its affiliates together beneficially
owning more than 4.99% of the then issued and outstanding shares of the
Company’s common stock.   This ownership may be waived, however,
by a holder upon sixty-one (61) days prior written notice.
 
 The
Debentures may be redeemed by the Company at any time or from time to time at a
price equal to (x) one hundred twenty percent (120%) of the principal amount of
the Debenture if the Debenture is called for redemption prior to the expiration
of six months from the issuance date, or one hundred thirty one percent (131%)
if called for redemption thereafter, plus (y) interest accrued through the day
immediately preceding the date of redemption.
  22
 
 Minimum Annual
Maturities
 
 The
Company’s aggregate annual maturities of notes payable and long-term debt are
summarized as follows:
 December
      31, 2010
                        
                        $
                        1,490,896December
      31, 2011
                        
                        
                        275,362December
      31, 2012
                        
                        
                        -0-Total
                        
                        $
                        1,766,258
 
 NOTE
6 – MINING CLAIM LEASE
 
 In
November 2009, the Company entered into an agreement to assume the lease
purchase option of the Gulch Mine properties, situated in the Hassayampa Mining
District of Arizona, approximately 10 miles south of Prescott.  As
mentioned in Note 5, the initial Gulch Mine lease assumption has been recorded
at $50,000, the cost of the initial lease assumption as of December 31, 2009,
and the $12,500 cost of extending the term of the lease through February 15,
2012.  An additional $12,500 to be paid by March 31, 2010 will extend
the lease through February 15, 2013.  According to the terms of the
Amendment and Extension to Lease Purchase Option Agreement (“the Amendment”),
the Gulch Mine original lessor (“the Lessor”), an unrelated party, consented to
the assignment of the lease to VHGI and granted options for extending the term
of the Gulch Mine lease for up to twelve (12) years. Payments to the former
leaseholder of the Gulch Mine have been made to secure the lease extension
option term through February 2013. Renewal options exist through 2023 and
require VHGI to pay an extension fee of $20,000 per year for each subsequent
annual extension.
 
 NOTE
7 - INCOME TAXES
 
 The
Company accounts for income taxes in accordance with ASC topic No. 740, “Income
Taxes.” This standard requires the Company to provide a net deferred tax asset
or liability equal to the expected future tax benefit or expenses of temporary
reporting differences between book and tax accounting and any available
operating loss or tax credit carry-forwards.
 
 There is
no current or deferred income tax expense due to the Companies’ consolidated
loss position and the net deferred tax benefits of timing differences having
been reduced by an offsetting valuation allowance. The deferred tax consequences
of temporary differences in reporting items for financial statement and income
tax purposes are recognized, as appropriate. Realization of the future tax
benefits related to the net deferred tax assets is dependent on many factors,
including the Companies' ability to generate taxable income within the net
operating loss carry forward period. Management has considered these factors in
reaching its conclusion as to the valuation allowance for financial reporting
purposes and has recorded a 100% valuation allowance against the net deferred
tax asset. The change in the valuation allowance is approximately $290,700 for
the year ended December 31, 2009.
 
 Reconciliations
of the expected federal income tax benefit based on the statutory income tax
rate of 34% to actual benefit for the years ended December 31, 2009, and 2008
are as follows:
 
 2009
                    
                    
                    2008Expected
      federal income tax benefit
                    
                    $
                    505,000
                    
                    
                    $
                    303,000Valuation
      allowance
                    
                    
                    (505,000
                    )
                    
                    
                    (303,000
                    )Income
      tax expense (benefit)
                    
                    $
                    0
                    
                    
                    $
                    0
  23
 
 At
December 31, 2009, the potential non-current deferred tax asset of approximately
$975,800 results from the deferred tax benefit of applying the statutory income
tax rate of 34% to the net operating loss carryforwards of approximately
$2,870,000 which have a 100% valuation allowance, as the ability of the
Companies to generate sufficient taxable income in the future is uncertain.
There are no other significant deferred tax assets or liabilities.
 
