ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2017 | ||
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from to |
DELAWARE | 333-29295 | 30-0957912 |
(State of incorporation) | (Commission File No.) | (I.R.S. Identification Number |
None | N/A | |
Title of each class | Name of each exchange on which registered |
PART I | |||
ITEM 1: | BUSINESS | 3 | |
ITEM 1A | RISK FACTORS | 8 | |
ITEM 1B | UNRESOLVED STAFF COMMENTS | 24 | |
ITEM 2: | PROPERTIES | 24 | |
ITEM 3: | LEGAL PROCEEDINGS | 24 | |
ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 24 | |
PART II | |||
ITEM 5: | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES | 25 | |
ITEM 6: | SELECTED FINANCIAL DATA | 26 | |
ITEM 7: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 26 | |
ITEM 8: | FINANCIAL STATEMENTS | 32 | |
ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | ||
PART III | |||
ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | 53 | |
ITEM 11: | EXECUTIVE COMPENSATION | 57 | |
ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 58 | |
ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 59 | |
ITEM 14: | PRINCIPAL ACCOUNTING FEES AND SERVICES | 59 | |
PART IV | |||
ITEM 15: | EXHIBITS | 59 | |
SIGNATURES | 60 |
• | The worldwide economic situation; |
• | Any change in interest rates or inflation; |
• | The willingness and ability of third parties to honor their contractual commitments; |
• | The Company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition for risk capital; |
• | The Company's capital costs, as they may be affected by delays or cost overruns; |
• | The Company's costs of production; |
• | Environmental and other regulations, as the same presently exist or may later be amended; |
• | The Company's ability to identify, finance and integrate any future acquisitions; and |
• | The volatility of the Company's stock price. |
· | require the licensing of all persons manufacturing, exporting, importing, or selling ammunition as a business; |
· | require serialization, labeling, and tracking of the acquisition and disposition of certain types of ammunition; |
· | regulate the interstate sale of certain ammunition; |
· | restrict or prohibit the ownership, use, or sale of specified categories of ammunition; |
· | require registries of so-called "ballistic images" of ammunition fired from new guns; |
· | govern the sale, export, and distribution of ammunition; |
· | regulate the use and storage of gun powder or other energetic materials; |
· | regulate the employment of personnel with certain criminal convictions; and |
· | restrict access to ammunition manufacturing facilities for certain individuals from other countries or with criminal convictions. |
· | required compliance iwth ITAR. |
· | an increase or decrease in consumer demand for our products or for the products of our competitors; |
· | our failure to accurately forecast consumer acceptance of new products; |
· | new product introductions by us or our competitors; |
· | changes in our relationships within our distribution channels; |
· | changes in general market conditions or other factors, which may result in cancellations of orders or a reduction or increase in the rate of reorders placed by retailers; |
· | changes in laws and regulations governing the activities for which we sell products, such as hunting and shooting sports; |
· | weak economic conditions or consumer confidence, which could reduce demand for discretionary items, such as our products; and |
· | the domestic political environment, including debate over the regulation of firearms, ammunition, and related products. |
· | we may be unable to secure and maintain favorable relationships with retailers and distributors; |
· | we may be unable to control the timing of delivery of our products to end-user consumers; |
· | our retailers and distributors are not subject to minimum sales requirements or any obligation to market our products to their customers; |
· | our retailers and distributors may terminate their relationships with us at any time; and |
· | our retailers and distributors market and distribute competing products. |
· | our success in developing and producing new products; |
· | our ability to address the needs of our consumer customers; |
· | the pricing, quality, performance, and reliability of our products; |
· | the quality of our customer service; |
· | the efficiency of our production; and |
· | product or technology introductions by our competitors. |
· | enhance our operational, financial, and management systems; |
· | enhance our facilities and purchase additional equipment; and |
· | successfully hire, train, and motivate additional employees, including additional personnel for our technological, sales, and marketing efforts. |
