UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-KA
Pursuant to Section 13 of 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 6, 2002
Federal Security Protection Services, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 000-28335 84-1080043
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number
400 Poydras Street, Suite 1510, New Orleans, LA 70130
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 866.932.2628
1616 Warren Avenue, Suite 34, P.O. Box 3171, Cheyenne, Wyoming 82003
(Former name or former address, if changed since last report)
FEDERAL SECURITY PROTECTION SERVICES, INC.
FORM 8-KA
TABLE OF CONTENTS
Page
Item 1. Changes in Control of Registrant--------------------------- 3
Item 2. Acquisition of Assets-------------------------------------- 5
Audit Not Completed------------------------------------------------- 7
Signature----------------------------------------------------------- 7
APPENDIX
Unaudited Balance Sheet Iris Broadband, Inc.---------------------- 9
Unaudited Statement of Operations Iris Broadband, Inc.------------ 10
Consolidated Balance Sheet Registrant----------------------------- 11
Consolidated Statement of Operations Registrant------------------- 13
Consolidated Statement of Cash Flows Registrant------------------- 14
Notes to Financial Statements--------------------------------------- 15
EXHIBIT 1----------------------------------------------------------- 20
Item 1. Changes in Control of Registrant
(a) The following persons controlled Registrant prior to September 6, 2002,
the effective date of the Merger Agreement with Iris Broadband, Inc.
Total Common Stock outstanding prior to the effective date of the merger
was 6,065,209 shares. Total voting rights of Preferred Stock was 700,000.
Grand total voting rights prior to the effective date of the merger
was 6,765,209.
Table 1. Control of Registrant Prior to September 6, 2002
Number of Shares Number of Voting Rights Percentage of then
Name Of Common Stock of Series A Preferred Stock (3) Total Voting Rights
Dennis Schlagel 1,620,000 (1) 250,000 27.6%
(Director)
Blair J. Merriam 1,869,000 (2) 250,000 31.3%
(Director)
Daniel W. Thornton 212,500 none 3.1%
(Director and Secretary)
William Livingston 50,000 none .7%
(Director)
Total Percentage of then
Total Voting Rights 62.7%
(1) Includes 600,000 shares of common stock issued to Latin Foods, Inc., and
650,000 shares of common stock issued to Web Consultants, Inc., companies
wholly owned by Mr. Schlagel. Does not include 1,500,000 shares of common
stock which Mr. Schlagel may acquire should he exercise certain options
granted to him, covering said number of shares. Does not include 280,000
shares of common stock which may be acquired by Latin Foods, Inc., should
Latin Foods, Inc. exercise the options held by it.
(2) Does not include 1,340,000 shares of common stock which Mr. Merriam may
acquire should he exercise certain options granted to him covering said
number of shares. Does not include 180,000 shares of common stock which
may be acquired by Beltropic Inc., a company wholly owned by Mr. Merriam,
should Beltropic, Inc. exercise the options held by it.
(3) There are 70,000 shares of Series A Preferred Stock outstanding. One
Preferred Series A share converts to 100 shares of common stock, however
these shares are then reverse split 10 for 1, per the reverse split of common
stock approved by the shareholders on March 12th, 2002, so that the net
effect is a conversion to 700,000 shares of common stock (and voting rights).
On September 6, 2002, control of the Registrant potentially shifted to the
former shareholders of Iris Broadband, Inc., a corporation organized and
existing under and pursuant to the laws of the Louisiana (hereinafter
referred to as "Iris"). On that date, the shareholders of Iris received
the number of shares of Registrant's Series B Preferred Stock as shown in
Table 2. The Series B Preferred Stock is identical to the Series A Preferred
Stock except for the date as of which said stock can be converted to Common
Stock of Registrant and the holding period for conversion. Said date is
March 6, 2003, six months as and from the date of its issuance.
On September 6, 2002, shares of Series B Preferred Stock were issued to the
following named persons, each such person being both the beneficial and record
owner of said shares. Total Common Stock outstanding at the effective date
of the merger was unchanged at 6,065,209 shares. Total voting rights of
Series A Preferred Stock is unchanged at 700,000. Total voting rights of
Series B Preferred Stock is 7,000,000. Grand total voting rights at the
effective date of the merger is 13,765,209.
Table 2. Control of Registrant on September 6, 2002
Number of Shares Number of Voting Rights Percentage of
Name Of Common Stock of Series B Preferred Stock (4) Total Voting Rights
Gary S. O'Neal (1) none 2,600,000 18.9%
Edward E. Reynolds (2) none 1,830,000 13.3%
Michael T. Landers (3) 10,000 2,085,000 15.2%
Richard J. Schluter none 165,000 1.2%
Christopher L. Courtright none 50,000 .4%
Lynn S. Yeldell none 50,000 .4%
Nicholas A. Robins none 165,000 1.2%
Thomas W. Wilson none 55,000 .4%
Total 10,000 7,000,000 51.0%
(1) Does not include 2,000,000 shares of common stock which Mr. O'Neal may
acquire should he exercise certain options granted to him, covering said
number of shares.
(2) Does not include 1,700,000 shares of common stock which Mr. Reynolds
may acquire should he exercise certain options granted to him covering said
number of shares.
(3) Does not include 2,000,000 shares of common stock which Mr. Landers may
acquire should he exercise certain options granted to him covering said
number of shares.
(4) There are 70,000 shares of Series B Preferred Stock outstanding. One
Preferred Series B share converts to 100 shares of common stock, so that the
net effect is a conversion to 7,000,000 shares of common stock (and voting
rights).
The shares of Series B Preferred Stock of Registrant were issued pursuant to
a Plan and Agreement of Reorganization by Exchange of Voting Stock of
Registrant and Iris dated August 16, 2002 (hereinafter referred to as
the "Plan and Agreement"), with a Closing Date of September 6, 2002. Pursuant
to the Plan and Agreement Iris became a wholly-owned subsidiary of
Registrant.
