UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
Commission file number 000-28335
Federal Security Protection Services, Inc.
____________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware
____________________________________________________________
(State or other jurisdiction of incorporation or organization)
84-1080043IRS
____________________________________________________________
(Employer Identification No.)
1616 Warren Avenue, Suite 34, PO Box 3171
Cheyenne, Wyoming 82003
____________________________________________________________
(Address of principal executive offices)
(866) 932-2628
____________________________________________________________
(Issuer's telephone number)
____________________________________________________________
(Former name, former address, and former fiscal year, if changed since last
report)
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date:
August 1, 2002, 5,750,209 shares.
Transitional Small Business Format (Check one): Yes [ ] No [x]
(1)
FEDERAL SECURITY PROTECTION SERVICES, INC.
FORM 10-QSB
TABLE OF CONTENTS
Page PART I--FINANCIAL INFORMATION
Item 1. Financial Statements------------------------------------------ 3
Independent Accountant's Review Report--------------------------------- 3
Balance Sheets--------------------------------------------------------- 4
Statements of Operations----------------------------------------------- 6
Statements of Cash Flows----------------------------------------------- 7
Notes to Financial Statements------------------------------------------ 8
Item 2. Management's Discussion and Analysis or Plan of Operation----- 12
PART II OTHER INFORMATION--------------------------------------------- 16
Item 1. Legal Proceedings------------------------------------------ 16
Item 2. Changes in Securities-------------------------------------- 16
Item 3. Defaults Upon Senior Securities---------------------------- 16
Item 4. Submission of Matters to a Vote of Security Holders-------- 16
Item 5. Other Information------------------------------------------ 16
Item 6. Exhibits and Reports--------------------------------------- 16
Signatures------------------------------------------------------------- 16
(2)
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
Independent Accountant's Review Report
August 2, 2002
To the Board of Directors and Shareholders
of Federal Security Protection Services, Inc.:
I have reviewed the accompanying balance sheets of Federal Security
Protection Services, Inc. as of June 30, 2002 and 2001, and the related
statements of operations and cash flows for each of the three 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 statements is the representation
of the management of Federal Security Protection Services, Inc.
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 accounting standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am 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.
The accompanying financial statements have been prepared assuming that Federal
Security Protection Services, Inc. will continue as a going concern. As
discussed in Note 7 to the financial statements, the Company has suffered
recurring losses from operations and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Carl S. Sanko
Topanga, California
(3)
Federal Security Protection Services, Inc.
Balance Sheets
June 30, 2002 and 2001
June 30, June 30,
2002 2001
Assets
Current assets
Cash $ 220 $ 9,913
Prepaid expenses 1,250 20,000
Total current assets 1,470 29,913
Property and equipment
Equipment 2,444 2,444
2,444 2,444
Accumulated depreciation (1,342) (854)
Property and equipment, net 1,102 1,590
Other assets
Trademarks, net 0 6,929
Total other assets 0 6,929
Total assets $ 2,572 $ 38,432
See accompanying notes to financial statements
- Unaudited -
(4)
Federal Security Protection Services, Inc.
Balance Sheets
June 30, 2002 and 2001
June 30, June 30,
2002 2001
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 81,970 $ 46,692
Accrued expenses 31,349 14,376
Accrued litigation settlement 42,500 42,500
Short-term borrowings 156,580 136,781
Total current liabilities 312,399 240,349
Shareholders' equity (deficit)
Convertible Series A preferred stock,
par value $.001, 20,000,000 shares
authorized, 70,000 issued and
outstanding at June 30, 2002 and none
at June 30, 2001. Aggregate liquidation
preference of $7,000,000 at June 30, 2002. 70 0
Common stock, par value $.001,
100,000,000 shares authorized,
5,750,209 and 2,059,209 issued
and outstanding at June 30, 2002
and 2001, respectively 5,750 20,592
Paid in capital 4,459,426 4,027,241
Accumulated deficit (4,775,073) (4,249,750)
Total shareholders' equity (309,827) (201,197)
Total liabilities and shareholders' equity $ 2,572 $ 38,432
See accompanying notes to financial statements
- Unaudited -
(5)
Federal Security Protection Services, Inc.
