U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 2001, or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
act of 1934 for the transition period from to

                          Commission File No. 000-15243

                         VITAL HEALTH TECHNOLOGIES, INC.
           (Name of Small Business Issuer as specified in its charter)

               Minnesota                               41-1618186
    (State or Other Jurisdiction of                   (IRS Employer
     Incorporation or Organization)                Identification No.)

             855 Village Center Drive Suite 315, North Oaks MN 55127
              (Address of Principal Executive Offices and Zip Code)

Issuer's Telephone Number:  (651) 238-8636

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

Securities  registered  under Section 12(g) of the Act: Common Stock,  par value
$0.01

Check whether the issuer (1) filed all reports  required to be filed by sections
13 or 15(d) of the  Exchange  Act  during  the past 12 months  (or such  shorter
period  that the issuer was  required  to file such  reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The Registrant's revenues for its most recent fiscal year:  $2,906.

The aggregate market value of voting stock held by non-affiliates:  $0

As of February 5, 2002, the Registrant had outstanding  284,460 shares of common
stock, par value $0.01.

Documents incorporated by reference:  None.


<PAGE>


                                TABLE OF CONTENTS

ITEM NUMBER AND CAPTION                                                   Page

Part I

1.    Description of Business                                             3

2.    Description of Property                                             6

3.    Legal Proceedings                                                   6

4.    Submission of Matters to a Vote of Security Holders                 6

Part II

5.    Market for Common Equity and Related Stockholder Matters            6

6.    Management's Discussion and Analysis or Plan of Operation           7

7.    Financial Statements                                                8

8.    Changes in and Disagreements with Accountants                       8
      on Accounting and Financial Disclosure
Part III

9.    Directors, Executive Officers, Promoters and Control                8
      Persons; Compliance with Section 16(a) of the Exchange Act

10.    Executive Compensation                                              9

11.   Security Ownership of Certain Beneficial Owners and Management      9

12.   Certain Relationships and Related Transactions                      10

13.   Exhibits and Reports on Form 8-K                                    11

Signatures                                                                12

                                       2

<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General

     Vital  Health   Technologies,   Inc.  ("Vital  Health"  or  "Company")  was
incorporated  in the  State of  Minnesota  on April 11,  1960  under the name of
Cherne Test Ball,  Inc.  Starting in December of 1961  through May of 1992,  the
Company  effectuated  several name  changes:  Cherne  Industrial,  Inc.;  Cherne
Enterprises,  Inc.; Cherne Medical, Inc.; and Vital Heart Systems, Inc. In 1984,
the Company began research into the science of the electrophysiology of coronary
artery  disease.  As a result,  the Company  began  selling off its  non-medical
activities  and focusing on providing  effective  technologies  and resources to
promote heart disease  detection and prevention.  In 1991, the Company  obtained
financing  to  begin  the   commercialization   of  a  product   that   utilized
electrophysiology to detect heart disease. However, due to numerous factors, the
Company  ceased a majority of its  operations in November of 1993. On January 1,
1994, the Company reentered the development stage with limited  operations,  and
in 1996 the  Company  ceased all  operations.  In 1998,  the  Company  was again
revived.  On  September  26, 2000 the Company  changed its name to Vital  Health
Technologies,  Inc.  and on December 1, 2000,  the Company  acquired  all of the
assets of Vital Health Technologies, LLC ("Vital Health LLC").

     Vital Health is a development  stage company that owns a technology  called
Variance Cardiography  ("Variance  Cardiography" or "Variance  Cardiograph") for
detecting  heart  disease.  Heart  disease is the  number  one killer  among all
diseases and is responsible for over one million deaths per year. Statistically,
almost one in every two Americans will develop  coronary  artery disease and one
in seven will die from sudden cardiac  arrest.  Further,  it is estimated that 5
million Americans have a non-symptomatic  form of heart disease known as "silent
ischemia."  Currently  there does not exist an effective  methodology  to detect
coronary  artery disease that can be utilized on a wide scale basis.  Management
believes that the Variance  Cardiograph may become that methodology by providing
a state of the art tool to detect coronary artery disease.

     The Company intends to license or sell the Variance Cardiography technology
to another medical technology company with the resources required to effectively
market,  manufacture  and  distribute  it to the United States and other foreign
markets.  The company will also be seeking  merger  opportunities  with existing
operating companies, which will generate on-going revenues for the Company.

Principal Product

The Variance Cardiograph

     The Company's  primary  product is the Variance  Cardiograph.  The Variance
Cardiograph is a medical device  designed to assist in the diagnosis of coronary
artery disease by measuring the  electro-physiological  behavior of heart tissue
while the patient is at rest. If heart cells are unhealthy  they are not able to
conduct the electric  current that the heart generates each time it beats.  Just
as the water flow in a river will vary due to  obstacles  such as  boulders  and
logs,  the flow of the  electric  current  in the  heart  will  vary due to cell
deterioration.

     Traditional  evaluation  for the  coronary  artery  disease  begins  with a
personal history review, physical examination, routine lab studies, chest x-rays
and electrocardiograms ("ECG"). However, the accuracy of the ECG, particularly a
resting ECG, is much lower than desired for detecting  coronary  artery disease.
The  accuracy of the stress ECG test is higher than that of the resting ECG, but

                                       3
<PAGE>

many patients cannot be stressed.  For example,  non-ambulatory  individuals and
individuals with health problems such as obesity,  asthma or arthritis cannot be
stressed.  The exercise  ECG test is limited in its accuracy to detect  coronary
artery disease, especially when its results are equivocal as is usually the case
in patients  without  heart disease  symptoms and in patients with  intermediate
risk (i.e.,  patents with or without  symptoms  but having high blood  pressure,
high cholesterol levels,  tobacco use, family history or diabetes).  The medical
community  recognizes  that stress ECGs often have high false positive  results,
particularly in women, which leads to more invasive tests and more expense.

     The Variance  Cardiograph  and the ECG are both designed to detect abnormal
electric  activity of the heart,  but there are  significant  differences in the
methods used to record and analyze this electric activity.  The Company believes
that the Variance  Cardiograph's  manner of collecting  data with respect to the
heart's  electrical  activity allows it to gather data with a higher  resolution
and fidelity than the conventional  ECG. The Variance  Cardiograph uses up to 22
surface electrodes,  compared to 10 for the ECG. The Variance Cardiograph uses a
wider  frequency  range and  increased  sample  rate,  which  allows  the higher
frequency components to be measured and analyzed.  These components are normally
lost  in  standard  12-lead  ECGs.  Increasing  the  sample  rate  improves  the
resolution of collected data. High frequency  changes in the waveforms cannot be
detected  by the  standard  ECG due to its the  narrow  frequency  response  and
limited  sample  rate.  The  Variance  Cardiographs  higher  analog  to  digital
conversion    resolution   allows   measurement   of   smaller   variations   in
electrophysiological  voltage,  down to about 1/6th of a microvolt,  compared to
about 10 microvolts achieved by the standard 12-lead ECG.

