-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HgZpKGsUV9JWdgsH9IheVTo4aT3182inMnjbSsGvnrQefN9fj9eW5f6DSroTgL98 C/j9Ydj8HzZjOG+UxlRXLA== 0000926236-05-000147.txt : 20051114 0000926236-05-000147.hdr.sgml : 20051111 20051114155341 ACCESSION NUMBER: 0000926236-05-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VPGI CORP CENTRAL INDEX KEY: 0000755229 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 751975147 STATE OF INCORPORATION: TX FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13225 FILM NUMBER: 051201385 BUSINESS ADDRESS: STREET 1: P.O. BOX 802808 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75380 BUSINESS PHONE: 214 263 3122 MAIL ADDRESS: STREET 1: P.O. BOX 802808 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75380 FORMER COMPANY: FORMER CONFORMED NAME: CURTIS MATHES HOLDING CORP DATE OF NAME CHANGE: 19940609 FORMER COMPANY: FORMER CONFORMED NAME: ENHANCED ELECTRONICS CORP DATE OF NAME CHANGE: 19940527 FORMER COMPANY: FORMER CONFORMED NAME: ENTERTAINMENT EQUITY CORPORATION DATE OF NAME CHANGE: 19930910 10-Q 1 vpg06q1.txt FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number 000-13225 VPGI CORP. ------------------------------------------------------ (Exact name of Registrant as specified in its charter) Texas 75-1975147 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 17304 Preston Road, Suite 1280, Dallas, Texas 75252 (Address of principal executive offices) (Zip Code) (972) 733-6858 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ___ Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 of the Exchange Act). YES ___ NO X Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). YES ___ NO X At November 14, 2005, there were 6,828,787 shares of Registrant's common stock outstanding. GENERAL INDEX Page Number --------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS.................................. 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................................... 11 ITEM 4. CONTROLS AND PROCEDURES............................... 11 PART II. OTHER INFORMATION ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS................................... 12 ITEM 6. EXHIBITS.............................................. 12 SIGNATURES...................................................... 12 EXHIBIT INDEX................................................... 13 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VPGI CORP. and Subsidiaries (A Development Stage Company) Condensed Consolidated Balance Sheets September 30 June 30 2005 2005 ----------- ----------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 53,957 $ 55,337 Trade accounts receivable - 21,000 Prepaid expenses 7,705 7,705 Other current assets - 4,627 ----------- ----------- Total current assets 61,662 86,669 OTHER ASSETS Pension surplus 55,108 55,108 ----------- ----------- Total other assets 55,108 55,108 ----------- ----------- Total assets $ 116,770 $ 141,777 =========== =========== The accompanying notes are an integral part of these condensed statements. VPGI CORP. and Subsidiaries (A Development Stage Company) Condensed Consolidated Balance Sheets September 30 June 30 2005 2005 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) CURRENT LIABILITIES Note payable, net of deferred loan costs $ 821,638 $ 644,069 Trade accounts payable 8,341 16,020 Due to related party 29,171 - Accrued expenses 26,614 39,046 ----------- ----------- Total liabilities 885,764 699,135 STOCKHOLDERS' EQUITY Preferred stock, cumulative, $1.00 par value; 1,000,000 shares authorized: Series A, 30,000 shares issued and outstanding (liquidation preference of $30,000) 30,000 30,000 Series H, 2 shares issued and outstanding (liquidation preference of $50,000) 2 2 Series K, 20 shares issued and outstanding (liquidation preference of $500,000) 20 20 Series 2002-G, 156 shares issued and outstanding (liquidation preference of $3.9 million) 156 156 Series 2004-L, 175 shares issued and outstanding (liquidation preference of $1.75 million) 175 175 Common stock, $.001 par value; 80,000,000 shares authorized; 6,828,787 shares issued and outstanding at September 30 and June 30, 2005 6,829 6,829 Additional paid in capital 60,494,522 60,485,022 Accumulated deficit (60,362,085) (60,362,085) Deficit accumulated during development stage (938,613) (717,477) ----------- ----------- Total stockholders' equity (deficit) (768,994) (557,358) ----------- ----------- Total liabilities and stockholders' equity $ 116,770 $ 141,777 =========== =========== The accompanying notes are an integral part of these condensed statements. VPGI CORP. and Subsidiaries (A Development Stage Company) Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Cumulative During Development Stage (July 1, 2004 to September 30, 2005) 2005 2004 --------------------------- ---------- Revenues Product sales $ 5,548 $ - $ - Consulting and support services 6,695 - - ------------------------- ---------- Total revenues 12,243 - - Cost of products and services Cost of product sales - - - Cost of consulting and support services - - - ------------------------- ---------- Total cost of products and services - - - ------------------------- ---------- Gross margin 12,243 - - Operating expenses General and administrative 728,528 158,252 - ------------------------- ---------- Total