<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 2000
VPN COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 33-19345-LA 33-0943718
------------------------------- ------------------- ------------------
(State or other jurisdiction of (Commission File No.) (I.R.S. 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
N/A
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. FINANCIAL STATEMENTS OR EXHIBITS.
a. FINANCIAL STATEMENTS.
1. Audited Financial Statements of VPNCOM.NET
Corporation for the periods ended September 30, 1999
and March 1, 2000.
2. Pro Forma Statement of Operations for the Company, as
of December 31, 1999.
b. EXHIBITS.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed by the undersigned
hereunto duly authorized.
DATE: JUNE 20, 2000 VPN COMMUNICATIONS CORPORATION
/s/ E.G. MARCHI
---------------------------
E. G. Marchi, President
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
VPNCOM.NET
We have audited the accompanying balance sheets of VPNCOM.NET as of
March 1, 2000 and September 30, 1999 and the related statements of operations,
stockholders' deficit and cash flows for the five months period ended March 1,
2000 and twelve months period ended September 30, 1999. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of VPNCOM.NET as of
March 1, 2000 and September 30, 1999 and the results of its operations and its
cash flows for the five months period ended March 1, 2000 and twelve months
period ended September 30, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the company will continue as a going concern. As discussed in Note 3 to the
financial statements, the company has suffered losses from operations since
inception. These conditions raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Kabani & Company, Inc.
Fountain Valley, California
June 9, 2000
<PAGE>
VPNCOM.NET
BALANCE SHEETS
MARCH 1, 2000 AND SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS: MARCH 1, 2000 SEPTEMBER 30, 1999
------------- ------------------
<S> <C> <C>
Cash & cash equivalent $ 7,100 $ 9,369
Accounts receivable, net of allowance for
Bad debts of $13,115 at March 1, 2000 10,325 --
Inventory 1,121 --
Prepaid Expenses 22,000 --
-------- --------
Total current assets 40,546 9,369
PROPERTY AND EQUIPMENT, NET 74,854 --
OTHER ASSETS:
Note Receivable 143,109 103,500
-------- --------
$258,509 $112,869
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 77,869 $ --
Accrued expenses 69,195 16,015
Loan payable-Related parties 211,944 60,413
Loan payable-Others 51,020 51,000
-------- --------
Total current liabilities $410,028 $127,428
COMMITMENTS
STOCKHOLDERS' DEFICIT
Common stock, no par value;
25,000 shares authorized; 1000 shares
issued and outstanding 40,675 40,675
Accumulated deficit (192,194) (55,234)
Total stockholders' deficit (151,519) (14,559)
-------- --------
$258,509 $112,869
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
VPNCOM.NET
STATEMENTS OF OPERATIONS
FOR THE FIVE MONTHS PERIOD ENDED MARCH 1, 2000 &
TWELVE MONTHS PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 1, 2000 1999
--------------------------- ----------------------
<S> <C> <C>
NET REVENUE $ 25,891 $ -
COST OF REVENUE 44,165 -
--------------------------- ----------------------
GROSS LOSS (18,274) -
Total Operating Expenses 120,117 22,705
--------------------------- ----------------------
LOSS FROM OPERATIONS (138,391) (22,705)
Non-Operating Income (expense):
Interest expense (3,590) (3,220)
Other income - 8,966
Gain on sale of assets 5,821
Loss on retirement of assets - (37,475)
--------------------------- ----------------------
Total Non-Operating Income (Expenses) 2,231 (31,729)
--------------------------- ----------------------
LOSS BEFORE INCOME TAXES (136,160) (54,434)
Provision for income taxes 800 800
--------------------------- ----------------------
NET LOSS $ (136,960) $ (55,234)
=========================== ======================
BASIC & DILUTED WEIGHTED AVERAGE NUMBER OF
--------------------------- ----------------------
COMMON STOCK OUTSTANDING 1,000 1,000
=========================== ======================
--------------------------- ----------------------
BASIC AND DILUTED NET LOSS PER SHARE $ (136.96) $ (55.23)
=========================== ======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
VPNCOM.NET
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE FIVE MONTHS PERIOD ENDED MARCH 1, 2000 &
TWELVE MONTHS PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Common Stock
--------------------------------------- TOTAL
NUMBER OF ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT DEFICIT
--------------- ----------- ------------------ -------------------
<S> <C> <C> <C> <C>
Issuance of Shares 1,000 $ 40,675 $ - $ 40,675
Net Loss for year ended September 30, 1999 (55,234) (55,234)
----------------------------------------------------------------------------
BALANCE, SEPTEMBER 30, 1999 1,000 40,675 (55,234) (14,559)
Net Loss for period ended March 1, 2000 (136,960) (136,960)
----------------------------------------------------------------------------
BALANCE, MARCH 1, 2000 1,000 $ 40,675 $ (192,194) $ (151,519)
============================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
VPNCOM. NET
STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS PERIOD ENDED MARCH 1, 2000 &
TWELVE MONTHS PERIOD ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 1, 2000 1999
------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Loss $ (136,960) $ (55,234)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 3,542 -
(Gain) loss on disposal of equipment (5,821) 37,475