· | determine the appropriate creative message and media mix for advertising, marketing, and promotional expenditures; |
· | select the right markets, media, and specific media vehicles in which to advertise; |
· | identify the most effective and efficient level of spending in each market, media, and specific media vehicle; and |
· | effectively manage marketing costs, including creative and media expenses, in order to maintain acceptable customer acquisition costs. |
· | the cyclicality of the markets we serve; |
· | the timing and size of new orders; |
· | the cancellation of existing orders; |
· | the volume of orders relative to our capacity; |
· | product introductions and market acceptance of new products or new generations of products; |
· | timing of expenses in anticipation of future orders; |
· | changes in product mix; |
· | availability of production capacity; |
· | changes in cost and availability of labor and raw materials; |
· | timely delivery of products to customers; |
· | pricing and availability of competitive products; |
· | new product introduction costs; |
· | changes in the amount or timing of operating expenses; |
· | introduction of new technologies into the markets we serve; |
· | pressures on reducing selling prices; |
· | our success in serving new markets; |
· | adverse publicity regarding the safety, performance, and use of our products; |
· | the institution and outcome of any litigation; |
· | political, economic, or regulatory developments; and |
· | changes in economic conditions. |
· | the availability of suitable acquisition candidates at attractive purchase prices; |
· | the ability to compete effectively for available acquisition opportunities; |
· | the availability of cash resources, borrowing capacity, or stock at favorable price levels to provide required purchase prices in acquisitions; |
· | the ability of management to devote sufficient attention to acquisition efforts; and |
· | the ability to obtain any requisite governmental or other approvals. |
· | the potential disruption of our core businesses; |
· | risks associated with entering markets and businesses in which we have little or no prior experience; |
· | diversion of management's attention from our core businesses; |
· | adverse effects on existing business relationships with suppliers and customers; |
· | risks associated with increased regulatory or compliance matters; |
· | failure to retain key customers, suppliers, or personnel of acquired businesses; |
· | the potential strain on our financial and managerial controls and reporting systems and procedures; |
· | greater than anticipated costs and expenses related to the integration of the acquired business with our business; |
· | potential unknown liabilities associated with the acquired company; |
· | risks associated with weak internal controls over information technology systems and associated cyber security risks; |
· | meeting the challenges inherent in effectively managing an increased number of employees in diverse locations; |
· | failure of acquired businesses to achieve expected results; |
· | the risk of impairment charges related to potential write-downs of acquired assets in future acquisitions; and |
· | the challenge of creating uniform standards, controls, procedures, policies, and information systems. |
· | require the licensing of all persons manufacturing, exporting, importing, or selling firearms and ammunition as a business; |
· | require background checks for purchasers of firearms; |
· | impose waiting periods between the purchase of a firearm and the delivery of a firearm; |
· | prohibit the sale of firearms to certain persons, such as those below a certain age and persons with criminal records; |
· | regulate the use and storage of gun powder or other energetic materials; |
· | regulate the interstate sale of certain firearms; |
· | prohibit the interstate mail-order sale of firearms; |
· | regulate our employment of personnel with criminal convictions; and |
· | restrict access to firearm manufacturing facilities for individuals from other countries or with criminal convictions. |
· | our ability to execute our business plan; |
· | actual or anticipated changed in our operating results; |
· | variations in our quarterly results; |
· | changes in expectations relating to our products, plans, and strategic position or those of our competitors or customers; |
· | announcements of technological innovations or new products by us or our competitors; |
· | market conditions within our market; |
· | the sale of even small blocks of Common Stock by stockholders; |
· | price and volume fluctuations in the overall stock market from time to time; |
· | significant volatility in the market price and trading volume of public companies in general and small emerging companies in particular; |
