HighCom Global Security, Inc. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - HighCom Global Security, Inc.	Financial_Report.xls
EX-32.1 - CERTIFICATION PURSUANT TO - HighCom Global Security, Inc.	ex32_1.htm
EX-31.1 - CERTIFICATION PURSUANT TO - HighCom Global Security, Inc.	ex31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

(March One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the quarterly period ended: March 31, 2013
OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
For the transition period from: _____________ to _____________

Commission file number: 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 þ 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 þ 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 þ

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 þ

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of April 30, 2013 the issuer had 263,874,315 shares of $.001 par value common stock outstanding.

Transitional Small Business Disclosure Format (Check one): Yes ¨ No þ

BLASTGARD INTERNATIONAL, INC.

INDEX

		PAGE
	PART 1 – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated balance sheets, March 31, 2013 (unaudited) and December 31, 2012	3

	Consolidated statements of operations, for the three months ended March 31, 2013 and March 31, 2012 (unaudited)	5

	Consolidated statement of changes in stockholders’ deficit for the year ended December 31, 2012 and three months ended March 31, 2013 (unaudited)	6

	Consolidated statements of cash flows for the three months ended March 31, 2013 and March 31, 2012 (unaudited)	7

	Notes to consolidated financial statements (unaudited)	9

Item 2.	Management’s Plan of Operation	20

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

	PART I1 – OTHER INFORMATION

Item 1.	Legal Proceedings.	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 6.	Exhibits	26

Signatures		28

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEET

	March 31,			December 31,
	2013			2012
	(unaudited)			(audited)
Assets
Current assets
Cash	$	68,200		$	356,426
Accounts receivable (net of allowance for doubtful accounts)		15,404			19,600
Inventory		367,339			392,819
Prepaid and other current assets		8,319			8,319
Net related party loans receivable from acquisition		122,316			122,316
Total current assets		581,578			899,480
Property & equipment, net of accumulated
depreciation of $319,473 and $304,824, respectively		119,471			133,669
Intangible property, net of accumulated
amortization of 441,359 and $389,698, respectively		354,919			406,580
Investments		112,832			112,832
Goodwill		2,061,649			2,061,649
Deposits		5,666			5,667
Total Assets	$	3,236,115		$	3,619,877
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable	$	832,962		$	1,026,095
Accrued expenses		275,596			252,495
Customer deposits and deferred revenue		-			79,182
Current portion notes payable		2,416,435			2,492,565
Total current liabilities		3,524,993			3,850,337
Contingent liability		1,170,081			1,170,081
Derivative liability, net		1,142,011			339,874
Total liabilities		5,837,085			5,360,292
Stockholders' Deficit
Preferred Stock:
Preferred Stock, 1,000,000 shares authorized;
$100 par value; 0 and 0 issued and outstanding		-			-
Common Stock, $.001 par value, 500,000,000 shares
authorized; 102,604,905 and 90,386,036 shares
issued and outstanding, respectively		102,605			90,386
Additional paid-in capital		14,792,461			14,694,710
Minority interest		(29,983	)		(29,961	)
Accumulated deficit		(17,466,053	)		(16,495,550	)
Total stockholders' deficit		(2,600,970	)		(1,740,415	)
Total Liabilities and Stockholders' Deficit	$	3,236,115		$	3,619,877

See accompanying notes to consolidated financial statements

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended
	March 31,
		2013			2012

Revenues	$	357,140		$	349,821
Direct costs		228,934			262,344
Gross Profit		128,206			87,477
Operating expenses:
General and administrative		214,285			217,733
Research and Development		2,100			3,177
Amortization and depreciation		66,310			61,107
Total operating expenses		282,695			282,017
Operating loss		(154,489	)		(194,540	)
Non-operating activity
Other income (expense)		-			(788	)
Gain on settlement of debt		65,527			-
Gain (loss) on derivative liability		(729,327	)		1,564,761
Interest expenses		(152,236	)		(302,137	)
Interest income		-			2
Total other income (expense)		(816,036	)		1,261,838
Income (Loss) before income taxes		(970,525	)		1,067,298
Minority interest loss		22			(2,304	)
Provision for income taxes		-			-
Net Income (Loss)	$	(970,503	)	$	1,069,602
Earnings (loss) per share:
Basic	$	(0.01	)	$	0.01
Dilutive	$	(0.01	)	$	0.00
Weighted average shares outstanding
Basic		91,209,780			85,093,344
Dilutive		91,209,780			274,312,956

