TheSee accompanying unaudited notes are an integral part of these unauditedto financial statements.statements

AmeriGuard Security Services, Inc.

CONSPIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

AMERIGUARD SECURITY SERVICES, INC.
(formerly HEALTH REVENUE ASSURANCE HOLDINGS, INC.)
STATEMENT OF OPERATIONS

(Unaudited)For the Three Months Ending March 31, 2023

TheSee accompanying unaudited notes are an integral part of these unauditedto financial statements.statements

AmeriGuard Security Services, Inc.

STATEMENTS OF CASH FLOWS

See accompanying notes to financial statements

AMERIGUARD SECURITY SERVICES, INC.

NOTE 1 – (formerly HEALTH REVENUE ASSURANCE HOLDINGS, INC.)

STATEMENTSORGANIZATION AND DESCRIPTION OF STOCKHOLDERS’ DEFICIT
(Unaudited)BUSINESS

ForAmeriGuard Security Services, Inc. (the Company), was incorporated on November 14, 2002, with an S-Corp tax election. The corporation was incorporated with the Threeissuance of 1,000 shares of no-par value stock held by Lawrence Garcia, President and Nine Months ended September 30,CEO with 550 shares and Lillian Flores, VP of Operations with 450 shares. The Company 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, 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 10,000,000 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 Year endedstock ticker of HRAA was changed to AGSS.

On December 31, 20219, 2022, the Company executed the reverse merger agreement and became the subsidiary of AGSS. 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.

The accompanying unaudited notesCompany’s accounting year end is December 31.

Basis of Presentation

These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.

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 90% of its total revenue from four Federal contracts as described in Note 9 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 integral partamount 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 these unaudited financial statements.the proposal to the contracting agency. Due to the time span required to prepare a proposal and wining 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, accelerating inflation, and overall business environment issues we cannot foresee.

AMERIGUARD SECURITY SERVICES, INC.
(formerly HEALTH REVENUE ASSURANCE HOLDINGS, INC.)
STATEMENT OF CASH FLOWS

(Unaudited)

The accompanying unaudited notes are an integral part of these unaudited financial statements.

AMERIGUARD SECURITY SERVICES, INC.
(formerly HEALTH REVENUE ASSURANCE HOLDINGS, INC.)
NOTES TO FINANCIAL STATEMENTS

For the Nine Months ending September 30, 2022

(Unaudited)

1 – NATURE OF BUSINESS AND GOING CONCERN

Overview

Ameriguard Security Services, Inc., a Nevada company (“AGSS”) formerly Health Revenue Assurance Holdings, Inc). (“HRAA”) intended to become a provider of revenue cycle services to a broad range of healthcare providers.

On February 10, 2012, HRAA entered into an Agreement and Plan of Merger and Reorganization 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.

The Company had been dormant since 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.

On September 8, 2021, in a private stock purchase agreement, 10,000,000 shares of Series A-1 Preferred Stock, $0.001 par value per share (AGSS), were transferred from Custodian Ventures, LLC to Ameriguard Security Services, Inc. California corporation (“Ameriguard”). As a result, the 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 and became the controlling shareholder. The consideration paid for the Shares was $450,000. In connection with the transaction, David Lazar has forgiven the Company from all debts owed to him and/or Custodian Ventures, LLC.

On September 8, 2021, the Company accepted the resignations from 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. from Health Revenue Assurance Holdings, Inc. The name was deemed effective by FINRA on March 17, 2022.

Going Concern

The accompanying financial statements have been prepared assuming AGSS will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business for the twelve months following the date of these financial statements. As of September 30, 2022, AGSS had no cash and an accumulated deficit of $10,103,511.

Because AGSS does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about AGSS’s ability to continue as a going concern. Therefore, AGSS will need to raise additional funds and is currently exploring alternative sources of financing. Recently the Company is being funded by Ameriguard which has extended interest-free demand loans to AGSS. Historically, AGSS raised capital through private placements, to finance working capital needs and may attempt to raise capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to so until its operations become profitable. Also, AGSS has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BasisUse of PresentationEstimates

The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation ofIn preparing financial statements in conformity with generally accepted accounting principles, (“GAAP”) in the United States.

