Attached files
| file | filename |
|---|---|
| 8-K/A - AMMO, INC. | form8-ka.htm |
AMMO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINACIAL INFORMATION
INTRODUCTION
On October 5, 2018, Ammo, Inc. (the “Company”) completed its acquisition of SW Kenetics Inc. (“SWK”), pursuant to the terms of the Agreement and Plan of Merger, dated September 27 (the “Merger Agreement”), by and among the Company, Ammo Technologies, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and SWK. SWK merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation.
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.
The total purchase consideration totals $7,069,207 and includes 1,700,002 restricted shares of our common stock issued to the three shareholders of SWK. The restricted shares of common stock were issued with claw back provisions to ensure agreed upon objectives are met, payment of $250,000 and a payment obligation of $1,250,000 subject to completion of specific milestones. The merger will be accounted for using the acquisition method under the accounting guidance for business combinations from Accounting Standards Codification 805.
The unaudited pro forma condensed combined balance sheet as of September 30, 2018 reflects the acquisition as if it occurred on September 30, 2018. The unaudited pro forma condensed combined balance sheet dated September 30, 2018, includes SWK’s financial information as of October 3, 2018. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2018 and for the six months ended September 30, 2018 reflects the acquisition as if it occurred on January 1, 2018 and April 1, 2018, respectively. SWK was formed for the purpose of this transaction and no operating activity took place from the time the entity was formed through the completion of this transaction. The unaudited pro forma condensed combined financial information should be read in conjunction with the audited financial statements and related disclosures contained in the Company’s Annual Transition Report filed with the SEC on Form 10-KT for three month transition period ended March 31, 2018, the Company’s Quarterly Report on Form 10-Q for the three and six month period ended September 30, 2018, and SWK’s financial statements that are attached to this Form 8-K/A as an exhibit.
The unaudited pro forma condensed combined financial information are presented for illustrative purposes only and are not necessarily indicative of the results of operations and financial position that would have been achieved had the acquisition taken place on the dates indicated or the future consolidated results of operations or financial position of the Company.
AMMO, INC.
Unaudited Pro Form Combined Condensed Balance Sheet
September 30, 2018
(Unaudited)
| Ammo, Inc, | SW Kenetics, Inc. | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
| ASSETS | ||||||||||||||||
| Current Assets: | ||||||||||||||||
| Cash | $ | 6,697,838 | $ | 466 | $ | (466 | )(a) | $ | 6,697,838 | |||||||
| Accounts receivable, net | 1,066,411 | 1,066,411 | ||||||||||||||
| Due from related parties | 18,308 | 18,308 | ||||||||||||||
| Inventories | 3,378,406 | 3,378,406 | ||||||||||||||
| Prepaid expenses | 401,753 | 401,753 | ||||||||||||||
| Total Current Assets | 11,562,716 | 466 | (466 | ) | 11,562,716 | |||||||||||
| Equipment, net | 2,262,906 | 2,262,906 | ||||||||||||||
| Other Assets: | - | |||||||||||||||
| Deposits | 148,463 | 148,463 | ||||||||||||||
| Licensing agreements, net | 166,667 | 166,667 | ||||||||||||||
| Patents, net | 857,836 | 534 | (534 | )(a) | 857,836 | |||||||||||
| Acquisition Deposit | 250,000 | (250,000 | )(b) | - | ||||||||||||
| Intangible Assets | 250,000 | (b) | - | |||||||||||||
| 1,250,000 | (c) | - | ||||||||||||||
| 5,569,207 | (d) | 7,069,207 | ||||||||||||||
| TOTAL ASSETS | $ | 15,248,588 | $ | 1,000 | $ | 6,818,207 | $ | 22,067,795 | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Accounts payable | $ | 557,844 | $ | 40 | $ | (40 | )(a) | $ | 557,844 | |||||||
| Accrued liabilities | 402,653 | 402,653 | ||||||||||||||
| Insurance premium note payable | 27,909 | 27,909 | ||||||||||||||
| Total Current Liabilities | 988,406 | 40 | (40 | ) | 988,406 | |||||||||||
| Long-Term Liabilities: | ||||||||||||||||
| Contingent Consideration Payable | 1,250,000 | (c) | 1,250,000 | |||||||||||||
| Shareholders’ Equity: | ||||||||||||||||
| Common Stock | 32,601 | 1,700 | (d) | 34,301 | ||||||||||||
| Additional paid-in capital | 25,329,998 | 5,567,507 | (d) | 30,897,505 | ||||||||||||
| Accumulated (Deficit) | (11,102,417 | ) | (11,102,417 | ) | ||||||||||||
| SW Kenetics Inc. Owner Equity | - | 960 | (960 | )(a) | - | |||||||||||
| Total Shareholders’ Equity | 15,248,588 | 960 | 5,568,247 | 20,817,795 | ||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 15,248,588 | $ | 1,000 | $ | 6,818,207 | $ | 22,067,795 | ||||||||
AMMO, INC.
