HighCom Global Security, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - HighCom Global Security, Inc.	ex32-2.htm
EX-32.1 - HighCom Global Security, Inc.	ex32-1.htm
EX-31.2 - HighCom Global Security, Inc.	ex31-2.htm
EX-31.1 - HighCom Global Security, Inc.	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2017

[ ]	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

HIGHCOM GLOBAL SECURITY, INC.

(Formerly known as BlastGard International, Inc.)

(Exact name of small business issuer as specified in it charter)

Colorado		84-1506325
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

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

(Address of principal executive offices)

(727) 592-9400

(issuer’s telephone number)

BlastGard International, Inc., 2451 McMullen Booth Road, Suite 212, Clearwater, Florida 33759-1362

(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 November 1, 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]

HIGHCOM GLOBAL SECURITY, INC.

INDEX

		PAGE

	PART 1 – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated balance sheets as of September 30, 2017 (unaudited) and December 31, 2016	3

	Consolidated statements of operations, for the three and nine months ended September 30, 2017 and September 30, 2016 (unaudited)	4

	Consolidated statement of changes in stockholders’ deficit for the year ended December 31, 2016 and the nine months ended September 30, 2017 (unaudited)	5

	Consolidated statements of cash flows for the nine months ended September 30, 2017 and September 30, 2016 (unaudited)	6

	Notes to consolidated financial statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	23

PART I1 – OTHER INFORMATION

Item 1.	Legal Proceedings.	23

Item 1A.	Risk Factors	23

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	23

Item 6.	Exhibits	24

Signatures		25

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HIGHCOM GLOBAL SECURITY, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2017			December 31, 2016
	(unaudited)			(audited)
Assets
Current assets
Cash	$	208,068		$	270,331
Accounts receivable		614,312			943,073
Inventory		1,827,618			1,931,083
Prepaid and other current assets		3,750			8,750
Total current assets		2,653,748			3,153,237

Property & equipment, net		163,774			189,002
Deferred tax asset - net		5,236,413			5,138,687
Intangible property, net		93,789			132,127
Goodwill		2,061,649			2,061,649
Deposits		10,254			10,254
Total Assets	$	10,219,627		$	10,684,956

Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable	$	494,337		$	645,225
Accrued expenses		170,430			119,582
Customer deposits and deferred revenue		10,952			11,867
Current portion notes payable		-			241,752
Total current liabilities		675,719			1,018,426

Contingent liability		-			-
Total liabilities		675,719			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 shares issued and outstanding respectively		366,976			366,976
Additional paid-in capital		18,259,864			18,221,122
Minority interest		35,630			35,019
Accumulated deficit		(9,118,562	)		(8,956,587	)
Total stockholders’ equity		9,543,908			9,666,530

Total Liabilities and Stockholders’ Equity	$	10,219,627		$	10,684,956

See accompanying notes to consolidated financial statements

HIGHCOM GLOBAL SECURITY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

Revenues	$	1,271,687		$	2,812,357		$	3,990,199		$	4,757,632
Direct costs		729,316			1,854,910			2,383,476			3,157,034
Gross Profit		542,371			957,447			1,606,723			1,600,598

Operating expenses:

General and administrative		649,363			515,635			1,759,868			1,284,593
Research and Development		22,205			43,386			77,784			57,699
Stock based compensation		38,742			38,742			38,742			38,742
Amortization and depreciation		17,437			18,759			85,870			56,096
Total operating expenses		727,747			616,522			1,962,264			1,437,130

Operating income (loss)		(185,376	)		340,925			(355,541	)		163,468

Non-operating activity
Gain (loss) on derivative liability		-			(107,620	)		-			(63,361	)
Gain on settlement of debt		-			-			102,325			300,200
Interest expenses		-			(34,282	)		(5,874	)		(97,231	)
Total other income (expense)		-			(141,902	)		96,451			139,608
Income(loss) before minority interest and income taxes		(185,376	)		199,023			(259,090	)		303,076

Minority interest (gain) loss		(1,383	)		(6,982	)		(611	)		(10,421	)
Income tax benefit (provision)		70,278			-			97,726			-

