☐
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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||
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ý
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
January 1, 2018
to
March 31, 2018
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DELAWARE
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001-13101
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30-0957912
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(State of incorporation)
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(Commission File No.)
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(I.R.S. Identification Number
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None
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N/A
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Title of each class
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Name of each exchange on which registered
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Large accelerated filer
☐
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Accelerated filer
☐
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Non-accelerated filer
☐
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Smaller reporting company
ý
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Emerging growth company
☐
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PART I
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ITEM 1:
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BUSINESS
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4
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ITEM 1A
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RISK FACTORS
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10
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ITEM 1B
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UNRESOLVED STAFF COMMENTS
|
28
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ITEM 2:
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PROPERTIES
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28
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ITEM 3:
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LEGAL PROCEEDINGS
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28
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ITEM 4:
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SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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28
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PART II
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ITEM 5:
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MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES
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29
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ITEM 6:
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SELECTED FINANCIAL DATA
|
30
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ITEM 7:
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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30
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ITEM 8:
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FINANCIAL STATEMENTS
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38
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ITEM 9:
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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61
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PART III
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ITEM 10:
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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
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61
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ITEM 11:
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EXECUTIVE COMPENSATION
|
68
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ITEM 12:
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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69
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ITEM 13:
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS , AND DIRECTOR INDEPENDENCE
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70
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ITEM 14:
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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70
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PART IV
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ITEM 15:
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EXHIBITS
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72
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SIGNATURES
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73
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·
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require the licensing of all persons manufacturing, exporting, importing, or selling ammunition as a business;
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·
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require serialization, labeling, and tracking of the acquisition and disposition of certain types of ammunition;
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·
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regulate the interstate sale of certain ammunition;
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·
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restrict or prohibit the ownership, use, or sale of specified categories of ammunition;
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·
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require registries of so-called "ballistic images" of ammunition fired from new guns;
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·
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govern the sale, export, and distribution of ammunition;
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·
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regulate the use and storage of gun powder or other energetic materials;
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·
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regulate the employment of personnel with certain criminal convictions;
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·
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restrict access to ammunition manufacturing facilities for certain individuals from other countries or with criminal convictions; and
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·
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require compliance with ITAR.
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·
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an increase or decrease in consumer demand for our products or for the products of our competitors;
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·
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our failure to accurately forecast consumer acceptance of new products;
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·
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new product introductions by us or our competitors;
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·
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changes in our relationships within our distribution channels;
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·
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changes in general market conditions or other factors, which may result in cancellations of orders or a reduction or increase in the rate of reorders placed by retailers;
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·
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changes in laws and regulations governing the activities for which we sell products, such as hunting and shooting sports;
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·
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weak economic conditions or consumer confidence, which could reduce demand for discretionary items, such as our products; and
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·
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the domestic political environment, including debate over the regulation of firearms, ammunition, and related products.
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·
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we may be unable to secure and maintain favorable relationships with retailers and distributors;
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·
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we may be unable to control the timing of delivery of our products to end-user consumers;
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·
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our retailers and distributors are not subject to minimum sales requirements or any obligation to market our products to their customers;
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·
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our retailers and distributors may terminate their relationships with us at any time; and
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·
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our retailers and distributors market and distribute competing products.
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·
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our success in developing, producing, marketing, and successfully selling new products;
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·
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our ability to address the needs of our consumer customers;
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·
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the pricing, quality, performance, and reliability of our products;
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·
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the quality of our customer service;
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·
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the efficiency of our production; and
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·
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product or technology introductions by our competitors.
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·
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enhance our operational, financial, and management systems;
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·
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enhance our facilities and purchase additional equipment; and
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·
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successfully hire, train, and retain additional employees, including additional personnel for our technological, sales, and marketing efforts.
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·
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determine the appropriate creative message and media mix for advertising, marketing, and promotional expenditures;
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·
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select the right markets, media, and specific media vehicles in which to advertise;
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·
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identify the most effective and efficient level of spending in each market, media, and specific media vehicle; and
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·
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effectively manage marketing costs, including creative and media expenses, to maintain acceptable customer acquisition costs.
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·
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the cyclicality of the markets we serve;
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·
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the timing and size of new orders;
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·
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the cancellation of existing orders;
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·
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the volume of orders relative to our capacity;
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·
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product introductions and market acceptance of new products or new generations of products;
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·
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timing of expenses in anticipation of future orders;
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·
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changes in product mix;
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·
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availability of production capacity;
|
·
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changes in cost and availability of labor and raw materials;
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·
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timely delivery of products to customers;
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·
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pricing and availability of competitive products;
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·
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new product introduction costs;
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·
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changes in the amount or timing of operating expenses;
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·
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introduction of new technologies into the markets we serve;
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·
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pressures on reducing selling prices;
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·
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our success in serving new markets;
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·
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adverse publicity regarding the safety, performance, and use of our products;
|
·
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the institution and outcome of any litigation;
|
·
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political, economic, or regulatory developments; and
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·
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changes in economic conditions.
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·
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the availability of suitable acquisition candidates at attractive purchase prices;
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·
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the ability to compete effectively for available acquisition opportunities;
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·
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the availability of cash resources, borrowing capacity, or stock at favorable price levels to provide required purchase prices in acquisitions;
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·
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the ability of management to devote sufficient attention to acquisition efforts; and
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·
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the ability to obtain any requisite governmental or other approvals.
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·
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the potential disruption of our core businesses;
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·
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risks associated with entering markets and businesses in which we have little or no prior experience;
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·
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diversion of management's attention from our core businesses;
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·
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adverse effects on existing business relationships with suppliers and customers;
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·
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risks associated with increased regulatory or compliance matters;
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·
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failure to retain key customers, suppliers, or personnel of acquired businesses;
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·
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the potential strain on our financial and managerial controls and reporting systems and procedures;
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·
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greater than anticipated costs and expenses related to the integration of the acquired business with our business;
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·
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potential unknown liabilities associated with the acquired company;
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·
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risks associated with weak internal controls over information technology systems and associated cyber security risks;
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·
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meeting the challenges inherent in effectively managing an increased number of employees in diverse locations;
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·
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failure of acquired businesses to achieve expected results;
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·
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the risk of impairment charges related to potential write-downs of acquired assets in future acquisitions; and
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·
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the challenge of creating uniform standards, controls, procedures, policies, and information systems.
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·
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require the licensing of all persons manufacturing, exporting, importing, or selling firearms and ammunition as a business;
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·
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require background checks for purchasers of firearms;
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·
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impose waiting periods between the purchase of a firearm and the delivery of a firearm;
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·
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prohibit the sale of firearms to certain persons, such as those below a certain age and persons with criminal records;
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·
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regulate the use and storage of gun powder or other energetic materials;
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·
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regulate the interstate sale of certain firearms;
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·
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prohibit the interstate mail-order sale of firearms;
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·
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regulate our employment of personnel with criminal convictions; and
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·
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restrict access to firearm manufacturing facilities for individuals from other countries or with criminal convictions.
