Viper Networks, Inc. Form 10-QSB dated September 30, 2005

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

FORM 10-QSB

(Mark one)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

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

For the transition period from ___________ to ____________

Commission File Number: 0-032939

Viper Networks, Inc.
(Exact name of registrant as specified in its charter)

Nevada		87-0140279
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

10373 Roselle Street, Suite 170 San Diego, California		92121
(Address of Principal Executive Offices)		(Zip Code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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

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

The aggregate market value of the voting stock held by non-affiliates (114,760,614 shares of Common Stock) was $10,902,258 as of September 30, 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 September 30, 2005 was 124,261,911.

VIPER NETWORKS, INC.
FORM 10-QSB QUARTERLY REPORT
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

			Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

		Basis of Presentation	3

		Report of Independent Registered Public Accounting Firm	4

		Consolidated Balance Sheets – September 30, 2005 (Unaudited) and December 31, 2004	5

		Consolidated Statements of Operations - Three Months Ended September 30, 2005 and 2004 (Unaudited)	6

		Consolidated Statements of Operations - Nine Months Ended September 30, 2005 and 2004 (Unaudited)	7

		Consolidated Statements of Changes in Stockholders’ Equity – Nine Months Ended September 30, 2005 (Unaudited) and Year ended December 31, 2004	8

		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2005 and 2004 (Unaudited)	9-10

		Notes to Consolidated Financial Statements (Unaudited)	11

Item 2.	Managements’ Discussion and Analysis of Financial Condition and Results of Operations		17

Item 3.	Factors That May Affect Future Results		22

Item 4.	Controls and Procedures		26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28

Item 3.	Defaults Upon Senior Securities		32

Item 4.	Submission of Matters to a Vote of Security Holders		32

Item 5.	Other Information		32

Item 6.	Exhibits and Reports on Forms 8-K		33

SIGNATURES			34

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VIPER NETWORKS, INC. AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENT

BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-QSB pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholders equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

The unaudited balance sheet of the Company as of September 30, 2005, and the related balance sheet of the Company as of December 31, 2004, which is derived from the Company's audited financial statements, the un-audited statement of operations and cash flows for the nine months ended September 30, 2005 and September 30, 2004 and the statement of stockholders equity for the period of December 31, 2003 to September 30, 2005 are included in this document.

Operating results for the quarter and nine months ended September 30, 2005 are not necessarily indicative of the results that can be expected for the year ending December 31, 2005.

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ARMANDO C. IBARRA
Certified Public Accountants
A Professional Corporation

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

To the Board of Directors of
Viper Networks Inc. and Subsidiaries

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

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

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

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

/s/ Armando C. Ibarra
Armando C. Ibarra, CPA-APC
March 15, 2006
Chula Vista, California

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Balance Sheet (Unaudited)

		September 30 2005 (Unaudited)			December 31, 2004


ASSETS
Current Assets:
Cash	$	8,631		$	46,956
Short-term investments		4,000			5,000
Accounts receivable, net of allowance for doubtful accounts and sales returns (Note 4)		137,611			121,948
Inventories		89,234			72,020
Other current assets (Note 4)		281,913			59,324

Total current assets		521,389			305,248

Property and equipment, net (Note 4)		240,054			497,226
Investments in unconsolidated business		-			-
Goodwill and other intangible assets (Note 5)		149,541			524,641

Total assets	$	910,984		$	1,327,115


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	592,567		$	375,564
Accrued liabilities (Note 4)		123,403			61,915
Loans from related party (Note 7)		867,470			607,094
Taxes payable		3,425			2,623
Deferred revenues		177,554			82,103
Short term debt		230,331			97,647
Stock subscription deposits (Note 8)		81,380			81,380

Total current liabilities		2,076,128			1,308,326


Commitments and Contingencies (Note 10)

Stockholders equity:
Preferred stock: Class A, authorized 100,000 shares at $1.00 par value, -0- shares issued and outstanding (Note 11)		-			-
Preferred stock: Class B, authorized 10,000,000 shares at $1.00 par value, -0- shares issued and outstanding (Note 11)		-			-
Common stock: 250,000,000 shares authorized at $0.001 par value, 124,261,911 and 121,222,899 shares issued and outstanding		124,262			121,223
Additional paid-in capital		11,692,826			11,425,685
Stock subscription receivable (Note 6)		(125,000	)		(125,000	)
Unearned stock-based compensation		(139,196	)		(253,318	)
Treasury Stock		(223,028	)		-
Accumulated deficit		(12,415,882	)		(11,071,676	)
Accumulated comprehensive loss		(79,125	)		(78,125	)

Total stockholders’ equity		(1,165,144	)		18,789

Total liabilities and stockholders’ equity	$	910,984		$	1,327,115

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

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Three Months Ended September 30,

	2005			2004


Net revenues	$	932,467		$	1,154,010
Cost of revenues		898,397			1,035,231

Gross margin		34,071			118,779


Operating expenses:
General and administrative		246,511			909,782
Bad debt (recovery) expenses		289			20,572
Equity loss from unconsolidated subsidiaries		-			122,495
(Recovery) impairment of purchased intangibles		-			-

		246,800			1,052,849

Loss from operations		(212,729	)		(934,070	)


Other income (expenses):
Realized gain (loss) on marketable securities		265,440			-
Interest expense		(43,780	)		(10,129	)
Other income		8			108

Total other income (expenses)		221,668			(10,021	)


Net loss	$	8,939		$	(944,091	)


Basic loss per share	$	0.00		$	(0.01	)


Weighted average number of shares outstanding		130,479,292			106,544,173

The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Nine Months Ended September 30,

	2005			2004


Net revenues	$	2,737,759		$	3,323,726
Cost of revenues		2,542,201			2,943,840

Gross margin		195,557			379,886


Operating expenses:
General and administrative		1,965,642			2,838,774
Bad debt (recovery) expense		(18,063	)		26,785
Equity loss from unconsolidated subsidiaries		14,213			123,495
(Recovery) impairment of purchased intangibles		(254,833	)		4,488,238

