8-K 1 b404982_8k.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): November 30, 2004 SiVault Systems, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Nevada 0-30711 98-0209119 ------------------------------- ------------------------ ------------------ (State or Other Jurisdiction of (Commission File Number) (I. R. S. Employer Incorporation or organization) Identification No.) 500 Fifth Avenue, Suite 1650, New York, New York 10110-0002 ----------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (212) 931-5760 -------------- Registrant's telephone number, including area code ------------------------------------------------------------------------------- (Former name or Former Address, If Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) SECTION 2 - FINANCIAL INFORMATION ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS On December 7, 2004, SiVault Systems, Inc. ("SiVault") completed the purchase of all the principal assets of Viaquo Corporation ("Viaquo") a leading developer of computer security technology with effect as of November 30, 2004. Under the terms of the Agreement for Purchase and Sale of Assets dated as of November 30, 2004 among SiVault, Viaquo and an Escrow Holder (the "Agreement"), SiVault acquired all principal assets Viaquo including physical equipment, technology, products and intellectual property. The majority of the Viaquo staff has joined SiVault to support the continued development, sales and marketing of its technology. The core technology and intellectual property purchased represents Viaquo's patent pending ViaSeal(TM) security technology. ViaSeal provides cryptographic protection of electronic data for distribution or access by multiple parties without the cumbersome and costly process of private key management as seen in most modern Public Key Infrastructure (PKI) systems. The Purchase Price for the assets consisted of 3,050,000 of SiVault's shares of restricted stock; 750,000 of the shares were issued and delivered to Viaquo at Closing; 2,050,000 of the shares were placed in escrow to be held until the earlier to occur of (i) the issuance of a U.S. Patent for certain U.S. Patent Applications acquired by SiVault or (ii) the abandonment by SiVault of the U.S. Patent Application following final rejection thereof by the U.S. Patent and Trademark Office; and the remaining 250,000 shares were placed in escrow to be held until the earlier to occur of (i) the issuance by the European Patent Office ("EPO") of a decision to grant a European Patent with respect to an European Patent Application acquired by SiVault or (ii) the abandonment by SiVault of European Patent Application following a final refusal by EPO to grant the European Patent. The shares issued to Viaquo in consideration for the Purchase of Assets carried with them certain registration rights as set forth in a Registration Rights Agreement, dated as of November 30, 2004 between SiVault and Viaquo. The summary of the foregoing transaction is qualified in its entirety by reference to the text of the related agreements, which are included as exhibits to the Company's filing on Form 8-K dated November 30, 2004 and filed with the Securities and Exchange Commission on December 8, 2004. -2- SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired VIAQUO CORPORATION FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003 AND 2002 CONTENTS PAGE ---- INDEPENDENT AUDITORS' REPORT 4 BALANCE SHEETS 5 - 6 STATEMENTS OF OPERATIONS 7 STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 8 STATEMENTS OF CASH FLOWS 9 NOTES TO FINANCIAL STATEMENTS 10 - 17 -3- INDEPENDENT AUDITORS' REPORT To the Board of Directors Viaquo Corporation San Jose, California We have audited the accompanying balance sheets of Viaquo Corporation, as of December 31, 2003 and December 31, 2002 and the related statements of operations, changes in stockholders' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits, the financial statements referred to above present fairly, in all material respects, the financial position of Viaquo Corporation as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements referred to above have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management's plan with regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. New York, New York /s/ Miller Ellin and Company February 4, 2005 Certified Public Accountants -4- VIAQUO CORPORATION BALANCE SHEET ASSETS

The accompanying notes are an integral part of these financial statements. -5- VIAQUO CORPORATION BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY

The accompanying notes are an integral part of these financial statements. -6- VIAQUO CORPORATION STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these financial statements. -7- STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2003 AND 2002

The accompanying notes are an integral part of these financial statements. -8- VIAQUO CORPORATION STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these financial statements. -9- VIAQUO CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND PLAN OF OPERATIONS Nature of Business Viaquo Corporation (the "Company") is a provider of Internet-based distributed access control software that protects the data over any channel. Viaquo's ViaSeal software platform enables carriers, ISPs, content vendors, satellite service providers, enterprises, and exchanges to seal and tamper-proof digital packages of rich media or sensitive enterprise information and distribute those packages via the Internet, satellite, or selectively through the corporate enterprise. The Company was incorporated in the State of Delaware on May 26, 1999 under the name of "ULOGON.COM." The Company changed its name to "Viaquo, Inc." on September 25, 2002. The Company has two segments, a satellite transmission secured content business, and the ViaSeal Access Control Business ("ViaSeal"). The financials presented herein contain both segments. Since inception, the Company has experienced significant losses and negative cash flows from operations, raising substantial doubt about its ability to continue as a going concern. On December 7, 2004, SiVault Systems, Inc. ("SiVault") completed the purchase of substantially all of the assets of the Company's ViaSeal business segment, dated as of November 30, 2004, as described in Note 11. SiVault shares received from the sale may be sold or exchanged to raise cash for any use deemed to be in the best interest of the Company's stockholders. Management plans to continue building its satellite transmission secured content business. Management is also exploring strategic partnerships to further develop and market its products and services. The ability of the Company's remaining business segment to continue as a going concern is unknown. These financial statements do not include any adjustments that might be necessary should the company be unable to continue as a going concern. The future of the ViaSeal segment is the responsibility of SiVault. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Software License Revenue Revenues from software license sales are recognized in accordance with Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, and SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition with Respect to Certain Transactions. Revenues from software license sales that do not depend on services rendered to make the software functional are recognized as revenue upon delivery, provided (1) there is evidence of an arrangement, (2) collection of our fee is considered probable and (3) the fee is fixed or determinable. When services are necessary to make the software functional, fees are allocated between services and software based on either (1) vendor specific objective evidence of a fair value basis to allocate the total fee to all elements of the arrangement. If vendor specific objective evidence of fair value does not exist (2) the residual method allowable under SOP No. 98-9, to allocate excess of the fee over the fair value of the services to the license element. Cash and Cash Equivalents Cash equivalents include cash and money market investments with original maturities of three months or less. -10- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization and are depreciated or amortized using the straight-line method over the following estimated useful lives: Furniture and fixtures 7 Years Machinery and equipment 5 Years Computer equipment 5 Years Software 3 Years Capitalized Software The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Software development costs are capitalized after technological feasibility has been established, which is the earlier point in time at which the Company has developed a working prototype or has a detailed program design for the software. The Company amortizes capitalized software over five years. Impairment of Long-Lived Assets The Company's long-lived assets, including property and equipment, and capitalized software, are reviewed for impairment whenever such events or changes in circumstances indicate that the net carrying amount may not be recoverable. When such events occur, the Company measures impairment by comparing the carrying value of the long lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Income Taxes The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and the tax effect of the net operating loss carry forwards. A valuation allowance is recorded against deferred tax assets if it more likely than not that such assets will not be realized. Use of Estimates Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. Significant estimates made by management include the fair values of warrants and options issued, the valuation allowance on deferred tax assets and the valuation of capitalized software. -11- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Concentration of Credit Risk Cash Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high credit quality financial institutions. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment as of December 31, consists of the following:

