UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
(March One)
R |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE |
|
ACT OF 1934 |
For the quarterly period ended: September 30, 2015 |
OR |
|
|
☐ |
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: 333-47924
———————
BLASTGARD INTERNATIONAL, INC.
(Exact name of small business issuer as specified
in it charter)
———————
Colorado |
84-1506325 |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
2451 McMullen Booth Road, Suite 212,
Clearwater, Florida 33759-1362
(Address of principal executive offices)
(727) 592-9400
(issuer’s telephone number)
(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period
that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes R No ☐
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate website, if any, every Interactive Date File required to be submitted
pursuant to Rule 405 of Regulation S-T during the 12 preceding months (or such shorter period that the registrant was
required to submit and post such file. Yes R No ☐
Indicate by checkmark 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 ☐ |
|
Accelerated Filer ☐ |
Accelerated Filer ☐ |
|
Smaller Reporting Company R |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No R
State the number of shares outstanding
of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 13, 2015 the issuer had
331,405,857 shares of $.001 par value common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes ☐
No R
INDEX
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Page |
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PART 1 – FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Consolidated Balance Sheets, September 30, 2015 (unaudited) and December 31, 2014 (audited) |
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3 |
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Consolidated Statements of Operations, for the three and nine months ended September 30, 2015 and 2014 (unaudited) |
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4 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 (unaudited) |
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6 |
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Consolidated Statements of Equity for the year ended December 31, 2014 and for the nine months ended September 30, 2015 (unaudited) |
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7 |
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Notes to consolidated financial statements (unaudited) |
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8 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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21 |
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Item 4. Controls and Procedures |
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21 |
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PART 2 – OTHER INFORMATION |
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Item 1. Legal Proceedings |
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22 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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22 |
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Item 3. Defaults upon Senior Securities |
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23 |
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Item 4. Mine Safety Disclosures |
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23 |
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Item 5. Other Information |
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23 |
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Item 6. Exhibits |
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23 |
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Signatures |
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27 |
2
BlastGard International, Inc. |
Consolidated Balance Sheets |
| |
| |
|
| |
September 30, | |
December 31, |
| |
2015 | |
2014 |
| |
(unaudited) | |
(audited) |
Assets | |
| |
|
Current assets | |
| | | |
| | |
Cash | |
$ | 66,807 | | |
$ | 15,187 | |
Accounts receivable | |
| 390,188 | | |
| 256,619 | |
Inventory | |
| 1,747,925 | | |
| 1,348,827 | |
Prepaid and other current assets | |
| 13,000 | | |
| 5,000 | |
Total current assets | |
| 2,217,920 | | |
| 1,625,633 | |
| |
| | | |
| | |
Property & equipment, net | |
| 106,411 | | |
| 80,439 | |
Intangible property, net | |
| 153,178 | | |
| 164,631 | |
Investments | |
| — | | |
| 45,000 | |
Goodwill | |
| 2,061,649 | | |
| 2,061,649 | |
Deposits | |
| 7,612 | | |
| 7,612 | |
| |
| | | |
| | |
Total Assets | |
$ | 4,546,770 | | |
$ | 3,984,964 | |
| |
| | | |
| | |
Liabilities and Stockholders' Equity | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 926,733 | | |
$ | 863,476 | |
Accrued expenses | |
| 43,557 | | |
| 158,853 | |
Customer deposits and deferred revenue | |
| — | | |
| 179,998 | |
Current portion notes payable | |
| 979,206 | | |
| 956,518 | |
Total current liabilities | |
| 1,949,496 | | |
| 2,158,845 | |
| |
| | | |
| | |
Contingent liability | |
| — | | |
| — | |
Derivative liability, net | |
| 144,991 | | |
| 169,630 | |
Total liabilities | |
| 2,094,487 | | |
| 2,328,475 | |
| |
| | | |
| | |
Stockholders' Equity | |
| | | |
| | |
Preferred Stock, 1,000 shares authorized; | |
| | | |
| | |
$.001 par value; 0 and 0 issued and outstanding | |
| — | | |
| — | |
Common Stock, $.001 par value, 500,000,000 shares | |
| | | |
| | |
authorized; 331,405,857 and 328,405,857 shares | |
| | | |
| | |
issued and outstanding, respectively | |
| 331,405 | | |
| 328,405 | |
Additional paid-in capital | |
| 17,641,260 | | |
| 17,356,271 | |
Minority interest | |
| 3,636 | | |
| (11,282 | ) |
Accumulated deficit | |
| (15,524,018 | ) | |
| (16,016,905 | ) |
Total stockholders’ equity | |
| 2,452,283 | | |
| 1,656,489 | |
| |
| | | |
| | |
Total Liabilities and Stockholders' Equity | |
$ | 4,546,770 | | |
$ | 3,984,964 | |
The accompanying notes are an integral
part of these financial statements.
3
BlastGard International Inc. |
Consolidated Statements of Operations |
(unaudited) |
| |
For the Three Months Ended September 30, | |
For the Nine Months Ended September 30, |
| |
2015 | |
2014 | |
2015 | |
2014 |
| |
| |
| |
| |
|
Revenues | |
$ | 532,891 | | |
$ | 1,264,420 | | |
$ | 4,461,761 | | |
$ | 2,283,475 | |
| |
| | | |
| | | |
| | | |
| | |
Direct costs | |
| 320,722 | | |
| 911,498 | | |
| 2,557,352 | | |
| 1,568,839 | |
| |
| | | |
| | | |
| | | |
| | |
Gross Profit | |
| 212,169 | | |
| 352,922 | | |
| 1,904,409 | | |
| 714,636 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 263,289 | | |
| 376,751 | | |
| 1,020,018 | | |
| 982,718 | |
Research and Development | |
| 7,564 | | |
| 1,310 | | |
| 35,760 | | |
| 16,516 | |
Stock based compensation | |
| 173,131 | | |
| — | | |
| 257,989 | | |
| 99,919 | |
Amortization and depreciation | |
| 13,380 | | |
| 13,568 | | |
| 38,280 | | |
| 63,112 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 457,364 | | |
| 391,629 | | |
| 1,352,047 | | |
| 1,162,265 | |
| |
| | | |
| | | |
| | | |
| | |
Operating income (loss) | |
| (245,195 | ) | |
| (38,706 | ) | |
| 552,362 | | |
| (447,629 | ) |
| |
| | | |
| | | |
| | | |
| | |
Non-operating activity | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense) | |
| (45,000 | ) | |
| — | | |
| (45,000 | ) | |
| — | |
Gains (losses) on settlement of debt | |
| — | | |
| 990,037 | | |
| — | | |
| 990,037 | |
Gain (loss) on derivative liability | |
| 439,762 | | |
| 586,759 | | |
| 112,518 | | |
| 2,095,169 | |
Interest expenses | |
| (37,542 | ) | |
| (39,085 | ) | |
| (112,075 | ) | |
| (117,817 | ) |
Total other income (expense) | |
| 357,220 | | |
| 1,537,711 | | |
| (44,557 | ) | |
| 2,967,389 | |
| |
| | | |
| | | |
| | | |
| | |
Income(loss) before income taxes | |
| 112,025 | | |
| 1,499,005 | | |
| 507,805 | | |
| 2,519,760 | |
Less minority interest income(loss) | |
| 1,786 | | |
| (1,724 | ) | |
| (14,918 | ) | |
| 674 | |
| |
| | | |
| | | |
| | | |
| | |
Net Income(loss) | |
$ | 113,811 | | |
$ | 1,497,281 | | |
$ | 492,887 | | |
$ | 2,520,434 | |
| |
| | | |
| | | |
| | | |
| | |
Earnings (loss) per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.01 | | |
$ | 0.01 | | |
$ | 0.01 | | |
$ | 0.01 | |
Dilutive | |
$ | 0.01 | | |
$ | 0.01 | | |
$ | 0.01 | | |
$ | 0.01 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 328,960,205 | | |
| 300,277,222 | | |
| 328,592,670 | | |
| 296,644,250 | |
Dilutive | |
| 349,136,788 | | |
| 326,718,659 | | |
| 359,102,302 | | |
| 317,697,147 | |
The accompanying notes are an integral
part of these financial statements.