Statements of Operations
For the Three Months Ended June 30, 2002 and 2001
3 Months Ended 3 Months Ended
June 30, June 30,
2002 2001
Revenues $ 0 $ 408
Operating expenses:
Marketing 0 10,500
General and administrative 213,713 56,892
Total operating expenses 213,713 67,392
Loss from operations (213,713) ( 66,984)
Other income 0 0
Net income (loss) $ (213,713) $ ( 66,984)
Basic and dilutive income (loss) per share $ (.045) $ (.003)
See accompanying notes to financial statements
- Unaudited -
(6)
Federal Security Protection Services, Inc.
Statements of Cash Flows
For the Three Months Ended June 30, 2002 and 2001
3 Months Ended 3 Months Ended
June 30, June 30,
2002 2001
Cash flows from operating activities
Net income (loss) $ (213,713) $ ( 66,984)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 122 668
Common stock issued for services 216,213 0
Changes in operating assets and
liabilities
Prepaid expenses 11,750 12,250
Accounts payable (18,978) 23,622
Accrued expenses 4,438 4,206
Short-term borrowings 300 (14,100)
Net cash provided by (used in) operating
activities 132 (40,338)
Cash flows from investing activities
Sale of fixed assets 0 0
Net cash provided by (used in) investing
activities 0 0
Cash flows from financing activities
Proceeds from issuance of common stock 0 50,000
Net cash provided by (used in) financing
activities 0 50,000
Net increase (decrease) in cash 132 9,662
Cash, beginning of period 88 251
Cash, end of period $ 220 $ 9,913
See accompanying notes to financial statements
- Unaudited -
(7)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 Summary of significant accounting policies
Organization and business
Federal Security Protection Services, Inc. ("the Company"),
a Delaware Corporation, was incorporated on February 4, 1994 as New York
Bagel Exchange, Inc. Commencing September 26, 1995, the Company has operated
in the business of wholesale and retail sales of bagels, sandwiches, baked
goods, specialty coffees and related items. On August 22, 1997, the Company
acquired the assets and liabilities of Windom, Inc., a non-operating public
shell, resulting in the retirement of all the common and preferred shares of
both companies, and the reissuance, by the Company, of 2,594,560 shares of
common stock. The merger was accounted for, in substance, as an issuance of
stock for the net monetary asets of Windom, Inc. on August 22, 1997, and the
financial statements presented are those of New York Bagel Exchange, Inc.
since the date of its formation. Subsequent to the merger, the Company
continued its wholesale and retail operations. On January 26, 1999, New York
Bagel Exchange, Inc. changed its name to Webboat.com, Inc., on April 2, 1999,
Webboat.com, Inc. changed its name to Windom.com, Inc., on April 20, 1999,
Windom.com, Inc. changed its name to Web4boats.com, Inc., and on March 12,
2002 Web4Boats.com, Inc. changed its name to Federal Security Protection
Services, Inc.
On March 22, 1999, the Board of Directors approved sale of the Company's
inventory and fixed assets for $120,000. The Company ceased its bagel
business operations on March 25, 1999. The actual disposal date of assets
subject to the sale was on April 19, 1999. A gain of approximately $72,000
resulted upon the disposition for the year ended December 31, 1999.
During fiscal year 1999, the Company began making plans to
develop a commercial internet site in which boat builders, manufacturers,
dealers, marinas, individual buyers and sellers would come to advertise sales
and services related to the boating industry. Subsequently, through November
30, the Company continued to invest substantially in website development and
related costs. While all such development costs were expensed as incurred,
the Company expected, as a going concern, to realize future benefits from
these costs.
