VIPER NETWORKS, INC. AND SUBSIDIARIES |
Consolidated Statements of Cash Flows |
(Unaudited) |
| Six Months Ended June 30, | |
| | |
| 2005 | | | 2004 | |
| | | | | |
| | | | | | | |
Cash flows from operating activities: | | | | | | | |
Net loss | $ | (1,457,659 | ) | | $ | (6,219,133 | ) |
Adjustments to reconcile net loss to net cash used in operations: | | | | | | | |
Depreciation | | 157,204 | | | | 136,074 | |
Allowance for doubtful accounts and sales returns | | (57,144 | ) | | | 4,000 | |
Amortization of stock-based compensation | | 31,138 | | | | 32,898 | |
Amortization of stock-based interest | | - | | | | 19,944 | |
Amortization of equity swap premium | | 104,514 | | | | - | |
Loss on sale of property and equipment | | 2,175 | | | | - | |
(Recovery) impairment of purchased intangibles | | (254,834 | ) | | | 4,489,238 | |
Stock based compensation | | 246,621 | | | | 688,809 | |
Interest accrual | | 22,807 | | | | (7,822 | ) |
(Gain) loss on sale of marketable securities | | - | | | | 14,787 | |
Changes in assets and liabilities: | | | | | | | |
Accounts receivable | | 43,854 | | | | 47,226 | |
Inventories | | 65,594 | | | | (103,000 | ) |
Prepaid expenses | | 17,313 | | | | (7,040 | ) |
Other current assets | | 8,647 | | | | (21,528 | ) |
Accounts payable | | 296,420 | | | | 56,019 | |
Accrued liabilities | | 165,869 | | | | 44,453 | |
Taxes payable | | 802 | | | | (1,201 | ) |
Deferred revenues | | 44,399 | | | | 8,000 | |
| | | | | | | |
Net cash used in operating activities | | (562,280 | ) | | | (818,276 | ) |
| | | | | | | |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Acquisition, net of cash acquired | | - | | | | (657,091 | ) |
Purchases of property and equipment | | (2,119 | ) | | | (129,457 | ) |
Proceeds from sale of property and equipment | | 15,450 | | | | - | |
Sales of marketable securities | | - | | | | 3,306 | |
| | | | | | | |
Net cash used in investing activities | | 13,331 | | | | (783,242 | ) |
| | | | | | | |
| | | | | | | |
The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES |
Consolidated Statements of Cash Flows (Continued) |
(Unaudited) |
| Six Months Ended June 30, | |
| | |
| 2005 | | | 2004 | |
| | | | | |
| | | | | | | |
Cash flows from financing activities: | | | | | | | |
Proceeds from issuance of common stock | | 472,000 | | | | 1,679,219 | |
Net borrowing (repayments) under revolving credit lines | | - | | | | (107,661 | ) |
Repayment of debt from acquisition | | - | | | | (269,500 | ) |
Repayments of short term debt | | - | | | | (15,000 | ) |
Proceeds from shareholder loans | | 177,093 | | | | 244,463 | |
Repayments of shareholder loans | | (51,099 | ) | | | (59,718 | ) |
Repayments of convertible loans | | (21,145 | ) | | | (75,000 | ) |
Payments on capital lease obligations | | (820 | ) | | | (28,800 | ) |
Stock subscription deposits | | - | | | | 84,950 | |
| | | | | | | |
Net cash provided by financing activities | | 576,029 | | | | 1,452,953 | |
| | | | | | | |
Net increase in cash | | 27,080 | | | | (148,565 | ) |
Cash at the beginning of the period | | 46,956 | | | | 170,340 | |
| | | | | | | |
Cash at the end of the period | $ | 74,036 | | | $ | 21,775 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Supplemental schedule of cash flow activities | | | | | | | |
Cash paid for: | | | | | | | |
Interest | $ | 8,857 | | | $ | 17,116 | |
Income taxes | $ | 800 | | | $ | 127 | |
| | | | | | | |
Non-cash investing and financial activities: | | | | | | | |
Common stock (cancelled) issued for business acquisition | $ | (637,500 | ) | | $ | 4,094,500 | |
Common stock issued in payment of services | $ | 423,521 | | | $ | 688,809 | |
Common stock issued in payment of convertible loans | $ | - | | | $ | 50,806 | |
Common stock received upon rescission of convertible loan | $ | (151,168 | ) | | $ | - | |
Common stock issued for U.S Treasury Bonds | $ | 5,000,000 | | | $ | - | |
Common stock issued in payment of equity swap premium | $ | 666,667 | | | $ | - | |
Common stock issued for cashless exercise of warrants | $ | 223,028 | | | $ | - | |
The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements |
NOTE 1 - | CONDENSED FINANCIAL STATEMENTS |
| |
