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.

Overview 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 Entities." 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.

Going Concern 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.

Recent Developments 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.

12 -------------------------------------------------------------------------------- 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 ongoing priority.

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.

13 -------------------------------------------------------------------------------- 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 capital.

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 generation device.

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.

14 -------------------------------------------------------------------------------- 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.

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