operating expenses 728,528 158,252 - Operating loss (716,285) (158,252) - Other (income) expense Other income (5,137) - - Interest expense 227,465 62,882 - ------------------------- ---------- Total other (income) expense 222,328 62,882 - ------------------------- ---------- Net loss (938,613) (221,134) - Dividend requirements on preferred stock (222,966) (62,325) (1,075) ------------------------- ---------- Net loss attributable to common stockholders $(1,161,579) $ (283,459) $ (1,075) ========================= ========== Per share amounts allocable to common stockholders Basic and diluted Net loss $ (0.04) $ (0.00) ========== ========== Weighted average common shares outstanding - basic and diluted 6,828,787 5,242,120 The accompanying notes are an integral part of these condensed statements. VPGI CORP. and Subsidiaries (A Development Stage Company) Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended September 30, Cumulative During Development Stage (July 1, 2004 to September 30, 2005) 2005 2004 --------------------------- ---------- Cash flows from operating activities Net loss $ (938,613) $ (221,134) $ - Adjustments to reconcile net loss to cash used in operating activities: Amortization of debt discount 135,479 37,068 - Issuance of warrants for services 10,000 - - Write-off of acquired in-process research and development 146,819 - - Changes in operating assets and liabilities Trade accounts receivable - 21,000 - Prepaid and other Assets (12,841) 4,627 - Accounts payable and accrued liabilities (22,520) 9,059 - ------------------------- ---------- Cash and cash equivalents used in operating activities (681,676) (149,380) - Cash flows from investing activities Cash and cash equivalents provided by investing activities - - - Cash flows from financing activities Preferred stock dividend paid (20,067) - - Proceeds from issuance of notes payable 755,700 150,000 - ------------------------- ---------- Cash and cash equivalents used in financing activities 735,633 150,000 - Net decrease in cash and cash equivalents 53,957 620 - Cash and cash equivalents, beginning of period - 53,337 - ------------------------- ---------- Cash and cash equivalents, end of period $ 53,957 $ 53,957 $ - ========================= ========== The accompanying notes are an integral part of these condensed statements. VPGI CORP. AND SUBSIDIARIES (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2005 (Unaudited) BASIS OF PRESENTATION The interim consolidated financial statements and summarized notes included herein were prepared, without audit, in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in complete financial statements prepared in accordance with U.S. GAAP were condensed or omitted pursuant to such rules and regulations, it is suggested that these financial statements be read in conjunction with the Consolidated Financial Statements and the Notes thereto, included in the Company's Annual Report on Form 10-K for the preceding fiscal year. These interim financial statements and notes hereto reflect all normal, recurring adjustments which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Such financial results, however, should not be construed as necessarily indicative of future earnings. DEVELOPMENT STAGE COMPANY The Company previously offered enhanced digital media solutions, as well as contact center customer service solutions through CIMphony[TM], a suite of computer telephony integration software products and services. This operation was discontinued in December 2002. Effective July 1, 2004, the Company's management has devoted substantially all of its time to the planning and acquisition of new operations. On November 10, 2004, the Company acquired Venture Pacific Group, Inc. ("VPG") to capitalize upon and apply its technical expertise and its existing technologies to the field of radio frequency identification ("RFID"). Since November 10, 2004, the Company has been relying primarily on borrowings for its primary source of cash flow. Accordingly, the Company's financial statements are presented as those of a development stage enterprise, as prescribed by Statement of Financial Accounting Standard No. 7, Accounting and Reporting by Development Stage Enterprises. NOTES PAYABLE On November 10, 2004 the Company entered into a note payable with Trident Growth Fund, L.P. for $700,000, at an annual interest rate of 14%, maturing on November 10, 2005. The loan is collateralized by a security interest in Company assets. Interest is payable monthly in cash. Subsequent to year end the Company entered into negotiations with Trident to extend the maturity date of this note. As of the date of this filing, such negotiations are still ongoing. The Company expects Trident to approve extension of the maturity date by approximately twelve months. On August 10, 2005 the loan agreement was modified to change the loan amount from $700,000 to $750,000 and the Company entered into an additional note payable with Trident Growth Fund, L.P., for $50,000 at an annual interest rate of 14%, maturing on August 10, 2006. In connection with the $50,000 loan, the Company issued warrants to purchase 36,000 shares of its Common Stock, exercisable for five years at an exercise price of $.10 per share. The warrants were valued at approximately $3,500. On September 19, 2005 the loan agreement was again modified to change the loan amount from $750,000 to $850,000 and the Company entered into an additional note payable with Trident Growth Fund, L.P., for $100,000 at an annual interest rate of 14%, maturing on September 19, 2006. In connection with the $100,000 loan, the Company issued warrants to purchase 72,000 shares of its Common Stock, exercisable for five years at an exercise price of $.10 per share. The warrants were valued at approximately $6,000. The above notes are convertible into Common Stock at any time on or after the six month anniversary of the date of issue of the notes, at a per share conversion price equal to the average of the closing prices of the common stock for the three business days ending on any conversion date. In addition, the notes may be redeemed at the earlier of: (i) the maturity dates stated above; (ii) the closing date of the Company's next public offering; or (iii) the date of any change of control of the Company, as defined therein. DUE TO RELATED PARTY During the quarter ended September 30, 2005, Pat Custer, the Company's Chief Executive Officer, advanced approximately $29,000 to the Company to fund working capital requirements. This balance currently bears no interest and is payable on demand. LOSS PER SHARE Basic loss per share is based upon the weighted average number of shares of common stock outstanding. Diluted loss per share is based upon the weighted average number of shares of common stock outstanding plus the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued. In all periods presented, all potential common shares were anti-dilutive. BUSINESS SEGMENT INFORMATION The Company discontinued normal operations in December, 2002. Since that date, no business segments have existed. CONCENTRATION OF CREDIT RISK There were no revenues or accounts receivable in the first quarter. The Company plans to become active in the licensing of radio frequency identification ("RFID") technologies. RECENT PRONOUNCEMENTS Effective July 1, 2005, the Company adopted , Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No. 123 (Revised 2004), "Share-Based Payment" ("SFAS 123R"). SFAS 123R eliminates the option to account for employee stock options under APB 25 and generally requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards (the "fair-value-based" method). The adoption of SFAS 123R had no impact on compensation expense for the quarter ended September 30, 2005 as all outstanding stock options are fully vested and no stock options were awarded during the financial statement period. The Company does not expect the adoption of SFAS 123R to have a material impact on the Company's financial position or results of operations in future periods. RETIREMENT PLAN Prior to a subsidiary's bankruptcy filing in 1992, the subsidiary had a defined benefit plan, which covered substantially all full-time employees. The following table presents the components of net periodic pension cost recognized in earnings for the three months ended September 30, 2005 in accordance with the provisions of SFAS No. 132 (revised 2003), Employers' Disclosures about Pensions and Other Postretirement Benefits: Three Months Ended September 30, ------------------------ 2005 2004 -------- -------- Service cost $ - $ - Interest cost 6,479 6,647 Expected return on plan assets (6,584) (7,931) -------- -------- Net periodic benefit cost $ (105) $ (1,284) ======== ======== ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements This report may contain "Forward Looking Statements," which are our expectations, plans, and projections which may or may not materialize, and which are subject to various risks and uncertainties, including statements concerning expected expenses and the adequacy of our sources of cash to finance our current and future operations. When used in this report, the words "plans," "believes," "expects," "anticipates," "estimates" and similar expressions are intended to identify forward-looking statements. Factors which could cause actual results to materially differ from our expectations include the following: general economic conditions and growth in the high tech industry; competitive factors and pricing pressures; changes in product mix; the timely development and acceptance of new products; and the risks described from time to time in our SEC filings. These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to release publicly any updates or change in our expectations or any change in events, conditions or circumstances on which any such statement may be based, except as may be otherwise required by the securities laws. Overview The Company previously offered enhanced digital media solutions, as well as contact center customer service solutions through CIMphony[TM], a suite of computer telephony integration software products and services. This operation was discontinued in December 2002. We acquired Venture Pacific Group, Inc. ("VPG") in November 2004 to capitalize upon and apply our technical expertise and our existing technologies to the field of radio frequency identification ("RFID"). We intend to license and to develop applications in specialty areas, such as anti-counterfeiting of drugs, medical devices, and logistical systems, and plan to