Net Income(loss)	$	(116,481	)	$	192,041		$	(161,975	)	$	292,655

Earnings (loss) per share:
Basic	$	-		$	-		$	-		$	-
Dilutive	$	-		$	-		$	-		$	-

Weighted average shares outstanding
Basic		366,976,178			366,976,178			366,976,178			364,238,952
Dilutive		366,976,178			366,976,178			366,976,178			364,238,952

See accompanying notes to consolidated financial statements

HIGHCOM GLOBAL SECURITY, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2016 AND THE NINE MONTHS ENDED September 30, 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

Options issued for services						38,742							38,742

Net Loss								611		(161,975	)		(161,364	)

Balances at September 30, 2017		366,976,178	$	366,976	$	18,259,864	$	35,630	$	(9,118,562	)	$	9,543,908

See accompanying notes to consolidated financial statements

HIGHCOM GLOBAL SECURITY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended
	September 30,
	2017			2016
Cash Flows from Operating Activities:
Net income (loss)	$	(161,975	)	$	292,655
Adjustment to reconcile Net Income to net cash provided by operations:
Minority interest (gain) loss		611			10,421
Stock based compensation		38,742			38,742
Income tax benefit		(97,726	)		-
Depreciation and amortization		85,870			56,096
Amortization of debt discount		-			88,201
Gain on settlement of debt		(102,325	)		(300,200	)
(Gain) loss on derivative		-			63,361
Changes in assets and liabilities:
Accounts receivable		328,761			(431,932	)
Inventory		103,465			(715,069	)
Other Operating Assets		-			(3,750	)
Prepaid expenses		5,000			-
Accounts payable and accruals		(27,715	)		658,811
Customer deposits		(915	)		(74,330	)
Net Cash (Used) Provided by Operating Activities		171,793			(316,994	)

Cash Flows from Investing Activities:
Purchase of property and equipment		(22,304	)		(7,087	)
Net Cash Used by Investing Activities		(22,304	)		(7,087	)

Cash Flows from Financing Activities:
Proceeds from notes payable		-			655,190
Repayments of notes payable		(211,752	)		(307,137	)
Net Cash (Used) Provided by Financing Activities		(211,752	)		348,053

Net increase in Cash		(62,263	)		23,972
Cash at beginning of period		270,331			109,251
Cash at end of period	$	208,068		$	133,223
Supplemental cash flow information:
Interest paid	$	5,874		$	6,860
Taxes paid	$	-		$	-

See accompanying notes to consolidated financial statements

HIGHCOM GLOBAL SECURITY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2017

(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 September 30, 2017 and the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and September 30, 2016 have been made.

These consolidated financial statements include the assets and liabilities of HighCom Global Security, Inc. and its subsidiaries as of September 30, 2017 and December 31, 2016. All material intercompany transactions have been eliminated.

HighCom Global Security, Inc. (the “Company”) went public through a shell merger on January 31, 2004, in which the Company acquired BlastGard Technologies, Inc. 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. On June 28, 2017, the Company changed its name to HighCom Global Security, Inc. The income of HighCom Armor Solutions, Inc. 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 Technologies Inc., a 100% wholly-owned subsidiary of the Company, was a dormant Florida corporation from 2005 through June 2017 when the Company’s tangible and intangible assets relating to BlastWrap technology were transferred back into BlastGard Technologies, Inc. (“BTI”). BTI was incorporated on September 26, 2003 in the State of Florida, to design and market proprietary blast mitigation materials. The Company created, designs, develops and markets proprietary blast mitigation materials. BTI’s patented BlastWrap^®technology effectively mitigates blast effects and suppresses post-blast fires. BTI sub-contracts the manufacturing of products to licensed and qualified production facilities.

HighCom Armor Solutions, Inc. HighCom Armor Solutions, Inc. (HighCom Armor), which is a 98.2% owned subsidiary of the Company, originally located in San Francisco, California is a global provider of security equipment and a leader in advanced ballistic armor manufacturing. HighCom Armor’s corporate office and manufacturing facility are located in Columbus, Ohio.

Business Segments

Although the Company accounts for its operations in three separate corporations, all of its business operations are associated with security for Individuals and Property. HighCom Global Security, Inc. primarily provides for corporate administration. HighCom Armor sales represent in excess of 99% of total sales and BTI has incidental sales of an immaterial amount. 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 nine months ended September 30, 2017, approximately 51% of the Company’s revenue was provided by three customers with the largest representing approximately 28%. The next two largest customers represented approximately 13% and 9%.

