Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements 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 known and unknown risks, uncertainties and
other factors that may cause our actual results, level of activity, 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. You should not place undue certainty on these forward-looking
statements, which apply only as of the date of this report. These
forward-looking statements are subject to certain known and unknown risks,
uncertainties and assumptions that could cause actual results to differ
materially from historical results or our predictions. The terms "GWSN," "we,"
"us," "our," and the "Company" refer to Gulf West Security Network, Inc., a
Nevada corporation, except where the context requires otherwise. The following
discussion should be read in conjunction with our condensed consolidated
financial statements and related notes thereto included elsewhere in this
report.
Business Overview
Gulf West Security Network, Inc., a Nevada corporation, and its wholly-owned
subsidiaries (formerly known as NuLife Sciences, Inc.), are principally engaged
in the sale, installation, servicing, and monitoring of electronic home and
business security and automation systems in the United States.
The Company's retail division, which includes its wholly-owned subsidiary, LJR
Security Services, Inc., a Louisiana corporation ("LJR"), is actively engaged 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").
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.
Both Gulf West and LJR are based in Lafayette, Louisiana and were previously
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.
Reverse Merger
On August 9, 2018, the Board of Directors of the Company through its
wholly-owned subsidiary NuLife Acquisition Corp., a Louisiana corporation
("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 had 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 the Merger Agreement. Pursuant to the terms of
the Merger Agreement, NuLife Sub merged with and into LJR, with LJR being the
surviving entity and becoming a wholly-owned subsidiary of the Company, all one
hundred (100) issued and outstanding shares of common stock of LJR held by the
sole stockholder of LJR ("LJR Stockholder") were exchanged into one thousand
(1,000) shares of series D senior convertible preferred stock, par value $0.001
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 (the "Merger"). In addition,
the LJR Stockholder received one 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.
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The Merger was intended to constitute a tax-free reorganization within the
meaning of Section 368 of the United States Internal Revenue Code of 1986, as
amended. In accordance with the accounting treatment for a "reverse merger",
the Company's historical financial statements prior to the Merger have been
replaced with the historical financial statements of LJR prior to the Merger.
The financial statements after completion of the Merger include the assets,
liabilities, and results of operations of the combined company from and after
the closing date of the Merger, with only certain aspects of pre-consummation
stockholders' equity remaining in the consolidated financial statements.
On September 19, 2018, the Company amended and restated its articles of
incorporation of the Company in order to change the Company's name to "Gulf West
Security Network, Inc." The Company also amended and restated its bylaws to
reflect the name change.
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 Merger to closely align the Company's operations and internal
controls with that of its wholly owned subsidiary LJR.
Our corporate office is located at 2851 Johnson Street, Unit #194, Lafayette,
LA, 70503 and our telephone number is (337) 210-8790.
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of the unaudited 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 unaudited consolidated financial statements for a
discussion of recently issued accounting standards.
Results of Operations
Three months ended March 31, 2021 and 2020
We had revenue of $2,541 for the three months ended March 31, 2021, as compared
to $2,699 for the three months ended March 31, 2020, a decrease of $158.
Cost of Revenue
Cost of revenue sold for the three months ended March 31, 2021 was $986, as
compared to $1,124 for the three months ended March 31, 2020, a decrease of
$138.
General and Administrative
Our general and administrative expenses for the three months ended March 31,
2021 were $110,674, a decrease of $11,994, or 9.8%, compared to $122,668 for the
three months ended March 31, 2020. General and administrative expenses decreased
mainly due to timing of legal expenses, wages, office expenses, insurance, audit
and accounting expenses associated with our operations as a public company.
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Sales and marketing
Our sales and marketing expenses for the three months ended March 31, 2021 were
$0, compared to $26 for the three months ended March 31, 2020. The decrease in
sales and marketing expenses reflected management's decision to shift its focus
from retail to wholesale alarm operations.
Loss from discontinued operations
Subsequent to the Merger, management decided to discontinue the activities of
NuLife. As a result, we recorded loss of $26,667 primarily due to a change in
the fair value of a derivative liability for the three months ended March 31,
2021.
Net loss
As a result of the foregoing, for the three months ended March 31, 2021, we
recorded a net loss of $138,583 compared to a net loss of $91,808 for the three
months ended March 31, 2020.
Liquidity and Capital Resources
At March 31, 2021, the Company had $17,757 cash. The Company had a net loss from
continuing operations of $119,916 for the three months ended March 31, 2021, and
an accumulated deficit of $3,218,443, and a working capital deficit of
$2,855,981 at March 31, 2021. 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. However, the Company has limited commercial experience and 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 three months ended March 31, 2021,
have been prepared assuming the Company will continue as a going concern.
We do not believe that we have enough cash on hand to operate of business during
the next 12 months. The Company will require additional financing to fund its
future planned operations, including research and development and
commercialization of its products. To date, the Company has financed its
operation primarily from advances from its affiliates. As of March 31, 2021 and
December 31, 2020, the Company has received advances totaling $1,797,666 and
$1,728,166, respectively, from its affiliates. The formal structure and payment
terms of these advances have not yet been determined by the Company and the
third parties. We do not have verbal or formal contracts with our affiliates
obligating them to loan funds to us.
We may seek to raise additional funding that we require in the form of equity
financing from the sale of our common stock. However, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock to fund our operations. We currently do not
have any agreements or arrangements in place for any future financing.
Operating Activities
During the three months ended March 31, 2021, we used $55,126 of cash in
operating activities primarily as a result of our loss of $138,583 from
operations, offset by net changes in working capital items of operating assets
and liabilities of $56,790.
During the three months ended March 31, 2020, we used $950 of cash in operating
activities primarily as a result of our net loss of $91,808 and net changes in
operating assets and liabilities of $56,329.
Financing Activities
During the three months ended March 31, 2021, financing activities provided
$69,500 in proceeds from a bridge loan and $3,919 in payment of advances from a
related party.
During the three months ended March 31, 2020, financing activities provided
$50,500 in proceeds from a bridge loan and $6,651 in payment of advances from a
related party.
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Off-Balance Sheet Transactions
At March 31, 2021, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet arrangements.
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