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 December 31, 2004
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
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.)
4255 South Bannock St.
Englewood, CO 80110
____________________________________________________________
(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:
February 04, 2005, 11,375,281 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
Balance Sheets--------------------------------------------------------- 3
Statements of Operations----------------------------------------------- 5
Statements of Cash Flows----------------------------------------------- 6
Notes to Financial Statements------------------------------------------ 9
Item 2. Management's Discussion and Analysis or Plan of Operation----- 17
PART II OTHER INFORMATION--------------------------------------------- 18
Item 1. Legal Proceedings------------------------------------------ 18
Item 2. Changes in Securities-------------------------------------- 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk- 18
Item 4. Controls and Procedures------------------------------------ 18
Item 5. Other Information------------------------------------------ 18
Item 6. Exhibits and Reports--------------------------------------- 19
Signatures------------------------------------------------------------- 19
(2)
PART I--FINANCIAL INFORMATION
Federal Security Protection Services, Inc.
Balance Sheets
December 31, 2004 and 2003
December 31, December 31,
2004 2003
Assets
Current assets
Cash $ 789 315
Total current assets 789 315
Property and equipment
Equipment 2,444 2,444
Accumulated depreciation (2,444) (2,074)
Property and equipment, net 0 370
Other assets
Investment in Affiliate 0 0
Total other assets 0 0
Total assets $ 789 $ 685
(3)
Federal Security Protection Services, Inc.
Balance Sheets
December 31, 2004 and 2003
December 31, December 31,
2004 2003
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 5,296 $ 10,828
Accrued expenses 67,916 48,292
Due to Related Parties 132,000 90,000
Accrued litigation settlement 0 42,500
Short-term borrowings 182,546 184,061
Total current liabilities 387,758 375,681
Shareholders' (deficit)
Convertible preferred stock, par value of
$.001, 20,000,000 shares authorized.
70,000 shares designated as Series A with 10,000
shares issued and outstanding at December 31, 2004
and 60,000 shares at December 31, 2003. Aggregate
liquidation preference of $100,000 at
December 31, 2004. 10 60
100,000 shares designated as Series B with 20,000
shares issued and outstanding at December 31, 2004
and at December 31, 2003, respectively. Aggregate
liquidation preference of $2,000,000 at
December 31, 2004. 20 20
10,000 shares designated as Series C with 3,800
shares issued and outstanding at December 31, 2004
and at December 31, 2003, respectively. Aggregate
liquidation preference of $380,000 at
December 31, 2004. 4 4
Common stock, par value $.001, 100,000,000
shares authorized, 11,375,211 and 7,975,211
issued and outstanding at December 31, 2004
and 2003, respectively 11,375 7,975
Paid in capital 5,299,693 5,134,043
Accumulated deficit (5,698,071) (5,517,098)
Total shareholders'(deficit) ( 386,969) ( 374,996)
Total liabilities and shareholders' (deficit) $ 789 $ 685
(4)
Federal Security Protection Services, Inc.
Statements of Operations
For the Nine Months Ended December 31, 2004 and 2003
9 Months Ended 9 Months Ended
December 31, December 31,
2004 2003
Revenues $ 0 $ 0
Operating expenses:
General and administrative 142,551 196,019
Total operating expenses 142,551 196,019
Loss from operations (142,551) (196,019)
Other income (expense)
Interest expense (16,404) (15,909)
Net income (loss) $ (158,955) $ (211,928)
Basic and dilutive income (loss) per share $ (.019) $ (.028)
Weighted average shares outstanding 8,485,756 7,597,433
(5)
Federal Security Protection Services, Inc.
