VPGI CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2004

Commission file number 000-13225

VPGI CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)

Texas 75-1975147
(State of incorporation) (I.R.S. Employer Identification No.)

P.O. Box 802808 75380
Dallas, Texas (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (214) 263-3122

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

Common Stock, par value $.001 per share
(Title of class)

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, if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). YES NO X

As of December 31, 2003 the aggregate market value of the voting
stock held by non-affiliates of the Registrant (4,473,547 shares) was
approximately $536,826, based on the closing sale price of the Common Stock
as reported by the OTC Bulletin Board[R] ($0.12). Shares of Common Stock
held by each executive officer and director and by each person who owns 5%
or more of the outstanding Common Stock, based on corporate records and
Schedule 13G filings, have been excluded since such persons may be deemed
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

At September 28, 2004 there were 5,242,120 shares of Registrant's
Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: exhibits shown on the Exhibit
Index.

GENERAL INDEX

Page Number

ITEM l. BUSINESS............................................ 3

ITEM 2. PROPERTIES.......................................... 5

ITEM 3. LEGAL PROCEEDINGS................................... 5

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 5

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES.......................................... 5

ITEM 6. SELECTED FINANCIAL DATA............................. 6

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.................. 7

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK......................................... 12

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......... 13

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................. 13

ITEM 9A. CONTROLS AND PROCEDURES............................. 13

ITEM 9B. OTHER INFORMATION................................... 14

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.. 14

ITEM 11. EXECUTIVE COMPENSATION.............................. 15

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.......................................... 16

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...... 18

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.............. 18

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.......... 19

SIGNATURES.................................................... 19

EXHIBIT INDEX................................................. 50

VPGI CORP.

PART I

ITEM l. BUSINESS

(a) General Development of Business

We were incorporated in Texas on July 13, 1984. We filed an S-18
registration statement in November 1984 and completed the registered
offering in January 1985. In 1996 we introduced a digital media device
(set top box), which enabled the display of Internet content on a
television. In 1998 we added design and cabling services for voice/data
networks and in 1999 we added computer telephony integration (CTI)
capabilities to our product offerings with customized call center
solutions.

In December 2002, due to our financial position and the business
outlook for the foreseeable future, we discontinued normal operations.
All of our directors resigned, except for the CEO who remained as the sole
director, and we laid off all of our remaining officers and employees,
although some former employees continued to act in limited consulting roles
to facilitate an orderly winding down process. We are continuing to
evaluate various options and may consider a merger candidate, an acquisition
of a viable business or positioning the Company for a buyer of the corporate
entity.

(b) Financial Information About Industry Segments

Please refer to Note O of the Notes to Consolidated Financial
Statements in this Form 10-K for information concerning Industry Segments.

(c) Narrative Description of Business

We have conducted no business operations since December 2002. The
following information, consequently, relates only to normal business
operations conducted prior to that date.

Major Markets, Products and Services

Our digital media technology was available for licensing by customers
wishing to manufacture and market a digital media device that provided easy
and affordable access to the Internet through the television medium. The
units offered video on demand, Internet access, broadcast entertainment
programming and content streams. The digital media devices allowed users
to save and store programming, rewind, and pause television shows in mid-
broadcast; provided electronic programming guides that allowed users to
select channels based on television show, actor, or theme and could be used
to collect demographic information.

Our CTI technologies offered customized products for customer contact
centers, which could be designed to support a diverse network of sites, and
managed voice and data transactions from multiple sources while allowing for
intelligent routing and queuing.

Patents, Trademarks and Licenses

We owned or held rights to all patents, trademarks and licenses that we
considered to be necessary in the conduct of our business.

Manufacturing

We did not own manufacturing facilities, but rather contracted all
manufacturing to third parties.

Environmental

We were in compliance with all applicable environmental laws.

Major Customers

In fiscal year 2003, one customer accounted for approximately 39% of
consolidated revenues. In fiscal year 2002, one customer accounted for
approximately 44.6% of consolidated revenues and at June 30, 2002, one
customer accounted for 58.1% and another customer accounted for 25.2% of
trade accounts receivable.

Competition

We operated in an intensely competitive industry. A number of
companies had developed digital media devices and technologies similar to
ours, including, among others, low-cost Internet access technologies, (ii)
"set top" boxes, as well as (iii) video game devices that provide Internet
access. Personal computer manufacturers offered products that offered
television viewing combined with Internet access. CTI competitors included
companies that marketed products with functionalities similar to ours.

Employees

As of June 30, 2004, the Company had no employees.

Warranty

The Company has no material outstanding warranty obligations.

ITEM 2. PROPERTIES

Until December 2002, we operated from the following locations, which
were deemed suitable for our operations. At June 30, 2004, all locations
were closed.

Location Purpose/Use Owned/Leased Square Footage
-------- ----------- ------------ --------------
Dallas, TX Corporate Headquarters Leased 16,617
Dallas, TX Storage facility Leased 5,120
Tulsa, OK Subsidiary office Leased 7,500

ITEM 3. LEGAL PROCEEDINGS

Prior to closing the business in December 2002, we were routinely a
party to ordinary litigation incidental to our business, as well as to other
litigation of a nonmaterial nature.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report on Form 10-K, through the
solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Until September 13, 2002 our common stock, $.001 par value (the "Common
Stock") traded on the NASDAQ SmallCap MarketSM. It now trades on the OTC
Bulletin Board under the symbol "VPGI." High and low trade price
information for our Common Stock is presented below for each quarter in the
last two fiscal years.

Quarter Ending Date High Trade Low Trade
------------------- ---------- ---------

Fiscal 2004
-----------
June 30, 2004 $ 0.10 $ 0.05
March 31, 2004 $ 0.18 $ 0.085
December 31, 2003 $ 0.29 $ 0.10
September 30, 2003 $ 0.18 $ 0.08

Fiscal 2003
-----------
June 30, 2003 $ 0.19 $ 0.018
March 31, 2003 $ 0.045 $ 0.02
December 31, 2002 $ 0.20 $ 0.035
September 30, 2002 $ 0.85 $ 0.15

Holders

As of June 30, 2004 there were approximately 11,500 record shareholders
and individual participants in security position listings.

Dividends

We have never paid cash dividends on common shares and do not
anticipate doing so in the foreseeable future. In addition, our Series
2002-G Convertible Preferred Stock contains preferential covenants that
materially limit the discretion of our Board of Directors with respect
to payment of dividends or making any other distribution to our common
shareholders so long as Series 2002-G is outstanding or unconverted.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes our equity compensation plans as of June
30, 2004:

Number of Securities
Number of Securities Remaining Available For
To Be Issued Upon Weighted-average Future Issuance Under
Exercise of Outstanding Exercise Price of Equity Compensation Plans
Options, Warrants Outstanding Options, (Excluding Securities
Plan Category and Rights Warrants and Rights Reflected in Column (a))
--------------------------------------------------------------------------------------------

(a) (b) (c)
Equity Compensation
Plans Approved by
Security Holders 1,815,533 $ 3.94 3,101,967

Equity Compensation
Plans Not Approved by
Security Holders 215,000 $ 0.02 -0-
--------- ------- ---------
Total 2,030,533 $ 3.53 3,101,967
========= ======= =========

Options issued and available for future issuance under stockholder-
approved plans consist primarily of those authorized pursuant to our
1999 Equity Incentive Plan. Options issued under plans not approved by
stockholders consist of a one-time grant to former employees for services
rendered in connection with the winding down of normal Company operations
and to consultants for prior services rendered.

ITEM 6. SELECTED FINANCIAL DATA

All financial data for the years referenced below were derived from our
Consolidated Financial Statements for those years and the comparability of
the information is affected by acquisitions, dispositions, and other
transactions which are described in the footnotes which accompany those
Consolidated Financial Statements, and which should be read in conjunction
with this five-year financial summary. Other factors which may affect the
comparability of the information for the more recent fiscal years are
discussed further in Item 7 below.

Year Ended June 30,
-------------------------------------------------------------
2004 2003 2002 2001 2000
---- ---- ---- ---- ----

Consolidated Statement
of Operations Data
----------------------
Revenues $ -- $ 625,785 $5,369,311 $9,332,232 $ 9,145,705

Operating loss (37,018) (3,516,230) (3,894,502) (6,789,892) (10,631,655)

Net loss (20,355) (3,435,735) (2,733,434) (6,622,458) (10,863,875)

Net loss attributable
to common stockholders (24,655) (2,123,935) (1,019,077) (284,658) (9,825,275)

Loss per Common Share (1) (0.01) (0.51) (0.30) (0.08) (3.82)

Consolidated Balance
Sheet Data
--------------------
Total assets 49,972 62,700 4,842,203 8,837,360 12,523,204

Long term debt -- -- 14,938 1,388,126 595,324

Redeemable preferred stock -- -- 1,456,000 1,170,000 8,409,600

Stockholders' equity 49,972 50,708 2,018,192 3,933,806 860,699

Number of employees -- -- 25 67 104

(1) Basic and diluted loss per share which was computed based upon the
weighted average number of common shares outstanding during each fiscal
year.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion provides information to assist in the
understanding of our financial condition and results of operations and
should be read in conjunction with the Consolidated Financial Statements
and related notes appearing elsewhere herein.

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.

Results of Operations

Please refer to Note O of the Notes to Consolidated Financial
Statements in this Form 10-K for additional information on our operating
segments.

FISCAL YEAR ENDED JUNE 30, 2004 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2003
---------------------------------------------------------------------------

Revenues

We discontinued all operations in December 2002 and had no revenues for
fiscal year 2004. Revenues of $626,000 for fiscal year 2003 were primarily
comprised of revenues from the sale of CTI products and support services
during the first half of the fiscal year before the Company discontinued
operations.

Gross Margin

We had no gross margin for fiscal year 2004. Gross margin for fiscal
year 2003 was $421,000, which represented 67.2% of all revenue in fiscal
year 2003. This is attributable to the virtual elimination of all costs
associated with the sale of products and services due to the discontinuance
of operations.