Management’s Representation of Interim Financial Statements

The accompanying unaudited financial statements have been prepared by AGSS without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). AGSS uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited financial statements and notes thereto on December 31, 2021, as presented in the AGSS’s Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires managementis 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 the reported amounts of revenues and expenses during the reportingreported period. The most significant estimates relate to income taxes and contingencies. AGSS bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from thesethose 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 equivalentsCash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. The Company had no cash on hand as of September 30, 2022,On March 31, 2023, and December 31, 2021,2022, the Company had cash and cash equivalents totaling $444,879 and $1,227,654 respectively.

Income taxesAccounts Receivable

AGSSWe record accounts receivable at net realizable value. This value includes an appropriate allowance for income taxes under FASB ASC 740, “Accountingestimated 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 ninety 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 March 31, 2023, and December 31, 2022, an allowance for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expectedestimated uncollectible accounts was determined to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.unnecessary.

The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.Property and Equipment

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.

Net LossIncome/(Loss) per Share

Net lossincome/(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.”Share”. Basic earningsearnings/(loss) per common share (“EPS”) calculations are determined by dividing net incomeincome/(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.

Recent Accounting PronouncementsRevenue Recognition

ThereWe recognize revenue when the Invoice for contracted services is issued as stipulated by the contract. Other services provided are no recent accounting pronouncements that impactrecognized at the Company’s operations.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 not recorded a reserve for returns on March 31, 2023, or 2022 since it does not believe such returns will be material.

3 – EQUITY

Common Stock

On March 11, 2022, AGSS amended its articlesFair Value of incorporation to reverse split its Common Stock at a rate of one-for-20Financial Instruments, which was declared effective by FINRA on March 17, 2022. The Common Stock was reverse split to post-split 3,417,302 shares from pre-split 68,346,042 common shares.

The Company has authorized 500,000,000 sharesapplies 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 $non-performance.

0.001 parThe guidance also establishes a fair value Common Stock. Ashierarchy for measurements of September 30, 2022fair value as follows:

The carrying amount of the Company’s financial instruments approximates their fair value as of March 31, 2023 and December 31, 2022, due to the short-term nature of these instruments.

NOTE 3 – RELATED PARTY RECEIVABLE

On July 7, 2021, therethe company has entered into an agreement to purchase 100% of the Preferred A-1 Stock of Health Revenue Assurance Holdings, Inc. a SEC registered company for $5000,000. 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 Company becoming a 100% owned subsidiary of AGSS. Prior to the merger, the Company funded the operational expenses of AGSS and treated these expenses as related party expenses. These expenses we eliminated when the two companies were consolidated for the financial statement presentation.

The receivable balances on March 31, 2023, and December 31, 2022, were $3,417,30257,971 (pre-split . Related party receivables are eliminated upon consolidation.

68,346,042)

NOTE 4 – FIXED ASSETS

Fixed assets consist of the following on March 31, 2023, and December 31, 2022:

68,346,042NOTE 5 – 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 March 31, 2023, and December 31, 2022, for all plans were $281,582 (post-split 3,417,302) shares of Common Stock issued and outstanding,$453,965 respectively.

Preferred StockNOTE 6 – 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 the 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 March 31, 2023, and December 31, 2022, was 10.75% and 9% respectively. Balance remaining on the SBA loan was $804,387 and $785,988 as of March 31, 2023, and December 31, 2022, respectively.

On November 16, 2020,July 7, 2022, the Company designated, outentered into a buyout agreement with a shareholder Lillian Flores. The total buyout amount was $3,384,950 representing 45% of the Twenty-five Million (25,000,000) authorized sharescalculated business value as of preferred stock, par valueDecember 31, 2020. Following the initial payment of $0.001686,990 per share,, the company agreed to make 4 equal instalments of Series A-1 Preferred Stock, consistingprincipal and interest of Ten Million (10,000,000) shares, which are convertible to common stock$739,508 each December 31, starting 2023. Interest is calculated at a fixed rate of 3.110% compounded semi-annually. The company has accrued interest on March 31, 2022, of $70,335. Balance remaining in the conversion ratioamount of 72 shares of common stock for each share of preferred stock. These shares were awarded to Custodian Ventures, managed by former officer and director David Lazar, for services performed for the Company. These shares were valued at par value assuming all of the preferred shares were converted to common stock, or $720,0002,697,960 which was recorded as stock-based compensation..