		1,706,959			7,477,292

Loss from operations		(1,511,402	)		(7,097,406	)


Other income (expenses):
Realized gain (loss) on marketable securities		265,440			(14,787	)
Interest expense		(98,256	)		(52,855	)
Other income		12			1,824

Total other income (expenses)		167,196			(65,818	)


Net loss	$	(1,344,206	)	$	(7,163,224	)


Basic loss per share	$	(0.01	)	$	(0.07	)


Weighted average number of shares outstanding		127,798,849			96,784,299

The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Unaudited)

	Common Stock					Additional Paid-In Capital			Stock Subscriptions			Unearned stock-based			Treasury			Accumulated			Other Comprehensive			Total Stockholders’

	Shares		Amount			(Deficit)			Receivable			Compensation			Stock			Deficit			Loss			Deficit


Balance, December 31, 2003	78,796,146		$	78,796		$	3,901,379		$	(125,000	)	$	(324,548	)	$	-		$	(3,160,751	)	$	(48,018	)	$	321,858
Issuance of common stock for cash	14,244,836			14,245			2,127,218			-			-			-			-			-			2,141,463
Issuance of common stock for services received	12,113,382			12,114			908,047			-			-			-			-			-			920,161
Issuance of common stock 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	-			-			-			-			-			-			(7,910,925	)		-			(7,910,925	)

Balance, December 31, 2004	121,222,899			121,223			11,425,685			(125,000	)		(253,318	)		-			(11,071,676	)		(78,125	)		18,789
Issuance of common stock for cash	16,368,250			16,368			841,553			-			-			-			-			-			857,921
Issuance of common stock for services received	(12,062,117	)		(12,062	)		59,107			-			-			-			-			-			47,045
Cancellation of common stock upon rescission of
notes payable	(554,283	)		(554	)		(150,614	)		-			-			-			-			-			(151,168	)
Cancellation of common stock for settlement
and termination of acquisition	(1,375,000	)		(1,375	)		(636,125	)		-			-			-			-			-			(637,500	)
Issuance of common stock for cashless
exercise of warrants	662,162			662			222,366			-			-			(223,028	)		-			-			-
Stock-based compensation	-			-			(69,147	)		-			114,122			-			-			-			44,975
Comprehensive loss	-			-			-			-			-			-			-			(1,000	)		(1,000	)
Net Loss for nine months ended
September 30, 2005	-			-			-			-			-			-			(1,344,205	)		-			(1,344,205	)

Balance, September 30, 2005	124,261,911		$	124,262		$	11,692,825		$	(125,000	)	$	(139,196	)	$	(223,028	)	$	(12,415,881	)	$	(79,125	)	$	(1,165,143	)

The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,

	2005			2004


Cash flows from operating activities:
Net loss	$	(1,344,204	)	$	(7,165,224	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		231,601			211,951
Allowance for doubtful accounts and sales returns		(60,333	)		7,000
Allowance for inventory obsolescence		20,750			-
Allowance for warranty returns		20,000			-
Amortization of stock-based compensation		44,975			68,106
Amortization of stock-based interest		-			19,944
Loss on sale of property and equipment		24,360			-
(Recovery) impairment of purchased intangibles		(254,834	)		4,488,248
Equity loss from unconsolidated subsidiaries		14,213			123,485
Stock based compensation		391,432			779,644
Interest accrual		76,488			(5,544	)
(Gain) loss on sale of marketable securities		(265,440	)		14,787
Changes in assets and liabilities:
Accounts receivable		36,731			15,961
Inventories		(37,965	)		(85,000	)
Prepaid expenses		(616,418	)		(19,918	)
Other current assets		7,801			(31,916	)
Accounts payable		222,801			148,423
Accrued liabilities		267,038			56,170
Taxes payable		802			(1,110	)
Deferred revenues		95,451			17,000

Net cash used in operating activities		(1,124,750	)		(1,357,993	)


Cash flows from investing activities:
Acquisition, net of cash acquired		-			(707,091	)
Purchases of property and equipment		(16,609	)		(167,595	)
Proceeds from sale of property and equipment		15,450			-
Sales of marketable securities		265,440			5,056

Net cash used in investing activities		264,281			(869,630	)

The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Continued) (Unaudited)

	Nine Months Ended September 30,

	2005			2004


Cash flows from financing activities:
Proceeds from issuance of common stock		857,921			2,146,320
Net borrowing (repayments) under revolving credit lines		-			(107,661	)
Repayment of debt from acquisition		-			(269,500	)
Repayments of short term debt		-			(15,000	)
Proceeds from shareholder loans		229,237			450,220
Repayments of shareholder loans		(227,513	)		(60,967	)
Proceeds from convertible loans		-			150,000
Repayments of convertible loans		(35,110	)		(75,000	)
Payments on capital lease obligations		(2,389	)		(32,506	)
Stock subscription deposits		-			(86,565	)

Net cash provided by financing activities		822,145			2,099,341

Net increase in cash		(38,325	)		(128,282	)
Cash at the beginning of the period		46,956			170,340

Cash at the end of the period	$	8,632		$	42,058



Supplemental schedule of cash flow activities
Cash paid for:
Interest	$	11,465		$	22,049
Income taxes	$	800		$	927

Non-cash investing and financial activities:
Common stock (cancelled) issued for business acquisition	$	(637,500	)	$	4,094,500
Common stock issued in payment of services	$	47,045		$	777,701
Common stock issued in payment of convertible loans	$	-		$	201,974
Common stock received upon rescission of convertible loan	$	(151,168	)	$	-
Common stock issued for cashless exercise of warrants	$	223,028		$	-

The referenced notes are an integral part of these consolidated financial statements.
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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements (unaudited)

NOTE 1 -	CONDENSED FINANCIAL STATEMENTS

	The accompanying September 30, 2005 financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2005 and 2004 and for all periods presented have been made. Certain information and Footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 2004 audited financial statements. The results of operations for periods ended September 30, 2005 and 2004 are not necessarily indicative of the operating results for the full years.

