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Gulf West Security Network (GWSN)

Filed: 30 Mar 20, 6:25am

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

☒    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019

 

or

 

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

COMMISSION FILE NUMBER 333-193220

 

GULF WEST SECURITY NETWORK, INC.

(Exact name of registrant as specified in its charter)

 

Nevada

 

82-2908492

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

2851 Johnson Street, Unit #194

Lafayette, LA

 

70503

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (337) 210-8790

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of each exchange on which registered

None

 

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001 per share

 

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 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 reports), 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒     No ☐

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):

 

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

As of March 26, 2020, there were 4,518,250 shares of our common stock, par value $0.001 per share, outstanding.

 

 
 

 

 

 

GULF WEST SECURITY NETWORK, INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2019

 

TABLE OF CONTENTS

 

 

 

PAGE

 

PART I

 

 

 

 

 

 

Item 1

Business

 

4

 

Item 1A

Risk Factors

 

5

 

Item 1B

Unresolved Staff Comments

 

5

 

Item 2

Properties

 

5

 

Item 3

Legal Proceedings

 

5

 

Item 4

Mine Safety Disclosures

 

5

 

 

 

 

 

PART II

 

 

 

 

 

 

Item 5

Market for Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

 

6

 

Item 6

Selected Financial Data

 

6

 

Item 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

7

 

Item 7A

Quantitative and Qualitative Disclosures about Market Risk

 

9

 

Item 8

Financial Statements and Supplementary Data

 

10-31

 

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

32

 

Item 9A

Controls and Procedures

 

32

 

Item 9B

Other Information

 

33

 

 

 

 

 

PART III

 

 

 

 

 

 

Item 10

Directors, Executive Officers of the Registrant and Corporate Governance

 

34

 

Item 11

Executive Compensation

 

36

 

Item 12

Security Ownership of Certain Beneficial Holders and Management and Related Stockholder Matters

 

37

 

Item 13

Certain Relationships and Related Transactions, and Director Independence

 

38

 

Item 14

Principal Accounting Fees and Services

 

39

 

 

 

 

 

PART IV

 

 

 

 

 

 

Item 15

Exhibits, Financial Statement Schedules

 

40

 

 

 

 

 

Signatures

 

41

 

 

 
2

 

 

 

 

Forward-Looking Statements

 

This annual report contains forward-looking statements and information relating to us that are based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. When used in this report, the words “believe,” “anticipate,” “expect,” “will,” “estimate,” “intend”, “plan” and similar expressions, as they relate to us or our management, are intended to identify forward-looking statements. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved. Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The terms “GWSN,” “we,” “us,” “our,” and the “Company” refer to Gulf West Security Network, Inc.

 

 
3

 

Table of Contents

 

PART I

 

Item 1. Business.

 

Overview

 

Gulf West Security Network, Inc., a Nevada corporation (“Gulf West”) and its wholly-owned subsidiaries, are principally engaged in the sale, installation, servicing, and monitoring of electronic home and business security and automation systems in the United States.

 

“Gulf West” and LJR Security Services, Inc. (“LJR”) are active in the engineering, design, installation, remote monitoring and after-market servicing of electronic intrusion alert and fire detection systems for homes and businesses (the “alarm industry”). Both Gulf West and LJR are based in Lafayette, Louisiana and were owned by Louis J. (“Lou”) Resweber, a long-time veteran of the alarm industry, who has also previously served as a corporate officer, board member and executive consultant to a number of NYSE and NASDAQ-listed public companies over the past 35 years.

 

Merger

 

On August 9, 2018, the Board of Directors of the Company through its wholly-owned subsidiary NuLife Acquisition Corp. (“NuLife Sub”) approved and executed an agreement of merger and plan of reorganization (the “Merger Agreement”), to become effective at such time as the articles of merger have been filed with the Secretary of State of Louisiana (the “Effective Time”), and after the satisfaction or waiver by the parties thereto of the conditions set forth in Article VI of the Merger Agreement. Pursuant to the terms of the Merger Agreement, and in exchange for all one hundred (100) issued and outstanding shares of LJR“”, LJR received one thousand (1,000) shares of series D senior convertible preferred stock, par value $.001 per share (the “Series D Preferred Stock”) of the Company, convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock of the Company. In addition, the LJR shareholder received one share of series C super-voting preferred stock of NuLife which granted the holder 50.1% of the votes of NuLife at all times.

 

Our corporate office is located at Gulf West Security Network, Inc., 2851 Johnson Street Unit #194, Lafayette, LA, 70503, (337) 210-8790.

 

Critical Accounting Policies and Estimates

 

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.

 

Recent Accounting Pronouncements

 

See Note 2 of the accompanying consolidated financial statements for a discussion of recently issued accounting standards.

 

Employees

 

As of December 31, 2019, we had two employees, one of whom is employed on a full-time basis.

 

 
4

 

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Item 1A. Risk Factors.

 

Since we are a smaller reporting company, we are not required to supply the information required by this Item 1A.

 

Item 1B. Unresolved Staff Comments.

 

None.

 

Item 2. Properties.

 

Our corporate office is located at Gulf West Security Network, Inc., 2851 Johnson Street, Unit #194 Lafayette, LA, 70503 (337) 210-8790. Our website is http://www.gulfwestsecurity.com.

 

Item 3. Legal Proceedings.

 

The Company currently has no litigation pending, threatened or contemplated, or unsatisfied judgments.

 

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with contractors and suppliers. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

 
5

 

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PART II

 

Item 5. Market for Registrant’s Common Equity, Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

The Company’s common stock is currently quoted on the OTCQB Market under the symbol “GWSN”. The following table sets forth the high and low per share sales prices for our common stock for each of the quarters as reported by the OTC Markets.

 

Year Ended December 31, 2019

 

High

 

 

Low

 

Fourth quarter

 

$0.10

 

 

$0.05

 

Third quarter

 

$0.25

 

 

$0.10

 

Second quarter

 

$0.75

 

 

$0.0001

 

First quarter

 

$0.30

 

 

$0.12

 

 

Year Ended December 31, 2018

 

High

 

 

Low

 

Fourth quarter

 

$1.00

 

 

$0.10

 

Third quarter

 

$1.90

 

 

$0.15

 

Second quarter

 

$1.50

 

 

$0.60

 

First quarter

 

$1.80

 

 

$1.00

 

 

On March 26, 2020, the closing sales price reported for our common stock was $0.049 per share and as of that date, we had approximately 43 holders of record of our common stock, and 4,508,250 shares outstanding.

 

Dividend Policy

 

We have not declared or paid any dividends on our common stock. We intend to retain earnings for use in our operations and to finance our business. Any change in our dividend policy is within the discretion of our board of directors and will depend, among other things, on our earnings, debt service and capital requirements, restrictions in financing agreements, if any, business conditions, legal restrictions and other factors that our board of directors deems relevant.

 

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

 

None.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

The Company has no formally adopted compensation plans or equity incentive plans approved or submitted for approval by the shareholders.

 

Recent Sale of Unregistered Securities

 

None.

 

Item 6. Selected Financial Data.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

 
6

 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This annual report contains certain information that may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. While we have specifically identified certain information as being forward-looking in the context of its presentation, we caution you that all statements contained in this report that are not clearly historical in nature, including statements regarding anticipated financial performance, management’s plans and objectives for future operations, business prospects, market conditions, and other matters are forward-looking. Forward-looking statements are contained principally in the sections of this report entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Without limiting the generality of the preceding sentence, any time we use the words “expects,” “intends,” “will,” “anticipates,” “believes,” “confident,” “continue,” “propose,” “seeks,” “could,” “may,” “should,” “estimates,” “forecasts,” “might,” “goals,” “objectives,” “targets,” “planned,” “projects,” and similar expressions, we intend to clearly express that the information deals with possible future events and is forward-looking in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. For GWSN, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include,

without limitation:

 

 

·

our ability to maintain and grow our existing customer base;

 

 

 

 

·

the amount and timing of our cash flows and earnings, which may be impacted by customer, competitive, supplier and other dynamics and conditions;

 

 

 

 

·

our ability to maintain or improve margins through business efficiencies;

 

 

 

 

·

our ability to launch new product and service offerings that achieve market acceptance with acceptable margins;

 

 

 

 

·

changes in law, economic and financial conditions, including tax law changes, changes to privacy requirements, changes to telemarketing, email marketing and similar consumer protection laws, interest and exchange rate volatility, and trade tariffs applicable to the products we sell;

 

 

 

 

·

the impact of potential information technology, cybersecurity or data security breaches.