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·
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our ability to execute our business plan;
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·
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actual or anticipated changed in our operating results;
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·
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variations in our quarterly results;
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·
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changes in expectations relating to our products, plans, and strategic position or those of our competitors or customers;
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·
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announcements or introduction of technological innovations or new products by us or our competitors;
|
·
|
market conditions within our market;
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·
|
the sale of even small blocks of Common Stock by stockholders;
|
·
|
price and volume fluctuations in the overall stock market from time to time;
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·
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significant volatility in the market price and trading volume of public companies in general and small emerging companies in particular;
|
·
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changes in investor perceptions;
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·
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the level and quality of any research analyst coverage of our Common Stock, changes in earnings estimates or investment recommendations by securities analysis, or our failure to meet such estimates;
|
·
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any financial guidance we may provide to the public, any changes in such guidance, or our failure to meet such guidance;
|
·
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various market factors or perceived market factors, including rumors, whether or not correct, involving us, our customers, or our competitors;
|
·
|
future sales of our Common Stock;
|
·
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Introductions of new products or new pricing policies by us or by our competitors;
|
·
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regulatory or environmental laws that restrict the sale of ammunition containing lead
|
·
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acquisitions or strategic alliances by us or by our competitors;
|
·
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litigation involving us, our competitors, or our industry;
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·
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regulatory, legislative, political, and other developments that may affect us, our customers, and the purchasers of our products;
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·
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the gain or loss of significant customers;
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·
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the volume and timing of customers' orders;
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·
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recruitment or departure of key personnel;
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·
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developments with respect to intellectual property rights;
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·
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our international acceptance;
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·
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market conditions in our industry, the business success of our customers, and economy as a whole; and
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·
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general global economic and political instability.
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Fiscal Year Ended
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High
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Low
|
||||||
December 31, 2016
|
||||||||
First Quarter
|
$
|
1.25
|
$
|
1.25
|
||||
Second Quarter
|
$
|
1.28
|
$
|
1.28
|
||||
Third Quarter
|
$
|
1.28
|
$
|
1.28
|
||||
Fourth Quarter
|
$
|
1.25
|
$
|
1.25
|
||||
|
||||||||
December 31, 2017
|
||||||||
First Quarter
|
$
|
3.60
|
$
|
3.60
|
||||
Second Quarter
|
$
|
3.00
|
$
|
3.00
|
||||
Third Quarter
|
$
|
2.30
|
$
|
2.30
|
||||
Fourth Quarter
|
$
|
3.20
|
$
|
3.08
|
||||
|
||||||||
|
||||||||
Transition Period
|
||||||||
January 1, 2018 – March 31, 2018
|
$
|
4.75
|
$
|
4.50
|
For the Three-Months Ending | ||||||||
|
March 31, 2018
|
March 31, 2017
(Unaudited)
|
||||||
Net Sales
|
$
|
1,960,688
|
$
|
653,784
|
||||
Cost of Products Sold
|
1,667,614
|
474,890
|
||||||
Gross Margin
|
293,074
|
178,894
|
||||||
Sales, General & Administrative Expenses
|
2,095,388
|
863,601
|
||||||
Loss from Operations
|
(1,802,314
|
)
|
(684,707
|
)
|
||||
Interest and other income (expense), net
|
5,086
|
(1,836,101
|
) | |||||
Loss before provision for income taxes
|
$
|
(1,797,228
|
)
|
$
|
(2,520,808
|
)
|
||
Provision for income taxes
|
-
|
-
|
||||||
Net Loss
|
$
|
(1,797,228
|
)
|
$
|
(2,520,808
|
)
|
For the
Twelve Months
Ended
|
For the Period
October 13, 2016
(Inception) to
|
|||||||
|
December 31, 2017
|
December 31, 2016
|
||||||
Net Sales
|
$
|
1,294,861
|
$
|
-
|
||||
Cost of Products Sold
|
1,303,586
|
-
|
||||||
Gross Margin
|
(8,725
|
)
|
-
|
|||||
Sales, General & Administrative Expenses
|
3,967,503
|
136,274
|
||||||
Loss from Operations
|
(3,976,228
|
)
|
(136,274
|
)
|
||||
Interest and other income (expense), net
|
(1,812,673
|
)
|
(18,750
|
)
|
||||
Loss before provision for income taxes
|
$
|
(5,788,901
|
)
|
$
|
(155,024
|
)
|
||
Provision for income taxes
|
-
|
-
|
||||||
Net Loss
|
$
|
(5,788,901
|
)
|
$
|
(155,024
|
)
|
Three Months Ended
March 31, 2018
|
Three Months Ended
March 31, 2017
|
Twelve Months Ended
December 31, 2017
|
||||||||||
Prior Inventory
1
|
$
|
0
|
$
|
581,117
|
$
|
581,117
|
||||||
Streak Visual Ammunition
|
|
543,285
|
|
0
|
|
0
|
||||||
One Precise Shot (OPS) Line
|
|
94,936
|
|
47,081
|
|
285,715
|
||||||
Stelth
|
|
31,493
|
|
18,179
|
|
32,123
|
||||||
Standard Ammunition
2
|
|
1,290,974
|
|
7,407
|
|
395,906
|
||||||
Total Sales
|
$
|
1,960,688
|
$
|
653,784
|
$
|
1,294,861
|
(1) |
This total represents inventory purchased as part of the acquisition detailed in Note 3 of our Financial Statements.
|
(2) |
This total includes bulk ammunition sales of reprocessed brass casings, and other miscellaneous sales
|
|
March 31, 2018
|
December 31, 2017
|
December 31, 2016
|
|||||||||
Current assets
|
$
|
8,323,045
|
$
|
3,019,061
|
$
|
2,904,155
|
||||||
Current liabilities
|
1,120,582
|
2,413,547
|
2,536,745
|
|||||||||
|
$
|
7,202,463
|
$
|
605,514
|
$
|
367,410
|
|
2019
|
2020
|
2021
|
2022
|
Total
|
|||||||||||||||
Payson Lease
|
$
|
120,000
|
$
|
120,000
|
$
|
120,000
|
$
|
80,000
|
$
|
440,000
|
· |
persuasive evidence of an arrangement exists
|
· |
the product has been shipped to the customer
|
· |
the sales price is fixed or determinable
|
· |
collectability is reasonably assured
|
Common Shares
|
Additional Paid-In
|
Subscription
|
Accumulated
|
|
||||||||||||||||||||
Number
|
Par Value
|
Capital | Receivable | (Deficit) |
Total
|
|||||||||||||||||||
Balance as of October 13, 2016
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||
Common stock issued for founder's shares
|
14,934,000
|
14,934
|
-
|
-
|
-
|
14,934
|