NOTE 2 -	DESCRIPTION OF THE BUSINESS

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

	We are a provider of Voice over Internet Protocol, or VoIP, communications products and services. Since we began VoIP operations in 2000, we have evolved from a pioneer in selling VIPER CONNECT, a “push to talk” technology developed by ITXC, to a next generation provider of high-quality telecommunication services and technology for internet protocol, or IP telephony applications. We utilize our VoIP technology to transmit digital voice communications over data networks and the Internet.

NOTE 3 -		SIGNIFICANT ACCOUNTING POLICIES

		a. Basis of Presentation.

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

		b. Inventories

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

		c. Estimates

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

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

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)

	c. Estimates (continued)

	litigation, and other contingencies. The Company bases its estimates on historical experience and various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

	d. Property and Equipment

	Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method. Useful lives range from three to five years for office furniture and equipment. Additions to property and equipment together with major renewals and betterments are capitalized. Maintenance, repairs and minor renewals and betterments are charged to expense as incurred.

	e. Goodwill and Other Intangible Assets

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

	f. Long-lived Assets

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

	g. Revenue Recognition

	The Company recognizes revenues and the related costs for voice, data and other services along with product sales when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is probable and not contingent. Service revenue from monthly and per minute fee agreements is recognized gross, consistent with Emerging Issues Task Force (EITF) No. 99-19 “Reporting Revenues Gross as a Principal Versus Net as an Agent”, as the Company is the primary obligor in its transaction, has all credit risk, maintains all risk and rewards, and establishes pricing. Service revenue from fixed-price agreements is allocated between periods using the percentage-of- completion method, which includes revenues recognized as costs are incurred, in accordance with

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)

	g. Revenue Recognition (continued)

	Statement of Position (SOP) 81-1 "Accounting for Performance of Construction-Type and Certain Production-Type Contracts." Total estimated costs are based on management’s assessment of the hours and costs to complete the project and on an evaluation of the level of work achieved and the hours and costs expended to date. Combined product and service agreements are allocated consistent with EITF No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” with the multiple deliverables divided into separate units of accounting. Revenue is allocated among the separate units of accounting based on their relative fair value. Support and maintenance sales are recognized over the contract term. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue.

	h. Stock-based Compensation

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

	In accordance with the provisions of SFAS 123, all other issuances of stock, stock options or other equity instruments to employees and non-employees as the consideration for goods or services received by the Company are accounted for based on the fair value of the equity instrument issued (unless the fair value of the consideration received can be more reliably measured). During the nine months ended September 30, 2005 and 2004, the Company recognized $246,926 and $158,718 and $271,882 and $533,892 of expense relating to the grant of common stock to non-employees and employees, respectively, for services which are included in the accompanying consolidated statements of operations. The value of these shares was determined based upon over the counter closing prices.

	i. Income Tax

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

	j. Net Loss Per Share

	Basic net loss per share is computed using the weighted average number of common shares outstanding during the periods presented. Diluted loss per share has not been presented because the assumed exercise of the Company’s outstanding options and warrants would have been antidilutive. Options and/or warrants will have a dilutive effect only when the average market price of the common

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 3 -	SIGNIFICANT ACCOUNTING POLICIES (continued)

	j. Net Loss Per Share (continued)

	stock during the period exceeds the exercise price of the options and/or warrants. There were options to purchase 10,890,000 shares of common stock and 35,229,680 warrants potentially issuable at September 30, 2005 which were not included in the computation of net loss per share.

	k. Concentrations of Risk

	The Company entered into an agreement during September 1998 to acquire 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico (the “Land”) with the intent, at the time, to sell lots for residential development and build a communications facility for residents in the surrounding area. As of the date of these financial statements, the Company had not received documented title to the Land. Since consideration for the agreement (documented title) has never been received the Company does not believe it is the owner of the Land. If the Company was determined to be the owner of the Land the Company could be subject to the following risks. The property is located in Mexico, which has a developing economy. Hyperinflation, volatile exchange rates and rapid political and legal change, often accompanied by military insurrection, have been common in this and certain other emerging markets in which the Company may conduct operations. The Company may be materially adversely affected by possible political or economic instability in Mexico. The risks include, but are not limited to terrorism, military repression, expropriation, changing fiscal regimes, extreme fluctuations in currency exchange rates, high rates of inflation and the absence of industrial and economic infrastructure. Changes in land development or investment policies or shifts in the prevailing political climate in Mexico in which the Company plans to sell lots for residential development and build a communications facility could adversely affect the Company’s business. Operations may be affected in varying degrees by government regulations with respect to development restrictions, price controls, export controls, income and other taxes, expropriation of property, maintenance of claims, environmental legislation, labor, welfare, benefit policies, land use, land claims of local residents, water use and mine safety. The effect of these factors cannot be accurately predicted.

NOTE 4 -	GOING CONCERN

	The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred a loss from inception on September 14, 2000 through September 30, 2005, resulting in an accumulated deficit of $12,415,882 at September 30, 2005, that raises doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

	It is the intent of management to continue to develop its voice and data services to Web-based customers and expand its Voice-over-Internet Protocol networks for businesses, institutions, and Internet Service Providers (ISP).

	Company management will seek additional financing through new stock issuances and lines of credit.