Operating Expenses

Total operating expenses for fiscal year 2004 decreased to
approximately $37,000, compared to approximately $3.94 million for the
same period last year. Significant components of operating expenses for
the fiscal years ended June 30, 2004 and 2003 consisted of the following:

Year ended June 30,
-------------------------------
2004 2003
----------- -----------
Compensation $ 5,760 $ 537,859
Facilities -0- 156,560
Depreciation -0- 439,621
Asset Impairment -0- 1,793,534
Amortization of software development
costs, trademark, and goodwill -0- 177,985
Online service expense -0- 2,188
Legal expense and professional fees 17,860 205,411
Sales and marketing -0- 10,370
Other 13,398 613,293
----------- -----------
Total $ 37,018 $ 3,936,821
=========== ===========

"Other" expenses include public company cost, telephone, travel,
office, insurance, and other general and administrative expenses. The
decrease in operating expenses for fiscal year 2004 is attributable to the
discontinuance of all Company operations in December 2002.

Interest Expense

We had no interest expense in fiscal year 2004 as compared to total
interest expense of $13,000 for the previous year. The decrease in interest
expense is attributable to the elimination of debt.

FISCAL YEAR ENDED JUNE 30, 2003 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2002
---------------------------------------------------------------------------

Revenues

Total revenues for fiscal year 2003 decreased to $626,000, as compared
to $5.37 million in 2002. Revenues for fiscal year 2003 are primarily
comprised of revenues from the sale of CTI products and support services
during the first half of the fiscal year before the Company discontinued
all operations.

Gross Margin

Gross margin for fiscal year 2003 was $421,000, as compared to $3.11
million for 2002. This represents 67.2% of all revenue in fiscal year
2003, compared to 58% in the previous year. The increase as a percentage of
revenue can be attributed to the virtual elimination of all costs associated
with the sale of products and services due to the discontinuance of
operations.

Write-Off of Inventory and Software Development Costs

We wrote off all remaining inventories, purchased software and product
and software development costs in December 2002 for fiscal year 2003, as
they were no longer being utilized. No inventories were written down or
off and we did not capitalize any software development costs in fiscal year
2002.

Operating Expenses

Total operating expenses for fiscal year 2003 decreased to
approximately $3.94 million, compared to approximately $7.0 million for the
same period last year. Significant components of operating expenses for the
fiscal years ended June 30, 2003 and 2002 consisted of the following:

Year ended June 30,
-------------------------------
2003 2002
----------- -----------
Compensation $ 537,859 $ 3,099,108
Facilities 156,560 578,423
Depreciation 439,621 494,112
Asset Impairment 1,793,534 -0-
Amortization of software development
costs, trademark, and goodwill 177,985 1,098,937
Online service expense 2,188 66,516
Legal expense and professional fees 205,411 141,489
Extinguishment of debt -0- 406,243
Sales and marketing 10,370 52,850
Other 613,293 1,070,460
----------- -----------
Total $ 3,936,821 $ 7,008,138
=========== ===========

"Other" expenses include public company cost, telephone, travel,
office, insurance, and other general and administrative expenses. The
decrease in operating expenses for fiscal year 2003 is attributable to
the discontinuance of all Company operations in December 2002.

Interest Expense

Total interest expense for fiscal year 2003 was $13,000 as compared
to $101,000 in 2002. The decrease in interest expense is primarily
attributable to the virtual elimination of our debt level at June 30, 2003,
from approximately $215,000 at June 30, 2002.

Liquidity and Capital Resources

Cash and cash equivalents at June 30, 2004 were zero compared to $9,883
at June 30, 2003. In the past we relied on available borrowing arrangements
and sales of our common and preferred stock to supplement operations.
However, during 2003 outside financial resources became unavailable to us
and it was necessary to discontinue operations and close the Company.

Cash Flows From Operations

Cash used in operations for the fiscal year ended June 30, 2004 was
$9,883 compared to $1.07 million used in operations in 2003. The major
components of cash used in operations during 2004 were comprised of a
$20,000 loss from operations, accounts payable and accrued liabilities of
$11,992 and other assets of $12,948, offset by issuances of common stock
and warrants to purchase common stock valued at approximately $28,000.

Cash used in operations for the fiscal year ended June 30, 2003 was
$1.07 million compared to $2.15 million used in operations in 2002. The
major components of cash used in operations during 2003 were comprised of a
$3.48 million loss from operations, including depreciation and amortization
of $440,000, asset and goodwill impairment of $1.7 million, and a discount
on a note receivable of $300,000.

Cash used in operations for the fiscal year ended June 30, 2002 was
$2.15 million compared to $3.46 million in 2001. The major components of
cash used in operations during 2002 were comprised of a $2.73 million loss
from operations, including depreciation and amortization of $1.6 million
(primarily capitalized software amortization) and a one-time gain of $1.1
million on the sale of the Curtis Mathes trademark, as well as a reduction
in our investment in working capital. In addition, a loss of $406,000 for
extinguishment of debt resulted from the assumption by the purchaser of the
trademark of a $2 million note payable.

Cash Flows From Investing Activities

During fiscal year 2004, we conducted no investing activities.

During fiscal year 2003, we discounted the outstanding principal
balance of $850,000 of the note receivable received in the sale of the
Curtis Mathes trademark and collected $550,000. We additionally redeemed
a certificate of deposit for $25,000.

During fiscal year 2002, we sold the Curtis Mathes trademark to an
investment group for $4.5 million, which included $635,000 in cash ($450,000
of which was received in fiscal 2001) and $1,865,000 in a note receivable.
The sale resulted in a release of a secured debt of $2 million as the buyer
assumed the outstanding debt, providing additional operating capital. The
value of the sale was based on an estimated four years of projected royalty
stream from the Curtis Mathes brand. Payments received on the note
receivable in fiscal 2002 totaled $1.02 million, and the outstanding
principal balance of the note receivable at June 30, 2002 was $850,000.
We additionally purchased approximately $12,000 of property and equipment
during 2002 and purchased a long-term certificate of deposit for $25,000.

Cash Flows From Financing Activities

During fiscal year 2004, we had no financing activities.

Cash of $315,000 was used in financing activities during fiscal year
2003, consisting of payments on long-term and capital lease obligations.
Cash of $100,000 was borrowed during fiscal year 2003.

Cash flow from financing activities generated approximately $1.11
million during fiscal year 2002; major components include $500,000 from the
issuance of preferred stock and $700,000 from proceeds of long term debt.

Other Matters

Critical Accounting Policies

The preparation of the consolidated financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates. The
following critical accounting policies are utilized by management in the
preparation of the consolidated financial statements.

Product and Software Development Costs. We capitalized product and
software development costs beginning at the time technological feasibility
of the product or software was established, until the product or software
was ready for use in products. Research and development costs of products
and software were expensed as incurred. The capitalized costs related to
products or software which we expected to become an integral part of our
revenue-producing products were amortized in relation to expected revenues
from the product, or straight-line over a maximum of four years, whichever
was greater. We regularly reviewed the carrying value of product or
software development costs, and we would recognize a loss when the expected
net realizable value of a product fell below the unamortized cost.

Impairment of Long-lived Assets. The Company evaluated long-lived
assets and intangibles held and used for impairment whenever events or
changes in circumstances indicated that the carrying amounts may not be
recoverable. Impairment was recognized when the undiscounted cash flows
estimated to be generated by those assets were less than the carrying
amounts of such assets.

Revenue Recognition. We recognized revenue as follows: (a) service
revenue - when the services were provided; (b) equipment and product
sales - at the time of delivery and customer acceptance; (c) installation
of software and hardware systems - the completed contract method; and
(d) royalties - when earned as the customer sold royalty related products.
Amounts for which revenue could not be recognized, such as uncompleted
contracts or unearned maintenance services, were included in deferred
revenue and were recognized as contracts were completed or ratably over
the period covered by the maintenance agreement.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Prior to December 2002, we were exposed to market risk from changes in
interest rates which could adversely affect our financial position, results
of operations and cash flows. In seeking to minimize the risks from
interest rate fluctuations, we managed exposures through our regular
operating and financing activities. We did not use financial instruments
for trading or other speculative purposes and we were not a party to any
leveraged financial instruments. We were exposed to interest rate risk
primarily through our borrowing activities, which are described in the
"Long-Term Debt" Notes to the Consolidated Financial Statements, which
are incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements and related Financial Statement
Schedules are included immediately following the signature page of this
Form 10-K.

Selected Quarterly Financial Data (unaudited)

The following tables set forth certain unaudited financial data for the
quarters indicated:

Fiscal 2004 Quarter Ended Fiscal 2003 Quarter Ended
-------------------------------------------------- ------------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
2003 2003 2004 2004 2002 2002 2003 2003
---------- ---------- --------- ---------- ---------- ---------- ---------- ----------

Net Sales $0.00 $0.00 $0.00 $0.00 $437,503 $103,282 $0.00 $85,000

Gross Margin $0.00 $0.00 $0.00 $0.00 $243,985 $ 91,606 $0.00 $85,000
% of net sales 0% 0% 0% 0% 55.8% 88.7% 0% 100%

Operating income
(loss) $(37,152) $(2,685) $0.00 $2,819 $(1,820,458) $(1,574,644) $(67,986) $(53,142)
% of net sales 0% 0% 0% 0% (416.1)% (1,524.6)% 0% (60)%

Net income (loss) $(30,592) $(2,685) $0.00 $12,922 $(1,806,122) $(1,555,195) $(76,208) $2,790
% of net sales 0% 0% 0% 0% (412.8)% (1,505.8)% 0% 0%

Net income (loss)
attributable to
common shareholders $(31,667) $(3,760) $(1,075) $11,847 $(1,151,372) $(926,095) $(47,183) $715
% of net sales 0% 0% 0% 0% (263.2)% (896.7)% 0% 0%

Net income (loss)
attributable to
common shareholders
per share - basic and
diluted* $(0.01) $(0.00) $(0.00) $0.00 $(0.27) $(0. 23) $(0.01) $0.00

* Difference in per share amounts between quarterly financial data and
year-end results are attributable to rounding.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. 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 these disclosure controls and procedures are
effective.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Board of Directors

The following sets forth, with respect to each member of our Board of
Directors as of June 30, 2004, his name, age, period served as director,
present position, if any, with the Company and other business experience.
All directors in the past have served one-year terms between annual meetings
of shareholders.