Unaudited Pro Form Combined Condensed Balance Sheet
For the Three Months Ended March 31, 2018
(Unaudited)
| Ammo, Inc, | SW Kenetics, Inc. (e) | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
| Net Sales | $ | 1,960,688 | $ | - | $ | - | $ | 1,960,688 | ||||||||
| Cost of Goods Sold | 1,667,614 | - | - | 1,667,614 | ||||||||||||
| Gross Margin | 293,074 | 293,074 | ||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling and marketing | 585,294 | - | - | 585,294 | ||||||||||||
| Corporate general and administrative | 589,983 | - | - | 589,983 | ||||||||||||
| Employee salaries and related expenses | 914,258 | - | - | 914,258 | ||||||||||||
| Depreciation expense | 5,853 | - | - | 5,853 | ||||||||||||
| Total operating expenses | 2,095,388 | - | - | 2,095,388 | ||||||||||||
| Loss from Operations | (1,802,314 | ) | - | - | (1,802,314 | ) | ||||||||||
| Other (Expenses) | ||||||||||||||||
| Interest expense | 5,086 | - | - | 5,086 | ||||||||||||
| (Loss) before Income Taxes | (1,797,228 | ) | - | - | (1,797,228 | ) | ||||||||||
| Provision for Income Taxes | - | - | - | - | ||||||||||||
| Net (Loss) | $ | (1,797,228 | ) | $ | - | $ | - | $ | (1,797,228 | ) | ||||||
| (Loss) per share | ||||||||||||||||
| Basic and fully diluted: | ||||||||||||||||
| Weighted average number of shares outstanding | 26,045,890 | - | - | 26,045,890 | ||||||||||||
| (Loss) per share | $ | (0.07 | ) | $ | - | $ | - | $ | (0.07 | ) | ||||||
AMMO, INC.
