UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20222023
or
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 333-173039
AMERIGUARD SECURITY SERVICES, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 99-0363866 | |
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
5470 W. Spruce Avenue, Suite 102
Fresno, CA 93722
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including the area code: (559) 271-5984
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| Non-accelerated filer | Smaller reporting company | |||
| Emerging growth company | ☐ | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold on June 30, 2022,2023, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter is $4,021,596.
The number of outstanding shares of the registrant’s common stock on March 20,December 31, 2023, was .
Documents Incorporated by Reference: None.None.
FORM 10-K ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 20222023
TABLE OF CONTENTS
i
FORWARD-LOOKING STATEMENTS
The statements contained in this report with respect to our financial condition, results of operations and business that are not historical facts are “forward-looking statements”. Forward-looking statements can be identified by the use of forward-looking terminology, such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “seek”, “estimate”, “project”, “could”, “may” or the negative thereof or other variations thereon, or by discussions of strategy that involve risks and uncertainties. Management wishes to caution the reader of the forward-looking statements that any such statements that are contained in this report reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors, including, but not limited to, economic, competitive, regulatory, technological, key employees, and general business factors affecting our operations, markets, growth, services, products, licenses and other factors, some of which are described in this report including in “Risk Factors” in Item 1A and some of which are discussed in our other filings with the SEC.factors. These forward-looking statements are only estimates or predictions. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of risks facing our company, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events.
These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. All written and oral forward-looking statements made in connection with this report that are attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Given these uncertainties, we caution investors not to unduly rely on our forward-looking statements. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events, except as required by applicable law or regulation.
ii
PART I
ITEM 1. BUSINESS
Company History
Health Revenue Assurance Holding, Inc. (the Company)“Company”), was incorporated in Nevada on December 13, 2010.
The Company intended to become a provider of revenue cycle services to a broad range of healthcare providers. Offering the customers integrated solutions designed around their specific business needs, including revenue cycle data analysis, contract and outsourced coding, billing, coding and compliance audits, coding education, coding consulting, physician coding services and ICD-10 education and transition services.
On February 10, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) with Health Revenue Assurance Holdings, Inc. (formerly known as Anvex International, Inc., “HRAH”), a Nevada company, and its wholly-owned subsidiary Health Revenue Acquisition Corporation (“Acquisition Sub”), which was treated for accounting purposes as a reverse recapitalization with HRAA, considered the accounting acquirer. Each share of HRAA’s common stock was exchanged for the right to receive approximately 1,271 shares of HRAH’s common stock. Before their entry into the Merger Agreement, no material relationship existed between HRAH and Acquisition Sub or HRAA. On April 27, 2012, the Company completed a 12.98 to 1 forward stock split. On May 2, 2012, the Company changed its ticker symbol from ANVX to HRAA.
The Company then went dormant in August 2014.
On July 14, 2020, as a result of a custodianship in Clark County, Nevada, Case Number: A816259, Custodian Ventures LLC (“Custodian”) was appointed Custodian of the Company.
On July 15, 2020, Custodian appointed David Lazar as the Company’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer and Chairman of the Board of Directors.
AmeriGuard Security Services, Inc. (AmeriGuard)(“AmeriGuard”) was incorporated in California on November 14, 2002. The corporation was incorporated with the issuance of 1,000 common shares formerly held by Lawrence Garcia, President and CEO with 550 shares and Lillian Flores, former VP of Operations with 450 shares. On July 12, 2022, under the terms of a Settlement Agreement, Flores exchanged her 450 shares for the consideration of $3,384,950 and a promissory note in that amount secured by a stock pledge. AmeriGuard provides armed guard services as a federal contractor with licenses in 7 states and provides commercial guard services in California.
On September 8, 2021, under the terms of a private stock purchase agreement, 10,000,000 shares of Series A-1 Preferred Stock, $0.001 par value per share (the “Shares”) of the Company, were transferred from Custodian Ventures, LLC to AmeriGuard. As a result, AmeriGuard became holder of approximately 91% of the voting rights of the issued and outstanding share capital of the Company on a fully diluted basis of the Company and became the controlling shareholder. The consideration paid for the Shares was $450,000.$500,000. In connection with the transaction, David Lazar forgave the Company from all debts owed to him and/or Custodian Ventures, LLC.
On September 8, 2021, the Company accepted the resignations fromof David Lazar as the Company’s Chief Executive Officer, Chief Financial Officer, Treasurer, Secretary and as a Member of the Board of Directors. Effective on the same date to fill the vacancies created by Mr. Lazar’s resignations, the Company appointed Lawrence Garcia as the Company’s President, CEO, CFO, Treasurer, Secretary, and Chairman of the Board of Directors. These resignations are in connection with the consummation of the private stock purchase agreement and was not the result of any disagreement with Company on any matter relating to Company’s operations, policies or practices.
On March 11, 2022, the Company amended its articles of incorporation to change its name to AmeriGuard Security Services, Inc. (AGSS) from Health Revenue Assurance Holdings, Inc. The name was deemed effective by FINRA on March 17, 2022.
1
On December 9, 2022, AGSS entered into the Merger Agreement. AmeriGuard became a wholly owned subsidiary of AGSS, and AGSS itsis the only shareholder and will continue in its existence with one owner, AGSS. Pursuant to the Share Exchange, (a) the Majority Shareholder relinquished all of his 573 AmeriGuard common shares and the Minority Shareholders relinquished all of their 67 AmeriGuard common shares, constituting all issued and outstanding shares of AmeriGuard (the “AmeriGuard Shares”), and were issued an aggregate of 80,578,125 and 9,421,875 respectively of AGSS common shares, representing 86.26% and 10.09% of the outstanding Common Stock of AGSS and (b) AmeriGuard returned the A-1 Preferred Stock of AGSS for retirement. After the issuance of the common shares, the existing 3,417,302 common shares represent 3.66% of the outstanding common stock of AGSS.
Under the AGSS Merger Agreement, One Hundred Percent (100%) of the ownership interest of Ameriguard was exchanged for an aggregate of 90,000,000 shares of common stock of AGSS issued to the Majority Shareholders and the Minority Shareholders, in accordance with the AGSS Merger Agreement (the “AGSS Merger”). Also, as part of the AGSS Merger, Ameriguard cancelled the 10,000,000 shares of Series A-1 Preferred Stock it had purchased from Custodian Ventures, LLC. The former stockholders of Ameriguard acquired a majority of the issued and outstanding common stock as a result of the share exchange transaction. Lawrence Garcia currently owns 86.26% of the issued and outstanding voting stock of the Company and will be able to exert significant influence and control over the Company for the foreseeable future.
We have 10,000,000 authorized and designated Series A-1 Preferred Stock which are entitled to seventy-two (72) votes per share of Series A-1 Preferred Stock on all matters on which stockholders may vote. While we currently have no such shares issued and outstanding, the voting rights afforded these Series A-1 Preferred Stock would give any future holders a disparate voting interest and allow them to potentially exert control over the actions of the Company.
Pursuant to the terms of a settlement agreement, by and among Garcia, AmeriGuard, and Lillian Flores (“Flores”), dated July 7, 2022 (the “Settlement Agreement”), AmeriGuard repurchased the 450 common shares of Flores for a total consideration of $3,384,950 payable in five equal annual installments compounded semi-annually at a three percent rate. The initial payment on July 8, 2022, of $686,990 reduced the balance to $2,697,960. The second through fifth installment are due on December 31, 2023, through December 31, 2026.
Prior to Merger, under the terms of a stock pledge agreement, by and among Garcia, Flores and AmeriGuard, dated July 7, 2022, 360 AmeriGuard common shares remained held in AmeriGuard treasury pledged to Flores. On Merger these pledged shares were substituted with 50,625,000 AGSS common stock of the 80,578,125 issued to Lawrence Garcia. These pledged shares are redeemed and returned to Garcia based on a stock redemption agreement, by and among Garcia, Flores and AmeriGuard, dated July 7, 2022.
The purposes of the transactions described in this Current Report were to complete a business combination by a stock for stock merger and complete a recapitalization of the company with the result being that AmeriGuard became a wholly owned subsidiary of AGSS. Our business operations will now focus on the business of AmeriGuardAGSS, and itsAmeriGuard’s management will be the management of AGSS.
There iswas no offering with this merger.
Effective immediately after the Share Exchange, the stock transfer books of AmeriGuard shall be closed.
On October 20, 2023, the Company executed a share purchase agreement to acquire TransportUS Inc. TransportUS, Inc. was incorporated on October 24, 2018, with an S-Corp tax election. The corporation was incorporated with the issuance of 1,000 shares with no-par par value stock held by Lawrence Garcia, President and CEO. TransportUS Inc. provides human transportation services as a federal contractor, currently providing services in the state of California.
The purchase agreement was to issue 3,000,000 common shares to Lawrence Garcia in exchange for the 1,000 shares held from TransportUS, Inc. The agreement called for the immediate issuance of 1,500,000 shares when agreement was executed with the remaining 1,500,000 shares to be issued contingent on TransportUS Inc., renewing its current transportation contract with the Veterans Administration in Long Beach California. The award of the contract is expected to occur in late March 2024.
2
Overview
AmeriGuardThe Company manages two separate subsidiaries: Ameriguard Security Services, Inc. (“AGS”) and TransportUS, Inc. (“TUS”).
AGS principally provides guard services tofor Federal, State and Local governmental entities, quasi-governmental entities and for commercial property management.property. Guard services generated $24$20 million in revenues for the fiscal year ended December 31, 2022.2023. Guard services include, providing armed and unarmed uniformed security personnel for access control, mobile patrols, traffic control, security console/system operators, fire safety directors, communication, reception, concierge and front desk/doorman operations.
TUS provides ambulatory and non-ambulatory services for the Veterans Administration, in Long Beach CA and Central Los Angeles CA. These two contracts generate approximately $5 million in revenues annually. TUS operates approximately 40 vehicles, a mixture of sedans, minivans, and full-size vans with wheelchair lifts, along with a dispatch service available 24 hours a day, 365 days a year.
As we continue to push growth organically as well as through acquisition, we will be able to realize a greater market share in the security industry.each of these two industries.
Corporation Information
Our principal executive offices are currently located at 5470 W Spruce Ave Suite 102 Fresno CA 93722.
Our website; www.ameriguardsecurity.com.www.ameriguardsecurity.com and www.transportus.us
Employees
As of December 31, 2022, we2023, AGS had 315203 full-time employees, 240157 of these employees are represented by collective bargaining agreements and theTUS had 35 full and part-time employees. The Company considers it relations with its employees to be very good.