 

Forward-looking information involves risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such statements, including without limitation, the risks and uncertainties disclosed above. Therefore, caution should be taken not to place undue reliance on any such forward-looking statements. Much of the information in this report that looks toward future performance of our Company is based on various factors and important assumptions about future events that may or may not actually occur. As a result, our operations and financial results in the future could differ materially and substantially from those we have discussed in the forward-looking statements included in the Annual Report. We assume no obligation (and specifically disclaim any such obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 

 
7

 

Table of Contents

 

Business Overview

 

Gulf West Security Network, Inc., a Nevada corporation (“Gulf West”) and its wholly-owned subsidiaries, are principally engaged in the sale, installation, servicing, and monitoring of electronic home and business security and automation systems in the United States.

 

Gulf West Security Network, Inc. and LJR Security Services, Inc. (“LJR”) are active in the engineering, design, installation, remote monitoring and after-market servicing of electronic intrusion alert and fire detection systems for homes and businesses (the “alarm industry”). Both Gulf West and LJR are based in Lafayette, Louisiana and were owned by Louis J. (“Lou”) Resweber, a long-time veteran of the alarm industry, who has also previously served as a corporate officer, board member and executive consultant to a number of NYSE and NASDAQ-listed public companies over the past 35 years.

 

Results of Operations

 

Year ended December 31, 2019 and 2018

 

We had revenue of $14,601 for the year ended December 31, 2019, as compared to $16,530 for year ended December 31, 2018 a decrease of $1,929 or 12%. The decrease in revenue was due to a lesser concentration on new alarm system sales and installations, with our focus moving more toward alarm system monitoring and the corresponding recurring monthly revenue (RMR) that is associated with monitoring services.

 

Cost of Revenue

 

Cost of revenue sold for the year ended December 31, 2019 was $12,848, as compared to $6,880 for the year ended December 31, 2018. The increase in cost of revenue is due to write-off of inventory amounting to $6,035.

 

General and Administrative

 

Our general and administrative expenses for the year ended December 31, 2019 were $808,441, an increase of $157,803, or 24%, compared to $650,638 for the year ended December 31, 2018. General and administrative expenses increased mainly due to timing of wages, audit and accounting expenses associated with the public company operations.

 

Sales and marketing

 

Our sales and marketing expenses for the year ended December 31, 2019 were $0, compared to $46,538 for the year ended December 31, 2018. The decrease in sales and marketing expenses reflected management’s decision to shift its focus from retail to wholesale alarm operations.

 

Income from discontinued operations

 

Subsequent to the Merger, management decided to discontinue the activities of NuLife. As a result, we recorded income of $33,068 primarily due to a change in the fair value of a derivative liability.

 

Net loss

 

As a result of the foregoing, for the year ended December 31, 2019, we recorded a net loss of $773,620 compared to a net loss of $1,358,550 for the year ended December 31, 2018.

 

 
8

 

Table of Contents

 

Liquidity and Capital Resources

 

The Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has limited commercial experience and had a net loss from continuing operations of $806,688 for the year ended December 31, 2019, and an accumulated deficit of $2,288,000, and a working capital deficit of $2,105,528 at December 31, 2019. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying condensed consolidated financial statements for the year ended December 31, 2019, have been prepared assuming the Company will continue as a going concern. The Company’s cash resources will likely be insufficient to meet its anticipated needs during the next twelve months. The Company will require additional financing to fund its future planned operations, including research and development and commercialization of its products.

 

Operating Activities

 

During the year ended December 31, 2019, we used $425,227 of cash in operating activities primarily as a result of our loss of $773,620 from continuing operations, offset by net changes in working capital items of operating assets and liabilities of $381,461.

 

During the year ended December 31, 2018, we used $598,549 of cash in operating activities primarily as a result of our net loss of $ $1,358,550, depreciation expenses of $1,319, and net changes in operating assets and liabilities of $87,658.

 

Financing Activities

 

During the year ended December 31, 2019, financing activities provided $401,050 in proceeds from a bridge loan and used $28,211 in net payments to advances from related party.

 

During the year ended December 31, 2018, financing activities provided $671,000 in proceeds from a bridge loan, $14,202 of net contribution and $6,471 in proceeds from advances from related party.

 

Off-Balance Sheet Transactions

 

At December 31, 2019, the Company did not have any transactions, obligations or relationships that could be considered off-balance sheet arrangements.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

 

 
9

 

Table of Contents

 

Item 8. Financial Statements and Supplementary Data.

 

Gulf West Security Network, Inc.

A Nevada Corporation

 

Consolidated Financial Statements

December 31, 2019 and 2018

 

 
10

 

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Gulf West Security Network, Inc.

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

 

Independent Auditor’s Reports

 

12-13

 

 

 

 

Consolidated Financial Statements as of December 31, 2019 and 2018 and for the years then ended:

 

 

 

 

 

Consolidated Balance Sheets

 

14

 

 

 

 

Consolidated Statements of Operations

 

15

 

 

 

 

Consolidated Statements of Deficiency in Stockholders’ Equity

 

16

 

 

 

 

Consolidated Statements of Cash Flows

 

17

 

 

 

 

Notes to Consolidated Financial Statements

 

18-31

 

 

 
11

 

Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of Gulf West Security Network, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheet of Gulf West Security Network, Inc. (the Company) as of December 31, 2019, and the related consolidated statements of operations, deficiency in stockholders’ equity, and cash flow for the year ended December 31, 2019, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations and its cash flow for the year ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America. The financial statements of Gulf West Security Network, Inc. as of December 31, 2018 were audited by other auditors whose report dated April 16, 2019 expressed an unqualified opinion on those statements.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 audits 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 consolidated 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 audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ M&K CPAS, PLLC

 

We have served as the Company’s auditor since 2019.

 

Houston, TX

March 30, 2020

 

 
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Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and

Stockholders of Gulf West Security Network, Inc. F/K/A LJR Security Services, Inc.

Lafayette, Louisiana

 

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gulf West Security Network, Inc. (formerly known as LJR Security Services, Inc.) (the “Company”) at December 31, 2018, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for each of the years in the year ended December 31, 2018, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company has experienced net losses and has accumulated and working capital deficits, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

 

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated 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 audits included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Daszkal Bolton LLP

Daszkal Bolton LLP

April 16, 2019

Boca Raton, Florida

We have served as the Company’s auditor since 2018.

 

 
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GULF WEST SECURITY NETWORK, INC.

CONSOLIDATED BALANCE SHEET

As of December 31, 2019 and December 31, 2018

 

 

 

2019

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$10,045

 

 

$64,798

 

Accounts receivable

 

 

2,876

 

 

 

1,906

 

Prepaid expenses

 

 

25,987

 

 

 

85,560

 

Total current assets

 

 

38,908

 

 

 

152,264

 

 

 

 

 

 

 

 

 

 

Total assets

 

$38,908

 

 

$152,264

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS’ EQUITY (DEFICIENCY)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$248,888

 

 

$100,976

 

Accounts payable - related party

 

 

3,565

 

 

 

31,776

 

Accrued wages - related party

 

 

218,805

 

 

 

43,859

 

Bridge Loan from affiliates

 

 

1,072,050

 

 

 

671,000

 

Liabilities of discontinued operations

 

 

601,128

 

 

 

636,561

 

Total liabilities

 

 

2,144,436

 

 

 

1,484,172

 

 

 

 

 

 

 

 

 

 

Deficiency in Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred Stock, $0.001 par value, 25,000,000 shares authorized

 

 

 

 

 

 

 

 

Preferred stock Series A, 742,500 shares issued and outstanding

 

 

743

 

 

 

743

 

Preferred stock Series B, nil issued or outstanding

 

 

-

 

 

 

-

 

Preferred stock Series C, 1 share issued and outstanding

 

 

-

 

 

 

-

 

Preferred stock Series D, 1,000 shares issued and outstanding

 

 

1

 

 

 

1

 

Common stock, $0.001 par value; 475,000,000 shares authorized; 4,518,250 shares issued and outstanding