concentrate on Asian deployment, primarily to China. We also plan to participate in other business ventures and opportunities as they may present themselves. For example, our revenues during the current fiscal quarter was derived primarily from the telecommunications (cell phone) industry. Our new business model continues in the development stage. Consequently, we are continuing to evaluate all of our options and may consider seeking a buyer, a merger candidate or an acquisition of a viable business. The following discussion provides information to assist in the understanding of our financial condition and results of operations for the fiscal quarter ended September 30, 2005. It should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing in our Annual Report on Form 10-K for fiscal year ended June 30, 2005. Results of Operations Revenues. We report no revenues for the three months ended September 30, 2005 and no revenues for the three months ended September 30, 2004. Gross Margin. Gross margin was zero for the three months ended September 30, 2005 and the three months ended March 31, 2004. Operating Expenses. Total operating expenses for the three months ended September 30, 2005 increased to $158,252 compared to zero for the same quarter last year. Significant components of operating expenses for the three months ended September 30, 2005 and 2004 consisted of the following: 2005 2004 -------- -------- Compensation $ 79,218 $ - Legal expense and professional fees 25,889 - Other 53,145 - -------- -------- Total $ 158,252 $ - ======== ======== "Other" expenses include public company cost, telephone, office, insurance and other general and administrative expenses. The increase in operating expenses for the period is attributable to the Company resuming business activity with the acquisition of Venture Pacific Group, Inc. ("VPG") during November 2004. Liquidity and Capital Resources Cash Flows From Operations. Cash used in operations for the three months ended September 30, 2005 and 2004 were $149,380 and zero, respectively. Cash Flows From Investing Activities. During the three months ended September 30, 2005, we engaged in no investing activities. During the three months ended September 30, 2004 we engaged in no investing activities. Cash Flows from Financing Activities. During the three months ended September 30, 2005 approximately $150,000 was provided by financing activities. The primary components of the financing activities for the three months ended September 30, 2005 were $150,000 proceeds from the issuance of short-term debt.. During the three months ended September 30, 2004 we engaged in no financing activities. Going Concern We incurred net losses of $717,477, $20,355 and $3,435,735 for the years ended June 30, 2005, 2004 and 2003, respectively. In December 2002 we laid off all of our employees and discontinued normal operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Before we discontinued normal operations in 2002, we offered enhanced digital media solutions and call center computer telephony integration software products and services. With the acquisition of Venture Pacific Group, Inc. ("VPG") in November 2004 we expected to become active in licensing RFID technologies to integrate with our own technologies to develop RFID applications in specialty areas, such as anti-counterfeiting of drugs, medical devices, and logistical systems. Our new business model continues in the development stage, while expenses are ongoing. Consequently, the outlook for generating sufficient cash to support our operations for the next twelve months is guarded. If we are unable to achieve a positive cash flow, additional financing or equity placements may again be necessary. Although we believe that sufficient financing resources may be available, such resources may not continue to be available to us or they may not be available upon favorable terms. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates which may adversely affect our financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our regular operating and financing activities. We do not use financial instruments for trading or other speculative purposes and we are not a party to any leveraged financial instruments. We are exposed to interest rate risk primarily through our borrowing activities, which are described in the "Notes Payable" Note to the Consolidated Financial Statements of our Annual Report on Form 10-K for fiscal year ended June 30, 2005, which is incorporated herein by reference. ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer has reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-15(e) or 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer has concluded that our current disclosure controls and procedures provide him with reasonable assurance that they are effective to provide him with timely material information relating to us required to be disclosed in the reports we file or submit under the Exchange Act. Annual report on internal control over financial reporting. Based upon the most recent pronouncements of the Securities and Exchange Commission, our first annual report on internal control over financial reporting is due for inclusion in our annual report on Form 10-K for the twelve month period ending June 30, 2007. We expect to begin the process during next fiscal year of identifying a framework to use to evaluate the effectiveness of our internal control over financial reporting as (as defined in Rule 13a-15(f) or 15d-15(f) under the Securities Exchange Act of 1934.) Changes in Internal Control over Financial Reporting. Our management has evaluated whether any change in our internal control over financial reporting occurred during the last fiscal quarter. Based on that evaluation, management concluded that there has been no change in our internal control over financial reporting during the relevant period that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Issuances of equity securities during the period covered by this report that were not registered under the Securities Act of 1933 consisted of the following: In August and September 2005 we issued to an unrelated party warrants to purchase an aggregate of 108,000 shares of our par value $.001 common stock ("Common Stock"), in connection with additional advances made pursuant to amendments to a previous loan agreement. These issuances were made pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, in that they did not involve a public offering. ITEM 6. EXHIBITS Reference is made to the Exhibit Index of this Form 10-Q for a list of all exhibits filed with and incorporated by reference in this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VPGI Corp. (Registrant) By: /s/ PATRICK A. CUSTER --------------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer Date: November 14, 2005 VPGI CORP. and Subsidiaries EXHIBIT INDEX Exhibit Number Description of Exhibits Page Number ---------------------------------------------------------------------------- 4.2 Form of warrant issued to Trident Growth Fund, L.P. in connection with First and Second Amendments to the Loan Agreement dated November 1, 2004 between the Company and Trident Growth Fund, L.P. (filed as Exhibit "4.2" to the Company's Current Report on Form 8-K filed on November 17, 2004 and incorporated herein by reference.) N/A 10.1* First Amendment dated August 10, 2005 to Loan Agreement dated November 10, 2004 between the Company and Trident Growth Fund, LP. 14 10.2* Second Amendment dated September 19, 2005 to Loan Agreement dated November 10, 2004 between the Company and Trident Growth Fund, LP. 19 31 * Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 21 32 * Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 23 _______________ * Filed herewith. EX-10.1 2 exh10-1.txt FIRST AMENDMENT DATED AUGUST 10, 2005 TO LOAN AGREEMENT Exhibit 10.1 FIRST AMENDMENT to that certain LOAN AGREEMENT by and between VPGI Corp. and Trident Growth Fund, L.P. (November 10, 2004) This First Amendment to that certain Loan Agreement by and between VPGI Corp. and Trident Growth Fund, L.P. dated November 10, 2004 (this "Agreement") is made and entered into this 10th day of August 2005, by and between VPGI Corp., a Texas corporation (the "Borrower") and Trident Growth Fund, LP, a Delaware limited partnership (the "Lender"). W I T N E S S E T H: WHEREAS, on November 10, 2004, the parties entered into a Loan Agreement (so called herein) wherein Lender agreed to loan to Borrower up to $700,000 (the "Loan"); and WHEREAS, Borrower has requested and Lender has agreed to loan to Borrower an additional $50,000 pursuant to and on the same terms as the Loan; and NOW, THEREFORE, the parties have agreed to amend the Loan as follows: 1. Defined Terms. All capitalized terms set forth but not defined herein shall have the meaning ascribed to them in the Loan Agreement. 2. Increase in Loan Amount. The Loan Agreement shall be amended by increasing the Loan Amount from $700,000 to 750,000, and everywhere in the Loan Agreement where reference is made to the Loan Amount, directly or indirectly, such term or reference shall be amended and modified accordingly. Accordingly, a Convertible Note in the form of Exhibit A shall be executed and delivered by Borrower to Lender contemporaneously herewith. The Origination and Commitment Fees described in Section 2.1 of the Loan Agreement shall apply to the additional amount to be loaned hereunder. 3. Additional Warrant Coverage. Borrower shall issue an additional Warrant to Lender in the form of Exhibit B hereto giving Lender the right to purchase an additional 36,000 shares of Common Stock at an exercise price of $.10 per share. As set forth in the Loan Agreement, Borrower and Lender agree that the aggregate value of the Warrant to be issued in accordance with this Agreement together with the Warrants previously issued in connection with the Loan Agreement is less than $1,000. 4. Amendment of Convertible Notes, Warrants, and Series 2004-L Class A Preference Shares Certificate of Designations. Such Convertible Notes and Warrants as listed on Exhibit C as well as Section 4.4 of the Certificate of Designations for the Series 2004-L Class A Preference Shares hereto previously issued to Lender in connection with the Loan Agreement or otherwise are hereby amended to include the provisions and respective amendments (modified accordingly) set forth on Exhibit D, such amendments to be made effective retroactively to the date of issuance of each such Convertible Note, Warrant, or Series 2004-L Class A Preference Stock, as the case may be. 5. Representations and Warranties. Except as otherwise set forth on Exhibit E hereto, all of the representations and warranties contained in the Loan Agreement are true and correct as of the date hereof, and the Disclosure Schedules attached thereto have not changed in any material manner. 