Management's Discussion and Analysis or Plan of Operation

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

The following discussion and analysis should be read in conjunction with our financial statements and notes thereto included elsewhere in this Form 10-KSB. Except for the historical information contained in this Form 10-KSB, the discussion in this Form 10-KSB contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this Form 10-KSB should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-KSB. Our actual results could differ materially from those discussed here.

Introduction

On January 31, 2004, pursuant to an Agreement and Plan of Reorganization, we acquired 100% of the issued and outstanding common stock of BlastGard Technologies, Inc., a Florida corporation, from BlastGard Technologies' shareholders, in exchange for an aggregate of 18,200,000 (adjusted to reflect subsequent stock split) shares of our common stock. BTI is a development stage company that was created to develop, design, manufacture, and market proprietary blast mitigation materials. BlastGard Technologies' patent-pending BlastWrap® technology

is designed to effectively mitigate blasts and suppress fires resulting from explosions. As a result of the Reorganization Agreement, a change in control and change in management of the Company occurred and BTI became a wholly-owned subsidiary of the Company. The Reorganization Agreement also provided that the Company hold a shareholders meeting to (i) change the name of the corporation to BlastGard® International, Inc., and (ii) approve a reverse split of the outstanding common stock on a 5:1 basis. A Special Shareholder meeting was held on March 12, 2004, and both proposals were approved. The name change and the reverse split of the outstanding common stock became effective on March 31, 2004.

We intend to focus exclusively on the business plan of BlastGard Technologies. BlastGard Technologies was formed on September 26, 2003, and is a development stage company. BTI acquired its only significant asset, a patent application for BlastWrap®, in January 2004, from co-inventors John L. Waddell, Jr., our Chief Operating Officer, and President, and James F. Gordon, our Chief Executive Officer, who assigned the patent to BlastGard Technologies in consideration of the consummation of the Reorganization Agreement. For accounting purposes, we assigned no monetary value to the patent application that was assigned to BlastGard Technologies. Our current management team, which was the management team of BlastGard Technologies prior to the reorganization, had operated a corporation called BlastGard, Inc., which was dissolved in 2004. BlastGard, Inc. had a license from a third-party to certain technology which is different from the technology owned by BlastGard Technologies. Pursuant to the Reorganization Agreement, BlastGard Technologies became a wholly-owned subsidiary of our company. However, for accounting purposes, the acquisition was treated as a recapitalization of BlastGard Technologies, with our company the legal surviving entity.

Results of Operations

Year Ended December 31, 2008 vs. 2007

Since emerging from our development stage operations in 2005, our BlastGard MTR blast mitigated trash receptacles have been sold to six government service advantage ("GSA") clients located in the United States. We received orders for MTRs from the National Railroad Passenger Corporation also known as Amtrak., the U.S. Holocaust Memorial Museum, GSA for Federal Buildings, NYC Transit and for BlastWrap® from the Naval Weapons Station Earle, Sandia National Labs, and several domestic and international entities. For fiscal 2008, we recognized sales of $732,044 and a gross profit of $109,897, as compared to sales of $408,988 and a gross profit of $68,881 for the comparable period of the prior year. A major U.S. airport ordered 156 BlastGard MTR Blast Mitigated Receptacles, which order resulted in gross revenues to the Company of over $700,000. On January 7, 2009, the Company's accounts receivable balance of $255,800 out of $267,964 at December 31, 2008 was paid in full from a major U.S. airport from the sale of its Blast Mitigating trash receptacles.

For fiscal 2008, our overall operating and non operating expenses, including interest expense and gain on derivative liability, were relatively constant over the comparable period of the prior year. In November 2008, we took measures to reduce our monthly operating costs from approximately $110,000 per month to an estimated $50,000 per month. See "Recent Developments" under Item 7 following "Liquidity and Capital Resources."

Our net loss for fiscal 2008 was $1,493,945 as compared to $3,827,188 for the comparable period of the prior year.

BlastGard's products are currently being tested (or have recently been tested) and evaluated by many military and defense contractors and commercial companies in the United States and abroad as described under Business Prospects. As we experience anticipated growth and expansion of our operations, we will experience an increase in operating expenses and costs of doing business.

