Viper Networks (VPER) 10QSB/A 2005 Q2 Quarterly report (small business) (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB/A

Amendment No. 2

(Mark one)

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

¨TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________

Commission File Number: 0-032939

Viper Networks, Inc.

(Exact name of registrant as specified in its charter)

Nevada	87-0140279
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
10373 Roselle Street, Suite 170 San Diego, California	92121
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (858) 452-8737

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, and (2) has been subject to such filing requirements for the past 90 days. Yes x  No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes ¨ No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The aggregate market value of the voting stock held by non-affiliates (95,336,823 shares of Common Stock) was $11,440,419 as of June 30, 2005.  The stock price for computation purposes was $0.12. This value is not intended to be a representation as to the value or worth of the Registrant's shares of Common Stock.  The number of shares of non-affiliates of the Registrant has been calculated by subtracting shares held by persons affiliated with the Registrant from outstanding shares.  The number of shares outstanding of the Registrant's Common Stock as of June 30, 2005 was 133,361,656.

VIPER NETWORKS, INC.

FORM 10-QSB/A (Amendment No. 2) QUARTERLY REPORT

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

Explanatory Note

Viper Networks, Inc. (the “Company”) is filing this amendment to its Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005 (the “Amendment”) to expand disclosures and restate the Consolidated Financial Statements in response to comments issued by the Securities and Exchange Commission (the “SEC”). The restated financials and revised document (Item 1 - Financial Statements; Item 2 - Managements’ Discussion and Analysis of Financial Condition and Results of Operations; and Item 3 - Factors That May Affect Future Results) address comments issued by the SEC as relates to the Company’s Forms 10-KSB Amendment 1 for the year ended December 31, 2004, and 10-QSB Amendment 1 for the quarters ended March 31, 2005 and June 30, 2005. Any reference to facts and circumstances at a “current” date refer to such facts and circumstances as of such original filing date. In addition, this amendment corrects the preferred stock presentation on the Consolidated Balance Sheet to remove the class A and B designation based on the corporate domicile change to Nevada (see Note 6).

TABLE OF CONTENTS

			Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
		Basis of Presentation	3
		Report of Independent Registered Public Accounting Firm	4
		Consolidated Balance Sheets - June 30, 2005 (Unaudited) and December 31, 2004	5
		Consolidated Statements of Operations - Three Months Ended June 30, 2005 and 2004 (Unaudited)	6
		Consolidated Statements of Operations - Six Months Ended June 30, 2005 and 2004 (Unaudited)	7
		Consolidated Statements of Changes in Stockholders’ Equity - Six Months Ended June 30, 2005 (Unaudited) and Year ended December 31, 2004	8
		Consolidated Statements of Cash Flows - Six Months Ended June 30, 2005 and 2004 (Unaudited)	9
		Notes to Consolidated Financial Statements (Unaudited)	11
Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Factors That May Affect Future Results		23
Item 4.	Controls and Procedures		27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3.	Defaults Upon Senior Securities		32
Item 4.	Submission of Matters to a Vote of Security Holders		32
Item 5.	Other Information		32
Item 6.	Exhibits and Reports on Forms 8-K		34
SIGNATURE			35

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VIPER NETWORKS, INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION
ITEM 1 -	FINANCIAL STATEMENT
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-QSB pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholders equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of June 30, 2005, and the related balance sheet of the Company as of December 31, 2004, which is derived from the Company's audited financial statements, the un-audited statement of operations and cash flows for the six months ended June 30, 2005 and June 30, 2004 and the statement of stockholders equity for the period of December 31, 2003 to June 30, 2005 are included in this document.
Operating results for the quarter and six months ended June 30, 2005 are not necessarily indicative of the results that can be expected for the year ending December 31, 2005.

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ARMANDO C. IBARRA

Certified Public Accountants

A Professional Corporation

Armando C. Ibarra, C.P.A.	Members of the California Society of Certified Public Accountants
Armando Ibarra, Jr., C.P.A., JD	Members of the American Institute of Certified Public Accountants
	Registered with the Public Company Accounting Oversight Board

To the Board of Directors of

Viper Networks Inc. and Subsidiaries

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have reviewed the accompanying consolidated balance sheets of Viper Networks, Inc. and Subsidiaries as of June 30, 2005, and the related statements of operations, changes in stockholders’ equity, and cash flows for the six months and three months ended June 30, 2005 and 2004, in accordance with Statements on Standards for Accounting Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Viper Networks, Inc. and Subsidiaries.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Our review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Management’s plans in regard to its current status are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Armando C. Ibarra             

Armando C. Ibarra, CPA-APC

September 18, 2006 - restated; see note 7

December 28, 2005 - restated; see Note 7

September 6, 2005

Chula Vista, California

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

		June 30, 2005 (Unaudited)			December 31, 2004
ASSETS
Current Assets:
Cash	$	74,036		$	46,956
Short-term investments		4,000			5,000
Accounts receivable, net of allowance for doubtful accounts and sales returns (Note 4)		127,709			121,948
Inventories		6,426			72,020
Other current assets (Note 4)		189,828			59,324
Total current assets		401,998			305,248
Property and equipment, net (Note 4)		324,516			497,226
Investments in unconsolidated businesses (Note 3)		-			46,833
Goodwill and other intangible assets (Note 5)		149,541			424,541
Total assets	$	876,055		$	1,273,848
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	671,983		$	375,564
Accrued liabilities (Note 4)		207,383			61,915
Loans from related party (Note 7)		744,757			607,094
Taxes payable		3,425			2,623
Deferred revenues		126,502			82,103
Short term debt		237,989			97,647
Stock subscription deposits (Note 8)		81,380			81,380
Total current liabilities		2,073,419			1,308,326
Commitments and Contingencies (Note 10)
Stockholders equity:
Preferred stock: authorized 10,100,000 shares at $0.001 par value, -0- shares issued and outstanding (Note 11)		-			-
Common stock: 250,000,000 shares authorized at $0.001 par value, 133,361,656 and 121,222,899 shares issued              and outstanding		133,362			121,223
Additional paid-in capital		11,742,770			11,425,685
Stock subscription receivable (Note 6)		(125,000	)		(125,000	)
Unearned stock-based compensation		(221,522	)		(253,318	)
Treasury Stock		(223,028	)		-
Accumulated deficit		(12,424,821	)		(11,124,943	)
Accumulated comprehensive loss		(79,125	)		(78,125	)
Total stockholders’ equity		(1,197,364	)		(34,478	)
Total liabilities and stockholders’ equity	$	876,055		$	1,273,848

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

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Three Months Ended June 30,
	2005			2004
Net revenues	$	858,338		$	1,208,748
Cost of revenues		718,892			954,947
Gross margin		139,446			253,801
Operating expenses:
General and administrative		878,543			1,141,745
Bad debt (recovery) expense		8,481			5,113
Equity loss (income) from unconsolidated subsidiaries		(231	)		1,000
Impairment of purchased intangibles		-			-
(Recovery) impairment of purchased asset		(615,216	)		1,092,100
		271,577			2,239,958
Loss from operations		(132,131	)		(1,986,157	)
Other income (expenses):
Realized (loss) on marketable securities		-			(14,787	)
Interest expense		(39,923	)		(19,566	)
Other income		1			236
Total other income (expenses)		(39,922	)		(34,117	)
Net loss	$	(172,053	)	$	(2,020,274	)
Basic loss per share	$	(0.01	)	$	(0.02	)
Weighted average number of shares outstanding		129,191,823			96,932,904