Depreciation expense charged to operations for the years ended December 31, 2003 and 2002 totaled $109,727 and $189,710, respectively. NOTE 4 - CAPITALIZED SOFTWARE Capitalized software as of December 31, consists of the following:

Amortization of capitalized software charged to operations totaled $485,821 for the year ended December 31, 2003. There was no amortization in the year ended December 31, 2002. NOTE 5 - CONVERTIBLE NOTES PAYABLE - STOCKHOLDER On September 25, 2002 and May 14, 2003, the Company entered into agreements to issue convertible notes to a stockholder. The notes bear interest at 8% per annum and were due on December 31, 2004. As of December 31, 2004, the Company was in default of these convertible note agreements. The Company's intention is to payoff the notes by selling the common stock received from the sale of the ViaSeal business segment, part of which is currently being held in escrow subject to events happening which would release the shares (see Notes 1 and 11). -12- NOTE 5 - CONVERTIBLE NOTES PAYABLE - STOCKHOLDER (CONTINUED) In the event of liquidation, the lender is entitled to receive three times the outstanding principal on the notes, and the unpaid interest. The convertible notes payable balances at December 31, 2003 and 2002 was $3,619,000 and $1,235,000, respectively. The accrued interest balances at December 31, 2003 and 2002 was $214,185 and $20,474, respectively. The Company has made no principal or interest payments since the obligations were incurred. Interest expense on the convertible notes for the years ended December 31, 2003 and 2002 was $149,409 and $11,048, respectively. In addition, $51,404 and $9,828 of interest was capitalized as software development assets. The notes are convertible at the option of the majority of the limited partner note holders and upon the next sale of equity securities, including preferred stock, in which the Company receives gross proceeds of $500,000 or more ("Next Financing"). The notes and accrued interest are convertible to the same security issued in the Next Financing at the conversion price is the price paid per share for the securities. Upon the initial closing of the September 25, 2002 Agreement, the Company delivered to each limited partner of the noteholder a warrant to purchase Warrant Conversion Shares. Each such warrant is exercisable for Warrant Conversion Shares equal to the individual warrants' proportionate share of the product of the then total outstanding shares of the Company calculated on a fully-diluted basis as of the date of exercise of the warrant multiplied by 75%. NOTE 6 - INCOME TAXES The tax effect of major temporary differences that give rise to the Company's net deferred tax asset is as follows:

The provision for income taxes for the years ended December 31, consists of the following:

-13- NOTE 6 - INCOME TAXES (CONTINUED) As of December 31, 2003, the Company had net operating losses of approximately $15,536,000 to be carried forward to offset future taxable income for federal and California income tax purposes. Due to the ownership changes that have occurred, the loss carryovers incurred prior to the change which can be utilized in the future years may be severely limited pursuant to Section 382 of the Internal Revenue Code and the California Revenue and Taxation Code. The Federal and California net operating loss carryovers will expire from the years 2019 through 2023 and 2009 through 2013, respectively. NOTE 7 - STOCKHOLDERS' EQUITY The Company has 154,107,950 authorized common shares having a par value of $.000001. In 2003, the Company issued 8,000,000 common shares in exchange for warrants (see below). Treasury Stock In 2000, the Company repurchased 1,260,000 of Common Shares, which it returned to its treasury. Preferred Stock Series A Preferred On June 10, 1999, the Company sold 2,250,000 shares of Series A Preferred Stock, at a purchase price of $.888889 per share. Series B Preferred On December 23, 2000, the Company sold 5,078,710 shares of Series B Preferred Stock, at a purchase price of $1 per share. Series B-1 Preferred The Company sold 2,000,000 shares of Series B-1 Preferred Stock on June 22, 2001, 1,500,000 shares on November 6, 2001, and 1,500,000 shares on February 22, 2002, all at a purchase price of $1 per share. Rights and Preferences of Preferred Shares Each Preferred Share is convertible into one share of common stock, at any time at the option of the holder or automatically upon an initial public offering of the Company's common stock. The conversion ratio is adjustable, if the Company issues additional common stock or securities convertible into common stock or a stock split occurs. Holders are entitled to receive non-cumulative cash dividends when and if declared by the Board of Directors in its sole discretion at a rate of 8% of their respective conversion prices. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares are entitled to receive, prior and in preference to any distribution to the common stockholders, as follows: -14- NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED) First, Series B-1 Preferred Shareholders an amount equal to the greater of $2 per share or $1 per share plus, participation with common stock distributions plus all declared but unpaid dividends. Second, to Series B Preferred Shareholders an amount equal to the greater of $2 per share or $1 per share plus, participation with common stock distributions plus all declared but unpaid dividends. Third, to Series A Preferred Shareholders an amount equal to $.888889 per share plus all declared but unpaid dividends. Warrants The Company issued Series B Preferred Stock warrants to holders of Series B Preferred Stock on December 29, 2000. A total of 90,000 warrants were issued and each warrant is exercisable to purchase one Series B Preferred share until December 29, 2005 at $.30 per share. As discussed in Note 5, at the closing of Convertible Notes on September 25, 2002, the Company issued a warrant to purchase Warrant Conversion Shares to each Convertible Note holder. Upon issuance, the warrants had a negligible value. In 2003, a portion of these warrants were converted into Warrant Conversion Shares at a purchase price of $1,900 and a portion of the Warrant Conversion Shares were converted into 8,000,000 common shares at a price of $800. A summary of the warrants for the years ended December 31, 2003 and 2002 is presented below: Warrants Outstanding as of December 31, 2001 90,000 Issued 115,400,000 Exercised - ------------ Warrants Outstanding as of December 31, 2002 115,490,000 Issued - Exercised (8,000,000) ------------ Warrants Outstanding as of December 31, 2003 107,490,000 ============ Stock Awards and Stock Options The Company established the 1999 Stock Plan (the "Plan") for its employees, directors, and consultants. The Plan permits the granting of incentive stock options ("ISOS") and non-qualified stock options ("NSOs"). The incentive stock options are granted at the fair market value of the stock on the day the option is granted, as determined by the Board of Directors. Non-qualified stock options are granted for at least 50% of the fair market value of the stock on the day the option is granted. Both the incentive and the non-qualified stock options are exercisable over a period of ten years from the date of grant. -15- NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED) A summary of the Company's incentive and non-qualified employee stock option and the related transactions for the years ended December 31, 2003 and 2002 is presented below:

The Company believes that no measurable value can be attributed to stock awards and stock options issued because of the uncertain financial position of the Company. NOTE 8 - BUSINESS SEGMENTS For the year ended December 31, 2003, the Company had two segments, a satellite transmission secured content business, and the ViaSeal Access Control Business. For the year ended December 31, 2002, there was only one business segment - ViaSeal Access Control Business. The summarized financial information concerning the Company's reportable segments for the year ended December 31, 2003, as follows:

NOTE 9 - RETIREMENT PLAN The Company has a 401K Plan in which all employees are eligible to participate. Employees may make contributions to the plan subject to limitations as defined by the Internal Revenue Code. The Company made no contributions to the plan for the years ended December 31, 2003 and 2002. -16- NOTE 10 - COMMITMENT AND CONTINGENCY Leases Commitment The Company leases its premises under an operating lease agreement, expired May 31, 2004. The lease requires the Company to pay a base rent and various operating and maintenance costs. Future aggregate minimum rents due under this lease at December 31, 2003 are $22,968 per year. Rent expense was $61,208 and $130,524 for the year ended December 31, 2003 and 2002. Contingency The California Employment Development Department ("EDD") issued a Notice of Assessment on July 11, 2003 for unpaid unemployment insurance, employment training tax, disability insurance, and personal income tax totaling $61,513 based on its determination that certain independent contractors hired by the Company were employees subject to payroll deductions. The Company filed a Petition for Reassessment on September 9, 2003 challenging the finding that the individuals were not independent contractors. By a decision dated January 27, 2005, the Petition for Reassessment was accepted. An Administrative Law Judge will schedule a hearing to hear the merits of the petition. Meanwhile, the Company has obtained and submitted to the EDD Personal Income Tax ("PIT") Abatement Forms by which the alleged employees have declared that they paid their income tax on the payments the Company made to them, thus reducing the assessment. Management has estimated an ultimate liability with respect to this matter of approximately $14,000 as of December 31, 2003 based on the PIT Abatement Forms and telephone conversations with the EDD. NOTE 11 - SUBSEQUENT EVENT As of November 30, 2004, SiVault Systems, Inc. ("SiVault") purchased substantially all of the assets of Viaquo related to Viaquo's ViaSeal business, including physical equipment, technology, products and intellectual property, in exchange for 3,050,000 shares of the Company's common stock valued at $2.35 per share (average market price for the four trading days around November 30, 2004), of which 750,000 of the shares were issued and delivered to Viaquo at closing; 2,050,000 of the shares were placed in escrow to be held until the earlier to occur of (i) the issuance of a U.S. Patent for certain U.S. Patent Applications acquired by SiVault, or (ii) the abandonment by SiVault of the U.S. Patent Application following final rejection thereof by the U.S. Patent and Trademark Office; and the remaining 250,000 shares were placed in escrow to be held until the earlier to occur of (i) the issuance by the European Patent Office ("EPO") of a decision to grant a European Patent with respect to an European Patent Application acquired by SiVault, or (ii) the abandonment by SiVault of European Patent Application following a final refusal by EPO to grant the European Patent. Should the patents be rejected, the seller is not entitled to the shares held in escrow. In addition, SiVault agreed to assume the vacation pay liability of employees who resigned from Viaquo and agreed to join SiVault as employees, effective as of December 1, 2004, which amounted to $52,553. -17- VIAQUO CORPORATION FINANCIAL STATEMENTS ELEVEN MONTHS ENDED NOVEMBER 30, 2004 CONTENTS PAGE ---- INDEPENDENT ACCOUNTANTS' REPORT 19 BALANCE SHEET 20 - 21 STATEMENT OF OPERATIONS 22 STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) 23 STATEMENT OF CASH FLOWS 24 NOTE TO FINANCIAL STATEMENTS 25 - 32 -18- INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors Viaquo Corporation San Jose, California We have reviewed the accompanying balance sheet of Viaquo Corporation, as of November 30, 2004 and the related statements of operations, changes in stockholders' equity (deficiency), and cash flows for the eleven months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statement is the representation of the Companies' management. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, 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. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles in the United States of America. The accompanying financial statements referred to above have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, conditions exist which raise substantial doubt about the Company's ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations. Management's plan with regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern. New York, New York /s/ Miller Ellin and Company February 4, 2005 Certified Public Accountants -19- VIAQUO CORPORATION BALANCE SHEET NOVEMBER 30, 2004 ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,638 Accounts receivable 250,000 Note receivable - related party, net of allowance of $54,000 54,000 ---------- TOTAL CURRENT ASSETS 309,638 PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 40,542 CAPITALIZED SOFTWARE, NET OF ACCUMULATED AMORTIZATION 3,481,717 SECURITY DEPOSIT 12,301 ---------- $3,844,198 ==========

