10-K/A: AmeriGuard Security Services Restates Financials After Audit Issues, Eyes Growth Through Acquisitions

AmeriGuard Security Services, Inc. restated its 2022 and 2023 financial statements due to issues discovered during a re-audit following the disbarment of its previous accounting firm, and is pursuing growth through strategic acquisitions.

Summary

• AmeriGuard Security Services, Inc. (AGSS) is filing an amendment to its annual report to restate its previously issued financial statements for the fiscal years ended December 31, 2022 and 2023.
• The restatement was prompted by the disbarment of AGSS's former independent registered public accounting firm, BF Borgers, by the SEC.
• A new independent auditor, Bush & Associates CPA, LLC, was engaged to re-audit the affected prior-year financial statements.
• The re-audit revealed an improper application of ASC 805 (Business Combinations) regarding the October 20, 2023, acquisition of TransportUS.
• The prior stated revenue for 2022 was $29,139,403 and has now been corrected to $24,947,401.
• The net income for 2022 changed from a loss of $392,919 to a loss of $436,766.
• Total Assets for 2022 changed from $5,149,832 to $3,748,343, total liabilities changed from $6,760,412 to $5,745,791 and retained earnings changed from a deficit of $1,769,926 to $2,155,794.
• For 2023, the re-audit discovered improper valuations of certain assets such as goodwill, deferred liability, an investment in subsidiary asset value and deferred liability of subsidiary.
• The prior stated revenue for 2023 changed from $24,350,618 to $20,969,727.
• The net income for 2023 changed from $122,636 to $103,615.
• Total Assets for 2023 changed from $6,067,966 to $7,835,340, total liabilities changed from $7,561,590 to $8,619,173 and retained earnings changed from a deficit of $1,653,470 to $2,052,179.
• The company manages two subsidiaries: Ameriguard Security Services, Inc. (AGS) and TransportUS, Inc. (TUS).
• AGS provides guard services, generating $20 million in revenues for the fiscal year ended December 31, 2023.
• TUS provides transportation services, generating approximately $5 million in revenues annually.
• The company is pursuing growth organically and through acquisitions to increase market share.
• The company has four federal contracts continuing into 2024, that approximated 96% of our total services revenue for the year ended December 31, 2023.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the company is correcting past accounting errors and pursuing growth opportunities, the restatement and operational losses raise concerns. The future outlook is cautiously optimistic.

Positives

• The company is actively addressing and correcting accounting errors.
• The company is pursuing growth organically and through acquisitions.
• The company has secured federal contracts that provide a stable revenue stream.
• The company has an exclusive contract with Think Equity a New York Investment Banking Firm, and we have engaged legal and SEC compliance professionals.
• The company has a Board of Directors with Wall Street and government security experience making us well positioned to aggressively grow the business.

Negatives

• The company experienced a 15.9% overall decrease in operational revenue in 2023, totaling approximately $3,977,000.
• The company experienced a significant net loss from operations of $2,428,681 for the year ending December 31, 2023, compared to a minor loss of $82,311 for the year ending December 31,2022.
• The company is restating its 2022 and 2023 financial statements due to an improper application of ASC 805 (Business Combinations) for its October 20, 2023 acquisition of TransportUS.

Risks

• The company's reliance on federal contracts, which are subject to renewal, cancellation, or renegotiation, poses a risk to future revenue.
• The company faces risks related to state and federal regulations, staffing shortages, accelerating inflation, and unforeseen business environment issues.
• The company is involved in three pending employment issues related to alleged wage and labor law violations.
• The company is dependent on the renewal of a key contract for TransportUS Inc. with the Veterans Administration in Long Beach California.

Future Outlook

Management is positive regarding profitable operations for the next twelve months, citing growth in the security and non-emergency transportation industries, potential acquisitions, and a conservative approach to resource management.

Management Comments

• Management is very positive regarding profitable operations for the next twelve months based on the following: Both industries that AGSS currently operates in are growing industries.
• The security industry is somewhat recession proof.
• The non-emergency transportation market is growing at an annual rate of over 7.5%.
• There are over 10,000 security companies operating in our market, with 50% available for acquisition.
• Our management team, Board of Directors and supporting equity professionals can get the job done.
• We have been and will continue to be a company that is very conservative with our resources and will use every possible dollar to provide strength and good return to our investors.
• We are in it for the long haul.

Industry Context

The security industry is experiencing consolidation, with larger firms leveraging technology and economies of scale. The non-emergency medical transportation (NEMT) industry is also growing rapidly, presenting opportunities for expansion.

Comparison to Industry Standards

• The security guard and related services industry in the US is comprised of over 11,000 companies and 900,000 officers.
• AGS revenue at approximately $20 million in annual revenue places it in a strong competitive position.
• We compete with top firms, such as Allied Universal, Securitas, G4S and Prosegur Security, which control the majority of the industry.
• The non-emergency medical transportation (NEMT) industry is a fast-growing industry.
• A review of multiple publications available online indicates the North American market was approximately $6.4 billion in 2022 with a compound annual growth rate of between 7.5% and 9%.
• This provides TUS with a market of approximately $7.6 billion in 2024.

Legal Proceedings

• As of December 31, 2023, there are three employment issues pending.
• The issues revolve around terminated employees alleging the Company has failed to pay minimum wages, sick pay wages, meal period violations, rest period violations, wage statement violations and violation of the unfair business practices act.

Related Party Transactions

• As of December 31, 2023, the subsidiary TransportUS Inc., has a note receivable from AmeriGuard Security Systems, Inc. (SYS).
• SYS is a California Corporation, owned 100% by Lawrence Garcia, the majority shareholder of AGSS.

Stakeholder Impact

• The restatement of financial statements may impact investor confidence.
• Employees may be affected by the company's efforts to address employment-related legal issues.
• Customers may be impacted by the company's focus on technology and patrol services instead of traditional standing guard services.

Next Steps

• The company plans to continue seeking organic growth through bidding and winning contracts.
• The company intends to pursue growth through mergers and acquisitions within the security industry and potentially in other industries.
• The Board of Directors and stockholders plan to adopt an Equity Incentive Plan during 2024.

Key Dates

Keywords

financial restatement, security services, acquisitions, federal contracts, TransportUS, AmeriGuard, revenue, ASC 805, audit