On September 8, 2021, in a private transaction Custodian Ventures LLC sold its Series A-1 Preferred Stock to Ameriguard Security Services, Inc., California corporation. The officerfollowing schedule details the loans active as of March 31, 2023, and control person of Ameriguard Security Services, Inc., California corporation is Lawrence Garcia, the Company’s President, CEO, CFO, Treasurer, Secretary, and Chairman of the Board of Directors.December 31, 2022:

NOTE 7 – STOCKHOLDERS’ EQUITY

As of September 30, 2022 andFrom December 31, 2021, there were 10,000,000 shares2022, to March 31,2023 the only impact to equity was the net loss for the period of Series A-1 Preferred Stock issued and outstanding, respectively.

4 – DUE TO RELATED PARTY

As of September 8, 2021, the Company had a due to related party Custodian Ventures LLC, of which former officer and director David Lazar is a managing member, totaling $36,361. On September 8, 2021, the $36,361 was forgiven in full by Custodian Ventures LLC and the Company recorded the resulting gain as additional paid-in capital.

During the quarter ended September 30, 2022, Ameriguard paid expenses on behalf of AGSS totaling $11,882, As of September 30, 2022, AGSS had a balance due to related party totaling $41,659442,996.

5NOTE 8 – COMMITMENTS AND CONTINGENCIES

AGSS did not have any contractual commitments asThe company has a multiple vehicle lease agreement with Enterprise Leasing. As of September 30, 2022,March 31, 2023, the company had 19 vehicles under lease. The lease agreement includes maintenance services. The term of the lease agreement varies based on the date vehicle were leased and December 31, 2021, respectively.the respective terms for each vehicle. The master lease is updated annually and requires annual internal financial reports and company tax return.

6NOTE 9 – SUBSEQUENT EVENTSCONCENTRATION OF SALES

In accordanceThe company generated approximately $6,000,000 and $5,700,000 in guard service revenue for the three-month ending March 31, 2023 and 2022 respectively. Of the total guard service revenue, approximately 92% was earned from four federal contracts operated by the company. The contracts and their respective terms are as follows:

NOTE 10 – LITIGATION AND CLAIMS

As of December 31, 2022, there was one employment issue pending. The issue involves a terminated employee alleging discrimination and wrongful termination. A lawsuit has not been filed only a demand letter has been presented. Management has been working with SFAS 165 (ASC 855-10) management has performed an evaluationthe attorneys to find a reasonable settlement to this dispute without going to trial. After several months of subsequent events through the datediscussion and negotiation it appears that the financial statements were available tocomplaint will be issued and has determined that it does not have any material subsequent events to disclosesettled for $23,000. As of March 31, 2023, the final agreement was signed which pays out the $23,000 settlement in these financial statements.three monthly installments starting May 15, 2023 Per Attorney letters received there are no other pending cases or legal matters.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Organizational History of the Company and OverviewITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

PlanThis Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of Operationrisks 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 sections entitled “Forward-Looking Statements” and “Risk Factors” included elsewhere in this Quarterly Report.

WeManagement’s Discussion and Analysis should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q (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 pursuingquoted 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 business combinationsafe harbor for forward-looking statements. In order to comply with Ameriguard. To date we have no signed definitive agreement, have not submitted the terms of the proposed transactionsafe harbor, the Company notes that in addition to appropriate regulatory agencies for approvalthe 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 determiningsubject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the terms of any agreement. If a business combination is consummated with Ameriguard, AGSS will ceaseforward-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 be a shell company (as defined in Rule 12b-2 ofachieve strategic initiatives, including but not limited to the Exchange Act). We will be an operating company engaged in providing guard security services.ability to achieve sales growth, and (e) unknown litigation.

