UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(March One)

 

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2017
OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________

 

Commission file number: 000-53756

 

 

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.)

 

2901 East 4^th Avenue, Unit J, Columbus, Ohio 43219

(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 [X] 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 [X] 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 [X]

 

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 [X]

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 2, 2017, the issuer had 366,976,178 shares of $.001 par value common stock outstanding.

 

Transitional Small Business Disclosure Format (Check one): Yes [  ] No [X]

 

 

 

BLASTGARD INTERNATIONAL, INC.

INDEX

 

		PAGE
	PART 1 – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated balance sheets as of March 31, 2017 (unaudited) and December 31, 2016	3
	Consolidated statements of operations, for the three months ended March 31, 2017 and March 31, 2016 (unaudited)	4
	Consolidated statement of changes in stockholders’ deficit for the year ended December 31, 2016 and three months ended March 31, 2017 (unaudited)	5
	Consolidated statements of cash flows for the three months ended March 31, 20 17 and March 31, 2016 (unaudited)	6
	Notes to consolidated financial statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
	PART I1 – OTHER INFORMATION
Item 1.	Legal Proceedings.	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	21
Item 6.	Exhibits	21
Signatures		22

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.

Financial Statements

 

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

 

		March 31, 2017				December 31, 2016
		(unaudited)				(audited)
Assets
Current assets
Cash		$	599,222			$	270,331
Accounts receivable			524,167				943,073
Inventory			1,910,796				1,931,083
Prepaid and other current assets			8,750				8,750
Total current assets			3,042,935				3,153,237
Property & equipment, net			177,351				189,002
Deferred tax asset - net			5,168,781				5,138,687
Intangible property, net			115,875				132,127
Goodwill			2,061,649				2,061,649
Deposits			10,254				10,254
Total Assets		$	10,576,845			$	10,684,956
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable		$	573,668			$	645,225
Accrued expenses			56,530				119,582
Customer deposits and deferred revenue			295,603				11,867
Current portion notes payable			34,701				241,752
Total current liabilities			960,502				1,018,426
Contingent liability			-				-
Notes payable, net of current portion			-				-
Total liabilities			960,502				1,018,426
Stockholders' Equity
Preferred Stock, 1,000 shares authorized; $.001 par value; 0 and 0 issued and outstanding			-				-
Common Stock, $.001 par value, 500,000,000 shares authorized; 366,976,178 and 366,976,178 shares issued and outstanding respectively			366,976				366,976
Additional paid-in capital			18,221,122				18,221,122
Minority interest			34,711				35,019
Accumulated deficit			(9,006,466	)			(8,956,587	)
Total stockholders' equity			9,616,343				9,666,530
Total Liabilities and Stockholders' Equity		$	10,576,845			$	10,684,956

 

 

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

		For the Three Months Ended
		March 31,
		2017				2016
Revenues		$	1,147,069			$	1,244,336
Direct costs			644,886				861,820
Gross Profit			502,183				382,516
Operating expenses:
General and administrative			532,677				388,848
Research and Development			11,532				8,156
Amortization and depreciation			32,381				18,636
Total operating expenses			576,590				415,640
Operating income (loss)			(74,407	)			(33,124	)
Non-operating activity
Gain (loss) on derivative liability			-				4,202
Gain on settlement of debt			-				300,200
Interest expenses			(5,874	)			(31,311	)
Total other income (expense)			(5,874	)			273,091
Income before minority interest and income taxes			(80,281	)			239,967
Minority interest (gain) loss			308				(5,415	)
Income tax benefit (provision)			30,094				-
Net Income (Loss)		$	(49,879	)		$	234,552
Earnings (loss) per share:
Basic		$	0.00			$	0.00
Dilutive		$	0.00			$	0.00
Weighted average shares outstanding
Basic			366,976,178				358,734,420
Dilutive			366,976,178				358,734,420

 

 

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2016 AND THE THREE MONTHS ENDED MARCH 31, 2017

(UNAUDITED)