See accompanying notes to consolidated financial statements

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE YEAR ENDED DECEMBER 31, 2012 AND THE THREE MONTHS ENDED MARCH 31, 2013

					Additional								Stock-
	Common				Paid in		Minority			Accumulated			Holders'
	shares		Par		Capital		Interest			Deficit			Deficit

Balance at December 31, 2011		90,386,036	$	90,386	$	14,694,710	$	(39,118	)	$	(17,540,517	)	$	(2,794,539	)
Net income								9,157			1,044,967			1,054,124
Balance at December 31, 2012		90,386,036	$	90,386	$	14,694,710	$	(29,961	)	$	(16,495,550	)	$	(1,740,415	)
Stock issued for conversion of debt		12,218,869		12,219		97,751								109,970
Net loss								(22	)		(970,503	)		(970,525	)
Balance at March 31, 2013		102,604,905	$	102,605	$	14,792,461	$	(29,983	)	$	(17,466,053	)	$	(2,600,970	)

See accompanying notes to consolidated financial statements

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended
	March 31,
	2013			2012
Cash Flows from Operating Activities:
Net (loss) income	$	(970,503	)	$	1,069,602
Adjustment to reconcile Net Income to net
cash provided by operations:
Minority interest loss		(22	)		(2,304	)
Depreciation and amortization		66,310			61,107
Amortization of debt discount		95,190			265,254
(Gain) loss on derivative		729,327			(1,564,761	)
Changes in assets and liabilities:
Accounts receivable		4,196			12,426
Note receivable		-			(922	)
Inventory		25,480			61,336
Other operating assets		-			(4,289	)
Accounts payable and accruals		(232,340	)		(96,207	)
Related party loans		-			-
Net Cash (Used) Provided by Operating Activities		(282,362	)		(198,758	)
Cash Flows from Investing Activities:
Purchase of property and equipment		(451	)		(8,921	)
Net Cash Used by Investing Activities		(451	)		(8,921	)
Cash Flows from Financing Activities:
Repayments of notes payable		(5,413	)		(10,519	)
Net Cash Provided by Financing Activities		(5,413	)		(10,519	)
Net increase/decrease in Cash		(288,226	)		(218,198	)
Cash at beginning of period		356,426			253,221
Cash at end of period	$	68,200		$	35,023
Supplemental cash flow information:
Interest paid	$	18,481		$	31,675
Taxes paid	$	-		$	-
Debt converted to stock	$	109,970

See accompanying notes to consolidated financial statements

BLASTGARD INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

March 31, 2013

(1) Basis of Presentation

The interim period financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such SEC rules and regulations. This report should be read in conjunction with our Form 10-K for our fiscal year ended December 31, 2012.

In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of the financial position at April 30, 2012 and the results of operations and cash flows for the three months ended Marchl 31, 2013 and 2012 have been made.

These consolidated financial statements include the assets and liabilities of Blastgard International, Inc. and its subsidiaries as of March 31, 2013 and December 31, 2012. 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. The income of HighCom and subsidiaries is included from January 25, 2011, the date of the binding letter of intent. 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), originally located in San Francisco California, 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. As shown in the accompanying financial statements, the Company has incurred recurring losses and has used significant cash in support of its operating activities. These factors, among others, may indicate that the Company will be unable to continue as a going concern.

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.

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. The Company had no cash equivalents at December 31, 2012 or March 31, 2013.

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. As of March 31, 2013, management believes an allowance for uncollectible accounts in the amount of $27,662 was adequate.

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.

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.

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

Sales revenue was recognized upon the shipment of product to customers. Allowances for sales returns, rebates and discounts were recorded as a component of net sales in the period the allowances were recognized.

Research and Development

Research and development costs were expensed as incurred.

Advertising

Advertising costs were expensed as incurred. Advertising costs of $0 and $0 were incurred during the three months ended March 31, 2013 and 2012, respectively.

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 March 31, 2013, there were 7,050,000 and vested common stock options outstanding, which were excluded from the calculation of net loss per share-diluted because they were anti-dilutive. In addition, March 31, 2013 the Company had 104,333,335 warrants outstanding issued in connection with convertible promissory notes and stock sales that were also excluded because they were anti-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)	Notes Payable

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 March 31, 2013 and December 31, 2012:

	March 31. 2013 (unaudited)			December 31, 2012

Convertible promissory note, $93,097 (1/4 of previous outstanding notes) issued December 2, 2004, due November 30, 2009, 8% interest rate	$	-		$	93,097

Convertible promissory note, $50,000, issued December 2, 2004, due on November 30, 2009, 8% annual interest rate		17,325			17,325

Convertible promissory note, $50,000, issued December 2, 2004, due on November 30, 2009, 8% interest rate		15,241			15,241

		32,566			125,663
Less: current maturities		(32,566	)		(125,663	)
	$	-		$	-

At March 31, 2013, there were 0 warrants outstanding and exercisable associated with the 2004 debt. These warrants were valued at $0.

