AGSS 10-K & 10-Q changes, risk factors and insider trading

Results of Operations for the fiscal year ending December 31, 2025

Revenues and Cost of Services

For 2025 the Company experienced a 11% overall decrease in operational revenue, totaling approximately $2,903,900. The decrease results from AGCs loss of three federal guard contracts with Social Security Administration in Durham NC, Urbana MD, and Wilkes-Barre PA. The loss of the three contracts reduced total revenue by approximately $6,593,700. This loss was offset by an increase in total revenue from TUS in the amount of $3,690,000. Also, in 2025, TUS had an increase in service fee credits issued by approximately $161,450, offset by an increase in other services revenue by approximately $169,700.

The demand for commercial services continued to increase in 2025, but the expectations of the cost of our services are out of line with the market expectations. As AGC deals with the increased labor costs, the customers are experiencing similar cost pressures and are less willing to pay for our traditional services. This conflict with commercial services needing to raise services fees and customers needing to pay less has created challenges in the market. As a result, AGC has needed to shift its approach to protecting business assets from the traditional standing guard to technology and patrol services. AGC has established a 24-hour dispatch department to monitor camera systems and direct patrolling officers to the problem locations. Our patrol officers respond to all alarms regardless of cause within 15 minutes of activation. This is a cost effect way for businesses to have protection without the high expense of a posted guard. The market continues to respond positively to this new approach to protecting company assets. AGC is planning to increase market share for these services by adding two additional individuals to our sales team and expanding to the Las Vegas Nevada market.

Currently, we have three Federal transportation contracts continuing into 2026, that approximated 89% of our total services revenue for the year ended December 31, 2025. All federal contracts are awarded with a term of 5 years, with annual renewals. At the end of each contract year the government has the option to renew, cancel or renegotiate. Our six contracts and their respective terms are as follows:

As with all professional service industries, most of the expense is direct labor and expenses associated with that labor. We are not an exception. Our direct expenses average around 84% of revenues. Total direct cost of services was approximately $20,050,000 in 2025 and approximately $23,400,000 in 2024.

The total direct cost of services saw a decrease of approximately $3,033,000, or 13%. This decrease was the result of labor and benefits declining by approximately $5,436,000 after losing the federal guard contracts in July 2025. This decrease in employee expenses was offset by an increase in ither direct expenses in the amount of approximately $2,402,000.

Operating Expenses and Other Expense

Operation expenses decreased in 2025 over 2024 by approximately $140,000. Total expenses in every expense category, other than Salaries payroll taxes and benefits, Communication services, Licenses and permits, General and administration expenses and Depreciation expenses, decreased. The total decrease in expenses is approximately $762,700. The total increase in the expense categories listed above totaled approximately $622,600.

At this time, our operating structure and current level of expense can handle twice the revenue with minor increases to our operating overhead expenses. This allows the entire gross profit of any new contract or company acquisition to go straight to the bottom line, providing a consistent return on investment.

Net (Loss) from Operations and Other Income

The Company experienced a net loss from operations of $3,134,181 for the year ending December 31, 2025, compared to a loss of $3,403,601 for the year ending December 31, 2024. A decrease in our net loss from operations of $269,420. Other income for 2025 was $2,647,040, resulting from three unusual events. AGC had a gain on sales assets in the amount of $177,176, AGC received an employee retention tax credit (ERTC) in the amount of $1,943,743 and TUS Experience a forgiveness of debt in the amount of $657,327. ARC paid an ERTC preparation fee of $247,330. Resulting in a pre-tax net loss of $487,792 for 2025 and a pre-tax net loss of $2,332,735 for 2024.

Management Dispute and Interruption of Credit Line with Legalist

On June 12, 2025, Douglas Anderson and Russel Honore, on behalf of the Board of Directors of the Company, removed Lawrence D. Garcia from the position of Chief Executive Officer of the Company and appointed Douglas Anderson, an independent director of the Board and member of the Audit Committee and Compensation Committee, as interim Chief Executive Officer.