										Additional												Stock-
		Common								Paid in				Minority				Accumulated				Holders'
		Shares				Par				Capital				Interest				Deficit				Equity
Balances at December 31, 2015			336,976,178			$	336,976			$	17,791,640			$	13,264			$	(15,027,809	)		$	3,114,071
Stock issued as satisfaction of debt			30,000,000				30,000				270,000												300,000
Options issued for services											138,740												138,740
Settlement of derivative liability											20,742												20,742
Net Income															21,755				6,071,222				6,092,977
Balances at December 31, 2016			366,976,178			$	366,976			$	18,221,122			$	35,019			$	(8,956,587	)		$	9,666,530
Net Loss															(308	)			(49,879	)			(50,187	)
Balances at March 31, 2017			366,976,178			$	366,976			$	18,221,122			$	34,711			$	(9,006,466	)		$	9,616,343

 

 

BLASTGARD INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

		For the Three Months Ended
		March 31,
		2017				2016
Cash Flows from Operating Activities:
Net income (loss)		$	(49,879	)		$	234,552
Adjustment to reconcile Net Income to net cash provided by operations:
Minority interest (gain) loss			(308	)			5,415
Income tax benefit			(30,094	)			-
Depreciation and amortization			32,381				18,636
Amortization of debt discount			-				29,293
Gain on settlement of debt			-				(300,200	)
(Gain) loss on derivative			-				(4,202	)
Changes in assets and liabilities:
Accounts receivable			418,906				829,510
Inventory			20,287				(204,169	)
Accounts payable and accruals			(134,609	)			(189,629	)
Customer deposits			283,736				(64,708	)
Net Cash (Used) Provided by Operating Activities			540,420				354,498
Cash Flows from Investing Activities:
Purchase of property and equipment			(4,478	)			(10,174	)
Net Cash Used by Investing Activities			(4,478	)			(10,174	)
Cash Flows from Financing Activities:
Repayments of notes payable			(207,051	)			(171,026	)
Net Cash (Used) Provided by Financing Activities			(207,051	)			(171,026	)
Net increase in Cash			328,891				173,299
Cash at beginning of period			270,331				109,251
Cash at end of period		$	599,222			$	282,550
Supplemental cash flow information:
Interest paid		$	5,874			$	2,018
Taxes paid		$	-			$	-

 

 

BLASTGARD INTERNATIONAL, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

QUARTER ENDED MARCH 31, 2017

(UNAUDITED) 

(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, 2016.

 

In the opinion of management, all adjustments consisting of normal recurring adjustments necessary for a fair statement of the financial position at March 31, 2017 and the results of operations and cash flows for the three months ended March 31, 2017 and 2016 have been made.

 

These consolidated financial statements include the assets and liabilities of BlastGard International, Inc. and its subsidiaries as of March 31, 2017 and December 31, 2016. 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 patented 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 21, 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 consolidated 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.

 

Business Segments

 

Although the Company accounts for its operations in two separate corporations, all of its business operations are associated with Security for Individuals and Property. BlastGard International, Inc. primarily provides for corporate administration, and only has incidental sales of an immaterial amount. HighCom sales represent in excess of 99% of total sales. Therefore, the Company has determined that all business operations should be aggregated together and not reported as separate operating segments.

 

Concentrations – Major Customers and Major Vendors

 

For the three months ended March 31, 2017, approximately 40% of the Company’s revenue was provided by three customers with the largest representing approximately 16%. The next two largest customers represented approximately 13% and 11%.

 

For the three months ended March 31, 2017, approximately 70% of inventory purchases was provided by five vendors, with the largest supplier representing approximately 34% of purchases. The next three largest suppliers provided approximately 10% of purchases each, with the last one representing approximately 6% of purchases.

 

 

Principles of Consolidation

 

These consolidated financial statements include the assets and liabilities of BlastGard International, Inc. and its subsidiaries as of March 31, 2017 and December 31, 2016.

 

All material intercompany transactions have been eliminated

 

Use of Estimates

 

The preparation of financial statements in accordance with generally accepted accounting principles required management to make estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considered all highly liquid debt instruments with original maturities of three months or less when acquired to be cash equivalents.

 

Financial Instruments

 

The carrying amounts of cash, receivables and current liabilities approximated fair value due to the short-term maturity of the instruments. Debt obligations were carried at cost, which approximated fair value due to the prevailing market rate for similar instruments.

 

Fair Value Measurement

 

All financial and nonfinancial assets and liabilities were recognized or disclosed at fair value in the financial statements. This value was evaluated on a recurring basis (at least annually). Generally accepted accounting principles in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on a measurement date. The accounting principles also established a fair value hierarchy which required an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs were used to measure fair value.

