NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
1 – ORGANIZATION AND BUSINESS ACTIVITY
We
were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished
garments and fabrics. We were inactive until the following series of events in December 2016 and March 2017.
On
December 15, 2016, the Company’s majority shareholders sold 475,681 (11,891,976 pre-split) of their outstanding shares to
Mr. Fred W. Wagenhals (“Mr. Wagenhals”) resulting in a change in control of the Company. Mr. Wagenhals was appointed
as sole officer and the sole member of the Company’s Board of Directors.
The
Company also approved (i) doing business in the name AMMO, Inc., (ii) a change to the Company’s OTC trading symbol to POWW,
(iii) an agreement and plan of merger to re-domicile and change the Company’s state of incorporation from California to
Delaware, and (iv) a 1-for-25 reverse stock split (“Reverse Split”) of the issued and outstanding shares of the common
stock of the Company. As a result of the reverse split, the previous issued and outstanding shares of common stock became 580,052
shares; no shareholder was reversed below 100 shares, and all fractional shares resulting from the reverse split were rounded
up to the next whole share. All references to the outstanding stock have been retrospectively adjusted to reflect this split.
These transactions were effective as of December 30, 2016.
On
March 17, 2017, the Company entered into a definitive agreement with AMMO, Inc. a Delaware Corporation (PRIVCO) under which the
Company acquired all of the outstanding shares of common stock of (PRIVCO). Under the terms of the Agreement, the Company issued
17,285,800 newly issued shares of common stock of the Company. In connection with this transaction the Company retired 475,681
shares of common stock and issued 500,000 shares of common stock to satisfy an issuance commitment. The acquisition was considered
to be a capital transaction. The transaction was the equivalent to the issuance by PRIVCO of 604,371 shares to the Company’s
shareholders accompanied by a recapitalization. The weighted average number of outstanding shares has been adjusted for this transaction.
(PRIVCO) subsequently changes its name to AMMO Munitions, Inc.
NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting
Basis
We
use the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”)
and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31
st
.
The
financial statements and related disclosures as of March 31, 2019, March 31, 2018, and December 31, 2017 are presented pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC”). Unless the context otherwise requires,
all references to “AMMO”, “we”, “us”, “our,” or the “Company” are
to AMMO, Inc., a Delaware corporation
Principles
of Consolidation
The
consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries, Enlight Group II, LLC
(d/b/a Jagemann Munition Components), SNI, LLC, AMMO Munitions, Inc. and AMMO Technologies, Inc. (inactive). All significant intercompany
accounts and transactions are eliminated in consolidation
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
us to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the balance sheet and reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, we consider highly liquid financial instruments purchased with a maturity of three months
or less to be cash equivalents.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
Accounts
Receivable and Allowance for Doubtful Accounts
Our
accounts receivable represent amounts due from customers for products sold and include an allowance for uncollectible accounts
which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts. At March
31, 2019, March 31, 2018 and December 31, 2017, we reserved $129,365, $23,046, and $26,046, respectively, of allowance for doubtful
accounts.
License
Agreements
We
are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas
limited liability company, or JJF. The license agreement grants us the exclusive worldwide rights through October 15, 2021 to
Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale,
and commercial exploitation of Jesse James Branded Products. In addition, Mr. James agreed to make himself available for certain
promotional activities and to promote Jesse James Branded Products through his own social media outlets. We agreed to pay Mr.
James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses
and reasonable travel expenses. We also issued 100,000 shares of our common stock upon the execution of the license agreement
with the potential issuance of up to 75,000 additional shares of common stock upon achieving certain gross sales with $15 million
in gross sales required to earn the entire 75,000 shares.
We
are a party to a license agreement with Jeff Rann, a well-known wild game hunter and spokesman for the firearm and ammunition
industries. The license agreement grants us through February 2022 the exclusive worldwide rights to Mr. Rann’s image rights
and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation
of all Jeff Rann Branded Products. Mr. Rann agreed to make himself available for certain promotional activities and to promote
the Branded Products through his own social media outlets. We agreed to pay Mr. Rann royalty fees on the sale of ammunition and
non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses. We also issued
100,000 shares of our common stock upon the execution of the license agreement with the potential issuance of 75,000 additional
shares of common stock upon achieving certain gross sales with $15 million in gross sales required to earn the entire 75,000 shares.
Amortization
expense for the license agreements for the year ended March 31, 2019, the three months ended March 31, 2018, and the year ended
December 31, 2017 were $50,000, $12,500, and $45,833, respectively.
Patent
In
September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with
Hallam, Inc, a Texas corporation, with ATI being the survivor. Under the terms of the Merger, we issued to Hallam, Inc.’s
two shareholders, 600,000 shares of our common stock, subject to restrictions, and payment of $200,000. The first payment of $100,000
to the Hallam, Inc. shareholders was paid on September 13, 2017, and the second payment of $100,000 was paid on February 6, 2018.
The
shares were valued at $1.25 and the aggregate value of $950,000 was recorded as a patent asset. This asset will be amortized from
September 2017, the first full month of the acquired rights, through October 29, 2028. Patent amortization expense for the year
ended March 31, 2019, the three months ended March 31, 2018, and the year ended December 31, 2017 were $85,074, $24,461, and $25,166.
Under
the terms of the Merger, ATI succeeded to all of the assets of Hallam, Inc. and assumed the liabilities of Hallam, Inc., which
were none. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence
Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana
at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment
to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. Under
the terms of the Exclusive License Agreement, the Company is obligated to pay a royalty to the patent holder, based on a $0.01
per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For year
ended March 31, 2019, the three months ended March 31, 2018 and the year ended December 31, 2019, the Company accrued $33,920,
$10,783, and $6,000 respectively under this agreement.
In
August 2018, we applied for additional patent coverage for the manufacturing methods or application of the Hybrid Luminescence
Ammunition Technology on a variety of projectile and ammunition types. The costs of filing this patent were expensed, but may
be recapitalized pending the outcome of the USPTO’s review of the application.
On
October 5, 2018, we completed the acquisition of SW Kenetics Inc. on (See Note 7). Under the terms of the Merger, ATI succeeded
all of the assets of SW Kenetics, Inc. and assumed all of the liabilities. The primary asset of SW Kenetics Inc. was a pending
patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc.
pursuant to Intellectual Property Rights Agreement on September 27, 2018.
We
intend to continue building our patent portfolio to protect our proprietary technologies and processes, and will file new applications
where appropriate to preserve our rights to manufacture and sell our branded lines of ammunition.
Other
Intangible Assets
On
March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc.,
completed its acquisition of selected assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales
operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement (See Note 10). The intangible assets
acquired include a tradename, customer relationships, and intellectual property. For the year ended March 31, 2019,
amortization of the other intangibles assets was $61,803.
Impairment
of Long-Lived Assets
We
continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether
the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future
cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying
amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair
value less costs to sell. No impairment expense was recognized for the year ended March 31, 2019, the three month period ended
March 31, 2018 or the year ended December 31, 2017.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
Revenue
Recognition
We
generate revenue from the production and sale of ammunition. We recognize revenue according to ASC 606. When the customer obtains
control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in
exchange for those goods and services. The Company applies the following five-step model to determine revenue recognition:
|
●
|
identification
of a contract with a customer
|
|
●
|
identification
of the performance obligations in the contact
|
|
●
|
determination
of the transaction price
|
|
●
|
allocation
of the transaction price to the separate performance allocation
|
|
●
|
recognition
of revenue when performance obligations are satisfied
|
The
Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to
in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined
to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are
performance obligations, and assesses whether each promised good or service is distinct. Our contracts contain a single performance
obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount
of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied
or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product,
which typically occurs upon shipment of the product.