New Financing

Alpha Capital Anstalt, a secured debt holder which first loaned us money in December 2004, loaned us $160,000 in February 2011, an additional $300,000 in March 2011, an additional $300,000 in June 2011 and an additional $500,000 in November 2011 pursuant to secured convertible promissory notes.

At March 31, 2013, we had convertible secured debt of approximately $1,680,000. The 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 our Secured Debt Holder warrants to purchase 104,333,335 shares of the Company’s Common Stock, which warrants are currently exercisable at an exercise price of $.01 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.

As of March 21, 2013, the Company had outstanding December 2004 Debt in the principal amount (including accrued interest thereon) of $109,969.82 owed to Robocheyne Consulting Ltd, $24,243.75 owed to Steven Gold and $21,331.65 owed to TRW Holdings Pty Limited (collectively hereinafter referred to as the “December 2004 Debt”). As of March 21, 2013, the Company also had outstanding $1,267,707.07 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 are 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 (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 $1,267,770.07 (which excludes $182,000 of the principal due on this note that will be maintained by Alpha Capital) owned by it plus warrants to purchase 104,333,335 shares (exercisable at $0.01 per share). The agreements require 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 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 requires the Purchaser to offer to purchase the December 2004 Debt for a purchase price equal to the total amount of principal and interest due on each note with a 10% premium. Prior to the April 4, 2013 closing, Robocheyne Consulting elected to convert their notes in the principal amount described above plus accrued interest into 12,218,869 shares of the Company’s Common Stock.

As a result of the foregoing transactions, the Company expects to have the aforementioned Secured Debt converted into shares of Common Stock on or before June 21, 2013. Such transaction should result in the Purchaser obtaining control of the Company. Also, pursuant to the Purchase and Exchange Agreement, the Purchaser and the Company 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, subject to further agreements between the Company and Purchaser. All such funding will be provided through equity transactions and will not be funded via debt.

This transaction will result 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 $.01 per share and its acquisition of secured debt in the principal amount of $1,267,770.07, which together with accrued interest thereon, is convertible at $.009 per share. As of April 4, 2013, the Warrants and secured debt, if entirely converted into Common Stock, would result in Purchaser owning approximately 245.2 million shares or 66.6% of the issued and outstanding shares assuming Alpha Capital converts its $182,000 in debt at the same conversion price. 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 is due on August 31, 2013. The Purchaser and Seller also entered into a Pledge Agreement with respect to a portion of the securities of the Company that were the subject of the change of control.

The Purchaser has the right to nominate and appoint to the Board at least 50% of the board members of the Company.

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 $67,025.30 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.

The 2011 convertible promissory notes consisted of the following at March 31, 2013 and December 31, 2012:

	March 31, 2013 (unaudited)			December 31, 2012

Convertible promissory note, $160,000, issued February 3, 2011, due on August 31, 2011, 10% annual interest rate	$	110,000		$	110,000

Convertible promissory note, $300,000, issued March 3, 2011, due on March 3, 2012, 10% interest rate		300,000			300,000

Convertible promissory note, $300,000, issued June 17, 2011, due on June 17, 2012, 10% interest rate		300,000			300,000

Convertible promissory note, $500,000, issued November 10, 2011, due on February 10, 2013 10% interest, net of unamortized discount of $0 and $22,380, respectively		500,000			477,620

Convertible promissory note, $210,000, issued January 31, 2011, due on September 30, 2011, 6% interest rate		210,000			210,000

Convertible promissory note, $160,000, issued January 31, 2011, due on January 31, 2012, 6% interest rate		160,000			160,000

Convertible promissory note, $67,025, issued January 31, 2011, due on September 30, 2011, 6% interest rate		67,025			67,025
		1,647,025			1,624,645
Less: current maturities		(1,647,025	)		(1,624,645	)
	$	-		$	-

The Company issued 104,333,335 warrants with the convertible debt. These warrants are exercisable at $0.01 and expire in 2018. Due to changes in the terms, the warrants are re-valued, using the Black-Scholes method each quarter. At March 31, 2013 the warrants were valued at approximately $2,085,000. These warrants have created a derivative liability in the amount of approximately $2,085,000. This liability is included in accrued liabilities on the balance sheet, net of the unamortized warrant value.