 The
Company has no tax positions at December 31, 2009 and 2008 for which the
ultimate deductibility is highly certain but for which there is uncertainty
about the timing of such deductibility.
 
 The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in operating expenses.  During the
years ended December 31, 2009 and 2008, the Company recognized no interest and
penalties.  The Company had no accruals for interest and penalties at
December 31, 2009, and 2008.
 
 NOTE
8 - CAPITAL STOCK
 
 Preferred
Stock
 
 The
Company is authorized to issue 10,000,000 shares of Preferred Stock at a par
value of $.001 per share. The Company has designated 300,000 shares of Class B
voting Preferred stock and at December 31, 2009 and 2008 there were 70,000
shares outstanding.  Accrued, but unpaid dividends totaled $33,750 at
December 31, 2009 and December 31, 2008.
 
 Common
Stock
 
 The
Company is authorized to issue 100,000,000 common shares, at a par value of
$0.001 per share.  These shares have full voting rights.  At
December 31, 2009 there are 57,352,644 shares issued and
outstanding.  At December 31, 2008, there were 46,451,533 shares
issued and outstanding.
 
 During
2009 the Company issued 8,999,623 shares in payment of debt and 1,901,488 shares
for payment of services resulting in a loss on settlement of
$471,905.  During 2008 the Company issued 2,800,000 shares in payment
of debt and 950,000 shares for payment of services.
 
 NOTE
9 - RELATED PARTY TRANSACTIONS
 
 The
Company has various debts to related parties as fully described in Note
5.
 
 The
Company has a note receivable from a related party as described in Note
4.
 
 Rent of
$26,000 was contributed to the Company by an officer or a related entity of the
officer and accounted for as a capital contribution for 2009 and
2008.
 
 NOTE
10 - LOSS PER SHARE
 
 The
following data show the amounts used in computing loss per share for the periods
presented:
 For the Year EndedDecember 31,2009
                    
                    
                    2008Income
      (loss) from continuing operations (Numerator)
                    
                    $
                    (1,485,513
                    )
                    
                    $
                    (889,870
                    )Weighted
      average number of common shares outstanding used in loss per share For the
      period (denominator)
                    
                    
                    49,080,108
                    
                    
                    
                    46,451,533
  24
 
 Dilutive  loss  per  share  was
not  presented,  as the  Company  had
no  common equivalent shares for all periods presented that would
affect the computation of diluted loss per share.
 
 NOTE
11 – CONTINGENCIES AND COMMITMENTS
 
 Operating
Lease
 The
Company had a 3 year lease agreement for office space that converted to a
month-to-month rental arrangement in March 2006. Monthly rental expense is
currently $783 per month.  Total rents paid for the years ended
December 31, 2009 and 2008 were $10,452 and $11,376, respectively.
 
 Litigation
 The
Company was engaged in a lawsuit by a former employee for unpaid commission on
sales.  This lawsuit was settled in June 2009 for $3,000.
 
 The
Company is currently a defendant in a Florida state court lawsuit regarding the
alleged nonpayment of certain brokerage commissions.  Management
considers the claim to be without merit and is vigorously defending the
suit.
 
 Mining Lease
Commitments
 In
November 2009, the Company entered into an agreement to assume the lease
purchase option of the Gulch Mine properties, situated in the Hassayampa Mining
District of Arizona, approximately 10 miles south of Prescott.  As
mentioned in Note 6, the initial Gulch Mine lease assumption has been recorded
at $50,000, the cost of the initial lease assumption as of December 31, 2009,
and the cost of extending the term of the lease.  According to the
terms of the Amendment and Extension to Lease Purchase Option Agreement (“the
Amendment”), the Gulch Mine original lessor (“the Lessor”), an unrelated party,
consented to the assignment of the lease to VHGI and granted options for
extending the term of the Gulch Mine lease for up to twelve (12) years. Payments
to the former leaseholder of the Gulch Mine have been made to secure the lease
extension option term through February 2013. Renewal options exist through 2023
and require VHGI to pay an extension fee of $20,000 per year for each subsequent
annual extension.
 