     Twenty-four  clinical  studies have been  completed  with  several  studies
published  that  conclude   Variance   Cardiography  has  greater   sensitivity,
specificity  and  accuracy  than  a  standard  ECG  and  exercise  stress  test.
Additionally,  the  Company  believes  the  cost of a  Variance  Cardiograph  is
comparable, if not favorable, to comparable tests.

     Vital  Health  devoted  $400,000 and 2 years to design a new version of the
Variance  Cardiograph  that  replaces  the  Variance  Cardiograph's  current ISA
(Industry   Standard  Adapter)  interface  with  a  Universal  Serial  Bus  data
converter.  The Universal Serial Bus is the new I/O (Input/Output)  standard for
personal computers and gives users simple, easy,  plug-and-play  connections for
peripherals.  The new Variance  Cardiograph  is built as an outside the computer
device  that  provides  potential  advantages  in  flexibility  and  mobility by
allowing the Variance Cardiograph to interface with a laptop or desktop personal
computer.  In addition,  the newer Variance  Cardiograph  can complete a test in
10-15 minutes, compared to the 45-minute test of the previous design.

     The first prototype for the Universal  Serial Bus Variance  Cardiograph was
completed in September of 2000.  The new design  requires  that a new 510 (k) be
filed with the FDA in order to market the device to the medical community.

Patents

     The  Company  holds and  maintains  seven US patents  relating  to Variance
Cardiography  with the master patent being issued in 1993. The Company  believes
that it  possesses  all  necessary  rights  to the  technology  involved  in the
Variance  Cardiograph.  However,  there is no assurance the Variance Cardiograph
will not infringe on patents held by others, nor is there any assurance that the
patents  granted  will  provide  commercial  benefit to the  Company or adequate
protection against  competition.  The Company requires its consultants to agree,
in writing, to keep its proprietary information confidential and, within certain
limitations,  to assign to the Company all inventions  relating to the Company's
business.

                                       4
<PAGE>


Plans for licensing or sale of technology

     Do to the  lack  of  available  capital  to  successfully  market  Variance
Cardiography,  the Company  changed its  direction in 2001 from trying to market
the Variance  Cardiography  technology to actively seeking candidates to license
or purchase the Variance  Cardiograph  technology.  Types of companies that have
been targeted include ECG manufacturers,  electrode manufacturers, large medical
device and pharmaceutical  companies. The Company has contacted companies in the
United  States,  Europe  and  Japan.  As of this  date,  there have not been any
proposals  presented by the Company or any  candidates  that have been targeted.
There can be no  assurance  that the Company  will have  success in licensing or
selling the Variance Cardiograhy technology. In the event that the Company sells
the technology in exchange for stock and/or a royalty, there can be no assurance
that the stock will be marketable or have future value or that royalty  payments
will be paid or have any significant value.

Pursuit of acquisition and merger candidates

     The  Company has been  receiving  assistance  from Focus Tech  Investments,
Houston  Texas who has  provided  the Company  with loans and help in locating a
market maker for the Company's stock. The Company has received approval from the
NASD for its stock to trade on the  over-the-counter  bulletin board. Focus Tech
Investments  is also seeking  operating  companies that may be candidates for an
acquisition or merger with Vital Health Technologies. As of this date there have
been no discussions  with any potential  candidates for an acquisition or merger
and there can be no  assurance  that either will take place in the future or any
agreement will be finalized if discussions take place.

Reverse stock split

     To better  position the Company for a potential  merger or acquisition  the
Company's  board of directors  considered  and approved a reverse stock split on
December  26,  2001.  For  shareholders  of  record  on  January  7,  2002  each
shareholder received one share of Vital Health  Technologies,  Inc. common stock
in exchange for each ten shares held. For  shareholders  who will then hold less
than one share of common stock the Company will be purchasing  those shares at a
price of .05 per  fractional  share.  As the reverse  split was  approved by the
board of directors  only,  the Company may be required  under  Minnesota  law to
amend its articles of incorporation to reduce the number of authorized shares of
common stock to 5,000,000 and increase the par value per share to $0.10.

Governmental Regulation

     The Variance  Cardiograph  is subject to government  regulation by the Food
and Drug  Administration  ("FDA") under the Federal Food, Drug and Cosmetic Act.
The Company has  submitted a 510(k) and  received  FDA  clearance  for the older
model of the  Variance  Cardiograph  in 1986.  The first  prototype  for the new
Variance Cardiograph was completed in September 2000. With the new design, a new
510(k)  must be filed with the FDA before  the  device  can be  marketed  to the
medical   community.   Any  company  who  licenses  or  purchases  the  Variance
Cardiography  technology  will  need to file  for FDA  clearance.  However,  FDA
clearance is not certain,  and such  clearance  will  require  additional  time,
effort, and expense.

Employees

     The Company is a development  stage company and currently has no employees.
Executive officers will devote such time to the affairs of the Company,  as they
deem  appropriate.  Management  of  the  Company  expects  to  use  consultants,

                                       5
<PAGE>

attorneys,  and  accountants as necessary,  and does not currently  anticipate a
need to  engage  any  full-time  employees.  The need for  employees  and  their
availability   will  be  addressed  in  connection  with  potential   merger  or
acquisitions.

ITEM 2.  DESCRIPTION OF PROPERTY

     To reduce  operating  expenses the Company  negotiated a lease  termination
agreement  with CSM  Properties.  The Company  vacated the  approximately  2,000
square foot facility at its Roseville,  Minnesota location on October 1, 2001 to
save approximately $3,500 in monthly expenses. The Company will continue to rent
420  square  feet at its  Shoreview,  Minnesota  location,  which is rented on a
monthly basis.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to any legal proceedings, and to the best of its
knowledge, no such proceedings by or against the Company have been threatened.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matter was submitted to a vote of security holders in the fourth quarter
of 2001.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     With the assistance of Focus Tech Investments the Company was successful in
seeking a market maker to file a form 11 with the NASD.  In late  December  ACAP
Securities  of Salt Lake City,  Utah was  notified  by the NASD the  approval to
develop a public market for Vital Health Technologies,  Inc. common stock on the
OTC Bulletin  Board.  However,  there is no assurance that a trading market will
develop in the future. Even if a trading market should develop,  there is no way
of determining what the market price may be at any future time.

