UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
 

 
FORM 10-Q
 

 
x           QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¨         TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-150954

GUARDIAN 8 HOLDINGS
(Exact name of registrant as specified in its charter)

Nevada
26-0674103
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

7432 E. Tierra Buena Lane
Suite 102
Scottsdale, Arizona
 
 
85260
(Address of principal executive offices)
(Zip Code)

(877) 659-6007
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x    No ¨

Indicate by check mark 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 ¨
   
Non-accelerated filer ¨  (Do not check if a smaller reporting company) 
Smaller reporting company x
                                         
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨    No x

The number of shares of Common Stock, $0.001 par value, outstanding on August 8, 2014, was 40,737,560, not including 435,000 shares authorized but unissued. 
 
 
 

 
TABLE OF CONTENTS
 
Part I - Financial Information
Page
     
Item 1.
1
Item 2.
19
Item 3. 
29
Item 4.
29
     
Part II - Other Information
 
     
Item 1. 
30
Item 1A. 
30
Item 2. 
30
Item 3.  
30
Item 4. 
30
Item 5.
31
Item 6.
31
 
36
 
 
 

 
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
 
GUARDIAN 8 HOLDINGS
Condensed Consolidated Balance Sheets
(Unaudited)
 
   
June 30, 2014
   
December 31, 2013
 
Assets
           
Current assets:
           
Cash
 
$
3,046,445
   
$
305,649
 
   Accounts receivable, net of allowance for doubtful accounts of
    $952 as of June 30, 2014 and December 31, 2013
   
7,266
     
3,767
 
   Other receivable
   
7,000
     
-
 
   Prepaid loan costs
 
 
540,519
     
143,302
 
   Prepaid expenses, other
   
111,581
     
195,810
 
   Deposits on inventory
 
 
287,278
     
138,262
 
Inventory
               
   Finished goods
   
633,074
     
41,022
 
  Finished goods in transit
   
239,000
     
-
 
   Finished goods on consignment
   
8,079
     
4,216
 
     Total current assets
   
4,880,242
     
832,028
 
                 
Property and equipment:
               
   Fixed assets, net of accumulated depreciation of $75,019 and $41,931
    as of June 30, 2014 and December 31, 2013
   
232,493
     
220,652
 
                 
   Website, net of accumulated amortization of $21,698 and $18,226
    as of June 30, 2014 and December 31, 2013
   
1,736
     
5,207
 
                 
   Patent, net of accumulation amortization of $4,122 and $3,547
    as of June 30, 2014 and December 31, 2013
   
15,735
     
16,310
 
          Total property and equipment
   
249,964
 
 
 
242,169
 
                 
Other assets:
               
   Prepaid loan costs, net of current portion
   
     225,216
         
   Rent security deposit
   
       8,750
     
          -
 
   Utility deposit
   
       4,580
     
          -
 
     Total other assets
   
     238,546
     
          -
 
          Total assets
 
$
   5,368,752
   
$
   1,074,197
 
                 
Liabilities and Stockholders’ Deficit
               
                 
Current liabilities:
               
   Accounts payable and accrued expenses
 
$
172,562
   
$
218,266
 
   Deferred revenue
   
769
     
1,388
 
   Accrued payroll expenses
   
27,981
     
23,737
 
   Accrued interest
               
      Related
   
1,810
     
39,133
 
      Unrelated
   
48,053
     
3,025
 
   Notes payable
               
       Related
   
-
     
1,023,933
 
       Unrelated
   
-
     
100,000
 
     Total current liabilities
   
251,175
     
1,409,482
 
                 
Long-term liabilities:
               
   Convertible senior secured debentures, net of discount
   Of $1,604,390 at June 30, 2014 and $0 at December 31, 2013
   
   5,395,610
     
          -
 
                 
Stockholders’ deficit:
               
Preferred stock, $0.001 par value, 10,000,000 shares authorized;
  no shares issued and outstanding
   
-
     
-
 
Common stock, $0.001 par value, 100,000,000 shares authorized;
  issued and outstanding of 40,737,560 and 37,274,292
  at June 30, 2014 and December 31, 2013
   
40,736
     
37,273
 
Common stock owed but not issued: 435,000 and 2,855,979
  at June 30, 2014 and December 31, 2013
   
435
     
 2,856
 
Paid in capital
   
9,153,132
     
6,629,143
 
Accumulated deficit
   
( 9,472,336
)
   
(7,004,557
)
     Total stockholders’ deficit
   
(278,033
)
   
(335,285
)
          Total liabilities and stockholders’ deficit
 
$
5,368,752
   
$
1,074,197
 
 
The accompanying notes are an integral part of the consolidated financial statements. 
 
 
1


GUARDIAN 8 HOLDINGS
Condensed Consolidated Statement of Operations
(Unaudited)
 
   
For the Three
   
For the Three
   
For the Six
   
For the Six
 
   
Months Ended
   
Months Ended
   
Months Ended
   
Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2014
   
2013
   
2014
   
2013
 
Revenues
  $ 13,967     $ 3,124     $ 19,012     $ 3,124  
   Cost of sales
    10,225       976       14,104       976  
   Gross profit
    3,742       2,148       4,908       2,148  
                                 
Depreciation and amortization
    23,181       14,574       43,143       17,399  
General and administrative expenses
    870,097       676,606       1,862,336       1,245,245  
      893,278       691,180       1,905,479       1,262,644  
Loss from operations
    (889,536 )     (689,032 )     (1,900,571 )     (1,260,496 )
                                 
Other income (expense):
                               
  Interest income
    737       -       737       -  
  Interest expense
    (374,295 )     (13,463 )     (567,945 )     (21,863 )
                                 
Loss before income tax
    (1,263,094 )     (702,495 )     (2,467,779 )     (1,282,359 )
Provision for income tax expense
    -       -       -       -  
Net loss
  $ (1,263,094 )   $ (702,495 )   $ (2,467,779 )   $ (1,282,359 )
                                 
Net loss per share - basic and diluted
  $ (0.03 )   $ (0.02 )   $ (0.06 )   $ ( 0.04 )
                                 
Weighted average shares outstanding - basic and diluted
    40,865,616       33,585,431       40,621,946       32,810,135  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
2

 
GUARDIAN 8 HOLDINGS
Condensed Consolidated Statement of Stockholders’ Equity
 For the Six Months Ended June 30, 2014 and the Year Ended December 31, 2013
(Unaudited)
 
   
Common Stock Issued
   
Common Stock Owed but Not Issued
   
Paid in
   
Accumulated
   
Total Stockholders’
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Equity
 
                                           
Balance, January 1, 2013
   
30,874,508
   
$
30,874
     
1,225,994
   
$
1,226
   
$
3,299,780
   
$
(3,379,393
)
 
$
(47,513
)
                                                         
Issuance of common stock previously owed
   
1,225,994
     
1,226
     
(1,225,994
)
   
(1,226
)
   
-
     
-
     
-
 
Common stock issued for compensation
   
478,400
     
478
     
665,300
     
665
     
554,889
     
-
     
556,032
 
Common stock issued for services
   
745,390
     
745
     
294,429
     
294
     
419,977
             
421,016
 
Common stock issued for director fees
   
-
     
-
     
360,000
     
360
     
219,600
     
-
     
219,960
 
Common stock sold for cash
   
3,700,000
     
3,700
     
1,473,750
     
1,474
     
2,064,326
     
-
     
2,069,500
 
Exercise of warrants
   
250,000
     
250
     
62,500
     
63
     
86,562
     
  -
     
86,875
 
Discounts on notes payable
   
-
     
-
     
-
     
-
     
296,524
     
-
     
296,524
 
Private placement fees
   
-
     
-
     
-
     
-
     
(312,515
)
   
-
     
(312,515
)
Net loss for the year
   
-
     
-
     
-
     
-
     
-
     
(3,625,164
)
   
(3,625,164
)
Balance December 31, 2013
   
37,274,292
     
37,273
     
2,855,979
     
2,856
     
6,629,143
     
(7,004,557
)
   
(335,285
)
                                                         
Issuance of common stock previously owed
   
2,850,979
     
2,851
     
(2,850,979
)
   
(2,851
)
   
-
     
-
     
-
 
Common stock issued for compensation
   
150,000
     
150
     
-
     
-
     
76,350
     
-
     
76,500
 
Common stock issued for services
   
462,289
     
462
     
430,000
     
430
     
408,118
     
-
     
409,010
 
Discounts on notes payable
   
-
     
-
     
-
     
-
     
154,881
     
-
     
154,881
 
Discounts on convertible debentures
   
-
     
-
     
-
     
-
     
1,698,766
     
-
     
1,698,766
 
Loan fees paid in conjunction with warrants granted to placement agents in convertible debenture offering
   
-
     
-
     
-
     
-
     
185,874
     
-
     
185,874
 
Net loss for the six  months
   
-
     
-
     
-
     
-
     
-
     
(2,467,779
)
   
(2,467,779
)
Balance, June 30, 2014
   
40,737,560
   
$
40,736
     
435,000
   
$
435
   
$
9,153,132
   
$
(9,472,336
)
 
$
(278,033
)
 
The accompanying notes are an integral part of these consolidated financial statements. 
 
 
3

 
GUARDIAN 8 HOLDINGS
Condensed Consolidated Statement of Cash Flows
(Unaudited) 
 
   
For the Six Months Ended
   
For the Six Months Ended
 
   
June 30,
   
June 30,
 
   
2014
   
2013
 
Cash flows from operating activities:
           
Net loss
 
$
(2,467,779
)
 
$
(1,282,359
)
Adjustments to reconcile net loss to net cash (used) from operating activities:
               
   Stock issued for services
   
409,010
     
67,500
 
   Stock issued for compensation
   
76,500
     
205,459
 
   Depreciation and amortization
   
43,143
     
17,398
 
   Amortization of discount on notes payable
   
154,881
     
-
 
   Amortization of discount on convertible debentures
   
94,376
     
-
 
   Change in operating assets and liabilities:
               
   Accounts receivable
   
(3,499
)
   
-
 
   Other receivable
   
(7,000
)
   
-
 
   Prepaid loan costs
   
  (436,559
)
   
-
 
   Prepaid expenses
   
84,229
     
(76,635)
 
   Deposits on inventory
   
(149,016
)
   
(43,136)
 
   Inventory
   
(834,915
)
   
(12,839)
 
   Rent security deposit
   
(8,750
)
   
-
 
   Utility deposit
   
(4,580
)
   
-
 
   Accounts payable and accrued expenses
   
(45,704
)
   
154,566
 
   Deferred revenue
   
(619
)
   
-
 
   Accrued interest
   
7,705
     
23,901
 
   Accrued payroll expenses
   
4,244
     
151,440
 
Net cash (used) by operating activities
   
(3,084,333
)
   
(794,705
)
Cash flows from investing activities:
               
   Purchase of property and equipment
   
(50,938
)
   
(146,800
)
Net cash (used) by investing activities
   
(50,938
)
   
(146,800
)
Cash flows from financing activities:
               
   Proceeds from common stock sales, net of private placement fees
   
-
     
719,783
 
   Proceeds from notes payable, related parties
   
475,000
     
250,000
 
   Proceeds from notes payable, unrelated parties
   
25,000
     
-
 
   Proceeds from bank line of credit
   
900,000
     
-
 
   Proceeds from convertible senior secured debentures
   
7,000,000
     
-
 
   Repayment of notes payable, related parties
   
(1,498,933
)
   
-
 
   Repayment of notes payable, unrelated parties
   
(125,000
)
   
-
 
   Repayment of bank line of credit
   
(900,000
)
   
-
 
Cash flows from financing activities
   
5,876,067
     
969,783
 
                 
Net increase in cash and cash equivalents
   
2,740,796
 
   
28,278
 
Cash and cash equivalents, beginning of period
   
305,649
     
41,855
 
                 
Cash and cash equivalents, end of period
 
$
3,046,445
   
$
70,133
 
                 
Supplemental cash flow information:
               
Interest paid
 
$
9,227
   
$
-
 
Income taxes paid
 
$
-
   
$
-
 
Non-cash financing activity:                
Loan fees paid in conjunction with warrants granted to placement agents in convertible debenture offering
 
$
185,874
     
-
 
Stock issued for services
 
$
409,010
   
$
67,500
 
Number of shares issued for services
   
892,289
     
172,500
 
Stock issued for compensation
 
$
76,500
   
$
205,459
 
Number of shares issued for compensation
   
150,000
     
564,900
 
Discount on notes payable
   
1,698,766
     
-
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
4

 
GUARDIAN 8 HOLDINGS
Notes to Condensed Consolidated Financial Statements

Note 1 - Company Organization and Summary of Significant Accounting Policies
 
Organization

Guardian 8 Corporation (“Guardian 8”) was incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.  In August of 2009, the Company changed its name to Guardian 8 Corporation.  The Company’s principle offices are located in Scottsdale, Arizona.
 
