VERTICAL HEALTH SOLUTIONS INC - FORM 10-K

VERTICAL HEALTH SOLUTIONS INC - FORM 10-K - March 16, 2011

Attached files

Attached files

VERTICAL HEALTH SOLUTIONS INC Reports

Attached files

VERTICAL HEALTH SOLUTIONS INC Reports

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

file	filename
EX-32.1 - SECTION 906 CEO CERTIFICATION - VERTICAL HEALTH SOLUTIONS INC	dex321.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - VERTICAL HEALTH SOLUTIONS INC	dex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2010

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-31275

VERTICAL HEALTH SOLUTIONS, INC.

(Name of small business issuer in its charter)


Florida		59-3635262
(State of or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

180 Douglas Ave., East, Oldsmar, Florida		34677
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number (813) 403-5050

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

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405) during the preceding 12 months. Yes ¨ No ¨

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy of 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 shell company (as defined in Rule 12b-2 of the exchange Act). Yes x No ¨

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $58,517 as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price on the OTC:BB reported for such date. Shares of common stock held by each officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were 44,474,973 shares of the Registrant’s $0.001 par value common stock outstanding as of December 31, 2010.

Vertical Health Solutions, Inc.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

DECEMBER 31, 2010

TABLE OF CONTENTS


PART I
Item 1. Business			3
Item 1A. Risk Factors			7
Item 1B. Unresolved Staff Comments			9
Item 2. Description of Property			9
Item 3. Legal Proceedings			9
Item 4. [Removed and Reserved]			9

PART II

Item 5. Market For Registrant’s Common Equity Related Stockholder Matters and Issuer Purchases of Equity Securities			10
Item 6. Selected Financial Data			10
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			10
Item 7A Quantitative and Qualitative Disclosures About Market Risk			11
Item 8. Financial Statements and Supplementary Data			11
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			11
Item 9A. Controls and Procedures			12
Item 9B. Other Information			13

PART III

Item 10. Directors, Executive Officers, and Corporate Governance			13
Item 11. Executive Compensation			14
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			15
Item 13. Certain Relationships and Related Transactions, and Director Independence			16
Item 14. Principal Accounting Fees and Services			16

PART IV

Item 15. Exhibits and Financial Statement Schedules			16

SIGNATURES			18

Index to Financial Statements

PART I

Item 1.

DESCRIPTION OF BUSINESS.

General

In June 2007, Vertical Health Solutions, Inc. completed the sale of its only operating subsidiary, Drug Depot, Inc. The Company is not actively engaged in any business at the present time and is seeking to develop a new business or secure future acquisitions. Prior to August 2007, the Company, through its wholly-owned subsidiary, operated a Florida retail and veterinary compounding pharmacy providing specialized compounding pharmaceutical prescription services to veterinarians and their customers in the companion animal sector

Vertical Health Solutions, Inc. was incorporated on March 2000, as a Florida corporation under the name LabelClick.com, Inc. In January 2001, we changed our name to Vertical Health Solutions, Inc. The Company’s executive offices are located at 180 Douglas Ave., East, Oldsmar, Florida 34677 and its telephone number is (813) 403-5060. References in this Annual Report on Form 10-K refer to Vertical Health Solutions, Inc. as the “Company” or “Vertical”, unless the context otherwise requires.

Cautionary Statements for Purposes of The “Safe Harbor” Provisions of The Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a “safe harbor” for “forward-looking statements” to encourage companies to provide prospective information, so long as such information is identified as forward-looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statement(s). The Company desires to take advantage of the safe harbor provisions of the Act.

Except for historical information, the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, the Company’s quarterly reports on Form 10-Q, the Company’s current reports on Form 8-K, periodic press releases, as well as other public documents and statements, may contain forward-looking statements within the meaning of the Act.

In addition, representatives of the Company may, from time to time, participate in speeches and calls with market analysts, conferences with investors and potential investors in the Company’s securities, and other meetings and conferences. Some of the information presented in such speeches, calls, meetings and conferences may be forward-looking within the meaning of the Act.

It is not reasonably possible to itemize all of the many factors and specific events that could affect the Company and/or the Company’s industry as a whole. In some cases, information regarding certain important factors that could cause actual results to differ materially from those projected, forecasted, estimated, budgeted or otherwise expressed in forward-looking statements made by or on behalf of the Company may appear or be otherwise conveyed together with such statements.

Business – General

The Company, based on proposed business activities, is a “blank check” company. The U.S. Securities and Exchange Commission (the “SEC”) defines those companies as any company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Exchange Act of 1934, as amended, (the “Exchange Act”) and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies. Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the “Securities Act”), the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

The analysis of new business opportunities has and will be undertaken by or under the supervision of the officer and directors of the Company. The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, the Company will consider the following kinds of factors:

(a) Potential for growth, indicated by new technology, anticipated market expansion or new products;

(b) Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;

(d) Capital requirements and anticipated availability of required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;

(e) The cost of participation by the Company as compared to the perceived tangible and intangible values and potentials;

(f) The extent to which the business opportunity can be advanced;

(g) The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and

(h) Other relevant factors.

In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company’s limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.

Form of Acquisition

The manner in which the Company participates in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoters.

It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called “tax free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other “tax free” provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.

The present stockholders of the Company will likely not have control of a majority of the voting shares of the Company following a reorganization transaction. As part of such a transaction, all or a majority of the Company’s directors may resign and new directors may be appointed without any vote by stockholders.

In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders’ meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval.

It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.

Competition

Our primary goal is the acquisition of a target company or business seeking the perceived advantages of being a publicly held corporation. The Company faces vast competition from other shell companies with the same objectives. The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.