||||||||||||||||||
Common stock issued for licensing agreement
|
100,000
|
100
|
124,900
|
-
|
-
|
125,000
|
||||||||||||||||||
Common stock issued for cash
|
720,000
|
720
|
899,280
|
(167,500
|
)
|
-
|
732,500
|
|||||||||||||||||
Organizational and fundraising cost
|
-
|
-
|
(225,000
|
)
|
-
|
-
|
(225,000
|
)
|
||||||||||||||||
Net loss for period ended December 31, 2016
|
-
|
-
|
-
|
-
|
(155,024
|
)
|
(155,024
|
)
|
||||||||||||||||
Balance as of December 31, 2016
|
15,754,000
|
$
|
15,754
|
$
|
799,180
|
$
|
(167,500
|
)
|
$
|
(155,024
|
)
|
$
|
492,410
|
|||||||||||
Reverse merger and recapitalization
|
604,371
|
604
|
(604
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Subscriptions collected
|
-
|
-
|
-
|
167,500
|
-
|
167,500
|
||||||||||||||||||
Common stock issued to founders
|
500,000
|
500
|
145
|
-
|
-
|
645
|
||||||||||||||||||
Founder shares repurchased
|
(400,000
|
)
|
(400
|
)
|
(99,600
|
)
|
-
|
-
|
(100,000
|
)
|
||||||||||||||
Common stock issued for cash
|
4,640,822
|
4,641
|
6,034,259
|
-
|
-
|
6,038,900
|
||||||||||||||||||
Common stock issued for payment of legal fees
|
49,600
|
50
|
123,950
|
-
|
-
|
124,000
|
||||||||||||||||||
Subscription receivable
|
4,000
|
4
|
4,996
|
(5,000
|
)
|
-
|
-
|
|||||||||||||||||
Organizational and fundraising cost
|
20,000
|
20
|
(179,770
|
)
|
-
|
-
|
(179,750
|
)
|
||||||||||||||||
Common stock issued for licensing agreement
|
100,000
|
100
|
124,900
|
-
|
-
|
125,000
|
||||||||||||||||||
Legal, advisory and consulting fees
|
495,000
|
495
|
554,130
|
-
|
-
|
554,625
|
||||||||||||||||||
Employee stock awards
|
120,000
|
120
|
159,880
|
-
|
-
|
160,000
|
||||||||||||||||||
Shares issued for patents
|
600,000
|
600
|
749,400
|
-
|
-
|
750,000
|
||||||||||||||||||
Imputed interest on related party note
|
-
|
-
|
46,340
|
-
|
-
|
46,340
|
||||||||||||||||||
Issuance of warrants for interest
|
-
|
-
|
46,188
|
-
|
-
|
46,188
|
||||||||||||||||||
Issuance of warrants for services
|
-
|
-
|
67,000
|
-
|
-
|
67,000
|
||||||||||||||||||
Net loss for year ended December 31, 2017
|
-
|
-
|
-
|
-
|
(5,788,901
|
)
|
(5,788,901
|
)
|
||||||||||||||||
Balance as of December 31, 2017
|
22,487,793
|
$
|
22,488
|
$
|
8,430,394
|
$
|
(5,000
|
)
|
$
|
(5,943,925
|
)
|
$
|
2,503,957
|
|||||||||||
Subscription collected
|
-
|
-
|
-
|
5,000
|
-
|
5,000
|
||||||||||||||||||
Common stock issued for cash
|
5,614,210
|
5,614
|
9,257,810
|
-
|
-
|
9,263,424
|
||||||||||||||||||
Organizational and fundraising cost
|
-
|
-
|
(1,137,211
|
)
|
-
|
-
|
(1,137,211
|
)
|
||||||||||||||||
Employee stock awards
|
292,500
|
292
|
482,332
|
-
|
-
|
482,624
|
||||||||||||||||||
Stock grant expense
|
106,563
|
106,563
|
||||||||||||||||||||||
Issuance of warrants for services
|
-
|
-
|
125,000
|
-
|
-
|
125,000
|
||||||||||||||||||
Net loss for period ended March 31, 2018
|
-
|
-
|
-
|
-
|
(1,797,228
|
)
|
(1,797,228
|
)
|
||||||||||||||||
Balance as of March 31, 2018
|
28,394,503
|
$
|
28,394
|
$
|
17,264,888
|
$
|
-
|
$
|
(7,741,153
|
)
|
$
|
9,552,129
|
|
||||||||||||
For the Three
Months Ended
March 31,
|
For the Year Ended
December 31,
|
For the Period
October 13, 2016
(Inception) to
December 31
|
||||||||||
2018
|
2017
|
2016
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net (Loss)
|
$
|
(1,797,228
|
)
|
$
|
(5,788,901
|
)
|
$
|
(155,024
|
)
|
|||
Adjustments to reconcile Net (Loss) to Net Cash provided by operations:
|
||||||||||||
Debt discount amortization
|
-
|
356,250
|
18,750
|
|||||||||
Depreciation and amortization
|
72,258
|
148,860
|
-
|
|||||||||
Loss on vendor notes receivable foreclosure
|
-
|
1,279,921
|
-
|
|||||||||
Founders shares issued as consulting fees
|
-
|
-
|
14,934
|
|||||||||
Stock for services
|
-
|
454,625
|
-
|
|||||||||
Warrants for services and interest
|
125,000
|
113,188
|
-
|
|||||||||
Employee stock awards
|
482,624
|
160,000
|
-
|
|||||||||
Stock Grants
|
106,563
|
-
|
-
|
|||||||||
Imputed interest
|
-
|
46,340
|
-
|
|||||||||
Changes in Current Assets and Liabilities
|
||||||||||||
Vendor notes receivable
|
-
|
-
|
(1,550,000
|
)
|
||||||||
Vendor advances receivable
|
-
|
186,486
|
(89,934
|
)
|
||||||||
Accounts receivable
|
(1,031,385
|
)
|
(171,812
|
)
|
-
|
|||||||
Allowance for doubtful accounts
|
(3,000
|
)
|
26,046
|
-
|
||||||||
Due from related parties
|
4,257
|
(18,461
|
)
|
-
|
||||||||
Inventories
|
(612,693
|
)
|
(928,762
|
)
|
(219,105
|
)
|
||||||
Prepaid expenses
|
101,114
|
183,181
|
-
|
|||||||||
Deposits
|
(16,300
|
)
|
-
|
-
|
||||||||
Accounts payable
|
2,572
|
418,898
|
57,995
|
|||||||||
Accrued liabilities
|
286,435
|
254,774
|
-
|
|||||||||
Net cash used in operating activities
|
(2,279,783
|
)
|
(3,279,367
|
)
|
(1,922,384
|
)
|
||||||
Cash flows from investing activities
|
||||||||||||
Purchase of equipment
|
(507,181
|
)
|
(304,188
|
)
|
-
|
|||||||
Patent Note Payment
|
(100,000
|
)
|
(100,000
|
)
|
-
|
|||||||
Net cash used in investing activities
|
(607,181
|
)
|
(404,188
|
)
|
-
|
|||||||
Cash flow from financing activities
|
||||||||||||
Convertible note payable
|
(1,575,000
|
)
|
-
|
1,500,000
|
||||||||
Convertible note payment
|
-
|
(300,000
|
)
|
-
|
||||||||
Note payment - related party
|
-
|
(960,000
|
)
|
(75,000
|
)
|
|||||||
Insurance premium note payment
|
(74,429
|
)
|
(207,033
|
)
|
-
|
|||||||
Sale of common stock
|
9,263,424
|
6,038,900
|
732,500
|
|||||||||
Collection of stock subscription
|
5,000
|
167,500
|
-
|
|||||||||
Common stock activity - founder shares
|
-
|
(99,355
|
)
|
-
|
For the Three
Months Ended
March 31,
|
For the Year Ended
December 31,
|
For the Period
October 13, 2016
(Inception) to
December 31
|
||||||||||
2018
|
2017
|
2016
|
||||||||||
Organizational and fundraising costs
|
(1,137,211
|
)
|
(179,750
|
)
|
(225,000
|
)
|
||||||
Net cash provided by financing activities
|
6,481,784
|
4,460,262
|
1,932,500
|
|||||||||
Net increase in cash
|
3,594,820
|
776,707
|
10,116
|
|||||||||
Cash, beginning of period
|
786,823
|
10,116
|
-
|
|||||||||
Cash, end of period
|
$
|
4,381,643
|
$
|
786,823
|
$
|
10,116
|
||||||
Supplemental cash flow disclosures
|
||||||||||||
Cash paid during the period for -
|
||||||||||||
Interest
|
$
|
-
|
$
|
9,105
|
$
|
-
|
||||||
Income taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Non-cash investing and financing activities:
|
||||||||||||
Vendor note receivable foreclosure -
|
||||||||||||
Vendor notes receivable
|
$
|
-
|
$
|
1,305,079
|
$
|
-
|
||||||
Vendor advances receivable
|
-
|
(96,552
|
)
|
-
|
||||||||
Accounts receivable
|
-
|
(20,965
|
)
|
-
|
||||||||
Inventories
|
-
|
(644,447
|
)
|
-
|
||||||||
Equipment
|
-
|
(543,115
|
)
|
-
|
||||||||
Vendor notes receivable
|
-
|
-
|
(1,035,000
|
)
|
||||||||
Licensing Agreement
|
-
|
(125,000
|
)
|
(125,000
|
)
|
|||||||
Issuance of common stock
|
-
|
125,000
|
-
|
|||||||||
Insurance premium note payable
|
167,456
|
213,913
|
-
|
|||||||||
Prepaid expense
|
(167,456
|
)
|
(213,913
|
)
|
-
|
|||||||
Common Stock
|
-
|
604
|
-
|
|||||||||
Additional paid-in-capital
|
-
|
(604
|
)
|
-
|
||||||||
Prepaid legal services
|
-
|
(224,000
|
)
|
-
|
||||||||
Issuance of common stock
|
-
|
224,000
|
125,000
|
|||||||||
Notes payable - related parties
|
-
|
1,035,000
|
||||||||||
Issuance of common stock
|
-
|
750,000
|
-
|
|||||||||
Patent acquisition
|
-
|
(750,000
|
)
|
-
|
||||||||
Stock subscription receivable
|
-
|
(5,000
|
)
|
(167,500
|
)
|
|||||||
Additional paid-in-capital
|
-
|
5,000
|
167,500
|
|||||||||
$
|
-
|
$
|
-
|
$
|
-
|
· |
persuasive evidence of an arrangement exists
|
· |
the product has been shipped to the customer
|
· |
the sales price is fixed or determinable
|
· |
collectability is reasonably assured
|
|
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.
