UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-2
(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/A-2
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 replace in their entirety the financial
statements as contained in our 10-QSB/A for the three-months ended June 30,
2004.
(3)
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Federal Security Protection Services, Inc.
Balance Sheet
June 30
--------
2004
(Restated)
Assets
Current Assets
Cash 641
Total Current Assets 641
Property and equipment
Equipment 2,444
Accumulated depreciation (2,320)
Property and equipment, net 124
Total assets 765
- unaudited -
See accompanying notes to financial statements
(4)
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Federal Security Protection Services, Inc.
Balance Sheet - continued
June 30
--------
2004
(Restated)
Liabilities and Shareholders' (Deficit)
Current liabilities
Accounts payable 7,676
Accrued compensation - related parties 198,000
Short-term borrowings, including accrued
interest $57,216 231,761
Total current liabilities 437,437
Shareholders' (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
convertable at the option of the holder
into 600,000 shares of common stock.
Aggregate liquidation preference of $600,000 at
June 30, 2004. 60
100,000 shares designated Series B and 20,000
shares issued and outstanding at June 30, 2004.
Aggregate liquidation preference of $2,000,000 at
June 30, 2004. 20
10,000 shares designated Series C and 3,800
shares issued and outstanding at June 30, 2004.
Aggregate liquidation preference of $380,000 at
June 30, 2004. 4
Common stock, par value $.001, 100,000,000 shares
authorized. 8,475,211 issued and
outstanding at June 30, 2004. 8,475
Paid in capital 5,158,543
Accumulated deficit (5,603,774)
Total shareholders' (deficit) (436,672)
Total liabilities and shareholders' (deficit) 765
See accompanying notes to financial statements
(5)
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Federal Security Protection Services, Inc.
Statements of Operations
For the Three Months Ended June 30, 2004 and 2003
June 30 June 30
-------------------------
2004 2003
Revenues 0 0
Operating expenses:
General and administrative 59,470 63,699
Loss from operations (59,470) (63,699)
Other expense
Interest expense (5,188) (5,092)
Net income (loss) (64,658) (68,791)
Basic and dilutive income (loss) per share (.007) (.011)
Weighted shares outstanding 8,475,211 6,275,211
See accompanying notes to financial statements
(6)
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Federal Security Protection Services, Inc.
Statements of Cash Flows
For the Three Months Ended June 30, 2004 and 2003
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 expense 124 122
Changes in operating assets and
liabilities
Increase (decrease) in accounts payable (1,524) 9,206
Increase in accrued compensation
due related parties 54,000 41,250
Increase in short-term borrowings 5,188 5,092
Net cash provided by (used in) operating
activities (6,870) (13,121)
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 party 2,000 10,000
Donated capital 0 2,500
Repayment of related party advances (2,500) 0
Net cash provided by (used in) financing
activities (500) 12,500
Net (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
(7)
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NOTES TO FINANCIAL STATEMENTS
NOTE 1 Basis of Presentation and Organization
Organization and business
Federal Security Protection Services, Inc. ("the Company"), a Delaware
Corporation, was incorporated on January 19, 1988 as Windom, Inc. After
several failed business attempts, the Company changed its name to Federal
Security Protection Services, Inc on March 12, 2002 and acquired Iris
Broadband, Inc. on September 6, 2002, allowing the Company to become a
full-service managed security services company and a secure Internet
Protocol ("IP") network services provider. As discussed in Note 3, the
Company reversed its merger with Iris Broadband, Inc. and, as a result,
discontinued business operations. The Company is currently pursuing feasible
opportunities in other industries.
Basis of Presentation
The Company's financial statements are prepared using the accrual method
of accounting in accordance with accounting principles generally accepted
in the United States of America and have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities in the normal course of business. The Company has sustained
operating losses since its inception (January 19, 1988). In addition, the
Company has used substantial amounts of working capital in its operations.
Further, at June 30, 2004, current liabilities exceed current assets by
approximately $437,000 and has a net deficit since its inception amounted to
approximately $5,600,000.
In view of these matters, the continuation of its operations is dependent on
funds advanced by its management and the raising of capital through the sale
of its equity instruments or issuance of debentures. Management continues to
fund the Company's operations and is currently seeking financing from third
parties, however, no assurances can be made that current or anticipated future
sources of funds will enable the Company to finance future periods'
operations. These financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets or
liabilities that might be necessary should the Company be unable to continue
as a going concern.
