<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
- --------------------- --------------------
March 31, 2000 33-19345-LA
VPN Communications Corporation
--------------------------------
(Name of small business issuer in its charter)
Nevada 93-0943718
- -------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3200 Bristol Street, Suite 725
Costa Mesa, California 92626
---------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (714) 540-4444
---------------
Former name, former address, and former fiscal
year end, if changed since last report. N/A
Check whether the issuer (1) filed all report required to be filed
with 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
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Applicable only to issuers involved in bankruptcy proceedings during the
proceeding five years.
Check whether the registrant filed all document and report required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
N/A
Applicable only to corporate issuers.
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: 7,723,080 as of May 15,
2000.
Transitional Small Disclosure Format
Yes X No
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VPN Communications Corporation
TABLE OF CONTENTS
PART I FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Accountant's Review Report . . . . . . . . . . . . . . . . . . .3
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . .4
Statements of Operations . . . . . . . . . . . . . . . . . . . .5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . .6
Notes to Financial Statements. . . . . . . . . . . . . . . . . .7
ITEM 2 MANAGEMENT DISCUSSION AND FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . .9
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . .9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 11
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[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.
Board of Directors
VPN Communications Corporation
I have reviewed the accompanying balance sheets, of VPN Communications
Corporation, as of March 31, 2000, and for the three months period then
ended. These financial statements are the responsibility of the Company's
management.
I conducted my review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an
opinion.
Based on my review, I am not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah 84111
May 22, 2000
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VPN Communications Corporation
Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Assets
Current Assets
- --------------
Cash $ -0- $ -0-
---------- ----------
Total Current Assets $ -0- $ -0-
========== ==========
Liabilities & Stockholders' Equity
Current Liabilities
- -------------------
Accounts Payable $ 4,371 $ 4,371
Due Officers 2,493 2,493
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Total Current Liabilities 6,864 6,864
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) ( 139,163)
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Total Stockholders' Equity ( 6,864) ( 6,864)
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Total Liabilities & Stockholders' Equity $ -0- $ -0-
========== ==========
</TABLE>
See accountant's review report and accompanying notes
4
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<PAGE>
VPN Communications Corporation
Statements of Operations (Unaudited)
For the Period January 31, 2000 and March 31, 2000
and the Period January 1, 1999 to March 31, 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ -0- $ -0-
- -------- ---------- ----------
Expenses
- --------
Professional Fees -0- 1,632
---------- ----------
Total Expenses -0- 1,632
---------- ----------
Net Loss $ -0- ($ 1,632)
========== ==========
Loss Per Share ( 0.00) ( 0.00)
Weighted Average Shares Outstanding 6,428,078 6,428,078
</TABLE>
See accountant's review report and accompanying notes
5
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<PAGE>
VPN Communications Corporation
Statements of Cash Flows (Unaudited)
For the Period January 1, 2000 to March 31, 2000
and the Period January 1, 1999 to March 31, 1999
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Loss -0- ($ 1,632)
Changes in Operating Liabilities:
Increase (Decrease) in Accounts Payable -0- ( 228)
Increase Due Officers -0- 1,860
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Net Cash Used by Operating Activities -0- -0-
Cash Flows from Investing Activities -0- -0-
- ------------------------------------
Cash Flows from Financing Activities
- ------------------------------------
Sale of Common Stock -0- -0-
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Net Cash Provided by Financing Activities -0- -0-
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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>
See accountant's review report and accompanying notes
6
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<PAGE>
VPN Communications Corporation
Notes to Financial Statements (Unaudited)
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. On April 19, 2000, the Company entered into an
agreement to acquire all of the capital stock of VPNCOM.NET Corporation
("VCNC"), which became a wholly owned subsidiary of the Company. On March
14, 2000 the Company changed its name to VPN Communications Corporation.
NOTE #2 - Significant Accounting Policies
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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.
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VPN Communications Corporation
Notes to Financial Statements (Unaudited) -Continued-
NOTE #3 - Statement Preparation
- -------------------------------
The Company has prepared the accompanying financial statements with interim
financial reporting requirements promulgated by the Securities & Exchange
Commission. The information furnished reflects all adjustments which are,
in the opinion of management, necessary for a fair presentation of
financial position and results of operations.
The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's 1999 10-K report.
</Page>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
As of March 31, 2000, the Company had no operations, no assets or
liabilities and was dependent upon its officers for its cash requirements.
On April 19, 2000, the Company entered into an agreement to acquire all of
the capital stock of VPNCOM.NET Corporation ("VCNC"), which became a wholly
owned subsidiary of the Company. The selling stockholders of VCNC
consisted of E.G. Marchi, a Director and President of the Company, Theodore
A. Bohrer, a Director, Secretary and Principal Financial and Accounting
Officer of the Company and Richard E. Floegel, a party otherwise unrelated
to the Company. VCNC is a provider of integrated communications involving
the provision of virtual private network and Internet solutions for
corporations and multi-dwelling unit properties and entities. All assets
of VCNC, including, but not limited to, its tangible assets, such as
computers, servers, and related telecommunications equipment, as well as
its non-tangible assets, such as contracts, on-going business
relationships, and "goodwill,' are included in the acquisition. In
exchange for the stock of VCNC, the Company issued 1,500,000 shares of its
Common Stock to the selling stockholders of VCNC. The valuation of the
exchange was based upon VCNC's historical financial statement, assets and
liabilities, historical operations, and the value of the Common Stock of
the Company at the time negotiations began, with a 15% discount from the
then market price of the Common Stock in consideration of the restricted
nature of the securities issued.
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
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None
Item 2. CHANGES IN SECURITIES
- -------------------------------
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
- -----------------------------------------
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------
No matter was submitted to a vote of the security holders of the Company
during its fiscal quarter ended March 31, 2000.
Item 5. OTHER INFORMATION
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Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits:
* Exhibits filed herewith. Other exhibits are incorporated by reference to
previous filings.
10.1 Agreement and Plan of Reorganization, dated April 19, 2000, by and
among the Company, VPNCOM.NET Corporation and the stockholders of VPNCOM.NET
Corporation, E.G. Marchi, Theodore A. Bohrer and Richard E. Floegel, which
was filed with the Securities and Exchange Commission on May 3, 2000 as an
Exhibit to Form 8-K, is hereby incorporated by this reference.
27.1* Financial Data Schedule.
1 Reports on Form 8-K.
On March 14, 2000, the Company filed a report on Form 8-K which
disclosed the change of control of the Company, change of the name of
the Company from Exhibitronix, Inc. to VPN Communications Corporation,
and election of new Directors and Executive Officers of the Company.
On May 3, 2000, the Company filed a report on Form 8-K which disclosed
the Agreement and Plan of Reorganization , dated April 19, 2000,
entered into by and between the Company, VPNCOM.NET Corporation and the
stockholders of VPNCOM.NET Corporation, E.G. Marchi, Theodore A. Bohrer
and Richard E. Floegel, whereby the Company agreed to purchase all of
the capital stock of VPNCOM.NET Corporation.
</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.
VPN Communications Corporation
Date: May 19, 2000
By: /S/ E.G. Marchi
-------------------------------------
E. G. Marchi
Director and President
Date: May 19, 2000 By: /S/ Theodore A. Bohrer
-------------------------------------
Theodore A. Bohrer
Director, Secretary and Principal
Financial and Accounting Officer
11
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000827164
<NAME> VPN COMMUNICATIONS CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<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> 6,428
<OTHER-SE> (6,864)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