· | changes in investor perceptions; |
· | the level and quality of any research analyst coverage of our Common Stock, changes in earnings estimates or investment recommendations by securities analysis, or our failure to meet such estimates; |
· | any financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such guidance; |
· | various market factors or perceived market factors, including rumors, whether or not correct, involving us, our customers, or our competitors; |
· | future sales of our Common Stock; |
· | introductions of new products or new pricing policies by us or by our competitors; |
· | acquisitions or strategic alliances by us or by our competitors; |
· | litigation involving us, our competitors, or our industry; |
· | regulatory, legislative, political, and other developments that may affect us, our customers, and the purchasers of our products; |
· | the gain or loss of significant customers; |
· | the volume and timing of customers' orders; |
· | recruitment or departure of key personnel; |
· | developments with respect to intellectual property rights; |
· | our international acceptance; |
· | market conditions in our industry, the business success of our customers, and economy as a whole; and |
· | general global economic and political instability. |
Year Ending | High | Low | ||||||
December 31, 2017 | ||||||||
First Quarter | $ | 3.60 | $ | 3.60 | ||||
Second Quarter | $ | 3.00 | $ | 3.00 | ||||
Third Quarter | $ | 2.30 | $ | 2.30 | ||||
Fourth Quarter | $ | 3.195 | $ | 3.080 | ||||
December 31, 2016 | ||||||||
First Quarter | $ | 1.25 | $ | 1.25 | ||||
Second Quarter | $ | 1.275 | $ | 1.275 | ||||
Third Quarter | $ | 1.275 | $ | 1.275 | ||||
Fourth Quarter | $ | 1.25 | $ | 1.25 |
· | On this date, our CEO and Chairman, Fred Wagenhals, acquired the outstanding shares of the former Company, resulting in a change of control |
· | The name of the company was changed to AMMO, Inc. |
· | The OTC trading symbol was changed to POWW |
· | As the sole director, Mr. Wagenhals approved a 1-for-25 reverse stock split |
· | A plan of merger was filed to re-domicile and change the state of incorporation from California to Delaware |
· | Under the domicile change, a new certificate of incorporation was filed increasing the number of authorized shares of common stock from 15.0 million to 100 million; establishing a par value of $0.001 |
· | Streak visual ammunition you will see the difference |
· | Jesse James line of munitions and accessories |
· | SHIELD Series munitions for Law Enforcement |
· | StelTH subsonic munitions |
· | OPS (One Precise Shot) a tactical munitions line for self-defense |
2017 | 2016 | |||||||
Net Sales | $ | 1,294,861 | $ | - | ||||
Cost of Products Sold | 1,303,586 | - | ||||||
Gross Margin | (8,725 | ) | - | |||||
Sales, General & Administrative Expenses | 3,967,503 | 136,274 | ||||||
Loss from Operations | 3,976,228 | 136,274 | ||||||
Interest and other income (expense), net | (1,812.673 | ) | (18,750 | ) | ||||
Loss before provision for income taxes | $ | (5,788,901 | ) | $ | (155,024 | ) | ||
Provision for income taxes | - | - | ||||||
Net Loss | $ | (5,788,901 | ) | $ | (155,024 | ) |
December 31, 2017 | December 31, 2016 | |||||||
Current assets | $ | 3,019,061 | $ | 2,904,155 | ||||
Current liabilities | 2,413,547 | 2,536,745 | ||||||
$ | 605,514 | $ | 367,410 |
2018 | 2019 | 2020 | 2021 | Total | ||||||||||||||||
Payson Lease | $ | 120,000 | $ | 120,000 | $ | 120,000 | $ | 110,000 | $ | 470,000 |
Index to Financial Statements: | |
Report of Independent Registered Public Accounting Firm | 33 |
Consolidated Balance Sheets as of December 31, 2017 and 2016 | 34 |
Consolidated Statements of Operations for the year ended December 31, 2017 and for the period October 13, 2016 (Inception) to December 31, 2016 | 35 |
Consolidated Statements of Changes in Stockholders' Equity for the period October 13, 2016 (Inception) to December 31, 2016 and the year ended December 31, 2017 | 36 |
Consolidated Statements of Cash Flows for the year ended December 31, 2017 and for the period October 13, 2016 (Inception) to December 31, 2016 | 37 |
Notes to Consolidated Financial Statements | 39 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Ammo, Inc.
Scottsdale, AZ
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheets of Ammo, Inc. (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2017 and for the period from October 13,2016 (Inception) to December 31, 2016, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December, 2017 and 2016, and the results of its operations and its cash flows for the year ended December 31, 2017 and for the period from October 13, 2016 (Inception) to December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KWCO, PC
We have served as the Company’s auditor since 2016.