     At  January  21,  2002,  there  were  approximately  1,218  holders  of the
Company's  284,460  issued and  outstanding  shares of common  stock,  $0.01 par
value.

     The Company has never  declared a cash  dividend on its Common  Stock.  The
Company has not paid, nor declared,  any cash dividends  since its inception and
does not intend to declare any such  dividends in the  foreseeable  future.  The
Company's  ability  to pay  dividends  is  subject  to  limitations  imposed  by
Minnesota law.

Issuance of Securities

     In July 2001,  the Company  issued 470, post reverse split shares of common
stock to  Prudential  Securities  to correct an error from  December  of 1996 in
which the Company  issued a  certificate  to Prudential  Securities  but did not
record it on the  Company  shareholder  list.  The  mistake  was  identified  by
Prudential  Securities when they presented the certificate to the transfer agent
to exchange for a post stock split certificate.

Convertible Promissory Notes.

     During the year 2001 the  Company  issued  promissory  notes  amounting  to
$102,500 in proceeds to the Company. The notes accrue at a 10% interest rate and
are due 12 months  following  the issue  date.  Each  holder  has the  option to
convert all or a portion of each note into shares of Vital Health  Technologies,
Inc. common stock at price determined by a stock offering or the Company's board
of  directors.  The notes issued  through  March of 2001 include a stock warrant
that was issued at the same time as the  notes.  Each note  increment  of $5,000
includes a warrant  to  purchase  250  shares of common  stock at a price of $20

                                       6
<PAGE>

within 5 years of the issue  date.  A total of 4,500  shares  are under  warrant
relating to these notes.

Warrants Issued For Services Rendered

     In 2000 and 2001 the Company issued  warrants to purchase  17,050 shares at
exercise prices ranging from $.49 to $.50 per share in exchange for advisory and
consulting  services.  Each warrant  expires 5 years following the date of issue
(October 2005 to March 2006).

     Currently the Company has a total of 21,550 warrants outstanding, including
the warrants issued for services  rendered and those issued with the convertible
notes.


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     Vital  Health is a  development  stage  company and has not  commenced  its
principal  operation  of  distributing  the  Variance  Cardiograph  and  related
services. Due to economic and market conditions the Company was unable to secure
sufficient financing to complete the plan of development for 2001. Consequently,
management  has changed the  strategic  direction of the Company to focus on the
sale or licensing  of the Variance  Cardiograhy  technology  and seek  potential
merger-acquisition   opportunities.   The  Company  is   utilizing   Focus  Tech
Investments,  Houston,  Texas to provide  services  that  include  locating  and
negotiating merger-acquisition agreements with existing operating companies.

     Our plan for the next 12 months is to:

     Maintain the administrative and reporting requirements of a public company

     Target and approach  potential  candidates who will purchase or license the
     variance cardiography technology

     Position  the  Company  for,   and  pursue   potential   merger-acquisition
     opportunities with existing operating companies


     As of this date we have not  presented or received any proposals or entered
into any  negotiations  regarding  the  purchase or  licensing  of the  Variance
Cardiography technology.  In addition, we have not entered into any proposals or
negotiations   with  potential   merger-acquisition   candidates.   The  Company
implemented  a 1 for 10 reverse  stock  split  early in the year 2002 to be more
attractive for merger-acquisition candidates. However, there can be no assurance
that the Company will be successful with either of the two  initiatives,  and if
so; we cannot accurately predict the value of any agreement to the Company.

     The  Company  has relied on loans and  internal  sources  for  funding  the
expenses of the Company. Since we presently have no revenue from operations,  we
cannot rely on internal sources of capital to fund ongoing Company expenses.  If
we are unable to locate candidates for the purchase or licensing of the Variance
Cardiography  technology  or  complete a merger or  acquisition  agreement,  our
ability to continue as a going concern is unlikely.

     The  convertible  promissory  notes that were  issued in 2001 will begin to
come due in January 2002.  There can be no assurance  that the Company will have
the funds  available  if the note  holders  do not elect to  convert  their note
balances into common stock at a price that the board of directors may offer.  If
the notes go into default the note holders will have the right to pursue  action

                                       7
<PAGE>

against the Company to seek  payment.  Management  has been in contact with each
note  holder and it is  believed  that each will allow the notes to  continue to
accrue  interest  at 10% for a limited  period of time  beyond the due dates for
each note. Our senior officer,  William Kieger has provided his services in 2001
without  compensation.  For financial  statement  purposes,  these services were
valued at their fair  value of  $120,000  in  accordance  with Staff  Accounting
Bulletins  5-T. Each of the officers and directors of the Company have expressed
a desire to be replaced by other qualified officers and directors during 2002.

     All  of our  outside  product  development,  marketing  and  administrative
consultants  have  accepted  warrants  for  services  rendered,  but there is no
assurance  they will continue to do so in the future.  In the event Vital Health
is successful in its  initiatives a new team of managers and directors will most
likely fill those positions for the Company.

Forward-Looking Statement Notice

     When used in this report, the words "may," "will," "expect,"  "anticipate,"
"continue,"   "estimate,"  "project,"  "intend,"  and  similar  expressions  are
intended to identify  forward-looking  statements regarding events,  conditions,
and financial  trends that may affect the Company's  future plans of operations,
business strategy,  operating results, and financial position. Persons reviewing
this report are cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties and that actual
results may differ  materially  from those included  within the  forward-looking
statements as a result of various factors.  Such factors are discussed under the
headings "Item 1. Description of Business," and "Item 6. Management's Discussion
and Analysis or Plan of Operation,"  and also include general  economic  factors
and conditions  that may directly or indirectly  impact the Company's  financial
condition or results of operations.

ITEM 7.  FINANCIAL STATEMENTS

     The financial  statements  of the Company  appear at the end of this report
beginning with the Index to Financial Statements on page 13.

ITEM 8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     There have been no changes in or disagreements  with accountants during the
last three fiscal years.

                                    PART III

ITEM 9.  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND CONTROL  PERSONS;  AND
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Directors and Officers

     The following  table sets forth the names,  ages,  and  positions  with the
Company for each of the officers and directors of the Company.