Patrick A. Custer, 55, is the sole member of the Board and Chief
Executive Officer. Mr. Custer served as a director from 1984 to 1985, and
from 1987 until the present. He served as President and Chief Executive
Officer from 1984 to 1985 and from September 1992 until the present. From
1986 until 1990, Mr. Custer was an international business consultant for
Park Central Funding (Guernsey), Ltd. From 1978 until 1982, Mr. Custer was
a general securities principal and worked for a major brokerage firm as a
corporate finance specialist and was owner of his own brokerage firm. He
was responsible for structuring and funding IPO's, real estate, energy
companies, and numerous high-tech start-up companies. Mr. Custer's
technical experience includes engineering and management positions with
Texas Instruments and Honeywell. Mr. Custer is a graduate of Texas Tech
University in Finance and Management, with additional studies in Electrical
Engineering and master studies in Finance.

Executive Officers

The following table lists the names and positions held by all executive
officers as of June 30, 2004.

Name Position

Patrick A. Custer Sole Board member, President, Chief
Executive Officer and Principal Financial
Officer

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the 1934 Act ("Section 16(a)"), requires our
directors, executive officers and persons who beneficially own more than
10% of a registered class of our equity securities ("10% Owners") to file
reports of beneficial ownership of our securities and changes in such
beneficial ownership with the Securities and Exchange Commission
("Commission"). Directors, executive officers and 10% Owners are also
required by rules promulgated by the Commission to furnish us with copies
of all forms they file pursuant to Section 16(a).

Based solely upon a review of the copies of the forms filed pursuant to
Section 16(a) furnished to us, or written representations that no year-end
Form 5 filings were required for transactions occurring during fiscal year
ended June 30, 2004, we believe that during the fiscal year ended June 30,
2004, all Section 16(a) filing requirements applicable to our directors,
executive officers and 10% Owners were complied with.

Audit Committee

We have no active Audit Committee, however, Mr. Custer meets the
definition of an audit committee financial expert, as set forth in Item
401(h)(2) of Regulation S-K.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes the compensation paid over the last
three completed fiscal years to our Chief Executive Officer and any other
executive officer who received compensation exceeding $100,000 during the
fiscal year ended June 30, 2004.

Long Term Compensation
------------------------------------
Annual Compensation Awards Payouts
--------------------------------- --------------------------- -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
All
Other
Name and Year Other Restricted Securities LTIP Compen-
Principal Ended Annual Stock Underlying Payouts sation
Position June 30 Salary($) Bonus($) Compensation($) Awards($) Options(#) ($) ($)
- ---------- ------- -------- ------- -------------- ---------- -------------- ------- ------

Patrick A. Custer 2004 -0- -0- (1) 5,760 -0- -0- -0-
Sole member of the 2003 159,490 -0- (1) -0- 310,000 -0- -0-
Board and CEO 2002 210,000 -0- (1) -0- 378,000 -0- -0-

(1) Other annual compensation to this executive officer, including payment
of a car allowance and other personal benefits, did not exceed the
lesser of $50,000 or 10% of such executive officer's total annual
salary and bonus for such fiscal year.

Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values

The following table shows aggregate exercises of options (or tandem
stock appreciation rights) and freestanding stock appreciation rights during
the fiscal year ended June 30, 2004 by each of the named executive officers.

(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)(1)
Shares
Acquired Value Exercisable (E)/ Exercisable (E)/
Name on Exercise(#) Realized($) Unexercisable (U) Unexercisable (U)
- ------ -------------- ----------- ----------------- -----------------

Patrick A. Custer -0- -0- 872,500 (E) 12,400 (E)
63,000 (U) -0- (U)

(1) At June 30, 2004, 310,000 of the options were considered "in-the-
money," as the fair market value of the underlying securities on that
date ($0.06) exceeded the exercise price of the options ($0.02). None
of the remaining options were considered "in-the-money," as the fair
market value of the underlying securities did not exceed the exercise
price of the options.

Compensation of Directors

Directors are not paid compensation as such, except for services
performed in another capacity, such as an executive officer.

Employment Contracts and Termination and Change-in-Control Arrangements

At June 30, 2004, we had no employment agreement with any named
executive officer.

Compensation Committee Interlocks and Insider Participation

Mr. Custer participated in advising the Board of Directors concerning
certain aspects of executive officer compensation during the last completed
fiscal year. Mr. Custer is Chairman of the Board, President and Chief
Executive Officer.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of September 28,
2004 with respect to the beneficial ownership of Common Stock by (i) persons
known to us to be the beneficial owners of more than 5% of the outstanding
shares of Common Stock, (ii) all directors of the Company, (iii) each of the
executive officers and (iv) all directors and executive officers of the
Company as a group.

The number of shares of Common Stock beneficially owned by each
individual set forth below is determined under the rules of the Commission
and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes
any shares as to which an individual has sole or shared voting power or
investment power and any shares which an individual presently, or within 60
days of September 28, 2004 (the date on which this Form 10-K is due at the
Commission), has the right to acquire through the exercise of any stock
option or other right. Unless otherwise indicated, each individual has sole
voting and investment power (or shares such powers with his spouse) with
respect to the shares of Common Stock set forth in the following table. The
information is based upon corporate records, information furnished by each
shareholder, or information contained in filings made with the Securities
and Exchange Commission.

Number of Shares
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
------------------- ----------------------- --------
5% Beneficial Owners

Patrick A. Custer 1,198,508 (1) 19.60%
17300 N. Dallas Pkwy., Suite 2050
Dallas, Texas 75248

Peak Decision International Limited 350,000 (2) 6.68%
Unit 1603, 16F
Dina House,
11 Duddell Street, Central
Hong Kong

Trident Growth Fund, L.P. 423,815 (3) 7.60%
(formerly known as Gemini
Growth Fund, L.P.)
3602 McKinney Ave, Suite 220
Dallas, Texas 75204

Directors

Patrick A. Custer 1,198,508 (1) 19.60%

Executive Officers

Patrick A. Custer 1,198,508 (1) 19.60%

All Directors and Executive
Officers as a Group 1,198,508 (4) 19.60%

(1) Includes 290,188 shares owned outright by Mr. Custer; 872,500 shares
issuable to Mr. Custer upon exercise of vested nonstatutory Employee
Stock Options; 32,729 shares held of record by Custer Company, Inc., a
family trust, over which Mr. Custer exercises voting control; 2,969
shares owned by his wife; 118 shares held by his wife for the benefit
of his minor daughter; and 2 shares each held by Mr. Custer for the
benefit of his two sons.

(2) Common shares owned.

(3) Includes 26,625 shares owned outright by Founders Equity Group, Inc.,
an affiliate of Beneficial Owner, 65,940 shares owned outright by
Founders Partners IV, LLC, an affiliate of Beneficial Owner, and
331,250 shares issuable upon exercise of warrants.

(4) Includes shares beneficially owned by all directors and Executive
Officers shown above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

Audit fees include fees paid by the Company to its auditors in
connection with the annual audit of the Company's financial statements and
the auditor's review of the Company's interim financial statements. The
aggregate fees billed to the Company by CF & Co., L.L.P. for audit services
for the fiscal year ended June 30, 2004 were $7,200. The aggregate fees
billed to the Company by Cheshier & Fuller, L.L.P. for audit services for
the fiscal year ended June 30, 2003 were $22,500.

Audit Related Fees

Audit related fees include fees paid by the Company to its auditors for
services related to accounting consultations and internal control review.
There were no audit-related fees paid by the Company for either of the
fiscal years ended June 30, 2004 or 2003.

Tax Fees

Tax fees include fees paid by the Company to its auditors for corporate
tax compliance and tax advisory services. The aggregate tax related fees
billed to the Company by CF & Co., L.L.P. for the fiscal year ended June 30,
2004 were $0.

All Other Fees

All other fees include fees paid by the Company to its auditors for all
other services rendered by the auditor to the Company. There were no fees
for other services paid by the Company for either of the fiscal years ended
June 30, 2004 or 2003.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

Reference is made to the financial statements filed as part of
this report.

(2) Financial Statement Schedules

Reference is made to the financial statement schedules filed as
part of this report. All other schedules are omitted because
they are not applicable or not required, or because the required
information is included in the financial statements or notes
thereto.

(3) Exhibits

Reference is made to the Exhibit Index at the end of this Form
10-K for a list of all exhibits filed with and incorporated by
reference in this report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ PATRICK A. CUSTER
---------------------
Patrick A. Custer
Chief Executive Officer
and Principal Financial Officer

October 13, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.

Principal Executive Officer and
-------------------------------
Principal Financial and Accounting Officer
------------------------------------------

/s/ PATRICK A. CUSTER Chairman of the Board, October 13, 2004
Patrick A. Custer Chief Executive Officer
and Director

Independent Auditor's Report
----------------------------

Board of Directors
VPGI Corp. and Subsidiaries

We have audited the accompanying consolidated balance sheets of VPGI Corp.
and Subsidiaries as of June 30, 2004 and 2003, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the years ended June 30, 2004 and 2003. These consolidated financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The financial statements of VPGI Corp. and Subsidiaries as of June
30, 2002 were audited by other auditors whose report dated September 3,
2002, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of VPGI Corp. and Subsidiaries as of June 30, 2004 and 2003, and
the consolidated results of their operations and their consolidated cash
flows for the years ended June 30, 2004 and 2003 in conformity with
accounting principles generally accepted in the United States of America.

We have also audited Schedule II for the years ended June 30, 2004 and 2003.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

As shown in the consolidated financial statements, the Company incurred net
losses of $20,355, $3,435,735 and $2,733,434 for the years ended June 30,
2004, 2003 and 2002, respectively. These factors, among others, as
discussed in Note B to the consolidated financial statements raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are described in
Note B. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

CF & Co., L.L.P

Dallas, Texas
October 1, 2004

Report of Independent Registered Public Accountanting Firm

Board of Directors
VPGI Corp. and Subsidiaries

We have audited the related consolidated statements of operations, changes
in stockholders' equity and cash flows of VPGI Corp. and Subsidiaries
for the year ended June 30, 2002. These financial statements are the
responsibility of management. Our responsibility is to express an opinion
on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and
consolidated cash flows of VPGI Corp. and Subsidiaries for the year ended
June 30, 2002 in conformity with accounting principles generally accepted in
the United States of America.