On December 1, 2001, the Company ended its pursuit of developing an internet
boating site. The much slower than anticipated growth in popularity of its
website, with correspondingly minimal revenues, rendered putting further
resources into internet boating unviable. Accordingly, the boating website
was closed in January, 2002. Presently, the Company is making plans to become
a full-service managed security services company and a secure Internet
Protocol ("IP") network services provider. The Company will provide its
products and services to customers (carriers, other IP-based service
providers, systems integrators, business enterprises) on a turnkey or per-
requirement basis. It will develop custom solutions for securing virtual
private networks, email/document security management, digital rights
management, content delivery networks, IP-based video products suite and
others requiring IP based network security solutions. These integrated
solutions will be deployed on a secure network which provides integrated
access to 85% of the United States and in 115 countries. The Company will
also provide desktop-to-desktop managed security network solutions and
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other policy-based services.
The Company had only minimal revenues from its internet site for the
three months ended June 30, 2001, and no revenues for the three months ended
June 30, 2002. The Company expects, as a going concern, to derive revenues
from the acquisition of existing security related companies and from
internally generated growth in the remaining quarters of fiscal year 2002.
Property and equipment
Equipment is recorded at cost and depreciated over estimated useful
lives of five years using the straight-line method. Trademarks are recorded
at cost and amortized over estimated useful lives of five years using the
straight-line method. For the year ended March 31, 2002, all trademarks
related to Web4Boats.com, Inc. were written down to zero.
Income taxes
The Company has total net operating loss carryforwards at June 30, 2002
of approximately $2,509,000 and $2,274,000 for federal and California state
tax purposes, respectively. A deferred asset for these amounts has not been
accrued due to the uncertain nature of its being realized. Net operating loss
carryforwards begin to expire in fiscal year 2011 and 2004 for federal and
California state tax purposes, respectively.
Earnings per share
On March 12, 2002, the Company effected a ten for one reverse split of its
common stock. The computation of loss per share of common stock is based on
the weighted average number of shares outstanding during each three month
period with the reverse stock split retroactively applied to the three months
ended June 30, 2001.
NOTE 2 Shareholders' equity
Stock options
During fiscal year 1998, the Company recorded a charge to operations
of $687,500 for marketing and other services in exchange for issuance of stock
options. The value for such services was computed as the difference between
the quoted market price at the option's measurement date and the option price.
All options were exercisable at time of grant and no options had been
exercised as of March 31, 2002. On April 24, 2002, all previously issued
stock options that had not already expired totalling 3,525,000 shares with an
option price of $.07 to $1.00 per share, and $1,487,500 in total were
cancelled and the Company's Board of Directors took the action of reissuing
3,525,000 shares with an option price of $.15 per share. Additionally, the
Board of Directors granted 2,700,000 in stock options with an option price of
$.15 per share to three related parties to be earned during the period April
25, 2002 to October 25, 2002. The number of shares represented by stock
options outstanding at June 30, 2002 is therefore, 6,225,000 shares with an
option price of $.15 per share, and $933,750 in total, and with a market
price at date of grant of $.08 per share, and $498,000 in total. Outstanding
options expire in April, 2007. The 6,225,000 in stock options outstanding at
June 30, 2002 were valued as of the date of grant using the Black-Scholes
option pricing model and determined to have a fair value per option of $.0142
with the following assumptions: expected price volatility of 32.8%, expected
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option lives of five years, risk free interest rate of 6.0%.
Issuance of preferred stock
In June, 1999, the Company authorized the issuance of 20,000,000 shares
of $.001 par value, preferred stock. In August, 1999, 10,000 shares of
preferred stock was designated as Series A preferred stock with conversion
rights of one share of Series A preferred to 100 shares of common stock.
Subsequently, the 10,000 shares of Series A preferred was sold for $100,000
to a related party. A beneficial conversion feature of $100,000 was present
in the transaction and is reflected in stockholders' equity at June 30, 2002.