For
the year ended March 31, 2019, and the three months ended March 31, 2018 the Company’s customers that comprised more than
ten percent (10%) of total revenues and accounts receivable were as follows:
|
|
For
the
Year
Ended
March 31, 2019
|
|
|
For
the
Three
Months Ended
March 31, 2018
|
|
|
For
the
Year
Ended
December 31, 2017
|
|
PERCENTAGES
|
|
Revenues
|
|
|
Accounts Receivable
|
|
|
Revenues
|
|
|
Accounts Receivable
|
|
|
Revenues
|
|
|
Accounts Receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
24.6
|
%
|
|
|
29.4
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
B
|
|
|
19.1
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
C
|
|
|
10.0
|
%
|
|
|
-
|
|
|
|
35.5
|
%
|
|
|
54.6
|
%
|
|
|
57.8
|
%
|
|
|
27.4
|
%
|
D
|
|
|
-
|
|
|
|
19.0
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
E
|
|
|
-
|
|
|
|
-
|
|
|
|
17.1
|
%
|
|
|
12.6
|
%
|
|
|
-
|
|
|
|
-
|
|
F
|
|
|
-
|
|
|
|
-
|
|
|
|
15.1
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
G
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20.4
|
%
|
H
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12.7
|
%
|
|
|
|
53.7
|
%
|
|
|
48.4
|
%
|
|
|
67.7
|
%
|
|
|
67.2
|
%
|
|
|
57.8
|
%
|
|
|
60.5
|
%
|
Advertising
Costs
We
expense advertising costs as they are incurred. We incurred advertising and marketing costs of $554,266 $245,472 and $220,154
for the year ended March 31, 2019, for the three months ended March 31, 2018 and for the year ended December 31, 2017, respectively.
Fair
Value of Financial Instruments
We
measure options and warrants at fair value in accordance with Accounting Standards Codification 820 – Fair Value Measurement
(“ASC 820”). The objective of ASC 820 is to increase consistency and comparability in fair value measurements and
to expand disclosures about fair value measurements. ASC 820 defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 specifies a valuation
hierarchy based on whether the inputs to those valuation techniques are observable or unobservable.
Observable
inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions.
These two types of inputs have created the following fair value hierarchy:
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.
This
hierarchy requires us to minimize the use of unobservable inputs and to use observable market data, if available, when estimating
fair value.
We
value all common stock issued for services on the date of the agreements, using the price at which shares were being sold to private
investors or at the value of the services performed.
We
valued warrants issued for the reduction in conversion price for the conversion of Convertible Promissory Notes at the grant date
of March 31, 2019 using valuation methods and assumptions that consider, among other factors, the fair value of the underlying
stock, risk free interest rate, volatility, and expected life.
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
2.39
|
%
|
|
|
2.05
|
%
|
|
|
1.31
- 1.5 %
|
|
Expected volatility
|
|
|
45
|
%
|
|
|
195
|
%
|
|
|
250
|
%
|
Expected term
|
|
|
2.5 years
|
|
|
|
1 year
|
|
|
|
1 - 1.5 years
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
Equipment
acquired in the March 15, 2019 acquisition of the Jagemann Casings was valued at fair value on the acquisition date by a third
party valuation firm.
We
valued warrants issued for services at the grant date of March 12, 2018 using valuation methods and assumptions that consider,
among other factors, the fair value of the underlying stock, risk free interest rate, volatility, and expected life.
In
the year ended December 31, 2017, Equipment acquired in the foreclosure transaction and the patent were valued on their respective
acquisition dates using fair values.
|
|
Quoted Active
Markets
for
Identified
Assets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Unobservable
Inputs
|
|
|
Total
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock awards
|
|
$
|
-
|
|
|
$
|
1,172,974
|
|
|
$
|
-
|
|
|
$
|
1,172,974
|
|
Executive stock grant expense
|
|
|
-
|
|
|
|
703,030
|
|
|
|
-
|
|
|
|
703,030
|
|
SWK patent acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
4,624,005
|
|
|
|
4,624,005
|
|
Jagemann Munition Components acquired intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
5,912,305
|
|
|
|
5,912,305
|
|
Stock and warrants issued for convertible promissory notes
|
|
|
-
|
|
|
|
358,800
|
|
|
|
-
|
|
|
|
358,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock awards
|
|
$
|
-
|
|
|
$
|
482,432
|
|
|
$
|
-
|
|
|
$
|
482,432
|
|
Executive stock grant expense
|
|
|
-
|
|
|
|
106,563
|
|
|
|
-
|
|
|
|
106,563
|
|
Warrants issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Inventories
We
state inventories at the lower of cost or market. We determine cost using the average cost method. Our inventory consists of raw
materials, work in progress, and finished goods. Cost of inventory includes cost of parts, labor, quality control, and all other
costs incurred to bring our inventories to condition ready to be sold. We periodically evaluate inventories for obsolescence.
Property
and Equipment
We
state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge
minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method
over estimated useful lives, which are generally five to ten years.
Compensated
Absences
We
accrue a liability for compensated absences in accordance with Accounting Standards Codifications 710 – Compensation –
General.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
Stock-Based
Compensation
We
account for stock-based compensation at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718). There were 702,500 shares
of common stock issued to employees, members of the Board of Directors, and members of the Advisory Committee for services during
the year ended March 31, 2019.
On
March 12, 2018, we entered into an employment agreement with an executive that included, among other provisions, an equity grant
of 400,000 shares of restricted common stock that vests at the rate of 100,000 shares annually for four years. The $660,000 compensation
value is being recognized ratably on a straight-line basis over the four-year period covered by the agreement.
On
May 1, 2018, we entered into an employment agreement with Robert D. Wiley, Chief Financial Officer, that included, among other
provisions, an equity grant of 100,000 shares of restricted common stock that vests at the rate of 33,333 shares annually for
three years. The $250,000 compensation value is being recognized on a straight-line basis over the three-year period covered by
the agreement.
From
September 2018 through March 2019, we entered into seven separate employment agreements that included in total, among other provisions,
equity grants of 535,000 shares of restricted common stock that vests annually over the next four years. The total compensation
value of $1,376,000 is being recognized on a straight-line basis over the periods covered by each agreement, up to four years.
Concentrations
of Credit Risk
Accounts
at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at various times. As of
March 31, 2019, our bank account balances exceeded federally insured limits.
Income
Taxes
We
file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income
taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC
740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes.
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and
liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected
to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized,
a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those
positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is
greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change
in judgment occurs. We currently have substantial net operating loss carryforwards. We have recorded a valuation allowance equal
to the net deferred tax assets due to the uncertainty of the ultimate realization of the deferred tax assets.
Contingencies
Certain
conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will
only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against
us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted
claims and the perceived merits of the amount of relief sought or expected to be sought therein.
If
the assessment of a contingency indicates that it is possible that a material loss has been incurred and the amount of the liability
can be estimated, the estimated liability would be accrued in our consolidated financial statements. If the assessment indicates
that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material,
would be disclosed. There were no known contingencies at March 31, 2019, March 31, 2018 or December 31, 2017.