2Our Industries
Our IndustrySecurity
Security guard and related services in the US is a $43 billion industry comprisingcomprised of over 11,000 companies and 900,000 officers. Over 55%, ($24 billion) of this market is serviced by 40 companies,We compete with the top 4 firms, withsuch as Allied Universal, Securitas, G4S and Prosegur Security, controlling 74% ($31.8 billion), an averagewhich control the majority of the industry. AGS revenue of $7.9 billion; the next 21 firms control 8.4% ($3.6billion), an average of 172 million and the next 10 firms control 1% ($550 million) with a range ofat approximately $20 to $100 million with average of $50 million. AmeriGuard’s approximately $22 million in annual revenue places is within the top 25 firmsit in the country. The rest of the market comprises over 7,900 firms with $19 billion or an average of $2.5 million in revenue. This consolidation of market share has not been gradual but rather a rapid shift over the last five years in an industry which once was highly fragmented and widely dispersed, from smaller regional and local companies to the largest companies.strong competitive position.
We believe that the top 40 companies have the resources to harness technology, to expand their business into related services other than guard services. Companies with over $50 million in revenue have, over the last 10 years, experienced steady growth while those guard companies under $20 million, the remaining 9,900 firms, have experienced declining revenues. We believe that the principal reason for this is the steady diversification of security services away from the traditional guard services to areas of utilization of technology requiring capital. Along with this, we believe that the profitability challenges below $20 million annual sales are much more difficult that above $50 million is sales, largely due to the significant economies of scale achieve at the higher revenue levels.
The proliferation of technology while increasing efficacy in performance and inevitably lower costs in the future, the impact on the contract security industry will likely have mixed results – positive for companies who harness technology into their service delivery strategies – and negative for those companies who fail to invest in or adopt these service-enhancing capabilities. Despite the advances in the U.S. contract guarding business over recent years, there remains a question as to the industry’s viability in view of the increasing trend for integrating manned services with security systems (i.e. security video, access control and monitoring) along with the emergence of other new smart technology options and solutions (i.e. robotics, drones, cybersecurity and crowd sharing alert notification).
3
The recent merger and acquisition trend, primarily by the major national and international security organizations and fueled by investment and funding from private equity firms, is continuing. The underlying reason for this shift is less obvious and suggests an increasing number of sellers who concluded that their better option was to exit and sell rather than remain in the marketplace and try to compete and organically grow their market share.
Despite its low barriers of entry and nominal capital requirements, the security guard business has become more challenging for the smaller owner/operator. The traditionally historic advantage of the smaller operator’s ability to offer relationship-driven customized services is no longer totally sufficient for sustainable growth – especially with the increasing regulatory challenges of the Affordable Care Act, federal and state minimum wage laws, Family Medical Leave Act and state laws (i.e. meal and rest break reporting and now, predictive scheduling).
Even stronger local and smaller regional companies are finding it more difficult to protect their client base and grow revenues under increasing regulatory as well as competitive pressures. Larger regional and national organizations are dealing with the regulatory climate while growing market share by leveraging infrastructure, technology, economies of scale with more aggressive pricing and better service reliability. This approach appears to offer a more compelling value proposition from the client’s perspective, which seems evident by the higher client retention rates reported by the major security companies.
However, this consolidatingconsolidation trend may not be inevitable for the future as newer, more tech-savvy owner/operators enter the business and recognize how to adopt best practices with a variety of sophisticated third-party software platforms and applications to help level the playing field. These include talent management and on-boarding applications to attract, hire and maintain a more skilled and reliable workforce; integrated labor management platforms to control scheduling, compliance, operations, payroll, billing and financial reporting; and state-of-the-art social media marketing applications.
3
The contract security industry should now be able to more effectively capitalize on and penetrate opportunities in a $20 billion in-house market – especially for those companies who have invested and integrated technology into a more highly reliable ecosystem of protective services.
For the foreseeable future, the U.S. manned guarding business seems likely for continued sustainable growth. While the technology/manpower ratio may shift the revenue mix going forward, based on today’s currently expanding U.S. economy, the prospects for an aggregate growth rate of four percent or more seem realistic and perhaps even conservative, especially for ownership who have prudently invested in technology enhancements to their core guarding operations.
Providing these strategies can yield an attractive ROI, increase operating profits (EBITDA ranges of four to six percent and higher) and enterprise valuations, this industry seems not only viable but also opportune for further investment consideration.
(The above industry data taken from https://www.nasco.org/wp-content/uploads/2021/08/2021-Bob-Perry-Contract-Security-Industry-White-Paper-1.pdf)
Non-Emergency Medical Transportation
The non-emergency medical transportation (NEMT) industry is a fast-growing industry. A review of multiple publications available online indicates the North American market was approximately $6.4 billion in 2022 with a compound annual growth rate of between 7.5% and 9%. This provides TUS with a market of approximately $7.6 billion in 2024. As a relatively new company, it is positioned to grow rapidly in the governmental NEMT market and is focused on expanding its market share in southern CA.
TUS has an excellent reputation in the industry and will take advantage of this status as it bids on contracts moving forward. TUS will continue to focus on providing high quality service with our excellent staff and improving the quality of our fleet. Taking advantage of the capital markets available to AGSS, TUS will be able to enter more markets and be very competitive and profitable.
4
ITEM 1A. RISK FACTORS
AS A SMALLER REPORTING COMPANY, WE ARE NOT REQUIRED TO PROVIDE A STATEMENT OF RISK FACTORS.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 1C. CYBERSECURITY.
We have a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information. Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition.
Cybersecurity Governance
Our board of directors, in considering cybersecurity risk as part of its risk oversight function, oversees management’s implementation of our cybersecurity risk management program. Our board of directors receives reports from management on our cybersecurity risks. In addition, management updates our board of directors, as necessary, regarding any material cybersecurity incidents, as well as any incidents with lesser impact potential.
Our management team is responsible for assessing and managing our material risks from cybersecurity threats. The team has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and our retained external cybersecurity consultants. Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel, threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us, and alerts and reports produced by security tools deployed in the IT environment.
ITEM 2. PROPERTIES
The Company’s corporate headquarters is located at 5470 W. Spruce Avenue, Suite 102, Fresno CA. The lease is currently month to month. Landlord has not indicated a desire for a new lease. Our lease payments are a total of $55,767 for the entire term (or, $4,230 per month). The Company believes that this rent expense is reasonable and comparable to the rent that would be charged to a third party.
5
ITEM 3. LEGAL PROCEEDINGS
Involvement in Certain Legal Proceedings
To our knowledge, during the past ten years, none of our directors, executive officers, promoters, control persons, or nominees has:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses) |
| ||
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| ● | been found by a court of competent jurisdiction in a civil action or by the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
In the second quarterAs of 2022December 31, 2023, there are three employment issues pending. The issues revolve around terminated employees alleging the Company did receive a demand letter from a terminated employee’s lawyer. The demand letter claimedhas failed to pay minimum wages, sick pay wages, meal period violations, rest period violations wage statement violations and violation of the employee experienced discrimination and wrongful termination. This issue was handled by the Company’s labor attorney and after review and negotiation it was settled out or court in March of 2023unfair business practices act. A lawsuit has been filed in the amount of $23,000. No other legal issues or court filings are activeFresno County Superior Court, but it is early in the process and the attorneys cannot comment on the merits at this time. The Company believes the suit has no merit and intends to resolve it before a trial, if possible.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
56
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
As of the date of this report, the Company’s common stock is quoted on OTC Markets, symbol AGSS.
The high and low bid prices of our common stock following such date is as follows:
| Quarter Ended | High | Low | ||||||
| March 31, 2022 | $ | 3.70 | $ | 1.04 | ||||
| June 30, 2022 | $ | 5.34 | $ | 1.70 | ||||
| September 30, 2022 | $ | 3.00 | $ | 1.20 | ||||
| December 31, 2022 | $ | 3.38 | $ | 1.00 | ||||
| Quarter Ended | High | Low | ||||||
| March 31, 2023 | $ | 1.60 | $ | 1.30 | ||||
| June 30, 2023 | $ | .739 | $ | .699 | ||||
| September 30, 2023 | $ | .64 | $ | .64 | ||||
| December 31, 2023 | $ | .85 | $ | .76 | ||||
The last reported sales price of our common stock on the OTC Markets on March 22, 2023, was $2.10.April 4, 2024 is $.48.
Authorized Capital Stock
Our authorized capital stock consists of five hundred million (500,000,000)(500,000,000) shares of common stock, par value $0.001 per share. Immediately after giving effect to the Merger and related transactions, there were 93,417,30294,917,302 shares of our common stock issued and outstanding.
Dividend Policy
We have not declared or paid dividends on our common stock since our formation, and we do not anticipate paying dividends in the foreseeable future. Declaration or payment of dividends, if any, in the future, will be at the discretion of our Board of Directors and will depend on our then current financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. There are no contractual restrictions on our ability to declare or pay dividends.dividend
Holders
As of March 20,December 31, 2023, there were 94,471,30294,971,302 shares of common stock issued and outstanding, which were held by 95 stockholders of record.
Transfer Agent
The transfer agent for our common stock is VStockV-Stock Transfer, and its telephone number is (727) 289-0010.
Equity Compensation Plans
We do not have any equity compensation plans.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
On December 9, 2022, Ameriguard Security Services, Inc. f/k/a Health Revenue Assurance Holding, Inc. a Nevada corporation (“we”, “AGSS” or the “Company”), entered into a Definitive Share Exchange Agreement (the “Merger Agreement”) with Ameriguard Security Services, Inc., a California corporation, (“Ameriguard”) and Lawrence Garcia (“Garcia”) the majority shareholder of Ameriguard (the “Majority Shareholder”) and the minority shareholders of Ameriguard (“Minority Shareholders”). Under the Merger Agreement, One Hundred Percent (100%) of the ownership interest of Ameriguard was exchanged for an aggregate of 90,000,000 shares of common stock of AGSS issued to the Majority Shareholders and the Minority Shareholders, in accordance with the Share Exchange Agreement (the “Merger”)
Purchases of Equity Securities by the Small Business Issuer and Affiliated Purchasers
None.
6
ITEM 6. SELECTED FINANCIAL DATA.
Smaller reporting companies are not required to provide the information required by this Item 6.