For the nine months ended September 30, 2017, approximately 54% of inventory purchases was provided by five vendors, with the two largest suppliers representing approximately 36% each of purchases. The next three largest suppliers provided approximately 5% to 7% of purchases each.

For the nine months ended September 30, 2016, approximately 49% of the Company’s revenue was provided by two customers, one representing approximately 29% and the other approximately 20%.

For the nine months ended September 30, 2016, approximately 65% of cost of sales was provided by five vendors, with the largest supplier representing approximately 27% of cost of sales. The next largest supplier provided approximately 15% of cost of sales, with the last three making up this customer group being at 9%, 8% and 6%.

Principles of Consolidation

These consolidated financial statements include the assets and liabilities of HighCom Global Security, Inc. and its subsidiaries as of September 30, 2017 and December 31, 2016, and its results of operations and cash flows for the periods presented.

All material intercompany transactions have been eliminated for periods presented.

Use of Estimates

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

Cash and Cash Equivalents

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

Financial Instruments

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

Fair Value Measurement

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

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

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

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

Accounts Receivable

Accounts receivable consisted of amounts due from customers based in the United States and abroad. The Company considered accounts more than 30 days old to be past due. The Company used the allowance method for recognizing bad debts. When an account was deemed uncollectible, it was written off against the allowance. The Company generally does not require collateral for its accounts receivable. Management deems all accounts receivable to be collectable at September 30, 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 are 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 $22,205 and $43,386 for the three months ended September 30, 2017 and 2016 respectively. Research and development costs totaled $77,784 and $57,699 for the nine months ended September 30, 2017 and 2016, respectively.

Advertising

Advertising costs for trade shows and social media were expensed as incurred. Advertising costs of $31,673 and $48,615 were incurred during the nine months ended September 30, 2017 and 2016, respectively.

Shipping and Freight Costs

The Company includes shipping costs in cost of goods sold

Gain on settlement of debt

The Company has recorded in other income, a gain on settlement of debt for the nine months ended September 30, 2017 in the amount of $102,325. This amount includes $30,000 recorded as Acquisition Note Payable from a transaction originating in 2010, $67,593 recorded in Accounts Payable from a transaction originating in 2011, and $4,732 representing a 50% negotiated settlement of an amount included in Accounts Payable. The Company evaluated the two transactions form 2010 and 2011 pursuant to the Florida Statute of Limitations applicable to the circumstances of each, and has concluded that these amounts are time-barred in Florida, and should be taken into income.

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 September 30, 2017, and 2016, there were 49,250,000 and 38,000,000 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 September 30, 2017 and 2016 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.

ASU Update 2014-15 Presentation of Financial Statements-Going Concern (Sub Topic 205-40) issued August 27, 2014 by FASB defines managements responsibility to evaluate whether there is a substantial doubt about an organizations ability to continue as a going concern. The additional disclosure required became effective after December 31, 2016 and has been evaluated accordingly. This did not have a material impact on our Consolidated Financial Statements.

In July 2015, the FASB issued ASU 2015-11, Inventory, which simplifies the measurement principle of inventories valued under the First-In, First-Out (“FIFO”) or weighted average methods from the lower of cost or market to the lower of cost and net realizable value. ASU 2015-1 1 is effective for reporting periods beginning after December 15, 2016 including interim periods within those annual periods. This did not have a material impact on our Consolidated Financial Statements.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires that deferred tax assets and liabilities be classified as non-current on the consolidated balance sheet. ASU 2015-17 is effective for annual periods beginning after December 15, 2016, including interim periods within those annual periods. Early adoption is permitted as of the beginning of an interim or annual reporting period. Upon adoption, ASU 2015-17 may be applied either prospectively or retrospectively. This did not have a material impact on our Consolidated Financial Statements.

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.