In August, 2000, the outstanding 10,000 shares of Series A preferred
stock were converted to 1,000,000 shares of common stock. The Series A
preferred shares were then cancelled and returned to the status of authorized
and unissued.
In November, 2001, 70,000 shares of Series A preferred stock were issued
as incentive to four related parties for providing the Company with operating
capital from loans totaling $20,000 and from purchase of common stock for
$50,000.
NOTE 3 Related parties
Short term borrowings
During the year ended March 31, 2001, the Company received $140,000
from eight lenders, two of which were related parties, in exchange for
promissory notes with interest at 12% per year and terms ranging from seven
days to six months. As inducement to obtain the unsecured loans, the Company
issued a total of 560,000 shares of common stock, valued at $123,800, which
was recorded as interest expense during the year ended March 31, 2001.
At June 30, 2001, the Company had unsecured promissory notes, inclusive
of accrued interest, of $151,158, payable to nine shareholders, and that bear
annual interest at rates of 10% to 12%.
At June 30, 2002, the Company had unsecured promissory notes, inclusive
of accrued interest, of $187,630, payable to nine shareholders, and that bear
annual interest at rates of 10% to 12%.
Stock options
Represented in outstanding stock options are 6,200,000 shares at June 30,
2002, to related parties.
NOTE 4 Statements of Cash Flows
Financial instruments
The Company considers all liquid interest-earning investments with a maturity
of three months or less at the date of purchase to be cash equivalents.
Noncash transactions
During the three months ended June 30, 2002, the Company issued 3,042,000
shares of its common stock, of which 2,650,000 shares were to related parties.
The shares were compensation in exchange for $152,100 in services, of which
(10)
$71,100 had been accrued at March 31, 2002.
Interest paid
During the three months ended June 30, 2002 and 2001, the Company charged
to operations interest expense of $8,688 and $4,206, respectively. No
interest was paid for either period.
NOTE 5 Commitments and Contingencies
Contract commitments
On April 5, 1999, the Company entered into a one year consulting agreement,
with a related party, under which the Company agreed to pay $10,000 per month,
payable in cash or stock, for management and advisory services. The contract
was renewed through March 31, 2002. For the year ended March 31, 2002, $4,500
in cash and 2,790,000 shares of common stock, valued at $83,700 were issued as
payment for services received from April through December, 2001. A balance of
$30,000 under the contract that was accrued as of March 31, 2002 was paid in
the quarter ended June 30, 2002 with the issuance of 600,000 shares of common
stock.
On April 25, 2002, the Company entered into a six month professional
services agreement with Iris Broadband, Inc. under which the Company agreed
to pay $20,000 per month and 2,700,000 in stock options (see Note 2). Iris
Broadband, Inc.'s responsibilities under the agreement will be to fully
develop and refine the Company's business plan, and establish the Company
in the Internet and private network security business. Coincidental with
the professional services agreement, the Company signed a letter of intent
to negotiate, execute and consummate a tax-free stock exchange acquisition of
Iris Broadband, Inc. by September 30, 2002 in which Iris Broadband, Inc. would
become a wholly-owned subsidiary of the Company in a transaction whereby the
stockholders of Iris Broadband, Inc. would receive 120,000 shares of the
Company's $.001 par value Series A preferred stock.
Litigation
During fiscal 1999, a lawsuit was filed against the Company in which
the plaintiff, a former officer, claimed breach of employment contract related
to fiscal year 1998. In May, 1999, the dispute was settled for $42,500. The
unpaid settlement amount is accrued as of June 30, 2002 and 2001.
NOTE 6 Subsequent events
Contract commitments
On July 26, 2002, the Company entered into a six month contract with
GlobalEquitywatchers.coms, a wholly owned subsidiary of Round II Inc., under
which terms the Company will receive various services related to promoting the
Company's website in exchange for 15,000 shares of the Company's common stock
which had a value of $900 ($.06 per share) on the contract date.