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

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Six Months Ended June 30,
	2005			2004
Net revenues	$	1,805,291		$	2,169,716
Cost of revenues		1,643,805			1,908,609
Gross margin		161,486			261,107
Operating expenses:
General and administrative		1,719,131			1,928,992
Bad debt (recovery) expense		(18,352	)		6,213
Equity loss (income) from unconsolidated subsidiaries		46,329			1,000
Impairment of purchased intangibles		275,000			3,396,138
(Recovery) impairment of purchased asset		(615,216	)		1,092,100
		1,406,892			6,424,443
Loss from operations		(1,245,406	)		(6,163,336	)
Other income (expenses):
Realized (loss) on marketable securities		-			(14,787	)
Interest expense		(54,476	)		(42,726	)
Other income		4			1,716
Total other income (expenses)		(54,472	)		(55,797	)
Net loss	$	(1,299,878	)	$	(6,219,133	)
Basic loss per share	$	(0.01	)	$	(0.07	)
Weighted average number of shares outstanding		126,436,414			91,960,147

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

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

	Common Stock						Additional Paid-In Capital			Stock Subscriptions			Unearned stock-based			Treasury			Accumulated			Other Comprehensive			Total Stockholders’
	Shares			Amount			(Deficit)			Receivable			Compensation			Stock			Deficit			Loss			Deficit
Balance, December 31, 2003		78,796,146		$	78,796		$	3,901,379		$	(125,000	)	$	(324,548	)	$	-		$	(3,160,751	)	$	(48,018	)	$	321,858
Issuance of common stock for cash		14,244,836			14,245			2,127,218			-			-			-			-			-			2,141,463
Issuance of common stock for services received		12,113,382			12,114			908,047			-			-			-			-			-			920,161
Issuance of common stock for acquisition		4,500,000			4,500			4,090,000			-			-			-			-			-			4,094,500
Conversion of notes payable and interest		646,322			646			201,327			-			-			-			-			-			201,973
Issuance of common stock for stock dividend		10,632,213			10,632			(10,632	)		-			-			-			-			-			-
Employee Compensation Fund		290,000			290			213,645			-			-			-			-			-			213,935
Stock-based compensation		-			-			(5,299	)					71,230			-			-			-			65,931
Comprehensive loss		-			-			-			-			-			-			-			(30,107	)		(30,107	)
Net Loss for the year ended December 31, 2004		-			-			-			-			-			-			(7,964,192	)		-			(7,964,192	)
Balance, December 31, 2004		121,222,899			121,223			11,425,685			(125,000	)		(253,318	)		-			(11,124,943	)		(78,125	)		(34,478	)
Issuance of common stock for cash		11,247,187			11,247			460,753			-			-			-			-			-			472,000
Issuance of common stock for services received		2,158,691			2,159			421,363			-			-			-			-			-			423,522
Cancellation of common stock upon rescission of notes payable		(554,283	)		(554	)		(150,614	)		-			-			-			-			-			(151,168	)
Cancellation of common stock for settlement    and termination of acquisition		(1,375,000	)		(1,375	)		(636,125	)		-			-			-			-			-			(637,500	)
Issuance of common stock for cashless exercise of warrants		662,162			662			222,366			-			-			(223,028	)		-			-			-
Stock-based compensation		-			-			(658	)		-			31,796			-			-			-			31,138
Comprehensive loss		-			-			-			-			-			-			-			(1,000	)		(1,000	)
Net Loss for six months ended June 30, 2005		-			-			-			-			-			-			(1,299,878	)		-			(1,299,878	)
Balance, June 30, 2005		133,361,656		$	133,362		$	11,742,770		$	(125,000	)	$	(221,522	)	$	(223,028	)	$	(12,424,821	)	$	(79,125	)	$	(1,197,364	)

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 (Unaudited)

	Six Months Ended June 30,
	2005			2004
Cash flows from operating activities:
Net loss	$	(1,299,878	)	$	(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
Loss on sale of property and equipment		2,175			-
Impairment of purchased intangibles		275,000			3,396,138
(Recovery) impairment of purchased assets		(615,216	)		1,092,100
Equity loss from unconsolidated businesses		46,329			1,000
Stock based compensation		232,408			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		165,868			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 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 (unaudited)

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, as amended. 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 THE BUSINESS
	The consolidated financial statements presented are those of Viper Networks, Inc. and its wholly-owned Subsidiaries (the “Company”).

We are striving to become a provider of Voice over Internet Protocol, or VoIP, communications products and services. Since we began VoIP operations in 2000, we have 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 -	SIGNIFICANT ACCOUNTING POLICIES
	a.  Basis of Presentation.

The Company’s consolidated financial statements are prepared using the accrual method of accounting and include its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Investments in businesses which the Company does not control, but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method and are included in Investments in Unconsolidated Businesses on the consolidated balance sheet.

b.  Inventories

Inventories are stated at the lower of cost or market using the first-in first-out method.  Inventory costs include international inbound freight, duty and custom fees.

c.  Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The Company is required to make judgments and estimates about the effect of matters that are inherently uncertain. Although, we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.

On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to bad debts, product returns, warranties, inventory reserves, long-lived assets, income taxes,

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)
	c.  Estimates (continued)
	litigation, and other contingencies. The Company bases its estimates on historical experience and various other assumptions we believe 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.
	d.  Property and Equipment
	Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method. Useful lives range from three to five years for office furniture and equipment. Additions to property and equipment together with major renewals and betterments are capitalized. Maintenance, repairs and minor renewals and betterments are charged to expense as incurred.
	e.  Goodwill and Other Intangible Assets
	Goodwill represents the excess of the cost of businesses acquired over the fair value of the identifiable net assets at the date of acquisition. Goodwill and intangible assets acquired in a purchase business combination and determined to have indefinite useful lives are not amortized, but instead are evaluated for impairment annually and if events or changes in circumstances indicate that the carrying amount may be impaired per Statement of Financial Accounting Standards, No.142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. An impairment loss would generally be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The estimated fair value is determined using a discounted cash flow analysis. SFAS 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”.
	f.  Long-lived Assets
	Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable per SFAS 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis. Any impairment in value is recognized as an expense in the period when the impairment occurs.
	g.  Revenue Recognition

The Company recognizes revenues and the related costs for voice, data and other services along with product sales when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Service revenue from monthly and per minute fee agreements is recognized gross, consistent with Emerging Issues Task Force (EITF) No. 99-19 “Reporting Revenues Gross as a Principal Versus Net as an Agent”, as the Company is the primary obligor in its transaction, has all credit risk, maintains all risk and rewards, and establishes pricing.

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)
	g.  Revenue Recognition (continued)

Combined product and service agreements are allocated consistent with EITF No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” with the multiple deliverables divided into separate units of accounting. Revenue is allocated among the separate units of accounting based on their relative fair value. Support and maintenance sales are recognized over the contract term. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue.

The Company accrues for warranty costs, sales returns, bad debt, and other allowances based on its historical experience.

h.  Stock-based Compensation

Statement of Financial Accounting Standards No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation”, provides for the use of a fair value based method of accounting for stock-based compensation. However, SFAS 123 allows the measurement of compensation cost for stock options granted to employees using the intrinsic value method of accounting prescribed by Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees”, which only requires charges to compensation expense for the excess, if any, of the fair value of the underlying stock at the date a stock option is granted (or at an appropriate subsequent measurement date) over the amount the employee must pay to acquire the stock. The Company has elected to account for employee stock options using the intrinsic value method under APB 25. By making that election, the Company is required by SFAS 123 to provide pro forma disclosures of net loss as if a fair value based method of accounting had been applied.

In accordance with the provisions of SFAS 123, all other issuances of stock, stock options or other equity instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instrument issued (unless the fair value of the consideration received can be more reliably measured). During the six months ended June 30, 2005 and 2004, the Company recognized $126,426 and $120,195 and $201,959 and $478,100 of expense relating to the grant of common stock to non-employees and employees, respectively, for services which are included in the accompanying consolidated statements of operations. The value of these shares was determined based upon over the counter closing prices.

i.  Income Tax

Current income tax expense (benefit) is the amount of income taxes expected to be payable (receivable) for the current year. A deferred tax asset and/or liability is computed for both the expected future impact of differences between the financial statement and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. Deferred income tax expense is generally the net change during the year in the deferred income tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be “more likely then not” realized in future tax returns. Tax rate changes are reflected in income in the period such changes are enacted.

j.  Net Loss Per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted loss per share has not been presented because the assumed exercise of the Company’s outstanding options and warrants would have been antidilutive.

