VERTICAL HEALTH SOLUTIONS INC

OnPoint was unable to file its Quarterly Report on Form 10-Q (the “Quarterly Report”) in a complete and timely manner by November 14, 2013, because the Company had inadequate funds to retain its independent registered accounting firm, SEC counsel and its consultant CFO. Therefore, this 10-Q filing is being filed without a review by the Company’s independent registered public accounting firm. Once the Company obtains the necessary funds to re-engage the auditor to perform the required review for this 10-Q filing, an amended Quarterly Report in conjunction with Rules 8-03 and 10-01(d) of Regulation S-X will be filed at a later date.

On August 21, 2013, and pursuant to the original convertible promissory note agreement, the Company issued warrants to purchase 456,750 shares of the Company’s common stock. 112,500 of the warrants have an exercise price of $0.3125, and the remaining 344,250 warrants have an exercise price of $0.65 per share. All of these warrants have a 10 year term from the issuance date. Upon issuance to the lenders, the fair value of the 456,750 warrants related to the extension of the $406,000 in convertible debt was estimated to be in excess of the $406,000 debt extension, utilizing a Black-Scholes pricing model. The value assigned to the warrants of $406,000 was recorded as debt discounts on the consolidated balance sheet. The debt discounts are being amortized over the life of the corresponding convertible promissory notes using the effective interest method.

On August 21, 2013, the Company elected to exercise its option to extend the term of the Tranche A convertible promissory notes from August 21, 2013 to February 14, 2014. In connection with the extension of the term of these notes, we also issued to the investors ten-year warrants to purchase, in the aggregate,456,750 shares of our common stock. These warrants have an exercise prices of $0.65 (344,250 warrant shares) and $0.3125 (112,500 warrant shares).

Selling, General and Administrative Expenses.  Our general and administrative expenses were $355,436 for the three months ended September 30, 2013 compared to $341,880 for the three months ended September 30, 2012. Consulting expense increased in the current three month period over the comparable prior year period, primarily due to the addition of our Chief Revenue Officer, who was paid $37,500 in consulting fees during the quarter.

The outstanding convertible notes issued in the first 2012 convertible debt issuance (Tranche A) totaling $406,000 matured in August 2013. At the option of the Company, these notes were extended until February 2014. Interest on Tranche A convertible notes is payable quarterly. The principal and accrued interest on the outstanding notes issued in the second 2012 and 2013 convertible debt offerings (Tranches B and C) totaling $1,655,500 are payable at maturity in March 2015 through March 2016. The principal and accrued interest on the outstanding notes issued in June 2013 (Tranche D) totaling $100,000 are payable at maturity in December 2013. The principal and accrued interest on the outstanding notes issued during the three months ended September 30, 2013 (Tranche E) totaling $132,500 are payable at maturity in August and September of 2015.