<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[ X ] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ------ to ------
Commission File Number: 33-19345-LA
VPN COMMUNICATIONS CORPORATION
-------------------------------
(Name of small business issuer in its charter)
Nevada 93-0943718
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Federal Employer ID No.)
incorporation or organization)
3200 Bristol Street, Suite 725, Costa Mesa, California 92626
- ------------------------------------------------------ -------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (714) 540-4444
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of exchange on which registered
------------------- ------------------------------------
N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 value
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the 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.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year: $0
The aggregate market value of voting stock held by non-affiliates of
the registrant as of March 31, 2000:
Common stock, no par value: $18,567
The number of shares of the registrant's common stock outstanding as
of March 31, 2000: 6,428,080 shares
Documents incorporated by reference: None
Transitional Small Business Disclosure Format: Yes No X
</Page>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
- ----------------------------------
History and Organization
- ------------------------
VPN Communications Corporation, formerly Exhibitronix, Inc., was organized
under the laws of the State of Nevada on September 29, 1986, for the
primary purpose of seeking selected mergers or acquisitions with a small
number of business entitles expected to be private companies, partnerships,
or sole proprietorships. In November of 1988, the Company completed the
first of its three business combination transactions, through a merger with
Mimetics, Inc., a California corporation, following which the Company
changed its name to Exhibitronix, Inc. Thereafter, the Company had a total
of three subsidiaries Tabery Corporation, Shows Up, and Modular Display
Systems, Inc. The Company divested one half of Modular Display Systems,
Inc., in 1991; the Tabery Corporation filed for protection under Chapter 7
or the United Stated Bankruptcy Code in 1991. During 1990 and 1991, the
Company disposed of all of its assets to satisfy its creditors and, since
1991, has conducted no operations. Following a change of control of
ownership, on March 2, 2000 the Company changed its name to VPN
Communications Corporation and a Certificate of Amendment to Articles of
Incorporation was filed with the Secretary of State of Nevada on March 10,
2000.
Commencing the first quarter of 1997, the Company began to engage in
preliminary efforts intended to identify possible merger on acquisition
"targets" and has neither conducted negotiations concerning, nor entered
into a letter of intent for any possible mergers or acquisitions. All dates
in this Annual Report have been adjusted to reflect a one for five reverse
split of the shares of the Company's common stock, effective March of 1997.
Plan Of Operations
- ------------------
The Company has, and for the foreseeable future expects to have,
insufficient capital with which to provide merger or acquisition candidates
with substantial cash or other assets. However, Management believes the
Company will offer owners of potential merger or acquisition candidates the
opportunity to acquire a controlling ownership interest in a public company
at substantially less cost than would be required for them to conduct an
initial public offering. A target company will, however, incur significant
post merger or acquisition registration costs in the event target company
shareholders wish to offer a portion of their shares for subsequent sale.
Further, while target company shareholders will receive "restricted
securities" in any merger or acquisition transaction, those restricted
securities will represent, if a trading market develops for the Company's
common stock, ownership in a "publicly traded" as opposed to a "privately
held" company. Management also believes target company shareholders may
benefit in obtaining a greater ownership percentage in the Company
remaining after a merger or acquisition than may be the case in the event a
target company offered it shares directly for sale to the public.
Nevertheless, the officers and directors of the Company have not conducted
market research and are not aware of statistical data, which would support
the perceived benefits of a merger or acquisition transaction for target
company shareholders.
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<PAGE>
The Company expects to concentrate primarily on the identification and
evaluation of prospective merger or acquisition "target" entities including
private companies, partnerships, or sole proprietorships. The Company does
not intend to act as a general or limited partner in connection with
partnerships it may merge with acquire. Management has not identified any
particular area of interest within which the Company will concentrate its
efforts.
Management contemplates that the Company will seek to merger with or
acquire a target company with either assets or earnings, or both, and that
preliminary evaluations undertaken by the Company will assist in
identifying possible target companies. The Company has not established a
specific level of earnings or assets below which the Company would not
consider a merger or acquisition with a target company. Moreover,
management may identify a target company, which is generating losses, which
it will seed to acquire or merge with the Company. The merger with or
acquisition of a target company which is generating losses or which has
negative shareholders' equity may have a material adverse effect on the
price of the Company's Common Shares.