We have also audited Schedule II for the year ended June 30, 2002. In our
opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $2,733,434 for the year ended
June 30, 2002. These factors, among others, as discussed in Note B to the
financial statements raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters
are described in Note B. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

GRANT THORNTON LLP

Dallas, Texas
September 3, 2002

VPGI Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30,

ASSETS 2004 2003
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ - $ 9,883
----------- -----------
Total current assets - 9,883

OTHER ASSETS
Security deposit on corporate office - 12,948
Pension surplus 49,972 39,869
----------- -----------
Total other assets 49,972 52,817
----------- -----------
Total assets $ 49,972 $ 62,700
=========== ===========

The accompanying notes are an integral part of these consolidated financial
statements.

VPGI Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - CONTINUED
June 30,

LIABILITIES AND STOCKHOLDERS' EQUITY 2004 2003
----------- -----------
CURRENT LIABILITIES
Accrued expenses $ - $ 11,992
----------- -----------
Total current liabilities - 11,992

COMMITMENTS AND CONTINGENCIES (NOTE I)
----------- -----------
Total liabilities - 11,992

STOCKHOLDERS' EQUITY
Preferred stock, cumulative, $1.00 par value;
1,000,000 shares authorized:
Series A, 30,000 shares issued and outstanding
at June 30, 2004 and 2003 30,000 30,000
Series H, 2 shares issued and outstanding
at June 30, 2004 and 2003 (liquidation
preference of $50,000) 2 2
Series 2002-K, 20 shares issued and outstanding
at June 30, 2004 and June 30, 2003
(liquidation preference of $500,000) 20 20
Series 2002-G, 196 shares issued and outstanding
at June 30, 2004 and 2003 (liquidation
preference of $4.9 million) 196 196
Common stock, $.001 par value; 80,000,000 shares
authorized; 5,242,120 and 4,486,120 shares
issued and outstanding at June 30, 2004 and
2003, respectively 5,242 4,486
Additional paid in capital 60,356,529 60,337,666
Accumulated deficit (60,342,017) (60,321,662)
----------- -----------
Total stockholders' equity 49,972 50,708
----------- -----------
Total liabilities and stockholders' equity $ 49,972 $ 62,700
=========== ===========

The accompanying notes are an integral part of these consolidated financial
statements.

VPGI Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended June 30,

2004 2003 2002
---------- ---------- ----------
Revenues
Product sales $ - $ 127,730 $ 1,919,695
Consulting and support services - 498,055 3,399,463
Royalties - - 50,153
---------- ---------- ----------
Total revenues - 625,785 5,369,311

Cost of products and services
Cost of product sales - 50,649 939,082
Cost of consulting and support services - 154,545 1,316,593
---------- ---------- ----------
Total cost of products and services - 205,194 2,255,675
---------- ---------- ----------
Gross margin - 420,591 3,113,636

Operating expenses
Selling - 10,370 52,850
General and administrative 31,258 1,693,296 4,955,996
Fees paid to related party 5,760 - -
Depreciation and amortization - 439,621 1,593,049
Extinguishment of debt - - 406,243
Asset impairment - 1,793,534 -
---------- ---------- ----------
37,018 3,936,821 7,008,138
---------- ---------- ----------
Operating loss (37,018) (3,516,230) (3,894,502)

Other (income) expense
Interest income - (83,023) (95,445)
Interest expense - 13,166 101,389
Other income, net (16,663) (10,638) (63,966)
Gain on sale of trademark - - (1,103,046)
---------- ---------- ----------
Total other (income) expense (16,663) (80,495) (1,161,068)
---------- ---------- ----------
Net loss (20,355) (3,435,735) (2,733,434)
---------- ---------- ----------

Decrease in redemption value
of redeemable preferred stock - 1,316,100 2,168,657

Dividend requirements on preferred stock (4,300) (4,300) (454,300)
---------- ---------- ----------
Net loss attributable to
common stockholders $ (24,655) $(2,123,935) $(1,019,077)
========== ========== ==========

Per share amounts allocable to common
stockholders - Basic and diluted

Net loss $(0.00) $(0.51) $(0.30)
===== ===== =====
Weighted average common shares
outstanding - Basic and diluted 5,140,907 4,133,160 3,404,172
========== ========== ==========

The accompanying notes are an integral part of these consolidated financial
statements.

VPGI Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended June 30, 2004, 2003 and 2002

Common Stock Preferred Stock Additional
---------------------- -------------------- paid-in Accumulated
Shares Amount Shares Amount capital deficit Total
---------- ---------- -------- ---------- ----------- ------------ -----------

Balances - July 1, 2001 3,398,977 3,399 30,002 30,002 59,080,801 (55,180,396) 3,933,806

Adjustment to common stock for reverse
stock split 808 1 - - (1) - -
Issuance of common stock for investment
in subsidiary 350,000 350 - - 129,150 - 129,500
Issuance of Series 2002-K preferred stock - - 20 20 499,980 - 500,000
Issuance of warrants for services - - - - 72,000 - 72,000
Issuance of warrants in connection
with long-term debt - - - - 156,875 - 156,875
Repriced warrants in connection
with long-term debt - - - - 179,064 - 179,064
Issuance of warrants in connection
with the sale of trademark - - - - 68,500 - 68,500
Preferred stock dividends - - - - - (2,119) (2,119)
Preferred stock dividends forgiven
in exchange of Series D-1 for
Series G preferred stock - - - - - (2,454,657) (2,454,657)
Allocation for decrease in redemption
value of redeemable preferred stock - - - - - 2,168,657 2,168,657
Net loss - - - - - (2,733,434) (2,733,434)
---------- ---------- -------- ---------- ----------- ------------ -----------
Balances - June 30, 2002 3,749,785 3,750 30,022 30,022 60,186,369 (58,201,949) 2,018,192

Conversion of Series 2002-G preferred
to common stock 733,335 733 - - 60,767 - 61,500
Issuance of common stock in exchange
for services 3,000 3 - - 66 - 69
Issuance of warrants for services - - - - 4,025 - 4,025
Issuance of warrants in connection
with long-term debt - - - - 4,965 - 4,965
Issuance of warrants with sale
of subsidiaries - - - - 3,270 - 3,270
Adjustment for Series 2002-G preferred - - 196 196 78,204 - 78,400
Allocation for decrease in redemption
value of redeemable preferred stock 1,316,022 1,316,022
Net loss - - - - - (3,435,735) (3,435,735)
---------- ---------- -------- ---------- ----------- ------------ -----------
Balances - June 30, 2003 4,486,120 $ 4,486 30,218 $ 30,218 $ 60,337,666 $ (60,321,662) $ 50,708
---------- ---------- -------- ---------- ----------- ------------ -----------

Issuance of common stock in exchange
for services 756,000 756 - - 14,363 - 15,119
Issuance of warrants for services - - - - 4,500 - 4,500
Net loss - - - - - (20,355) (20,355)
---------- ---------- -------- ---------- ----------- ------------ -----------
Balances - June 30, 2004 5,242,120 $ 5,242 30,218 $ 30,218 $ 60,356,529 $ (60,342,017) $ 49,972
========== ========== ======== ========== =========== ============ ===========

The accompanying notes are an integral part of these consolidated financial
statements.

VPGI Corp. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,

2004 2003 2002
---------- ---------- -----------
Cash flows from operating activities
Net loss $ (20,355) $(3,435,735) $ (2,733,434)
Adjustments to reconcile net loss to
cash used in operating activities:
Depreciation and amortization - 439,621 1,593,049
Asset impairment - 1,793,534 -
Provision for bad debt - 300,000 -
Gain on sale of Curtis Mathes
trademark - - (1,103,046)
Stock compensation expense 15,119 11,318 -
Issuance of warrants for services 4,500 - 72,000
Amortization of debt discount - - 53,545
Loss on extinguishment of debt - - 406,243
Conversion of preferred stock -
Series 2002-G - 196 -
Proceeds from issuance of common stock - 736 -
Changes in assets and liabilities,
net of effects from acquisitions
and dispositions:
Trade accounts receivable - 356,178 205,079
Inventories - 49,929 173,520
Prepaid expenses - 274,634 (131,738)
Other current assets - - 163,045
Other assets 2,845 90,661 81,286
Accounts payable and accrued
liabilities (11,992) (904,433) (734,867)
Deferred revenue - (50,869) (194,165)
---------- ---------- -----------
Cash and cash equivalents
used in operating activities (9,883) (1,074,230) (2,149,483)
---------- ---------- -----------
Cash flows from investing activities
Purchase of property and equipment - - (11,606)
Collections on note receivable - 550,000 1,015,000
Proceeds from sale of trademark - - 185,000
Investment in certificate of deposit - - (25,000)
Proceeds from certificate of deposit - 25,000 -
Disposal of property and equipment - - 23,019
---------- ---------- -----------
Cash and cash equivalents provided
by (used in) investing activities - 575,000 1,186,413
---------- ---------- -----------
Cash flows from financing activities
Proceeds from long term debt - 100,000 700,000
Principal payments on long-term debt - (313,445) (19,621)
Principal payments on capital lease
obligations - (1,493) (71,740)
Dividends paid - - (2,119)
Proceeds from issuance of preferred
stock - Series 2002-K - - 500,000
---------- ---------- -----------
Cash and cash equivalents provided
by (used in) financing activities - (214,938) 1,106,520
---------- ---------- -----------
Net increase (decrease) in cash and
cash equivalents (9,883) (714,168) 143,450

Cash and cash equivalents,
beginning of year 9,883 724,051 580,601
---------- ---------- -----------
Cash and cash equivalents,
end of year $ - $ 9,883 $ 724,051
========== ========== ===========
Supplemental information
Cash paid for interest $ - $ 13,166 $ 80,965
========== ========== ===========

See Note N for supplemental schedule of non-cash investing and financing
activities.