7
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Item 7 contains forward-looking statements. Forward-looking statements in this Annual Report on Form 10-K are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the sectionssection entitled “Forward-Looking Statements” and “Risk Factors” included elsewhere in this Annual Report.
Management’s Discussion and Analysis should be read in conjunction with the financial statements included in this Annual Report on Form 10-K (the “Financial Statements”). The financial statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the Financial Statements and footnotes thereto appearing elsewhere in this Report.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) regulatory, competitive and contractual risks; (c) development risks; (d) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth, and (e) unknown litigation.
Corporate Structure
As previously mentioned, on December 9, 2022, AGSS executed a reverse merger with AmeriGuard resulting in AGSS becoming the sole owner of AmeriGuard. This merger establishes AGSS as a company operating a viable guard company with annual sales of approximately $24,000,000. It also is in the position to access the capital market to generate the capital needed to begin its growth strategy of mergers and acquisitions within the security industry.
PriorOn October 20, 2023, the Company executed a share purchase agreement to acquire TransportUS Inc. This brings the second entity under the ownership and aftermanagement of AGSS. TransportUS Inc., adds an opportunity to increase revenues in the mergermore profitable federal contracts requiring non-emergency medical transportation. As mentioned earlier, this industry is projected to grow at 9% year over year through 2032. AGSS has been working onwill be a strong participant in the industry and will grow via contract awards and additional acquisitions within the industry.
AGSS continues developing the leadership team needed.needed for success. We have in place a CEO with 20 years of experience in our industry and has been very successful in the government contracting market. Our new CFO has 20 years of experience in improving business performance as well as organizational growth across various sectors. Our Senior Controller has over 35 years of business finance experience, the last 15 of which he has been focusing on organizational development consulting across multiple industries, and an Operations team on the east coast managing IT and our federal contracts. We have an exclusive contract with Think Equity a New York Investment Banking Firm, and we have engaged legal and SEC compliance professionals. We have a Board of Directors with Wall Street and government security experience making us well positioned to aggressively grow the business.
8
Results of Operations for the fiscal year ending December 31, 20222023
Revenues and Cost of Goods SoldServices
2022For 2023 the Company experienced a 10% increase of $2.2 million16.4% overall decrease in security services revenue.operational revenue, totaling approximately $4,800,000. The majority of whichthe decline, approximately $4,600,000, was from federal contractsthe contract with the Environmental Protection Authority, EPA, that ended in May 2023. The result was only 5 months of revenue in 2023 compared to 12 months in 2022. The remaining $200,000 decline was experienced in the amount of approximately $1.5 millioncommercial services market, as businesses are facing declining sales and the remaining $700,000 from commercialincreasing costs, reduced security guard services. The contracthours in 2023. Transportation services revenue increase wasslightly during 2023 by approximately $90,000.
The total cost of goods sold saw a decline of approximately $3,650,000, a 14% decline as expected. This decline reflects the cost reduction due to the ending of the EPA contract, against a slight increase in direct labor costs due to the inflation rate experienced in 2023. All direct expense categories within the Cost of Services section saw a decline from 2022 due to the ending of the EPA contract. Salaries and benefits declined approximately $1,000,000, sub-contractor expenses declined approximately $2,200,000, Training and supplies expense declined approximately $134,700 and vehicle expenses declined approximately $310,000 as a result of monthly fee increases within4 cars taken out of service.
For the four existing contract operated for during 2022 and 2021. Asfederal guard contracts, as the costs of labor increases within the unionized contract so does the revenue. For the Commercial operations there is a lag between cost increases and service rate increases. It continues to be our practice to adjust service rates annually in the month of February. Although we sawdid increase our billing rates for new contracts during 2023, the existing companies did not see a significantrate increase insince February 2023. Although demand for services specificallycontinues to grow, the expectations of the cost of those services are out of line within the market. As AGS struggles with the cost of labor, the customers are experiencing similar cost pressures and are less willing to pay for our services. This conflict with AGS needing to raise services fees and customers needing to pay less is creating difficulty in the market. As a result, AGS has needed to shift its approach to protecting business assets for the traditional standing guard, to technology and patrol services. Patrol services solveAGS has established a 24-hour dispatch department to monitor activity and direct patrol officers to the problem of delayed police response.locations. Our patrol officers respond to all alarms regardless of cause within 15 minutes of activation. This is a cost effect way for businesses to have protection without the high expense of a posted guard. This is an area of service we are continuing to expand.
7Currently, we have four federal contracts continuing into 2024, that approximated 87% of our total services revenue for the year ended December 31,2023. All federal contracts are awarded with a term of 5 years, with annual renewals. At the end of each contract year the government has the option to renew, cancel or renegotiate. Our four contracts and their respective terms are as follows:
September 2022 through September 2027 Annual Revenue of approx. $3M June 2022 through June 2027 Annual Revenue of approx. $5M June 2021 through July 2026 Annual Revenue of approx. $5.8M Feb 2019 through June 2024 Annual Revenue of approx. $4.4M As with all professional service industries the vast majority of expense in with direct labor and expenses associated with that labor. We are not an exception. Our direct expenses average around 9 Operating Expenses and Other Expense Operation expenses, overhead expenses, increased in Other expenses At this time, our operating structure and current level of expense can handle twice the revenue stream with minor increases to our operating overhead expenses. This allows the entire gross profit of any new contract or company acquisition to go straight to the bottom line, providing a consistent return on investment. Net Liquidity and Capital Resources The Company’s principal sources of liquidity include cash from operations and proceeds from The main source of cash from financing activities was a short-term accounts receivable loan received in December in the amount of $766,677. Financing activities usage was SBA loan payments of $74,174 and equity distributions of $5,678. The main use of cash in investing activities was On December 31, Moving Forward During the past eighteen months we have been working to get to where we are today. It has been difficult and expensive, to get to this point of being a public company with the corporate structure, systems and team that can expand our business with increasing profitability. Our current overhead expense structure has the capacity to manage two to three times the revenues from one of two strategic sources. 10 Our first source is to continue down our historical path of seeking out contracts that meet our sweet spot and bidding with hope of successful award. However, this path is time consuming and isn’t a guarantee of the growth we desire and is outside of our control. Our second source of growth is merger and acquisition. Now that we have the capital market available to us and our industry is positioned for long term growth, now is the time. The security industry continues to grow in opportunity, and at the same there’s a lot of consolidation occurring. There are also potential acquisition opportunities in several other industries that Management is very positive regarding profitable operations for the next twelve months based on the following: ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company and are not required to provide the information required by this item. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our consolidated balance sheets, as of December 31, ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the “Exchange Act”) that are designed to ensure that information that would be required to be disclosed in the Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, Internal Control over Financial Reporting and Attestation Report of Registered Public Accounting Firm This annual report does not include a report of management’s assessment regarding internal control over financial reporting (“ICFR”) or an attestation report of the Company’s independent registered public accounting firm on ICFR due to a transition period established by rules of the Securities and Exchange Commission (the “SEC”) for newly public companies. The SEC has adopted a transition period permitting a newly public company to wait until its second annual report to comply with Section 404(a) of Sarbanes-Oxley Act of 2002 (“SOX”). After that point, issuers that are emerging growth companies, or are not large, accelerated filers or accelerated filers are exempt from the requirements of SOX 404(b). As such, if the Company continues to satisfy as being an emerging growth company or other exemption standards as listed above, it will continue to be exempted from filing attestation report of the Company’s independent registered public accounting firm regarding ICFR. Changes in Internal Controls over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Set forth below is information regarding our directors and executive officers The following persons Lawrence Garcia is the CEO and President of AmeriGuard Security Service, Inc incorporated in state of California in 2002. Lawrence is a disabled veteran of the United States Navy and of Hispanic dissent. He has led the company from a small local guard company to a national company currently managing five Federal Government armed guard contracts with annual revenue of over $24 million. Mr. Garcia has twice been named, “Businessman of the Year” in the State of California. Michael Goossen, CPAis the former Chief Financial Officer of AmeriGuard Security Services, Inc., a California Corporation. Michael has been a CPA since 1986, has worked in multiple industries as a CFO and CEO. During the past 20 years he has been providing small business consulting, offering CFO services and executive leadership development. Michael began working with AmeriGuard as a CFO consultant and business development strategist 3 years ago and became the full time CFO for AmeriGuard in August 2022. Douglas Anderson, Board Director. Mr. Anderson is the CEO of Wall Street Capital Partners and has been involved in or exposed to most aspects of corporate finance with over 20 years on Wall Street. Prior to his work in corporate finance, he served in the U.S. Marine Corps, including the elite Marine Reconnaissance Battalion. He held a Top-Secret clearance while serving operationally in the U.S. State Department at American Embassies overseas, as well as at the U.N. in New York, where he participated in Security Enhancement programs. Mr. Anderson was formally trained on Wall Street as an Underwriter. He has been interviewed and broadcast nationally and internationally, many times as an expert both on NASDAQ and at the NYSE. Mr. Anderson earned his undergraduate degree from the University of Washington and postgraduate graduate education includes executive education from Harvard in Finance and Texas A&M in Agriculture Science. Mr. Anderson has served as an Advisor, Director, public company CEO and public company Board Director over his career. 13 General Russel Honore’, Board Director. General Russel Honore is a decorated 37-year army veteran and a global authority on leadership, disaster management, and climate preparedness. At the request of the Speaker of the House, the General led Task Force 1-6 Capitol Security Review to improve Capitol security following the attacks on January 6, 2021. As the commander of Joint Task Force Katrina, he became known as the “Category 5 General” for his leadership in coordinating military relief efforts in post-hurricane New Orleans. General Honore knows that the future of our national security depends on protecting our environment, and he’s fighting for a brighter future for us all. A Louisiana native, he founded GreenARMY, a coalition of environmental experts and advocates, to protect against pollution while fighting climate change and the natural disasters it causes. During his military career, General Honore held numerous commands, including Vice Director for Operations for the Joint Chiefs of Staff and Commander of the Standing Joint Force Headquarters-Homeland Security. Term of OfficeWe also had a significant increase of over $280,000 in other related income. This increase was due to a change in accounting practices. Prior to 2022, overhead expenses included management salaries were allocated to between AmeriGuard and three other related companies. Has part of our transition to prepare for the reverse merger we shifted to management agreements between AmeriGuard and the other related entities. As a result, we saw both an increase in other revenues along with an increase in administrative expenses.