Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Item 2 contains forward-looking statements. Forward-looking statements in this Quarterly Report on Form 10-Q are subject to a number of risks and uncertainties, some of which are beyond our control. Our actual results, performance, prospects or opportunities could differ materially from those expressed in or implied by the forward-looking statements. Additional risks of which we are not currently aware or which we currently deem immaterial could also cause our actual results to differ, including those discussed in the sections entitled "Forward-Looking Statements" and "Risk Factors" included elsewhere in this Quarterly Report.

Management's Discussion and Analysis should be read in conjunction with the financial statements included in this Quarterly Report on Form 10-Q (the "Financial Statements"). The financial statements have been prepared in accordance with generally accepted accounting policies in the United States ("GAAP"). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.

The following discussion of the Company's financial condition and the results of operations should be read in conjunction with the Financial Statements and footnotes thereto appearing elsewhere in this Report.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this report contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company's other filings with the Securities and Exchange Commission and elsewhere. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company's fluctuations in sales and operating results; (b) regulatory, competitive and contractual risks; (c) development risks; (d) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth, and (e) unknown litigation.

Corporate Structure

As previously mentioned, on December 9, 2022, AGSS executed a reverse merger with AmeriGuard resulting in AGSS becoming the sole owner of AmeriGuard. This merger establishes AGSS as a company operating a viable guard company with annual sales of approximately $24,000,000. On October 20, 2023, the Company executed a share purchase agreement to acquire TransportUS Inc. TransportUS, Inc. was incorporated on October 24, 2018, with an S-Corp tax election. The corporation was incorporated with the issuance of 1,000 shares with no-par par value stock held by Lawrence Garcia, President and CEO. TransportUS Inc. provides human transportation services as a federal contractor, currently providing services in the state of California. These two acquisitions within one year allows AGSS to access the capital market to generate the capital needed to continue its growth strategy of mergers and acquisitions within related industries.

AGSS continues developing the leadership team needed for success. We have in place a CEO with 20 years of experience in our industry who has experienced success in the government contracting market. Our CFO has 20 years of experience in improving business performance as well as organizational growth across various sectors. Our Senior Controller has over 35 years of business finance experience, the last 15 of which has been focused on organizational development consulting across multiple industries.

Results of Operations for the six months ending June 30, 2025

Revenues and Cost of Goods Sold

Through the second quarter of 2025 the Company experienced a 21.6% increase in services revenue compared to the same time period of 2024 of approximately $2,630,000. The increase was the result of two new Veterans Administration contracts awarded to TransportUS, Inc (TUS) that started in October 2024.

Along with the increase in revenue, AGSS experienced an increase in the gross profit margin of approximately $212,000, due to an increase in direct expenses, that was less than the related revenue increase. AGSS experienced increases in direct expenses such as labor, vehicles expenses and sub-contractor services that were related to the additional contract services revenue experienced. Management is working on reducing direct expenses wherever possible without affecting the services provided.

Operating Expenses and Other Expense

Operation expenses increased in 2025 over 2024 by approximately $763,000. Most of the increase was the results of increases in general and administrative expenses, administrative salaries and professional services. The largest increase came in general and administrative expenses of approximately $517,600. Of this increase, $300,000 was the result of the costs associated with the $7,000,000 credit line awarded in February. The remaining expense categories experienced both increases and decreases. The net results were a decrease of approximately $44,000.

At this time, we believe that our operating structure and current level of expense can handle significantly more revenue with minor increases in our operating overhead expenses. This would allow the entire gross profit of any new contract or company acquisition to flow directly to our earnings, providing a consistent return on investment for our stockholders. Management is focused on reducing operating expenses wherever possible and actively seeking companies to acquire.

Net (Loss) from Operations

Net loss from operations through June 30, 2025, is approximately $1,898,400, an increase over the loss during the same period of 2024 by approximately $551,000. This increase is the result of an increase in operating expenses that exceeded the increase in gross profit. Management is focused on reducing the direct expenses of our services, thus increasing the gross profit percentage. At the same time management does not expect increases in the operation expenses, resulting in bottom line improvement in the next quarter and beyond.

Liquidity and Capital Resources

The Company's principal sources of liquidity include cash from operations and proceeds from debt financing. During the six months ending June 30, 2025, operations generated a net decrease in cash of approximately $3,131,000 while cash used by investing activities was approximately $81,200. Financing activities added approximately $3,091,000. The net decrease in cash for the period was approximately $122,100.

On June 30, 2025, the Company had cash on hand of $302,483 with total current assets of $3,794,921.

Moving Forward

During June and July, several key events occurred that have impacted the Companies ability to continue operating. We have filed the required Form 8-K's and a summary of the events follows:

On June 10, 2025, the executive level management and Board of directors experience a significant disruptive event. At a board Meeting held on that day, board members Douglas Anderson and Russel Honore' acting on the recommendation of the Audit Committee, on which they were appointed, made a motion to remove Mr. Lawrence Garcia from the position of CEO. At the same time, they appointed board member Anderson as the temporary CEO. On June 12^th, Douglas Anderson filed a Form 8-K stating that Board of Directors (the "Board") of AmeriGuard Security Services, Inc. (the "Company") removed Lawrence Garcia from the position of Chief Executive Officer of the Company, effective immediately, and that the Board appointed as interim Chief Executive Officer Mr. Anderson, an independent director of the Board and member of the Audit Committee and Compensation Committee.

