Edgar Filing: VIPER NETWORKS INC

Unassociated Document

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB/A

Amendment No. 1

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2005

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 0032939

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Exchange on Which Registered
Common Stock, $.001 par value

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. ¨

State issuer's revenues for its most recent fiscal year: $3,482,549.

The aggregate market value of the voting stock held by non-affiliates (144,855,249 shares of Common Stock) was $13,761,248 as of December 31, 2005. The stock price for computation purposes was $0.095. 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 December 31, 2005 was 151,048,582.

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date. Number of Common Shares outstanding as of December 31, 2005 was 151,048,582.

Documents Incorporated by Reference:

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 31, 2004).

Explanatory Note

Viper Networks, Inc. (the “Company”) is filing this amendment to its Annual Report on Form 10-KSB for the year ended December 31, 2005 (the “Amendment”) to expand disclosures in response to comments issued by and discussions with the Securities and Exchange Commission (the “SEC”) and to provide exhibits 10.21, 10.22, 10.23, and 21.1. The revised document (items 1 – Description of Business (Business of the Company); 3 – Legal Proceedings, 5 – Market for Common Equity and Related Stockholder Matters; 6 – Managements’ Discussion and Analysis of Financial Condition and Results of Operations; and 8A – Controls and Procedures) and revised Notes to the Consolidated Financial Statements address comments issued by and discussions with the SEC as relates to the Company’s Forms 10-KSB for the year ended December 31, 2005, and 10-QSB for the quarters ended March 31, 2006 and June 30, 2006.

Any reference to facts and circumstances at a “current” date refer to such facts and circumstances as of such original filing date of the Annual Report on Form 10-KSB.

INDEX TO ANNUAL REPORT ON FORM 10-KSB

		Page No.
PART I

Item 1.	DESCRIPTION OF BUSINESS	3
Item 1A.	FACTORS THAT MAY AFFECT FUTURE RESULTS	17
Item 2.	DESCRIPTION OF PROPERTY	23
Item 3.	LEGAL PROCEEDINGS	24
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24

PART II

Item 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	25
Item 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
Item 7.	FINANCIAL STATEMENTS	41
Item 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	41
Item 8A.	CONTROLS AND PROCEDURES	42
Item 8B.	OTHER INFORMATION	42

PART III

Item 9.	DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSON	43
Item 10.	EXECUTIVE COMPENSATION	44
Item 11.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	47
Item 12.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	47
Item 13.	EXHIBITS AND REPORTS ON FORM 8-K	48
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	49

SIGNATURES		51

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTING FIRM		F-2

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Available Information

Information about our Company is available to the public on our website (www.vipernetworks.com). We file reports with the Securities and Exchange Commission, or SEC, which are available on our website. These reports include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to such reports, each of which is provided on our website after we electronically file such materials with or furnish them to the SEC. You can also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.

PART I

THIS FORM 10-KSB CONTAINS "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS ARE STATEMENTS CONCERNING PLANS, OBJECTIVES, GOALS, STRATEGIES, EXPECTATIONS, INTENTIONS, PROJECTIONS, DEVELOPMENTS, FUTURE EVENTS, PERFORMANCE OR PRODUCTS, UNDERLYING (EXPRESSED OR IMPLIED) ASUMPTIONS AND OTHER STATEMENTS THAT 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," "MAY," "WILL," "SHOULD," OR "ANTICIPATES," OR THE NEGATIVE OF THESE WORDS OR OTHER VARIATIONS OF THESE WORDS OR COMPARABLE WORDS, OR BY DISCUSSIONS OF PLANS OR STRATEGY THAT INVOLVE RISKS AND 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-KSB, INCLUDING, BUT NOT LIMITED TO "THE FACTORS THAT MAY AFFECT FUTURE RESULTS" SHOWN AS ITEM 1A 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 IMPACT THE PRICING OF THESE PRODUCTS AND 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-KSB OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED OR OTHER SUBSEQUENT EVENTS.

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

The Company was incorporated under the laws of Utah on February 28, 1983 under the name Tinglefoot Mining, Inc. for the purpose of developing certain mining operations. The Company was unsuccessful in its attempts to acquire the Tinglefoot Mine, was unable to establish an alternative business operation and remained dormant until 1994, when a new management team took office and changed the purpose of the Company’s business to pursue investment opportunities in Mexico in 1995.

On December 20, 1995, the Company changed its name to Mexico Investment Corporation and effected a reverse split of its common stock on a 1 for 40 basis. On February 26, 1996, the Company changed its name to Baja Pacific International, Inc.

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On April 30, 1998, the Company’s shareholders approved the following: (1) the execution of an exclusive agreement with Tri-National Development Corp., a Wyoming corporation headquartered in San Diego, California ("Tri-National") to service all of their telecommunication needs at Tri-National’s Hills of Bajamar resort; (2) the acquisition of a 5% stake in Future Tel Communications, a Vancouver, British Columbia telecommunications company in exchange for 200,000 common shares; and (3) a change in the Company’s name to Taig Ventures, Inc. and the Company’s Articles of Incorporation were amended on October 7, 1998. These actions were taken in furtherance of the Company’s intentions to work with Tri-National to provide a massive upgrade of its existing telecommunication facilities and the Company believed that a new management team would be better suited to execute this new business model as well as pursue other telecommunications projects.

In November 2000, the Company entered into a Securities Purchase Agreement and Plan of Reorganization (the "California Reorganization") with Viper Networks, Inc., a California corporation ("Viper-CA"). Viper-CA was formed on September 14, 2000. Under the terms of the California Reorganization, the Company exchanged 36,000,000 shares of its Common Stock for all of the then-outstanding common shares of Viper-CA with the result that Viper-CA became a wholly-owned subsidiary of the Company. Viper-CA’s business was that of an application service provider. The Company then changed its name to Viper Networks, Inc. and the Company effected a complete change of the Company and its Board of Directors and officers to position the Company to execute a new business strategy as described below.

With these changes, the Company re-focused its attention on providing internet telephony services, the development of an infrastructure for providing services to its Web-based customers (the "Graphic User Interface") and, eventually, the construction of Voice over Internet Protocol ("VoIP") network for business, institutions, and Internet Service Providers ("ISPs"). The Company’s management team and Board of Directors determined that the goals for use of the Mexico property purchased from Tri-National and construction of telecommunications facilities to service the Hills of Bajamar resort were not within the Company’s capabilities. Since consideration for the agreement (documented title to the Mexico property) has never been received the Company does not believe it is the owner of the Land and accordingly considers the agreement to be null and void.

In July 2003, the Company acquired Coliance Communications (“Coliance”) in exchange for the Company’s issuance of an aggregate of 17,000,000 shares of the Company’s Common Stock and 450,000 shares of the Company’s Preferred Stock (aggregate purchase price $750,005). All of the Preferred Stock was later converted into notes payable. Coliance was a reseller of USB-enabled VoIP hardware; through this acquisition the Company hoped to acquire knowledge of available VoIP products and suppliers (the vPhone and Internet Phone Adapter were gained through the acquisition), and also management talent relating to the procurement and sale of such products. As a result of this acquisition, Stephen D. Young and Ronald G. Weaver from Coliance became Directors of the Company as Chairman and President and as Chief Executive Officer, respectively.

On October 15, 2003, the Company entered into a Securities Merger Agreement (the “Mid-Atlantic Agreement”) with Farid Shouekani in connection with the purchase of all the common stock (the “Mid-Atlantic Shares”) of Mid-Atlantic International, Inc., a Michigan corporation (“Mid-Atlantic”) from Farid Shouekani. Under the terms of the Mid-Atlantic Agreement, the Company acquired all of Mr. Shouekani’s Mid-Atlantic Shares in exchange for: (1) $50,000 cash within 21 days of Closing; and (2) an aggregate of 7,235,000 shares of the Company’s Common Stock with 4,235,000 of these shares (the “Special Shares”) subject to certain redemption rights (the “Redemption Rights”), at the option of Mr. Shouekani at a redemption price of $0.17 per Special Share as provided by the Mid-Atlantic Agreement (aggregate purchase price $779,700). All of the Redemption Rights expire on January 15, 2003 and are secured by Mid-Atlantic’s assets. As of December 31, 2004, Mr. Shouekani exercised his Redemption Rights over 1,802,000 Special Shares. The remaining 2,433,000 Special Shares were canceled and returned to treasury. Mid-Atlantic owned and operated a global VoIP network, with strong routing capabilities in the Middle East and Africa. In addition, Mid-Atlantic owned the billing servers and associated hardware, plus switching hardware and software, required of a consumer VoIP system provider. Through this acquisition, the Company hoped to quickly establish the network infrastructure needed for it’s consumer VoIP network, acquire the technical talent needed to manage and improve this capability, and obtain and existing revenue stream. As a result of this acquisition, Mr. Shouekani became Chief Technical Officer and a Director of the Company.

On January 30, 2004, the Company entered into a Securities Merger Agreement (the “Adoria Agreement”) with James R. Balestraci, the sole holder of the membership interests of Adoria Communications, LLC, a Delaware limited liability company (“Adoria”). Under the terms of the Adoria Agreement, the Company acquired all of Mr. Balestraci’s membership interests in Adoria in exchange for: (1) cash payments totaling $500,000 and (2) the Company’s issuance of 2,500,000 shares of the Company’s Common Stock with 500,000 of these shares (the “Performance Shares”) of the Company’s Common Stock subject to the condition that Adoria’s financial results in 2004 must equal or exceed its financial results in 2003 (aggregate purchase price $3,574,500). In the event that Adoria’s financial results in 2004 did not equal or exceed its 2003 results, the Performance Shares were to be

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cancelled and returned as treasury stock. As it happened, Adoria’s 2004 financial results exceeded its 2003 results and the Performance Shares were earned. Adoria was a reseller of internet traffic routes and capacity, especially in Europe and Asia. Through this acquisition the Company hoped to acquire the capability for dynamic network routing through the utilization of internet routes routinely exercised by Adoria, and management expertise regarding least cost routing alternatives of international internet-based telephony traffic. As a result of this acquisition, Mr. Balestraci joined the Company as Chief of International Wholesale Operations and a Director.

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. As consideration for the purchase, the Company issued 2,000,000 shares of the Company’s common Stock to SII and $350,000 payable in cash to Brasil LLC (aggregate purchase price for 50% ownership interest $1,320,000). Brasil LLC owns and operates a VoIP network with licenses and operations in Brazil and El Salvador. Through this acquisition the Company hoped to gain a foothold for its VoIP business in Brazil and El Salvador (each considered a fertile market). Management also hopes to expand the Company’s global VoIP network and hardware sales into Latin America through this investment.

In May 2005 and pursuant to an action taken by the Company's stockholders in December 2003, the Company changed its state of domicile from Utah to Nevada. As a result, the Company became a Nevada corporation and subject to the Nevada General Corporation Law.

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 by, 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). At December 31, 2005 the Company had no equity investment in Brasil LLC.

In November 2005 the Company began plans for a new business unit intended to focus on direct sales (telemarketing) of ‘flat-rate’ monthly plans to consumers. To lead this business unit, the Company entered into an employment agreement with Mr. Nabil Youkhana, and individual with considerable experience in telemarketing to population grouped similar to those targeted by the Company. We anticipate these efforts to begin producing results during 2006.

(As used herein and unless otherwise stated, the term "Company," "we," and "our," refers to the Company, and the subsidiaries Mid-Atlantic, Adoria, and Viper-CA.)

Business of the Company

We are 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. The Company is located on the internet at www.vipernetworks.com.

We branded and shipped our first VoIP product, the vPhone, in July of 2003, and acquired our first global VoIP network with gateways and a billing server in Detroit, Michigan in October of 2003, through our acquisition of Mid-Atlantic International, Inc. We believe that while VoIP will eventually surplant the existing (“POTS”) telephone system, the more immediate market need exists where telephone costs are high and call quality is low (i.e., developing countries). Our strategy has been to establish a network targeting these markets and to concentrate on customer segments characterized by a disproportionate call volume to such markets (e.g., foreign nationals). However, since customers expect the ability to call anywhere our network also serves all USA destinations and those of most other industrialized countries.

Our gateways are located as follows: four in Brazil, one in El Salvador, one in Egypt, one in Ghana, one in India, one in Israel, one in Lebanon, one in Saudi Arabia, one in Sri Lanka, one in the United Kingdom, six in Western Europe, two in Eastern Europe. No individual gateway is deemed to represent a material investment of the Company’s resources. Developing countries are generally less economically and politically stable than are industrialized countries; business interactions with some countries may be unilaterally restricted by the U.S. government in furtherance of the war on terror or the interests to curb human rights violations. The Company has

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developed alternate route strategies should existing network facilities become compromised (and will abandon routes that are in conflict with U.S. national interests.

In fiscal 2005 substantially all of the Company's revenues were generated from the sale and provisioning of VoIP products, services and technology with approximately 94% of our sales revenues derived from the sale of services and 6% from the sale of products as described in the section entitled, “Products and Services” below. We do not own or hold any proprietary or intellectual property rights to the technology used in its vPhone products. The Company holds no applicable patents, trademarks, or licenses, and derives none of its income from franchises, royalty agreements, or the similar.

Our corporate structure is primarily organized around four wholly-owned operating subsidiaries:

	Viper International LLC (“Viper International”), formed in August 2004, represents the combination of the capabilities obtained through the acquisitions of Mid-Atlantic (9/03) and Adoria (2/04). Viper International’s network is powered by the Company’s Nextone softswitch and is compatible with most VoIP networks (including Sansay, Cisco, and Nextone). Viper International sells wholesale minutes on our VoIP network to other telecommunications providers through our internal sales force.

	Viper-CA (“Viper Consumer Products”), which we acquired in November 2000, along with Coliance (7/03) offers an alternative to traditional telephone companies through its suite of VoIP products. Our VoIP products allow voice telephone calls to be placed at a substantial savings compared to traditional calling methods to any phone number in the world over our global VoIP network (no special hardware or software, other than a standard telephone, is needed at the destination end of a call). As of December 31, 2004, we had approximately 12,000 active accounts using our suite of VoIP products.

Industry Background

Voice over Internet Protocol (“VoIP”) technology converts voice (telephone calls) into data packets, transmits the packets over data networks, and reconverts them back into voice at its final destination. Data networks, such as the internet have always utilized data packet technology to transmit information between two communicating devices (such as sending an email between two computers). The most common protocol used for communicating on these packet switched networks is internet protocol, or IP. VoIP allows for the transmission of voice along with other data over these same packet switched networks, and provides an alternative to traditional telephone networks.

VoIP is an alternative technology that can replace services provided by the traditional telephone network. Unlike traditional telephone networks, VoIP does not use dedicated circuits for each telephone call; instead, the same VoIP network can be shared by multiple users for voice, data and video simultaneously. This type of data network is more efficient than a dedicated circuit network because the data network is not restricted by the one-call, one-line limitation of a traditional telephone network. This improved efficiency creates cost savings that can be passed on to the consumer in the form of lower rates or retained by the VoIP provider.

As a result of the potential cost savings and added features of VoIP many view VoIP as the future of telecommunications. VoIP has experienced significant growth in recent years. The traditional telephone networks maintained by many local and long distance telephone companies were designed solely to carry low-fidelity audio signals with a high level of reliability. Although these traditional telephone networks are very reliable for voice communications, these networks are not well suited to service the explosive growth of digital communication applications.

Until recently, traditional telephone companies have avoided the use of packet switched networks for transmitting voice calls due to the potential for poor sound quality attributable to latency issues (delays) and lost packets which can prevent real-time transmission. Recent improvements in packet switch technology, compression and broadband access technologies, as well as improved hardware and provisioning techniques, have significantly improved the quality and usability of packet-switched voice calls.

The exponential growth of the internet in recent years has proven the scalability (or ease of expansion) of these underlying packet switched networks. As broadband connectivity, including cable modem and digital subscriber line, or DSL, has become more available and less expensive, it is now possible for service providers like us to offer voice and video services that run over these IP networks to businesses and consumers. Providing such services has the potential to both substantially lower the cost of telephone service and equipment costs to these

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customers and to increase the breadth of features available to the end-user. We anticipate that if present technology and cost factor trends continue, these cost savings will continue and become more apparent to telecommunications users worldwide.

Our Strategy

To the extent that we are able and as conditions allow, our strategy is to become a profitable, leading provider of VoIP telephony products and services worldwide.

Viper entered the VoIP industry earlier than most current competitors. Thus, even though some companies have experienced more explosive growth and have achieved a larger installed base of domestic customers, Viper has a good base of knowledge of the business it competes in. We believe we have a strong understanding of our industry. Since we entered the VoIP industry, we have sought to implement a strategy that may allow us to:: 1) develop a comprehensive call management and billing system that is fully scalable as the customer base grows; 2) acquire knowledge and contacts in the wholesale VoIP transport industry that complements and expands our own network and provides call termination capability to essentially any location on the planet; 3) acquire technical and marketing talent to support the Company’s’ business needs.

From the beginning the Company targeted international VoIP calls. This in part dictated the characteristics of the network, hardware and software we adopted. Although broadband internet connections have become commonplace in the U.S., they still represent only 45 million subscribers in the U.S. and 179 million worldwide – or 17 % of all internet subscribers (http://www.morganstanley.com/institutional/techresearch/pdfs/GSB112005.pdf). With ‘dial-up’ connections so prevalent in the Company’s target market (international calls), this mandated the Company design and implement its network such that it provides VoIP over low-speed internet connections. Most competitors – including Vonage and the offerings of AOL, Yahoo, MSN, and the internet cable companies – do not currently have the capability to offer VoIP over a dialup internet connection.

If we are successful in implementing our strategy and if market conditions allow, we may be able to achieve profitability even as price competition among VoIP providers intensifies. We plan to develop and offer a ‘flat rate’ service for unlimited domestic calls. The Company will selectively target customers with a disproportionate amount of international calling, such as certain ethnic groups who frequently ‘call home’. Since international calls are billed on a per-minute-of-usage basis on top of any ‘flat-rate’ charges (and, since there is less price competition than in the domestic market, per-minute prices on international calls are generally more profitable), we can afford to treat our flat-rate plans as loss leaders toward customers who will prove profitable through their international calling habits. Competitors who are not effectively positioned in a broad international capability will need to depend on their flat-rate plans as their primary profit generator, since they cannot support the dominant percentage of dial-up customers in other countries. Being less ‘selling-price’ sensitive than our competitors, we therefore believe we will be effective with our flat-rate plans.

Our current network consists of gateways in major population centers from which we currently serve 40 markets on a consistent basis. Our goal, if we are able to expand our VoIP network and successfully implement our Strategy (as discussed below), is to serve 108 major population markets worldwide. We also seek to expand our relationships with other providers who can “partner” with us and, if our financial resources allow, to acquire other companies that possess complimentary resources that fit within our overall strategy.

If we are successful in obtaining sufficient additional financial and managerial resources and as market and competitive conditions allow, we intend to implement our Strategy to bring the best possible voice products and services, at an affordable price, to consumers and businesses and enhance the ways in which these customers communicate. The following are key elements of our strategy:

Capitalize on the Growth of VoIP Products and Services.