Odessa, Texas
April 11, 2018
Ammo, Inc. |
CONSOLIDATED BALANCE SHEETS |
December 31, 2017 and 2016 |
2017 | 2016 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash | $ | 786,823 | $ | 10,116 | ||||
Accounts receivable, net of allowance for doubtful accounts of $26,046 in 2017 | 166,731 | - | ||||||
Due from related parties | 18,461 | - | ||||||
Vendor notes receivable, net of allowance for doubtful collection of $360,993 | - | 2,585,000 | ||||||
Vendor advances receivable | - | 89,934 | ||||||
Inventories, at lower cost or market, principally average cost method | 1,792,314 | 219,105 | ||||||
Prepaid expense | 254,732 | - | ||||||
Total Current Assets | 3,019,061 | 2,904,155 | ||||||
Equipment, net of accumulated depreciation of $77,861 in 2017 | 769,442 | - | ||||||
Other Assets: | ||||||||
Licensing agreements, net of $45,833 of accumulated amortization in 2017 | 204,167 | 125,000 | ||||||
Patent, net of $25,166 of accumulated amortization in 2017 | 924,834 | - | ||||||
TOTAL ASSETS | $ | 4,917,504 | $ | 3,029,155 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 476,893 | $ | 57,995 | ||||
Accrued liabilities | 254,774 | - | ||||||
Convertible note payable, net of debt discount of $356,250 in 2016 | 1,575,000 | 1,518,750 | ||||||
Note payable - related party | 100,000 | 960,000 | ||||||
Insurance premium note payable | 6,880 | - | ||||||
Total Current Liabilities | 2,413,547 | 2,536,745 | ||||||
Shareholders' Equity: | ||||||||
Common Stock, $0.001 par value, 100,000,000 shares authorized 22,487,793 and 15,754,000 shares issued and outstanding at December 31, 2017 and 2016, respectively | 22,488 | 15,754 | ||||||
Additional paid-in capital | 8,430,394 | 799,180 | ||||||
Stock subscription receivable | (5,000 | ) | (167,500 | ) | ||||
Accumulated (Deficit) | (5,943,925 | ) | (155,024 | ) | ||||
Total Shareholders' Equity | 2,503,957 | 492,410 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 4,917,504 | $ | 3,029,155 |
Ammo, Inc. | |
CONSOLIDATED STATEMENTS OF OPERATIONS | |
For the Year ended December 31, 2017 and for the Period October 13, 2016 | |
(Inception) to December 31, 2016 |
2017 | 2016 | |||||||
Gross Sales, net of customer incentives, discounts, returns, and allowances | $ | 1,294,861 | $ | - | ||||
Cost of Goods Sold, includes depreciation and amortization of $141,575 and $132,294 of federal excise taxes in 2017 | 1,303,586 | - | ||||||
Gross Margin | (8,725 | ) | - | |||||
Operating Expenses | ||||||||
Selling and marketing | 759,053 | - | ||||||
Corporate general and administrative | 2,154,498 | 136,274 | ||||||
Employee salaries and related expenses | 1,046,667 | - | ||||||
Depreciation expense | 7,285 | - | ||||||
Total operating expenses | 3,967,503 | 136,274 | ||||||
Loss from Operations | (3,976,228 | ) | (136,274 | ) | ||||
Other (Expenses) | ||||||||
Loss on vendor notes receivable foreclosure | (1,279,921 | ) | - | |||||
Interest expense | (532,752 | ) | (18,750 | ) | ||||
(Loss) before Income Taxes | (5,788,901 | ) | (155,024 | ) | ||||
Provision for Income Taxes | - | - | ||||||
Net (Loss) | $ | (5,788,901 | ) | $ | (155,024 | ) | ||
Loss per share | ||||||||
Basic and fully diluted: | ||||||||
Weighted average number of shares outstanding | 19,279,601 | 15,754,000 | ||||||
(Loss) per share | $ | (0.30 | ) | $ | (0.01 | ) |
Common Shares | Additional Paid-In | Subscription | Accumulated | |||||||||||||||||||||
Number | Par Value | Capital | Receivable | (Deficit) | Total | |||||||||||||||||||
Balance as of October 13, 2016 | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Common stock issued for founder shares | 14,934,000 | 14,934 | - | - | - | 14,934 | ||||||||||||||||||
Common stock issued for licensing agreement | 100,000 | 100 | 124,900 | - | - | 125,000 | ||||||||||||||||||
Common stock issued for cash | 720,000 | 720 | 899,280 | (167,500 | ) | - | 732,500 | |||||||||||||||||
Organizational and fundraising costs | - | - | (225,000 | ) | - | - | (225,000 | ) | ||||||||||||||||
Net loss for period ended December 31, 2016 | - | - | - | - | (155,024 | ) | (155,024 | ) | ||||||||||||||||
Balance as of December 31, 2016 | 15,754,000 | $ | 15,754 | $ | 799,180 | $ | (167,500 | ) | $ | (155,024 | ) | $ | 492,410 | |||||||||||