Each of the recipients of the shares of Series B Preferred Stock surrendered
and delivered to Registrant all of the stock of Iris which each such person
owned. There follows a table showing the number of shares of Iris
surrendered and the number of shares of Registrant's Series B Preferred
Stock received in consideration of the stock of Iris which was surrendered.
This was the only consideration given by the recipients of the shares of
Series B Preferred Stock.
Table 3. Iris Shares Surrendered and Registrant Shares Issued
Number of Shares of Registrant's Series B
Name Number of Shares of Iris Preferred Issued
Gary S. O'Neal 2,600,000 26,000
Edward E. Reynolds 1,830,000 18,300
Michael T. Landers 2,085,000 20,850
Richard J. Schluter 165,000 1,650
Christopher L. Courtright 50,000 500
Lynn S. Yeldell 50,000 500
Nicholas A. Robins 165,000 1,650
Thomas W. Wilson 55,000 550
Total 7,000,000 70,000
A copy of the Plan and Agreement is appended hereto as Exhibit 1.
In contemplation of the consummation of the Plan and Agreement certain
officers of Registrant resigned their offices and were replaced by persons
who had been officers of Iris. The new officers of Registrant all became
directors of Registrant.
Ownership of the outstanding stock of Registrant, as of the consummation of
the Plan and Agreement by officers and directors of Registrant, giving effect
to the conversion of both series of Preferred Stock is as follows:
Table 4. Ownership by Executive Officers and Directors
Name and Office Number of Voting Rights Percentage of Voting Rights
Gary S. O'Neal 2,600,000 18.9%
(President and Chief
Executive Officer and Director)
Michael Landers 2,095,000 15.2%
(Vice President, Finance
and Treasurer and Director)
Edward Reynolds 1,830,000 13.3%
(General Counsel)
Daniel Thornton 212,500 1.5%
(Vice President, Business Development
and Secretary and Director)
Blair Merriam 2,119,000 15.4%
(Director)
William Livingston 50,000 .4%
(Director)
Dennis Schlagel 1,870,000 13.6%
(Director)
All Current Executive Officers
And Directors as a Group 10,776,500 78.3%
Total voting rights of all officers and directors expressed as a percentage
of all stock issued and outstanding and giving effect to the conversion rights
as to all shares of Preferred Stock, regardless of series, is 78.3 percent.
Item 2. Acquisition of Assets
On September 6, 2002, Registrant acquired all of the outstanding stock of
Iris and thus acquired the business of Iris.
The Company is a full-service managed security services company and a secure
Internet Protocol ("IP") network services provider. The Company provides its
products and services to its customers (carriers, other IP-based service
providers, systems integrators, business enterprises) on a turnkey or
per-requirement basis. The Company also intends to 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. The Company
deploys these integrated solutions on a secure network which is currently
deployed on a Tier 1 Backbone, and can provide integrated access to Tier 2 - 4
and rural access to cover 85% of the United States and international in
115 countries. The Company can provide desktop-to-desktop managed security
network solutions and other policy-based services.
An integrated broadband network utilizing wireless technology as well as
fiber optic infrastructure is being planned. Wireless network development
is concentrated initially in the Southeastern United States, particularly in
Tier 2 - 4 cities and rural areas. Iris executed a joint venture agreement
to implement the first wireless network in a city in Louisiana and is
interested in implementation of wireless networks in other states. 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 the Company, or upon any terms.
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 the Company
The Company is a secure Internet Protocol ("IP") network services provider
and full-service Managed Security Services Provider.
* Products and services to carriers, other IP-based service providers, systems
integrators and business enterprises on a turnkey or per-requirement basis,
including customers critically needing HIPPA-compliant services.
* Custom solutions utilizing virtual Network Services for:
--Layer2 security (Layer 2 customer separation)
--Virtual Private Networks (Secure and Proprietary)
--Transaction security (e-Commerce and Financial)
--IPVideo surveillance networks
--Authentication service (Document and Network)
--Vulnerability scanning and Network Monitoring
--Data back-up and recovery (Individual and Enterprise)
--Anti-virus Scanning (Individual and Enterprise)
--Content filtering (Spam and E-Mail)
--Firewalls. (Remote and Enterprise)
* Desktop-to-desktop managed security network solutions and other policy-based
services.
* Integrated solutions deployed on a secure network. The network, provided by
Iris Broadband, a wholly owned subsidiary of the Company, covers nearly all
of the United States and 115 countries.
* Custom solutions utilizing FSPS Network Technologies for:
--Access Control and Physical Security Systems
--CCTV Employment and Integration
--Physical facilities construction and installation
--Wireless networks deployment
--Cable and fiber optic networks deployment.
FSPS Network Services
Security Applications and Services
--Layer2 security
--Virtual Private Networks (Secure and Proprietary)
--Transaction security (e-Commerce and Financial)
--IPVideo surveillance networks
--Authentication service (Document and Network)
--Vulnerability scanning and Network Monitoring
--Data back-up and recovery (Individual and Enterprise)
--Anti-virus Scanning (Individual and Enterprise)
--Content filtering (Spam and E-Mail)
--Firewalls. (Remote and Enterprise)
FSPS Network Technologies
FSPS Network Technologies provides the in-house capability of meeting
immediate customer requirements desiring a specific supporting physical
infrastructure to integrate with the services delivered by FSPS Network
services. These capabilities are:
* Access Control and Physical Security Systems integrated into a
comprehensive security plan for enterprise, office building or office
park environments
* Communications Installation and Construction Services, includes:
Physical Facility Construction
FSPS affiliates are fully licensed and bonded and provide a range of planning,
design, construction and installation services. These include physical
facilities, e.g., collocation facilities, building huts and regeneration
sites.
Site planning and design
Site preparation
Equipment install and de-install
Tower and Antenna Erection
Install generators and emergency backup systems
Engineering
CAD drawings
Asset management and logistics control
Wireless Deployment
Wireless Internet access networks in the 2.4 and 5.8 GHz range, as well as
Free Space Optics (FSO) and 60mm Wave (MMW), are proliferating throughout
the U.S. FSPS affiliates are experienced in the design and deployment of
these networks (including Terabeam, Lucent, Motorola and Nortel), and in the
supporting tower erection and antenna installation.