Patent and Trademarks

We currently do not own any patents, trademarks or licenses of any kind.

Government Regulations

There are no government approvals necessary to conduct our current business.

Employees

We presently have no employees. Our officer and directors are engaged in outside business activities and we anticipate that they will devote to our business very limited time until the acquisition of a successful business opportunity has been identified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.

Material Developments

On February 1, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among OnPoint Medical Diagnostics, Inc., a Minnesota corporation (“OnPoint”), the Company and Vertical HS Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of VHS (“Merger Sub”). Pursuant to the Merger Agreement, on the closing date of the merger, the Merger Sub will merge with and into OnPoint, which will be the surviving company and a wholly-owned subsidiary of the Company (the “Merger”).

OnPoint was founded to commercialize Magnetic Resonance Imaging Quality Assurance software and technologies developed by the Mayo Clinic. OnPoint is a development stage company leveraging technology and intelligent systems to assist the healthcare industry in delivering high quality medical images in a safe, consistent and efficient manner. These technology and intelligent systems are delivered in a Software-as-a-Service (SaaS) model, deployed in the cloud and exceed the accreditation standards required by law. OnPoint believes its comprehensive software service detects gradual degradation in image quality, saves time and money by improving consistency and reliability, and facilitates proactive preventative maintenance that minimizes unplanned downtime.

As a condition to the Merger Agreement, the Company must complete a reverse stock split of its outstanding shares of common stock on a one-for-164 basis prior to closing of the Merger (the “Reverse Stock Split”), such that immediately prior to the Merger, the Company will have no more than 1,084,756 shares of common stock outstanding. As of the date of filing of this Form 10-K, the Reverse Stock Split has not been effectuated. Pursuant to the Merger Agreement, upon completion of the Merger, the Company will issue an aggregate of 7,143,113 post reverse split shares of the Company’s common stock (the “Acquisition Shares”) to the shareholders of OnPoint in exchange for 100% of the issued and outstanding capital stock of OnPoint. In addition, up to 2,803,847 post reverse split shares of the Company’s common stock may be issued upon conversion of outstanding OnPoint promissory notes (at an assumed conversion price of $0.65 per share), up to 264,250 post reverse split shares of the Company’s common stock may be issued upon exercise of warrants currently issued to purchase OnPoint common stock (at an exercise price of $1.00 per share), and up to 800,000 post reverse split shares of the Company’s common stock may be issued upon exercise of options currently issued to purchase OnPoint common stock (at an exercise price of $1.00 per share). Of the 7,143,113 post reverse split Acquisition Shares, 1,000,000 post reverse split shares will be placed in escrow. Such shares will be released to the OnPoint stockholders in the event the Company completes an aggregate of $1,000,000 of equity financing on or before December 31, 2011. If such financing is not completed on or before December 31, 2011, the 1,000,000 post reverse split shares will be cancelled.

Upon consummation of the Reverse Stock Split, the holders of certain promissory notes and other Company obligations aggregating $150,000 (the “VHS Promissory Notes”) will convert such notes into 813,567 post reverse split shares of the Company’s common stock.

The Company’s obligation to complete the Merger is subject to the fulfillment or waiver by the Company of customary conditions contained in the Merger. OnPoints’s obligation to complete the Merger is subject to the fulfillment or waiver by OnPoint of the conditions contained in the Merger Agreement including, but not limited to, the following conditions:

•

the Company shall have completed the Reverse Stock Split;

•

the VHS Promissory Notes shall have been converted into shares of the Company’s common stock;

•

OnPoint shall have completed a private placement pursuant to which it receives gross proceeds of at least $500,000;

•

all outstanding liabilities of the Company shall have been satisfied, other than amounts of up to $50,000;

•

OnPoint stockholders shall have approved the Merger;

•

subject to appropriate filings under the Securities and Exchange Act of 1934, as amended, the current officers and directors of the Company shall have resigned and officers and directors designated by OnPoint shall have been appointed to the Company’s Board of Directors and as officers of the Company.

The Merger Agreement may be terminated by either party if the Merger has not been consummated by March 31, 2011. The Merger Agreement may be terminated by the Company if the representations or warranties provided by OnPoint become inaccurate. The Merger Agreement may be terminated by OnPoint if:

•

The representations or warranties provided by the Company become inaccurate;

•

OnPoint’s due diligence investigation reveals information which varies materially or adversely from the understandings upon which OnPoint agreed to proceed with the Merger;

•

More than 5% of the OnPoint stockholders exercise dissenters’ rights; or

•

The Company has suffered any material adverse change from the date of signing the Merger Agreement

Closing of the transactions contemplated by the Merger Agreement is subject to other customary terms and conditions. The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as an exhibit to this Current Report on Form 8-K filed on February 7, 2011.

Item 1A.

RISK FACTORS.

RISK FACTORS

Our business is difficult to evaluate because we have a limited operating history.

As the Company has no operating revenue and only minimal assets, there is a risk that we will be unable to continue as a going concern and consummate a business combination. The Company has had no recent operating history nor any recent revenues or earnings from operations. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.

There is competition for those private companies suitable for a merger transaction of the type contemplated by management.

The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.

Future success is highly dependent on the ability of management to locate and attract a suitable acquisition.

The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.

Management intends to devote only a limited amount of time to seeking a target company which may adversely impact our ability to identify a suitable acquisition candidate.

While seeking a business combination, management anticipates devoting no more than a few hours per week to the Company’s affairs in total. Our sole officer has not entered into a written employment agreement with us and are not expected to do so in the foreseeable future. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.