Recent
Accounting Pronouncements
In
May 2014, FASB issued ASU 2014-09, “Revenue from Contracts with Customers”. This ASU is a comprehensive new revenue
recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an
amount that reflects the consideration it expects to receive in exchange for those goods or services. The revised effective date
for this ASU is for annual and interim periods beginning on or after December 15, 2017, and early adoption will be permitted,
but not earlier than the original effective date of annual and interim periods beginning on or after December 15, 2016, for public
entities. We adopted ASU 2014-09 as of January 1, 2018, and it did not have a material impact on the Company’s consolidated
results of operations, financial position or cash flows for the year ended March 31, 2019 and the three months ended March 31,
3018.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
Sales
are initiated in three ways –
|
●
|
third
party sales representative obtains signed purchase order from a customer
|
|
●
|
direct
contact by in-house sales representatives who obtains signed purchase order
|
|
●
|
electronic
purchase order from a customer (usually the very large customers)
|
Once
a customer’s order is received a sales order is generated by authorized sales or management personnel. Once approved for
shipping, the sales order is entered, the inventory control department will pull the purchased items from the inventory or if
needed will request the manufacture of a specific product. When the items that were ordered are available for shipment, the merchandise
is prepared for shipping and shipped by FedEx or common carrier.
All
sales are recorded upon shipment and, depending on credit worthiness of customer, the payment terms will vary from thirty (30)
to sixty (60) days. No refunds are allowed on any product shipped.
Each
product manufactured by the Company has standard specifications and performance objectives. The Company has an extensive product
testing program and, if the Company were given notice of a product defect by a customer, the Company would request the return
of the product so that the manufacturing defect could be identified. From inception to March 31, 2019, the Company has had no
returned products related to product warranty.
The
revenue recognition procedures set forth above have been used by the Company since its inception and are consistent with requirements
of ASC 606 “Revenue from Contracts with Customers”.
In
February 2016, the FASB issued ASU 2016-02 – “Leases (Topic 842)” Under ASU 2016-02, entities will be required
to recognize lease asset and lease liabilities by lessees for those leases classified as operating leases. Among other changes
in accounting for leases, a lessee should recognize in the statement of financial position a liability to make lease payments
(the lease liability) and a right-of-use asset representing its right to (and a lessor) should include payments to be made in
optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option
to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of
lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. The amendments in
ASU 2016-02 will become effective for fiscal years beginning after December 15, 2018, including interim periods with those fiscal
years for public business entities. We are currently evaluating the effect of the adoption of ASU 2016-02 will have on our consolidated
results of operations, financial position or cash flows.
On
June 20, 2018, the FASB expanded the scope of Accounting Standards Codification (ASC) 718, Compensation – Stock Compensation,
to include share-based payments to nonemployees for goods and services. The accounting board said the amendments in Accounting
Standards Update (ASU) No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based
Payment Accounting, align the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC
505-50, Equity – Equity-Based Payments to Non-Employees. We anticipate that this ASC will not have a material effect on
the Company’s financial statements.
The
amendments in ASU No. 2018-07 apply “to all share-based payment transactions in which a grantor acquires goods or services
to be used or consumed in a grantor’s own operations by issuing share-based payment awards,” the FASB said. But the
amended guidance does not cover stock compensation that is used to provide financing to the company that issued the shares or
stock awards tied to a sale of goods or services as part of a contract accounted for according to ASC 606, Revenue From Contracts
With Customers.
The
amendments are effective for public companies for fiscal years that begin after December 15, 2018, and the quarterly and other
interim periods in those years, the FASB said the amended guidance can be applied before it becomes effective, but businesses
are not permitted to use the guidance in ASU No. 2018-07 before they have implemented ASC 606. We have evaluated the effect of
the adoption of ASU 2018-07 will have on our consolidated results of operations, financial position or cash flows and determine
the effects will not be material to the Company’s financial statements.
Management
does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the
accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under
the circumstances.
Loss
Per Common Share
We
calculate basic loss per share using the weighted-average number of shares of common stock outstanding during each reporting period.
Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants, using various methods,
such as the treasury stock or modified treasury stock method, in the determination of dilutive shares outstanding during each
reporting period. We have issued warrants to purchase 8,143,115 shares of common stock that are potentially dilutive. All weighted
average numbers were adjusted for the reverse stock split and merger transaction. Due to the loss from operations in the year
ended March 31, 2019, the three month period ended March 31, 2018, and the year ended December 31, 2017, there are no common shares
added to calculate the dilutive EPS for those periods as the effect would be antidilutive.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
3 – VENDOR NOTES RECEIVABLE
While
living in Payson, AZ, a small city 90 minutes north of Phoenix, AMMO’s CEO, Fred Wagenhals, was approached by Payson’s
mayor to discuss Advanced Tactical Armament Concepts, LLC (ATAC), an ammunition manufacturing company located in Payson. ATAC
was experiencing financial difficulties and the mayor was concerned about the economic effect it would have on his city if ATAC’s
manufacturing plant closed down. The mayor asked Mr. Wagenhals if he could develop a plan to salvage the ATAC plant and restore
operations.
Before
Mr. Wagenhals could assist, ATAC’s financial situation worsened and the business ceased operations. ATAC’s bank, WESTERN
ALLIANCE BANK, petitioned the bankruptcy court to appoint a receiver to protect the bank’s collateral. Wagenhals approached
the bank about resolving the receivership issue and re-opening the business. The bank agreed to delay its action in exchange for
an immediate payment of $235,000 by ATAC and an increase of $665,000 in ATAC’s working capital. ATAC borrowed $900,000 plus
$135,000 in stipulated interest from a related party of Wagenhals (Mansfield L.L.C.). On October 24, 2016, AMMO, Inc. completed
negotiations with Western Alliance Bank to purchase the bank’s position ($1,910,993) as the note holder for $1,550,000.
Vendor
note receivable consisted of the following at December 31, 2016:
Advanced Tactical Armament Concepts, L.L.C. Notes Payable Purchased by Ammo
|
|
Amount
|
|
|
|
|
|
Western Alliance Bank – Balance outstanding as of October 24, 2016
|
|
$
|
1,910,993
|
|
Negotiated Discount with Western Alliance Bank to assume the Note Receivable
|
|
|
(360,993
|
)
|
AMMO, Inc. Net Purchase Price for Western Alliance Note Payable
|
|
|
1,550,000
|
|
Mansfield, LLC Note Outstanding, inclusive of $135,000 fee outstanding
|
|
|
1,035,000
|
|
AMMO, Inc. Net Purchase Price to Acquire Notes Receivable of Western
Alliance Bank & Mansfield LLC
|
|
$
|
2,585,000
|
|
On
November 21, 2016 AMMO applied for its’ Federal Firearms License which it received on February 1, 2017. Between November
21, 2016 and February 1, 2017, Wagenhals made an agreement with the owners of ATAC to start production of AMMO, Inc. branded ammunitions.
This was accomplished by providing ATAC $219,000 in raw materials and ATAC was advanced $89,000 to pay selected ATAC vendors whose
materials were required in the manufacturing process and to re-hire production employees. AMMO negotiated an agreement with the
management of ATAC to liquidate the vendor notes advances balance by manufacturing AMMO branded products in the future.
