UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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:
August 13, 2004, 8,475,211 shares.
Transitional Small Business Format (Check one): Yes [ ] No [x]
(1)
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FEDERAL SECURITY PROTECTION SERVICES, INC.
FORM 10-QSB
TABLE OF CONTENTS
Page PART I--FINANCIAL INFORMATION
Item 1. Financial Statements------------------------------------------ 3
Independent Accountant's Review Report--------------------------------- 3
Balance Sheets--------------------------------------------------------- 4
Statements of Operations----------------------------------------------- 6
Statements of Cash Flows----------------------------------------------- 7
Notes to Financial Statements------------------------------------------ 8
Item 2. Management's Discussion and Analysis or Plan of Operation----- 13
PART II OTHER INFORMATION--------------------------------------------- 18
Item 1. Legal Proceedings------------------------------------------ 18
Item 2. Changes in Securities-------------------------------------- 18
Item 3. Defaults Upon Senior Securities---------------------------- 18
Item 4. Submission of Matters to a Vote of Security Holders-------- 18
Item 5. Other Information------------------------------------------ 18
Item 6. Exhibits and Reports--------------------------------------- 19
Signatures------------------------------------------------------------- 20
(2)
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements have not been reviewed by an independent
accountant.
Independent Accountant's Review Report
August 6, 2004
To the Board of Directors and Shareholders
of Federal Security Protection Services, Inc.:
I have reviewed the accompanying balance sheets of Federal Security
Protection Services, Inc. as of June 30, 2004 and 2003, and the
related statements of operations and cash flows for each of the three
months then ended, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Federal Security Protection Services, Inc.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to financial data. It is substantially
less in scope than an audit in accordance with generally accepted accounting
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole. Accordingly, I do not express
such an opinion.
Based on my review, I am not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Federal Security Protection Services, Inc. will continue as a going
concern. As discussed in Note 7 to the financial statements, the Company has
suffered recurring losses from operations and has a net capital deficiency
that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Carl S. Sanko
Topanga, California
(3)
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Federal Security Protection Services, Inc.
Balance Sheets
June 30, 2004 and 2003
June 30, June 30,
2004 2003
Assets
Current assets
Cash $ 641 $ 583
Total current assets 641 583
Property and equipment
Equipment 2,444 2,444
2,444 2,444
Accumulated depreciation (2,320) (1,830)
Property and equipment, net 124 614
Other assets
Investment in Affiliate 0 0
Total other assets 0 0
Total assets $ 765 $ 1,197
See accompanying notes to financial statements
- Unaudited -
(4)
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Federal Security Protection Services, Inc.
Balance Sheets
June 30, 2004 and 2003
June 30, June 30,
2004 2003
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 205,676 $ 60,621
Accrued expenses 57,216 37,475
Accrued litigation settlement 42,500 42,500
Short-term borrowings 199,545 178,960
Total current liabilities 504,937 319,556
Shareholders' equity (deficit)
Convertible preferred stock, par value of $.001,
20,000,000 shares authorized.
70,000 shares designated Series A and 60,000
shares issued and outstanding at June 30, 2004
and at June 30, 2003, respectively. Aggregate
liquidation preference of $600,000 at
June 30, 2004. 60 60
100,000 shares designated Series B and 20,000
shares issued and outstanding at June 30, 2004,
and none issued at June 30, 2003. Aggregate
liquidation preference of $2,000,000 at
June 30, 2004. 20 0
10,000 shares designated Series C and 3,800
shares issued and outstanding at June 30, 2004,
and at June 30, 2003, respectively. Aggregate
liquidation preference of $380,000 at
June 30, 2004. 4 4
Common stock, par value $.001, 100,000,000 shares
authorized, 7,975,211 and 6,275,211 issued and
outstanding at June 30, 2004 and 2003,
respectively 7,975 6,275
Paid in capital 5,134,043 5,049,263
Accumulated deficit (5,646,274) (5,373,961)
Total shareholders' equity (504,172) (318,359)
Total liabilities and shareholders' equity $ 765 $ 1,197
See accompanying notes to financial statements
- Unaudited -
(5)
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Federal Security Protection Services, Inc.