Effective November 30, 2010, we merged with Global Risk Management & Investigative Solutions (“Global Risk”), a public company with its common stock registered with the United States Securities and Exchange Commission.  The Company merged into a newly formed wholly owned subsidiary of Global Risk, with the Company being the surviving corporation.  Post-merger, Global Risk changed its name to Guardian 8 Holdings.
 
Basis of presentation
 
Effective July 1, 2013 the Company transitioned from reporting as a development stage entity to an operating entity as revenues became sustainable with product sales.
 
Principles of consolidation
 
For the three and six months ended June 30, 2014 and 2013, and for the year ended December 31, 2013, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.
 
Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  As of June 30, 2014 and December 31, 2013, there were cash equivalents of $3,046,445 and $305,649 respectively. 

Revenue recognition

Revenues are recognized in accordance with ASC subtopic 605-10, “Revenue Recognition”.  The company recognizes revenue from sales of product upon delivery to its customers where the fee is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.  Extended warranties are recorded as deferred revenue and amortized according to the number of months in service.  Revenue for the six months ended June 30, 2014 and 2013 were $19,012 and $3,124, respectively.

Warranty

The Company offers a 90-day limited warranty on its core product with an opportunity to upgrade to a one year limited warranty (for a fee) on the device.  These fees are intended to cover the handling and repair costs and include a profit.  One year extended warranties that provide additional coverage beyond the limited warranty are offered for specified fees. Revenue derived from the sale of extended warranties are deferred and amortized over the duration of the warranty period.  During the six months ended June 30, 2014 and year ended December 31, 2013 the, Company recorded $769 and $1,388 as deferred revenue, and had related warranty expense of $955 and $0, respectively.
 
Research and development costs

The Company expenses all costs of research and development as incurred. Research and development expenses included in general and administrative expenses totaling $107,248 and $249,529 for the six months ended June 30, 2014 and 2013 respectively. 

 
5


Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates.

Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.

The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 
 
Equipment
2 years
Tooling
10 years
Computer equipment
3 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years
Warehouse equipment
10 years
                                                      
Fair value of financial instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2014 and 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable and amounts due to related party.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.  See Note 13 for further details.

Impairment of long-lived assets

ASC 360, “Accounting for the Impairment of Long-Lived Assets to be Disposed Of”, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate.  The Company assesses recoverability of the carrying value of an asset by estimating the future new cash flows expected to result from the asset, including eventual disposition.  If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.  The Company did not have impaired assets during the six months ended June 30, 2014 and 2013. 
 
Net loss per share

Net Loss per share is provided in accordance with ASC 260-10, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share.  Basic earnings (loss) per share is computed by dividing the earnings (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.  Diluted earnings (loss) per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  In accordance with ASC 260-10, any anti-dilutive effects on net income (loss) per share are excluded.  For the six months ended June 30, 2014 and 2013, the denominator in the diluted earnings per share computation is the same as the denominator for basic earnings per share due to the anti-dilutive effect of the warrants on the Company’s net loss.  Diluted earnings (loss) per share is not presented since the effect would be anti-dilutive. Potential common shares as of June 30, 2014 that have been excluded from the computation of diluted net loss per share amounted to 21,414,621 from warrants. Potential common shares as of June 30, 2013 that have been excluded from the computation of net loss per share amounted to 5,927,500 from warrants.
 
 
6

 
Income taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes”, for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.  See Note 14 for further details.

 Recent pronouncements

The Company has evaluated all new accounting pronouncements as of the issue date of these financial statements and has determined that none have or will have a material impact on the financial statements or disclosures.

Note 2 - Going Concern

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles and under the assumption that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.  As of June 30, 2014, the Company has an accumulated deficit of $9,472,336.
 
The Company’s activities since inception have been financially sustained by issuance of common stock and related party loans. The Company intends to raise additional funding to continue its operations through contributions from the current shareholders and stock issuance to other investors and has issued convertible senior secured debentures.
 
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues.  The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.

Note 3 - Prepaid loan costs

During the year ended December 31, 2013, the Company issued notes payable that include a three-year warrant for each $1.00 of principal covered in the notes.   The warrants are exercisable at $0.40 per share (See Note 7).  The warrants issued were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $296,524.  As of June 30, 2014, the loan costs were fully amortized.

During the three months ended March 31, 2014, the Company issued notes payable that included a three-year warrant for each $1.00 of principal covered in the notes.  The warrants are exercisable at $0.50 per share (See Note 7).  The warrants were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $154,881. As of June 30, 2014, the loan costs were fully amortized.

On May 27, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $632,786, which are being amortized over eighteen months, which is the period for which the debentures are due. As of June 30, 2014, the balance on these loan costs was $597,631.

On June 2, 2014, the Company issued convertible senior secured debentures (See Note 8).  From these debentures, the Company incurred loan costs in the amount of $177,153, which are being amortized over eighteen months, which is the period for which the debentures are due.  As of June 30, 2014, the balance on these loan costs was $168,104.
 
 
7


Note 4 - Property and equipment

Property and equipment consists of the following:
 
   
June 30,
2014
   
December 31,
2013
 
Equipment
 
$
96,379
   
$
96,379
 
Tooling
   
127,436
     
127,436
 
Computer equipment
   
25,018
     
-
 
Leasehold Improvements
   
23,070
     
6,007
 
Furniture and fixtures
   
25,741
     
32,761
 
Warehouse equipment
   
9,868
     
-
 
     
307,512
     
262,583
 
Less accumulated depreciation
   
75,019
     
41,931
 
   
$
232,493
   
$
220,652
 
 
As of June 30, 2014, all tooling was complete and placed into service.  
 
Note 5 - Deposit on Inventory

As of June 30, 2014 the Company pre-paid $287,278 as a deposit on inventory for its finished personal security devices.  This inventory is scheduled to arrive by December 31, 2014.

Note 6 - Bank line of credit

On January 17, 2014, the Company entered into a revolving line of credit agreement with Cornerstone Bank, N.A.  The agreement provided for an aggregate of up to $700,000, which was increased to $900,000 on April 28, 2014, at any time outstanding pursuant to a revolving line of credit and matures on January 16, 2015.  The agreement was secured by inventory, work in process, accounts receivable, a letter of credit, and was personally guaranteed by the Company’s Chief Executive Officer/President.  Borrowings bear interest at 6% per annum, with monthly interest payments to be paid by the Company.

As part of the agreement, the Company entered into a Letter of Credit Rights Control Agreement with F&M Bank & Trust Company.  Per this agreement, if the Company were to default on the line of credit, F&M Bank & Trust Company would then be held liable to Cornerstone Bank, N.A. for the payment of the line of credit.  In addition, the Company would then owe the amount disbursed to F&M Bank & Trust Company.  As of June 30, 2014, the bank line of credit was fully paid.
 
Note 7 - Notes payable

On January 1, 2013, the Company had notes payable from related parties, totaling $200,000.  These notes were originally due in 2012, but subsequently extended into 2013.  The notes bear interest at a rate of 12% per annum.

On January 24, 2013, the Company received a note payable from the CEO and president of the Company in the amount of $50,000.  The note was unsecured, bearing interest at 12% per annum and was payable on September 1, 2013.
 
On March 6, 2013, the Company received a note payable from the CEO and president of the Company in the amount of $100,000.  The note was unsecured, bearing interest at 12% per annum and was payable on September 1, 2013.

On March 6, 2013, the Company received $50,000 from a director of the Company in the form of an unsecured 90-day promissory note.  The note was unsecured, bearing interest at 12% per annum and was payable on September 1, 2013.

On March 26, 2013, the Company received $50,000 from a director of the Company in the form of an unsecured 90-day promissory note.  The note was unsecured, bearing interest at 12% per annum and was payable on September 1, 2013.

On August 12, 2013, the Company received a note payable from the CEO and president of the Company in the amount of $50,000.  The note was unsecured, bearing interest at 12% per annum and was payable on November 30, 2013.
 
 
8


On August 26, 2013, 2013, the Company received a note payable from the CEO and president of the Company in the amount of $150,000.  The note was unsecured, bearing interest at 12% per annum and was payable on November 30, 2013.
 
On September 1, 2013, the Company had a total of $615,000 of the original $650,000 in notes payable outstanding to its CEO and directors, with an additional $33,933 owed in accrued interest.  This debt, previously due on September 1, 2013 through November 30, 2013, was exchanged for three new unsecured notes payable totaling $648,933.  Each of these notes were to mature on April 30, 2014, bearing interest at 12% per annum, and included a three-year warrant for every $1.00 of principal amount of each note.  The warrants were exercisable at $0.40 per share.  The notes and related accrued interest were paid off as of June 30, 2014.
 
On September 1, 2013 the Company received a note payable in the amount of $45,000 from a related party in exchange for outstanding invoices owed for engineering services provided in the first nine months of the year.  The note was unsecured, bearing interest at 12% per annum, is payable on April 30, 2014, and includes a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note and related accrued interest were paid off as of June 30, 2014.

On September 18, 2013, the Company received a note payable from the CEO and president of the Company in the amount of $50,000.  The note was unsecured, bearing interest at 12%, was payable on April 30, 2014, and includes a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note and related accrued interest was paid off as of June 30, 2014.

On September 19, 2013, the Company issued a note payable from a related party in the amount of $30,000.  The note was unsecured, bearing interest at 12%, was payable on April 30, 2014, and includes a three-year warrant for each $1.00 of principal included in the note.  The warrants are exercisable at $0.40 per share.  The note and related accrued interest was paid off as of June 30, 2014.

On September 19, 2013, the Company issued a note payable from a related party in the amount of $250,000.  The note was unsecured, bearing interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each $1.00 of principal included in the note.  The warrants were exercisable at $0.40 per share. The note and related accrued interest was paid off as of June 30, 2014.

On September 30, 2013, the Company received a note payable in the amount of $100,000.  The note was unsecured, bears interest at 12%, was payable on April 30, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.   The warrants were exercisable at $0.40 per share. The note and related accrued interest was paid off as of June 30, 2014.

As of December 31, 2013, the Company had notes payable of $1,123,933 and accrued interest of $42,158.  All amounts were due within twelve months.  The Company also recognized $296,524 of expense associated with the convertible features of the notes payable issued during the year ended December 31, 2013.  As noted above, the balances outstanding inclusive of all accrued interest from these notes were paid in full as of June 30, 2014.

On February 12, 2014, the Company received a note payable in the amount of $50,000 from a related party.  The note was unsecured, bearing interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants were exercisable at $0.50 per share.  The note and related accrued interest was paid off as of June 30, 2014.

On February 24, 2014, the Company received a note payable in the amount of $25,000 from a related party.  The note was unsecured, bearing interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants were exercisable at $0.50 per share.  The note and related accrued interest was paid off as of June 30, 2014.

On February 24, 2014, the Company received a note payable in the amount of $400,000 from a related party.  The note was unsecured, bearing interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants were exercisable at $0.50 per share.  The note and related accrued interest was paid off as of June 30, 2014.

On February 24, 2014, the Company received a note payable in the amount of $25,000 from an unaffiliated company.  The note was unsecured, bearing interest at 12%, was payable on July 15, 2014, and included a three-year warrant for each of $1.00 of principal included in the note.  The warrants were exercisable at $0.50 per share.  The note and related accrued interest was paid off as of June 30, 2014.
 