The business of Iris is the sum total of the assets acquired by Registrant.
Audit Not Completed
The audit of Iris Broadband, Inc. financial statements has not been completed
as of the date of this filing within the sixty day period following
submission of the 8-K filed on September 19, 2002. The audit will be
completed as expeditiously as possible and submitted as soon as it is
available. There are appended hereto unaudited financial statements of Iris
as of September 6, 2002, the effective date of the Merger Agreement, and
consolidated financial statements of the Registrant , as of September 30,
2002. All assets reflected on the Balance Sheet of Iris in existence as
at September 6, 2002 were acquired by Registrant upon acquisition of all of
the outstanding stock of Iris.
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: November 15, 2002 / s/ Gary S. O'Neal
Gary S. O'Neal, President and
Chief Executive Officer
APPENDIX
UNAUDITED FINANCIAL STATEMENTS OF IRIS BROADBAND, INC.
AS OF SEPTEMBER 6, 2002
AND CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT
AS OF SEPTEMBER 30, 2002
The accompanying balance sheet of Iris Broadband, Inc. as of September 6,
2002, and the related statements of operations for the period January 1
September 6, 2002 were compiled in accordance with Statements on Standards
for Accounting and Review Services by the American Institute of Certified
Public Accountants.
The accompanying balance sheet of the Registrant as of September 30,
2002, and the related statements of income were compiled in accordance
with Statements on Standards for Accounting and Review Services by the
American Institute of Certified Public Accountants. The statements of
income include revenues and expenses of Iris for the period September 7 -
30, 2002.
A compilation is limited to presenting in the form of financial statement,
information that is the representation of management. Management has elected
to omit substantially all of the disclosures and the statements of retained
earnings and cash flows required by generally accepted accounting principles.
If the omitted disclosures and the statements of retained earnings and cash
flows were included in the financial statements, they might influence the user
"conclusions about the company", financial position, results of operations
and cash flows. Accordingly, these financial statements are not designed for
those who are not informed about such matters.
Iris Broadband, Inc.
Balance Sheet
September 6, 2002
September 6, 2002
ASSETS
Current Assets
Cash 5,967
Due from FSPS 93,300
Security Deposit 700
Accounts Receivable 42,648
Officer Advances 381,233
Total Current Assets 523,848
Fixed Assets net of depreciation 11,792
Deferred IRU Costs 549,903
TOTAL ASSETS 1,085,543
LIABILITIES AND EQUITY
Liabilities
Current Liabilities
Accounts Payable 136,474
Rent Deposit 700
Total Current Liabilities 137,174
Long Term Liabilities
Deferred IRU Income 890,960
Income Taxes Payable 12,874
Total Long Term Liabilities 903,834
Total Liabilities 1,041,008
Equity
Common Stock 10,000
Retained Earnings 73,923
Net Income -39,388
Total Equity 44,535
TOTAL LIABILITIES AND EQUITY 1,085,543
- - Unaudited -
Iris Broadband, Inc.
Statement of Operations
January 1, 2002 through September 6, 2002
INCOME
Ordinary Income 121,891
Cost of Goods Sold 72,370
Gross Profit 49,521
EXPENSE
General and Administrative Expense 88,909
NET INCOME -39,388
- - Unaudited -
Federal Security Protection Services, Inc.
Balance Sheet
September 30, 2002
September 30,
2002
Assets
Current assets
Cash $ 3,887
Accounts receivable 42,648
Officer advances 383,033
Prepaid expenses 43,896
Total current assets 473,464
Property and equipment
Equipment 65,649
Accumulated depreciation (12,477)
Property and equipment, net 53,172
Other assets
Deferred IRU costs 502,041
Goodwill 157,391
Deposits 1,388
Trademarks, net 0
Total other assets 660,820
Total assets $ 1,187,456
See accompanying notes to financial statements
- Unaudited -
Federal Security Protection Services, Inc.
Balance Sheet
September 30, 2002
September 30,
2002
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 159,851
Accrued expenses 80,806
Current portion of long term debt 9,658
Income taxes payable 13,574
Deferred IRU income 31,808
Accrued litigation settlement 42,500
Short-term borrowings 156,782
Total current liabilities 494,979
Long term liabilities
Deferred IRU income 858,229
Note payable 29,477
Total long term liabilities 887,706
Shareholders' equity (deficit)
Convertible preferred stock, par value of
$.001, 20,000,000 shares authorized.
70,000 shares designated as Series A and
issued and outstanding at September 30, 2002.
Aggregate liquidation preference of $7,000,000 at
September 30, 2002. 70
70,000 shares designated as Series B and
issued and outstanding at September 30, 2002.
Aggregate liquidation preference of $7,000,000 at
September 30, 2002. 70
Common stock, par value $.001, 100,000,000
shares authorized, 6,065,209 issued and
outstanding at September 30, 2002 6,065
Paid in capital 4,859,723
Accumulated deficit (5,061,157)
Total shareholders' equity (195,229)
Total liabilities and shareholders' equity $ 1,187,456
See accompanying notes to financial statements
- Unaudited -
Federal Security Protection Services, Inc.