| The accompanying June 30, 2005 financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2005 and 2004 and for all periods presented have been made. Certain information and Footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2004 audited financial statements. The results of operations for periods ended June 30, 2005 and 2004 are not necessarily indicative of the operating results for the full years. |
| |
NOTE 2 - | DESCRIPTION OF BUSINESS |
| |
| The consolidated financial statements presented are those of Viper Networks, Inc. and its wholly-owned Subsidiaries (the “Company”). |
| |
| We are a leading provider of Voice over Internet Protocol, or VoIP, communications products and services. The company has evolved from a pioneer in selling VIPER CONNECT, a “push to talk” technology developed by ITXC, to a next generation provider of high-quality telecommunication services and technology for internet protocol, or IP telephony applications. We utilize our VoIP technology to transmit digital voice communications over data networks and the Internet. |
| |
NOTE 3 - | GOING CONCERN |
| |
| The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred a loss from inception on September 14, 2000 through June 30, 2005, which has resulted in an accumulated deficit of $12,529,335 at June 30, 2005 which raises doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. |
| |
| It is the intent of management to continue to develop it’s voice and data services to Web-based customers and expand its Voice-over-Internet Protocol networks for businesses, institutions, and Internet Service Providers (ISP). |
| |
| Company management will seek additional financing through new stock issuances and lines of credit. |
| |
NOTE 4 - | SIGNIFICANT EVENTS |
| |
| In July 2005, the Company cancelled and returned 10,450,000 common shares previously issued and reserved for the Viper Networks, Inc. Employee Compensation Fund. |
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VIPER NETWORKS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements |
NOTE 4 - | SIGNIFICANT EVENTS (continued) |
| |
| On February 4, 2005, the Company entered into five stock subscription agreements (the “Subscribers”) for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. Concurrent with the execution of the agreements, the Company purchased from Cogent Capital for $1 a call option to repurchase at the end of two years 80% of the shares of Common Stock sold at the then current market price. Also concurrent with the agreements, the Company entered into an equity swap arrangement with Cogent Capital for $50,000 and 3,333,333 shares of the Company’s Common Stock that entitles the Company to receive and obligate the Company to pay the price return of 75% of the shares issued in two years, or sooner if the shares are registered for sale under the Securities Act of 1933. The equity swap also provides for the exchange of certain cash flows, as defined in the agreement. |
| |
| On August 8, 2005, the Company, the Subscribers, and Cogent Capital mutually agreed to rescind the transaction. The $5,000,000 in US Treasury Bonds, including accumulated interest, were returned to the Subscribers, the 36,666,668 shares of common stock issued by the Company in connection with this transaction have been cancelled and returned to the Company’s treasury, and the $50,000 payable to Cogent Capital was not paid. |
| |
| On August 16, 2005, Farid Shouekani was appointed the Chief Executive Officer and President of the Company and on August 26, 2005, he was elected to the board of directors. Also on August 26, 2005, the board of directors was reduced from four members to three with John Castiglione and Jason Sunstein resigning from the board of directors. |
| |
| On August 26, 2005, to reduce the Company’s total issued and outstanding number of common shares the Company’s officers agreed to return all executive bonuses previously paid in the form of common stock in exchange for an equal amount of common stock purchase warrants at a price of $.25 and a Promissory Note for all unpaid loans, salaries and expenses. The following bonuses have been cancelled and the common shares returned to treasury, four year warrants were issued, and promissory notes due December 31, 2006 were issued. |