                                       8
<PAGE>



Name                      Age   Positions                     Since

William Kieger            46    President and Director        August, 2000

Stephen Muscanto          59    Director                      August, 2000

Lloyd R. Woelfle          49    Secretary and Director        August, 2000


     All directors hold office until the next annual meeting of  stockholders or
until their  successors  are duly  elected and  qualify.  Officers  serve at the
discretion of the Board of Directors.

     The following is  information  on the business  experience of each director
and officer.

     William Kieger received his B.A. in Business Management from the University
of St. Thomas, St. Paul, Minnesota in 1978. For fifteen years prior to 1996, Mr.
Kieger served as a Vice  President  with American  Express  Financial  Advisors,
where he was manager of a division of the company, which sold financial services
products.  For the past six  years he has  owned  and  operated  Aurora  Capital
Management, a consulting firm providing venture capital,  business and strategic
planning.

     Stephen  Muscanto  received  a BA  from  Yale,  an MS from  the  California
Institute of Technology,  and an MBA from  University of Southern  California in
1972. He is currently  self-employed  as a business  consultant  specializing in
operations and business systems. From 1991 to May 1999, he was the President and
CEO of  Pneuseal  International  Corporation,  a  manufacturer  of heat  sealing
plastic film equipment and tooling primarily for the health care market.

     Lloyd Woelfle attended the University of Oklahoma  majoring in Microbiology
from 1971 to 1973. He received a CFP designation  from the College for Financial
Planning,  Denver,  Colorado, and is a licensed principal. For the past 23 years
American  Express has employed Mr.  Woelfle;  most recently as a vice  president
specializing in security compliance and systems management.

ITEM 10.  EXECUTIVE COMPENSATION

     The Company has no agreement or understanding, express or implied, with any
officer or principal stockholder,  or their affiliates or associates,  regarding
compensation in the form of salary, bonuses,  stocks,  options,  warrants or any
other form of remuneration, for services performed on behalf of the Company. Nor
are there compensatory plans or arrangements,  including payments to any officer
in relation to resignation,  retirement, or other termination of employment with
the  Company,  or any  change  in  control  of the  Company,  or a change in the
officer's responsibilities following a change in control of the Company

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets  forth as of  February  5, 2002,  the number and
percentage of the 284,460 issued and outstanding  shares of the Company's common
stock,  par value  $0.01,  which  according to the  information  supplied to the
Company,  were beneficially owned by (i) each person who is currently a director
of the Company,  (ii) each executive  officer,  (iii) all current  directors and
executive  officers  of the  Company as a group and (iv) each person who, to the
knowledge  of the  Company,  is the  beneficial  owner  of  more  than 5% of the
outstanding common stock.  Except as otherwise  indicated,  the persons named in

                                       9
<PAGE>


the table have sole  voting  and  dispositive  power with  respect to all shares
beneficially owned, subject to community property laws where applicable.

Name and Address
of Beneficial Owner                             Common Shares   Percent of Class

Aurora Capital Management LLC (1)(4)               210,421           73.97

William Kieger (2)(4)                              210,421           73.97

Stephen Muscanto (2)(3)                              1,167           0.041

Lloyd Woelfle (2)(3)                                 6,532            2.29

All officers and directors as a group:  3          218,121           76.30
Persons

(1)  William  Kieger owns and controls  Aurora  Capital  Management  LLC,  which
     directly owns 210,421  shares of the Company's  common stock.  Accordingly,
     Mr. Kieger may be deemed to have  indirect  voting and  investment  control
     over the shares held by Aurora Capital Management.
(2)  Officer or director of the Company.
(3)  Includes a warrant to purchase 1,000 shares.
(4)  Includes a warrant to purchase   750 shares.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

     Copies of the  following  documents are included as exhibits to this report
pursuant to Item 601 of Regulation S-B.

SEC Ref. No.  Title of Document                                     Location
------------  -----------------                                     --------

3.1           Amended and Restated Articles of Incorporation            *
3.2           Restated Bylaws                                           *

*    These items were filed as exhibits to the  Company's  annual report on Form
10-KSB for the year ended December 31, 2000, and are incorporated herein by this
reference.

Form 8-K Filings

     No  reports on Form 8-K were  filed  during the fourth  quarter of the year
ended December 31, 2001.

                                       10

<PAGE>


SIGNATURES

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

                                          Vital Health Technologies, Inc.

Date:  January 25, 2002                   /s/ William Kieger, President,
                                          Chief Executive and Financial Officer

     In  accordance  with the Exchange  Act,  this report has been signed by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.


January 25, 2002                          /s/ William Kieger, Director


January 25, 2002                          /s/ Lloyd Woelfle, Director


January 25, 2002                          /s/ Stephen Muscanto, Director



                                       11
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                             FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 31, 2001 AND 2000
                      AND THE PERIOD FROM REENTRANCE INTO
                               DEVELOPMENT STAGE
                    (JANUARY 1, 1994) TO DECEMBER 31, 2001


                               TABLE OF CONTENTS

                                                                      Page

Independent Auditors' Report...........................................13


Financial Statements:

      Balance Sheets...................................................14

      Statements of Operations.........................................15

      Statements of Stockholders" Equity (Deficit).....................16

      Statements of Cash Flows.........................................17

      Notes to Financial Statements....................................18

                                       12
<PAGE>


                     Callahan, Johnston & Associates, LLC
                 Certified Public Accountants and Consultants


                         INDEPENDENT AUDITORS' REPORT

Stockholders and Board of Directors
Vital Health Technologies, Inc.
   (A Development Stage Company)
Minneapolis, Minnesota


We have audited the  accompanying  balance sheets of Vital Health  Technologies,
Inc.  (f/k/a/ Vital Heart  Systems,  Inc.) as of December 31, 2001 and 2000, and
the related statements of operations,  stockholders' equity (deficit),  and cash
flows for the years then ended and the period from reentrance  into  development
stage (January 1, 1994) to December 31, 2001. These financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain  reasonable  assurance  about whether the financial
statements are free of material misstatements. An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Vital Health Technologies, Inc.
as of December 31, 2001 and 2000,  and the results of operations  and cash flows
for the years then ended and the period from reentrance into  development  stage
(January 1, 1994) to December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.