Statement of Operations
For the Six Months Ended September 30, 2002
6 Months Ended
September 30,
2002
Revenues $ 21,710
Cost of sales:
Network costs 14,775
IRU costs 3,967
Total cost of sales 18,742
Operating expenses:
Salaries 48,000
General and administrative 454,765
Total operating expenses 502,765
Loss from operations (499,797)
Other income 0
Net income (loss) $ (499,797)
Basic and dilutive income (loss) per share $ (.094)
See accompanying notes to financial statements
- Unaudited -
Statement of Cash Flows
For the Six Months Ended September 30, 2002
6 Months Ended
September 30,
2002
Cash flows from operating activities
Net income (loss) $ (499,797)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 705
Common stock issued for services 413,895
Changes in operating assets and
liabilities
Accounts receivable (42,648)
Officer advances (383,033)
Prepaid expenses 13,000
Deferred IRU costs (43,896)
Accounts payable 58,904
Accrued expenses 53,895
Current portion long term debt 9,658
Income taxes payable 13,574
Deferred IRU income 31,808
Short-term borrowings 500
Net cash provided by (used in) operating
activities (373,435)
Cash flows from investing activities
Business acquisition 203,000
Purchase of fixed assets (52,651)
Long term deferred costs (503,430)
Purchase of goodwill (157,391)
Net cash provided by (used in) investing
activities (510,472)
Cash flows from financing activities
Proceeds from issuance of common stock 0
Note payable for purchase of fixed assets 29,477
Deferred IRU income 858,229
Issuance of common stock in payment of
Interest payable 0
Net cash provided by (used in) financing
activities 887,706
Net increase (decrease) in cash 3,799
Cash, beginning of period 88
Cash, end of period $ 3,887
See accompanying notes to financial statements
- Unaudited -
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 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 assets 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 the 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 a full-service
managed security services company and a secure Internet Protocol ("IP")
network services provider. The Company provides its products and services to
customers (carriers, other IP-based service providers, systems integrators,
business enterprises) on a turnkey or per-requirement basis. It develops
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 can be deployed on a secure network
which provides integrated access to 85% of the United States and in 115
countries. The Company also provides desktop-to-desktop managed security
network solutions and other policy-based services. The Company expects to
fulfill its plans and, as a going concern to derive revenues, by the
acquisition of existing security related companies during fiscal year 2002.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated upon consolidation.
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. Goodwill and indefinite-lived
intangible assets acquired after June 30, 2001 are not amortized but are
reviewed annually for impairment according to the provisions of SFAS No. 142
"Goodwill and Other Intangible Assets." There was no impairment of such
assets for the six months ended September 30, 2001 or 2002.
Income taxes
The Company has total net operating loss carryforwards at September 30,
2002 of approximately $2,518,000 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.
Revenue recognition
With the acquisition of Iris Broadband, Inc. (see Note 2), the Company has
obtained "Indefeasible Rights of Use" (IRU) agreements with telecommunication
and data network carriers that grant and convey to the user the exclusive,
indefeasible right of access to and use of conduit or fiber optic fibers
leased by Iris. The terms of the agreements are from seventeen to
twenty-five years. Agreements can be for one-time up-front payments or for
a down payment with subsequent monthly or annual payments for the rights of
use during the term of the agreement. When an up-front payment is made, it
is recorded as deferred income in a liability account. Income is then
realized each reporting period according to the straight line amortization
over the term of the agreement. Any related costs incurred under the
contract by Iris are capitalized and also amortized on a straight line basis
over the life of the contract.
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 September 30, 2001.
NOTE 2 Acquisition
Iris Broadband, Inc.
On September 6, 2002, the Company acquired all of the outstanding
capital stock of Iris Broadband, Inc. ("Iris") in exchange for 70,000 shares
of the Company's Series B preferred stock valued at $203,000. The plan of
reorganization was made pursuant to the provisions of Internal Revenue Code
Section 368 (a)(1)(B). In keeping with the provisions of SFAS No. 141
"Business Combinations" for such transactions completed after June 30,2001,
the acquisition was accounted for by the purchase method. The results of
operations of Iris have been included in the consolidated results of the
Company since the date of acquisition. The excess of the purchase price over
the fair value of net assets acquired resulted in the recording of
$157,391 of goodwill. Within six months of the acquisition,
should the Company be unsuccessful in raising a minimum of $750,000 in
capital and maintaining a minimum average stock price of twenty-five cents
per share for a consecutive ten day period, Iris, at its sole discretion,
has the option of disengaging from the Company by reversing and nullifying
the acquisition transaction.
The unaudited proforma financial information for the acquisition
of Iris as if the business had been acquired at the beginning of each
respective fiscal period, is presented as follows:
For the six months ended,
2001 2002
Revenues $ 23,409 $ 46,336
Net loss $ (193,676) $ (565,922)
Net loss per common share:
Basic & diluted $ (.021) $ (.046)
The unaudited proforma financial information is presented for information
purposes only and may not be indicative of results of operations as they
would have been if the acquisition occurred on April 1, 2001, nor is it
indicative of the results of operations which may occur in the future.
Anticipated efficiencies from the combination have been excluded from the
amounts included in the proforma information.
NOTE 3 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. These 6,225,000 in stock options 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 option lives of
five years, risk free interest rate of 6.0%. On September 1, 2002, the Board
of Directors also granted 3,000,000 in stock options with an option price of
$.07 per share to three Company officers. These 3,000,000 in stock options
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 $.0525 with the
following assumptions: expected price volatility of 135%, expected option
lives of five years, risk free interest rate of 5.0%. The number of shares
represented by stock options outstanding at September 30, 2002 is therefore,
9,225,000 shares with an option price of $.07-.15 per share, and $1,143,750
in total, and with a market price at date of grant of $.06-.08 per share,
and $678,000 in total. Outstanding options expire from April to September,
2007.
Issuance of preferred stock
In September, 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 and
voting 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
September 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.
As discussed in Note 2, in September, 2002, 70,000 shares of preferred
stock was designated as Series B preferred stock and issued to the
shareholders of Iris Broadband, Inc. in exchange for all the capital stock of
Iris. Series B preferred stock has conversion and voting rights of one share
of Series B preferred to 100 shares of common stock.
NOTE 4 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 September 30, 2001, the Company had unsecured promissory notes, inclusive
of accrued interest, of $153,571, payable to nine shareholders, and that bear
annual interest at rates of 10% to 12%.
At September 30, 2002, the Company had unsecured promissory notes, inclusive
of accrued interest, of $192,454, payable to nine shareholders, and that bear
annual interest at rates of 10% to 12%.