Plan of Acquisition
- -------------------
The Company intends to follow a systematic approach to identify its most
suitable acquisition candidates.
First, management intends to concentrate on identifying any number of
preliminary prospects that may be brought to the attention of management
through present association. Management will then apply certain of its
broad criteria to the preliminary prospects. Essentially, this will entail
a determination by management as to whether or not the prospects themselves
have potential within their own industries. During this initial screening
process, management will ask and receive answers to questions framed to
provide appropriate threshold information, depending upon the nature of the
prospect's business. Such evaluation is not expected to be an in depth
analysis of the target company's operations although it will encompass a
look at most, if not all, of the same areas to be examined once one or more
target companies are selected for an in depth review. For instance, at
this stage, management may look at a prospect's unaudited balance sheet.
Once a prospect is selected for an in depth review, management will review
the prospect's audited financial statements. Nevertheless, management
anticipates that this evaluation will provide a broad overview of the
business of the target company and should allow a large percentage of
preliminary prospects to be eliminated from further consideration.
Assuming management is able to complete the preliminary evaluation process
and select a limited number of companies for further study, of which there
can be no assurance, the Company may enter into preliminary negotiations
with target company management in order to obtain detailed financial and
operational information. Following the Company's receipt of such
information, management will conduct an in depth analysis of five (5) major
areas of concern with respect of the target company as follows:
1 MANAGERIAL AND FINANCIAL STABILITY. Management of the Company will
review audited financial statements of the target company and will
also research the background of each director and member of management
of the target company in order to discern whether the stability of the
Company is such that further negotiations are warranted.
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<PAGE>
2 INDUSTRY STATUS. Management will research the potential of the target
company's industry. The concern here is whether the industry is in a
growth, stagnant or declining stage.
3 PRODUCTION OF PRODUCT. If the target company is a manufacturer,
management will review whether it has the necessary resources or
access to the necessary resources and supplies to produce a quality
product in a timely manner.
4 ACCEPTANCE AND POTENTIAL OF PRODUCT. Management will review the
acceptance of the target company's product in the market place.
Management will also review whether or not the product is realistic
(therefore, is there potential for the product to be workable and for
it to fulfill its intended purpose.
5 DEVELOPMENT OF TARGET COMPANY. Management will review the target
company's stage of development, e.g., start up or established company.
The foregoing is an outline of the areas of concern, which most often arise
and merit careful scrutiny by management. Because of the possible
varieties of target companies, which may come to the attention of
management, additional factors will most likely be considered in any given
analysis. Also, the procedures used in such a review are expected to vary
depending upon the target company being analyzed. Management may select a
target company for further negotiations even though the target may not
receive a favorable evaluation as to some of the five areas of concern.
Management considers it unlikely that it will evaluate more than two or
three firms on this basis in view of capital and managerial time
constraints. Following the identification of at most one or two target
companies which appear to be suitable merger or acquisition candidates, the
Company expects to commission appraisals, professional studies of reserve
and asset reports to be conducted by outside consultants. The Company has
limited funds with which to engage consultants and, accordingly, management
intends to conserve such funds pending management's evaluation.
Management expects to enter into further negotiations with target company
management following successful conclusion of financial and evaluation
studies. Negotiations with target company management will be expected to
focus on the percentage of the Company which target company shareholders
would acquire in exchange for their shareholdings in the target company.
Depending upon, among other things, the target company's assets and
liabilities, the Company's stockholders will in all likelihood hold a
lesser percentage ownership interest in the Company following any merger or
acquisition. The percentage ownership may be subject to significant
reduction in the event to Company acquires a target company with
substantial assets. Any merger or acquisition effected by the Company can
be expected to have a significant dilutive effect on the percentage of
shares held by the Company's then stockholders.