On June 16, 2025, Mr. Garcia, as a majority shareholder, pursuant to Section 3.6 of the Company’s bylaws, removed Mr. Anderson and Mr. Russel Honore as board members. In addition, on June 16, 2025, Mr. Garcia, pursuant to the bylaws, appointed Wilhelm Cashen and Terry Slatic, as board members. The Board of Directors removed Douglas Anderson from the position of Interim Chief Executive Officer of the Company and re-appointed Mr. Garcia as Chief Executive Officer. At the same time, the Board of Directors appointed Terry Slatic and Wilhelm 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. A copy of the Complaint is attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on July 15, 2025 (the “July 15, 2025 Form 8-K”).

On June 18, 2025, lawyers purporting to represent the Company sent to Mr. Garcia, purportedly at the request of its Audit Committee, a cease and desist demand letter demanding that Mr. Garcia cease and desist allegedly unauthorized activities taken in the name of the Company. A copy of the June 18, 2025 letter is attached as Exhibit 10.2 to the July 15, 2025 Form 8-K.

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. 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. A copy of the Answer and Counterclaim is attached as Exhibit 10.3 to the July 15, 2025 Form 8-K.

On June 26, 2025, the Company terminated Mr. Jason Bovell from the position of Chief Financial Officer for, among other reasons, failure to respond to communications by the Company since June 18, 2025.

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. The Application for Temporary Restraining Order and Motion for Preliminary Injunction is attached as Exhibit 10.4 to the July 15, 2025 Form 8-K.

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. The Findings of Fact, Conclusions of Law, and Order Denying Counterclaimants’ Application for Temporary Restraining Order, Scheduling Supplemental Briefing and Setting Evidentiary Hearing on Counterclaimants’ Motion for Preliminary Injunction is attached as Exhibit 10.5 to the July 15, 2025 Form 8-K.

Following a two-day evidentiary hearing on July 29 and 31, 2025, the Court denied Mr. Anderson’s and Mr. Honore’s motion for a preliminary injunction without prejudice, concluding, among other things, that Mr. Anderson and Mr. Honore failed to show a likelihood of success on the merits of their claims. However, the Court allowed them to provide additional proof that Mr. Garcia was not the controlling shareholder as of June 16, 2025. There is a court date set in February 2027. Both parties have agreed to a mediation, which is scheduled to occur in May 2026.

Interruption of Line of Credit Financing

On July 1, 2025, the Company received a notice of an event of default under its Government Purchase Order/Receivables Financing Agreement (the “Financing Agreement”), dated as of February 5, 2025, between the Company and List Government Receivables Fund, LLC (aka Legalist”) (the “Lender”). The Financing Agreement provides for a revolving line of credit for Borrower in the aggregate maximum principal amount of $7,000,000. Amounts advanced accrue interest daily at the U.S. prime rate in effect from time to time (divided by 365) plus 0.0246%. On July 1, 2025, the outstanding principal balance due was $5,845,900. Pursuant to the Financing Agreement, the Company granted to the Lender a continuing lien on and security interest in all assets of Borrower. TransportUS, Inc., a California corporation, and Lawrence D. Garcia each have guaranteed the Company’s payment and performance obligations under the Financing Agreement.

The notice stated there is the occurrence and continuation of certain Events of Default under the Financing Agreement, from at least June 12, 2025, arising from circumstances that the Lender contends constitute an Event of Default under Section 21(e) of the Financing Agreement and which, in Lender’s sole discretion, have caused Lender to deem itself insecure. As a result, since such date, incremental 4.75% interest has accrued on all of the Borrower’s obligations under the Financing Agreement and shall continue until repayment in full.

Section 21(e) of the Financing Agreement provides that an “Event of Default” shall be deemed to have occurred and be continuing if: (e) [a]ny material change occurs in Borrower’s business or business structure, expressly including its ownership or financial condition or there occurs any dispute between its principals/managers/officers, any of which (in Lender’s sole and absolute discretion) causes Lender to deem itself insecure; Borrower acknowledges that it shall not change any material aspect of its business structure.