See accompanying notes and accountants' review report. -20- VIAQUO CORPORATION BALANCE SHEET NOVEMBER 30, 2004 LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 199,502 Accrued interest - stockholder 548,146 Convertible notes payable - stockholder 4,949,000 ------------ TOTAL CURRENT LIABILITIES 5,696,648 ------------ COMMITMENT AND CONTINGENCY STOCKHOLDERS' DEFICIENCY Preferred stock - Series B-1: 5,000,000 shares authorized, issued, and outstanding, par value $.000001 ($5); liquidating value, $2.00 ($10,000,000,000); at the amount contributed 5,000,000 Preferred stock - Series B: 5,078,710 shares authorized, issued, and outstanding, par value $.000001 ($5); liquidating value, $2.00 ($10,000,000,000); at the amount contributed 5,078,710 Preferred stock - Series A: 2,250,000 shares authorized, issued, and outstanding, par value $.000001 ($2); liquidating value, $0.888889 ($2,000,000); at the amount contributed 2,000,000 Common stock - 154,107,950 shares authorized; issued and outstanding - 13,232,084 exclusive of treasury stock, par value $.000001 13 Additional paid-in capital 422,300 Accumulated deficit (14,333,473) ------------ (1,832,450) Less: Treasury stock (1,260,000 shares) - at cost 20,000 ------------ TOTAL STOCKHOLDERS' DEFICIENCEY (1,852,450) ------------ $ 3,844,198 ============

See accompanying notes and accountants' review report. -21- VIAQUO CORPORATION STATEMENT OF OPERATIONS ELEVEN MONTHS ENDED NOVEMBER 30, 2004 REVENUES: Smart card revenues $ 81,502 Licensing fees 300,000 ----------- 381,502 ----------- OPERATING EXPENSES: Costs of revenue earned 48,993 Selling, general and administrative 2,571,295 ----------- 2,620,288 ----------- LOSS FROM OPERATIONS (2,238,786) ----------- INTEREST EXPENSE, NET 334,060 ----------- NET LOSS $(2,572,846) ===========

See accompanying notes and accountants' review report. -22- VIAQUO CORPORATION STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY) ELEVEN MONTHS ENDED NOVEMBER 30, 2004

See accompanying notes and accountants' review report. -23- VIAQUO CORPORATION STATEMENT OF CASH FLOWS ELEVEN MONTHS ENDED NOVEMBER 30, 2004 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss from operations $(2,572,846) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization of property and equipment 85,177 Amortization of capitalized software 890,671 Allowance for doubtful note receivable 54,000 Impairment loss on property and equipment 52,616 Change in assets and liabilities: Accounts receivable (250,000) Security deposits 12,700 Accounts payable and accrued liabilities 380,567 ----------- NET CASH USED IN OPERATING ACTIVITIES (1,347,115) ----------- CASH FLOWS USED BY INVESTING ACTIVITIES: Issuance of a note receivable - stockholder (108,000) ----------- NET CASH USED BY INVESTING ACTIVITIES (108,000) ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of convertible notes payable 1,330,000 ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,330,000 ----------- NET DECREASE IN CASH (125,115) CASH AND CASH EQUIVALENTS - BEGINNING 130,753 ----------- CASH AND CASH EQUIVALENTS - ENDING $ 5,638 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 99 Income taxes -----------