 

Level 1: Quotes market prices in active markets for identical assets or liabilities.

 

Level 2: Observable market based inputs or unobservable inputs that were corroborated by market data.

 

Level 3: Unobservable inputs that were not corroborated by market data.

 

Accounts Receivable

 

Accounts receivable consisted of amounts due from customers based in the United States and abroad. The Company considered accounts more than 30 days old to be past due. The Company used the allowance method for recognizing bad debts. When an account was deemed uncollectible, it was written off against the allowance. The Company generally does not require collateral for its accounts receivable. Management deems all accounts receivable to be collectable at March 31, 2017.

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

 

Revenue Recognition

 

The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met:

 

(i)	persuasive evidence of an arrangement exists,
(ii)	the product has been shipped or the services have been rendered to the customer,
(iii)	the sales price is fixed or determinable, and
(iv)	collectability is reasonably assured.

 

The Company’s product and return policy allows for merchandise purchased directly from the Company to be returned after obtaining a Return Authorization Number during the 30 day period following date of shipment by the Company for a refund of the purchase price.

 

Research and Development

 

Research and development costs were expensed as incurred. Research and development costs totaled $11,532 and $8,156 for the three months ended March 31, 2017 and 2016 respectively.

 

Advertising

 

Advertising costs were expensed as incurred. Advertising costs of $8,002 and $13,059 were incurred during the three months ended March 31, 2017 and 2016, respectively.

 

Shipping and Freight Costs

 

The Company includes shipping costs in cost of goods sold.

 

Income Taxes

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and the tax basis of assets and liabilities by using estimated tax rates for the year in which the differences are expected to reverse.

 

The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. If we determine that the Company would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

The Company reports uncertain tax positions in accordance with guidance provided by ASC-740-10, Accounting for Uncertainty in Income Taxes.

 

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, 2017, there were 46,125,000 vested common stock options outstanding, which were not included in the calculation of net loss per share-diluted because they were anti-dilutive. In addition, at March, 2017 the Company had 41,801,793 remaining warrants outstanding issued in connection with convertible promissory notes and stock sales that were also not included because they were anti-dilutive.

 

Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial position.

 

ASU Update 2014-09 Revenue from Contracts with Customers (Topic 606) issued May 28, 2014 by FASB and IASB converged guidance on recognizing revenue in contracts with customers on an effective date after December 31, 2017 will be evaluated as to impact and implemented accordingly.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, to improve financial reporting about leasing transactions. This ASU will require organizations that lease assets (“lessees”) to recognize a lease liability and a right-of-use asset on its balance sheet for all leases with terms of more than twelve months. A lease liability is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset represents the lessee's right to use, or control use of, a specified asset for the lease term. The amendments in this ASU simplify the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. This ASU leaves the accounting for the organizations that own the assets leased to the lessee (“lessor”) largely unchanged except for targeted improvements to align it with the lessee accounting model and Topic 606, Revenue from Contracts with Customers.

 

The amendments in ASU 2016-02 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. The Company is evaluating the potential impact of ASU 2016-02 on its Consolidated Financial Statements.

 

 

(2) Inventory

 

Our inventory is made up of raw materials, work in progress and finished goods. Our inventory is maintained at

our manufacturing facilities.

 

		March 31, 2017				December 31, 2016
		(unaudited)
Raw materials		$	524,774			$	648,702
Work in process			306,763				240,849
Finished Goods			1,079,259				1,041,532
TOTAL		$	1,910,796			$	1,931,083

 

(3)	Property and Equipment, Net

 

Property and equipment are comprised of the following at March 31, 2017 and December 31, 2016

 

		March 31,2017				December 31, 2016
Equipment		$	436,959			$	429,417
Furniture			101,739				104,802
Moulds			45,060				45,060
Test Range			110,802				110,802
			694,560				690,081
Less accumulated depreciation			(517,209	)			(501,079	)
Property and equipment, net		$	177,351			$	189,002

 

Depreciation expense for the next five years ended March 31,
2018		$	56,000
2019			46,956
2020			40,393
2021			23,403
2022			8,069
		$	174,821

 

Depreciation expense for the three months ended March 31, 2017 was $16,129.