ATAC’s
operations continued to worsen and on February 20, 2017, a sale was held for the disposition of collateral for Advanced Tactical
Armament Concepts, LLC, a Nevada Limited Liability Company. As a secured party, we submitted a creditor bid. Our bid for the sale
for the disposition of collateral was the highest and was accepted and we assumed operation of the manufacturing facility. We
reflected this transaction in the following manner:
Notes Receivable
|
|
$
|
(2,585,000
|
)
|
Vendor advances receivable
|
|
|
96,552
|
|
Accounts receivable
|
|
|
20,965
|
|
Inventories
|
|
|
644,447
|
|
Equipment
|
|
|
543,115
|
|
Loss on notes receivable
|
|
|
1,279,921
|
|
|
|
$
|
-
|
|
The
management of AMMO reviewed their options for accounting for the foreclosure on ATAC’s collateral and determined that they
had not purchased a business, therefore the assets acquired in foreclosure would have to be assessed for their fair values. The
receivables and inventories were valued at their collectible amounts or replacement costs. AMMO had the equipment appraised by
a professional appraisal firm.
NOTE
4 – INVENTORIES
At
March 31, 2019, March 31, 2018, December 31, 2017, the inventory balances consisted of the following:
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Finished product
|
|
$
|
2,628,241
|
|
|
$
|
809,680
|
|
|
$
|
1,007,291
|
|
Raw materials
|
|
|
1,635,130
|
|
|
|
1,471,666
|
|
|
|
764,810
|
|
Work in process
|
|
|
509,226
|
|
|
|
123,661
|
|
|
|
20,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,772,597
|
|
|
$
|
2,405,007
|
|
|
$
|
1,792,314
|
|
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
5 – EQUIPMENT
We
state property and equipment at historical cost less accumulated depreciation. We compute depreciation using the straight-line
method at rates intended to depreciate the cost of assets over their estimated useful lives, which are generally five to ten years.
Upon retirement or sale of property and equipment, we remove the cost of the disposed assets and related accumulated depreciation
from the accounts and any resulting gain or loss is credited or charged to selling, general, and administrative expenses. We charge
expenditures for normal repairs and maintenance to expense as incurred.
We
capitalize additions and expenditures for improving or rebuilding existing assets that extend the useful life. Leasehold improvements
made either at the inception of the lease or during the lease term are amortized over the shorter of their economic lives or the
lease term including any renewals that are reasonably assured.
Property
and equipment consisted of the following at March 31, 2019, March 31, 2018 and December 31, 2017:
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Leasehold Improvements
|
|
$
|
98,444
|
|
|
$
|
17,772
|
|
|
$
|
15,475
|
|
Furniture and Fixtures
|
|
|
154,777
|
|
|
|
8,102
|
|
|
|
33,751
|
|
Vehicles
|
|
|
103,511
|
|
|
|
89,388
|
|
|
|
36,500
|
|
Equipment
|
|
|
18,689,140
|
|
|
|
879,871
|
|
|
|
184,626
|
|
Tooling
|
|
|
117,390
|
|
|
|
359,351
|
|
|
|
579,951
|
|
Construction in Progress
|
|
|
3,352,669
|
|
|
|
-
|
|
|
|
-
|
|
Total property and equipment
|
|
$
|
22,515,931
|
|
|
$
|
1,354,484
|
|
|
$
|
847,303
|
|
Less accumulated depreciation
|
|
|
(516,144
|
)
|
|
|
(113,158
|
)
|
|
|
(77,861
|
)
|
Net equipment
|
|
|
21,999,787
|
|
|
|
1,241,326
|
|
|
|
769,442
|
|
Depreciation
expense for the year ended March 31, 2019, for the three months ended March 31, 2018, and for the year ended December 31, 2017
totaled $402,986, $35,297, and $77,861, respectively.
NOTE
6 – CONVERTIBLE NOTE PAYABLE
We
entered into an agreement for a short-term convertible note payable to an unrelated party on December 22, 2016 with a 60-day maturity
and a $1,875,000 principal balance. The note had a one-time fee of $375,000, which was amortized as interest ratably over the
60-day period. The note is convertible into shares of our common stock and one stock purchase warrant at a conversion price of
$1.25 per unit and an exercise price of $2.50.
During
the year ended December 31, 2017, we recognized $356,250 of interest as amortization of a portion of the one-time interest fee
and accrued an additional $74,896 in interest expense. As of December 31, 2017, the balance of the note payable was $1,575,000.
During
the three months ended March 31, 2018, we recorded no additional interest expense and the note was paid in full.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
7 – NOTES PAYABLE – RELATED PARTY
On
December 16, 2016, we and Mansfield, an entity controlled by our Chief Executive Officer, entered into a note purchase and sale
agreement to purchase a promissory note held by Mansfield and payable by ATAC. We purchased the promissory note for $1,035,000.
The note was repaid on December 31, 2017. Interest on the note was imputed in the amount of $46,340, as there was no stated interest
rate in the note document.
In
connection with the acquisition of the patent on August 22, 2017, we were obligated to pay $200,000 to Hallam, Inc.’s shareholders.
The first $100,000 was paid on August 22, 2017, and a note was executed in the amount of $100,000 which was paid in full on February
2, 2018.
On
August 29, 2017, we borrowed $100,000 from a paid legal consultant to whom we issued warrants to purchase 40,000 shares of common
stock with an exercise price of $0.50 per share, expiring two years from date of issuance. The warrants were valued at $46,188
and recognized as interest expense in 2017. The note was paid in full on October 31, 2017.
In
connection with the acquisition of the casing division of Jagemann Stamping Company, a $10,400,000 promissory note was executed
and is described in Note 10. The promissory note, under which $500,000 was paid on March 25, 2019 using funds raised for the acquisition,
had a remaining balance at March 31, 2019 of $9,900,000. On April 30, 2019, the original due date of the note was subsequently
extended to April 1, 2020. The note bears interest per annum at approximately 4.6% payable in arrears monthly until October 1,
2019 when the interest rate increases to 9% per annum payable monthly until principal and accrued interest are paid in full. In
May of 2019, the Company paid $1,500,000 on the balance of the note. As of March 31, 2019, we accrued interest of $22,196 related
to the note. The note is secured by all the equipment purchased from Jagemann Stamping Company and was valued at $18,869,541 in
the accompanying financial statements.
NOTE
8 – CONVERTIBLE PROMISSORY NOTES
On
January 9, 2019, we completed the issuance of 10% Convertible Promissory Notes in the principal amount of $1,710,000 to accredited
investors through a private placement in exchange for cash in an equal amount. The principal amounts were raised from the period
of October 23, 2018 to December 28, 2018. As a result of the issuance of the Convertible Promissory Notes, the placement agent
received an aggregate commission of $171,000, and $5,000 in escrow fees were paid, totaling $176,000 of Note Issuance Costs. As
of March 31, 2019, we recorded $151,856 of interest expense related to the Note Issuance Costs.
The
Maturity Date of the notes is the two year anniversary from the date of issuance. The holders have the option to convert the entire
principal of the Convertible Promissory Note into Common Stock at a conversion price equal to $2.50 per share at any time until
the Maturity Date, subject to “Qualified Financing.” Qualified Financing means the next equity round of financing
of the Company that raises not less than $10,000,000 gross proceeds from institutional(s) or commercial lender(s) in the aggregate
with any combination of Common Stock (valued at the close of the Trading Day on the date of the closing for the financing) or
debt. In the event of Qualified Financing, the Convertible Promissory Notes will automatically convert 100% of the principal amount
into Common Stock at a conversion price equal to $2.50 per share. As of March 31, 2019, we accrued $65,291 of interest expense
related to the Convertible Promissory Notes.