Statements of Operations
For the Three Months Ended June 30, 2004 and 2003
3 Months Ended 3 Months Ended
June 30, June 30,
2004 2003
Revenues $ 0 $ 0
Operating expenses:
General and administrative 64,658 68,791
Total operating expenses 64,658 68,791
Loss from operations (64,658) ( 68,791)
Other income 0 0
Net income (loss) $ (64,658) $ ( 68,791)
Basic and dilutive income (loss) per share $ (.008) $ (.011)
See accompanying notes to financial statements
- Unaudited -
(6)
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Federal Security Protection Services, Inc.
Statements of Cash Flows
For the Three Months Ended June 30, 2004 and 2003
3 Months Ended 3 Months Ended
June 30, June 30,
2004 2003
Cash flows from operating activities
Net income (loss) $ (64,658) $ ( 68,791)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization 124 122
Common stock issued for services 0 0
Changes in operating assets and
liabilities
Accounts payable 52,476 50,456
Accrued expenses 5,188 (7,087)
Short-term borrowings (500) 22,179
Net cash provided by (used in) operating
activities (7,370) (3,121)
Cash flows from investing activities 0 0
Net cash provided by (used in) investing
activities 0 0
Cash flows from financing activities
Proceeds from paid in capital 0 2,500
Net cash provided by (used in) financing
activities 0 2,500
Net increase (decrease) in cash (7,370) (621)
Cash, beginning of period 8,011 1,204
Cash, end of period $ 641 $ 583
See accompanying notes to financial statements
- Unaudited -
(7)
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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 as Windom, Inc. On
August 22, 1997, Windom, Inc., as a non-operating public shell, merged with
New York Bagel Exchange, Inc. with each then outstanding share of New York
Bagel Exchange, Inc. common stock being, by virtue of the merger, cancelled.
The then outstanding shares of Windom, Inc. common stock continued unchanged
as the outstanding shares of the surviving corporation. The surviving
corporation continued the business of wholesale and retail sale of bagels
and related items. On January 26, 1999, New York Bagel Exchange, Inc.
changed its name to Webboat.com, 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. 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 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, 1999 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. On March 12, 2002 Web4Boats.com, Inc. changed
its name to Federal Security Protection Services, Inc. The acquisition of
Iris Broadband, Inc. (see note 2) on September 6, 2002, allowed the Company
to become a full-service managed security services company and a secure
Internet Protocol ("IP") network services provider. Between September 6,
2002 and June 9, 2003, the Company provided products and services to customers
(carriers, other IP-based service providers, systems integrators, business
enterprises) on a turnkey or per-requirement basis. It developed 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 provided desktop-to-desktop managed security network solutions
and other policy-based services. As discussed in Note 2, the Company
reversed its merger with Iris Broadband, Inc. and, as a result, discontinued
business operations. The Company expects to fulfill its plans and, as a
going concern to derive revenues during fiscal year 2004 and following years,
by its acquisition of existing security related companies or by pursuing
feasible opportunities in other industries.
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.
Income taxes
The Company has total net operating loss carryforwards at June 30, 2004 of
approximately $3,185,000 for federal 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 for federal tax purposes.
Earnings per share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding during each annual period ended.
(8)
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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. Per terms
of the contract between the two companies, within nine 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. On June 9, 2003, the Company and
Iris Broadband, Inc. agreed to disengage and to reverse and nullify the
acquisition transaction. According to Accounting Research Bulletin No.