4
BlastGard International Inc. |
Consolidated Statements of Cash Flows |
(unaudited) |
| |
For the Nine Months Ended
September 30, |
| |
2015 | |
2014 |
| |
| |
|
Cash Flows from Operating Activities: | |
| | | |
| | |
Net (loss) income | |
$ | 492,887 | | |
$ | 2,520,434 | |
Adjustment to reconcile Net Income to net cash provided by operations: | |
| | | |
| | |
Minority interest (gain) loss | |
| 14,918 | | |
| (674 | ) |
Impairment loss on investment | |
| 45,000 | | |
| — | |
Stock based compensation | |
| 257,989 | | |
| 99,919 | |
Depreciation and amortization | |
| 38,280 | | |
| 63,112 | |
Amortization of debt discount | |
| 87,879 | | |
| 87,878 | |
Gain on settlement of debt | |
| (990,037 | ) | |
| | |
Gain on derivative | |
| (112,518 | ) | |
| (2,095,169 | ) |
Changes in assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (133,569 | ) | |
| (140,355 | ) |
Inventory | |
| (399,098 | ) | |
| (163,605 | ) |
Other operating assets | |
| (8,000 | ) | |
| 8,086 | |
Accounts payable and accruals | |
| (52,039 | ) | |
| 396,769 | |
Customer deposits | |
| (179,998 | ) | |
| (102 | ) |
Net Cash (Used) Provided by Operating Activities | |
| 51,731 | | |
| (213,744 | ) |
| |
| | | |
| | |
Cash Flows from Investing Activities: | |
| | | |
| | |
Purchase of property and equipment | |
| (52,799 | ) | |
| (3,135 | ) |
Net Cash Used by Investing Activities | |
| (52,799 | ) | |
| (3,135 | ) |
| |
| | | |
| | |
Cash Flows from Financing Activities: | |
| | | |
| | |
Proceeds from issuance of note payable | |
| 226,610 | | |
| 242,746 | |
Repayments of notes payable | |
| (173,922 | ) | |
| (19,152 | ) |
Net Cash Provided by Financing Activities | |
| 52,688 | | |
| 223,594 | |
| |
| | | |
| | |
Net increase/decrease in Cash | |
| 51,620 | | |
| 6,715 | |
| |
| | | |
| | |
Cash at beginning of period | |
| 15,187 | | |
| 43,253 | |
| |
| | | |
| | |
Cash at end of period | |
$ | 66,807 | | |
$ | 49,968 | |
| |
| | | |
| | |
Supplemental cash flow information: | |
| | | |
| | |
Interest paid | |
$ | 20,508 | | |
$ | 27,003 | |
Taxes paid | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
| |
| | | |
| | |
Supplemental Schedule of Noncash Investing and Financing Activities | |
| | | |
| | |
| |
| | | |
| | |
Debt converted to stock | |
$ | 30,000 | | |
$ | 302,474 | |
The accompanying notes are an integral
part of these financial statements.
5
BlastGard International Inc. |
Consolidated Statements of Stockholders Equity |
For the nine months ended September 30, 2015 and the year ended December 31, 2014 |
(unaudited) |
|
| |
| |
| |
Additional | |
| |
| |
Stock- |
| |
Common | |
Paid in | |
Minority | |
Accumulated | |
Holders' |
| |
Shares | |
Par | |
Capital | |
Interest | |
Deficit | |
Deficit |
| |
| |
| |
| |
| |
| |
|
Balances at December 31, 2013 | |
| 294,797,657 | | |
$ | 294,797 | | |
$ | 16,452,001 | | |
$ | (24,027 | ) | |
$ | (18,530,706 | ) | |
$ | (1,807,935 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options issued for services | |
| | | |
| | | |
| 199,917 | | |
| | | |
| | | |
| 199,917 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for exercise of Warrants | |
| 33,608,200 | | |
| 33,608 | | |
| 704,353 | | |
| | | |
| | | |
| 737,961 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income (Loss) | |
| | | |
| | | |
| | | |
| 12,745 | | |
| 2,513,801 | | |
| 2,526,546 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balances at December 31, 2014 | |
| 328,405,857 | | |
$ | 328,405 | | |
$ | 17,356,271 | | |
$ | (11,282 | ) | |
$ | (16,016,905 | ) | |
$ | 1,656,489 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for debt | |
| 3,000,000 | | |
| 3,000 | | |
| 27,000 | | |
| | | |
| | | |
| 30,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Options issued for services | |
| | | |
| | | |
| 257,989 | | |
| | | |
| | | |
| 257,989 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net Income (Loss) | |
| | | |
| | | |
| | | |
| 14,918 | | |
| 492,887 | | |
| 507,805 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balances at September 30, 2015 | |
| 331,405,857 | | |
$ | 331,405 | | |
$ | 17,641,260 | | |
$ | 3,636 | | |
$ | (15,524,018 | ) | |
$ | 2,452,283 | |
6
BLASTGARD INTERNATIONAL, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Basis of Presentation
The consolidated balance sheet
as of September 30, 2015, the consolidated statements of operations for the three and nine months ended September 30, 2015 and
2014, and consolidated statements of cash flows for the nine months ended September 30, 2015 and 2014 have been prepared by us
without audit. In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly in all material respects our financial position as
of September 30, 2015 and results of operations for the three and nine months ended September 30, 2015 and 2014, and cash flows
for the nine months ended September 30, 2015 and 2014. The results of operations and cash flows for the periods indicated above
are not necessarily indicative of the results to be expected for the full year.
This report
should be read in conjunction with our Form 10-K for our fiscal year ended December 31, 2014. All material intercompany
transactions have been eliminated.
BlastGard International, Inc. (the
“Company”) was incorporated on September 26, 2003 as BlastGard Technologies, Inc. (“BTI”) in the State
of Florida, to design and market proprietary blast mitigation materials. The Company created, designs, develops and markets proprietary
blast mitigation materials. The Company’s patent-pending BlastWrap® technology effectively mitigates blast effects and
suppresses post-blast fires. The Company sub-contracts the manufacturing of products to licensed and qualified production facilities.
The Company went public through
a shell merger on January 31, 2004. On March 31, 2004, the Company changed its name to BlastGard International, Inc. On March 4,
2011, the Company completed the acquisition of HighCom Securities, Inc and subsidiaries. These financial statements include the
assets liabilities and activity of the following:
BlastGard International, Inc.
BlastGard® International, Inc. is a Colorado corporation that has developed and designed proprietary blast mitigation
materials. The Company operates from offices in Clearwater, Florida and uses contract manufacturers in various locations for production.
BlastGard Technologies Inc. is
a dormant Florida corporation.
HighCom Securities, Inc.
HighCom Securities, Inc. (HighCom), is a global provider of security equipment and a leader in advanced ballistic armor manufacturing.
The Company has a manufacturing facility in Columbus, Ohio for production and has moved the corporate offices to Clearwater, Florida
as of May 1, 2011.
Going Concern
The accompanying financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. The financial statements do not include any adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s
continuation as a going concern was dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely
basis and ultimately to attain profitability. The Company plans to generate the necessary cash flows with increased sales revenue
over the next 12 months. However, should the Company’s sales not provide sufficient cash flow; the Company has plans to raise
additional working capital through debt and/or equity financings. There was no assurance the Company will be successful in producing
increased sales revenues or obtaining additional funding through debt and equity financings.
7
Accounting Policies
Use of Estimates
The preparation of financial statements
in accordance with generally accepted accounting principles required management to make estimates and assumptions that affected
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considered all highly
liquid debt instruments with original maturities of three months or less when acquired to be cash equivalents.
Financial Instruments
The carrying amounts of cash, receivables
and current liabilities approximated fair value due to the short-term maturity of the instruments. Debt obligations were carried
at cost, which approximated fair value due to the prevailing market rate for similar instruments.
Fair Value Measurement
All financial and nonfinancial
assets and liabilities were recognized or disclosed at fair value in the financial statements. This value was evaluated on a recurring
basis (at least annually). Generally accepted accounting principles in the United States define fair value as the exchange price
that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on a measurement date. The accounting principles
also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use
of unobservable inputs when measuring fair value. Three levels of inputs were used to measure fair value.