Restated Financial Statements
The financial statements for the three-months ended June 30, 2004 have been
restated to correct errors included in the financial statements as previously
reported, These errors include a) the accounting as a liability the $25,000
received for the issuance of common stock , and b) the March 31, 2004 charge
off of the $42,500 obligation due a former employee whose collection of the
obligation became barred by statute.
A reconciliation of the Company's liabilities and equity is as follows:
As Previously As
Type of Security Reported Correction Restated
_____ ______ ______
Liabilities $504,937 a)$(25,000) $437,437
b)$(42,500)
Stockholders' Deficit
Common Stock $7,975 a)$500 $8,475
Additional paid-in-capital $5,134,043 a)$24,500 $5,158,543
Retained deficit $(5,646,274) b)$42,500 $(5,603,774)
Total Stockholders'
Deficit $(504,172) $67,500 $436,672
NOTE 2 - Summary of significant accounting policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Significant
estimates include the fair value of marketable securities and the
recoverability of long-lived assets. Accordingly, actual results could
differ from those estimates.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers cash
equivalents to include highly liquid investments with original maturities of
three months or less.
Property and equipment
Property and equipment are stated at cost. Major renewals and improvements
are charged to the asset accounts while replacements, maintenance and repairs
that do not improve or extend the lives of the respective assets are expensed.
At the time property and equipment are retired or otherwise disposed of, the
asset and related accumulated depreciation accounts are relieved of the
applicable amounts. Gains or losses from retirements or sales are credited
or charged to income.
Equipment consists of computer and phone equipment, recorded at cost, and
depreciated over its estimated useful lives of five years using the
straight-line method. Depreciation expense for the three-months ended June
30, 2004 and 2003 amounted to $124 and $122, respectively.
Long-Lived Assets
The Company accounts for its long-lived assets in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 144 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the historical
cost carrying value of an asset may no longer be appropriate. The Company
assesses recoverability of the carrying value of an asset by estimating the
future net cash flows expected to result from the asset, including eventual
disposition. If the future net cash flows are less than the carrying value
of the asset, an impairment loss is recorded equal to the difference between
the asset's carrying value and fair value or disposable value. As of June
30, 2004 and 2003, the Company does not believe there has been any impairment
of its long-lived assets.
Income taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are recognized for future tax benefits or consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance
is provided for significant deferred tax assets when it is more likely than
not that such assets will not be realized through future operations.
The Company has total net operating loss carryforwards at June 30, 2004 of
approximately $3,185,000 for federal income tax purposes. These net operating
losses have generated a deferred tax asset of $1,082,900 on which a valuation
allowance equaling the total tax benefit has been provided due to the
uncertain nature of it being realized. Net operating loss carryforwards begin
to expire in fiscal year 2011 for federal tax purposes.
Net Loss per Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS"). SFAS No. 128 provides for the calculation of basic and diluted
earnings per share. Basic EPS includes no dilution and is computed by
dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the
earnings or losses of the entity. For the quarters ended June 30, 2004
and 2004, basic and diluted loss per share are the same, since the calculation
of diluted per share amounts would result in an anti-dilutive calculation
that is not permitted and therefore not included. If such shares were
included in diluted EPS, they would have resulted in weighted-average common
shares of 15,300,211 and 13,100,211 in 2004 and 2003, respectively. Such
amounts include common shares potentially issuable from the conversion feature
of the Company's Series A convertible preferred stock and outstanding stock
options.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
marketable securities, accounts receivable, receivable from officer, accounts
payable, accrued expenses, notes payable and convertible debentures. 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 at
the balance sheet date. The Company cannot determine the estimated fair
value of receivable from officer as the transaction originated with a related
party and instruments similar to the convertible debentures could not be
found. Other than these items, the Company considers the carrying values of
its financial instruments in the financial statements to approximate their
fair values.
Reclassifications
Certain amounts in the June 30, 2003 financial statements have been
reclassified to conform with the June 31, 2004 presentation. Such
reclassifications had no effect on net loss as previously reported.
