Note 1 - Company Organization and Summary of Significant Accounting Policies |
6 Months Ended | ||||||||
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Jun. 30, 2015 | |||||||||
| Accounting Policies [Abstract] | |||||||||
| Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] |
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
These interim financial statements are condensed and should be read in conjunction with the Company’s December 31, 2014 annual statements included in the form 10-K filed on March 31, 2015.
Principles of consolidation
For the three and six months ended June 30, 2015 and 2014, and for the year ended December 31, 2014, 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, 2015 and December 31, 2014, there were cash equivalents of $163,670 and $491,988 respectively.
Inventory
During the first quarter of 2014, the Company accepted the delivery of 1,396 units of its ProV2 from its contract manufacturer. These deliveries were part of the Company’s initial purchase orders totaling 11,800 units. The terms for the purchase of the product require 50% prepayment at the time of order, and the remaining 50% is paid prior to shipment to the United States. In addition to the prepayment terms, the supplier also provides the Company with a 2% overallotment of units to replace any fallout during incoming receiving inspection. The Company recognized the total number of units received and in stock at the end of the period, and allows for a 2% scrap allowance to offset any potential losses incurred. As of June 30, 2015, the Company has paid for and received all deliveries associated with initial purchase orders and has reserved $59,510 to offset any units scrapped during inspection of units not yet performed as of this date. No additional purchase orders are pending. As of June 30, 2015 there are approximately 10,600 units in stock. We believe this inventory will be adequate to fulfill orders for the next twelve months. Inventories are priced at the lower of cost, determined on a first-in, first-out basis, or market. Inventories include the cost of inbound shipping, duty and receiving inspection. Inventory obsolescence is examined on a regular basis. Currently there is no inventory considered obsolete.
Accounts receivable
Accounts receivable are customers outstanding balances carried on a gross basis less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of our customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted. We review these policies on a quarterly basis and based on these reviews, we believe we maintain adequate reserves. At June 30, 2015 and December 31, 2014, the allowance for doubtful accounts was $478 and $4,978, respectively. Interest is not accrued on overdue accounts receivable.
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. Revenues for the six months ended June 30, 2015 and 2014 were $95,308 and $19,012, 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. As of June 30, 2015 and December 31, 2014, the Company recorded $11,481 and $4,513 as deferred revenue, respectively. Extended warranty expense for the six months ended June 30, 2015 and 2014 was $3,483 and $955, 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 totaled $94,353 and $107,248 for the six months ended June 30, 2015 and 2014 respectively.
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. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected as required by Regulation S-X, Rule 10-01. Adjustments include appropriate estimates for arrangements normally determined or settled at year-end. All adjustments are of a normal and recurring nature.
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:
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, 2015 and December 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, accounts receivable, accounts payable, debentures payable and related accrued interest, and derivative liability. 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 any impaired assets as of June 30, 2015 or December 31, 2014.
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, 2015 and 2014, 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 of the assumed conversion of warrants would have an anti-dilutive effect. Potential common shares as of June 30, 2015 that have been excluded from the computation of diluted net loss per share amounted to 23,485,923 from warrants and debt totaling $7,182,500 that is convertible into 95,766,667 common shares.
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.
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