Level 1: Quotes market prices in
active markets for identical assets or liabilities.
Level 2: Observable market based
inputs or unobservable inputs that were corroborated by market data.
Level 3: Unobservable inputs that
were not corroborated by market data.
Accounts Receivable
Accounts receivable consisted of
amounts due from customers based in the United States and abroad. The Company considered accounts more than 30 days old to
be past due. The Company used the allowance method for recognizing bad debts. When an account was deemed uncollectible, it was
written off against the allowance. The Company generally does not require collateral for its accounts receivable. Management deems
all accounts receivable to be collectable at September 30, 2015.
Inventory
Inventory was stated at the lower
of cost (first-in, first-out) or market. Market was generally considered to be net realizable value. Inventory consisted of materials
used to manufacture the Company’s product and finished goods ready for sale.
Property and Equipment
Property and equipment were stated
at cost. Depreciation was calculated using the straight-line method over the estimated useful lives of the related assets, ranging
from three to seven years. Expenditures for additions and improvements were capitalized, while repairs and maintenance costs were
expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of were
removed from the accounts and any gain or loss was recorded in the year of disposal.
8
Impairment of Long-Lived Assets
The Company evaluates the carrying
value of its long-lived assets at least annually. Impairment losses were recorded on long-lived assets used in operations when
indicators of impairment were present and the undiscounted future cash flows estimated to be generated by those assets were less
than the assets’ carrying amount. If such assets were impaired, the impairment to be recognized was measured by the amount
by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of were reported at the
lower of the carrying value or fair value, less costs to sell. The Company recorded an impairment loss of $45,000 due to an investment
deemed worthless as of September 30, 2015.
Goodwill
Goodwill represents the premium paid
over the fair value of the net tangible and identifiable intangible assets we have acquired in our business combinations. We perform
a goodwill impairment test on at least an annual basis. Application of the goodwill impairment test requires significant judgments,
including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth
for the businesses, the useful life over which cash flows will occur and determination of our weighted average cost of capital.
Changes in these estimates and assumptions could materially affect the determination of fair value and/or conclusions on goodwill
impairment for each reporting unit. We will conduct our annual goodwill impairment test as of December 31 of each year or more
frequently if indicators of impairment exist. We periodically analyze whether any such indicators of impairment exist. A significant
amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include a sustained
significant decline in our sham price and market capitalization, a significant adverse change in legal factors or in the business
climate, unanticipated competition and/or slower expected growth rates, adverse actions or assessments by a regulator, among others.
We compare the fair value of its reporting unit to its respective carrying value, including related goodwill. Future changes in
the industry could impact the results of future annual impairment tests. There can be no assurance that future tests of goodwill
impairment will not result in impairment charges.
Debt Issue Costs
The costs related to the issuance
of debt were capitalized and amortized to interest expense using the straight-line method over the lives of the related debt. The
straight-line method results in amortization that was not materially different from that calculated under the effective interest
method.
Revenue Recognition
The Company recognizes revenue
when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following
criteria are met:
(i)
persuasive evidence of an arrangement exists,
(ii)
the product has been shipped or the services have been rendered to the customer,
(iii)
the sales price is fixed or determinable, and
(iv)
collectability is reasonably assured.
The Company’s product and return
policy allows for merchandise purchased directly from the Company to be returned after obtaining a Return Authorization Number
during the 30 day period following date of shipment by the Company for a refund of the purchase price.
Research and Development
Research and development costs
were expensed as incurred.
Advertising
Advertising costs were expensed
as incurred. Advertising costs of $0 and $35,002 were incurred during the nine months ended September 30, 2015 and 2014, respectively.
9
Shipping and Freight Costs
The Company includes shipping costs in cost
of goods sold.
Income Taxes
Income taxes were provided for
the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related
primarily to differences between the recorded book basis and the tax basis of assets and liabilities for financial and income tax
reporting. Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either
be taxable or deductible when the assets and liabilities were recovered or settled. Deferred tax assets were also recognized for
operating losses that were available to offset future taxable income and tax credits that were available to offset future federal
income taxes, less the effect of any allowances considered necessary. The company use guidance provided by ASC-740-10, Accounting
for Uncertainty in Income Taxes, for reporting uncertain tax provisions.
Stock-based Compensation
We use the Black-Scholes option
pricing model to estimate the fair value of stock-based awards on the date of grant, using assumptions for volatility, expected
term, risk-free interest rate and dividend yield. We have used one grouping for the assumptions as our option grants were primarily
basic with similar characteristics. The expected term of options granted has been derived based upon our history of actual exercise
behavior and represents the period of time that options granted were expected to be outstanding. Historical data was also used
to estimate option exercises and employee terminations. Estimated volatility was based upon our historical market price at consistent
points in a period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield
curve in effect at the time of grant and the dividend yield was based on the historical dividend yield. Compensation expense for
stock based compensation is recognized over the vesting period.
Income (Loss) per Common Share
Basic net loss per share excludes
the impact of common stock equivalents. Diluted net income (loss) per share utilizes the average market price per share when applying
the treasury stock method in determining common stock equivalents. As of September 30, 2015, there were 31,000,000 vested common
stock options outstanding, which were included in the calculation of net income per share-diluted because they were dilutive. In
addition, September 30, 2015 the Company had 41,801,793 warrants outstanding issued in connection with convertible promissory notes
and stock sales that were also included because they were dilutive.
Recent Accounting Pronouncements
We have reviewed the FASB issued
Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates
during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous
generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on
the corporation’s reported financial position or operations in the near term. The applicability of any standard
is subject to the formal review of our financial management and certain standards are under consideration. Reference
is made to these recent accounting pronouncements as if they are set forth therein in their entirety.
(2) Inventory
The Company’s manufacturing
is sub-contracted to licensed and qualified production facilities. Our inventory is made up of raw materials, work in progress
and finished goods. Our inventory is maintained at our manufacturing facilities.
10
| |
September 30, | |
December 31, |
| |
2015 | |
2014 |
| |
(unaudited) | |
|
| |
| |
|
Raw materials | |
$ | 409,496 | | |
$ | 268,894 | |
Work in process | |
| 10,395 | | |
| 10,600 | |
Finished Goods | |
| 1,328,034 | | |
| 1,069,333 | |
| |
| | | |
| | |
TOTAL | |
$ | 1,747,925 | | |
$ | 1,348,827 | |
| (3) | Property and Equipment, Net |
Property and equipment are comprised of the following at September 30, 2015 and December 31, 2014:
| |
September 30, | |
|
| |
2015 | |
December 31, |
| |
(unaudited) | |
2014 |
Equipment | |
$ | 263,058 | | |
$ | 233,688 | |
Furniture | |
| 118,671 | | |
| 95,242 | |
Moulds | |
| 45,060 | | |
| 45,060 | |
Test Range | |
| 110,802 | | |
| 110,802 | |
| |
| | | |
| | |
| |
| 537,591 | | |
| 484,792 | |
Less accumulated depreciation | |
| (431,180 | ) | |
| (404,353 | ) |
| |
| | | |
| | |
Property and equipment, net | |
$ | 106,411 | | |
$ | 80,439 | |
| | Depreciation expense for the nine months ended September 30, 2015 and 2014 was $26,827 and $35,544. |
| (4) | Intangible Assets, Net |
Intangible Assets are comprised of the following at September 30, 2015 and December 31, 2014:
| |
September 30, | |
|
| |
2015 | |
December 31, |
| |
(unaudited) | |
2014 |
Patents and Trademarks | |
$ | 161,278 | | |
$ | 161,278 | |
Websites | |
| 80,000 | | |
| 80,000 | |
Lists | |
| 500,000 | | |
| 500,000 | |
Research and Development | |
| 55,000 | | |
| 55,000 | |
| |
| | | |
| | |
| |
| 796,278 | | |
| 796,278 | |
Less accumulated amortization | |
| (643,100 | ) | |
| (631,647 | ) |
| |
| | | |
| | |
Intangible assets, net | |
$ | 153,178 | | |
$ | 164,631 | |
| |
| | | |
| | |
Amortization expense for the nine
months ended September 30, 2015 and 2014 was $11,453 and $27,568.