(Increase) / decrease in current assets:
Accounts receivable (10,325) -
Inventory (1,121) -
Prepaid expenses (22,000) -
Increase / (decrease) in current liabilities:
Accounts payable 77,869 -
Accrued expenses 53,180 16,015
------------------- ----------------
Net cash used in operating activities (41,636) (1,744)
------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from Loans 151,551 111,413
Proceeds from sale of common stock - 3,200
Note receivable (39,609) (103,500)
------------------- ----------------
Net cash provided by financing activities 111,942 11,113
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property & equipment (72,575) -
------------------- ----------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENT (2,269) 9,369
CASH & CASH EQUIVALENT, BEGINNING BALANCE 9,369 0
------------------- ----------------
CASH & CASH EQUIVALENT, ENDING BALANCE $ 7,100 $ 9,369
=================== ================
SUPPLEMENTAL INFORMATION:
CASH PAID FOR INTEREST $ 0 $ 0
=================== ================
CASH PAID FOR INCOME TAXES $ 0 $ 0
=================== ================
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITY
In the year ended September 30, 1999, the company received contribution to
equity from a shareholder of $37,475 in form of equipment.
The accompanying notes are an integral part of these financial statements.
<PAGE>
VPNCOM.NET
NOTES TO FINANCIAL STATEMENTS
MARCH 1, 2000 AND SEPTEMBER 30, 1999
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
VPNCOM.NET ("the Company"), formerly "City Pacific International
U.S.A., Inc.", was incorporated in the state of Nevada on July 15, 1997 to
provide telecommunications products and services for commercial and residential
customers and clientele, directly or through joint ventures with strategic
partners. The Company's activities from inception until 1998 consisted primarily
of reviewing possible business opportunities and acquisitions, and maintaining
the business entity. The company had no assets and no operational activities for
the fiscal years ended September 30, 1997 and 1998. The company's current
activities include providing integrated communications involving virtual private
networks and Internet solutions for corporations and multi-dwelling unit
properties and entities.
E-Net Financial Corporation (E-Net) acquired the company on March 19,
1999. On March 1, 2000, E-Net sold all of the shares of the company to Mr. E. G.
Marchi, sole proprietor of the management company, VPN Communications, Inc.,
LLC.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three
months or less from the date of purchase that are readily convertible into cash
to be cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORY
The inventory consists of Tele-communication items. Inventory is
valued utilizing the lower of cost or market value determined on First-in
First-out (FIFO) valuation method.
PROPERTY & EQUIPMENT
Property and equipment is carried at cost. Depreciation of property
and equipment is provided using the straight-line method over the estimated
useful lives of the assets. Expenditures for maintenance and repairs are charged
to expense as incurred.
<PAGE>
INCOME TAXES
Deferred income tax assets and liabilities are computed annually for
differences between the financial statements and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted laws and rates applicable to the periods in which the
differences are expected to affect taxable income (loss). Valuation allowance is
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
BASIC AND DILUTED NET LOSS PER SHARE
Net loss per share is calculated in accordance with the Statement of
financial accounting standards No. 128 (SFAS No. 128), "Earnings per share".
SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net
loss per share for all periods presented has been restated to reflect the
adoption of SFAS No. 128. Basic net loss per share is based upon the weighted
average number of common shares outstanding. Diluted net loss per share is based
on the assumption that all dilutive convertible shares and stock options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at
the beginning of the period (or at the time of issuance, if later), and as if
funds obtained thereby were used to purchase common stock at the average market
price during the period.
STOCK-BASED COMPENSATION
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". SFAS No. 123 prescribes accounting and reporting
standards for all stock-based compensation plans, including employee stock
options, restricted stock, employee stock purchase plans and stock appreciation
rights. SFAS No. 123 requires compensation expense to be recorded (i) using the
new fair value method or (ii) using the existing accounting rules prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for stock issued to
employees" (APB 25) and related interpretations with proforma disclosure of what
net income and earnings per share would have been had the company adopted the
new fair value method. The company adopted this standard in 1998 and the
implementation of this standard did not have any impact on its financial
statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of financial accounting standard No. 107, Disclosures about
fair value of financial instruments, requires that the company disclose
estimated fair values of financial instruments. The carrying amounts reported in
the statements of financial position for current assets and current liabilities
qualifying as financial instruments are a reasonable estimate of fair value.