We believe that if we can implement our Strategy, we will be well positioned to take advantage of the expected growth of the VoIP products and services markets. Technology research firm Jupiter Research predicted that VoIP telephony services would grow to about 400,000 U.S. households by the end of 2004, and to 12.1 million U.S. households by 2009 (http://www.clickz.com/stats/sectors/broadband/article.php/3418651).

Capitalize on our technological expertise to introduce new products and features.

Over the past three years, we have developed or acquired several core technologies that form the backbone of our VoIP service and which we intend to use to develop product enhancements and future products.

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Offer the best possible service and support to our customers with a world class customer support organization.

We have established relationships with several resellers and distributors of telecommunications products. To further accelerate growth of our vPhone and future consumer and enterprise offerings, we intend to build upon our existing relationships and establish new relationships with distributors, value added resellers and system integrators, other service providers and retailers with strong local sales and marketing channels to make our products more readily available and accessible to potential customers of our service.

Focus Viper Networks on Opportunities in Emerging Markets and New Service Offerings.

Viper Networks’ Mid-Atlantic International, Inc. and Adoria Communications LLC targets international markets undergoing telecommunications deregulation, which we believe will provide high margin opportunities. As our financial resources allow, we seek to continue to enhance and expand our global VoIP network into new markets by internal growth, acquisition and strategic alliances. Our plan is to develop, expand and integrate new services into our existing managed platform.

Focus Retail Sales Efforts on Selected Ethnic Population Centers and Flat-Rate Calling Plans

A new business unit formed in November, 2006 will promote, through a direct sales effort (telemarketing) flat-rate calling plans to ethnic groups who typically make a disproportionately large volume of international telephone calls. Our plan is to remain a low-price provider, but target customers who, because of their penchant for international (i.e., additional charge) calls, are likely to be more profitable to the Company.

Our ability to implement our Strategy, as described above, is subject to our ability to raise sufficient additional capital, attract and retain additional managerial talents, and meet the many competitive and technological challenges that face us as a small company. Further, while we believe that our technical expertise in integrating VoIP functions and technologies provides us with certain advantages over traditional telecommunications companies, the barriers to entry into the VoIP industry are not high and many of the risks that we face are beyond our control. (See “Factors That May Affect Future Results,” in Item 1a below.)

If we can implement our Strategy, we seek to make significant upgrades to our existing system infrastructure to enhance the support we can provide to new and existing subscribers, as well as our distribution partners. In an emerging industry with world-changing technologies, we are focused on our customers and their experience using our products and services.

Our Solution

The Company is a provider of high quality cost effective Voice over the Internet solutions for consumers (including businesses). In addition, the Company provides a wholesale VoIP transmission resale capability to other carriers who lack needed capacity to certain destinations, or for whom our network is more cost effective. Our secure, reliable method of communication is growing in demand in the global markets where communication distances are typically great and where costs to communicate are high. The Company’s low rates, high reliability, and good quality connection are the three factors fueling the growth and success.

We believe our products and services help improve the cost, availability, and reliability, of voice communications. Our “vPhone” (and our other consumer VoIP products) provides our customers with rich, robust communications. Our planned global VoIP network consists of gateways in major population centers. The network automatically locates remote servers at the closest point to the end user of each telephone call and routes the call over internet connection to that point – thereby eliminating the high cost of long distance connectivity. With our VoIP network we can terminate (or send) our customers' calls to the proper destination using the most efficient route available.

Consumer Products and Services

The Company offers a full suite of consumer (including residential and small business) VoIP products and services designed to meet our customers’ diverse global voice communications needs (all products are sourced from third parties, who hold any and all applicable intellectual property rights; none of the Company’s current products is deemed to be available from a single source). The Company has designed its network such that products from different manufacturers will function correctly provided the manufacturer adheres to applicable industry standards. In this way, the Company hopes to avoid sole source dependencies.

Our suite of consumer VoIP Products allows calls to be placed to any phone number in the world over our global VoIP network (no special hardware or software, other than a standard telephone, is needed at the destination end of a call).

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vPhone

Our vPhone is a USB powered telephone device connected to a personal computer. The vPhone:

	•	Greatly reduces the cost of telephone calls by routing them over the internet.
	•	Connects and installs in minutes with our proprietary, downloadable vPhone Dialer Software and the included USB cable.
	•	Provides superior voice quality wherever a stable internet connection is present.
	•	Works with Dial-Up or Broadband internet connections.
	•	Allows our customers to pay only for the minutes used without monthly fees, contracts or hidden charges.
	•	Allows customers to purchase additional minutes conveniently online.

IP Phone Adaptor (IPA)

Our IP Phone Adaptor is a USB powered device that allows a user to connect any standard telephone to a personal computer. The IP Phone Adaptor:

	•	Greatly reduces the cost of telephone calls by routing them over the internet.
	•	Connects and installs in minutes with our proprietary, downloadable vPhone Dialer Software and the included USB cable.
	•	Connects a standard telephone – or all telephones in a customer’s house or business – to our global VoIP network through their existing internet connection.
	•	Is compatible with both traditional wired telephones and with cordless telephones – allowing the user to make calls from anywhere inside a home or office.
	•	Works with Dial-Up or Broadband internet connections.
	•	Allows our customers to pay only for the minutes used without monthly fees, contracts or hidden charges.
	•	Allows customers to purchase additional minutes conveniently online.

Broadband Phone Adaptor (BPA)

Our Broadband Phone Adaptor is a network device that allows a user to connect up to 2 standard telephones (or 1 phone and 1 fax machine) to the internet. The Broadband Phone Adaptor:

	•	Greatly reduces the cost of telephone calls by routing them over the internet.
	•	Connects a standard telephone – or all telephones in a customer’s house or business – to our global VoIP network through their existing internet connection.
	•	Provides 2-line direct connectivity - making it an ideal device for small office/home office (“SOHO”) applications.
	•	Connects and installs in minutes to an existing internet connection (requires a broadband internet connection).
	•	Is compatible with both traditional wired telephones and with cordless telephones – allowing the user to make calls from anywhere inside a home or office.
	•	Eliminates the need for a computer to make or manage calls (does not require our vPhone Dialer Software). Only an internet connection is required.
	•	Allows our customers to pay only for the minutes used without monthly fees, contracts or hidden charges.
	•	Allows customers to purchase additional minutes conveniently online.

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Wi-Fi vPhone

Our Wi-Fi vPhone is an intelligent IP communications device. The Wi-Fi vPhone:

	•	Greatly reduces the cost of telephone calls by routing them over the internet.
	•	Operates almost like a cell phone; provides VoIP call capability throughout the world where ever a standard 802.11b wireless network exists.
	•	Can be used in most any 802.11 Wi-Fi “Hot Spot” location in the world (user ID and Password may be required for privately operated networks).
	•	Easily configured and installed in minutes (similar to authentication of a laptop computer for use within your wireless network).
	•	Completely self-contained; does not require a personal computer or our vPhone Dialer Software.
	•	Allows our customers to pay only for the minutes used without monthly fees, contracts or hidden charges.
	•	Allows customers to purchase additional minutes conveniently online.

IP PBX

Our IP PBX provides:

	•	Greatly reduces the cost of telephone calls by routing them over the internet.
	•	Provides multi-functional telephone features and calling services to Business users, blending access to the local telephone network, the public internet, and internal communications.
	•	Provides simultaneous voice, text, data and graphics support over standard telephone lines and/or IP connections.
	•	Compatible with existing analog or digital telephones (with optional FXS gateway), or with VoIP-enabled telephones.
	•	Intra-company connectivity either through local network or through existing telephone wiring.
	•	Provides automated attendant, dial by name and spell/say, call history and call detail reports, intercom, full call monitoring, conference calling, voice mail (including voice mail to email), caller ID, call forwarding, music on hold, and most other PBX functions.
	•	Fully scalable from 1 to 1,000 (or more) extensions (depending on hardware selected).
	•	Compatible with a variety of incoming local voice connections (T1, T3, FXO, etc.).
	•	Easily managed and reconfigured through intuitive menu driven interface.
	•	Provided with a pre-programmed server running the PBX functionality.

Calling time

Viper has developed a full suite of account and call management databases, software and servers such that individual telephone calls to any destination in the world served by the Company can be recorded and charged according to unique per-minute calling rates to each destination. The billing and call management system also allows customers to establish an account, purchase pre-paid calling minutes, and review their calling history online without any human interaction. Once a retail customer registers a Viper product and establishes a prepaid account (the “Viper Minutes Account”) they obtain access to the Company’s global VoIP network. Retail calls on our global VoIP network are prepaid by conveniently depositing funds online. The Viper Minutes Account maintains the retail customer’s detailed call records (telephone number, duration, and cost) and remaining prepaid balance.

Viper plans to expand its call and account management system to include the capability to support ‘flat-rate’ plans with unlimited or capped calling volumes to specific domestic and international destinations.

Wholesale Operations

Viper International LLC, formed in August 2004, represents the combination of the capabilities obtained through the acquisitions of Mid-Atlantic (9/03) and Adoria (2/04). Viper International is responsible for world-wide termination of all calls made by customers using any of the Company’s consumer products. Viper’s worldwide network permits the Company to offer high quality routes and the cost effective pricing in the highly competitive telecommunications industry.

Additionally, Viper International has cooperative agreements with many underlying carriers who provide termination routes to destinations not served by Viper’s own network. By combining the power of its own network with the breadth of affiliates’ networks, Viper is able to offer customers calling capability to anywhere in the world at prices unmatched by any traditional telephone carrier (and, lower than most competitive VoIP providers).

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Vipers’ network is powered by the Company’s Nextone softswitch. This state of the art VOIP switching facility allows hundreds of thousands of calls to be directed to specific partnerships and carriers throughout the world. This Nextone switch is compatible with all VOIP networks, including Sansay, Cisco, and Nextone.

In addition to the termination of consumer calls, Viper International also sells traffic capacity on our VoIP network to a wide variety of wholesale clients. While providing our wholesale customers with a cost-effective alternative for their global traffic needs, this offering also helps us more fully utilize the capacity of our network (and creates another profitable revenue stream). Viper’s wholesale activities have targeted Latin America and the Middle East, including Argentina, Brazil, Uruguay, Egypt, Jordan, Saudi Arabia, Nepal & Mongolia.

To the extent that we are able, we attempt to exploit our moment-to-moment knowledge of market pricing for destinations around the globe to enable us to efficiently price usage of our network while maximizing revenues.

Sales, Marketing and Promotional Activities

We currently sell and market our VoIP products to retail customers (end users) through our direct sales force, web site and third party distributors. The retail customer is required to 1) register their Viper Product, 2) establish a Viper Minutes Account, and 3) deposit funds into their Minutes Account in advance of utilizing Viper’s global VoIP network. Most agreements require the customer to pre-pay for all products and services. To date, we have not incurred significant advertising and promotional expenses as we have not had the working capital to fund significant mass media advertising expenditures.

Viper’s VoIP products and services are offered to these third parties distributors (“Distributors”) through a standard distributor agreement. These agreements typically provide 20% to 40% in discounted pricing (from approximate retail pricing levels) for product purchases and a residual 20% to 30% commission on funds deposited by retail customers (of the VoIP products sold by the Distributor) into their Minutes Account. Agreements typically are for a one year term and include an option to renew the term for an additional one year period.

We offer businesses the opportunity to become resellers of our products and services through a reseller program. Resellers are able to purchase bulk accounts (the Viper Minutes Account) and/or hardware at additional discounts that they are then able to resell to end users under the Viper Networks brand. In certain circumstances, resellers are able to resell end users under a private brand.

Wholesale minutes on our global VoIP network are sold to other traditional and VoIP telecommunications providers through our internal sales force.

Competition

We face several competitors who each possess significantly greater financial and managerial resources. These competitors include iConnectHere, Net2Phone, Vonage and Packet8 as well as incumbent telephone carriers, cable television providers, and other providers of traditional telephone service.

The market for telecommunications services is intensely competitive and likely will remain intensely competitive in the future. In addition to the competitors listed above, 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. In an emerging industry with world-changing technologies brand name recognition is critical to success; we may not be able to compete effectively with competitors who each possess significantly 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 and cash flow will be substantially reduced and our business, financial condition, and results of operations may be materially and adversely affected.

The market for enhanced internet and IP communications services is new and rapidly evolving. We believe that the primary competitive factors determining success in the internet and IP communications market are quality of service, the ability to meet and anticipate customer needs through multiple service offerings, responsive customer care services and price. Future competition could come from a variety of companies both in the internet

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and telecommunications industries as technology and competitive opportunities evolve. These industries include major companies who have greater resources and large subscriber bases than we have. We also compete in the growing market of discount telecommunications services including calling cards, prepaid cards, call-back services, dial-around or 10-10 calling and collect calling services. In addition, some internet service providers have begun to aggressively enhance their real-time interactive communications, focusing initially on instant messaging, although we expect them to begin to provide PC-to-phone services.

We anticipate that as markets develop and technology and commercial acceptance of our products and services evolve, other new and likely larger competitors may offer products and services similar to those we offer. In this event we may be facing significant and continuing challenges in implementing our strategy. This may force us to change or alter our strategy or otherwise undertake new and unforeseen actions.

However, we face substantial competition from a number of larger companies with substantially greater resources and longer operating histories and we may not be able to compete effectively. We also face competition from private and start-up companies given the limited barriers to entry in our business.

While we may experience indirect competition from companies such as Vocaltec, Cisco Systems, Inc. and Net2Phone, which manufacture or market products similar to ours and may offer services similar to us, currently these companies typically only provide their services to companies like ours to sell and market them. As a result, these companies are also potential competitors.

Traditional telecommunications companies, such as AT&T, Sprint, MCI WorldCom and Qwest Communications International, may offer enhanced internet and IP communications services in both the United States and internationally. All of these competitors are significantly larger than we are and have substantially greater financial, technical and marketing resources, larger networks, a broader portfolio of services, stronger name recognition and customer loyalty, well-established relationships with target customers, and an existing user base to which they can cross-sell their services. These and other competitors may be able to bundle services and products that are not offered by us together with enhanced internet and IP communications services, which could place us at a significant competitive disadvantage. Many of these types of competitors enjoy economies of scale that can result in lower costs structure for transmission and related costs, which could cause significant pricing pressures within the industry.

Operations

Key elements of our system include: provisioning, customer access, network security, call routing, call monitoring, call reliability and detailed call records. Our platform monitors our process of digitizing and compressing voice into packets and transmitting these packets over data networks around the world and if additional bandwidth is required, we will expand bandwidth to meet demand.

We maintain a system which is a software-based product that manages call admission, call control and routes calls to an appropriate endpoint. Unless the recipient is using an internet telephony device, the packets are sent to a gateway belonging to Viper Networks or to one of our partner telecommunications carriers where the packets are reassembled and the call is transferred to the PSTN (Public Switched Telephone Network) and directed to a regular telephone anywhere in the world. Our billing and back office systems manage and enroll customers and bill calls as they originate and terminate on the service. If sufficient additional financial resources are available, we may acquire additional gateways in Beijing, Hong Kong, Osaka, Philippines, Seoul, Singapore, and Thailand as market conditions and suitable opportunities arise.

Suppliers

We outsource the manufacturing of our vPhone and other VoIP products to third-party manufacturers. The Company’s primary suppliers are: BCM Advanced Research; Tiger Jet Network, Inc.; and, Shandong Bittel Electronics Co., Ltd. While we believe that relations with our contract manufacture and third party suppliers (collectively “Suppliers”) are good, there can be no assurance that our Suppliers will be able or willing to supply products and services to us in the future or if they are supplied, that they will offer these products and services at prices that allow us to resell them at a profit. While we believe that we could replace our Suppliers if necessary, our ability to provide product and service to our customers would be materially and adversely impacted for a protracted period, and this could have an adverse effect on our business, financial condition and results of operations.

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Research and Development

The VoIP market is characterized by rapid technological changes and advances. Accordingly, if sufficient financial resources become available, we plan to make substantial investments in the design and development of new products and services and enhancements and features to existing products and services as well as investments in our global VoIP network. Our future research and development efforts will relate to our vPhone, SOHO applications, the 802-11 wireless standard, and our IP PBX products and the acquisition and development of new endpoints for subscribers of our service. The development of new products and the expansion of our global VoIP network are essential to our success.

To date, we have not incurred significant research and development expenses as we have not had the working capital to fund significant development expenditures. Our ability to offer new products or enhanced features has been dependent on our Suppliers, who are free to offer similar or identical products to other of their customers – our competitors. Accordingly, the Company does not possess a competitive advantage with its suite of VoIP products and services.

Industry Overview

Historically, the communications services industry has transmitted voice and data over separate networks using different technologies. Traditional carriers have typically built telephone networks based on circuit switching technology, which establishes and maintains a dedicated path for each telephone call until the call is terminated (sent). With a circuit-switched system a telephone call is placed, a circuit is established, and the circuit remains dedicated for transmission of the call and is unavailable to transmit any other call. This restricted use of transmission capacity has become inefficient in light of the increased demand for voice services and the proliferation of data networks, with their enhanced functionality and efficiency.

Data networks have typically been built utilizing packet switching technology, such as IP, which divides signal into packets that are simultaneously routed over different channels to a final destination where they are reassembled in the original order in which they were transmitted. Packet switching provides for more efficient use of the capacity in the network because the network does not establish dedicated circuits and does not require a fixed amount of bandwidth to be reserved for each transmission. As a result, substantially greater traffic can be transmitted over a packet-switched network, such as the internet, than a circuit-switched network.

Early packet-switched networks suffered from poor sound quality attributable to delays and lost packets. However, recent improvements in packet switching, compression broadband access technologies, hardware and the use of privately-managed networks have allowed for quality, real-time transmission. As a result, packet switching technology now allows service providers to converge their traditional voice and data networks and to carry voice, fax and data traffic over the same network. These improved efficiencies of packet-switching technology create network cost savings that can be passed on to the consumer in the form of lower long distance rates. In addition, international telephone calls carried over the internet or private IP networks are less expensive than similar calls carried over circuit-switched networks primarily because they bypass the international settlement process, which represents a significant portion of international long distance tariffs.

Over the last decade, the volume of traffic on data networks has grown at a faster rate than traditional telephone networks. This growth has been driven by several factors, including technological innovation, high penetration of personal computers and, in particular, by the rapid expansion of the internet as a global medium for communications, information and commerce. International Data Corporation, a market research firm, estimated in 1999 that the number of internet users worldwide would grow from approximately 142 to 399 million between 1998 and 2002 (http://docs.yahoo.com/docs/advertising/research/TheWeb/GrowthOfWeb/GrowthOfWeb.html). Internet usage has continued to accelerate; in March, 2000 the Angus Reid Group predicted internet usage would reach 1 billion by 2005 (http://www.clickz.com/stats/sectors/geographics/article.php/326181). The Computer Industry Almanac confirmed this level of usage in 2004 (http://www.c-i-a.com/pr0904.htm). Morgan Stanley estimated in 2005 that communications over the internet – not browsing, chat and search – accounted for 44% of all U.S. online usage (http://www.morganstanley.com/institutional/techresearch/pdfs/GSB112005.pdf). This increase in data traffic has necessitated additional data network capacity and quality. As a result, businesses have invested billions of dollars in order to meet this need.