Notes payable at September 30, 2015 and
December 31, 2014 as detailed below, is summarized as follows:
| |
September 30, 2015 (unaudited) | |
December 31, 2014 |
| |
| |
|
Convertible promissory notes | |
$ | 32,566 | | |
$ | 32,566 | |
Convertible promissory notes – accrued expenses | |
| 365,025 | | |
| 437,025 | |
Revolving credit | |
| 194,866 | | |
| 226,789 | |
Acquisition debt | |
| 30,000 | | |
| 30,000 | |
Line of credit | |
| 256,749 | | |
| 230,138 | |
Short Term Loan | |
| 100,000 | | |
| — | |
| |
| 979,206 | | |
| 956,518 | |
Less current maturities | |
| (979,206 | ) | |
| (956,518 | ) |
| |
$ | — | | |
$ | — | |
11
Convertible Promissory Notes
On December 2, 2004, the Company entered into agreements
to borrow an aggregate principal amount of $1,420,000 and to issue to the investors secured convertible notes and common stock
purchase warrants. The Company’s convertible promissory notes payable consist of the following at September 30, 2014 and
December 31, 2013:
| |
September 30, 2015 (unaudited) | |
December 31, 2014 |
| |
| |
|
Convertible promissory note, $50,000, issued December 2, 2004, due on November 30, 2009, 8% annual interest rate, convertible at $1.50 per share | |
| 17,325 | | |
| 17,325 | |
| |
| | | |
| | |
Convertible promissory note, $50,000, issued December 2, 2004, due on November 30, 2009, 8% interest rate, convertible at $1.50 per share | |
| 15,241 | | |
| 15,241 | |
| |
| | | |
| | |
| |
| 32,566 | | |
| 32,566 | |
Less: current maturities | |
| (32,566 | ) | |
| (32,566 | ) |
| |
$ | — | | |
$ | — | |
| |
| | | |
| | |
At September 30, 2015, there were
no warrants outstanding and exercisable associated with the 2004 debt.
Conversion of Accrued Expenses.
On March 8, 2011, BlastGard’s Board
of Directors ratified, adopted and approved that James F. Gordon’s accrued salary of $160,000 (20 months at $8,000 per month
covering May-December 2009, January-October 2010 and January-February 2011); Michael J. Gordon’s accrued salary of $160,000
(20 months at $8,000 per month covering May-December 2009, January-October 2010 and January-February 2011); and Morse & Morse,
PLLC’s accrued legal bill of $67,025 be converted into a Convertible Non-Interest Bearing Demand Note, convertible into Common
Shares of BlastGard at $.05 per share at the noteholder(s) discretion. On May 3, 2011, BlastGard’s Board of Directors ratified,
adopted and approved $100,000 in additional compensation to Michael J. Gordon as CEO, of which $50,000 be converted into a Convertible
Non-Interest Bearing Demand Note, convertible into Common Shares of BlastGard at $.05 per share at the noteholder(s) discretion
and $50,000 issued in Common Stock at $.05 per share. On November 11, 2013, the Board of Directors approved the lowering the conversion
price for $.05 per share to $.01 per share on these notes.
The 2011 convertible promissory
notes consisted of the following at September 30, 2015 and December 31, 2014:
| |
September 30, 2015 (unaudited) | |
December 31, 2014 |
| |
| |
|
Convertible promissory note, $210,000, issued January 31, 2011, due on September 30, 2011, 6% interest rate | |
$ | 180,000 | | |
$ | 210,000 | |
| |
| | | |
| | |
Convertible promissory note, $160,000, issued January 31, 2011, due on January 31, 2012, 6% interest rate | |
| 118,000 | | |
| 160,000 | |
| |
| | | |
| | |
Convertible promissory note, $67,025, issued January 31, 2011, due on September 30, 2011, 6% interest rate | |
| 67,025 | | |
| 67,025 | |
| |
| 365,025 | | |
| 437,025 | |
Less: current maturities | |
| (365,025 | ) | |
| (437,025 | ) |
| |
$ | — | | |
$ | — | |
12
The Company had issued 104,333,335 warrants
with the convertible debt. The 41,801,793 warrants which remain outstanding are currently exercisable at $0.009 and expire in 2018.
Due to changes in the terms, the warrants are re-valued, using the Black-Scholes method each quarter. On August 23, 2013, 28,923,342
warrants were exercised and on September 2, 2014, 33,608,200 warrants were exercised. At September 30, 2015, the remaining 41,801,793
warrants were valued at approximately $511,312, with an unamortized debt discount of $366,321, and a net value of $144,991. These
amounts are presented as a derivative liability, net on the balance sheet.
Revolving Credit Facilities
The Company also acquired various revolving
credit facilities in the acquisition of HighCom Security, Inc. HighCom had been paying interest only on the loans. Two of these
loans are not transferable and all have been called by the lenders. The revolving credit facilities consist of the following at
September 30, 2015 and December 31, 2014:
| |
September 30, 2015 (unaudited) | |
December 31, 2014 |
| |
| |
|
Line of credit from Regions Bank, $100,000, interest only at 8% annually, due on demand | |
$ | 56,784 | | |
$ | 63,940 | |
| |
| | | |
| | |
Revolving credit card facility with Wells Fargo Bank, $150,000, interest only at 7.5% annually, due on demand | |
| 138,082 | | |
| 142,582 | |
| |
| | | |
| | |
Three credit card accounts with major financial institutions varying monthly minimum payments including interest, due on demand | |
| — | | |
| 20,267 | |
| |
| | | |
| | |
| |
| 194,866 | | |
| 226,789 | |
Less: current maturities | |
| (194,866 | ) | |
| (226,789 | ) |
| |
$ | — | | |
$ | — | |
Acquisition Debt
On March 4, 2011, the Company issued
a note payable in association with the purchase of HighCom Security Inc. and on March 31, 2011, the Company issued a note payable
in association with the purchase of Acer product designs. These acquisition notes have the following balances at September 30,
2015 and December 31, 2014;
| |
September 30, 2015 (unaudited) | |
December 31, 2014 |
| |
| |
|
Acquisition note for the purchase of Acer product designs, original amount $30,000, interest at 8% | |
| 30,000 | | |
| 30,000 | |
| |
| | | |
| | |
| |
| 30,000 | | |
| 30,000 | |
Less: current maturities | |
| (30,000 | ) | |
| (30,000 | ) |
| |
$ | — | | |
$ | — | |
13
Line of Credit
The Company has a $100,000 credit line, which
was secured by a personal guarantee of its Chief Executive Officer and a $220,000 credit line secured by a personal guarantee of
its Chief Executive Officer. As of September 30, 2015 and December 31, 2014, $256,749 and $230,138 was borrowed and advanced to
the Company. These loans are unsecured and included in the current portion of notes payable.
Short Term Loan
The Company borrowed $100,000 from a related
party on August 6, 2015, bearing interest at 3%, with a maturity date of October 31, 2015. This loan balance is included in the
current portion of notes payable. This short term loan was paid in full on October 26, 2015.
Off Balance Sheet Arrangements.
We currently have no off-balance sheet arrangements.
Background of Secured Financings
of BlastGard and Conversion into Common Stock
As of March 21, 2013, the Company had outstanding
$1,267,707 in principal debt, including accrued interest thereon owed to Alpha Capital Anstalt, pursuant to secured promissory
notes (collectively the “Company Debt”). Pursuant to an amendment and consent, all of the debt owed to Alpha Capital,
which was previously past due and were the subject of security agreements, guarantee and other transaction documents, to the extent
outstanding, have had their maturity date extended through June 14, 2013 and their conversion price lowered from $0.010 per share
to $0.009 per share.