Statements of Operations
For the Three Months Ended December 31, 2004 and 2003
3 Months Ended 3 Months Ended
December 31, December 31,
2004 2003
Revenues $ 0 $ 0
Operating expenses:
General and administrative 31,086 103,683
Total operating expenses 31,086 103,683
Loss from operations (31,086) (103,683)
Other income (expense)
Interest expense (5,587) (5,447)
Net income (loss) $ (36,673) $ (109,130)
Basic and dilutive income (loss) per share $ (.004) $ (.014)
Weighted average shares outstanding 8,506,733 7,975,211
(6)
Federal Security Protection Services, Inc.
Statements of Cash Flows
For the Nine Months Ended December 31, 2004 and 2003
9 Months Ended 9 Months Ended
December 31, December 31,
2004 2003
Cash flows from operating activities
Net income (loss) $ (158,955) $ (211,928)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 248 366
Common stock issued for services 132,000 166,500
Preferred stock issued for services 0 10,000
Changes in operating assets and
liabilities
Accounts payable (3,903) 663
Accrued expenses 15,888 15,909
Net cash provided by (used in) operating
activities (14,722) (18,490)
Cash flows from investing activities 0 0
Net cash provided by (used in) investing
activities 0 0
Cash flows from financing activities
Advances from related parties 7,500 27,600
Repayment to related parties 0 (10,000)
Net cash provided by (used in) financing
activities 7,500 17,600
Net increase (decrease) in cash (7,222) (890)
Cash, beginning of period 8,011 1,205
Cash, end of period $ 789 $ 315
(7)
Federal Security Protection Services, Inc.
Statements of Cash Flows
For the Years Ended March 31, 2004 and 2003
9 Months Ended 9 Months Ended
December 31, December 31,
2004 2003
Supplemental Disclosures of Cash Flow
Information
Cash paid during the year for:
Interest $ 0 $ 322
Income taxes 0 0
Noncash investing and financing activity:
During the nine months ended December 31, 2003, the Company issued 20,000
shares of its Series B preferred stock, of which 10,000 shares was to a
related party. The shares were compensation in exchange for $10,000
in management services.
During the nine months ended December 31, 2003, the Company credited to equity
the accrued compensation it owed the officers of Iris Broadband which was
forgiven in the June 3, 2003 rescission and reversal of its acquisition of
Iris.
During the nine months ended December 31, 2003, the Company cancelled $76,500
of accrued compensation due its officers and former officers of Iris Broadband
in exchange for the issuance of 1,700,000 shares of its common stock.
During the nine months ended December 31, 2004, the Company issued 2,400,000
shares of its common stock to three related parties. The shares were issued
in exchange for the cancellation of $144,000 of accrued compensation due them.
In December 2004, 50.000 shares of Series A preferred stock were converted
into 500,000 shares of the Company's common stock.
(8)
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 January 19, 1988. It currently
has no operating business.
Interim Financial Statements
The accompanying unaudited financial statements are represented in
accordance with the requirements for Form 10-QSB and article 10 of
Regulation S-X and Regulation S-B. Accordingly, they do not include all
the disclosures normally required by generally accepted accounting
principles. Reference should be made to the Federal Security Protection
Services, Inc.'s financial statements for the year ended March 31,
2004, contained in the Company's Form 10-KSB for additional disclosures
including a summary of the Company's accounting policies, which have not
significantly changed.
Property and equipment
Office equipment is recorded at cost and depreciated over estimated useful
lives of five years using the straight-line method.
Long-Lived Assets
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," was issued establishing new rules and clarifying
implementation issues with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of", by allowing a
probability-weighted cash flow estimation approach to measure the impairment
loss of a long-lived asset. The statement also established new standards for
accounting for discontinued operations. Transactions that qualify for
reporting in discontinued operations include the disposal of a component of
an entity's operations that comprises operations and cash flow that can be
clearly distinguished, operationally and for financial reporting purposes,
from the rest of the entity. The statement is effective for fiscal years
beginning after December 15, 2001. The Company adopted this standard and
its adoption has no significant effect on the Company's financial statements.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash and
cash equivalents to include all stable, highly liquid investments with
maturities of three months or less.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States require management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and
the reported amounts of revenues and expenses. Actual results could
differ from those estimates.