 

 

(4)

Intangible Assets, Net

Intangible Assets are comprised of the following at March 31, 2017 and December 31, 2016:

 

		March 31, 2017				December 31, 2016
Patents and Trademarks		$	161,278			$	161,278
Websites			80,000				80,000
Lists			500,000				500,000
Research and Development			55,000				55,000
			796,278				796,278
Less accumulated amortization			(680,403	)			(664,151	)
Intangible assets, net		$	115,875			$	132,127

 

Amortization expense for the next five years ended March 31,
2018		$	16,252
2019			16,252
2020			16,252
2021			12,585
2022			10,752
		$	72,093

 

Amortization expense for the three months ended March 31, 2017 was $16,252

 

(5) Notes Payable

 

Notes payable at March 31, 2017 and December 31, 2016 as detailed below, is summarized as follows:

 

		March 31, 2017 (unaudited)				December 31, 2016
Acquisition debt			30,000				30,000
Notes payable - equipment			4,701				11,752
Note payable - individual			-				200,000
			34,701				241,752
Less current maturities			(34,701	)			(241,752	)
		$	-			$	-

 

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, 2017 and December 31, 2016:

 

		March 31, 2017				December 31, 2016
Acquisition note for the purchase of Acer product designs, original amount $30,000, no interest			30,000				30,000
			30,000				30,000
Less: current maturities			(30,000	)			(30,000	)
		$	-			$	-

 

 

Note payable – Equipment

 

The Company financed the acquisition of certain equipment through a promissory note. The note is payable in monthly installments of $2,350, is non-interest bearing, and has a maturity date of May 17, 2017. The note is secured by equipment. As of March 31, 2017, the balance of this note was $4,701. Interest has not been imputed on this balance as management has deemed it to be immaterial.

 

Notes payable – Individuals

 

On November 4, 2016, the Company issued a demand promissory note to an individual in the amount of $200,000 at a rate of 18% per annum. Principal and accrued interest are payable no sooner than 60 days and no later than 90 days from issuance. This note was paid in full on January 7, 2017.

 

Off Balance Sheet Arrangements

 

We currently have no off-balance sheet arrangements.

 

Canadian corporation has the right to nominate and appoint at least 50% of the Board Members.

 

In 2013, in connection with 8464091 Canada Inc. acquiring over majority control of the Company’s Common Stock from a former affiliated third party, the Company agreed that the Canadian corporation has the right to nominate and appoint to the Board at least 50% of the Board members. Pursuant to this right, 8464091 Canada has nominated and the Board has appointed to the Board four members, which include, Paul Sparkes, Craig Campbell, Andrew Griffith and David Frum. Also, the Canadian corporation has the right to participate in future financings up to its pro rata share of Common Stock of the Company. Mr. Campbell resigned from the Board in November 2016.

 

(6) 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. None of our preferred stock are outstanding.

 

Common stock issuances

 

In January 2016, the Company issued 30,000,000 common shares in a debt conversion in the amount of $300,000.

 

366,976,178 shares were issued and outstanding at March 31, 2017.

 

 

Stock Compensation

 

The Company periodically offered options to purchase stock in the Company to vendors and employees. There were 25,000,000 options granted during the 3rd quarter of 2015 to three key employees and 1,500,000 options granted during the 3^rd quarter of 2015 to a board member for consultant services.

 

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, 2013 and 2012 there were 0 and 0 options granted, respectively and 0 and 1,450,000 expired un-exercised, respectively. On March 25, 2014, the Board of Directors approved granting all four directors 500,000 shares exercisable at $.02 per share. The options are for 5 years and are fully-vested, non-statutory stock options. The options to purchase 500,000 shares of the Company’s Common Stock, effective March 25, 2014, at an exercise price of $0.01 per share were granted to the following persons: Michael J. Gordon, Paul W. Henry, Solomon Mayer and Keith Brill. The options to purchase 750,000 shares of the Corporation’s Common Stock, effective March 10, 2015, at an exercise price of $0.01 per share were granted to the following persons: Michael J. Gordon, Paul W. Henry, Solomon Mayer and Keith Brill.

