The disclosure in this press release is at the request of the TSX Venture
Exchange.
CLARIFICATION OF COMPANY AFFAIRS AS ANNOUNCED IN THE COMPANY'S APRIL 23,
2007 PRESS RELEASE
Trading Symbol: VPI
VANCOUVER, Aug. 28 /CNW/ - On April 23, 2007, the Company publicly announced that it had determined to establish a division to be called "Vitality Fuels" to produce "alternative non-fossil fuels including ethanol, bio-diesel and co-products such as animal feed and nutraceuticals" (the "April 23, 2007 Release"). The April 23, 2007 Release went on to describe the capacity of a production plant (the "Plant"), what the capital costs of the Plant would be, the source of the capital, and the estimated revenues and profits that the Plant would generate.
The April 23, 2007 Release should be clarified as follows: at this time, the plan to construct the Plant is in the embryonic stage. The Company has not yet completed a sufficiently detailed feasibility study to determine whether the Plant is economically feasible and therefore the Company has not yet made a decision to pursue the construction of the Plant. The Company has no executed sales agreements in place relating to the proposed Plant with the entities noted in the April 23, 2007 Release or any other entity. The Company has no executed financing agreements in place relating to the proposed Plant and there are no commitments from or applications made by the Company for financing to the United States Department of Agriculture ("USDA") or the United States Department of Energy ("DOE"). Consolidated Firstfund Capital Corp., a company related by common directors and common officers, will act as agent for the Company in efforts to arrange for the financing of the proposed Plant on a best efforts basis should the Company decide to proceed.
The Company has not purchased land in connection with the construction of the Plant or made any commitments to do so. It is, however, in the process of selecting a suitable site. The Company has entered into discussions with various engineering firms in conjunction with the construction of the proposed Plant but no engineering has begun as yet and there are no executed agreements with any engineering firm at this time. The April 23, 2007 Release describes the significant capital costs involved, projected annual production volume, annual revenues, annual earnings and tax credits. The source of the data in the April 23, 2007 Release is from a report entitled "Ethanol Feasibility Study for Vitality Fuels" (the "Study"), dated April 19, 2007. However, the April 23, 2007 Release did not provide details of the risks, hurdles and milestones involved in completing the Plant. These risks, hurdles and milestones are many, and include, but are not limited to, (1) financing; (2) the availability of feedstock, water, electrical power and natural gas; (3) access to rail, all weather roads and personnel; (4) permits; (5) changes to government regulations; (6) adverse sales; and (7) competition. There can be no assurance whatsoever that the Company will be able to achieve its objective of constructing and operating the Plant profitably. The Company's expected operational target date of Spring 2009 as announced in the April 23, 2007 Release is now Spring 2010 should the Company decide to proceed.
The Study is referenced in the April 23, 2007 Release as a "feasibility study". The Study included a review of the availability of land, water, sewer, power, natural gas, rail, permits and feedstock. It was an internally commissioned study, not then intended to be used for any purpose other than to demonstrate to the Company's management the potential feasibility of the Plant. The author of the Study is Christopher Landrum, a business development consultant. Mr. Landrum is currently completing his Bachelor of Business Administration Degree and had no previous experience in the ethanol industry when he began working on the Study. Mr. Landrum is an independent consultant to the Company and is not a holder of any securities of the Company. Mr. Landrum has previous experience in the POS, Motion Picture Media Development and the Telecommunication industry segments over the past six years. Mr. Landrum has had previous engagements with firms including P&G, General Mills, Microsoft, Cisco, Pfizer, Albertsons, Kraft and Verizon. Mr. Landrum compiled the information for inclusion in the Study from various sources including, but not limited to, several qualified individuals with backgrounds in various industries such as the ethanol industry, nutraceuticals, agriculture, engineering, technology, real estate and finance. The key assumptions used for the projections in the Study include the following: a sales price of $2.30 per gallon of ethanol; a corn feedstock cost of $3.80 per bushel; and the cost to build the proposed Plant and expenses to operate the proposed Plant are similar to the construction costs and operating expenses of known comparable plants located in the United States. There can be no assurances that the prices used in the assumptions would remain constant and/or be secured and there can be no assurances that the actual construction costs and operating expenses would be comparable to other plants located in the United States. The information was compiled over a period of four months commencing in January 2007 and ending April 2007. On September 28, 2006, the Company first announced a plan to add a division to investigate alternatives for producing, marketing and distributing ethanol and other renewable fuel products in North America. This plan was confirmed in the Company's news release of December 29, 2006, when it announced that its efforts to enter the ethanol business were being pursued.
Based on the results of the Study, the Company determined to spend an additional $200,000 on a more detailed and extensive feasibility study. The purposes of the proposed $200,000 study are to provide the Company with a definitive conclusion as to the economic viability of the proposed Plant and to assist the Company in raising the necessary funds to build the proposed Plant in Whatcom County, Washington, to present to potential investors and lenders who will be able to rely upon this report in making an investment decision. This type of study is sometimes referred to as a "bankable feasibility study". This "bankable feasibility study" will contain very detailed information about the proposed Plant, including location, design, operation, timing of completion, budgets, permitting processes, marketing and projections and the like, as well as the risks involved in embarking on such an enterprise. Some of these risks include, but are not limited to, (1) financing; (2) the availability of feedstock, water, electrical power and natural gas; (3) access to rail, all weather roads and personnel; (4) permits; (5) changes to government regulations; (6) adverse sales; and (7) competition.
The Company confirms that should it in the future enter into a transaction or series of transactions which may redirect the Company's resources and change the nature of its business; such that they may constitute a "Change of Business" ("COB") under TSX Venture Exchange ("Exchange") Policy 5.2, trading in the Company's shares will be halted and the Company will thereafter issue a comprehensive news release in accordance with Policy 5.2. Trading will then remain halted until the completion of the COB unless the Exchange otherwise reinstates trading on compliance by the Company of the requirements of Policy 5.2. The Company will work closely with the Exchange, and by way of pre-filing consultation, should such a determination so arise.
CLARIFICATION OF MATERIALS PRESENTED AT THE ANNUAL GENERAL MEETING
The oral presentation relating to the Plant made by a shareholder after the annual general meeting held on July 17, 2007, which was also in writing and made available for those that attended this presentation, included disclosure on the capacity of the Plant, capital costs, source of capital, estimated revenues and profits and milestones completed that do not comply with Exchange Requirements regarding the contents of documents that describe the activities or potential activities of TSX Venture Exchange listed companies. These Exchange Requirements include disclosure of assumptions, hypothesis, risks and conditions made concerning future oriented financial information.
Forward-Looking Information Statements: This release may contain forward-looking information based on management's expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expected expenditures and financial results are forward-looking statements. These statements are not guarantees of future performance and involve a significant number of risks, uncertainties and assumptions.
On behalf of the Board of
VITALITY PRODUCTS INC.
"William N. Grant"
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William N. Grant, President & CEO
The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this release.
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