Stock options
Represented in outstanding stock options are 9,200,000 shares at
September 30, 2002, to related parties.
NOTE 5 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 six months ended September 30, 2002, the Company issued 3,357,000
shares of its common stock, of which 2,950,000 shares were to related parties.
The shares were compensation in exchange for $169,000 in services, of which
$101,100 had been accrued at March 31, 2002.
Interest paid
During the six months ended September 30, 2001, the Company charged
to operations interest expense of $9,119 and paid no interest. During the six
months ended September 30, 2002, the Company charged to operations interest
expense of $14,382 and paid $220 of interest in cash.
NOTE 6 Capital lease
In September, 2002, the Company acquired data network equipment in
a transaction classified as a capital lease in accordance with SFAS No. 13,
"Accounting for Leases." The gross carrying amount of the computer equipment
was $40,860 at September 30, 2002. Amortization expense related to the
equipment is included as part of the Company's total depreciation expense.
The following table presents the future minimum lease payments under the
capital lease together with the present value of the minimum lease payments
as of September 30, 2002.
Years Ended March 31,
2003 $12,072
2004 20,695
2005 20,695
2006 8,623
Total minimum lease payments 62,085
Less: amount representing interest 21,225
Present value of minimum lease payments $40,860
NOTE 7 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 September 30,
2002 with the issuance of 600,000 shares of common stock.
On September 1, 2002, the Company entered into a seven year employment
agreement with three officers under which the Company agreed to pay $480,000
in annual salary, 3,000,000 of its common shares in stock options (see
Note 3), various employment benefits, and an annual bonus based on meeting
certain performance criteria. Additionally, the Company has committed to pay
the three officers up to $8,250,000 in total for early termination for other
than death, disability, or breach of conduct.
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
efforts, Round II Inc. will be paid a fee of 10% of the stock and/or cash
received by the Company.
Lease commitments
The Company leases its Iris facility under a long-term operating lease
expiring in June 2004. Future minimum lease payments total $16,704 for
fiscal 2002, $33,408 for fiscal 2003, and $8,352 for fiscal 2004. Rent
expense was incurred only in September, 2002 with the acquisition of Iris and
totaled $2,227.
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 September 30, 2002 and 2001.
NOTE 8 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 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 operate 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.
EXHIBIT 1
PLAN AND AGREEMENT OF REORGANIZATION
By exchange of voting stock of FEDERAL SECURITY PROTECTION SERVICES,
INC., a Corporation organized and existing under and pursuant to the laws
of the State of Delaware For all of the shares of IRIS BROADBAND, INC. A
Corporation organized and existing under and pursuant to the laws of the
State of Louisiana Federal Security Protection Services, Inc., a corporation
organized and existing under and pursuant to the laws of the State of Delaware
(hereinafter referred to as "FSPS") and Iris Broadband, Inc., a corporation
organized and existing under and pursuant to the laws of the State of
Louisiana, (hereinafter referred to as "Iris"), hereby agree as follows:
ARTICLE 1
PLAN OF REORGANIZATION
Plan Adopted
Section 1.01. A plan of reorganization of FSPS and Iris, pursuant to the
provisions of Internal Revenue Code Section 368(a)(1)(B) ("the Agreement"),
is hereby adopted as follows:
(4) Each Shareholder will transfer to FSPS the number of shares of capital
stock of Iris, listed after his or her name in Column B of Schedule "A",
which together will constitute all of the issued and outstanding shares of
stock of Iris.
(5) In exchange for the number of shares transferred by each Shareholder,
FSPS will issue and cause to be delivered to each Shareholder the number of
shares of Preferred Series B stock listed after the name of each Shareholder
in Column C of Schedule "A".
Closing Date
Section 1.02. Subject to the conditions precedent set forth in this Agreement,
this plan of reorganization shall be executed at a mutually convenient date to
both parties. The closing date ("Closing Date") shall be subsequent to the
execution of this Agreement and shall be the consummation of the transactions
contemplated by the Agreement. The Closing Date shall be five (5) days after
all conditions to closing have been satisfied.
ARTICLE 2
COVENANTS, REPRESENTATIONS AND WARRANTIES OF FSPS
Legal Status
Section 2.01. FSPS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with corporate power to
own property and carry on its business as it is now being conducted. Copies
of the articles of incorporation of FSPS, together with amendments thereto,
certified by the Secretary of State of Delaware, and delivered to Iris, are
complete and accurate as of the date hereof.
Subsidiaries
Section 2.02. FSPS has neither subsidiaries nor any interest in any other
corporation, firm or partnership.
Capitalization
Section 2.03. FSPS has an authorization of One Hundred Million (100,000,000)
shares of common stock with the par value of one tenth of a cent ($.001) per
share of which, as at June 30, 2002, 2,708,201 were issued and outstanding.
In addition FSPS has an authorization of Twenty Million (20,000,000) shares
of preferred stock with the par value of one tenth of a cent ($.001) per
share, of which 70,000 Preferred A shares were issued and outstanding as of
June 30, 2002. One Preferred Series A share converts to 100 common shares,
however these shares are then reverse split 10 for one, per the reverse split
of common stock approved by the shareholders on March 12, 2002, so the net
effect is a conversion to 700,000 common shares.
There are currently outstanding options to acquire 5,700,000 shares of common
stock.
Financial Statements
Section 2.04. (a) FSPS will deliver to Iris the balance sheet of FSPS as of
June 30, 2002, and the related statements of income and retained earnings of
FSPS prior to the Closing Date.
(b) Other than changes in the usual and ordinary conduct of the business
since June 30, 2002 there have been, and at the Closing Date there will be,
no changes in the financial statement as of June 30, 2002.