51, while a controlling interest of 50% or more by a parent company requires
consolidated financial statements with the subsidiary, this is not the case
where such control of the subsidiary is temporary. Accordingly, the financial
statements of the Company do not include the accounts of Iris Broadband,
Inc. Instead, the Company's investment in Iris Broadband, Inc. has been
accounted for by applying the equity method of accounting per Accounting
Principles Board Opinion No. 18. A net loss by Iris Broadband, Inc. of
approximately $457,000 for the period September 6, 2002 to March 31, 2003,
under the application of the equity method resulted in the reduction in the
Company's entire investment in affiliate of $203,000 and was reported on the
Income Statement "Equity in net loss of unconsolidated affiliate" for the
period ending 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, as formerly, 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 will be
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 not treated as extraordinary income for the
year ended March 31, 2004 but was reversed by an increase to paid in capital.
(9)
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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 totaling 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%. The number of shares represented
by stock options outstanding at June 30, 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.
Issuance of preferred stock
In August, 1999, the Company authorized the issuance of 20,000,000 shares
of $.001 par value, preferred stock and 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 June 30, 2004.
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.
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.
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. The shares were retired upon
reversal of the merger on June 9, 2003.
On January 15, 2003, 10,000 shares of preferred stock was designated as
Series C preferred stock and 3,800 shares, valued at $37,566, were issued to
a creditor of Iris in exchange for a reduction in the Company's "Due to
Affiliate" liability account for the same amount.
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.
(10)
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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 nine
months. As inducement to obtain the unsecured loans, the Company issued a
total of 560,000 shares of common stock, valued at $123,800, which was
recorded as interest expense during the year ended March 31, 2001.
At June 30, 2003, the Company had unsecured promissory notes, inclusive of
accrued interest, of $216,435, payable to seven shareholders, and that bear
annual interest at a rate of 12%.
At June 30, 2004, the Company had unsecured promissory notes, inclusive of
accrued interest, of $231,761, payable to six shareholders, and that bear
annual interest at a rate of 12%.
Stock options
Represented in outstanding stock options are 6,200,000 shares at June 30,
2004, 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 year ended March 31, 2004, 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.
Additionally, at June 30, 2004, The Company has accrued $198,000 to three
related parties for management services which will be compensated in
subsequent periods with the issuance of 3,480,000 shares of common stock.
Interest paid
During the three months ended June 30, 2003 and 2004, the Company charged to
operations interest expense of $5,092 and $5,188, respectively. No interest
was paid for either period.
(11)
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NOTE 6 Commitments and Contingencies
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 March 31, 2003 and 2004.
NOTE 7 Going concern
The Company has suffered recurring losses from operations and has a net
capital deficiency that raise substantial doubt about its ability to continue
as a going concern. During the year ended March 31, 2002, as a result of
considering the inviability 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 the managed security and IP secured services industry or
by pursuing feasible opportunities in other industries. 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. Additionally, management is actively looking for a
profitable private company that is intent on becoming publicly held by
acquisition in a manner similar to the Iris Broadband, Inc. transaction.
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.
(12)
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Item 2. Management's Discussion and Analysis or Plan of Operation.
You should read the following discussion of our results of operations and
financial condition in conjunction with our consolidated financial statements
and related notes included elsewhere in this Form 10-QSB. Unless specified
otherwise as used herein, the terms "we", "us" or "our" refers to Federal
Security Protection Services, Inc.
The following Management's Discussion and Analysis or Plan of Operation
contains certain forward-looking statements regarding future financial
condition and results of operations and the company's business operations.
We have based these statements on our expectations about future events. The
words "may," "intend," "will," "expect," "anticipate," "objective,"
"projection," "forecast," "position" or negatives of those terms or other
variations of them or comparable terminology are intended to identify forward-
looking statements. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable,
we cannot assure you that these expectations will be achieved. Our actual
results may differ materially from what we currently expect. Important factors
which could cause our actual results to differ materially from the forward-
looking statements include, without limitation: (1)general economic and
business conditions, (2) effect of future competition,and (3) failure to
raise needed capital.