 The
Company has agreed to pay $10,000 to Western Sierra Mining for due diligence and
production analogies to be performed related to its mining claim
lease.
 
 NOTE
12 - SUBSEQUENT EVENTS
 
 In
accordance with applicable accounting standards for the disclosure of events
that occur after the balance sheet date but before the financial statements are
issued, all events or transactions that occurred after December 31, 2009
are outlined below:
  On
February 1, 2010, the Company entered into a purchase agreement (the “Purchase
Agreement”) with Wound Management Technologies, Inc. (“WMT”), a Texas
corporation, pursuant to which  WMT purchased from VHGI—for a total
purchase price of $500,000, consisting of $100,000 in cash and a promissory note
in the principal amount of $400,000 (the “WMT Note”) — the
following:
  1)
              VHGI
      membership interest in the wholly-owned subsidiary, Secure eHealth, LLC, a
      Nevada limited liability company
(“eHealth”).
  2)
              VHGI
      interest in a $1,500,000 Senior Secured Convertible Promissory Note issued
      by Private Access, Inc. (the “Private Access Note”), certain agreements
      related thereto, and a note payable obligation of $1,000,000 (including
      accrued interest)  incurred by VHGI in conjunction with the
      Private Access Note
transaction.
  25
  3)
              VPS
      intellectual property assets of the real-time prescription drug monitoring
      business, including its “Veriscrip”
technology.
  Scott A.
Haire, the Company's Chief Executive Officer and Chairman, also serves as the
Chief Executive Officer, Chief Financial Officer, and a director of WMT. Based
on shares outstanding as of the report on Form 10-K filed by WMT for the year
ended December 31, 2009, Mr. Haire beneficially owns, through H.E.B., LLC, a
Nevada limited liability company of which Mr. Haire is the managing member, 25%
of the outstanding common stock of WMT.
  On
February 24, 2010 the Company formed VHGI Energy, LLC, a Delaware limited
liability company and a 100% owned subsidiary of VHGI.
  On
February 4, 2010 the Company executed a convertible promissory note in the
amount of $25,000 with an unrelated party.  The principal and accrued
interest, at 8% per annum, is due on November 4, 2010.
  On
February 8, 2010 the Company entered into a non-binding letter of intent to
acquire 2,628 acres and related mining claims for an expected price of
$16,000,000.  The ultimate consummation of the transaction is not
guaranteed and is subject to various conditions including the obtaining of
funding, the completion of due diligence, and the negotiation of a definitive
purchase agreement.
  On March
9, 2010, the Company executed a convertible promissory note in the amount of
$30,000 with an unrelated party.  The principal and accrued interest,
at 8% per annum, is due on December 10, 2010.
 
 On March
22, 2010 the Company completed a name change in the State of Delaware to VHGI
Holdings, Inc.
 
 On March
31, 2010 the Company entered into an agreement to acquire certain pipeline
assets from a chapter 7 bankruptcy proceeding for $4,500,000.  The
ultimate consummation of the transaction is not guaranteed and is subject to an
auction and bidding process and approval of the bankruptcy court.
 
 Subsequent
to the balance sheet date the Company has issued a total of 6,382,610 shares of
common stock upon conversion of debentures, for payment of debt and services,
and for additional consideration for the purchase of mining claim
leases.
  26


ITEM
9.  ChangesIn
And
Disagreements
With
Accountants
On
Accounting
And
FinancialDisclosure




None.





ITEM
9A (T).  Controls
and
Procedures




Evaluation
of Disclosure Controls and Procedures




In
accordance with Exchange Act Rules 13a-15 and 15a-15, we carried out an
evaluation, under the supervision and with the participation of management,
including our Principal Executive Officer and Principal Financial Officer, of
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, our Principal Executive
Officer and Principal Financial Officer concluded that our disclosure controls
and procedures were effective as of December 31, 2009.