The accompanying notes are an integral part of these consolidated financial
statements.

VPGI Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2004, 2003 and 2002

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business
-----------------------
Until it discontinued normal operations in December 2002 (see Note B),
VPGI Corp. and Subsidiaries (the Company), offered enhanced digital media
solutions to customers worldwide. It also offered contact center customer
service solutions through CIMphony[TM], a suite of computer telephony
integration (CTI) software products and services.

Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.

Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 accompanying
notes. Actual results could differ from those estimates.

Cash Equivalents
----------------
All highly liquid debt investments with an original maturity of three
months or less are considered to be cash equivalents.

Fair Value of Financial Instruments
-----------------------------------
The Company's financial instruments consist of cash and cash equivalents,
notes receivable, redeemable preferred stock and debt. The fair value of
cash and notes receivable approximate the recorded amounts because of the
liquidity and short term nature of these items. The fair value of debt
approximates the recorded amounts. The fair value of redeemable preferred
stock is reflected by the recorded amount as it represents fair value
based on the market price of the Company's common stock.

Stock-Based Compensation
------------------------
The Company accounts for stock-based compensation to employees using the
intrinsic value method. Accordingly, compensation cost for stock options
is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.

Redeemable Preferred Stock
--------------------------
Prior to April 2003, the Company's Series 1999-D1 and 2002-G preferred
stock was redeemable at the option of the holder, and was therefore
classified outside of stockholders' equity. The redemption value of these
securities varies based on the market price of the Company's common stock.
The Company adopted an accounting method provided in EITF Topic D-98 for
these types of securities, which recognizes changes in redemption value
immediately as they occur and adjusts the carrying value of the security
to equal the redemption value at the end of each reporting period. The
result of this accounting method is an increase in loss attributable
to common shareholders and a decrease in stockholders' equity as the
Company's common stock price increases, with the opposite effect when the
Company's common stock price decreases.

Revenue Recognition
-------------------
The Company recognized service revenue as the services are provided.
Equipment and product sales were recognized at the time of delivery and
customer acceptance. Revenue from the installation of software and
hardware systems was recognized on the completed contract method. Royalty
revenue was recognized when earned as the customer sells royalty related
products. Amounts for which revenue could not be recognized such as
uncompleted contracts or unearned maintenance services were included in
deferred revenue and were recognized as contracts are completed or ratably
over the period covered by the maintenance agreement.

No revenue was earned during 2004.

On January 16, 2002, the Company completed the sale of a source code
license to one of its largest customers of its CTI product. The sale
resulted in the Company receiving $1.3 million in cash (this revenue is
included in consulting and support service revenue in the accompanying
statements of operations). The buyer also hired six of the Company's
employees.

Advertising Costs
-----------------
Advertising costs are charged to operations as incurred. Advertising
costs for the years ended June 30, 2004, 2003 and 2002, were $0, $319, and
$23,469, respectively.

Reverse Stock Split
-------------------
In September 2001, the Company's stockholders approved a one for eight
reverse stock split. All share and per share data give effect to the
reverse split applied retroactively as if it occurred at the beginning of
the earliest period presented. The number of outstanding shares has been
further adjusted to reflect the effects of rounding fractional shares to
the next whole share after the reverse split.

Loss Per Share
--------------
Basic loss per common share is based on the weighted average number of
common shares outstanding. Diluted loss per share is computed based on
the weighted average number of shares outstanding, plus the number of
additional common shares that would have been outstanding if dilutive
potential common shares had been issued. In all years presented, all
potential common shares were anti-dilutive.

All share and per share data give retroactive effect to the one for eight
reverse stock split approved by the stockholders in September 2001 as if
the reverse split occurred at the beginning of the earliest period
presented.

Reclassifications
-----------------
Certain reclassifications of the 2002 financial statements and related
notes were made to conform with the 2003 presentation.

Income taxes
------------
The company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires that deterred tax assets and liabilities
arising from temporary differences between book and tax basis will be
recognized using enacted rates at the time such temporary differences
reverse. In the case of deferred tax assets, SFAS 109 requires a
reduction in deferred tax assets if it is more likely than not that some
portion or all of the deferred tax will not be realized. There are
accumulated deferred tax assets of $21 million, which are offset by a
valuation allowance pursuant to SFAS 109. Such losses are limited by
certain Internal Revenue Service regulations.

NOTE B - GOING CONCERN MATTERS

The Company laid off all of its employees and discontinued normal
operations in December 2002. The accompanying financial statements have
been prepared accordingly. The Company incurred net losses of $20,355,
$3,435,735 and $2,733,434 for the years ended June 30, 2004, 2003 and
2002, respectively. These conditions raise substantial doubt about the
Company's ability to continue as a going concern.

For the last several years, the Company had been developing its business
plan with a focus in offering its technical expertise in information
technology. The Company's product offerings included providing consulting
services to niche markets, technology products through its digital media
products and computer telephony integration products. The Company is
continuing to evaluate all of its options and may consider seeking a
buyer, a merger candidate or an acquisition of a viable business.

The financial statements do not include any adjustment to reflect the
possible effects on the recoverability and classification of assets or
liabilities which may result from the inability of the Company to continue
as a going concern.

NOTE C - BUSINESS COMBINATIONS AND DIVESTITURES

Effective September 22, 1999 the Company acquired assets of Zirca
Corporation ("Zirca") for $300,000 cash and 45,000 restricted common
shares of the Company valued at $675,000. The acquisition of Zirca was
accounted for as a purchase and the Company allocated the excess purchase
price over tangible assets acquired of approximately $360,000 to purchased
software. In December 2001, the Company wrote off the remaining assets of
$143,539 relating to prior acquisitions as these assets were no longer
being utilized.

Effective June 26, 2002, the Company acquired 60% of the outstanding
capital stock of an Asian company for 350,000 shares of its common stock.
The acquisition was accounted for as a purchase. The Company allocated
the purchase price of approximately $129,500 to intellectual property
license. In December 2002, the Company wrote off this asset, as it was no
longer being utilized.

All acquisitions have been accounted for as purchases and the operations
of the purchased companies have been included in the Company's statement
of operations since their date of acquisition.

NOTE D - SHAREHOLDER MATTERS

In July 2003, stockholders approved an amendment and restatement of the
Company's articles of incorporation, resulting in a reduction in par value
of the Company's common stock from $.80 per share to $.001 per share. The
authorized number of shares was maintained at 80,000,000. All share and
per share data give effect to the reduction in par value applied
retroactively as if it occurred on July 1, 2001.

NOTE E - DISPOSITION OF ASSETS AND SIGNIFICANT SALES TRANSACTIONS

In September 2001, the Company sold the Curtis Mathes trademark for $4.5
million, consisting of cash and notes receivable. $450,000 in cash was
received in June 2001. At June 30, 2002, a total of $1,650,000 of the
purchase price had been received in cash, leaving a principal balance of
$850,000 on a note receivable due in March 2003. In connection with the
sale, the Company was released from approximately $2.0 million of long-
term debt, which was assumed by the buyer of the trademark. As a result
of the release of this long-term debt, the Company recorded an
extraordinary loss on debt extinguishment of $406,243. The Company had
issued warrants to the lender in connection with the loan and was
amortizing these costs over the life of the loan. The carrying amount of
the debt was $1,593,757 at the time of payment due to the value of the
warrants and upon extinguishment of the debt, all of the costs were
accelerated. The Company recorded a gain of $1,103,046 on the sale of the
trademark.

In January 2002, the Company sold a source code license of its CIMphony
product to HSBC, its largest customer for that product, for $1.3 million
in cash. In February 2002, as part of the agreement, the Company allowed
HSBC to hire six of its employees who were principally involved in
servicing this customer, while retaining adequate support staff for its
other CTI customers. In addition to providing cash for operations, this
transaction resulted in a reduction of overall employee expenses, while
continuing to allow opportunities for sales of CIMphony source code
licenses to other customers. However, the transaction was expected to
result in limited revenues in the future from this customer, as it assumes
the responsibility for its own CTI software operations. This customer
generated approximately $241,000 and $2.4 million (including the sale of
the source code license) in revenues during the years ended June 30, 2003
and 2002, respectively.

In December 2002, the Company sold nine of its subsidiaries: Video
Management, Inc., including its wholly owned subsidiary Network America,
Inc., Corporate Network Solutions, L.C., Warranty Repair Corporation, FFL
Corporation, including its wholly owned subsidiary Systematic Electronics
Corp., uniView Technologies Advanced Systems Group, Inc., uniView Network
America Corp., and uniView Xpressway Corporation. In the transaction, all
of the issued and outstanding common stock of each of subsidiary was
transferred to W. I. Technology Holding Company Inc. for a purchase price
of $10. In connection with the sale, the Company issued warrants to
purchase 150,000 shares of its common stock, exercisable through December
19, 2005 at a fixed exercise price of $.01 per share. The Company had no
operations remaining after the sale. Due to the resulting suspension of
ongoing development of its technologies, the Company wrote down all of
the intellectual property values and goodwill associated with its
technologies. The Company reported no gain or loss on the transaction as
the assets of these subsidiaries had been written off or realized, and the
liabilities on the books were satisfied prior to the sale.

NOTE F - PROPERTY AND EQUIPMENT

As a result of the cessation of all normal business activities, the
Company wrote off all remaining property and equipment during 2003. All
remaining property and equipment was disposed of during 2004.

Depreciation expense and amortization of assets held under capital leases
for years ended June 30, 2004, 2003, and 2002 totaled $-0-, $439,621 and
$1,593,049, respectively.