We believe that the combination of increasing demand for voice services and the proliferation of data networks, with their enhanced functionality and efficiency, is driving the convergence of voice traffic and data networks, including the internet. We expect this transfer of traffic to accelerate as corporation and network infrastructure providers attach increasing value to data networks and as the functionality of computers and computing devices, such as personal digital assistants, are enhanced by voice capability.

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Voice on Data Networks

Voice on the Internet or Voice over Internet Protocol (“VoIP”) consists of both traditional and enhanced voice and fax services between ordinary phones and the addition of interactive voice capability to computers, web sites and e-mail. Voice on the Internet serves both the extensive market of existing phone users and the expanding market of computer users. We believe data networks provide lower cost than the traditional telephone network and are better suited to deliver future enhanced services to both phone users and computer users. Moreover, the internet is the most cost-effective data network for transmitting any type of data worldwide, including voice.

Telephony based on internet protocols emerged in 1995, with the invention of a personal computer program that allowed the transport of voice communications over the internet via a microphone connected to a personal computer. Initial sound quality was poor and the service required that both parties to the conversation use personal computers instead of telephone. In 1996, the advent of the gateway for the first time offered anyone with access to a telephone the ability to complete calls on the internet. A gateway is a device that transfers calls from the traditional telephone network to a network such as the internet, and vice versa.

Despite advances in VoIP technology, Voice over the Internet has only recently improved to the point of allowing quality, real-time voice communications. We believe that, overall, the VoIP marketplace is still in its infancy. Most enterprise customers and consumers still rely on traditional, circuit-switched telephone services. In our opinion, the full advantages of VoIP will not be realized for another two to five years, giving companies like Viper Networks an opportunity to make an early entrance into the market.

The Economics of Internet Telephony

Long distance telephone calls transported over the internet are less expensive than similar calls carried over the traditional telephone network primarily because the cost of using the internet is not determined by the distance those calls need to travel. Also, routing calls over the internet is more cost-effective than routing calls over the traditional telephone network because the technology that enables internet telephony is more efficient than traditional telephone network technology. The great efficiency of the internet creates cost savings that can be passed on to the consumer in the form of lower long distance rates or retained by the carrier as higher margins.

Beyond cost benefits, innovation in the provision of enhanced services is expected to yield increased functionality as well. We believe such enhanced functionality will expand the addressable market for internet services to include anyone with a telephone, and that this market is potentially larger than the market for any other existing internet service which requires a computer for access. Moreover, computer users will benefit from interactive voice being an option in web browsing and other computer-based communications.

Limitations of Existing Internet Telephony Solutions

The growth of voice on the internet has been limited in the past due to poor sound quality caused by technical issues such as delays in packet transmission and bandwidth limitations related to internet network capacity and local access constraints. However, the continuing addition of data network infrastructure, recent improvements in packet-switching and compression technology, new software algorithms and improved hardware have substantially reduced delays in packet transmissions and the effect of these delays.

Several large long distance carriers, including AT&T and Sprint, have announced internet telephony service offerings. Smaller internet telephone service providers have also begun to offer low-cost internet telephony services from personal computers to telephones and from telephones to telephones. Traditional carriers have substantial investments in traditional telephone network technology, and therefore have been slow to embrace internet technology. We believe that these service offerings by large long distance carriers and smaller providers are generally available in limited geographic areas and can only complete calls to a limited number of locations.

In recent years, commercial web sites have grown in popularity. Efforts to enhance these web sites with voice enabled e-commerce features such as click-and-call contact with a customer service agent have been hampered by the early quality problems with voice on the internet described above. In addition, we believe that the infrastructure required for a global network is too expensive for most companies to deploy on their own.

Increasing Trends Toward Outsourcing Telephony Solutions

We believe that the global reach and functionality of the internet makes it especially suited for enhanced voice services. These services, which may include web-to-phone, phone-to-PC and unified messaging, could be a

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significant source of additional revenues to internet portals, internet service providers and web sites that are seeking to expand their service offerings. Such voice services require considerable expertise and capital to deploy and may involve execution risk for any internet portal, internet service provider or web site lacking this expertise. We expect that internet portals, internet service providers and web sites will increasingly outsource their communications services to companies, like us, that provide the network and expertise necessary to facilitate those services rather than incurring the risk and delay of developing and deploying an array of communications services themselves and undertaking the task of building a global network.

Government Regulation

The use of the internet and private IP networks to provide telephone service is a recent market development. While we believe that the provision of voice communications services over the internet and private IP networks is currently permitted under United States law, some foreign countries have laws or regulations that may prohibit voice communications over the internet.

United States. We believe that, under U.S. law, the internet-related services that the Company provides constitute information services as opposed to regulated telecommunications services, and, as such, are not currently actively regulated by the FCC or any state agencies charged with regulating telecommunications carriers. Nevertheless, aspects of our operations may be subject to state or federal regulation, including regulation-governing universal service funding, disclosure of confidential communications and excise tax issues. We cannot provide assurances that internet-related services will not be actively regulated in the future. Several efforts have been made in the U.S. to enact federal legislation that would either regulate or exempt from regulation services provided over the internet. Increased regulation of the internet may slow its growth, particularly if other countries also impose regulations. Such regulation may negatively impact the cost of doing business over the internet and materially adversely affect our business, operating results, financial condition and future prospects.

The FCC has considered whether to impose surcharges or other common carrier regulations upon certain providers of internet telephony, primarily those which, unlike the Company, provide internet telephony services directly to end users. While the FCC has presently refrained from such regulation, the regulatory classification of internet telephony remains unresolved.

Specifically, the FCC has expressed an intention to further examine the question of whether certain forms of phone-to-phone internet telephony are information services or telecommunications services. The two are treated differently in several respects, with certain information services being regulated to a lesser degree.

The FCC has noted that certain forms of phone-to-phone internet telephone bear many of the same characteristics as more traditional voice telecommunications services and lack the characteristics that would render them information services.

If the FCC were to determine that certain internet-related services including internet telephony services are subject to FCC regulations as telecommunications services, the FCC could subject providers of such services to traditional common carrier regulation, including requirements to make universal service contributions, and pay access charges to local telephone companies. It is also possible that the FCC may adopt a regulatory framework other than traditional common carrier regulation that would apply to internet telephony providers. Any such determinations could materially adversely affect our business, financial condition, operating results and future prospects to the extent that any such determinations negatively affect the cost of doing business over the internet or otherwise slow the growth of the internet. Congressional dissatisfaction with FCC conclusion could result in requirements that the FCC impose greater or lesser regulation, which in turn could materially adversely affect our business, financial condition, operating results and future prospects.

State regulatory authorities may also retain jurisdiction to regulate certain aspects of the provision of intrastate internet telephony services. Several state regulatory authorities have initiated proceedings to examine the regulation of such services. Others could initiate proceedings to do so.

911 and E911 Services. On November 12, 2004 the FCC released the “Vonage Order” which, among other things, ruled that providers of ‘interconnected VoIP services’ must provide 911/E911 capability to their customers. The FCC, in a prior Notice, adopted four criteria to determine if 911/E911 regulations would be imposed on a service provider: 1). Real-time, 2-way switched voice services, interconnected with the public switched network, are provided; 2). Customers have a reasonable expectation of access to 911/E911; 3). The provided service competes with traditional CMRS or wireline local exchange service; and, 4) it is technically and operationally feasible to support E911. On June 3, 2005 the Commission released the VoIP 911 Order adopting rules that require interconnected VoIP providers to provide their new and existing subscribers with 911 service no later than

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November 28, 2005. VoIP service providers were required to also file, not later than November 28, 2005, a Certification Letter commenting on the steps taken to satisfy the requirements of the ‘VoIP Order’ and the status of implementation measures. On September 27, 2005 the FCC indicated it would not pursue enforcement of any service provider who achieved compliance with at least 90% of its subscribers. In a November 7, 2005 letter the FCC softened its stance further, indicating service providers who failed to comply need not terminate their service, but should refrain from marketing their service to new customers in areas where they did not provide 911/E911 capability. The Company has not filed a Certification Letter, and does not make available 911/E911 service other than to new customers who purchase DID (“Direct In Dial”) telephone numbers (numbers assigned in conformity with the North American Numbering Plan, NAMP).

No definitive ruling exists on whether or not the type of service currently provided by the Company constitutes an ‘interconnected VoIP Service’ if the customer does not have a DID number. The Company believes it is in compliance with the VoIP 911 Order if it provides 911/E911 capability only to customers with DID numbers and files applicable certification documents; however, it is possible the FCC could rule otherwise. We anticipate additional regulation and government imposed requirements on the Company’s operations in the future.

The Company is working to provide 911/E911 capability to a broad a range of its customers as is feasible, and anticipates the percentage of covered customers will improve as these efforts bear fruit.

International. The regulatory treatment of internet telephony outside of the U.S. varies widely from country to country and is subject to constant change. Until recently, most countries either did not have regulations addressing internet telephony or other VoIP services, classifying these services as unregulated enhanced services. As the internet telephony market has grown and matured, increasing numbers of regulators have begun to reconsider whether to regulate VoIP services. Some countries currently impose little or no regulation on these services, as in the United States. Conversely, other countries that prohibit or limit competition for traditional voice telephony services generally do not permit internet telephony or VoIP services or strictly limit the terms under which it may be provided. Still other countries regulate internet telephony and VoIP services like traditional voice telephony services, requiring internet telephony companies to make universal service contributions and pay other taxes. Countries may also determine on a case-by-case basis whether to regulate internet telephony and VoIP services as voice services, as enhanced services or as another service. The varying and constantly changing regulation of internet telephony and VoIP in the countries in which we currently provide or may provide services may materially adversely affect our business financial condition and results of operations.

The European Commission regulatory regime, for example, distinguishes between voice telephony services and other telecommunications services. The European Commission stated that only phone-to-phone communications reasonably could be considered voice telephony and that, at present, even phone-to-phone internet telephony does not meet all elements of its voice telephone definition. Therefore, the European Commission concluded that, at the present time, voice over internet services cannot be classified as voice telephony. More recently, in September 2000, after requesting comments from interested parties the European Commission issued a subsequent communication in which it reaffirmed that internet telephony is not currently voice telephony.

As a result of the European Commission’s conclusion, providers of internet telephony should be subjected to no more than a general authorization or declaration requirement by European Union member countries. However, Viper cannot provide assurances that more stringent regulatory requirements will not be imposed by individual member countries of the European Union, since Commission communications, unlike directives, are not binding on the member states. The member countries therefore are not obligated to reach the same conclusions as the Commission on this subject so long as they adhere to the definition of voice telephony in the Services Directive. Moreover, in its January 1998 IP Telephony Communication, the European Commission state that providers of internet telephony whose services satisfy all elements of the voice telephony definition and whose users can dial out to any telephone number can be considered providers of voice telephony and may be regulated as such by the member states of the European Union.

We will also be providing services in countries where the regulation of internet telephony is more restrictive than in the United States or the European Union. Also, in the event we expand into additional foreign countries, such countries may assert that we are required to qualify to do business in the particular foreign country, that we are otherwise subject to regulation, or that we are prohibited from conducting our business in that country. Our failure to qualify as a foreign corporation in a jurisdiction in which we are required to do so, or to comply with foreign laws and regulations, would materially adversely affect our business, financial condition and results of operations by subjecting us to taxes and penalties and/or by precluding us from, or limiting us in, enforcing contracts in such jurisdictions. In some of those countries, we may be forced to find strategic partners within those countries to help us obtain regulatory approval. Likewise, our customers and partners may be or become subject to requirements to qualify to do business in a particular foreign country, otherwise to comply with regulations, or to

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cease from conducting business in that country. We cannot be certain that our customers and partners are currently in compliance with regulatory or other legal requirements in their respective countries, that they will be able to comply with existing or future requirements, and/or that they will continue in compliance with any requirements. Changes in the regulatory regimes of countries where we do business, may have the effect of limiting or prohibiting internet telephony services, to one or more countries in which we currently operate or seek to operate in the future or the failure of our customers and partners to comply with these requirements could materially adversely affect our business, financial conditions and results of operations.

Additionally, 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. The effect of these factors cannot be accurately predicted but their occurrence could materially adversely affect our business, financial conditions and results of operations.

Finally, the International Telecommunications Union, or the ITU, an international treaty organization that deals with telecommunications matters, has not taken any action in favor or against internet telephony. In 2000, however, the ITU convened meetings and published reports on the internet and internet telephony issues, partly in response to concerns from some developing countries over internet telephony and tariffing of international internet backbone traffic. The ITU continues to track the regulatory environment in many countries regarding the internet, and may in the future encourage some countries to increase or reduce their regulation of internet telephony (http://www.itu.int/publications/publications.aspx?lang=en&parent=D-REG-TTR&folder=D-REG-TTR-2003). In particular, an ITU study group is examining how international internet backbone providers compensate each other for traffic. These efforts, which may take several years to be completed and which are currently opposed by the United States and some European countries, may eventually result in changes in national or international regulations dealing with financial compensation for international internet traffic which could affect certain of our costs.

Certain Other Regulations Affecting the Internet

United States. Congress has recently adopted legislation that regulates certain aspects of the internet, including online content, user privacy and taxation. In addition, Congress and other federal entities are considering other legislative and regulatory proposals that would further regulate the internet. Congress has, for example, considered legislation on a wide range of issues including internet spamming, database privacy, gambling, pornography and child protection, internet fraud, privacy and digital signatures. Various states have adopted and are considering internet-related legislation. Increased U.S. regulation of the internet may slow its growth, particularly if other governments follow suit, which may negatively impact the cost of doing business over the internet and materially adversely affect our business, financial condition, results of operations and future prospects.

International. The European Union has also enacted several directives relating to the internet. The European Union has, for example, adopted a directive that imposes restrictions on the collection and use of personal data. Under the directive, citizens of the European Union are guaranteed rights to access their data, rights to know where the data originated, rights to have inaccurate data rectified, rights to recourse in the event of unlawful processing and rights to withhold permission to use their data for direct marketing. The directive could, among other things, affect U.S. companies that collect or transmit information over the internet from individuals in European Union member states, and will impose restrictions that are more stringent than current internet privacy standards in the U.S. In particular, companies with offices located in European Union countries will not be allowed to send personal information to countries that do not maintain adequate standards of privacy.

Although Viper does not engage in the collection of data for purposes other than routing its services and billing for its services, the directive is quite broad and the European Union privacy standards are stringent. Accordingly, the potential effect on the development of Viper in this area is uncertain.

As of December 31, 2005, we had a total of 6 employees, of which all 6 were full time. In addition, the Company employs independent contractors as required for services not demanding of full-time employment. These services include software development, technical support, and other miscellaneous business support. No independent contractors are deemed to be critical to the business of the Company.

ITEM 1A. 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, ever-changing technology, domestic and international regulatory changes, 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

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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 harm. 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 $1,929,685 in losses during the twelve months ending December 31, 2005 and cumulative losses of $13,054,628 since the Company’s inception through December 31, 2005. The Company is an early-stage company and 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 is business plan. This dependence upon common equity financing has meant that we are reliant upon the price of our common stock in the public markets, which has dramatically declined over the past two years and there can be no assurance that the price of our common stock will recover. In addition, we have had only limited discussions with potential investors and there can be no guarantee that the Company will receive additional capital from any investors 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. We have limited equity and limited working capital. 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 substantial doubt about the Company's ability to continue as a going concern since the Company is an early-stage company and there exists only a limited history of operations and has continued operating losses.

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. Outstanding Debt and Stock Purchase Warrants to Current and Former Management.

In August of 2005, we entered into agreements with certain of our current and former officers and directors. Under the terms of these agreements, these individuals returned an aggregate of 16,500,000 shares of our common stock previously awarded as bonuses in connection with their prior employment with the Company and in exchange, we issued an aggregate of 16,500,000 common stock purchase warrants. In addition, the existing short term unsecured promissory notes with these officers were amended to include certain unpaid salaries, benefits, previous salary deferrals, and unpaid expenses within the existing notes. The warrants grant the holder the right to purchase our common stock at an exercise price of $0.25 per share and the warrants do not expire until August 26, 2009. In February of 2006, the short term unsecured promissory notes were exchanged for unsecured twelve month convertible promissory notes with variable interest equal to the greater of the monthly market yield on 1-year constant maturity U.S. Treasury securities or the noteholders cost of funds. Each of the notes, at the option of each noteholder, are convertible, in whole or part, into shares of the Company’s common stock at a percentage of the preceding 52-week low trading range of the Company’s publicly traded common stock price. While the Company believed at the time the issuance of the warrants and the exchange of the notes served to support the Company’s plans, the terms of the notes and the warrants may limit the ability to raise additional capital. Further, while the transactions involve the return of shares previously issued in connection with the Company’s payment of employment bonuses and unpaid accrued salaries, the Company did not undertake any evaluation of whether the transactions do not expose the Company to potential claims under the California Labor Code and other state employment rules and regulations.

6. Conflicts of Interest.

As a small company, we are dependent, from time to time, upon one or more our officers and directors to assist us in meeting our financial obligations. In some cases, we may enter into an agreement with an officer or director who assists us in completing one or more transactions or in providing us with financing or other services. These transactions involve a conflict of interest. A conflict of interest arises whenever a party has an interest on both sides of a transaction. While we believe that we have and will continue to enter into such agreements with officers and directors on terms that are no different than that which we can obtain from independent third parties, there can be no assurance that we will always be successful in these efforts or that we can successfully resolve conflicts of interest to fully satisfy our obligations to our Company and our stockholders.

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7. 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 which may result in adverse pricing pressures on our products with resulting adverse impact on our profits, if any.

8. Recent Acquisitions & Limited History of Operations.

During the fiscal year ending December 31, 2005, we generated $3,482,549 in net revenues, primarily through our acquisition of Coliance and Mid-Atlantic in 2003 and our acquisition of Adoria in 2004. 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 their investment.

9. Matter of 911 and Emergency Calling Services and Exposure to Liability.

Both our emergency calling service and our E911 calling service are different, in significant respects, from the emergency calling services offered by traditional wireline telephone companies. In each case, those differences may cause significant delays, or even failures, in callers’ receipt of the emergency assistance they need. Traditional wireline telephone companies route emergency calls over a dedicated infrastructure directly to an emergency services dispatcher at the public safety answering point, or PSAP, in the caller’s area. Generally, the dispatcher automatically receives the caller’s phone number and actual location information. While our system being deployed is designed to route calls in a similar fashion to traditional wireline services, our 911 services are not yet available in all locations. Further to the extent that it is not available in a specific location or to the extent that a caller experiences delays in obtaining and accessing emergency calling services, we may face significant liability.