(9)
Income Taxes
The Company accounts for its income taxes under the provisions of Statement
of Financial Accounting Standards 109 ("SFAS 109"). The method of accounting
for income taxes under SFAS 109 is an asset and liability method. The asset
and liability method requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of temporary differences
between tax bases and financial reporting bases of other assets and
liabilities.
Fair Value of Financial Instruments
Pursuant to SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments", the Company is required to estimate the fair value of all
financial instruments included on its balance sheets as of December 31, 2004
and 2003. The Company considers the carrying value of such amounts in the
financial statements to approximate their face value.
Issuances Involving Non-cash Consideration
All issuances of the Company's stock for non-cash consideration have been
assigned a dollar amount equaling either the market value of the shares issued
or the value of consideration received whichever is more readily
determinable. The majority of the non-cash consideration received pertains
to services rendered by consultants and others and have been valued at the
estimated value of the services rendered.
Earnings per share
The Company adopted Statement of Financial Accounting Standards No. 128 that
requires the reporting of both basic and diluted earnings (loss) per share.
Basic earnings (loss) per share is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted earnings (loss) per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. In
accordance with FASB 128, any anti-dilutive effects on net earnings (loss)
per share are excluded. For 2004 and 2003, common stock equivalents are anti-
dilutive and, accordingly, basic and diluted earnings per share are the same.
Reclassification
Certain amounts in the December 31, 2003 financial statements have been
reclassified to conform with the December 31, 2004 presentation. Such
reclassification had no effect on net income as previously reported.
(10)
New Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46, "Consolidation of Variable Interest Entities" (an
interpretation of Accounting Research Bulletin (ARB) No. 51, "Consolidated
Financial Statements"). Interpretation 46 addresses consolidation by
business enterprises of entities to which the usual condition of consolidation
described in ARB-51 does not apply. Interpretation 46 changes the criteria by
which one company includes another entity in its consolidated financial
statements. The general requirement to consolidate under ARB-51 is based on
the presumption that an enterprise's financial statements should include all
of the entities in which it has a controlling financial interest (i.e.,
majority voting interest). Interpretation 46 requires a variable interest
entity to be consolidated by a company that does not have a majority voting
interest, but nevertheless, is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. In December
2003 the FASB concluded to revise certain elements of Interpretation 46,
primarily to clarify the required accounting for interests in variable
interest entities. Interpretation 46R replaces Interpretation 46, that was
issued in January 2003. Interpretation 46R exempts certain entities from its
requirements and provides for special effective dates for entities that have
fully or partially applied Interpretation 46 as of December 24, 2003. In
certain situations, entities have the option of applying or continuing to
apply Interpretation 46 for a short period of time before applying
Interpretation 46R. In general, for all entities that were previously
considered special purpose entities, Interpretation 46 should be applied in
periods ending after December 15, 2003. Otherwise, Interpretation 46 is to be
applied for registrants who file under Regulation SX in periods ending after
March 15, 2004, and for registrants who file under Regulation SB, in periods
ending after December 15, 2004. The Company does not expect the adoption to
have a material impact on the Company's financial position or results of
operations.
During April 2003, the FASB issued SFAS No. 149 - "Amendment of Statement
133 on Derivative Instruments and Hedging Activities," effective for contracts
entered into or modified after June 30, 2003, except as stated below and for
hedging relationships designated after June 30, 2003. In addition, except as
stated below, all provisions of SFAS No. 149 should be applied prospectively.
The provisions of SFAS No. 149 that relate to Statement 133 Implementation
Issues that have been effective for fiscal quarters that began prior to June
15, 2003, should continue to be applied in accordance with their respective
effective dates. In addition, paragraphs 7(a) and 23(a), which relate to
forward purchases or sales of when issued securities or other securities that
do not yet exist, should be applied to both existing contracts and new
contracts entered into after June 30, 2003. The Company has implemented this
pronouncement and has concluded that the adoption has no material impact to the
financial statements.