6. Terms of Loan Agreement Unchanged. Except as set forth or contemplated herein, the remaining terms of the Loan Agreement shall remain in effect as set forth therein. 7. Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 8. Further Assurances. Each party hereto agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement. 9. Governing Law. This Agreement and the legal relations among the parties hereto shall be governed by and construed in accordance with the laws of the State of Texas without regard to its conflicts of law doctrine. Each of the parties hereto irrevocably consents to the jurisdiction of the federal and state courts located in Dallas County, the State of Texas. IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. VPGI CORP. TRIDENT GROWTH FUND, LP ---------------------------- By: TRIDENT MANAGEMENT, LLC, its GENERAL PARTNER By: /s/ Pat Custer By: /s/ Scott Cook ----------------------- ----------------------- Pat A. Custer, Scott Cook, Chief Executive Officer Authorized Member EXHIBIT C --------- [CONVERTIBLE NOTES AND WARRANTS TO BE AMENDED] Warrants 2000-G-01.3 (date of issue: 12/2/00) 2001-G-02.3 (date of issue: 3/16/01) 2001-5-03.3 (date of issue: 7/25/01) 2002-G-04.2 (date of issue: 5/10/02) 2002-G-05.2 (date of issue: 11/13/02) 2004-J-02 (date of issue: 11/10/04) Convertible Notes ----------------- 14% Secured Convertible Note No. 1 (date of issue: November 10, 2004) in the Principal Amount of $125,000. 14% Secured Convertible Note No. 2 (date of issue: November 15, 2004) in the Principal Amount of $575,000. EXHIBIT D --------- [CONVERTIBLE NOTE/WARRANTS AMENDMENT LANGUAGE] Exercise Limitations. At any time after the Common Stock is registered under Section 12 of the Exchange Act, the Holder shall not have the right to exercise any portion of this Warrant [Convertible Note], pursuant to Section II(1) [4] or otherwise, to the extent that after giving effect to such issuance after exercise, the Holder (together with the Holder's affiliates), as set forth on the applicable Subscription [Conversion] Notice, would beneficially own in excess of 4.99% or 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such issuance. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant [Convertible Note] with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised portion of this Warrant [Convertible Note] beneficially owned by the Holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures, Convertible Notes, or Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this provision, beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act. To the extent that the limitation contained in this Section applies, the determination of whether this Warrant [Convertible Note] is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant [Convertible Note] is exercisable shall be in the sole discretion of such Holder, and the submission of a Subscription [Conversion] Notice shall be deemed to be such Holder's determination of whether this Warrant [Convertible Note] is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant [Convertible Note] is exercisable, in each case subject to such aggregate percentage limitation, the Company shall verify or confirm the accuracy of such determination. For purposes of this Section, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) Section 3.3 of the Loan Agreement, (y) a more recent public announcement by the Company, or (z) any other notice by the Company or the Company's Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within two days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant [Convertible Note], by the Holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this Section may be waived by the Holder upon, at the election of the Holder, not less than 61 days' prior notice to the Company, and the provisions of this Section shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). [SERIES 2004-L CLASS A PREFERENCE SHARES CERTIFICATE OF DESIGNATIONS AMENDMENT] 4.4 Notwithstanding the provisions hereof, in no event shall the holder be entitled to convert any Series 2004-L Class A Preferred Stock in excess of that number of shares upon conversion of which the sum of (1) the number of Common Shares beneficially owned by such holder and its affiliates (other than Common Shares which may be deemed beneficially owned through the ownership of the unconverted portion of the Preferred Stock), and (2) the number of shares of Common Stock issuable upon the conversion of the Preferred Stock with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Eligible Holder and its affiliates of more than 4.9% or 9.9% (as the case may be) of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided in clause (1) of such proviso. The provisions of this Section may be waived by the holder upon, at the election of the holder, not less than 61 days' prior notice to the Corporation, and the provisions of this Section 4.4 shall continue to apply until such 61st day (or such later date, as determined by