Officer | | Bonus Amount Returned | | $0.25 Warrants | | Promissory Notes |
| | | | | | | |
Ronald Weaver | | 4,400,000 common shares | | 4,400,000 | | $ | 53,119.97 |
Jason Sunstein | | 4,400,000 common shares | | 4,400,000 | | $ | 208,445.54 |
John Castiglione | | 4,400,000 common shares | | 4,400,000 | | $ | 211,894.68 |
Farid Shouekani | | 2,200,000 common shares | | 2,200,000 | | $ | 330,000.00 |
James Balestraci | | 1,100,000 common shares | | 1,100,000 | | $ | 35,590.07 |
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent liabilities. On an ongoing basis, management evaluates its estimates, including those that relate to income tax contingencies, revenue recognition, and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. If actual results significantly differ from management's estimates, the Company's financial condition and results of operations could be materially impaired.
Comparison of Six Months Ended June 30, 2005 and Six Months Ended June 30, 2004 |
During the six months ended June 30, 2005, we recorded $1,805,291 as Net revenues. This compares to the six months ended June 30, 2004 when we recorded $2,169,716 as Net revenue. |
During the six months ended June 30, 2005, our Cost of revenues was $1,647,877, which resulted in a Gross margin as a percentage of Net revenues of approximately 8.7%. This compares to the six months ended June 30, 2004 where our Cost of revenues was $1,908,609, which resulted in a Gross margin percentage of Net revenues was approximately 12%. Competitive conditions, product and sales mix, and technology trends impacted our gross margin in both of these years.
During the six months ended June 30, 2005 we incurred $1,729,272 in Selling, general and administrative expenses. This compares to the six months ended June 30, 2004 when we incurred $1,929,992 in Selling, general and administrative expenses. The decrease of approximately 10% from the six months ended June 30, 2004 to the six months ended June 30, 2005 was due primarily to the cost containment measures implemented by management during the six months ended June 30, 2005. Overall, Selling, general and administrative expenses were primarily made up of wages and salaries, office expenses, fees and costs incurred for legal and accounting services, and other administrative costs.
During the six months ended June 30, 2005, we incurred an Operating loss of $1,676,371 compared to an Operating loss of $1,668,886 during the six months ended June 30, 2004. During the six months ended June 30, 2005, we incurred Interest expense of $54,476 compared to $42,726 in Interest expense during the six months ended June 30, 2004. During the six months ended June 30, 2005, we had Bad debt recovery of $18,352 compared to the six months ended June 30, 2004 when we $6,213 in Bad debt expense. During the six months ended we had a net recapture of a prior impairment of intangibles of $254,833, compared to an impairment of $4,488,238 during the six months ended June 30, 2004.
As a result, during the six months ended June 30, 2005 we had a Net loss of $1,457,658 compared to the six months ended June 30, 2004 when we had a Net loss of $6,219,133.
Basic loss per share for the six months ended June 30, 2005 was $.01 compared to the six months ended June 30, 2004 when we had a Basic loss per share of $.07. During the six months ended June 30, 2005, we had 147,909,712 Weighted average shares outstanding. By comparison, during the six months ended June 30, 2004 we had 91,960,147 Weighted average shares outstanding.
Liquidity and Capital Resources
At June 30, 2005, we had $74,036 in Cash. At the same time, we had $548,161 in Other current assets, $760,331 in Total current assets and $6,488,208 in Total assets. In contrast, as of June 30, 2005, our Total current liabilities were $2,123,420 which consisted primarily of the following material amounts: $671,984 in Accounts payable, $257,384 in Accrued liabilities, $744,757 in Related party obligations, $126,502 in Deferred revenues, $237,989 in Short term debt, and $81,380 in Stock subscription deposit.