Business Prospects

Marketing Strategy

We believe that our BlastGard® Technology can provide blast mitigation solutions for numerous industries across various market segments. However, we recognize that some industries will have significant barriers to entry and/or long lead times or conversely, provide an immediate revenue source. Having limited resources, we have researched each target market, ranked each market and divided the markets into two groups; markets that will require a strategic partnership to penetrate and markets we will sell directly to. We have developed a two-pronged approach to market our BlastGard® Technology.

The two-pronged approach will maximize market penetration while minimizing cost. Our approach is to:

·

Develop Strategic Partners in existing well-defined markets.

·

Initiate a Direct Sales Approach. We are focused on the top four markets, which we currently consider to be (1) military, (2) aviation industry, (3) oil and gas industry and (4) homeland defense. In addition, we are retaining commercial representatives who will be licensed to sell BlastGard® Technology to specific markets.

Business Prospects/Recent Developments

On October 29, 2007, we announced that we entered into a strategic business agreement with Lancer Systems LP ("Lancer"). Lancer was recently created by Green, Tweed's ownership to focus solely on the defense industry. Lancer provides manufacturing, marketing/sales and program management capabilities to service the domestic and international Military market. Lancer also has support and sales organizations within Israel to support the military and security markets in that country. Lancer and BlastGard have agreed to enter into an exclusive arrangement for the manufacture, marketing, and sale of BlastGard products for two defined business opportunities: 1) military weapons containers for shipment and storage; and 2) under and side armor of General Dynamics Stryker vehicle program. The Company has also granted to Lancer a limited exclusive right to sell all BlastGard products in the State of Israel on defined and agreed projects. Lancer intends to use BlastGard products for container and baggage storage for aircraft, public and specifically school safety as well as various military applications within Israel.

On February 13, 2008, we introduced a new product for perimeter and structure protection. The BlastGard Barrier System ("BBS") is an innovative combination of three patented technologies, an HDPE cellular core, BlastWrap® and an aesthetically pleasing novel fascia system. BBS has extraordinary blast, ballistic, fragment, shaped charge jet and breaching resistance capabilities and it is beautiful, low cost, configurable and "stealthy". The cellular core material, patented by the U.S. Army, has been used extensively by the U.S. military and commercial clients worldwide for building roads, for shoring up unstable roads, for extensive soil stabilization projects and for revetments and barriers. After the core is placed and filled, BlastWrap® is attached to the "threat side(s)" of the BBS structure, and finally, the fascia system encloses the entire structure, thereby creating an effective "stealth" characteristic for the entire BBS structure…that is, the extreme capabilities of this system are not at all visually apparent. BlastGard's new high-capacity Clients with concerns about heavy blast, breaching, ballistic, fragment and shaped charge jet threats to their facilities can now effectively address all of those threats with our economical solution." Optional electronic security capabilities can also be integrated into the system.

On February 25, 2008, we introduced a new product for Airport Security, transit stations, convention centers, and other transportation centers' with security requirements, the BlastGard® Gard Cart. The BlastGard® MBR Gard Cart (Mobile Suspect Package Removal Unit), which houses BlastGard's MBR 300, provides security personnel with an effective tool for safe removal of an explosive device after it is discovered. The MBR Gard Cart contains and protects against all lethal threats posed by the detonation of an improvised explosive device (IED) and also provides rapid removal of the threat using a Mobile Removal Unit Cart. When a suspect package or device is discovered, the airports now have a safe means of securing that package and removing it from public exposure until the bomb squad arrives. In this way, the MBR Gard Cart can help prevent long airport facility shut-down times presently experienced when a suspect package is discovered.

On September 22, 2008 BlastGard announced an agreement with U. S. Explosive Storage to provide them with BlastWrap for insensitive munitions packaging of ammunition storage, ordnance storage, pyrotechnics storage, and other explosive materials storage, utilized, among other things, for military, governmental, and commercial use. BlastGard and U.S. Explosive are joining forces to create storage and transportation boxes that will prevent sympathetic detonation through BlastWrap's unique proprietary technology. Initial testing was completed the week of March 23, 2009. The US ARMY Department of Defense Explosive Safety Board ("DDESB") sponsored 2 of our tests for the purpose of getting DDESB certification. DDESB wants ISO certified blast mitigated containers for major storage and special ISO containers to store grenades, etc. We will be installing BlastWrap inside storage boxes and inside the magazines. U.S. Explosives is forecasting sales of $5-6 million in year one and approximately $8 million in year two. The BlastWrap component in the new product line represents approximately $1.8 million in year one and $2.4 million in year two.