● Social Security Administration, NSC - ● Social security Administration, SSC - ● Social Security Administration, WBDOC - ● Veterans Administration – Long Beach CA - 89%91% of revenues. Total cost of services increasedwas approximately $1.3 million$22,300,000 in 2022,2023 and that increase is expectedapproximately $25,900,000 in relation to the revenue increase in 2022 as previously discussed.2022.20222023 over 20212022 by approximately $1.3$1.2 million. Slightly more than halfThe largest category of that increase was in administrative salaries and related payroll expenses, of approximately $796,000. As mentioned earlier in 2021 overhead expenses included administrative salaries were allocated between related companies. In 2022, all the salaries were expensed to AmeriGuard. Also, during 2022 as part$442,000. Ninety percent of the reverse merger preparations, we added to our administrative team a full-time CFO, an HR Manager and an Operations Management team along with the necessary support positions in payroll and accounting. Thisthis increase was done in the preparations for the merger and the following expansion.Other areas of expense increase were in the cost of vehicle operations of approximately $138,000 due to the leasingestablishment of four additional vehicles for patrolsthe required IT department and an east coast operations group (mid-2022) along with a new Human Resource department (2023). Professional services experienced an increase of approximately $167,000. A portion of this increase, $65,000, was due to the audit requirements of TransportUS Inc. prior to acquisition, the remainder due to the cost associated with a full year of quarterly filings that required professional review. Two other expense categories that experienced and increase over 2022 were Staff Training and Livescan fees. These two experienced a combined increase of approximately $180,000. This is due to the strategic decision to close a separate Training Company operating in fuel costs. The categoryMaryland and making it a division of General administrative expenses increased approximately $350,000. Approximately $100,000AGS. This resulted in all of the operating expenses of the closed company being added to AGS normal operations. Loan interest expense also saw an increase relatedof approximately $171,000 due to expenses no longer allocated toa full year of interest for the related companies as we did in 2021. Then the merger related expenses new to 2022 such as office rent in New York, marketing expenses, travel, shareholder buyout loan, expensealong with additional loan interest and Board of Director expenses totaling approximately $200,000. The remainder ofborrowing fees occurred in the increase were minor changes in other operational expenses.4th quarter.in the amountincurred a minor increase of $344,105 that occurred in 2022, but not in 2021 are non-operational expenses related specifically to the preparations for and after the reverse merger. These expenses are legal, compliance, accounting and merger related expenses that are treated as non-operational expense to prevent distortions of operational net income or loss. It is anticipated that there will be continued non-operational expenses from ongoing capital raise activities moving forward.$31,472.Income/(Loss) from Operations and Other IncomeCombining 2022The Company experience a significant net loss from operations of $74,003, with 2021 net$2,440,000 for the year ending December 31, 2023, compared to a minor loss of $100,349 for the year ending December 31,2022. The cause of this loss was the gross profit margin lost due to the end of the EPA contract and the expenses increase described above. Other income of $128,038 we have a total operational income of $54,035. Our operational structure that drives theses costs has excess capacityincreases over $2.8 million due to the Employee Retention Tax Credit received by AGS in anticipation of significant growth via new contracts or more specifically, company acquisitions. This allows additional revenue to go directly to our bottom line (see moving forward comments).June 2023.long termlong-term debt financing. During the year ended December 31, 2022,2023, operations generated net cash increasedecrease of approximately $258,000$70,076 while cash used from financinginvesting activities during the same period was approximately $1,160,000, the$192,981, with cash provided from financing activities was $686,815. The Company did not receive andany proceeds from long term debt.debt in 2023. The net decrease in cash for 2022 was approximately $902,000.$346,000.the first payment to shareholder from the shareholder buyout agreement signed in July 2022 in the amount of $686,990, as previously discussed. Other finance activities usage was building improvements of approximately $224,000, loan payments $180,000 and owner distributions before merger in the amount of $63,000.office remodel expenses.2022,2023, the Company had cash on hand of $1,226,600,$2,166,118, with total current assets of $3,207,750.$4,142,819.8 As a top 25 company in the industry, we can, We plan to be the company acquiring others and quickly doubling our revenues with one or two key acquisitions. After which we could see all the gross profit from those companies going directly to our bottom line. The returns would be quick and significant.fitscould fit our business model. Those include transportation, cyber security, private security, ammunition manufacturing, and surveillance to mention a few. The Company has already begun the process of our first equity raise with Think Equity to recover our expended working capital and position the Company for its first acquisition. We anticipate the equity raise to be completed in the second quarter along with our first acquisition.surveillance.● Both industries that AGSS currently operates in, aare growing industry.industries.● The security industry is somewhat recession proof. ●● The non-emergency transportation market is growing at an annual rate of over 7.5%. ● There are over 10,000 security companies operating in our market, with 50% available for acquisition. ● Our management team, Board of Directors and supporting equity professionals can get the job done. ● We have been and will continue to be a company that is very conservative with our resources and will use every possible dollar provide strength and good return to our investors. ● We are in it for the long haul. ● We make profits the old fashion way, hard work. 2022,2023, and 2021,2022, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 20222023, and 2021,2022, together with the related notes and the report of our independent registered public accounting firm, are set forth on the “F” pages of this report.9112022.2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2022,2023, our disclosure controls and procedures were not effective to satisfy the objectives for which they are intended due to a weakness in our internal control over financial reporting discussed below.The weakness identified by our management as of December 31, 2022, relates to the Company not having an audit committee.intended. The Company intends to appointappointed an independent audit committee duringJune 14, 2023.None.1012following the closingas of the Reverse Merger on December 9, 2022.31, 2023:Pursuant to the terms of the Merger, our sole officer and director, Lawrence Garcia, was appointed as President and Chief Executive Officer, was appointed as our Chief Operating Officer, Secretary and Treasurer, Michael Goossen as our Chief Financial Officer. In addition, in connection with the Merger, Douglas Anderson was appointed to serve as a director on December 7, 2022became ourare executive officers and directors upon completion of the Merger, and hold the positions set forth opposite their respective names, including shares held.Name Age Position Common
shares held Percentage
of Class(1) Age Position Common
shares held Percentage of
Class(1) Lawrence Garcia 50 Chairman of the Board, President and Chief Executive Officer
Chief Operating Officer, Chief Marketing Officer, Secretary, Treasurer and Director 80,578,125 86.26 % 51 Chairman of the Board, President and Chief Executive Officer
Chief Operating Officer, Chief Marketing Officer, Secretary, Treasurer and Director 82,078,125 86.47 % Michael Goossen, CPA 61 Chief Financial Officer 2,671,875 2.86 % Michael Goosen, CPA 62 Former Chief Financial Officer 2,671,875 2.81 % Douglas Anderson* 60 Director 3,515,625 3.76 % 61 Director 3,515,625 3.70 % Russel Honore’ 76 Director 562,500 .59 % (1) (1)Based on 93,417,30294,917,302 shares of common stock outstanding as of December 31, 20222023* *Appointed December 20222023
Our directors are appointed to hold office until the next meeting of our shareholders or until removed from office in accordance with our bylaws.
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Family Relationships
There are no family relationships between any of our directors or executive officers.
Our directors do not hold any directorships in other reporting companies and does not qualify as an “independent director” under the Rules of NASDAQ, Marketplace Rule 4200(a)(15).
To our knowledge, during the last ten years, none of our directors and executive officers (including those of our subsidiaries) have:
| (a) | had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. |
| (b) | been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. |
| (c) | been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. |
| (d) | been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. |
Director or Officer Involvement in Certain Legal Proceedings
To our knowledge, our directors and executive officers were not involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company is not subject to Section 15(d) of the Securities Exchange Act Exchange Act.
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Code of Ethics
A code of business conduct and ethics is a written standard designed to deter wrongdoing and to promote (a) honest and ethical conduct, (b) full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements, (c) compliance with applicable laws, rules and regulations, (d) the prompt reporting violation of the code and (e) accountability for adherence to the code. We are not currently subject to any law, rule or regulation requiring that we adopt a code of ethics; however, we intend to adopt one in the near future.
Board of Directors
All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified, or until their earlier death, resignation or removal. Officers are elected by and serve at the discretion of the board.
Our directors are reimbursed for expenses incurred by them in connection with attending board meetings and receive a monthly honorarium for serving on the board.
Lawrence Garcia, CEO and majority Shareholder is our only non-independent director.
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Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
| ● | the director is, or at any time during the past three years was, an employee of the Company; | |
| ● | the director or a family member of the director accepted any compensation from the Company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service); | |
| ● | a family member of the director is, or at any time during the past three years was, an executive officer of the Company; | |
| ● | the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the Company made, or from which the Company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions); | |
| ● | the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or | |
| ● | the director or a family member of the director is a current partner of the Company’s outside auditor, or at any time during the past three years was a partner or employee of the Company’s outside auditor, and who worked on the company’s audit. |
Compensation committee
The board of directors plans to establishestablished a compensation committee as required by Sarbanes-Oxley Act. The committee will make compensation recommendationrecommendations to the board.
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20222024 Equity Incentive Plan
Our Board of Directors and stockholders owning a majority of our outstanding shares plans to adopt an Equity Incentive Plan during 2023.2024. Details of the plan will be developed with the input of the Board of Directors along with the then established compensation committee.
Code of Ethics
We have not adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions, because of the small number of persons involved in the management of the Company.
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ITEM 11. EXECUTIVE COMPENSATION
Executive positions and salaries:
| Name and Position | Year | Salary ($) | Bonus ($) | Other Compensation ($) | Total ($) | Year | Salary ($) | Bonus ($) | Other Compensation ($) | Total ($) | |||||||||||||||||||||
| Lawrence Garcia - CEO | 2022 | 146,551 | - | 21,279 | 167,830 | 2023 | 188,351 | 50,000 | 21,279 | 259,630 | |||||||||||||||||||||
| 2021 | 129,190 | - | 19,789 | 148,979 | 2022 | 146,551 | - | 21,279 | 167,830 | ||||||||||||||||||||||
| Michael Goossen, CPA - CFO(1) | 2022 | 134,250 | - | 650 | 134,900 | ||||||||||||||||||||||||||
| Michael Goosen, CPA - Former CFO | 2023 | 150.000 | 20,000 | 1,038 | 171,038 | ||||||||||||||||||||||||||
| 2021 | 98,423 | - | - | 98,423 | 2022 | 134,250 | - | 650 | 134,900 | ||||||||||||||||||||||
Employment Agreements
Prior to merger dateAs of December 31, 2023, there are no employment agreements were in place. It is the intention of ownership to rely on the recommendation of the compensation committee appointed by the Board of Directors.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding equity awards held by our officers as of December 31, 2021.2023.