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)
	j.  Net Loss Per Share (continued)
	Options and/or warrants will have a dilutive effect only when the average market price of the common stock during the period exceeds the exercise price of the options and/or warrants. There were options to purchase 11,750,000 shares of common stock and 18,593,316 warrants potentially issuable at June 30, 2005 which were not included in the computation of net loss per share.
	k.  Concentrations of Risk
	The Company entered into an agreement during September 1998 to acquire 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico (the “Land”) with the intent, at the time, to sell lots for residential development and build a communications facility for residents in the surrounding area. As of the date of these financial statements, the Company had not received documented title to the Land. Since consideration for the agreement (documented title) has never been received the Company does not believe it is the owner of the Land. If the Company was determined to be the owner of the Land the Company could be subject to the following risks. The property is located in Mexico, which has a developing economy. Hyperinflation, volatile exchange rates and rapid political and legal change, often accompanied by military insurrection, have been common in this and certain other emerging markets in which the Company may conduct operations. The Company may be materially adversely affected by possible political or economic instability in Mexico. The risks include, but are not limited to terrorism, military repression, expropriation, changing fiscal regimes, extreme fluctuations in currency exchange rates, high rates of inflation and the absence of industrial and economic infrastructure. Changes in land development or investment policies or shifts in the prevailing political climate in Mexico in which the Company plans to sell lots for residential development and build a communications facility could adversely affect the Company’s business. Operations may be affected in varying degrees by government regulations with respect to development restrictions, price controls, export controls, income and other taxes, expropriation of property, maintenance of claims, environmental legislation, labor, welfare, benefit policies, land use, land claims of local residents, water use and mine safety. The effect of these factors cannot be accurately predicted.
NOTE 4 -	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, resulting in an accumulated deficit of $12,424,821 at June 30, 2005, that 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 its 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.

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 5 -	RECOVERY OF IMPAIRMENT OF PURCHASED ASSET
	During May 2004, the Company acquired an aggregate 50% of the membership interests of Brasil Communications, LLC (“Brasil LLC”) in two concurrent transactions with Software Innovations, Inc. (“SII”) and Brasil LLC. Brasil LLC owns and operates a VoIP network with licenses and operations in Brazil and El Salvador. As consideration for the purchase, the Company issued 2,000,000 shares of the Company’s Common Stock to SII and $300,000 payable in cash to Brasil LLC for an aggregate purchase price of $1,320,000, recorded on the consolidated balance sheet as an in investment in unconsolidated businesses. Management intended to expand the Company’s global VoIP network and hardware sales into Latin America through this investment.
	Subsequently, the Company evaluated the fair market value of the assets and liabilities held by Brasil LLC, as shown below, and determined its investment to be impaired:

	Brasil LLC FMV
Fixed assets	$	130,000
Other intangible assets (license)		100,100
Net current assets (liabilities)		(2,200	)
Aggregate FMV of purchased Assets	$	227,900

Since the Company determined this to be other than a temporary impairment, a charge against earnings was taken in the amount of $1,092,100 for Impairment of Purchased Assets. Following this charge, the book value of Brasil LLC investment was $227,900. For the year ended December 31, 2004 the Company recorded $181,067 as its 50% equity share in Brasil LLC operating loss subsequent to the Company’s investment. At December 31, 2004 the Company’s equity investment was $46,833.

In June, 2005 SII, Brasil LLC, and the Company reached a settlement agreement and release to terminate the Company’s 50% ownership in Brasil LLC arising from a disagreement between SII and the Company over responsibility for operating cash calls, the management of, and the operation of Brasil LLC. The Company assigned its 50% interest in Brasil LLC to SII, and SII returning to the Company 1,375,000 shares of the Company’s Common Stock previously issued to them as part of the original purchase price paid for the Brasil LLC acquisition (inclusive of the Company’s subsequent 10% stock dividend). The aggregate value of the Company’s Common Stock returned ($637,500) was allocated as follows: 1) $7,566 to open accounts receivable; 2) $14,718 to zero out the remaining book investment in unconsolidated businesses; and, 3) $615,216 as a gain on the disposal of the purchased assets. At June 30, 2005 the Company had no equity investment in Brasil LLC.

NOTE 6 -	SIGNIFICANT EVENTS
	On May 18, 2005, the Company changed its corporate domicile from Utah to Nevada pursuant to a prior action by a majority of the shareholders.
	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.
	On February 4, 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. On August 8, 2005, by mutual agreement, the five stock subscription agreements and all associated agreements (as described below) were rescinded; the escrow was closed with the 33,333,335 shares of the Company’s

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 6 -

SIGNIFICANT EVENTS (continued)

Common Stock and the $5,000,000 in US Treasury Bonds returned to the Company and the five subscribers, respectively. 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 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 the resignation of John Castiglione and Jason Sunstein.

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 Shares 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

	A total of 16,500,000 shares of the Company’s Common Stock were cancelled. All of these shares were originally valued at $0.0364 per share (adjusted for the September 2004 10% stock dividend). A credit against income of $660,000 was recorded in the consolidated statement of operations in the third quarter as general and administrative expense. The shares were originally issued during 2004 ($360,000) and 2003 ($240,000).
NOTE 7 -	RESTATEMENT
	The accompanying unaudited financial statements as of June 30, 2005, along with the Report of Independent Registered Public Accounting Firm dated September 6, 2005 and previously restated as of December 28, 2005, have been restated as of September 18, 2006.
	The current restatement includes additional disclosures regarding; business investments (Balance Sheet, Statements of Operations, and Statements of Cash Flows captions), goodwill and purchased intangible assets (Balance Sheet, Statements of Operations, and Statements of Cash Flows caption), preferred stock presentation on the Consolidated Balance Sheet to remove the class A and B designation based on the corporate domicile change to Nevada (Note 6).

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BASIS OF DISCUSSION AND ANALYSIS

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, as amended, 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.  Although we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.   If actual results significantly differ from management's estimates, the Company's financial condition and results of operations could be materially impaired.

FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains forward-looking statements. 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 forward-looking statements can be identified by the use of forward-looking words such as “believes”, “expects”, "ma,", "will", "should", "could", "intends", "plan,", "anticipates", "contemplates", "estimates", "predicts", "projects", and other similar terminology or the negative of these terms or by discussions of plans or strategy that involve risks or uncertainties Management wishes to caution the reader that these forward-looking statements including, but not limited to, statements regarding the Company’s marketing -plans, goals, competitive and technology trends, and other matters that are not historical facts are only predictions. No assurances can be given that such predictions will prove correct or that the anticipated future results will be achieved. Actual events or results may differ materially either because one or more predictions prove to be erroneous or as a result of other risks facing the Company. Forward-looking statements should be read in light of the cautionary statements and important factors described in this Form 10-QSB, including, but not limited to, the Sections titled “The Factors That May Affect Future Results” shown as Item 3 and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The risks include, but are not limited to, the risks associated with an early-stage company that has only a limited history of operations, the comparatively limited financial resources of the Company, the intense competition the Company faces from other established competitors, technological changes that may limit the ability of the company to market and sell its products and services or adversely affect the pricing of these products or services, and management that has only limited experience in developing systems and management practices. Any one or more of these or other risks could cause actual results to differ materially from the future results indicated, expressed, or implied in such forward-looking statements. 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.