See accompanying notes and accountants' review report. -24- VIAQUO CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND PLAN OF OPERATIONS Nature of Business Viaquo Corporation (the "Company") is a provider of Internet-based distributed access control software that protects the data over any channel. Viaquo's ViaSeal software platform enables carriers, ISPs, content vendors, satellite service providers, enterprises, and exchanges to seal and tamper-proof digital packages of rich media or sensitive enterprise information and distribute those packages via the Internet, satellite, or selectively through the corporate enterprise. The Company was incorporated in the State of Delaware on May 26, 1999 under the name of "ULOGON.COM." The Company changed its name to "Viaquo, Inc." on September 25, 2002. The Company has two segments, a satellite transmission secured content business, and the ViaSeal Access Control Business ("ViaSeal"). The financials presented herein contain both segments. Since inception, the Company has experienced significant losses and negative cash flows from operations, raising substantial doubt about its ability to continue as a going concern. On December 7, 2004, SiVault Systems, Inc. ("SiVault") completed the purchase of substantially all of the assets of the Company's ViaSeal business segment, dated as of November 30, 2004, as described in Note 11. SiVault shares received from the sale may be sold or exchanged to raise cash for any use deemed to be in the best interest of the Company's stockholders. Management plans to continue building its satellite transmission secured content business. Management is also exploring strategic partnerships to further develop and market its products and services. The ability of the Company's remaining business segment to continue as a going concern is unknown. These financial statements do not include any adjustments that might be necessary should the company be unable to continue as a going concern. The future of the ViaSeal segment is the responsibility of SiVault. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Software License Revenue Revenues from software license sales are recognized in accordance with Statement of Position ("SOP") No. 97-2, Software Revenue Recognition, and SOP No. 98-9, Modification of SOP No. 97-2, Software Revenue Recognition with Respect to Certain Transactions. Revenues from software license sales that do not depend on services rendered to make the software functional are recognized as revenue upon delivery, provided (1) there is evidence of an arrangement, (2) collection of our fee is considered probable and (3) the fee is fixed or determinable. When services are necessary to make the software functional, fees are allocated between services and software based on either (1) vendor specific objective evidence of a fair value basis to allocate the total fee to all elements of the arrangement. If vendor specific objective evidence of fair value does not exist (2) the residual method allowable under SOP No. 98-9, to allocate excess of the fee over the fair value of the services to the license element. Cash and Cash Equivalents Cash equivalents include cash and money market investments with original maturities of three months or less. -25- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization and are depreciated or amortized using the straight-line method over the following estimated useful lives: Furniture and fixtures 7 Years Machinery and equipment 5 Years Computer equipment 5 Years Software 3 Years Capitalized Software The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Software development costs are capitalized after technological feasibility has been established, which is the earlier point in time at which the Company has developed a working prototype or has a detailed program design for the software. The Company amortizes capitalized software over five years. Impairment of Long-Lived Assets The Company's long-lived assets, including property and equipment, and capitalized software, are reviewed for impairment whenever such events or changes in circumstances indicate that the net carrying amount may not be recoverable. When such events occur, the Company measures impairment by comparing the carrying value of the long lived assets to the estimated undiscounted future cash flows expected to result form the use of the assets and their eventual disposition. If the sum of the expected undiscounted future cash flows is less than the carrying amount of the assets, the Company recognizes an impairment loss are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Income Taxes The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, "Accounting for Income Taxes." Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and the tax effect of the net operating loss carry forwards. A valuation allowance is recorded against deferred tax assets if it more likely than not that such assets will not be realized. Concentration of Credit Risk Cash Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited with high credit quality financial institutions. -26- NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounts and Note Receivable The customer, SiVault (see Notes 1 and 11) comprised 100% of the Company's receivable balance at November 30, 2004 and 100% of the Company's licensing fee revenues for the eleven months ended November 30, 2004. The Company performs ongoing credit evaluations of their customers' financial condition and estimates an allowance for doubtful accounts based on the credit worthiness of their customers, historical trends and current economic conditions. Management has recorded an allowance for the note receivable since there is a risk that the note will not be collected. On September 9, 2004 the Company loaned $108,000 to a related party. The note bears interest at 8% per annum and was due on demand by the Company's Satellite business segment at any time after December 9, 2004. An allowance of $54,000 or 50% of the note balance has been recorded as of November 30, 2004. Use of Estimates Management uses estimates and assumptions in preparing consolidated financial statements in accordance with generally accepted accounting principles in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. Significant estimates made by management include revenue recognition, the fair values of warrants and options issued, allowances on receivables, the valuation allowance on deferred tax assets and the valuation of capitalized software. NOTE 3 -PROPERTY AND EQUIPMENT Property and equipment as of November 30, 2004 consisted of the following: Equipment and furniture $ 34,006 Computer equipment 325,206 Computer software 101,921 Telephone system 7,251 --------- 468,384 Less: Accumulated depreciation and amortization (427,842) --------- $ 40,542 ========= Depreciation expense charged to operations totaled $85,177 for the eleven months ended November 30, 2004. In 2004, certain property and equipment was determined to be impaired, and an impairment loss of $52,616 was included in selling, general and administrative expenses. -27- NOTE 4 -CAPITALIZED SOFTWARE Capitalized software as of November 30, 2004, consists of the following: Capitalized software $ 4,858,208 Less: Accumulated amortization (1,376,492) ------------- $ 3,481,716 ============= Amortization of capitalized software charged to operations for the eleven months ended November 30, 2004 totaled $890,761. NOTE 5 - CONVERTIBLE NOTES PAYABLE - STOCKHOLDER On September 25, 2002 and May 14, 2003, the Company entered into agreements to issue convertible notes to a stockholder. The notes bear interest at 8% per annum and were due on December 31, 2004. As of December 31, 2004, the Company was in default of these convertible note agreements. The Company's intention is to pay off the note by selling the common stock received from the sale of ViaSeal business segment, part of which is currently being held in escrow subject to events happening which would release the shares (see Note 1 and 11). In the event of liquidation, the lender is entitled to receive three times the outstanding principal on the notes, and the unpaid interest. The convertible notes balances payable at November 30, 2004 was $4,949,000. The accrued interest balance as of November 30, 2004 was $548,146. The Company has made no principal or interest payments since the inception of the note agreements. Interest expense on the convertible notes for the eleven months ended November 30, 2004 was $333,961. The notes are convertible at the option of the majority of the limited partners note holders and upon the next sale of equity securities, including preferred stock, in which the Company receives gross proceeds of $500,000 or more ("Next Financing"), the notes and accrued interest are convertible to the same security issued in the Next Financing at the conversion price per share for the securities. Upon the initial closing of the September 25, 2002 Agreement, the Company delivered to each limited partnership of the noteholder a warrant to purchase Warrant Conversion Shares. Each such warrant is exercisable for Warrant Conversion Shares equal to the individual warrants' proportionate share of the product of the then total outstanding shares of the Company calculated on a fully-diluted basis as of the date of exercise of the warrant multiplied by 75%. NOTE 6 - INCOME TAXES The tax effect of major temporary differences that give rise to the Company's net deferred tax asset as of November 30, 2004 is as follows: -28- Net operating loss carryforwards $ 6,816,000 Capitalized software (1,393,000) Note receivable 22,000 ------------ 5,445,000 Less: Valuation Allowance (5,445,000) ----------- $ - =========== The provision for income taxes for the eleven months ended November 30 2004, consists of the following: Federal - deferred $ 870,000 State - deferred 154,000 ----------- 1,024,000 Less: Valuation Allowance (1,024,000) ----------- $ - =========== As of December 31, 2003, the Company had net operating losses of approximately $15,536,000 to be carried forward to offset future taxable income for federal and California income tax purposes. Due to the ownership changes that have occurred, the loss carryovers incurred prior to the change which can be utilized in the future years may be severely limited pursuant to Section 382 of the Internal Revenue Code and the California Revenue and Taxation Code. The Federal and California net operating loss carryovers will expire from the years 2019 through 2023 and 2009 through 2013, respectively. NOTE 7 - STOCKHOLDERS' EQUITY The Company has 154,107,950 authorized common shares having a par value of $.000001. In 2003, the Company issued 8,000,000 common shares in exchange for warrants (see below). Treasury Stock In 2000, the Company repurchased 1,260,000 of Common Shares, which it returned to its treasury. Preferred Stock Series A Preferred On June 10, 1999, the Company sold 2,250,000 shares of Series A Preferred Stock, at a purchase price of $.888889 per share. Series B Preferred On December 23, 2000, the Company sold 5,078,710 shares of Series B Preferred Stock, at a purchase price of $1 per share. Series B-1 Preferred -29- NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED) The Company sold 2,000,000 shares of Series B-1 Preferred Stock on June 22, 2001, 1,500,000 shares on November 6, 2001, and 1,500,000 shares on February 22, 2002, all at a purchase price of $1 per share. Rights and Preferences of Preferred Shares Each Preferred Share is convertible into one share of common stock, at any time at the option of the holder or automatically upon an initial public offering of the Company's common stock. The conversion ratio is adjustable, if the Company issues additional common stock or securities convertible into common stock or a stock split occurs. Holders are entitled to receivenon-cumulative cash dividends when and if declared by the Board of Directors in its sole discretion at a rate of 8% of their respective conversion prices. In the event of any liquidation, dissolution or winding up of the Company, the holders of the Preferred Shares are entitled to receive, prior and in preference to any distribution to the common stockholders, as follows: First, Series B-1 Preferred Shareholders an amount equal to the greater of $2 per share or $1 per share plus, participation with common stock distributions plus all declared but unpaid dividends. Second, to Series B Preferred Shareholders an amount equal to the greater of $2 per share or $1 per share plus, participation with common stock distributions plus all declared but unpaid dividends. Third, to Series A Preferred Shareholders an amount equal to $.888889 per share plus all declared but unpaid dividends. Warrants The Company issued Series B Preferred Stock warrants to holders of Series B Preferred Stock on December 29, 2000. A total of 90,000 warrants were issued and each warrant is exercisable to purchase one Series B Preferred share until December 29, 2005 at $.30 per share. As discussed in Note 5, at the closing of Convertible Notes on September 25, 2002, the Company issued a warrant to purchase Warrant Conversion Shares to each Convertible Note holder. Upon issuance, the warrants had a negligible value. In 2003, a portion of these warrants were converted into Warrant Conversion Shares at a purchase price of $1,900 and a portion of the Warrant Conversion Shares were converted into 8,000,000 common shares at a price of $800. A summary of the warrants for the eleven months ended November 30, 2004 is presented below: Warrants Outstanding as of December 31, 2003 107,490,000 Issued - Exercised - ----------- Warrants Outstanding as of November 30, 2004 107,490,000 =========== -30- NOTE 7 - STOCKHOLDERS' EQUITY (CONTINUED) Stock Awards and Stock Options The Company established the 1999 Stock Plan (the "Plan") for its employees, directors, and consultants. The Plan permits the granting of incentive stock options ("ISOS") and non-qualified stock options ("NSOS"). The incentive stock options are granted at the fair market value of the stock on the day the option is granted, as determined by the Board of Directors. Non-qualified stock options are granted for at least 50% of the fair market value of the stock on the day the option is granted. Both the incentive and the non-qualified stock options are exercisable over a period of ten years from the date of grant. A summary of the Company's incentive and non-qualified employee stock options and the related transactions for the eleven months ended November 30, 2004 is presented below:

The Company believes that no measurable value can be attributed to stock awards and stock options issued because of the uncertain financial position of the Company. NOTE 8 - BUSINESS SEGMENTS The Company has two segments, a satellite transmission secured content business, and the ViaSeal Access Control Business. The summarized financial information concerning the Company's reportable segments for the eleven months ended November 30, 2004, as follows:

NOTE 9 - RETIREMENT PLAN The Company has a 401K Plan in which all employees are eligible to participate. Employees may make contributions to the plan subject to limitations as defined by the Internal Revenue Code. The Company made no contributions to the plan for the eleven months ended November 30, 2004. -31- NOTE 10 - COMMITMENT AND CONTINGENCY Leases Commitment The Company leased renewed its premises under an operating lease agreement, which expired May 31, 2004 and was subsequently renwed on a month to month basis until November 30, 2004. The office lease required the Company to pay a base rent and various operating and maintenance costs. The Company currently has no office lease and is sharing a space with SiVault. Rent expense was $48,000 for the eleven months ended November 30, 2004. Contingency The California Employment Development Department ("EDD") issued a Notice of Assessment on July 11, 2003 for unpaid unemployment insurance, employment training tax, disability insurance, and personal income tax totaling $61,513 based on its determination that certain independent contractors hired by the Company were employees subject to payroll deductions. The Company filed a Petition for Reassessment on September 9, 2003 challenging the finding that the individuals were not independent contractors. By a decision dated January 27, 2005, the Petition for Reassessment was accepted. An Administrative Law Judge will schedule a hearing to hear the merits of the petition. Meanwhile, the Company has obtained and submitted to the EDD Personal Income Tax ("PIT") Abatement Forms by which the alleged employees have declared that they paid their income tax on the payments the Company made to them, thus reducing the assessment. Management has estimated an ultimate liability with respect to this matter of approximately $14,000 as of November 30, 2004 based on the PIT Abatement Forms and telephone conversations with the EDD. NOTE 11 - SUBSEQUENT EVENT As of November 30, 2004, SiVault Systems, Inc. ("SiVault") purchased substantially all of the assets of Viaquo related to Viaquo's ViaSeal business, including physical equipment, technology, products and intellectual property, in exchange for 3,050,000 shares of the Company's common stock valued at $2.35 per share (average market price for the four trading days around November 30, 2004), of which 750,000 of the shares were issued and delivered to Viaquo at closing; 2,050,000 of the shares were placed in escrow to be held until the earlier to occur of (i) the issuance of a U.S. Patent for certain U.S. Patent Applications acquired by SiVault, or (ii) the abandonment by SiVault of the U.S. Patent Application following final rejection thereof by the U.S. Patent and Trademark Office; and the remaining 250,000 shares were placed in escrow to be held until the earlier to occur of (i) the issuance by the European Patent Office ("EPO") of a decision to grant a European Patent with respect to an European Patent Application acquired by SiVault, or (ii) the abandonment by SiVault of European Patent Application following a final refusal by EPO to grant the European Patent. Should the patents be rejected, the seller is not entitled to the shares held in escrow. In addition, SiVault agreed to assume the vacation pay liability of employees who resigned from Viaquo and agreed to join SiVault as employees, effective as of December 1, 2004, which amounted to $52,553. -32- (b) Pro Forma Financial Statements. SIVAULT SYSTEMS, INC. AND SUBSIDIARIES, AND VIAQUO CORPORATION PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION On December 7, 2004, SiVault Systems, Inc. ("SiVault") completed the purchase of substantially all of the assets of Viaquo Corporation ("Viaquo") related to Viaquo's ViaSeal Access Control Business ("ViaSeal"). Viaquo is a developer of computer security technology. Under the terms of the Agreement for Purchase and Sale of Assets dated as of November 30, 2004 among SiVault, Viaquo and an Escrow Holder (the "Agreement"), SiVault acquired all Viaquo's principal assets including physical equipment, technology, products and intellectual property. The majority of the Viaquo staff has joined SiVault to support the continued development, sales and marketing of its technologies. The core technology and intellectual property purchased represents Viaquo's patent pending ViaSeal(TM) security technology. ViaSeal provides cryptographic protection of electronic data for distribution or access by multiple parties without the cumbersome and costly process of private key management as seen in most modern Public Key Infrastructure (PKI) systems. The Purchase Price for the Viaquo assets acquired consisted of 3,050,000 of SiVault's shares of common stock; 750,000 of the shares were issued and delivered to Viaquo at Closing; 2,050,000 of the shares were placed in escrow to be held until the earlier to occur of (i) the issuance of a U.S. Patent for certain U.S. Patent Applications acquired by SiVault or (ii) the abandonment by SiVault of the U.S. Patent Application following final rejection thereof by the U.S. Patent and Trademark Office; and the remaining 250,000 shares were placed in escrow to be held until the earlier to occur of (i) the issuance by the European Patent Office ("EPO") of a decision to grant a European Patent with respect to an European Patent Application acquired by SiVault or (ii) the abandonment by SiVault of European Patent Application following a final refusal by EPO to grant the European Patent. If the patents are rejected, the shares revert back to SiVault. The shares issued to Viaquo in consideration for the Purchase of Assets carried with them certain registration rights as set forth in a Registration Rights Agreement, dated as of November 30, 2004 between SiVault and Viaquo. The shares were valued at $2.35 per share (the weighted average of the closing prices of SiVault Common Stock for the 4 trading days around the effective date). The purchase will be accounted for as a business purchase transaction with the assets acquired and liabilities assumed recorded at fair values. The results of the ViaSeal business operations will be included in the Company's consolidated financial statements from the date of the effective asset purchase. The following unaudited pro forma condensed combined financial information, with explanatory notes, present how the combined financial statements of SiVault Systems and Subsidiaries, and the ViaSeal business may have appeared had the businesses actually been combined at July 1, 2003, June 30, 2004, November 30, 2004 and for the twelve months ended June 30, 2004 and the five months ended November 30, 2004. The unaudited condensed combined pro forma financial information combines the historical financial information of SiVault Systems, SiVault Analytics (acquired by SiVault on July 9, 2004), and the ViaSeal business for the aforementioned dates and periods. -33- The unaudited pro forma condensed combined financial statements may not be indicative of the actual results of the combined business had the acquisitions occurred on July 1, 2003. The accompanying condensed combined pro forma financial statements should be read in conjunction with the historical financial statements and the related notes of both SiVault and Viaquo. SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.), AND SIVAULT ANALYTICS, INC. AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED BALANCE SHEET (A) (UNAUDITED) JUNE 30, 2004 The following unaudited pro forma condensed combined balance sheet combines the historical balance sheets of SiVault Systems, Inc., SiVault Analytics, Inc. and the ViaSeal business assuming the SiVault Analytics and ViaSeal business purchases had occurred and these businesses had been combined on June 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -34- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.), AND SIVAULT ANALYTICS, INC. AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED BALANCE SHEET (A) (UNAUDITED) JUNE 30, 2004 The following unaudited pro forma condensed combined balance sheet combines the historical balance sheets of SiVault Systems, Inc., SiVault Analytics, Inc. and the ViaSeal business assuming the SiVault Analytics and ViaSeal business purchases had occurred and these businesses had been combined on June 30, 2004.

(A) See Notes Unaudited Pro Forma Condensed Combined Financial Information -35- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND SIVAULT ANALYTICS, INC. AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (A) (UNAUDITED) YEAR ENDED JUNE 30, 2004 The following unaudited pro forma condensed combined statement of operations combines the statements of operations of SiVault Systems, Inc., SiVault Analytics, Inc. and the ViaSeal business assuming the SiVault Analytics and ViaSeal business purchases had occurred and these businesses had been combined throughout the year ended June 30, 2004.

(A) See Notes Unaudited Pro Forma Condensed Combined Financial Information -36- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND SIVAULT ANALYTICS, INC. AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED STATEMENT OF CASH FLOWS (A) (UNAUDITED) YEAR ENDED JUNE 30, 2004 The following unaudited pro forma condensed combined statement of cash flows combines the cash flow statements of SiVault Systems, Inc., SiVault Analytics, Inc. and the ViaSeal business assuming the SiVault Analytics and ViaSeal business purchases had occurred and these businesses had been combined throughout the year ended June 30, 2004.