 
9


Note 8 - Convertible Senior Secured Debentures

The Company issued the following convertible Senior Secured Debentures:
 
   
1st Closing
   
2nd Closing
 
             
1.  Date of issuance
 
May 27, 2014
   
June 2, 2014
 
             
2.  Gross amount of debentures
 
$
5,250,000
   
$
1,750,000
 
                 
3.  Term
 
18 Months
Due November 30, 2015
   
18 Months
Due November 30, 2015
 
                 
4.  Interest rate
 
8% from May 27, 2014
   
8% from June 2, 2014
 
                 
5.  Class C warrants to debenture holders:
               
Number issued
   
5,250,000
     
1,750,000
 
Price per share
 
$
0.60
   
$
0.60
 
Term
 
5 years
   
5 years
 
See condition number 2
               

6.  Conversion Rights

The debentures may be converted by each buyer commencing on the 91st day following closing and through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.50 per share.

The Company may force conversion of the debentures into shares of common stock at $0.50 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $1.00 per share.

In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.80, then on the maturity date, the buyers must convert all remaining principal due under the debentures.

Upon conversion of the debentures, an additional Class C Warrant will be issued under the same terms and same amount as the warrants issued in the debenture sale.

7.  Security of Debentures. The debentures are guaranteed, pursuant to “Secured Guaranty” and “Pledge and Security Agreement by Guardian 8 Corporation and secured interest in all of the assets of the company and Guardian 8 Corporation.

8.  Registration Rights. The Company has agreed to file a “resale” registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144.  The Registrant has agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company is obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty day period up to a maximum of six percent, (i) that the registration statement has not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.

9.  Valuation of Warrants

The warrants issued with the debentures were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amounts of $1,274,074 for the first closing and $424,692 for the second closing. The assumptions used in the pricing model were:  term 5 years, risk free interest rate 1.56%-1.60%, and volatility 99%.  A $1,698,766 discount on the debenture was recorded and is being amortized into interest expense over the eighteen month life of the debenture using the interest method.

As of June 30, 2014, $94,376 was amortized into interest expense and the remaining discounts were $1,604,390.

$295,000 of the debentures were to related parties.
 
 
10


Note 9 - Patents

In June of 2009, concurrent with the Company’s incorporation, one of its officers and directors, agreed to transfer all rights, title and interest in the patent he held for a personal security device. The cost of the patent is being amortized over the 20-year life of the patent.

The Company hired a patent attorney specializing in products for the security industry to assist in filing additional utility and technology patents for its new enhanced non-lethal products.  As of June 30, 2014, the costs paid to this attorney for the filings, drawings, and research totaled $9,472.  These costs have been capitalized and are being amortized over the 20-year life of the patents once issued and placed into service.

Note 10 - Stockholders’ equity
 
On January 1, 2013, there were 30,874,508 common shares issued and outstanding, 1,225,994 common shares owed but not issued, and no preferred shares issued.  As of March 31, 2013, all of these shares were issued to their respective parties.

During the quarter ended March 31, 2013, three employees vested shares of common stock in accordance with their employment agreements (see Note 15).  The first was the CEO/Director, vesting 150,000 shares of common stock, which were valued at market price of $54,000.  The other two issuances were for the Company’s Chief Operating Officer and Vice President of Customer Service, both of which achieved milestones predicated by their employment agreements.  The total number of shares vested for these two officers totaled 89,200 shares of common stock that were valued at market price of $37,464.
 
On January 23, 2013, the Company authorized the issuance of 330,000 shares of common stock in exchange for services, 180,000 of these shares were earned and expensed in the year ended December 31, 2012.  The remaining 150,000 shares were valued at the market price at the date of authorization for a total expense of $58,500.
 
On January 23, 2013, the Company conducted the third and final closing under a private placement offering, selling 225,000 units for $90,000 ($45,000 and 112,500 shares of which was received and accounted for in the year ended December 31, 2012).  The shares were sold for $0.40 each and came with two warrants.  The Class A warrants have an exercise price of $0.55 and a term of three years.  The Class B warrants have an exercise price of $0.75 and a term of five years.  All of the shares sold were issued as of December 31, 2013.

On March 6, 2013, the Company issued 10,000 shares of restricted common stock for $4,000 to a consultant.

On March 19, 2013, the Company conducted the first closing under a private placement offering selling 750,000 units for $300,000 to three accredited investors. Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share. In connection with the sale of these units, the Company paid Finance 500, Inc., a registered broker/dealer and managing dealer for the offering, selling commissions in the amount of $39,000 and is obligated to issue 112,500 warrants to Finance 500. Each warrant will entitle Finance 500, or its assignees, to purchase one share of the Company’s common stock at $0.40 per share for ten years. The Company also incurred $46,121 of expenses associated with this offering, for a net amount of $253,879.

On April 30, 2013 the Company completed a closing under a private placement offering selling 187,500 units for $75,000 to three accredited investors.  Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for a $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share.  In connection with the sale of these units, the Company paid selling commissions to a registered broker/dealer and managing dealer for the offering in the amount of $9,750.  The Company incurred $11,324 of total expenses associated with this offering, for a net amount of $63,675, and is obligated to issue 28,125 warrants to the registered broker in association with the sale.

On April 30, 2013 the Company issued 12,500 shares of common stock for cash in the amount of $5,000.

On May 6, 2013, the Company conducted a closing under a private placement offering selling 625,000 units for $250,000 to an accredited investor.  Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one fie year warrant to purchase one share of common stock for $0.75 per share.  In connection with the sale of these units, the Company paid selling commissions to registered broker/dealer and managing dealer for the offering in the amount of $32,500.  The Company incurred $36,214 of total expenses associated with this offering, for a net amount of $213,786 and is obligated to issue 93,750 warrants to the registered broker in association with this sale.

On May 15, 2013, the Company entered into an amendment with its investment banking firm to reduce the warrants payable to the firm by 30,000.
 
 
11


On June 12, 2013, the Company conducted a closing under a private placement offering selling 437,500 units for $175,000 to four accredited investors.  Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 and one five year warrant to purchase one share of common stock for $0.75 per share.  In connection with the sale of these units, the Company paid selling commissions to a registered broker/dealer and managing dealer for the offering in the amount of $22,750.  The Company incurred $31,558 of total expenses associated with this offering, for a net amount of $143,442 and is obligated to issue 65,625 warrants to the registered broker in association with this sale.

On June 30, 2013 employees vested 325,700 shares of common stock.  The value of the stock was $114,039 and the 325,700 shares were issued in the third quarter of 2013.  See Note 15 for further details.

On July 16, 2013, the Company issued a five-year warrant to purchase 22,000 shares of common stock at $0.40 per share for the second month of services under an Investor Relations Letter of Engagement. The warrant was valued at $6,300.

On July 30, 2013, the Company entered into two agreements with independent contractors to deliver a training course for their product.  As part of the agreement, the Company will issue each contractor 19,445 shares of its common stock, with a value of $7,778 for each of their services, totaling 38,890 shares of its common stock, with a value of $15,556 which were expensed during the third quarter of 2013.

On July 30, 2013, the Company conducted a closing under a private placement offering selling 187,500 units for $75,000 to three accredited investors. Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share. In connection with the sale of these units, the Company paid a registered broker/dealer and managing dealer for the offering, selling commissions in the amount of $9,750 and is obligated to issue 28,125 warrants to registered broker. Each warrant will entitle registered broker, or its assignees, to purchase one share of the Company’s common stock at $0.40 per share for ten years. The Company also incurred $25,659 of expenses associated with this offering, for a net amount of $49,341.

On August 12, 2013, the CEO agreed to convert $35,000 of his notes payable into 100,000 shares of common stock, with a value of $35,000 by exercising his warrants.  These shares were issued in the fourth quarter of 2013.

On August 29, 2013, the Company authorized and issued 225,000 shares of common stock with a value of $67,500 to a director and engineer for services performed for the Company.

On August 29, 2013, the Company authorized and issued 17,500 shares of common stock with a value of $6,125 to an employee.

On August 30, 2013 the Company issued 150,000 shares of common stock, valued at $0.25 per share, upon exercise of a warrant form and receipt of $37,500 from a current stockholder.

On August 30, 2013, the Company issued 142,000 shares of common stock, valued at $41,194, for public and investor relation services pursuant to an agreement dated August 26, 2013.

On August 30, 2013, the Company issued a five-year warrant to purchase 22,000 shares of common stock at $0.40 per share for the third and final month of services under an Investor Relations Letter of Engagement.  The warrant was valued at $5,311.

On September 23, 2013, the Company issued 31,500 shares of common stock, valued at $11,009 to a consultant for services per a signed contract.  The shares were issued at $0.3495 per share.

On September 30, 2013, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $66,000 to its CEO pursuant to the terms of his employment agreement.  These shares were issued in the first quarter of 2014.

On September 30, 2013, the Company authorized and recognized the expense for the issuance of 104,000 shares of common stock, valued at $45,760 shares to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were issued in the first quarter of 2014.

On September 30, 2013, the Company authorized and recognized the expense for the issuance of 31,500 shares of common stock, valued at $13,388, to a consultant for services per a signed contract.  

During the three months ended September 30, 2013, in connection with the issuance of new promissory notes, the Company issued 1,023,935 three year warrants for the purchase of shares of its common stock for $0.40 per share.
 
 
12


On October 1, 2013, the Company sold 250,000 shares of common stock with an aggregate value of $100,000.  Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share.

On October 10, 2013, the Company sold 100,000 shares of common stock with an aggregate value of $40,000.  Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share.  These shares were owed but not issued as of December 31, 2013.

On October 25, 2013, the Company conducted a closing under a private placement offering selling 787,500 units for $315,000 to eleven accredited investors. Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share. In connection with the sale of these units, the Company paid a registered broker/dealer and managing dealer for the offering, selling commissions in the amount of $40,950. The Company also incurred $8,774 of expenses associated with this offering, for a net amount of $265,276.

On October 29, 2013, two investors exercised 57,500 warrants to purchase common stock with total cash payments of $14,375.

On November 12, 2013, the Company conducted a closing under a private placement offering selling 1,373,750 units for $549,500 to three accredited investors. Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share. In connection with the sale of these units, the Company paid a registered broker/dealer and managing dealer for the offering, selling commissions in the amount of $71,435. The Company also incurred $2,314 of expenses associated with this offering, for a net amount of $475,751.  These shares were issued in the second quarter of 2014.

On November 20, 2013, the Company conducted a closing under a private placement offering selling 362,500 units for $145,000 to five accredited investors. Each unit consists of one share of common stock, one three year warrant to purchase one share of common stock for $0.55 per share and one five year warrant to purchase one share of common stock for $0.75 per share. In connection with the sale of these units, the Company paid a registered broker/dealer and managing dealer for the offering, selling commissions in the amount of $18,850. The Company also incurred $2,650 of expenses associated with this offering, for a net amount of $123,500.

On November 26, 2013, the Company issued 71,429 shares of common stock, valued at $50,000 for public and investor relation services pursuant to an agreement dated August 26, 2013.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company authorized 20,000 shares of common stock for engineering assistance with the Company’s security device.  The services were valued at $9,165.  15,000 of these shares were issued in the first quarter of 2014.  5,000 shares were owed but not issued as of June 30, 2014

On December 31, 2013, the Company issued 360,000 shares of its common stock to its six directors for director fees.  The services were valued at $219,960.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company issued 100,000 shares of its common stock to its CEO as a bonus for services performed for the Corporation.  These shares were valued at $61,100.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $91,650 to its CEO pursuant to the terms of his employment agreement.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company authorized and recognized the expense for the issuance of 104,000 shares of common stock, valued at $63,544 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company authorized and recognized the expense for the issuance of 212,500 shares of common stock, valued at $129,838 to its COO pursuant to the terms of his employment agreement.  These shares were issued in the first quarter of 2014.

On December 31, 2013, the Company authorized and recognized the expense for the issuance of 52,800 shares of common stock, valued at $32,261 to its VP of Customer Support pursuant to the terms of his employment agreement.  These shares were issued in the first quarter of 2014.
 
 
13


As of December 31, 2013, there were 37,274,292 shares of common stock outstanding, 2,855,979 were owed but not issued and there were no preferred shares.