the holder, as may be specified in such notice of waiver). EX-10.2 3 exh10-2.txt SECOND AMENDMENT DATED SEPTEMBER 19, 2005 TO LOAN AGREEMENT Exhibit 10.2 SECOND AMENDMENT to that certain LOAN AGREEMENT by and between VPGI Corp. and Trident Growth Fund, L.P. (November 10, 2004) This Second Amendment to that certain Loan Agreement by and between VPGI Corp. and Trident Growth Fund, L.P. dated November 10, 2004 (this "Agreement") is made and entered into this 19th day of September 2005, by and between VPGI Corp., a Texas corporation (the "Borrower") and Trident Growth Fund, LP, a Delaware limited partnership (the "Lender"). W I T N E S S E T H: WHEREAS, on November 10, 2004, the parties entered into a Loan Agreement (so called herein) wherein Lender agreed to loan to Borrower up to $700,000 (the "Loan"); and WHEREAS, on August 10, 2005, the Loan was amended to increase the Loan Amount by $50,000; and WHEREAS, Borrower has requested and Lender has agreed to loan to Borrower an additional $100,000 pursuant to and on the same terms as the Loan; and NOW, THEREFORE, the parties have agreed to amend the Loan as follows: 1. Defined Terms. All capitalized terms set forth but not defined herein shall have the meaning ascribed to them in the Loan Agreement. 2. Increase in Loan Amount. The Loan Agreement shall be amended by increasing the Loan Amount from $750,000 to 850,000, and everywhere in the Loan Agreement where reference is made to the Loan Amount, directly or indirectly, such term or reference shall be amended and modified accordingly. Accordingly, a Convertible Note in the form of Exhibit A shall be executed and delivered by Borrower to Lender contemporaneously herewith. The Origination and Commitment Fees described in Section 2.1 of the Loan Agreement shall apply to the additional amount to be loaned hereunder. 3. Additional Warrant Coverage. Borrower shall issue an additional Warrant to Lender in the form of Exhibit B hereto giving Lender the right to purchase an additional 72,000 shares of Common Stock at an exercise price of $.10 per share. As set forth in the Loan Agreement, Borrower and Lender agree that the aggregate value of the Warrant to be issued in accordance with this Agreement together with the Warrants previously issued in connection with the Loan Agreement is less than $1,000. 4. Representations and Warranties. Except as otherwise set forth on Exhibit C hereto, all of the representations and warranties contained in the Loan Agreement are true and correct as of the date hereof, and the Disclosure Schedules attached thereto have not changed in any material manner. 5. Terms of Loan Agreement Unchanged. Except as set forth or contemplated herein, the remaining terms of the Loan Agreement shall remain in effect as set forth therein. 6. Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 7. Further Assurances. Each party hereto agrees to perform any further acts and to execute and deliver any further documents that may be reasonably necessary to carry out the provisions of this Agreement. 8. Governing Law. This Agreement and the legal relations among the parties hereto shall be governed by and construed in accordance with the laws of the State of Texas without regard to its conflicts of law doctrine. Each of the parties hereto irrevocably consents to the jurisdiction of the federal and state courts located in Dallas County, the State of Texas. IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. VPGI CORP. TRIDENT GROWTH FUND, LP ---------------------------- By: TRIDENT MANAGEMENT, LLC, its GENERAL PARTNER By: /s/ Pat Custer By: /s/ Scott Cook ----------------------- ----------------------- Pat A. Custer, Scott Cook, Chief Executive Officer Authorized Member EX-31 4 exh31.txt CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31 CERTIFICATION OF PATRICK A. CUSTER, CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER, PURSUANT TO RULE 13a-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, Patrick A. Custer, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of VPGI Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d- 15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. November 14, 2005 /s/ PATRICK A. CUSTER ------------------------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer EX-32 5 exh32.txt CERTIFICATION PURSUANT TO 18 U.S.C. S1350 Exhibit 32 CERTIFICATIONS OF PATRICK A. CUSTER, PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Quarterly Report on Form 10-Q of VPGI Corp. (the "Company") for the period ended September 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, the undersigned officer of the Company, certifies, pursuant to 18 U.S.C. S1350, as adopted pursuant to S906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: 1. The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 14, 2005 /s/ PATRICK A. CUSTER ------------------------------- Patrick A. Custer Chief Executive Officer and Principal Financial Officer The foregoing certification is being furnished as an exhibit to the Form 10-Q pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and, accordingly, is not being filed as part of the Form 10-Q for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any filings of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. -----END PRIVACY-ENHANCED MESSAGE-----