On
February 28, 2019, the company notified the holders of an offer to convert Convertible Promissory Notes and Accrued Interest into
Common Stock at a conversion price of $2.00 per share and receive one-half warrant exercisable at $2.40 per share for five years
in conjunction with each converted share On March 29, 2019, the Company converted $1,410,000 of Convertible Promissory Notes and
$52,065 of Accrued Interest into 731,039 shares of Common Stock and issued Warrants to purchase 365,523 shares of Common Stock.
The offer ended on March 29, 2019 at 11:59 PM. As a result of the conversion of the Convertible Promissory Notes, the Company
accrued $42,300 for a 3% cash conversion fee on the principal converted payable to the placement agent, Paulson Investment Company.
Additionally, $118,351 of Unamortized Note Issuance Costs were amortized and $358,800 of Interest Expenses related to the reduction
in conversion price were recognized as result of the conversions.
The
holders that did not elect to convert their notes during this period have the option to convert their entire principal of the
Convertible Promissory Note into Common Stock per the terms of the original agreement.
As
of March 31, 2019, there was $300,000 in principal remaining and $23,145 of Unamortized Note Issuance Costs.
On
June 5, 2019, the remaining $300,000 of Convertible Promissory Notes were mandatorily converted into shares of our common stock
pursuant to the terms of the Note. The Company converted $300,000 of Convertible Promissory Notes and $18,228 of Accrued Interest
were converted into 127,291 shares of Common Stock at a conversion price of $2.50. The Company accrued $9,000 for a 3% cash conversion
fee on the principal converted payable to the placement agent, Paulson Investment Company.
NOTE
9 – CAPITAL STOCK
Our
authorized capital consists of 200,000,000 shares of common stock with a par value of $0.001 per share.
During
the 12-month period ended December 31, 2017, we issued 6,733,793 shares of common stock as follows:
|
●
|
604,371
were issued in connection with the acquisition of our business assets
|
|
●
|
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 valued at $750,000 were issued to acquire the use of a patent
|
|
●
|
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
|
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
During
the three-month period ended March 31, 2018, we issued 5,906,710 shares of common stock as follows:
|
●
|
5,614,210
shares were sold to investors for $9,263,424
|
|
●
|
292,500
shares valued at $482,624 were issued to employees and directors as compensation
|
During
the year ended March 31, 2019, we issued 15,618,572 shares of common stock as follows:
|
●
|
5,796,336
shares were sold to investors for $10,903,930
|
|
●
|
1,972,800
shares were issued through exercised warrants of $4,767,625
|
|
●
|
10,495
shares were issued through a cashless exercise of 14,719 warrants
|
|
●
|
702,500
shares valued at $1,172,974 were issued to employees, members of the Board of Directors, and members of the Advisory Committee
as compensation
|
|
●
|
5,000
shares were issued for services valued at $22,350
|
|
●
|
1,700,002
shares were issued to the shareholders of SW Kenetics, Inc. (subject to claw back provisions) valued $4,624,005 in connection
with the acquisition
|
|
●
|
4,750,000
shares were issued to Jagemann Stamping Company valued at $9,500,000 in connection with the acquisition of Jagemann Casings
|
|
●
|
731,039
shares were issued for the conversion of Convertible Promissory Notes valued at $1,820,865
|
|
●
|
49,600
shares were purchased by the Company for a price of $124,000
|
In
November of 2017, the Board of Directors approved the 2017 Equity Incentive Plan (“the Plan”). Under the Plan, 485,000
shares of the common stock were reserved and authorized to be issued. As of December 31, 2017, 200,000 shares of common stock
were approved and issued under the Plan, and we recognized approximately $250,000 of related consulting expense. On January 10,
2018, 200,000 shares were awarded, and we recognized $330,000 of compensation expense. There are 85,000 shares remaining to be
issued under the Plan.
In
October of 2017. we entered into a placement agent agreement to secure equity capital from qualified investors to provide funds
to expand our operations. The offering consisted of Units priced at $1.65, which included one share of common stock and one five-year
warrant to purchase an additional half-share of common stock for an exercise price of $2.00 per share. Effectively, every two
units purchased provided the investor with a five-year warrant at an exercise price of $2.00 per share. Units sold under this
arrangement totaled 594,702 shares of common stock and 297,351 warrants for $981,250 during the year ended December 31, 2017,
and 5,614,210 shares of common stock and 2,807,105 warrants for a total of $9,263,424 for the three months ended March 31, 2018.
The total number of Units covered by this offering was 6,060,606, and the amount was $10,000,000. In March 2018, we entered into
a second placement agent agreement with the same terms for up to an additional $3,500,000.
For
services provided under the placement agreements, the placement agent collected a 12% cash fee on the sale of every Unit and a
fee payable in warrants equaling 12% of the total Units sold. These warrants have a term of seven years and an exercise price
of $1.65 per share. The cash fee totaled $117,750 for the year ended December 31, 2017 and $1,137,211 for the three months ended
March 31, 2018, including reimbursed expenses. Under this agreement, we recognized 71,364 and 673,705 warrants as authorized,
but unissued as of December 31, 2017 and March 31, 2018, respectively.
In
April of 2018, our second placement agreement to secure equity capital from qualified investors to provide funds to our operations
ended. Units sold under this agreement during the year ended March 31, 2019 totaled 1,967,886 shares of common stock and 983,943
warrants for $3,247,030. The cash fee totaled $389,644 for the year ended March 31, 2019, including reimbursed expenses. We authorized
an additional 236,145 warrants to the placement agent under the terms of the agreement and issued a total of 981,213 warrants
to the placement agent for the two placement agent agreements.
In
December of 2018, we entered into a placement agreement to secure equity capital from qualified investors to provide up to $13,000,000
in funds to our operation. The offering consisted of Units priced at $2.00, which included one share of common stock and one five-year
warrant to purchase an additional half-share of common stock for an exercise price of $2.40 per share. Effectively, every two
units purchased provided the investor with a five-year warrant at an exercise price of $2.40 per share. Units sold under this
agreement totaled 3,828,450 shares of common stock and warrants to purchase 1,914,225 shares of our Common Stock for $7,656,900
for the year ended March 31, 2019. As of June 28, 2019, there is up to $3,546,000 in funds to be provided under this placement
agreement.
For
services provided under the placement agreements, the placement agent collected a 12% cash fee on the sale of every Unit and a
fee payable in warrants equaling 12% of the total Units sold. These warrants have a term of five years and an exercise price of
$2.00 per share. The cash fee totaled $942,828 for the year ended March 31, 2019, including reimbursed expenses and the fee payable
in warrants totaled 459,414 warrants.