	September 30, 2017		December 31, 2016
	(unaudited)

Raw materials	$	648,060	$	648,702
Work in process		323,666		240,849
Finished Goods		855,892		1,041,532

TOTAL	$	1,827,618	$	1,931,083

(3) Property and Equipment, Net

Property and equipment are comprised of the following at September 30, 2017 and December 31, 2016

	September 30, 2017			December 31, 2016
Equipment	$	450,197		$	429,417
Furniture		106,326			104,802
Moulds		45,060			45,060
Test Range		110,802			110,802

		712,385			690,081
Less accumulated depreciation		(548,611	)		(501,079	)

Property and equipment, net	$	163,774		$	189,002

Depreciation expense for the next five years ended September 30,

2018	$	54,512
2019		46,845
2020		38,068
2021		17,510
2022		6,207

	$	163,142

Depreciation expense for the nine months ended September 30, 2017 and 2016 was $47,532 and $43,907, respectively.

(4) Intangible Assets, Net

Intangible Assets are comprised of the following at September 30, 2017 and December 31, 2016:

	September 30, 2017			December 31, 2016
Patents and Trademarks	$	145,749		$	161,278
Websites		80,000			80,000
Lists		500,000			500,000
Research and Development		-			55,000

		725,749			796,278
Less accumulated amortization		(631,960	)		(664,151	)

Intangible assets, net	$	93,789		$	132,127

Amortization expense for the next five years ended September 30,

2018	$	9,717
2019		9,717
2020		9,717
2021		9,717
2022		9,717

	$	48,585

During the quarter ended September 30, 2017, the Company changed its estimate for the useful life of certain intangible assets accounted for as patents, trademarks and research and development costs. The net effect of these changes has been accounted for through amortization expense. Amortization expense for the nine months ended September 30, 2017 and 2016 was $38,338 and $12,189, respectively.

(5) Notes Payable

Notes payable at September 30, 2017 and December 31, 2016 as detailed below, is summarized as follows:

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

Acquisition Debt and Gain on Settlement

On March 31, 2011, the Company issued a note payable in association with the purchase of Acer product designs. The Company has determined that this entity no longer exists, and the statute of limitations pertaining to this debt, has expired. As a result, the Company has reported in other income, a gain on settlement of this debt in the amount of $30,000 for the nine months ended September 30, 2017. These acquisition notes have the following balances at September 30, 2017 and December 31, 2016:

	September 30, 2017		December 31, 2016
	(unaudited)
Acquisition note for the purchase of Acer product designs, original amount $30,000, no interest		-		30,000

		-		30,000
Less: current maturities		-		(30,000	)
	$	-	$	-

Note payable - Equipment

The Company financed the acquisition of certain equipment through a promissory note. The note was payable in monthly installments of $2,350, is non-interest bearing, and had a maturity date of May 17, 2017. The note was secured by equipment. As of September 30, 2017, the balance of this note was paid in full. 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 were payable no sooner than 60 days and no later than 90 days from issuance. This note was paid in full on January 7, 2017.

Line of Credit

On May 9, 2017, the Company secured a line of credit with Huntington National Bank in the amount of $500,000. This line of credit has no stipulated maturity date, and is payable on demand by the lender. If no demand is made, payments of all accrued and unpaid interest is payable monthly on the 15^th of each month. Interest rate is variable, and to be determined at the time of advances on this line of credit. As of September 30, 2017, the Company has not used this facility, and there is no balance outstanding.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

(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, bringing the total number of issued and outstanding shares at September 30, 2017 to 366,976,178 shares.

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 September 30, 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.

Historically Directors of the Company have not received any compensation. The Board on June 29, 2017, approved the following compensation as an annual retainer and per-meeting fee schedule regarding Directors: $20,000 annually for serving on the Board; $5,000 additional for serving on the Audit Committee; the Chairman of the Board to receive $30,000 as total compensation annually for said services; for telephonic meetings an additional $500; and for in-person meeting another $2,000. Each Director can elect Company stock in lieu of monetary compensation for the services as set forth above, however, no “strike price” has been established for the acceptance of stock in lieu of monetary compensation.

The following table represents stock option activity as of and for the nine months ended September 30, 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		-		-				-
Exercised		-		-
Forfeited/expired/cancelled		-		-
Options Outstanding – September 30, 2017		60,500,000	$	0.01		6.3 years	$	-
Outstanding Exercisable – January 1, 2017		46,125,000	$	0.01		7.9 years	$	-
Outstanding Exercisable – September 30, 2017		49,250,000	$	0.01		6.4 years	$	-

The total grant date fair value of options vested during the nine months ended September 30, 2017 and 2016 was $38,742 and $38,742 respectively.