Foti Fireworks, Australia's Premiere Pyrotechnic Company has ordered our BlastWrap for testing, which will be shipped out in April 2009. Foti ships 20 million cases of fireworks per year. It is anticipated that the implementation of BlastWrap will reduce their shipping and insurance costs dramatically.

In February 2009, Precision Operations Systems India Pvt. Ltd., which has been supplying security, surveillance, counter surveillance and special ops equipment to various Government entities in India, purchased BGI's MBR (mitigated bomb receptacle) for testing. Precision is our commercial representative for India and represented BlastGard at the 12th India International Security Expo, which was held from February 22-25, 2009. We anticipate additional sales in 2009.

In March 2009, BlastGard entered into a commercial representative agreement with Lindner & Co. as our exclusive sales and marketing representative for Iraq. Lindner's alliance with an Iraqi company, which has a credentialed history with US Corps of Engineers, KBR, and other Iraqi national companies as well as business relationships with companies in Saudi Arabia, the Emirates, Jordan and other Middle Eastern countries, will operate in Iraq as the authorized installer for BlastGard in Iraq.

On July 17, 2008 BlastGard announced receipt of a formal purchase agreement for 156 BlastGard MTR blast mitigated receptacles valued at approximately $700,000 for a major United States airport. BlastGard's blast mitigating receptacles were installed throughout the facility and this very important transaction has opened the door to the Airport Security market for our Blast Mitigating Receptacles. Receptacles, which are a necessity for waste management, pose a serious threat to public safety considering how easily they can conceal an explosive device. The installation of these blast mitigating receptacles is another step toward USA airport's emphasis on safety, reliability, enhanced cleanliness and improved customer service. In addition to a $2,000,000 order from Miami Airport, which is pending the securing of grant funds. we are attempting to secure funding for pending MTR orders from Houston Airport, San Francisco Airport, and Chicago Airport.

Liquidity and Capital Resources.

At December 31, 2008, we had cash of $1,477, accounts receivable of $267,964, a retained deficit of $12,506,498 and shareholder equity of $(506,980). During 2008, net cash was used in operating activities of $1,060,483. This resulted primarily from our net loss of $1,493,945, partially reduced by a stock based compensation non-cash charge of $114,000 and depreciation and amortization of $297,734. During 2008, net cash was used in investing activities of $77,546, primarily payments for deferred costs.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, we have incurred recurring losses, and have negative working capital and a net capital deficiency at December 31, 2008. These factors, among others, may indicate that we may be unable to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. The Company has a plan of financing to obtain cash to finance its operations through the sale of equity, debt borrowing and/or through the receipt of product licensing fees. The Company is currently in negotiations with a non-affiliated party for the right to an exclusive worldwide license to market and sell BlastGard's entire product line. The Company is also in discussions with another group for possible debt borrowing. We can provide no assurances that financing will be available to us on terms satisfactory to us, if at all, or that we will be able to continue as a going concern. Further, we can provide no assurances that a mutually acceptable licensing agreement will be entered into on terms satisfactory to us, if at all. In this respect, see "Note 1 - Going Concern" in our financial statements for additional information as to the possibility that we may not be able to continue as a "going concern."

At December 31, 2008, we had cash of $1,477. At that date, we owed approximately $372,000 pursuant to our December 2004 Debt (described herein). As of March 15, 2009, we had cash of approximately $3,594. As described under "Recent Developments" in this Item 7, we recently issued Class G Warrants to purchase 1,800,000 shares of the Company to the December 2, 2004 Note Holders in exchange for an extension of the due date of the Notes through November 30, 2009, and that all of these Warrants and one-half of the principal amount of the Notes were then sold to third parties.