On February 3, 2014, the Company authorized and recognized the expense for 325,000 shares of common stock, valued at $130,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were owed but not issued as of June 30, 2014.

On February 3, 2014, the Company authorized and recognized the expense for 98,039 shares of common stock, valued at $50,000 to an outside consultant pursuant to an agreement with the consultant.  These shares were issued in the second quarter of 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 104,250 shares of common stock, valued at $53,040 to its Interim CFO pursuant to the terms of her consulting agreement.  These shares were issued in the second quarter of 2014.

On March 31, 2014, the Company authorized and recognized the expense for the issuance of 150,000 shares of common stock, valued at $76,500 to its CEO pursuant to the terms of his employment agreement.  These shares were issued in the second quarter of 2014.

On May 20, 2014, the Company authorized and recognized the expense for the issuance of 60,000 shares of common stock, valued at $30,600 to a board member.

On June 18, 2014, the Company authorized 200,000 shares of common stock to its interim CFO per the terms of her new employment contract (See Note 15). The associated expense recognized during the second quarter of 2014 was $96,020. These shares were issued as of June 30, 2014.

On May 27, 2014, the Company authorized and recognized the expense for the issuance of 105,000 shares of common stock, valued at $49,350 to its interim CFO per her new employment contract (See Note 15).  These shares were owed but not issued as of June 30, 2014.

As of June 30, 2014, there were 40,737,560 common shares issued and outstanding, 435,000 common shares owed but not issued, and no preferred shares issued.
 
Note 11 - Options and warrants

Options

As of June 30, 2014 and 2013 there are no outstanding options.
 
Warrants

On January 1, 2013, there were 1,432,500 warrants outstanding.

During the year ended December 31, 2013, 307,500 warrants were exercised at a strike price between $0.25 and $0.40 per warrant.

During the year ended December 31, 2013, the Company issued 10,347,500 warrants to purchase common stock relating to the sale of units as noted in Note 10.  All warrants have a term between three and five years and a strike price ranging from $0.55 to $0.75. In connection with the sale of unit the Company issued warrants as private placement fees.  The amount of warrants issued were 744,188 later reduced by 30,000 warrants for a total amount issued of 714,188.  These warrants have an exercise price of $.40 per share and have a term of 10 years.  Also upon conversion of any of the warrants relating to the sale of the units the Company is required to issue additional warrants as part of the fee agreement.

In connection with notes payable entered into in 2013, the Company issued 1,123,923 warrants.  The value of the warrants was determined using the Black Scholes model with the following weighted average assumptions; Term 3 years, Stock Price at the date of the grant $0.37, Strike Price $0.40, Volatility 121%, Dividend $0, Risk Free Interest Rate 0.32%.  The value of $284,914 has been recorded as a prepaid loan fee and is being amortized over the life of the loan.

In May of 2013, the Company issued 44,000 warrants for consulting services. The value of the warrants was determined using the Black Scholes.  The value of $11,610 has been recorded as a prepaid asset and was amortized over the life of the consulting agreement.
 
 
14


In connection with notes payable entered into in the first six months of 2014, the Company issued 500,000 warrants during the six months ended June 30, 2014. The value of the warrants was determined using the Black Scholes.  The value of $154,881 was recorded as a prepaid loan fee and was amortized over the life of the loan.

In connection with the convertible senior secured debentures, the Company issued 7,000,000 warrants during the six months ended June 30, 2014.  The value of the warrants was determined using the Black Scholes.  The value of $1,698,766 was recorded as a prepaid loan fee and is being amortized over the life of the loan.  As of June 30, 2014, the balance remaining in prepaid loan fees is $1,604,390.

The Company issued 560,000 warrants to the placement agents representing the Company in conjunction with the debenture transaction.  The warrants have an exercise price of $0.50, and have a 5 year expiration period.  The value of $185,874 was recorded as prepaid loan costs and are being amortized over eighteen months.

A summary of warrants as of June 30, 2014 is as follows:

    Number of Options     Weighted Average
Exercise Price of Options
    Number of Warrants     Weighted Average
Exercise Price of Warrants
 
Outstanding 1/01/2014
   
-
   
$
-
     
13,354,621
   
$
0.61
 
    Granted
   
-
     
-
     
8,060,000
     
0.59
 
    Cancelled
   
-
     
-
     
-
     
-
 
    Exercised
   
-
     
-
     
-
     
-
 
Outstanding 6/30/2014
   
-
   
$
-
     
21,414,621
   
$
0.60
 

Note 12 - Lease commitments and related party transactions
 
In December of 2011, the Company leased space in Scottsdale, Arizona for its main headquarters. The lease ran from January 2012 to March 2014 at a rate of $1,907 per month. The lease expired on June 30, 2014.  The Company subsequently entered a new lease on July 1, 2014 (See Note 18).
 
Rent expense was $14,724 and $12,005 for the six months ended June 30, 2014 and 2013, respectively.

During the six months ended June 30, 2014, as part of a new convertible debenture, the Company issued notes payable totaling $295,000 to related parties.  The maturity dates for these notes are November 30, 2015.  See Note 8 for further details.

See Note 15 for details on stock issued to employees and related party consultants per their employment or consulting contracts with the Company.
 
Note 13 - Fair Value Measurements

The Company adopted ASC Topic 820-10 to measure the fair value of certain of its financial assets that are required to be measured on a recurring basis.  The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or results of operations.  ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).  ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date.  A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability.  The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
 
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
 
Level 2 - Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
 
 
15

 
Level 3 - Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.  The Company had no level three assets or liabilities as of June 30, 2014 or 2013; therefore, a reconciliation of the changes during the year is not shown. 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of June 30, 2014:
 
   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Convertible senior secured debentures
   
-
   
$
5,395,610
     
-
   
$
5,395,610
 

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2013:
 
   
Level 1
   
Level 2
   
Level 3
   
Fair Value
 
Notes payable
   
-
   
$
1,123,933
     
-
   
$
1,123,933
 

Note 14 - Income Taxes
 
The Company follows ASC subtopic 740-10 for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
 
Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods.  Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate.  Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company’s operations for the six months ended June 30, 2014 and 2013 resulted in losses, thus no income taxes have been reflected in the accompanying statements of operations.
 
As of December 31, 2013, the Company had net operating loss carry-forwards that may be used to reduce future income taxes payable.  A valuation allowance has been recorded to reduce the net benefit recorded in the financial statements related to this deferred asset. The valuation allowance is deemed necessary as a result of the uncertainty associated with the ultimate realization of these deferred tax assets.

For financial reporting purposes, the Company has incurred a loss since inception to June 30, 2014.  Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at June 30, 2014. Further, management does not believe it has taken the position in the deductibility of its expenses that creates a more likely than not potential for future liability under the guidance of FIN 48.

Note 15 - Employment Contracts

During the year ended December 31, 2012, the Company entered into an amended and restated three-year employment contract with its Chief Operating Officer.  If the Company meets various goals and criteria during those three years, which have been set forth in the agreement, they will issue a prescribed amount of shares of its common stock to the Chief Operating Officer.  The Company reserved 450,000 shares of its common stock as required by the agreement.  As of June 30, 2014, in accordance with the terms of the agreement, the employee vested 352,500 shares of restricted stock for achieving milestones as set forth in the employment agreement.  

During the year ended December 31, 2012, the Company entered into a three-year contact with its Vice President of Customer Support.  If the Company meets various goals and criteria during those three years they will issue a prescribed amount of its common shares to the Vice President of Customer Support, all of which are prescribed in the agreement.  The Company reserved 288,000 shares of its common stock as required by the agreement.  As of June 30, 2014, in accordance with the terms of the agreement, the employee vested 91,200 shares of restricted stock for achieving milestones as set forth in the employment agreement.  
 
 
16


On March 4, 2013, the Company entered into an employment agreement with its CEO/president.  The CEO/president has the ability to earn shares of common stock over the term of the agreement.  The Company reserved 750,000 shares of its common stock as required by the agreement.  Per the agreement, the Company will issue 150,000 common shares on the last day of every fiscal quarter as compensation through that period.  As of June 30, 2014, all 750,000 common shares have vested.  In addition, the Chief Executive Officer and President shall earn an initial base salary of $250,000, which began on January 1, 2013.   

On March 4, 2013, the Company amended the agreement with its non-employee interim Chief Financial Officer (CFO).  The CFO has the ability to earn shares of common stock over the term of the agreement, which ran through March 31, 2014.  The Company reserved 416,250 shares of its common stock as required by the agreement.  Per the contract, the Company issued a prescribed amount of common shares on the last day of every fiscal quarter, beginning with the second quarter of 2013 and ending on March 31, 2014.  As of June 30, 2014, all 416,250 shares vested.  In addition, the Non-Employee Interim Chief Financial Officer will earn a base monthly retainer of $3,000, which began on January 1, 2013.  

On May 22, 2014, the Company entered into a second amended agreement with its Non-Employee Interim CFO.  The amendment extended the term of the Non-Employee Interim CFO agreement from April 1, 2014 through November 30, 2015.  Further, the agreement provides for compensation to the CFO of up to 935,000 shares of the Company’s common stock, which have been prescribed as part of this amendment.  As of June 30, 2014, 305,000 shares have vested, leaving 630,000 shares reserved as of June 30, 2014.  In addition, the Non-Employee Interim CFO will continue to earn a base monthly retainer of $3,000.
 
As of June 30, 2014, the Company has a total of 924,300 shares of its common stock reserved for the following employment contracts:
 
Employee or Position
 
Shares
 
Chief Operating Officer
   
97,500
 
Vice President of Customer Support
   
196,800
 
Chief Executive Officer
   
-
 
Non-Employee Interim Chief Financial Officer
   
630,000
 
Total
   
924,300
 

Note 16 - Public and Investor Relations Agreements

On March 1, 2013, the Company entered into a one-year agreement with Kraves PR to assist with public relations as the Company moves into scaled production and distribution.  The contract was executed on a project-by-project basis, beginning with media assistance provided at an industry conference in April 2013.  All monies paid under this contract were classified in sales, general and administrative expenses as a marketing expenditure.

On August 30, 2013, the Company entered an agreement with an investor relations firm for a period of twelve months, ending May 26, 2014, with the right to cancel services at the end of each subsequent three-month period.  The terms of the agreement called for the issuance of 142,000 common shares to be issued for the first three-months of service ending November 26, 2013, and then the equivalent number of shares required to compensate for the $50,000 per period thereafter. In April of 2014 the agreement was terminated.

Note 17 - Interest expense

The company’s interest expense for the six months ended consists of the following:

Description
 
Amount
 
Loan fees
   
342,386
 
Notes payable, related and unrelated
   
63,677
 
Convertible senior secured debentures
   
146,705
 
Bank line of credit
   
15,177
 
Total
   
567,945
 

Note 18 - Subsequent events

On July 1, 2014, the Company entered into a new office lease agreement.  The lease is for forty months, commencing on July 1, 2014 and ending on October 31, 2017.  The lease requires monthly payments of $5,988.

 
17

 
FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

 
·  
deterioration in general or global economic, market and political conditions;
 
·  
our ability to diversify our operations;
 
·  
actions and initiatives taken by both current and potential competitors;
 
·  
supply chain disruptions for components used in our product;
 
·  
manufacturers inability to deliver components or products on time;
 
·  
inability to raise additional financing for working capital;
 
·  
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;
 
·  
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
 
·  
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;
 
our ability to efficiently manage our debt obligations;
 
·  
inability to efficiently manage our operations;
 
·  
inability to achieve future operating results;
 
·  
the unavailability of funds for capital expenditures;
 
·  
our ability to recruit and hire key employees;
 
·  
the inability of management to effectively implement our strategies and business plans; and
 
·  
the other risks and uncertainties detailed in this report.

In this form 10-Q references to “Guardian 8”, “G8”, “the Company”, “we,” “us,” “our” and similar terms refer to Guardian 8 Holdings and its wholly owned operating subsidiary, Guardian 8 Corporation.
 
 
 
18

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

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this report.
 