The following table represents stock warrant activity as of and for the nine months ended September 30, 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 – September 30, 2017		41,801,793	$	0.009		2.9 years	$	-
Outstanding Exercisable – January 1, 2017		41,801,793	$	0.009		2.9 years	$	-
Outstanding Exercisable – September 30, 2017		41,801,793	$	0.009		2.9 years	$	-

(7) 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 nine months ended September 30, 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 $97,726.

(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 September 30, 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. The corporate location for both HighCom Global and HighCom Armor is Columbus, OH. HighCom Armor secured the lease for both the office and the manufacturing plant in Columbus, Ohio. In February 2011, HighCom Armor entered into a six-month lease agreement for approximately 11,200 square feet of office and warehouse space in Columbus, OH. In June 2012, HighCom Armor entered into a one-year lease agreement for approximately 16,200 square feet of office and warehouse space in Columbus, OH. In June 2013, HighCom Armor 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, HighCom Armor 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. Two satellite offices are maintained in Florida and Colorado for additional sales support.

Rent expense for the nine months ended September 30, 2017 and 2016 was approximately $97,443 and $96,882, 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 HighCom Global (f/k/a BlastGard International, Inc.) 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 HighCom Global for HighCom Global’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 HighCom Global). The parties also agreed not to file any complaints with any state, federal or international agency or disciplinary body regarding any of the other parties or any person affiliated with any of the other parties or otherwise makes negative statements about them (in other words, a broad non-disparagement clause). The company and Verde also signed mutual general releases (excepting the obligations above) and a covenant not to sue. At September 30, 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 vested on January 1, 2015, exercisable at $.009 per share. Mr. Kiefner serves as the Company’s corporate counsel; (ii) lowering the conversion price from $.05 per share to $.01 per share of certain notes described in Note 5 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) Change in Directors and Management/Compensation paid to Resilience Capital, Inc.

An Annual Meeting of Shareholders was held on June 28, 2017 as described under Item 5.07 of the Form 8-K and in a definitive Proxy Statement which was filed with the Securities and Exchange Commission. Paul Sparkes was re-elected to the Board of Directors and continues to serve as Chairman of the Board. Craig Campbell, Curt Cronin, Andrew Blott and Bill Buckley were also elected to the Board as anticipated by the Proxy Statement.

On June 29, 2017, the Board of Directors elected Craig Campbell as Chief Executive Officer, Francis Michaud as Chief Financial Officer, and Greg Sullivan as Chief Commercial Officer. Their biographical information is set forth in the definitive Proxy Statement filed with the Securities and Exchange Commission on May 31, 2017 and incorporated by reference herein. The Proxy Statement also describes the compensation that is paid to an affiliate of Mr. Campbell, namely, Resilience Capital, Inc. Resilience will continue to receive an annual fee of $250,000 payable in equal monthly installments. As for the other executive officers named above, none of them currently have employment agreements and are considered employees at will.

Michael Gordon, former CEO and a director of the Company, is now serving as Chief Executive Officer of the Company’s wholly-owned subsidiary, BTI. Likewise, Michael Bundy and Chad Aaron Wright, former President/Chief Operating Officer and Vice President of the Company, respectively, are also now serving in identical positions in HighCom Armor. Each of these officers will continue to receive their compensation pursuant to their existing employment agreements through December 31, 2017.

The Annual Meeting of Shareholders held on June 28, 2017 also approved of the following amendments: 1) to file an amendment to the Company’s Articles of lncorporation to change the name of the corporation from BlastGard International, Inc. to “HighCom Global Security, Inc.”; 2) approval to grant the Board of Directors discretionary authority to amend the Company’s Articles of lncorporation (the “RS Amendment”) to effectuate a Reverse Stock split of the Company’s Common Stock, $.001 par value, by a ratio of no more than one-for-100 with such ratio to be determined by the sole discretion of the Board (the “Reverse Split”), with a decrease in the number of authorized shares of Common Stock to l00,000,000 and with such Reverse split and change in authorized number of common shares to be effective at such time and date, if at all, as determined by the Board in its sole discretion (the “Reverse Split Proposal”); 3) to file an Amendment to the Articles of Incorporation to permit the Company to hold meetings by action without a meeting in accordance with Section 7-107-104 (1)(b) of Title 7 of the Colorado Revised Statutes in order to permit the shareholders holding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all of the shares entitled to vote thereon were present and voted consent to such action in writing; 4) approval to transfer all the Company’s tangible and intangible assets, which exclude any HighCom Armor assets, from HighCom Global Security, Inc. to its wholly-owned Florida subsidiary, BlastGard Technologies, Inc.; 5) approval to file an amendment to its Articles of Incorporation in the State of California to change HighCom Security, Inc’s name to “HighCom Armor Solutions, Inc.”; and 6) approval to ratify, adopt and approve a 2017 Employee Benefit and Consulting Services Compensation Plan covering a maximum of up to 10,000,000 post-split shares of Common Stock, which Plan will not be established until the discretionary stock split is approved by the Board.