 

At March 31, 2017 and December 31, 2016, 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 three months ended March 31, 2017:

 

			Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life				Aggregate Intrinsic Value
Options Outstanding - January 1, 2017				60,500,000				$ 0.01.				8.9 years				-
Granted				-			$	0.01				5.0 years				-
Exercised				-				-
Forfeited/expired/cancelled				-
Options Outstanding – March 31, 2016				60,500,000			$	0.01				6.3 years			$	-
Outstanding Exercisable – January 1, 2017				46,125,000			$	0.01				7.9 years			$	-
Outstanding Exercisable – March 31, 2017				46,125,000			$	0.01				6.4 years			$	-

 

The total grant date fair value of options vested during the three months ended March 31, 2017 and 2016 was $0 and $84,858 respectively.

 

The following table represents stock warrant activity as of and for the three months ended March 31, 2017:

 

			Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life				Aggregate Intrinsic Value
Warrants Outstanding - January 1, 2017				41,801,793				$ 0.009.				2.9 years			$	-
Granted				-
Exercised				-				-
Forfeited/expired/cancelled				-
Warrants Outstanding – March 31, 2017				41,801,793			$	0.009				2.9 years			$	-
Outstanding Exercisable – January 1, 2017				41,801,793			$	0.009				2.9 years			$	-
Outstanding Exercisable – March 31, 2017				41,801,793			$	0.009				2.9 years			$	-

 

(7) Income Taxes

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and the tax basis of assets and liabilities by using estimated tax rates for the year in which the differences are expected to reverse.

 

The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. If we determine that the Company would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

 

In assessing the realizability of its deferred tax assets, management evaluated whether it is more likely than not that some portion, or all of its deferred tax assets, will be realized. The realization of its deferred tax assets relates directly to the Company’s ability to generate taxable income. The valuation allowance is then adjusted accordingly.

 

As of December 31, 2016, based on all the available evidence, management determined that it is more likely than not its deferred tax assets will be fully realized. Accordingly, the valuation allowance was reversed in full and $5,138,687 was recognized as a deferred tax asset at December 31, 2016 with a corresponding income tax benefit also being recognized for the year ended December 31, 2016. During the quarter ended March 31, 2017, the Company incurred a net loss, which created an increase in its deferred tax asset with and a corresponding income tax benefit in the amount of $30,094.

 

(8) Concentration of Credit Risk for Cash

 

The Company has concentrated its credit risk for cash by maintaining deposits in a financial institution, which may at times exceed the amounts covered by insurance provided by the United States Federal Deposit Insurance Corporation (“FDIC”). At March 31, 2017, the Company had no funds in excess of the FDIC insurance limits.

 

(9) Commitments and Contingencies

 

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

Office Lease

 

We do not own any real estate properties. BlastGard entered into a lease agreement in January 1, 2009 for office space in Clearwater Florida, which was expanded to two offices in 2011 to accommodate HighCom Security. In 2012, BlastGard moved into a larger office space. Rental payment under the new lease is $398 per month on a month to month basis.

 

HighCom leases office and manufacturing space in Columbus, Ohio. In February 2011, the Company entered into a six-month lease agreement for approximately 11,200 square feet of office and warehouse space in Columbus, OH. In June 2012, the Company entered into a one-year lease agreement for approximately 16,200 square feet of office and warehouse space in Columbus, OH. In June 2013, the Company entered into a three-year lease agreement for approximately 24,160 square feet of office and warehouse space in Columbus, OH. Rental payment under the new lease was $6,967 per month through August 2016. In October 2015, the Company entered into a three-year lease agreement for approximately 32,155 square feet of office and warehouse space in Columbus, OH. Rental payment under the new lease was $9,863 per month on a month to month basis through June 2016 and is now $9,734 per month through October 2018.

 

HighCom rented approximately 900 square feet of office space in Aurora, CO on a short-term lease which expired on May 31, 2014 at a rental of $518 per month. On January 1, 2015, HighCom secured similar office space in Centennial, CO for one year at a rental of $525 per month, which was renewed January 2016. Rental payment under the new lease is at $525 per month on a month to month basis.

 

Rent expense for the three months ended March 31, 2017 and 2016 was approximately $30,791 and $32,746, respectively.