</Page>
<PAGE>
The final stage of any merger or acquisition to be affected by the Company
will require the Company to retain the services of its counsel and a
qualified accounting firm in order to properly affect the merger or
acquisition. The Company may be expected to incur significant legal fees
and accounting costs during the final stages of a merger or acquisition.
Also, if the merger or acquisition is successfully completed, management
anticipates that certain costs will be incurred for public relations, such
as the dissemination of information to the public, to the stockholders and
to the financial community. If the Company is unable to complete the
merger or acquisition for any reason, the Company's capital may be
substantially depleted if legal fees and accounting costs have been
incurred. Management intends to retain legal and accounting services only
on an as needed basis in the latter stages of a proposed merger or
acquisition.
Management expects that it will be necessary to raise funds at such time as
significant evaluation work is undertaken regarding prospective mergers of
acquisitions. There can be no assurance that funds for such purposes will
be available to the Company on acceptable terms or at all.
Competition
- -----------
The Company will remain an insignificant participant among the firms which
engage in mergers with and acquisitions of privately financed entities.
There are many established venture capital and financial concerns which
have significantly greater financial and personnel resources and technical
expertise than the Company. In view of the Company's combined limited
financial resources and limited management availability, the Company will
continue to be at a significant competitive disadvantage compared to the
Company's competitors.
Regulation and Taxation
- -----------------------
The Company could be subject to regulation under the Investment Company Act
of 1940 in the event the Company obtains and continues to hold a minority
interest in a number of entities. However, management intends to seek at
most one or two mergers or acquisitions and management's plan of operation
is based upon the Company obtaining a controlling interest in any merger or
acquisition target company and, accordingly, the Company may be required to
discontinue any prospective merger or acquisition of any company in which a
controlling interest will not be obtained.
The Company could also be required to register under the Investment Company
Act of 1940 in the event the Company comes within the definition of an
Investment Company contained in that Act due to its assets consisting
principally of shareholdings held in a number of subsidiaries. Management
intends to seek at most one or two mergers or acquisitions, which
transactions will not result in the Company holding an interest in any
subsidiaries.
Any securities which the Company acquires in exchange for its Common Stock
will be "restricted securities" within the meaning of the Securities Act of
1933 (the "1933 Act"). If the Company elected to resell such securities,
such sale could not proceed unless a registration statement had been
declared effective by the Securities and Exchange Commission or an
exemption from registration was available. Section 4 (2) of the 1933 Act,
which exempts sales of securities not involving any public offering, would
in all likelihood be available since it is likely that any such sale would
be a block sale to a private investor to raise additional capital.
</Page>
<PAGE>
Although management's plan of operation does not contemplate resale of
securities acquired, in the event such a sale were necessary, the Company
would be required to comply with the provisions of the 1933 Act.
As a condition to any merger or acquisition, it is possible that management
of the target company may request registration of the Company's Common
Shares to be received by target company's shareholders. In such event, the
Company could incur registration costs, and management intends to require
the target company to bear most, if not all, of the cost of any such
registration. If the Company does contribute toward the cost of such
registration, its maximum contribution will be limited to the extent that
it can raise capital, on a debt or equity basis. No such offering is
currently planned and there can be no assurance that any funds will be
available for the Company at the time or under terms acceptable to the
Company or at all. Alternatively, the Company may issue "restricted
securities" to any prospective target company, which securities may be
subsequently registered for sale or sold in accordance with Rule 144 of the
Securities Act of 1933.
The Company intends to structure a merger or acquisition in such a manner
as to minimize federal and state tax consequences to the Company and any
target company.
Employees
- ---------
The Company presently no employees, it's President, E. G. Marchi, will
devote as much time as necessary to the affairs of the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
- ----------------------------------
The Company currently leases executive office space located at 3200
Bristol, Suite 725, Costa Mesa, California 92626. The lease covers
approximately 1,500 square feet at a monthly rental of approximately $3,500
per month. The lease expires in 2003. The Company believes that its new
facilities are adequate for its current needs.
ITEM 3. LEGAL PROCEEDINGS.