Reverse merger and recapitalization | 604,371 | 604 | (604 | ) | - | - | - | |||||||||||||||||
Subscriptions collected | - | - | - | 167,500 | - | 167,500 | ||||||||||||||||||
Common stock issued to founders | 500,000 | 500 | 145 | - | - | 645 | ||||||||||||||||||
Founder shares purchased | (400,000 | ) | (400 | ) | (99,600 | ) | - | - | (100,000 | ) | ||||||||||||||
Common stock issued for cash | 4,640,822 | 4,641 | 6,034,259 | - | - | 6,038,900 | ||||||||||||||||||
Common stock issued for prepaid legal fees | 224,000 | 224 | 223,776 | - | - | 224,000 | ||||||||||||||||||
Subscription receivable | 4,000 | 4 | 4,996 | (5,000 | ) | - | - | |||||||||||||||||
Organizational and fundraising cost | 20,000 | 20 | (179,770 | ) | - | - | (179,750 | ) | ||||||||||||||||
Common stock issued for licensing agreement | 100,000 | 100 | 124,900 | - | - | 125,000 | ||||||||||||||||||
Legal, advisory fees and consulting fees | 320,600 | 321 | 454,304 | - | - | 454,625 | ||||||||||||||||||
Employee stock awards | 120,000 | 120 | 159,880 | - | - | 160,000 | ||||||||||||||||||
Shares issued for patent | 600,000 | 600 | 749,400 | - | - | 750,000 | ||||||||||||||||||
Imputed interest on related party note | - | - | 46,340 | - | - | 46,340 | ||||||||||||||||||
Issuance of warrants for interest | - | - | 46,188 | - | - | 46,188 | ||||||||||||||||||
Issuance of warrants for services | - | - | 67,000 | - | - | 67,000 | ||||||||||||||||||
Net loss for year ended December 31, 2017 | - | - | - | - | (5,788,901 | ) | (5,788,901 | ) | ||||||||||||||||
Balance as of December 31, 2017 | 22,487,793 | $ | 22,488 | $ | 8,430,394 | $ | (5,000 | ) | $ | (5,943,925 | ) | $ | 2,503,957 |
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net (Loss) | $ | (5,788,901 | ) | $ | (155,024 | ) | ||
Adjustments to reconcile Net (Loss) to Net Cash provided by operations: | ||||||||
Debt discount amortization | 356,250 | 18,750 | ||||||
Depreciation and amortization | 148,860 | - | ||||||
Loss on vendor notes receivable foreclosure | 1,279,921 | - | ||||||
Founders shares issued as consulting fees | - | 14,934 | ||||||
Stock issued for services | 454,625 | - | ||||||
Warrants for services and interest | 113,188 | - | ||||||
Employee stock awards | 160,000 | - | ||||||
Imputed interest | 46,340 | - | ||||||
Allowance for doubtful accounts | 26,046 | - | ||||||
Changes in Current Assets and Liabilities | ||||||||
Vendor notes receivable | - | (1,550,000 | ) | |||||
Vendor advances receivable | 186,486 | (89,934 | ) | |||||
Accounts receivable | (171,812 | ) | - | |||||
Due from related parties | (18,461 | ) | - | |||||
Inventories | (928,762 | ) | (219,105 | ) | ||||
Prepaid expenses | 183,181 | - | ||||||
Accounts payable | 418,898 | 57,995 | ||||||
Accrued liabilities | 254,774 | - | ||||||
Net cash used in operating activities | (3,279,367 | ) | (1,922,384 | ) | ||||
Cash flows from investing activities | ||||||||
Purchase of equipment | (304,188 | ) | - | |||||
Patent | (100,000 | ) | - | |||||
Net cash used in investing activities | (404,188 | ) | - | |||||
Cash flow from financing activities | ||||||||
Convertible note payable | - | 1,500,000 | ||||||
Convertible note payment | (300,000 | ) | - | |||||
Note payment - related party | (960,000 | ) | (75,000 | ) | ||||
Insurance premium note payment | (207,033 | ) | - | |||||
Sale of common stock | 6,038,900 | 732,500 | ||||||
Collection of stock subscription | 167,500 | - | ||||||
Common stock activity - founder shares | (99,355 | ) | - |
2017 | 2016 | |||||||
Organizational and fundraising costs | (179,750 | ) | (225,000 | ) | ||||
Net cash provided by financing activities | 4,460,262 | 1,932,500 | ||||||
Net increase in cash | 776,707 | 10,116 | ||||||
Cash, beginning of period | 10,116 | - | ||||||
Cash, end of period | $ | 786,823 | $ | 10,116 | ||||
Supplemental cash flow disclosures | ||||||||
Cash paid during the period for - | ||||||||
Interest | $ | 9,105 | $ | - | ||||
Income taxes | $ | - | $ | - | ||||
Non-cash investing and financing activities: | ||||||||
Vendor note receivable foreclosure - | ||||||||
Vendor notes receivable | $ | 1,305,079 | - | |||||
Vendor advances receivable | (96,552 | ) | - | |||||
Accounts receivable | (20,965 | ) | - | |||||
Inventories | (644,447 | ) | - | |||||
Equipment | (543,115 | ) | - | |||||