On
March 29, 2019, the Company converted $1,410,000 of Convertible Promissory Notes and $52,065 of Accrued Interest into 731,039
shares of Common Stock and Warrants to purchase 365,523 shares of Common Stock. We accrued $42,300 for a 3% cash conversion fee
on the principal converted payable to the placement agent, Paulson Investment Company.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
At
March 31, 2019, March 31, 2018, and December 31, 2017, outstanding and exercisable stock purchase warrants consisted of the following:
|
|
December 31, 2017
|
|
|
|
Number of Shares
|
|
|
Weighted Averaged Exercise
Price
|
|
|
Weighted Average Life Remaining
(Years)
|
|
Outstanding at December 31, 2016
|
|
|
720,000
|
|
|
$
|
2.22
|
|
|
|
1.95
|
|
Granted
|
|
|
4,542,338
|
|
|
|
2.23
|
|
|
|
1.9
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited or cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2017
|
|
|
5,262,338
|
|
|
$
|
2.43
|
|
|
|
1.77
|
|
Exercisable at December 31, 2017
|
|
|
5,262,338
|
|
|
$
|
2.43
|
|
|
|
1.77
|
|
|
|
March 31, 2018
|
|
|
|
Number of Shares
|
|
|
Weighted Averaged Exercise
Price
|
|
|
Weighted Average Life Remaining
(Years)
|
|
Outstanding at December 31, 2017
|
|
|
5,262,338
|
|
|
$
|
2.50
|
|
|
|
1.77
|
|
Granted
|
|
|
3,609,822
|
|
|
|
2.42
|
|
|
|
5.13
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited or cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2018
|
|
|
8,872,160
|
|
|
$
|
2.23
|
|
|
|
2.97
|
|
Exercisable at March 31, 2018
|
|
|
8,872,160
|
|
|
$
|
2.23
|
|
|
|
2.97
|
|
|
|
March 31, 2019
|
|
|
|
Number of Shares
|
|
|
Weighted Averaged Exercise
Price
|
|
|
Weighted Average Life Remaining
(Years)
|
|
Outstanding at March 31, 2018
|
|
|
8,872,160
|
|
|
$
|
2.23
|
|
|
|
2.97
|
|
Granted
|
|
|
4,233,274
|
|
|
|
2.23
|
|
|
|
4.62
|
|
Exercised
|
|
|
(1,987,519
|
)
|
|
|
2.41
|
|
|
|
-
|
|
Forfeited or cancelled
|
|
|
(2,974,800
|
)
|
|
|
2.47
|
|
|
|
-
|
|
Outstanding at March 31, 2019
|
|
|
8,143,115
|
|
|
$
|
2.09
|
|
|
|
4.35
|
|
Exercisable at March 31, 2019
|
|
|
8,143,115
|
|
|
$
|
2.09
|
|
|
|
4.35
|
|
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
As
of March 31, 2019, we had 8,143,115 warrants outstanding. Each warrant provides the holder the right to purchase up to one share
of our Common Stock at a predetermined exercise price. The outstanding warrants consist of (1) warrants to purchase an aggregate
of 349,060 shares of Common Stock at an average price of $2.50 per share until March 2020; (2) warrants to purchase 966,494 shares
of Common Stock at an exercise price of $1.65 per share until April 2025; (3) warrants to purchase 4,547,813 shares of our Common
Stock of an exercise price of $2.00 per share until over the next five years, and (4) warrants to purchase 2,279,748 shares of
Common Stock at an exercise price of $2.40 until March 2024.
On
May 31, 2018, per the terms of the private offering dated January 25, 2017, we called for the exercise of warrants to purchase
a total of 4,947,600 shares of our Common Stock. According to the terms of the Warrant Purchase Agreement, the warrants could
be called when the average price of our common stock traded at $5.00 per share or higher, for a consecutive 30 day period. This
call provision was met on May 21, 2018. As a result, we issued formal notice to all warrant holders on May 31, 2019, advising
them that they had until July 6, 2018, to exercise their warrants, or they would become null and void. The total number of warrants
included in the January 25, 2017 offering were 4,947,600 and were priced as follows: 4,790,100 warrants at an exercise price of
$2.50, 67,500 warrants at an exercise price of $1.25 and 90,000 warrants at an exercise price of $0.50.
As
of July 6, 2018, a total of 1,972,800 warrants were exercised to purchase an equivalent 1,972,800 shares of common stock at an
average price of $2.42 and 2,974,800 warrants to purchase shares of Common Stock were cancelled. On July 12, 2018, the company
filed a Form 8-K to report the activity of this event.
Additionally,
there was a cashless exercise of 14,719 warrants resulting in the issuance of 10,495 shares of Common Stock unrelated to the call
for the exercise of warrants.
NOTE
10 – ACQUISITIONS
SW
Kenetics, Inc.
On
September 27, 2018, AMMO Technologies, Inc. (“ATI”) entered into a definitive Agreement and Plan of Merger with SW
Kenetics Inc. (“SWK”), an Arizona corporation and completed the merger on October 5, 2018. Pursuant to the agreement
SWK merged with and into AMMO Technologies, Inc., with ATI being the survivor. Under the terms of the agreement, we issued to
SW Kenetics Inc.’s three shareholders, 1,700,002 restricted shares of our common stock, payment of $250,000, and a payment
obligation of $1,250,000 subject to completion of specific milestones that we have recorded as Contingent Consideration Payable.
Additionally, the 1,700,002 shares of common stock were issued with claw back provisions to ensure agreed upon objectives are
met. Included among the list of milestones or events that must be completed are significant revenue goals incorporating the product
technology of SWK. The initial payment of $250,000 was made on August 20, 2018. The shares were each valued at $2.72, the weighted
average share price of our Common Stock that was publicly traded and sold through private placement. We recorded the total purchase
consideration to patents as follows:
Cash
|
|
$
|
250,000
|
|
Contingent
Consideration Payable
|
|
|
1,250,000
|
|
Common
Stock
|
|
|
1,700
|
|
Additional
Paid-in Capital
|
|
|
4,622,305
|
|
Fair
Value of Patent
|
|
$
|
6,124,005
|
|
The
fair value originally recorded was determined by a third party valuation firm. SWK’s significant assets only include the
patent asset and the third party valuation firm allocated determined the fair value measurement based on the patent.
SWK
is a research and development firm located in Arizona that has designed a new portfolio of modular projectiles that the Company
believes will advance the force capability of the United States military, as well as NATO member countries. SWK filed a patent
for their technology, which is now pending with the United States Patent and Trademark Office.
On
December 13, 2018, the Company made a $50,000 payment to SW Kenetics, Inc. in connection with the completion of a milestone. The
$50,000 payment reduced the Contingent Consideration Payable.
On February 25, 2019, the Company filed a Current Report on Form 8-K/A to amend the original Form 8-K filed
on October 5, 2019 that announced the completion of the acquisition of SW Kenetics, Inc. The Form 8-K/A included the audited financial
statements of SW Kenetics, Inc. and the Unaudited Pro Forma Combined and Condensed Financial Information.
Jagemann
Stamping Company’s Ammunition Casing Division
On
March 15, 2019, Enlight Group II, LLC (hereinafter referred to as the “Buyer”), a wholly owned subsidiary of AMMO,
Inc., completed its acquisition of selected assets of Jagemann Stamping Company’s (“Seller”) ammunition casing,
projectile manufacturing, and sales operations (“Jagemann Casings”) pursuant to the terms of the Amended and Restated
Asset Purchase Agreement (“Amended APA”) dated March 14, 2019.
In
accordance with the terms of the Amended APA, Buyer paid Seller a combination of $7,000,000 in cash, $10,400,000 delivered in
the form of a Promissory Note, and 4,750,000 shares of AMMO, Inc., common stock valued at $2.00 per share.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
The
fair value of the consideration transferred was valued as of the date of the acquisition as follows:
Cash
|
|
$
|
7,000,000
|
|
Note Payable
|
|
|
10,400,000
|
|
Common Stock
|
|
|
4,750
|
|
Additional Paid-in Capital
|
|
|
9,495,250
|
|
Total Consideration
|
|
$
|
26,900,000
|
|
Total
allocation for the consideration recorded for the acquisition is as follows:
Equipment
|
|
$
|
18,869,541
|
|
Intellectual property
|
|
|
1,773,436
|
|
Customer relationships
|
|
|
1,666,774
|
|
Tradename
|
|
|
2,472,095
|
|
Loss on Purchase
|
|
|
2,118,154
|
|
Total Consideration
|
|
$
|
26,900,000
|
|
The
fair value of the tangible and intangible assets recorded was determined by third party valuation firms. The acquired intangible
assets, have remaining useful lives ranging from three to five years.