The time and cost of preparing a private company to become a public reporting company may preclude us from entering into a merger or acquisition with the most attractive private companies.

Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require reporting companies to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or

three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.

The Company may be subject to further government regulation which would adversely affect our operations.

Although we will be subject to the reporting requirements under the Exchange Act, management believes we will not be subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”), since we will not be engaged in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the SEC as to our status under the Investment Company Act and, consequently, violation of the Investment Company Act could subject us to material adverse consequences.

Any potential acquisition or merger with a foreign company may subject us to additional risks.

If we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.

There are issues impacting liquidity of our securities with respect to the SEC’s review of a future resale registration statement.

Since our shares of common stock issued prior to a business combination or reverse merger cannot currently, nor will they for a considerable period of time after we complete a business combination, be available to be offered, sold, pledged or otherwise transferred without being registered pursuant to the Securities Act, we will likely file a resale registration statement on Form S-1, or some other available form, to register for resale such shares of common stock. We cannot control this future registration process in all respects as some matters are outside our control. Even if we are successful in causing the effectiveness of the resale registration statement, there can be no assurances that the occurrence of subsequent events may not preclude our ability to maintain the effectiveness of the registration statement. Any of the foregoing items could have adverse effects on the liquidity of our shares of common stock.

We have never paid dividends on our common stock.

We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.

The Company may be subject to certain tax consequences in our business, which may increase our cost of doing business.

We may not be able to structure our acquisition to result in tax-free treatment for the companies or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. Currently, a transaction may be structured so as to result in tax-free treatment to both companies, as prescribed by various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.

Our business will have no revenues unless and until we merge with or acquire an operating business.

We are a shell company and have had no revenues from operations. We may not realize any revenues unless and until we successfully merge with or acquire an operating business.

The Company intends to issue more shares in a merger or acquisition, which will result in substantial dilution.

Our Certificate of Incorporation authorizes the issuance of a maximum of 250,000,000 shares of common stock and a maximum of 4,000,000 shares of preferred stock. Any merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm’s-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our Board of Directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock or preferred stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.

The Company has conducted no market research or identification of business opportunities, which may affect our ability to identify a business to merge with or acquire.

The Company has neither conducted nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transactions for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.

Item 1B.

UNRESOLVED STAFF COMMENTS.

None.

Item 2.

DESCRIPTION OF PROPERTY.

As of December 31, 2010, the Company had no real property, equipment, furniture, and leasehold improvements.

Item 3.

LEGAL PROCEEDINGS.

The Company is not currently a party to any other legal proceeding, which it believes will have a material adverse affect on its results of operations.

Item 4.

[REMOVED AND RESERVED].

PART II

Item 5.

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Securities

In January 2004, the Company’s common stock began trading on the OTC Bulletin Board under the symbol “VHSL”. There is a limited trading market for the Company’s stock; therefore historical price information is limited. High and low sales prices since that time, by quarter-ended date, are as follows:


	High		Low
March 31, 2009	$	0.011	$	0.005
June 30, 2009	$	0.006	$	0.005
September 30, 2009	$	0.18	$	0.006
December 31, 2009	$	0.02	$	0.005

March 31, 2010	$	0.08	$	0.011
June 30, 2010	$	0.06	$	0.015
September 30, 2010	$	0.048	$	0.022
December 31, 2010	$	0.025	$	0.012

As of December 31, 2010, there were approximately 259 stockholders of record of the Company’s common stock.

Dividend Policy

Historically, the Company has not declared or paid any cash dividends on its common stock. Any future determination to pay dividends on its common stock will depend upon the Company’s results of operations, financial condition and capital requirements, applicable restrictions under any contractual arrangements and such other factors deemed relevant by the Company’s Board of Directors.

Recent Sales of Unregistered Securities:

None.

Item 6.

Selected Financial Data.

Not applicable.

Item 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The statements contained in this Report that are not historical are forward-looking statements, including statements regarding the Company’s expectations, intentions, beliefs or strategies regarding the future. Forward-looking statements include the Company’s statements regarding liquidity, anticipated cash needs and availability and anticipated expense levels. All forward-looking statements included in this Report are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. It is important to note that the Company’s actual results could differ materially from those in such forward-looking statements. Additionally, the following discussion and analysis should be read in conjunction with the Financial Statements and notes thereto appearing elsewhere in this Report. The discussion is based upon such financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles.

Overview

The Company is currently operating as a public shell and does not generate revenues or produce products.

Selling, general and administrative costs include professional fees and consulting expenses and other minor costs.

Results of Operations

Year Ended December 31, 2010 Compared To Year Ended December 31, 2009

Operating expenses. The Company incurred operating expenses of $80,576 for the year ended December 31, 2010, an increase of $23,935 or 42%, compared to $56,641 for the year ended December 31, 2009. The increase was primarily attributable to the lack of operations in 2010 and search for a merger candidate.

Interest expense, net of interest income. Interest income, net of interest expense was $1,097 for the year ended December 31, 2010 as compared to $0 for the year ended December 31, 2009. The increase in interest expense is due to a loan from a shareholder to pay operating expenses until a merger candidate could be secured.

Income taxes. The Company had no income tax provision for the years ended December 31, 2010 and 2009. No tax benefit has been provided due to the uncertainty in the utilization of the loss carry forwards. These net operating losses may be carried forward for up to 20 years.

Preferred dividends. Preferred dividends on the Company’s preferred stock were $0 for the years ended December 31, 2010 and December 31, 2009.