10. Matter of National Security Agency and Potential Liability.

As a provider of telephone services, our company may be asked to provide information regarding our customer telephone records to the National Security Agency (NSA) and governmental agencies in connection with efforts taken by these agencies to fight the war against terror. In the event that we assist the NSA and other agencies in providing such information, we may be exposed to potential liability in violating the privacy rights of our customers. We may also face the loss of revenues and customer good will.

11. Decreasing Pricing Trends.

Domestic and international telecommunications prices continue to decrease and we anticipate that this trend will continue. Further, users who select our services may switch to the services offered by our competitors to take advantage of lower priced services offered by them. Such continued competition or continued price decreases may require us to lower our prices to remain competitive. This will serve to reduce our revenue and lead to loss of customers or a decrease in our growth and may delay or prevent us from achieving profitability.

12. Consumer Acceptance of VoIP Technology and Competitive Issues.

The market for VoIP services continues to grow and develop. While we believe that a significant portion of this growth is due to customers who are “early adopters,” as this market segment utilizes VoIP services in larger numbers, if we are to achieve any growth in revenues, we will likely incur higher marketing expenses in attracting customers from other segments. For these reasons, we may experience lower growth and higher expenses than our larger competitors. Further, our larger competitors have entered into co-marketing agreements with other technology and internet companies and, in other cases, they are offering VoIP services bundled with other internet services that we do not offer and have no ability to offer. These and other competitive conditions will serve to severely limit our ability to compete effectively.

13. Flaws in Technology and Systems.

While we believe that our VoIP serve network offers a high level of system integrity, flaws in our technology and systems may arise which may create disruptions and other outages. Software and hardware malfunctions or problems with our network may arise. In addition, “hacker attacks” can occur from the Internet. As a result, if the reliability of our services is adversely perceived by our customers, we may have difficulty ion attracting and retaining customers and our reputation may suffer.

14. Losses Due to Customers 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 $42,579 during the twelve months ending December 31, 2005. We have implemented new anti-fraud procedures in

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order to control losses relating to unauthorized credit card use, but these procedures may not be adequate to effectively limit our exposure in the future from 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.

15. 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.

16. 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. Our products and services primarily utilize the intellectual property rights of others. For these reasons we may face continuing financial losses.

17. Limited Customer Base.

While we seek to implement our plans, we have a limited customer base of approximately 20,000 accounts using our suite of VoIP products 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.

18. 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 market to achieve commercial viability.

19. 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 and delay or prevent us from achieving profitability.

20. 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.

21. Domestic and Foreign Government Regulation.

We incur significant additional costs to remain a public company and to file current and prior period past due original and amended periodic reports (with the U.S. Securities and Exchange Commission) to meet our obligations as a public company. Since September 22, 2004 (the date at which we were informed that our common stock was registered under Section 12(g) of the Securities Exchange Act of 1934), we have had to expend and divert significant managerial and financial resources to address prior year filing delinquencies and to meet our current year filing obligations under Section 13(a) of the Securities Exchange Act of 1934. While we have made significant progress in filing many periodic reports with the SEC, we have yet to complete work on: (A) amending certain previously filed reports to respond to comments from the staff at the SEC; and (B) completing certain other reports that need to be filed for certain prior periods, including, for example, the filing of Form 10-QSB for the first quarter

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of 2006 through March 31, 2006. Our goal is to complete the filing of all of our past periodic reports, respond to SEC comments on all of prior and current periodic filings, and to file all of our current periodic reports in a timely manner. However, until we accomplish these and related objectives, we cannot assure you that we have satisfy our obligations as a public company.

Our planned operations will likely be subject to extensive telecommunications-based regulation by the 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 our VoIP will not be unduly burdened by new and expanded regulations. However, there can be no assurance that the occurrence of regulatory changes would not significantly affect our operations by restricting our planned operations 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.

22. 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.

23. Control.

Our current officers and directors directly and indirectly hold an aggregate of 6,193,333 shares of the Company’s common stock (before including any shares issuable upon exercise of any options, warrants, or the conversion of certain convertible promissory notes issued on February 9, 2006). This represents approximately 4.1% of the Company’s total outstanding shares as of December 31, 2005 and thereby allows the Company’s officers and directors to retain significant influence over the Company. Further and due to our limited financial resources, in the past we have issued our common stock and granted common stock purchase options to our officers and directors in lieu of paying cash compensation and we anticipate that we may need to continue this practice in the future. This may further limit the ability of stockholders

24. 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 ("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.

25. Dependence Upon Key Personnel and New Employees.

We believe that our success will depend, to a significant extent, on the efforts and abilities of Farid Shouekani, Paul W. Atkiss, and James R. Balestraci. 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.

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26. 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.

27. 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 revenues 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.

28. 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.

29. Potential Immediate and Substantial 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 guarantee that we will be successful in raising additional capital, if we are successful in obtaining any additional capital, existing stockholders will likely incur immediate and substantial dilution.

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

As of December 31, 2005, there were 93,824,016 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 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.

31. 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 2. DESCRIPTION OF PROPERTY

Principal Office

Our headquarters is located at 10373 Roselle Street, Suite 170, San Diego, California 92121 at which we have 4,415 square feet of space under a forty month lease at a cost of $4,387 per month, terminating on December 31, 2007. In Addition, during a part of 2005 we leased 1,477 square feet of office space at 2070 Business Center Drive, Suite 210, Irvine, California 92612 under a twenty-four month lease at a cost of $1,736 per month. Occupancy at this location was terminated in November 2005, but the Company remains obligated through July, 2006.

Our subsidiary, Mid-Atlantic International, Inc. is located at 49 S. Plaza Blvd, Suite B31, Rochester Hills, Michigan 48307, maintains offices and support facilities totaling approximately 1000 square feet of space under a month to month lease at a cost of $1000 per month.

Our subsidiary, Adoria Communications, LLC with offices at 140 Wood Road Suite 200, Braintree, Massachusetts 02184, maintains offices and support facilities totaling less than 1000 square feet of space under a month to month lease at a cost of $125 per month.

Hills of Bajamar Commercial/Residential development

During September 1998, the Company entered into an agreement with Tri-National, a related party, to purchase 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico (the “Land) that is valued at the predecessor cost of $125,000. The Company 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 its series B Preferred Stock and stock warrants to purchase 1,000,000 shares of Common Stock. During June 2001, the Company negotiated a settlement and release with the Class B preferred stockholder whereby the Preferred Stock and stock warrants were exchanged for 400,000 shares of the Company’s Common Stock and the cumulative undeclared dividend was not declared. During October 2001, Tri-National filed a voluntary bankruptcy petition; the court appointed a Trustee in October 2002.

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Because consideration for the agreement (documented title) never was received the Company did not believe it was ever the owner of the Land. Accordingly, the value of the Land had previously been classified as a stock subscription receivable.

During January 2006, the Company and the court appointed Trustee entered into a settlement agreement whereby the 400,000 shares of the Company’s Common Stock was released to the Trustee as an asset of the bankruptcy estate, Viper was released from all claims, and the Company relinquished any claim in the Land. Accordingly, the $125,000 previously held as a stock subscription receivable was charged against earnings as a bad debt during the year ended December 31, 2005.

ITEM 3. LEGAL PROCEEDINGS

On June 11, 2004, the Company filed an action in the Superior Court of California, County of San Diego seeking, among other things, the rescission of an April 25, 2003 agreement with Greenland Corp. The agreement provided that Greenland was to receive 2,500,000 shares of the Company’s common stock. The Company claimed that the agreement with Greenland was entered into on the basis of fraud. Greenland filed counterclaims in both California and Utah and sought, among other remedies, the full and unrestricted ownership of the 2,500,000 shares of the Company’s common stock.

As requested, by the Company, the Superior Court stayed the California cases and referred the California and Utah cases to binding arbitration. Subsequently on February 10, 2006, the Arbitrator issued an interim award, which remains pending. The Company believes the interim award would, in essence, restore the Company and Greenland to the position that each had prior to entering into the Agreement. If the interim award becomes the final decision, the Company will seek to regain 2,500,000 shares previously issued to Greenland and the Company may seek additional claims (for attorney’s fees and other disbursements).

The Company's officers and directors are aware of no other threatened or pending litigation, which would have a material, adverse effect on us. From time to time we are a defendant (actual or threatened) in certain lawsuits encountered in the ordinary course of its business, the resolution of which, in our opinion, should not have a material adverse effect on our financial position, results of operations, or cash flows.

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

None.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As of December 31, 2005, the Company's Common Stock traded in the non-Over the Counter "Pink Sheets" listed in the National Daily Quotations Service under the symbol, VPER. Trading in the stock commenced on September 16, 2002 and only a limited and volatile trading market exists with only sporadic and limited interest by market makers.

Stockholders who may seek to sell any Shares of the Common Stock will not likely find any significant liquidity and therefore may not be able to sell any significant volume of the Company’s Common Stock. As of December 31, 2005, the Company had 370 stockholders of record and several market makers.

The following table reflects the high and low prices of the Company's Common Stock for the two years ended December 31, 2005.

Year	Period		High Close		High Bid		Low Close		Low Bid
2004	First Quarter	$	1.55	$	1.55	$	0.35	$	0.35
	Second Quarter	$	0.72	$	0.72	$	0.36	$	0.36
	Third Quarter	$	0.46	$	0.50	$	0.23	$	0.23
	Fourth Quarter	$	0.47	$	0.49	$	0.27	$	0.27
2005	First Quarter	$	0.33	$	0.33	$	0.105	$	0.105
	Second Quarter	$	0.21	$	0.21	$	0.095	$	0.095
	Third Quarter	$	0.13	$	0.13	$	0.04	$	0.04
	Fourth Quarter	$	0.095	$	0.095	$	0.041	$	0.041

The Company has followed the policy of reinvesting earnings, if any, and, consequently, has not paid any cash dividends. At the present time, no change in this policy is under consideration by the Board of Directors. The payment of cash dividends in the future will be determined by the Board of Directors in light of conditions then existing, including the Company's earnings, financial requirements and condition, opportunities for reinvesting earnings, business conditions and other factors.

In January 2004, the Company issued 2,100,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of $210,000 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 early February 2004, the Company issued an aggregate of 1,800,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of $450,000 in cash. The shares were valued at $0.25 per share. 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.

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In early March 2004, in connection with the repurchase rights of common stock issued pursuant to the acquisition of Mid-Atlantic in October, 2003 (see above), the Company reissued 1,802,000 shares of the Company’s Common Stock to nine investors in connection with the acquisition of Mid-Atlantic. The shares were accorded an aggregate value of $450,500. Of the 7,535,000 shares issued at the time of the Mid-Atlantic acquisition, 4,235,000 held a put option. In March, 2004 some of these shares (1,467,648) were repurchased by the Company at the redemption price of $0.17 (a total of $249,500 was paid). Of the remaining 2,767,352 shares, 1,802,000 were reissued to the nine pre-acquisition investors in Mid-Atlantic in accordance with the wishes of the former owner of Mid-Atlantic. The remaining shares (965,353) were returned to treasury without compensation and the put option expired. The re-issued 1,802,000 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 mid March 2004, the Company issued an aggregate of 5,000,000 shares of the Company’s Common Stock to five officers and directors of the Company with each share valued at $0.04 per share. The share issuances were as follows: (1) 1,000,000 shares to Farid Shouekani; (2) 1,000,000 shares to Jason A. Sunstein; (3) 1,000,000 shares to John L. Castiglione; (4) 1,000,000 shares to Ronald G. Weaver; and (5) 1,000,000 shares to Stephen D. Young. 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.

Later, in March 2004, the Company issued 2,500,000 shares of the Company’s Common Stock in connection with the acquisition of Adoria Communications. The shares were accorded an aggregate value of $3,074,500 and were issued to one purchaser. 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.

Later, in March 2004, the Company issued an aggregate of 1,295,000 shares of the Company’s Common Stock to nine purchasers in exchange for the Company’s receipt of an aggregate of $323,750 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer, however 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. The Company paid a finder’s fee equal to 8% of the aggregate amount received, with 7% paid in cash and 1% paid by the issuance of the Company’s Common Stock. Apart from the payment of a finder’s fee, 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

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informed the securities purchased were restricted securities and they may have to hold them for an indefinite period of time.

In late March 2004, the Company issued an aggregate of 1,669,184 shares of the Company’s Common Stock to 34 investors in exchange for the Company’s receipt of an aggregate of $310,500 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. The Company paid 150,000 shares of the Company’s Common Stock as a finder’s fee in connection with the Company’s issuance of 1,062,500 of these shares. However, apart from the issuance of these shares to a finder, no other fees or 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 early April 2004, the Company issued 95,000 shares of the Company’s Common Stock to three purchasers in exchange for the Company’s receipt of an aggregate of $17,500 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. The Company paid a finder’s fee equal to 8% of the aggregate amount received, with 7% paid in cash and 1% paid by the issuance of the Company’s Common Stock. Apart from the payment of a finder’s fee, 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.

Later in April 2004, the Company issued additional shares of the Company’s Common Stock as follows:

	(1)	10,000 shares to one purchaser in exchange for the Company’s receipt of cash of $1,000;
	(2)	240,000 shares to two purchasers in exchange for the Company’s receipt of cash of $60,000; and
	(3)	110,000 shares to two purchasers in exchange for the Company’s receipt of cash of $27,500.

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. In each transaction, the Company paid a finder’s fee equal to 8% of the aggregate amount received, with 7% paid in cash and 1% paid by the issuance of the Company’s Common Stock. The finder merely introduced the Company to each purchaser and apart from the payment of a finder’s fee 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 2004, the Company issued an aggregate of 610,000 shares of the Company’s Common Stock to five investors in exchange for the Company’s receipt of an aggregate of $152,500 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. The Company paid a finder’s fee equal to 13% of the aggregate amount received, with 7% paid in cash and 6% paid by the issuance of the Company’s Common Stock. The finder merely introduced the Company to each purchaser and apart from the payment of a finder’s fee 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

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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 late June 2004, the Company issued 575,000 shares of the Company’s Common Stock to one investor in exchange for the Company’s receipt of $115,000 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.

Later in June 2004, the Company issued 2,000,000 shares of the Company’s Common Stock in connection with the acquisition of a 37.5% interest in Brasil Communications, LLC. The shares were valued at $0.46 per share. 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 July 2004, the Company issued 187,500 shares of the Company’s Common Stock to one purchaser in consideration of the Company’s receipt of cash of $9,375. 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 early August 2004, the Company issued an aggregate of 545,000 shares of the Company’s Common Stock to five investors in exchange for the Company’s receipt of cash of $136,250. 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. The Company paid a finder’s fee equal to 13% of the aggregate amount received, with 7% paid in cash and 6% paid by the issuance of the Company’s Common Stock. The finder merely introduced the Company to each purchaser and apart from the payment of a finder’s fee 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.

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Later in August 2004, the Company issued 1,800,000 shares of the Company’s Common Stock to one investor in exchange for the Company’s receipt 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 September 2004, the Company issued shares of the Company’s Common Stock as follows:

	(1)	A total of 45,192 shares of the Company’s Common Stock were issued in payment of legal services. All of these shares were valued at aggregate of $0.6425 per share;
	(2)	A total of 100,000 shares of the Company’s Common Stock were issued to Paul E. Atkiss, an officer and director of the Company in payment for services. All of these shares were valued at aggregate of $0.4175 per share;
	(3)	An aggregate of 6,000,000 shares of the Company’s Common Stock were issued in payment for services by the following officers and directors with each receiving 1,000,000 shares: (a) Farid Shouekani; (b) Jason A. Sunstein; (c) James R. Balestraci; (d) John L. Castiglione; (e) Ronald G. Weaver; and (f) Stephen D. Young. All of these shares were valued at $0.04 per share;
	(4)	A total of 250,000 shares were issued in settlement of a dispute with all of the shares issued to one purchaser. All of these shares were valued at $0.51 per share;
	(5)	A total of 20,000 shares were issued to one purchaser in consideration of the Company’s receipt of cash $10,000 for a value of $0.50 per share;
	(6)	A total of 50,000 shares were issued to one purchaser in payment of certain accrued and unpaid interest on a Company debt. These shares were valued at $0.06 per share;
	(7)	An aggregate of 503,893 shares were issued to three purchasers in connection with the conversion of notes aggregating $150,000 previously issued to them by the Company plus accrued interest of $1,168. These shares were valued at $0.30 per share;
	(8)	A total of 225,000 shares were issued to two purchasers in payment for services received by the Company. These shares were valued at aggregate of $0.45 per share; and
	(9)	A total of 76,333 shares were issued to one purchaser in payment for services. These shares were valued at aggregate of $0.4569 per share.

All of the shares were offered and sold by the Company’s management 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.

On October 17, 2004, the Company effected a forward split of the Company’s Common Stock so that, as effected, each stockholder received one share of the Company’s Common Stock for every ten share of the Company’s Common Stock held as of the record date.

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

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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 3,000,000 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 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 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

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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 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 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 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 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 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

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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 July 2005, the Company issued 1,021,500 shares of the Company’s Common Stock to five purchasers in exchange for the Company’s receipt of an aggregate of $57,621 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.

In July 2005, the Company issued an aggregate of 4,938,300 shares of the Company’s Common Stock to several subscribers of a previous private placement aggregating 4,717,000 share for $1,179,250 conducted during 2004, upon the final calculation of the subscribers' purchase price. No additional proceeds were received. 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 July 2005, the Company issued shares of the Company’s Common Stock in payment for services received as follow:
(1)	A total of 83,333 shares were issued to two persons in payment for services received by the Company. These shares were valued at an aggregate of $0.1945 per share;
(2)	A total of 126,027 shares were issued to Donald Sinnar, an officer of the Company in payment of services received by the Company. These shares were valued at $0.12 per share;
(3)	A total of 250,000 shares were issued to Paul E. Atkiss, an officer and director of the Company in payment of services received by the Company. These shares were valued at $0.125 per share; and
(4)	A total of 119,837 shares were issued to one person in payment for legal services received by the Company. These shares were valued at an aggregate of $0.2223 per share.

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 July 2005, the Company cancelled 1,375,000 shares of the Company’s Common Stock previously issued in June 2004 to an Accredited Investor is connection with the May 2005 agreement to eliminate the Company’s 50%

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ownership interest in Brasil Communications, LLC. All of the shares were originally 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 August 2005, the Company issued 500,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of an aggregate of $25,300 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 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 an equal amount of common stock purchase warrants at a price of $0.25 (expiration August 26, 2009). In addition, the existing short term unsecured promissory notes with these officers were amended to include certain unpaid salaries, benefits, previous salary deferrals, and unpaid expenses within the existing notes. A total of 16,500,000 shares of the Company’s Common Stock were returned as treasury stock by the following officers:

(1)	4,400,000 shares by Ronald G. Weaver originally issued: (a) 2,200,000 October 2003, (b) 1,100,000 March 2004, and (c) 1,100,000 September 2004;
(2)	4,400,000 shares by John L. Castiglione originally issued: (a) 2,200,000 October 2003, (b) 1,100,000 March 2004, and (c) 1,100,000 September 2004;
(3)	4,400,000 shares by Jason A. Sunstein originally issued: (a) 2,200,000 October 2003, (b) 1,100,000 March 2004, and (c) 1,100,000 September 2004;
(4)	2,200,000 shares by Farid Shouekani originally issued: (a) 1,100,000 March 2004, and (b) 1,100,000 September 2004; and
(5)	1,100,000 shares by James R. Balestraci originally issued 1,100,000 September 2004.