- ----------------------------
The Company is not a party to any legal proceedings and management is not
aware of any threatened legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- --------------------------------------------------------------
No matters were submitted during the fourth quarter of the fiscal year
ended December 31, 1999, to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- -------------------------------------------------------------------
The Company's common stock is currently not traded on any public market and
has not been traded during the proceeding two years.
The over-the-counter bid and ask quotations, known to the Company, for the
previous two fiscal years are included in the table below. These
quotations reflect inter-dealer prices, without retail mark-ups, mark-downs
or commissions and may not represent actual transactions.
</Page>
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1999:
-------------------------------------
<S> <C> <C>
1st Quarter. . . . . . . . . . . . . . . $0.03 $0.03
2nd Quarter. . . . . . . . . . . . . . . $0.03 $0.03
3rd Quarter. . . . . . . . . . . . . . . $0.03 $0.03
4th Quarter. . . . . . . . . . . . . . . $0.03 $0.03
Fiscal Year Ended September 30, 1998:
-------------------------------------
1st Quarter. . . . . . . . . . . . . . . $0.03 $0.03
2nd Quarter. . . . . . . . . . . . . . . $0.03 $0.03
3rd Quarter. . . . . . . . . . . . . . . $0.03 $0.03
4th Quarter. . . . . . . . . . . . . . . $0.03 $0.03
</TABLE>
On March 31, 2000, the closing bid and asked prices of the Common Stock of
the Company were $0.06 bid and $0.06 asked per share.
As of March 31, 2000, there were 6,428,080 shares of Common Stock
issued and outstanding which were held by approximately 234 holders of
record.
During the fiscal years ended December 31, 1998, and 1999, the Company has
not paid any dividends on its Common Stock and does not expect to do so in
the foreseeable future. The Company intends to apply its earnings, if any,
in expanding its operations and related activities. The payment of cash
dividends in the future will be at the discretion of the Board of Directors
and will depend upon such factors as earnings levels, capital requirements,
the Company's financial condition and other factors deemed relevant by the
Board of Directors.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
- ------------------------------------------------------------------
Results of Operations
- ---------------------
During the years ended December 31, 1999, and 1998, the Company had no
operations and generated no operating revenues. Management does not
anticipate the Company will earn any revenue except a minimal amount of
interest until following the conclusion of a merger or acquisition. There
can be no assurance that the Company will enter any such merger or
acquisition or that such transaction will prove profitable to the Company
or its stockholders.
Liquidity and Capital Resources
- -------------------------------
The Company has virtually no assets or liabilities and from and after
January 1, 1997, had been dependent upon its officers for its minimal cash
requirements. Management anticipates operational costs will remain limited
until such time as significant evaluation work is undertaken regarding
prospective mergers or acquisitions. There can be no assurance that funds
for such purposes will be available to the Company on acceptable terms or
at all.
The Company has not long-term capital commitments.
</Page>
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
- -------------------------------
Information with respect to this Item is set forth in "Index to Financial
Statements".
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE.
- ---------------------------------------------------------------------
There have no events or conditions requiring reporting under the
requirements of this item.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTORL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
- ------------------------------------------------------------------------
The directors and executive officers of the Company, since March 2000,
are as follows:
<TABLE>
<CAPTION>
Name of Individual Age Position
------------------ ---- ----------------------------------
<S> <C> <C>
E.G. Marchi 70 President, Chief Executive Officer
and a Director
Theodore A. Bohrer 56 Chief Financial Officer, Secretary
and a Director
Paul A. Stevens 41 Executive Vice President and a
Director
</TABLE>
Each of the Company's directors has been elected to serve until the next
annual meeting of stockholders. Except as described below, there are no
arrangements or understandings between any director and any other person
pursuant to which any person was elected or nominated as a director. The
Company's executive officers serve at the discretion of the Board of
Directors.