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 March 31, 2013 and December 31, 2012:

	March 31. 2013 (unaudited)			December 31, 2012

Line of credit from Regions Bank, $100,000, interest only at 8% annually, due on demand	$	79,622		$	81,574

Line of credit from Fifth Third Bank, $450,000, interest only at 6.2% annually, due on demand		427,830			428,716

Revolving credit card facility with Wells Fargo Bank, $150,000, interest only at 7.5% annually, due on demand		146,331			146,796

Three credit card accounts with major financial institutions varying monthly minimum payments including interest, due on demand		53,059			54,991

		706,842			712,257
Less: current maturities		(706,842	)		(712,257	)
	$	-		$	-

(3) 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 March 31, 2013 and December 31, 2012;

	March 31. 2013 (unaudited)			December 31, 2012

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	)
	$	-		$	-

(4)

Shareholders’ Equity

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

102,604,905 shares were issued and outstanding at March 31, 2013.

Stock Compensation

The Company periodically offered options to purchase stock in the company to vendors and employees. No options were granted during the 1st quarter of 2013 ending March 31, 2013.

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. Options generally become fully vested after one year from the date of grant and expire five years from the date of grant. During the years ended December 31, 2012 and 2011 there were 0 and 0 options granted, respectively and 1,450,000 and 900,000 expired un-exercised, respectively.

There were no net cash proceeds from the exercise of stock options during the three months ended March 31, 2013. At March 31, 2013 and December 31, 2012, there was no unrecognized compensation cost related to share-based payments which was expected to be recognized in the future.

The following table represents stock option activity as of and for the twelve months ended December 31, 2012:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Options Outstanding - January 1, 2013		7,050,000	$	0.10	1.0years		-
Granted		-	$	0.03
Exercised		-		-
Forfeited/expired/cancelled		1,450,000
Options Outstanding – March 31, 2013		7,050,000	$	0.05	4.8 years	$	0
Outstanding Exercisable – January 1, 2013		7,050,000	$	0.10	4.8 years	$
Outstanding Exercisable – March 31, 2013		7,050,000	$	0.05	3.7 years	$	0

The total grant date fair value of options vested during the three months ended March 31, 2013 $0.

(5) 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 $25,000 revolving credit line tied to a credit card. Currently, $79,622 was owed pursuant to the line of credit (inclusive of interest at 5%) and $8,762 on the revolving line at March 31, 2013. Credit available at March 31, 2013 was $20,378 and $16,238 on the line of credit and revolving line respectively. These loans are included current portion of notes payable.

(6) Income Taxes

The Company incurred a net operating loss in the current quarter but 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 expanse has been presented. Any tax liability associated with the gain was offset by the deferred tax assets and changing in the valuation allowance on those tax assets.

(7) Commitments and Contingencies

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 $350 per month on a month to month basis. Rent expense for three months ended March 31, 2013 and 2012 was approximately $13,000 and $13,000 respectively.

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. We believe that our HighCom facility is adequate for present requirements and suitable for the operations involved.

HighCom rents approximately 900 square feet of office space in Aurora, CO on a short-term lease expiring on October 31, 2013 at a rental of $965 per month.

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, 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 make 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 March 31, 2013, the Company was in arrears on the final twelve monthly payments on the settlement. These amounts are included in accrued expenses.

(8) 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.

	March31,		December 31,
	2013		2012
	(unaudited)
Raw materials	$	61,237	$	216,201
Work in process		38,729		39,354
Finished Goods		267,373		137,264

TOTAL	$	367,339	$	392,819

(9) Acquisition of HighCom Security, Inc.

On March 4, 2011, the Company issued notes in the amount of $196,400 note and issued 9,820,666 shares of common stock as initial consideration for 98.2% of the outstanding stock of HighCom Security, Inc. The activity of HighCom Security in included as on January 25, 2011, the date of the initial agreement.

The pro forma results for the three months ended March 31, 2011 as though HighCom was acquired on January 1, 2011 are as follows:


	BlastGard International			HighCom Security			Combined

Revenues	$	20,241		$	264,244		$	284,485

Net income	$	(154,173	)	$	(198,290	)	$	(352,463	)

Earnings per share							$	(0.01	)

WA shares outstanding								62,822,942

The unaudited pro forma results disclosed in the tables above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed this acquisition on January 1, 2011.