On April 4, 2013, Alpha Capital Anstalt, closed
on an agreement dated March 21, 2013 (the “Purchase and Exchange Agreement”) with 8464081 Canada Inc. (the “Purchaser”)
to sell to the Purchaser and its assignees the Company’s Debt in the principal amount, including accrued interest thereon,
of $1,267,770 (which excludes $182,000 of the principal due on this note that was maintained by Alpha Capital) owned by it plus
warrants to purchase 104,333,335 shares (exercisable at $0.009 per share). The agreements required that within three (3) months
of March 21, 2013, that the Purchaser shall convert all the notes acquired by it at the current conversion price of $0.009 per
share. Alpha Capital Anstalt (the “Seller”) has also committed to convert the $182,000 of principal retained by it
into shares of the Company’s Common Stock at the same conversion price. Also, the agreement required the Purchaser to offer
to purchase the other December 2004 Debt for a purchase price equal to the total amount of principal and interest due on each note
with a 10% premium.
On April 23, 2013, the aforementioned secured
note holders converted their debt in the principal amount of approximately $1.451 million including accrued interest thereon into
161,269,410 shares of common stock at a conversion price of $.009 per share. Of the 161,269,410 shares, 132,426,499 shares were
issued to 8464081 Canada Inc., 20,222,222 shares were issued to Alpha Capital Anstalt and 8,620,689 shares were issued to Laurentian
Bank Securities ITF Robocheyne Consulting Ltd. Exemption from registration is claimed under Section 3(a)(9) of the Securities Act
of 1933, as amended.
14
At December 31, 2012, the Company had outstanding
other secured indebtedness borrowed in December 2004 in the amount of $125,663. At September 30, 2013, this other secured indebtedness
was reduced to $32,566 as a result of the conversion of principal and accrued interest into 12,218,869 shares of Common Stock at
a conversion price of $.009 per share. As part of Alpha Capital Anstalt’s agreement with 8464081 Canada, 8464081 Canada is
reportedly in the process of purchasing this other secured indebtedness which approximates $45,000, including accrued interest
thereon, and, upon the completion of said purchase, such indebtedness will be converted into Common Stock at $.009 per share.
Our outstanding secured debt has mandatory
redemption provisions. A large portion of the secured debt provides that in the event (i) the Company is prohibited from issuing
Conversion Shares, (ii) upon the occurrence of any other Event of Default (as defined in the Transaction Documents), that continues
beyond any applicable cure period, (iii) a Change in Control (as defined below) occurs, or (iv) upon the liquidation, dissolution
or winding up of the Company or any Subsidiary, then at the Secured Debt Holder’s election, the Company must pay to the Secured
Debt Holder not later than ten (10) days after request by such Secured Debt Holder, a sum of money determined by multiplying up
to the outstanding principal amount of the Note designated by the Secured Debt Holder, at the Secured Debt Holder’s election,
the greater of (i) 120%, or (ii) a fraction the numerator of which is the highest closing price of the Common Stock for the thirty
days preceding the date demand is made by Secured Debt Holder and the denominator of which is the lowest applicable conversion
price during such thirty (30) day period, plus accrued but unpaid interest and any other amounts due under the Transaction Documents
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be received by the Secured Debt Holder
on the same date as the Conversion Shares otherwise deliverable or within ten (10) days after request, whichever is sooner ("Mandatory
Redemption Payment Date"). Upon receipt of the Mandatory Redemption Payment, the corresponding Note principal, interest
and other amounts will be deemed paid and no longer outstanding. The Secured Debt Holder may rescind the election to receive a
Mandatory Redemption Payment at any time until such payment is actually received. Liquidated damages calculated that have been
paid or accrued for the ten day period prior to the actual receipt of the Mandatory Redemption Payment by such Secured Debt Holder
shall be credited against the Mandatory Redemption Payment provided the balance of the Mandatory Redemption Payment is timely paid.
“Change in Control” is defined as (i) the Company becoming a Subsidiary of another entity (other than a corporation
formed by the Company for purposes of reincorporation in another U.S. jurisdiction), (ii) the sale, lease or transfer of substantially
all the assets of the Company or any Subsidiary, (iii) a majority of the members of the Company’s board of directors as of
the Closing Date no longer serving as directors of the Company, except as a result of natural causes or as a result of hiring additional
outside directors in order to meet appropriate stock exchange requirements, or (iv) Michael Gordon, the Chief Executive Officer
of the Company is no longer serving as Chief Executive Officer unless prior written consent of the Secured Debt Holder had been
obtained by the Company. The foregoing notwithstanding, the Secured Debt Holder may demand and receive from the Company the amount
stated above or any other greater amount which the Secured Debt Holder is entitled to receive or demand pursuant to the Transaction
Documents.
In connection with the aforementioned loan
transactions, we also issued to Alpha Capital Anstalt warrants to purchase 104,333,335 shares of the Company’s Common Stock,
which warrants are currently exercisable at a reduced exercise price of $.009 per share, which exercise price is subject to adjustment
pursuant to the provisions of the warrant. In the event a fundamental transaction occurs as defined in the warrants, which includes
without limitation any person or group acquiring 50% of the aggregate Common Stock of the Company, then the holder of the warrants
may have the right to have the warrants redeemed at a price equal to the Black-Scholes value of said warrants. These warrants were
sold by Alpha Capital to 8464081 Canada.
Also, pursuant to the Purchase and Exchange
Agreement by and among Alpha Capital Amstalt (the “Seller”), 8464081 Canada (the “Purchaser”) and the Company,
the parties agreed to the following:
·
Purchaser has the right to nominate and appoint to the Board at least 50% of the Board members;
·
Purchaser has a right of first refusal to participate in future financings up to its pro rata share of Common Stock of the
Company.
·
Purchaser undertakes to provide the Company with sufficient capital to allow the Company to conduct its business and remain
a going concern until December 31, 2013.
15
This
transaction resulted in the Purchaser, namely, 8464081 Canada Inc., acquiring control of the Company through its acquisition of
Warrants to purchase 104,333,335 shares of Common Stock exercisable at $.009 per share (which exercise price was later lowered
to $.009 per share) and its acquisition of secured debt in the principal amount of $1,267,770, which together with accrued interest
thereon, was convertible at $.009 per share. The Purchaser paid Seller approximately $1.82 million to acquire control of the Company,
including giving Seller a promissory note in the amount of $400,000, which note was due on August 31, 2013 and has been paid.
Preferred
stock
The Company was authorized to issue
1,000 shares of $.001 par value preferred stock. The Company may divide and issue the Preferred Shares in series. Each Series,
when issued, shall be designated to distinguish them from the shares of all other series. The relative rights and preferences of
these series include preference of dividends, redemption terms and conditions, amount payable upon shares of voluntary or involuntary
liquidation, terms and condition of conversion as well as voting powers.
Common stock issuances
331,405,857
shares were issued and outstanding at September 30, 2015.
In September 2015, the Company issued
3,000,000 common shares to its CEO as a conversion of $30,000 of his $210,000 convertible debenture.
Stock
Compensation
The Company periodically offers options
to purchase stock in the Company to vendors and employees. The Board’s policy with respect to options is to grant options
at the fair market value of the stock on the date of grant.
On March 25, 2014, the Board of Directors
approved granting all four directors options to purchase 500,000 shares exercisable at $.01 per share. The options are for 5 years
and are fully-vested, non-statutory stock options. These options were granted to the following persons: Michael J. Gordon, Paul
W. Henry, Solomon Mayer and Keith Brill.
On March 10, 2015, the Board of Directors
approved granting all four directors options to purchase 750,000 shares exercisable at $.01 per share, for a total of 3,000,000
options. The options are for 5 years and are fully-vested, non-statutory stock options. These options were granted to the following
persons: Michael J. Gordon, Paul W. Henry, Solomon Mayer and Keith Brill.
On September 1, 2015, the Board of
Directors approved granting four employees non-statutory stock options to purchase 26,500,000 shares exercisable at $.009 per share.
25,000,000 of these options are for 10 years, with 50% vested immediately, and the remaining 50% vesting pro-rata over the four
subsequent years. 1,500,000 of these options are for 3 years and are fully vested. These options were granted to the following
persons: Michael J. Gordon, Mike Bundy, Chad Wright and Paul Sparkes.
There were no net cash proceeds from
the exercise of stock options during the nine months ended September 30, 2015.