As described in Note 2 to the financial statements,  the accompanying  financial
statements have been prepared assuming that the Company will continue as a going
concern.  The Company's  significant  operating losses raise  substantial  doubt
about its ability to continue as a going  concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

/s/ Callahan, Johnston & Associates, LLC


CALLAHAN, JOHNSTON & ASSOCIATES, LLC
Minneapolis, Minnesota
January 19, 2002




              7850 Metro Parkway, Suite 207, Minneapolis, MN 55425
                   Telephone: (952)858-7207 Fax: (952)858-7202
                        Email: callahan_johnston@msn.com

                                       13
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                                BALANCE SHEETS

                                                              December 31,
                                                       -------------------------
                                                          2001           2000
                                                       -----------   -----------
               ASSETS

Current assets:
   Cash                                                $     1,379   $    9,143
   Inventory                                                  -           3,073
   Prepaid expenses                                           -           7,282
                                                       -----------   -----------

     Total current assets                                    1,379       19,498
                                                       -----------   -----------

Furniture and equipment                                      6,677        6,677
Less accumulated depreciation                                2,108          162
Less valuation allowance                                     4,569          -
                                                       -----------   -----------
     Net furniture and equipment                              -           6,515
                                                       -----------   -----------

     Total assets                                      $     1,379   $   26,013
                                                       ===========   ===========

   LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable and accrued expenses               $    10,080   $    10,232
   Convertible notes payable                               102,500          -
   Note payable - related party                               -             -
                                                       -----------   -----------

     Total current liabilities                             112,580       10,232
                                                       -----------   -----------

Stockholders' equity (deficit):
   Undesignated stock: 5,000,000 shares
     authorized; none issued and outstanding                  -             -
   Common stock: $.01 par value;
     50,000,000 shares authorized (see Note 1);
     shares issued and outstanding
     284,459 in 2001 and 2000                                2,845        2,845
   Additional paid-in capital                           11,966,778   11,846,228
   Accumulated deficit                                 (11,793,637) (11,793,637)
   Deficit accumulated during the
     development stage                                    (287,187)     (39,655)
                                                       -----------   -----------

     Total stockholders'
       equity (deficit)                                   (111,201)      15,781
                                                       -----------   -----------

     Total liabilities and
       Stockholders' equity (deficit)                  $     1,379   $    26,013
                                                       ===========   ===========







              The accompanying notes are an integral part of these
                          financial statements.


                                       14
<PAGE>


                         VITAL HEALTH TECHNOLOGIES, INC.
                          (A Development Stage Company)

                            STATEMENTS OF OPERATIONS

                                                                 Reentrance Into
                                                                    Development
                                                                     Stage To
                                         Years Ended December 31,   December 31,
                                         ------------------------
                                            2001         2000           2001
                                         ----------   ----------     ----------

Revenues                                 $   2,906    $      457     $   96,361
Cost of goods sold                             (38)        -                (38)
Administrative expenses                   (234,790)      (86,102)      (718,846)
Other income (expense)                      (7,604)        -             (7,404)
Interest expense                            (7,651)       (4,323)       (91,974)
Income tax expense (benefit)                  (355)        -               (529)
                                         ----------   ----------     ----------

     Operating income (loss)              (247,532)      (89,968)      (722,430)

Gain on debt forgiveness/
   collection, net of income
   taxes of $-0-, and $-0-,
   respectively                               -          438,942        435,243
                                        ----------     ----------    ----------

     Net income (loss)                    (247,532)      348,974       (287,187)

Other comprehensive income (loss)             -            -               -
                                        ----------     ----------    ----------

Comprehensive income (loss)             $ (247,532)    $  348,974    $ (287,187)
                                        ==========     ==========    ==========

Basic earnings (loss) per share:
   Continuing operations                $     (.87)    $    (1.36)   $    (9.56)
   Extraordinary item                         -              6.64          5.76
                                        ----------     ----------    ----------

                                        $     (.87)    $     5.28    $    (3.80)
                                        ==========     ==========    ==========

     Weighted average number of
       shares outstanding                  284,459         66,066        75,533
                                        ==========     ==========    ==========

Diluted earnings (loss) per share:
   Continuing operations                $     (.87)    $    (1.36)   $    (9.56)
   Extraordinary item                         -              6.64          5.76
                                        ----------     ----------    ----------
                                        $     (.87)    $     5.28    $    (3.80)
                                        ==========     ==========    ==========

     Weighted average number of
       shares outstanding                  284,459         66,066        75,533
                                        ==========     ==========    ==========








              The accompanying notes are an integral part of these
                          financial statements.

                                       15

<PAGE>


                                           VITAL HEALTH TECHNOLOGIES, INC.
                                            (A Development Stage Company)

                                    STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<S>                                          <C>     <C>       <C>          <C>            <C>             <C>
                                                                                           Accumulated
                                              Common Stock                                    Deficit
                                           -------------------  Additional                    During
                                             Number of           Paid-In    Accumulated    Development
                                             Shares     Amount   Capital      Deficit         Stage           Total
                                           ------------------- ----------- -------------   -----------     ------------

Balances, January 1, 1994                     41,900 $     419 $11,779,532 $(13,896,096)   $    -          $(2,116,145)
  Issuance of common stock in 1994               553         6      14,994         -            -               15,000
  Net income (loss) - 1994                      -          -          -           5,503(1)     (89,747)        (84,244)
  Net income (loss) - 1995                      -          -          -            -           (62,874)        (62,874)
  Net income (loss) - 1996                      -          -          -            -           (71,513)        (71,513)
  Net income (loss) - 1997                      -          -          -            -           (70,000)        (70,000)
  Net income (loss) - 1998                      -          -          -         488,491(1)      264,570(1)     753,061
  Net income (loss) - 1999                      -          -          -       1,300,012(1)      (50,612)     1,249,400
                                           --------- --------- -----------  -----------    ------------    -----------

Balances, December 31, 1999                  42,433        425  11,794,526  (12,102,090)        (80,176)      (387,315)
  Issuance of common stock and warrants in
    in settlement of debt in September 2000     181          2         234         -               -               236
  Exercise of warrant in September 2000       1,451         14         712         -               -               726
  Issuance of common stock and warrants for
    services in September 2000                  275          3         534         -               -               537
  Issuance of common stock in settlement of
    debt in October 2000                     40,099        401      19,649         -               -            20,050
  Issuance of warrants for services            -           -           925         -               -               925
  Issuance of common stock as part of asset
    purchase agreement                      200,000      2,000      29,648         -               -            31,648
  Net income (loss) - 2000                     -           -          -         308,453          40,521        348,974
                                          --------- ---------- -----------  -----------    ------------    -----------

Balances, December 31, 2000                 284,459      2,845  11,846,228  (11,793,637)        (39,655)        15,781
  Contributed capital from donated services    -           -       120,000         -               -           120,000
  Issuance of warrants for services            -           -           550         -               -               550
  Net income (loss) - 2001                     -           -          -            -           (247,532)      (247,532)
                                          --------- ---------- -----------  -----------    ------------    -----------

Balances, December 31, 2000                 284,459 $    2,845 $11,966,778 $(11,793,637)   $   (209,187)   $  (111,201)
                                          ========= ========== =========== ============    ============    ===========
</TABLE>

(1) Debt forgiveness  applied to accumulated  deficit and or deficit accumulated
during  development  stage based on period forgiven  liabilities  were initially
incurred.