(12) 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 September 30, 2017, have been included.

Summary.

HighCom Global Security, Inc. is a leading provider of equipment and services for the security and defense industries. We acquire, manage and build industry leading businesses which provide specialized, mission-critical solutions that address the needs of our customers. The Company owns 100% of BlastGard Technologies, Inc. (“BTI”) which developed and has been marketing BlastWrap products to protect people and property against explosive forces. The Company owns 98.2% of HighCom Armor Solutions, Inc. (“HighCom Armor”) 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.

We believe that the products of our operating subsidiaries have a certain synergy and that HighCom Global is poised to be a full-service provider for defensive and protective product needs. The term “the Company” shall include HighCom Global, BTI and HighCom Armor unless the context indicates otherwise.

HighCom Armor 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 Armor caters to local law enforcement agencies, correctional facilities and municipal authorities. Given the equipment and ballistic protection solutions provided by HighCom Armor, 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 Armor 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 Armor Solutions, Inc. is a global provider of security equipment. HighCom Armor is a leader in advanced ballistic armor manufacturing. With a 32,865 square foot manufacturing and distribution facility located in Columbus, Ohio, HighCom Armor 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. HighCom Armor serves a wide range of customers throughout the world. Our North American customer base includes the Department of Defense and the Department of Homeland Security. We cater to local law enforcement agencies, correctional facilities and municipal authorities, as well as large corporations. We export our products throughout the world and have in the past sold products in Asia, Africa, Europe, Latin America and the Middle East. Many of our products are controlled for export purposes and we require end user details prior to all sales. Strict compliance with U.S. and International laws and regulations is mandatory.

Results of Operations

The following information represents our results of operations for the three and nine months ended September 30, 2017:

For the three months ended September 30, 2017, we recognized revenues of $1,271,687 as compared to $2,812,357 for the comparable period of the prior year. For the nine months ended September 30, 2017, we recognized revenues of $3,990,199 as compared to $4,757,632 for the comparable period of the prior year. In future operation periods, the Company expects growth through the addition of new distributors and from increased demand for personal body armor for both domestic and international markets.

For the three months ended September 30, 2017, gross profit was $542,371 as compared to a gross profit of $957,447 for the comparable period of the prior year. For the nine months ended September 30, 2017, gross profit was $1,606,723 as compared to $1,600,598 for the comparable period of the prior year. The increased margins are a result of increased pricing as well as more efficient purchasing.

For the three months ended September 30, 2017, the Company’s operating expenses were $727,747 as compared to $616,522 for the three months ended September 30, 2016. For the nine months ended September 30, 2017, the Company’s operating expenses were $1,962,264 as compared to $1,437,130 for the nine months ended September 30, 2016. The increased operating expenses were due primarily to increases in general and administrative expenses associated with professional services.

For the three months ended September 30, 2017, the Company had no other income to report. For the nine months ended September 30, 2017, total other income was $96,451, and consisted of a $102,325 gain on settlement of debt, offset by interest expense of $5,874.

For the three months ended September 30, 2016, total other income (expense) was ($141,902). This included a loss on derivative liability in the amount of $107,620 and interest expense of $34,282. For the nine months ended September 30, 2016, total other income was $139,608. This included a gain on settlement of debt in the amount of $300,200, a loss on derivative liability of $63,361, and interest expense of $97,231.

For the three months ended September 30, 2017, the Company had a net loss of $116,481, which included an income tax benefit of $70,278, as compared to a net income for the comparable period of the prior year of $192,041. For the nine months ended September 30, 2017, the Company had a net loss of $161,975, which included an income tax benefit of $97,726, as compared to a net income for the comparable period of the prior year of $292,655.