RESULTS OF OPERATIONS

Organization of Business; Presentation of Results

The Company provides VoIP communication products and services both to consumer and wholesale customers. Through our consumer operations we sell 1) third-party hardware products directly and indirectly to consumer end users (both residential and commercial) that enable these customers to place VoIP telephone calls over our networks, and 2) services based on individual prepaid customer accounts and the ability to purchase additional prepaid calling time through our automated, on-line system (“Consumer Operations”). We also provide software which enables call origination, account management, call routing and billing so that per-call revenue can be

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calculated and charged to the customers’ prepaid account. Through our wholesale activity we both buy and sell network capacity to and from other VoIP providers for specific destinations around the world (“Wholesale Operations”). Thus, we attempt to better utilize the capacity in our network by selling unused capacity to competitors, and expand our termination footprint by contracting for the termination of our customer’s calls to destinations where we do not yet have our own servers. Our Wholesale Operations were born from the activities in our acquisitions of Mid-Atlantic and Adoria.

Comparison of Three Month period Ended June 30, 2005 and June 30, 2004

During the three months ended June 30, 2005, the Company recorded $858,338 in Net revenues (“Revenues”). This was a $350,410 decrease (-29.0%) compared to the three months ended June 30, 2004 when we recorded $1,208,748 in Revenues. The decrease in Revenues consisted of a $135,548 (+312.7%) increase in sales of Consumer Operations (from $43,345 in the second Quarter of 2004) and a $485,958 (-41.7%) decrease in Wholesale Operations. The decrease in Wholesale Operations Revenues resulted from an intentional shift in emphasis away from the former Mid-Atlantic operations ($500,243 in the second Quarter of 2004 vs. $69,521 in the same three months of 2005; a decrease of $430,722 or -86.1%), coupled with a decrease of $55,237 (-8.3%) in the former Adoria operations.

During the three months ended June 30, 2005, the Company’s Cost of revenues (“COGS”) was $718,892, which resulted in a Gross margin (“GM”) as a percentage of Revenues of approximately 16.2%. This compares to the three months ended June 30, 2004 when our COGS was $954,947, which resulted in a GM as a percentage of Revenues of approximately 21.0%. Consumer Operations GM in the second three months of 2005 was 18.0% of Revenues ($32,138 GM vs. $178,893 Revenues); in the same period during 2004 Consumer Operations COGS exceeded Revenues by 20.1% ($52,067 COGS or -$8,722 GM vs $43,345 Revenues). For our Wholesale Operations, GM fell as the reduction in Mid-Atlantic Revenues resulted in purchasing inefficiencies. Wholesale’s profitability for the period on a GM basis decreased from 22.5% in 2004 ($262,522 GM on Revenues of $1,165,403) to a GM of 15.8% in 2005 ($107,309 GM on revenues of $679,445). The gain in Consumer Operations GM failed to offset the decrease in Wholesale Operations GM, resulting in a decrease in GM for the Company ($253,800 in the second quarter of 2004 fell to $139,446 in the second quarter of 2005). The Company expects these trends to continue for the remainder of the year.

During the three months ended June 30, 2005 the Company incurred $878,543 in Sales and general and administrative expenses (“SG&A”). This is a decrease of 23.1% compared to the three months ended June 30, 2004 when we incurred $1,141,745 in SG&A.  Consumer Operations (including corporate overhead) SG&A in the three months ended June 30, 2005 totaled $647,750 (362% of Consumer Operations Revenues); during the same period in 2004 Consumer Operations SG&A were $898,874, or 2,074% of Consumer Operations Revenues. Simultaneously, Wholesale Operations SG&A decreased by 5.0% from $242,871 in the second three months of 2004 (21% of Revenues) to $230,794 in the same period in 2005 (34% of Revenues). The decrease in Wholesale Operations SG&A from 2004 to 2005 occurred almost entirely in the former Adoria operations (-19.7%). SG&A are primarily made up of wages and salaries, business consulting services, office expenses, fees and costs incurred for legal and accounting services, and other administrative costs.

During the three months ended June 30, 2005 the Company had Bad debt expense of $8,481 compared to the three months ended June 30, 2004, when we had a bad debt expense of $5,113. The 2005 expense was entirely within our Consumer Operations. During the three months ended June 30, 2005 we recorded a Recovery of purchased assets in the amount of $615,216, whereas in the three months ended June 30, 2004 we recorded an Impairment of purchased assets in the amount of $1,092,100.

During the three months ended June 30, 2005, we realized a Loss from operations of $132,131 compared to a Loss from operations of $1,986,157 during the three months ended June 30, 2004. The larger loss in 2004 was due primarily to the $1,092,100 charge for Impairment of purchased intangibles and $263,202 in greater SG&A expenses in 2004, offset in part by the Recovery of Purchased assets in 2005 ($615,216).

During the three months ended June 30, 2004, we incurred a loss on the sale of marketable securities of $14,454, whereas there was no charge during the three months ended June 30, 2005. During the three months ended June 30, 2005, we incurred Interest expense of $39,923 compared to $19,566 in Interest expense during the three months ended June 30, 2004.

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As a result, during the three months ended June 30, 2005 we had a Net loss of $172,053 compared to the three months ended June 30, 2004, when we had a Net loss of $2,020,274 (-20.0% of revenues in 2005 compared to -167.1% of revenues in 2004). Excluding the Recovery of purchased assets, the Net loss would have been -$787,269 in 2005; excluding the Impairment of purchased assets in the second Quarter of 2004 the Net loss would have been -$928,174. The Net loss in our Consumer Operations (excluding the Recovery/Impairment) improved from -$942,266 in the second Quarter of 2004 to -$638,750 in the second Quarter of 2005. Net profitability in our Wholesale Operations fell from a profit of $14,092 in the second Quarter of 2004 to a Net loss of -$148,519 in the second Quarter of 2005 (of this $162,611 adverse change, $153,667 occurred in the former Mid-Atlantic operations).

The single largest factor distinguishing profitability in the three months ended June 30, 2005 compared to the same period in 2004 was the result of a recovery/impairment associated with purchased assets from the Brasil, LLC investment. In 2004 we incurred a charge against income for impairment of purchased assets of 1,092,100 resulting from a post-investment analysis of the fair market value of the purchased assets which showed them to be worth significantly less than their book value. By contrast, in 2005 we recognized a gain on the disposal of purchased assets of $615,216 when the dissolution of the Brasil LLC investment led to a partial recovery of the Company’s common stock issued for the acquisition.

Basic loss per share for the three months ended June 30, 2005 was $0.01 on a total of 129,191,823 Weighted average outstanding shares. In the same period of 2004 Basic loss per share was $0.02 on a total of 96,932,904 Weighted average shares outstanding.

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.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2005, we had $74,036 in Cash, an increase of $27,080 from December 31, 2004. At the same time, we had $127,709 in Net accounts receivable, $6,426 in Inventories, and $189,828 in Other current assets, for a total of $401,998 in Total current assets. In contrast, as of June 30, 2005, our Total current liabilities were $2,073,419, which consisted primarily of the following material amounts: $671,983 in Accounts payable, $207,383 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 deposits.

Net working capital as of June 30, 2005 was -$1,671,422 compared to -$1,003,078 as of December 31, 2004 (an adverse change of -67%). This $668,343 adverse change in working capital was comprised of the following significant amounts: $27,080 increase in Cash, $65,594 decrease in Inventories, $130,504 increase in Prepaid expenses, $296,419 increase in Accounts payable, $145,468 increase in Accrued liabilities, $137,663 increase in Loans from related party, $140,342 increase in Short term debt, and $44,399 increase in Deferred revenues. Total assets less Liabilities as of June 30, 2005 were -$1,197,364, compared to -$34,478 at the end of 2004; principally resulting from the changes in Working Capital noted above plus depreciation of fixed assets ($157,204), Equity loss from unconsolidated businesses net of cash advanced ($46,833), and Impairment of purchased intangible assets ($275,000).