COMPREHENSIVE INCOME
Statement of financial accounting standards No. 130, Reporting
comprehensive income (SFAS No. 130), establishes standards for reporting and
display of comprehensive income, its components and accumulated balances.
Comprehensive Income is defined to include all changes in equity, except those
resulting from investments by owners and distributions to owners. Among other
disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in financial statements that are displayed with the same
prominence as other financial statements. The company adopted this standard in
1998 and the implementation of this standard did not have a material impact on
its financial statements.
<PAGE>
REPORTING SEGMENTS
Statement of financial accounting standards No. 131,
Disclosures about segments of an enterprise and related information (SFAS No.
131), which superceded statement of financial accounting standards No. 14,
Financial reporting for segments of a business enterprise, establishes standards
for the way that public enterprises report information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements regarding products and
services, geographic areas and major customers. SFAS No. 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performances. The company adopted this standard in 1998 and the implementation
of this standard did not have a material impact on its financial statements.
PENSION AND OTHER BENEFITS
In February 1998, the Financing accounting standards
board issued statement of financial accounting standards No. 132, Employers'
disclosures about pension and other post-retirement benefits (SFAS No. 132),
which standardizes the disclosures requirements for pension and other
post-retirement benefits. The company adopted this standard in 1998 and the
implementation of this standard did not have any impact on its financial
statements.
ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL
USE
In March 1998, the Accounting Standards Executive
Committee of the American Institute of Certified Public Accountants (ASEC of
AICPA) issued Statement of position (SOP) No. 98-1, "Accounting for the costs of
computer software developed or obtained for internal use", effective for fiscal
years beginning after December 15, 1998. SOP No. 98-1 requires that certain
costs of computer software developed or obtained for internal use be capitalized
and amortized over the useful life of the related software. The company adopted
this standard in fiscal 1999 and the implementation of this standard did not
have a material impact on its financial statements.
COSTS OF START-UP ACTIVITIES
In April 1998, the ASEC of AICPA issued SOP No. 98-5,
"Reporting on the costs of start-up activities", effective for fiscal years
beginning after December 15, 1998. SOP 98-5 requires the costs of start-up
activities and organization costs to be expensed as incurred. The company
adopted this standard in fiscal 1999 and the implementation of this standard did
not have a material impact on its financial statements.
ACCOUNTING DEVELOPMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting
for derivative instruments and hedging activities", effective for fiscal years
beginning after June 15, 1999, which has been deferred to June 30, 2000 by
publishing of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. This statement requires that entities recognize all
derivatives as either assets or liabilities in the statement of financial
condition and measure those instruments at fair value. The accounting for
changes in the fair value of a derivative instrument depends on its intended use
and the resulting designation. The company does not expect that the adoption of
this standard will have a material impact on its financial statements.
<PAGE>
REVENUE
Revenue represents estimated net realizable amounts from
clients, third-party payers and others for services rendered and products sold.
Revenue was recognized when services were performed or products were delivered
to the customers.
ADVERTISING
The Company expenses advertising costs as incurred.
3. GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared
in conformity with generally accepted accounting principles which contemplate
continuation of the company as a going concern. However, the Company has
incurred net losses from inception to March 1, 2000 of $192,194 including net
losses of $136,960 and $55,234 during the five months and twelve months period
March 1, 2000 and September 30, 1999, respectively. The continuing losses have
adversely affected the liquidity of the Company. Losses are expected to
continue for the immediate future. The Company faces continuing significant
business risks, including but not limited to, its ability to maintain vendor
and supplier relationships by making timely payments when due.
In view of the matters described in the preceding
paragraph, recoverability of a major portion of the recorded asset amounts shown
in the accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management has taken the following steps to revise its
operating and financial requirements, which it believes are sufficient to
provide the Company with the ability to continue as a going concern. The Company
has embarked on new marketing methods. The management has put together a sales
team to implement its marketing policies. In addition, the Company is actively
pursuing potential merger or acquisition candidates and strategic partners which
would enhance stockholders' investment. Management believes that the above
actions will allow the Company to continue operations through the next fiscal
year.