(11)
During May 2003, the FASB issued SFAS No. 150 - "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity,"
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective for public entities at the beginning of the
first interim period beginning after June 15, 2003. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a freestanding financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many of those
instruments were previously classified as equity. Some of the provisions of
this SFAS No. 150 are consistent with the current definition of liabilities
in FASB Concepts Statement No. 6, "Elements of Financial Statements." The
Company has implemented this pronouncement and has concluded that the adoption
has no material impact to the financial statements.
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Post Retirement Benefits" which replaces
the previously issued Statement. The revised Statement increases the existing
disclosures for defined benefit pension plans and other defined benefit post-
retirement plans. However, it does not change the measurement or recognition
of those plans as required under SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits,"
and SFAS No. 106, "Employers Accounting for Post Retirement Benefits Other
than Pensions." Specifically, the revised Statement requires companies to
provide additional disclosures about pension plan assets, benefit obligations,
cash flows, and benefit costs of defined benefit pension plans and other
defined benefit post-retirement plans. Also, companies are required to
provide a breakdown of plan assets by category, such as debt, equity and
real estate, and to provide certain expected rates of return and target
allocation percentages for those asset categories. The Company has implemented
this pronouncement and has concluded that the adoption has no material impact
to the financial statements.
In December 2003, the FASB issued FIN No. 46R, "Consolidation of Variable
Interest Entities." This requires that the assets, liabilities and results of
the activity of variable interest entities be consolidated into the financial
statements of the company that has a controlling financial interest. It also
provides the framework for determining whether an entity should be
consolidated based on voting interest or significant financial support
provided to it. The adoption of FIN No. 46R did not have any impact on the
Company's financial condition or results of operations.
In December 2004, the FASB issued FASB Statement No. 153, exchanges of
Nonmonetary Assets which is an amendment of APB Opinion No. 29. The amendments
made by Statement 153 are based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the assets exchanged.
Further, the amendments eliminate the narrow exception for nonmonetary
exchanges of similar productive assets and replace it with a broader exception
for exchanges of nonmonetary assets that do not have "commercial substance."
Previously, Opinion 29 required that the accounting for an exchange of a
productive asset for a similar productive asset or an equivalent interest in
the same or similar productive asset should be based on the recorded amount of
the asset relinquished. The provisions in Statement 153 are effective for
nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. Early application is permitted and companies must apply the
standard prospectively. The Company adopted this statement on January 1, 2005.
The adoption of the statement should not cause a significant change in the
current manner in which the Company accounts for its exchanges of nonmonetary
assets.
(12)
On December 2004, the FASB issued FASB Statement No. 152, Accounting for Real
Estate Time-Sharing Transactions - An Amendment of FASB Statements No. 66
and 67. This standard amends FASB Statement No. 66, Accounting for Sales of
Real Estate, by referring users to AICPA Statement of Position (SOP) 04-2,
Accounting for Real Estate Time-Sharing Transactions. Statement 152 also
amends FASB Statement No. 67, Accounting for Costs and Initial Operations of
Real Estate Projects, to state that the guidance for "incidental operations"
and costs incurred to sell real estate projects does not apply to real estate
time-sharing transactions. Statement 152 is effective for financial statements
for fiscal years beginning after June 15, 2005. This statement is not
applicable to the Company's current operations.
The FASB has issued FASB Statement No. 123 (Revised 2004), Share-Based
Payment. The new FASB rule requires that the compensation cost relating to
share-based payment transactions be recognized in financial statements. That
cost will be measured based on the fair value of the equity or liability
instruments issued. This statement precludes the recognition of compensation
expense under APB 25 intrinsic value method. Public entities that file as
small business issuers will be required to apply Statement 123R in the first
interim or annual reporting period that begins after December 15, 2005.