OVERVIEW
The Company was organized under and pursuant to the laws of the State of
Delaware on February 4, 1994, under the name of New York Bagel Exchange, Inc.,
and as of September 26, 1995, operated in the business of wholesale and retail
sales of bagels, sandwiches, baked goods, specialty coffees and related items.
On August 22, 1997, the Company underwent a reorganization with Windom, Inc.,
a non-operating public shell which resulted in the retirement of all the
(13)
<page>
common and preferred shares of both companies and the reissuance of certain
shares of the Company which continued to do business as New York Bagel
Exchange, Inc.
On January 26, 1999, New York Bagel Exchange, Inc. changed its name to
Web4boats.com, Inc. which after another two changes of name continued to
be the name of the Company.
On March 25, 1999, the Company sold its inventory and fixed assets and on
March 25th, 1999, ceased its bagel business operations. During fiscal 1999,
the Company began making plans to develop a commercial internet site and
the Company contemplated that recreational boaters, manufacturers, dealers,
marinas and individual buyers and sellers would advertise sales and services
related to the boating industry. The effort to develop the Internet site
continued for approximately two years.
On November 6, 2001 the Company amended its Articles of Incorporation. To
change the name of the Company to Federal Security Protection Services, Inc.
At the Company's Annual Meeting of Shareholders held on March 12, 2002, the
name change was approved by the shareholders. The Company was not successful
in raising the necessary funds to finance the continuing operations of the
Internet site and due to the fact that revenues from the operation of the site
had not been significant, management of the Company determined to change the
business operations of the Company. In the opinion of management, the
business prospects of the Company would be enhanced by entry into the field
of Internet and data security, recognizing the current sensitivity of
Corporate America to security issues. Management also recognizes the fact
that recent events resulted in the imposition of tight security measures for
certain industries and generally resulted in a heightened sense of the
increased need for security for our society in general. No assurance can be
given that this realignment of the Company business will result in an
improvement in the results of the operations or financial condition of the
business.
The Company's corporate headquarters is 4255 South Bannock St, Englewood,
CO 80110, and its operating office is located at the same address.
(14)
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The Company's then General Manager, Mr. Blair Merriam, was authorized by
the Directors of the Company to seek suitable candidates in the field of
security, for acquisition by the Company. In furtherance of this aim the
Company executed an agreement with Iris Broadband, Inc., a corporation
organized and existing under and pursuant to the laws of the State of
Louisiana, (hereinafter "Iris") pursuant to which it was agreed that the
Company would acquire all of the issued and outstanding stock of Iris. Iris
and the Company executed a letter of intent on April 25, 2002 to negotiate,
execute and consummate a tax-free stock exchange acquisition of Iris by
September 30, 2002 in which Iris would become a wholly-owned subsidiary of
the Company whereby the stockholders of Iris would receive 120,000 shares of
the Company's $.001 par value Series A preferred stock.
In contemplation of the consummation of the acquisition, on May 23, 2002, Mr.
Dennis Schlagel, the Company's then President and Mr. Blair Merriam, the
Company's then General Manager, resigned their offices (both, however,
remained as Directors of the Company) and Mr. Gary O'Neal, and Mr. Michael
Landers (respectively Chief Executive Officer and President of Iris)
(13)
respectively became President and Vice President of Finance of the Company.
Messrs. O'Neal and Landers were also appointed Directors of the Company.
On the same date Mr. Daniel Thornton (Secretary and a Director of the Company)
was appointed Vice President - Business Development of the Company. (See
"Directors and Executive Officers".)
On April 25, 2002, the Company entered into an agreement with Iris pursuant
to which Iris agreed to render certain services to the Company which services
are designed to accelerate the Company's business realignment. (See "Iris -
Professional Services Contract".)