4. PROPERTY AND EQUIPMENT
MARCH 1, 2000 SEPTEMBER 30, 1999
-------------- ------------------
Furniture & fixtures $ 7,406 $ --
Computer equipment 69,761 --
-------- ------
77,167 --
Less Accumulated Depreciation (2,313) --
-------- ------
$ 74,854 $ --
======== ======
<PAGE>
5. NOTE RECEIVABLE
The company converted an interest in a telecommunication
joint venture into a note receivable on September 30, 1999. The company had
formed the joint venture with another venturer on equal equity basis on February
25, 1999, to carry on certain telecommunication business. No business was
conducted by the venture during this period. The company didn't have any gain or
loss on the disposal of its interest in the joint venture. The note is due on
demand, unsecured and carries an interest rate of 10% per year beginning March
31, 2000.
6. ACCRUED EXPENSES
Accrued expenses as of March 1, 2000 and September 30,
1999, consist of the following:
MARCH 1, 2000 SEPTEMBER 30, 1999
------------- ------------------
Accrued payroll $14,272 $ --
Payroll taxes payable 3,002 --
Professional fees 27,500 15,000
Accrued interest 4,620 215
Other accruals 19,801 800
------- -------
$69,195 $16,015
======= =======
7. NOTES PAYABLE
Notes payable consist of amounts payable to affiliated
companies related through common ownership. Notes are due on demand, unsecured
and carry an interest rate of 10% per year. Interest expense for the period
ended March 1, 2000 and September 30, 1999 was $3,590 and $3,220, respectively.
8. INCOME TAXES
Since the Company has not generated taxable income since
inception, no provision for income taxes has been provided (other than minimum
franchise taxes paid to the State of California). Differences between income tax
benefits computed at the federal and state statutory rate and reported income
taxes for the periods ended March 1, 2000 and September 30, 1999 are primarily
attributable to the valuation allowance for net operating losses (NOL) and other
permanent differences. The net deferred tax (benefit) due to NOL carried
forward, as of March 1, 2000 and September 30, 1999, consisted of the following:
MARCH 1, 2000 SEPTEMBER 30, 1999
------------- ------------------
Deferred tax asset $ 86,413 $ 24,495
Deferred tax asset valuation allowance (86,413) (24,495)
----------- -------
Balance $ -- $ --
=========== ========
<PAGE>
A summary of Net operating losses carried forward and
their expiration date is as follows:
YEAR OF EXPIRATION NET OPERATING LOSSES
------------------ --------------------
2014 $ 24,495
2015 61,918
--------- ---------
Total $ 86,413
========= =========
The availability of the Company's net operating loss carryforwards are subject
to limitation if there is a 50% or more positive change in the ownership of the
Company. Therefore, the availability of the Company's net operating loss
carryforwards is limited. The provision for income taxes consists of the
California state minimum taxes imposed on corporations.
9. MAJOR CUSTOMERS AND VENDORS
During the period ended March 1, 2000, substantially all
the revenue was generated from company's five major customers. The Company had
accounts receivable due from these customers of $10,325 as of March 1, 2000. The
company did not earn any revenue in the year ended September 30, 1999.
During the period ended March 1, 2000, the company
purchased 94% of its material or services from three major vendors.
10. SUBSEQUENT EVENTS
On April 19, 2000, the company entered into an agreement
and plan of reorganization with VPN Communications Corporation, a Nevada
corporation (VPNC) and the stockholders of VPNC, whereby VPNC acquired all of
the outstanding stock of the company, which became a wholly-owned subsidiary of
VPNC. In exchange for the stock of the company, VPNC issued 1,500,000 shares of
its common stock to the selling stockholders of the company. The transaction is
considered a related party transaction, since the major shareholder of the
company is also the major shareholder of VPNC.
In April 2000, the company issued 500 shares of common
stock as compensation to certain officers of the company.
11. COMMITMENTS
The company has entered into an agreement to lease
certain equipment. This lease is treated as an operating lease. Under the lease
agreement, the company is required to pay $1684 per month, including tax, for
twenty-four months beginning June 2000. At March 1, 2000, the future minimum
lease payments for next twelve months approximated $15,155 for the period ending
March 1, 2001, $20,207 for the period ending March 1, 2002 and $5,052 for the
period ending March 1, 2003.
The Company has entered into agreements with E-net
Financial.Com Corporation (E-Net), a related party, whereby, E-Net agrees to
provide administrative services and certain office equipment for a term of six
months beginning on March 1, 2000 and ending on August 31, 2000 for a maximum
monthly fee of $20,000.