Net loss per share. Net loss per share was $0.00 for the year ended December 31, 2010, compared to net loss per share of $0.00 for the year ended December 31, 2009.

Inflation; Seasonality. Management believes that there was no material effect on operations or the financial condition of the Company as a result of inflation for the years ended December 31, 2010 and 2009. Management also believes that its business is not seasonal; however, significant promotional activities can have a direct impact on sales volume in any given quarter.

Financial Condition, Liquidity and Capital Resources

The Company had cash of $4,856 and a working capital deficit of $197,012 at December 31, 2010, compared to cash of $2,932 and a working capital deficit of $116,436 at December 31, 2009.

Net cash used by operating activities was $38,446 for the year ended December 31, 2010, as compared to net cash used in operating activities of $90,976 for the year ended December 31, 2009.

Net cash provided by investing activities was $0 for the years ended December 31, 2010 and 2009.

Net cash provided by financing activities was $40,370 for the year ended December 31, 2010, as compared to $93,908 for the year ended December 31, 2009. The decrease in cash provided by financing activities is primarily due the decrease in proceeds from notes or stockholders during the year ended December 31, 2010.

The Company’s future liquidity and cash requirements will primarily depend on the Company’s ability to develop a new business or secure future acquisitions. In particular, as the Company will not have any cash flows from operations, it will be necessary for the Company to raise capital or seek additional financing. While there can be no assurance that such raising of capital or seeking of additional financing would be available in amounts and on terms acceptable to the Company, management believes that such financing would likely be available on acceptable terms.

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

Not applicable.

Item 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

See financial statements following Item 15 of this Annual Report on Form 10-K.

Item 9.

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

None.

Item 9A.

CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Management conducted its evaluation based on the framework in Internal Control – Integrated Framework issued by the Committee on Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, at December 31, 2010, such disclosure controls and procedures were effective.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rue 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our management assessed our internal control over financial reporting based on the Internal Control – Integrated Framework issued by the COSO. Based on the results of this assessment, our management concluded that our internal control over financial reporting were not effective as of December 31, 2010 based on such criteria due to the Company’s lack of internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review and audit process, management believes that the financial statements and other information presented herewith are materially correct.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on their evaluation as of the end of the period covered by this report, management concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that the objectives of our disclosure control system were met.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth fiscal quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Auditor’s Report on Internal Control over Financial Reporting

This Annual Report does not include an attestation report of the Company’s independent 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 and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Item 9B.

OTHER INFORMATION.

None

Item 10.

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

The following are the names and certain information regarding the current Directors and Executive Officers of the Company:


Name	Age	Position	Director Since
Stephen M. Watters	43	Chief Executive and Chief Financial Officer, Director		2006

Jugal K. Taneja	66	Director		2000

Alfred Lehmkuhl	78	Director		2002

Pursuant to the Company’s bylaws, each director serves for a term of one year and until his successor is duly qualified. Officers are elected annually by the Board of Directors (subject to the terms of any employment agreement), at the Company’s annual meeting, to hold such office until an officer’s successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board. Some of the directors and executive officers of the Company also serve in various capacities with subsidiary of the Company. There are no family relationships among any of the Company’s other directors and executive officers.

Background of Executive Officers and Directors

On January 4, 2006 Stephen Watters resigned as Chief Executive Officer of the Company and effective July 7, 2006, was reappointed Chief Executive and Financial Officer of the Company. Prior to working with us, Mr. Watters was the Co-founder, Chief Executive Officer and President, of DrugMax, Inc., from September 1998 until August 2000. DrugMax, was a wholesaler and retailer of pharmaceuticals, over-the counter drugs, health and beauty care products and private label dietary supplements. DrugMax was subsequently renamed FamilyMed and is no longer in business. From September through November 1998, Mr. Watters served as Vice President of Finance of Dynamic Health Products, Inc., a publicly-held nutraceutical products company. Prior to that, he worked in the investment banking and brokerage businesses from April 1992 to September 1998. He received his Executive Masters of Business Administration degree from Case Western Reserve University in 1997.

On January 4, 2006, Jugal Taneja resigned as a consultant to the Company. Jugal K. Taneja had served as a director of the Company since its inception and as a consultant to the Company since March 2000. In addition to his service to the Company, Mr. Taneja operates several other companies. He served as Co-Chairman of the Board of DrugMax, Inc., and from October 2000 to November 2004 served as DrugMax’s Chief Executive Officer. He previously served as DrugMax’s Chief Executive Officer from its inception in October 1993 through April 1995, and again from January 1996 until August 1999. Further, he served at various times over the years as DrugMax’s President and Secretary. DrugMax was a wholesaler and retailer of pharmaceuticals, over-the counter drugs, health and beauty care products and private label dietary supplements. DrugMax was subsequently named FamilyMed and is no longer in business. Mr. Taneja also serves as Chairman and a director of Geopharma, Inc., a publicly-held pharmaceutical and nutraceutical products company. Mr. Taneja holds degrees in Petroleum Engineering, Mechanical Engineering, and a Masters in Business Administration from Rutgers University.

Alfred F. Lehmkuhl has been a Director since May 2002. Since June 1988, he has been Chief Executive Officer of Seven Limers, Inc., an agricultural equipment and supply company, and KAS Trucking, Inc., a regulated

common carrier trucking company. He served as President and Chief Executive Officer of Horn’s Crop Service, Inc., an agricultural supply company from September 1984 to December 1993. Mr. Lehmkuhl holds a Bachelor of Science degree in Animal Nutrition from The Ohio State University.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4, 5, and amendments thereto, furnished to the Company during fiscal year 2009 and 2010, the Company is not aware of any director, officer or beneficial owner of more than ten percent of the Company’s Common Stock that failed to file reports required by Section 16(a) of the Securities Exchange Act of 1934 on a timely basis during fiscal year 2010.