              The accompanying notes are an integral part of these
                                financial statements.

                                       16
<PAGE>


                         VITAL HEALTH TECHNOLOGIES, INC.
                          (A Development Stage Company)

                            STATEMENTS OF CASH FLOWS
                           Increase (Decrease) In Cash

                                                                 Reentrance Into
                                                                    Development
                                                                     Stage To
                                          Years Ended December 31,  December 31,
                                          ------------------------
                                             2001          2000          2001
                                          ----------    ----------  ------------

Cash flows from operating activities:
  Net income (loss)                       $ (247,532)   $  348,974  $  (287,187)
  Adjustments to reconcile net income
    (loss) to cash flows from
    operating activities:
      Debt forgiveness/cancellation             -         (438,942)    (435,243)
      Stock and warrants issued for
        services                                 550         1,462        2,012
      Donated officer compensation           120,000          -         120,000
      Valuation allowances                     7,604          -           7,604
      Depreciation                             1,946          -           1,946
      Inventory                                   38          -              38
      Indebtedness incurred
        for services and storage                -           55,000      400,000
      Prepaid expenses                         7,282        (7,282)        -
      Accounts payable and
        accrued expenses                        (152)      (14,970)     (10,594)
                                          ----------    ----------    ----------

Cash flows from operating activities        (110,264)      (55,758)    (201,424)
                                          ----------    ----------    ----------

Cash flows from financing activities:
  Stock proceeds                                -           19,888       34,888
  Proceeds of note payable                   102,500        45,013      157,038
                                          ----------    ----------    ----------

Cash flows from financing activities         102,500        64,901      191,926
                                          ----------    ----------    ----------

Increase (decrease) in cash                   (7,764)        9,143       (9,498)

Cash:
  Beginning of year                            9,143          -          10,877
                                          ----------    ----------   -----------
  End of year                             $    1,379    $    9,143   $    1,379
                                          ==========    ==========   ===========

Cash paid for:
   Interest                               $     -       $     -      $     -
                                          ==========   ==========    ===========
   Income taxes                           $    1,081    $     -      $    1,081
                                          ==========   ==========    ===========

Summary of non cash activity:

     In 2000 the Company  issued  common stock and warrants with a fair value of
     $20,286  as  partial  settlement  of  accounts  payable  and other  accrued
     expenses and note payable - related party.

     In 2000 the Company issued common stock and warrants for services  totaling
     $1,462.

     On  December  1, 2000,  the  Company  acquired  assets,  including  cash of
     $19,162, in exchange for 2,000,000 shares of the Company's common stock.

     In 2001,  $120,000 in value was assigned to donated officer  services under
     SAB 5-T.


              The accompanying notes are an integral part of these
                          financial statements.


                                       17
<PAGE>


                         VITAL HEALTH TECHNOLOGIES, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

The Company was  incorporated  on April 1, 1960,  under the laws of the State of
Minnesota.  On September 26, 2000, the Company  changed its name to Vital Health
Technologies, Inc. Formerly the Company was known as Vital Heart Systems, Inc.

In November 1993, the Company ceased the majority of its operations.  At January
1, 1994, the Company was deemed to have reentered the  development  stage.  From
1994 to 1997 the Company had only limited operations as it tried to complete the
design and marketing of a  non-invasive,  stress-free  coronary  artery  disease
(CAD) detection device. In 1997 the Company ceased all operations.

In 1998 and 2000 the  Company  worked  with a Minnesota  venture  capital  firm,
Aurora Capital  Management,  LLC (Aurora) and a Minnesota entity with compatible
business operations,  Vital Health  Technologies,  LLC (VHT-LLC) in an effort to
revitalize the Company (see Notes 2 and 5). These dealings ultimately led to the
acquisition of VHT-LLC's assets on December 1, 2000 (see Note 5).

Risks, Estimates and Uncertainties

   Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements and reported  amounts of revenues and expenses during
     the reporting period.




                                       18
<PAGE>


                         VITAL HEALTH TECHNOLOGIES, INC.
                          (A Development Stage Company)

                          NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Risks, Estimates and Uncertainties

   Authorized Number of Shares

     The Company  enacted a 1 for 10 reverse  stock split as  reflected in these
     financial  statements (see Note 5). A provision in Minnesota Statutes might
     require  reduction of the authorized  shares of the Company from 50,000,000
     to  5,000,000  and  adjustment  of the par  value  from  $.01 to $.10.  The
     ultimate resolution of this matter cannot be determined at this time.

   Inventory

     Inventory  is  recorded  at the lower of cost  (determined  on a  first-in,
     fist-out  basis) or  market.  Inventory  levels  significantly  exceed  the
     Company's current requirements. The estimated loss that management believes
     is  probable  is  included in the  inventory  valuation  allowance.  Due to
     uncertainties,   however,   it  is  at  least   reasonably   possible  that
     management's  estimate will change during the next year. That amount cannot
     be estimated.

   Inventory is as follows:
                                                 2001         2000
                                               --------     --------

     Finished goods inventory                  $  3,035     $  3,073
     Valuation allowance                         (3,035)        -
                                               --------     --------

                                               $   -        $  3,073
                                               ========     ========

   Furniture and Equipment

     Furniture and equipment  are recorded at cost.  Depreciation  is calculated
     using the straight-line method over estimated useful lives of 2 to 5 years.
     The Company's ability to utilize these fixed assets in on-going  operations
     is uncertain (see Note 2). The estimated loss that  management  believes is
     probable is included in the furniture and  equipment  valuation  allowance.
     Due to  uncertainties,  however,  it is at least  reasonably  possible that
     management's  estimate will change during the next year. That amount cannot
     be estimated.

                                       19
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 31, 2001 AND 2000


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Risks, Estimates and Uncertainties (Continued)
----------------------------------

   Lender Concentration/Continued Existence

     The  Company  has been  fully  dependent  on  VHT-LLC  and  Aurora  for the
     maintenance  of  its  corporate   status  and  to  provide  all  managerial
     assistance and working capital support for the Company.

   Continued Existence

     Management is uncertain if current agreements will allow it to remain as an
     operating business (see Note 2).