 

 

4,518

 

 

 

4,518

 

Additional paid in capital

 

 

177,210

 

 

 

177,210

 

Accumulated deficit

 

 

(2,288,000)

 

 

(1,514,380)

Total deficiency in stockholders’ equity

 

 

(2,105,528)

 

 

(1,331,908)

 

 

 

 

 

 

 

 

 

Total liabilities and deficiency in stockholders’ equity

 

$38,908

 

 

$152,264

 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

 
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GULF WEST SECURITY NETWORK, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended December 31, 2019 and 2018

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

Monitoring and related services

 

$13,335

 

 

$16,530

 

Product sales and installation

 

 

1,266

 

 

 

-

 

Total Revenue

 

 

14,601

 

 

 

16,530

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

 

12,848

 

 

 

6,880

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

1,753

 

 

 

9,650

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

General and administrative

 

 

808,441

 

 

 

650,638

 

Sales and martketing

 

 

-

 

 

 

46,538

 

Total Operating Expenses

 

 

808,441

 

 

 

697,176

 

 

 

 

 

 

 

 

 

 

Operating Loss

 

 

(806,688)

 

 

(687,526)

 

 

 

 

 

 

 

 

 

Loss from continuing operations before provision for income taxes

 

 

(806,688)

 

 

(687,526)

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(806,688)

 

 

(687,526)

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations

 

 

33,068

 

 

 

(671,024)

 

 

 

 

 

 

 

 

 

Net loss

 

$(773,620)

 

$(1,358,550)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share, continuing operations

 

$(0.11)

 

$(0.16)

Basic and diluted net loss per common share, discontinued operations

 

$0.01

 

 

$(0.16)

Weighted average shares outstanding

 

 

4,518,250

 

 

 

4,172,198

 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

 
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GULF WEST SECURITY NETWORK, INC.

CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS’ EQUITY

For the years ended December 31, 2019 and 2018

 

 

 

Preferred Stock Series A

 

 

Preferred Stock Series B

 

 

Preferred Stock Series C

 

 

Preferred Stock Series D

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

 

Amount

 

 

Number

of

Shares

 

 

Amount

 

 

Number

of

Shares

 

 

Amount

 

 

Number of Shares

 

 

Amount

 

 

Number

of

Shares

 

 

Amount

 

 

Additional  

Paid-In Capital

 

 

Accumulated Deficit

 

 

 Total

Stockholders' Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

117,500

 

 

$118

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

 

4,050,439

 

 

$4,050

 

 

$164,102

 

 

$(155,830)

 

$12,440

 

Shares issued for debt settlement

 

 

25,000

 

 

 

25

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,385

 

 

 

15

 

 

 

(1,836)

 

 

-

 

 

 

(1,796)

Shares issued in connection with reverse merger

 

 

600,000

 

 

 

600

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

1,000

 

 

 

1

 

 

 

452,426

 

 

 

453

 

 

 

10,791

 

 

 

-

 

 

 

11,845

 

Shares issued for debt settlement

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,153

 

 

 

-

 

 

 

4,153

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,358,550)

 

 

(1,358,550)

Balance at December 31, 2018

 

 

742,500

 

 

$743

 

 

 

-

 

 

$-

 

 

 

1

 

 

$-

 

 

 

1,000

 

 

$1

 

 

 

4,518,250

 

 

$4,518

 

 

$177,210

 

 

$(1,514,380)

 

$(1,331,908)

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(773,620)

 

 

(773,620)

Balance at December 31, 2019

 

 

742,500

 

 

$743

 

 

 

-

 

 

$-

 

 

 

1

 

 

$-

 

 

 

1,000

 

 

$1

 

 

 

4,518,250

 

 

$4,518

 

 

$177,210

 

 

$(2,288,000)

 

$(2,105,528)

 

See accompanying notes, which are an integral part of these consolidated financial statements.

  

 
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GULF WEST SECURITY NETWORK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended December 31, 2019 and 2018

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net loss

 

$(773,620)

 

$(1,358,550)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

(Income) loss from discontinued operations

 

 

(33,068)

 

 

671,024

 

Depreciation

 

 

-

 

 

 

1,319

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(970)

 

 

(1,906)

Prepaid expenses

 

 

59,573

 

 

 

(55,271)

Accounts payable and accrued liabilities

 

 

147,912

 

 

 

100,976

 

Accrued wages - related party

 

 

174,946

 

 

 

43,859

 

Net cash used in operating activities – continuing operations

 

 

(425,227)

 

 

(598,549)

Net cash used by operating activities – discontinued operations

 

 

(2,365)

 

 

(34,463)

 

 

 

 

 

 

 

 

 

Cash Flows from Investing Activities

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

Contributions, net

 

 

-

 

 

 

14,202

 

Proceeds from bridge loan

 

 

401,050

 

 

 

671,000

 

Advances from related party, net

 

 

(28,211)

 

 

6,471

 

Cash flow provided by financing activities

 

 

372,839

 

 

 

691,673

 

 

 

 

 

 

 

 

 

 

Net Change in Cash

 

 

(54,753)

 

 

58,661

 

 

 

 

 

 

 

 

 

 

Cash at Beginning of Period

 

 

64,798

 

 

 

6,137

 

Cash at End of Period

 

$10,045

 

 

$64,798

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosure of Cash Flow Information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$-

 

 

$-

 

Cash paid for income taxes

 

$-

 

 

$-

 

Net assets acquired via stock issued

 

$-

 

 

$612,774

 

 

See accompanying notes, which are an integral part of these consolidated financial statements.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

NOTE 1: NATURE OF THE BUSINESS

 

Gulf West Security Network, Inc. (a Nevada Corporation), and its wholly-owned subsidiaries, formerly known as “NuLife Sciences, Inc.” (“we”, “us”, “our”, “Gulf West”, “GWSN”, or the “Company”), are principally engaged in providing residential and commercial electronic security, home automation, and systems integration services on both a retail and wholesale basis.

 

The Company’s retail division, which includes its wholly-owned subsidiary LJR Security Services, Inc. (a Louisiana Corporation) (“LJR”), is actively engaged in the hands-on design, engineering, sales, installation, after-market servicing, inspection and remote electronic monitoring of home (residential) burglar, fire and medical alarm systems as well as fully-integrated business (commercial) security and automation systems in the United States.

 

The Company’s wholesale division, which operates under the name Gulf West Security Network (or “Gulf West”), is further engaged in the development and expansion of a proprietary coalition (alliance or network) of independently-branded life safety and property protection providers, fire alert and suppression system installers, electronic remote monitoring and video surveillance specialists, smart home designers, commercial systems integrators, structured wiring professionals and electrical contractors.

 

Merger

 

On August 9, 2018, the Board of Directors of the Company through its wholly-owned subsidiary NuLife Acquisition Corp. (“NuLife Sub”) approved and executed an agreement of merger and plan of reorganization (the “Merger Agreement”), to become effective at such time as the articles of merger have been filed with the Secretary of State of Louisiana (the “Effective Time”), and after the satisfaction or waiver by the parties thereto of the conditions set forth in Article VI of the Merger Agreement. Pursuant to the terms of the Merger Agreement, and in exchange for all one hundred (100) issued and outstanding shares of LJR Security Services, Inc. (“LJR”), LJR received one thousand (1,000) shares of series D senior convertible preferred stock, par value $.001 per share (the “Series D Preferred Stock”) of the Company, convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock of the Company. In addition, the LJR shareholder received one share of series C super-voting preferred stock of NuLife which granted the holder 50.1% of the votes of NuLife at all times.

 

The merger was accounted for as a reverse merger, whereby LJR was considered the accounting acquirer and became our wholly-owned subsidiary. In accordance with the accounting treatment for a “reverse merger”, the Company’s historical financial statements prior to the reverse merger has been replaced with the historical financial statements of LJR prior to the reverse merger. The financial statements after completion of the reverse merger include the assets, liabilities, and results of operations of the combined company from and after the closing date of the reverse merger, with only certain aspects of pre-consummation stockholders’ equity remaining in the consolidated financial statements.

