GUARDIAN 8 HOLDINGS - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion should be read in conjunction with our financial
statements, including the notes thereto, appearing elsewhere in this report.
We were incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation. In
August of 2009, we changed our name to Guardian 8 Corporation. Our principle
offices are located in Scottsdale, Arizona. We are in the process of developing
a personal security device that incorporates countermeasures to help defend
against personal attack.
Effective November 30, 2010 we merged with Global Risk Management &
Investigative Solutions ("Global Risk"), a public company, with its common stock
registered with the United States Securities and Exchange Commission under
section 12g. We merged into a newly formed wholly owned subsidiary of Global
Risk, with Guardian 8 Corporation being the surviving corporation. Post merger,
Global Risk changed its name to Guardian 8 Holdings.
For the nine months ended September 30, 2012 and 2011, the Company was
consolidated with its wholly-owned subsidiary Guardian 8 Corporation. All
material intercompany transactions and accounts have been eliminated.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses. In consultation with our Board of Directors, we have identified
several accounting principles that we believe are key to the understanding of
our financial statements. These important accounting policies require
management's most difficult, subjective judgments.
Development Stage Enterprise
We are a development stage enterprise, as defined in ASC 915, "Development Stage
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Net Loss Per Share
We adopted ASC 260, "Earnings Per Share" that requires the reporting of both
basic and diluted earnings (loss) per share. Basic earnings (loss) per share is
computed by dividing net income (loss) available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings (loss) per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. In accordance with ASC 260, any anti-dilutive effects on net
income (loss) per share are excluded.
Our financial statements are prepared using generally accepted accounting
principles applicable to a going concern, which contemplates the realization of
assets and liquidation of liabilities in the normal course of business. Our
ability to continue as a going concern is dependent upon our ability to locate
sources of capital, and attain future profitable operations. Our management is
currently initiating their business plan. The accompanying financial statements
do not include any adjustments that might be necessary should we be unable to
continue as a going concern.
We completed the initial design the first product under development in 2011. We
tested these prototypes through a number of different venues and collected
feedback and input on suggested design changes. As a result we have elected to
incorporate a significant number of upgrades, enhancements and make
modifications to the initial design to improve reliability, durability and
efficiencies. We introduced the new design in the second quarter of 2012 and
project to have product to market in the first quarter of 2013.
Table of Contents
In March of 2012 we announced a new upgraded model call the Pro V2. This model
was developed in response to professional security guards seeking a robust
design as well as highly functional tool for their duty belt. The Pro V2 will
also be available to security conscious industries where staff safety is an
In addition, in March of 2012 we filed with the Depository Trust Company (DTC)
for electronic clearing of our common stock, with the assistance of C. K. Cooper
& Company and Legent Clearing. We received DTC approval for electronic clearing
on May 7, 2012. Along these same lines, our board of directors has decided to
file a registration statement on Form S-1 to register 100% of the shares held by
stockholders of record as of April 1, 2012. This is intended to make it easier
and more efficient for our stockholders to trade our shares and brokerage firms
to accept the shares for deposit.
On April 20, 2012, we appointed Kathleen Hanrahan, a current member of our board
of directors, to serve as our interim chief financial officer. In addition, in
anticipation of structuring the company for an exchange listing, our board of
directors designated two new board committees, (i) an audit committee, and (ii)
a governance, compensation and nominating committee.
Further, in May of 2012, we executed a letter of intent with an investment
banker to pursue a public offering of our common stock in late 2012 and
concurrently seek a listing of our common stock on a national stock exchange.
On June 29, 2012, a total of $644,500 of notes payable and $21,950 of related
accrued interest was converted into 3,107,690 shares of common stock.
During the three months ended September 30, 2012, we sold 267,500 shares of
common stock, with a cash value of $107,000. In addition, we agreed to issue
90,000 shares to a former director for consulting services, with an aggregate
value of $42,500.
On September 30, 2012, we agreed to sell 125,000 shares of common stock, with an
aggregate value of $50,000. These shares were not yet issued or paid for at
September 30, 2012, therefore we set up a Stock Subscription Receivable of
$50,000 at September 30, 2012.
Additionally, we received $61,750 from the exercise of 247,000 warrants.
Results of Operations for Guardian 8 Corporation for the nine months ended
September 30, 2012 and September 30, 2011.
Nine Months Nine Months
Ended Ended Increase/
September 30, September 30,
2012 2011 Decrease
Revenues $ - $ - $ -
Operating Expenses 1,007,148 421,594 585,554
Net (loss) from operations (1,007,148 ) (421,594 ) ( 585,554 )
Interest expense 278,859 - 278,859
Net (loss) $ 1,286,007 ) $ ( 421,594 ) $ ( 864,413 )
Net (loss) per share $ ( 0.05 ) $ ( 0.02 ) $ ( 0.03 )
Weighted average shares
outstanding 27,755,124 26,896,709
We generated net losses of $1,286,007 and $421,594 for the nine months ended
September 30, 2012 and 2011, respectively. Our losses were generated from
general and administrative expenses; however, did include research and
development costs related to our ProV2 device of $392,081 for the nine months
ended September 30, 2012.
We anticipate continued losses from operations until such time as we generate
revenues through the sale of our device.
Satisfaction of our cash obligations for the next 12 months.
Since our inception in June of 2009 through September 30, 2012, we raised
$1,172,500 through the sale of our common stock, $61,750 from the exercise of
warrants and an additional $679,500 through the issuance of six month
convertible term notes. As of September 30, 2012, our cash balance was $25,185.
