10-Q 1 gsa10q-9302011.htm gsa10q-9302011.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 10-Q
 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________________ to ______________________

Commission File Number: 000-53184

GLOBAL SECURITY AGENCY INC.
(Exact name of registrant as specified in its charter)

Nevada
98-0516432
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

12818 Hwy # 105 West, Suite 2-G
Conroe, TX  77304
(Address of principal executive offices)

(818) 281-1618
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (of for such shorter period that the registrant was required to submit and post such files).  Yes þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer o   Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No þ

As of November 10, 2011, there were 61,721,645 shares of common stock of the registrant outstanding.
 
 
TABLE OF CONTENTS
 


 
PART I - FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

GLOBAL SECURITY AGENCY INC.
INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011
(Unaudited)

Index
 

 
Global Security Agency Inc.
Balance Sheets
(unaudited)
 
   
30-Sep-11
$
    
31-Dec-10
$
  
ASSETS            
Current Assets            
Cash
     16,952       2,485  
Accounts receivable
     635,601       687,058  
Other receivables
     96,412       17,750  
Prepaid expenses and deposits
     2,350       425  
                 
Total Current Assets
     751,315       707,718  
    Accounts receivable – long-term
     266,038       -  
Property and equipment, net
     30,257       34,554  
Other assets
     –       4,576  
                 
Total Assets
     1,047,610       746,848  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current Liabilities
                
Accounts payable
     145,786       78,099  
Accounts payable - related parties
     139,766       22,679  
Accrued liabilities
     126,908       46,405  
Income taxes payable
     58,963       -  
Due to related party
     –       70,000  
Deferred revenue
     –       31,348  
Total Current Liabilities
     471,423       248,531  
                 
Stockholders’ Equity
                
                 
Preferred Stock, 100,000,000 shares authorized, $0.00001 par value, none issued
     –       –  
                 
Common stock, 100,000,000 shares authorized, $0.00001 par value
61,721,645 shares (December 31, 2010 – 61,721,645 shares) issued and outstanding
     617       617  
                 
 Additional paid-in capital
     650,807       650,807  
    Accumulated deficit
     (75,237 )     (153,107 )
Total Stockholders’ Equity
     576,187       498,317  
Total Liabilities and Stockholders’ Equity
     1,047,610       746,848  
 
(The accompanying notes are an integral part of these financial statements)
 

Global Security Agency Inc.
Statements of Operations
(unaudited)
 
   
For the Three
Months Ended
30-Sep-11
$
    
For the Three
Months Ended
30-Sep-10
$
    
For the Nine
Months Ended
30-Sep-11
$
    
For the Nine
Months Ended
30-Sep-10
 $
  
Revenue
                        
Personal protection services
     196,115       137,325       433,944       272,668  
Private investigation services
     188,952       154,030       877,917       211,194  
                                 
Total Revenue
     385,067       291,355       1,311,861       483,862  
Cost of Sales
     169,593       107,363       498,439       187,255  
Gross Profit
     215,474       183,992       813,422       296,607  
                                 
Consulting
     -       6,150       89,800       46,460  
General and administrative
     19,803       16,208       115,552       37,734  
Legal and accounting
     34,791       24,643       90,680       53,665  
Rent
     14,025       16,015       41,075       31,015  
Salaries
     41,160       20,851       164,414       22,393  
Salaries - officers
     36,000       31,000       108,000       36,000  
Selling expenses
     19,681       22,600       61,489       45,959  
                                 
Net Income (Loss) from Operations
     50,014       46,525       142,412       23,381  
                                 
Other Expenses
                                
Interest expense
     (1,296 )     (5,755 )      (5,474 )     (6,555 )
 Net Income (Loss) before Income Taxes
     48,718       40,770       136,938       16,826  
 Federal income tax expense
     (40,523 )      -       (59,068 )      -  
                                 
Net Income (Loss)
     8,195       40,770       77,870       16,826  
                                 
   Net Income (Loss) Per Common Share – Basic and Diluted
     0.00       0.00       0.00       0.00  
                                 
Weighted Average Number of Common Shares Outstanding
                                
   Basic
     61,721,645       52,090,862       61,721,645       21,952,660  
Diluted
     61,721,645       52,400,631       61,721,645       22,252,106  
 