Management’s
Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f). Under the supervision and with the participation of our
management, including our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in  Internal
Control—Integrated Framework  issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).


Based on
our evaluation under the framework in Internal Control—Integrated Framework
issued by COSO, our management concluded that our internal control over
financial reporting was effective as of December 31, 2009 in providing
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles.




This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities Exchange
Commission that permit the company to provide only management’s report in this
annual report.





Changes
in Internal Control Over Financial Reporting





During
the fourth quarter of 2009, there was no change in the Company’s internal
control over financial reporting that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.




Item
9B.  Other
Information




Not
Applicable.




27




PART
III




Item
10.  Directors,
Executive Officers and Corporate Governance





Set forth
below is certain information concerning each of the directors and executive
officers of the Company as of December 31, 2009:





The
following table sets forth the name, age, and position of each executive officer
and director of the Company:





Director's Name
                  
                  Age
                  
                  Position With CompanyScott
      A. Haire
                  
                  45
                  
                  Chief
      Executive Officer, Chief Financial Officer and DirectorJames
      M. Renfro
                  
                  63
                  
                  PresidentDeborah
      Hutchinson
                  
                  51
                  
                  Director





Scott A. Haire—Mr. Haire has
been Chief Executive Officer, Chief Financial Officer and a director of the
Company since August 28, 2006.  Mr. Haire is also Chief Executive
Officer, Chief Financial Officer and a director of Wound Management
Technologies, Inc.  (“WMT”), a company focused on providing wound care
products.  Shares of common stock of WMT are traded over the counter
on the OTC:BB.  Prior to VHGI, Mr. Haire was President of Preferred
Payment Systems, a company specializing in electronic claims and insurance
system related projects.


James M. Renfro— Mr. Renfro
has served as President of the Company since August 28, 2006.  Mr.
Renfro began his management experience with a tour in the U.S. Marines in
Vietnam where he received several decorations, which included three Purple
Hearts for wounds in combat. Mr. Renfro earned his BS degree in Business and
Governmental Accounting from Cumberland College in Williamsburg, Kentucky with
additional studies toward an MBA at both Morehead State and Eastern Kentucky
Universities. Afterwards he worked for the Kentucky Democratic Party and the
Jefferson County Government. He next secured a position with Rockwell
International where he worked for over 20 years. During his tenure with Rockwell
he served in key management roles in areas of production, accounting, quality
control, as well as sales and service. In each of these functions Jim was
recognized as the best in the company operations. Jim's most cherished
recognition came in his final year when he received the National Account Sales
Award for personally producing over $80mm in sales. Jim then joined a new start
up venture as Vice President of Field Operations for GraMag commercial seating.
In this position Jim worked with heavy equipment manufacturers to get their
products tested and approved for ordering by major trucking companies. He was
also instrumental in the development of products to be used by the commercial
airlines industry. Jim has a proven track record as a leader and innovator and
possesses extensive experience in developing an organization and fueling its
momentum to achieve success.




28




Deborah
Jenkins Hutchinson— Ms.Hutchinson has
served as a Director of the Company since August 28, 2006.   Ms.
Jenkins is the Managing Member of Cognitive Communications, LLC, a Business
Consulting company.    She has served as Special Consultant
to Health Office India for strategy development and operations assistance for
work with US clients in medical transcription and coding services. Prior to
serving in these capacities, she was President of pH Solutions, Ltd, the patent
licensee of “safe acids” used in cosmetics, water purification, agriculture,
pharmaceutical and many other industries. She has served on many national and
international trade association’s boards including the Intel Internet
Health Board of Advisors, the American National Standards Institute Health
Informatics Standards Board – representing HIBCC (ANSI HISB and the American
Society for Automation in Pharmacy (ASAP) where she also served as President and
Secretary of the Board. Ms. Hutchinson earned aBA degreein English-Minor
Journalism from Texas Christian University in 1980.