Our plan for satisfying our cash requirements for the next twelve months is
through the funds from additional offerings of our common stock, sales of
additional convertible notes and third party financings. We anticipate potential
sales-generated income in the fourth quarter of 2012, but may not generate
sufficient amounts of revenues to meet our working capital requirements.
Consequently, we intend to make appropriate plans to ensure sources of
additional capital in the future to fund growth and expansion through additional
equity or debt financing or credit facilities.
Table of Contents
Since inception, we have financed cash flow requirements through the issuance of
common stock for cash and services. As we continue to expand operational
activities, we may continue to experience net negative cash flows from
operations, pending receipt of revenues from our product sales, and will be
required to obtain additional financing to fund operations through common stock
offerings and debt borrowings, giving consideration to loans and working
diligently to move sales ahead to the extent necessary to provide working
We anticipate incurring operating losses over the majority of the next twelve
months. Our lack of operating history makes predictions of future operating
results difficult to ascertain. Our prospects must be considered in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development. Such risks include, but are not limited to, an
evolving and unpredictable business model and the management of growth. To
address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and continue to
attract, retain and motivate qualified personnel. There can be no assurance that
we will be successful in addressing such risks, and the failure to do so can
have a material adverse effect on our business prospects, financial condition
and results of operations.
As a result of our cash requirements and our lack of revenues, we anticipate
continuing to issue stock in exchange for loans and/or equity financing, which
may have a substantial dilutive impact on our existing stockholders.
Summary of any product research and development that we will perform for the
term of our plan of operation.
We expense all costs of research and development as incurred. There are R&D
costs included in other general and administrative expenses of $392,081 and
$35,793 for the nine months ended September 30, 2012 and 2011, respectively. We
anticipate performing up to $500,000 on additional significant product research
and development under our plan of operation for the development of our second
Significant changes in the number of employees.
We are a development stage company and currently have only two full-time
employees, Paul Hughes, Vice President of operations, and Jose Rojas, Vice
President of Customer Service, for Guardian 8 Corporation. We utilize the
services of several contract personnel, engineers and other professionals on an
as needed basis. We are currently managed by C. Stephen Cochennet, Kathleen
Hanrahan and Paul Hughes with the assistance of our board of directors. We look
to Mr. Cochennet, Ms. Hanrahan and Mr. Hughes for entrepreneurial,
organizational and management skills. We plan to continue to use consultants,
legal and patent attorneys, design and mechanical engineers, engineers and
accountants as necessary. We may hire marketing employees based on the projected
size of the market and the compensation necessary to retain qualified sales
employees. A portion of any employee compensation likely would include direct
stock grants, or the right to acquire stock in the company, which would dilute
the ownership interest of holders of existing shares of our common stock.
Expected purchase or sale of plant and significant equipment.
We do not anticipate the purchase or sale of any plant or significant equipment;
as such items are not required by us at this time.
Liquidity and Capital Resources
Working capital is summarized and compared as follows:
September 30, 2012 September 30, 2011
Current assets $ 129,238 $ 11,104
Current liabilities 105,583 16,392
Surplus (Deficit) $ 23,655 $ (5,288 )
We were able to reduce our working capital deficit through the receipt of funds
from private placement offerings and conversion of promissory notes into shares
of common stock.
Changes in cash flows are summarized as follows:
Since inception, we have financed our cash flow requirements through issuance of
common stock, receipt of funds from convertible term notes and through September
30, 2012 had raised approximately $1,172,500 from two private placement
offerings, $61,750 from the exercise of warrants and an additional $679,500 from
convertible notes. Our cash balance as of September 30, 2012 was $25,185.
We had a net loss of $1,286,007 for the nine months ended September 30,
2012. This loss was offset by non-cash items such as stock issued for services
of $64,750, stock issued for compensation of $135,000, depreciation and
amortization of $7,585, and the amortization of a discount on notes payable of
$257,746. We had cash provided by the decrease in prepaid expenses of $59,088,
and the decrease in accounts payable and accrued expenses of $43,771 and the
decrease in accrued interest of $21,113.
Table of Contents
We had cash used by investing activities of $5,005 for the nine months ended
September 30, 2012 due to the purchase of property and equipment.
We had cash provided by financing activities of $531,250 for the nine months
ended September 30, 2012. This included proceeds from the sale of common stock
of $107,000, proceeds from warrants exercised of $61,750, and proceeds from
notes payable to related parties of $362,500.
We had a net operating loss of $421,594 for the nine months ended September 30,
2011. This included non-cash items such as stock issued for services of $62,500,
stock issued for compensation of $90,000, and depreciation and amortization of
$387. We had cash provided by a decrease in prepaid expenses of $10,000, and
cash used by a decrease in accounts payable and accrued expenses of $21,018.
There were no financing or investing activities for the nine months ended
September 30, 2011.
As a result, we are in immediate need for additional working capital and are
forced to seek additional equity or debt financing to meet our ongoing working
capital needs. As we expand our activities, we may, and most likely will,
continue to experience net negative cash flows from operations, pending receipt
of revenues from product sales. Additionally we anticipate obtaining additional
financing to fund operations through common stock offerings, to the extent
available, or to obtain additional financing to the extent necessary to augment
our working capital. We have also evaluated sources of inventory financing that
will be implemented once we have orders for our product.
We anticipate that we will incur operating losses in the next twelve months. Our
lack of operating history makes predictions of future operating results
difficult to ascertain. Our prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving
markets. Such risks for us include, but are not limited to, an evolving and
unpredictable business model and the management of growth. To address these
risks, we must, among other things, obtain a customer base, implement and
successfully execute our business and marketing strategy, continually develop
and upgrade our product, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results or operations, liquidity,
capital expenditures or capital resources that is material to investors.
[ Back To Technology News's Homepage ]