(The accompanying notes are an integral part of these financial statements)
 
 
Global Security Agency Inc.
Statements of Cash Flows
(unaudited)
 
   
For the Nine
months Ended
30-Sep-11
$
    
For the Nine
months Ended
30-Sep-10
$
  
Operating Activities            
Net Income (loss)
     77,870       16,826  
                 
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation and amortization
     12,808       1,196  
 Common stock issued for services
     –       5,000  
Changes in operating assets and liabilities:
                
Accounts receivable and other receivables
     (293,243 )     (424,891 )
Prepaid expenses and deposits
     (1,500 )     (850 )
Accounts payable
     243,736       83,410  
Accrued liabilities
     80,503       29,292  
Deferred revenue
     (31,348 )     205  
Net Cash Provided by (Used in) Operating Activities
     88,826       (289,812 )
                 
Investing Activities
                
Purchase of Licenses
     –       (7,500 )
Purchase of property and equipment
     (4,359 )     (29,877 )
Net Cash Provided by (Used in) Investing Activities
     (4,359 )     (37,377 )
                 
Financing Activities
                
Proceeds from long-term loan payable
     –       50,000  
Advances from notes payable - related parties
     (70,000 )     100,000  
Proceeds from the sale of common stock
     –       240,400  
                 
Net Cash Provided by Financing Activities
     (70,000 )     390,400  
                 
Increase (Decrease) In Cash
     14,467       63,211  
                 
Cash - Beginning of Period
     2,485       247  
Cash - End of Period
     16,952       63,458  
Supplemental Disclosures:
                
Interest paid
     10,087       –  
Income tax paid
     -       –  
 
(The accompanying notes are an integral part of these financial statements)
 
 
Global Security Agency, Inc.
Notes to the Financial Statements

1. Nature of Business

The Company was incorporated in Nevada on September 27, 2006 under the name Belvedere Resources Corporation. On January 15, 2010, the Company incorporated a wholly-owned subsidiary, Global Security Agency Inc. (“Global Security” or the “Company”). On January 25, 2010, the Company completed a merger with Global Security and assumed the subsidiary’s name by filing Articles of Merger with the Nevada Secretary of State. Global Security was incorporated entirely for the purpose of effecting the name change and the merger did not affect the Company’s Articles of Incorporation or corporate structure in any other way. The Company’s principal business is in the security solutions and risk management services industry. The Company was formerly an exploration stage company involved in mineral exploration.

2.  Basis of Presentation

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the Company’s audited 2010 annual financial statements and notes thereto. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure required in the Company’s 2010 annual financial statements have been omitted.

3. Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will not continue to meet its obligations in the normal course of business for the next fiscal year. As of September 30, 2011, the Company has only generated small net income and cash flows from operations. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

4. Related Party Transactions

(a)  
During the nine months ending September 30, 2011, the company repaid $70,000 of unsecured, non-interest bearing, on-demand loans to the former President.
(b)  
As of September 30, 2011, the Company owed three officers a total of $139,767 for certain trade payables paid by them on behalf of the Company.

5.   Other Receivables

$75,000 of other receivables is pursuant to a termination of a consulting agreement with a former consultant in the nine months ended September 30, 2011.  The receivable is non-interest bearing, unsecured, and has no fixed repayment schedule.


Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
 
As used in this quarterly report: (i) the terms "we", "us", "our", and the “Company" mean Global Security Agency Inc., and (ii) all dollar amounts in this quarterly report refer to U.S. dollars unless otherwise indicated.
 
Cautionary Statement Regarding Forward-Looking Information
 
The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements appear in a number of different places in this report and can be identified by words such as “estimates”, “projects”, “expects”, “intends”, “believes”, “plans”, or their negatives or other comparable words. Also look for discussions of strategy that involve risks and uncertainties. Forward-looking statements include, among others, statements regarding our markets and the demand for our services.
 
You are cautioned that any such forward-looking statements are not guarantees and may involve risks and uncertainties. Our actual results may differ materially from those in the forward-looking statements due to risks facing us or due to actual facts differing from the assumptions underlying our estimates. Some of these risks and assumptions include those set forth in reports and other documents we have filed with or furnished to the United States Securities and Exchange Commission (“SEC”). We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
 
Our Business
 
We are security solutions and risk management services company.  We offer a wide range of security and risk management services for individuals, corporations and other entities. Our services include risk assessments, training, crisis management, protection, support and intelligence.
 