Additionally, the Company signed a 60 day agreement (with options for
renewal) with Round II Inc. on July 26, 2002 for the express purpose of
having Round II Inc. endeavor to use its professional expertise towards
presenting the Company with potential business entities for acquisition by the
Company or for the purpose of locating appropriate funding sources for the
Company. As a result of successfully completed transactions through its
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efforts, Round II Inc. will be paid a fee of 10% of the stock and/or cash
received by the Company.
NOTE 7 Going concern
The Company has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability to continue
as a going concern. During the year ended March 31, 2002, as a result of
considering the unviability of remaining in the internet boating industry,
and as described in Note 1 above, the Company saw no alternative but to cease
activities in that industry and look for a new economic model and opportunity.
Note 1 also describes management's plans in regard to perpetuating its
existence through this new opportunity related to the small business and home
security industry. The Company has the ability to raise funds through the
public equity market and, as stated in Notes 2, 3 and 4, has paid significant
liabilities to related and other parties with common stock and raised
substantial funds from a related party in the private sector as well.
While such plans and fundraising ability seem to mitigate the effect of prior
years' losses and deficits, the Company is essentially only beginning to
market in a new industry. The inability to assess the likelihood of the
effective implementation of management's plans in this new environment also
raises substantial doubt about its ability to continue as a going concern.
Item 2. Management's Discussion and Analysis or Plan of Operation.
You should read the following discussion of our results of operations and
financial condition in conjunction with our consolidated financial statements
and related notes included elsewhere in this Form 10-QSB. Unless specified
otherwise as used herein, the terms "we", "us" or "our" refers to Federal
Security Protection Services, Inc.
The following Management's Discussion and Analysis or Plan of Operation
contains certain forward-looking statements regarding future financial
condition and results of operations and the company's business operations.
We have based these statements on our expectations about future events. The
words "may," "intend," "will," "expect," "anticipate," "objective,"
"projection," "forecast," "position" or negatives of those terms or other
variations of them or comparable terminology are intended to identify forward-
looking statements. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable,
we cannot assure you that these expectations will be achieved. Our actual
results may differ materially from what we currently expect. Important factors
which could cause our actual results to differ materially from the forward-
looking statements include, without limitation: (1)general economic and
business conditions, (2) effect of future competition,and (3) failure to
raise needed capital.
OVERVIEW
The Company was organized under and pursuant to the laws of the State of
Delaware on February 4, 1994, under the name of New York Bagel Exchange, Inc.,
and as of September 26, 1995, operated in the business of wholesale and retail
sales of bagels, sandwiches, baked goods, specialty coffees and related items.
On August 22, 1997, the Company underwent a reorganization with Windom, Inc.,
a non-operating public shell which resulted in the retirement of all the
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common and preferred shares of both companies and the reissuance of certain
shares of the Company which continued to do business as New York Bagel
Exchange, Inc.
On January 26, 1999, New York Bagel Exchange, Inc. changed its name to
Web4boats.com, Inc. which after another two changes of name continued to
be the name of the Company.
On March 25, 1999, the Company sold its inventory and fixed assets and on
March 25th, 1999, ceased its bagel business operations. During fiscal 1999,
the Company began making plans to develop a commercial internet site and
the Company contemplated that recreational boaters, manufacturers, dealers,
marinas and individual buyers and sellers would advertise sales and services
related to the boating industry. The effort to develop the Internet site
continued for approximately two years.
On November 6, 2001 the Company amended its Articles of Incorporation. To
change the name of the Company to Federal Security Protection Services, Inc.