Earnings Per Share

The  Company  implemented  FASB 128:  Earnings  Per  Share.  Basic EPS  excludes
dilution and is computed by dividing net income by the  weighted-average  number
of common shares  outstanding  for the year.  Diluted EPS reflects the potential
dilution  from stock  options and  warrants  and is computed  using the treasury
stock  method.  Under the treasury  stock method stock  options and warrants are
assumed to have been  exercised  at the  beginning of the period if the exercise
price  exceeds the average  market  price during the period.  Stock  options and
warrants  are  excluded  from the EPS  calculation  due to  their  antidultitive
effect.

Stock-Based Consideration

The Company has applied the fair  value-based  method of accounting for employee
and nonemployee stock-based consideration and/or compensation in accordance with
FASB Statement 123.

Contributed Services

Management services  contributed by a principal  stockholder have been reflected
at their fair value in the accompanying  financial statements in accordance with
Staff Accounting Bulletin (SAB) 5-T: Accounting For Expenses or Liabilities Paid
By Principal Stockholders.

                                       20
<PAGE>



                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 31, 2001 AND 2000
                      AND THE PERIOD FROM REENTRANCE INTO
                               DEVELOPMENT STAGE
                    (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income

SFAS  No.  130  establishes  standards  for  the  reporting  and  disclosure  of
comprehensive  income and its components  which will be presented in association
with a company's financial  statements.  Comprehensive  income is defined as the
change  in  a  business   enterprise's  equity  during  a  period  arising  from
transactions,  events or circumstances  relating to non-owner  sources,  such as
foreign  current  translation  adjustments  and  unrealized  gains or  losses on
available-for-sale securities. It includes all changes in equity during a period
except those resulting from investments by or  distributions to owners.  For the
years ended December 31, 2001 and 2000, net income and comprehensive income were
equivalent.

Fair Values

The Company's agreements with Aurora and VHT-LLC (see Note 5) approximated their
fair value due to the short-term nature of these financial instruments.

Income Taxes

The Company  accounts for income taxes in accordance with Statement of Financial
Accounting  Standards No. 109,  "Accounting for Income Taxes" which requires the
use of the "liability method" of accounting for income taxes.


NOTE 2 - GOING CONCERN/DEVELOPMENT STAGE COMPANY

On January 1, 1994,  the Company was deemed to have  reentered  the  development
stage.  Since that date the Company has devoted the  majority of its efforts to:
maintenance of the corporate status;  settlement of liabilities;  and the search
for a viable method of operations and/or merger candidate.



                                       21
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 2 - GOING CONCERN/DEVELOPMENT STAGE COMPANY (Continued)

In 2001 and 2000 the Company has been fully  dependent on its  stockholders  and
Aurora for the maintenance of its corporate status and to provide all managerial
assistance and working capital support for the Company.

In November 2000, the Company satisfied the last of its judgment  creditors (see
Note 6). In October  2000,  the Company  reached an  agreement  with  VHT-LLC to
settle its  indebtedness  to VHT-LLC for 40,099 shares of the  Company's  common
stock (see Note 6). On December 1, 2000, the Company  acquired all of the assets
of VHT-LLC for 200,000  shares of the  Company's  common  stock (see Note 6). In
2001,  the  Company  attempted  to move  forward  with  development  of its core
technology  (variance  cardiography).  The Company  attempted  to raise  capital
through a private  placement or rights offering of the Company's common stock to
move forward with product development, but was unsuccessful.  Due to the lack of
available  capital to  successfully  market variance  cardiography,  the Company
changed its  direction in 2001 from trying to market the  variance  cardiography
technology  to actively  seeking  candidates to license or purchase the variance
cardiograph technology.

During 2002, management will continue to:

  * Attempt to raise monies,
  * Maintain the administrative and reporting requirements of a public company,
  * Target and approach potential candidates who will purchase or license the
    variance cardiography technology, and
  * Position the Company; and pursue potential merger-acquisition opportunities
    with existing operating companies.

Failure of the company to achieve these goals could result in it being unable to
continue as a going  concern.  No estimate can be made of the range of loss that
is reasonably possible should the Company be unsuccessful.


                                       22

<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                    (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 3 - GAIN ON DEBT CANCELLATION/SETTLEMENT

From 1999 to 2000, the Company  successfully  negotiated  settlements of various
obligations for:

   *  Partial payments
   *  Equity issuances
   *  Creditor releases

Other obligations of the Company were statutorily canceled due to the expiration
of the statute of limitations on these  obligations.  At December 1, 2000, these
cancellations  and  or  settlements  resulted  in  reduction  of  the  Company's
liabilities to only current trade payables.

NOTE 4 - CONVERTIBLE NOTES PAYABLE

In 2001,  the Company  issued  $102,500 in  convertible  notes payable  maturing
between  January 29, 2002 and October 7, 2002.  These notes are unsecured,  bear
interest at 10% per annum,  and are convertible into common stock of the Company
at the option of the note  holders at a price  equal to the next stock  offering
price.

Certain note holders were also issued warrants (see Note 5).

NOTE 5 - STOCKHOLDERS' EQUITY (DEFICIT)

Authorized Shares/Reverse Split

At the Company's  August 28, 2000 Special Meeting of  Shareholders,  the Company
approved  Amended and Restated  Articles of  Incorporation  which  increased the
authorized capitalization of the Company to fifty million (50,000,000) shares of
$.01 par value common shares and five million (5,000,000) shares of undesignated
stock. At this meeting a one for sixty consolidation of the Company's issued and
outstanding  shares  was  also  approved.  At its  December  26,  2001  Board of
Directors  meeting,  the  Company  approved a reverse  split on a 1 for 10 basis
effective January 7, 2002.

All references to stockholders'  equity (deficit) in the accompanying  financial
statements have been restated to reflect these amendments retroactively.

                                       23
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 5 - OTHER AGREEMENTS

Warrants

The Company has issued warrants to purchase its common stock as follows:

                         Shares
                         Under     Exercise
                         Warrant   Price           Exercise Period
                         ------    --------------  -----------------------------
   Issued for services
     in 2000 and 2001    17,050    $.49 to $20.00  January 2001 to January 2006
   Attachment to
     convertible notes    4,500    $20.00          January 2001 to October 2006
                         ------    --------------

                         21,550    $.50 to $20.00
                         ======    ==============

Other

The Company is obligated to issue 300 post reverse shares to a former creditor.