NOTE 5 -	RECOVERY OF IMPAIRMENT OF PURCHASED INTANGIBLE

	During May 2004, the Company acquired an aggregate 50% of the membership interests of Brasil Communications, LLC (“Brasil LLC”) through two concurrent transactions with Software Innovations, Inc. (“SII”) and Brasil LLC. The purchase price of $1,320,000 was paid through the issuance of

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 5 -	RECOVERY OF IMPAIRMENT OF PURCHASED INTANGIBLE (continued)

	2,000,000 shares of the Company’s Common Stock to SII and a cash payment of $350,000 to Brasil LLC. The purchase was recorded on the consolidated balance sheet as $127,800 in Investments in unconsolidated businesses, $100,100 of Other intangible assets (for an in-country telecommunication termination licenses for Brazil and El Salvador), and $1,092,100 of Goodwill (recognized as the excess of the aggregate purchase price over the fair value of Brasil LLC’s identifiable net assets). Based on a discounted cash flow model the goodwill balance was considered to be significantly impaired. A non-cash impairment loss of $1,092,100 was therefore charged to income during 2004 as an Impairment of Purchased Intangibles.

	In May, 2005 SII (the other 50% member of Brasil LLC) and the Company reached an agreement to eliminate the Company’s share of ownership in Brasil LLC. In exchange for the elimination the Company was compensated by the return of 1,375.000 shares of the Company’s Common Stock previously issued to SII. The aggregate value of the shares returned was $637,500, after the Company recorded a charge against income equal to the sum of Accounts receivable owed by Brasil LLC ($7,567) and Other intangible assets ($100,100) the remaining recovery ($529,833) was recognized as a Recovery of purchased intangibles.

NOTE 6 -	SIGNIFICANT EVENTS

	On February 4, 2005, the Company entered into five stock subscription agreements (the “Subscribers”) for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. On August 8, 2005, by mutual agreement, the five stock subscription agreements and all associated agreements (as described below) were rescinded; the escrow was closed with the 33,333,335 shares of the Company’s 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 obligates the Company to pay the price return of 75% of the shares issued in two years, or sooner if the shares are registered for sale under the Securities Act of 1933. The equity swap also provides for the exchange of certain cash flows, as defined in the agreement.

	On August 16, 2005, Farid Shouekani was appointed the Chief Executive Officer and President of the Company and on August 26, 2005, he was elected to the board of directors. Also on August 26, 2005, the board of directors was reduced from four members to three with the resignation of John Castiglione and Jason Sunstein.

	On August 26, 2005, to reduce the Company’s total issued and outstanding number of common shares, the Company’s officers agreed to return all executive bonuses previously paid in the form of common stock in exchange for an equal amount of common stock purchase warrants at a price of $.25 and a Promissory Note for all unpaid loans, salaries and expenses. The following bonuses have been cancelled and the common shares returned to treasury, four year warrants have been issued, and promissory notes due December 31, 2006 have been issued.

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VIPER NETWORKS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

NOTE 6 -	SIGNIFICANT EVENTS (continued)

Officer	Bonus Shares Returned	$0.25 Warrants	Promissory Notes

Ronald Weaver	4,400,000 common shares	4,400,000	$	53,119.97
Jason Sunstein	4,400,000 common shares	4,400,000	$	208,445.54
John Castiglione	4,400,000 common shares	4,400,000	$	211,894.68
Farid Shouekani	2,200,000 common shares	2,200,000	$	330,000.00
James Balestraci	1,100,000 common shares	1,100,000	$	35,590.07

	A total of 16,500,000 shares of the Company’s Common Stock were cancelled. All of these shares were originally valued at $0.0364 per share (adjusted for the September 2004 10% stock dividend). A credit against income of $600,000 was recorded in the consolidated statement of operations in the third quarter as general and administrative expense. The shares were originally issued during 2004 ($360,000) and 2003 ($240,000).

	On November 15, 2005, John Castiglione and Jason Sunstein elected to convert $176,000 of each of their promissory notes into 4,400,000 shares of the Company’s Common Stock in accordance with the terms of the notes and exchanged an additional $3,700 of the notes upon their exercise of vested options for the purchase of 100,000 shares of the Company’s Common Stock.

	During March 2006, Ronald Weaver and Farid Shouekani each elected to convert their promissory notes into shares of the Company’s Common Stock in accordance with the terms of the notes.

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

BASIS OF DISCUSSION AND ANALYSIS

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent liabilities. On an ongoing basis, management evaluates its estimates, including those that relate to income tax contingencies, revenue recognition, and litigation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Although we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results. If actual results significantly differ from management's estimates, the Company's financial condition and results of operations could be materially impaired.

SAFE HAROR FOR FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains forward-looking statements as defined by federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements concerning plans, objectives, goals, strategies, expectations, intentions, projections, developments, future events, performance or products, underlying (express or implied) assumptions and other statements which are other than historical facts. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expects," "intends," "plans," "anticipates," "contemplates," "believes," "estimates," "predicts," "projects," and other similar terminology or the negative of these terms. From time to time we may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements, whether written or oral, and whether made by us or on our behalf, are expressly qualified by the cautionary statements described in this Form 10-QSB, including those set forth in Section 1A entitled "Factors That May Affect Future Results." In addition, we undertake no obligation to update or revise any forward-looking statement to reflect events, circumstances, or new information after the date of this Form 10-QSB or to reflect the occurrence of unanticipated or other subsequent events, and we disclaim any such obligation.

RESULTS OF OPERATIONS

Comparison of Nine Month period Ended September 30, 2005 and September 30, 2004

During the nine months ended September 30, 2005, the Company recorded $2,737,759 in Net revenues. This was a $585,967 decrease (-18%) compared to the nine months ended September 30, 2004 when we recorded $3,323,726 in Net revenue. The decrease in Net revenues consisted of a $382,373 (297%) increase in sales of VoIP products and services (“vPhone”) revenue and a $968,340 (30%) decrease in wholesale operations (“Wholesale”). The decrease in revenue from Wholesale resulted from an intentional shift in emphasis away from this activity, coupled with the curtailment of available business caused by cash flow restrictions.