The risks involved in operating domestically and internationally have increased significantly for companies and other organizations over the years.  Risk mitigation has become an increasingly important concern for these companies and other organizations, particularly in high-threat environments, for the protection of personnel, property and other valuable assets.  In addition, security concerns have increased for wealthy individuals in countries across the globe.  Security threats can arise in a variety of forms and we assist companies and other organizations and wealthy individuals with addressing any potential threats to them.
 
We operate our business through a network of consultants.  Our consultants are experts in the field of crisis management with significant government, military, foreign services and private industry experience, and are located around the world.  Our consultants are experienced in all aspects of the services we provide.
 
See our Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC for more information.
 
Results of Operations
 
The following discussion and analysis of our results of operations and financial condition for the three and nine months ended September 30, 2011 should be read in conjunction with our interim financial statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the year ended December 31, 2010 filed with the SEC.
 
Nine Months Ended September 30, 2011 Compared to Nine Months Ended September 30, 2010
 
Revenues
 
We generated revenues of $1,311,861 in the nine months ended September 30, 2011, compared to $483,862 in the nine months ended September 30, 2010, from personal protection and private investigation services, due to increased operations.  Our cost of sales in the nine months ended September 30, 2011 was $498,439, compared to $187,255 in the prior period, and related primarily to consultants engaged to provide our services.  Our gross profit in the nine months ended September 30, 2011 was $813,422, compared to $296,607 in the nine months ended September 30, 2010.
 
 
Expenses
 
For the nine months ended September 30, 2011, we incurred total operating expenses of $671,010, compared to $273,226 in the prior period, due to increased operations. Fees paid to consultants increased to $89,800 in the current period from $46,460 in the prior period.  General and administrative expenses related to our operations increased to $115,552 in the current period from $37,734 in the prior period.  Legal and accounting expenses increased to $90,680 in the nine months ended September 30, 2011 from $53,665 in the prior period.  Salaries paid to employees and to our officers increased to $164,414 and $108,000, respectively, in the current period from $22,393 and $36,000, respectively, in the prior period. Our selling expenses increased to $61,489 in the current period from $45,959 in the prior period.
 
We generated operating income of $142,412 in the nine months ended September 30, 2011, compared to $23,379 in the prior period, resulting in increased federal income tax expense.
 
Net Income
 
For the nine months ended September 30, 2011, we generated net income of $77,870, compared to $16,826 for the nine months ended September 30, 2010.
 
Three Months Ended September 30, 2011 Compared to Three Months Ended September 30, 2010
 
Revenues
 
We generated revenues of $385,067 in the three months ended September 30, 2011, compared to $291,355 in the three months ended September 30, 2010, from personal protection and private investigation services, due to increased operations.  Our cost of sales in the three months ended September 30, 2011 was $169,593, compared to $107,363 in the prior period, and related primarily to consultants engaged to provide our services.  Our gross profit in the three months ended September 30, 2011 was $215,474, compared to $183,992 in the three months ended September 30, 2010.
 
Expenses
 
For the three months ended September 30, 2011, we incurred total operating expenses of $165,460, compared to $137,467 in the prior period, due to increased operations.  During the current period, an agreement with a consultant was terminated by mutual consent resulting in fees paid to consultants of $0 in the current period, compared to fees to consultants of $6,150 in the prior period.  General and administrative expenses related to our operations increased to $19,803 in the current period from $16,208 in the prior period.  Legal and accounting expenses increased to $34,791 in the three months ended September 30, 2011 from $24,643 in the prior period.  Salaries paid to employees and to our officers increased to $41,160 and $36,000, respectively, in the current period from $20,851 and $31,000, respectively, in the prior period. Our selling expenses decreased to $19,681 in the current period from $22,600 in the prior period due to reduced promotional activities.
 
We generated operating income of $50,014 in the three months ended September 30, 2011, compared to operating income of $46,525 in the prior period, resulting in increased federal income tax expense.
 
Net Income
 
For the three months ended September 30, 2011, our net income was $8,195, compared to net income of $40,770 for the three months ended September 30, 2010.
 