NOTE G - OTHER ASSETS

Other assets at June 30 consist of the following:

2004 2003
---------- ----------
Security deposit on corporate office $ - $ 12,948
Pension surplus 49,972 39,869
---------- ----------
49,972 52,817
Less accumulated amortization - -
---------- ----------
$ 49,972 $ 52,817
========== ==========

Purchased software is normally amortized in relation to expected revenue
from the product or straight-line over a maximum of four years, whichever
is greater. Amortization expense for the years ended June 30, 2004, 2003
and 2002 was $-0-, $177,985 and $683,718, respectively. Revenue from
these products was $-0-, $241,026 and $2,677,445 (including the $1.3
million sale of the source code license) for the years ended June 30,
2004, 2003 and 2002, respectively. In December 2002, the Company wrote
off this asset, as it was no longer being utilized.

Product and software development costs are normally amortized over their
estimated useful life of three years. Amortization expense for the years
ended June 30, 2004, 2003 and 2002 was $-0-, $-0- and $273,060,
respectively. Revenue from these products was $-0-, $2,808 and $93,623
for the years ended June 30, 2004, 2003 and 2002, respectively. In
December 2002, the Company wrote off this asset, as it was no longer being
utilized.

The Company purchased the Curtis Mathes Corporation in 1993 and sold its
only remaining asset, the Curtis Mathes trademark, in September 2001 for a
gain of $1,103,046. The trademark was being amortized on a straight-line
basis over 20 years. Amortization expense for the years ended June 30,
2002 was $43,706.

Goodwill totaling $1,420,333 from 1998 acquisitions of Video Management,
Inc. (VMI) and Corporate Network Solutions (CNS) was being amortized over
its estimated useful life of fourteen years. Amortization expense for the
year ended June 30, 2002 was $101,453. In October 2002, management and
the Board of Directors of the Company determined, based on i) lower than
expected revenues, ii) its inability to secure contracts it had expected
to secure during the quarter ended September 30, 2002, and iii) its
limited resources, the Company would not continue to support the
operations of its subsidiary, Network America, Inc. (NWA). As a result of
this decision, and based on the fair value of the subsidiary, the Company
determined that the $1,005,509 of unamortized goodwill on the Company's
books relating to NWA was impaired. Accordingly, the Company recorded an
impairment expense for that amount to write off the goodwill as of
September 30, 2002.

NOTE H - LONG-TERM DEBT

On May 10, 2002 the Company entered into a note payable with Gemini Growth
Fund, L.P. for $200,000, at an annual interest rate of 14%, maturing on
May 31, 2003. On November 12, 2002, the loan agreement was modified to
change the loan amount from $200,000 to $300,000 and the Company entered
into an additional note payable with Trident Growth Fund, L.P., formerly
known as Gemini Growth Fund, L.P., for $100,000 at an annual interest rate
of 14%, maturing on November 30, 2003. In connection with the $100,000
loan, the Company issued warrants to purchase 75,000 shares of its common
stock, exercisable for three years at a fixed exercise price of $1.50 per
share. The loans were collateralized by a security interest in the note
received in connection with the sale of the Curtis Mathes trademark and
other assets of the Company. Interest was payable monthly in cash. In
December 2002, the Company received a notice of default and acceleration
notice from Trident Growth Fund, accelerating the entire principal balance
due on the notes. To satisfy this obligation, the Company negotiated a
discount on the $850,000 note receivable it acquired in the sale of the
Curtis Mathes trademark in exchange for a lump sum payment of $550,000
from the debtor, charging $300,000 to bad debt expense. Approximately
$300,000 of the proceeds received by the Company were applied to pay the
entire remaining principal balance, as well as accumulated interest and
other fees, due on the note payable to Trident Growth Fund.

NOTE I - COMMITMENTS AND CONTINGENCIES

Litigation
----------
Prior to closing the business in December 2002, the Company was routinely
a party to ordinary litigation incidental to its business, as well as to
other litigation of a nonmaterial nature, the outcome of which management
does not expect, individually or in the aggregate, to have a material
adverse effect on the financial condition or results of operations of the
Company.

NOTE J - CONCENTRATIONS OF CREDIT RISK

During 2003 and 2002, one customer represented 39% and 45% of sales,
respectively.

NOTE K - STOCKHOLDERS' EQUITY AND REDEEMABLE PREFERRED STOCK

Preferred Stock
---------------
The Company has 1,000,000 shares authorized of $1.00 par value cumulative
preferred stock. The Company's articles of incorporation allow the board
of directors to determine the number of shares and determine the relative
rights and preferences of any series of preferred stock to be issued.

In December 1992, the Company issued 140,000 shares of Series A redeemable
preferred stock (stated value $1 per share). In fiscal 2000, 100,000
shares were redeemed for cash, and 10,000 shares were converted to common
stock, with the remaining 30,000 outstanding at June 30, 2004. Shares
accumulate dividends at 6%, or $1,800 per year. Dividends in arrears at
June 30, 2004 and 2003 on Series A shares totaled $13,950 and $12,150,
respectively.

In fiscal 1996, the Company issued 55 shares of Series H convertible
preferred stock (stated value $25,000 per share). 52 shares were
converted into common stock in fiscal 1997, and one share was converted in
fiscal 2000, with the remaining two shares outstanding at June 30, 2004.
Shares accumulate dividends at 5%, or $2,500 per year and are paid in May
and November of each year. Shares are convertible based on 80% of the
five day average closing bid price of the Company's common stock, with
minimum and maximum conversion limits of $12 and $32 per share,
respectively. Dividends of $5,000 and $2,500 were in arrears on Series H
shares at June 30, 2004 and 2003, respectively.

In June 1999, the Company issued 720 shares of Series D-1 convertible
preferred stock (stated value $25,000 per share). The shares accumulated
dividends at 5%, or $900,000 per year and were convertible into common
stock at $32 per share. In fiscal 2002, the Company exchanged these
shares for 240 shares of Series 2002-G preferred stock (stated valued
$25,000 per share). The new series of preferred stock has no provision
for dividends and was convertible into 4,000,000 shares of common stock at
$1.50 per share. All outstanding and unconverted shares of the new
preferred stock as of June 30, 2004 shall be, at the Company's option,
either converted into common stock or redeemed by the Company based on the
market price of the Company's common stock. In conjunction with the
exchange of shares, all accumulated dividends associated with the D-1
preferred stock were released by mutual agreement.

Dividends of $-0-, $-0- and $2,119 on preferred stock were paid during the
years ended June 30, 2004, 2003 and 2002, respectively. Cumulative
dividends in arrears as of June 30, 2004, 2003 and 2002 amounted to
$18,950, $14,650 and $10,350, respectively.

In June 2002, the Company issued 20 shares of Series 2002-K convertible
preferred stock (stated value $25,000 per share). The shares have no
provision for dividends and are convertible into common shares at $.80 per
share. At any time, at the Company's sole discretion, the Company may
redeem all or part of the outstanding preferred shares at a price per
share of 120% of their face value.

On April 16, 2003, the holder of the Company's Series 2002-G preferred
stock agreed to modify the terms of the preferred stock, whereby any
future redemption of the preferred stock shall be at the sole option of
the Company rather than at the option of the Holder. This modification to
the terms of the preferred stock resulted in the preferred stock being
accounted for as equity as of June 30, 2003, rather than as liability. In
addition, 44 shares of the preferred stock was converted into 733,335
shares of common stock for a total of $61,500 during the year ended June
30, 2003.

Stock Options
-------------
The Company has periodically granted stock options for employment and
outside services received during the years reported. These options are
treated as fixed, compensatory awards.

The Company has granted non-compensatory stock options to key employees
and directors at market value at the date of grant. The options granted
to directors have generally vested immediately, and the options granted to
employees have generally vested over a 3-year period; however, during
2003, options covering 310,000 shares were granted that vested
immediately. During 2002, options covering 22,688 shares, were granted
that vest over 3 years. No options were granted during 2004.

During 2003 and 2002, options issued to employees and directors with
exercise prices less than market on the grant date were immaterial and,
accordingly, no compensation expense was recognized in those years. Had
compensation cost been determined on the basis of fair value pursuant to
FASB Statement No. 123, net loss and net loss per share for 2004, 2003 and
2002 would have been increased as follows:

2004 2003 2002
---------- ---------- ----------
Net loss
As reported $ (20,355) $(3,435,735) $(2,733,434)
Deduct: total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of income tax effect - (261,578) (250,113)
---------- ---------- ----------
Pro forma net loss $ (20,355) $(3,697,313) $(2,983,547)
========== ========== ==========
Loss per share
As reported (0.01) (0.51) (0.80)
Pro forma (0.01) (0.89) (0.88)

The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions:

2004 2003 2002
---------- ---------- ----------
Expected volatility 374% 150% 150%
Risk-free interest rate 2.6% 1.15% - 1.3% 3.50% - 4.30%
Expected lives 5 years 2.7 to 5.5 years 3 years
Dividend yield - - -

Additional information with respect to all options outstanding at June 30,
2004, and changes for the three years then ended was as follows:

Issued Issued Issued
Above Equal to Below
market price market price market price
------------------ --------------- --------------
Weighted Weighted Weighted
average average average
exercise exercise exercise Total
Options price Options price Options price Options
------- ------ ------ ----- ------- ----- -------
Outstanding at
June 30, 2001 454,930 15.761 8,750 14.56 115,901 15.68 589,581

Granted 2,162,857 0.83 - - - - 2,162,857
Forfeited (540,820) 2.46 - - (11,147) 28.65 (551,967)
------- ------ ------ ----- ------- ----- -------
Outstanding at
June 30, 2002 2,076,967 $ 3.63 18,750 $14.56 104,754 $14.40 2,200,471
========= ====== ====== ===== ======= ===== =========

Granted - - 310,000 0.02 - - 310,000
Forfeited (466,035) 1.56 - - - - (466,035)
------- ------ ------ ----- ------- ----- -------
Outstanding at
June 30, 2003 1,610,932 4.13 $328,750 $ 0.85 104,754 $14.40 2,044,436
========= ====== ====== ===== ======= ===== =========

Granted - - - - - - -
Forfeited (140,407) 1.41 (9,375) 12.43 (79,121) 12.38 (228,903)
------- ------ ------ ----- ------- ----- -------
Outstanding at
June 30, 2004 1,470,525 $ 4.39 319,375 $ 0.51 25,633 $20.62 1,815,533
========= ====== ====== ===== ======= ===== =========

Number Weighted
of shares average
underlying exercise
options price
---------- -----

Options exercisable at June 30, 2002 1,061,555 $ 7.91
========= =====
Options exercisable at June 30, 2003 1,855,436 $ 4.55
========= =====
Options exercisable at June 30, 2004 1,752,533 $ 4.05
========= =====

No options were granted during 2004. For 2003, options granted equal to
market value had a weighted average fair value per share of $0.02. For
2002, options granted above market value had a weighted average fair value
per share of $0.83.