Vendor notes receivable | - | (1,035,000 | ) | |||||
Licensing Agreement | (125,000 | ) | (125,000 | ) | ||||
Issuance of common stock | 125,000 | - | ||||||
Insurance premium note payable | 213,913 | - | ||||||
Prepaid expense | (213,913 | ) | - | |||||
Common Stock | 604 | - | ||||||
Additional paid-in-capital | (604 | ) | - | |||||
Prepaid legal services | (224,000 | ) | - | |||||
Issuance of common stock | 224,000 | 125,000 | ||||||
Notes payable - related party | - | 1,035,000 | ||||||
Issuance of common stock | 750,000 | - | ||||||
Patent acquisition | (750,000 | ) | - | |||||
Notes payable - related party | 100,000 | - | ||||||
Patent acquisition | (100,000 | ) | - | |||||
Stock subscription receivable | (5,000 | ) | (167,500 | ) | ||||
Additional paid-in-capital | 5,000 | 167,500 | ||||||
$ | - | $ | - |
· | The term of the agreement commenced on October 15, 2016. Ammo was granted exclusive worldwide rights to JJ's image rights and any and all trademarks associated with JJ in connection with the marketing, promoting, advertising, sale and commercial exploitation of the Jesse James Branded Products ("Branded Products"). |
· | Jesse James agreed to make himself available for certain promotional activities and to promote Branded Products through his own social media outlets. Ammo will reimburse JJ for any out-of-pocket expenses and reasonable travel expenses. |
· | JJ was issued 100,000 shares of the Company's common stock upon execution of the licensing agreement and can earn an additional 75,000 shares of common stock if certain gross sales are achieved ($15,000,000 gross sales to receive the total 75,000 shares). |
· | The 100,000 shares of common stock were valued at $1.25 per share and the $125,000 was recognized as an asset and will be amortized over the initial sixty (60) month term of the licensing agreement. |
· | Ammo agreed to pay JJ various royalty fees on the sale of ammunition and non-ammunition Branded Products. |
· | The term of the agreement commenced on February 15th, 2017. Ammo was granted exclusive worldwide rights to JR's image rights and any and all trademarks associated with JR in connection with the marketing, promoting, advertising, sale and commercial exploitation of the Jeff Rann Branded Products ("Branded Products"). |
· | Jeff Rann agreed to make himself available for certain promotional activities and to promote Branded Products through his own social media outlets. Ammo will reimburse JR for any out-of-pocket expenses and reasonable travel expenses. |
· | JR was issued 100,000 shares of the Company's common stock upon execution of the licensing agreement and can earn an additional 75,000 shares of common stock if certain gross sales are achieved ($15,000,000 gross sales to receive the total 75,000 shares). |
· | The 100,000 shares of common stock were valued at $1.25 per share and the $125,000 was recognized as an asset and will be amortized over the initial sixty (60) month term of the licensing agreement. |
· | Ammo agreed to pay JR various royalty fees on the sale of ammunition and non-ammunition Branded Products. |
Level 1 – Quoted prices for identical instruments in active markets; | |
Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and | |
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Risk free interest rate | 1.31 - 1.5% | |
Expected volutility | 250% | |
Expeted term | 1 - 1.5 years | |
Expected dividend yield | 0% |
Quoted Active Markets for Identified Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | Total | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | ||||||||||||||
December 31, 2017 | ||||||||||||||||
Common stock issued for legal, advisory and consulting fees | - | $ | 454,625 | - | $ | 454,625 | ||||||||||
Employee stock awards | - | 160,000 | - | 160,000 | ||||||||||||
Common stock for licensing agreement | - | 125,000 | - | 125,000 | ||||||||||||
Patent acquisition, noncash element | - | - | 750,000 | 750,000 | ||||||||||||
Warrants issued for interest | - | - | 46,188 | 46,188 | ||||||||||||
Warrants issued for services | - | - | 67,000 | 67,000 | ||||||||||||
Assets acquired in foreclosure | - | 543,115 | 543,115 | |||||||||||||
Common Stock issued for prepaid legal fees | - | 224,000 | - | 224,000 |