Long-Term Incentive Plans and Awards
There were no awards made to a named executive officer in fiscal 20222023 and 20212022 under any long-term incentive plan.
Director Compensation
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors.
Payments to Directors totaled $120,000 for the year ended December 31, 2023, and $35,000 for the year ended December 31, 2022, and $0 for the year ended December 31, 2021.2022.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. All share ownership figures include shares of our Common Stock issuable upon securities convertible or exchangeable into shares of our Common Stock within sixty (60) days of March 20, 20232024 which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.
| Name and Address | Beneficial Ownership | Percentage of Class(1) | ||||||
| Lawrence Garcia | 80,578,125 | 86,26 | % | |||||
| Michael Goossen, CPA | 2,671,875 | 2.86 | % | |||||
| Douglas Anderson* | 3,515,625 | 3.76 | % | |||||
| All officers/directors as a group (3 people) | 86,765,625 | 92.88 | % | |||||
| (1) | Based on 94,471,302 shares of common stock outstanding as of March 20, | ||
| * | Appointed on December 09, 2022. |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
There are no related party transactions as of the fiscal year ended December 31,2022.31, 2023
Independence of the Board of Directors
For a director to be “independent” under these standards, the Board must affirmatively determine that the director has no material relationship with us, either directly or as a partner, shareholder, or officer of an organization that has a relationship with us. Applying corporate governance standards, and all other applicable laws, rules and regulations, the Board of Directors has determined that one of our directors is independent. This does not constitute an independent board of directors.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
We were billed by BF Borgers CPA PC, our independent public accountants for the following professional services it performed for us during the fiscal year ended December 31, 2022,2023, and 2021,2022, as set forth in the table below:
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Audit Fees | $ | 59,400 | $ | 47,200 | $ | 115,500 | $ | 59,400 | ||||||||
| Audit Related Fees | $ | $ | $ | $ | ||||||||||||
| Tax Fees | $ | $ | $ | $ | ||||||||||||
| All other fees | $ | 38,500 | $ | 2,700 | $ | 79,500 | $ | 44,000 | ||||||||
| TOTAL FEES | $ | 97,900 | $ | 49,900 | $ | 195,000 | $ | 103,400 | ||||||||
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Audit Fees — This category includes the audit of our annual financial statements and services that are normally provided by the independent auditors in connection with engagements for those fiscal years.
Audit-Related Fees — This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees”.
Tax Fees — This category consists of professional services rendered by the Company’s independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees — This category consists of fees for other miscellaneous items such as financial statements reviews and quarterly filing reviews.
Pre-Approval Policies and Procedures
All of the services rendered to us by our independent registered public accountants were pre-approved by the Board.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this report:
Financial Statements
The following financial statements of Ameriguard Security Services, Inc. and Report of Independent Registered Public Accounting Firm are presented in the “F” pages of this report:
(b) Exhibits
See the Exhibit Index following the signature page of this report, which Index is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AMERIGUARD SECURITY SERVICES, INC. | |||
| Date: | By: | /s/ Lawrence Garcia | |
| Name: | Lawrence Garcia | ||
| Title: | Chief Executive Officer | ||
| (principal executive officer) | |||
| Date: | By: | /s/ | |
| Name: | |||
| Title: | Chief Financial Officer | ||
| (principal financial officer and principal accounting officer) | |||
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AMERIGUARD SECURITY SERVICES, INC.
Exhibit Index to Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 20222023
| * | Exhibits filed herewith. |
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Index to Financial Statements
F-1
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Ameriguard Security Services, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Ameriguard Security Services, Inc. as of December 31, 20222023 and 2021,2022, the related statements of operations, stockholders’stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20222023 and 2021,2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
We determined that there are no critical audit matters.
/S/ BF Borgers CPA PC (PCAOB ID 5041)
We have served as the Company’sCompany's auditor since 2021
Lakewood, CO
March 30, 2023 April 4, 2024
F-2
AmeriGuard Security Services, Inc.
CONSOLIDATED BALANCE SHEETS
| December 31, | December 31, | December 31, | December 31, | |||||||||||||
| 2022 | 2021 | 2023 | 2022 | |||||||||||||
| Assets | ||||||||||||||||
| Current Assets | ||||||||||||||||
| Cash | $ | 1,227,654 | $ | 2,129,801 | $ | 2,166,118 | $ | 1,751,489 | ||||||||
| Accounts receivable, net (note 1) | 1,869,268 | 2,215,197 | ||||||||||||||
| Prepaid insurance | 110,829 | 107,884 | ||||||||||||||
| Related Party Receivable (note 3) | - | - | ||||||||||||||
| Accounts receivable, net (note 2) | 1,583,379 | 2,030,434 | ||||||||||||||
| Current Portion Note Receivable (note 3) | 9,300 | 9,300 | ||||||||||||||
| Prepaid Expenses | 327,147 | 185,501 | ||||||||||||||
| Deposits | 61,575 | 38,000 | ||||||||||||||
| Related Party Receivable (note 4) | - | - | ||||||||||||||
| Total Current Assets | 3,207,751 | 4,452,882 | 4,147,519 | 4,014,724 | ||||||||||||
| Other Non-Current Assets | ||||||||||||||||
| Fixed assets, net depreciation (note 4) | 298,806 | 132,802 | ||||||||||||||
| Fixed assets, net depreciation (note 5) | 574,114 | 491,713 | ||||||||||||||
| Note Receivable (note 3) | 340,700 | 340,700 | ||||||||||||||
| Operating Lease | 302,695 | - | 1,005,633 | 302,695 | ||||||||||||
| Total Non-Current Assets | 601,501 | 132,802 | 1,920,447 | 1,135,108 | ||||||||||||
| Total Assets | $ | 3,809,252 | $ | 4,585,684 | $ | 6,067,966 | $ | 5,149,832 | ||||||||
| Liabilities | ||||||||||||||||
| Current Liabilities | ||||||||||||||||
| Accounts payable | $ | 761,516 | $ | 418,342 | $ | 449,921 | $ | 824,098 | ||||||||
| Accrued Interest Due (note 6) | 49,035 | - | ||||||||||||||
| Accrued Interest Due (note 9) | - | 49,035 | ||||||||||||||
| Accrued Payroll | 737,143 | 657,741 | 626,694 | 737,143 | ||||||||||||
| Payroll liability - Pension (note 5) | 453,965 | 616,579 | ||||||||||||||
| Current portion of notes payable (note 6) | 719,563 | 127,615 | ||||||||||||||
| Deferred Revenue (note 7) | 722,327 | 887,327 | ||||||||||||||
| Payroll liability - Pension (note 8) | 507,793 | 466,075 | ||||||||||||||
| Current portion of notes payable (note 9) | 2,160,347 | 719,563 | ||||||||||||||
| Total Current Liabilities | 2,721,222 | 1,820,277 | 4,467,082 | 3,683,241 | ||||||||||||
| Long Term Liabilities | ||||||||||||||||
| Long term portion of notes payable (note 6) | 2,782,784 | 780,845 | ||||||||||||||
| Long term portion of notes payable (note 9) | 2,034,493 | 2,782,784 | ||||||||||||||
| Operating Lease | 294,387 | - | 1,060,015 | 294,387 | ||||||||||||
| Total Liabilities | 5,798,393 | 2,601,122 | 7,561,590 | 6,760,412 | ||||||||||||
| Stockholders’ equity | ||||||||||||||||
| Common stock, $ par value, shares issued and outstanding at December 31, 2022 and 2021 (Note 7) | 158,346 | 158,346 | ||||||||||||||
| Common stock, $ par value, shares issued and outstanding at December 31, 2023 and 2022 (Note 7) | 159,846 | 159,346 | ||||||||||||||
| Retained earnings/(defecit) | (2,147,486 | ) | 1,826,216 | (1,653,470 | ) | (1,769,926 | ) | |||||||||
| Total Stockholders’ Equity | (1,989,140 | ) | 1,984,562 | (1,493,624 | ) | (1,610,580 | ) | |||||||||
| Total Liabilities and Stockholders’ Equity | $ | 3,809,253 | $ | 4,585,684 | $ | 6,067,966 | $ | 5,149,832 | ||||||||
See accompanying notes to financial statements
F-3
AmeriGuard Security Services, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Revenue | ||||||||
| Security Services | $ | 24,643,096 | $ | 22,418,328 | ||||
| Other related income | 304,305 | 24,185 | ||||||
| Total Revenue | 24,947,401 | 22,442,513 | ||||||
| Cost of Services | ||||||||
| Salaries and related taxes | 15,030,738 | 13,873,241 | ||||||
| Employee benefits | 3,052,774 | 2,915,322 | ||||||
| Sub-Contractor payments | 3,467,391 | 3,433,959 | ||||||
| Guard training | 202,826 | 222,298 | ||||||
| Vehicles and equipment expenses | 194,889 | 184,176 | ||||||
| Total Cost of Services | 21,948,618 | 20,628,996 | ||||||
| Gross Margin | 2,998,783 | 1,813,517 | ||||||
| Operating Expenses | ||||||||
| Salaries, payroll taxes and benefits | 1,161,982 | 365,433 | ||||||
| Vehicle expense | 433,424 | 295,054 | ||||||
| Professional services | 361,314 | 318,442 | ||||||
| Cellular services | 106,382 | 112,140 | ||||||
| General liability insurance | 87,119 | 111,287 | ||||||
| Advertising and marketing | 128,544 | 77,349 | ||||||
| General and administrative expenses | 645,268 | 294,062 | ||||||
| Loan interest | 105,826 | 59,439 | ||||||
| Depreciation expense | 42,927 | 52,273 | ||||||
| Total Operating Expenses | 3,072,786 | 1,685,479 | ||||||
| Net Income/(Loss) from Operations | (74,003 | ) | 128,038 | |||||
| Other Income (Expenses) | ||||||||
| Other Income | - | - | ||||||
| Other (Expense) | (344,105 | ) | - | |||||
| Total Other Income | (344,105 | ) | - | |||||
| Net Income/(loss) before Income Taxes | (418,108 | ) | 128,038 | |||||
| Income tax expense | 10,350 | 33,923 | ||||||
| Net Income/(loss) | $ | (428,458 | ) | $ | 94,115 | |||