Title to Properties
Section 2.05. All book assets of FSPS are in existence, are in the possession
of FSPS, are in good condition and repair and conform to all applicable zoning
and building laws and ordinances. FSPS has good and marketable title to all
of its assets and, except for any liens or encumbrances that are shown on its
financial statements as of June 30, 2002, or which have arisen in the ordinary
course of its business since the date of the financial statement[s], and which
do not interfere with the conduct of its business in it ordinary course, holds
the assets subject to no mortgage, lien or encumbrance.
Indebtedness
Section 2.06. Except as set forth in the balance sheet of FSPS as of June 30,
2002 there is no outstanding indebtedness other than liabilities incurred in
the ordinary course of business or in connection with this transaction FSPS is
not in default with respect to any terms or conditions of any indebtedness.
No Litigation or Proceeding Pending or Threatened
Section 207. FSPS is not a party to, nor has it been threatened with, any
litigation or governmental proceeding which if decided adversely to it, would
have a material adverse effect on the transaction contemplated hereby, or
upon the financial condition, net worth, prospects, or business of FSPS, or
would create a material liability on the part of FSPS.
No Restriction Preventing Transaction
Section 2.08. FSPS is not subject to any charter, bylaw, mortgage, lien,
lease, agreement, judgment or other restriction of any kind that would prevent
consummation of the transaction contemplated by this Agreement.
Status of Receivables
Section 2.09. None of the accounts receivable or contracts receivable
indicated in the financial statements that FSPS has delivered to Iris is
subject to any counterclaim or setoff, and all such accounts receivable and
contracts receivable are good and collectible at the aggregate amount recorded
thereof.
No Broker or Finder
Section 2.10. FSPS has not retained or otherwise utilized the services of any
broker or finder in connection with the transaction contemplated by this
Agreement.
Taxes
Section 2.11. FSPS has filed all FSPS income tax returns and, in each state
where qualified or incorporated, all state income tax or franchise tax returns
which are required to be filed, has paid all taxes as shown on those returns
as have become due and has paid all assessments received to the extent that
assessments have become due.
Status of Shares Being Transferred
Section 2.12. The shares of stock of FSPS that are to be issued and delivered
to Shareholders pursuant to the terms of this Agreement, when issued and
delivered, will be validly authorized and issued, and will be fully paid and
nonassessable. No Shareholder of FSPS will have any preemptive right of
subscription or purchase with respect to any of these shares.
Authority to Execute Agreement
Section 2.13. FSPS has the legal power and right to enter into this
Agreement and to comply with all of its terms and conditions.
Disclosure
Section 2.14. On the date of this Agreement FSPS has, and at the Closing
Date, will have disclosed all events, conditions and facts materially
affecting the business and prospects of FSPS. FSPS has not now and will
not have, at the Closing Date, withheld knowledge of any such events,
conditions and facts which it knows, or has reasonable grounds to know, may
materially affect the business and prospects of FSPS. None of the
representations and warranties made by FSPS in this Agreement and contained
in any certificate or other instrument furnished or to be furnished to Iris,
pursuant to this Agreement, contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact necessary in
order to make the statements contained in this Agreement not misleading.
ARTICLE 3
COVENANTS, REPRESENTATIONS AND WARRANTIES OF IRIS
Legal Status
Section 3.01. Iris is a corporation duly organized, validly existing and
in good standing under the laws of the State of Louisiana, with corporate
power to own property and carry on its business as it is now being conducted.
Copies of the articles of incorporation of Iris, together with amendments
thereto, certified by the Secretary of State of Louisiana, and delivered to
FSPS, are complete and accurate as of the date hereof.
Subsidiaries
Section 3.02. Iris has a minority interest in Kinetix Broadband, L.L.C., a
Louisiana limited liability company. Iris signed a joint venture agreement
on July 30, 2002 with Vida Technologies, Inc. to create LTTI, Inc. Iris will
own fifty percent of LTTI. Iris has neither other subsidiaries nor any
interest in any other corporation, firm or partnership.
Capitalization
Section 3.03. Iris has an authorization of Ninety Million (90,000,000) shares
of common stock with the par value of one tenth of a cent ($.001) per share of
which, as at June 30, 2002, none were issued and outstanding.
In addition, Iris has an authorization of Ten Million One
Hundred Thousand (10,100,000) shares of preferred stock with the par value
of one tenth of a cent ($.001) per share of which, as at June 30, 2002,
7,000,000 were issued and outstanding.
There are no outstanding options, contracts, calls commitments
or demands relating to the authorized but unissued stock of Iris.
Financial Statements
Section 3.04. (a) Iris will deliver to FSPS the balance sheet of Iris as of
June 30, 2002, and the related statements of income and retained earnings of
FSPS prior to the Closing Date.
(b) Other than changes in the usual and ordinary conduct of the business since
June 30, 2002 there have been, and at the Closing Date there will be, no
changes in the financial statement as of June 30, 2002.
Title to Properties
Section 3.05. All book assets of Iris are in existence, are in the possession
of Iris, are in good condition and repair and conform to all applicable zoning
and building laws and ordinances. Iris has good and marketable title to all
of its assets and, except for any liens or encumbrances that are shown on its
financial statements as of June 30, 2002, or which have arisen in the ordinary
course of its business since the date of the financial statement and which do
not interfere with the conduct of its business in it ordinary course, holds
the assets subject to no mortgage, lien or encumbrance.
Indebtedness
Section 3.06. Except as set forth in the balance sheet of Iris as of June 30,
2002 there is no outstanding indebtedness other than liabilities incurred in
the ordinary course of business or in connection with this transaction Iris is
not in default with respect to any terms or conditions of any indebtedness.
No Litigation or Proceeding Pending or Threatened
Section 3.07. Iris is not a party to, nor has it been threatened with, any
litigation or governmental proceeding, which if decided adversely to it,
would have a material adverse effect on the transaction contemplated hereby,
or upon the financial condition, net worth, prospects, or business of Iris, or
would create a material liability on the part of Iris.
No Restriction Preventing Transaction
Section 3.08. Iris is not subject to any charter, bylaw, mortgage, lien,
lease, agreement, judgment or other restriction of any kind that would prevent
consummation of the transaction contemplated by this Agreement.