(15)
<page>
The Board of Directors approved on June 9,2003, the reversal of the
plan of reorganization of Iris Broadband, Inc. and the Company. This
action came about over time as an assessment was done of the costs
required to be a public company, particularly in light of recently
enacted Sarbanes-Oxley regulations. Iris had underwritten all costs
since prior to the merger, and could not afford to continue to do so.
Compliance with these new regulations is onerous for small publicly-held
companies without the financial and staff resources necessary to be
devoted to all of the requirements. The issued and outstanding shares of
Preferred Series B stock of FSPS were transferred back to FSPS by the
former Iris shareholders in return for Iris shares. All stock options
issued to Gary O'Neal, Michael Landers,Edward Reynolds, John Fentum
and Thomas Polich were cancelled upon the approval of the unwind
resolution. Additionally, Gary O'Neal, Michael Landers and Edward
Reynolds resigned from their respective Director and employment positions.
Mr. Fentum and Mr. Polich resigned from the Board of Directors. The
financial statements contained herein reflect the reversal of the
acquisition of Iris, and therefore show unconsolidated financial
statements reflecting only FSPS results, not including Iris results.
BUSINESS
Upon consummation of the reversal acquisition of all of the outstanding
stock of Iris, the Company has decided to seek acquistion or merger
candidates.
RESULTS OF OPERATIONS
There was no revenue for the three months ended June 30, 2004 and for the
three months ended June 30, 2003. Operating expenses consist of salaries,
marketing and general and administrative expenses. General and administrative
expense consists primarily of executive, consulting, financial and legal
expenses and related costs.
There was no marketing expense for the three months ended June 30, 2004 and
for the three months ended June 30, 2003. General and administrative
expense for the three months ended June 30, 2004 was $64,658 and $68,791 for
the three months ended June 30, 2003.
The Company does not have any non-officer employees, and no cash salaries or
wages are currently being paid.
(16)
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2004, the Company had current assets of $641. At June 30,
2003 the current asset balance was $583. Total assets for the same
respective periods were $765 and $1,197.
As of June 30, 2004, the Company had current liabilities of $504,937.
At June 30, 2003 the current liability balance was $319,556. There
was no long term liability in either year, so the total liability amounts
are the same as the current liability balances.
The Company's auditor has issued an opinion questioning the Company's ability
to continue as a going concern, and we believe our current cash and cash
equivalents are, in fact, not sufficient to meet our anticipated cash needs
for working capital and capital expenditures. The Company intends to meet its
needs through borrowing or through the issuance of common stock.
PLAN OF OPERATION
The Company is currently seeking acquisition and/or merger candidates. The
management of the Company is considering the evaluation of various companies
in various 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 cadidiate. 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 industries
that the Company will seek to do business in.
(17)
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PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
- - -Shares Outstanding-
Type of Security 12/31/02 12/31/03 Increase/(Decrease)
Common Stock 6,065,210 7,975,211 1,910,001
Series A Preferred Stock 70,000 60,000 (10,000)
Series B Preferred Stock 70,000 20,000 (50,000)
Series C Preferred Stock -0- 3,800 3,800
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
(18)
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Item 6. Exhibits and Reports.
Exhibit 1.1
CERTIFICATION BY BLAIR J. MERRIAM PURSUANT TO SECURITIES EXCHANGE ACT RULE
13a-14
I, Blair J. Merriam, certify that:
I have reviewed this quarterly report on Form 10-QSB/A 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: May 5, 2005
/s/ Blair J. Merriam
- - -----------------------
Blair J. Merriam
President, Chief Executive Officer & Treasurer
(19)
<page>
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/A for the
period ended June 30, 2004 (the "Report"), as filed with the
Securities and Exchange Commission on the date hereof, I, Blair J. Merriam,
President and 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 J. Merriam
- - -------------------------------------
Blair J. Merriam
President, Chief Executive Officer & Treasurer
May 5, 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: May 5, 2005 /s/ Blair J. Merriam
________________ __________________________
Blair J. Merriam, President and CEO
(20)