Information about stock options outstanding at June 30, 2004 is summarized
as follows:

Options outstanding Exercisable
-------------------------------- ----------------------
Weighted
average Weighted Weighted
remaining average average
Range of contractual exercise Number exercise
exercise prices Number life price exercisable price
---------------- --------- ----- ------- ----------- --------

$0.02 310,000 3.90 $ 0.02 310,000 $ 0.02
$0.80 1,087,400 2.31 0.80 1,024,400 0.80
$13.44 to $16.48 399,383 0.73 14.51 399,383 14.51
$21.52 to $28.00 18,750 0.63 25.84 18,750 25.84
--------- ---------
1,815,533 1,752,533
========= =========

Common stock warrants issued and outstanding at June 30, 2004 are
summarized as follows:

Weighted Weighted
average average
Range of exercise price Number remaining life exercise price
---------------------- ------- -------------- --------------
$0.01 to $0.09 415,000 3.11 $ 0.02
$1.50 to $6.72 481,250 1.67 1.91
$13.28 to $28.00 15,000 1.28 25.55
$32.00 to $48.00 76,250 0.35 35.93

All outstanding warrants are exercisable at June 30, 2004, with the
exception of 50,000 warrants which become exercisable in February 2005.

During the year ended June 30, 2004, warrants to purchase 50,000 shares of
the Company's common stock were granted in connection with services
provided. The warrants have an exercise price of $.09, expire in July
2008, and were valued at $4,500.

During the year ended June 30, 2003, warrants to purchase 25,000 shares of
the Company's common stock were granted in connection with services
provided. The warrants have an exercise price of $.01, expire in July
2008, and were valued at $548 upon issuance. Additionally, warrants to
purchase 190,000 shares of the Company's common stock were granted in
connection with services provided. The warrants have an exercise price of
$.02, expire in July 2008, and were valued at $3,477 upon issuance.
Additionally, warrants to purchase 75,000 shares of the Company's common
stock were granted in connection with the issuance of long-term debt.
These warrants have an exercise price of $1.50, with a provision to
reprice at par value upon the satisfaction of the anti-dilution provisions
of certain preferred stock, and expire in November 2005. The value of the
warrants is $4,965 upon issuance. Additionally, warrants to purchase
150,000 shares of the Company's common stock were granted in connection
with the sale of subsidiaries. The warrants have an exercise price of
$.01, expire in December, 2005, and were valued at $3,270.

During the year ended June 30, 2002, warrants to purchase 150,000 shares
of the Company's common stock were granted in connection with consulting
services provided. The warrants have an exercise price of $1.50, expire
in February 2007, and were valued at $72,000 and recorded as a prepaid
expense, net of amortization of $6,000 upon issuance. Additionally,
warrants to purchase 150,000 shares of the Company's common stock were
granted in connection with the issuance of long-term debt. These warrants
have an exercise price of $1.50 and expire in April 2005. The value of
the warrants, $60,000, is included as a discount on the debt net of
accumulated amortization of $7,500. Warrants to purchase 50,000 shares of
the Company's common stock were granted for a finder's fee in connection
with the sale of the Curtis Mathes trademark. These warrants have an
exercise price of $32.00 per share, with a provision to reprice at par
value upon the satisfaction of the anti-dilution provisions of certain
preferred stock. The value of the warrants, $68,500, was recorded as a
reduction in the gain on the sale of trademark in the accompanying
statement of operations.

NOTE L - INCOME TAXES

A reconciliation of income tax benefit computed by applying the U.S.
Federal tax rates to the net loss and recorded income tax expense
(benefit) is as follows:

2004 2003 2002
---------- ---------- ----------

Tax benefit at statutory rate $ (7,836) $(1,322,758) $ (929,368)
Non-deductible expenses - - 3,134
Sale of trademark - - (610,842)
Change in valuation allowance 7,836 1,322,758 1,502,582
Other - - 34,494
---------- ---------- ----------
$ - $ - $ -
========== ========== ==========

The components of the Company's deferred income taxes at June 30, 2004 and
2003 are as follows:

2004 2003
---------- ----------
Deferred tax assets
Net operating loss carryforwards $21,034,359 $21,026,522
---------- ----------
Deferred tax asset 21,034,359 21,026,522
Valuation allowance (21,034,359) (21,026,522)
---------- ----------
$ - $ -
========== ==========

At June 30, 2004, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $63,397,090 which may be used
to offset future taxable income, subject to certain limitations and
provisions of the Internal Revenue Code, and will expire in various
amounts in the years 2008 through 2022 if not utilized.

NOTE M - PENSION AND OTHER BENEFIT PROGRAMS

2002
----
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 sets forth the funded status of the Company's defined
pension plan at June 30:
2002
--------
Actuarial present value of benefit obligations
----------------------------------------------
Accumulated benefit obligation $ 637,444
========

Projected benefit obligation 637,444
Plan assets at fair value 666,675
--------

Excess projected benefit obligation (29,231)
--------
Net pension (asset) liability $ (29,231)
========

Net pension cost includes the following components
--------------------------------------------------
Interest on unfunded liability $ 6,387
Actuarial (gain) loss (84,881)
--------
Net pension cost (benefits) $ (78,494)
========

The weighted average assumed discount rate used in determining the
actuarial present value of the projected benefit obligation for 2002 was
7%. The net pension asset is shown in other noncurrent assets in the
consolidated balance sheet.

2004 - 2003
-----------
The following table sets forth the funded status of the Company's defined
pension plan at June 30:

Pension Benefits
-------------------
2004 2003
-------- --------
Change in benefit obligation
Benefit obligation at beginning of year 659,668 661,314
Service cost 0 0
Interest cost 25,320 36,198
Plan participants' contributions 0 0
Amendments 0 0
Actuarial (gain)/loss (38,289) 54,892
Benefits paid (31,503) (31,242)
Other (38,521) (61,494)
-------- --------
Benefit obligation at end of year 576,675 659,668
-------- --------
Change in plan assets
Fair value of plan assets at beginning of year 703,413 697,051
Actual return on plan assets (11,781) 99,098
Acquisition 0 0
Employer contributions 0 0
Plan participants' contributions 0 0
Benefits paid (31,503) (31,242)
Other (38,521) (61,494)
-------- --------
Fair value of plan assets at end of year 621,608 703,413
-------- --------
Reconciliation of Funded status
Funded Status (Underfunded)/Overfunded 44,933 43,745
Unrecognized net actuarial loss (gain) 5,039 (3,876)
Unrecognized prior service cost (benefit) 0 0
-------- --------
Net amount recognized 49,972 39,869

Amounts recognized in the statement of financial position consist of:

Pension Benefits
-------------------
2004 2003
-------- --------
Prepaid benefit cost 0 0
Accrued benefit cost 0 0
Intangible assets 0 0
Accumulated other comprehensive income 0 0
-------- --------
Net amount recognized 0 0

The accumulated benefit obligation for all defined benefit pension plans
was $576,675 and $659,668 at June 30, 2004 and 2003, respectively.

Components of Net Periodic Benefit Cost

Pension Benefits
-------------------
2004 2003
-------- --------
Service cost $ 0 $ 0
Interest cost 25,320 36,198
Expected return on plan assets (35,760) (39,969)
Amortization of prior service cost 0 0
Amortization of net (gain) loss 0 0
Effect of Special Events 337 (361)
-------- --------
Net periodic benefit cost $ (10,103) $ ( 4,132)

Additional Information

Pension Benefits
-------------------
2004 2003
-------- --------
Increase in minimum liability included
in other comprehensive income $ 0 $ 0

Assumptions

Weighted-average assumptions used to determine benefit obligations at June
30:

Pension Benefits
-------------------
2004 2003
-------- --------
Discount rate 6.00% 5.00%
Rate of compensation increase NA NA

Weighted-average assumptions used to determine net periodic benefit cost
for years ended June 30:
Pension Benefits
-------------------
2004 2003
-------- --------
Discount rate 5.00% 6.25%
Expected long-term return on plan assets 6.50% 6.50%
Rate of compensation increase NA NA

Historical returns of multiple asset classes were analyzed to develop a
risk free real rate of return and risk premiums for each asset class. The
overall rate for each asset class was developed by combining a long-term
inflation component, the risk free real rate of return, and the associated
risk premium. A weighted average rate was developed based on those
overall rates and the target asset allocation of the plan.

Plan Assets

The Company's pension plan weighted-average asset allocations at June 30,
2004 and 2003 by asset category are as follows:

Plan Assets at June 30:
2004 2003
-------- --------
Asset Category
--------------
Equity securities 21% 17%
Debt securities 79% 83%
Real estate 0% 0%
Other 0% 0%
-------- --------
Total 100% 100%

The Company has elected to invest in a general fund comprised of fixed
income securities managed by their financial services firm. In addition,
they have invested in equity securities of their financial services firm
they acquired through a demutualization. They have not utilized any
weighted-average target asset allocations.

Equity securities include the Company's Common Stock in the amounts of
$131,440 (21 percent of total plan assets) and $118,649 (17 percent of
total plan assets) at June 30, 2004 and 2003, respectively.

Cash Flows

Contributions
-------------
The Company does not expect to contribute to its pension plan in fiscal
2005.

Estimated Future Benefit Payments
---------------------------------
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:

Pension Benefits
----------------
2005 $ 166,000
2006 50,000
2007 80,000
2008 45,000
2009 60,000
Years 2010 - 2014 270,000

Components of Net Periodic Benefit Cost for the fiscal year ending June
30, 2005

Pension Benefits
2005
-------
Service cost $ 0
Interest cost 26,586
Expected return on plan assets (31,722)
Amortization of prior service cost 0
Amortization of net (gain) loss 0
-------
Net periodic benefit cost $ (5,136)

Employer Contributions

The Interest Cost shown above is based on a Benefit Obligation of
$576,675. Expected benefit payments during the measurement year are
$166,348.