Overview
 
We were incorporated in Nevada on June 8, 2009 as Guardian 6 Corporation.  In August of 2009, we changed our name to Guardian 8 Corporation.  Our principle offices are located in Scottsdale, Arizona.  We were a development stage company from our inception through June 30, 2013, engaged in the design and introduction of a new category of personal security devices, Enhanced Non-Lethal Devices (ENL).  Our product, the Pro V2 incorporates a layered defensive approach to help security professionals and consumers protect themselves against personal attacks, while capturing critical images and audio recordings to defend against personal liability.
 
Effective November 30, 2010 we merged with Global Risk Management & Investigative Solutions (“Global Risk”), a public company, with its common stock registered with the United States Securities and Exchange Commission.  We merged into a newly formed wholly owned subsidiary of Global Risk, with Guardian 8 Corporation being the surviving corporation.  Post-merger, Global Risk changed its name to Guardian 8 Holdings.
 
For the six months ended June 30, 2014 and 2013, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.  Beginning July 1, 2013 as product revenues became sustainable, the Company transitioned from reporting as a development stage Entity to an operating entity.  As a result, the financial statements included in this filing have been presented accordingly.
 
Since inception, our team of engineers and executives has been focused on developing and patenting our first commercial product, (the Guardian 8 Pro V2) as well as the key functions that create market differentiation.  We have also been formalizing marketing and manufacturing strategies as well as building customer distribution channels in preparation for our first product launch into the Private Security Market.  

During the year ended December 31, 2013, the Company received its first production units assembled by its contract manufacturer and generated initial revenue totaling $43,619. 

 In 2013, key personnel were hired in the areas of Sales and Operations.  These hires include an experienced Vice President of Customer Service, a lead manufacturing engineer, and a Sales Manager.  We intend to expand our sales and marketing staff, as well as administrative support during the next few months enabling us to reach key customers and shorten the sales cycles.

During the first six months of 2014, the Company expanded its sales team to include regional representatives, as well as non-employee sales and training consultants.  These individuals were trained, and are now working to develop relationships with the potential leads identified in the Company’s database.  enduring the second quarter of 2014, the Company added one additional sales rep who will focus in the Atlantic region of the United States.

The Company also added William Clough to its Board of Directors, effective April 9, 2014.

During the first six months of 2014, the Company also initiated development efforts on the new consumer product, which is targeted for release in 2015.  During this period, the Company expensed $37,070 for these development efforts.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with our Board of Directors, we have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require management’s most difficult, subjective judgments.
  
 
19


Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Net Loss Per Share

            We adopted ASC 260, “Earnings Per Share” that requires the reporting of both basic and diluted earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with ASC 260, any anti-dilutive effects on net income (loss) per share are excluded.
 
Going Concern

Our financial statements are prepared using generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to locate sources of capital, and attain future profitable operations. Our management is currently initiating their business plan. The accompanying financial statements do not include any adjustments that might be necessary should we be unable to continue as a going concern.
 
Revenue Recognition
 
It is the Company’s policy that revenues are recognized in accordance with ASC 605-10, “Revenue Recognition”.  The company therefore recognizes revenue from sales of product upon delivery to its customers where the amount is fixed or determinable, and collectability is probable. Cash payments received in advance are recorded as deferred revenue.   Extended warranties are recorded as deferred revenue and amortized according to the number of months included in service.  The Company recognized $19,012 and $3,124 in revenues for the six months ended June 30, 2014 and 2013, respectively.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2014 and 2013. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable and amounts due to related party.  Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Income Taxes

The Company follows ASC subtopic 740-10, “Accounting for Income Taxes” for recording the provision for income taxes.  ASC 740-10 requires the use of the asset and liability method of accounting for income taxes.  Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled.  Deferred income tax expenses or benefits are based on the changes in the asset or liability each period.  If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized.  Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.
 
Principles of consolidation
 
For the six months ended June 30, 2014 and 2013, the Company was consolidated with its wholly-owned subsidiary, Guardian 8 Corporation.  All material intercompany transactions and accounts have been eliminated.
 
 
20


Cash and cash equivalents

Cash and cash equivalents include all cash balances in non-interest bearing accounts and money-market accounts. The Company places its temporary cash investments with quality financial institutions.  At times such investments may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limit. The Company does not believe it is exposed to any significant credit risk on cash and cash equivalents. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents.  As of June 30, 2014 and December 31, 2013, there were cash equivalents of $3,046,445 and $305,649 respectively. 

Inventory

During the six months ended June 30, 2014, the Company accepted the delivery of 3,192 units of its ProV2 from its contract manufacturer.  These deliveries were part of the Company’s initial release of 10,000 production units.  The terms for the purchase of the product required 50% prepayment at the time of order, and the remaining 50% to be paid prior to shipment to the United States.  In addition, as of June 30, 2014, the Company had prepaid its contract manufacturer approximately $287,278 toward the purchase of these units, and had 2,000 units that were in transit as of June 30, 2014, and were subsequently received.  We believe this inventory will be adequate to fulfill orders for the next twelve months.
 
 Research and development costs

The Company expenses all costs of research and development as incurred. There are research and development costs included in other general and administrative expenses of $107,248 and $249,529 for the six months ended June 30, 2014 and 2013 respectively. The Company intends to continue investing in the development of future products, including a new consumer product anticipated for market launch in 2015.

Property and equipment

Property and equipment are stated at cost.  Major improvements are charged to the asset accounts while replacements, maintenance and repairs which do not improve or extend the lives of respective assets are expensed.

The Company depreciates its property and equipment for the financial reporting purposes using the straight-line method based on the following useful lives of the assets: 
 
Equipment
2 years
Tooling
10 years
Computer equipment
3 years
Leasehold improvements
Life of lease
Furniture and fixtures
5 years
Warehouse equipment
10 years

Recent Developments
 
We completed the initial design of the first product under development in 2011. We tested these prototypes through a number of different venues and collected feedback and input on suggested design changes. As a result, during the 2012 and 2013 fiscal years, we incorporated significant upgrades and modified the initial design to improve reliability, durability and efficiencies.   An initial run of 120 units of the new designed Pro V2 was produced in the second quarter enabling our Engineers to complete a comprehensive testing protocol to confirm tooling and the assembly processes performed by our contract manufacturer, and to enable our Sales Team to send initial units for customer review.   In late June of 2013, the product was released by our Engineers for production and customer sales.

In March of 2012 we filed with the Depository Trust Company (DTC) for electronic clearing of our common stock, with the assistance of C. K. Cooper & Company and Legent Clearing. We received DTC approval for electronic clearing on May 7, 2012.  Our board of directors intends to file a registration statement on Form S-1 to register 100% of the shares held by stockholders of record sometime in 2014. This is intended to make it easier and more efficient for our stockholders to trade our shares and brokerage firms to accept the shares for deposit.
 
 
21

 
On April 20, 2012, we appointed Kathleen Hanrahan, a current member of our board of directors, to serve as our interim chief financial officer. Ms. Hanrahan has extended the term of her agreement until such time as the Company finds a suitable replacement or, by the end of 2015. 
  
On February 7, 2013, we filed a Form 8-A to register our common stock under Section 12(g) of the Exchange Act.  Before this filing we were a voluntarily reporter under the Act and before November of 2010 were considered a “shell” company.  Therefore, our stockholders have been unable to rely on Rule 144 of the Act for the public sale of our securities.  Our stockholders will be able to rely on Rule 144 of the Act following the 90th day from filing of the Form 8-A described above.

During the year ended December 31, 2013, our CEO/president, C. Stephen Cochennet, along with two directors exchanged existing term notes along with accrued interest totaling $648,933 to three new unsecured notes, bearing interest at a rate of 12% per annum, which include a three-year warrant for every $1.00 of principal amount of each note, exercisable at $0.40 per share. All of the notes and related accrued interest were paid as of June 30, 2014.

We issued four additional notes payable to related parties, including our CEO, during the month of September 2013, totaling $375,000.  These notes were unsecured, all bearing interest at a rate of 12% per annum, and include a three-year warrant for every $1.00 of principal amount of each note, exercisable at $0.40 per share.  All of the notes payable and related accrued interest were paid as of June 30, 2014.

Also during the year ended December 31, 2013, we issued a note payable to a non-related party in the amount of $100,000.  This note was unsecured, bearing interest at a rate of 12% per annum, and included a three-year warrant for 100,000 shares of common stock, exercisable at $0.40 per share.  This note and related accrued interest were paid as of June 30, 2014.

The warrants issued with the note were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amount of $284,914.  The loan costs are being amortized over the life of the notes, which expire on April 30, 2014.  As of June 30, 2014, all loan costs were fully amortized.

During the year ended December 31, 2013, we agreed to sell 5,173,750 shares of common stock for $2,069,500, less private placement fees of $312,515.  We also issued 1,143,700 shares of common stock for compensation in the amount of $556,032, 1,039,819 shares of common stock in exchange for services in the amount of $421,016, 360,000 shares of common stock in exchange for $219,960, and had warrants to purchase 312,500 shares of common stock converted through the payment of $51,875 in cash, and a reduction of $35,000 in a related party note payable.
 
We entered into four employment and or consulting contracts, in which employees and consultants of the Company receive vested shares either at set times, or if the Company meets certain criteria in the respective time periods of their contract.  As of December 31, 2013, 1,338,200 common shares vested per these contracts, for a total expense of $640,637.  A total of 548,550 shares were owed but not issued as of December 31, 2013.

During the year ended December 31, 2013, revenue increased over the prior period, as additional production units became available for sale.  We also attended the ASIS conference in September 2013 where we initiated our training program and accepted new test and evaluation commitments from industry leaders in the Security market.  These trial units have not been recognized as revenue, but will be recorded as payment is received, or a purchase order documenting collectability is obtained.

On September 13, 2013, we received a Research Report (the “Report”) prepared by Steven Ralston, CFA (the “Analyst”) of Zacks Small-Cap Research. We assisted the Analyst in gathering information for the Report, however, the understanding between us and the Analyst calls for the Analyst to maintain full discretion to report his own opinion about our investment prospects and its desirability for both individual and institutional investors.

In May of 2013, we entered into a service agreement with Zacks Investment Research, Inc. for the distribution of the Zacks Small Cap Research Report and the use of Zacks Advanced Targeting Software, whereby Zacks has licensed us to use the web based software targeting programs owned by Zacks. We agreed to pay Zacks a fee of $18,000 over the twelve month term of the service agreement. Zacks Advanced Targeting Software is used for targeting Institutional Investors / Buy & Sell Side Contact Directories and accessing shareholder data and peer group holdings analysis. 
 
 
22


On January 17, 2014, the Company entered into a revolving line of credit agreement with Cornerstone Bank, N.A.  The agreement provided for an aggregate of up to $700,000 (which was subsequently increased to $900,000 in April of 2014) at any time outstanding pursuant to a revolving line of credit and was to mature on January 16, 2015.  The agreement was secured by inventory, work in process, accounts receivable, letter of credit, and was personally guaranteed by the Company’s Chief Executive Officer/President.  Borrowings carried an interest rate of 6% per annum, with monthly interest payments to be paid by the Company.  The line of credit was fully paid as of June 30, 2014.

As part of the agreement, the Company entered into a Letter of Credit Rights Control Agreement with F&M Bank & Trust Company.  Per this agreement, if the Company defaulted on the line of credit, F&M Bank & Trust Company would then be held liable from Cornerstone Bank, N.A. for the payment of the line of credit.  In addition, the Company would then owe the amount disbursed to F&M Bank & Trust Company.  This agreement ceased with the satisfactory payment of the debt outstanding.

During the three months ended March 31, 2014, the Company received three notes payable from related parties in the amount of $475,000, and one note payable from an unrelated party in the amount of $25,000.  All of the notes were unsecured, bearing interest at 12% per annum, and were due on July 15, 2014.  All notes also included a three-year warrant for each of $1.00 of principal included in the note.  All of the notes and related accrued interest were paid in full as of June 30, 2014.
 
During the six months ended June 30, 2014, the Company issued 150,000 shares of its common stock, with an aggregate value of $76,500 for compensation.  The Company also issued 892,289 shares of its common stock, with an aggregate value of $409,010 for services.