Status of Receivables
Section 3.09. None of the accounts receivable or contracts receivable
indicated in the financial statements that Iris has delivered to FSPS is
subject to any counterclaim or setoff, and all such accounts receivable and
contracts receivable are good and collectible at the aggregate amount
recorded thereof.
No Broker or Finder
Section 3.10. Iris has not retained or otherwise utilized the services of
any broker or finder in connection with the transaction contemplated by this
Agreement.
Taxes
Section 3.11. Iris has filed all federal income tax returns and, in each
state where qualified or incorporated, all state income tax or franchise tax
returns which are required to be filed, has paid all taxes as shown on those
returns as have become due and has paid all assessments received to the
extent that assessments have become due, unless as noted in the financial
statements of June 30, 2002.
Status of Shares Being Transferred
Section 3.12. The shares of stock of Iris that are to be issued and delivered
to FSPS pursuant to the terms of this Agreement, when issued and delivered,
will be validly authorized and issued, and will be fully paid and
nonassessable. No Shareholder of Iris will have any preemptive right of
subscription or purchase with respect to any of these shares.
Authority to Execute Agreement
Section 3.13. Iris has the legal power and right to enter into this Agreement
and to comply with all of its terms and conditions.
Disclosure
Section 3.14. On the date of this Agreement Iris has, and at the Closing
Date, will have disclosed all events, conditions and facts materially
affecting the business and prospects of Iris. Iris has not now and will not
have, at the Closing Date, withheld knowledge of any such events, conditions
and facts which it knows, or has reasonable ground to know, may materially
affect the business and prospects of Iris. None of the representations and
warranties made by Iris in this Agreement and contained in any certificate or
other instrument furnished or to be furnished to FSPS, pursuant to this
Agreement, contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary in order to make the
statements contained in this Agreement not misleading.
ARTICLE 4
CONDUCT OF FSPS PENDING CLOSING
Access to Information and Documents
Section 4.01. (a) FSPS will afford Iris and accredited representatives, from
the date of this Agreement until consummation of the plan or reorganization,
full access during normal business hours to all properties, books, accounts,
contracts, commitments and records of every kind of FSPS in order that Iris
may have full opportunity to make any investigation as it shall desire to make
of, and to keep itself informed with respect to, the affairs of FSPS.
(b) In addition, FSPS will permit Iris to make extracts or copies of all such
books, accounts, contracts, commitments and records and will furnish to
Shareholders and Iris upon demand, any further financial and operating data
and other information as Iris shall reasonably request from time to time.
(c) Iris will use any information so secured only for its own purposes in
connection with the consummation of the transaction contemplated and will not
divulge the information to any persons not entitled thereto.
Carry On Business as Usual
Section 4.02. FSPS will carry on its business in substantially the same
manner as it was conducted prior to the execution of this Agreement.
Section 4.03. FSPS will use its best efforts to cause the satisfaction of
all conditions precedent contained in this Agreement.
ARTICLE 5
CONDUCT OF IRIS PENDING CLOSING
Access to Information and Documents
Section 5.01. (a) Iris will afford FSPS and accredited representatives, from
the date of this Agreement until consummation of the plan or reorganization,
full access during normal business hours to all properties, books accounts,
contracts, commitments and records of every kind of Iris in order that FSPS
may have full opportunity to make any investigation as they shall desire to
make of, and to keep itself informed with respect to, the affairs of Iris.
(b) In addition, Iris will permit FSPS to make extracts or copies of all such
books, accounts, contracts, commitments and records and will furnish to FSPS
upon demand, any further financial and operating data and other information
as FSPS shall reasonably request from time to time.
(c) FSPS will use any information so secured only for their, or its, own
purposes in connection with the consummation of the transaction contemplated
and will not divulge the information to any persons not entitled thereto.
Carry On Business as Usual
Section 5.02. Iris will carry on its business in substantially the same
manner as it was conducted prior to the execution of this Agreement.
Section 5.03. Iris will use its best efforts to cause the satisfaction of
all conditions precedent contained in this Agreement.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF FSPS TO CLOSE
Section 6.01. The obligations of FSPS to consummate the plan of
reorganization shall be subject to the following conditions precedent:
Truth of Representations and Warranties and Compliance with Covenants
(a) Representations and warranties of FSPS contained in this Agreement
shall be true as of the Closing Date with the same effect as though made on
the Closing Date. FSPS shall have performed all obligations and complied with
all covenants required by this Agreement to be performed or complied with by
them, or each of them, prior to the Closing Date. FSPS shall have delivered
to Iris a certificate signed by a duly authorized officer of FSPS, certifying
as to the truth of the representations and warranties, as to the performance
of the obligations and as to the compliance with the covenants.
Commitment as to Investment Purpose
(b) Iris shall have delivered to FSPS prior to the Closing Date, a written
commitment in form satisfactory to FSPS that the Shareholders are taking the
shares of stock of FSPS for purposes of investment and will not dispose of the
shares received by him or her hereunder in a manner which would result in a
violation of the Securities Act of 1933.
Acceptability of Papers and Proceedings
(c) To the extent requested by Iris, the form and substance of all papers and
proceedings shall be acceptable to counsel for Iris.
Approval of Board of Directors of FSPS
(d) The principal terms of this Agreement shall have been approved by the
Board of Directors of FSPS.
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF IRIS AND SHAREHOLDERS TO CLOSE
Section 7.01. The obligations of Iris to consummate the plan of
reorganization shall be subject to the following conditions precedent:
Truth of Representations and Warranties and Compliance with Covenants
(a) Representations and warranties of Iris contained in this Agreement
shall be true as of the Closing Date with the same effect as though made on
the Closing Date. Iris shall have performed all obligations and complied with
all covenants required by this Agreement to be performed or complied with by
Iris, prior to the Closing Date. Iris shall have delivered to FSPS a
certificate dated as of the Closing Date and signed by Iris, certifying as to
the truth of the representations and warranties, as to the performance of the
obligations and as to the compliance with the covenants.