Unaudited Pro Form Combined Condensed Balance Sheet
For the Six Months Ended September 30, 2018
(Unaudited)
| Ammo, Inc, | SW Kenetics, Inc. (e) | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||
| Net Sales | $ | 2,712,887 | $ | - | $ | - | $ | 2,712,887 | ||||||||
| Cost of Goods Sold | 2,380,096 | - | - | 2,380,096 | ||||||||||||
| Gross Margin | 332,791 | 332,791 | ||||||||||||||
| Operating Expenses | ||||||||||||||||
| Selling and marketing | 579,806 | - | - | 579,806 | ||||||||||||
| Corporate general and administrative | 1,400,837 | - | - | 1,400,837 | ||||||||||||
| Employee salaries and related expenses | 1,675,739 | - | - | 1,675,739 | ||||||||||||
| Depreciation expense | 34,770 | - | - | 34,770 | ||||||||||||
| Total operating expenses | 3,691,152 | - | - | 3,691,152 | ||||||||||||
| Loss from Operations | (3,358,361 | ) | - | - | (3,358,361 | ) | ||||||||||
| Other (Expenses) | ||||||||||||||||
| Interest expense | (2,903 | ) | - | - | (2,903 | ) | ||||||||||
| (Loss) before Income Taxes | (3,361,264 | ) | - | - | (3,361,264 | ) | ||||||||||
| Provision for Income Taxes | - | - | - | - | ||||||||||||
| Net (Loss) | $ | (3,361,264 | ) | $ | - | $ | - | $ | (3,361,264 | ) | ||||||
| (Loss) per share | ||||||||||||||||
| Basic and fully diluted: | ||||||||||||||||
| Weighted average number of shares outstanding | 31,466,483 | - | - | 31,466,483 | ||||||||||||
| (Loss) per share | $ | (0.11 | ) | $ | - | $ | - | $ | (0.11 | ) | ||||||
AMMO, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINACIAL INFORMATION
NOTE 1 - BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements reflected the combined historical financial information of Ammo, Inc. (“Ammo”) and SW Kenetics, Inc. (“SWK”). The pro forma adjustments are preliminary and based on estimates and have been prepared to show the effects of the acquisition of SWK. The valuation and final determination of the fair value of the intangible acquired from SWK will be based on a third party valuation and may significantly differ from the preliminary.
The unaudited pro forma condensed combined balance sheet dated September 30, 2018, includes SWK’s financial information as of October 3, 2018. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2018 and for the six months ended September 30, 2018 reflects the acquisition as if it occurred on January 1, 2018 and April 1, 2018, respectively. SWK was formed for the purpose of this transaction and no operating activity took place from the time the entity was formed through the completion of this transaction.
NOTE 2 - DESCRIPTION OF THE TRANSACTION
On October 5, 2018, Ammo, Inc. (the “Company”) completed its acquisition of SW Kenetics Inc. (“SWK”), pursuant to the terms of the Agreement and Plan of Merger, dated September 27 (the “Merger Agreement”), by and among the Company, Ammo Technologies, Inc., a wholly owned subsidiary of the Company (“Merger Sub”), and SWK. SWK merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation.
The total estimated purchase consideration is $7,069,207, which includes 1,700,002 restricted shares of our common stock issued to the three shareholders of SWK. The restricted shares of common are subject to claw back provisions to ensure agreed upon objectives are met, payment of $250,000 and a payment obligation of $1,250,000 subject to completion of specific milestones.
NOTE 3 - ESTIMATED PURCHASE PRICE ALLOCATION
The consideration consisted of 1,700,002 shares of restricted common stock, payment of $250,000, and a contingent consideration payable of $1,250,000. The shares were valued at approximately $3.28, the weighted average price of our stock from September 20, 2018 to October 4, 2018.
Total consideration recorded for the acquisition on the intangible asset is as follows:
| Cash | $ | 250,000 | ||
| Contingent Consideration Payable | 1,250,000 | |||
| Common Stock | 5,569,207 | |||
| Total Purchase Consideration | $ | 7,069,207 |
The purchase price allocation to intangible assets is preliminary. The preliminary estimated fair value recorded for the intangible asset was determined by management based on the Agreement and Plan of Merger. SWK’s significant assets only include intangible assets and we have allocated the preliminary purchase price allocation accordingly. The purchase price allocation will continue to be preliminary until a third-party valuation is completed and the fair value and useful life of the assets acquired is determined. The amounts from the valuation may significantly differ from the preliminary allocation.
AMMO, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINACIAL INFORMATION
NOTE 4 - ADJUSTMENTS TO FINANCIAL INFORMATION
Explanation of Pro Forma Adjustments
| (a) | To remove the assets and liabilities of SWK as it was not acquired by Ammo | |
| (b) | To record the initial deposit paid to SWK as an intangible asset | |
| (c) | To record the purchase liability | |
| (d) | To record the issuance of 1,700,002 shares of common stock | |
| (e) | SWK had no operations during the period |