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During the six months ended June 30, 2005, our cash needs were met primarily by the sale of common stock and loans from certain of our shareholders. We can not be assured that we will continue to obtain funds from these or any other sources to meet our need for additional capital resources.
Overall, our liquidity and access to capital is very limited. We have not received any commitment for additional financing and given the size of our company, we may be limited to loans and other cash infusions from officers, directors, existing stockholders, and persons affiliated or associated with one or more of them. If we are to implement our business plan, we will need to raise significant amounts of additional capital and during the period ended June 30, 2005 we had not received any commitment that any such additional financing would be forthcoming or, if could be obtained, that it can be obtained on reasonable terms in light of our circumstances at that time. In addition, if any financing should be obtained, existing shareholders will likely incur substantial, immediate, and permanent dilution of their existing investment.
As of June 30, 2005, the Company expects that it will need at least $1,000,000 to cover our anticipated operating expenses for the twelve month period thereafter.
Critical Accounting Policies
The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amount of revenues and expenses during the reporting periods. We are required to make judgments and estimates about the effect of matters that are inherently uncertain. Actual results could differ from our estimates. The most significant areas involving our judgments and estimates are principally those involving our current liabilities.
Safe Harbor for Forward-Looking Statements
This Form 10-QSB contains forward-looking statements as defined by federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying (express or implied) assumptions and other statements which are other than historical facts. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "contemplates," "believes," "estimates," "predicts," "projects," and other similar terminology or the negative of these terms. From time to time we may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this Form 10-QSB, including those set forth in Section 1A entitled "Factors That May Affect Future Results." In addition, we undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-QSB or to reflect the occurrence of unanticipated or other subsequent events, and we disclaim any such obligation.
Impact of Inflation
Because of the nature of its services, the Company does not believe that inflation had a significant impact on its sales or profits.
Recent Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS 151, Inventory Costs – an amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “… under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges…” This Statement requires that those items be recognized as current-
14
period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption is not expected to have a material effect on the Company’s results of operations or financial conditions.
In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67” (“SFAS 152). This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005, with earlier application encouraged. The adoption is not expected to have a material effect on the Company’s results of operations or financial conditions.
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), Shared-Based Payment (“SFAS 123R). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R are effective as of the first interim period that begins after June 15, 2005. Accordingly, the Company will implement the revised standard in the third quarter of fiscal year 2005. Currently, the Company accounts for its share-based payment transactions under the provisions of APB 25, which does not necessarily require the recognition of compensation cost in the financial statements. Management is assessing the implications of this revised standard, which may materially impact the Company’s results of operations in the third quarter of fiscal year 2005 and thereafter.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer has concluded that current disclosure controls and procedures are effective as of the end of the period covered by this quarterly report on Form 10-QSB.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Viper Networks, Inc. vs. Greenland Corp.
On June 11, 2004 the Company filed an action in Superior Court seeking among other things, rescission of an April 25, 2003 agreement with Greenland Corp. The Company considers the contract it entered into with Greenland (wherein Greenland was to receive 2,500,000 common shares of the Company) to have been obtained by fraud. Greenland made numerous false statements and material omissions regarding Greenland Corp.’s financial condition, and failed to disclose investigations and litigation pending or threatened which would impair the value of Greenland. Indeed, subsequent to entering into this transaction, the Company discovered that Greenland had undisclosed tax liabilities nearing $2,000,000. The Internal Revenue Service had imposed tax liens against the property owned by Greenland. The Company also recently learned that at the time of the contract, Greenland Corp.’s majority shareholder and controlling Board of Directors transferred (“up-streamed”) roughly $1,300,000 from Greenland Corp.