During the six months ended June 30, 2005, our cash flow from operations was -$562,280, with $471,212 consumed in our Consumer Operations and $91,068 consumed in our Wholesale Operations. These cash requirements were primarily funded by the sale of common stock and by loans from certain of our shareholders, The Company anticipates that it will consume cash within Consumer Operations as revenues increase, products are added to inventory, and as we implement our business plan. In addition, Wholesale Operations are expected to continue to consume cash as they compete against lower gross margin competitors and as they support implementation of our business plans. We cannot be assured that we can continue to obtain funds from these or any other sources to meet our need for additional capital resources.

Overall, the company’s access to capital is very limited. The Company continually evaluates its cash needs and anticipates seeking additional equity or debt financing in order to achieve its overall business objectives.

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However, no commitment for additional financing has been obtained and there can be no assurance that such financing will be available, or, if available, at a price or in a form that is acceptable to the Company. We may be limited to 1) loans and other cash infusions from officers, directors, existing stockholders, and persons affiliated or associated with one or more of them or 2) the sale of the Company’s investment in NextPhase Wireless, Inc. subject to the occurrence of future events as noted below. In addition, if any financing should be obtained, existing stockholders will likely incur substantial, immediate, and permanent dilution of their existing investment. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have an adverse impact on the Company’s ability to achieve its business objectives.

NextPhase Wireless, Inc. is trading on the OTC BB under the symbol NXPW.  Incorporated in September, 2000 as a 100% owned subsidiary of the Company, NextPhase remained operationally dormant until May, 2004. At that time the Company elected to concentrate its efforts into its core VoIP business activities. The non-VoIP technologies - that were never developed, were deemed to be of no value, and into which the Company had no intention of investing time or funds - were then assigned to the NextPhase subsidiary in anticipation of spinning it off as a separate entity. In this way, the Company hoped through the spinoff some value might be obtained from what otherwise would have remained worthless. The asset assignment and spinoff was accomplished by Resolution of the Board of Directors of the Company; no formal purchase and sale agreement existed.

One officer of the Company, believing he could create and implement a viable business model within NextPhase, then terminated his employment with Viper and became an officer of NextPhase. Concurrent with the spinoff, NextPhase issued additional common shares to this officer and to several other NextPhase employees that had the effect of diluting Vipers’ share of ownership to 40% (4,000,000 shares).

From that point forward NextPhase pursued its own business opportunities independent to those of the Company, except that in 2004 all holders of NextPhase common stock, including the Company, pledged their shares as collateral for a loan NextPhase sought, the proceeds of which were used by NextPhase to purchase a publicly trading entity (Edison Renewables, Inc). That loan has been repaid in full and the pledged shares have been released from the Pledge Agreement.

NextPhase was and continues to be a separate legal entity not related to the Company other than through the Company’s equity ownership. None of the management of the Company have any operational position within NextPhase nor as members of it’s Board of Directors.

The Company still owns these 4,000,000 “restricted” common shares of NextPhase, which has had a recent trading range of $0.24 to $1.39.  The 4,000,000 common shares of NextPhase were pledged (“Pledged Stock”) as collateral on behalf of NextPhase for a $350,000 promissory note (“Note”).  In early May 2005, the Note was paid in full and the Pledged Stock is being released to the Company.  During August the Company will be eligible to request an exemption (as noted below) to commence selling shares of the NextPhase “restricted” common stock to raise capital for the Company.

The term “restricted” refers to common stock represented by certificate(s) that have not been registered under the Securities Act of 1933, as amended (the “Act”), or under certain state securities laws.  No public sale or transfer of these shares may be made in the absence of (a) an effective registration statement under the Act or (b) an opinion of counsel acceptable to the issuing company that registration under the Act or under applicable state securities laws is not required (an exemption) in connection with such proposed sale or transfer.  An exemption is typically limited to i) stock owned for a minimum of twelve months and ii) a maximum number of shares to be offered for sale, during any rolling three month period, limited to 1% of the issuing company’s total number of shares issued and outstanding.

The Company has been cash negative since inception, and is not expected to become cash neutral or cash positive until revenues grow significantly in the VoIP operation (at the earliest, by the end of 2006). Until this time, the Company will depend on outside cash sources - mainly new equity sales. Cash on hand as of June 30, 2005 is insufficient to support the needs of the Company for more than a very short period of time. To support operational needs and to implement it’s business plan the Company will need to raise significant additional capital; without such additional capital the Company cannot grow or continue as it is currently constituted. As of June 30, 2005, the Company expects that it will need at least $1,650,000 to cover its anticipated operating expenses for the twelve

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month period thereafter.  Of this, approximately 59% is for projected salary and payroll related expenses, 13% for projected lease and facility related expenses, and 11% for projected professional services expenses.

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.  Although, we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.

On an on-going basis, we evaluate our estimates, including, but not limited to, those related to bad debts, product returns, warranties, inventory reserves, long-lived assets, income taxes, litigation, and other contingencies. We base our estimates on historical experience and various other assumptions we believe 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.

The Company recognizes revenues and the related costs for voice, data and other services along with product sales when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Service revenue from monthly and per minute fee agreements is recognized gross, consistent with Emerging Issues Task Force (EITF) No. 99-19 “Reporting Revenues Gross as a Principal Versus Net as an Agent”, as the Company is the primary obligor in its transaction, has all credit risk, maintains all risk and rewards, and established pricing. Combined product and service agreements are allocated consistent with EITF No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” with the multiple deliverables divided into separate units of accounting. Revenue is allocated among the separate units of accounting based on their relative fair value. Support and maintenance sales are recognized over the contract term. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts and other allowances based on its historical experience.

The Company’s property and equipment and purchased intangible assets represent a significant component of our consolidated assets. Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method. Useful lives range from three to five years for office furniture and equipment. Additions to property and equipment together with major renewals and betterments are capitalized. Maintenance, repairs and minor renewals and betterments are charged to expense as incurred.

Goodwill represents the excess of the cost of businesses acquired over the fair value of the identifiable net assets at the date of acquisition. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful lives are not amortized, but instead are evaluated for impairment annually and if events or changes in circumstances indicate that the carrying amount may be impaired per Statement of Financial Accounting Standards, No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets”. An impairment loss would generally be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The estimated fair value is determined using a discounted cash flow analysis. SFAS 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets”.

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable per SFAS 144, “Accounting for Impairment or Disposal of Long-Lived Assets”. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the

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estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis. Any impairment in value is recognized as an expense in the period when the impairment occurs.

Changes in the remaining useful lives of assets as a result of technological change or other changes in circumstances, including competitive factors in the VoIP market, can have a significant impact on asset balances, recoverability, or depreciation expense. There is inherent subjectivity involved in estimating discounted future cash flows, which can have a material impact on the amount of any impairment.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 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-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”. 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 FASB published SFAS No. 123 (Revised 2004), “Shared-Based Payment”.  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.

In March 2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 which provides guidance regarding the interaction of SFAS 123R and certain SEC rules and regulations. The new guidance includes the SEC’s view on the valuation of share-based payment arrangements for public companies and may simplify some of SFAS 123R‘s implementation challenges for registrants and enhance the information investors receive.

In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”), which clarifies that the term ‘conditional asset retirement obligation’ as used in SFAS No. 143, “Accounting for Asset Retirement Obligations”, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 requires an entity to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. FIN 47 is effective no later than

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the end of the fiscal year ending after December 15, 2005. The Company does not believe that FIN 47 will have a material impact on its financial position or results from operations.

ITEM 3. FACTORS THAT MAY AFFECT FUTURE RESULTS

The Company’s business organization, the Company’s reliance upon certain technology and third parties, competitive trends in the marketplace, and other factors all involve elements of substantial risk. In many instances, these risks arise from factors over which the Company will have little or no control. Some adverse events may be more likely than others and the consequence of some adverse events may be greater than others. No attempt has been made to rank risks in the order of their likelihood or potential impact. In addition to those general risks enumerated elsewhere, any purchaser of the Company's Common Stock should also consider the following factors.