After an Event of Default, the Lender may, in its sole and absolute discretion, require Government Account Debtors to pay Eligible Purchase Order and/or Eligible Receivable obligations directly to it or an affiliate, including (i) notify a Government Account Debtor that its account has been assigned to Lender by Borrower and that payment thereof shall be made to the order of and directly to Lender and (ii) demanding, collecting, or enforcing payment thereof. After an Event of Default, Lender may suspend or terminate Lender’s obligations to make advances upon notice of termination to Borrower, after which Borrower shall be obligated to pay immediately to Lender the full amount of its outstanding obligations. After an Event of Default, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including attorneys’ fees and costs, actually incurred by Lender.

On July 1, 2025, prior to receiving the notice of default, the Company requested a draw under the Financing Agreement in the amount of $981,816, a substantial part of which was to fund the Company’s July 10, 2025 payroll obligation. On July 2, 2025, Legalist informed the Company that in light of the existing Event of Default under the Financing Agreement that it would not make any advances unless and until the default had been resolved to its satisfaction. As a result, the Company is unable to satisfy its July 10, 2025 payroll obligation, which will materially adversely affect the Company’s results of operations and financial position.

A copy of the Financing Agreement is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 14, 2025. The above description of the terms of the Financing Agreement is qualified in its entirety by reference to such exhibit.

As a result of the Lender’s actions described above, and in order to act responsibly and transparently with our contracting agencies, on July 14, 2025, AGSS formally notified the respective federal Contracting Officers that the Company was required to forfeit the following contracts:

Social Security Administration – Wilkes-Barre, PA (Annual Revenue: $3,184,176) Social Security Administration – Urbana, MD (Annual Revenue: $6,339,912) Social Security Administration – Durham, NC (Annual Revenue: $5,490,360) On March 27, 2026, Legalist Government Receivables Fund, LP, and Legalist SPV III, LP filed in the Supreme Court of New York (Index No. 651884/2026), a Notice of Motion for Summary Judgment in Lieu of Complaint for entry of judgment against the Company, TransportUS, Inc., and Lawrence D. Garcia in the amount of $4,123,549,73, as well as attorneys’ fees, costs, and expenses and further relief.

The major impact of the management dispute and interruption of the financing agreement was the loss of our operational fund source and the significant attorney fees we incurred. The lender, Legalist LLC, was providing monthly cash for operations for our then six federal contracts.

The following is an overview of the strategic plan developed for 2026 There are three avenues for AGSS to achieve the significant success it seeks for our shareholders. Those are:

All three of these strategies require capital to accelerate success. Which is why a large portion of the executive management team and the board’s focus is exploring every opportunity to find a willing partner investor to join AGSS and help AGSS achieve the goal of becoming a company actively trade on the NASDAQ market.

The first avenue is rather routine for the transportation company. That is submitting bids on every VA contract that is announced. TUS has established a duplicatable structure and system allowing us to establish an operation anywhere in the USA. We can do this without a significant amount of capital, but investment capital would allow TUS own vehicles rather than leasing them, allowing for better contract pricing increasing the odds of being awarded new contracts. TUS currently has four outstanding bids and two more being prepared. In the next twelve months management anticipates approximately 6-10 RFP’s to be put out by the VA. Additionally, the market is expanding to accommodate individual’s needs for non-emergency medical transportation. TUS has been looking into ways to meet this need in a profitable way. It appears the best approach is to focus on private pay transportation. A part of our strategic plan is to first develop this service in the Fresno area and then expand by adding the service to the team in southern CA. There is a need for new capital to help develop this service. There’s a need for two new fully outfitted vehicles and personnel to be available to deliver the service and build the program.