The following table represents vested stock option activity
as of and for the nine months ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares |
|
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual Life |
|
Aggregate
Intrinsic
Value |
Options Outstanding - January 1, 2015 |
|
20,550,000 |
|
|
$ |
0. |
|
4.2 years |
|
|
- |
Granted / Vested |
|
19,000,000 |
|
|
$ |
0.01 |
|
6.0 years |
|
|
|
Exercised |
|
- |
|
|
|
- |
|
|
|
|
|
Forfeited/expired/cancelled |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding – September 30, 2015 |
|
39,550,000 |
|
|
$ |
0.05 |
|
4.4 years |
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Exercisable – January 1, 2015 |
|
20,550,000 |
|
|
$ |
0.03 |
|
4.2 years |
|
$ |
|
Outstanding Exercisable – September 30, 2015 |
|
39,550,000 |
|
|
$ |
0.03 |
|
4.4 years |
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
16
The total grant date fair value of options vested during
the nine months ended September 30, 2015 and 2014 was $257,989 and $99,919 respectively.
The following table represents stock warrant activity as of and
for the nine months ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares |
|
|
Weighted
Average
Exercise
Price |
|
Weighted
Average
Remaining
Contractual Life |
|
Aggregate
Intrinsic
Value |
Warrants Outstanding - January 1, 2015 |
|
41,801,793 |
|
|
$ |
0.009. |
|
3.9years |
|
$ |
0.006 |
Granted / Vested |
|
- |
|
|
|
|
|
|
|
|
|
Exercised |
|
- |
- |
|
|
- |
|
|
|
|
|
Forfeited/expired/cancelled |
|
- |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants Outstanding – September 30, 2015 |
|
41,801,793 |
|
|
$ |
0.009 |
|
3.9 years |
|
$ |
0.005 |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Exercisable – January 1, 2015 |
|
41,801,793 |
|
|
$ |
0.009 |
|
3.9 years |
|
$ |
0.006 |
Outstanding Exercisable – September 30, 2015 |
|
41,801,793 |
|
|
$ |
0.009 |
|
3.9 years |
|
$ |
0.005 |
|
|
|
|
|
|
|
|
|
|
|
|
The Company used the following Black-Scholes assumptions in
arriving at the fair value of the warrants as of September 30, 2015 and December 31, 2014
|
September 30, |
|
December 31, |
|
2015 |
|
2014 |
|
|
|
|
Expected Life in Years |
3.1 |
|
2.43 |
Risk-free Interest Rates |
1.63% |
|
1.65% |
Volatility |
310.87% |
|
347.49% |
Dividend Yield |
0% |
|
0% |
The Derivative Liability consists of the following as of September
30, 2015 and December 31, 2014:
| |
September 30, | |
December 31, |
| |
2015 | |
2014 |
| |
| |
|
Fair Value of embedded warrants | |
$ | 511,312 | | |
$ | 623,830 | |
Unamortized discount | |
| (366,321 | ) | |
| (454,200 | ) |
| |
| | | |
| | |
| |
$ | 144,991 | | |
$ | 169,630 | |
Derivative Liability
We review the terms of convertible debt issues to determine
whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and
accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one
embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments
are accounted for as a single, compound derivative instrument
17
Bifurcated embedded derivatives are initially recorded at
fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense.
When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted
for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments.
The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being
recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated
interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense, using the
effective interest method.
During 2011, the Company entered into certain convertible
debt agreements with warrants attached. Because the warrant values exceeded the note values after the beneficial conversion feature
discount, the warrants have been bifurcated out and recorded separately. The initial value was the fair value less the fair value
of the debt discount. The difference between the amortized fair value and the revalued fair value at each reporting period is recorded
as a derivative liability. This derivative liability will change every reporting period based on the current market conditions.
(7) Income
Taxes
The Company realized a net operating
income in the current quarter, and has realized net income in various prior periods presented. Due to the deferred tax attributes
of the derivatives and a deferred tax asset from prior periods, which was fully allowed for, no income tax benefit or expense has
been presented. Any tax liability associated with any profits was offset by the deferred tax assets and changes in the valuation
allowance on those tax assets.
(8) Commitments
and Contingencies
From
time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that
there are no current matters that would have a material effect on the Company’s financial position or results of operations.
Office Lease
We do not own any real estate properties. BlastGard
entered into a lease agreement in January 1, 2009 for office space in Clearwater Florida, which was expanded to two offices in
2011 to accommodate HighCom Security. In 2012, BlastGard moved into a larger office space. Rental payment under the new lease is
$373 per month on a month to month basis.
HighCom leases office and manufacturing space
in Columbus, Ohio. In February 2011, the Company entered into a six month lease agreement for approximately 11,200 square feet
of office and warehouse space in Columbus, OH. In June 2012, the Company entered into a one year lease agreement for approximately
16,200 square feet of office and warehouse space in Columbus, OH. In June 2013, the Company entered into a three year lease agreement
for approximately 24,160 square feet of office and warehouse space in Columbus, OH. Rental payment under the new lease is $6,967
per month on a month to month basis.
HighCom rented approximately 900 square feet
of office space in Aurora, CO on a short-term lease which expired on May 31, 2014 at a rental of $518 per month. On January 1,
2015, HighCom secured similar office space in Centennial, CO for one year at a rental of $525.00 per month.
Rent expense for the nine months ended September
30, 2015 and 2014 was approximately $76,710 and $48,769.
18
(9) Prior
Litigation Matter
Verde Partners Family Limited Partnership
On April 2, 2009, the Company entered
into a Settlement Agreement to settle our outstanding civil litigation. The Company will pay the sum of $125,000 over 18 months.
The first monthly payment was paid within 30 days after the Defendants deliver to the Company’s counsel an original executed
version of the Agreement and a promissory note in the amount of the remaining principal balance to bear interest in the amount
of 6% per annum. Upon Verde’s receipt of the payment and promissory note, the parties shall jointly dismiss with prejudice
all litigation between them, including the Pinellas County action and the Federal action. The company and Verde also entered into
a license agreement whereby BlastGard obtains a fully paid up non-exclusive license for the 2 Verde patents for the remaining life
of those patents in exchange for the Company paying Verde a 2% royalty for the life of the patents (which expired in the 2nd
quarter of 2012), on the sales price received by BlastGard for BlastGard’s portion of all blast mitigation products sold
by the company (the royalty was not on any third-party’s portion of any product containing blast mitigation
products sold by BlastGard). The parties also agreed not to file any complaints with any state, federal or international agency
or disciplinary body regarding any of the other parties or any person affiliated with any of the other parties or otherwise makes
negative statements about them (in other words, a broad non-disparagement clause). The company and Verde also signed mutual general
releases (excepting the obligations above) and a covenant not to sue. At September 30, 2015, the Company was in arrears on the
final twelve monthly payments on the settlement.
(10) Subsequent
Events
The Company has evaluated all subsequent
events through the filing date of this form 10Q for appropriate accounting and disclosures, and there are no subsequent event disclosures
required.
In October 2015, HighCom extended its lease
through October 2018 and expanded the facility by an additional 8,705 square feet which should be adequate for present requirements
and suitable for the operations involved. As of November 1, 2015, the new rental payment is $9,863 per month.
In October 2015, the Company acquired
through an Asset Purchase Agreement $34,000 in additional manufacturing equipment and $17,000 in raw materials to further expand
its soft armor and hard armor capacity.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Statements contained
herein that are not historical facts are forward-looking statements as that term is defined by the Private Securities Litigation
Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable,
the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected.
The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance
and those actual results may differ materially from those in the forward-looking statements. Such risks and uncertainties include,
without limitation: well-established competitors who have substantially greater financial resources and longer operating histories,
regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of
capital.
The following discussion
should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-Q
and in our Form 10-K for the fiscal year ended December 31, 2014. Except for the historical information contained herein, the discussion
in this Form 10-Q contains certain forward looking statements that involve risks and uncertainties, such as statements of
the Company's plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-Q should be read
as being applicable to all related forward-looking statements wherever they appear herein. The Company's actual results could differ
materially from those discussed here.
The financial information
furnished herein has not been audited by an independent accountant; however, in the opinion of management, all adjustments (only
consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the period ended September
30, 2015, have been included.
