UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 4, 2005
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VIPER NETWORKS, INC.
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(Exact Name of Registrant as Specified in Charter)
Utah
(State of Incorporation)
0032939
(Commission File No.)
87-0410279
(IRS Employer Identification No.)
10373 Roselle Street, Suite 170, San Diego, CA 92121
(Address of Principal Executive Office)
Registrant's telephone number including area code: (858) 452-8737
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communication pursuant to Rule 425 under the Securities Act (17 CFR
230.425).
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12).
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b)).
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
exchange Act (17 CFR 240.13e-4(c)).
Item 1.01. Entry into a Material Definitive Agreement.
On February 4, 2005, Viper Networks, Inc., the Registrant, entered into common
stock subscription agreements with five accredited investors: Potente Capital,
Inc., Ellenallhatatlan, Inc., Nieodparty Inc., Krachtig Inc., and Bindes
Holdings, Inc., each of which is a Delaware corporation. Pursuant to these
subscription agreements, each accredited investor acquired 6,666,667 shares of
Registrant's common stock in an unregistered private placement. In exchange,
Registrant received payment in a United States Treasury Bond and a stripped
interest security ("Bonds") with an aggregate value of $5,000,000.
The private placement was the first step in a series of related and concurrent
transactions between Registrant, the investors, Cogent Capital Corp., the party
that facilitated the private placement and Investors Bank & Trust Company, which
is serving as escrow agent in the transactions pursuant to an Escrow Agreement
which the parties entered into in connection with the arrangements specified
herein. The Escrow Agreement provides that Investors Bank & Trust is to act as
the escrow agent in the private placement transaction, and further provides that
the Bonds, the private placement stock and the cash premium of $50,000 were to
be deposited with the escrow agent at the closing. Additionally, the agreement
specified that the Bonds will be held in an account at Investors Bank & Trust
after the closing. The transaction with the investors was undertaken in
contemplation that the Company can enhance the its balance sheet through an
increase in the Company's assets and equity.
Concurrently with the execution and acceptance of the subscription agreements by
Registrant, the Registrant purchased from Cogent a call option for $1, which
entitles Registrant to repurchase 80% of the shares of common stock it sold in
the private placement at the then current market price. The option expires in
two years and may only be exercised on the expiration date.
Also concurrent with the private placement, Registrant entered into an equity
swap arrangement with Cogent that entitles Registrant to receive or obligates
Registrant to pay the price return on 75% of the shares issued in the private
placement based upon a base price of $0.20 per share in two years, or sooner if
the shares are registered for sale under the Securities Act of 1933. Registrant
paid a premium of $50,000 and 3,333,333 share of it's common stock to enter into
this contract and secured the transaction by placing the $5 million of Bonds in
a collateral account. These securities are restricted from being used during the
contract period but may be borrowed against, as specified below. In order to
facilitate and memorialize these transactions, Registrant and Cogent also
entered into the standard form International Swaps and Derivative Association,
Inc. ("ISDA") ISDA 2002 Master Agreement & Schedule and ISDA 1994 Credit Support
Annex.
The equity swap agreement also provides that Registrant and Cogent Capital will
exchange certain defined cash flows. Under terms of the agreement, Registrant
will periodically pay Cogent interest on the value of Registrant's Bond account
(the interest rate will be LIBOR + 1.25%) and an amount equal to the decrease in
Registrant's stock price over the price at closing times 80% of the number of
shares included in the private placement specified above. Similarly, Cogent
agreed to pay Registrant, periodically, an amount equal to the increase in
Registrant's stock price over the price at closing times 80% of the number of
shares included in the private placement specified above. Both parties agreed
that any required payment resulting from the increase or decrease of
Registrant's stock price as of a measurement date will be made in the form of
Bonds similar to those already in Registrant's account with Investors Bank &
Trust.
The Escrow arrangement provides for indemnification of the escrow agent
consistent with typical agreements of this type and otherwise for payment of
annual escrow fees of $3,000.
Registrant's Bond account will be subject to a security agreement executed in
favor of Cogent. However, Cogent agrees and understands that Registrant will
hold title to the bonds at all times. Registrant may, and in fact intends to,
secure borrowing against the bond account, provided such borrowing is
subordinate to Cogent's security interest. This agreement will commence at the
date of closing and will continue for a period of 24 months, at which point
Cogent's security interest in Registrant's bond account will expire.
Item 3.02. Unregistered Sale of Equity Securities.
On February 4, 2005, Registrant completed a private placement of 33,333,335
shares of its common stock to five accredited investors: Potente Capital, Inc.,
Ellenallhatatlan, Inc., Nieodparty Inc., Krachtig Inc., and Bindes Holdings,
Inc., each of which is a Delaware corporation.
Each accredited investor acquired 6,666,667 shares of Registrant' common stock.
In exchange, Registrant received an aggregate payment in a United States
Treasury Bond and stripped interest security ("Bonds") valued at $5,000,000.
This private placement is the first in a series of related concurrent
transactions that are intended to facilitate Registrant' attempt to obtain a
listing for its common stock on the American Stock Exchange.
The Bonds will serve as collateral in an equity swap transaction with Cogent
Capital Corp. These Bonds will remain in this collateral account for two years
and can be used with a call option that Registrant may exercise. At the end of
this two year period, assuming Registrant' stock price has not declined below
the value as of the date the transaction closed, the Bonds would be released
from the collateral account and made available to Registrant for working capital
purposes. In the interim, while the Bonds reside in the collateral account,
Registrant may borrow against the value of the bonds from a party that is
willing to take a subordinate position to Cogent Capital Corp.
Reference is made to Item 1.01 of this current report for a description of the
agreements executed by Registrant in connection with the foregoing transactions.
The common stock was offered and sold in a private placement, pursuant to the
provisions of Section 4(2) of the Securities Act of 1933 and Rule 506 of
Regulation D. The common stock was offered and sold to purchasers whom the
company or its authorized agents believe are "accredited investors," as that
term is defined in Rule 501 of Regulation D in reliance upon an exemption from
the registration requirements of the Securities Act in a transaction not
involving any public offering. Each of the investors represented to Registrant
that:
o such investor is an "accredited investor";
o the shares of common stock were purchased by such investor for its own
account, for investment and without any view to the distribution,
assignment or resale to others other than pursuant to a registered
offering;
o such investor understood that the shares of common stock issued to the
investor have not been registered under the Securities Act of 1933 or any
state securities laws; and
o such investor acknowledged that it may not transfer the shares unless the
shares are registered under Federal and applicable state securities laws or
unless, in the opinion of counsel satisfactory to Registrant, an exemption
from such laws is available.
Registrant will arrange for the certificates representing such securities to be
legended and subject to stop transfer restrictions. Registrant did not engage in
any form of general solicitation or general advertising in connection with these
issuances.
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.
Date: February 15, 2005
Viper Networks, Inc.
/s/ Jason Sunstein
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Jason Sunstein
Vice President, Finance