The Company has no operations from a continuing business other than the expenditures related to running the Company and has no revenue from continuing operations as of the date of this Report.Corporate Structure

In addition to pursuing the business combination as in the plan of operation, management intends to explore and identify business opportunities within the U.S., including a potential acquisition of an operating entity throughAs previously mentioned, on December 9, 2022, AGSS executed a reverse merger asset purchase or similar transaction. Our ability to effectively identify, develop and implementwith AmeriGuard resulting in AGSS becoming the sole owner of AmeriGuard. This merger establishes AGSS as a company operating a viable plan for our business may be hindered by risksguard 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 uncertainties which are beyond our control, including without limitation,acquisitions within the continued negative effects of the coronavirus pandemic on the U.S. and global economies. For more information see AGSS’s 2021 Form 10-K.security industry.

Prior to and after the merger AGSS has been working on developing the leadership team needed. We do not currently engagehave in any business activities that provide revenue or cash flow. During the next 12-month period we anticipate incurring costs in connectionplace a CEO with investigating, evaluating, and negotiating potential business combinations, filing SEC reports, and consummating an acquisition20 years of an operating business.

Given our limited capital resources, we may consider a business combination with an entity which has recently commenced operations, is a developing company or is otherwise in need of additional funds for the development of new products or services or expansion into new markets, is an established business experiencing financial or operating difficulties and is in need of additional capital. Alternatively, a business combination may involve the acquisition of, or merger with, an entity which desires access to the U.S. capital markets.

Other than our pursuit of combination asexperience in our plan of operation, as of the date of this Report, our managementindustry and who has not had any discussions with any representative of any other entity regarding a potential business combination. Any target business that is selected may be financially unstable orbeen very successful in the early stagesgovernment contracting market. Our CFO has over 35 years of development. In such event, we expect to be subject to numerous risks inherent inbusiness finance experience, the business and operationslast 15 of a financially unstable or early-stage entity. In addition, we may consummate a business combination with an entity in an industry characterized by a high level of risk or in which our managementhe has limited experience, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.

Our management anticipates that we will likely only be able to effect one business combination due to our limited capital. This lack of diversification will likely pose a substantial risk in investing in the Company for the indefinite future because it will not permit us to offset potential losses from one venture or operating territory against gains from another. The risks we face will likely be heightened to the extent we acquire a business operating in a single industry or geographical region.

We anticipate that the selection of a business combination will be a complex and risk-prone process. Because of general economic conditions, including unfavorable conditions caused by the coronavirus pandemic, rapid technological advances being made in somebeen focusing on organizational development consulting across multiple industries, and shortagesan Operations team on the east coast managing IT and our federal contracts. We have a Board of available capital, management believes that there are a number of firms seeking business opportunities at this time at discounted ratesDirectors with which we will compete. We expect that any potentially available business combinations may appear in a variety of different industries or regionsWall Street and at various stages of development, all of which will likely rendergovernment security experience making us well positioned to aggressively grow the task of comparative investigation and analysis of such business opportunities extremely difficult and complicated. Once we have developed and begun to implement our business plan, management intends to fund our working capital requirements through a combination of our existing funds and future issuances of debt or equity securities. Our working capital requirements are expected to increase in line with the implementation of a business plan and commencement of operations.business.

Based upon our current operations, we do not have sufficient working capital to fund our operations over the next 12 months. If we close a reverse merger, it is likely we will need capital as a condition of closing that acquisition. Because of the uncertainties, we cannot be certain as to how much capital we need to raise or the type of securities we will be required to issue. In connection with a reverse merger, we will be required to issue a controlling block of our securities to the target’s shareholders which will be very dilutive. 

Additional issuancesResults of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences, or privileges senior to our Common Stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

We anticipate that we will incur operating losses inOperations for the next 12three months principally costs related to our being obligated to file reports with the SEC. Our prospects must consider the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks for us include, but are not limited to, an evolving and unpredictable business model, recognition of revenue sources, and the management of growth. To address these risks, we must, among other things, develop, implement, and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so could have a material adverse effect on our business prospects, financial condition, and results of operations.ending March 31, 2023

Critical Accounting PoliciesRevenues and EstimatesCost of Goods Sold

The first quarter of 2023 experienced a 5.6% increase of approximately $325,000 in overall revenue over the previous year. The majority of which was from federal contracts and commercial services in the amount of approximately $288,000 and the remaining increase from training revenue. The contract services revenue increase was the result of monthly fee increases within the four existing contracts operated during both quarters. As the costs of labor increases within the unionized contract so does the revenue. For the Commercial operations we saw a significant increase in demand for services, specifically our patrol services. Patrol services solve the problem of delayed police response. 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.