All of these shares were originally valued at $0.0364 per share (adjusted for the September 2004 10% stock dividend) and charged against income during 2004 ($360,000) and 2003 ($240,000). 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 September 2005, the Company issued an aggregate of 3,492,063 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of an aggregate of $300,000 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

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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 September 2005, the Company issued 1,500,000 shares of the Company’s Common Stock to Investor Relations International, Inc. in payment for twelve month of investor relation and public relation services. The shares were valued at $0.10 per share. 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 November 2005, the Company issued shares of the Company’s Common Stock in payment for services received as follow:
(1)	A total of 199,113 shares were issued to Donald Sinnar, an officer of the Company in payment of services received by the Company. These shares were valued at $0.09 per share;
(2)	A total of 250,000 shares were issued to Paul E. Atkiss, an officer and director of the Company in payment of services received by the Company. These shares were valued at $0.057 per share; and
(3)	A total of 20,000 shares were issued to one person in payment for services received by the Company. These shares were valued at an aggregate of $0.095 per share.

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 November 2005, the Company issued an aggregate of 4,700,002 shares of the Company’s Common Stock to four purchasers in exchange for the Company’s receipt of an aggregate of $300,000 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. The Company paid 100,000 shares of the Company’s Common Stock as a finder’s fee in connection with the Company’s issuance of 3,500,002 of these shares. However, apart from the issuance of these shares to a finder, no other fees or 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.

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The following table summarizes the 2000 Equity Plan and 2002 Employee Compensation Plan as of December 31, 2005:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance.
	(a)	(b)	(c)

Equity Issuances pursuant to 2000 Equity Plan*	7,250,000	$0.232	4,750,000

Equity Issuances Pursuant to 2002 Employee Compensation Plan*	0	$0.00	0

Equity compensation plans not approved by security holders	0	0	0

Total	7,250,000	$0.232	4,750,000

* Approved by security holders

ITEM 6. 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, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions 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, but not limited to, those related to bad debts, product returns, warranties, inventory reserves, long-lived assets, income taxes, litigation, and other contingencies. Management bases its estimates on historical experience and 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-KSB 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-KSB, including, but not limited to, the Sections titled “The Factors That May Affect Future Results” shown as Item 1A 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

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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-KSB 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 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 Fiscal Year Ending December 31, 2005 and Fiscal Year Ending December 31, 2004

During the fiscal year ending December 31, 2005 (“Fiscal 2005”), we recorded $3,482,549 as Net revenues. This compares to the fiscal year ending December 31, 2004 ("Fiscal 2004") when we recorded $4,612,783 as net revenue. Net revenues of Consumer Operations grew approximately 190%, increasing from $222,941 in 2004 to $646,375 in 2005. This increase was the result of increased market acceptance of the Company’s VoIP products and services. Wholesale Operations Net revenues (on a consolidated basis) decreased from $4,389,843 to $2,836,175, or approximately 35%. Both the former Adoria and Mid-Atlantic operations saw revenue decreases, though that for the Mid-Atlantic operations (-69%) was much more significant than that for the Adoria operations (-15%). The decrease in Mid-Atlantic revenues was the result of a redirection in staff efforts away from Mid-Atlantic’s wholesale business and toward the testing and quality management of Consumer Operations products and services. The decrease in Adoria revenues resulted from limitations imposed by cash shortages that proved insufficient to support prior revenue levels.

During Fiscal 2005, our Cost of revenues was $3,136,285 which resulted in a gross margin as a percentage of net sales revenues of approximately 10%. This compares to Fiscal 2004 where our Cost of revenues was $4,108,185 which resulted in a gross margin percentage of net sales revenues was approximately 11%. Consumer Operations Cost of revenues as a percentage of net sales revenues decreased from 117% in 2004 to 97% in 2005, the result of improved purchasing efficiencies associated with the larger sales volumes in 2005. Wholesale Operations Cost of revenues as a percentage of revenues increased from 88% to 89%, the result of lower margins in the Adoria operation (which represented a much higher percentage of Wholesale Operations revenues in 2005 compared to 2004). Competitive conditions, product and sales mix, and technology trends impacted our gross margin in both of these years. Net revenues and Cost of revenues resulted in gross margins as a percentage of sales diminishing from 11% in 2004 to 10% in 2005 (Consumer Operations margins improved from -17% to 3% while Wholesale Operations margins decreased from 11% to 10%, respectively).

During Fiscal 2005 we incurred $2,810,055 in General and administrative expenses. This compares to Fiscal 2004 when we incurred $3,660,801 in General and administrative expenses. General and administrative expenses as a percent of Net revenues decreased for the Consumer Operations (1,207% in 2004; 274% in 2005) and decreased on an absolute basis by 34%. However, General and administrative expenses as a percent of revenues increased for the Wholesale Operations (22% in 2004; 37% in 2005) and increased on an absolute basis by 7%. The improvement in Consumer Operations was due to better absorption of marketing expenses in 2005 as revenues increased and the reversal of $600,000 in executive bonuses paid in the Company’s common stock in prior years ($360,000 and $240,000 during 2004 and 2003, respectively) and returned by the executives in Fiscal 2005. The adverse change in Wholesale Operations was the result of both decreased revenues in the Mid-Atlantic operation coupled with increased expenses there. Overall, General and administrative expenses were primarily made up of wages and salaries, office expenses, fees and costs incurred for legal and accounting services, and other administrative costs.

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The single largest factor distinguishing profitability in 2005 compared to 2004 was the result of impairments taken against purchased intangibles and purchased assets. In 2004 we incurred a charge against income for Impairment of purchased intangibles of $3,396,138 (related to the Adoria acquisition) and a charge against income for Impairment of purchased assets of 1,092,100 (related to the Brasil, LLC investment). Both charges resulted from a post-acquisition or post-investment analysis of the fair market value of the purchased intangibles or assets which showed them to be worth significantly less than their book value. By contrast, in 2005 we incurred a much smaller charge against income for Impairment of purchased intangibles of $275,000 (again associated with the Adoria acquisition), and 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.

During Fiscal 2005, we had Bad debt expense of $26,845 compared to Fiscal 2004 when we had a Bad debt expense of $83,712 (in 2005 the Consumer Operations incurred a Bad debt expense of $65,605 which was partially offset by a recovery of $38,760 in Wholesale Operations). Changes were enacted mid-year in 2005 to curb what were deemed to be excessive and unsustainable bad debt losses from Consumer Operations’ customer fraud. Also during Fiscal 2005, we recorded an Equity loss from unconsolidated subsidiaries of $46,329 compared to Fiscal 2004 when we recorded a loss of $181,067 (associated with the Brasil LLC investment).

As a result of these margins and expenses, we incurred an operating loss of $2,196,748 in 2005 compared to an operating loss of $7,909,220 in 2004. Most of the loss in 2005 ($1,522,390) was within the Consumer Operations, which incurred the bulk of the General and administrative costs. As a percent of sales, the operating loss in Consumer Operations decreased from 3,336% to 236%, while the loss in Wholesale Operations increased from 11% to 24%.

During Fiscal 2005 we had $392,034 in Realized gain on marketable securities from the sale of NextPhase Wireless, Inc. (“NextPhase”) shares held by the Company compared to a Fiscal 2004 gain of $15,761. In addition, in Fiscal 2005 we had Interest expense of $128,412 compared to $73,060 in Fiscal 2004. The increase in Interest expense in 2005 occurred from increased loans from related parties.

As a result, during Fiscal 2005 we had a Net loss of $1,929,685 compared to Fiscal 2004 when we had a Net loss of $7,964,192. The improvement in Net loss was predominantly within Consumer Operations (the 2004 Net loss of $7,465,493 improved to a Net loss of $1,171,885). The operating loss in Wholesale Operations increased from $498,699 (11% of revenues) in 2004 to $757,800 (27% of revenues) in 2005. The improvement in Net loss from Fiscal 2004 to Fiscal 2005 is the result of the discussions above, notable from the benefit of reduced Impairment of purchased intangibles ($3,121,138), reduced Impairment of purchased assets ($1,707,316), returned executive bonuses paid in the Company’s common stock ($960,000), and increased Realized gain on marketable securities (NextPhase) ($376,273).

Basic loss per share for Fiscal 2005 was $.01 compared to Fiscal 2004 when we had a Basic loss per share of $.08. During Fiscal 2005, we had 130,766,267 Weighted average shares outstanding. By comparison, during Fiscal 2004 we had 101,961,298 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 December 31, 2005, we had $33,430 in cash, down 29% from 2004 ($46,945). At the same time, we had $119,039 in net accounts receivable (compared to $121,948 in 2004), $74,959 in inventories (compared to $72,020 in 2004), and $194,874 in Other current assets (compared to $194,874 in 2004) for $426,301 in Total current assets (a 38% increase from 2004 Current assets of $305,248). We expect inventory needs to grow in proportion to product sales growth; cash will be negatively impacted by this need. Net fixed assets decreased 64% from $497,226 in 2004 to $179,640 in 2005. Total assets decreased 41% from $1,273,848 in 2004 to $755,482 in 2005.

In contrast, as of December 31, 2005, our Total current liabilities were $1,471,943 compared to $1,216,775 at the same time in 2004. During this time Accounts payable grew from $375,564 in 2004 to $589,918 in 2005, loans at the end of 2005 remained generally unchanged at $606,490, General liabilities increased from $15,163 (2004) to $84,492 (2005), and Deferred revenues increased from $82,103 in 2004 to $185,293 in 2005.

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Net Working Capital as of December 31, 2005 was negative -$1,045,643 compared to negative -$911,527 at the same time in 2004, a decrease of 15%. Total assets less Liabilities decreased between the end of 2004 and 2005 from negative -$34,478 to negative -$716,461 – a decrease of $681,983.

During Fiscal 2005, cash flows from operations was negative -$1,551,430; comprised of negative -$1,195,744 for Consumer Operations and negative -$355,606 for Wholesale Operations. These cash requirements were funded in part from the sale of NextPhase common stock, loans from shareholders, and the sale of the Company’s common stock. The Company anticipates that it will consume cash within Consumer Operations as revenues increase, products are added to inventories, and we implement our business plan. In addition, Wholesale Operations will consume cash as it competes against lower gross margins and it supports implementation of our business plan. We can not be assured that we will continue to obtain funds from these or any other sources to meet our need for additional capital resources.

Overall, our liquidity and access to capital is very limited. We have not received any commitment for additional financing and given the size of our company, we may be limited to 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. If we are to implement our business plan, we will need to raise significant amounts of additional capital and during the period ending December 31, 2005 we had not received any commitment that any such additional financing would be forthcoming or, if could be obtained, that it can be obtained on reasonable terms in light of our circumstances at that time. In addition, if any financing should be obtained, existing shareholders will likely incur substantial, immediate, and permanent dilution of their existing investment.

NextPhase 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 4,000,000 shares of NextPhase common stock (“Pledged Stock”) were pledged as collateral on behalf of NextPhase for a $350,000 promissory note (“Note”) issued in connection with the acquisition of the public shell. In early May 2005, the Note was paid in full and the Pledged Stock was released to the Company. During August the Company request an exemption (as noted below) to commence selling shares of the NextPhase “restricted” common stock to raise capital for the Company.

During the period ending December 31, 2005, the Company sold 219,499 shares of NextPhase in the public market and 1,759,576 shares in private transactions. Aggregate proceeds from these sales equaled $290,611. In addition, the Company sold 122,192 shares of NextPhase in a private transaction for payment of $30,548 in debt. On December 31, 2005 the Company holds 1,898,733 shares of NextPhase common stock

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

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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 December 31, 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 December 31, 2005, the Company expects that it will need at least $2,000,000 to cover its anticipated operating expenses for the twelve month period thereafter. Of this, approximately 60% 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 conformity 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 amounts 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, in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition in financial Statements”. 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 the relative fair value of the hardware (product) and minutes of calling time (service) based on published pricing. 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 a deferred revenue liability.

The Company’s hardware products consist of both i) devices connected to and used in conjunction with a computer for use over any speed Internet connection (dial-up or broadband) and ii) devices used with a broadband Internet connection not requiring a computer. Hardware products contain embedded software or firmware provided by the third party manufacture which is incidental to the product sale. Included with each product sale are a Viper Networks VoIP calling account (“VoIP Account”) and the ability to download our proprietary dialer software/VoIP Account interface. Our dialer software/VoIP Account interface is not sold separately; the current version is available for customers to download from our web site.

The Company sells the routing and delivery of internet traffic which conforms with Voice over Internet Protocol to both consumers and wholesale carriers. Consumers purchase prepaid calling time for addition to a VoIP Account either directly from the Company web site or by the purchase of a voucher from our distributor network. Revenue from the sale of prepaid calling time to consumers or vouchers to distributors is deferred upon sale. These deferred revenues are recognized into revenue based on the number of minutes during a call in accordance with our published calling rates. Consumer revenue for a period is calculated by our proprietary software from information received through our network switches. Wholesale carriers purchase bulk minutes of VoIP traffic typically billed weekly in arrears from information received through our network switches. Other services are sold on a per use basis typically billed in arrears.

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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, (“SFAS”) No.142, “Goodwill and Other Intangible Assets” (“SFAS 142”). 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” (“SFAS 144”).

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. 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.

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 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. The provisions of this Statement will be effective for the Company beginning with its fiscal year ending November 30, 2006. Management believes that the adoption of this Statement will not have any immediate material impact on the Company.

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, and Statement 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 Company believes that the implementation of this standard will not have a material impact on its financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”). This Statement requires that the cost resulting from all share-based transactions be recorded in the financial

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statements. The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Statement replaces SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees”. The provisions of this Statement will be effective for the Company beginning with its fiscal year ending December 31, 2006. The Company believes that the implementation of this standard will not have a material impact on its financial position, results of operations or cash flows.

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 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.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections: a Replacement of Accounting Principles Board Opinion No. 20 and FASB Statement No. 3" ("SFAS 154"). SFAS 154 requires retrospective application for voluntary changes in accounting principle unless it is impracticable to do so or another methodology is required by the standard. Retrospective application refers to the application of a different accounting principle to previously issued financial statements as if that principle had always been used. SFAS 154's retrospective application requirement replaces APB No. 20's ("Accounting Changes") requirement to recognize most voluntary changes in accounting principle by including in net income (loss) of the period of the change the cumulative effect of changing to the new accounting principle. This statement defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity. SFAS 154 also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. The requirements are effective for accounting changes made in fiscal years beginning after December 15, 2005 and will only impact the consolidated financial statements in periods in which a change in accounting principle is made. The Company does not expect that the adoption of SFAS 154 in the first quarter of fiscal 2006 will have a material impact on its results of operations and financial condition.

In November 2005, the FASB issued FASB Staff Position FSP 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP 115-1”), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment. The Company expects to adopt FSP 115-1 effective for the quarter beginning January 1, 2006, and the adoption is not expected to have a material impact on our results of operations or financial condition.

ITEM 7. FINANCIAL STATEMENTS

The consolidated financial statements and related financial information required to be filed hereunder are indexed on page F-1 of this report and are incorporated herein by reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUTANTS

None.

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ITEM 8A. CONTROLS AND PROCEDURES

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, as to there effectiveness to record, process, summarize, and report on a timely basis. 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, taken as a whole, 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 and 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, except that such controls and procedures are not effective to ensure that the reports that it files or submits under the Exchange Act are on a timely basis nor that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is communicated to the Company’s management, as appropriate, to allow for timely decisions regarding required disclosure.

Changes in Internal Controls 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.

Limitations On The Effectiveness Of Controls

Internal controls are processes designed, by our board of directors and management, to provide reasonable assurance regarding the achievement of objectives in the following categories: (a) reliability of financial reporting, (b) effectiveness and efficiency of operations, and (c) compliance with applicable laws and regulations. Internal controls consist of five interrelated components:

Control environment sets the tone of an organization, influencing the control consciousness of its people and is the foundation for all other components of internal control, providing discipline and structure,

Risk assessment is the entity's identification and analysis of relevant risks to achievement of its objectives, forming a basis for determining how the risks should be managed,

Control activities are the policies and procedures that help ensure that management directives are carried out,

Information and communication systems support the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities, and

Monitoring is a process that assesses the quality of internal control performance over time.

Internal controls, no matter how well designed and operated, can provide only reasonable assurance of achieving our control objectives. The likelihood of achievement is affected by limitations inherent to internal controls. These include the realities that human judgment in decision-making can be faulty and that breakdowns in internal controls can occur because of human failures such as simple errors or mistakes. Additionally, controls, whether manual or automated, can be circumvented by the collusion of two or more people or inappropriate management override of internal controls. Internal controls are influenced by the quantitative and qualitative estimates and judgments made by management in evaluating the cost-benefit relationship of an internal control. Custom, culture, and the corporate governance system may inhibit fraud, but they are not absolute deterrents.

It is the responsibility of management, to include the Chief Executive Officer and Chief Financial Officer, to monitor compliance with and maintain effective internal controls.

ITEM 8B. OTHER INFORMATION

None.

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PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Directors and Executive Officers

The members of the Board of Directors of the Company serve until the next annual meeting of stockholders, or until their successors have been elected. The Company’s by-laws provide for four authorized directors. Currently, the Company has only three directors and intends, as opportunities become available, to identify one additional director to serve on the Company’s Board of Directors.

The officers serve at the pleasure of the Board of Directors. Information as to the directors and executive officers of the Company as of December 31, 2005 is as follows:

Name	Age	Position	Date Elected

Ronald G. Weaver	62	President, Chief Executive Officer & Director	2003
Farid Shouekani	42	Chief Technical Officer & Director	2003
Paul E. Atkiss	51	Chief Financial Officer and Director	2004

Each of the foregoing persons may be deemed a "promoter" of the Company, as that term is defined in the rules and regulations promulgated under the Securities Act of 1933.

Ronald G. Weaver, age 62, is Chairman of the Board of Directors and Director of the Company and has been a member of the Board since June 2003. From 1999 to 2002, Mr. Weaver served as Chief Operating Officer of Digital Services Group, Inc. where he created a multi-year business plan while directing overall revenue growth of 47% in China and Taiwan and in Europe and Latin America. From 1997 to 1999, Mr. Weaver served as Vice President of World Wide Sales of Global VoIP Sound. From 1994 to 1997, Mr. Weaver served as Vice President of World Wide Sales and Marketing at Franklin Telecom where he created turnkey VoIP sales systems for Latin America, Europe, Asia, and the Pacific Rim and opened up nine new telecom markets and established the NATO satellite communications services backbone. From 1984 to 1997, Mr. Weaver served as National Distribution Sales Manager at Panasonic AOG. From 1980 to 1984, Mr. Weaver served as National Sales and Marketing Manager at Western Digital. Mr. Weaver received his Bachelor of Arts (degree) in Business Administration and Economics from the University of California at Los Angeles (1973), completed studies at New Mexico State University in Organizational Psychology (1975), completed studies in French at California State University (1988), and completed studies at MSU in Russian.