|
March 31, 2018
|
December 31, 2017
|
|||||||
Risk free interest rate
|
2.05
|
%
|
1.31 - 1.5
|
%
|
||||
Expected volatility
|
195
|
%
|
250
|
%
|
||||
Expected term
|
1 year
|
1 - 1.5 years
|
||||||
Expected dividend yield
|
0
|
%
|
0
|
%
|
|
Quoted Active Markets for Identified Assets
|
Significant Other
Observable Inputs
|
Significant
Unobservable Inputs
|
Total
|
||||||||||||
|
||||||||||||||||
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||
March 31, 2018
|
||||||||||||||||
Employee stock awards
|
-
|
$
|
482,432
|
$
|
-
|
$
|
482,432
|
|||||||||
Executive Stock Grant Expense
|
-
|
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
|
Advanced Tactical Armament Concepts, L.L.C. Notes Payable Purchased by Ammo
|
Amount
|
|||
|
||||
Western Alliance Bank
|
$
|
1,910,993
|
||
Less: Allowance for uncollectible amounts
|
(360,993
|
)
|
||
|
1,550,000
|
|||
Mansfield, LLC
|
1,035,000
|
|||
|
$
|
2,585,000
|
Vendor notes receivable
|
$
|
$2,585,000
|
||
Vendor advances receivable
|
(96,552
|
)
|
||
Accounts receivable
|
(20,965
|
)
|
||
Inventories
|
(644,447
|
)
|
||
Equipment
|
(543,115
|
)
|
||
Loss on vendor notes receivable collectability
|
(1,279,921
|
)
|
||
|
$
|
-
|
|
2018
|
2017
|
2016 | |||||||||
|
||||||||||||
Finished product
|
$
|
809,680
|
$
|
1,007,291
|
$
|
-
|
||||||
Raw materials
|
1,471,666
|
764,810
|
219,105
|
|||||||||
Work in process
|
123,661
|
20,213
|
-
|
|||||||||
|
$
|
2,405,007
|
$
|
1,792,314
|
$
|
219,105
|
|
2018
|
2017
|
||||||
Leasehold Improvements
|
$
|
17,772
|
$
|
15,475
|
||||
Furniture and Fixtures
|
8,102
|
33,751
|
||||||
Vehicles
|
89,388
|
36,500
|
||||||
Tooling
|
359,351
|
184,626
|
||||||
Equipment
|
879,871
|
576,951
|
||||||
Total property and equipment
|
$
|
1,354,484
|
$
|
847,303
|
||||
Less accumulated depreciation
|
(113,158
|
)
|
(77,861
|
)
|
||||
Net property and equipment
|
$
|
1,241,326
|
$
|
769,442
|
●
|
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
|
● |
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
|
● |
400,000 shares were granted to an executive that have not yet vested
|
2016
|
||||||||||||
Number of Shares
|
Weighted Average
Exercise Price
|
Weighted Average Life
Remaining (Years)
|
||||||||||
Outstanding at October 13, 2016
|
-
|
-
|
-
|
|||||||||
Granted
|
720,000
|
$
|
2.50
|
1.95
|
||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Forfeited or cancelled
|
-
|
-
|
-
|
|||||||||
Expired
|
-
|
-
|
-
|
|||||||||
Outstanding at December 31, 2016
|
720,000
|
$
|
2.50
|
1.95
|
||||||||
Exercisable at December 31, 2016
|
720,000
|
$
|
2.50
|
1.95
|
|
||||||||||||
2017 | ||||||||||||
Number of Shares
|
Weighted Average
Exercise Price
|
Weighted Average Life Remaining (Years)
|
||||||||||
Outstanding at December 31, 2016
|
720,000
|
$
|
2.50
|
1.95
|
||||||||
Granted
|
4,542,338
|
2.42
|
1.90
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Forfeited or cancelled
|
-
|
-
|
-
|
|||||||||
Expired
|
-
|
-
|
-
|
|||||||||
Outstanding at December 31, 2017
|
5,262,338
|
$
|
2.43
|
1.77
|
||||||||
Exercisable at December 31, 2017
|
5,262,338
|
$
|
2.43
|
1.77
|
2018 | ||||||||||||
Number of Shares
|
Weighted Average
Exercise Price
|
Weighted Average Life Remaining (Years)
|
||||||||||
Outstanding at December 31, 2017
|
5,262,338
|
$
|
2.43
|
1.77
|
||||||||
Granted
|
3,609,822
|
1.95
|
5.13
|
|||||||||
Exercised
|
-
|
-
|
-
|
|||||||||
Forfeited or cancelled
|
-
|
-
|
-
|
|||||||||
Expired
|
-
|
-
|
-
|
|||||||||
Outstanding at March 31, 2018
|
8,872,160
|
$
|
2.23
|
2.97
|
||||||||
Exercisable at March 31, 2018
|
8,872,160
|
$
|
2.23
|
2.97
|
|
2018
|
2017
|
2016
|
|||||||||
Accrued payroll
|
$
|
172,419
|
$
|
145,779
|
$
|
-
|
||||||
Accrued interest
|
-
|
74,896
|
-
|
|||||||||
Accrued FAET
|
133,104
|
26,075
|
-
|
|||||||||
Accrued professional fees
|
99,255
|
|||||||||||
Other accruals
|
136,432
|
8,024
|
-
|
|||||||||
|
$
|
541,210
|
$
|
254,774
|
$
|
-
|
|
2019
|
2020
|
2021
|
2022
|
Total
|
|||||||||||||||
Payson Lease
|
$
|
120,000
|
$
|
120,000
|
$
|
120,000
|
$
|
80,000
|
$
|
440,000
|
|
2018
|
2017
|
2016
|
|||||||||
Net (Loss)
|
$
|
(1,797,228
|
)
|
$
|
(5,788,901
|
)
|
$
|
(155,024
|
)
|
|||
Benefit (expense) for income taxes computed using the statutory rate of 21% and 34%
|
377,418
|
1,968,226
|
52,708
|
|||||||||
Non-deductible expense
|
(161,864
|
)
|
(360,952
|
)
|
(5,274
|
)
|
||||||
Re-measurement of deferred income taxes due to tax reform
|
-
|
(632,683
|
)
|
-
|
||||||||
Change in valuation allowance
|
(215,554
|
)
|
(974,591
|
)
|
(47,434
|
)
|
||||||