E.G. MARCHI has been President and Director of VPN Communications
Corporation since March 3, 2000. Before acquiring control of the Company,
he had been President, Secretary/Treasurer and sole Director of City
Pacific International, USA, Inc., a wholly owned subsidiary of e-Net
Financial.Com corporation since March 1999. From August 1997 through
August 1998, in addition to his executive consulting business, Mr. Marchi
served as Chief Executive Officer of a publicly held company, Alliance
Biotechnology International, where he directed its activities towards its
ultimate sale and merger. From July 1994 through 1997, he was general
partner of American Capital Growth, where he was responsible for its
development as an investment banking organization. Mr. Marchi completed
his undergraduate work in Electrical and Mechanical Engineering at Illinois
Institute of Technology in 1957.
</Page>
<PAGE>
THEODORE A. BOHRER has served as Secretary, Chief Financial Officer, and a
Director of the Company from March 3, 2000 to present. From March 1, 1999
to March 3, 2000, Mr. Bohrer served as Vice President of e-Net
Financial.Com Corporation and also as broker of record for its subsidiary,
e-Net Mortgage Corporation. From January 1995 to March 1999 he held a
variety of positions as a consultant in the communications industry
specializing in transport of compressed long distance voice and data
traffic. Mr. Bohrer's career in financial institutions and information
services has spanned 25 years after serving as a Naval Lieutenant
Commander. Before joining e-Net Mortgage as broker of record in March
1999, his previous position involved developing Net Fund, a mortgage
company in San Jose. Mr. Bohrer received a BS degree in Business and
Industrial Management from San Jose State University in 1965.
PAUL C. STEVENS has served as Executive Vice President and a Director of
the Company since March 3, 2000. From December 1999 to March 2000, Mr.
Stevens was Vice President with VPNCOM.NET Corporation, a former subsidiary
of e-Net Financial.Com Corporation. From 1995 to 1998 he served as
Chairman of Digital Integrated Systems, Inc. From January 1992 to December
1994 he served as President and CEO of Paul Stevens Associates. Mr.
Stevens received a degree in Industrial Electronics from Norwich Regional
Technical Institute in 1997.
To the best of the knowledge of the Company, its directors, officers and
10% beneficial owners have filed all reports in compliance with the
reporting requirements of Section 16(a) of the Securities Exchange Act of
1934 during the fiscal year ended September 30, 1999.
ITEM 10. EXECUTIVE COMPENSATION.
- ---------------------------------
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Awards
Other Restr- All
Annual icted Other
Compen- Stock Options LTIP Compen-
Position Year Salary sation Award(s) /SARs Payouts sation
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Jay A Geier 1999 $-0- $-0- $-0- $-0- $-0- $-0-
1998 -0- -0- -0- -0- -0- -0-
1997 -0- -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
Percentage of
Total Options
Options/SARs /SARS Granted
Expiration Employees Exercise or Market Price
Granted in Base Share on Date of
Name (#) Date Fiscal Year Price ($Sh) Grant ($Sh)
- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Jay A Geier -0- N/A N/A N/A
</TABLE>
</Page>
<PAGE>
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Percentage of
Total Options
Options/SARs /SARS Granted
Expiration Employees Exercise or Market Price
Granted in Base Share on Date of
Name (#) Date Fiscal Year Price ($Sh) Grant ($Sh)
- ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Jay A Geier -0- N/A N/A N/A
</TABLE>
Directors of the Company do not receive compensation for their services as
directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------
The following tables set forth certain information regarding the beneficial
ownership of Common Stock as of March 31, 2000, (except as otherwise
indicated by footnote) by (i) each person (including any "group" as that
term is used in Section 13 (d) (3) of the Securities Exchange Act of 1934)
known by management to own beneficially more than five percent of the
Company's outstanding Common Stock, (ii) each of the Company's directors,
and (iii) all executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Shares of
Common Stock Percent of
Beneficially Outstanding
Management Shareholders Owned (1) Stock
- --------------------------------------------- -------------- -------------
<S> <C> <C>
E.G. Marchi. . . . . . . . . . . . . . . . . . 5,812,699(2) 90.43
3200 Bristol Street, Suite 725
Costa Mesa, CA 92626
Theodore A. Bohrer. . . . . . . . . . . . . . . -0- -0-
3200 Bristol Street, Suite 725
Costa Mesa, CA 92626
Paul A. Stevens. . . . . . . . . . . . . . . . . -0- -0-
3200 Bristol Street, Suite 725
Costa Mesa, CA 92626
Directors and officers as a group (3) persons,
including the above 5,812,699 90.43%
</TABLE>
1 Except as otherwise noted, it is believed by the Company that all
persons have full voting and investment power with respect to the
shares, except as otherwise specifically indicated. Under the rules of
the Securities and Exchange Commission, a person (or group of persons)
is deemed to be a "beneficial owner" of a security if he or she,
directly or indirectly, has or shares the power to vote or to direct
the voting of such security, pr the power to dispose of or to direct
the disposition of such security. Accordingly, more than one person
may be deemed to be an owner of the same security. A person is also
deemed to be a beneficial owner of any security which that person has
the right to acquire within 60 days, such as warrants or options to
purchase the Common Stock of the Company.