It is unfortunate that this transaction resulted in litigation, but it is imperative that the Board of Directors of Viper Networks fulfill its fiduciary responsibility and protect its’ shareholders best interests. As such, we intend to take any and all action necessary to protect the rights of our shareholders. In order to minimize legal fees, as of the date of this filing, this case is in Arbitration. Unfortunately, Greenland has been seeking other forums to force the sale of the Viper stock outside of arbitration (which, to date, the Company has thwarted). The Company feels confident that all matters will be resolved in the Company’s favor, and the 2,500,000 common shares will be returned to treasury.
Hills of Bajamar
During September 1998, the Company’s prior management entered into an agreement with a related party to purchase 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico. The property was valued at a predecessor cost of $125,000. Prior management intended to sell lots for residential development and build a communications facility for residents in the surrounding area. The Company's current management team and Board of Directors has determined that the goals for use of property and construction of telecommunications facilities to the Hills of Bajamar are not within the Company's current capabilities and budget.
As consideration for the land, the Company issued 3,000,000 shares of our Series B Preferred Stock. On June 30, 2001, all of the Series B Preferred Stock was converted into 400,000 shares of our Common Stock. As of June 30, 2005, the Company had still not received clear title to the land. Without clear title, the Company is in the process of attempting to rescind the original transaction, cancel the 400,000 common shares and return the shares to treasury.
The Company's officers and directors are aware of no other threatened or pending litigation, which would have a material, adverse effect on us. From time to time we are a defendant (actual or threatened) in certain lawsuits encountered in the ordinary course of its business, the resolution of which, in our opinion, should not have a material adverse effect on our financial position, results of operations, or cash flows.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In January 2005, the Company issued 1,500,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of an aggregate of $50,000 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
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In February 2005, the Company issued 1,500,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of an aggregate of $180,000 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In February 2005, the Company entered into five stock subscription agreements for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. Concurrent with the execution of the agreements, the Company purchased from Cogent Capital for $1 a call option to repurchase at the end of two years 80% of the shares of Common Stock sold at the then current market price. Also concurrent with the agreements, the Company entered into an equity swap arrangement with Cogent Capital for $50,000 and 3,333,333 shares of the Company’s Common Stock that entitles the Company to receive and obligate the Company to pay the price return of 75% of the shares issued in two years, or sooner if the shares are registered for sale under the Securities Act of 1933. The equity swap also provides for the exchange of certain cash flows, as defined in the agreement. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 and the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with the transaction. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In March 2005, the Company issued a total of 300,000 shares of the Company’s Common Stock to Paul Atkiss, an officer and director of the Company, in payment for services. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In March 2005, the Company issued 55,173 shares of the Company’s Common Stock to IBC Radio in payment for six month of advertising services. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In March 2005, the Company issued 1,250,000 shares of the Company’s Common Stock to Rhino Capital in payment for twelve months of business consulting services. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In April 2005, the Company issued 4,938,300 shares of the Company’s Common Stock to several subscribers of a previous private placement conducted during 2004, due to a recalculation of the subscribers' purchase price. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
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In May 2005, the Company issued 1,400,000 shares of the Company’s Common Stock to two purchases in a cashless exercise of previously issued Common Stock Purchase Warrants (“Warrants”) in a prior private placement. The Warrants were exercised at a price of $0.195. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In May 2005, the Company issued a total of 25,000 shares of the Company’s Common Stock to Uzi Yair, an Advisory Board member of the Company, in payment for services. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In May 2005, the Company issued a total of an aggregate of 150,000 shares of the Company’s Common Stock to HF Solutions and CEO Solutions, consultants for the Company, in payment for services. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
In June 2005, the Company issued 3,055,554 shares of the Company’s Common Stock to four purchasers in exchange for the Company’s receipt of an aggregate of $275,000 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 and the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with the transaction. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
CHANGE IN OFFICERS AND DIRECTORS
On August 26, 2005, pursuant to the power conferred on the board of directors of the Corporation by the Corporation’s Bylaws, the board of directors of the Corporation determined that the exact number of authorized directors of the Corporation should be three (3), effective immediately until such time as the number is changed in accordance with the Corporation’s Bylaws.