Code of Ethics

The Company has adopted its Code of Ethics and Business Conduct for Officers, Directors and Employees, which applies to all of the officers, directors and employees of the Company. The Code of Ethics is filed as an exhibit to this Report on Form 10-K, incorporated by reference.

Audit Committee Financial Expert.

The Board of Directors acts as the Company’s audit committee.

Changes in Nominating Procedures.

None.

Item 11.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE (1)


	Summary Compensation Table
Name Principal Positions	Year Ended	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($) ^(A)		All Other Compensation ($)		Total ($)
Stephen M. Watters, CEO, CFO	2010		0		—		—		—	$	12,000	$	12,000
	2009		0		—		—		—	$	12,000	$	12,000
	2008		0		—		—		—		—		0

During the year ended December 31, 2010, the Company did not pay any director fees for each meeting attended by such director. Directors who are also employees receive no compensation for serving on the Board. The Company’s non-employee directors receive options to purchase shares of common stock at the market price on the date they are granted, reimbursement of expenses incurred consequential to their service and may receive additional options at the discretion of the Board. There was no compensation paid to our non-employee directors during the year ended December 31, 2010.

Employment Agreements

The Company did not have any outstanding employment contracts with any of its officers or directors for the year ended December 31, 2010.

The Company did not grant or issue any stock options for the year ended December 31, 2010.

Name

Grant
Date

All Other
Stock Awards:
Number of
Shares of Stock
Or Units (#)

All Other
Option Awards:
Number of
Securities
UnderLying
Options (#)

Exercise or
Base Price
Of Option
Awards
($ / Share)

Grant Date
Fair Value
Of Stock and
Option
Awards

Stephen M. Watters, CEO, CFO and Director

—

Item 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth certain information, as of December 31, 2010 with respect to the beneficial ownership of the outstanding Common Stock by (i) any holder of more than five (5%) percent; (ii) each of the Company’s executive officer and directors; and (iii) the directors and executive officer of the Company as a group. An asterisk indicates beneficial ownership of less than 1% of the outstanding Common Stock. Except as otherwise indicated, each of the shareholders listed below has sole voting and investment power over the shares beneficially owned.


Class	Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)		Approximate Title of Percent Of Class
Common	Stephen M. Watters(3)		19,162,244		43.09	%
Common	Brian T. Nugent (4)		5,427,085		12.20	%
Common	Jugal K. Taneja(5)		13,997,603		31.47	%

Common	Alfred Lehmkuhl(6)		1,562,395		3.51	%
Common	All officers and directors as a group (3 persons)		34,722,242		78.07	%

(1)	Except as otherwise indicated, the address of each beneficial owner is c/o Vertical Health Solutions, Inc. at 180 Douglas Ave., East, Oldsmar, FL 34677.

(2)

Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to the shares shown. Except where indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of voting securities shown as beneficially owned by them.

(3)

Of the shares beneficially owned by Mr. Watters, 1,913,868 shares are owned by SMW Capital Group Limited Partnership, a company owned and controlled by Mr. Watters. Also includes 228,575 shares are owned by Kristen Watters, Mr. Watters’ wife. Mr. Watters disclaims beneficial ownership of the shares registered in the name of his wife.

(4)	Of the shares beneficially owned by Mr. Nugent, 95,240 shares are owned by Julie Nugent, Mr. Nugent’s wife. Mr. Nugent disclaims beneficial ownership of the shares registered in the name of his wife.

(5)

Of the shares beneficially owned by Mr. Taneja, 450,994 shares are owned by Manju Taneja, Mr. Taneja’s wife. 839,570 shares are owned by Carnegie Capital LLC, a company owned and controlled by Mr. Taneja, and 322,232 shares are owned by Bryan Capital Limited Partnership, a company wholly-owned by Dynamic Health Products, Inc., a public company which is controlled by Mr. Taneja. Mr. Taneja disclaims beneficial ownership of the shares registered in the name of his wife.

(6)	Of the shares beneficially owned by Mr. Lehmkuhl, 38,100 shares are held by Mr. Lehmkuhl as custodian for each of Joseph J. Zam, Jr. and Katelyn C. Zam, Mr. Lehmkuhl’s grandchildren.

Item 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The Company had a verbal agreement with Vitality Systems, Inc., a related party, to pay expenses on their behalf. Jugal Taneja, Brian Nugent and Steve Watters are all shareholders of both Vitality Systems, Inc. and the Company. The agreement had no specific repayment terms and was non-interest bearing. As of December 31, 2010 and 2009, the Company owed the related party $10,370 and $0, respectively.

As of December 31, 2010 and 2009, the Company had an outstanding obligation to Steve Watters, Chief Executive and Financial Officer, in the amount of $21,000 and $12,000, respectively, for services rendered and payment of invoices on the Company’s behalf.

The Company believes that material affiliated transactions and loans, and business relationships entered into by the Company with certain of its officers, directors and principal shareholders or their affiliates were on terms no less favorable than the Company could have obtained from independent third parties. Any future transactions between the Company and its officers, directors or affiliates will be subject to approval by a majority of disinterested directors or shareholders in accordance with Florida law.

Director Independence.

Alfred Lehmkuhl is an independent director.

Item 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

Audit Fees. The aggregate fees billed by our auditors to date, for professional services rendered for the audit of the Company’s annual financial statements for the years ended December 31, 2010 and 2009, and for review of the financial statements included in the Company’s quarterly reports on Form 10-Q during such fiscal years, were $24,000 and $24,000, respectively.