1. Continued Operating Losses.

The Company has incurred $1,299,878 in losses during the six months ending June 30, 2005 and cumulative losses of $12,424,821 since the Company’s inception through June 30, 2005. The Company may well incur significant additional losses in the future as well and there can be no assurance that the Company will be successful or that it will be profitable in the future.

2. Current Financial Structure, Limited Equity, Limited Working Capital & Need for Additional Financing.

While the Company’s management believes that its financial policies have been prudent, the Company has relied, in large part, upon the use of common stock financing to provide a substantial portion of the Company’s financial needs. The Company anticipates that it will need to raise significant additional capital to implement its business plan. While the Company believes that it will be successful, the Company has had only limited discussions with potential investors and there can be no guarantee that the Company will receive additional capital from any investor or, if it does receive sufficient additional capital, that it can obtain additional capital on terms that are reasonable in light of the Company’s current circumstances. Further, the Company has not received any commitments or assurances from any underwriter, investment banker, venture capital fund, or other individual or institutional investor.

3. Auditor's Opinion; Going Concern.

The Company’s independent auditors, Armando C. Ibarra, CPA, P.C., have expressed doubt about the Company's ability to continue as a going concern; there exists only a limited history of operations.

4. Subordinate to Existing and Future Debt & Authorized But Unissued Preferred Stock.

All of the Common Stock is subordinate to the claims of the Company's existing and future creditors and the holders of the Company's existing preferred stock and any that may be issued in the future.

5. Dependence & Reliance Upon Others.

Some of our products and services may rely upon hardware, software, and communications systems provided by others. For this reason we may become dependent upon third parties which may materially and adversely affect our ability to offer distinct products and services, this may result in adverse pricing pressures on our products, with resulting adverse impact on our profits, if any.

6. Recent Acquisitions & Limited History of Operations.

During the six months ending June 30, 2005, we generated $1,805,291 in net sales revenues. We will need to further increase our revenues and successfully develop and implement our business strategy in an ever-changing and challenging marketplace if we are to succeed. In the event that we are not able to successfully develop and implement our business strategy, we may be subject to continuing significant risks and resulting financial volatility. Our limited history and the continuing technological and competitive challenges that we face are beyond our ability to control. For these and other reasons we may incur continuing and protracted losses with the result that an investor may lose all or substantially all of its investment.

7. Losses Due to Customer Fraud.

Customers have obtained access to the Company’s service without prepaying for the service (minutes) by submitting fraudulent credit card information. Losses from unauthorized credit card transactions and theft of service totaled $24,393 during the six months ending June 30, 2005. We have implemented new anti-fraud procedures in order to

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control losses relating to unauthorized credit card use, but these procedures may not be adequate to effectively limit our exposure in the future to customer fraud. If our procedures are not effective, consumer fraud and theft of service could be significant and have a material adverse effect on our business and operating results.

8. Price Competition on Certain Services.

The products and services that we intend to offer may, through changing technology and cost structures, become commodities which result in intense price competition. While we believe that we will be able to distinguish our products and services from competing products, services, and technologies offered by others, if we fail to distinguish ourselves from others, this could hinder market acceptance of our services, force reductions in contemplated sales prices for our products and services, and reduce our overall sales and gross margins. Potential customers may view price as the primary distinguishing characteristic between our products and services and those of our competitors. This could result in the Company incurring significant and protracted losses. Further, we are selling into a market that has a broad range of desired product characteristics and features which may make it difficult for us to develop products that will address a broad enough market to be commercially viable.

9. Absence of Barriers to Entry & Lack of Patent Protection.

Our planned products and services are not unique and others could easily copy our strategy and provide the same or similar services since there are no significant barriers to entering the business of providing Internet telephone services or VoIP networks and no significant barriers to entry are expected in the future. In addition, we do not hold and do not expect to hold any patent protection on any of our planned products or services. For these reasons we may face continuing financial losses.

10. Limited Customer Base.

While we seek to implement our plans, we have a limited customer base of approximately 17,000 active accounts using our suite of VoIP products (as of June 30, 2005) and there can be no assurance that we will grow and develop a sufficient customer base that generates sufficient sustainable revenues that provide stable profit margins. The absence of growth at pricing levels that can provide for sustainable revenues and profit margins may greatly inhibit our ability to attract additional capital and otherwise lead to volatile results from operations with consequent adverse and material impact on our financial condition.

11. Customers, Technology/Feature Options & Commercial Viability.

If we are able to implement our business plan, we will be selling our products and services into a marketplace that is experiencing a convergence of competing technologies. Typically, telecommunications providers desire extremely robust products with the expectation of a relatively long effective life. As a result and depending on the outcome of unknown trends in technology, market forces, and other variables, we may not attract a broad enough customer base to achieve commercial viability.

12. New Technologies May Be Developed.

New products or new technologies may be developed that supplant or provide lower-cost or better-performing alternatives to our planned products and services. This could negatively impact our financial results.

13. Absence of Brand Name Recognition: Limited Ability to Promote.

The market for telecommunications services is intensely competitive; brand name recognition is critical to success. Many companies offer products and services like ours and many have a well established presence in major metropolitan centers. We may not be able to compete successfully with these companies and others that may enter the market. Some of them also have substantially greater financial, distribution, and marketing resources than we do. If we do not succeed in this competitive marketplace, we will lose customers and our revenue will be substantially reduced and our business, financial condition, and results of operations may be materially and adversely affected.

14. Government Regulation.

Our planned operations will likely be subject to extensive telecommunications-based regulation by United States and foreign laws and international treaties. In the United States we are subject to various Federal Communications Commission ("FCC") rules and regulations. Current FCC regulations suggest that VoIP products and services will not be unduly burdened by new and expanded regulations. However, there can be no assurance that the occurrence

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of regulatory changes will not significantly affect our operations by restricting them or increasing the opportunity of our competitors. In the event that government regulations change, there can be no assurance that the costs and burdens imposed on us will not materially and adversely impact our planned business.

15. Loss of Equipment.

Equipment located in a foreign country with a developing or emerging economy may be materially adversely affected by possible political or economic instability. The risks include, but are not limited, to rapid political and legal change, terrorism, military repression, or expropriation of assets. In the event that equipment is damaged or lost our ability to service to our customers will be substantially reduced and our business, financial condition, and results of operations may be materially and adversely affected.

16. Control.

Our officers and directors directly and indirectly hold an aggregate of 38,024,833 shares of the Company’s common stock (before including any shares issuable upon exercise of any options). This represents approximately 28.5% of the Company’s total outstanding shares as of June 30, 2005 and thereby allows the Company’s officers and directors to retain significant influence over the Company.

17. Prior Filing of Form 10-SB.

In June of 2001 we prepared and filed a registration statement on Form 10-SB with the U.S. Securities and Exchange Commission (the "SEC"). Subsequently, our then legal counsel delivered a letter (dated November 15, 2001) to the SEC, which, by its terms, stated that the SEC had agreed to allow us to withdraw the registration statement. At the time the Company’s management believed, in reliance upon assurances from the Company’s then legal counsel, that the Company had been allowed to withdraw the registration statement, notwithstanding that the Securities Exchange Act of 1934 (the "Exchange Act") provides that any withdrawal of a Form 10-SB registration statement (at any time after 60 days from the date at which it is originally filed) requires that the registrant: (a) file Form 15 with the SEC; (b) meet certain requirements that allow the registrant to file Form 15 to terminate the registration of the securities that were previously registered on Form 10-SB; and (c) file such other periodic reports as required to ensure compliance with Section 13(a) of the Exchange Act up to the date at which the Form 15 is filed. Subsequently, in September 2004, the Company received a letter from the SEC (the "SEC Letter") informing the Company that the Company had not satisfied its obligations to file periodic reports required under Section 13(a) of the Exchange Act. While we believed that we had reasonably relied upon the assurances from our legal counsel (that we had effectively withdrawn the Form 10-SB registration statement), we are determined to complete all past and current periodic filings and to comply with the SEC Letter as expeditiously as possible. However, we have not received any assurances from the SEC that we will not be subject to any adverse enforcement action by the SEC. While we did not seek to avoid our obligations under the Exchange Act in any way, our prior actions in mistakenly believing that we had no obligation to file periodic reports required by the Exchange Act exposes us to risk of liability for significant civil fines and the SEC could, among other enforcement actions, suspend trading in our Common Stock. Further, we offered and sold securities in reliance upon exemptions that were predicated on our mistaken belief that the registration statement had been withdrawn. For these and other reasons we may be exposed to liability. We intend to continue a dialogue with the staff of the SEC and, as information is collected and documents are prepared, to complete all filings needed to demonstrate that we are fulfilling our obligations under the Exchange Act with due care and in full observance of our obligations as a "reporting company" thereunder.