At the Company's Annual Meeting of Shareholders held on March 12, 2002, the
name change was approved by the shareholders. The Company was not successful
in raising the necessary funds to finance the continuing operations of the
Internet site and due to the fact that revenues from the operation of the site
had not been significant, management of the Company determined to change the
business operations of the Company. In the opinion of management, the
business prospects of the Company would be enhanced by entry into the field
of Internet and data security, recognizing the current sensitivity of
Corporate America to security issues. Management also recognizes the fact
that recent events resulted in the imposition of tight security measures for
certain industries and generally resulted in a heightened sense of the
increased need for security for our society in general. No assurance can be
given that this realignment of the Company business will result in an
improvement in the results of the operations or financial condition of the
business.
The Company's corporate headquarters is 1616 Warren Avenue, Suite 34,
Cheyenne, WY, 82001, and its operating office is located at 400 Poydras
Street, Suite 1510, New Orleans, LA 70130.
The Company's then General Manager, Mr. Blair Merriam, was authorized by
the Directors of the Company to seek suitable candidates in the field of
security, for acquisition by the Company. In furtherance of this aim the
Company executed an agreement with Iris Broadband, Inc., a corporation
organized and existing under and pursuant to the laws of the State of
Louisiana, (hereinafter "Iris") pursuant to which it was agreed that the
Company would acquire all of the issued and outstanding stock of Iris. Iris
and the Company executed a letter of intent on April 25, 2002 to negotiate,
execute and consummate a tax-free stock exchange acquisition of Iris by
September 30, 2002 in which Iris would become a wholly-owned subsidiary of
the Company whereby the stockholders of Iris would receive 120,000 shares of
the Company's $.001 par value Series A preferred stock.
In contemplation of the consummation of the acquisition, on May 23, 2002, Mr.
Dennis Schlagel, the Company's then President and Mr. Blair Merriam, the
Company's then General Manager, resigned their offices (both, however,
remained as Directors of the Company) and Mr. Gary O'Neal, and Mr. Michael
Landers (respectively Chief Executive Officer and President of Iris)
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respectively became President and Vice President of Finance of the Company.
Messrs. O'Neal and Landers were also appointed Directors of the Company.
On the same date Mr. Daniel Thornton (Secretary and a Director of the Company)
was appointed Vice President - Business Development of the Company. (See
"Directors and Executive Officers".)
On April 25, 2002, the Company entered into an agreement with Iris pursuant
to which Iris agreed to render certain services to the Company which services
are designed to accelerate the Company's business realignment. (See "Iris -
Professional Services Contract".)
BUSINESS
Upon consummation of the acquisition of all of the outstanding stock of Iris,
the Company will provide IP based products and services with emphasis on
Internet and data security. Iris is developing and deploying an integrated
broadband network utilizing wireless technology as well as fiber optic
infrastructure. Wireless network development is concentrated initially in
the Southeastern United States, particularly in Tier 2 - 4 cities and rural
areas. Iris has executed a joint venture agreement to implement the first
wireless network in a city in Louisiana and is in negotiations that may lead
to the implementation of wireless networks in another state(s). Expansion
to other cities is expected to occur as quickly as capital can be secured.
No assurance can be given that such capital can be secured on terms acceptable
to Iris, or upon any terms. Iris has contracted for access and transport
services covering other cities. Iris has no timetable at this time as to when
these services will be activated.
Services can also be provided in major metropolitan areas of Denver,
Houston, Dallas, Atlanta, Miami, Austin, Orlando, Tampa and New Orleans
via DSL and fiber optic networks with which Iris has contracted for access
and transport services.
Services offered by Iris include:
* IP Virtual Private Networks (VPN) set-up
* ATM/Frame Relay Virtual Private Networks set-up A VPN is a means of
augmenting a shared network on a secure basis through encryption or tunneling.