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS
AS OF DECEMBER 31, 1999
(UNAUDITED)
The following unaudited Pro Forma Statement of Operations is derived from the
Consolidated Statement of Operations of VPN Communications Corporation for the
period ended March 1, 2000 and the audited Statement of Operations of VPNCOM.NET
for the period ended March 1, 2000. The unaudited Pro Forma Statement of
Operations reflects the acquisition of VPN Communications Corporation (a
reporting company) by VPNCOM.NET (a previously non public company) in a reverse
merger using the purchase method of accounting and assumes that such acquisition
was consumated as of March 1, 2000. The unaudited Pro Forma Statement of
Operations should be read in conjunction with the Consolidated Financial
Statements of VPN Communications Corporation, the Financial Statements of
VPNCOM.NET and the Notes thereto. The Pro Forma Statement of Operations does not
purport to represent what the Company's results of operations would actually
have been if the acquisition of VPN Communications Corporation had occured on
the date indicated or to project the company's results of operations for any
future period or date. The Pro Forma adjustments, as described in the
accompanying data, are based on available information and the assumptions set
forth in the footnotes below, which management believes are reasonable.
<TABLE>
<CAPTION>
VPN
OPERATIONS STATEMENTS COMMUNICATIONS ADJUSTMENTS FOR
DATA CORPORATION VPNCOM.NET ACQUISITION AS ADJUSTED
------------------------------- -------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Revenue:
Products & Services $ $ 25,891 $ $ 25,891
-------- --------- --------- -----------
-- 25,891 25,891
-------- --------- --------- -----------
Expenses:
Costs of operations 164,282 164,282
-------- --------- --------- -----------
-------- --------- --------- -----------
Loss from Operations -- (138,391) (138,391)
-------- --------- --------- -----------
Other Income 5,821 5,821
Other Expenses (3,590) (10,101)(1) (13,691)
-------- --------- --------- -----------
Net Loss before Income Tax -- (136,160) (10,101) (146,261)
-------- --------- --------- -----------
Income Taxes (800) (800) (1,600)
-------- --------- --------- -----------
Net Loss $ (800) $(136,960) $ (10,101) $ (147,861)
======== ========= ========= ===========
Weighted average common
stock 6,428,078
-----------
Loss per common share $ (0.02)
===========
</TABLE>
<PAGE>
PRO FORMA BALANCE SHEET
AS OF DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VPN
COMMUNICATIONS ADJUSTMENTS FOR
CORPORATION VPNCOM.NET ACQUISITION AS ADJUSTED
-------------- ---------- --------------- -----------
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash $ -- $ 7,100 $ $ 7,100
Accounts Receivable -- 10,325 10,325
Marketable & Inventoried
Securities -- -- --
Other current assets -- 23,121 -- 23,121
----------- ----------- ----------- ---------
-- 40,546 -- 40,546
Property & Equipment(net) -- 74,854 74,854
Other Assets 2,071,950 143,109 151,519(2) 284,527
(2,071,950)(2)
(10,101)(1)
----------- ----------- ----------- ---------
TOTAL ASSETS $ 2,071,950 $ 258,509 $(1,930,532) $ 399,927
=========== =========== =========== =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 4,371 $ 77,869 $ $ 82,240
Accrued Expenses 800 69,195 69,995
Other current liabilities 2,493 262,964 265,457
----------- ----------- ----------- ---------
7,664 410,028 -- 417,692
Long term debts --
Stockholders equity
Preferred Stock -- --
Common Stock 7,928 40,675 (40,675)(2) 7,928
Paid in Capital 2,196,321 (2,071,950)(2) 176,602
-- 52,231(2)
--
Retained Earnings (deficit) (139,963) (192,194) 139,963 (2) (202,295)
(10,101)(1)
----------- ----------- ----------- ---------
2,064,286 (151,519) (1,930,532) (17,765)
TOTAL LIABILITIES &
STOCKHOLDERS' ----------- ----------- ----------- ---------
EQUITY (DEFICIT) 2,071,950 258,509 (1,930,532) 399,927
=========== =========== =========== =========
-- -- -- --
</TABLE>
<PAGE>
Notes:
(1) Represents amortization of goodwill recorded in acquisition of VPNCOM.NET.
(refer #2 below)
(2) Acquisition of VPNCOM.NET has been recorded through purchase method of
accounting as follows:
Assets
acquired $258,509
Liabilities
assumed (410,028)
Direct acquisition costs --
----------
Goodwill recorded in acquisition (151,519)
==========
----------
Amortization of goodwill (15 years) $(10,101)
==========