During the nine months ended September 30, 2005, the Company’s Cost of revenues was $2,542,201, which resulted in a Gross margin as a percentage of Net revenues of approximately 7.1%. This compares to the nine months ended September 30, 2004 when our Cost of revenues was $2,943,840, which resulted in a Gross margin percentage of Net revenues of approximately 11.4%. vPhone Cost of revenues in the first nine months in 2004 exceeded Net revenues ($166,720 vs. $128,545, respectively); in the same period during 2005 purchasing efficiencies led to a Gross profit for vPhone activities of 0.7% ($3,798). Conversely, as revenues from Wholesale diminished, efficiencies decreased. Wholesale’s profitability for the period on a Gross margin basis fell from 13.1% in 2004 ($418,061) to 8.6% in 2005 ($191,759). These factors result in a 110% improvement in Gross margin for

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vPhone activities, and a 54% decrease in Gross margin for Wholesale (and a combined decrease of 49% for the Company). The Company expects these trends to continue for the remainder of 2005 and through a significant portion of 2006.

During the nine months ended September 30, 2005 the Company incurred $1,965,642 in General and administrative expenses. This compares to the nine months ended September 30, 2004 when we incurred $2,838,774 in General and administrative expenses. vPhone (including corporate overhead) General and administrative expenses in the nine months ended September 30, 2004 totaled $2,126,793 (1,655% compared to revenues of $128,545); during the same period in 2005 these expenses decreased 41% to $1,246,703, or 326% or vPhone revenue. This decrease was the result of $600,000 in executive bonuses paid in prior years and cancelled in 2005 (See Note 6 to the consolidated financial statements) and cost containment measures enacted by the Company in 2005. Simultaneously, Wholesale General and administrative expenses grew slightly (1%) from $711,981 in the first nine months of 2004 (22.3% of revenues) to $719,569 in the same period in 2005 (32.3% of revenues). The Company is aggressively reducing costs wherever appropriate, but does not expect to see significant improvement in General and administrative expenses relative to revenues until late in 2006. These results led to an overall decrease of 30% in General and administrative expenses for the first nine months of 2005 compared to the same period in 2004. 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.

During the nine months ended September 30, 2005 the Company had Bad debt recovery of $18,063 compared to the nine months ended September 30, 2004, when we had $26,785 in Bad debt expense. During the nine months ended September 30, 2005 we recorded an Equity loss from unconsolidated subsidiaries of $14,213 compared to the nine months ended September 30, 2004, when we recorded an Equity loss from unconsolidated subsidiaries of $123,495 (both based on our 50% interest in Brasil LLC). In addition, during the nine months ended September 30, 2005 we recorded a net benefit of $254,833 for Recovery of purchased intangibles, compared to the nine months ended September 30, 2004, when we recorded a charge against income in the amount of $4,488,238 for Impairment of purchased intangibles recognized based on the application of a discounted cash flow model applied to the Adoria and Brasil LLC acquisitions (both unchanged from the second Quarter). The Recovery of purchased intangibles (net of impairment expense) recognized during the nine months ended September 30, 2005 resulted from the annual discounted cash flow analysis of purchased intangibles for Mid-Atlantic (deemed to be $244,000 less than book value) and Adoria (deemed to be $31,000 less than book value) offset by a $529,833 recovery of purchased intangible upon settlement and termination in May, 2005 of the Brasil LLC 50% investment resulting in a partial return of the Company’s initial investment in excess of the net associated assets carried by the Company.

During the nine months ended September 30, 2005, we realized a Loss from operations of $1,511,402 compared to $7,097,406 during the nine months ended September 30, 2004. The improvement ($5,586,004, or 79% on a year-to-year basis) was due primarily to the decreased impairment of purchased intangibles and, to a lesser extent, the reduction in General and administrative expenses offset in part by reduced Gross margin.

During the nine months ended September 30, 2005, we recognized a $265,440 gain from the sale of 1,531,500 shares of NextPhase Wireless, Inc. (“NextPhase”) common stock compared to the nine months ended September 30, 2004 when we incurred a loss of $14,787 selling stock market investments. During the nine months ended September 30, 2005, we incurred Interest expense of $98,256 compared to $52,855 in Interest expense during the nine months ended September 30, 2004. The increase in Interest expense was due to increased borrowings from related parties.

As a result, during the nine months ended September 30, 2005 we had a Net loss of $1,344,206 compared to the nine months ended September 30, 2004, when we had a Net loss of $7,163,224 (an improvement of 81%). vPhone experienced a Net loss of $786,525 (154% of revenues), an improvement of 88% compared to a Net loss in the comparable period in 2004 of $6,834,539. Wholesale experienced a Net loss of $557,679 (25% of revenues), an increase of $228,994 (70%) compared to the Net loss for Wholesale in the comparable period in 2004 of ($328,685).

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Net Loss for the nine months ended September 30, 2005 and 2004 adjusted on a proforma basis to remove the impact of a) executive bonuses ($600,000 benefit in 2005 and $360,000 charge in 2004), b) Recovery of purchased intangible ($254,833 benefit in 2005), and c) Impairment of purchased intangible ($4,488,238 charge in 2004) would have been $2,199,039 and $2,314,986, respectively.

Basic loss per share for the nine months ended September 30, 2005 was $.01 compared to the nine months ended September 30, 2004, when we had a Basic loss per share of $.07. During the nine months ended September 30, 2005, the Company had 127,798,849 of Weighted average shares outstanding. By comparison, during the nine months ended September 30, 2004 the Company had 96,784,299 of 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 September 30, 2005, we had $12,631 in Cash and Short term investments. At the same time, we had $137,611 in net accounts receivable, $89,234 in Inventories, and $281,913 in Other current assets, for a total of $521,389 in Total current assets. In contrast, as of September 30, 2005, our Total current liabilities were $2,076,128, which consisted primarily of the following material amounts: $592,567 in Accounts payable, $123,403 in Accrued liabilities, $867,470 in related party obligations, $177,554 in Deferred revenues, $230,331 in Short term debt, and $81,380 in Stock subscription deposits.

During the nine months ended September 30, 2005, our cash needs were met primarily by the sale of common stock, loans from certain of our shareholders, and the sale of stock holdings in NextPhase owned by the Company (see discussion below). We cannot be assured that we can continue to obtain funds from these or any other sources to meet our need for additional capital resources.