Like other professional service industries most of the expense is direct labor and the expenses associated with that labor. We are not an exception. Our direct expenses average around 90% of revenues. Total cost of services increased approximately $232,300 in 2023 over 2022, and that increase is expected in relation to the revenue increase in 2023 as previously discussed.

Operating Expenses and Other Expense

Operation expenses, overhead expenses, increased in 2023 over 2022 by approximately $385,000. Nearly half of that increase, 42%, was in administrative salaries and related payroll expenses, of approximately $165,000. As part of the reverse merger preparations, we added to our administrative team a full-time CFO, an HR Management team and an Operations Management team along with the necessary support positions in payroll and accounting. We also experienced an increase in professional fees of approximately $70,000. These increases relate to the preparations for the merger and the following corporate expansion. We have established an administrative team with the capacity available to take the company to annual sales of $200 million and beyond.

The remaining increase in operations expenses varied between various expense accounts with both increases and decreases in total expense. Most of which were minor, yet the combined total is approximately $150,000. Some categories of expense that experienced some sizable increase were loan interest in the amount of $29,200, training expense in the amount of $64,000 to name two of the significant accounts.

At this time, our operating structure and current level of expense can handle several times more revenue 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 (Loss) from Operations

Net loss in the first quarter of 2023 was approximately $441,000. An increase over the loss in 2022 of approximately $298,000. As previously mentioned, our operational structure that drives theses costs has excess capacity 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).

Liquidity and Capital Resources

The Company’s principal sources of liquidity include cash from operations and proceeds from long term debt financing. During the three months ending March 31, 2023, operations generated net decrease in cash of approximately $441,000 while cash used from general operations was approximately $344,000. The majority of the operational cash used was due to an increase in accounts receivable of approximately $138,000 and payments to pension liabilities of approximately $172,000. The net decrease in cash for period was approximately $783,000.

On March 31, 2023, the Company had cash on hand of $444,879, with total current assets of $2,619,095.

Moving Forward

During the past twenty-one 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. These costs have had a negative impact on our bottom line, yet we now in a position to execute our plans. Our current overhead expense structure has the capacity to manage ten times the revenues from one of two strategic sources. We are confident that our future is profitable.

Our management’s discussionfirst source is to continue down our historical path of seeking out contracts that meet our sweet spot and analysisbidding 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 financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.” The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.control.

Our significant accounting policies are fully describedsecond 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 Note 2opportunity, and at the same there’s a lot of consolidation occurring. As a top tier company in the industry, we can be a company acquiring others and quickly triple our revenues with one or two key acquisitions. After which we could see all the gross profit from those companies going directly to our financial statements appearing elsewhere in this Quarterly Report,bottom line. The returns would be quick and we believe those accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.significant.

Off-Balance Sheet ArrangementsThere are also acquisition opportunities in several other industries that fit our business model. Those include transportation, cyber security, private security, ammunition manufacturing, and surveillance to mention a few. At the March 23, 2023, board meeting, the board approved the acquisition of TransportUS Inc. A company valued at $3.72 million with 3 million shares issued to Lawrence Garcia, sole owner of the company. Shares will be issued in two phases. 1.5 million shares issued at close, with the remaining 1.5 million shares issued upon completion of a major contract renewal. We are very pleased to add this company to our family of companies and look forward to more acquisitions in 2023.

None.The Company has begun the process of our first equity raise to recover our expended working capital and position the Company for future acquisitions. We anticipate the equity raise to be completed in the third quarter.

Management is very positive regarding profitable operations for the next twelve months based on the following:

ItemITEM 3. Quantitative And Qualitative Disclosures About Market Risk.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

AsWe are a smaller reporting company weand are not required to provide the information called forrequired by this Item.item.