| Net Income/(loss) per Common Share - Basic and Diluted | $ | (0.0046 | ) | $ | 0.0010 | |||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | 93,417,302 | 93,417,302 | ||||||
For the Years Ending
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Services | $ | 24,327,153 | $ | 28,957,220 | ||||
| Discounts and allowances | (99,004 | ) | (10,534 | ) | ||||
| Other operational income | 122,469 | 192,717 | ||||||
| Total Revenue | 24,350,618 | 29,139,403 | ||||||
| Cost of Services | ||||||||
| Salaries and related taxes | 16,170,868 | 17,026,802 | ||||||
| Employee benefits | 3,266,243 | 3,410,659 | ||||||
| Sub-Contractor payments | 1,477,908 | 3,683,379 | ||||||
| Training and direct expenses | 94,516 | 229,220 | ||||||
| Vehicles and equipment expenses | 1,298,959 | 1,608,944 | ||||||
| Total Cost of Services | 22,308,494 | 25,959,005 | ||||||
| Gross Margin | 2,042,124 | 3,180,399 | ||||||
| Operating Expenses | ||||||||
| Salaries, payroll taxes and benefits | 1,604,520 | 1,161,982 | ||||||
| Vehicle expense | 418,537 | 461,498 | ||||||
| Professional services | 531,317 | 372,756 | ||||||
| Communiction services | 160,621 | 130,239 | ||||||
| General liability insurance | 160,431 | 120,485 | ||||||
| Advertising and marketing | 144,747 | 137,175 | ||||||
| Staff training | 185,004 | 75,802 | ||||||
| Livescan services fees | 125,815 | 56,261 | ||||||
| Licenses and permits | 108,749 | 43,128 | ||||||
| General and administrative expenses | 646,509 | 526,580 | ||||||
| Loan interest | 277,205 | 105,826 | ||||||
| Depreciation expense | 110,581 | 89,016 | ||||||
| Total Operating Expenses | 4,474,036 | 3,280,748 | ||||||
| Net Income/(Loss) from Operations | (2,431,912 | ) | (100,349 | ) | ||||
| Other Income (Expenses) | ||||||||
| Other Income | 3,352,426 | 461,423 | ||||||
| Other (Expense) | (775,115 | ) | (743,643 | ) | ||||
| Total Other Income/(Expense) | 2,577,311 | (282,220 | ) | |||||
| Net Income/(loss) before Income Taxes | 145,399 | (382,569 | ) | |||||
| Income tax expense | 22,763 | 10,350 | ||||||
| Net Income/(loss) | $ | 122,636 | $ | (392,919 | ) | |||
| Net Income/(loss) per Common Share - Basic and Diluted | $ | $ | ) | |||||
| Weighted Average Number of Common Shares Outstanding - Basic and Diluted | ||||||||
See accompanying notes to financial statements
F-4
AmeriGuard Security Services, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDED December 31, 20212022 and 20222023
| Common Stock | Additional Paid-In | Stockholders’ | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Equity | Equity | ||||||||||||||||
| Balance, December 31, 2021 | 93,417,302 | $ | 158,346 | $ | 9,397,045 | $ | (7,570,828 | ) | $ | 1,984,562 | ||||||||||
| TransportUS Inc. Stockholders Equity (note 10) | 1,000 | 1,000 | 357,260 | 358,260 | ||||||||||||||||
| Owner draws (pre-merger) | - | - | - | (78,063 | ) | (78,063 | ) | |||||||||||||
| Shareholder buyout (note 9) | - | - | (3,384,950 | ) | - | (3,384,950 | ) | |||||||||||||
| Retained Deficit of merger with related entity | - | - | - | (97,470 | ) | (97,470 | ) | |||||||||||||
| Equity purchase of TransportUS Inc, (note 10) | 1,500,000 | 1,500 | (1,500 | ) | - | - | ||||||||||||||
| TransportUS Inc. Shares retired | (1,000 | ) | (1,000 | ) | 1,000 | - | - | |||||||||||||
| Net (Loss) for year ended December 31, 2022 | - | - | - | (392,919 | ) | (392,919 | ) | |||||||||||||
| Balance, December 31, 2022 | 94,917,302 | $ | 159,846 | $ | 6,011,595 | $ | (7,782,021 | ) | $ | (1,610,580 | ) | |||||||||
| Owner draws (pre-merger) | (5,679 | ) | (5,679 | ) | ||||||||||||||||
| Net Income for year ended December 31, 2023 | - | - | 122,636 | 122,636 | ||||||||||||||||
| Balance, December 31, 2023 | 94,917,302 | $ | 159,846 | $ | 6,011,595 | $ | (7,665,064 | ) | $ | (1,493,624 | ) | |||||||||
| Common Stock | Preferred Stock | Additional Paid-In | Stockholders’ | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Equity | Equity | ||||||||||||||||||||||
| Balance, December 31, 2020 | 2,743,302 | $ | 69,346 | 675,000 | $ | 10,000 | $ | 9,976,045 | $ | (7,191,705 | ) | $ | 2,863,685 | |||||||||||||||
| Owner draws (pre-merger) | - | - | (473,238 | ) | $ | (473,238 | ) | |||||||||||||||||||||
| Equity Merger | 89,999,000 | 89,000 | (10,000 | ) | (579,000 | ) | $ | (500,000 | ) | |||||||||||||||||||
| Cancelation and conversion of preferred stock | 675,000 | (675,000 | ) | |||||||||||||||||||||||||
| Net Income for year ended December 31, 2021 | 94,115 | $ | 94,115 | |||||||||||||||||||||||||
| Balance, December 31, 2021 | 93,417,302 | 158,346 | - | - | $ | 9,397,045 | $ | (7,570,828 | ) | $ | 1,984,562 | |||||||||||||||||
| Owner draws (pre-merger) | $ | (62,824 | ) | $ | (62,824 | ) | ||||||||||||||||||||||
| Shareholder buyout | (3,384,950 | ) | (3,384,950 | ) | ||||||||||||||||||||||||
| Retained Deficit of merger with related entity | (97,470 | ) | $ | (97,470 | ) | |||||||||||||||||||||||
| Net (Loss) for year ended December 31, 2022 | - | - | (428,458 | ) | (428,458 | ) | ||||||||||||||||||||||
| Balance, December 31, 2022 | 93,417,302 | $ | 158,346 | - | $ | - | $ | 6,012,095 | $ | (8,159,580 | ) | $ | (1,989,140 | ) | ||||||||||||||
See accompanying notes to financial statements
F-5
AmeriGuard Security Services, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Years Ended | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income/(Loss) | $ | (428,458 | ) | $ | 94,115 | |||
| Adjustment to reconcile net loss from operations: | ||||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Accounts receivable, net | 345,929 | (23,372 | ) | |||||
| Prepaid insurance | (2,945 | ) | (32,949 | ) | ||||
| Depreciation | 42,927 | 52,273 | ||||||
| Accounts payable | 343,173 | 33,742 | ||||||
| Accrued Interest | 49,035 | - | ||||||
| Accrued Payroll | 79,402 | 75,693 | ||||||
| Payroll liability - Pension | (162,614 | ) | 77,237 | |||||
| Net Cash (Used)/provided in Operating Activities | 266,449 | 276,739 | ||||||
| Cash Flows Used from Investing Activities | ||||||||
| Purchase of fixed assets | (6,043 | ) | (24,552 | ) | ||||
| Building improvements | (224,132 | ) | - | |||||
| Operating lease liability | (79,358 | ) | - | |||||
| Purchase of Shell Corporations - AGSS | - | (500,000 | ) | |||||
| Payment for Shareholder buyout | (686,990.00 | ) | - | |||||
| Loan principle payments | (180,298 | ) | (227,097 | ) | ||||
| Owner distributions | (62,824 | ) | (473,238 | ) | ||||
| Net Cash Used by Investing Activities | (1,239,644 | ) | (1,224,887 | ) | ||||
| Cash Provided from Financing Activities | ||||||||
| Secure Transportation vehicle loan | - | 21,500 | ||||||
| Operating lease asset | 71,049 | - | ||||||
| Net Cash Provided by Financing Activities | 71,049 | 21,500 | ||||||
| Net Increase (Decrease) in Cash | (902,147 | ) | (926,648 | ) | ||||
| Cash at Beginning of Period | 2,129,801 | 3,056,449 | ||||||
| Cash at End of Period | $ | 1,227,654 | $ | 2,129,801 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Income Taxes Paid | $ | 10,350 | $ | 33,923 | ||||
| Interest Paid | $ | 105,826 | $ | 59,439 | ||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Operating leases - right of use asset | $ | 302,695 | ||||||
| Operating leases - lease liability | $ | 294,387 | ||||||
For the Years Ending
| December 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Income/(Loss) | $ | 122,636 | $ | (392,919 | ) | |||
| Adjustment to reconcile net loss from operations: | ||||||||
| Changes in Operating Assets and Liabilities | ||||||||
| Accounts receivable, net | 447,053 | 866,972 | ||||||
| Prepaid insurance | (141,647 | ) | 46,039 | |||||
| Deposits | (23,575 | ) | ||||||
| Accounts payable | (374,207 | ) | 286,903 | |||||
| Accrued Interest | (49,035 | ) | 49,035 | |||||
| Accrued Payroll | (110,449 | ) | 79,402 | |||||
| Deferred revenue | (165,000 | ) | (200,000 | ) | ||||
| Payroll liability - Pension | 41,717 | (198,703 | ) | |||||
| Depreciation | 110,581 | 89,016 | ||||||
| Operating lease liability | (702,937 | ) | (79,358 | ) | ||||
| Operating lease asset | 765,658 | 71,049 | ||||||
| Net Cash (Used)/provided in Operating Activities | (79,205 | ) | 617,436 | |||||
| Cash Flows (Used)/Provided from Investing Activities | ||||||||
| Purchase of fixed assets, net retirements | (142,980 | ) | (66,956 | ) | ||||
| Building improvements | (50,001 | ) | (224,132 | ) | ||||
| Net Cash Used by Investing Activities | (192,981 | ) | (291,088 | ) | ||||
| Cash (Used)/Provided from Financing Activities | ||||||||
| Note Receivable | - | 348,840 | ||||||
| Financed Capital | 766,667 | |||||||
| Payment for Shareholder buyout | (686,990 | ) | ||||||
| Loan principle payments | (74,174 | ) | (256,308 | ) | ||||
| Common stock retired from merger | (1,000 | ) | ||||||
| Owner distributions (prior to merger) | (4,678 | ) | (78,063 | ) | ||||
| Net Cash Provided by Financing Activities | 686,815 | (672,521 | ) | |||||
| Net Increase (Decrease) in Cash | 414,629 | (346,173 | ) | |||||
| Cash at Beginning of Period | 1,751,489 | 2,097,662 | ||||||
| Cash at End of Period | $ | 2,166,118 | $ | 1,751,489 | ||||
| Supplemental Cash Flow Information: | ||||||||
| Income Taxes Paid | $ | 22,763 | ||||||
| Interest Paid | $ | 277,205 | ||||||
| Supplemental disclosure of non-cash financing activities: | ||||||||
| Shareholder Loan | $ | 2,697,960 | ||||||
| Operating leases - right of use asset | $ | 1,005,633 | ||||||
| Operating leases - lease liability | $ | 1,060,015 | ||||||
See accompanying notes to financial statements
F-6
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
AmeriGuard Security Services, Inc. (the Company)(AGS), was incorporated on November 14, 2002, with an S-Corp tax election. The corporation was incorporated with the issuance of shares of no-par value stock held by Lawrence Garcia, President and CEO with shares and Lillian Flores, VP of Operations with shares. The CompanyAGS provides armed guard services as a federal contractor with licenses in 5 states and provides commercial guard services in California.