Net working capital as of September 30, 2005 was ($1,554,739), a decrease of $861,627 (124%) from the same period in 2004. Overall, the company’s access to capital is very limited. The Company continually evaluates its cash needs and anticipates seeking additional equity or debt financing in order to achieve its overall business objectives. However, no commitment for additional financing has been obtained and there can be no assurance that such financing will be available, or, if available, at a price or in a form that is acceptable to the Company. We may be limited to loans and other cash infusions from officers, directors, existing stockholders, and persons affiliated or associated with one or more of them. In addition, if any financing should be obtained, existing stockholders will likely incur substantial, immediate, and permanent dilution of their existing investment. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have an adverse impact on the Company’s ability to achieve its business objectives.

NextPhase is trading on the OTC BB under the symbol NXPW. Incorporated in September, 2000 by the same founders as those who incorporated Viper-CA, NextPhase remained operationally dormant until May, 2004 when the Company, having decided to concentrate on it’s core VoIP business, transferred it’s non-VoIP-related technologies (with a book basis of zero) to NextPhase in exchange for 4,000,000 shares of NextPhase common stock. NextPhase later acquired a public shell and implemented a business model as a wireless IP provider. NextPhase was and continues to be a separate legal entity not related to the Company other than through the Company’s minority equity ownership. None of the management of the Company have any operational positions within NextPhase or are members of its 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.

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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 September 30, 2005, the Company sold 110,000 shares of NextPhase in the public market and 1,421,500 shares in private transactions. Aggregate proceeds from these sales equaled $265,440. On September 30, 2005 the Company holds 2,468,500 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 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.

As of September 30, 2005, the Company expects that it will need at least $1,000,000 to cover its anticipated operating expenses for the twelve month period thereafter.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amount of revenues and expenses during the reporting periods. We are required to make judgments and estimates about the effect of matters that are inherently uncertain. 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 probable and not contingent. 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. Service revenue from fixed-price agreements is allocated between periods using the percentage-of-completion method, which includes revenues recognized as costs are incurred, in accordance with Statement of Position (SOP) 81-1 "Accounting for Performance of Construction-Type and Certain Production-Type Contracts." Total estimated costs are based on management’s assessment of the hours and costs to complete the project and on an evaluation of the level of work achieved and the hours and costs expended to date. Combined product and service agreements are allocated consistent with EITF No. 00-21 “Accounting for Revenue Arrangements with Multiple Deliverables” with the multiple deliverables divided into separate units of accounting. Revenue is allocated among the separate units of accounting based on their relative fair value. Support and maintenance sales are recognized over the contract term. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts and other allowances based on its historical experience.

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The Company’s property and equipment and purchased intangible assets represent a significant component of our consolidated assets. We depreciate property and equipment on a straight-line basis over the estimated useful life of the assets. 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. Purchased intangible assets with indefinite useful lives are not amortized but are evaluated for impairment at least annually, as required by Statement of Financial Accounting Standards, No.142 “Goodwill and Other Intangible Assets”. Any impairment loss is determined by comparing the fair value of the Intangible Assets with the carrying value. Fair value is estimated using discounted future cash flows. 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 151, Inventory Costs – an amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “… under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges…” This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The adoption is not expected to have a material effect on the Company’s results of operations or financial conditions.

In December 2004, the FASB issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions—an amendment of FASB Statements No. 66 and 67” (“SFAS 152). This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. This Statement is effective for financial statements for fiscal years beginning after June 15, 2005, with earlier application encouraged. The adoption is not expected to have a material effect on the Company’s results of operations or financial conditions.

On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), Shared-Based Payment (“SFAS 123R). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R are effective as of the first interim period that begins after June 15, 2005. Accordingly, the Company will implement the revised standard in the third quarter of fiscal year 2005. Currently, the Company accounts for its share-based payment transactions under the provisions of APB 25, which does not necessarily require the recognition of compensation cost in the financial statements. Management is assessing the implications of this revised standard, which may materially impact the Company’s results of operations in the third quarter of fiscal year 2005 and thereafter.

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 No. 154"). SFAS No. 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 No.

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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 No. 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 No. 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”) FAS 115-1 and FAS 124-1, “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 impairments. 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 3. FACTORS THAT MAY AFFECT FUTURE RESULTS

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

1. Continued Operating Losses.

The Company incurred $1,344,206 in losses during the nine months ending September 30, 2005 and cumulative losses of $12,415,882 since the Company’s inception through September 30, 2005. The Company may well incur significant additional losses in the future as well and there can be no assurance that the Company will be successful or that it will be profitable in the future.

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

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

3. Auditor’s Opinion; Going Concern.

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

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

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

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5. Dependence & Reliance Upon Others.

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

6. Recent Acquisitions & Limited History of Operations.

During the nine months ending September 30, 2005, we generated $2,737,759 in net sales revenues. We will need to further increase our revenues and successfully develop and implement our business strategy in an ever-changing and challenging marketplace if we are to succeed. In the event that we are not able to successfully develop and implement our business strategy, we may be subject to continuing significant risks and resulting financial volatility. Our limited history and the continuing technological and competitive challenges that we face are beyond our ability to control. For these and other reasons we may incur continuing and protracted losses with the result that an investor may lose all or substantially all of its investment.

7. Losses Due to Customer Fraud.

Customers have obtained access to the Company’s service without prepaying for the service (minutes) by submitting fraudulent credit card information. Losses from unauthorized credit card transactions and theft of service totaled $20,706 during the nine months ending September 30, 2005. We have implemented new anti-fraud procedures in 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 to customer fraud. If our procedures are not effective, consumer fraud and theft of service could be significant and have a material adverse effect on our business and operating results.