During the six months ended June 30, 2014, the Company issued $7,000,000 of convertible senior secured debentures.  These debentures are all due on November 30, 2015, bear interest at a rate of 8%, and include one five-year warrant with a value of $0.60 per share for each dollar issued.

As part of these debentures, the company also incurred loan costs of $809,939.  The loan costs are being amortized over an 18-month period ending November 30, 2015.

The Company issued the following convertible Senior Secured Debentures:

     
1st Closing
 
2nd Closing
           
1.
Date of issuance
 
May 27, 2014
 
June 2, 2014
           
2.
Gross amount of debentures
 
$5,250,000
 
$1,750,000
           
3.
Net cash received:
       
 
  Gross amount of debentures
 
$5,250,000
 
$1,750,000
 
  Less
       
 
  Repay Cornerstone bank loan and interest
 
(901,510)
 
-
 
  Conversion of short-term debt
 
0
 
(195,000)
 
  Commissions and fees
 
(439,979)
 
(113,715)
 
  Attorney fees
 
(55,000)
 
(5,370)
 
  Other fees
 
(5,000)
 
(5,000)
 
  Amount held in escrow by third party
 
(7,000)
 
-
 
Net cash received
 
$3,841,511
 
$1,430,915
           
4.
Term
 
18 Months
Due November 30, 2015
 
18 Months
Due November 30, 2015
           
5.
Interest rate
 
8% from May 27, 2014
 
8% from June 2, 2014
           
6.
Interest payment dates
 
Quarterly
Beginning May 1, 2015
 
Quarterly
Beginning May 1, 2015
           
7.
Class C warrants to debenture holders:
       
 
  Number issued
 
5,250,000
 
1,750,000
 
  Price per share
 
$0.60
 
$0.60
 
  Term
 
5 years
 
5 years
 
  See condition number 2
       
           
8.
Warrants to placement agents
       
 
  Number issued
 
420,000
 
140,000
 
  Price per share
 
$0.50
 
$0.50
 
  Term
 
5 years
 
5 years
           
9.
Number of investors
 
10
 
17

 
23


The following conditions/terms apply to both closings:

1.     Use of funds

The funds will be used for:

Repay short-term debt
Repay bank line of credit and interest
Sales and marketing expenses
Purchase additional inventory
International sales channel development
Research and development of a consumer ENL device
Purchase of fixed assets
General corporate purposes

2.     Conversion Rights

The debentures may be converted by each buyer commencing on the 91st day following closing and through maturity, either in whole or in part, up to the full principal amount and accrued interest thereunder into shares of common stock at $0.50 per share.

The Company may force conversion of the debentures into shares of common stock at $0.50 per share, either in whole or in part, if the closing sale price of shares of common stock during any ten consecutive trading days has been at or above $1.00 per share.

In the event the average closing price of the common stock for the ten trading days immediately preceding, but not including, the maturity date of the debentures is equal to or greater than $0.80, then on the maturity date, the buyers must convert all remaining principal due under the debentures.

The debentures contain provisions limiting the conversion to the extent that, as a result of such conversion, each buyer would beneficially own more than 4.99% (subject to waiver) in the aggregate of the issued and outstanding shares of the company’s common stock, calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the debentures.

In addition, upon conversion of the debentures, the number of Class C warrants issued to each buyer shall automatically double.

Right to Redeem Debenture. Beginning on the 91st day following the closing and so long as a registration statement covering all the registrable securities is effective, the company has the option of redeeming the principal, in whole or in part by paying the amount equal to 100% of the principal, together with accrued and unpaid interest by giving ten business days prior notice of redemption to the buyers.

Security of Debentures. The debentures are guaranteed, pursuant to “Secured Guaranty” and “Pledge and Security Agreement by Guardian 8 Corporation and secured interest in all of the assets of the company and Guardian 8 Corporation.

Registration Rights. The Company has agreed to file a “resale” registration statement with the Securities and Exchange Commission covering all shares of common stock underlying the debentures and Class C warrants within 90 days of the final closing, on or before August 31, 2014, and to maintain the effectiveness of the registration statement for five years, or until all securities have been sold or are otherwise able to be sold pursuant to Rule 144.  The Registrant has agreed to use its reasonable best efforts to have the registration statement declared effective within 120 days of the filing date. The Company is obligated to pay to investors liquidated damages equal to 1.0% per month in cash for every thirty day period up to a maximum of six percent, (i) that the registration statement has not been filed after the filing date, (ii) following the effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the financing agreements.
 
 
24

 
3.     Events of Default.

Failure of Registrant to timely file the registration statements and have same declared effectively by the SEC within the time
 
  ·        periods set forth in the Agreement;

  ·       The suspension of the company’s common stock from the OTC:QB for five consecutive days or for more than an aggregate of ten days in 365 days;
 
  ·        Failure to pay principal and interest when due;
 
  ·        An uncured breach of any material covenant, term or condition in any of the Debentures or related agreements;
 
  ·        A breach of any material representation or warranty made in any of the Debentures or related agreements: and
 
  ·        Any form of bankruptcy or insolvency proceeding is instituted against the companies.
 
4.     Valuation of Warrants

The warrants issued with the debentures were valued using the Black-Scholes option pricing model and bifurcated out of the note proceeds and recorded as additional paid in capital in the amounts of $1,274,075 for the first closing and $424,691 for the second closing. A discount on the debenture was recorded in the same amount and is being amortized into interest expense over the eighteen month life of the debenture using the interest method.

As of June 30, 2014, $94,376 was amortized into interest expense and the remaining discounts were $1,604,390.

5.       Debenture balances as of June 30, 2014
 
   
1st Closing
   
2nd Closing
   
Total
 
                   
   Gross debentures
  $ 5,250,000     $ 1,750,000     $ 7,000,000  
   Less discount
    1,203,293       401,097       1,604,390  
                         
   Net Debentures
  $ 4,046,707     $ 1,348,903     $ 5,395,610  
 
 
25


Results of Operations for Guardian 8 Corporation for the six months ended June 30, 2014 and 2013.
 
   
Six Months Ended June 30, 2014
   
Six Months Ended June 30, 2013
   
Increase/ (Decrease)
 
                   
Revenues
 
$
19,012
   
$
3,124
   
$
15,888
 
Cost of sales
   
14,104
     
976
     
13,128
 
Gross Profit
   
4,908
     
2,148
     
2,760
 
Operating Expenses
   
1,905,479
     
1,262,644
     
642,835
 
                         
Net (loss) from operations
   
(1,900,571
)
   
(1,260,496
)
   
(640,075
)
Interest income
   
737
     
-
     
737
 
Interest expense
   
(567,945
)
   
(21,863
)
   
 (546,082
)
                         
Net (loss)
 
$
(2,467,779
)
 
$
(1,282,359
)
 
$
(1,185,420
)
                         
Net (loss) per share
 
$
(0.06
)
 
$
(0.02
)
 
$
(0.02
Weighted average shares outstanding
   
  40,621,946
     
  32,810,135
         
 
During the six months ended June 30, 2014 and 2013, we had revenues of $19,012 and $3,124, and corresponding costs of sales of $14,104 and $976, respectively associated with shipments of our commercial products.  

We generated net losses of $2,467,779 and $1,282,359 for the six months ended June 30, 2014 and 2013, respectively. Our losses for these periods included research and development costs related to our ProV2 and new consumer device of $107,248 and $249,529, as well as general and administrative expenses of $1,798,231 and $1,013,115 for the same six month periods.
 
We anticipate continued losses from operations until such time as we generate sufficient revenues through the sale of our device to cover both our cost of manufacturing, and sales, general and administrative expenditures.
 
Satisfaction of our cash obligations for the next 12 months.
 
Since inception, we have financed cash flow requirements through the issuance of common stock for cash and services, as well as both convertible and non-convertible term notes, and bank financing. From June of 2009 through June 30, 2014, we raised $3,024,485 through the sale of our common stock, $113,625 from the exercise of 371,250 warrants in conjunction with notes payable, $900,000 from a revolving bank line of credit agreement, and an additional $2,328,433 through the issuance of notes payable, net of $10,000 of principle payments, and the exercise of warrants through a $35,000 reduction in notes payable.  We also issued convertible senior secured debentures for a total of $7,000,000.  As of June 30, 2014, our cash balance was $3,046,445. Our plan for satisfying our cash requirements for the next twelve months is through the funds from additional offerings of our common stock, third party financings, and revenue generated through the sales of our products and training services.  We may not generate sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to ensure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.
 
As we continue to expand operational activities, we may continue to experience net negative cash flows from operations, pending receipt of revenues from our product sales, and will be required to obtain additional financing to fund operations through common stock offerings and debt borrowings, giving consideration to loans and working diligently to move sales ahead to the extent necessary to provide working capital.
 
 
26

 
We anticipate incurring operating losses over the next twelve months as we expand distribution, and invest in the development of our new consumer product. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and continue to attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
 
As a result of our cash requirements and our lack of significant revenues, we anticipate continuing to issue common stock in exchange for loans and/or equity financing, which may have a substantial dilutive impact on our existing stockholders.

Summary of any product research and development that we will perform for the term of our plan of operation.
 
We expense all costs of research and development as incurred. There are research and development costs included in other general and administrative expenses of $107,248 and $249,529 for the six months ended June 30, 2014 and 2013, respectively, which included approximately $37,100 toward our new consumer device. We anticipate expending up to $500,000 on additional significant product research and development for our consumer device, the next program pending on our product road map.
 
In addition to investments in research and development expenditures, we have also retained the services of a patent attorney to assist us with the filing and protection of key utility applications, as well as future technologies to be incorporated in next generation products for the commercial security and consumer markets.  Costs associated with the filing of intellectual property has been capitalized and will be amortized over the 20-year life of the patents when issued.
 
Changes in the number of employees.
 
We have ten full-time employees, C. Stephen Cochennet, Chief Executive Officer, Paul Hughes, Chief Operations Officer, Jose Rojas, Vice President of Customer Support, our lead manufacturing engineer, four regional sales managers, a customer service representative, and one administrative support person for Guardian 8 Corporation. We utilize the services of several contract personnel, engineers and other professionals on an as needed basis. We are currently managed by C. Stephen Cochennet, Kathleen Hanrahan and Paul Hughes with the assistance of our board of directors. We look to Mr. Cochennet, Ms. Hanrahan and Mr. Hughes for entrepreneurial, organizational and management skills. We plan to continue to use consultants, legal and patent attorneys, design and mechanical engineers, engineers and accountants as necessary. We intend to continue hiring sales and operations employees in 2014 to facilitate go to market activities. A portion of any employee compensation likely would include direct stock grants, or the right to acquire common stock in the company, which would dilute the ownership interest of holders of existing shares of our common stock.
 
Expected purchase or sale of plant and significant equipment.
 
We anticipate investing significant resources in the purchase of a plant and equipment in the near future; as we will begin to scale production operations throughout 2014.
 
 Liquidity and Capital Resources
 
Working capital is summarized and compared as follows:
 
   
June 30, 2014
   
June 30, 2013
 
             
         Current assets
 
$
4,880,242
   
$
832,028
 
         Current liabilities
   
 251,175
     
 1,409,482
 
     Working capital (deficit)
 
$
4,629,067
   
$
(577,454
 
 
 
27

 
Changes in cash flows are summarized as follows:
 
We had a net loss of $2,467,779 for the six months ended June 30, 2014.  This loss was offset by non-cash items such as stock issued for services of $409,010, stock issued for compensation of $76,500, depreciation and amortization of $43,143, and the amortization of discount on notes payable of $249,257.  We had cash used by the increase in accounts receivable of $3,499, other receivables of $7,000, prepaid loan costs of $436,559, deposits on inventory of $149,016, the increase in inventory of $834,915, increase in rent security deposits of $8,750, increase in utility deposit of $4,580, the decrease in accounts payable and accrued expenses of $45,704, and the decrease in deferred revenue of $619.  We had cash provided due to the decrease in prepaid expenses of $84,229, increase in accrued interest of $7,705, and the increase in accrued payroll taxes of $4,244.
 
We had cash used by investing activities of $50,938 for the purchase of property and equipment for the six months ended June 30, 2014.
 
