The following discussion and analysis of Gulf West Security Network, Inc. f/k/a
NuLife Sciences, Inc., a Nevada corporation ("GWSN," "we," "us," "our," and the
"Company") and its wholly-owned subsidiaries financial condition and results of
operations includes information with respect to our plans and strategies for our
business and should be read in conjunction with our interim unaudited condensed
consolidated financial statements and related notes ("Interim Financial
Statements") included herein, and our consolidated financial statements, related
notes, and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2020.
Forward-Looking Statements
This quarterly 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. 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
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions.
Business Overview
GWSN 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.
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 with LJR (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, and 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. The closing of the Merger, pursuant to the terms and conditions of the
Merger Agreement, occurred on October 5, 2018, at which time LJR became a
wholly-owned subsidiary of the Company.
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The Merger constituted 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 were 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 providing for a change in 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.
Acquisition Agreement and Related Matters
On December 21, 2020, the Company entered into a share purchase agreement with
the sole shareholder and owner of Westech Security and Investigations, Inc.
("Westech"). Pursuant to the terms of the share purchase agreement, the sole
shareholder of Westech will sell all her shares to the Company in exchange for
approximately 66% of the Company's issued and outstanding shares of common stock
(the "Sale"), to become effective at such time as the articles of merger have
been filed. The remaining 34% of the Company's issued and outstanding shares of
common Stock shall consist of presently issued and outstanding shares of common
Stock of the Company and the following to be issued in the form of Company's
Series E Preferred Stock, convertible into one share of Company's common Stock,
and shall consist of: (i) an exchange of all outstanding preferred stock of the
Company, (ii) an exchange of all outstanding loans to the Company which shall
either be satisfied or shall convert to Series E Preferred Stock immediately
following the closing of the sale so that there are no outstanding loans to the
Company at closing of the sale, (iii) a bridge loan of $500,000 previously made
to Westech, which shall convert to Series E Preferred Stock immediately
following the closing of the sale and (iv) an investment of $750,000 into the
Company at closing of the sale. In connection with the additional $1,250,000,
the Company shall issue 1,250,000 shares of Series E Preferred Stock.
Furthermore, subject to the approval of Company's shareholder and subject to
discretion of the Board of Directors of the Company, the Company will change its
name to "Westech Security and Investigation, Inc", increase the number of shares
of authorized preferred stock so it has sufficient amount of preferred stock to
undertake the transactions contemplated by the sale; and undertake a 1-for-187
reverse stock split of its shares of common stock. Subsequent to the period
ended September 30, 2021, the Company is still in the process of completing this
merger transaction.
On April 7, 2021, the Board of Directors of the Company approved the amendment
of articles of incorporation to change the name to "Westech Security and
Investigation, Inc., increase the number of authorized shares to 500,000,000
shares of common stock and 50,000,000 shares of preferred stock and effect a
reverse stock split of the issued and outstanding common stock at a range of
1-for-200 to 1-for-250. These amendments were also approved by the written
consent of the holder of the one share of Series C Preferred Stock based on a
vote of 50.1% of the outstanding voting stock of the Company. The amendment will
be effective upon filing of such amendment to the articles of incorporation with
the Secretary of State of Nevada.
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 September 30, 2021 and 2020
Total Revenue
We had revenue of $2,647 for the three months ended September 30, 2021, as
compared to $2,831 for the three months ended September 30, 2020, a decrease of
$184 or 6.5%. This decrease in revenue was due to a reduction in revenue from
monitoring and related services between the two periods.
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Cost of Revenue
Cost of revenue sold for the three months ended September 30, 2021 was $969, as
compared to $1,077 for the three months ended September 30, 2020, a decrease of
$108 or 10%. This decrease in cost of revenue was a result of several
cost-cutting measures put into place by management during the current fiscal
year.
General and Administrative
Our general and administrative expenses for the three months ended September 30,
2021 were $83,316, a decrease of $165,458, or 66.5%, compared to $248,774 for
the three months ended September 30, 2020. General and administrative expenses
decreased mainly due to a decrease in legal expenses from $148,158 in 2020 to a
minimal amount in 2021, as well as slight decreases in in other general and
administrative expenses as a result of several cost-cutting measures put into
place by management during the current fiscal year.