Liquidity and Capital Resources
 
As of September 30, 2011, we had cash of $16,952, total assets of $1,047,610, total liabilities of $471,423, working capital of $279,892 and an accumulated deficit of $75,237.
 
For the nine months ended September 30, 2011, operating activities provided cash of $88,826, compared to using cash of $289,812 in the prior period.  An increase in accounts receivable and other receivables used cash of $293,243 in the current period, compared to $424,891 in the prior period.  An increase in accounts payable provided cash of $243,736 in the current period, compared to $83,410 in the prior period. An increase in accrued liabilities provided cash of $80,503 in the current period, compared to providing cash of $29,292 in the prior period.
 
For the nine months ended September 30, 2011, investing activities used cash of $4,359, compared to $37,377 in the prior period, related primarily to the purchase of property and equipment.
 
 
During the nine months ended September 30, 2011, financing activities used cash of $70,000 due to the repayment of a loan from our former director and officer. During the nine months ended September 30, 2010, we received $390,400 from financing activities primarily from the sale of our common stock and loans.
 
We are dependent on equity financing and proceeds from related parties to fund our operations.  Over the next 12 months, we plan to pursue and expand our current business of providing security solutions and risk management services to our clients, and expect that we will require additional funds of approximately $1.5 million to proceed with our business plan.  However, this estimate may change significantly depending on the level of our business activities.  If we secure less than the full amount of financing that we require, we will not be able to carry out our complete business plan and we will be forced to proceed with a scaled back plan based on our available financial resources.  There can be no assurance that we will be successful in our current business.
 
We intend to raise our capital requirements for the next 12 months from our operations, private placements, loans from related parties or public offerings (either self-underwritten or through a broker-dealer). If we are unsuccessful in raising sufficient funds through such efforts, we may review other financing possibilities such as bank loans. At this time we do not have a commitment from any person to provide us with financing. There is no assurance that any financing will be available to us or if available, on terms that will be acceptable to us.
 
Although we plan to raise capital through equity or debt financing, we believe that the latter may not be a viable alternative for funding our operations as we do not have tangible assets to secure any such financing. We anticipate that any additional funding will be in the form of equity financing from the sale of our common stock. However, we currently do not have any financing arranged and we cannot provide any assurance that we will be able to raise sufficient funds from the sale of our common stock to finance our operations.
 
Going Concern
 
Our financial statements for the period ended September 30, 2011 have been prepared on a going concern basis and Note 3 to the financial statements identifies issues that raise substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
We have only started generating revenues and rely upon the sale of our common stock and sustained profitable operations.  We may not generate any material revenues, and if we are unable to raise equity or secure alternative financing, we may not be able to pursue our plans and our business may fail.
 
Off-Balance Sheet Arrangements
 
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
Not applicable.
 
 
6
 
 
Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
As of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to the following deficiencies:
 
1.
Management override of existing controls is possible given our small size and lack of personnel; and
 
2.
We maintain an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.
 
In light of the existence of these control deficiencies, our management concluded that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls.
 
Management is currently evaluating remediation plans for the above control deficiencies. Management plans to enhance our risk assessment, internal control design and documentation and implement other procedures in the internal control function.
 
Changes in Internal Control
 
Other than as described above, during the three months ended September 30, 2011, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II – OTHER INFORMATION
 
Item 1. Legal Proceedings
 
We are not a party to any material pending legal proceedings and are not aware of any legal proceedings that have been threatened against us. None of our directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or securityholder are (i) a party adverse to us in any legal proceedings, or (ii) have a material interest adverse to us in any legal proceedings.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3. Defaults Upon Senior Securities
 
None.
 
Item 4. (Removed and Reserved)
 
Item 5. Other Information
 
None.
 
Item 6. Exhibits

Exhibit Number
Exhibit Description
31.1
31.2
32.1
32.2
101.INS
  
XBRL Instance Document
101.SCH
  
XBRL Taxonomy Extension Schema Document
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document
 
 

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 10, 2011
GLOBAL SECURITY AGENCY INC.
   
   
   
 
By:   /s/ Larry E. Lunger                                          
 
Larry E. Lunger
 
Chief Executive Officer