Seller
is engaged exclusively in the business of full-service stamping involving, among other things, the manufacture and sale of deep
drawn stampings for use in the ammunition casing and projectile industries. Pursuant to the Amended APA, Buyer acquired the Seller’s
munition and casing division assets (including equipment and intellectual property), and is transitioning the associated employees
to its direct workforce to continue the operations at Seller’s Wisconsin facilities.
On June 24, 2019,
the Company filed a Current Report on Form 8-K/A to amend the original Form 8-K filed on March 18, 2019 that announced the
completion of selected assets of Jagemann Sporting Group’s Wisconsin Casing Division. The Form 8-K/A included the
audited financial statements of the acquired business and the Unaudited Pro Forma Combined and Condensed Financial
Information.
NOTE
11 – ACCRUED LIABILITIES
At
March 31, 2019, March 31, 2018, and December 31, 2017, accrued liabilities were as follows:
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
Accrued payroll
|
|
$
|
248,027
|
|
|
$
|
172,419
|
|
|
$
|
145,779
|
|
Accrued interest
|
|
|
35,422
|
|
|
|
-
|
|
|
|
74,896
|
|
Accrued FAET
|
|
|
145,460
|
|
|
|
133,104
|
|
|
|
26,075
|
|
Accrued professional fees
|
|
|
74,300
|
|
|
|
99,255
|
|
|
|
-
|
|
Other accruals
|
|
|
28,225
|
|
|
|
136,432
|
|
|
|
8,024
|
|
|
|
$
|
531,434
|
|
|
$
|
541,210
|
|
|
$
|
254,774
|
|
NOTE
12 – RELATED PARTY TRANSACATIONS
On
December 16, 2016, we purchased a promissory note in the amount of $1,035,000 from Mansfield L.L.C. (“Mansfield”),
a company owned by our CEO, Fred Wagenhals. We paid $75,000 on the note in the year ended December 31, 2016 and $960,000 in the
year ended December 31, 2017 and recorded imputed interest of $46,340.
From
October 2016 through December 2018, our executive offices were located in Scottsdale, Arizona where we lease approximately 5,000
square feet under a month-to-month triple net lease for $3,800 per month. This space housed our principal executive, administration,
and marketing functions. Our Chairman, President, and Chief Executive Officer owns the building in which these offices are currently
leased.
During
the year ended March 31, 2019, we paid approximately $168,000 in consulting fees, and $53,013 of rent to related parties. During
the period ended March 31, 2018, we paid approximately $69,800 in consulting fees, and $12,434 of rent to related parties. During
the year ended December 31, 2017, we paid approximately $212,700 in consulting fees, $143,000 in rents and corporate overhead
and reimbursed general corporate expenses of $121,500 to related parties.
In
connection with the acquisition of the casing division of Jagemann Stamping Company, a promissory note was executed. The promissory
note, under which $500,000 was paid on March 25, 2019 using funds raised for the acquisition, had a remaining balance at March
31, 2019 of $9,900,000. On April 30, 2019, the original due date of the note was subsequently extended to April 1, 2020. The note
bears interest per annum at approximately 4.6% payable in arrears monthly until October 1, 2019 when the interest rate increases
to 9% per annum payable monthly until principal and accrued interest are paid in full. In May of 2019, the Company paid $1,500,000
on the balance of the Note. As of March 31, 2019, we accrued interest of $22,196 related to the note.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
13 – OPERATING LEASES
We
are obligated under a triple-net operating lease for our 20,000 square foot manufacturing facility located in Payson, Arizona.
The terms of the lease require a payment of approximately $10,000 per month, which includes an estimate for utilities, taxes,
and repairs. This lease expires in November of 2021.
We
believe this facility will be adequate to meet our needs in the near future. However, we are making plans to expand our building
footprint to accommodate additional automation equipment. We intend to pay for these improvements using working capital and will
amortize the costs over the remaining lease period.
The
following table outlines our future contractual financial obligations associated with this lease by fiscal year in which payment
is expected, as of March 31, 2019:
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
Total
|
|
Payson Lease
|
|
$
|
120,000
|
|
|
$
|
120,000
|
|
|
$
|
80,000
|
|
|
$
|
320,000
|
|
Our
executive offices are located in Scottsdale, Arizona where we lease 21,000 square feet of office and warehouse space for $17,702,
which will increase by approximately 4.4% each year. This space houses our principal executive, administration, marketing, and
research and development functions. The lease expires in December of 2023.
The
following table outlines our future contractual financial obligations associated with this lease by fiscal period in which payment
is expected, as of March 31, 2019:
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
Total
|
|
Scottsdale Lease
|
|
$
|
216,591
|
|
|
$
|
226,587
|
|
|
$
|
236,583
|
|
|
$
|
246,580
|
|
|
$
|
147,240
|
|
|
$
|
1,073,581
|
|
Our
ammunition casing operations are located in Manitowoc, Wisconsin where we lease approximately 50,000 square feet. The terms of
the lease provide for a monthly payment of approximately $32,844. The lease expires in March of 2026 and can be renewed every
three years thereafter.
The
following table outlines our future contractual financial obligations associated with this lease by fiscal period in which payment
is expected, as of March 31, 2019:
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
Total
|
|
Manitowoc Lease
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
394,128
|
|
|
$
|
2,758,896
|
|
Additional
offices are located in Scottsdale, Arizona where we lease approximately 5,000 square feet under a month-to-month triple net lease
for $3,800 per month. Our Chief Executive Officer owns the building in which these offices are leased.
Total
lease and rent expense for the year ended March 31, 2019, for the three months ended March 31, 2018 and the year ended December
31, 2017 were $272,700, $47,400 and $199,950, respectively.
In
connection with the acquisition of the casing division of Jagemann Stamping Company, a promissory note was executed. The promissory
note, under which $500,000 was paid on March 25, 2019 using funds raised for the acquisition, had a remaining balance at March
31, 2019 of $9,900,000. On April 30, 2019, the original due date of the note was subsequently extended to April 1, 2020. The note
bears interest per annum at approximately 4.6% payable in arrears monthly until October 1, 2019 when the interest rate increases
to 9% per annum payable monthly until principal and accrued interest are paid in full. In May of 2019, the Company paid $1,500,000
on the balance of the Note. As of March 31, 2019, we accrued interest of $22,196 related to the note.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
14 – INCOME TAXES
As
of March 31, 2019, we had net operating loss carryforwards of approximately $13,229,231, which will expire beginning at the end
of 2036. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future
taxable income.
On
December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act
(the “Tax Act”). The Tax Act reduces the corporate tax rate to 21% effective January 1, 2018. Consequently, we have
recorded an adjustment to the deferred tax provision for the year ended December 31, 2017.