On July 7, 2021, the Company,AGS, entered into an agreement to gain 100% control of Health Revenue Assurance Holdings, Inc (HRAA) a public corporation, incorporated in Nevada, by the purchase of shares of Preferred A-1 Stock from the seller, Custodian Ventures LLC. The purchase of HRAA allowed the Company to begin plans to consummate a reverse merger with HRAA, becoming a wholly owned subsidiary of a public company. In March of 2022, a Certificate of Amendment was filed with the Nevada Secretary of State, changing the name of HRAA, to Ameriguard Security Services, Inc. (AGSS). Shortly thereafter, a stock name and ticker change report was filed with the SEC and the stock ticker of HRAA was changed to AGSS.
On December 9, 2022, the CompanyAGS executed the reverse merger agreement and became the subsidiary of AGSS.AGSS (the Company). From that point forward, the financial statement filings will be the consolidation of Ameriguard Security Services, Inc, a Nevada company with Ameriguard Security Services, Inc. a California company.
On October 20, 2023, the Company executed a share purchase agreement to acquire TransportUS Inc. TransportUS, Inc. was incorporated on October 24, 2018, with an S-Corp tax election. The corporation was incorporated with the issuance of 1,000 shares with no-par par value stock held by Lawrence Garcia, President and CEO. TransportUS Inc. provides human transportation services as a federal contractor, currently providing services in the state of California.
The Company’s accounting year end is December 31.
Basis of Presentation
These consolidating financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles. The financial statements and notes include TransportUS Inc.’s financial results for 2022 and 2023.
Risks and Uncertainties
The risks and uncertainties described below may not be the only ones we are or may face in the future. If any of the following do occur, our business, financial condition or results of operations could be materially adversely affected.
The company receives over 9087%% of its total revenue from fourfive Federal contracts as described in Note 912 below. These contracts have specific terms, typically five years with the opportunity for extension, but there are no assurances they will be extended. Although we have had several extended in the past, there is no guarantee this will again happened in the future. However, there are significant direct expenses for each contract that also are removed from operations at the end of a contract. As a result, the revenue lost from a completed contract does not affect the bottom-line profits in an amount equal to the revenue lost. The actual net income impact depends on the contract.
The process required to acquire a government contract takes several months to complete prior to delivery of the proposal to the contracting agency. Due to the time span required to prepare a proposal and winingwinning the contract is not guaranteed, the company maintains a department of individuals who monitor and write proposals for all government contracts that become open for bid on a continuing basis. It is important to the company that new contracts are acquired consistently to maintain and grow annual revenue.
Other risks to operations consist of State and Federal regulations, staffing shortages, the ongoing impact of COVID, accelerating inflation, and overall business environment issues we cannot foresee.
F-7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, along with the collectability of some receivables from customers.
Cash and Cash Equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On December 31, 2022,2023, and December 31, 2021,2022, the Company had cash and cash equivalents totaling $1,227,6542,166,118 and $2,129,8011,751,489 respectively.
Accounts Receivable
We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and is charged to other bad debt expense. We calculate this allowance based on our history of write-offs, the level of past-due accounts based on the contractual terms of the receivables, and our relationships with, and the economic status of, our customers. With over ninetyeighty-seven percent of year end accounts receivable balance from Federal contracts that require payment, and the uncollectable amount historically has been less than 1%. As of December 31, 2022,2023, and 2021,2022, an allowance for estimated uncollectible accounts was determined to be unnecessary.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment is retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful life for Machinery and Equipment, and Vehicles is 5 years, with Leasehold improvements useful life is 1015 Years.
Operating Leases
In February 2016, FASB ASU No. 2016-02 established ASC Topic 842, Leases, which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. Effective December 31, 2022, we have implemented ASU No. 2016-02 and booked the operating lease asset and the related liability.
We have leased vehicles that are classified as operating leases per the guidelines. The capital lease value as calculated following FASB guidelines is presented as a non-current asset on the balance sheet. As of December 31, 2023, the value is calculated to be $1,005,633, and as of December 31, 2022, the value was $302,695. For the Operating Lease liability, the amount of $1,060,015 was calculated as of December 31, 2023, and was $294,387 as of December 31, 2022. The significant increase in both the Operating Lease asset and liability is due to the calculation formula and acquisition of TransportUS Inc. A part of the formula used to calculate the asset and liability is the annual discount rate. The discount rate used for the 2023 calculation increased 184% over 2022, due to the increase in the treasury lending rate. The increase in the discount rate and the addition of 5 leased vehicles from TransportUS Inc. directly caused the increased lease asset and related liability.
F-8
Net income/(loss) per common share is computed by dividing net income or loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share”. Basic earnings/(loss) per common share (“EPS”) calculations are determined by dividing net income/(loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
F-8
Revenue Recognition
We recognize revenue when the Invoice for contracted services is issued as stipulated by the contract. Other services provided are recognized at the time the service is provided. Ninety eight percent of revenues are billed monthly and recognized in the month the services were provided. Refunds and returns, which are minimal, are recorded as a reduction of revenue. The Company has notnot recorded a reserve for returns on December 31, 2022,2023, or 20212022 since it does not believe such returns will be material.
Fair Value of Financial Instruments
The Company applies the accounting guidance under Financial Accounting Standards Board (“FASB”) ASC 820-10, “Fair Value Measurements”, as well as certain related FASB staff positions. This guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.
The guidance also establishes a fair value hierarchy for measurements of fair value as follows:
| ● | Level 1 - quoted market prices in active markets for identical assets or liabilities. | |
| ● | Level 2 - inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3 - unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
The carrying amount of the Company’s financial instruments approximates their fair value as of December 31, 20212022, and December 31, 2022,2023, due to the short-term nature of these instruments.
NOTE 3 – NOTE RECEIVABLE
On December 31, 2022, TransportUS held a receivable from a related company, AmeriGuard Security Systems, Inc (AmeriGuard) in the amount of $350,000. The relationship with AmeriGuard relates to the contract the Company holds with the Veteran’s Administration in Long Beach, California. The contract required this relationship with AmeriGuard, at the time of award. Funds from the contract were shared with AmeriGuard, during the first 3.5 years of operations and ended April 2022. As of December 31, 2022, the receivable was adjusted to $350,000 and a note payable from AmeriGuard was executed. The $350,000 note is amortized over 20 years, with a balloon payment December 31, 2032. The interest rate is 6%, with the monthly payment of $2,500. For 2023, the payments were interest only in the amount of $1,750. The note receivable is presented with the current portion of $9,300, and long-term portion of $340,700 For the two years ending December 31, 2023, and 2022.
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NOTE 34 –RELATED PARTY RECEIVABLE
On July 7, 2021, the company hasAGS entered into an agreement to purchase 100% of the Preferred A-1 Stock of Health Revenue Assurance Holdings, Inc. a SEC registered company for $. In March 2022, Health Revenue Assurance Holdings, Inc. name was changed to Ameriguard Security Services Inc. (AGSS). On December 9, 2022, we signed the definitive merger agreement initiating a reverse merger with AGSS, resulting in the CompanyAGS becoming a 100% owned subsidiary of AGSS. Prior to the merger, the CompanyAGS funded the operational expenses of AGSS and treated these expenses as related party expenses. These expenses wewere eliminated when the two companies were consolidated for the financial statement presentation.
The receivable balancesbalance on December 31, 2023, and 2022 and 2021 werewas $.
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NOTE 45 – FIXED ASSETS
Fixed assets consist of the following on December 31, 2022,2023, and 2021:2022:
| Schedule of Fixed assets | ||||||||||||||||
| Schedule of fixed assets | ||||||||||||||||
| 2021 | 2020 | 2023 | 2022 | |||||||||||||
| Leasehold Improvements | 224,132 | - | 274,133 | 224,132 | ||||||||||||
| Machinery and Equipment | 278,551 | 246,974 | 290,892 | 278,551 | ||||||||||||
| Vehicles | 110,274 | 131,775 | 635,172 | 546,371 | ||||||||||||
| Total Fixed Assets | 612,957 | 378,749 | 1,200,197 | 1,049,054 | ||||||||||||
| Accumulated Depreciation | (314,151 | ) | (245,947 | ) | (626,083 | ) | (557,341 | ) | ||||||||
| Fixed Assets, Net | $ | 298,806 | $ | 132,802 | $ | 574,114 | $ | 491,713 | ||||||||
NOTE 57 – DEFERRED REVENUE
During the first three years of operations of TransportUS Inc, Secure Transportation, Inc. (Secure), a subcontractor, advanced funds to TransportUS Inc. with the expectation of future services provided for Secure. This arrangement ended, December 31, 2021, after Secure had advanced $1,087,327. The agreement moving forward required TransportUS to provide services in the amount of $15,000 per month or return funds to secure in that same amount. During 2023 and 2022, TransportUS has returned funds in the amount of $365,000, leaving a balance of $722,327 as of December 31, 2023.
NOTE 8 – PAYROLL LIABILITY – PENSION
The company offers various pension plans to employee groups based on location of employment. Corporate office employees and guards have an option to participate in a 401K sponsored by the company with a matching program up to 5% of employee salary. Federal contracts have union agreements that define the pension calculation and due dates. It is the responsibility of the company to calculate the pension benefit amount each month and contribute the amount due to the plan designated. The pension balances due on December 31, 2022,2023, and 20212022 for all plans waswere $453,965507,793 and $616,579466,075 respectively.
