EX-99.2 3 ex99-2.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 fair value of the purchased patent was $7,723,166. The purchase consideration included 1,700,002 restricted shares of our common stock issued to the three shareholders of SWK , these 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 was 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 5, 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 occurrent on January 1, 2018 and April 1, 2018, respectively. SWK was formed for the purpose of this transaction and only nominal 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

(Unaudited)

 

   Ammo, Inc.
September 30,
2018		   SW Kenetics, Inc.
October 5,
2018		   Pro Forma Adjustments     Pro Forma Condensed Combined 
                   
ASSETS                      
Current Assets:                      
Cash  $6,697,838   $466   $(466) (d)  $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) (d)   857,836 
Acquisition Deposit   250,000         (250,000) (a)   - 
SWK Patent             250,000  (a)    -  
              7,473,166  (b)(c)(e)    7,723,166  
TOTAL ASSETS  $15,248,588   $1,000   $7,472,166     $22,721,754 
                       
LIABILITIES AND SHAREHOLDERS' EQUITY                      
Current Liabilities:                      
Accounts payable  $557,844   $40   $(40) ( d )  $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  (b)   1,250,000 
Shareholders' Equity:                      
Common Stock   32,601         1,700  (c)   34,301 
Additional paid-in capital   25,329,998         4,622,305  (c)   29,952,303 
Accumulated (Deficit)   (11,102,417)        1,599,161      (9,503,256)
SW Kenetics Inc. Owner Equity   -    960    (960) ( d )   - 
Total Shareholders' Equity   14,260,182    960    6,222,206      20,483,348 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $15,248,588   $1,000   $7,472,166     $22,721,754 

 

 
 

 

AMMO, INC.

Unaudited Pro Form Combined Condensed Statement of Operations

(Unaudited)

 

   AMMO, Inc.
Six Months Ended September 30, 2018		   SW Kenetics, Inc.
Period from August 3, 2018 (Inception) to October 5,
2018		   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    40    -    1,400,877 
Employee salaries and related expenses   1,675,739    -    -    1,675,739 
Depreciation expense   34,770    -    -    34,770 
Total operating expenses   3,691,152    40    -    3,691,192 
Loss from Operations   (3,358,361)   (40)   -    (3,358,401)
                     
Other (Expenses)                    
Gain on bargain purchase of SW Kenetics, Inc.   -    -    1,599,161(e)   1,599,161 
Interest expense   (2,903)   -    -    (2,903)
                     
(Loss) before Income Taxes   (3,361,264)   (40)   1,599,161    (1,762,143)
                     
Provision for Income Taxes   -    -    -    - 
                     
Net (Loss)  $(3,361,264)  $(40)  $1,599,161   $(1,762,143)
                     
(Loss) per share                    
Basic and fully diluted:                    
Weighted average number of shares outstanding   31,429,324    -    1,007,002    32,436,326 
(Loss) per share  $(0.11)   -    -   $(0.05)

 

 
 

 

AMMO, INC.

Unaudited Pro Form Combined Condensed Statement of Operations

(Unaudited)

 

   AMMO, Inc.  
Three Months Ended March 31, 2018		   SW Kenetics, Inc.
Period from
August 3, 2018 (Inception) to October 5, 2018		   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    40    -    590,023 
Employee salaries and related expenses   914,258    -    -    914,258 
Depreciation expense       5,853    -    -    5,853 
Total operating expenses   2,095,388    40    -    2,095,428 
Loss from Operations       (1,802,314)   (40)   -    (1,802,354)
                     
Other (Expenses)                          
Gain on bargain purchase of SW Kenetics, Inc.             1,599,161(e)   1,599,161 
Interest expense   5,086    -    -    5,086 
                     
(Loss) before Income Taxes   (1,797,228)   (40)   1,599,161    (198,107)
                     
Provision for Income Taxes   -    -    -    - 
                     
Net (Loss)  $(1,797,228)  $(40)  $1,599,161   $(198,107)
                     
(Loss) per share                    
Basic and fully diluted:                        
Weighted average number of shares outstanding   26,045,890    -    1,007,002    27,052,892 
(Loss) per share      $(0.07)   -    -   $(0.01)

 

 
 

 

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 5, 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 occurrent on January 1, 2018 and April 1, 2018, respectively. SWK was formed for the purpose of this transaction and no statement of operations 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 fair value of the purchased patent was $7,723,166. The purchase consideration included 1,700,002 restricted shares of our common stock issued to the three shareholders of SWK , these 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.

 

NOTE 3 - 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 $2.72, the weighted average share price of our Common Stock that was publicly traded and sold through private placement.

 

Total consideration recorded for the acquisition on the intangible asset is as follows:

 

Cash  $250,000 
Contingent Consideration Payable   1,250,000 
Common Stock   1,700 
Additional Paid-in Capital   4,622,305 
Gain on Bargain Purchase   1,599,161 
    7,473,166 
Fair Value of Patent  $7,723,166 

 

The fair value recorded was determined by a third party valuation firm. SWK’s significant assets only include the patent asset and the third party determined the fair value measurement based on the patent ’s expected future cash flows .

 

 
 

 

AMMO, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINACIAL INFORMATION

 

NOTE 4 - ADJUSTMENTS TO FINANCIAL INFORMATION

 

Explanation of Pro Forma Adjustments

 

  (a) To reclass the initial deposit paid to SWK for a patent
     
  (b) To record the purchase liability
     
  (c) To record the issuance of 1,700,002 shares of common stock
     
  (d) To reverse SWK’s assets and liabilities
     
  (e) To record the excess of the fair value of the patent over the value of the assets given up and liabilities assumed by Ammo .