Reconciliation
of the benefit (expense) for income taxes with amounts determined by applying the statutory federal income rate of 21% in 2019
and 2018 and 34% in 2017:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Net (Loss)
|
|
$
|
(11,709,412
|
)
|
|
$
|
(1,797,228
|
)
|
|
$
|
(5,788,901
|
)
|
Benefit (expense) for income taxes computed using the statutory rate of 21% in 2019 and 2018
and 34% in 2017
|
|
|
2,458,977
|
|
|
|
377,418
|
|
|
|
1,968,226
|
|
Non-deductible expense
|
|
|
(918,417
|
)
|
|
|
(161,864
|
)
|
|
|
(360,952
|
)
|
Re-measurement of deferred income taxes due to tax reform
|
|
|
-
|
|
|
|
-
|
|
|
|
(632,683
|
)
|
Change in valuation allowance
|
|
|
(1,540,560
|
)
|
|
|
(215,554
|
)
|
|
|
(974,591
|
)
|
Provision for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Significant
components of the Company’s deferred tax liabilities and assets at March 31, 2019, March 31, 2018, and December 31, 2017
are as follows:
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
Total deferred tax assets – net operating losses
|
|
$
|
2,778,139
|
|
|
$
|
1,237,579
|
|
|
$
|
1,022,025
|
|
Deferred tax liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net deferred tax assets
|
|
|
2,778,139
|
|
|
|
1,237,579
|
|
|
$
|
1,022,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(2,778,139
|
)
|
|
$
|
(1,237,579
|
)
|
|
$
|
(1,022,025
|
)
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
At
March 31, 2019, net operating loss (“NOL”) carry forwards summary follows:
Expiring December 31,
|
|
|
|
2036
|
|
$
|
139,512
|
|
2037
|
|
|
4,727,276
|
|
|
|
|
4,866,788
|
|
Non-Expiring NOL
|
|
|
|
|
2018
|
|
|
1,026,447
|
|
2019
|
|
|
7,335,996
|
|
Total
NOL Carryforward
|
|
$
|
13,229,231
|
|
The
company has never had an Internal Revenue Service audit; therefore, the tax periods ended December 31, 2016 and 2017 and March
31, 2018 and 2018 are subject to audit.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
15 – INTANGIBLE ASSETS
Intangible
assets consisted of the following:
|
|
|
|
|
March 31, 2019
|
|
|
|
Life
|
|
|
Licenses
|
|
|
Patent
|
|
|
Other Intangible Assets
|
|
Licensing Agreement – Jesse James
|
|
|
5
|
|
|
$
|
125,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Licensing Agreement – Jeff Rann
|
|
|
5
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
Streak Visual Ammunition patent
|
|
|
11.2
|
|
|
|
-
|
|
|
|
950,000
|
|
|
|
-
|
|
SWK patent acquisition
|
|
|
15
|
|
|
|
|
|
|
|
6,124,005
|
|
|
|
|
|
Jagemann Munition Components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer Relationships
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,666,774
|
|
Intellectual Property
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,773,436
|
|
Tradename
|
|
|
5
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,472,095
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
7,074,005
|
|
|
|
5,912,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization – Licensing Agreements
|
|
|
|
|
|
|
(108,333
|
)
|
|
|
-
|
|
|
|
-
|
|
Accumulated amortization – Patents
|
|
|
|
|
|
|
-
|
|
|
|
(134,701
|
)
|
|
|
-
|
|
Accumulated amortization – Intangible Assets
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(61,803
|
)
|
|
|
|
|
|
|
$
|
141,667
|
|
|
$
|
6,939,304
|
|
|
$
|
5,850,502
|
|
|
|
|
|
|
March 31, 2018
|
|
|
|
Life
|
|
|
Licenses
|
|
|
Patent
|
|
|
Other Intangible Assets
|
|
Licensing Agreement – Jesse James
|
|
|
5
|
|
|
$
|
125,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Licensing Agreement – Jeff Rann
|
|
|
5
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
Streak Visual Ammunition Patent
|
|
|
11.2
|
|
|
|
-
|
|
|
|
950,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
950,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization – Licensing Agreements
|
|
|
|
|
|
|
(58,333
|
)
|
|
|
-
|
|
|
|
-
|
|
Accumulated amortization – Patents
|
|
|
|
|
|
|
-
|
|
|
|
(49,627
|
)
|
|
|
-
|
|
|
|
|
|
|
|
$
|
191,667
|
|
|
$
|
900,373
|
|
|
$
|
-
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Life
|
|
|
Licenses
|
|
|
Patent
|
|
|
Other
Intangible
Assets
|
|
Licensing Agreement – Jesse James
|
|
|
5
|
|
|
$
|
125,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Licensing Agreement – Jeff Rann
|
|
|
5
|
|
|
|
125,000
|
|
|
|
-
|
|
|
|
-
|
|
Streak Visual Ammunition Patent
|
|
|
11.2
|
|
|
|
-
|
|
|
|
950,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
950,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization – Licensing Agreements
|
|
|
|
|
|
|
(45,833
|
)
|
|
|
-
|
|
|
|
-
|
|
Accumulated amortization – Patents
|
|
|
|
|
|
|
-
|
|
|
|
(25,166
|
)
|
|
|
-
|
|
|
|
|
|
|
|
$
|
204,167
|
|
|
$
|
924,834
|
|
|
$
|
-
|
|
Amortization
expense for the year ended March 31, 2019, for the three-month period ended March 31, 2018, and for the year ended December 31,
2017 was $196,877, $36,961, and $70,999, respectively.
AMMO,
INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2019, March 31, 2018, and December 31, 2017
NOTE
16 - SUBSEQUENT EVENTS
On
April 30, 2019, the original due date of the Promissory Note in connection with the acquisition of the casing operations of Jagemann
Stamping Company was subsequently extended to April 1, 2020. The note bears interest per annum at approximately 4.6% payable in
arrears monthly until October 1, 2019 when the interest rate increases to 9% per annum payable monthly until principal and accrued
interest are paid in full. In May of 2019, the Company paid $1,500,000 on the balance of the Note.
On
May 2, 2019, the Company sold its online store “www.ammodeal.com” to AZ Virtual CFO, LLC. The assets sold include,
but are not limited to, the website, all permits and registrations, and the books and records of the website. The purchase price
was $50,000 and is to be paid in monthly installments of three percent of the gross revenue arising out of operation of the asset
and shall be paid in full by December 1, 2021. AZ Virtual CFO, LLC is owned by Ron Shostack, former Officer and current independent
contractor of the Company.
On
May 3, 2019, the Company entered into a promissory note of $375,000 with a shareholder of the Company. The note bears interest
at a per annum of 2.56%. The note has a maturity date of August 3, 2019.
On
June 5, 2019, the Company entered into an agreement with FSW Funding for an Accounts Receivable Credit Facility. The twenty-four
month facility is up to a maximum of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate
published from time to time by the Wall Street Journal plus 4.5%. A fee of 3% of the Maximum Facility will be assessed to the
Company.
On
June 5, 2019, the remaining $300,000 of Convertible Promissory Notes were mandatorily converted into shares of our common stock
pursuant to the terms of the Note. The Company converted $300,000 of Convertible Promissory Notes and $18,228 of accrued interest
into 127,291 shares of Common Stock at a conversion price of $2.50. The Company accrued $9,000 for a 3% cash conversion fee on
the principal converted payable to the placement agent, Paulson Investment Company.
As
of June 28, 2019, we sold an additional 898,550 shares of common stock for $1,797,100 and issued 449,275 common stock purchase
warrants exercisable at $2.40. We accrued commissions of $215,652 and 107,826 warrants payable in connection with the sale of
these shares to the placement agent. We issued 63,492 shares of Common Stock for services provided to the Company valued at $209,346.
We
evaluated subsequent events through the date the financial statements were issued, and determined that there are not any other
items to disclose.
13,242,186
Shares
AMMO,
INC.
Common
Stock
PROSPECTUS
__________,
2019