 

Restatement of Articles of Incorporation

 

On September 19, 2018, LJR Security Services, Inc. amended and restated its articles of incorporation providing for a change in the Company’s name to “Gulf West Security Network, Inc.” The Company’s authorized shares of common stock, preferred stock and the par value of the stock will remain unchanged. The Company also amended and restated its bylaws to reflect the name change.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

On September 20, 2018, the Board of Directors of the Company designated one (1) share of Series C Preferred Stock (the “Series C Stock”) and one thousand (1,000) shares of Series D Preferred Stock (the “Series D Stock”). The classes of Series C Stock and Series D Stock were created in anticipation of the closing of the Merger Agreement.

 

Change of Fiscal Year

 

On September 28, 2018, the Company’s Board approved a change in fiscal year end from September 30th to December 31st. The decision to change the fiscal year end was related to the recent merger of the Company with LJR to closely align its operations and internal controls with that of its wholly owned subsidiary LJR.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

 

Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined.

 

Principles of Consolidation

 

The Company’s consolidated financial statements include all accounts of Gulf West Security Network, Inc., LJR, and NuLife Sciences, Inc. from September 28, 2018, the consummation of the Merger Agreement. All inter-company balances and transactions have been eliminated in consolidation.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America (“U.S.”) as promulgated by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and with the rules and regulations of the U.S Securities and Exchange Commission (“SEC”).

 

Reclassifications

 

Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. As a result, certain line items have been amended in the consolidated balance sheets and consolidated statements of cash flow. Comparative figures have been adjusted to conform to the current year’s presentation. These reclassifications had no effect on the reported net loss

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Cash and Cash Equivalents

 

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of one year or less, when purchased, to be cash. As of December 31, 2019 and 2018, the Company had no cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible.

 

Capitalization of Fixed Assets

 

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.

 

Revenue Recognition

 

The Company retrospectively adopted FASB Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers”, on January 1, 2018, which did not have a material impact on the Company’s consolidated financial statements. The Company generates revenue primarily through contractual monthly recurring fees received for monitoring and related services provided to customers. In transactions involving security systems that are sold outright to the customer, or where equipment is already owned by the customer, the Company’s performance obligations include monitoring, related services, and the sale and installation, or refurbish and repair, of the security systems. Revenue associated with the sale and installation of security systems is recognized once installation is complete and is reflected in installation and repair revenue in the consolidated statements of operations. Revenue associated with monitoring and related services is recognized as those services are provided and is reflected in monitoring and related services revenue in the consolidated statements of operations.

 

Early termination of the contract by the customer results in a termination charge in accordance with the contract terms. Contract termination charges are recognized in revenue when collectability is probable and are reflected in monitoring and related revenue in the consolidated statements of operations. Amounts collected from customers for sales and other taxes are reported net of the related amounts remitted.

 

Barter Transactions

 

The Company conducts certain barter sales through trade organizations for which it is a member, as are some of its customers. The barter transactions are generally related to the Company providing its security services, and the value of these services is recorded at fair value which is the contracted for value of the services with the customer, which is the more readily available measure as to its valuation.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Fair Value Measurements

 

Disclosures about fair value of financial instruments require disclosure of the fair value information, whether or not recognized in its balance sheet, where it is practicable to estimate that value.

 

In accordance with ASC Topic 820, “Fair Value Measurements and Disclosures,” the Company measures certain financial instruments at fair value on a recurring basis. ASC Topic 820 defines fair value, established a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements.

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

 

 

·

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

 

 

 

 

·

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

 

 

 

·

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

 

 

 

Fair Value Measurement

 

 

 

Carrying Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities, debt and equity instruments

 

$72,904

 

 

 

 

 

 

 

 

$72,904

 

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liabilities, debt and equity instruments

 

$111,291

 

 

 

 

 

 

 

 

$111,291

 

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Changes in Level 3 assets measured at fair value for the year ended December 31, 2019 and 2018 were as follows:

 

Balance, December 31, 2017

 

$

 

Beneficial conversion derivative liability assumed in Merger

 

 

172,532

 

Changes in fair value of derivative

 

 

(61,241)

Balance, December 31, 2018

 

$111,291

 

Change in fair value of derivative

 

 

(38,387)

Balance, December 31, 2019

 

$72,904

 

 

Derivative Financial Instruments

 

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based financial instruments, the Company uses the Black-Scholes-Merton pricing model to value the derivative instruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

The Company estimates the fair value of these instruments using the Black-Scholes option pricing model and the intrinsic value if the convertible notes are due on demand.

 

The Company determined that certain convertible debt instruments outstanding as of the date of these consolidated financial statements include an exercise price “reset” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40, Derivatives and Hedging - Contracts in an Entity’s Own Stock (“ASC 815-40”). Certain of the convertible notes payable have a variable exercise price, thus are convertible into an indeterminate number of shares for which we cannot determine if we have sufficient authorized shares to settle the transaction with. Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period. Any change in fair value during the period is recorded in earnings as “Income (loss) from discontinued operations.” Please refer to Note 3 below.

 

Income Taxes

 

Income taxes are provided in accordance with ASC 740, Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

No provision was made for Federal or State income taxes.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Going Concern

 

The Company’s consolidated financial statements are prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has limited commercial experience and had a net loss from continuing operations of $806,688 for the year ended December 31, 2019, and an accumulated deficit of $2,288,000 and a working capital deficit of $2,105,528 at December 31, 2019. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and to allow it to continue as a going concern. The accompanying consolidated financial statements for the year ended December 31, 2019, have been prepared assuming the Company will continue as a going concern. The Company’s cash resources will likely be insufficient to meet its anticipated needs during the next twelve months. The Company will require additional financing to fund its future planned operations, including research and development and commercialization of its products.

 

The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund its operating losses until it establishes a revenue stream and becomes profitable. Management’s plans to continue as a going concern include raising additional capital through sales of equity securities and borrowing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. If the Company is not able to obtain the necessary additional financing on a timely basis, the Company will be forced to delay or scale down some or all of its development activities or perhaps even cease the operation of its business. The ability of the Company to continue as a going concern is dependent upon its ability to successfully secure other sources of financing and attain profitable operations. There is substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 was effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest period presented in the consolidated financial statements. The Company adopted the provisions of this standard in the year 2019 but did not have any impact since all leases are short-term in nature.

 

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment by removing Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation and may require the services of valuation experts. ASU 2017-04 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its consolidated financial statements.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and has issued subsequent amendments to this guidance. This new standard will replace all current guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for interim and annual periods beginning after December 31, 2018. The standard may be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company adopted this standard effective in these financial statements, which did not have an effect on its revenues or earnings.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

NOTE 3: ACQUIRED ASSETS AND ASSUMED LIABILITIES OF DISCONTINUED OPERATIONS

 

Assets Acquired and Liabilities Assumed through Reverse Merger

 

Pursuant to the terms of the Merger Agreement, and in exchange for all one hundred (100) issued and outstanding shares of LJR Security Services, Inc., LJR received one thousand (1,000) shares of series D senior convertible preferred stock, par value $.001 per share (the “Series D Preferred Stock”) of the Company, convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock of the Company. In addition, the LJR shareholder received one (1) share of series C super-voting preferred stock of the Company which granted the holder 50.1% of the votes of the Company at all times.

 

As a result of the Reverse Merger, the Company has acquired the following assets and liabilities which were recorded at fair value. The fair values of assets acquired and liabilities assumed are as follows:

 

Security deposit

 

$4,871

 

Goodwill

 

 

612,771

 

Accrued expenses

 

 

(125,647)

Accrued interest

 

 

(49,261)

Notes payable

 

 

(117,500)

Convertible notes

 

 

(138,500)

Derivative liability

 

 

(172,532)

Total identified net assets

 

$14,202

 

 

As a result of the Reverse Merger, we acquired approximately $0.6 million of liabilities of the former operations of NuLife Sciences, Inc., which have been discontinued. We are evaluating the means to relieve the Company of these liabilities. The assets and liabilities described below have been classified as discontinued operations in the consolidated financial statements.

 

 
24

 

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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Goodwill

 

The Company acquired goodwill through the Reverse Merger described above. The carrying value of $612,771 was impaired and written down to $0 as of December 31, 2018.

 

Notes Payable

 

As a result of the Reverse Merger the Company assumed notes payable with total outstanding principal of $117,500 and accrued interest of $36,304, detailed as follows:

 

 

·

Demand note payable with outstanding principal of $25,000, and accrued interest of $17,400. The note matured on June 30, 2015 and carries an interest rate of 12%. This note is in default.