</Page>
<PAGE>
2. E. G. Marchi, President of the Company, is deemed to be the beneficial
owner of these shares of Common Stock of the Company owned by MAI
Financial LLC, of which Mr. Marchi is the sole owner.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial of Beneficial Percent of Class of
Owner Title of Class Ownership Equity Securities
- --------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
MAI Financial LLC Common Stock 3,375,000 (1) 90.43%
3200 Bristol Street,
Suite 725
Costa Mesa, CA 92626
</TABLE>
(1) E. G. Marchi, President of the Company, is deemed to be the beneficial
owner of these shares of Common Stock of the Company owned by MAI Financial
LLC, of which Mr. Marchi is the sole owner.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- ---------------------------------------------------------
As of December 31, 1999, no officers or directors were indebted to the
Company in any amount.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
- -------------------------------------------
The following documents are filed as a part of this report:
(a) Exhibits:
--------
* Exhibits filed herewith. Other exhibits are incorporated by reference
to previous filings.
2.1 Amended and Restated Articles of Incorporation of the Registrant as
filed with the Secretary of State of Nevada on November 28, 1988,
filed as Exhibit 3 to the Registrant's Post-Effective Amendment to the
Registration Statement on Form S-18 filed with the Securities and
Exchange Commission on January 26, 1989, and is incorporated herein by
reference.
2.2 By laws of the Registrant as currently in effect, filed as Exhibit 3
to the Registrant's Registration Statement on Form S-18 filed with the
Securities and Exchange Commission on February 24, 1987, and is
incorporated herein by reference.
23.1* Consent of Schvaneveldt and Company
27.1* Financial Data Schedule.
(b) Reports on Form 8-K. The Registrant did not file any reports on
Form 8-K during the last quarter of the period covered by this
report.
</Page>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page Reference
Independent Auditor's Report. . . . . . . . . . . . . . . . . . . .F-2
Balance sheets as of December 31, 1999, and 1998. . . . . . . . . .F-3
Statement of operations for each of the years
in the two-year period ended December 31, 1999. . . . . . . . . . .F-4
Statement of stockholders' equity for each of the years
in the two-year period ended December 31, 1999. . . . . . . . . . .F-5
Statement of cash flows for each of the years
in the two-year period ended December 31, 1999. . . . . . . . . . .F-6
Notes to financial statements for each of the years
in the two-year period ended December 31, 1999. . . . . . . .F-7 & F-8
</Page>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant: VPN Communications Corporation
By: /s/ E. G. Marchi
-------------------------------
E. G. Marchi, President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signatures Title Date
- -------------------- --------------------------- --------------
/s/ E. G. Marchi Chairman of the Board, April 13, 2000
- ---------------- President, Chief Executive
E. G. Marchi Officer and a Director
/s/ Theodore A. Bohrer Principal Financial Officer, April 13, 2000
- ----------------------- Principal Accounting Officer,
Theodore A. Bohrer Secretary and a Director
/s/ Paul A. Stevens Executive Vice President and April 13, 2000
- -------------------- a Director
Paul A. Stevens
</Page>
<PAGE>
Exhibitronix, Inc.