Management believes that the adoption of the statement will not have a
significant impact on its current operations and plans to adopt this
statement on April 1, 2006.
On November 24, 2004, the FASB issued FASB Statement No. 151, Inventory
Costs - An amendment of ARB No. 43, Chapter 4. Statement 151 clarifies
that abnormal amounts of idle facility expense, freight, handling costs and
spoilage should be expensed as incurred and not included in overhead. Further,
Statement 151 requires that allocation of fixed production overheads to
conversion costs should be based on normal capacity of the production
facilities. The provisions in Statement 151 are effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. Companies
must apply the standard prospectively. Management plans on adopting this
standard on April 1, 2006 and expects that that the adoption of the statement
to have no impact on its current operations.
(13)
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. Per terms of the
contract between the two companies, 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. On June 9, 2003,
the Company and Iris Broadband, Inc. agreed to disengage and to reverse and
nullify the acquisition transaction. The acquisition was accounted under
the equity method of accounting pursuant to Accounting Research Bulletin
No. 51, as the Company maintained temporary control of Iris and due to the
significant losses of Iris the Company charged off its $203,000 to
operations in the year ended March 31, 2003. This plan to reverse the
acquisition transaction included transferring back to the Company, all
the issued and outstanding shares of Preferred Series B Stock of the
Company, by the former Iris Broadband, Inc. shareholders. In return, the
Company transferred back to the former Iris Broadband, Inc. shareholders,
all the shares of common stock they possessed prior to the September 6,
2002 reorganization. In addition, the seven year employment agreement
with three officers, who were also the officers of Iris Broadband, Inc.,
under which the Company agreed to pay $480,000 in annual salary, 3,000,000
of its common shares in stock options, various employment benefits, and an
annual bonus based on meeting certain performance criteria was cancelled
as well and made effective June 9, 2003. Also, all liability that the
Company had incurred to Iris Broadband, Inc. and to these officers from the
date of reorganization to its reversal on June 9, 2003 was forgiven by Iris
Broadband, Inc. As of June 9, 2003, this amount totaled $299,708. Due to
the elimination of this liability as a result of the reversal of the
acquisition and due to the related party nature of these transactions, the
$299,708 was credited to paid in capital.
(14)
NOTE 3 Shareholders' equity
Stock options
The number of shares represented by stock options outstanding at December
31, 2004 is 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 following is a schedule of stock option activity:
Outstanding at April 1, 2004 6,225,000
Granted 0
Expired 0
Outstanding at December 31, 2004 6,225,000
The weighted average exercise price for the above options is $.15.
Preferred stock
On March 12, 2002, the Company effected a ten for one reverse split of its
common stock. The conversion and voting rights of Series A preferred changed
from 100 to 10 shares of common stock. Also in March, 2002, 10,000 shares of
the Series A preferred were converted into 100,000 shares of common stock.
On January 15, 2003, 10,000 shares of preferred stock was designated as
Series C preferred stock with conversion rights of one share of Series C
preferred to 100 shares of common stock. On this date, 3,800 shares
were issued to a creditor of Iris in exchange for the cancellation of
indebtedness amounting to $37,566.
On November 11, 2003, 20,000 shares of Series B preferred stock were
issued in exchange for management services valued at $10,000, of which
$5,000 was to a related party.
On December 31, 2004, 50,000 shares of Series A preferred stock were
converted to 500,000 shares of common stock.
Issuance of Common Stock
On August 1, 2003, the Company cancelled $76,500 of accrued compensation
due its officers and former officers of Iris Broadband in exchange for the
issuance of 1,700,000 shares of its common stock.
In January 21, 2004, the Company issued 500,000 shares of its common stock
in exchange for $25,000.
On December 30, 2004, the Company issued 2,400,000 shares to corporate
officers in exchange for the cancellation of $144,000 of accrued compensation
due them.