Board
Composition and Committees




Our Board
of Directors currently consists of two members, Mr. Haire and Ms.
Hutchinson.  We are planning to expand the number of members
constituting our Board of Directors and will seek persons who are “independent”
within the meaning of the rules and regulations of NASDAQ to fill vacancies
created by any expansion.  Because of our current stage of
development, we do not have any standing audit, nominating or compensation
committees, or any committees performing similar functions.  The Board
meets periodically throughout the year as necessity dictates.  No
current director has any arrangement or understanding whereby they are or will
be selected as a director or nominee. No current director has any arrangement or
understanding whereby they are or will be selected as a director or
nominee.




We do not
believe that any member of our Board of Directors is an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission.  Like many
small companies, it is difficult for us to attract and retain board members who
qualify as "audit committee financial experts," and competition for these
individuals is significant.  We believe, however, that our current
board members are able to fulfill their roles under SEC regulations despite not
having a designated "audit committee financial expert."




Director
Compensation




We do not
pay our directors a fee for attending scheduled and special meetings of our
board of directors.  We intend to reimburse each director for
reasonable travel expenses related to such director’s attendance at board of
directors and committee meetings.  In the future we might have to
offer some compensation to attract the caliber of independent board members the
Company is seeking.




Indebtedness
of Directors and Executive Officers




None of
our directors or officers or their respective associates or affiliates is
indebted to us.




29




Family
Relationships




There are
no family relationships among our directors or executive officers.




Code
of Ethics




At
present, we have not adopted a Code of Ethics applicable to our principal
executive, financial and accounting officers; however, we plan to implement such
a Code of Ethics in the near future.




Section
16(a) of the Securities Exchange Act of 1934




Section
16(a) of the Exchange Act requires our officers and directors, and persons who
own more than 10% of a registered class of our equity securities, to file
initial reports of ownership and reports of changes in ownership with the
SEC.  Such persons are required by SEC regulation to furnish us with
copies of all Section 16(a) forms they file.  Based solely on its
review of the copies of such forms received by it and representations from
certain reporting persons regarding their compliance with the relevant filing
requirements, the Company believes that all filing requirements applicable to
its officers, directors and 10% shareholders were complied with during the
fiscal year ended December 31, 2009.




Item
11.  Executive Compensation




Summary
Compensation Table.




The
following table and the accompanying notes provide summary information for each
of the last two fiscal years concerning cash and non-cash compensation awarded
to, earned by or paid to executive officers (or those acting in a similar
capacity).




Name
      and Principal
                          Position
                        
                        Year
                        
                        Salary
      ($)
                        
                        
                        Bonus
      ($)
                        
                        
                        Stock
      Awards
                          ($)
                        
                        
                        Option
                          Awards
                          ($)
                        
                        
                        Nonequity
                          incentive
      plan
                          compensation
                          ($)
                        
                        
                        Nonqualified
                          deferred
                          compensation
                          earnings
      ($)
                        
                        
                        All
      other
                          compensation
      ($)
                        
                        
                        Total
      ($)Scott
      Haire, Chief Financial Officer and Chief Executive Officer
    (1)
                        
                        2009
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-2008
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-James
      Renfro, President
                        
                        2009
                        
                        
                        60,000
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        60,0002008
                        
                        
                        60,000
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        -0-
                        
                        
                        
                        60,000







(1) Scott
A. Haire serves as the Company’s Chief Executive Officer, but as a majority
shareholder, has elected not to receive compensation for either of the last two
fiscal years.




Employment
Agreements




None of
our executive officers or employees listed above has an employment agreement
with the Company or its subsidiaries.