On June 16, 2025, as previously reported on the Company's Current Report on Form 8-K filed on June 20, 2025, Mr. Garcia, pursuant to the Company's bylaws, removed Mr. Anderson and Russell Honore, an independent director of the Board and member of the Audit Committee and Compensation Committee, as board members and appointed Wilhelm Cashen and Terry Slatic as board members to replace Messrs Anderson and Honore. On June 16, 2025, the Board also removed Mr. Anderson from the position of Interim Chief Executive Officer, effective immediately, and appointed Mr. Garcia as Chairman of the Board and Chief Executive Officer of the Company to assume such executive responsibilities effective immediately. The Board also appointed Mr. Slatic and Mr. Cashen to be the members of the Audit Committee.

On June 17, 2025, the Company and Mr. Garcia filed a Complaint in the District Court, Clark County, Case No. A-25-921392-B (Dept. 31) (the "Complaint"), against Mr. Anderson and Mr. Honore. The Complaint seeks declaratory relief to declare that Mr. Garcia's purported removal from the Company's Board of Directors on June 12, 2025, was in violation of the Company's Bylaws and invalid; that Mr. Anderson and Mr. Honore are no longer members of the Board, nor of any board committees; that the Board of Directors is comprised of three directors - Mr. Garcia, Mr. Slatic, and Mr. Cashen; that Mr. Garcia is the Company's Chief Executive Officer; and other relief. The Complaint also seeks damages and injunctive relief against Mr. Anderson and Mr. Honore for conduct alleged to have been in violation of the Company's Bylaws.

On June 23, 2025, Mr. Anderson and Mr. Honore, on their own behalf and purportedly on behalf of the Company, filed an Answer and Counterclaim against Mr. Garcia, Mr. Cashen, Mr. Slatic, and the Company's Controller, Michael Goossen ("Mr. Goossen"). The Counterclaim alleges, among other things, that Mr. Garcia failed to disclose his arrest at an airport TSA checkpoint for carrying a firearm in his backpack; failed to disclose the suspension of a security guard and patrol business license in North Carolina, and that Mr. Garcia paid over $30,000 to a third-party without first obtaining the consent of Mr. Anderson and Mr. Honore as Compensation Committee members. The Counterclaim seeks damages against Mr. Garcia for breaches of fiduciary duty, and against Mr. Garcia, Mr. Cashen, Mr. Slatic, and Mr. Goossen for conversion, and against Mr. Garcia, Mr. Cashen, and Mr. Slatic for fraud. The Counterclaim also seeks declaratory and injunctive relief to declare that Mr. Garcia's actions following his termination as Chief Executive Office were unlawful, that transfers of funds to the third-party were improper, that Mr. Cashen's and Mr. Slatic's appointment to the Board was unlawful, that the purported removal of Mr. Anderson and Mr. Honore from the Board was unlawful, and the removal of Mr. Anderson as President and Chief Executive Officer and restoration of Mr. Garcia as President and Chief Executive Officer was unlawful.

On June 26, 2025, Mr. Anderson and Mr. Honore, on their own behalf and purportedly on behalf of the Company, filed an Application for Temporary Restraining Order and Motion for Preliminary Injunction against Mr. Garcia, Mr. Cashen, Mr. Slatic, and Mr. Goossen prohibiting the appointment of Mr. Cashen and Mr. Slatic to the Board of Directors, prohibiting the removal of Mr. Anderson and Mr. Honore from the Board, prohibiting the reinstitution of Mr. Garcia as Chief Executive Officer, prohibiting Mr. Garcia, Mr. Cashen, and Mr. Slatic from making or publishing any further false statements regarding their purported positions at and on the Board; prohibiting Mr. Garcia, Mr. Cashen, and Mr. Slatic from taking any further action on behalf of the Company.

On July 1, 2025, Garcia filed an Opposition to Counterclaimants' Application for Temporary Restraining Order and Motion for Preliminary Injunction.

On July 2, 2025, the Court denied Mr. Anderson's and Mr. Honore's Application for Temporary Restraining Order and Motion for Preliminary Injunction against Mr. Garcia, Mr. Cashen, Mr. Slatic, and Mr. Goossen. At this hearing, counsel for Mr. Anderson and Mr. Honore' indicated that they had evidence that Mr. Garcia was in fact not the majority shareholder and his actions since June 10, 2025, were unlawful. The Judge agreed to hear the evidence at a future hearing scheduled for July 29, 2025.

On July 29, 2025 the hearing began at 1:30 and the evidence and witness testimony occurred but did not get completed. A second hearing occurred on July 31, 2025, allowing for the completion of the testimony brought by the counsel of Mr. Anderson' and Mr. Honore'. Following the conclusion of the testimony, Mr. Garcia's counsel petitioned the judge that there was no evidence provided that countered the position that Mr. Garcia was in fact an 80% shareholder ad that the court should rule in his favor. The judge agreed.

The results of the actions taken by Mr. Anderson and Mr. Honore' have impacted the Company negatively in two ways. First, On July 1, 2025, the Company received notice that our Government Purchase Order/Receivables Financing Agreement (the "Financing Agreement"), dated as of February 5, 2025, between the Company and List Government Receivables Fund, LLC (the "Lender"), was in default and that no further funding would be available. A Form 8-K was filed July 10, 2025, detailing the event. The second event was this action taken by the Lender caused the Company to forfeit the three Social Security Administration contracts listed in Note 13 above effective June 30, 2025. The impact of the forfeiture was immediate, reducing monthly revenues by $1.2 million. This situation has put the operations of the Company in jeopardy.

Management has since begun a complete reorganization of operations which is ongoing. We have taken steps necessary to keep our Transportation company operating and have begun eliminating all non-vital expenses in all categories. Although we are optimistic that we will be able to continue, the future is not certain. We can operate profitably moving forward resulting in some free cash flow. Month to month expenses will be met. However, the amount of debt held by the Company and the amounts due to vendors is significant and may be more than the future operations can manage. The Company's continued operations greatly depend upon the arrangements that can be made with the Lender and the patience of our vendors.