Tax Fees. The aggregate fees billed for tax preparation and related services by our auditors was $0 for the years ended December 31, 2010 and 2009.

All Other Fees. For the fiscal year ended December 31, 2010 and 2009, the Company incurred fees to auditors of $0 for services rendered to the Company, other than the services covered in “Audit Fees”, “Audit-Related Fees” or “Tax Fees”.

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits are filed with this report:


3.1		Amended and Restated Articles of Incorporation*

3.2		Amendment Creating Class of Preferred Stock*

3.3		By-Laws*

3.4		Certificate of Incorporation of Vertical Health Ventures, Inc., a wholly-owned subsidiary of the Company, filed as Exhibit 3.4 to Form SB-2, File No. 333-116682.

3.5		Certificate of Designation of Vertical Health Ventures, Inc., designating the rights of Series A Cumulative Convertible Preferred Stock, as amended, filed as Exhibit 3.5 to Form SB-2, File No. 333-116682.


3.6		Bylaws of Vertical Health Ventures, Inc, filed as Exhibit 3.6 to Form SB-2, File No. 333-116682.

4.1		Specimen Stock Certificate*

4.2		Amendment No. 1 to Securities Purchase Agreement, dated as of September 20, 2004, filed as exhibit 4.9 to Company’s Report on Form SB2/A dated as of October 20, 2004, and incorporated herein by reference.

10.1		Form of 2001 Stock Option Plan*

10.2		Agreement and Plan of Merger, dated February 1, 2011, by and among OnPoint Medical Diagnostics, Inc., Vertical Health Solutions, Inc. and Vertical HS Acquisition Corp.**

14.1		Code of Ethics of Vertical Health Solutions, Inc.***

31.1		Certification Of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Incorporated by reference to the Company’s registration statement on Form SB-2, file no. 333-74766.

**	Incorporated by reference to the Company’s Current Report on Form 8-K, filed on February 7, 2010.

***	Incorporated by reference to the Company’s 10-KSB filed for the year ending December 31, 2007.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.


Signature		Title	Date

By:	/s/ Stephen M. Watters	Director	March 16, 2011
	Stephen M. Watters

By:	/s/ Jugal K. Taneja	Director	March 16, 2011
	Jugal K. Taneja

By:	/s/ Alfred Lehmkuhl	Director	March 16, 2011
	Alfred Lehmkuhl

VERTICAL HEALTH SOLUTIONS, INC.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULES


		PAGE

Report of Independent Registered Public Accounting Firm		F-2

Balance Sheets as of December 31, 2010 and 2009		F-3

Statements of Operations for the years ended December 31, 2010 and 2009		F-4

Statements of Changes in Stockholders’ Equity for the years ended December 31, 2010 and 2009		F-5

Statements of Cash Flows for the years ended December 31, 2010 and 2009		F-6 – F-7

Notes to Financial Statements		F-8 – F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Vertical Health Solutions, Inc.

We have audited the accompanying balance sheets of Vertical Health Solutions, Inc. as of December 31, 2010 and 2009, and the related statements of operations, changes in shareholders’ equity, and cash flows for the years then ended. Vertical Health Solution, Inc.’s 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 financial statements referred to above present fairly, in all material respects, the financial position of Vertical Health Solutions, Inc. as of December 31, 2010 and 2009 and the results of operations and cash flows for the years ended December 31, 2010 and 2009 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company incurred a net loss of $80,576 during the year ended December 31, 2010, and, as of that date, had a working capital deficiency of $197,012 and a retained deficit of $3,013,340. The Company currently has no revenue producing activities and there are no assurances that they will be able to obtain additional financing, if required. These conditions raise substantial doubt about the Company’s 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/ BRIMMER, BUREK & KEELAN LLP

Brimmer, Burek & Keelan LLP

Tampa, Florida

March 11, 2011

F-2

VERTICAL HEALTH SOLUTIONS, INC.

BALANCE SHEETS

December 31,


	2010			2009
Assets
Cash	$	4,856		$	2,932
Deposits		—			1,800

Total current assets		4,856			4,732

Total Assets	$	4,856		$	4,732


Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	34,901		$	9,168
Accrued expenses, related parties		41,967			12,000
Notes payable		125,000			100,000
Notes payable to related parties		—			—


Total current liabilities		201,868			121,168


Total liabilities		201,868			121,168


Commitments and contingencies		—			—

Stockholders’ equity (deficit):

Preferred stock, $0.001 par value, 5,000,000 shares authorized:
Series A; 10% cumulative, convertible; 1,000,000 shares authorized, no shares issued and outstanding		—			—
Undesignated, 4,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.001 par value, 250,000,000 shares authorized; 44,474,973 shares issued and outstanding		44,476			44,476
Additional paid-in capital		2,771,852			2,771,852
Accumulated deficit		(3,013,340	)		(2,932,764	)


Total stockholders’ deficit		(197,012	)		(116,436	)


	$	4,856		$	4,732

See accompanying notes to financial statements.

F-3

VERTICAL HEALTH SOLUTIONS, INC.