30




Item
12.  Security
Ownership
of Certain
Beneficial
Owners
and
Management
and
Related
Stockholder
Matters




The
following table sets forth certain information with respect to the beneficial
ownership of the common stock of the Company as of December 31, 2009, for: (i)
each person who is known by the Company to beneficially own more than five
percent of the Company’s common stock, (ii) each of the Company’s directors,
(iii) each of the Company’s Named Executive Officers, and (iv) all directors and
executive officers as a group.  As of December 31, 2009, the Company
had 57,352,644 shares of common stock outstanding.




Name
      and Address of Beneficial Owner (1)
                                
                                Number of
                                  Shares
                                  Owned
                                
                                
                                Percentage
                                  of
                                  ClassBeneficial
      Owners of more than 5%:H.E.B.,
      LLC(2)
                                
                                
                                24,119,730
                                (2)
                                
                                
                                42.06
                                %James
      Stuckert Trust
                                
                                
                                5,597,751
                                
                                
                                
                                9.76
                                %500
      W Jefferson St, Louisville, KY 40202Commercial
      Holding
                                
                                
                                4,650,001
                                
                                
                                
                                8.11
                                %202
      S Minnesota St., Carson City, NV 89703T
      Squared Investments, LLC
                                
                                
                                2,650,000
                                
                                
                                
                                4.62
                                %1325
      Sixth Avenue, Floor 28, New York, NY 10019MLH,
      LLC 525 W. Main St #240, Lexington,KY 40507
                                
                                
                                3,871,591
                                
                                
                                
                                6.75
                                %Officers
      and Directors:Scott
      A. Haire
                                
                                
                                (2
                                )
                                
                                
                                42.06
                                %James
      M. Renfro
                                
                                
                                -
                                
                                
                                
                                *Deborah
      Jenkins
                                
                                
                                500,000
                                
                                
                                
                                *All
      directors and executive officers as a group (3 persons)
                                
                                
                                41,389,073
                                
                                
                                
                                72.16
                                %


* less
than
1%


1)
            Unless
      otherwise noted, the address for each person or entity listed is 777 Main
      Street, Suite 3100, Fort Worth Texas,
76102.


2)
            Mr.
      Scott Haire is the managing member of H.E.B., LLC and, in such capacity,
      is deemed to beneficially own the shares of stock held by H.E.B.,
      LLC.  The ownership of shares held by both parties has been
      combined for purposes of calculating the percentage of
      ownership.




ITEM
13.  Certain
Relationships
and Related
Transactions
andDirectorIndependence




On
February 1, 2010, the Company entered into a purchase agreement (the “Purchase
Agreement”) with Wound Management Technologies, Inc. (“WMT”), a Texas
corporation, pursuant to which  WMT purchased from VHGI—for a total
purchase price of $500,000, consisting of $100,000 in cash and a promissory note
in the principal amount of $400,000 (the “WMT Note”) — the
following:




1)
            VHGI
      membership interest in the wholly-owned subsidiary, Secure eHealth, LLC, a
      Nevada limited liability company
(“eHealth”).




2)
            VHGI
      interest in a $1,500,000 Senior Secured Convertible Promissory Note issued
      by Private Access, Inc. (the “Private Access Note”), certain agreements
      related thereto, and a note payable obligation of $1,000,000 (including
      accrued interest)  incurred by VHGI in conjunction with the
      Private Access Note transaction.




31




3)
            VPS
      intellectual property assets of the real-time prescription drug monitoring
      business, including its “Veriscrip”
technology.




Scott A.
Haire, the Company's Chief Executive Officer and Chairman, also serves as the
Chief Executive Officer, Chief Financial Officer, and a director of WMT. Based
on shares outstanding as of the report on Form 10-K filed by WMTI for the year
ended December 31, 2009, Mr. Haire beneficially owns, through H.E.B., LLC, a
Nevada limited liability company of which Mr. Haire is the managing member, 25%
of the outstanding common stock of WMT.