 

 

Prior Litigation Matter

 

Verde Partners Family Limited Partnership

 

On April 2, 2009, the Company entered into a Settlement Agreement to settle our outstanding civil litigation. The Company will pay the sum of $125,000 over 18 months. The first monthly payment was paid within 30 days after the Defendants deliver to the Company’s counsel an original executed version of the Agreement and a promissory note in the amount of the remaining principal balance to bear interest in the amount of 6% per annum. Upon Verde’s receipt of the payment and promissory note, the parties shall jointly dismiss with prejudice all litigation between them, including the Pinellas County action and the Federal action. The company and Verde also entered into a license agreement whereby BlastGard obtains a fully paid up non-exclusive license for the 2 Verde patents for the remaining life of those patents in exchange for the Company paying Verde a 2% royalty for the life of the patents (which expired in the 2^nd quarter of 2012), on the sales price received by BlastGard for BlastGard’s portion of all blast mitigation products sold by the company (the royalty was not on any third-party’s portion of any product containing blast mitigation products sold by BlastGard). The parties also agreed not to file any complaints with any state, federal or international agency or disciplinary body regarding any of the other parties or any person affiliated with any of the other parties or otherwise makes negative statements about them (in other words, a broad non-disparagement clause). The company and Verde also signed mutual general releases (excepting the obligations above) and a covenant not to sue. At March 31, 2017, the Company was in arrears on the final twelve monthly payments on the settlement.

 

(10) Material Agreements and Transactions

 

On November 11, 2013, the Board of Directors approved the following transactions: (i) the issuance of 2,000,000 shares to corporate counsel; and pursuant to his position as chairman of the Company’s advisory board an option to purchase 2,000,000 shares of Common Stock which vested on January 1, 2014 and an option to purchase 2,000,000 shares which will vest on January 1, 2015, exercisable at $.009 per share so long as Mr. Keifner is still serving as chairman of the Company’s advisory board on the vesting date. In his capacity, Mr. Kiefner will serve as a lasison between the Company and its principal shareholder, to attend meetings of the Company’s board of directors, to meet with the Company’s officers on a regular basis and provide corporate counsel; (ii) lowering the conversion price from $.05 per share to $.01 per share of certain notes described in Note6 in the Notes to Financial Statements; and (iii) granting options to purchase an aggregate of 25,000,000 shares of Common Stock to Michael J. Gordon, Michael L. Bundy and Chad Wright with options exercisable at $.01 per share from the vesting date through the expiration date of said options. These options have cliff vesting where they are exercisable over a period of time, but they can become immediately vested in the event certain revenue goals are achieved. In the event the Company achieves $10 million in sales in a calendar year, 25% of the total options will automatically vest. An additional 25% will vest when the Company achieves $20 million in sales in a calendar year and 50% of the total options granted will automatically vest when the Company achieves $30 million in sales in a calendar year.

 

(11) Subsequent Events

 

The Company has evaluated all subsequent events through the filing date of this form 10Q for appropriate accounting and disclosures, and there are no subsequent event disclosures required.

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Statements contained herein that are not historical facts are forward-looking statements as that term is defined by the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance and those actual results may differ materially from those in the forward-looking statements. Such risks and uncertainties include, without limitation: well-established competitors who have substantially greater financial resources and longer operating histories, regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of capital.

 

The following discussion should be read in conjunction with the Company’s financial statements and notes thereto included elsewhere in this Form 10-Q and in our Form 10-K for the fiscal year ended December 31, 2016. 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, 2017, have been included.

 

Summary.

 

BlastGard International, Inc. is in the business of providing protection for individuals and property. We have developed and have been marketing BlastWrap products to protect people and property against explosive forces. The Company owns 98.2% of HighCom Security, Inc. (“HighCom”) which provides a wide range of security and personal protective gear. Our protective gear includes shields, helmets, vests and plates which provide police and military with the protective gear they need to do their jobs.

 

 

A description of each company can be located in our form 10-K for the fiscal year ended December 31, 2016. We believe that the products of the two companies have a certain synergy and that BlastGard International is poised to be a full-service provider for defensive and protective product needs. The term “the Company” shall include BlastGard and HighCom unless the context indicates otherwise. For a description of certain background on HighCom, reference is made to our Form 10-K for the fiscal year ended December 31, 2016.

 

HighCom provides a wide range of security products and personal protective gear (including tactical armor) that are tailored and offer protection solutions to specific customer requirements. HighCom caters to local law enforcement agencies, correctional facilities and municipal authorities. Given the equipment and ballistic protection solutions provided by HighCom, compliance with the U.S. Department of Commerce, U.S. Department of State, U.S. Department of the Treasury and all other governmental agencies’ regulations is a high priority. HighCom has sold its products in the defense and law enforcement sectors and is known for innovative technology, exceptional customer service and superior quality performance. We export our products throughout the world and have in the past sold products in Asia, Africa, Europe, Latin America and the Middle East. Many of our products are controlled for export purposes and we require end user details prior to all sales. Strict compliance with U.S. and International laws and regulations is mandatory.