8. Price Competition on Certain Services.

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

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

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

10. Limited Customer Base.

While we seek to implement our plans, we have a limited customer base of approximately 20,000 accounts using our suite of VoIP products (as of September 30, 2005) and there can be no assurance that we will grow and develop a sufficient customer base that generates sufficient sustainable revenues that provide stable profit margins. The absence of growth at pricing levels that can provide for sustainable revenues and profit margins may greatly inhibit our ability to attract additional capital and otherwise lead to volatile results from operations with consequent adverse and material impact on our financial condition.

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

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

12. New Technologies May Be Developed.

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

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

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

14. Government Regulation.

Our planned operations will likely be subject to extensive telecommunications-based regulation by United States and foreign laws and international treaties. In the United States we are subject to various Federal Communications Commission ("FCC") rules and regulations. Current FCC regulations suggest that VoIP products and services will not be unduly burdened by new and expanded regulations. However, there can be no assurance that the occurrence of regulatory changes will not significantly affect our operations by restricting them or increasing the opportunity of our competitors. In the event that government regulations change, there can be no assurance that the costs and burdens imposed on us will not materially and adversely impact our planned business.

15. Loss of Equipment.

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

16. Control.

Our officers and directors directly and indirectly hold an aggregate of 9,501,297 shares of the Company’s common stock (before including any shares issuable upon exercise of any options and warrants). Former officers with outstanding funds loaned to the Company directly and indirectly hold an aggregate of 13,961,626 shares of the Company’s common stock (before including any shares issuable upon exercise of any options and warrants). Combined this represents approximately 18.9% of the Company’s total outstanding shares as of September 30, 2005 and thereby allows the Company’s officers and directors and former officers to retain significant influence over the Company.

17. Prior Filing of Form 10-SB.

In June of 2001 we prepared and filed a registration statement on Form 10-SB with the U.S. Securities and Exchange Commission (the "SEC"). Subsequently, our then legal counsel delivered a letter (dated November 15, 2001) to the SEC, which, by its terms, stated that the SEC had agreed to allow us to withdraw the registration statement. At the time the Company’s management believed, in reliance upon assurances from the Company’s then legal counsel, that the Company had been allowed to withdraw the registration statement, notwithstanding that the Securities Exchange Act of 1934 (the "Exchange Act") provides that any withdrawal of a Form 10-SB registration statement (at any time after 60 days from the date at which it is originally filed) requires that the registrant: (a) file

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17. Prior Filing of Form 10-SB. (continued)

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

18. Dependence Upon Key Personnel and New Employees.

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

19. Absence of Key Man Insurance.

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

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

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

21. No Planned Dividends.

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

22. Potential Dilution.

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

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

As of December 31, 2004, there were 86,351,874 shares of the Company’s Common Stock that were “restricted securities” and which may be sold pursuant to Rule 144. Since September 16, 2002, we have had a limited public trading market for our Common Stock in the “Pink Sheets” market. Since that date trading volumes have been volatile with sporadic liquidity levels. Further, our Common Stock is (as of the date of the filing of this Report) a

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23. Matter of Public Market and Rule 144 Stock Sales. (continued)

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

24. General Risks of Low Priced Stocks.

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

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that current disclosure controls and procedures are effective as of the end of the period covered by this quarterly report on Form 10-QSB.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-QSB that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

DISCLOSURE CONTROLS AND INTERNAL COMTROLS

Our management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), have the responsibility for establishing and maintaining adequate disclosure and internal controls over our financial reporting. Disclosure Controls are procedures that are designed with the objective of providing reasonable assurance that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Quarterly Report on Form 10-QSB, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure Controls are also designed with the objective of providing reasonable assurance that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures that are designed with the objective of providing reasonable assurance that our transactions are properly authorized, our assets are safeguarded against unauthorized or improper use, and our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.

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LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS

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

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

VIPER NETWORKS, INC. vs GREENLAND CORPORATION

On June 11, 2004 the Company filed an action in The Superior Court of the county of San Diego, California seeking, among other things, rescission of an April 25, 2003 Agreement with Greenland Corporation (“Greenland”). The Company considers the contract it entered into with Greenland (wherein Greenland was to receive 2,500,000 shares of the Company’s Common Stock) to have been obtained by fraud. Greenland has filed counter-claims in both California and Utah, seeking, among other things, full and free ownership to the disputed shares of the Company.

As requested by Viper, The Superior Court stayed the California cases and referred the California and Utah causes of action to binding arbitration (as stipulated in the April 25, 2003 Agreement). Although the final decision of the Arbitrator remains pending, the company believes the interim award issued by the Arbitrator on February 10, 2006 to be very favorable to the Company. If the interim award were to stand, the Company believes the ruling would, in essence, restore the parties to the conditions that existed prior to the consummation of the Agreement; which is what the Company has been seeking. The Company is currently evaluating the interim award and formulating it’s response to it, including, but not limited to, additional claims (such as compensation for attorney’s fees), if any.

HILLS OF BAJAMAR

During September 1998, we entered into an agreement with a related party to purchase 50 acres of real property known as the Hills of Bajamar, located in Ensenada, Mexico. The property was valued at a predecessor cost of $125,000. At the time, we intended to sell lots for residential development and build a communications facility for residents in the surrounding area. The Company's current management team and Board of Directors has determined that the goals for use of the Mexico property and construction of telecommunications facilities to the Hills of Bajamar are not within the Company's current capabilities.

As consideration for the land, the Company issued 3,000,000 shares of our Series B Preferred Stock. On June 30, 2001, all of the Series B Preferred Stock was converted into 400,000 shares of our Common Stock. As of September 30, 2005, the Company had still not received documented title to the land. Since consideration for the agreement (documented title) has never been received, the Company has attempted to rescind the original transaction. The original seller is in Chapter 11 bankruptcy; the Trustee’s claims the Viper stock to be an asset of the bankruptcy and asserts that Viper’s claim (rescission of the agreement for nonperformance) is that of a general creditor. To limit continued legal cost Viper entered into a settlement agreement with the Trustee whereby the Company will allow the Trustee to sell the Viper stock to a Jason Sunstein for $50,000 in exchange for a release of all claims asserted against the Company. On March 7, 2006, the bankruptcy court approved the settlement agreement.