 

 

 

 

·

Demand notes payable to East West Secured Developments, LLC, with a combined outstanding principal of $74,500, and accrued interest of $18,061. These notes matured on October 31, 2016 and carry an interest rate of 12%. These notes are in default.

 

 

 

 

·

Term note payable with outstanding principal of $18,000, and accrued interest of $843. The note matured on July 31, 2019 and carries an interest at the rate of 3%. This note was paid on December 5, 2019.

 

As of December 31, 2019 and 2018, notes payable had total outstanding principal of $99,500 and $117,700, and accrued interest of $51,179 and $41,044, all respectively. These liabilities have been incorporated into liabilities from discontinued operations.

 

Convertible Notes

 

As a result of the Reverse Merger the Company assumed convertible notes with total outstanding principal of $138,500 and accrued interest of $11,078, detailed as follows:

 

 

 

December 31,

2019

 

(A) Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.11 per share and is due December 2019 (in default)

 

$5,000

 

(B) Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.11 per share and is due August 2020

 

 

50,000

 

(C) Convertible note payable, annual interest rate of 5%, convertible into common stock at a variable rate per share and was due September 2018 (in default)

 

 

63,500

 

(D) Convertible note payable, annual interest rate of 8%, convertible into common stock at $0.30 per share and is due October 13, 2020

 

 

20,000

 

Total convertible debt

 

$138,500

 

 

 

A.Originally issued in 2017, outstanding principal of $5,000, and accrued interest of $715.

 

B.Hayden note was issued on August 23, 2017, outstanding principal of $50,000, and accrued interest of $4,538.

 

C.Current holder acquired the note in May 2018. Current outstanding principal of $63,500, and accrued interest of $4,295.

 

D.Escala note was issued October 13, 2017, outstanding principal of $20,000, and accrued interest of $1,530.

 

As of December 31, 2019 and 2018, convertible notes had total outstanding principal of $138,500 and $138,500 and accrued interest of $24,626 and $13,806, all respectively. These liabilities have been incorporated into liabilities from discontinued operations.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Derivative Liability

 

As of December 31, 2019 and 2018, the derivative liabilities were valued at $39,873 and $111 ,291, respectively, related to a convertible note [(C) above] due September 2018. This derivative liability has been incorporated into liabilities from discontinued operations.

 

The fair value of the embedded derivative was determined using the Black-Scholes Model with the following assumptions:

 

 

 

December 31,

2019

 

December 31,

2018

 

(1) dividend yield of

 

 

0%;

 

 

0%;

 

(2) expected volatility of

 

 

39%;

 

 

336%;

 

(3) risk-free interest rate of

 

 

1.55%;

 

 

2.18%;

 

(4) expected life of

 

 

0.33 year;

 

 

0.33 year;

 

(5) fair value of the Company’s common stock of

 

$

0.06 per share.

 

$

0.08 per share.

 

NOTE 4: PREPAID EXPENSES

 

The Company has available to its credit through certain trade organizations as a result of barter transactions for services. These amounts are available for use with certain vendors and establishments who are part of the same trade organization. These balances do not represent cash available to the Company, and as such are recorded as the prepaid expenses account as incurred.

 

As of December 31, 2019 and 2018, the available barter credit balances were $20,987 and $22,760, respectively.

 

As of December 31, 2019 this account also includes prepaid expense for legal expenses amounting to $5,000. As of December 31, 2018, this account also includes prepaid expense for legal expenses, insurance expenses and other professional fees amounting to $5,000, $12,800 and $45,000, respectively.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

NOTE 5: RELATED PARTY TRANSACTIONS AND BALANCES

 

An officer of the Company agreed to defer portions of his salaries annually since inception. The balances due under this arrangement were $218,805 and $43,859 as of December 31, 2019 and 2018, respectively. This balance has no formal repayment terms or interest.

 

The same officer of the Company advances funds to the Company and receives repayments on such advances throughout the year in the form of allowing Company use of personal credit cards. The balances due under this arrangement as of December 31, 2019 and 2018 were $3,565 and $31,776, respectively.

 

NOTE 6: BRIDGE LOAN FROM AFFILIATES

 

As of December 31, 2019 and 2018, the Company has received advances totaling to $1,072,050 and $671,000, respectively, from its affiliates. The formal structure and payment terms of these advances have not yet been determined by the Company and its affiliates.

 

NOTE 7: CAPITAL STOCK

 

The Company is authorized to issue 475,000,000 shares of $0.001 par value common stock and 25,000,000 shares of $0.001 par value preferred stock.

 

As of December 31, 2019 and 2018, the Company had 4,518,250 shares of its common stock issued and outstanding, with 742,500 shares of its Series A Convertible Preferred Stock issued and outstanding, 0 shares of its Series B Convertible Preferred Stock issued and outstanding, 1 share of its Series C Super-Voting Preferred Stock issued and outstanding, and 1,000 shares of its Series D Senior Convertible Preferred Stock issued and outstanding.

 

Description of Preferred Stock:

 

Series A Preferred Stock

 

The Company has 742,500 shares of Preferred Stock designated as Series A Preferred Stock with the following characteristics:

 

 

·

Holders of the Series A Stock are entitled to receive dividends or other distributions with the holders of the common stock on an “as converted” basis when, as, and if declared by the Board of Directors of the Company.

 

 

 

 

·

Holders of shares of Series A Stock, upon Board of Directors approval, may convert at any time following the issuance upon sixty-one (61) day written notice to the Company. Each share of Series A Stock shall be convertible into such number of fully paid and non-assessable shares of common stock as is determined by multiplying the number of issued and outstanding shares of the Company’s common stock together with all other derivative securities, including securities convertible into or exchangeable for common stock, whether or not then convertible or exchangeable (b) subscriptions, rights, options and warrants to purchase shares of common stock, whether or not then exercisable, but entitled to vote on matters submitted to the shareholders, issued by the Company and outstanding as of the date of conversion, by .000001, then multiplying that number of shares of Series A Stock to be converted.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

 

·

In case of any consolidation, merger of the Company, or a change of control of the Company’s Board, the holders are entitled, without any further action required or permission by the Board, to exercise their conversions rights. In the case of any consolidation, merger of the Company, the Board shall mail to each holder of Series A Stock at least thirty (30) days prior to the consummation of such event, a notice thereof and each such holder shall have the option to either (i) convert such holder’s shares of Series A Stock into shares of common stock pursuant to this paragraph and thereafter receive the number of shares of common stock or other securities or property, or cash, as the case may be, to which a holder of the number of shares of common stock of the Company deliverable upon conversion of such Series A Stock would have been entitled upon conversion immediately preceding such consolidation, merger or conveyance, or (ii) exercise such holder’s rights pursuant to Section 8.1(a) hereof; provided however that the Series A Stock shall not be subject to or affected as to the number of conversion shares or the redemption or liquidation price by reason of any reverse stock split affected prior or as a result of any reorganization.

 

 

 

 

·

In the event of a liquidation, the holders of shares of the Series A Stock shall be entitled to receive, prior to the holders of the other series of preferred stock and prior and in preference to any distribution of the assets or surplus funds of the Company to the holders of any other shares of stock of the Company by reason of their ownership of such stock, an amount equal to five dollars ($5.00) per share with respect to each share of Series B Stock owned as of the date of Liquidation, plus all declared but unpaid dividends with respect to such shares, and thereafter they shall share in the net Liquidation proceeds on an “as converted basis” on the same basis as the holders of the common stock.

 

 

 

 

·

The holders of each share of Series A Stock shall have that number of votes as determined by multiplying the number of issued and outstanding shares of the Company’s common Stock together with all other derivative securities issued by the Company and outstanding as of the date of conversion, whether or not then convertible or exchangeable, entitled to vote on matters submitted to the shareholders, by .000001, then multiplying that number of shares of Series A Stock to be converted.