Backlog of Sales

As of September 30, 2017, the Company had a backlog of sales of $751,298, all of which is expected to ship in the 4^th quarter 2017. As of the date of this filing, the Company has also secured additional 4th quarter 2017 sales orders of approximately $850,000 which the Company expects to ship in the 4th quarter. Management also believes additional sales of the Company’s HighCom products will be secured during the balance of the fourth quarter and in future operating periods as the Company continues to bid on numerous sizeable contracts.

Various Security and Personal Protective Product Lines Identified

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-powered 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 panels and vests

	●	Ballistic hard armor plates

	●	Ballistic shields

	●	Ballistic blankets

In 2015, HighCom Armor 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. 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. We also designed a Rifle Special Threat Plate for special operators in SWAT and high-risk task forces. In 2017, we introduced 5 new hard armor models including a Level III++, multi-curve, hard armor ballistic plate and 1 new Level IIIa elite, lightweight, high performance soft armor panel. HighCom Armor now has 11 hard armor NIJ 0101.06 certified ballistic plate models as well as 5 soft armor NIJ 0101.06 certified panel solutions.

Manufactured products versus products supplied by third party vendors.

HighCom Armor manufactures ballistic plates, ballistic shields, ballistic vests, and ballistic helmets, along with ballistic and bomb-mitigating blankets. HighCom Armor’s hard and soft armor products are made under our brand name or a private label. Our ballistic helmets are assembled at the HighCom Armor plant. Third party vendors such as Team Wendy and Ops-Core provide accessories to our ballistic helmets. For a complete description of the HighCom Armor product line, reference is made to our Form 10-K for the fiscal year ended December 31, 2016.

Liquidity and Capital Resources.

At September 30, 2017, we had cash of $208,068, a positive working capital of $1,978,029, an accumulated deficit of $(9,118,562) and shareholder’s equity of $9,543,908.

For the nine months ended September 30, 2017, net cash provided by operating activities was $171,793 primarily due to collections of accounts receivable and reductions in inventory. During the nine months ended September 30, 2017, we used cash in investing activities for purchase of property and equipment of $22,304. During the nine months ended September 30, 2017, we used cash in our financing activities for repayment of notes payable of $211,752.

For the nine months ended September 30, 2016, net cash provided by operating activities was $316,994 primarily due to our net income of $292,655, adjusted by a gain on derivative liability, a large gain on settlement of debt, amortization and depreciation, a large increase in inventory offset by a large decrease in our accounts receivable. During the nine months ended September 30, 2016, we used cash in investing activities for purchase of assets of $7,087. During the nine months ended September 30, 2016, we used cash in our financing activities of $348,053.

Since 2016, we benefited from financial resources being provided from operations rather than from additional borrowings. We anticipate that future liquidity requirements will arise to finance our operations, accounts receivable and inventories, and for 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. If needed, the Company may also raise additional capital through equity and debt financing, including a $500,000 credit line secured by HighCom Armor with Huntington Bank in Columbus, Ohio. We can provide no assurances that cash generated from operations will occur or additional financing beyond the $500,000 credit line will be obtained on terms satisfactory to us, if at all.

We have no known demands or commitments and are not aware of any events or uncertainties as of September 30, 2017, that will result in or that are reasonably likely to materially increase or decrease our current liquidity.

Application of critical accounting policies

Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on the Company’s 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. As part of the Company’s efforts to improve its controls and procedures, management is in the process of establishing an accounting department that will effectively address such matters as risk assessment, segregation of duties, and the reviewing and documentation of all processes.

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 nine months ended September 30, 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 nine months ended September 30, 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 *

31.2		Rule 13a-14(a) Certification – Chief Financial Officer *

32.1		Section 1350 Certification – Chief Executive Officer *

32.2		Section 1350 Certification – 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.

	HIGHCOM GLOBAL SECURITY, INC.

Dated: November 9, 2017	By:	/s/ Craig Campbell
		Craig Campbell, Chief Executive Officer

Dated: November 9, 2017	By:	/s/ Francis Michaud
		Francis Michaud, Chief Financial Officer

Attached files

Stock widget

Investing forum

HighCom Global Security, Inc. Reports

Also read