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In January 2005, the Company issued 1,500,000 shares of the Company’s Common Stock to one purchaser in exchange for the Company’s receipt of an aggregate of $50,000 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and

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sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In February 2005, the Company 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In February 2005, the Company entered into five stock subscription agreements for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. 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 and the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with the transaction. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In March 2005, the Company issued a total of 300,000 shares of the Company’s Common Stock to Paul Atkiss, an officer and director of the Company, in payment for services. The shares were valued at an aggregate of $0.2442 per share. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In March 2005, the Company issued 55,173 shares of the Company’s Common Stock to IBC Radio in payment for six month of advertising services. The shares were valued at $0.26 per share. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In March 2005, the Company issued 1,250,000 shares of the Company’s Common Stock to Rhino Capital in payment for twelve months of business consulting services to assist the Company develop debt and equity capital formation plans and identify possible funding sources. The shares were valued at $0.21 per share. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares

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were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In May 2005, the Company issued 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In May 2005, the Company issued a total of 25,000 shares of the Company’s Common Stock to Uzi Yair, an Advisory Board member of the Company, in payment for services. The shares were valued at $0.18 per share. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In May 2005, the Company issued a total of an aggregate of 150,000 shares of the Company’s Common Stock to HF Solutions and CEO Solutions, consultants for the Company, in payment for services. The shares were valued at $0.3483 per share. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In June 2005, the Company issued 3,055,554 shares of the Company’s Common Stock to four purchasers in exchange for the Company’s receipt of an aggregate of $275,000 in cash. All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

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In 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In 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% ownership interest in Brasil Communications, LLC. All of the shares were originally offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. The investor was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

In 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. 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.

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 and a Promissory Note for all unpaid loans, salaries and expenses. A total of 16,500,000 shares of the Company’s Common Stock were returned by the following officers:
(1)	4,400,000 shares by John L. Castiglione originally issued: (a) 2,200,00 October 2003, (b) 1,100,000 March 2004, and (c) 1,100,000 September 2004;
(2)	4,400,000 shares by Jason A. Sunstein originally issued: (a) 2,200,00 October 2003, (b) 1,100,000 March 2004, and (c) 1,100,000 September 2004;
(3)	2,200,000 shares by Farid Shouekani originally issued: (a) 1,100,000 March 2004, and (b) 1,100,000 September 2004; and
(4)	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). All of the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were originally offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

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In 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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. 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.

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 by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with this transaction. All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

All of the shares were offered and sold under a claim of exemption provided by Section 4(2) of the Securities Act of 1933 and the shares were offered and sold by the Company’s management without the use of an underwriter or NASD registered broker-dealer and no commissions were incurred by the Company in connection with the transaction. Each purchaser was sophisticated and experienced in financial, business, and investment matters and otherwise able to evaluate the merits and risks associated with the purchase of the Company’s securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.

ITEM 5. OTHER INFORMATION

CHANGE IN OFFICERS AND DIRECTORS

On August 26, 2005, the Board of Directors pursuant to the power conferred it by the Corporation’s Bylaws determined that the exact number of authorized directors of the Corporation should be three (3), effective immediately, until such time as the number is changed in accordance with the Corporation’s Bylaws.

The Corporation also announced that Farid Shouekani is elected to serve as a director of the Corporation, his term of office to commence immediately and continue until his successor is duly elected and qualified; and, as previously announced, is appointed to serve as President and Chief Executive Officer of the Corporation, in accordance with the terms and conditions contained in the Employment Agreement, dated August 26, 2005.

The Board of Directors also accepted the resignation of Ron Weaver, as President and CEO, and the resignations of John Castiglione and Jason Sunstein, leaving the Board of Directors with the following members: Farid Shouekani, Ronald Weaver and Paul Atkiss.

CANCELLATION OF COGENT CAPITAL PRIVATE PLACEMENT

In February 2005, the Company entered into five stock subscription agreements (the “Subscribers”) for an aggregate of 33,333,335 shares of the Company’s Common Stock in exchange for $5,000,000 in US Treasury Bonds, with both the Company’s shares and the $5,000,000 being placed into escrow. Concurrent with the

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execution of the agreements, the Company purchased from Cogent Capital for $1 a call option to repurchase at the end of two years 80% of the shares of Common Stock sold at the then current market price. Also concurrent with the agreements, the Company entered into an equity swap arrangement with Cogent Capital for $50,000 and 3,333,333 shares of the Company’s Common Stock that entitled the Company to receive and obligate the Company to pay the price return of 75% of the shares issued in two years, or sooner if the shares are registered for sale under the Securities Act of 1933. The equity swap also provided for the exchange of certain cash flows, as defined in the agreement.

Due to the recent volatility of the Company’s common stock, on August 8, 2005, this transaction was mutually rescinded. All $5,000,000 in US Treasury Bonds, including accumulated interest, were returned to the Subscribers and the 36,666,668 shares of common stock issued by the Company in connection with this transaction have been cancelled and returned to the Company’s treasury.

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

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

ITEM 6. EXHIBITS AND REPORTS ON FORMS 8-K

(a). The following Exhibits are attached:

EXHIBIT NUMBER	DESCRIPTION

23.1 *	Auditor’s Consent
31.1*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	* Filed herewith.

(b). The Company filed the following Reports on Form 8-K during the nine months ended September 30, 2005:

Form 8K on January 27, 2005, February 4, 2005, February 17, 2005, March 14, 2005, March 16, 2005, August 22, 2005, and September 2, 2005

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VIPER NETWORKS, INC.


Date: March 16, 2005	By:	/s/ FARID SHOUEKANI

		FARID SHOUEKANI, CHIEF EXECUTIVE OFFICER


Date: March 16, 2005	By:	/s/ PAUL E. ATKISS

		PAUL E. ATKISS, CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)

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