Farid Shouekani, age 42, is President, Chief Executive Officer and Director of the Company and has held these positions since October 2005. For the past 10 years Mr. Shouekani has held positions in VoIP, telecommunications and engineering with such Companies as TEC Cellular, Robotron and Crescent International. Most recently he helped design, build and deploy Mid Atlantic International's World Wide VoIP (Voice over Internet Protocol) network which was acquired by Viper Networks in 2003. Mr. Shouekani has a Bachelor of Science Degree in Electrical Engineering and a Masters of Science Degree in Computer Engineering from Florida Tech.

Paul E. Atkiss, age 50, is Vice President Finance, Secretary, Chief Financial Officer, and Director of the Company and has held these positions since 2004. Prior to June 2004, Mr. Atkiss brings to the Company over 25 years of accounting and finance experience with privately held and publicly traded corporations. Mr. Atkiss spent 12 years with Jaycor, most recently as Controller, where he was responsible for the accounting systems, consolidated reporting, financial and tax audits, banking, and insurance. Mr. Atkiss holds a Bachelor of Science degree from San Diego State University and is a California CPA.

James R. Balestraci, age 40, is Chief of International Wholesale Operations and has held this position since January 2004. Prior to joining the Company, Mr. Balestraci was the President and founder of Adoria Communications, LLC and served in that capacity for 2 years. Mr. Balestraci joins Viper Networks with over 11 years of successful telephony engineering and sales experience having worked for some of the premier firms in the industry. This includes 9 years immediately prior to founding Adoria Communications with Network Plus, Inc., where he held various sales and marketing positions. Mr. Balestraci holds a Bachelors of Science degree from Plymouth State University with an emphasis in marketing.

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Advisory Board Member

The Company has established an Advisory Board. Currently the Company has only one Advisory Board Member but the Company may increase the size of the Board if opportunities arise. The Advisory Board provides advice to the Company’s management from time to time and as requested. The Company has not established any compensation arrangements for the services it receives from persons who provide advice in their capacity as Advisory Board Members.

Paul Goss, age 62, is an Advisory Board Member of the Company. Mr. Goss has been legal counsel to the Company since September 2000. Mr. Goss had been the Executive Vice President and General Counsel for One Capital Corporation, a private merchant bank with offices in New York and Denver from 1990 until 2005. Prior to joining Capital One, Corporation, Mr. Goss was engaged in the private practice of law in Denver, Colorado with a concentration in real estate, corporate, and merger and acquisition law both domestic and international. He is a member of the Denver and Colorado Bar Associations. Mr. Goss has a Masters in Business Administration (degree) in addition to his Juris Doctor (degree) from the University of Denver.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires that the Company’s directors, executive officers, and persons who own more than 10% of the Company’s Common Stock (collectively, “Covered Persons”) to file reports of ownership (Form 3) and reports changes in ownership of Common Stock (Forms 4 and Forms 5) with the Securities and Exchange Commission as well as the Company and any exchange upon which the Company's Common Stock is listed.

The Company is required to identify Covered Persons that the Company knows have failed to file or filed late Section 16(a) reports during the previous fiscal year. To the Company's knowledge, the following Covered Persons during the fiscal year ended December 31, 2005 failed to file on a timely basis reports required by Section 16(a) of the Exchange Act:

Name	Position	No. of Reports Not Filed on a Timely Basis(1)

Paul E. Atkiss	Chief Financial Officer and Director	Form 4
James R. Balestraci	Former Vice President	Form 4
John L. Castiglione	Former Vice President & Director	Form 4
Farid Shouekani	President, CEO & Director	Form 4
Jason A. Sunstein	Former Treasurer & Director	Form 4
Ronald G. Weaver	Director & Former President & CEO	Form 4

Footnote:
(1)	To the Company's knowledge, based solely on a review of the copies of the reports furnished to the Company by such persons, in the fiscal year ended December 31, 2005 such persons have subsequently filed the reports required by Section 16(a) of the Exchange Act.

ITEM 10. EXECUTIVE COMPENSATION

The Company's Board of Directors has authorized the compensation of its officers with the following annual cash salaries:

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SUMMARY COMPENSATION TABLE

		Annual Compensation			Long-Term Compensation

					Awards Payouts

Name and Principal Position (a)	Year (b)	Salary ($)(c)	Bonus ($)(d)	Other Annual Compen- sation(1) ($)(e)	Restricted Stock Awards(2) (s)($)(f)	Securities Underlying Options/ SARs (#)(g)	LTIP Payouts ($)(h)	All Other Compen- sation(3) ($)(i)

Ronald G. Weaver, Chairman(4)	2003 2004 2005	$ 13,846 $ 140,885 $ 109,269	$ 0 $ 0 $ 0	$ 0 $ 9,000 $10,527	$ 80,000 $ 80,000 $ 0	750,000 0 0	$ 0 $ 0 $ 0	$ 0 $ 0 $ 389
John L. Castiglione, V.P. Marketing, Treasurer, and Director(5)	2003 2004 2005	$ 13,846 $140,885 $100,038	$ 0 $ 0 $ 0	$ 0 $ 9,000 $ 7,332	$167,875 $ 80,000 $ 0	250,000 0 0	$ 0 $ 0 $ 0	$ 0 $ 0 $ 4,246
Farid Shouekani, President, CEO and Director (6)	2003 2004 2005	$ 24,000 $120,000 $120,000	$ 0 $ 0 $ 0	$ 1,831 $ 8,787 $ 7,930	$ 0 $80,000 $ 0	250,000 0 0	$ 0 $ 0 $ 0	$ 0 $ 0 $74,570
Jason A. Sunstein, V.P. Finance, Secretary & Director(7)	2003 2004 2005	$ 13,846 $140,885 $100,038	$ 0 $ 0 $ 0	$ 0 $ 9,000 $ 7,534	$167,875 $ 80,000 $ 0	250,000 0 0	$ 0 $ 0 $ 0	$ 0 $ 0 $ 4,187
Paul E. Atkiss, CFO & Director (8)	2003 2004 2005	$ 0 $ 75,077 $100,000	$ 0 $ 0 $ 0	$ 0 $ 0 $ 1,058	$ 0 $ 76,750 $120,750	0 1,000,000 4,000,000	$ 0	$ 0 $ 0 $ 181
James R. Balestraci Chief of International Wholesale Operations & Director (9)	2003 2004 2005	$ 0 $132,353 $120,000	$ 0 $ 0 $ 0	$ 0 $ 0 $20,928	$ 0 $ 40,000 $ 0	0 0 1,150,000	$ 0 $ 0 $ 0	$ 0 $ 6,753 $ 765

All Directors as a Group (6 persons)	2003 2004 2005	$ 65,538 $750,085 $649,346	$ 0 $ 0 $ 0	$ 1,831 $35,787 $53,309	$415,750 $436,750 $120,750	1,500,000 1,000,000 5,150,000	$ 0 $ 0 $ 0	$ 0 $ 6,753 $84,337

Footnotes:
(1)	The amounts shown as “Other Annual Compensation” includes for 2004 payments made as auto allowance or auto leases and for 2005 payments made as auto allowance or auto leases and employee medical/dental/vision insurance net of employee copayment.
(2)	The amounts shown for 2005 do not include the effect of certain agreements (the “Bonus Return Agreements”) involving the return of an aggregate of 16,500,000 shares of the Company’s common by James Balestraci (1,100,000 shares), John L. Castiglione (4,400,000 shares), Farid Shouekani (2,200,000 shares), Jason A. Sunstein (4,400,000 shares), and Ronald G. Weaver (4,400,000 shares) pursuant to certain agreements entered into between each of them and the Company. These shares that were returned (a total of 16,500,000 shares) were previously awarded as bonuses in connection with prior year employment. In exchange, we issued an aggregate of 16,500,000 common stock purchase warrants The warrants grant the holder the right to purchase our common stock at an exercise price of $0.25 per share and the warrants do not expire until August 26, 2009.
(3)	The amount shown as “All Other Compensation” for 2004 includes payment by subsidiary of 2003 contribution to qualified retirement plan and for 2005 represents interest earned on promissory notes issued by the Company in payment of salary and benefits, unreimbursed business expenses and funds advanced to the Company.
(4)	Mr. Weaver became an officer of the Company in July 2003 and resigned as an officer in August 2005.
(5)	Mr. Castiglione resigned as an officer and director of the Company in August 2005.
(6)	Mr. Shouekani became an officer of the Company in October 2003.
(7)	Mr. Sunstein resigned as an officer and director of the Company in August 2005.
(8)	Mr. Atkiss became an officer and Director of the Company in June 2004.
(9)	Mr. Balestraci became an officer of the Company in January 2004 and resigned in January 2005.

The Company does not currently compensate its Directors for their services as directors. The Board of Directors includes only one independent director Ronald G. Weaver as of December 31, 2005 Such Directors will be added as needed and at the same time such directors are appointed or elected, the Company may institute a system of compensation either in the form of attendance fees or option awards.

With respect to cash salaries, the Company may change or increase salaries as the Company's profits and cash flow allow. The amount of any increase in salaries and compensation for existing officers has not been determined at this time and the number and dollar amount to be paid to additional management staff that will likely be employed has not been determined.

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OPTION/SAR GRANTS IN 2005 FISCAL YEAR

(Fiscal Year Individual Grants)

Name (a)	No. of Securities Underlying Options/SARs Granted (#) (b)	Percent of Total Options/ SARs Granted to Employees in Fiscal Year (c)	Exercise of Base Price ($/Sh) (d)	Expiration Date (e)

Ronald G. Weaver, Chairman	4,400,000 (1)	20.23%	$0.25	August 26, 2009
Farid Shouekani, CEO & Director	2,200,000 (1)	10.11%	$0.25	August 26, 2009
Paul E. Atkiss, CFO	4,000,000 (2)	18.39%	$0.20	January 31, 2015
James R. Balestraci, Former V.P.	1,150,000 (2) 1,100,000 (1)	5.29% 5.06%	$0.20 $0.25	January 31, 2015 August 26, 2009
John L. Castiglione, Former Treasurer and Director	4,400,000 (1)	20.23%	0.25	August 26, 2009
Jason A. Sunstein, Former V.P. Finance and Secretary	4,400,000 (1)	20.23%	$0.25	August 26, 2009

Footnotes:
(1)	The options granted to each of the listed individuals were granted in connection with certain Bonus Return Agreements entered into with the Company. These agreements concern the return of certain shares of the Company’s common stock previously issued to each of them. Under the terms of the Bonus Return Agreements, all of these individuals returned an aggregate of 16,500,000 shares of our common stock previously awarded to them as bonuses in connection with their prior employment with the Company and in exchange, we issued an aggregate of 16,500,000 common stock purchase warrants. In addition, accrued but unpaid salary and benefits, unreimbursed business expenses, and funds advanced to the Company were aggregated into individual unsecured promissory notes for an aggregate of $838,969.26. Each of the notes are convertible, at the option of each noteholder, into shares of the Company’s common stock (using 50% of the 52-week low trading range of the Company’s public common stock price) and the number of shares so issued in payment of all accrued and unpaid interest and principal cannot be reduced as a result of any reverse split of the Company’s common stock or any recapitalization. Further, the number of shares issuable to each noteholder are described in each note as non-dilutive; that is the number of shares that may be purchased upon conversion any note will increase in direct proportion to any increase in the number of shares issued by the Company after the issuance of the notes. The warrants grant the holder the right to purchase our common stock at an exercise price of $0.25 per share and the warrants do not expire until August 26, 2009.
(2)	During the calendar year ending December 31, 2005, Mr. Atkiss was awarded an option to purchase 4,000,000 shares of the Company’s common stock at an exercise price of $0.200 per share with the option expiring on January 31, 2015; and Mr. Balestraci was awarded an option to purchase 1,150,000 shares of the Company’s common stock at an exercise price of $0.200 per share with the option expiring on January 31, 2015

There were 200,000 options exercised during the 2005 fiscal year and 4,400,000 unvested options were forfeited upon the resignation of officers.

A summary of Executive and Officer option holdings as of December 31, 2005 are shown below:

SUMMARY - EXECUTIVE OPTION HOLDINGS, 12/31/05

	Outstanding	In the Money

Name	as of	Shares	Exercise	Market
	12/31/05		Cost	Value*

Ron Weaver	750,000	500,000	$17,000	$47,500
Farid Shouekani	250,000	0	$ 0	$ 0
Paul Atkiss	5,000,000	0	$ 0	$ 0
TOTAL	6,000,000	500,000	$17,000	$47,500

* At the 12/31/05 closing price of $0.095

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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information relating to the beneficial ownership of Company common stock by those persons beneficially holding more than 5% of the Company's Common Stock, by the Company's directors and executive officers, and by all of the Company's directors and executive officers as a group as of December 31, 2005


(1) Title Of Class	(2) Name And Address Of Beneficial Owner	(3) Amount And Nature Of Beneficial Owner (1)	(4) Percent Of Class (1) (2)

Common Stock	Ronald G. Weaver 10373 Roselle Street Suite 170 San Diego, California 92121	8,000,000	5.30%
Common Stock	Farid Shouekani 10373 Roselle Street Suite 170 San Diego, California 92121	4,550,000	3.01%
Common Stock	Paul E. Atkiss 10373 Roselle Street Suite 170 San Diego, California 92121	6,243,333	4.13%

Officers and Directors as a group (3 persons)		18,793,333	12.44%

Footnote:
(1)	"Beneficial Owner" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.
(2)	Percentages are based on 151,048,582 shares outstanding on December 31, 2005 and an aggregate of 12,600,000 shares purchasable upon exercise of certain Common Stock Purchase Options and Warrants granted to the Company’s officers and directors, including 10,600,000 granted in fiscal 2005. The amounts and percentages shown include the effect of the exercise of: (a) an option to purchase 5,150,000 common shares held by Ronald G. Weaver, (b) an option to purchase 2,450,000 shares held by Mr. Farid Shouekani, (c) an option to purchase 5,000,000 shares held by Mr. Paul E. Atkiss, and do not include the effect of the conversion of certain unsecured promissory notes - $71,832 issued to Mr. Weaver and $380,276 issued to Mr. Shouekani pursuant to the “Bonus Return Agreements” as described elsewhere in this Form 10-KSB. (See “Option/SAR Grants in Last Fiscal Year” table shown above).

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

As a result of several transactions, Jason A. Sunstein, an officer and director of the Company, paid certain of the Company’s expenses which totaled $10,330 during the twelve months ending December 31, 2002, totaling $16,737 as of December 31, 2002. The Company subsequently repaid Mr. Sunstein all of these amounts.

As a result of several transactions, John L. Castiglione, an officer and director of the Company, paid certain of the Company’s expenses which totaled $23,251 during the twelve months ending December 31, 2002, totaling $26,603 as of December 31, 2002. The Company subsequently repaid Mr. Castiglione all of these amounts.

In July, 2001 (and continuing thru December 31, 2003) the Company entered into an oral month-to-month lease for the rental of office space from Jason A. Sunstein, an officer and director of the Company, which required that the Company pay Mr. Sunstein the sum of $1,100 per month in payment of all office space and utilities. While the Company believes that the office arrangement with Mr. Sunstein was undertaken on terms that were no different

-47-

than those the Company could have obtained in an arms-length transaction with an unrelated party, the Company completed only a limited evaluation of other alternatives.

During June and July 2003, the Company’s Board of Directors approved the acquisition of Coliance Communications (“Coliance”) which included the purchase of the shares of Coliance acquired from Ronald G. Weaver and Stephen D. Young. In this transaction, the Company issued 6,000,000 shares of the Company’s Common Stock to Ronald G. Weaver, who became the Company’s Chief Executive Officer and a Director and 6,000,000 shares of the Company’s Common Stock to Stephen D. Young, who became the Company’s Chairman of the Board and President.

On October 15, 2003, the Company’s Board of Directors approved the acquisition of Mid-Atlantic International, Inc., a Michigan corporation (“Mid-Atlantic”) from Farid Shouekani. Under the terms of the Mid-Atlantic Agreement, the Company acquired all of Mr. Shouekani’s Mid-Atlantic Shares in exchange for: (1) $50,000 cash within 21 days of Closing; and (2) an aggregate of 7,235,000 shares of the Company’s Common Stock with 4,235,000 of these shares (the “Special Shares”) subject to certain redemption rights (the “Redemption Rights”), at the option of Mr. Shouekani at a redemption price of $0.17 per Special Share as provided by the Mid-Atlantic Agreement. All of the Redemption Rights expire on January 15, 2003 and are secured by Mid-Atlantic’s assets. As of December 31, 2004, Mr. Shouekani exercised his Redemption Rights over 1,802,000 Special Shares. The remaining 2,433,000 Special Shares were canceled and returned to treasury. Mr. Shouekani also became Chief Technical Officer and a Director of the Company.

On January 30, 2004, the Company entered into a Securities Merger Agreement (the “Adoria Agreement”) with James R. Balestraci, the sole holder of the membership interests of Adoria Communications, LLC, a Delaware limited liability company (“Adoria”). Under the terms of the Adoria Agreement, the Company acquired all of Mr. Balestraci’s membership interests in Adoria in exchange for: (1) cash payments totaling $500,000 and (2) the Company’s issuance of 2,500,000 shares of the Company’s Common Stock with 500,000 of these shares (the “Performance Shares”) of the Company’s Common Stock subject to the condition that Adoria’s financial results in 2004 must equal or exceed its financial results in 2003. In the event that Adoria’s financial results in 2004 do not equal or exceed its 2003 results, the Performance Shares are to be cancelled and returned as treasury stock. Adoria’s 2004 financial results exceeded its 2003 results and the Performance Shares were earned. Mr. Balestraci also became Chief of International Wholesale Operations and a Director of the Company.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)	The following Exhibits are attached or incorporated by reference, as stated below.