Provision for income taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
Expiring December 31,
|
||||
2036
|
$
|
139,512
|
||
2037
|
4,727,276
|
|||
4,866,788
|
||||
2018 Non-Expiring NOL
|
1,026,447
|
|||
Total NOL Carryforward
|
$
|
5,893,235
|
|
March 31, 2018
|
|||||||||||
|
Life
|
Licenses
|
Patent
|
|||||||||
|
||||||||||||
Licensing Agreement – Jesse James
|
5
|
$
|
125,000
|
$
|
-
|
|||||||
Licensing Agreement – Jeff Rann
|
5
|
125,000
|
-
|
|||||||||
Patent
|
11.2
|
- |
950,000
|
|||||||||
|
250,000
|
950,000
|
||||||||||
Accumulated amortization – Licensing Agreements
|
(58,333
|
)
|
-
|
|||||||||
Accumulated amortization – Patents
|
-
|
(49,627
|
)
|
|||||||||
$
|
191,667
|
$
|
900,373
|
|
December 31, 2017
|
|||||||||||
|
Life
|
Licenses
|
Patent
|
|||||||||
|
||||||||||||
Licensing Agreement – Jesse James
|
5
|
$
|
125,000
|
$
|
-
|
|||||||
Licensing Agreement – Jeff Rann
|
5
|
125,000
|
-
|
|||||||||
Patent
|
11.2
|
- |
950,000
|
|||||||||
|
250,000
|
950,000
|
||||||||||
Accumulated amortization – Licensing Agreements
|
(45,833
|
)
|
||||||||||
Accumulated amortization – Patents
|
- |
(25,166
|
)
|
|||||||||
$
|
204,167
|
$
|
924,834
|
March 31, 2017
(Unaudited)
|
||||
Gross Sales
|
$
|
653,784
|
||
Customer incentives, discounts, returns, and allowances
|
-
|
|||
Net sales
|
653,784
|
|||
Cost of Goods Sold, includes depreciation and amortization of $19,421 and
|
||||
federal excise taxes of $64,055 for the three months ended March 31, 2017
|
474,890
|
|||
Gross Margin
|
178,894
|
|||
Operating Expenses
|
||||
Selling and marketing
|
116,833
|
|||
Corporate general and administrative
|
578,402
|
|||
Employee salaries and related expenses
|
167,987
|
|||
Depreciation expense
|
379
|
|||
Total operating expenses
|
863,601
|
|||
Loss from Operations
|
(684,707
|
)
|
||
Other Income (Expenses)
|
||||
Loss on vendor notes receivable collectability
|
(1,414,921
|
) | ||
Interest expense
|
(421,180
|
) | ||
Profit (Loss) before Income Taxes
|
(2,520,808
|
)
|
||
Provision for Income Taxes
|
-
|
|||
Net Profit (Loss)
|
$
|
(2,520,808
|
)
|
|
Loss per share
|
||||
Basic and fully diluted:
|
||||
Weighted average number of shares outstanding
|
17,118,431
|
|||
Loss per share
|
$
|
(0.15
|
)
|
March 31, 2017
(Unaudited)
|
||||
Cash flows from operating activities:
|
||||
Net (Loss)
|
$
|
(2,520,808
|
)
|
|
Adjustments to reconcile Net (Loss) to Net Cash provided by operations:
|
||||
Debt discount amortization
|
356,250
|
|||
Depreciation and amortization
|
11,343
|
|||
Common stock issued for legal fees
|
124,000
|
|||
Uncollectible vendor notes receivable
|
1,414,921
|
|||
Changes in Current Assets and Liabilities
|
||||
Vendor advances receivable
|
186,486
|
|||
Accounts receivable
|
4,546
|
|||
Other receivables
|
(2,465
|
)
|
||
Inventories
|
(765,320
|
)
|
||
Prepaid expenses
|
9,927
|
|||
Accounts payable
|
252,984
|
|||
Accounts payable
|
66,383
|
|||
Accrued liabilities
|
86,785
|
|||
Net cash used in operating activities
|
(766,511
|
)
|
||
Cash flows from investing activities
|
||||
Purchase of equipment
|
(36,017
|
)
|
||
Net cash used in investing activities
|
(36,017
|
)
|
||
Cash flow from financing activities
|
||||
Note payment - related party
|
(362,000
|
)
|
||
Insurance premium note payments
|
(79,328
|
)
|
||
Sale of common stock
|
1,350,875
|
|||
Organization and fundraising costs
|
(17,000
|
)
|
||
Net cash provided by financing activities
|
892,547
|
|||
Net increase in cash
|
90,019
|
|||
Cash, beginning of period
|
10,116
|
|||
Cash, end of period
|
$
|
100,135
|
||
Supplemental cash flow disclosures
|
||||
Cash paid during the period for -
|
||||
Interest
|
$
|
1,297
|
||
Income taxes
|
$
|
-
|
||
Name
|
|
Age
|
|
Position
|
|
Fred W. Wagenhals
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
75
|
|
Chairman of the Board, Chief Executive Officer and President
|
|
|
|
|
|
|
Ron Shostack
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
61
|
|
Chief Financial Officer
|
|
|
|
|
|
|
Steve Hilko
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
61
|
|
Chief Operating Officer
|
|
|
|
|
|
|
Kathleen C. Hanrahan
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
54
|
|
President – Global Tactical Defense Division; Director
|
|
|
|
|
|
|
Christopher Besing
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
57
|
Director
|
Randy Luth
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
63
|
|
Director
|
Harry S. Markley
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
55
|
|
Director
|
|
|
|
|
|
|
Russell William Wallace, Jr.