 

Founded in 1997 and originally based in San Francisco, HighCom Security, Inc., a California corporation, is a global provider of security equipment. HighCom is a leader in advanced ballistic armor manufacturing. With a 32,865 square foot manufacturing and distribution facility located in Columbus, Ohio, HighCom is well positioned for large scale and time sensitive global supply needs. We design, manufacture and/or distribute a range of security products and personal protective gear. Our logistics network is now managed from our corporate headquarters in Clearwater, Florida. HighCom serves a wide range of customers throughout the world. Our North American customer base includes the Department of Defense and the Department of Homeland Security. We cater to local law enforcement agencies, correctional facilities and municipal authorities, as well as large corporations. We export our products throughout the world and have in the past sold products in Asia, Africa, Europe, Latin America and the Middle East. Many of our products are controlled for export purposes and we require end user details prior to all sales. Strict compliance with U.S. and International laws and regulations is mandatory.

 

 

Results of Operations

 

For the quarter ended March 31, 2017, we recognized revenues of $1,147,069 as compared to $1,244,336 for the comparable period of the prior year. During the quarter ended March 31, 2017, revenues included $10,027 from the sales of our proprietary BlastWrap product. The Company expects to continue growth through the addition of new distributors and from increased demand for personal body armor for both domestic and international markets.

 

For the quarter ended March 31, 2017, gross profit was $502,183 as compared to a gross profit of $382,516 for the comparable period of the prior year. This increase in gross profit is due to increases in pricing and reduced cost or materials.

 

During the quarter ended March 31, 2016, the Company’s operating costs were $576,590 as compared to $415,640 for the quarter ended March 31, 2016, and did not include any stock based compensation for the quarters ended March 31, 2017 and 2016.  This increase in operating expenses in primarily due to increases in employee costs and professional services.

 

During the quarter ended March 31, 2017, the Company had a net loss of $(49,879), which included an income tax benefit of $30,094, as compared to a net income from the comparable period of the prior year of $234,552. During the quarter ended March 31, 2017, the Company incurred interest expense of $5,874 as compared to $31,311 for the quarter ended March 31, 2016.

 

Backlog of Sales

 

As of March 31, 2017, the Company had a backlog of sales, all of which are expected to be delivered in the second and third quarter of 2017. 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.

 

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

 

HighCom provides a wide range of security products and personal protective gear (including tactical armor) that are tailored and offer protection solutions to specific customer requirements. HighCom caters to local law enforcement agencies, correctional facilities and municipal authorities. Given the equipment and ballistic protection solutions provided by HighCom, compliance with the U.S. Department of Commerce, U.S. Department of State, U.S. Department of the Treasury and all other governmental agencies’ regulations is a high priority. HighCom has sold its products in the defense and law enforcement sectors and is known for innovative technology, exceptional customer service and superior quality performance.

 

Body armor is classified by the NIJ according to the level of protection it provides from various threats. The classifications are as follows:

 

	●	Type IIA body armor- minimal protection against smaller caliber handgun threats.
	●	Type II body armor – provides protection against many handgun threats, including many common smaller caliber pistols with standard pressure ammunition, and against many revolvers.
	●	Type IIIA body armor- provides a higher level of protection and will generally protect against most pistol calibers including many law enforcement ammunitions, and against many higher poared revolvers.
	●	Type III and IV body armor – provides protection against rifle rounds and are generally only used in tactical situations.

 

Our Security Products include the following:

 

	●	Ballistic helmets
	●	Ballistic soft body armor vests
	●	Ballistic hard armor plates
	●	Ballistic shields
	●	Ballistic blankets
	●	Mounted patrol, vehicular crew, and general duty helmets
	●	Metal detectors: walk-through and handheld

 

 

In 2015, HighCom completed several new NIJ 0101.06 certifications. Our new hard armor products include: our new 4S17M economical Level IV stand alone in multi curve shapes; our new 3S11 lightweight all PE plate; our new 3S11M lightweight all PE multi curve plate; and our new AR1000 lightweight steel advanced plate. We also have products pending certification such as our Rifle Special Threat Plate for special operators in SWAT and high risk task forces; and our new Multi threat Level III and Level IV solution when Level IV is required with special threat and Level III performance. In 2016, we launched a new lightweight Level IV plate; a new multi-hit Level IV plate; a new series of ultra-lightweight helmet solutions; as well as several new soft armor solutions.