We had cash provided by financing activities of $5,876,067 for the six months ended June 30, 2014.  This included proceeds from notes payable to related parties of $475,000 proceeds from notes payable to unrelated parties of $25,000, proceeds from a line of credit with a bank of $900,000, and proceeds from the issuance of convertible senior secured debentures of $7,000,000.  These were offset by a repayment of notes payable to related parties of $1,498,933, repayment of notes payable to unrelated parties of $125,000, and the repayment of a line of credit with a bank of $900,000.
 
We had a net loss of $1,282,359 for the six months ended June 30, 2013.  This included non-cash items such as stock issued for services of $67,500, stock issued for compensation of $205,459, and depreciation and amortization of $17,398.  We had cash used by an increase in prepaid expenses of $76,635, an increase in deposits on inventory of $43,136 and an increase in inventory of $12,839.  We had cash provided due to the increase in accounts payable and accrued expenses of $154,566, an increase in accrued interest of $23,901 and an increase in accrued payroll expenses of $151,440.
 
We had cash used by investing activities of $146,800 for the six months ended June 30, 2013, due to the purchase of property and equipment, and the Company’s website.
 
We had cash provided by financing activities of $969,783 for the six months ended June 30, 2014.  This included proceeds from the sale of common stock of $719,783 and proceeds from notes payable to related parties of $250,000.

As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of revenues from product sales. Additionally we anticipate obtaining additional financing to fund operations through common stock offerings, repay the current debt obligations associated with the unconverted debentures, and to the extent available, obtain additional financing through either convertible or non-convertible notes payable, necessary to augment our working capital. We are also evaluating additional sources of inventory financing that may be available once orders for our product are received.

We anticipate that we will incur operating losses in the next twelve months.  Our lack of operating history makes predictions of future operating results difficult to ascertain.  Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets.  Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth.  To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continually develop and upgrade our product, respond to competitive developments, and attract, retain and motivate qualified personnel.  There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.  
 
 
28

 
Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 4. Controls and Procedures.
 
Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, C. Stephen Cochennet and Kathleen Hanrahan, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on the evaluation, Mr. Cochennet and Ms. Hanrahan concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be included in our periodic SEC filings.

Changes in Internal Control Over Financial Reporting
 
There has been no change in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
Internal control systems, no matter how well designed and operated, have inherent limitations.  Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented.  Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
 
 
29

 
PART II--OTHER INFORMATION

Item 1. Legal Proceedings.

We may become involved in various routine legal proceedings incidental to our business. However, to our knowledge as of the date of this report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject.
 
Item 1A. Risk Factors.

Our significant business risks are described in Item 1A to Form 10-K for the year ended December 31, 2013 to which reference is made herein.

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

On April 9, 2014, we authorized and subsequently issued 60,000 shares to William Clough, a newly appointed director, as an initial engagement fee.

On April 29, 2014, we cancelled 142,000 shares issued to a consultant in error.

On May 27, 2014, we authorized and subsequently issued 200,000 shares of common stock to our Interim CFO (Kathleen Hanrahan) pursuant to the terms of the amendment to her engagement agreement.

On May 27, 2014, pursuant to the Senior Secured Debentures and the Financing Agreements related thereto, we, concurrent with first closing, issued 5,250,000 Class C warrants to purchase shares of common stock for five years at $0.60 per share to ten accredited investors. Upon conversion or maturity of the Debentures, the number of Class C warrants held by each Buyer shall automatically double. Merriman Capital, Inc. acted as sole placement agent in connection with the sale of the Debentures, in consideration for which Merriman received a cash commission of $420,000, fees and expenses of $19,979.23 and a warrant to purchase up to 420,000 shares of the Company’s common stock at an exercise price of $0.50 per share.

On June 2, 2014, pursuant to the Senior Secured Debentures and the Financing Agreements related thereto, we, concurrent with second closing, issued 1,750,000 Class C warrants to purchase shares of common stock for five years at $0.60 per share to seventeen accredited investors, which included seven of our board members. Further, upon conversion or maturity of the Debentures, the number of Class C warrants held by each Buyer shall automatically double. Merriman Capital, Inc. and Noble Financial Capital Markets acted as placement agents in connection with the sale of the Debentures, in consideration for which Merriman and Noble received cash commissions of $107,100 and $9,300, respectively. Further, Merriman and Noble were issued five year warrants to purchase up to 130,700 and 9,300 shares, respectively, of the Company’s common stock at an exercise price of $0.50 per share

On June 30, 2014, 105,000 shares of common stock vested pursuant to the terms of the agreement with our Interim CFO (Kathleen Hanrahan). As of the date of this report, the shares have not been issued.

All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities, and may not be offered or sold absent registration or pursuant to an exemption therefrom.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended June 30, 2014.
 
Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

 
30


Item 5. Other Information.

Effective July 1, 2014, we relocated our principal executive office to 7432 E. Tierra Buena Lane, Suite 102, Scottsdale, Arizona  85260. Our new lease is for forty months, commencing on July 1, 2014 and ending on October 31, 2017.  The lease requires monthly payments of $5,988.

Press Releases

On April 3, 2014, we issued a press release disclosing the deployment of our device by a hospital security team. A copy of the press release was attached to the Form 10-Q filed on May 15, 2014 for the quarter ended March 31, 2014 as Exhibit 99.22.

On April 23, 2014, we issued a press release disclosing the initial device order from a globally recognized family theme park. A copy of the press release was attached to the Form 10-Q filed on May 15, 2014 for the quarter ended March 31, 2014 as Exhibit 99.24.

On June 4, 2014, we issued a press release disclosing the $7 million convertible debenture financing. A copy of the press release is attached hereto as Exhibit 99.25.

On June 17, 2014, we issued a press release disclosing the signing of an agreement with Platinum Event Services, Inc. A copy of the press release is attached hereto as Exhibit 99.26.

Item 6. Exhibits.
 
Exhibit No.
 
Description
2.1
 
Agreement and Plan of Merger among Global Risk Management & Investigative Solutions, G8 Acquisition Subsidiary, Inc. and Guardian 8 Corporation effective November 30, 2010 (incorporated by reference to Exhibit 2.1 to the Form 10-Q filed on August 6, 2010)
2.2
 
Articles of Merger (incorporated by reference to Exhibit 2.1 to the Form 8-K filed on December 21, 2010)
3.1
 
Amended and Restated Articles of Incorporation, as currently in effect (incorporated by reference to Exhibit 3.1 to Form 10-K filed on March 23, 2011)
3.2
 
Bylaws, as currently in effect (incorporated by reference to Exhibit 3.1(ii) to Form 8-K filed on April 30, 2012)
3.3
 
Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on December 21, 2010)
4.1
 
Article VI of Amended and Restated Articles of Incorporation (included in Exhibit 3.1)
4.2
 
Article II and Article VIII of Bylaws (incorporated by reference to Exhibit 3(ii)(a) to Form S-1 filed on May 16, 2008)
10.1
 
Convertible Term Note and Warrant issued to C. Stephen Cochennet dated October 13, 2011 (incorporated by reference to Exhibit 10.1 to the Form 10-Q filed on November 14, 2011)
10.2†
 
Hughes Employment Agreement effective December 1, 2011 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on December 9, 2011)
10.3†
 
Hanrahan Engagement Agreement effective April 30, 2012 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on April 30, 2012)
10.4
 
$100,000 Term Note issued to C. Stephen Cochennet dated November 13, 2012 (incorporated by reference to Exhibit 10.4 to the Form 10-Q filed on November 19, 2012)
10.5
 
$50,000 Term Note issued to C. Stephen Cochennet dated December 10, 2012 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 8, 2013)
10.6
 
$50,000 Term Note issued to C. Stephen Cochennet dated December 28, 2012 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on January 8, 2013)
10.7
 
$50,000 Term Note issued to C. Stephen Cochennet dated January 24, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on January 31, 2013)
10.8
 
$100,000 Term Note issued to C. Stephen Cochennet dated March 6, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on March 18, 2013)
10.9
 
$50,000 Term Note issued to James G. Miller dated March 6, 2013 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on March 18, 2013)
10.10 †
 
Cochennet Employment Agreement dated March 4, 2013 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on March 18, 2013)
10.11 †
 
Hanrahan Amendment No. 1 to Interim CFO Agreement dated March 4, 2013 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on March 18, 2013)
 
 
31

 
10.12 †
 
Hughes Amended and Restated Employment Agreement with Guardian 8 Corporation effective October 1, 2012 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on March 18, 2013)
10.13 †
 
Rojas Employment Agreement with Guardian 8 Corporation effective October 1, 2012 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on March 18, 2013)
10.14 †
 
Silva Employment Agreement with Guardian 8 Corporation effective March 11, 2013 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on March 18, 2013)
10.15
 
$50,000 Term Note issued to Corey Lambrecht dated March 26, 2013 (incorporated by reference to Exhibit 10.15 to the Form 10-Q filed on May 15, 2013)
10.16
 
Extension No. 1 to $100,000 Term Note issued to C. Stephen Cochennet dated November 13, 2012 (incorporated by reference to Exhibit 10.16 to the Form 10-Q filed on May 15, 2013)
10.17
 
Extension No. 2 to $100,000 Term Note issued to C. Stephen Cochennet dated November 13, 2012 (incorporated by reference to Exhibit 10.17 to the Form 10-Q filed on May 15, 2013)
10.18
 
Extension No. 1 to $50,000 Term Note issued to C. Stephen Cochennet dated December 10, 2012 (incorporated by reference to Exhibit 10.18 to the Form 10-Q filed on May 15, 2013)
10.19
 
Extension No. 2 to $50,000 Term Note issued to C. Stephen Cochennet dated December 10, 2012(incorporated by reference to Exhibit 10.19 to the Form 10-Q filed on May 15, 2013)
10.20
 
Extension No. 1 to $50,000 Term Note issued to C. Stephen Cochennet dated December 28, 2012 (incorporated by reference to Exhibit 10.20 to the Form 10-Q filed on May 15, 2013)
10.21
 
Extension No. 1 to $50,000 Term Note issued to C. Stephen Cochennet dated January 24, 2013 (incorporated by reference to Exhibit 10.21 to the Form 10-Q filed on May 15, 2013)
10.22
 
Extension No. 2 to $50,000 Term Note issued to C. Stephen Cochennet dated May 27, 2013 (incorporated by reference to Exhibit 10.22 to the Form 10-Q filed on August 14, 2013)
10.23
 
Extension No. 1 to $50,000 Term Note issued to James Miller dated June 4, 2013 (incorporated by reference to Exhibit 10.23 to the Form 10-Q filed on August 14, 2013)
10.24
 
Extension No. 1 to $100,000 Term Note issued to C. Stephen Cochennet dated June 4, 2013 (incorporated by reference to Exhibit 10.24 to the Form 10-Q filed on August 14, 2013)
10.25
 
Extension No. 3 to $50,000 Term Note issued to C. Stephen Cochennet dated June 12, 2013 (incorporated by reference to Exhibit 10.25 to the Form 10-Q filed on August 14, 2013)
10.26
 
Extension No. 2 to $50,000 Term Note issued to C. Stephen Cochennet dated June 23, 2013 (incorporated by reference to Exhibit 10.26 to the Form 10-Q filed on August 14, 2013)
10.27
 
Extension No. 1 to $50,000 Term Note issued to Corey Lambrecht dated June 24, 2013 (incorporated by reference to Exhibit 10.27 to the Form 10-Q filed on August 14, 2013)
10.28
 
Extension No. 3 to $50,000 Term Note issued to C. Stephen Cochennet dated July 9, 2013 (incorporated by reference to Exhibit 10.28 to the Form 10-Q filed on August 14, 2013)
10.29
 
$50,000 Term Note issued to C. Stephen Cochennet dated August 12, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on August 21, 2013)
10.30
 
$100,000 Term Note issued to C. Stephen Cochennet dated August 26, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on September 5, 2013)
10.31
 
Form of 12% New Note and Warrant (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on October 4, 2013)
10.32
 
New Note issued to C. Stephen Cochennet (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on October 4, 2013)
10.33
 