NOTE 69 –NOTES PAYABLE
In June 2020, AmeriGuard Security Services, Inc. received an SBA Loan through Fresno First Bank in the amount of $1,080,000 that was used to close out thea Citibank loan in the amount of $312,339 with the remaining balance after expenses held in reserve. The SBA loan is a 10-year loan with monthly principal and interest payments. Interest rate is variable at prime rate plus 2.75%, adjusted every calendar quarter. Interest rate on December 31, 2022,2023, and 20212022 was 911%% and 4.019%% respectively. Balance remaining on the SBA loan was $804,387730,213 and $888,845804,387 as of December 31, 2023, and 2022 and 2021 respectively.
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In January 2020, the Company entered into a financing agreement with Master Security Company for the purchase of vehicles, guns, and guard equipment for the National Institute of Health USEPA contract which began May 2020. The principal financed was $150,000, with interest of 4% for a term of 21 months. Resulting in a monthly principal and interest payment of $7,406. Balance remaining in the amount of $0 and $7,729 as of December 31, 2022, and 2021 respectively.
In December 2021, the Company entered into a financing agreement with Secure Transportation Inc. for the purchase of three used vehicles in the amount of $21,500. Note requires 12 equal payments of $1,900 with a calculated interest rates of 5% with the first payment December 15, 2021. Balance remaining in the amount of $0 and $19,615 as of December 31, 2022, and 2021 respectively.
On July 7, 2022, the Company entered into a buyout agreement with a shareholder Lillian Flores. The total buyout amount was $3,384,950 representing 4545%% of the calculated business value as of December 31, 2020. Following the initial payment of $686,990, the company agreed to make 4 equal installments of principal and interest of $739,508 each December 31, starting 2023. Interest is calculated at a fixed rate of 3.1103.110%% compounded semi-annually. The company has accrued interest on December 31, 2022, of $49,035. Balance remaining in the amount of $2,6972,697,960. All interest due was paid December 28, 2023, resulting in a balance of $0 on December 31, 2023. The Company requested a deferral of the payment of principal due December 31, 2023, and received a deferral from Mrs. Flores. See subsequent events Note 15 for details.
On December 20, 2023, the company entered into a short-term loan agreement collateralized by accounts receivable from TVT Capital LLC. The agreement encumbered $1,199,200 of receivables resulting in a note payable of $800,000; the repayment term requires $49,967 per week for 24 weeks. As of December 31, 2023, the balance of $766,667 was outstanding, and is included as current portion of notes payable.
The following schedule details the loans active as of December 31, 2022,2023, and 2021:2022:
| Schedule of the loan active | ||||||||
| 2022 | 2021 | |||||||
| Current Portion: | ||||||||
| Notes and loans payable | $ | 719,563 | $ | 127,615 | ||||
| Total Current Portion | 719,563 | 127,615 | ||||||
| Long term Portion: | ||||||||
| Notes and loans payable | 2,782,784 | 780,845 | ||||||
| Total Long-term Portion | 2,782,784 | 780,845 | ||||||
| $ | 3,502,347 | $ | 908,460 | |||||
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| Schedule of the loan active | ||||||||
| 2023 | 2022 | |||||||
| Current Portion: | ||||||||
| Notes and loans payable | $ | 2,160,347 | $ | 719,563 | ||||
| Long term Portion: | ||||||||
| Notes and loans payable | 2,034,493 | 2,782,784 | ||||||
| Total Notes Payable | $ | 4,194,840 | $ | 2,782,784 | ||||
NOTE 710 – STOCKHOLDERS’ EQUITY
On December 9, 2022, the CompanyAGS executed a reverse merger agreement with AGSS resulting in significant adjustments to the equity section of both companies. The result of the merger was AGSS became the sole owner of the Company.AGS. Although the merger is dated December 9, 2022, for financial statement presentation purposes, we have presented the Equity Section as if the merger occurred in 2021.
The first significant impact on stockholders’ equity was the issuance of AGSS shares to the shareholders of Ameriguard Security Services, Inc (the Company)Inc., in exchange for shares of the Company,AGS, adding a net increase in common shares outstanding of . Next was the cancelation and conversion of series A-1 preferred shares held by AGSS on December 31, 2020. The final result in the total number of shares outstanding is .
On October 20, 2023, the Company executed a share purchase agreement to acquire a related company owned by Lawrence Garcia, CEO. Although the purchase agreement is dated October 2023, for financial statement presentation purposes, we have presented the purchase as if it occurred in 2022. The next part of stockholder’sresult is the purchase transaction impact on the equity impacted was Additional Paid-in Capital. The impact was a reduction of Paid-in Capital of $579,000. This reduction was caused by an $89,999 impact of issuing new shares, a $10,000 impact form the cancelation of preferred shares and finally the $500,000 costsection of the Company’s purchaseCompany is shown in detail in the 2022 section of AGSS, formally Heath Revenue Assurance Holdings, Inc.the report.
There were two other transactions that impacted stockholders’ equity that occurred to the Company’s equity section relating to owner draws and the merger with a related company. As a part of the normal activity of the privately held Company, an S-Corp, shareholders were distributed funds accounted for as Owner Draws. The owner draw accounts were used primarily for taxes paid by the shareholders due to profits of the S-Corp being transferred to their personal returns along with some personal expenses and personal cash needs. For 2021, there was approximately $105,000 posted as Owner drawdraws from historical balances of related party receivables. As part of the preparation for the merger, these inter-company balances were removed through the owner draw accounts. Total owner draw amounts were $473,2385,679 and $62,82478,063 for December 31, 2023, and 2022 and 2021 respectively.
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NOTE 811 – COMMITMENTS AND CONTINGENCIES
The company has a multiple vehicle lease agreement with Enterprise Leasing. As of December 31, 2022,2023, the company had 1923 vehicles under lease. The lease agreement includes maintenance services along physical damage insurance.and tracking. The termterms of the lease agreement variesvary based on the date the vehicle werewas leased and the respective terms for each vehicle. The master lease is updated annually and requires annual internal financial reports and company tax return.
NOTE 912 – CONCENTRATION OF SALES
The company generated approximately $24,600,00024,354,000 and $22,100.00029,139,000 in guard service revenue for the years 20222023 and 20212022 respectively. Of the total guard service revenue, approximately 9287%% was earned from four federal contracts operated by the company. The contracts and their respective terms are as follows:
| ● | Social Security Administration, NSC | - | September 2022 through September 2027 Annual Revenue of approx. $3M | ||
| ● | Social security Administration, SSC | - | June 2022 through June 2027 Annual Revenue of approx. $5M | ||
| ● | Social Security Administration, WBDOC | - | June 2021 through July 2026 Annual Revenue of approx. $5.8M | ||
| ● | National Institute of Health- EPA | - | May 2020 through March Annual Revenue of approx. $2.8M | ||
| ● | Veterans Administration – Long Beach CA | - | Feb 2019 through March 2024 Annual Revenue of approx. $4.4M |
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NOTE 1013 – LITIGATION AND CLAIMS
As of December 31, 2022,2023, there was oneare three employment issueissues pending. The issue involves aissues revolve around terminated employeeemployees alleging discriminationthe Company has failed to pay minimum wages, sick pay wages, meal period violations, rest period violations wage statement violations and wrongful termination.violation of the unfair business practices act. A lawsuit has not been filed, only a demand letter has been presented. Management has been working withbut it is early in the process and the attorneys cannot comment on the merits at this time. The Company believes the suit has no merit and intends to findresolve it before a reasonable settlement to this dispute without going to trial. After several months of discussion and negotiation it appears that the complaint will be settled for $23,000. It is anticipated that an agreement may be reached by the end of March 2023.trial, if possible.
Per Attorney letters receivedissued there are no other pending cases or legal matters.
NOTE 1114 – INCOME TAXETAXESS
Prior to the merger the Company had elected, with the consent of its stockholders, to be treated as an S Corporation under the Internal Revenue Code. In lieu of corporate income taxes, the stockholders of an S Corporation are taxed on their proportionate share of the Company’s income. As a result of the merger on December 9, 2022, the S Corporation status ends, and the consolidated 2022 tax return will be filed as a standard corporation. However, dueDue to the losses incurred during the tax year ending 2022, and the expected zero tax due for 2023, there will beis no estimated tax liability for 2022.2023. Therefore, no provision for income taxes has been included in the accompanying financial statements.
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NOTE 1215 – SUBSEQUENT EVENTS
On MarchJanuary 2, 2024, the Company entered into a short-term loan agreement collateralized by accounts receivable with Cedar Advance Capital. The agreement encumbered $719,250 of receivables, resulting in a note payable of $525,000; the repayment term requires $22,477 per week for 32 weeks. On the same date, the Company entered into a short-term loan agreement collateralized by accounts receivable with Velocity Capital Group. The agreement encumbered $565,150 of receivables resulting in a note payable of $412,500; the repayment term requires $17,660 per week for 32 weeks.
On January 22, 2024, the Company entered into an agreement with Lillian Flores regarding the deferral of the required shareholder buyout payment of $611,253 due December 31, 2023. The deferral of the principal payment we requested by the Company for the purpose of capital retention. The agreement allows for a $16,500 monthly principal and interest payment starting in January 2024 through June 2024. Monthly interest is calculated at $1,585, leaving $14,915 applied to principal. The agreement requires the remaining deferred principal of $521,763 to be paid by the Company on or before June 30, 2024.
Late January 2024, the Company was notified bythat TransportUS, Inc. was awarded a transportation contract from the Contracting Officer of National Institute of Health-EPA our contract with them was not continuing and they were invokingVeterans Administration for the 45 days cancelation clause in the contract. As a result, the company will transition the closurecentral Los Angeles region. The total value of the contract on or about April 30, 2023. This will reduce on ouris estimated at $7.5 million over 4.5 years. The original start date of February 1, 2024, was delayed until the start of the second quarter. The annual revenue in the amountimpact of approximately $5,122,000 in 2023, along with direct expenses thatthis contract will be reduced by $4,650,000.approximately $1.6 million in increased revenue.
On March 23, 2023, the board of directors approved the purchase of TransportUS, Inc., a California Corporation, with a valuation of approximately $3.72 million, for $3 million. The purchase will be made with restricted common stock only based on market price at the date of closure. Estimated number of shares for purchase is to be 1.5 million. TransportUS Inc. has annual revenues of approximately $4,350,000 with operating net income potential of 10%.
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