On December 31, 2004, 50,000 shares of Series A preferred stock were converted
to 500, 000 shares of common stock.
(15)
NOTE 4 Related parties
Short-term borrowings
At December 31, 2003, the Company had unsecured promissory notes, inclusive of
accrued interest, of $232,353, payable to six shareholders, that bear
interest at an annual rate of 12%. Interest charged to expense for the three
and nine months ended December 31, 2003 were $5,447 and $15,909, respectively.
At December 31, 2004, the Company had unsecured promissory notes, inclusive of
accrued interest, of $250,462, payable to six shareholders, that bear
interest at an annual rate of 12%. Per the terms of the note agreements, the
Company is in default on each of the notes. Interest charged to expense for
the three and nine months ended December 31, 2004 were $5,447 and $15,888,
respectively.
Stock options
Represented in outstanding stock options are 6,200,000 shares at December 31,
2004, to related parties.
Accrued Compensation
During the three and nine months ended December 31, 2004, the Company accrued
compensation to officers and directors for management services totaling
$30,000, and $132,000 respectively.
During the three and nine months ended December 31, 2003, the Company accrued
compensation to officers and directors for management services totaling
$100,000, and $166,500 respectively.
Preferred Stock
During the nine months ended December 31, 2003, the Company issued 10,000
shares of its Series B preferred stock to a related party for services
rendered. The shares were valued at $5,000.
NOTE 5 Litigation Settlements
During fiscal 1999, a lawsuit was filed against the Company in which the
plaintiff, a former officer, claimed breach of his employment contract
relating to fiscal year 1998. In May 1999, the dispute was settled for
$42,500. The unpaid settlement amount is accrued as of December
31, 2003. Before the year ended March 31, 2004, the $42,500 was
credited to operations due to the inability of the creditor to
collect as he is barred by statute.
(16)
NOTE 6 Going concern
The Company has suffered recurring losses from operations and has a net
capital deficiency that raises substantial doubt about its ability to
continue as a going concern. The Company has the ability to raise funds
through the public equity market and has paid significant liabilities to
related parties and others with common stock. The Company has also relied
on advances made from its current president to meet its daily operating
expenses. Management is currently looking for a profitable private company
that is intent on becoming publicly held by acquisition. While such plans
and fundraising ability seem to mitigate the effect of prior years' losses
and deficits, the Company's current sole support is from continuing advances
from its president and while it is the intent of the president to
continue financing the current operations of the Company until it acquires
a profitable company, there is no assurance that these advances will
continue or that the advances will be sufficient to fund the entire cost of
the Company's current operations.
Item 2.
Management's Discussion and Analysis
Results of Operations for the Three Months Ended December 31, 2004 and 2003.
The Company during the three months ended December 31, 2004 and 2003 had no
principal business operations. Net loss for the three months ended December
31, 2004 totaled $36,673 as compared to the previous year's three-month
loss of $109,130. The Company did not generate any income during these two
periods and the losses consist solely of administrative costs and accrued
interest expense. Of the $36,673 loss, $30,000 pertained to accrued
officers compensation and $5,447 to interest expense accrued on notes and
loans due related parties. Of the $109,130 loss, $100,000 pertained to accrued
officer compensation and $5,447 to interest expense accrued on notes and
loans due related parties. Significantly all of the Company's remaining
expenses for the two periods relate to costs incurred for legal, accounting,
and other expenses incurred in the preparation and filing of public forms and
reports and stock transfer agent fees.
Results of Operations for the Nine Months Ended December 31, 2004 and 2003.