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
61
|
|
Director
|
Name and Principal Position
|
Year (1)
|
|
Salary (2)
|
|
|
Bonus (1)
|
|
|
Option
Awards (3) |
|
|
All Other
Compensation (4) |
|
|
Total
|
|
|||||
Fred W. Wagenhals
|
2018
|
|
$
|
30,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,000
|
|
President, Chief Executive Officer, |
2017
|
|
$
|
140,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
140,000
|
|
and Director |
2016
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steve Hilko (4)
|
2018
|
|
$
|
30,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
30,000
|
|
Chief Operating Officer |
2017
|
|
$
|
108,350
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
108,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ron Shostack (5)
|
2018
|
|
$
|
19,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
19,500
|
|
Chief Financial Officer |
2017
|
|
$
|
71,500
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
71,500
|
Name and Address of Beneficial Owner,
Directors and Officers:
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percentage of Beneficial Ownership (1)
|
|
||
|
|
|
|
|
|
|
||
Fred W. Wagenhals
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
7,807,000
|
|
|
|
25.7
|
%
|
|
|
|
|
|
|
|
|
|
Ron Shostack
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
125,000
|
|
|
|
0.41
|
%
|
|
|
|
|
|
|
|
|
|
Steve Hilko
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
250,000
|
|
|
|
0.82
|
%
|
|
|
|
|
|
|
|
|
|
Kathleen Hanrahan
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
100,000
|
|
|
|
0.33
|
%
|
|
|
|
|
|
|
|
|
|
Christopher S. Besing
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Randy Luth
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
275,000
|
|
|
|
0.91
|
%
|
|
|
|
|
|
|
|
|
|
Harry S. Marklay
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
Russell William Wallace, Jr
6401 E. Thomas Road, #106
Scottsdale, AZ 85251
|
|
|
300,000
|
|
|
|
0.99
|
%
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (five people)
Beneficial Shareholders greater than 5%
|
|
|
8,857,000
|
|
|
|
29.2
|
%
|
|
2018
|
2017
|
2016
|
|||||||||
Audit Fees
|
$
|
99,255
|
$
|
100,234
|
$
|
-0-
|
||||||
Audit Related Fees
|
-0-
|
-0-
|
-0-
|
|||||||||
Tax Fees
|
-0-
|
-0-
|
-0-
|
|||||||||
All Other Fees
|
-0-
|
-0-
|
-0-
|
|||||||||
Total Fees
|
$
|
99,255
|
$
|
100,234
|
$
|
-0-
|
(a) |
Financial Statements and Financial Statement Schedules are set forth under Part II, Item 8 of this report.
|
(b) |
Exhibits
|
Exhibit
Number
|
Exhibit
|
||
2.1
|
|||
2.2
|
|||
2.3
|
|||
2.4
|
|||
3.1(a)
|
|||
3.2
|
|||
4.1
|
|||
4.2
|
|||
4.3
|
|||
10.1
|
|||
10.2
|
|||
31.1
|
|||
31.2
|
|||
32.1
|
|||
32.2
|
|||
(1) |
Incorporated by reference to the Form 8-K Report filed with the SEC on February 9, 2017
|
(2) |
Incorporated by reference to the Form 8-K Report filed with the SEC on March 23, 2017
|
|
|
AMMO, INC.
|
|
|
|
|
|
|
|
|
|
|
/s/ Fred W. Wagenhals
|
||
Dated: May 24, 2018
|
By: Fred W. Wagenhals, Chief Executive Officer
|
||
|
|
|
|
|
AMMO, INC.
|
|
|
|
|
|
|
|
|
|
|
/s/ Ron Shostack
|
||
Dated: May 24, 2018
|
By: Ron Shostack, Chief Financial Officer
|
||
|
|
|
Name
|
Title
|
Date
|
|
/s/ Fred Wagenhals
|
Chief Executive Officer, Director
|
May 24, 2018
|
|
Fred Wagenhals
|
|||
/s/ Kathleen Hanrahan
|
President, Global Tactical Defense Division, Director
|
May 24, 2018
|
|
Kathleen Hanrahan
|
|||
/s/ Rusty Wallace Jr.
|
Director
|
May 24, 2018
|
|
Rusty Wallace
|
|||
/s/ Randy Luth
|
Director
|
May 24, 2018
|
|
Randy Luth
|
|||
/s/ Harry Markley
|
Director
|
May 24, 2018
|
|
Harry Markley
|
|||
|
Director
|
May 24, 2018
|
|
Christopher Besing
|
TO:
|
AMMO, INC.
6401 East Thomas Rd
Scottsdale, AZ 852551
Tel:
Email: fred@ammo-inc.com
|
|
Signature:
|
|
|
|
|
|
Signature Guaranteed:
|
|
Name:
|
|
|
|
|
(Please Type or Print Address:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
(Please Print)
|
|
Address:
|
|
(Please Print)
|
|
Dated: _______________ __, ______
|
|
Holder’s Signature:______________________
|
|
Holder’s Address:_______________________
|
TO:
|
AMMO, INC.
6401 East Thomas Rd
Scottsdale, AZ 852551
Tel:
Email: fred@ammo-inc.com
|
|
Signature:
|
|
|
|
|
|
Signature Guaranteed:
|
|
Name:
|
|
|
|
|
(Please Type or Print Address:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name:
|
|
(Please Print)
|
|
Address:
|
|
(Please Print)
|
|
Dated: _______________ __, ______
|
|
Holder’s Signature:______________________
|
|
Holder’s Address:_______________________
|
X=
|
Y(A-B)
|
|
|
A
|
|
|
|
|
Where: | X = | The number of shares of Common Stock to be issued to the Warrantholder pursuant to this Cashless Exercise |
Y = |
The number of shares of Common Stock in respect of which the Cashless Exercise election is made
|
A = |
The fair market value of one share of Common Stock at the time the Cashless Exercise election is made
|
B = |
The Exercise Price (as adjusted to the date of the Cashless Exercise)
|
If to the Company:
|
Ammo, Inc.
Attn: Ron Shostack
6401 E Thomas Road, Suite 106
Scottsdale, AZ 85251
Email:
ron@ammo-inc.com
|
If to the Warrantholder:
|
Paulson Investment Company, LLC
Attn: Alex Winks
2141 W. North Ave., 2nd Floor
Chicago, Illinois 60647
|
Ammo, Inc. | |||
|
By:
|
||
Name: Ron Shostack | |||
Title: Chief Financial Officer | |||
1. |
The undersigned hereby irrevocably elects to exercise the right to purchase _________ shares of Common Stock, represented by Warrant No. C-19 as follows:
|
[ ] |
Exercise for Cash
. Pursuant to Section 2(a) of the Warrant, the Holder hereby elects to exercise the Warrant for cash and tenders payment herewith (or has made a wire transfer) to the order of Ammo, Inc. in the amount of $____________.
|
[ ] |
Cashless Exercise
. Pursuant to Section 2(b) of the Warrant, the Holder hereby elects to exercise the Warrant on a cashless basis.
|
2. |
The undersigned requests that the applicable number of shares of Common Stock be issued and delivered to the following address:
|
Name:
|
|
|
|
Address:
|
|
|
|
|
|
|
|
Email:
|
|
|
|
SSN:
|
|
|
|
3. |
The undersigned understands, agrees and recognizes that:
|
(a) |
No federal or state agency has made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the securities.
|
(b) |
All certificates evidencing the shares of Common Stock, if any, may bear a legend substantially similar to the legend set forth in [
Section 7]
of the Warrant Certificate regarding resale restrictions.
|
5. |
The undersigned acknowledges that the undersigned has received, read and understood the Warrant and agrees to abide by and be bound by its terms and conditions.
|
6. |
(i) The undersigned has such knowledge and experience in business and financial matters that the undersigned is capable of evaluating the Company and the proposed activities thereof, and the risks and merits of this prospective investment.
|
7. |
(i) The undersigned is an "accredited investor," as that term is defined in the Securities Act.