New Note issued to James G. Miller (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on October 4, 2013)
10.34
 
New Note issued to Corey Lambrecht (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on October 4, 2013)
10.35
 
New Note issued to Jim Nolton (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on October 4, 2013)
10.36
 
$50,000 New Note issued to C. Stephen Cochennet (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on October 4, 2013)
10.37
 
$250,000 New Note issued to Kansas Resource Development Company (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on October 4, 2013)
10.38
 
$30,000 New Note issued to James G. Miller (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on October 4, 2013)
10.39
 
Form of 12% Note and Warrant (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 25, 2014)
10.40
 
$50,000 Note issued to James G. Miller (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on February 25, 2014)
10.41
 
$25,000 Note issued to Jim Nolton (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on February 25, 2014)
10.42
 
$400,000 Note issued to C. Stephen Cochennet (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on February 25, 2014)
 
 
32

 
10.43
 
Cornerstone Line of Credit Agreements (incorporated by reference to Exhibit 10.43 to the Form 10-K filed on March 28, 2014)
10.44
 
Extension No. 1 to $543,300.01 Term Note issued to C. Stephen Cochennet dated April 30, 2014 (incorporated by reference to Exhibit 10.44 to the Form 10-Q filed on May 15, 2014)
10.45
 
Extension No. 1 to $52,983.33 Term Note issued to James Miller dated April 30, 2014 (incorporated by reference to Exhibit 10.45 to the Form 10-Q filed on May 15, 2014)
10.46
 
Extension No. 1 to $52,650 Term Note issued to Corey Lambrecht dated April 30, 2014 (incorporated by reference to Exhibit 10.46 to the Form 10-Q filed on May 15, 2014)
10.47
 
Extension No. 1 to $45,000 Term Note issued to Jim Nolton dated April 30, 2014 (incorporated by reference to Exhibit 10.47 to the Form 10-Q filed on May 15, 2014)
10.48
 
Extension No. 1 to $50,000 Term Note issued to C. Stephen Cochennet dated April 30, 2014 (incorporated by reference to Exhibit 10.48 to the Form 10-Q filed on May 15, 2014)
10.49
 
Extension No. 1 to $250,000 Term Note issued to Kansas Resource Development Company dated April 30, 2014 (incorporated by reference to Exhibit 10.49 to the Form 10-Q filed on May 15, 2014)
10.50
 
Extension No. 1 to $30,000 Term Note issued to James Miller dated April 30, 2014 (incorporated by reference to Exhibit 10.50 to the Form 10-Q filed on May 15, 2014)
10.51
 
Form of Note Extension No. 1 dated April 30, 2014 (incorporated by reference to Exhibit 10.51 to the Form 10-Q filed on May 15, 2014)
10.52
 
Securities Purchase Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on May 28, 2014)
10.53
 
Registration Rights Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 28, 2014)
10.54
 
Form of Secured Guaranty dated May 27, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on May 28, 2014)
10.55
 
Form of Pledge and Security Agreement dated May 27, 2014 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on May 28, 2014)
10.56
 
Form of Class C Warrant (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on May 28, 2014)
10.57
 
Senior Secured Debenture ($1,500,000) Wolverine Flagship Fund Trading Limited dated May 27, 2014 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on May 28, 2014)
10.58
 
Senior Secured Debenture ($1,000,000) Pinnacle Family Office Investments, L.P. dated May 27, 2014 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on May 28, 2014)
10.59
 
Senior Secured Debenture ($1,000,000) CK Management, LLC dated May 27, 2014 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on May 28, 2014)
10.60
 
Senior Secured Debenture ($750,000) Atlas Allocation Fund, L.P. dated May 27, 2014 (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on May 28, 2014)
10.61
 
Senior Secured Debenture ($500,000) Calm Waters Partnership dated May 27, 2014 (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on May 28, 2014)
10.62
 
Senior Secured Debenture ($250,000) Hard 4 Holdings LLC dated May 27, 2014 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on May 28, 2014)
10.63
 
Senior Secured Debenture ($100,000) Carl Feldman dated May 27, 2014 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on May 28, 2014)
10.64
 
Senior Secured Debenture ($50,000) Brett Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on May 28, 2014)
10.65
 
Senior Secured Debenture ($50,000) Taylor Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on May 28, 2014)
10.66
 
Senior Secured Debenture ($50,000) Cary Luskin dated May 27, 2014 (incorporated by reference to Exhibit 10.14 to the Form 8-K filed on May 28, 2014)
10.67†
 
Hanrahan Amendment No. 2 to Interim CFO Agreement dated May 22, 2014 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on May 28, 2014)
10.68
 
Senior Secured Debenture ($300,000) Southwell Capital, LP dated June 2, 2014 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on June 3, 2014)
10.69
 
Senior Secured Debenture ($250,000) Atlas Allocation Fund, L.P. dated June 2, 2014 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on June 3, 2014)
10.70
 
Senior Secured Debenture ($225,000) Precept Capital Master Fund, GP dated June 2, 2014 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on June 3, 2014)
10.71
 
Senior Secured Debenture ($200,000) Sandor Capital Master Fund dated June 2, 2014 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on June 3, 2014)
10.72
 
Senior Secured Debenture ($125,000) The Precept Fund II, LP dated June 2, 2014 (incorporated by reference to Exhibit 10.5 to the Form 8-K filed on June 3, 2014)
10.73
 
Senior Secured Debenture ($100,000) James K. Price dated June 2, 2014 (incorporated by reference to Exhibit 10.6 to the Form 8-K filed on June 3, 2014)
10.74
 
Senior Secured Debenture ($80,000) Vestal Venture Capital dated June 2, 2014 (incorporated by reference to Exhibit 10.7 to the Form 8-K filed on June 3, 2014)
 
 
33

 
10.75
 
Senior Secured Debenture ($50,000) Helmsbridge Holdings Limited dated June 2, 2014 (incorporated by reference to Exhibit 10.8 to the Form 8-K filed on June 3, 2014)
10.76
 
Senior Secured Debenture ($50,000) JSL Kids Partners dated June 2, 2014 (incorporated by reference to Exhibit 10.9 to the Form 8-K filed on June 3, 2014)
10.77
 
Senior Secured Debenture ($75,000) Cranshire Capital Master Fund, Ltd. dated June 2, 2014 (incorporated by reference to Exhibit 10.10 to the Form 8-K filed on June 3, 2014)
10.78
 
Senior Secured Debenture ($170,000) C. Stephen Cochennet dated June 2, 2014 (incorporated by reference to Exhibit 10.11 to the Form 8-K filed on June 3, 2014)
10.79
 
Senior Secured Debenture ($50,000) James G. Miller dated June 2, 2014 (incorporated by reference to Exhibit 10.12 to the Form 8-K filed on June 3, 2014)
10.80
 
Senior Secured Debenture ($25,000) Corey Lambrecht dated June 2, 2014 (incorporated by reference to Exhibit 10.13 to the Form 8-K filed on June 3, 2014)
10.81
 
Senior Secured Debenture ($20,000) Jim Nolton dated June 2, 2014 (incorporated by reference to Exhibit 10.14 to the Form 8-K filed on June 3, 2014)
10.82
 
Senior Secured Debenture ($10,000) William Clough dated June 2, 2014 (incorporated by reference to Exhibit 10.15 to the Form 8-K filed on June 3, 2014)
10.83
 
Senior Secured Debenture ($10,000) Kathleen Hanrahan dated June 2, 2014 (incorporated by reference to Exhibit 10.16 to the Form 8-K filed on June 3, 2014)
10.84
 
Senior Secured Debenture ($10,000) Kyle Edwards dated June 2, 2014 (incorporated by reference to Exhibit 10.17 to the Form 8-K filed on June 3, 2014)
31.1
 
31.2
 
32.1
 
32.2
 
99.1
 
Code of Business Conduct and Ethics effective March 23, 2012 (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 29, 2012)
99.2
 
Related Party Transaction Policy effective March 23, 2012 (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 29, 2012)
99.3
 
Executive Committee Charter (incorporated by reference to Exhibit 99.1 to Form 10-K filed on March 23, 2011)
99.4
 
Audit Committee Charter (incorporated by reference to Exhibit 99.2 to Form 8-K filed on April 30, 2012)
99.5
 
Governance, Compensation and Nominating Committee Charter (incorporated by reference to Exhibit 99.3 to Form 8-K filed on April 30, 2012)
99.6
 
Corporate order press release dated July 30, 2013 (incorporated by reference to Exhibit 99.11 to the Form 10-Q filed on August 14, 2013)
99.7
 
Security Industry Sales press release dated August 6, 2013 (incorporated by reference to Exhibit 99.12 to the Form 10-Q filed on August 14, 2013)
 99.8
 
Zacks Research Report dated September 13, 2013 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on September 13, 2013)
99.9
 
Training Program Press Release dated September 5, 2013(incorporated by reference to Exhibit 99.14 to the Form 10-Q filed on November 14, 2013)
99.10
 
ASIS 2013 Exhibition Press Release dated September 19, 2013 (incorporated by reference to Exhibit 99.15 to the Form 10-Q filed on November 14, 2013)
99.11
 
Production Increase Press Release dated October 4, 2013 (incorporated by reference to Exhibit 99.16 to the Form 10-Q filed on November 14, 2013)
99.12
 
Nova Security Group Distributor Agreement Press Release dated October 14, 2013 (incorporated by reference to Exhibit 99.17 to the Form 10-Q filed on November 14, 2013)
99.13
 
Presentation as of December 2013 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on December 3, 2013)
99.14
 
Private Placement Closing Press Release dated November 21, 2013 (incorporated by reference to Exhibit 99.2 to the Form 8-K filed on December 3, 2013)
99.15
 
LD Micro Event Press Release dated November 27, 2013 (incorporated by reference to Exhibit 99.3 to the Form 8-K filed on December 3, 2013)
99.16
 
CALSAGA Strategic Alliance Press Release dated January 8, 2014 (incorporated by reference to Exhibit 99.16 to the Form 10-Q filed on May 15, 2014)
99.17
 
Cornerstone Bank Line of Credit Press Release dated January 22, 2014 (incorporated by reference to Exhibit 99.17 to the Form 10-Q filed on May 15, 2014)
99.18
 
Russia and Mexico Distributor Press Release dated February 4, 2014 (incorporated by reference to Exhibit 99.18 to the Form 10-Q filed on May 15, 2014)
99.19
 
Additional Sales Representatives Press Release dated February 6, 2014 (incorporated by reference to Exhibit 99.19 to the Form 10-Q filed on May 15, 2014)
 
 
34

 
99.20
 
ENL Letter of Intent to Securitas Press Release dated February 27, 2014 (incorporated by reference to Exhibit 99.20 to the Form 10-Q filed on May 15, 2014)
99.21
 
Hospital Staff Accolade Press Release dated March 31, 2014 (incorporated by reference to Exhibit 99.21 to the Form 10-Q filed on May 15, 2014)
99.22
 
Hospital Usage Press Release dated April 3, 2014 (incorporated by reference to Exhibit 99.22 to the Form 10-Q filed on May 15, 2014)
99.23
 
Clough Appointment Press Release dated April 15, 2014 (incorporated by reference to Exhibit 99.1 to the Form 8-K filed on April 15, 2014)
99.24
 
Large Public Venue Press Release dated April 23, 2014 (incorporated by reference to Exhibit 99.24 to the Form 10-Q filed on May 15, 2014)
99.25
 
99.26
 
101.INS
 
XBRL Instance Document
101.SCH 
 
XBRL Taxonomy Extension Schema
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase 

† Indicates management contract or compensatory plan or arrangement.
 
 
35


SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
GUARDIAN 8 HOLDINGS
(Registrant)
 
       
Date: August 14, 2014
By:
/s/ C. Stephen Cochennet
 
   
C. Stephen Cochennet
 
   
Chief Executive Officer
 
   
(On behalf of the Registrant and as Chief Executive Officer)
 
       
Date: August 14, 2014
By:
/s/ Kathleen Hanrahan
 
   
Kathleen Hanrahan
 
   
Chief Financial Officer
 
   
(On behalf of the Registrant and as Principal Financial Officer)
 

 

 
36