 

Manufactured products versus products supplied by third party vendors.

 

HighCom manufactures ballistic plates, ballistic shields, ballistic vests, ballistic helmets and blankets. HighCom’s hard and soft armor products are made under our brand name or a private label. Our ballistic helmets are assembled at the HighCom plant. On occasion, HighCom distributes the following products made by other manufacturers: metal detectors, x-ray machines, EOD kits and detection devices. In the future, we intend to manufacture PASGT (personal armored systems for ground troops) and ACH (advanced combat helmets) ballistic helmets. For a complete description of the HighCom product line, reference is made to our Form 10-K for the fiscal year ended December 31, 2016.

 

Liquidity and Capital Resources.

 

At March 31, 2017, we had cash of $599,222, a positive working capital of $2,082,433, an accumulated deficit of $(9,006,466) and shareholder’s equity of $9,616,343.

 

For the quarter ending March 31, 2017, net cash provided by operating activities was $540,420 primarily due to collections of accounts receivable and increases in customer deposits. During the three months ended March 31, 2017, we used cash in investing activities for purchase of property and equipment of $4,478. During the three months ended March 31, 2017, we used cash in our financing activities for repayment of notes payable of $207,051.

 

For the quarter ending March 31, 2016, net cash provided by operating activities was $354,498 due to a gain on derivative, amortization of debt discount, our net income of $234,552, and the payment on our accounts payables and accruals. During the three months ended March 31, 2016, we used cash in investing activities for purchase of property and equipment of $10,174. During the three months ended March 31, 2016, we used cash in our financing activities for repayment of notes payable of $171,026.

 

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.

 

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.

 

Application of critical accounting policies

 

Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on the Company’s audited Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and corresponding disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we continue to evaluate our estimates which in large part are based on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our short term money market investments. The Company does not have any financial instruments held for trading or other speculative purposes and does not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure. The Company does not have any credit facilities with variable interest rates.

 

Item 4. Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective at the reasonable assurance level at the end of our most recent quarter. There have been no changes in the Company’s disclosure controls and procedures or in other factors that could affect the disclosure controls subsequent to the date the Company completed its evaluation. Therefore, no corrective actions were taken.

 

 

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)	For the three months ended March 31, 2017, we had no sales or issuances of unregistered securities,
	(b)	Rule 463 of the Securities Act is not applicable to the Company.
	(c)	In the three months ended March 31, 2017, there were no repurchases by the Company of its Common Stock.

 

Item 3. Defaults upon Senior Securities

 

N/A

 

Item 4. Mine Safety Disclosures

 

N/A

 

Item 5. Other Information.

 

N/A

 

Item 6. Exhibits

 

Except for the exhibits listed below, other required exhibits have been previously filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.

 

Exhibit Number		Description
3.1		Articles of Incorporation (Incorporated by reference to Company’s Form 10-QSB for the quarter ended March 31, 2004.)
3.2		Amendment to Articles of Incorporation (Incorporated by reference to Form 8-K dated August 2, 2011.)
3.3		By-Laws (Incorporated by reference to Company’s Form 10-QSB for the quarter ended March 31, 2004.)
11.1		Statement re: computation of earnings per share. See condensed consolidated statement of operations and notes thereto.
31.1		Rule 13a-14(a) Certification – Chief Executive Officer and Chief Financial Officer *
32.1		Section 1350 Certification – Chief Executive Officer and Chief Financial Officer *
101.SCH		Document, XBRL Taxonomy Extension (*)
101.CAL		Calculation Linkbase, XBRL Taxonomy Extension Definition (*)
101.DEF		Linkbase, XBRL Taxonomy Extension Labels (*)
101.LAB		Linkbase, XBRL Taxonomy Extension (*)
101.PRE		Presentation Linkbase (*)

 

* 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 22, 2017		By:	/s/ Michael J. Gordon
			Michael J. Gordon, Chief Executive and Chief Financial Officer