General

Basis of Presentation

The accompanying consolidated financial statements have been prepared by Raptor Networks Technology, Inc. (the “Company”) without audit (unless otherwise indicated) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements include all of the adjustments which, in the opinion of management, are necessary for a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. The December 31, 2010 consolidated balance sheet was derived from audited financial statements as of December 31, 2010. These financial statements should be read in conjunction with the audited financial statements at December 31, 2010 included in the Company’s most recent annual report on Form 10-K. Results of operations for the three and six months ended June 30, 2011 are not necessarily indicative of the results of operations expected for the full year or for any other period.

Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred a net loss of $4,152,900 for the six months ended June 30, 2011. Additionally, the Company also has an accumulated deficit of $88,544,948 and a working capital deficit of $21,973,012 as of June 30, 2011, of which $10,647,766 relates to the fair value of derivative financial instruments. In September 2008, the Company shifted its principal operating model from product sales to licensing enabling a reduction in headcount, footprint and infrastructure that reduced operating expense run rates substantially. This shift in business model has not been successful as the Company has not generated any revenues from licensing agreements until July 5, 2011, at which time the Company entered into an agreement with California Capital Equity, LLC (“CCE”) granting CCE an exclusive license (even as to the Company) leaving the Company without any continuing rights in or to its intellectual property. For further details on this transaction, see the disclosures made under the heading “Subsequent Events” in this quarterly report and to the Form 8-K filed by the Company on July 11, 2011. In addition, on August 1, 2011 all of the Company’s remaining assets were sold during a public foreclosure sale.

The Company’s service contract with a Government prime contractor was depleted as of March 31, 2011 and consequently, revenues for the quarter under review amounted to close to zero. Taking into account the current status of the U.S. Government budget, we believe it is unlikely that we will find a replacement for the expired contract revenue prior to January 2012.

The items discussed above raise substantial doubts about the Company's ability to continue as a going concern.

During 2010, the 2007 Notes, April 2008 Notes and July 2008 Notes (see Note 4) matured. The Company did not pay the principal balances and accrued interest at maturity or thereafter. As mentioned hereafter under the heading “Subsequent Events,” the note holders exercised their right as a secured lender against the Company’s assets and held a public foreclosure sale of substantially all of the Company’s assets and acquired all of these assets at a price of $100,000 which price was credited against the outstanding notes on August 1, 2011. As a result of the public sale on August 1, 2011, the Company retains no material assets with which to continue its operations. The Company is seeking companies or businesses with an interest in utilizing the Company as a public shell vehicle and in August 2011 has signed a non binding “Letter of Intent” with an interested party for a possible merger. There can be no assurance, however, that such a transaction will ultimately be consummated.

In light of these factors, management believes that a comprehensive financial restructuring with the utilization of the public shell entity as a reverse merger vehicle for a new entity is the only way to preserve any value for the public shareholders. Should such a transaction be consummated, the resultant debt for equity exchange will most likely result in a near total loss of shareholder value. Should a restructuring be unachievable, Raptor will permanently cease operations resulting in a total loss of shareholder value.

The financial statements do not include any adjustments relating to the recoverability and reclassification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Summary of Significant Accounting Policies

For a complete discussion of the Company’s significant accounting policies, please refer to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2010.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the three and six months ended June 30, 2011, as compared to the recent accounting pronouncements described in the Annual Report on Form 10-K that are of material significance, or have potential material significance, to the Company.