3.1	Articles of Incorporation of Tinglefoot Mining, Inc., Utah 2-28-83*
3.1(a)	Articles of Amendment to Articles of Incorporation of Tinglefoot Mining, Inc., 11-22-95*
3.1(b)	Articles of Amendment to Articles of Incorporation of Mexico Investment Corporation, 2-22-96*
3.1(c)	Articles of Amendment to the Articles of Incorporation of Baja Pacific International, Inc., 4-30-98*
3.1(d)	Amendment to the Articles of Incorporation of Taig Ventures, Inc., 1-11-01*
3.1(e)	Articles of Incorporation for Coliance Communications, Inc.#*
3.1(f)	Articles of Incorporation for Mid-Atlantic International, Inc.#*
3.1(g)	Articles of Organization for Adoria Communications, LLC#**
3.1(h)	Articles of Incorporation of Viper Networks, Inc., Nevada 5-18-05##[as 3(i)]
3.3	By-Laws for Bylaws for Viper Networks, Inc., Utah*
3.3(a)	Bylaws for Coliance Communications, Inc. #*
3.3(b)	Bylaws for Mid-Atlantic International, Inc. #*
3.3(c)	Bylaws for Viper Networks, Inc., Nevada##[as 3(ii)]
4.0	Specimen Common Stock certificate*
4.1	Specimen Mutual Release and Restructuring Agreement###(8-26-05)
4.2	Specimen Warrant Agreement###(8-26-05)
4.3	Specimen Revolving Promissory Note###(8-26-05)
10.1	Securities Purchase Agreement and Plan of Reorganization (between Taig Ventures, Inc. and Viper Networks, Inc), 11-15-00*
10.2	Viper Networks, Inc. 2000 Equity Incentive Plan, 12-29-00*
10.3	Employment Agreement (Wray), 10-31-00*
10.4	Employment Agreement (Castiglione), 10-31-00*
10.5	Employment Agreement (Sunstein), 10-31-00*

-48-

10.6	Agreement of Purchase and Sale of Assets (between Taig Ventures, Inc. and Tri-National Development Corporation), 4-30-98*
10.7	Addendum to the Agreement of Purchase and Sale of Assets (between Viper Networks, Inc. and Tri-National Development Corporation), 11-15-00*
10.8	Settlement Agreement And General Release of Claims (between Viper Networks, Inc. and Tri-National Development Corporation), 6-30-01*
10.9	Month-to-Month Industrial Lease, 8-26-00**
10.10	Employee Compensation Fund and Plan, 3-1-05***
10.11	Asset Purchase Agreement (between Viper Networks, Inc. and ePhone, Inc.), 5-20-03***
10.12	Month-to-Month Industrial Lease, 8-26-02***
10.13	Securities Purchase Agreement (between Viper Networks, Inc. and PC Mailbox, Inc.), 11-19-02***
10.14	Citi Capital lease, 12-14-00*
10.15	Citi Capital lease, 3-8-01*
10.16	Securities Merger Agreement (between Viper Networks, Inc. and Mid-Atlantic International, Inc.), 10-15-03#*[as 10.11]
10.17	Amendment to Securities Merger Agreement (between Viper Networks, Inc. and Mid-Atlantic International, Inc.), 1-20-04#*[as 10.12]
10.18	Securities Merger Agreement (between Viper Networks, Inc. and Adoria Communications, LLC), 1-30-04#**[as 10.13]
10.19	Push to Talk Services Reseller Billing Direct Agreement with ITXC, Inc., 8-14-01 #**[as 10.14]
10.21	Securities Purchase Agreement (between Viper Networks, Inc. and Coliance Communications, LLC for 40% interest), 6-16-03
10.22	Securities Purchase Agreement (between Viper Networks, Inc. and Coliance Communications, LLC for additional 60% interest), 7-16-03
10.23	Asset Purchase Agreement (between Viper Networks, Inc. and Young’s Environmental Solutions, LLC for 50% interest), 8-21-03
10.24	Settlement Agreement (between Viper Networks, Inc., Young’s Environmental Solutions, LLC, Young’s Environmental Solutions, Inc., and Stephen D. Young), 1-27-05###(2-1-05)
10.25	Employment Agreement (Sinnar), 3-5-05###(3-14-05)
14	Code of business Conduct and Ethics#**
21.1	Subsidiaries of Viper Networks, Inc.
23.1	Consent of Independent Accountants, Armando C. Ibarra, C.P.A., P.C.
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 Title 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to Title 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	*Previously filed with Form 10-SB, 10-SB-Amendment No. 1, or 10-SB-Amendment No. 2 and incorporated herein by reference.
	**Previously filed with 2001 Form 10-KSB and incorporated herein by reference.
	***Previously filed with 2002 Form 10-KSB and incorporated by reference herein.
	#*Previously filed with 2003 Form 10-KSB and incorporated by reference herein.
	#**Previously filed with 2004 Form 10-KSB, 10-KSB Amendment No. 1, or 10-KSB Amendment No. 2 and incorporated by reference herein.
	##Previously filed with March 31, 2005 Form 10-QSB and incorporated by reference herein.
	###Previously filed with Form 8-K and incorporated by reference herein.

(b)	The Company filed the following Reports on Form 8-K during the year ending December 31, 2005:

	- Form 8K January 27, 2005, amended February 4, 7, and 15, 2005
	- Form 8K February 4, 2005
	- Form 8K February 17, 2005
	- Form 8K March 14, 2005
	- Form 8K March 16, 2005
	- Form 8K August 22, 2005
	- Form 8K September 2, 2005

-49-

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The anticipated aggregate fees to Armando C. Ibarra, CPA, P.C., for professional services rendered for the audit of the Company’s annual consolidated financial statements for the fiscal year ended December 31, 2005 and for the reviews of the consolidated financial statements included in the Company’s Quarterly Reports on Form 10-QSB for that fiscal year are estimated at $50,000. The aggregate fees to Armando C. Ibarra, CPA, P.C., for professional services rendered for the audit of the Company’s annual consolidated financial statements for the fiscal year ended December 31, 2004 and for the reviews of the consolidated financial statements included in the Company’s Quarterly Reports on Form 10-QSB for that fiscal year were $20,000. Audit related services generally include fees for accounting consultations, business acquisitions, and work related thereto. No audit-related fees for assurance and related services were billed by or paid to Armando C. Ibarra, CPA, P.C. in 2004 or in 2005.

Tax Fees

An aggregate of $0 was spent for Tax Fees (as defined in Item 14(3) of Form 10-KSB of the Securities and Exchange Commission) during the last two fiscal years ended December 31, 2005.

Other Fees

No other fees for audit-related services or products were billed by or paid to Armando C. Ibarra, CPA, P.C. in 2003 or in 2005.

Audit Committee Charter

The Company intends to establish an Audit Committee of the Company’s Board of Directors and thereby to establish a Charter for the Audit Committee. For the year ending December 31, 2005 and due to limited financial resources, the Company has delayed the implementation of these plans until such later date at which the Company may have the financial resources available.

Audit Committee Report

Since the Company did not establish an Audit Committee for the year ending December 31, 2005, no Audit Committee Report for that period is available.

-50-

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, as amended, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Viper Networks, Inc.

By: /s/ Farid Shouekani Farid Shouekani Chief Executive Officer		Date: August 6, 2007

By: /s/ Paul E. Atkiss Paul E. Atkiss Chief Financial Officer/Principal Accounting Officer		Date: August 6, 2007

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Farid Shouekani Farid Shouekani Chief Executive Officer & Director		Date: August 6, 2007

By: /s/ Paul E. Atkiss Paul E. Atkiss Chief Financial Officer, Secretary & Director		Date: August 6, 2007

By: /s/ Ronald G. Weaver Ronald G. Weaver Chief Executive Officer & Director		Date: August 6, 2007

-51-

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheet as of December 31, 2005	F-3

Consolidated Statements of Operations for the Years Ended December 31, 2005 and 2004	F-4

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2005 and 2004	F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005 and 2004	F-6

Notes to the Consolidated Financial Statements	F-8

F-1

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

Viper Networks, Inc.

10373 Roselle Street, Suite 170

San Diego, CA 92121

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheet of Viper Networks, Inc. and subsidiaries of December 31, 2005 and 2004 and the related consolidated statements of operations, changes in shareholders’ equity and cash flow for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Viper Networks, Inc., and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company’s losses from operations raise substantial doubt about its ability to continue as a going concern. 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

May 25, 2006

Chula Vista, Ca. 91910

F-2

VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

	December 31,
	2005

ASSETS
Current assets:
Cash	$	33,430
Short-term investments		4,000
Accounts receivable, net of allowance for doubtful accounts and sales returns (Note 4)		119,039
Inventories (Note 4)		74,959
Other current assets (Note 4)		194,874
Total current assets		426,301

Property and equipment, net (Note 4)		179,640
Goodwill (Note 5)		149,541
Total assets	$	755,482

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	589,918
Accrued liabilities (Note 4)		84,492
Loans from related party (Note 7)		460,052
Taxes payable		3,749
Deferred revenues (Note 4)		185,293
Short term debt		148,438
Total current liabilities		1,471,943

Commitments and Contingencies (Note 9)		-

Stockholders’ equity (deficit):
Preferred stock: authorized 10,100,000 shares at $0.001 par value, -0- shares issuedand outstanding (Note 10)		-
Common stock: 250,000,000 shares authorized of $0.001 par value, 151,048,582 shares issued and outstanding		151,049
Additional paid-in capital		12,602,966
Unearned stock-based compensation		(113,694	)
Treasury Stock		(223,028	)
Accumulated deficit		(13,054,628	)
Accumulated comprehensive loss		(79,125	)
Total stockholders’ equity (deficit)		(716,461	)
Total liabilities and stockholders’ equity (deficit)	$	755,482

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

F-3

VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Year Ended December 31,
	2005			2004

Net Revenues	$	3,482,549		$	4,612,783
Cost of revenues		3,136,285			4,108,185
Gross Margin		346,265			504,598


Operating Expenses
General and administrative		2,810,055			3,660,801
Bad debt (recovery) expense		26,845			83,712
Equity loss from unconsolidated subsidiaries		46,329			181,067
Impairment of purchased intangibles		275,000			3,396,138
(Gain on sale) impairment of purchased assets		(615,216	)		1,092,100
Total Operating Expenses		2,543,012			8,413,818

Gain (Loss) from operations		(2,196,748	)		(7,909,220	)

Other income (expenses)
Realized gain on marketable securities		392,034			15,761
Interest expense		(128,412	)		(73,060	)
Other income (expense)		3,441			2,327
Total other income (expenses)		267,063			(54,972	)


Net loss	$	(1,929,685	)	$	(7,964,192	)

Basic loss per share	$	(0.01	)	$	(0.08	)

Weighted average number of shares outstanding		130,766,267			101,961,298

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

F-4

VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

							Additional			Stock			Unearned									Other			Total Stockholders’
	Common Stock						Paid-In			Subscriptions			Stock-based			Treasury			Accumulated			Comprehensive			Equity
	Shares			Amount			Capital			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			12,113			908,048			-			-			-			-			-			920,162
Issuance of common stock loan interest		-			-			-			-			-			-			-			-			-
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		29,185,475			29,185			1,179,036			125,000			-			-			-			-			1,333,221
Issuance of common stock for services received		(10,386,811	)		(10,387	)		148,576			-			-			-			-			-			138,189
Cancellation of common stock upon recision of notes payable		(554,283	)		(554	)		(150,614	)																	(151,168	)
Conversion of Notes payable and interest		12,094,140			12,094			491,523			-			-			-			-			-			503,617
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 ofwarrants and options		862,162			862			229,566			-			-			(223,028	)		-			-			7,400
Stock-based compensation		-			-			(84,681	)		-			139,624			-			-			-			54,943
Comprehensive loss		-			-			-			-			-			-			-			(1,000	)		(1,000	)
Net Loss for the year ended December 31, 2005		-			-			-			-			-			-			(1,929,685	)		-			(1,929,685	)
Balance, December 31, 2005		151,048,582		$	151,049		$	12,602,966		$	-		$	(113,694	)	$	(223,028	)	$	(13,054,628	)	$	(79,125	)	$	(716,461	)

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

F-5

VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2005			2004

Cash flows from operating activities:
Net loss	$	(1,929,684	)	$	(7,964,192	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		285,763			291,549
Allowance for doubtful accounts and sales returns		(20,062	)		76,272
Allowance for inventory obsolescence		31,175			-
Allowance for warranty returns		2,000			-
Amortization of stock-based compensation		54,943			65,931
Amortization of stock-based interest		-			19,944
Loss on sale of property and equipment		26,314			-
Equity loss from unconsolidated subsidiaries, net of cash contributions		32,115			181,067
Impairment of purchased intangibles		275,000			3,396,138
Impairment of purchased assets		(615,216	)		1,092,100
Stock based compensation		(76,961	)		948,163
Interest accrual		106,832			(1,446	)
(Gain) on sale of marketable securities		(392,034	)		(15,761	)
Changes in assets and liabilities:
Accounts receivable		31,522			(52,736	)
Inventories		(34,114	)		(72,020	)
Prepaid expenses		(7,323	)		739
Other current assets		(18,505	)		(35,039	)
Accounts payable		247,285			240,061
Accrued liabilities		345,204			22,268
Taxes payable		1,126			(885	)
Deferred revenues		103,190			79,625
Net cash used in operating activities		(1,551,430	)		(1,728,222	)

Cash flows from investing activities:
Acquisition, net of cash acquired		-			(757,091	)
Purchases of property and equipment		(19,858	)		(182,594	)
Proceeds from sale of property and equipment		22,995			1,750
Proceeds from the sales of marketable securities		290,611			3,306
Net cash provided by (used in) investing activities		293,748			(934,629	)

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

F-6

VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2005			2004

Cash flows from financing activities:
Proceeds from issuance of common stock		1,208,221			2,355,398
Net borrowing (repayments) under revolving credit lines		-			(107,661	)
Repayment of debt from acquisition		-			(269,500	)
Proceeds from short term debt		-			143
Repayments of short term debt		-			(15,000	)
Proceeds from shareholder loans		485,481			753,041
Repayments of shareholder loans		(409,048	)		(228,303	)
Proceeds from convertible loans		-			150,000
Repayments of convertible loans		(38,110	)		(75,000	)
Payments on capital lease obligations		(2,389	)		(35,086	)
Stock subscription deposits		-			11,435
Net cash provided by financing activities		1,244,155			2,539,467

Net increase in cash		(13,527	)		(123,385	)
Cash at the beginning of the period		46,957			170,341
Cash at the end of the period	$	33,430		$	46,956

Supplemental schedule of cash flow activities
Cash paid for:
Interest	$	11,465		$	20,839
Income taxes	$	800		$	800

Non-cash investing and financial activities:
Common stock issued for business acquisition	$	(637,500	)	$	4,094,500
Common stock issued in payment of services	$	138,189		$	920,161
Common stock issued in payment of convertible loans	$	503,617		$	201,973
Common stock received upon recision of convertible loan	$	(151,168	)	$	-
Common stock issued for cashless exercise of options	$	230,428		$	-

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

F-7

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	a. Organization

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

	We are a provider of Voice over Internet Protocol, or VoIP, communications products and services. The company has evolved from a pioneer in selling VIPER CONNECT, a “push to talk” technology developed by ITXC, to a next generation provider of high-quality telecommunication services and technology for internet protocol, or IP telephony applications. We utilize our VoIP technology to transmit digital voice and facsimile communications over data networks and the internet.

	Taig Ventures, Inc. (“Taig”) was incorporated under the laws of the State of Utah on February 28, 1983. Viper Networks, Inc. (“Viper-CA”) was incorporated on September 14, 2000 under the laws of the State of California.

	On November 15, 2000, Taig and Viper-CA completed a Securities Purchase Agreement and Plan of Reorganization whereby Taig issued 36,000,000 pre-split or 3,000,000 post-split shares of its common stock in exchange for all of the outstanding common stock of Viper-CA. Immediately prior to the Securities Purchase Agreement and Plan of Reorganization, Taig had 6,788,507 pre-split or 565,786 post-split shares of common stock and 3,000,000 shares of non-voting preferred stock issued and outstanding. For accounting purposes, the acquisition has been treated as a recapitalization of Viper-CA with Viper-CA as the acquirer (reverse acquisition). Viper-CA was treated as the acquirer for accounting purposes because the shareholders of Viper-CA controlled Taig after the acquisition. The historical financial statements prior to November 15, 2000 are those of Viper-CA.

	On December 29, 2000, Taig changed its name to Viper Networks, Inc. (“Viper-UT”) and authorized a reverse split of the Company’s common stock on a 1-for-12 basis. On May 18, 2005, Viper-UT changed its state of domicile from Utah to Nevada.

	b. 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.

	c. Inventories

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

	d. 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.

F-8

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	d. Estimates (continued)

	On an on-going basis, the Company evaluates 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. The Company bases 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.

	e. 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.

	f. 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 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 (“SFAS”) No.142 “Goodwill and Other Intangible Assets” (“SFAS 142”). 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” (“SFAS 144”).

	g. 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. 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.

	h. 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 in accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition in Financial Statements”. 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,

F-9

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	h. Revenue recognition (continued)

	maintains all risk and rewards, and establishes 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 the relative fair value of the hardware (product) and minutes of calling time (service) based on published pricing. 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 a deferred revenue liability.

	The Company’s hardware products consist of both i) devices connected to and used in conjunction with a computer for use over any speed Internet connection (dial-up or broadband) and ii) devices used with a broadband Internet connection not requiring a computer. Hardware products contain embedded software or firmware provided by the third party manufacture which is incidental to the product sale. Included with each product sale are a Viper Networks VoIP calling account (“VoIP Account”) and the ability to download our proprietary dialer software/VoIP Account interface. Our dialer software/VoIP Account interface is not sold separately; the current version is available for customers to download from our web site.

	The Company sells the routing and delivery of internet traffic which conforms with Voice over Internet Protocol to both consumers and wholesale carriers. Consumers purchase prepaid calling time for addition to a VoIP Account either directly from the Company web site or by the purchase of a voucher from our distributor network. Revenue from the sale of prepaid calling time to consumers or vouchers to distributors is deferred upon sale. These deferred revenues are recognized into revenue based on the number of minutes during a call in accordance with our published calling rates. Consumer revenue for a period is calculated by our proprietary software from information received through our network switches. Wholesale carriers purchase bulk minutes of VoIP traffic typically billed weekly in arrears from information received through our network switches. Other services are sold on a per use basis typically billed in arrears.

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

	i. Stock-based compensation

	SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS 123”), 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 (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), 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. During the year ended December 31, 2005 and 2004, the Company recognized $351,176 and $171,863 and $323,005 and $549,557 of gross expense relating to the grant of common stock to non-employees and employees, respectively, for services which are included in the accompanying consolidated

F-10

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	i. Stock-based compensation (continued)

	statements of operations. The value of these shares was determined based upon over the counter closing prices. Additionally during the year ended December 31, 2005, the Company recognized a $600,000 benefit relating to the return of stock previously granted to Officers of $360,000 and $240,000 during the years ended December 31, 2004 and 2003, respectively.

	j. Income taxes

	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 period 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.

	k. 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. 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 7,250,000 shares of common stock and 34,951,346 warrants potentially issuable at December 31, 2002 which were not included in the computation of net loss per share.

	Year Ended December 31,

	2005			2004


Net loss (numerator)	$	(1,929,685	)	$	(7,964,192	)
Weighted average shares outstanding for basic net loss per share (denominator)		130,766,267			101,961,298
Per share amount	$	(0.01	)	$	(0.08	)

	l. 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 consolidated 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

F-11

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	l. Concentrations of Risk (continued)

	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

	m. New 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. The provisions of this Statement will be effective for the Company beginning with its fiscal year ending November 30, 2006. Management believes that the adoption of this Statement will not have any immediate material impact on the Company.

