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. The terms "GWSN," "we," "us," "our,"
and the "Company" refer to Gulf West Security Network, Inc., a Nevada
corporation.
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 has 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 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.
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, 2020 and 2019
Revenues
We had revenue of $2,699 for the three months ended March 31, 2020, as compared
to $3,869 for the three months ended March 31, 2019, a decrease of $1,170. 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 three months ended March 31, 2020 was $1,124, as
compared to $1,989 for the three months ended March 31, 2019, a decrease of
$865.
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General and Administrative
Our general and administrative expenses for the three months ended March 31,
2020 were $125,739, a decrease of $137,776, or 52.3%, compared to $263,515 for
the three months ended March 31, 2019. General and administrative expenses
decreased mainly due decreased in wages, rent and legal expenses associated with
the public company operations.
Sales and Marketing
Our sales and marketing expenses for the three months ended March 31, 2020 were
$26, compared to $10,044 for the three months ended March 31, 2019. 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 reverse merger with LJR on August 9, 2018, management decided
to discontinue the activities of NuLife. As a result, we recorded income of
$32,382 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 March 31, 2020, we
recorded a net loss of $91,808 compared to a net loss of $221,167 for the three
months ended March 31, 2019.
Liquidity and Capital Resources
At March 31, 2020, the Company had $4,287 cash on hand. The Company has limited
commercial experience and had a net loss from continuing operations of $124,190
for the three months ended March 31, 2020, and an accumulated deficit of
$2,379,808, and a working capital deficit of $2,197,336 at March 31, 2020. 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 three months ended March 31, 2020,
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, 2020 and
December 31, 2019, the Company has received advances totaling $1,122,550 and
$1,072,050, 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, 2020, we used $950 of cash in operating
activities primarily as a result of our loss of $91,808 from operations, offset
by net changes in working capital items of operating assets and liabilities of
$56,329.
During the three months ended March 31, 2019, we used $66,880 of cash in
operating activities primarily as a result of our net loss of $ $271,679 and net
changes in operating assets and liabilities of $154,287.
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Financing Activities
During the three months ended March 31, 2020, financing activities provided
$57,151 in proceeds from a bridge loan and advances from related party.
During the three months ended March 31, 2019, financing activities provided
$75,000 in proceeds from a bridge loan.
Off-Balance Sheet Transactions
At March 31, 2020, the Company did not have any transactions, obligations or
relationships that could be considered off-balance sheet arrangements.
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