(A) See Notes Unaudited Pro Forma Condensed Combined Financial Information -37- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND SIVAULT ANALYTICS, INC. AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED SUPPLEMENTAL CASH FLOW INFORMATION (A) (UNAUDITED) YEAR ENDED JUNE 30, 2004 The following unaudited pro forma condensed combined supplemental cash flow information combines the supplemental cash flow information of SiVault Systems, Inc., SiVault Analytics, Inc. and the ViaSeal business assuming the SiVault Analytics and ViaSeal business purchases had occurred and these businesses had been combined throughout the year ended June 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -38- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND VIASEAL ACCESS CONTROL BUSINES PRO FORMA CONDENSED COMBINED BALANCE SHEETS (A) (UNAUDITED) NOVEMBER 30, 2004 The following unaudited pro forma condensed combined balance sheet combines the historical balance sheets of SiVault Systems, Inc. and the ViaSeal business assuming the ViaSeal business purchase had occurred and these businesses had been combined on November 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -39- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED BALANCE SHEETS (A) (UNAUDITED) NOVEMBER 30, 2004 The following unaudited pro forma condensed combined balance sheet combines the historical balance sheets of SiVault Systems, Inc. and the ViaSeal business assuming the ViaSeal business purchase had occurred and these businesses had been combined on November 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -40- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (A) (UNAUDITED) FIVE MONTHS NOVEMBER 30, 2004 The following unaudited pro forma condensed combined statement of operations combines the statements of operations of SiVault Systems, Inc. and the ViaSeal business assuming the ViaSeal business purchase had occurred and these businesses had been combined throughout the five months ended November 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -41- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED STATEMENT OF CASH FLOWS (A) (UNAUDITED) FIVE MONTHS ENDED NOVEMBER 30, 2004 The following unaudited pro forma condensed combined statement of cash flows combines the cash flow statements of SiVault Systems, Inc. and the ViaSeal business assuming the ViaSeal business purchase had occurred and these businesses had been combined throughout the five months ended November 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -42- SIVAULT SYSTEMS, INC. AND SUBSIDIARIES (FORMERLY SECURITY BIOMETRICS, INC.) AND VIASEAL ACCESS CONTROL BUSINESS PRO FORMA CONDENSED COMBINED SUPPLEMENTAL CASH FLOW INFORMATION (A) (UNAUDITED) FIVE MONTHS ENDED NOVEMBER 30, 2004 The following unaudited pro forma condensed combined supplemental cash flow information combines the supplemental cash flow information of SiVault Systems, Inc. and the ViaSeal business assuming the ViaSeal business purchase had occurred and these businesses had been combined throughout the five months ended November 30, 2004.

(A) See Notes to Unaudited Pro Forma Condensed Combined Financial Information -42- SIVAULT SYSTEMS, INC AND SUBSIDIARIES, AND SIVAULT ANALYTICS, INC., AND VIASEAL ACCESS CONTROL BUSINESS NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION NOTE 1 - BASIS OF PRO FORMA PRESENTATION As of November 30, 2004, the Company purchased substantially all of the of the assets of Viaquo Corporation ("Viaquo") related to Viaquo's ViaSeal business, including physical equipment, technology, products and intellectual property, in exchange for 3,050,000 shares of the Company's restricted common stock valued at $2.35 per share (average market price for the four trading days around November 30, 2004), of which 750,000 of the shares were issued and delivered to Viaquo at closing; 2,050,000 of the shares were placed in escrow to be held until the earlier to occur of (i) the issuance of a U.S. Patent for certain U.S. Patent Applications acquired by SiVault, or (ii) the abandonment by SiVault of the U.S. Patent Application following final rejection thereof by the U.S. Patent and Trademark Office; and the remaining 250,000 shares were placed in escrow to be held until the earlier to occur of (i) the issuance by the European Patent Office ("EPO") of a decision to grant a European Patent with respect to an European Patent Application acquired by SiVault, or (ii) the abandonment by SiVault of European Patent Application following a final refusal by EPO to grant the European Patent. The Company accounted for this as a business purchase transaction with the assets acquired and liabilities assumed recorded at fair values. The results of the ViaSeal Access Control business have been included in the Company's consolidated financial statements from the effective date of the purchase. On July 9, 2004, SiVault Systems, Inc. ("SiVault Systems" and the "Company") (formerly Security Biometrics, Inc.) entered into a stock purchase agreement to acquire all of the issued and outstanding shares of SiVault Analytics, Inc.'s ("SiVault Analytics") common stock (10 million common shares) in exchange for approximately four million shares of SiVault Systems' restricted common stock with a fair value of $1.80 per share at date of acquisition. The merger was accounted for as a business purchase transaction with the assets acquired and liabilities assumed recorded at fair values. The results of SiVault Analytics' operations have been included in the Company's consolidated financial statements from the effective date of acquisition. The accompanying unaudited pro forma condensed combined financial statements give effect to the acquisition of SiVault Analytics, Inc. and the purchase of the ViaSeal Access Control business as if they had been completed as of July 1, 2003. The pro forma condensed combined financial statements may not be indicative of the actual results of the combined business had the acquisitions occurred on July 1, 2003. The accompanying condensed combined pro forma financial statements should be read in conjunction with the historical financial statements and the related notes of both the Company and Viaquo Corporation. NOTE 2 - PRO FORMA ADJUSTMENTS The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows: (1) An intercompany accounts receivable ($300,000 on June 30, 2004, and $250,000 on November 30, 2004) of ViaSeal from SiVault Analytics has been eliminated. -43- (2) The assets acquired and liabilities assumed in the SiVault Analytics and ViaSeal business purchases have been reflected at their fair values and the excess of the cost over net assets acquired is reflected on the balance sheets as an intangible. Remaining equity balances of the acquired businesses have been adjusted accordingly. (3) Liabilities of SiVault Analytics not assumed by the Company have been eliminated. (4) Common stock has been increased due to effects of the SiVault Analytics, Inc. acquisition and the asset purchase of the ViaSeal Access Control business. -44- (C) EXHIBITS. Exhibit 23.1 Consent of Miller Ellin & Company, LLP, Certified Public Accountants Exhibit 23.2 Consent of Miller Ellin & Company, LLP, Certified Public Accountants Exhibit 23.3 Consent of Miller Ellin & Company, LLP, Certified Public Accountants -45- 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 hereunto duly authorized. SIVAULT SYSTEMS, INC. Date: February 24, 2005 /s/ Wayne Taylor ------------------ Wayne Taylor Interim Chief Financial Officer -46- (C) Exhibits Index Exhibit 23.1 Consent of Miller Ellin & Company, LLP, Certified Public Accountants Exhibit 23.2 Consent of Miller Ellin & Company, LLP, Certified Public Accountants Exhibit 23.3 Consent of Miller Ellin & Company, LLP, Certified Public Accountants -47-

SiVault Systems, Inc. 8-K