18. Dependence Upon Key Personnel and New Employees.

We believe that our success will depend, to a significant extent, on the efforts and abilities of James R. Balestraci, John L. Castiglione, Farid Shouekani, Jason A. Sunstein, and Ronald G. Weaver, Sr. the loss of the services of any of them could have a material and continuing adverse effect on the Company. Our success also depends upon our ability to attract and retain qualified employees. Hiring to meet our anticipated operations will require that we assimilate significant numbers of new employees during a relatively short period of time.

19. Absence of Key Man Insurance.

We currently do not maintain any key man life insurance on the life of any of our officers or directors and there are no present plans to obtain any such insurance. In the event that any one or more of them are unable to perform their duties, the Company's business may be adversely impacted and our results of operations and financial condition would be materially and adversely impacted for a protracted period.

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20. Lack of Independent Evaluation of Business Plan & Proposed Strategy.

We have not obtained any independent or professional evaluation of our business plan and our business strategy and we have no present plans to obtain any such evaluation. There can be no assurance that we will successfully increase revenues, or if we do, that we can do so at levels that will allow us to achieve or maintain profitability. If we are unsuccessful, our results of operations and financial condition would be materially and adversely impacted and investors would likely lose all or a significant portion of their investment.

21. No Planned Dividends.

We do not anticipate that we will pay any dividends on our Common Stock. Any profits that we may generate, if any, will be reinvested.

22. Potential Dilution.

 Funding of our planned business is likely to result in substantial and on-going dilution of our existing stockholders. While there can be no assurance that we will be successful in raising additional capital, if we are successful in obtaining any additional capital existing stockholders may incur substantial dilution.

23. Matter of Public Market and Rule 144 Stock Sales.

As of December 31, 2004, there were 86,351,874 shares of the Company’s Common Stock that were “restricted securities” and which may be sold pursuant to Rule 144. Since September 16, 2002, we have had a limited public trading market for our Common Stock in the “Pink Sheets” market. Since that date trading volumes have been volatile with sporadic liquidity levels. Further, our Common Stock is (as of the date of the filing of this Report) a “Penny Stock” and for this reason we face continuing difficulties in our efforts to gain a liquid trading market and there can be no assurance that any liquid trading market will ever develop or, if it does develop, that it can be maintained. In the event that we are able to complete the filing of all periodic reports (the “Periodic Reports”) required by Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), we may be able to avoid any significant adverse enforcement action by the SEC arising out of our lack of compliance with the Exchange Act. Rule 144 provides that a person holding restricted securities for a period of one year may thereafter sell in brokerage transactions an amount not exceeding in any three month period 1% of our outstanding Common Stock. Further, unless the Company can complete all of the required Periodic Reports and remain current in the filing of all future Periodic Reports, persons holding restricted stock will not be able to avail themselves of the safe harbor provisions of Rule 144. Persons who are not affiliated with the Company and who have held their restricted securities for at least two years are not subject to the volume limitation. In any trading market for our Common Stock, possible or actual sales of our Common Stock by present shareholders under Rule 144 may have a depressive effect on the price of our Common Stock even if a liquid trading market develops.

24. General Risks of Low Priced Stocks.

In any trading market for our Common Stock, we anticipate that our Common Stock will be deemed a "Penny Stock" which will limit trading and liquidity and thereby the retail market for the Common Stock. The limitations are primarily due to the burdens that are imposed on brokers whose customers may wish to acquire our Common Stock.

In that event, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the price of our Common Stock. In the absence of a security being quoted on NASDAQ, or the Company having $2,000,000 in net tangible assets, trading in the Common Stock is covered by Rule 3a51-1 promulgated under the Securities Exchange Act of 1934 for non-NASDAQ and non-exchange listed securities. Under such rules, broker/dealers who recommend such securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual income exceeding $200,000 or $300,000 jointly with their spouse) must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to a transaction prior to sale.

Securities are also exempt from this rule if the market price is at least $5.00 per share, or for warrants, if the warrants have an exercise price of at least $5.00 per share. The Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure related to the market for penny stocks and for trades in any stock defined as a penny stock.

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The Commission has adopted regulations under such Act which define a penny stock to be any NASDAQ or non-NASDAQ equity security that has a market price or exercise price of less than $5.00 per share and allow for the enforcement against violators of the proposed rules.

In addition, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule prepared by the Commission explaining important concepts involving a penny stock market, the nature of such market, terms used in such market, the broker/dealer's duties to the customer, a toll-free telephone number for inquiries about the broker/dealer's disciplinary history, and the customer's rights and remedies in case of fraud or abuse in the sale.

Disclosure also must be made about commissions payable to both the broker/dealer and the registered representative, current quotations for the securities, and, if the broker/dealer is the sole market maker, the broker/dealer must disclose this fact and its control over the market. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

While many NASDAQ stocks are covered by the proposed definition of penny stock, transactions in NASDAQ stock are exempt from all but the sole market-maker provision for (i) issuers who have $2,000,000 in tangible assets has been in operation for at least three years ($5,000,000 if the issuer has not been in continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor, and (iii) transactions that are not recommended by the broker/dealer.

In addition, transactions in a NASDAQ security directly with the NASDAQ market maker for such securities, are subject only to the sole market-maker disclosure, and the disclosure with regard to commissions to be paid to the broker/dealer and the registered representatives. The Company's securities are subject to the above rules on penny stocks and the market liquidity for the Company's securities could be severely affected by limiting the ability of broker/dealers to sell the Company's securities.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing and reporting information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, but that such disclosure controls and procedures are not effective to insure reporting is on a timely basis. In addition, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate but that such disclosure controls and procedures are not effective to insure information is communicated to allow for timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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DISCLOSURE CONTROLS AND INTERNAL COMTROLS

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorization of management and directors of the Company; and provide reasonable assurance regarding prevention or detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements. Management believes the internal control policies and procedures have been and are likely to continue to be effective in meeting these needs.

In addition, the Company’s internal control over financial reporting also includes policies and procedures that pertain to the timeliness of information and reporting, both to management and to the public. These policies and procedures are important to support Management’s decision making processes, to quickly identify inappropriate activities and minimize loss, and to empower investors with timely information in support of their investment decisions. Management has determined that these internal control policies and procedures have not been effective to ensure that financial statements for internal and external reporting purposes are prepared on a timely basis. In addition, management does not believe the necessary changes to these control policies and procedures to rectify this deficiency have been implemented. As such, management believes financial statements may continue to suffer from lack of timely preparation and dissemination, and that this condition will continue until adequate changes have been designed and implemented.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired control objectives.

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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 the Superior Court of California, County of San Diego 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 its financial condition, and failed to disclose investigations and litigation pending or threatened which would impair its value.  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 it holds outside of arbitration (including filing legal challenges in California and Nevada, and attempting to have the transfer agent remove restrictions from the certificates in their possession without a ruling, all of which, to date, the Company has thwarted).  The matter is currently in binding arbitration and, as such, the final disposition remains in doubt. However, preliminary rulings by the arbitrator are, in the opinion of management, highly favorable to the Company.