STATEMENTS OF OPERATIONS

Years Ended December 31, 2010 and 2009


	2010			2009

Sales	$	—		$	—
Cost of goods sold		—			—

Gross profit		—			—

Operating expenses:
Selling, general and administrative expenses		80,576			56,641

Total operating expenses		80,576			56,641


Operating loss before other income and expense		(80,576	)		(56,641	)

Other income (expense):
Gain on settlement of liability		—			—

Total other income (expense)		—			—

Loss before income taxes		(80,576	)		(56,641	)

Income taxes		—			—

Net loss available to common stockholders	$	(80,576	)	$	(56,641	)

Basic and diluted loss per share from continuing operations	$	(0.00	)	$	(0.00	)

Basic and diluted weighted average number of common shares outstanding		44,474,973			44,474,973

See accompanying notes to financial statements.

F-4

VERTICAL HEALTH SOLUTIONS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY DEFICIT

Years Ended December 31, 2010 and 2009


	Preferred Stock				Common Stock				Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit
	Shares		Dollars		Shares		Dollars		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit
Balance at December 31, 2008		0	$	0		44,474,973	$	44,476	$	2,771,852	$	(2,876,123	)	$	(59,795	)
Net loss												(56,641	)		(56,641	)

Balance, December 31, 2009		0	$	0		44,474,973		44,476		2,771,852		(2,932,764	)		(116,436	)
Net loss												(80,576	)		(80,576	)

Balance, December 31, 2010		0	$	0		44,474,973	$	44,476	$	2,771,852	$	(3,013,340	)	$	(197,012	)

See accompanying notes to financial statements.

F-5

VERTICAL HEALTH SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010 and 2009


	2010			2009
Cash flows from operating activities:
Net loss	$	(80,576	)	$	(56,641	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Changes in operating assets and liabilities:
Deposits		1,800			—
Accounts payable		25,733			(45,135	)
Accrued expenses		14,597			10,800

Net cash used by operating activities		(38,446	)		(90,976	)


Cash flows from investing activities		—			—

Cash flows from financing activities:
Proceeds from notes payable		25,000			100,000
Proceeds (payments) from related party notes payable		15,370			(6,092	)

Net cash provided by financing activities		40,370			93,908


Net increase in cash		1,924			2,932
Cash at beginning of period		2,932			—


Cash at end of period	$	4,856		$	2,932

See accompanying notes to financial statements.

F-6

VERTICAL HEALTH SOLUTIONS, INC.

STATEMENTS OF CASH FLOWS—Continued

Years Ended December 31, 2010 and 2009


	2010		2009
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	—	$	—
Cash paid during the period for income taxes	$	—	$	—

See accompanying notes to financial statements.

F-7

VERTICAL HEALTH SOLUTIONS, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Vertical Health Solutions, Inc., incorporated as Labelclick.com, Inc. on March 3, 2000 under the laws of the State of Florida, is located in Oldsmar, Florida. The Company changed its name to Vertical Health Solutions, Inc. on January 11, 2001.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.

Impairment of Assets

The Company’s policy is to evaluate whether there has been a permanent impairment in the value of long-lived assets, certain identifiable intangibles and goodwill when certain events have taken place that indicate that the remaining balance may not be recoverable. When factors indicate that the intangible assets should be evaluated for possible impairment, the Company uses an estimate of related undiscounted cash flows. A deficiency in these cash flows relative to the carrying amounts is an indication of the need for a write-down due to impairment. The impairment write-down would be the difference between the carrying amounts and the fair value of these assets. Losses on impairment are recognized by a charge to earnings. Factors considered in the valuation include current operating results, trends and anticipated undiscounted future cash flows. There were no impairment losses recorded during the years ended December 31, 2010 and 2009.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company adopted the provisions of FASB ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10), on January 1, 2007. The Company has not recognized a liability as a result of the implementation of ASC 740-10. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit since the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740-10. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Earnings (Loss) Per Common Share

Earnings (loss) per share are computed using the basic and diluted calculations on the face of the statement of operations. Basic earnings (loss) per share are calculated by dividing net income by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.

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 and disclosures of contingent assets and liabilities at December 31, 2010 and 2009, as well as the reported amounts of revenues and expenses for the years then ended. The actual outcome of the estimates could differ from the estimates made in the preparation of the financial statements.

F-8

Revenue Recognition

Revenues are recognized when the merchandise is shipped and title passes to the customer. Revenue is recorded net of any discounts, allowances, returns or credits. Returns are allowed for certain products and are subject to a restocking fee. The Company has not experienced any significant discounts, allowances, returns or credits to date as the Company has not had any revenue since the year ended December 31, 2007.

Stock Based Compensation

The Company recognizes all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted and the period of time they are expected to be outstanding; and expected volatility was calculated by review of a peer company’s historical activity.

As of December 31, 2010 and 2009, the Company has not awarded any share-based payments.

Non-Employee Stock-Based Compensation – The Company accounts for stock based compensation awards issued to non-employees for services and financing arrangements, as prescribed by FASB ASC 505-50, Equity-Based Payments to Non-Employees, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable. The fair value of common stock issued for services is based on the closing stock price on the date the common stock was issued.

As of December 31, 2010 and 2009, the Company has not awarded any stock based compensation.

Advertising Costs

The Company charges advertising costs to expense as incurred. Advertising expense was $0 for each of the years ended December 31, 2010 and 2009.

Fair Value of Financial Instruments

The Company, in estimating its fair value disclosures for financial instruments, uses the following methods and assumptions:

Deposits, Accounts Payable and Accrued Expenses: The carrying amounts reported in the balance sheet for deposits, accounts payable and accrued expenses approximate their fair value due to their relatively short maturity.

Earnings (Loss) Per Share

Earnings (loss) per share are computed using the basic and diluted calculations on the face of the statement of operations. Basic earnings (loss) per share are calculated by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings (loss) per share is calculated by dividing the net income (loss) by the weighted average number of shares of common stock outstanding for the period, adjusted for the dilutive effect of common stock equivalents, using the treasury stock method.