NOTE 6 - OTHER AGREEMENTS

Aurora Agreements

In 1997,  Aurora  Capital  Management,  LLC (Aurora)  agreed to loan the Company
$60,000  under a primary  note and entered  into a business  agreement  with the
Company.  These  agreements  were secured by all of the  Company's  tangible and
intangible assets.  This note bore interest at 6% per annum and was due December
30, 1998.  The Company  defaulted on these  agreements  and Aurora  retained the
collateral in satisfaction of these agreements on November 12, 1998.




                                       24

<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                    YEARS ENDED DECEMBER 31, 2001 AND 2000
                     AND THE PERI OD FROM REENTRANCE INTO
                               DEVELOPMENT STAGE
                    (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 6 - OTHER AGREEMENTS (Continued)

VHT-LLC Agreements

In 1998,  the  Company  entered  into  similar  loans  and  business  management
agreements with Vital Health Technologies,  LLC (VHT-LLC). VHT-LLC is related to
Aurora through common  principals.  These agreements were also secured by all of
the Company's tangible and intangible assets,  bore interest at 10%, and matured
August 31, 1999.

VHT-LLC  expended monies and provided  managerial and consulting  services under
these agreements from 1999 to September 30, 2000 as follows:

       Advances to and expenses paid on
         behalf of the Company                       $ 54,538
       Staff and consulting charges                    84,500
       Storage fees/rent                               11,500
                                                    ---------

                                                    $ 150,538

On October 27, 2000,  the Company  reached an agreement to settle its obligation
to VHT-LLC for 40,099 shares of the Company's  common stock with a fair value of
$20,050.  The Company  recorded a gain on debt  forgiveness  of $131,214 on this
transaction.

On December 1, 2000, the Company acquired all of the assets of VHT-LLC valued at
$31,648 in exchange  for  200,000  shares of the  Company's  common  stock.  The
Company  accounted  for  this  transaction  at  VHT-LLC's  historical  basis  in
accordance with SAB 48.

Debt Settlement

In November  2000,  the Company  received  notification  that its  purchase of a
judgment  against the Company had been approved.  Satisfaction  of this $244,590
judgment for $20,000  resulted in a gain on debt forgiveness of $224,590 on this
transaction.


                                       25
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 7 - OPERATING LEASE

The Company  assumed  VHT-LLC's  office lease at the time of the  acquisition of
VHT-LLC's  assets (see Note 6). In 2001, the Company  vacated this space and was
able to terminate its  obligation  under this lease.  The Company  incurred rent
expense of $28,795 in 2001 and $3,372 in 2000.

NOTE 8 - INCOME TAXES

Income taxes consisted of the following:

                                                       2001            2000
                                                     ---------       ---------
   Current:
     Federal                                         $    -          $    -
     State                                                 355            -
                                                     ---------       ---------
                                                           355            -
   Deferred:
     Federal                                              -               -
     State                                                -               -
                                                     ---------       ---------
                                                          -               -
                                                     ---------       ---------

   Income tax benefit (expense)                      $     355       $    -
                                                     =========       =========

The reconciliation between expected federal income tax rates is as follows:

                                          2001                    2000
                                  --------------------   ---------------------
                                  Amount       Percent   Amount        Percent

Expected federal tax              $ (57,000)    (34.0)   $ 119,000        34.0
State income tax, net
 of federal tax benefit             (11,000)     (7.0)      23,000         6.6
Exclusion of debt
 forgiveness from gross
 income under insolvency
 exclusion                            -            -      (178,000)      (50.9)
Valuation of net
 operating loss
 carryforwards                       67,645        41       36,000        10.3
                                  ---------   -------   ---------    ---------

                                  $     355        -    $     -            -
                                  =========   =======   =========    =========

The Company  excluded debt forgiveness from gross income for income tax purposes
in  1999,  and 2000  under  the  insolvency  exception  allowed  for  under  IRS
Publication  908. Net operating  loss  carryforwards  have been reduced for this
exclusion.

                                       26
<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO DECEMBER 31, 2001


NOTE 8 - INCOME TAXES (Continued)

Differences  between accounting rules and taw laws cause differences between the
bases of certain assets and liabilities for financial reporting purposes and tax
purposes.  The  tax  effects  of  these  differences,  to the  extent  they  are
temporary,  are recorded as deferred tax assets and liabilities  under SFAS 109,
and consisted of the following:
                                                      2001             2000
                                                   ----------       ----------
   Deferred tax assets:
     Inventory valuation allowance                 $      100       $     -
     Fixed asset valuation
       allowance                                        2,000             -
     Net operating loss
       carryforwards                                3,670,000        3,658,000
                                                   ----------       ----------

   Gross deferred tax asset                         3,672,100        3,658,000
   Valuation allowance                             (3,672,100)      (3,658,000)
                                                   ----------       ----------

   Net deferred tax asset                                -                -
   Deferred tax liability                                -                -
                                                   ----------       ----------
   Net deferred tax asset
     (liability)                                   $     -          $     -
                                                   ==========       ==========

Utilization of these losses is limited under Section 382 of the Internal Revenue
Code due to current  and  historical  changes in the  Company's  ownership.  The
Company's  net  operating  loss  carryforwards  are  fully  allowed  for  due to
questions  regarding the  Company's  ability to utilize these losses before they
expire.








                                       27

<PAGE>


                        VITAL HEALTH TECHNOLOGIES, INC.
                         (A Development Stage Company)

                         NOTES TO FINANCIAL STATEMENTS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                       AND THE PERIOD FROM REENTRANCE INTO
                                DEVELOPMENT STAGE
                     (JANUARY 1, 1994) TO December 31, 2001


NOTE 8 - INCOME TAXES (Continued)

The Company has  carryforwards  available  to offset  future  taxable  income as
follows:

                                    Federal                      State
                                NOL        Credits         NOL       Credits
                            -----------   ---------     -----------  ---------

   2002                     $   -         $  96,600     $  -         $  10,000
   2003                         -            60,700        -            10,000
   2004                         -            71,100        -           -
   2005                       2,615,000     -              -           -
   2006                       1,729,000     -              -           -
   2007                       3,295,000     -              -           -
   2008                       2,939,000     -              -           -
   2009                          14,000     -              -           -
   2010                            -        -              -           -
   2011                           2,000     -              -           -
   2012                            -        -              -           -
   2013                          25,000     -              -           -
   2014                          50,000     -              -           -
   2015                          90,000     -               28,000     -
   2016                         121,000     -              121,000     -
                            -----------   ---------    -----------   ---------

                            $10,880,000   $ 228,400    $   149,000   $  20,000
                            ===========   =========    ===========   =========


                                       28