The expected Return on Plan Assets is based on $621,608, the market value
of assets at June 30, 2004. The Company used $0 interest on estimated
contributions of $0.

NOTE N - NON-CASH INVESTING AND FINANCING ACTIVITIES

2004 2003 2002
---------- ---------- ----------

SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES

Issuance of common stock for
purchase of assets $ - $ - $ 129,500
========== ========= ==========
Issuance of common stock for services $ 15,119 $ 69 $ -
========== ========= ==========
Issuance of common stock warrants
for services $ 4,500 $ 4,025 $ 72,000
========== ========= ==========
Issuance of warrants in connection
with sale of trademark $ - $ - $ 68,500
========== ========= ==========
Issuance of warrants in connection
with sale of subsidiarie $ - $ 3,270 $ -
========== ========= ==========
Note receivable from sale
of trademark $ - $ - $ 1,865,000
========== ========= ==========
Debt relieved upon sale of trademark $ - $ - $ 2,000,000
========== ========= ==========
Issuance of warrants in connection
with long-term debt $ - $ 4,965 $ 335,938
========== ========= ==========
Conversion of preferred stock
to common stock $ - $ 61,500 $ -
========== ========= ==========

NOTE O - BUSINESS SEGMENT INFORMATION

Until it discontinued normal operations in December 2002, the Company was
primarily engaged in high technology product sales and consulting and
support services.

The Company had three segments for 2003 and 2002: Technology product
sales, technology consulting and support services, and royalty from
trademark licensing. The segments were differentiated by the products and
services provided as follows:

Product sales
-------------
This segment consisted of set-top boxes, network equipment, computer
cabling, computer telephony integration (CTI) and personal computer
equipment and peripherals.

Consulting and support services
-------------------------------
This segment consisted of services for the implementation of e-business
solutions, software support maintenance, and network development and
support.

Royalties
---------
This segment consisted of royalty income from licensing the Curtis
Mathes Trademark which was sold in September 2001.

The Company's underlying accounting records are maintained on a legal
entity basis. Segment disclosures are on a performance basis consistent
with internal management reporting. The Company evaluates performance
based on earnings from continuing operations before income taxes and other
income and expense. The Corporate column includes corporate overhead
related items. The accounting policies of the segments are the same as
those described in the summary of significant accounting policies (Note A).

2004 2003 2002
---------- ----------- -----------
Net revenues
Product sales $ - $ 127,730 $ 1,919,695
Consulting and support services - 498,055 3,399,463
Royalties - - 50,153
---------- ----------- -----------
$ - $ 625,785 $ 5,369,311
---------- ----------- -----------
Operating loss
Product sales $ - $ (1,147,212) $ (1,504,892)
Consulting and support services - (1,125,619) (1,497,418)
Corporate (37,018) (1,243,399) (485,949)
---------- ----------- -----------
Total operating loss (37,018) (3,516,230) (3,488,259)

Less interest expense - (13,166) (101,389)
Other income (expenses) 16,663 93,661 159,411
Gain on sale of trademark - - 1,103,046
---------- ----------- -----------
Loss before extraordinary item (20,355) (3,435,735) (2,327,191)

Extraordinary item - - (406,243)
---------- ----------- -----------
Net loss $ (20,355) $ (3,435,735) $ (2,733,434)
========== =========== ===========

Identifiable assets
Computer products and service$ - $ - $ 213,030
Corporate - 22,831 4,629,173
---------- ----------- -----------
$ - $ 22,831 $ 4,842,203
========== =========== ===========
Depreciation, amortization
and write-down
Computer products and service$ - $ 2,402,218$ 421,136
Corporate - 16,716 1,171,913
---------- ----------- -----------
$ - $ 2,418,934$ 1,593,049
========== =========== ===========
Capital expenditures
Computer products and service$ - $ - $ 11,606
Corporate - - -
---------- ----------- -----------

$ - $ - $ 11,606
========== =========== ===========

International revenues for the years ended June 30, 2004, 2003 and 2002
totaled $-0-, $156,334 and $2,396,981, respectively.

NOTE P - RELATED PARTIES

The CEO has previously paid various miscellaneous expenses of the Company
during the fiscal year ended June 30, 2004. The CEO holds the Company
harmless from these expenses and does not intend to seek reimbursement.
These expenses are less than $30,000. During the year ended June 30,
2004, 288,000 shares of common stock with a market value of $5,760 were
issued to the CEO for services.

VPGI Corp. and Subsidiaries

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the years ended June 30, 2004, 2003 and 2002

Balance at Charged to Charged Balance
beginning costs and to other at end
Description of year expenses accounts Deductions of year
----------- --------- --------- -------- ---------- ---------
Year ended June 30, 2002
Allowance for
doubtful accounts 13,637 - - - 13,637

Year ended June 30, 2003
Allowance for
doubtful accounts 13,637 42,851 - (56,488) -

Year ended June 30, 2004
Allowance for
doubtful accounts - - - - -

VPGI CORP. and Subsidiaries

EXHIBIT INDEX

Exhibit Number Description of Exhibits Sequential Page Number
----------------------------------------------------------------------------

3(i) Articles of Incorporation of the Company, as amended and restated
(filed as Exhibit "3(i)" to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2003 and incorporated
herein by reference.) N/A

3(ii) Bylaws of the Company, as amended (filed as Exhibit "3(ii)" to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1999 and incorporated herein by reference.) N/A

4.1 Form of common stock Certificate of the Company (filed as Exhibit
"4.2" to the Company's annual report on Form 10-K for the fiscal
year ended June 30, 1994 and incorporated herein by reference.) N/A

4.2 1999 Equity Incentive Plan (filed as Exhibit "4.4" to the
Company's Registration Statement on Form S-8 filed with the
Commission on July 12, 2000 and incorporated herein by reference.) N/A

4.3 Series A Preferred Stock terms and conditions (filed as Exhibit
"4.3" to the Company's annual report on Form 10-K for the fiscal
year ended June 30, 1994 and incorporated herein by reference.) N/A

4.4 Series H Preferred Stock terms and conditions (filed as Exhibit
"4.4" to the Company's Registration Statement on Form S-3
originally filed with the Commission on June 20, 1996 and
incorporated herein by reference.) N/A

4.5 Series 2002-G Preferred Stock terms and conditions (filed as
Exhibit "4.1" to the Company's Current Report on Form 8-K dated
as of March 5, 2002 and incorporated herein by reference.) N/A

4.6 Form of warrant issued in connection with private placement to
Bonanza Partners, Ltd. (filed as Exhibit "4.11" to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
December 31, 1999 and incorporated herein by reference.) N/A

4.7 Form of warrant issued in connection with private placement to LBI
Group, Inc. (filed as Exhibit "4.5" to the Company's Registration
Statement on Form S-3 filed with the Commission on May 19, 2000
and incorporated herein by reference.) N/A

4.8 Form of warrant issued to Sagemark Capital, L.P. in connection
with a loan to the Company (filed as Exhibit "4.11" to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended December 31, 2000 and incorporated herein by reference.) N/A

4.9 Securities Purchase Agreement dated March 5, 2002 between
registrant and Brown Simpson Partners I, Ltd. relating to the
redemption of registrant's Series 1999-D1 Convertible Preferred
Stock with Series 2002-G Convertible Preferred Stock (filed as
Exhibit "99.2" to the Company's Current Report on Form 8-K dated
as of March 5, 2002 and incorporated herein by reference.) N/A

4.10 Registration Rights Agreement dated March 5, 2002 between
registrant and Brown Simpson Partners I, Ltd. relating to the
registration of the shares of common stock underlying registrant's
Series 2002-G Convertible Preferred Stock (filed as Exhibit "99.3"
to the Company's Current Report on Form 8-K dated as of March 5,
2002 and incorporated herein by reference.) N/A

4.11 Settlement and Mutual Release Agreement dated March 5, 2002
between registrant and Brown Simpson Partners I, Ltd. relating to
the redemption of registrant's Series 1999-D1 Convertible
Preferred Stock with Series 2002-G Convertible Preferred Stock
(filed as Exhibit "99.4" to the Company's Current Report on Form
8-K dated as of March 5, 2002 and incorporated herein by
reference.) N/A

4.12 Form of warrant issued to Setfield Limited for services rendered
(filed as Exhibit "4.18" to the Company's annual report on Form
10-K for the fiscal year ended June 30, 2002 and incorporated
herein by reference.) N/A

4.13 Form of warrant issued to Gemini Growth Fund, L.P. in connection
with a loan to the Company (filed as Exhibit "4.19" to the
Company's annual report on Form 10-K for the fiscal year ended
June 30, 2002 and incorporated herein by reference.) N/A

4.14 Series 2002-K Preferred Stock terms and conditions (filed as
Exhibit "4.20" to the Company's annual report on Form 10-K for
the fiscal year ended June 30, 2002 and incorporated herein by
reference.) N/A

4.15 Form of warrant issued to Associates Funding Group, Inc. in
connection with sale of nine subsidiaries (filed as Exhibit "4.18"
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2003, filed on May 20, 2003 and
incorporated herein by reference.) N/A

4.16 Form of warrant issued to Akin, Gump, Strauss, Hauer & Feld, LLP.
in connection with legal services rendered to the Company (filed
as Exhibit "4.19" to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2003, filed on May 20, 2003
and incorporated herein by reference.) N/A

4.17 First Amendment to Series 2002-G Preferred Stock terms and
conditions (filed as Exhibit "4.21" to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 2003
and incorporated herein by reference.) N/A

4.18 Form of 190,000 warrants issued to consultants during year
ended June 30, 2003 in connection with services rendered to the
Company(filed as Exhibit "4.22" to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2003 and incorporated
herein by reference.) N/A

21 * Subsidiaries of the Company. 53

23 * Consent of Independent Certified Public Accountants. 54

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. 55

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. 57
_______________
* Filed herewith.