F-9

The following sets forth the computation of basic and diluted net earnings (loss) per common share for years ended December 31, 2010 and 2009:


	December 31, 2010			December 31, 2009
Numerator:
Net loss	$	(80,576	)	$	(56,641	)
Less preferred stock dividend and accreted dividends		—			—

Net loss available to common stockholders	$	(80,576	)	$	(56,641	)

Denominator:
Weighted average basic shares outstanding		44,474,973			44,474,973
Stock options		—			—

Warrants		—			—

Weighted average fully diluted shares outstanding		44,474,973			44,474,973

Net loss per common share—Basic and diluted	$	(0.00	)	$	(0.00	)

NOTE 2 GOING CONCERN

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of Vertical Health Solutions, Inc. (VHS) as a going concern. However, VHS has sustained operating losses in recent years and following the sale of Drug Depot has no operating revenue. Further for the year ended December 31, 2010, VHS had negative working capital of $197,012. The Company has incurred losses in previous years resulting in an accumulated deficit of approximately $3,013,340. These factors raise substantial doubt about the ability of Vertical Health Solutions, Inc. to continue as a going concern.

The Company is pursuing the further growth of the business through mergers and acquisitions, as noted in Note 8. Failure to secure a merger or acquisition, secure equity financing or to raise additional capital may result in the Company depleting its available funds and not being able to pay its obligations.

The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets of the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

NOTE 3 RELATED PARTY TRANSACTIONS

As of December 31, 2010 and 2009, the Company had an outstanding obligation to Steve Watters, Chief Executive and Financial Officer, in the amount of $21,000 and $9,000, respectively, for services rendered and payment of invoices on the Company’s behalf.

NOTE 4 – INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 2010 and 2009 is as follows:


	2010		2009
Current income tax expense (benefit)	$	—	$	—
Deferred income tax expense (benefit)		—		—

Income tax expense (benefit)	$	—	$	—

F-10

Income taxes for the years ended December 31, 2010 and 2009 differs from the amounts computed by applying the effective income tax rate of 34% to income before income taxes as a result of the following:


	2010			2009
Computed tax benefit at the statutory rate 34%	$	(27,400	)	$	(19,300	)
Increase (decrease) in taxes resulting from:
Increase in valuation reserve		27,400			19,300


Current income tax expense (benefit)	$	—		$	—

Temporary differences that give rise to deferred tax assets and liabilities:


	2010			2009
Deferred tax assets:
Net operating loss carryforward	$	698,100		$	670,700
Less valuation allowance		(698,100	)		(670,700	)


Gross deferred tax asset		—			—
Gross deferred tax liability		—			—


Net deferred tax asset	$	—		$	—

The Company has available at December 31, 2010, approximately $1,993,000 of unused operating loss carryforwards that may be applied against future taxable income and that expire in various years from 2021 to 2028. The Company does not have a reasonable expectation of utilizing the tax benefit of the net operating loss carryforward and therefore has provided a full valuation allowance against the deferred tax asset.

We conduct business domestically and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. In the normal course of business, we are subject to examination in U.S. federal jurisdiction, and generally in state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local tax examinations for years before 2006.

NOTE 5 – OPTIONS

During 2001, the Company adopted a stock option plan to be administered by the board of directors. Under the plan, the exercise price of any options granted may not be less than 100% of the fair market value of the Company’s common stock on the date of the grant (110% for holders of more than 10% of the total combined voting power of all classes of capital stock then outstanding).

There were no warrants outstanding as of December 31, 2010 and 2009, respectively.

2010

2009

Number
of
Shares

Weighted
Average
Exercise
Price

Number
of
Shares

Weighted
Average
Exercise
Price

Outstanding at January 1,

—

Granted

—

Exercised/exchanged

—

Forfeited

—

Outstanding at December 31,

—

Options exercisable at December 31,

—

Weighted average fair value of options granted

—

F-11

NOTE 6 – NOTE PAYABLE

On February 1, 2009, the Company received $100,000 in exchange for a nonrecourse note payable. The note is non-interest bearing, unsecured and due on demand. As of today, there have been no demands for repayment.

NOTE 7 – NOTE PAYABLE – RELATED PARTY

During the year ended December 31, 2010, the Company received $25,000 from the Chief Executive Officer for operating capital. The note bears 10% interest is unsecured and due on demand. The Company has accrued $1,097 of accrued interest which is included in accrued expenses on the Balance Sheets at December 31, 2010.

NOTE 8 – SUBSEQUENT EVENT

The Company has evaluated subsequent events through March 14, 2011, the date on which this Form 10-K was filed with the Securities and Exchange Commission.

F-12

•

the Company shall have completed the Reverse Stock Split;

•

the VHS Promissory Notes shall have been converted into shares of the Company’s common stock;

•

OnPoint shall have completed a private placement pursuant to which it receives gross proceeds of at least $500,000;

•

all outstanding liabilities of the Company shall have been satisfied, other than amounts of up to $50,000;

•

OnPoint stockholders shall have approved the Merger;

•

The representations or warranties provided by the Company become inaccurate;

•

OnPoint’s due diligence investigation reveals information which varies materially or adversely from the understandings upon which OnPoint agreed to proceed with the Merger;

•

More than 5% of the OnPoint stockholders exercise dissenters’ rights; or

•

The Company has suffered any material adverse change from the date of signing the Merger Agreement

Closing of the transactions contemplated by the Merger Agreement is subject to other customary terms and conditions.

F-13

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller reporting company