 

 

 

 

·

The Corporation shall have the option to redeem all of the outstanding shares of Series A Stock at any time on an “all or nothing” basis, unless otherwise mutually agreed in writing between the Corporation and the holders of shares of Series A Stock holding at least 51% of such Series A Stock, beginning ten (10) business days following notice by the Company, at a redemption price the higher of (a) five dollars ($5.00) per share, or (b) fifty percent (50%) of the trailing average highest closing bid price of the Company’s common stock as quoted on www.OTCMarkets.com or the Company’s primary listing exchange on the date of notice of redemption, unless otherwise modified by mutual written consent between the Company and the holders of the Series A Stock (the “Conversion Price”). Redemption payments shall only be made in cash within sixty (60) days of notice by the Company to redeem.

 

 

 

 

·

The shares of Series A Stock acquired by the Company by reason of conversion or otherwise can be reissued, but only as an amended class, not as shares of Series A Stock.
   
 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

Series C Preferred Stock

 

 

·

The Company has 1 share of Preferred Stock designated as Series C Preferred Stock. Although the Series C Preferred Stock carries no dividend, distribution, liquidation or conversion rights, each share of Series C Preferred Stock grants the holder 50.1% of the total votes of all classes of capital stock of the Company and are able to vote together with the common stockholders on all matters. Consequently, the holder of the Company’s Series C Preferred Stock is able to unilaterally control the election of its board of directors and, ultimately, the direction of the Company.

 

Series D Preferred Stock

 

 

·

The Company has 1,000 shares of Preferred Stock designated as Series D Preferred Stock. Although the Series D Preferred Stock have no voting rights, shares of Series D Preferred Stock in the aggregate are convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock of the Company. Additionally, the Series D Preferred Stock has pari passu dividend, distribution and liquidation rights with the common stock.

 

Stock Options

 

As a result of the Reverse Merger the Company has outstanding stock options as of December 31, 2019 and 2018 as follows:

 

 

 

December 31, 2019

 

 

December 31, 2018

 

 

 

Stock

Options

 

 

Weighted Average Exercise Price

 

 

Stock

Options

 

 

Weighted Average Exercise Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding - beginning of year

 

 

2,120,000

 

 

$0.17

 

 

 

-

 

 

$-

 

Granted

 

 

-

 

 

 

-

 

 

 

2,120,000

 

 

 

0.17

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited

 

 

(1,500,000)

 

 

0.14

 

 

 

-

 

 

 

-

 

Outstanding - end of year

 

 

145,200

 

 

$0.23

 

 

 

2,120,000

 

 

$0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable and vested - end of year

 

 

145,200

 

 

 

 

 

 

 

2,120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average remaining term

 

 

0.09

 

 

 

 

 

 

 

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average intrinsic value

 

$145,200

 

 

 

 

 

 

$355,200

 

 

 

 

 

 

 
29

 

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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

NOTE 8: INCOME TAXES

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of December 31, 2019 and 2018 are summarized below.

 

 

 

2019

 

 

2018

 

Net operating loss carryforward

 

$(373,451)

 

$(210,736)

Other

 

 

 

 

 

 

Total deferred tax assets

 

 

(373,451)

 

 

(210,736)

Valuation allowance

 

 

373,451

 

 

 

210,736

 

Net deferred tax asset

 

$

 

 

$

 

 

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2019 and 2018, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized, and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates.

 

No federal tax provision has been provided for the years ended December 31, 2019 and 2018 due to the losses incurred during such periods. Reconciled below is the difference between the income tax rate computed by applying the U.S. federal statutory rate and the effective tax rate for the years ended December 31, 2019 and 2018.

 

 

 

2019

 

 

2018

 

U.S federal statutory income tax

 

 

-21.00

%

 

 

-21.00

%

State tax, net of federal tax benefit

 

 

-5.80

%

 

 

-5.80

%

Stock based compensation

 

 

0.00%

 

 

0.00%

Change in valuation allowance

 

 

26.80%

 

 

26.80%

Effective tax rate

 

 

0.00%

 

 

0.00%

 

At December 31, 2019, the Company has available net operating loss carryforwards for federal and state income tax purposes of approximately $1.78 million, which, if not utilized earlier, expire through 2039.

 

The U.S. tax reform bill that Congress voted to approve December 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping modifications to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and a move to a territorial system for corporations that have overseas earnings. The act replaced the prior-law graduated corporate tax rate, which taxed income over $10 million at 35%, with a flat rate of 21%.

 

 
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GULF WEST SECURITY NETWORK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2019 and December 31, 2018 and for the years then ended

 

The Tax Reform Act of 1986 limits the annual utilization of net operating loss and tax credit carry forwards, following an ownership change of the Company. Note that as a result of the Company’s equity financings in recent years, the Company underwent changes in ownership for purposes of the Tax Reform Act. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of any of the Company’s net operating loss carry forwards may be limited if cumulative changes in ownership of more than 50% occur during any three-year period.

 

NOTE 9: COMMITMENT AND CONTINGENCIES

 

Office Lease

 

During the year ended December 31, 2019, the Company rented space on a month-to-month basis in a Class 1 office in Lafayette, LA. The monthly rent is $3,000. For the year ended December 31, 2019 and 2018, the Company incurred $18,000 and $29,500 in rent expense, respectively.

 

Laboratory Lease

 

During 2017, the Company executed a 5-year lease for a laboratory located at NOVA Southeastern University to be used by NuLife for conducting bench research. The lease calls for monthly payments of base rent of $1,925 along with applicable taxes and shared operating expenses. The lease required a security deposit in the amount of $4,871 and requires a 4% increase in base rent annually. During the year ended December 31, 2018, the agreement was terminated, with rent declared due and payable immediately in the amount of $142,944, including $46,052 past due rent, $92,850 estimated future rent payments, and $4,042 brokerage fees. These liabilities have been incorporated into liabilities from discontinued operations.

 

Litigation

 

From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

 

NOTE 10: SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after December 31, 2019 up through the date of the these consolidated financial statements.

 

Subsequent to the period ended December 31, 2019, the Company received an additional advance amounting to $40,000 from its affiliate. The formal structure and payment terms of these advances have not yet been determined by the Company and its affiliate.

 

 
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Table of Contents

 

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

 

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statement disclosure.

 

Item 9A. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures: We conducted an evaluation by our management, which consists of our President of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC`s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

Based on this evaluation, our President concluded as of December 31, 2019, that our disclosure controls and procedures are not effective at a reasonable assurance level and are designed to provide reasonable assurance that the controls and procedures will meet their objectives. However, it should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

 

Management's Report on Internal Control Over Financial Reporting: Our management is responsible for establishing and maintaining adequate 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. The key internal controls for the Company are provided by executive management's review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

 

 

(1)pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

 

 

 

(2)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

 

 

 

 

(3)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

 
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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 the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company's internal controls and procedures over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

 

Based on this assessment, management has concluded that as of December 31, 2019, our internal control over financial reporting was ineffective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

Attestation Report of the Independent Public Accounting Firm

 

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to applicable rules of the SEC that permit the Company to provide only management's report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially

affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

Item 9B. Other Information.

 

None.

 

 
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Table of Contents

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

Officers and Directors

 

The following table contains information as of December 31, 2019 as to each Officer and Director of the Company:

 

Name

 

Age

 

Position

Lou Resweber

 

57

 

Principal Executive Officer and Principal Financial Officer

Sean C. Clarke

 

41

 

Director

 

Louis J. Resweber. Mr Resweber has served as Chairman of the Board, Chief Executive Officer and Corporate Secretary of the Company since October 9, 2018. Prior to joining the Company, from September 2015 through October 2013, Mr. Resweber served as Chairman, President and Chief Executive Officer of LJR Security Services, Inc. and Gulf West Security Network, Inc., two privately-owned companies headquartered in Lafayette, LA, and both actively engaged in the electronic security industry. From September 2015 through September 2016, Mr. Resweber served as President and Chief Operating Officer of ESP Resources, Inc. (Nasdaq: ESPI). Previously, from its inception in March of 1993 through its successful sale in September of 2015, Mr. Resweber served as the Chairman of the Board, President and Chief Executive of Pelican Security Network, Inc., which he built from a start-up into the 36th largest provider of electronic security in the nation, in an industry with more than 14,000 licensed participants. Prior to that, from 1993 to 1996, Mr. Resweber was Chairman of the Board of Westmark Group Holdings, Inc. (Nasdaq:WGHI), where he completed the company’s reorganization as a nationwide financial services concern. From 1995to 1996, he was President and Chief Executive Officer of Network Acquisition Corp., a wholly-owned subsidiary of Network Long Distance, Inc. (Nasdaq: NTWK), where he engineered a series of 17 successful mergers and acquisitions, helping to convert the company into one of the fastest-growing participants in the independent switch based telecommunications industry. From 1992 to 1995, he was Senior Vice President of Capital Markets for United Companies Financial Corporation (NYSE:UC), where he was instrumental in developing a capitalization plan that helped push its stock from $16 to $132 per share, making it one of the top growth stock of that time. And from 1991 to 1992, he was Senior Vice President of Hill & Knowlton International, Inc, beginning his career in the energy sector, Mr. Resweber served as Vice President of Arkla Energy (NYSE: ALG /now NRG - Reliant Energy) in Shreveport, LA; as Vice President of Entex Gas (NYSE: ETX / now CenterPoint Energy) in Houston, TX; and as Manager of Celeron Oil &Gas (NYSE: CEL/now Plains - All American Pipeline) in Santa Barbara, CA; Austin, TX; Houston, TX; and Lafayette, LA; the latter of which ultimately merged with The Goodyear Tire & Rubber (NYSE: GT).