	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, and Statement 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 Company believes that the implementation of this standard will not have a material impact on its financial position, results of operations or cash flows.

	In December 2004, the FASB issued SFAS No. 123 (revised 2004) “Share-Based Payment” (“SFAS 123R”). This Statement requires that the cost resulting from all share-based transactions be recorded in the financial statements. The Statement establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. The Statement replaces SFAS 13 “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25 “Accounting for Stock Issued to Employees”. The provisions of this Statement will be effective for the Company beginning with its fiscal year ending December 31, 2006. The Company believes that the implementation of this standard will not have a material impact on its financial position, results of operations or cash flows.

F-12

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

	m. New Accounting Pronouncements (continued)

	In March 2005, the SEC issued SAB 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 (“FIN 47”), “Accounting for Conditional Asset Retirement Obligations”, 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 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.

	In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections: a Replacement of Accounting Principles Board Opinion No. 20 and FASB Statement No. 3" ("SFAS 154"). SFAS 154 requires retrospective application for voluntary changes in accounting principle unless it is impracticable to do so or another methodology is required by the standard. Retrospective application refers to the application of a different accounting principle to previously issued financial statements as if that principle had always been used. SFAS 154's retrospective application requirement replaces APB No. 20's ("Accounting Changes") requirement to recognize most voluntary changes in accounting principle by including in net income (loss) of the period of the change the cumulative effect of changing to the new accounting principle. This statement defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity. SFAS 154 also redefines restatement as the revising of previously issued financial statements to reflect the correction of an error. The requirements are effective for accounting changes made in fiscal years beginning after December 15, 2005 and will only impact the consolidated financial statements in periods in which a change in accounting principle is made. The Company does not expect that the adoption of SFAS 154 in the first quarter of fiscal 2006 will have a material impact on its results of operations and financial condition.

	In November 2005, the FASB issued FASB Staff Position (“FSP”) FSP 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“FSP 115-1”), which provides guidance on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other-than-temporary, and on measuring such impairment loss. FSP 115-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment. The Company expects to adopt FSP 115-1 effective for the quarter beginning January 1, 2006, and the adoption is not expected to have a material impact on our results of operations or financial condition.

F-13

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 2 -	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 December 31, 2005, which has resulted in an accumulated deficit of $13,054,628 at December 31, 2005 which raises doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

	It is the intent of management to continue to develop 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.

NOTE 3 -	ACQUISTIONS

	During January 2004, the Company acquired 100% of the membership interest in Adoria Communications, LLC (“Adoria”) from Mr. James Balestraci, the sole member. Adoria owns and operates a global VoIP network with operations in Boston, Mass. As consideration for the purchase, the Company issued an aggregate of 2,500,000 shares of the Company’s Common Stock, with 500,000 of these shares (the “Performance Shares”) subject to the condition that Adoria’s financial results in 2004 must equal or exceed its financial results in 2003, and $500,000 payable in cash for an aggregate purchase price of $3,574,500. The Performance Shares were contingent on Adoria’s 2004 financial results being equal to or exceeding its 2003 results; the Performance Shares were earned. Mr. Balestraci joined the Company as Chief of International Wholesale Operations and a Director. Management intends to consolidate the wholesale VoIP operations of Mid-Atlantic and Adoria and expand the Company’s global network into India and Europe through this investment. Goodwill of $3,482,238 was recognized upon the acquisition as the excess of the aggregate purchase price over the fair value of Adoria’s identifiable net assets. There were no purchased research and development assets. Based on a discounted cash flow model the goodwill balance was considered to be significantly impaired. A non-cash impairment loss of $3,396,138 was charged to income during 2004 as an Impairment of Purchased Intangibles.

	The Adoria acquisition was were accounted for using the purchase method and, accordingly, results of operations of the acquired company are included in the Company’s operating results as of the date of purchase.

	Adoria


Current assets	$	101,972
Fixed assets		72,515
Other intangible assets		-
Goodwill upon acquisition		3,482,238
Current liabilities		82,225
Long-term liabilities		-
Aggregate purchase price	$	3,574,500

F-14

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 3 -	ACQUISTIONS (continued)

	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 years ended December 31, 2005 and 2004 the Company recorded $46,329 and $181,067 as its 50% equity share in Brasil LLC operating loss subsequent to the Company’s investment, respectively.

	In June, 2005 SII (the other 50% member of Brasil LLC), 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 December 31, 2005 the Company had no equity investment in Brasil LLC.

F-15

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 4 -	COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

	December 31,
	2005


Accounts receivable, net of allowance for doubtful accounts and sales returns:
Accounts receivable	$	131,628
Allowance for doubtful accounts		(5,000	)
Allowance for sales returns		(7,589	)
	$	119,039


Inventories:
Consumer products	$	106,134
Reserve for obsolescence		(31,175	)
	$	74,959


Other current assets:
Prepaid expenses	$	141,838
Employee travel and payroll advances		1,500
Arbitration bond with the courts		15,000
Deposits		36,536
	$	194,874


Property and equipment, net:
Routing and networking systems	$	715,254
Computers and office equipment		35,181
		750,435
Less accumulated depreciation		(570,794	)
	$	179,640


Accrued liabilities:
Wages and payroll tax	$	9,636
Other accruals		74,857
	$	84,492

Deferred revenues:
Consumer products	$	91,317
Consumer calling time		93,976
	$	185,293

F-16

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 5 -	GOODWILL

	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 is evaluated in accordance with SFAS 142 for impairment annually and if events or changes in circumstances indicate that the carrying amount may be impaired. An impairment loss is the amount that 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. The changes in the carrying amount of goodwill is as follows:

	December 31,
	2005

Balance at beginning of year	$	424,541
Goodwill from acquisitions		-
Impairment losses		(275,000	)
Balance at end of year	$	149,541


NOTE 6 -	STOCK SUBSCRIPTION RECEIVABLE

	During September 1998, the Company entered into an agreement with Tri-National, a related party, to purchase 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico (the “Land) that is valued at the predecessor cost of $125,000. The Company 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 its series B Preferred Stock and stock warrants to purchase 1,000,000 shares of Common Stock. During June 2001, the Company negotiated a settlement and release with the Class B preferred stockholder whereby the Preferred Stock and stock warrants were exchanged for 400,000 shares of the Company’s Common Stock and the cumulative undeclared dividend was not declared. During October 2001, Tri-National filed a voluntary bankruptcy petition; the court appointed a Trustee in October 2002.

	Because consideration for the agreement (documented title) never was received the Company did not believe it was ever the owner of the Land. Accordingly, the value of the Land had previously been classified as a stock subscription receivable. .

	During January 2006, the Company and the court appointed Trustee entered into a settlement agreement whereby the 400,000 shares of the Company’s Common Stock was released to the Trustee as an asset of the bankruptcy estate and the Company relinquished any claim in the Land. Accordingly, the $125,000 previously held as a stock subscription receivable was charged against earnings as a bad debt.

NOTE 7 -	RELATED PARTY TRANSACTIONS

	During Fiscal 2005, the Company’s shareholders incurred expenses on behalf of the Company in the amount of $24,113, which will be repaid in the normal course of business.

	During Fiscal 2004, the Company’s shareholders incurred expenses on behalf of the Company in the amount of $120,912, which will be repaid in the normal course of business.

	During Fiscal 2005, certain of the Company’s shareholders advanced the Company $371,873 under short term unsecured promissory notes. At December 31, 2005, outstanding advances plus accrued interest from these shareholders were $556,068.

F-17

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 7 -	RELATED PARTY TRANSACTIONS (Continued)

	During Fiscal 2004, certain of the Company’s shareholders advanced the Company $753,041 under short term promissory notes. At December 31, 2004, outstanding advances plus accrued interest from these shareholders were $607,094.

	The following shareholders advanced cash funds to the Company in 2005:

Shareholder	Cash advances during 2005		December 31, 2005

Atkiss	$	72,756	$	11,751
Balestraci		15,000		-
Castiglione		91,275		59,100
Shouekani		20,900		380,276
Sunstein		79,930		36,916
Weaver		7,012		68,024
TOTAL	$	286,873	$	556,068

	During August 2005, as part of management’s Mutual Release and Restructuring Agreement, the short term unsecured promissory notes were amended to include certain unpaid salaries, benefits, previous salary deferrals, and unpaid expenses within the loan and are included in the above outstanding balances at December 31, 2005. The loans from Messrs Atkiss, Shouekani, and Weaver totaling $460,052 are classified on the balance sheet as loans from related party and the loans from the former employees Castiglione and Sunstein have been reclassified on the balance sheet as part of short term debt.

	The terms of the unsecured Notes carried full payment of principal and accrued interest as of the end of the following fiscal year. Interest on the Notes accrued at a rate equal to the Treasury Bills annual rate of interest announced monthly by the U.S. Government for one year Treasury Constant Maturities or at the lenders cost of funds rate.

	During November 2005, Messrs Castiglione and Sunstein each converted $176,000 of their loan balance into 4,400,000 shares of the Company’s Common Stock.

	On February 9, 2007, the Company exchanged certain short term unsecured promissory notes with current and former officers of the Company for unsecured twelve month convertible promissory notes with variable interest equal to the greater of the monthly market yield on 1-year constant maturity U.S. Treasury securities or the noteholders cost of funds. Each of the notes, at the option of each noteholder, are convertible, in whole or part, into shares of the Company’s common stock at a percentage of the preceding 52-week low trading range of the Company’s publicly traded common stock price. The potential beneficial conversion feature of the notes is recognized as debt discount and is accreted over the term of the notes as interest-in-kind.

Noteholder	Amount		Conversion Factor


John Castiglione	$	59,100	100% of the 52-week low trading range
Farid Shouekani, President and CEO		380,276	50% of the 52-week low trading range
Jason Sunstein		36,916	100% of the 52-week low trading range
Ronald Weaver, Chairman		68,025	100% of the 52-week low trading range
	$	532.481

F-18

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 7 -	RELATED PARTY TRANSACTIONS (Continued)

	Also during February 2006, Messrs Shouekani and Weaver converted their loan balances into 27,342,080 and 2,409,822 of the Company’s Common Stock, respectively.

NOTE 8 -	INCOME TAXES

	Due to the Company’s net loss position from inception on September 14, 2000 to December 31, 2005, there was no provision for income taxes recorded. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:

	Year ended December 31,
	2005				2004


Tax provision (benefit) at statutory rate		(35	)	%		(35	)	%
State tax, net of federal benefit		(4	)	%		(4	)	%
Permanent differences		7		%		8		%
Valuation allowance		32		%		31		%
		-		%		-		%

The components of net deferred tax assets are as follows:

	December 31,
	2005

Deferred tax assets:
Net operating loss carryforward	$	4,233,666
Other assets		1,671
		4,235,337
Less valuation allowance		(4,235,337	)
	$	-

	As a result of the Company’s losses to date, there exists doubt as to the ultimate realization of the deferred tax assets. Accordingly, a valuation allowance equal to the total deferred tax assets has been recorded at December 31, 2005.

	At December 31, 2005, the Company had federal and state net operating loss carryforwards for tax purposes of approximately $10,390,385 and $9,471,875 which may be available to offset future taxable income and which, if not used, begin to expire in 2011 and 2013, respectively.

NOTE 9 -	COMMITMENTS AND CONTINGENCIES

	Operating Lease Obligation

	In July, 2004 the Company entered into a twenty-four month lease agreement for office space housing its corporate headquarters and sales; monthly rent for this space is $1,736. During November 2005 the Irvine office was consolidated in with the San Diego office and the building management subsequently placed a subtenant in the space; the Company remains obligated for any unpaid rents through the July 2006 lease termination. In August, 2004 the Company entered into a forty month lease agreement for administrative and warehouse space; monthly rent for this space is $4,387. Rent expense for the year ended December 31, 2005 and 2004 was $77,337 and $43,328, respectively. Future minimum rental commitments are $64,799 in 2006 and $52,644 in 2007.

F-19

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 9 -	COMMITMENTS AND CONTINGENCIES (continued)

	Equity Incentive Plan

	In December 2000, the Company’s shareholders adopted the 2000 equity incentive plan (the “2000 Plan”) for the benefit of employees, directors, advisors and consultants of the Company. In December 2002, the Company’s shareholders increased the shares authorized within the 2000 Plan by 10,500,000 shares. Under the plan, the Company may grant stock options or awards at a maximum of 12,000,000 shares. At December 31, 2005, there were 4,750,000 shares of the Company’s Common Stock available for grant under the 2000 Plan.

NOTE 10 -	PREFERRED STOCK

	The Company has authorized 10,000,000 shares of preferred stock in one or more series with such rights and privileges as the Board of Directors may, from to time, determine. Under this provision, the Board of Directors has the right, as provided by our Articles of Incorporation to designate and issue up to 10,000,000 shares of our authorized preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series or the designation of such series. There were no shares issued and outstanding at December 31, 2005.

NOTE 11 -	COMMON STOCK TRANSACTIONS

	On December 29, 2000, the Company approved a reverse-split of its Common Stock on a 1-for-12 basis leaving 3,565,786 shares issued and outstanding. All references to common stock have been retroactively restated.

	During March 2002, the Company created the Viper Networks Compensation Fund to provide compensation to employees and consultants. The Company authorized the issuance of up to 10,000,000 shares of Common Stock.

	During Fiscal 2005, the Company issued (received) 29,185,475, (10,386,811), (1,375,000), 11,539,857, and 862,162 shares for cash, in payment of services (net of bonuses returned), for acquisition, in conversion of notes and accrued interest (net of recission), and a cashless exercise of warrants and options, respectively.

NOTE 12 -	STOCK OPTIONS

	During December 2000, the Company adopted the 2000 Plan which provides for the issuance of the Company’s Common Stock to employees and directors of the Company and its affiliates. The Company has reserved 12,000,000 shares of Common Stock for which incentive stock options and non-statutory stock options to purchase shares of the Company’s Common Stock, limited rights, and stock awards may be granted.

	Options and limited rights granted under the 2000 Plan shall be exercisable at such time or upon such events and subject to the terms, conditions, vesting, and restrictions as determined by the board of directors or the compensation committee (the “Plan Committee”) of the Company provided however that no option shall be exercisable after the expiration of ten years from the date of grant. The exercise price of options granted under the 2000 Plan will be equal to the fair market value of the Company’s Common Stock as determined by the Plan Committee on the date of grant. If, at the time of grant, an incentive stock option is granted to a 10% beneficial owner, as defined, the exercise price will not be less than to 110% of the fair market value of the Company’s Common Stock and the option shall not be exercisable after the expiration of five years.

	Stock awards granted under the 2000 Plan shall be subject to the terms, conditions, vesting, and restrictions as determined by the Plan Committee.

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 12 -	STOCK OPTIONS (continued)

	At December 31, 2005, there were 4,750,000 shares of the Company’s Common Stock available for future grant under the 2000 Plan.

	A summary of the Company’s stock options as of December 31, 2005 and 2004 and changes during the periods is as follows:

	Year Ended December 31,
	2005					2004
	Options			Weighted average exercise price		Options			Weighted average exercise price

Outstanding at the beginning of the period		3,600,000		$	0.235		3,250,000		$	0.132
Granted		8,250,000			0.211		1,000,000			0.488
Exercised		(200,000	)		0.037		-			-
Cancelled		(4,400,000	)		0.204		(650,000	)		0.116
Outstanding at the end of the period		7,250,000		$	0.232		3,600,000		$	0.234

Vested at the end of the period		600,000					940,000
Exercisable at the end of period		7,250,000					3,600,000
Weighted average fair value per option of options granted during the period				$	0.1973				$	0.4871

The following table summarizes information regarding employee stock options outstanding at December 31, 2005.

				Options Outstanding				Options Exercisable
Exercise prices		Number Outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable		Weighted average exercise price

$	0.034		500,000		2.6	$	0.034		500,000	$	0.034
$	0.200		5,250,000		9.1	$	0.200		5,250,000	$	0.200
$	0.248		500,000		7.9	$	0.248		500,000	$	0.248
$	0.450 - 0.526		1,000,000		8.6	$	0.488		1,000,000	$	0.488
			7,250,000		9.0	$	0.232		7,250,000	$	0.232

Stock-based compensation is recognized using the intrinsic value method. In connection with the grant of stock options to employees, the company recorded unearned stock-based compensation within stockholders’ deficit of zero during the year ended December 31, 2005 representing the difference between the estimated fair value of the common stock determined for financial reporting purposes and the exercise price of these options at the date of grant. Amortization of unearned stock-based compensation, net of any charges reversed during the period for the forfeiture of unvested options, was $54,943 and $65,931 for the years ended December 31, 2005 and 2004, respectively.

F-21

VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

As of December 31, 2005

NOTE 12 -	STOCK OPTIONS (continued)

	At December 31, 2005, the unearned stock-based compensation of $113,694 will be amortized as follows: $35,506 in 2006, $36,506 in 2007, $33,599 in 2008, and $7,083 in 2009. The amount of stock-based compensation expense to be recorded in future periods could decrease if options for which accrued but unvested compensation has been recorded are forfeited.

	The Company estimated the fair value of each option grant at the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions used for grants during the years ended December 31, 2005 and 2004; no dividend yield, expected volatility of 103.2% and 200.7%, risk-free interest rates of 4.36% and 4.43%, and expected lives of 10.0 and 10.0 years, respectively.

	Had compensation cost for the Company’s stock-based compensation plan been determined based on the fair value at the grant dates for awards under those plans consistent with the method described in SFAS 123, the Company’s net loss would have been as follows:

	Year Ended December 31,
	2005			2004

Net loss:
As reported	$	(1,929,685	)	$	(7,964,192	)
Pro forma	$	(2,186,875	)	$	(8,080,696	)

Basic loss per share:
As reported	$	(0.01	)	$	(0.08	)
Pro forma	$	(0.02	)	$	(0.08	)

NOTE 13 -	SUBSEQUENT EVENTS

	On May 1, 2006, the Company's Board of Directors approved the designation of up to 100,000 shares of newly-designated Series A Convertible Preferred Stock. Each share of the Series A Preferred Stock is convertible into 100 shares of the Company's common stock at any time after ten days from the date at which the Company's shareholders approve an amendment to the Company's Articles of Incorporation increasing the number of shares of the Company's common stock to an amount which would allow the Series A Preferred Stock to be converted into common stock. The Series A Preferred Stock convertible into 10,000,000 shares of the Company’s common stock is to be issued to the Company's President and CEO, Farid Shouekani, as a retention bonus and for past services to the Company. The Company plans to file a Certificate of Designation of Preferences with the Nevada Secretary of State and to adopt further resolutions consistent with this resolution prior to the issuance of the Series A Preferred Stock.

NOTE 14 -	AMENDMENT

	The above footnotes to the audited consolidated financial statements as of December 31, 2005, have been updated to conform to expanded disclosures made within items 5, and 6 of this amended annual report on Form 10-KSB.

	The changes include additional disclosures regarding; revenue recognition (footnote 1-h) and unsecured promissory notes (footnote 7).

F-22