On
February 4, 2010 the Company executed a convertible promissory note in the
amount of $25,000 with an unrelated party.  The principal and accrued
interest, at 8% per annum, is due on November 4, 2010.




On March
9, 2010 the Company executed a convertible promissory note in the amount of
$30,000 with an unrelated party.  The principal and accrued interest,
at 8% per annum, is due on December 10, 2010.




Funds are
advanced from various related parties including the Company's president and
CEO/CFO and entities controlled by him.  Other shareholders may fund
the Company as necessary to meet working capital requirements and
expenses.  The advances are made pursuant to note agreements that bear
interest at 10% per annum, with various maturity dates. All notes are current
liabilities. Accrued interest to related parties totaled $531,695 and $384,303
at December 31, 2009 and December 31, 2008, respectively.





December
      31,2009
                        
                        
                        2008Scott
      Haire, Company Chairman, CEO, and CFO:Unsecured,
      payable on December 31, 2008, including interest at 10% per
      annum.  Accrued interest at December 31, 2009 and December 31,
      2008 is $11,994 and $9,723, respectively.
                        
                        $
                        22,400
                        
                        
                        $
                        22,400HEB
      LLC, Scott Haire owner, Chairman, CEO, and CFO:Unsecured,
      two separate $1,000,000 open lines of credit, no maturity date, interest
      at 10% per annum.  Accrued interest at December 31, 2009 and
      December 31, 2008 is $331,949 and $281,009,
      respectively.  Unsecured lines available at December 31, 2009
      are $1,643,323.
                        
                        
                        430,196
                        
                        
                        
                        727,205Commercial
      and Financial Holdings, LLC:This
      note is considered to be a related party note.  Unsecured,
      payable on demand, including interest at 10% per annum.  Accrued
      interest at December 31, 2009 and December 31, 2008 is $167,524 and
      $54,446, respectively.
                        
                        
                        911,400
                        
                        
                        
                        1,185,000SWCC,
      dated 7/21/06, no stated interest rate
                        
                        
                        21,900
                        
                        
                        
                        21,900Anthony
      Chamblin, investor  in Secure eHealth, LLC:This
      note is considered to be a related party note.  Unsecured,
      payable on demand, including interest at 10% per annum.  Accrued
      interest at December 31, 2009 and December 31, 2008 is $6,636 and $5,622
      respectively.
                        
                        
                        10,000
                        
                        
                        
                        10,000$
                        1,395,896
                        
                        
                        $
                        1,966,505




32





ITEM 14. Principal
AccountantFees
and Services





The
following table presents the estimated aggregate fees billed and to be billed by
Pritchett, Siler & Hardy, P.C. for services performed during our last two
fiscal years.




Years
      Ended
                        December 31,2009
                      
                      
                      2008Audit
      fees(1)
                      
                      $
                      37,530
                      
                      
                      $
                      33,363Audit-related
      fees  (2)
                      
                      
                      0
                      
                      
                      
                      0Tax
      fees  (2)
                      
                      
                      0
                      
                      
                      
                      0All
      other fees (2)
                      
                      
                      0
                      
                      
                      
                      0$
                      37,530
                      
                      
                      $
                      33,363





(1)
            “Audit
      fees” include professional services rendered for (i) the audit of our
      annual financial statements for the fiscal years ended December 31,
      2009 and 2008, (ii) the reviews of the financial statements included
      in our quarterly reports on Form 10-Q for such years and (iii) the
      issuance of consents and other matters relating to registration statements
      filed by us.


(2)
            Our
      auditors provided no other services for us during the last two fiscal
      years other than audit services.




ITEM
15.  Exhibits,
Financial
Statement
Schedules




EXHIBIT
INDEX





EXHIBIT NO.
              