Such a shared network could be an IP network such as X.25, or the Internet, or
an Intranet, or an ATM or Frame Relay network. Tunneling involves
encapsulation of that encrypted data inside IP or ATM packets or frame relay
frames. Additional security is provided through firewalls at the user sites
and, perhaps, in the carrier network. (Source: Newton's Telecom Dictionary,
p. 858, Miller Freeman, Inc., February 1999)
* IP Video Services utilizing advance video software compression, including
* Surveillance
* Point-to-point and Point-to-multipoint videoconferencing
* Streaming media
* Video kiosks
Video surveillance utilizing a wireless Local Area Network (LAN) or
Wide Area Network (WAN) and software licensed to Iris is very simple to
setup, monitor and change as desired. Changing camera locations is
easy because there is no fixed wiring to move or install. The wireless
infrastructure provides complete mobility within the umbrella of the
wireless coverage area. Indoor and outdoor applications are established
with ease, ranging from a one camera, one room set-up to up to 16 cameras
in a large outdoor area.
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* Secure e-mail setup and maintenance
* VPN monitoring and maintenance
RESULTS OF OPERATIONS
There was no revenue for the three months ended June 30, 2002 and $408 for the
three months ended June 30, 2001. Operating expenses consist of salaries,
marketing and general and administrative expenses. General and administrative
expense consists primarily of executive, consulting, financial and legal
expenses and related costs.
There was no marketing expense for the three months ended June 30, 2002 and
$10,500 for the three months ended June 30, 2001. General and administrative
expense for the three months ended June 30, 2002 was $213,713 and $56,892 for
the three months ended June 30, 2001. Eighty eight percent, or $188,113, of
the general and administrative expense was for Professional fees-consulting.
Of this amount, $64,113 was for stock options previously granted that were
expensed for the three months ended June 30, 2002. It is anticipated that
$24,282 will be expensed in the second quarter for stock options previously
granted. Other Professional fees-consulting included $44,000 for Iris
Broadband, Inc.'s work under the Professional Services Contract executed on
April 25, 2002. The remaining $80,000 was paid out in common stock to certain
officers and directors and other persons for services rendered. Detail is
available in the S-8 registration dated March 29, 2002.
The Company does not have any non-officer employees, and no cash salaries or
wages are currently being paid.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2002, the Company had current assets of $1,470. At June 30,
2001 the current asset balance was $29,913. Total assets for the same
respective periods were $2,572 and $38,432.
As of June 30, 2002, the Company had current liabilities of $312,399. At June
30, 2001 the current liability balance was $240,349. There was no long term
liability in either year, so the total liability amounts are the same as the
current liability balances.
The Company's auditor has issued an opinion questioning the Company's ability
to continue as a going concern, and we believe our current cash and cash
equivalents are, in fact, not sufficient to meet our anticipated cash needs
for working capital and capital expenditures. The Company intends to meet its
needs through borrowing or through the issuance of common stock.
PLAN OF OPERATION
Upon consummation of the acquisition of all of the outstanding stock of Iris,
the Company will provide IP based products and services with emphasis on
Internet and data security. Execution of the Acquisition Agreement is
expected to be done in August 2002. Once the agreement is executed then due
diligence will commence. Assuming both partys' due diligence efforts are
completed and satisfactory, the closing date for the consummation of the
acquisition is expected no later than September 30, 2002.
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KNOWN RISKS AND TRENDS
The Company's business plan for its own operations is presently reliant on
the acquisition of Iris Broadband, Inc., a company that has ongoing operations.
If the acquisition does not occur, then the Company will have no foreseeable
means of generating revenues. Even if the acquisition does occur, there is no
means of judging the success of the venture. There is significant competition
in the IP and data security fields, and certainly much better funded companies
competing in the marketplace.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports.
EXHIBITS
Copies of all signed agreements mentioned in this 10QSB are available in
the Company's most recent 10KSB. Said agreements are hereby incorporated
herein by this reference.
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed in its behalf by the undersigned, thereunto
duly authorized.
Federal Security Protection Services, Inc.
Date: August 12th, 2002 /s/ Gary S. O'Neal
________________ __________________________
Gary S. O'Neal, President
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