ItemITEM 4. Controls and Procedures.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.Procedures

Our management is responsible for establishing and maintaining a system of “disclosureWe maintain disclosure controls and procedures”procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act)Act of 1934, as amended, or the “Exchange Act”) that isare designed to ensure that information that would be required to be disclosed by us in the reports that we file or submit under the Exchange Act reports is recorded, processed, summarized and reported within the time periodsperiod specified in the Commission’sSEC’s rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’sour management, including its principal executive officer or officersto our Chief Executive Officer and principal financial officer or officers, or persons performing similar functions,Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s ReportAs 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 March 31, 2023. Based on Internal Control overthat evaluation, our Chief Executive Officer and Chief Financial Reporting.

Our management is responsibleOfficer concluded that as of March 31, 2023, our disclosure controls and procedures were not effective to satisfy the objectives for establishing and maintaining adequatewhich they are intended due to a weakness in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.discussed below.

OurThe framework our management assesseduses to evaluate the effectiveness of our internal control over financial reporting is based on the parameters set forthguidance provided by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission in its 1992 report: INTERNAL CONTROL - INTEGRATED FRAMEWORK. Based on our evaluation under the framework described above, andour management has concluded that as of September 30, 2022, our internal control over financial reporting was ineffective as of March 31, 2023 due to the same weaknesses that rendered our disclosure controls and procedures ineffective. The Company’s internal control over financial reporting is not effective due to provide reasonable assurance regardinga lack of sufficient resources to hire a support staff to separate duties between different individuals. The Company plans to address these weaknesses as resources become available by hiring additional professional staff, as funding becomes available, outsourcing certain aspects of the reliability of financialrecording and reporting functions, and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles as a result ofseparating responsibilities. We have identified the following material weaknesses:weakness.

As of March 31, 2023, we did not maintain effective controls over the control environment. The Board of Directors has not established an audit committee as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

We plan to rectifyBecause of these weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2023, based on the criteria established in “INTERNAL CONTROL-INTEGRATED FRAMEWORK” issued by implementingthe COSO. Management believes that the weaknesses set forth above did not have an independent boardeffect on our financial results because the activity during this period was nominal. However, management believes that the lack of directors, establishing written policiesa functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, forwhich could result in a material misstatement in our internal control of financial reporting,statements in future periods. Management will further recruit qualified individuals, establish an audit committee, and hiring additional accounting personnel at such time as we complete a reverse merger or similar business acquisition.ensure that board members have current and pertinent financial experience.

Changes in Internal ControlControls over Financial Reporting.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 theour last fiscal quarter ended September 30, 2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ItemITEM 1. Legal Proceedings.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:

In the second quarter of 2022 the Company did receive a demand letter from a terminated employee’s lawyer. The Company may be involveddemand letter claimed 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 of court in certain legal proceedings that arise from time to timeMarch of 2023 in the ordinary courseamount of its business. Legal expenses associated with any contingency$23,000. No other legal issues or court filings are expensed as incurred. The Company’s officers and directors are not aware of any threatened or pending litigation to which the Company is a party or which any of its property is the subject and which would have any material, adverse effect on the Company.active at this time.

ItemITEM 1A. Risk Factors.RISK FACTORS

Reference is made to the risks and uncertainties disclosed in Item 1A (“Risk Factors”) of our Annual Report on Form 10-K for the period ended December 31, 2021, filed March 31,2022 which sections are incorporated by reference into this report, as the same may be updated from time to time. Prospective investors are encouraged to consider the risks described in AGSS’s 2021 Form 10-K, and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Report and other information publicly disclosed or contained in documents we file with the Securities and Exchange Commission before purchasing our securities.AS A SMALLER REPORTING COMPANY, WE ARE NOT REQUIRED TO PROVIDE A STATEMENT OF RISK FACTORS.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index below are provided as part of this report.

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.

Pursuant

AMERIGUARD SECURITY SERVICES, INC.

Exhibit Index to Quarterly Report on Form 10-Q

For the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.Three Months Ended March 31, 2023