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The Corporation also announced that Farid Shouekani is hereby elected to serve as a director of the Corporation, his term of office to commence immediately and continue until his successor is duly elected and qualified; and, as previously announced, is hereby appointed to serve as President and Chief Executive Officer of the Corporation, in accordance with the terms and conditions contained in the Employment Agreement, dated August 26, 2005.
The board of directors also accepted the resignation of Ron Weaver, as President and CEO, and the resignations of John Castiglione and Jason Sunstein, leaving the board of directors consisting of Farid Shouekani, Ronald Weaver and Paul Atkiss.
REDUCTION OF COMMON STOCK
In an effort to reduce the Corporation’s total issued and outstanding common stock, the Corporation’s officers have agreed to return all bonuses previously paid in the form of common stock in exchange for an equal amount of common stock purchase warrants at a price of $.25 and a Promissory Note for all unpaid loans, salaries and expenses. The following bonuses have been cancelled and returned to treasury, warrants issued, and promissory notes issued.
Officer | | Bonus Amount Returned | | $0.25 Warrants | | Promissory Notes |
| | | | | | | |
Ronald Weaver | | 4,400,000 common shares | | 4,400,000 | | $ | 53,119.97 |
Jason Sunstein | | 4,400,000 common shares | | 4,400,000 | | $ | 208,445.54 |
John Castiglione | | 4,400,000 common shares | | 4,400,000 | | $ | 211,894.68 |
Farid Shouekani | | 2,200,000 common shares | | 2,200,000 | | $ | 330,000.00 |
James Balestraci | | 1,100,000 common shares | | 1,100,000 | | $ | 35,590.07 |
CANCELLATION OF COGENT CAPITAL PRIVATE PLACEMENT
In February 2005, the Company entered into five stock subscription agreements (the “Subscribers”) for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. Concurrent with the execution of the agreements, the Company purchased from Cogent Capital for $1 a call option to repurchase at the end of two years 80% of the shares of Common Stock sold at the then current market price. Also concurrent with the agreements, the Company entered into an equity swap arrangement with Cogent Capital for $50,000 and 3,333,333 shares of the Company’s Common Stock that entitled the Company to receive and obligate the Company to pay the price return of 75% of the shares issued in two years, or sooner if the shares are registered for sale under the Securities Act of 1933. The equity swap also provided for the exchange of certain cash flows, as defined in the agreement.
Due to the recent volatility of the Company’s common stock, on August 8, 2005, this transaction was mutually rescinded. All $5,000,000 in US Treasury Bonds, including accumulated interest, were returned to the Subscribers and the 36,666,668 shares of common stock issued by the Company in connection with this transaction have been cancelled and returned to the Company’s treasury.
All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 and the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with the transaction. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.
CANCELLATION OF STOCK IN THE VIPER NETWORKS, INC. EMPLOYEE COMPENSATION FUND
In July 2005, the Company cancelled and returned 10,450,000 common shares previously issued and reserved for the Viper Networks, Inc. Employee Compensation Fund.
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ITEM 6. EXHIBITS
EXHIBIT
NUMBER | DESCRIPTION |
| |
23.1 * | Auditor’s Consent |
31.1* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* Filed herewith.
The Company filed the following Reports on Form 8-K during the six months ended June 30, 2005:
Form 8K on January 27, 2005, February 4, 2005, February 14, 2005, March 14, 2005 and March 16, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VIPER NETWORKS, INC. |
| | |
| | |
Date: September 6, 2005 | By: | /s/ FARID SHOUEKANI |
| |
|
| | FARID SHOUEKANI, CHIEF EXECUTIVE OFFICER |
| | |
| | |
Date: September 6, 2005 | By: | /s/ PAUL E. ATKISS |
| |
|
| | PAUL E. ATKISS, CHIEF FINANCIAL OFFICER |
| | (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) |
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