 

Sean C. Clarke. Mr. Sean C. Clarke has, since the Company’s inception on October 15, 2013 served in various capacities. Presently, Mr Clarke is a member of the Board of Directors. Mr. Clarke has also served as Chief Executive Officer and President and Chief Financial Officer of the Company. Mr. Clarke has served as the sole officer of EPunk, Inc. from June 2013 through the present time, where he provides financial and management services for small to medium-sized companies. These include part time CEO services to these companies, which includes operational advice, accounting, supply chain management, preparation of security filings, and advice regarding compliance, and corporate governance. From 2010 through June 2013, Mr. Clarke worked privately as an accountant for Global Properties Corp. where he refined existing accounting systems, instituted internal controls and worked in direct support of the Director, board members and primary shareholders. In 2010, he served as an interim controller for Omega Accounting Solutions, a South Orange County California accounting firm where he administered financial reporting, budgeting and payroll services for small businesses. He implemented and revised accounting systems, and accounting software solutions across functional departments. During which time, he orchestrated two cost containment strategies resulting in the turnaround of two key clients. He also established AIA government compliant billing and payroll processes. In 2009, as a contractor, Mr. Clarke functioned as the sole On-Site IT Administration and Payable Accountant for a $275 million organization that conducted nondestructive testing for major utilities. He coordinated with the Network Administrator to manage a $1.5 million network of servers and operational technology. Mr. Clarke started his career in sales at Yellow Book USA where he served from 2000 to 2006. As an Assistant Sales Manager, he oversaw a twenty-person sales team responsible for $15 million in annual sales. He facilitated management and recruitment, training, forecasting, and internal reporting responsibilities. He administered a budget, and coordinated with major vendors to contain costs, implement new technology, and ensure product quality. He served in the retention of key accounts, and represented the division at local and superior court levels. Mr. Clarke earned a Bachelor of Science in Business Administration with an emphasis in Finance from Chapman University in May 2002 and a Master of Business Administration from the University San Diego in May 2008.

 

 
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Family Relationships

 

None.

 

Involvement in Certain Legal Proceedings

 

No executive officer or director has been involved in the last ten years in any of the following:

 

 

·

Any bankruptcy petition filed by or against any business or property of such person, or 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;

 

 

 

 

·

Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

 

 

 

·

Being 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;

 

 

 

 

·

Being found by a court of competent jurisdiction (in a civil action), the SEC 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;

 

 

 

 

·

Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or 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, fraud, wire fraud or fraud in connection with any business entity; or

 

 

 

 

·

Being 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.

 

Corporate Governance by Board - Meetings, Committees and Audit Committee Financial Expert

 

In general, Boards of Directors have responsibility for risk management responsibilities and establishing broad corporate policies and reviewing overall performance rather than day-to-day operations. Also, a primary responsibility of a Board is to oversee the management of the Company and, in doing so, serve the best interests of the Company and its stockholders. Boards select, evaluate and provide for the succession of executive officers and, subject to stockholder election, directors. Boards review and approve corporate objectives and strategies, and evaluate significant policies and proposed major commitments of corporate resources. Boards of Directors also participate in decisions that have a potential major economic impact on the Company. Management keeps directors informed of company activity through regular communication, including written reports and presentations at Board and committee meetings.

 

We do not currently have regularly scheduled quarterly Board meetings, nor do we have standing audit, nominating or compensation committees of our Board of Directors, or any committee performing similar functions. Our Board of Directors performs the functions of audit, nominating and compensation committees. As of the date of this prospectus, no member of our Board of Directors qualifies as an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation SK promulgated under the Securities Act.

 

The Company is evaluating expansion of its current Board of Directors, including the addition of an independent board member with sufficient accounting and financial experience to chair an audit committee, as well as creating charters for its contemplated audit committee and compensation committee.

 

 
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Director Nominations

 

As of December 31, 2019, we did not affect any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. We have not established formal procedures by which security holders may recommend nominees to the Company's board of directors.

 

Code of Ethics

 

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. A copy of our code of ethics may be obtained free of charge by contacting us at the address or telephone number listed on the cover page hereof.

 

Section 16 Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and significant stockholders (defined by statute as stockholders beneficially owning more than 10% of our common stock) to file with the SEC initial reports of beneficial ownership, and reports of changes in beneficial ownership, of our common stock. Directors, executive officers and significant stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of Forms 3, 4 and 5 (and amendments thereto) filed with the SEC and submitted to us, and on written representations by certain directors and executive officers received by us, we believe that all of our executive officers, directors and significant stockholders complied with all applicable filing requirements under Section 16(a) during the year ended December 31, 2019.

 

Item 11. Executive Compensation.

 

Summary Compensation Table

 

The following table shows for the fiscal years ended December 31, 2019 and December 31, 2018 compensation awarded to or paid to, or earned by, our President, Chief Executive Officer and Chief Financial Officer (the “Named Executive Officers”).

 

Name and Principal Position

 

Year

 

Salary ($)

 

 

Bonus ($)

 

 

Stock

Awards ($)

 

 

All Other

Compensation ($)

 

 

Total ($)

 

Louis J. Resweber

 

2019

 

$264,000

 

 

$

 

 

$

 

 

$

 

 

$264,000

 

(President)

 

2018

 

$48,000

 

 

$

 

 

$

 

 

$

 

 

$48,000

 

 

On October 5, 2018, pursuant to the Merger Agreement with LJR, and in exchange for all one hundred (100) issued and outstanding shares of LJR, Lou Resweber, the sole shareholder of LJR received one thousand (1,000) shares of series D senior convertible preferred stock of the Company, convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock of the Company, and one share of series C super-voting preferred stock of the Company which grants the holder 50.1% of the votes of the Company at all times.

 

Narrative Disclosure to Summary Compensation

 

Louis J. Resweber – Effective October 8, 2018, the Company entered into an employment agreement with Louis J. Resweber, the Company’s Chief Executive Officer, President and Chairman of the board of directors. The term of the employment agreement runs through October 8, 2023. The employment agreement provides for an annual base salary that is subject to increase at the Compensation Committee’ discretion. The annual base salary in effect during the period covered by this Form 10-K was $264,000. Under the employment agreement, Mr. Resweber is eligible for an annual cash bonus based upon achievement of performance-based objectives established by the board of directors.

 

Equity Awards

 

None.

 

Compensation of Directors

 

During our fiscal years ended December 31, 2019 and 2018, we did not provide compensation to any of our directors for serving as a director.

