Anthrax is a spoil spore for company

Business, North Carolina, Mar 01, 2002 by Martin, Edward

A home test kit for anthrax looked like a sure cure for sickly Vital Living Products Inc. of Mattews. Then in November, FBI agents raided company headquarters, wanting to know where Vital Living got the anthrax it claimed had been used to prove the kits worked.

A few days later, the Securities and Exchange Commission came snooping, wanting to know whether the test was, in effect, snake oil being pitched to boost Vital Living's moribund stock, which was selling for 22 cents a share in early October. On Oct. 18, the day after the tests were announced, the price hit $2.08. The SEC wants to know if executives unloaded shares when the price spiked.

Vital Living has decided not to try to sell the test - the SEC had threatened it with an injunction if it did - but the company's troubles are not over. In SEC filings, the company says it could face criminal charges and bankruptcy.

Until the anthrax scare, Vital Living was a sleepy shop. Its 15 employees make kits to detect arsenic, pesticides, lead and other substances in drinking water. Prices range from $8.95 to $30 in stores such as Home Depot and HarrisTeeter. The anthrax kit would have retailed for $19 to $25.

The company reported an operating loss of $722,000 on sales of $1.6 million in 2000. But its fortunes seemed ready to change when it announced that Ace Hardware and others would sell its anthrax test.

The announcement piqued the curiosity of investigators seeking sources for the spores that had been mailed to the offices of federal lawmakers and others. In response to their inquiries, CEO Donald Podrebarac pointed at Sani-Pure Food Laboratories, a New Jersey testing lab he said had certified the tests. Vital Living later withdrew that claim.

At least one retailer no longer wants to carry the test. "Like we do with many companies," an Ace Hardware spokeswoman says, "we had discussions with Vital Living, but we decided we would not support the product."

Despite the setback, Vital Living launched a secondary offering of 14.3 million shares in December, accompanied by a prospectus in which the list of risk factors runs four pages - twice the typical length. Among the caveats: Fines, penalties and legal costs could sap its already limited resources.