Advanced Tactical Armament Concepts, L.L.C. Notes Payable Purchased by Ammo | Amount | |||
Western Alliance Bank | $ | 1,910,993 | ||
Less: Allowance for uncollectible amounts | (360,993 | ) | ||
1,550,000 | ||||
Mansfield, LLC | 1,035,000 | |||
$ | 2,585,000 |
Vendor notes receivable | $ | 2,585,000 | ||
Vendor advances receivable | (96,552 | ) | ||
Accounts receivable | (20,965 | ) | ||
Inventories | (644,447 | ) | ||
Equipment | (543,115 | ) | ||
Loss on vendor notes receivable collectability | (1,279,921 | ) | ||
$ | - |
2017 | 2016 | |||||||
Finished product | $ | 1,007,291 | $ | - | ||||
Raw materials | 764,810 | 219,105 | ||||||
Work in process | 20,213 | - | ||||||
$ | 1,792,314 | $ | 219,105 |
2017 | 2016 | |||||||
Leasehold Improvements | $ | 15,475 | $ | - | ||||
Furniture and Fixtures | 33,751 | - | ||||||
Vehicles | 36,500 | - | ||||||
Tooling | 184,626 | - | ||||||
Equipment | 576,951 | - | ||||||
Total property and equipment | $ | 847,303 | - | |||||
Less accumulated depreciation | (77,861 | ) | - | |||||
Net property and equipment | $ | 769,442 | $ | - |
· | 604,371 were issued in the reverse merger transaction |
· | 100,000 net shares were issued to founding shareholders |
· | 4,640,822 shares were sold to investors for $6,038,900 |
· | 544,600 shares valued at $678,625 were issued for legal, advisory and consulting fees |
· | 600,000 shares were issued to acquire the use of a patent. Shares were valued at $750,000 |
· | 120,000 shares valued at $160,000 were issued to employees as compensation |
· | 100,000 shares were issued to Jeff Rann for a licensing agreement |
· | 24,000 shares were issued for other purposes |
2016 | ||||||||||||
Number of shares | Weighted Average Exercise Price | Weighted Average Life Remaining (Years) | ||||||||||
Outstanding at December 31, 2015 | - | $ | - | - | ||||||||
Granted | 720,000 | 2.50 | 1.95 | |||||||||
Exercised | - | - | - | |||||||||
Forfeited or cancelled | - | - | - | |||||||||
Expired | - | - | - | |||||||||
Outstanding at December 31, 2016 | 720,000 | $ | 2.50 | 1.95 | ||||||||
Exercisable at December 31, 2016 | 720,000 | $ | 2.50 | 1.95 |
2017 | ||||||||||||
Number of shares | Weighted Average Exercise Price | Weighted Average Life Remaining (Years) | ||||||||||
Outstanding at December 31, 2016 | 720,000 | $ | 2.50 | 1.95 | ||||||||
Granted | 4,542,315 | 2.42 | 1.90 | |||||||||
Exercised | - | - | - | |||||||||
Forfeited or cancelled | - | - | - | |||||||||
Expired | - | - | - | |||||||||
Outstanding at December 31, 2017 | 5,262,315 | $ | 2.43 | 1.77 | ||||||||
Exercisable at December 31, 2017 | 5,262,315 | $ | 2.43 | 1.77 |
2017 | 2016 | |||||||
Accrued payroll | $ | 145,779 | $ | - | ||||
Accrued interest | 74,896 | - | ||||||
Accrued FAET | 26,075 | - | ||||||
Other accruals | 8,024 | - | ||||||
$ | 254,774 | $ | - |
2018 | 2019 | 2020 | 2021 | Total | ||||||||||||||||
Payson Lease | $ | 120,000 | $ | 120,000 | $ | 120,000 | $ | 110,000 | $ | 470,000 |
2017 | 2016 | |||||||
Net (Loss) | $ | (5,788,901 | ) | $ | (155,024 | ) | ||
Benefit (expense) for income taxes computed using the statutory rate of 34% | 1,968,226 | 52,708 | ||||||
Non-deductible expense | (360,952 | ) | (5,274 | ) | ||||
Re-measurement of deferred income taxes due to tax reform | (632,683 | ) | $ | - | ||||
Change in valuation allowance | (974,591 | ) | (47,434 | ) | ||||
Provision for income taxes | $ | - | $ | - | ||||
Significant components of the Company's deferred tax liabilities and assets at December 31, 2017 and 2016 are as follows: | ||||||||
2017 | 2016 | |||||||
Total deferred tax assets – net operating losses | $ | 1,022,025 | $ | 47,434 | ||||
Deferred tax liabilities | - | - | ||||||
Net deferred tax assets | 1,022,025 | $ | 47,434 | |||||
Valuation allowance | $ | (1,022,025 | ) | $ | (47,434 | ) | ||
$ | - | $ | - |
At December 31, 2017, net operating loss("NOL") carry forwards expiring through 2037 were as follows: | ||||||||
Expiring December 31, | ||||||||
2036 | $ | 139,512 | ||||||
2037 | 4,727,276 | |||||||
$ | 4,866,788 |
December 31, | ||||||||||||
Life | Licenses | Patent | ||||||||||
Licensing Agreement – Jesse James | 5 | $ | 125,000 | $ | - | |||||||
Licensing Agreement – Jeff Rann | 5 | 125,000 | - | |||||||||
Patent | 11.2 | - | 950,000 | |||||||||
250,000 | 950,000 |