Acceptability of Papers and Proceedings
(b) To the extent requested by FSPS, the form and substance of all papers
and proceedings shall be acceptable to counsel for FSPS.
Approval of Board of Directors of Iris
(c) The principal terms of this Agreement shall have been approved by the
Board of Directors of Iris.
Opinion >From Counsel for FSPS
(f) Prior to the Closing Date, there shall be furnished to Iris an opinion
from counsel for FSPS, in form satisfactory to counsel for Iris, to the
effect that FSPS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and that the shares
of FSPS delivered to Shareholders have been duly authorized, issued and
delivered and are validly issued and outstanding, fully paid and
nonassessable shares of Series B preferred stock of FSPS.
ARTICLE 8
CONSUMMATION OF TRANSACTION
Consideration of Iris
Section 8.01. The Board of Iris shall deliver to FSPS a resolution certifying
that all of the issued and outstanding shares of stock of Iris are transferred
to FSPS upon the issuance of the Series B preferred stock to the shareholders
of Iris as reflected in Schedule A.
Consideration of FSPS
Section 8.02. FSPS shall deliver to Shareholders within thirty days of the
Closing Date, in accordance with the data reflected on Schedule "A" attached
hereto, certificates representing 70,000 shares of Series B preferred stock
of FSPS.
Expenses
Section 8.03. FSPS shall pay its own expenses and Iris shall pay its own
expenses and costs incident to the preparation of this Agreement and to the
consummation of the plan of reorganization. If the reorganization is not
consummated, however, through no fault of FSPS, Iris shall bear all the
expenses and costs of both parties. If the reorganization is not consummated,
through no fault of Iris, FSPS shall bear all expenses and costs of both
parties.
Disengagement
Section 8.04 Within six (6) months from the Closing Date, should FSPS be
unsuccessful with raising a minimum of seven hundred fifty thousand dollars
($750,000) in capital and maintain a minimum average stock price of twenty
five (25) cents for a consecutive ten (10) day period, then, Iris may
exercise its option, at its sole discretion, to disengage from FSPS by
reversing and nullifying this stock exchange transaction and thereby deliver
the same shares of Iris to those persons owning Iris shares at the Closing
Date. Neither Iris, FSPS nor any of its respective shareholders shall have
any right, if any they have, which are hereby waived, to seek compensation
or damages of any kind or type resulting from the reversal/nullity, and the
effect therefrom shall be considered consideration by Iris and FSPS to the
other for the benefit of this effort.
ARTICLE 9
INTERPRETATION AND ENFORCEMENT
Notices
Section 9.01. Any notice or other communication required or permitted under
this Agreement shall be deemed to be properly given when deposited in the
United States mails for transmittal by certified or registered mail, postage
prepaid, or by overnight courier in accordance with the addresses shown on
Schedule "B" attached hereto. Facsimile transmission may also be used,
provided that a confirmed record of delivery is obtained. Facsimile numbers
are set forth for the respective parties on Schedule "B".
Assignment
Section 9.02. (a) Except as limited by the provisions of subsection (b), this
Agreement shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties, as well as the parties.
(b) Any assignment of this Agreement or of the rights of any of the parties
under it, without the prior written consent of the other parties, shall be
void.
Entire Agreement; Counterparts
Section 9.03. This Agreement and the exhibits to it contain the entire
agreement between the parties with respect to the transaction contemplated
hereby. It may be executed in any number of counterparts, each of which shall
be deemed an original, but any counterparts together constitute only one and
the same instrument.
Controlling Law
Section 9.04. The validity, interpretation and performance of this Agreement
shall be controlled by and be construed under the laws of the State of
Wyoming, the State in which this Agreement is being executed.
THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.
Executed on August 16th, 2002
FEDERAL SECURITY PROTECTION SERVICES, INC.
By: /s/ Blair J. Merriam
Blair J. Merriam, Director, Federal Security Protection Services, Inc.
By: /s/ Daniel Thornton
Daniel Thornton, Secretary and Director, Federal Security Protection
Services, Inc.
IRIS BROADBAND, INC.
By: /s/ Gary S. O'Neal
Gary S. O'Neal, Chairman and Chief Executive Officer, Iris Broadband, Inc.
Schedule A
Iris Broadband Shares to be Transferred to FSPS
And
FSPS Preferred Series B Shares to be Issued
Column A Column B Column C
Number of FSPS
Number of Iris Shares Preferred Series B Shares
Name and Address of Shareholder To be Transferred To be Issued *
Gary S. O'Neal 2,600,000 26,000
400 Poydras Street, Suite 1510
New Orleans, LA 70130
Edward E. Reynolds 1,830,000 18,300
Law Offices of Edward E. Reynolds
400 Poydras Street, Suite 1510
New Orleans, LA 70130
Michael T. Landers 2,085,000 20,850
400 Poydras Street, Suite 1510
New Orleans, LA 70130
Richard J. Schluter 165,000 1,650
941 Locust Drive
Sycamore, IL 60178
Christopher L. Courtright 50,000 500
P.O. Box 186
Sedalia, CO 80135
Lynn S. Yeldell 50,000 500
142 Orpheum Drive
Metairie, LA 70005
Nicholas A. Robins 165,000 1,650
2302 Cranford Road
Durham, NC 27705
Thomas W. Wilson 55,000 550
15 West Carrillo Street
Santa Barbara, CA 93101
* Conversion ratio of one preferred share to one hundred common shares
Schedule B
Notices to the Parties to This Agreement
Notices to Federal Security Protection Services, Inc.
Mailing Address: 400 Poydras Street, Suite 1510
New Orleans, LA 70130
Telephone: 866.932.2628
Facsimile: 504.680.1510
Notices to Iris Broadband, Inc.
Mailing Address: 400 Poydras Street, Suite 1510
New Orleans, LA 70130
Telephone: 504.680.4328
866.504.4747
Facsimile: 504.680.1510