|
[ ] |
The undersigned is a natural person whose present net worth (or whose joint net worth with his or her spouse), excluding the value of the undersigned's primary residence, exceeds $1,000,000. For purposes of calculating the undersigned's present net worth, the undersigned has included the following as liabilities: (i) any indebtedness that is secured by the undersigned's primary residence in excess of the estimated fair market value of the undersigned's primary residence at the time of the sale of the shares, and (ii) any incremental debt secured by the undersigned's primary residence that was incurred in the 60 days before the sale of the shares, other than as a result of the acquisition of the undersigned's primary residence.
|
[ ] |
The undersigned is a natural person who had individual income in excess of $200,000 in each of the last two years or joint income with the undersigned's spouse in excess of $300,000 during such two years, and the undersigned reasonably expects to have the same income level in the current year.
|
[ ] |
The undersigned is an officer or director of the Company.
|
[ ] |
The undersigned is a corporation or partnership not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
|
[ ] |
The undersigned is a trust with total assets in excess of $5,000,000 whose purchase is directed by a person with such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of the prospective investment.
|
[ ] |
The undersigned is an entity, all of whose equity owners are accredited investors under one or more of the categories above.
|
8. |
The undersigned understands that the shares purchased hereunder have not been registered under the Securities Act, in reliance upon the exemption from the registration requirements under the Securities Act pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated thereunder; and, therefore, that the undersigned must bear the economic risk of the investment for an indefinite period of time since the securities cannot be sold, transferred or assigned to any person or entity without compliance with the provisions of the Securities Act
|
|
By:
|
|
|
|
Name:
|
|
|
|
Print:
|
|
|
|
|
|
|
|
Note: Signature must correspond with the name as written upon the face of the Warrant in all respects, without alteration or enlargement or any change whatsoever.
|
a. |
"Confidential Information" means all financial, commercial, technical, proprietary, personal and other information, data, trade secrets and know-how of either party that is not generally known or readily derivable from publicly available information, including the terms of this Agreement.
|
b. |
"Image Rights" means the right to use the name, image, photographs, autograph, likeness, characterization, biography, visual and audio representation of JJ.
|
c. |
"Intellectual Property Rights" means all patents and patent applications, utility models, rights in industrial designs, trademarks (whether registered or unregistered and including any goodwill in such trade marks), service marks, trade names, business names, internet domain names, rights in designs (whether registered or unregistered), copyrights, moral rights, rights in Confidential Information, rights in inventions (whether patentable or not), and all rights in discoveries, improvements, techniques, processes, tools, models, concepts, and systems, and all other intellectual property rights, whether registered or unregistered, including any form of application for any of the same and all similar or equivalent rights which may exist anywhere in the world.
|
d. |
"Jesse James Branded Products" means AMMO's Jesse James branded line of ammunition, and other associated Jesse James branded promotional items related thereto. Such other promotional items include other items commonly promoted and sold by other ammunition manufacturers to promote the branding and recognition of their ammunition, for example, clothing, hats, etc.
|
e. |
"Net Profit" means Net Sales minus cost of goods sold, minus operating expenses, minus taxes, minus interest.
|
f. |
"Net Sales" means the revenue received from the wholesale sale of Jesse James Branded
Products, less customary discounts, and allowances, and less any bona fide returns. |
g. |
"Potential Retailers" means retail and e-commerce companies with which JJ already has commercial relationships for other JJ branded products, and which are targets to distribute and sell Jesse James Branded Products.
|
a. |
One or more television and/or radio commercials
|
b. |
Product packaging, promotion, and advertising
|
c. |
Use on the internet, including AMMO's website
|
d. |
In AMMO press releases
|
e. |
Personal appearances, for example, speaking engagements, trade shows, and exhibitions
|
f. |
Throughout all company controlled and operated social media pages and sites
|
g. |
Use in/on any advertising medium including magazine, billboard, electronic displays etc
|
a. |
Upon request by AMMO, attend at six (6) photograph session annually for pictures to be used in conjunction with the marketing, promotion, and sale of the Jesse James Branded Products, the date and time to be mutually agreed upon by the parties. The photograph(s) shall be submitted to JJ for approval. In the event JJ does not accept or reject the submitted photograph(s) within seven (7) days, the photograph(s) will be deemed accepted by JJ.
|
b. |
Upon request by AMMO, attend at least four (4) production sessions annually to be used for the production of a commercial used in conjunction with the marketing, promotion, and sale of the Jesse James Branded Products, the date and time to be mutually agreed upon by the parties. The commercial(s) shall be submitted to JJ for approval. In the event JJ does not accept or reject the submitted commercial(s) within seven (7) days, the commercial(s) will be deemed accepted by JJ.
|
c. |
Promote the Jesse James Branded Products through his own social media outlets, provided that JJ agrees to incorporate any reasonable changes, updates, or clarifications requested AMMO. JJ agrees to do a minimum of 4 posts per month during Term on each social media platform JJ has accounts on. JJ will use both video posts and static image posts to help promote and support Company.
|
d. |
Provide proposed designs for the packaging of the Jesse James Branded Products, provided that the ultimate design and packaging shall be at AMMO's absolute discretion.
|
e. |
Review and provide input on the Jesse James Branded Products, provided that the ultimate technical specifications, function, and overall design of the Jesse James Branded Products shall be at AMMO's absolute discretion.
|
f. |
In coordination with, and subject to AMMO's approval, E shall assist with introductions to, calling upon, and negotiations with Potential Retailers for the sale and distribution of Jesse James Branded Products.
|
g. |
If JJ is involved in any sponsored photography sessions, internet, promotional, or television commercials, JJ shall wear items of clothing and/or accessories that AMMO deems appropriate for the marketing, promotion, advertising and sale of the Jesse James Branded Products.
|
h. |
JJ agrees to make a minimum of six (6) appearances annually at trade shows or promotional events as determined by AMMO. At such appearances, JJ agrees to sign autographs for at least four (4) hours per appearance.
|
i. |
JJ hereby agrees that he shall not grant right to use the Jessie James Image Rights to any other company, manufacturer or retailer of the same product(s), or similar product(s), to that of the Jesse James Branded Products.
|
j. |
JJ agrees not to develop, sponsor, endorse, or promote (i) any other products that are substantially similar in purpose to, or competitive with the Jesse James Branded Products; or (ii) any other company, manufacturer, or retailer which sells products that are similar in purpose to, or competitive with the Jesse James Branded Products. The parties specifically agree that JE s and BED' s promotion and sale of Jesse James Firearms Unlimited firearms is authorized.
|
k. |
For all of the Services provided herein, JJ agrees that none of the Services will contain any obscene or defamatory material and will not expose AMMO to criminal or civil proceedings.
|
I. |
JJ agrees not to participate in any activities which would prejudice the goodwill and reputation of AMMO and/or the Jesse James Branded Products during the Term of the Agreement, and for a period of twelve (12) months thereafter.
|
m. |
JJ agrees not to act or engage in any action or conduct which would impugn his character or reputation or that of his work hereunder.
|
6. |
CONFIDENTIALITY
.
Each party agrees that it will not disclose to any third party or use any Confidential Information disclosed to it by the other party except as expressly permitted in this Agreement; and that it will take all reasonable measures to maintain the confidentiality of all Confidential Information of the other party in its possession or control, which will in no event be less than the measures it uses to maintain the confidentiality of its own information of similar importance. The foregoing restrictions do not apply to (a) any use or disclosures authorized by the disclosing party; (b) any use or disclosure required by law or by court, provided that the receiving party provides the disclosing party as much notice of the disclosure, or potential disclosure, as possible; and (c) any information which is already in, or comes into, the public domain other than through the receiving party's unauthorized disclosure.
|
7. |
TRADEMARKS
.