Management is taking steps to increase revenue for our AGC subsidiary by focusing on our very successful combination of portable surveillance system, 24/7 monitoring and security guard response. This three-part approach to protecting business assets meets the needs of most businesses and is very affordable over the traditional night guard. It allows AGC to support the customers’ needs, using our portable high-tech camera systems at a much lower cost to the customer. At the same time AGC benefits from fewer guards to cover more companies. Immediately, AGSS is launching a new marketing campaign, opening a sales office in Las Vegas, and hiring two individuals to our sales team. This will provide the sales needed to cover our operational cash needs, while we develop the next level of high-tech business asset protection.

During the first quarter of 2026 the Company experienced a 52.2% decrease in total revenue compared to the same time period of 2025 of approximately $3,742,000. The decrease is the result of losing three federal guard contracts in July 2025. The reasons for losing the contracts are described in some detail in Note – 13 Litigation and Claims. The result of actions taken by the previous board members, Mr. Anderson and Mr. Honore, was the Accounts Receivable credit line provider declared the Company in default and cancelled all further funding, making it impossible for the company to meet operational cash needs in July 2025.

The government contract revenue category decrease accounted for the entire decline in total revenues. The decreased government revenue impacted the Gross Profit Margin as well. The Company experienced a decline in gross profit by over $429,000 in 2026 over that in 2025.

Operation expenses decreased in 2026 over 2025 by 45.3%, an amount of approximately $884,000. This decrease was the result of decreases in nearly all operating expense categories, except for minor increases in General Liability insurance, Licenses and Permits and Depreciation Expense. All other expense categories declined by amounts as small as $8,200 up to $281,000. In percentages the declines were from 16% to 77%. These declines are traceable directly to the three federal guard contracts lost in July 2025.

Net loss from operations through March 31, 2026, decreased approximately $454,000, over the loss during the same period of 2025. Although the Company experience a decline in Gross profit in 2026 and compared to the same period in 2025, the much greater decline in operational expenses allowed for the reduced loss in 2026 compared to 2025.

Management has developed a strategic plan moving forward in 2026.

There are three avenues for AGSS to achieve the significant success it seeks for our shareholders. Those are:

All three of these strategies require capital to accelerate success. Which is why a large portion of the executive management team and the board’s focus is exploring every opportunity to find a willing partner investor to join AGSS and help AGSS achieve the goal of becoming an active company trading on the NASDAQ market.

The first avenue is rather routine for the transportation company, TransportUS Inc. (TUS). That is submitting bids on every VA contract that is announced. TUS has established a duplicatable structure and system allowing us to establish an operation anywhere in the USA. We can do this without a significant amount of capital, but investment capital would allow TUS own vehicles rather than leasing them, allowing for better contract pricing increasing the odds of being awarded new contracts. TUS currently has four outstanding bids and two more being prepared. In the next twelve months management anticipates approximately 6-10 RFP’s to be put out by the VA. Additionally, the market is expanding to accommodate individual’s needs for non-emergency medical transportation. TUS has been looking into ways to meet this need in a profitable way. It appears the best approach is to focus on private pay transportation. A part of our strategic plan is to first develop this service in the Fresno area and then expand by adding the service to the team in southern CA. There is a need for new capital to help develop this service.

Management is taking steps to increase revenue from our subsidiary Ameriguard Security of California, Inc (AGC), by focusing on our very successful combination of portable surveillance system, 24/7 monitoring and security guard response. This three-part approach to protecting business assets meets the needs of most businesses and is very affordable over the traditional night guard. It allows AGC to support the customers’ needs, using our portable high-tech camera systems at a much lower cost to the customer. At the same time AGC benefits from fewer guards to cover more companies. Immediately, AGSS is launching a new marketing campaign, opening a sales office in Las Vegas, and hiring two individuals to our sales team. This will provide the sales needed to cover our operational cash needs, while we develop the next level of high-tech business asset protection. The Las Vegas office was established during this quarter, and a sales team is in place. We have begun the sales process and there appear to be a significant opportunity in Las Vegas. Although there hasn’t been a new service agreement achieved to date, management is certain of sales before the end of the second quarter.