Financial Statements
December 31, 1999 & 1998
</Page>
<PAGE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
----------------------------
Board of Directors
Exhibitronix, Inc.
I have audited the accompanying balance sheets of Exhibitronix, Inc., as of
December 31, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for the years ended December 31, 1999
and 1998. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and the significant estimates made by management, as well as
evaluating the overall financial statements presentation. I believe that
my audit provides a reasonable basis for my opinion.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note #3 to the
financial statements, the Company has an accumulated deficit and a negative
net worth at December 31, 1999. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also discussed in Note #3. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
In my opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Exhibitronix, Inc., as of
December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
April 10, 2000
</Page>
<PAGE>
Exhibitronix, Inc.
Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current Assets
- --------------
Cash $ -0- $ -0-
----------- -----------
Total Current Assets $ -0- $ -0-
=========== ===========
Liabilities & Stockholders' Equity
Current Liabilities
- -------------------
Accounts Payable $ 4,371 $ 4,598
Due Officers 2,493 634
----------- -----------
Total Current Liabilities 6,864 5,232
Stockholders' Equity
- --------------------
Common Stock 50,000,000 Shares Authorized at
$.001 Par Value 6,428,078 Shares Issued &
Outstanding Retroactively Restated 6,428 6,428
Paid In Capital 125,871 125,871
Retained Earnings (Deficit) ( 139,163) ( 137,531)
----------- -----------
Total Stockholders' Equity ( 6,864) ( 5,232)
----------- -----------
Total Liabilities & Stockholders' Equity $ -0- $ -0-
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
</Page>
<PAGE>
Exhibitronix, Inc.
Statements of Operations
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ -0- $ -0-
- -------- ----------- -----------
Expenses
- --------
Office Cost -0- 259
Professional Fees 1,632 4,599
Transfer Fees -0- 139
License & Tax -0- 235
----------- -----------
Total Expenses 1,632 5,232
----------- -----------
Net Loss ($ 1,632) ($ 5,232)
=========== ===========
Loss Per Share ( .00) ( .00)
Weighted Average Shares Outstanding 6,428,078 6,428,078
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
</Page>
<PAGE>
Exhibitronix, Inc.
Schedule of Stockholders' Equity
For the Period January 1, 1995 to December 31, 1999
<TABLE>
<CAPTION>
Common Shares Paid In Accumulated
Shares Amount Capital Earnings
-------------------------------------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1995
Retroactively Restated 1,028,078 $1,028 $125,871 ($127,299)
Net Loss for Year Ended
December 31, 1995 ( 100)
-------------------------------------------------
Balance, December 31, 1995 1,028,078 1,028 125,871 ( 127,399)
Net Loss for Year Ended
December 31, 1996 ( 100)
-------------------------------------------------
Balance, December 31, 1996 1,028,078 1,028 125,871 ( 127,499)
Shares Issued for Cash 5,400,000 5,400
Net Loss for Year Ended
December 31, 1997 ( 4,800)
-------------------------------------------------
Balance, December 31, 1997 6,428,078 6,428 125,871 ( 132,299)
Net Loss for Year Ended
December 31, 1998 ( 5,232)
-------------------------------------------------
Balance, December 31, 1998 6,428,078 6,428 125,871 ( 137,531)
Net Loss for Year Ended
December 31, 1999 ( 1,632)
-------------------------------------------------
Balance, December 31, 1999 6,428,078 $ 6,428 $ 125,871 ($139,163)
=================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
</Page>
<PAGE>
Exhibitronix, Inc.
Statements of Cash Flows
For the Years Ended December 31, 1999 & 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Loss ($ 1,632) ($ 5,232)
Changes in Operating Liabilities:
Increase (Decrease) in Accounts Payable ( 227) 4,598
Increase Due Officers 1,859 634
----------- -----------
Net Cash Used by Operating Activities -0- -0-
Cash Flows from Investing Activities -0- -0-
- ------------------------------------
Cash Flows from Financing Activities -0- -0-
- ------------------------------------ ----------- -----------
Increase in Cash Equivalents -0- -0-
Cash at Beginning of Period -0- -0-
----------- -----------
Cash at End of Period $ -0- $ -0-
=========== ===========
Disclosures from Operating Activities
- -------------------------------------
Interest $ -0- $ -0-
Taxes -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
</Page>
<PAGE>
Exhibitronix, Inc.