Recent Accounting Pronouncements
In December 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. ("FIN") 46R, "Consolidation of Variable Interest
Entities." This statement requires that the assets, liabilities and results
of the activities 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. In general, for all entities that were previously
considered special purpose entities, FIN 46R should be applied in periods
ending after December 15, 2003. Otherwise, FIN 46R is applicable to all
public entities for periods ending after March 15, 2004. The adoption of FIN
46R did not have a material impact on the Company's financial condition or
results of operations.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-Monetary
Assets, an amendment of APB Opinion 29, Accounting for Non-Monetary
Transactions." The amendments made by SFAS No. 153 are based on the principle
that exchanges of non-monetary assets should be measured based on the fair
value of the assets exchanged. Further, the amendments eliminate the narrow
exception for non-monetary exchanges of similar productive assets and replace
it with a broader exception for exchanges of non-monetary assets that do not
have "commercial substance." The provisions in SFAS No. 153 are effective for
non-monetary 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 did result in a significant change in the
current manner in which the Company accounts for its exchanges of non-monetary
assets.
The FASB has issued SFAS No. 123R, "Share-Based Payment." The new rule
requires that the compensation cost relating to share-based payment
transactions be recognized in the 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 Opinion No. 25's intrinsic value method. Public entities will
be required to apply Statement 123R in the first annual reporting period that
begins after June 15, 2005. Since the Company has been accounting for its
share-based compensation under SFAS No. 123, management believes SFAS No. 123R
should not have a significant impact on the way it accounts for its stock-
based compensation.
NOTE 3. Acquisition of 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). The acquisition was accounted for by the purchase
method pursuant to SFAS No. 141.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.
NOTE 4 Shareholders' equity
Stock options
As of June 30, 2004 and 2003, the Company had granted a total of 6,225,000
stock options to its management and former management to purchase 6,225,000
shares of the Company's common stock at a price of $.15 pr share. The options
expire expire in April, 2007.
Preferred stock
In November, 2001, 70,000 shares of Series A convertible 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. The conversion and voting rights of Series A preferred is
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 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 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 indebtedness to
Iris.
NOTE 5. Related parties
Short-term borrowings
At June 30, 2004, the Company had unsecured promissory notes, inclusive of
accrued interest, of $231,761, payable to six shareholders. Each promissory
note is assessed interest at an annual interest rate of 12%. The Company did
not payoff the notes when they became due and is in default (see Note 6.
Subsequent events) Interest charged to operations on these obligations for
the three-months ended June 30, 2004 and 2003 amounted to $5,188 and $5,092,
respectively.
Stock options
Represented in outstanding stock options are 6,225,000 shares at June 30,
2004, to related parties.
Noncash transactions
For the three-months ended June 30, 2004 and 2003, the Company accrued $54,000
and $42,500 for officers management services (see Note 6.Subsequent events).
NOTE 6 - Subsequent events
In December 2004, the Company issued 2,400,000 shares to its officers in
cancellation of $144,000 of accrued compensation due them. Also in December
31, 2004, the Company converted 50,000 shares of Series A preferred stock into
500,000 shares of its common stock.
In March 2005, the Company issued 350,000 units for $70,000 pursuant to its
private offering. Each unit consist of one share common stock and two
warrants, of which one warrant to purchase one share of the Company's common
stock at $ .50 per share, and one warrant to purchase one share of the
Company's common stock at $1.00 per share The warrants are exercisable for 2
years with piggyback registration rights.
Also in March 2005, the Company issued to its note holders a total of 986,450
shares of its common stock in consideration for the modification of the terms
of all outstanding loans extending the due date the loans to February 28,
2006. In addition, under the terms of the modified agreements, until the loans
and accrued interest are paid in full, each holder has the right to convert
the obligation due them, including accrued interest, into shares of the
Company's common stock at a price per share equal to the average of the bid
price of the Company's common stock for the thirty day trading period prior to
the written notice of conversion.
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
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.
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)
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.
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 for the three-months
ended June 30, 2004, consist of accrued compensation to its officers totaling
$54,000, accounting fees of $4,900, and other general and administrative
expenses totaling $570.
Operating expenses for the three-months ended June 30, 2003, consist of
accrued compensation to its officers totaling $42,500, accounting fees of
$8,800, legal fees of $7,839, travel expense of $1,509, stock transfer
fees $2,204 and other general and administrative expenses totaling $847.
The Company does not have any non-officer employees, and no cash salaries or
wages are currently being paid.
Interest charged to operations for the three-months ended June 30, 2004 and
2003 amounted to $5,188 and $5,092, respectively.
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 $437,473. At
June 30, 2003 the current liability balance was $319,556. There was no long-
term liability in either year.
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.
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports.
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: June 2, 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
June 2, 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: June 2, 2005 /s/ Blair J. Merriam
________________ __________________________
Blair J. Merriam, President and CEO
(20)