Accumulated amortization – Licensing Agreements | (45,833 | ) | - | |||||
Accumulated amortization – Patents | - | (25,166 | ) | |||||
$ | 204,167 | $ | 924,834 |
Name | Age | Position | |||
Fred W. Wagenhals 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 75 | Chairman of the Board, Chief Executive Officer and President | |||
Ron Shostack 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 61 | Chief Financial Officer | |||
Steve Hilko 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 61 | Chief Operating Officer | |||
Kathleen C. Hanrahan 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 54 | Director | |||
Randy Luth 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 63 | Director |
Harry S. Marklay 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 55 | Director | |||
Russell William Wallace, Jr. 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 61 | Director |
(1) | A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
(2) | Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
(3) | Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: |
i. | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
ii. | Engaging in any type of business practice; or |
iii. | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
(4) | Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; |
(5) | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
(6) | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
(7) | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
i. | Any Federal or State securities or commodities law or regulation; or |
ii. | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or |
iii. | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
(8) | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Name and Principal Position | Year (1) | Salary (2) | Bonus (1) | Option Awards (3) | All Other Compensation (4) | Total | |||||||||||||||
Fred W. Wagenhals President, Chief Executive Officer, and Director | 2017 | $ | 140,000 | $ | 0 | $ | 0 | $ | 0 | $ | 140,000 | ||||||||||
2016 | $ | 0 | $ | 0 | 0 | 0 | 0 | ||||||||||||||
Steve Hilko (4) Chief Operating Officer | 2017 | $ | 108,350 | $ | 0 | $ | 0 | 0 | $ | 108,350 | |||||||||||
Ron Shostack (5) Chief Financial Officer | 2017 | $ | 71,500 | $ | 0 | $ | 0 | 0 | $ | 71,500 |
Salary | Officer Comp | Director Fees | Other Comp | Total | |||||||||||||||||
Fred W. Wagenhals | 2017 | $ | 140,000 | $ | — | — | — | $ | 140,000 | ||||||||||||
2016 | — | — | — | — | — | ||||||||||||||||
Kathleen C. Hanrahan | 2017 | — | — | — | — | — | |||||||||||||||
2016 | — | — | — | — | — | ||||||||||||||||
Randy Luth | 2017 | — | — | — | — | — | |||||||||||||||
2016 | — | — | — | — | — | ||||||||||||||||
Harry S. Marklay | 2017 | — | — | — | — | — | |||||||||||||||
2016 | — | — | — | — | — | ||||||||||||||||
Russell William Wallace, Jr. | 2017 | — | — | — | — | — | |||||||||||||||
2016 | — | — | — | — | — |
Name and Address of Beneficial Owner, Directors and Officers: | Amount and Nature of Beneficial Ownership | Percentage of Beneficial Ownership (1) | ||||||
Fred W. Wagenhals 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 7,807,000 | 27.7 | % | |||||
Kathleen Hanrahan 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 100,000 | 0.35 | % | |||||
Randy Luth 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 275,000 | 0.97 | % | |||||
Russell William Wallace, Jr 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 300,000 | 1.06 | % | |||||
Harry S. Marklay 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 0 | 0 | % | |||||
Ron Shostack 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 125,000 | 0.44 | % | |||||
Steve Hilko 6401 E. Thomas Road, #106 Scottsdale, AZ 85251 | 250,000 | 0.79 | % | |||||
All executive officers and directors as a group (5 people) Beneficial Shareholders greater than 5% | 8,857,000 | 31.5 | % |
2017 | 2016 | |||||||
Audit Fees | $ | 100,234 | $ | -0- | ||||
Audit Related Fees | -0- | -0- | ||||||
Tax Fees | -0- | -0- | ||||||
All Other Fees | -0- | -0- | ||||||
Total Fees | $ | 100,234 | $ | -0- |
AMMO, INC. | |||
/s/ Fred W. Wagenhals | |||
Dated: April 11, 2018 | By: Fred W. Wagenhals, Chief Executive Officer | ||
AMMO, INC. | |||
/s/ Ron Shostack | |||
Dated: April 11, 2018 | By: Ron Shostack, Chief Financial Officer | ||