              DESCRIPTION OF EXHIBIT3(i)
              
              Amended
      and Restated Certificate of Incorporation3(ii)
              
              By-Laws
      (Incorporated by reference to Exhibit 3(ii).1 of the Company’s Form
      10-KSB, dated December 31, 2003)10.1
              
              Form
      of Loan, Investment and Security Agreement (Incorporated by reference to
      Exhibit 10.25 to the Company's Current  Report on Form 8-K filed
      with the Commission on May 22, 2008)10.2
              
              Form
      of Note (Incorporated by reference to Exhibit 10.26 to the Company's
      Current  Report on Form 8-K filed with the Commission on May 22,
      2008)10.3*
              
              Securities
      Purchase Agreement, dated as of November 19, 2008, by and among
      VirtualHealth Technologies, Inc., and the investors named
      therein.10.4
              
              Securities
      Purchase Agreement, dated as of July 1, 2009, by and among VirtualHealth
      Technologies, Inc., and the investors named therein (Incorporated by
      reference to Exhibit 10.1 of the Company's Current  Report on
      Form 8-K filed with the Commission on July 27,
  2009)




33





EXHIBIT NO.
              
              DESCRIPTION OF EXHIBIT10.5
              
              Note
      Restructuring Agreement, dated January 15, 2009 (Incorporated by reference
      to Exhibit 10.1 of the Company's Current  Report on Form 8-K
      filed with the Commission on August 19, 2009)10.6
              
              Senior
      Secured Convertible Promissory Note, dated January 15,
      2009  (Incorporated by reference to Exhibit 10.2 of the
      Company's Current  Report on Form 8-K filed with the Commission
      on August 19, 2009)10.7
              
              Amendment
      to Convertible Promissory Notes and Note Restructuring  Agreement,
      dated August 3, 2009  (Incorporated by reference to Exhibit 10.3
      of the Company's Current  Report on Form 8-K filed with the
      Commission on August 19, 2009)10.8
              
              Security
      Agreement dated August 3, 2009  (Incorporated by reference to
      Exhibit 10.4 of the Company's Current  Report on Form 8-K filed
      with the Commission on August 19, 2009)10.9
              
              Purchase
      Agreement, dated February 1, 2010, by and between VirtualHealth
      Technologies, Inc., Wound Management Technologies, Inc., and VPS Holdings,
      LLC (Incorporated by reference to Exhibit 10.4 of the Company's
      Current  Report on Form 8-K filed with the Commission on
      February 9, 2010)10.10
              
              Promissory
      Note dated February 1, 2010 (Incorporated by reference to Exhibit 10.4 of
      the Company's Current  Report on Form 8-K filed with the
      Commission on February 9, 2010)10.11
              
              Veriscrip
      Royalty Agreement, dated February 1, 2010, between Virtual Health
      Technologies, Inc. and Secure eHealth, LLC(Incorporated by reference to
      Exhibit 10.4 of the Company's Current  Report on Form 8-K filed
      with the Commission on February 9, 2010)21.1*
              
              Schedule
      of Subsidiaries23.1*
              
              Consent
      of Pritchett, Siler & Hardy, P.C31.1*
              
              Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  200232.1*
              
              Certification
      pursuant to 18 U.S.C.  Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002


*Filed
herewith




34





SIGNATURES





In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant has duly caused this report to be signed by
the undersigned, thereunto duly authorized.





Vhgi
      holdings, Inc.(Registrant)Date:
      April 19, 2010
                By
                /s/
      Scott A.
      HaireScott
      A. Haire
                  Chief
      Executive Officer andChief
      Financial Officer (principal accounting
officer)





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 dates indicated.





Signature
                      
                      Title
                      
                      Date/s/ Scott A. Haire
                      
                      Chief
      Executive Officer, Chief Financial Officer
                      
                      April
      19, 2010Scott
      A. Haire
                      
                      and
      Director/s/ James M. Renfro
                      
                      Director
                      
                      April
      19, 2010James
      M. Renfro/s/ Deborah Jenkins
      Hutchinson
                      
                      Director
                      
                      April
      19, 2010Deborah
      Jenkins Hutchinson


35