Summary
BlastGard International,
Inc. is in the business of providing protection for individuals and property. We have developed and have been marketing BlastWrap
products to protect people and property against explosive forces. The Company owns 98.2% of HighCom Security, Inc. (“HighCom”)
which provides a wide range of security and personal protective gear. A description of each company can be located in our form
10-K for the fiscal year ended December 31, 2014. We believe that the products of the two companies have a certain synergy and
that BlastGard International is poised to be a full service provider for defensive and protective product needs. The term "the
Company" shall include BlastGard and HighCom unless the context indicates otherwise. For a description of certain background
on HighCom, reference is made to our Form 10-K for the fiscal year ended December 31, 2014.
19
HighCom provides
a wide range of security products and personal protective gear (including tactical armor) that are tailored and offer protection
solutions to specific customer requirements. HighCom caters to local law enforcement agencies, correctional facilities
and municipal authorities. Given the equipment and ballistic protection solutions provided by HighCom, compliance with
the U.S. Department of Commerce, U.S. Department of State, U.S. Department of the Treasury and all other governmental agencies'
regulations is a high priority. HighCom has sold its products in the defense and law enforcement sectors and is known for innovative
technology, exceptional customer service and superior quality performance. We export our products throughout the world and have
in the past sold products in Asia, Africa, Europe, Latin America and the Middle East. Many of our products are controlled for export
purposes and we require end user details prior to all sales. Strict compliance with U.S. and International laws and regulations
is mandatory.
Founded in 1997 and originally
based in San Francisco, HighCom Security, Inc., a California corporation, is a global provider of security equipment. HighCom
is a leader in advanced ballistic armor manufacturing. With a 24,160 square foot manufacturing and distribution facility located
in Columbus, Ohio, HighCom is well positioned for large scale and time sensitive global supply needs. We design, manufacture and/or
distribute a range of security products and personal protective gear. Our logistics network is now managed from our corporate
headquarters in Clearwater, Florida. HighCom serves a wide range of customers throughout the world. Our North American customer
base includes the Department of Defense and the Department of Homeland Security. We cater to local law enforcement agencies, correctional
facilities and municipal authorities, as well as large corporations. We export our products throughout the world and have in the
past sold products in Asia, Africa, Europe, Latin America and the Middle East. Many of our products are controlled for export
purposes and we require end user details prior to all sales. Strict compliance with U.S. and International laws and regulations
is mandatory.
Results of Operations
The following information represents our results of operations for
the three and nine months ended September 30, 2015:
For the three months
ended September 30, 2015 and 2014, we recognized sales of $532,891 and $1,264,420 and a gross profit of $212,169 and $352,922,
respectively. For the nine months ended September 30, 2015 and 2014, we recognized sales of $4,461,761 and $2,283,475 and a gross
profit of $1,904,409 and $714,636, respectively. Management believes that the 2015 nine month increase in sales for the reporting
period is primarily the result of expanded customer base placing orders in the 1st half of 2015, resulting in a slower
than expected sales cycle for the quarter ended September 30, 2015.
For the three months
ended September 30, 2015, our operating expenses were $457,364 as compared to $391,629 for the three months ended September 30,
2014. For the nine months ended September 30, 2015, our operating expenses were $1,352,047 as compared to $1,162,265 for the nine
months ended September 30, 2014. The increased operating expenses were due to additional temporary personnel necessary to keep
up with the demand for increased sales and the recording of stock based compensation associated with the vesting of certain warrants
during 2015.
For the three months
ended September 30, 2015, total other income (expense) was $357,220. This included a gain on derivative liability in the amount
of $439,762, offset by an impairment charge of $45,000 and interest expense of $37,542. For the nine months ended September 30,
2015, total other income (expense) was $(44,557). This included a gain on derivative liability of $112,518, offset by the impairment
charge of $45,000 and interest expense of $112,075.
Our net income for
the three months ended September 30, 2015 and 2014 was $113,811 as compared to $1,497,281, respectively. Our net income for the
nine months ended September 30, 2015 and 2014 was $ 492,887 as compared to $2,520,434, respectively. Gains on derivative liabilities
are shown in our statement of operations have a substantial impact on our net income for each reported period.
20
Sales
Backlog
As of the filing
date of this Form 10-Q, the Company is working on fulfilling booked sales of approximately $3 million that is expected to be shipped
in the 4th quarter of 2015. The Company has hired temporary personnel to complete these orders and this will substantially increase
our operating expenses in the fourth quarter. Management is optimistic that additional sales will occur in the fourth quarter
of 2015, although no assurances can be given in this regard.
Various Product Lines Identified For
BlastWrap® - We have Several Completed and Finished Products
HighCom provides a wide
range of security products and personal protective gear (including tactical armor) that are tailored and offer protection solutions
to specific customer requirements. HighCom caters to local law enforcement agencies, correctional facilities and municipal authorities.
Given the equipment and ballistic protection solutions provided by HighCom, compliance with the U.S. Department of Commerce, U.S.
Department of State, U.S. Department of the Treasury and all other governmental agencies' regulations is a high priority. HighCom
has sold its products in the defense and law enforcement sectors and is known for innovative technology, exceptional customer service
and superior quality performance.
Body armor is classified
by the NIJ according to the level of protection it provides from various threats. The classifications are as follows:
- Type IIA body armor- minimal protection against smaller caliber handgun threats.
- Type II body armor – provides protection against many handgun threats, including
many common smaller caliber pistols with standard pressure ammunition, and against many revolvers.
- Type IIIA body armor- provides a higher level of protection and will generally protect
against most pistol calibers including many law enforcement ammunitions, and against many higher poared revolvers.
- Type III and IV body armor – provides protection against rifle rounds and are
generally only used in tactical situations.
Our Security Products include
the following:
| § | Ballistic soft body armor vests |
| § | Ballistic hard armor plates |
| § | Mounted patrol, vehicular crew, and general duty helmets |
| § | Metal detectors: walk-through and handheld |
In 2015, HighCom completed
several new NIJ 0101.06 certifications. Our new hard armor products include: our new
4S17M economical Level IV stand alone in multi curve shapes; our new 3S11 lightweight all PE plate; our new 3S11M lightweight all
PE multi curve plate; and our new AR1000 lightweight steel advanced plate. We also have products pending certification
such as our Rifle Special Threat Plate for special operators in SWAT and high risk task forces; and our new Multi threat
Level III and Level IV solution when Level IV is required with special threat and Level III performance. In development, we
expect to launch in 2016 a new lightweight Level IV plate; a new multi-hit Level IV
plate; a new series of ultra-lightweight helmet solutions; as well as several new soft armor solutions
Manufactured products versus products supplied by third party
vendors.
HighCom manufactures ballistic
plates, ballistic shields, ballistic vests, ballistic helmets and blankets. HighCom’s hard and soft armor products are made
under our brand name or a private label. Our ballistic helmets are assembled at the HighCom plant. On occasion, HighCom distributes
the following products made by other manufacturers: metal detectors, x-ray machines, EOD kits and detection devices. In the future,
we intend to manufacture PASGT (personal armored systems for ground troops) and ACH (advanced combat helmets) ballistic helmets.
For a complete description of the HighCom product line, reference is made to our Form 10-K for the fiscal year ended December 31,
2014.
21
Liquidity and Capital Resources.
At September 30,
2014, we had cash of $66,807, working capital of $268,424, an accumulated deficit of $(15,524,018) and shareholder equity of $2,452,283.
For the nine months
ended September 30, 2015, net cash provided by operating activities was $51,731. During the nine months ended September 30, 2015,
we used cash in investing activities for purchase of assets of $(52,799) and we generated cash from financing activities of $52,688
from loans from related parties.
For the nine months
ending September 30, 2014, net cash used by operating activities was $(213,744) primarily due to our net income of $2,520,434,
offset by a large gain on derivative liability, a large gain on the negotiated settlement for the contingent liability that was
settled, stock based compensation, amortization and depreciation, and a large increase in accounts payable. During the nine months
ended September 30, 2014, we used cash in investing activities for purchase of assets of $(3,135) and we generated cash from financing
activities of $223,594 from loans from related parties.