(10) Subsequent Events

On April 23, 2013, our 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. Change in control?

Item 2.

Management’s Plan of Operation

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, 2012. 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 March 31, 2013, 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. We have recently acquired a 98.2% new subsidiary (HighCom Security, Inc.) that provides a wide range of security and personal protective gear. A description of each company can be found below and a description of our acquisition can be located under "Item 13" of our Form 10K for the fiscal year ended December 31, 2012. 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.

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.

As discussed under "Background of HighCom" under "Item 1"of our Form 10-K for the fiscal year ended December 31, 2012. HighCom's sales revenues in 2008 were approximately $17 million. Revenues in 2009 suffered a large decrease largely attributable to a May 2009 fire in its Columbus, OH facility. This destructive fire caused significant disruption to HighCom operations which was forced to relocate to new premises to restart its manufacturing activities. The combination of decreased spending in law enforcement and homeland security sectors experienced by the industry, the US financial crisis and the destructive effects of the factory fire, revenues decreased to $4 million. In the second half of 2009, HighCom was able to reestablish its operations in OH and began to regain its market presence both with customers and vendors. The result of which was the receipt of a $6 million contract award through an open bid process for the supply of hard armor plates and soft armor vests to United Nations Peacekeeping Forces. This was the first UN contract won by HighCom as a prime contractor. Shipments under this contract began in late 2009 with the majority of the contract revenues scheduled to be earned in 2010. Reference is made to “Item 1” – Foreign Corrupt Practices Act of our Form 10K for the fiscal year ended December 31, 2010 for a discussion of material events that effected HighCom in fiscal 2010 and the first quarter of 2011.

In March 2011, BlastGard’s management team officially assumed operational control of HighCom. Since this time we have accomplished a number of key compliance tasks and are currently in the process of finalizing manufacturing agreements with several key partners. As stated in the paragraph above, BlastGard has received official communication from the U.S. State Department that HighCom’s export authority has been reinstated. In addition to this, BlastGard has completed registration through both the Directorate of Defense Trade Controls as well as the Bureau of Industry and Security ("BSI"). The purpose of these registrations is to allow BlastGard control over the export management and compliance program moving forward. HighCom also completed their ISO certification which had been revoked under HighCom due to missed audits. BlastGard management has been able to complete an internal audit and management review, in addition to meeting with BSI for the external audit review and in March 2012 HighCom secured ISO certification. Communication with the United Nations is ongoing. On February 6, 2012, the Company was notified by letter that the United Nation’s Vendor Review Committee (“VRC”) had recommended to immediately place on hold the registration status of HighCom Security. This VRC decision to place on hold our registration status was based on integrity/ethical issues surrounding the former CEO’s actions. Soon after this decision was made, we were notified that on February 21, 2012 the government dismissed all the charges against the former CEO. The Company has been in communication with the United Nations Procurement Division regarding this matter and on March 15, 2012, the Company was informed that the VRC had met regarding our request for re-instatement and that its recommendation is currently under consideration. BlastGard has also made significant personnel changes within HighCom and restructuring of operating locations and costs. Since the completion of our acquisition of HighCom, the Company has focused its employee time and capital resources primarily on the development of the business of HighCom. We expect future results of operations to show the benefits of these changes. The results of operations for HighCom Security have been included on these statements from the date of acquisition, January 25, 2011.

Results of Operations

For the quarter ended March 31, 2013, we recognized revenues of $357,140 as compared to $349,821 for the comparable period of the prior year. During the quarter ended March 31, 2013, revenues included $11,000 from the sales of our proprietary BlastWrap product.

For the quarter ended March 31, 2013, gross profit was $128,206 as compared to a gross profit of $87,477 for the comparable period of the prior year. The improved gross profit is due to improved margins as a result of lower material costs and operational efficiencies..

During the quarter ended March 31, 2013, the Company’s operating costs $282,695 as compared to was $282,017 for the quarter ended March 31, 2012.

During the quarter ended March 31, 2013, total other income (expense) was $(816,036). This included a loss of $729,327 on derivative liability, and interest expense of $152,236 offset by $65,527 of gains from negotiated settlements on accounts payable. The derivative liability was the result of the Company’s stock increasing in value versus the value of the Company’s outstanding warrants which is based on the $.01 strike price. Thus, the warrants “derive” their value from BlastGard’s stock price. For this quarter, the lower strike price on the warrants resulted in a derivative liability.