On June 22, 2006, we borrowed the principal amount of $1,200,000 (the "June 2006 Debt") from two non-affiliated persons (the "Lenders") due June 22, 2008. Pursuant to an agreement dated as of August 7, 2007 (the "August 2007 Agreement"), Robert F. Rose Investments and two other non-affiliated parties (collectively hereinafter referred to as the "Purchasers") entered into an agreement with the Lenders to purchase the June 2006 Debt, which transaction is personally guaranteed by Mr. Rose. Upon the completion of said transaction, the Purchasers had agreed to automatically convert their June 2006 Debt into shares of our Common Stock at $.30 per share. To date, $795,000 of the $1,200,000 has been completed and converted into our Common Stock at $.30 per share and $50,000 in principal was paid back. Pursuant to an agreement dated as of September 21, 2007, the Purchasers agreed to assign the remaining $355,000 to be purchased pursuant to the August 2007 Agreement to five non-affiliated persons (collectively hereinafter referred to as the "Assignees") and the Assignees deposited $355,000 in escrow with Lenders' attorney, as Escrow Agent. Subsequently, the Assignees notified the Escrow Agent that it should not release the escrowed funds from escrow and demanded the return of their funds. Said $355,000 is currently the subject of a legal dispute and such funds are being held in escrow by the Lenders' attorneys. Although there is a dispute as to the rights and obligations of the parties pursuant to the aforementioned agreements and the possible conversion of the June 2006 Debt into shares of our Common Stock, we had continued to make the quarterly interest payments on the June 2006 Debt so as to avoid any claim of default. However, on June 22, 2008, the June 22, 2006 debt became due and payable and no payment of principal or accrued interest thereon was made by us. It is management's position, although no assurance can be given in this regard, that we do not owe the lenders the $355,000 and that we were obligated to deliver 1,183,333 shares of common stock to the assignees upon conversion thereof. Nevertheless, we have continued to include the principal of the June 2006 Debt (exclusive of interest after June 22, 2008) on our consolidated balance sheet in order to reflect the worse case scenario. See "Recent Developments" under "Item 7."

To date, we have relied on management's ability to raise capital through equity private placement financings to fund our operations. We anticipate that our future liquidity requirements will arise from the need to finance our accounts receivable and inventories, and from the need to fund our growth from operations, current debt obligations and capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional capital from the sale of equity and/or debt securities. We estimate that we will require between $1.5 million and $2.0 million in additional financing and cash flow from operations to support our operations and to meet our debt obligations as they become due and payable over the next 15 months of operations. We can provide no assurances that cash generated from operations will occur or additional financing will be obtained on terms satisfactory to us, if at all, or that additional debt conversions will occur.

Recent Developments

On October 17, 2008, in order to reduce the Company's monthly expenses, the Board and its Chief Executive Officer, Andrew McKinnon, agreed to pay Mr. McKinnon his monthly salary, effective December 1, 2008, pursuant to his employment contract in BlastGard common stock based on a 15% discount to the fair market value of the Company's Common Stock based on the ten preceding trading days prior to the conversion date. The fair market value of the Company's Common Stock is defined as the average of the closing sales price of the Company's Common Stock on the OTC Electronic Bulletin Board for the ten trading days preceding the last day of each month (conversion date of the monthly salary). The salary conversion shall not at any time be convertible at a conversion price below $.10 per share (the "Floor Price"). Between December 2008 and March 31, 2009, the Company issued Mr. McKinnon 187,500 shares of restricted Common Stock per month based upon the Floor Price of $.10 per share for a total of 750,000 shares.

A major U.S. airport ordered 156 BlastGard MTR Blast Mitigated Receptacles, which order resulted in gross revenues to the Company of over $700,000. On January 7, 2009, the Company's accounts receivable balance of $255,800 at December 31, 2008 was paid in full from a major U.S. airport from the sale of its Blast Mitigating trash receptacles.

On November 25, 2008, John L. Waddell, Jr. retired from his position as President of the Company and voluntarily terminated his employment agreement. Mr. Waddell also resigned as a member on the board of directors due to his retirement.