We anticipate that
our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need
to fund our growth from operations, current debt obligations and capital expenditures. The primary sources of funding for such
requirements are expected to be cash generated from operations and raising additional capital from the sale of equity and/or debt
securities. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or
obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern
is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain
profitability. The Company is attempting to obtain cash to finance its operations through the sale of equity, debt borrowing and/or
through the receipt of product licensing fees. We can provide no assurances that financing will be available to us on terms satisfactory
to us, if at all, or that we will be able to continue as a going concern. Further, we can provide no assurances that a mutually
acceptable licensing agreement will be entered into on terms satisfactory to us, if at all. In this respect, see “Note 1
– Going Concern” in our financial statements for additional information as to the possibility that we may not be able
to continue as a “going concern.”
To date, we have
relied on management’s ability to raise capital through equity private placement financings to fund our operations. We estimate
that we will require between $1.0 million and $1.5 million in additional financing and cash flow from operations to support
our operations and to meet our debt obligations as they become due and payable over the next 15 months of operations. We can provide
no assurances that cash generated from operations will occur or additional financing will be obtained on terms satisfactory to
us, if at all, or that additional debt conversions will occur.
Purchase of HighCom Security, Inc.
As previously reported,
on January 25, 2011, BlastGard International, Inc. ("BlastGard") entered into a binding Letter of Intent (“LOI”)
with HighCom Security, Inc. (“HighCom”) under which BlastGard will acquire 100% of the common stock of HighCom from
the stockholders of HighCom, none of whom are affiliates of BlastGard. HighCom is a worldwide security equipment provider based
in San Francisco, California. HighCom designs, manufactures and distributes a unique range of security products and personal protective
gear. BlastGard and HighCom have agreed to consummate a Stock Purchase Agreement, subject to the approval of all necessary parties,
agencies or regulatory organizations. As of the signing of the agreement, BlastGard immediately assumed the operations of HighCom
and started to provide financing for the operations while a definitive agreement is drawn up over the next 90 days.
As stated above, the LOI
contemplated several closing conditions and the closing in escrow with a possible of rescission if the State Department does not
reinstate HighCom’s export license. On March 4, 2011, among other changes the LOI was amended as follows: 1) the LOI constitutes
the definitive stock purchase agreement; 2) BlastGard issued 9,820,666 shares of its Common Stock and promissory notes totaling
$196,400 to Robert Rimberg as trustee for an Irrevocable Trust FBO and Yochi Cohen and his wife, Yocheved Cohen–Charash (the
"Trust") in exchange for 1,150 shares of the outstanding 1,171 shares of HighCom Common Stock, equivalent to 98.2% of
the outstanding shares; 3) the parties agree to waive all closing conditions, escrow provisions and right of rescission; and 4)
BGI agreed for a period of 30 days to offer to purchase Ron Peled 21 shares of HighCom from him or his transferee at a cost of
179,934 shares of BGI Common Stock and in exchange for promissory notes totaling $3,600, with terms identical to those received
by the Trust plus 1.8% of the Earn-out provisions contained in the LOI.
22
BlastGard also agreed to
an earn-out consisting of up to $100,000 in cash and up to 35,000,000 shares of common stock based on a pro-rata basis if revenue
were to reach certain goals. BlastGard management believed that a portion of the revenue goals were very achievable
and valued the contingent consideration at 68% of the market price at the time of the agreement.
In June 2014, we entered
into an agreement with Mr. Cohen to release us from any obligation to issue additional monies or stock to Mr. Cohen. We agreed
to pay $174,000 of credit cards and loans for which Mr. Cohen was responsible and to indemnify him against any loss. In the same
agreement, our principal stockholder 8464081 Canada, which had purchased a revolving note from Fifth Third Bank, which loan arrangement
was guaranteed by Mr. Cohen, agreed to release Mr. Cohen from his liability under such loan. The principal of such loan amounted
to approximately $435,376.
Application of critical accounting policies
Management’s Discussion
and Analysis of our Financial Condition and Results of Operations is based on the Company’s audited Consolidated Financial
Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of
financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of
assets and liabilities and corresponding disclosures at the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis, we continue to evaluate our estimates which in large part
are based on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results
of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily
available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Item 3. Quantitative
and Qualitative Disclosures about Market Risk
Market risk is the
risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments.
The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative
financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any
credit facilities with variable interest rates.
Item 4. Controls and
Procedures
The Company maintains
disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange
Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms,
and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition
of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls
and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures. The Company carried out an evaluation, under
the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the
Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls
and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that
the Company’s disclosure controls and procedures were ineffective at the reasonable assurance level at the end of our most
recent quarter. There have been no changes in the Company's disclosure controls and procedures or in other factors that could
affect the disclosure controls subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were
taken.
23
PART
II – OTHER INFORMATION
Item 1. Legal Proceedings
We are currently not subject
to any threatened or pending legal proceedings. Nevertheless, we may from time to time become a party to various legal proceedings
arising in the ordinary course of our business.
Item 1A. Risk Factors
As a Smaller Reporting
Company as defined Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure
reporting obligations and therefore are not required to provide the information requested by this Item 1A.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
(a)
In September 2015, the Company issued 3,000,000 common shares to its CEO as a conversion of $30,000 of his $210,000 convertible
debenture. The conversion of debt into Common Stock is exempt under Section 3(a)(9) of the Securities Act as an exchange of securities
without the payment of commissions. The exercise of Warrants is exempt under Section 4(2) of the Securities Act of 1933, as amended.
(b) Rule 463 of the Securities
Act is not applicable to the Company.
(c) In the nine months ended September
30, 2015, there were no repurchases by the Company of its Common Stock.
Item 3. Defaults upon Senior Securities
N/A
Item 4. Mine Safety Disclosures
N/A
Item 5. Other Information.
N/A
Item 6. Exhibits
Except for the exhibits listed below,
other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act
of 1934, as amended.
Exhibit |
|
|
Number |
|
Description |
3.1 |
|
Articles of Incorporation (Incorporated by reference to Company’s Form 10-QSB for the quarter ended March 31, 2004.) |
3.2 |
|
Amendment to Articles of Incorporation (Incorporated by reference to Form 8-K dated August 2, 2011.) |
3.3 |
|
By-Laws (Incorporated by reference to Company’s Form 10-QSB for the quarter ended March 31, 2004.) |
11.1 |
|
Statement re: computation of earnings per share. See condensed consolidated statement of operations and notes thereto. |
31.1 |
|
Rule 13a-14(a) Certification – Chief Executive Officer and Chief Financial Officer * |
32.1 |
|
Section 1350 Certification – Chief Executive Officer and Chief Financial Officer * |
101.SCH |
|
Document, XBRL Taxonomy Extension (*) |
101.CAL |
|
Calculation Linkbase, XBRL Taxonomy Extension Definition (*) |
101.DEF |
|
Linkbase, XBRL Taxonomy Extension Labels (*) |
101.LAB |
|
Linkbase, XBRL Taxonomy Extension (*) |
101.PRE |
|
Presentation Linkbase (*) |
———————
24
SIGNATURES
Pursuant to the requirements of the
Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
BLASTGARD INTERNATIONAL, INC. |
|
|
|
|
|
|
|
|
Dated: November 16, 2015 |
|
By: |
/s/ Michael J. Gordon |
|
|
|
Michael J. Gordon, Chief Executive and Chief Financial
Officer |
|
|
|
|
25
Exhibit 31.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael J. Gordon, Chief
Executive Officer and Chief Financial Officer of BlastGard International, Inc., certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2015, of BlastGard International, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements are made, not misleading with
respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
(a) designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) designed such internal control over
financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over financial reporting; and
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions): |
(a) all significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 16, 2015 |
/s/ Michael J. Gordon |
|
Michael J. Gordon, Chief Executive Officer and Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Solely for the purposes of complying with, and the extent required
by 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned certifies, in his capacity
as the Chief Executive Officer of BlastGard International, Inc., that, to his knowledge, the Quarterly Report of the company on
Form 10-Q for the period ended September 30, 2015, fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that the information contained in the report fairly presents, in all material respects, the company’s
financial condition and results of operations.
November 16, 2015
/s/ Michael J. Gordon
Michael J. Gordon, Chief Executive Officer
and Chief Financial Officer
Highcom Global Security (CE) (USOTC:HCGS)
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