Sales and marketing
Our sales and marketing expenses for the three months ended September 30, 2021
were $0, compared to $0 for the three months ended September 30, 2020. Minimal
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, the Company terminated and discontinued all of its
operations conducted prior to the Merger (the "NuLife Business") and continued
operations of the acquired business. As a result, we recorded a loss of $37,093,
during the three months ended September 30, 2021, compared to a loss of $57,016,
during the three months ended September 30, 2020, primarily due to a change in
the fair value of a derivative liability.
Net loss
As a result of the foregoing, for the three months ended September 30, 2021, we
recorded a net loss of $121,893 compared to a net loss of $254,792 for the three
months ended September 30, 2020, a decrease of $132,899 or 52.2%. This decrease
in net loss was primarily a result of the decrease in total revenue, along with
the significant decrease in legal expenses, mentioned above, as well as all of
the Company's other cost-cutting measures.
Nine months ended September 30, 2021 and 2020
Total Revenue
We had revenue of $7,944 for the nine months ended September 30, 2021, as
compared to $9,018 for the nine months ended September 30, 2020 a decrease of
$1,074 or 11.9%. 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 nine months ended September 30, 2021 was $2,981, as
compared to $3,239 for the nine months ended September 30, 2020, a decrease of
$258 or 8%. This decrease in cost of revenue was a result of several
cost-cutting measures put into place by management during the current fiscal
year.
General and Administrative
Our general and administrative expenses for the nine months ended September 30,
2021 were $291,474, a decrease of $280,739, or 49.1%, compared to $572,213 for
the nine months ended September 30, 2020. General and administrative expenses
decreased mainly due to decrease in legal expenses from $223,158 in 2020 to a
minimal amount in 2021, as well as decreases in other general and administrative
expenses as a result of several cost-cutting measures put into place by
management during the current fiscal year.
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Sales and marketing
Our sales and marketing expenses for the nine months ended September 30, 2021
were $0, compared to $26 for the nine months ended September 30, 2020. Minimal
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, the Company terminated and discontinued all of its
operations related to its NuLife Business and continued operations of the
acquired business. As a result, we recorded a loss of $31,598, during the nine
months ended September 30, 2021, compared to a loss of $157,757, during the nine
months ended September 30, 2020, primarily due to a change in the fair value of
a derivative liability.
Net loss
As a result of the foregoing, for the nine months ended September 30, 2021, we
recorded a net loss of $326,922 compared to a net loss of $684,082 for the nine
months ended September 30, 2020, a decrease of $357,160 or 52.2%. This decrease
in net loss was primarily a result of the decrease in total revenue, along with
the significant decrease in legal expenses, mentioned above, as well as all of
the Company's other cost-cutting measures.
Liquidity and Capital Resources
At September 30, 2021, the Company had $7,220 cash. The Company has limited
commercial experience and had a net loss from continuing operations of $295,324
for the nine months ended September 30, 2021, and an accumulated deficit of
$3,406,782, and a working capital deficit of $3,044,320 at September 30, 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. 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 nine months ended September 30, 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 September 30, 2021
and December 31, 2020, the Company has received advances totaling $1,839,666 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 nine months ended September 30, 2021, we used $115,027 of cash in
operating activities primarily as a result of our loss of $326,922 from
operations, offset by net changes in working capital items of operating assets
and liabilities of $180,297.
During the nine months ended September 30, 2020, we used $811,417 of cash in
operating activities primarily as a result of our loss of $684,082 from
operations, offset by net changes in working capital items of operating assets
and liabilities of $113,300.
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Financing Activities
During the nine months ended September 30, 2021, financing activities provided
$111,500 in proceeds from a bridge loan and used $2,320 in advances from related
party.
During the nine months ended September 30, 2020, financing activities provided
$492,725 in proceeds from a bridge loan, provided $5,674 advances from related
party and used $20,010 in redemption of preferred stock.
Off-Balance Sheet Transactions
At September 30, 2021, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet arrangements.
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