Notes to Financial Statements
NOTE #1 - Organization
- ----------------------
The Company was incorporated on November 29, 1986, as Fernwood Financial,
Inc., under the laws of the state of Nevada. In 1988, the Company merged
with Mimetics, Inc., a California Corporation and changed its name to
Exhibitronix, Inc.
The Company has three subsidiaries, the Tabery Corporation, Shows Up, and
Modular Display Systems, Inc. The Company divested half of Modular Display
Systems, Inc., in 1991. The Tabery Corporation filed Chapter Seven
Bankruptcy in 1991, and Shows Up, ceased existence in 1991. In 1990-1991
the Company became insolvent and disposed of all of its assets to satisfy
its creditors. Since 1991, the Company has had no operations.
NOTE #2 - Significant Accounting Policies
- -----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Shares shall be shown on stock options and
other convertible issues that may be exercised within ten years of the
financial statement dates.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
F. Consolidation Policies: The accompanying consolidated financial
statements include the accounts of the company and its majority -
owned subsidiary. Inter-company transactions and balances have been
eliminated in consolidation.
G. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is depreciated (amortized) over the lesser of
the length of the related assets or the estimated lives of the assets.
Depreciation is computed on the straight line method for reporting
purposes and for tax purposes.
H. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
NOTE #3 - Going Concern
- -----------------------
The Company currently has no operations and its only source of operating
capital is from its Officers. The Company seeks to find a business
opportunity that can be acquired through merger or stock purchase that will
provide cash flows.
F-7
</Page>
<PAGE>
<PAGE>
Exhibitronix, Inc.
Notes to Financial Statements -Continued-
NOTE #4 - Income Taxes & Net Operating Loss Carryforwards for Income Tax
Purposes
- -------------------------------------------------------------------------
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
<TABLE>
<CAPTION> Year Expiration
of Loss Amount Date
---------------------------------------------
<S> <C> <C>
1987 $ 48,186 2007
1988 24,093 2008
1989 63,043 2009
1990 100 2010
1991 100 2011
1992 100 2012
1993 100 2013
1994 100 2014
1995 100 2015
1996 100 2016
1997 4,800 2017
1998 5,232 2018
1999 1,632 2019
</TABLE>
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to
the extent of any tax benefit that net operating losses may generate.
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current Tax Asset Value of Net Operating Loss
Carryforwards Current Prevailing Federal Tax Rate $ 39,842 $ 39,287
Evaluation Allowance ( 39,842) ( 39,287)
----------- -----------
Net Tax Assets $ -0- $ -0-
Current Income Tax Expense -0- -0-
Deferred Income Tax Benefit -0- -0-
</TABLE>
NOTE #5 - Subsequent Events
- ---------------------------
Pursuant to a Stock Purchase Agreement dated March 2, 2000 certain
shareholders of Exhibitronix, Inc., sold to an unrelated party 5,812,699
shares representing approximately 90.4267% of the issued and outstanding
common stock of Exhibitronix, Inc.
New Officers and Directors were elected immediately following the closing
of the Stock Purchase Agreement. On March 10, 2000, a Certificate of
Amendment was filed in the state of Nevada changing the name of the
Corporation to VPN Communications Corporation.
F-9
</Page>
<PAGE>
Exhibit 23
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Consent of Darrell T. Schvaneveldt
Independent Auditor
I consent to the use, of our report dated April 13, 2000, on the
financial statements of Exhibitronix, Inc., dated December 31, 1998,
included herein and to the reference made to me.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
April 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000827164
<NAME> VPN COMMUNICATIONS CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 6,864
<BONDS> 0
0
0
<COMMON> 6,864
<OTHER-SE> (13,292)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,632
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,632)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,632)
<EPS-BASIC> .00
<EPS-DILUTED> .00
</TABLE>