The Company during the nine months ended December 31, 2004 and 2003 had no
principal business operations. Net loss for the nine months ended December
31, 2004 totaled $158,955 as compared to the previous year's nine-month
loss of $211,928. The Company did not generate any income during these two
periods and the losses consist solely of administrative costs and accrued
interest expense. Of the $158,955 loss, $132,000 pertained to accrued
officer's compensation and $15,888 to interest expense accrued on notes and
loans due related parties. Of the $211,928 loss, $166,750 pertained to accrued
officer compensation, $5,000 in additional officer compensation which was
paid through the issuance of 10,000 shares of the Company's Series B Preferred
Stock and $15,909 on interest expense accrued on notes and loans due related
parties. Significantly all of the Company's remaining expenses for the two
periods relate to costs incurred for legal, accounting, and other expenses
incurred in the preparation and filing of public forms and reports and stock
transfer agent fees.
(17)
Liquidity and Capital
Cash and cash equivalents as of December 31, 2004 and 2003 were $789 and $315,
respectively. During the nine-months ended December 31, 2004, the Company
received a total of $7,500 in advances from its president. Cash used in
operations for the nine-month period ended December 31, 2004 totaled
$14,722.
During the nine-months ended December 31, 2003, the Company received
$25,100 from its current president and an additional $2,500 from Iris
Broadband. During this nine-month period it used $18,490 in operations and
repaid $10,000 to Mr. Dennis Schlagel, the Company's former president.
PLAN OF OPERATION
The Company is currently seeking acquisition and/or merger candidates. The
management of the Company is considering the evaluation of various companies
in the oil and gas industries that may be in the best interest of the Company.
KNOWN RISKS AND TRENDS
The Company's business plan for its own operations is presently reliant on
the acquisition of a merger candidiate. If an acquisition does not occur,
then the Company will have no foreseeable means of generating revenues.
Even if an acquisition does occur, there is no means of judging the success
of the venture. There is significant competition in virtually all segments
of the oil and gas industries that the Company may potentially do business in.
Part II. Other Information
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
During the three-months ended December 31, 2004, the Company had the following
stock activity:
On December 30, 2004, the Company issued 2,400,000 shares to corporate
officers in exchange for the cancellation of $144,000 of accrued
compensation due them.
On December 31, 2004, 50,000 shares of Series A preferred stock were
converted to 500,000 shares of common stock.
Item 3 . Quantitative and Qualitative Disclosures about Market Risk
n/a.
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Item 4. Controls and Procedures
The Company's management has evaluated, with the participation of the
Company's Chief Executive Officer and Principal Financial Officer and its
Corporate Controller and Treasurer, the effectiveness of the design and
operation of the Company's disclosure controls and procedures, and have
concluded that, as of the end of the period covered by this Quarterly
Report, the Company's disclosure controls and procedures as defined in
Rule 13a-14(e) under the Securities Exchange Act of 1934, as amended, are
effective for gathering, analyzing and disclosing information the Company
is required to disclose in its periodic reports filed under such Act. During
the most recent fiscal quarter, there has been no change in the Company's
internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, the Company's internal control over
financial reporting.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports.
Exhibit 1.1
CERTIFICATION BY Blair Merriam PURSUANT TO SECURITIES EXCHANGE ACT RULE
13a-14
I, Blair Merriam, certify that:
I have reviewed this quarterly report on Form 10-QSB of Federal Security
Protection Services, Inc. (the "Registrant").
1. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
2. Based on my knowledge, the financial statements and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
3. As the Registrant's certifying officer, I am responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the Registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the Evaluation Date); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. As the Registrant's certifying officer, I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee
of Registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. As the Registrant's certifying officer, I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weakness.
Date: February 22, 2005
/s/ Blair Merriam
- - - - -----------------------
Blair Merriam
Chief Executive Officer & Treasurer
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Exhibit 1.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF the SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Federal Security
Protection Services, Inc. (the "Company") on Form 10-QSB for the
period ended December 31,2004 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, I, Blair Merriam,
Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley
Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.
/s/ Blair Merriam
- - - - -------------------------------------
Blair Merriam
Chief Executive Officer & Treasurer
February 22, 2005
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: February 22, 2005 /s/ Blair Merriam
________________ __________________________
Blair Merriam, CEO
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