Since April 2008, our monthly cash needs were budgeted to average approximately $80,000 per month. With the elimination of the President and CEO salary, effective December 2008, our monthly cash needs are based on the following approximate breakdown:

                       salaries and benefits:     $ 19,000
                       professional fees            14,000
                       office overhead               3,000
                       Travel                        7,000
                       research and development      4,000
                       Miscellaneous                 3,000
                       Total                      $ 50,000

The December 2004, Debt became due and payable on August 29, 2008. However, pursuant to a Revised and Amended Sixth Waiver and Modification Agreement dated as of September 16, 2008, the Senior Lenders received the payment of default interest calculated at the rate of 21% per annum (versus 8%) for the period April 1, 2008 through September 30, 2008 as consideration to extend the Maturity Date of the Notes to November 1, 2008. Commencing October 1, 2008 and thereafter, the interest rate shall revert to an amount equal to 8% per annum. In addition, the holders of the December 2004 Debt agreed to convert an aggregate of $124,093.19 in principal and accrued interest therein at a conversion price of $.10 per share.

On October 17, 2008, the Board of Directors agreed to extend the expiration date for an additional 92 days of privately placed warrants to purchase 9,264,970 shares that would otherwise have expired at the close of business on October 20, 2008. These warrants which were exercisable at $.45 per share became exercisable at a reduced exercise price of $.10 per share through the close of business on January 20, 2009 and expired unexercised on that date.

As a result of the Board's action in the preceding paragraph, the anti-dilution provisions of all other outstanding warrants resulted in the reduction of the exercise price of our outstanding Class A, Class C, Class D, Class E and Class F Warrants to an exercise price of $.10 per share and the reduction of the conversion price of the December 2004 debt to $.10 per share. In the case of the Class C, D, E and F Warrants, it also caused there to be an increase in the number of shares purchasable thereunder. The Board of Directors also agreed to reduce the exercise price on all the options (which varied in exercise prices from $.45 to $2.00 per share) to $.10 per share for all options granted to active consultants, legal, board members and management.

On March 10, 2009, the Company lowered the exercise price of its issued and outstanding Class A, C, D, E and F Warrants to an exercise price of $.03 per share on a temporary basis until the close of business on March 20, 2009, which was later extended to March 30, 2009 (the "Warrant Reduction Period"). Subsequent to that date, the exercise price of the aforementioned classes of Warrants reverted to $.10 per share. During the Warrant Reduction Period,, none of these Warrants were exercised. During the Warrant Reduction Period, the holders of certain outstanding Senior convertible securities originally issued on December 2, 2004 granted BlastGard an extension of the due date of their notes until the close of business on November 30, 2009, in exchange for the issuance of Class G Warrants to purchase 1,800,000 restricted shares of Common Stock of the Company. Contemporaneously, certain other person(s) were assigned these Warrants and sold one-half of their $372,000 of outstanding principal of the notes and related security agreements and guarantees at a purchase price of about $186,000. Each Class G Warrant entitles the holder to purchase one share of the Company's Common Stock at an exercise price of $.03 per share through the close of business on June 22, 2011.

During the Warrant Reduction Period, the Company cancelled Class A, C, D, E and F Warrants totaling the rights to purchase 11,000,334 shares of the Company's Common stock and issued an equal number of Class G Warrants in exchange thereof. Currently, the Company has outstanding the following Warrants:

                Class of Warrant   Number of Warrants Outstanding
                Undefined                     150,000
                Class A                          --
                Class C                      1,921,500
                Class D                       324,000
                Class E                       162,000
                Class F                      2,097,620
                Class G                      12,800,334

All shares of Common Stock issuable upon exercise of the aforementioned Warrants contain an appropriate restrictive legend. Exemption from registration for the issuance of the Class G Warrants as replacement Warrants was exempt under
Section 3a(9) of the Securities Act of 1933, as amended (the "1933 Act"). The issuance of 1,800,000 Warrants to the Senior convertible debt holders was exempt under Section 4(2) of the Securities Act.

2007 Private Placement Transactions

Between April 20, 2007 and May 4, 2007, the Company completed two concurrent Offerings and raised a total of $3,968,810 as described below.

The Company sold 11,529,368 units, each unit consisting of one share of its unregistered Common Stock at $.30 per share and one-half warrant, with a full warrant exercisable at $.45 per share in an offshore offering to non-US Persons through D &D Securities Company, its placement agent. The offering raised $3,458,810 in gross proceeds through the issuance of 11,529,368 shares and 5,764,684 warrants. In addition, the Company issued broker warrants to purchase 1,322,937 units. Exemption from registration is claimed under Regulation S of the Securities Act of 1933, as amended. . . .