HILLS OF BAJAMAR

During September 1998, we 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 “Land”).  The Land is valued at a predecessor cost of $125,000. We intended, at the time, to sell lots for residential development and build a communications facility for residents in the surrounding area.   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 documented title to the Land.

The Company's current management team and Board of Directors has determined that the goals for use of the Land and construction of telecommunications facilities for the Hills of Bajamar are not within the Company's current budget or operational capabilities. The Company and Tri-National did not upgrade the existing telecommunication facilities nor did the Company commence its principal business operations with respect to the Hills of Bajamar. To date Tri-National has not cleared the restrictions from the title to the Land nor transferred title to the Company.

Since consideration for the agreement (documented title) has never been received, the Company is attempting to rescind the original transaction, cancel the 400,000 common shares and return the shares to treasury. The original seller is in Chapter 11 bankruptcy; the Trustee claims the Viper stock to be an asset of the bankruptcy and asserts the Vipers claim (rescission of the agreement for nonperformance) is that of a general creditor. The Company feels confident in its claim and will continue to defending it’s position.

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, is not likely to have a material adverse effect on our financial position, results of operations, or cash flows.

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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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The 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. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The 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. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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.  On August 8, 2005, by mutual agreement, the five subscription agreements and all associated agreements (as described below) were rescinded; the escrow was closed with the 33,333,335 shares of the Company’s Common Stock and the $5,000,000 in US Treasury Bonds returned to the Company and the five subscribers, respectively. 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 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchasers were each 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. The purchasers were provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist them in understanding the merits and risks of the investment. The purchasers were further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchasers were informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The

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purchaser was an accredited investor as defined in Rule 501 of Regulation D of the Securities Act of 1933. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchaser was an accredited investor as defined in Rule 501 of Regulation D of the Securities Act of 1933. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 (Rhino Capital was retained to coordinate a fund raising effort soliciting equity or debt financing). All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchaser was an accredited investor as defined in Rule 501 of Regulation D of the Securities Act of 1933. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 each. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchasers were each 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. The purchasers were provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist them in understanding the merits and risks of the investment. The purchasers were further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchasers were informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchaser was an accredited investor as defined in Rule 501 of Regulation D of the Securities Act of 1933. The purchaser was provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist in understanding the merits and risks of the investment. The purchaser was further provided the opportunity to ask questions of the Company’s officers and

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directors and receive answers to their questions. The purchaser was informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchasers were each accredited investors as defined in Rule 501 of Regulation D of the Securities Act of 1933. The purchasers were provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist them in understanding the merits and risks of the investment. The purchasers were further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchasers were informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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 under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 without the use of an underwriter or NASD registered broker-dealer; no commissions were incurred by the Company in connection with the transaction. The purchasers were each 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. The purchasers were provided with, or given access to, information about the Company and the offering, including, but not limited to, the Company’s financial statements, business plan, articles of incorporation, by-laws, a description of how the proceeds were to be used, and additional information to assist them in understanding the merits and risks of the investment. The purchasers were further provided the opportunity to ask questions of the Company’s officers and directors and receive answers to their questions. The purchasers were informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

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, the Board of Directors pursuant to the power conferred it by the Corporation’s Bylaws 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.

The Corporation also announced that Farid Shouekani is 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 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 with the following members: Farid Shouekani, Ronald Weaver and Paul Atkiss.

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NEXTPHASE WIRELESS, INC.

NextPhase Wireless, Inc. is trading on the OTC BB under the symbol NXPW.  Incorporated in September, 2000 as a 100% owned subsidiary of the Company, NextPhase remained operationally dormant until May, 2004. At that time the Company elected to concentrate its efforts into its core VoIP business activities. The non-VoIP technologies - that were never developed, were deemed to be of no value, and into which the Company had no intention of investing time or funds - were then assigned to the NextPhase subsidiary in anticipation of spinning it off as a separate entity. In this way, the Company hoped through the spinoff some value might be obtained from what otherwise would have remained worthless. The asset assignment and spinoff was accomplished by Resolution of the Board of Directors of the Company; no formal purchase and sale agreement existed.

One officer of the Company, believing he could create and implement a viable business model within NextPhase, then terminated his employment with Viper and became an officer of NextPhase. Concurrent with the spinoff, NextPhase issued additional common shares to this officer and to several other NextPhase employees that had the effect of diluting Vipers’ share of ownership to 40% (4,000,000 shares).

From that point forward NextPhase pursued its own business opportunities independent to those of the Company, except that in 2004 all holders of NextPhase common stock, including the Company, pledged their shares as collateral for a loan NextPhase sought, the proceeds of which were used by NextPhase to purchase a publicly trading entity (Edison Renewables, Inc). That loan has been repaid in full and the pledged shares have been released from the Pledge Agreement.

NextPhase was and continues to be a separate legal entity not related to the Company other than through the Company’s equity ownership. None of the management of the Company have any operational position within NextPhase nor as members of it’s Board of Directors.

The Company still owns these 4,000,000 “restricted” common shares of NextPhase, which has had a recent trading range of $0.24 to $1.39.  The 4,000,000 common shares of NextPhase are pledged (“Pledged Stock”) as collateral on behalf of NextPhase for a $350,000 promissory note (“Note”).

The term “restricted” refers to common stock represented by certificate(s) that have not been registered under the Securities Act of 1933, as amended (the “Act”), or under certain state securities laws.  No public sale or transfer of these shares may be made in the absence of (a) an effective registration statement under the Act or (b) an opinion of counsel acceptable to the issuing company that registration under the Act or under applicable state securities laws is not required (an exemption) in connection with such proposed sale or transfer.  An exemption is typically limited to i) stock owned for a minimum of twelve months and ii) a maximum number of shares to be offered for sale, during any rolling three month period, limited to 1% of the issuing company’s total number of shares issued and outstanding.

REDUCTION OF COMMON STOCK

In August 2005, the Company’s officers, as part of management’s Mutual Release and Restructuring Agreement, returned all bonuses previously paid in the form of Common Stock in exchange for warrants for an equal amount of common stock purchase warrants at a price of $0.25 (expiration August 26, 2009) and a Promissory Note (unsecured; variable interest equal to 30-day U.S. Treasury notes; payable in full on December 1, 2006) for all unpaid loans, salaries and expenses. The Notes are convertible at the option of the holder into shares of the Company’s common stock at a price equal to 50% of the 52-week low trading range. Any so-issued shares are non-dilutive. A total of 16,500,000 shares of the Company’s Common Stock, originally valued at $0.0364 per share (adjusted for the September 2004 10% stock dividend), were returned to treasury. The following bonuses have been cancelled and returned to treasury, warrants issued, and promissory notes issued.

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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.

On August 8, 2005, by mutual agreement, the five subscription agreements and all associated agreements (as described below) were rescinded; the escrow was closed with the 33,333,335 shares of the Company’s Common Stock and the $5,000,000 in US Treasury Bonds returned to the Company and the five subscribers, respectively. .

CANCELLATION OF STOCK IN THE VIPER NETWORKS, INC. EMPLOYEE COMPENSATION FUND

In July 2005, the Company cancelled and returned to Treasury the 10,450,000 common shares previously issued and reserved for the Viper Networks, Inc. Employee Compensation Fund. Thereafter, the Fund was terminated.

ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K

(a). The following Exhibits are attached:

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.

(b). 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 17, 2005, March 14, 2005, March 16, 2005, August 22, 2005, and September 2, 2005

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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 19, 2006	By:	/s/    FARID SHOUEKANI
		FARID SHOUEKANI, CHIEF EXECUTIVE OFFICER
Date: September 19, 2006	By:	/s/    PAUL E. ATKISS
		PAUL E. ATKISS, CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

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