For the quarter ended March 31, 2012, total other income (expense) was $1,261,838. This included a gain of $1,564,761 on derivative liability, partially offset by interest expense of $302,137. As a result of this gain on derivative liability, the Company had a net income of $1,069,602 for the quarter ended March 31, 2012.

Backlog of Sales

As of March 31, 2013, the Company had a backlog of sales believed to be in the amount of $300,000, all of which are expected to be delivered in the second quarter of 2013. Management is optimistic that additional sales of the Company’s HighCom products will continue in the second quarter and in future operating periods as the Company has bid on numerous sizeable contracts.

Recent Financings

·	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.

The Purchaser has the right to nominate and appoint to the Board at least 50% of the board members of the Company.

Various Product Lines Identified For BlastWrap® - We have Several Completed and Finished Products

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 helmets

§	Body armor and hard armor plates

§	Riot helmets and shields

§	Mounted patrol, vehicular crew, and general duty helmets

§	Metal detectors: walk-through and handheld

§	Explosive ordinance disposal equipment: bomb suits & gear, hook & line kits, detectors and search mirrors, under vehicle surveillance systems

§	Range & training equipment: robots and targets

§	Safety equipment: gas masks, respirators, chemical detectors, medical equipment & supplies

§	X-Ray screening systems: luggage, parcel, freight and cargo scanners, mobile systems, transportation securities administration test objects

Manufactured products versus products supplied by third party vendors.

HighCom manufactures ballistic plates, ballistic shields and blankets. Hard armor plates are HighCom manufactured products which either carry our brand name or a private label. Our ballistic vests, ballistic helmets and EOD bomb suits and gear are currently manufactured and private labeled by third party vendors for us. Our soft arm vests are manufactured by one of two major suppliers and they either carry the supplier brand name or the HighCom brand name. Our UN soft armor vest is co-manufactured by us with a third party vendor. Our ballistic packs are also manufactured by one of two manufacturers. We distribute 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 as well as EOD suits. For a complete description of the HighCom product line, reference is made to our Form 10-K for the fiscal year ended December 31, 2012.

Liquidity and Capital Resources.

At March 31, 2013, we had cash of $68,200, working capital deficit of $(2,943,417), an accumulated deficit of $(17,466,053) and shareholder’s equity of $(2,600,970).

For the three months ended March 31, 2013, net cash used by operating activities was $282,362 primarily due to a loss on derivative, amortization of debt discount, our net loss of $970,503, and the payment on our accounts payables and accruals. During the three months ended March 31, 2013, we used cash in investing activities for purchase of property and equipment of $451. During the three months ended March 31, 2013, we used cash in financing activities of $5,413 for repayment of notes payable.

For the quarter ending March 31, 2012, net cash used by operating activities was $198,758 primarily due to a gain on derivative, amortization of debt discount, our net loss of $1,069,602, and the payment on our accounts payables and accruals. During the three months ended March 31, 2012, we used cash in investing activities for payment of deferred costs of $8,921. During the three months ended March 31, 2012, we used cash in financing activities of $10,519 for repayment of notes payable.

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.

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 reaches certain goals. BlastGard management believes that a portion of the revenues goals are very achievable and have valued the contingent consideration at 68% of the market price at the time of the agreement.

Recently Issued Accounting Pronouncements

During the past two years, the Financial Accounting Standards Board (“FASB”) issued a number of new pronouncements, which are described in Note 1, “Recent Accounting Pronouncements” of the Notes to Financial Statements contained in our latest annual report on Form 10-K filed with the Security and Exchange commission on April 14, 2011. Reference is made to these recent accounting pronouncements as if they are set forth therein in their entirety.

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 effective 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.

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)

From January 2012 to March 31, 2013, we had no sales or issuances of unregistered securities, except for the issuance of 12,218,869 shares of Common Stock to Robocheyne Consulting Ltd. in exchange for the conversion of principal and accrued interest thereon of $109,970. Exemption from registration is claimed under Section 3(a)(9) of the Securities Act inasmuch as there was an exchange of securities of the same Issuer without any commissions being paid.

(b) Rule 463 of the Securities Act is not applicable to the Company.

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
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 *

Filed herewith.

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: May 15, 2013	By:	/s/ Michael J. Gordon
		Michael J. Gordon, Chief Executive and Chief Financial Officer

Attached files

Stock widget

Investing forum

HighCom Global Security, Inc. Reports