 

 
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of March 26, 2020, certain information with regard to the record and beneficial ownership of the Company's common stock by (i) each person known to the Company to be the record or beneficial owner of 5% or more of the Company's common stock, (ii) each director of the Company, (iii) each of the named executive officers, and (iv) all executive officers and directors of the Company as a group:

  

Name(1)

 

Shares

of

Common

Stock Beneficially

Owned

 

 

Percent of

Class

 

 

Shares of

Series A Preferred

Stock

Beneficially

Owned(2)

 

 

Percent

of

Class

 

 

Shares of

Series C Preferred

Stock

Beneficially

Owned(3)

 

 

Percent of Class

 

 

Shares of

Series D Preferred

Stock

Beneficially

Owned(4)

 

 

Percent

of

Class

 

 

Other Beneficial

Ownership

 

 

Total

 

 

Voting Percentage for all

Classes

(fully-

diluted)

 

Louis J. Resweber(5)

 

 

 

 

*

 

 

 

 

 

*

 

 

 

1

 

 

 

100.00%

 

 

1,000

 

 

 

100.00%

 

 

 

 

 

1,001

 

 

 

99.98%

Sean C. Clarke(6)

 

 

50,000

 

 

 

1.11%

 

 

7,500

 

 

 

1.05%

 

 

 

 

*

 

 

 

 

 

*

 

 

 

 

 

 

57,500

 

 

 

1.05%

Global Business Strategies, Inc.(7)

 

 

132,156

 

 

 

2.92%

 

 

55,500

 

 

 

7.67%

 

 

 

 

*

 

 

 

 

 

*

 

 

 

1,500,000

 

 

 

1,637,656

 

 

 

7.67%

Derek Cahill(8)

 

 

2,175,000

 

 

 

48.14%

 

 

 

 

*

 

 

 

 

 

*

 

 

 

 

 

*

 

 

 

 

 

 

2,175,000

 

 

 

 

Kingdom Building, Inc.(9)

 

 

253,325

 

 

 

2.88%

 

 

655,000

 

 

 

91.29%

 

 

 

 

*

 

 

 

 

 

*

 

 

 

 

 

 

785,000

 

 

 

91.29%

All directors/directornominees and executiveofficers as a group (2 persons)

 

 

50,000

 

 

 

1.11%

 

 

7,500

 

 

 

1.01%

 

 

1

 

 

 

100.00%

 

 

1,000

 

 

 

100.00%

 

 

 

 

 

58,501

 

 

 

99.99%

 

(1)Except as otherwise indicated, the address of each beneficial owner is c/o Gulf West Security Network, Inc., 2851 Johnson Street, Unit #194 Lafayette, LA, 70503 (337) 210-8790.

 

 

(2)Shares of our Series A Preferred Stock are not convertible into common stock and are entitled to such votes as determined by multiplying the number of issued and outstanding shares of the Corporation’s Common Stock together with all other derivative securities issued by the Corporation and outstanding as of the Date of Conversion, whether or not then convertible or exchangeable, entitled to vote on matters submitted to the Shareholders, by .000001, then multiplying that by the number of shares of Series A Preferred Stock issued and outstanding.

 

 

(3)Shares of our Series C Preferred Stock are not convertible into common stock but hold 50.1% of the vote of all classes of capital stock, and are entitled to vote together with holders of our common stock on all matters in which our common stockholders may vote.

 

 

(4)Shares of our Series D Preferred Stock are convertible into fifty million two hundred thirty-nine thousand five hundred forty-one (50,239,541) shares of common stock, and are entitled to vote together on an as converted basis with holders of our common stock on all matters in which our common stockholders may vote.

 

 

(5)Chief Executive Officer and Chairman of the Board of Directors.

 

 

(6)Former Chief Financial Officer and Secretary and current member of the Board of Directors. Mr. Clarke has the option to convert 7,500 Series A Preferred Stock upon board of directors approval of the conversion, which shares are convertible into such number of shares of common stock as determined by multiplying the number of issued and outstanding shares of the Corporation’s Common Stock together with all other derivative securities issued by the Corporation and outstanding as of the Date of Conversion, whether or not then convertible or exchangeable, entitled to vote on matters submitted to the Shareholders, by .000001, then multiplying that by the number of Series A Preferred shares held.

 

 
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(7)Former President of the Company. Mr. Luke’s common and preferred shares are held by Global Business Strategies Inc. (“GBSI”), a Nevada corporation beneficially controlled by Mr. Luke. Mr. Luke has the option to convert GBSI’s 55,000 Series A Preferred Stock upon board of directors approval of the conversion, which shares are convertible into such number of shares of common stock as determined by multiplying the number of issued and outstanding shares of the Corporation’s Common Stock together with all other derivative securities issued by the Corporation and outstanding as of the Date of Conversion, whether or not then convertible or exchangeable, entitled to vote on matters submitted to the Shareholders, by .000001, then multiplying that by the number of Series A Preferred shares held.

 

 

(8)Beneficial shareholder of the Company.

 

 

(9)A California corporation named Kingdom Building, Inc. has the option to convert 655,000 Series A Preferred Stock upon board of directors approval of the conversion, which shares are convertible into such number of shares of common stock as determined by multiplying the number of issued and outstanding shares of the Corporation’s Common Stock together with all other derivative securities issued by the Corporation and outstanding as of the Date of Conversion, whether or not then convertible or exchangeable, entitled to vote on matters submitted to the Shareholders, by .000001, then multiplying that by the number of Series A Preferred shares held. This corporation is owned by Ted Haberfield.
 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Certain Relationships and Related Transactions

 

None.

 

Corporate Governance and Director Independence

 

The Company has not:

 

 

·

established its own definition for determining whether its directors and nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current director would not be deemed to be “independent” under any applicable definition given that he is an officer of the Company; nor

 

 

 

 

·

established any committees of the board of directors.

 

Given the nature of the Company's business, its limited stockholder base and the current composition of management, the board of directors does not believe that the Company requires any corporate governance committees at this time.

 

As of the date hereof, the entire board serves as the Company's audit committee.

 

 
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Item 14. Principal Accounting Fees and Services.

 

Independent Public Accountants

 

On February 14, 2020, Daszkal Bolton LLP and the Company mutually agreed to terminate the engagement of Daskal Bolton LP as the Company’s independent registered public accounting firm. Effective as of February 14, 2020, M&K CPAS, PLLC, the independent registered public accounting firm for GWSN, was engaged by the Company as its new independent registered public accounting firm.

 

Audit Fees

 

The aggregate fees billed for the two most recently completed fiscal years ended December 31, 2019, and December 31, 2018, for professional services rendered by M&K CPAS, PLLC and Daszkal Bolton LLP, for the audit of our annual consolidated financial statements, quarterly reviews of our interim, unaudited consolidated financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

 

 

 

Year Ended

December 31,

2019

 

 

Year Ended

December 31,

2018

 

Audit Fees and Audit Related Fees

 

$72,280

 

 

$43,950(1)

Tax Fees

 

 

-

 

 

 

-

 

All Other Fees

 

 

-

 

 

 

-

 

Total

 

$72,280

 

 

$43,950

 

 

(1)Includes $43,950 in audit fees paid to Daszkal Bolton LLP for services provided to Gulf West Security Networks after the Merger.

 

In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.

 

 
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Item 15. Exhibits, Financial Statement Schedules.

 

Exhibit No.

 

Description

 

 

3.1

 

Amended and Restated Articles of Incorporation (1)

 

 

3.2

 

Amended and Restated By-Laws (1)

 

 

3.3

 

Certificate of Designation for Series A Preferred Stock

 

 

3.4

 

Certificate of Designation for Series C Preferred Stock (1)

 

 

3.5

 

Certificate of Designation for Series D Preferred Stock (1)

 

 

10.1

 

Form of Note Agreement (2)

 

 

14.1

 

Code of Ethics (4)

 

 

31.1

 

Certification of Principal Executive Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*

 

 

31.2

 

Certification of Principal Financial Officer required under Rule 13a-14(a)/15d-14(a) under the Exchange Act.*

 

 

32.1

 

Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

 

 

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

 

 

101

 

XBRL Interactive Data Files*

____________

* Filed herewith.

 

(1)

Incorporated herein by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 24, 2018.

 

(2)

Incorporated herein by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on September 28, 2017.

 

(3)

Incorporated herein by reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on November 11, 2016.

 

(4)

Incorporated herein by reference to the Company’s Form S-1/A filed with the Securities and Exchange Commission on February 24, 2014.

 

Item 16. Form 10–K Summary.

 

Not applicable.

 

 
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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

GULF WEST SECURITY NETWORK, INC.

 

 

Date: March 30, 2020

By:

/s/ Louis J. Resweber

 

 

Louis J. Resweber

 

 

President (Principal Executive Officer)

 

 

Pursuant to 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.

 

Signature

 

Title

 

Date

 

 

/s/ Louis J. Resweber

 

President

 

March 30, 2020

Louis J. Resweber

 

(Principal Executive Officer and Principal Financial Officer)

 

41