The parties acknowledge and agree that AMMO may adopt, use, and/or seek trademark registration for, one or more trademarks relating to the Jesse James Branded Products, including but not limited to JESSE JAMES AMMUNITION. The parties agree that AMMO shall own all rights to such trademarks, and all use of such trademarks shall inure to the benefit of AMMO, provided that AMMO shall cease using JESSE JAMES as part of any such trademark(s) upon termination of this Agreement and expiration of the Transition Period. JJ and JJFU agree to cooperate with AMMO in seeking federal registration of any such trademark by AMMO.
|
8. |
OWNERSHIP OF INTELLECTUAL PROPERTY.
Subject to the limitations herein, and in consideration of the Royalty paid to JJ, JJ agrees to assign, and does hereby assign, all present and future Intellectual Property Rights related to the Services, including but not limited to in all media and advertising related to the Jesse James Branded Products, and any other material created for the purpose of this Agreement, including but not limited to the trademarks, and any packaging designs of JJ. AMMO shall be entitled to use, exploit or license any of the material produced or created as a result of the Services provided by JJ. JJ shall give AMMO immediate written notice of any actual, threatened, or suspected infringement of AMMO's Intellectual Property Rights. JJ represents and warrants that any intellectual property contributed by JJ (including the use of JESSE JAMES as part of the JESSE JAMES AMMUNITION trademark), will not infringe the Intellectual Property Rights of any third party.
|
9. |
COMPENSATION.
In exchange for JJ's performance of the Services, AMMO agrees to pay JJ a royalty, calculated by method of: (a) for Tier 1 ammunition Jesse James Branded Products, JJ will be paid five percent (5%) of the Net Sales for which payment has been received from the applicable customer ("Ammunition Royaltyl"); (b) for Tier 2 ammunition Jesse James Branded Products, JJ will be paid three percent (4%) of the Net Sales for which payment has been received from the applicable customer ("Ammunition Royalty2" ; and (c)for non-ammunition Jesse James Branded Products (e.g., t-shirts, hats, and other promotional items), JJ will be paid twenty-five percent (50%) of the Net Profit for which payment has been received from the applicable customer ("Promotional Item Royalty"). The Ammunition Royaltyl&2 and Promotional Item Royalty are collectively referred to as "Royalty". Royalty payments to be paid quarterly. AMMO will make this payment to JJ within 45 days of the close of each fiscal quarter. Along with the payment of the Royalties, AMMO shall provide a royalty statement showing the Net Sales or Net Profit (as applicable) of the Jesse James Branded Products, and the amount of Royalties due to JJ. Upon reasonable request by JJ, but not more than annually, AMMO shall make its applicable books and records available for review by JJ to confirm payment of the applicable Royalties.
|
10. |
STOCK COMPENSATION.
JJ will receive a onetime signing bonus of 100,000 shares of AMMO stock
|
11. |
DISCOUNTS.
Notwithstanding the foregoing, the parties recognize that Potential Retailers may seek special discounts for Jesse James Branded Products. In such event, the parties agree to negotiate in good faith appropriate adjustments to the Royalty to ensure the overall decrease in revenue is equitably shared between JJ and AMMO.
|
12. |
PRODUCT PURCHASE
. JJ may purchase Product to sell across his website(s) at AMMO's lowest pricing offered to wholesale vendors. If requested, JJ will receive 100 rounds of each skew of the Jesse James Branded Products per month during the Term.
|
13. |
INDEMNITY.
AMMO and JJ mutually agree to defend, indemnify, and hold harmless the other against all third party claims, losses (including attorneys' fees), liabilities, judgement, and settlements arising from or relating to its own breach of this Agreement. In the event of a claim hereunder, JJ and AMMO agree to provide full details in writing to the other party at the earliest opportunity and shall not settle any such matter without first consulting the other party. The indemnifying party will promptly reimburse the indemnified party for all reasonable expenses and cost incurred in defending the indemnified party. The indemnified party will have the right to select its own counsel, subject only to the indemnifying party's reasonable right of approval of any such counsel. This indemnification will survive termination of the Agreement.
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14. |
DEFAULT AND TERMINATION.
If either party at any time during the Term shall (a) fail to make a required payment when due; (b) goes into voluntary or involuntary liquidation or is declared insolvent; or (c) fail to observe or perform any of the covenants, agreements or obligations under this Agreement , the non-defaulting party may terminate this Agreement if such default is not cured within thirty (30) days after the defaulting party shall have received written notice of such failure specifying in reasonable detail the nature of such default. The termination rights shall not constitute the exclusive remedy. Upon any termination of this Agreement, AMMO shall be entitled to a transition period of twelve (12) months ("Transition Period") during which it can continue to use the Image Rights to enable it to liquidate all inventory and in-process orders for Jesse James Branded Products.
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15. |
LIMITED LIABILITY
.
Notwithstanding anything to the contrary in this Agreement, AMMO's liability to JJ shall not exceed the remuneration, excluding reimbursement of expenses, actually paid by AMMO to JJ over the preceding twenty-four (24) months. In no event will AMMO be liable for any indirect, incidental, reliance, special, consequential, or punitive damages for any claim or cause of action (including negligence) arising out of or related to this Agreement, even if AMMO has been advised of the possibility of such damages.
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16. |
FORCE MAJEURE.
If performance of this Agreement or any obligation under this Agreement is prevented, restricted, or interfered with by causes beyond either party's reasonable control ("Force Majeure"), and if the party unable to carry out its obligations gives the other party prompt written notice of such event, then the obligations of the party invoking this provision shall be suspended to the extent necessary by such event. The term Force Majeure shall include, without limitation, acts of God, fire, explosion, vandalism, storm or other similar occurrence, orders or acts of military or civil authority, or by natural emergencies, insurrections, riots, or wars, strikes, lock-outs, work stoppages. The excused party shall use reasonable efforts under the
|
17. |
ARBITRATION.
Any controversies or disputes arising out of or relating to this Agreement shall be resolved by binding arbitration in accordance with the then-current Commercial Arbitration Rules of the American Arbitration Association. The parties shall select a mutually acceptable arbitrator knowledgeable about issues relating to the subject matter of this Agreement. In the event the parties are unable to agree to such a selection, AMMO and JJ will select an arbitrator and the two arbitrators in turn shall select a third arbitrator, all three of whom shall preside jointly over the matter. The arbitration shall take place at a location that is reasonably centrally located between the parties, or otherwise mutually agreed upon by the parties. All documents, materials, and information in the possession of each party that are in any way relevant to the dispute shall be made available to the other party for review and copying no later than 30 days after the notice of arbitration is served. The arbitrator(s) shall not have the authority to modify any provision of this Agreement or to award punitive damages. The arbitrator(s) shall have the power to issue mandatory orders and restraint orders in connection with the arbitration. The decision rendered by the arbitrator(s) shall be final and binding on the parties, and judgement may be entered in conformity with the decision in any court having jurisdiction. The agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. During the continuance of any arbitration proceedings, the parties shall continue to perform their respective obligations under this Agreement. The costs of the arbitrators shall be split between the parties appearing before the arbitrators.
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18. |
ENTIRE AGREEMENT.
This Agreement contains the entire agreement of the parties, and there are no other promises or conditions in any other agreement whether oral or written concerning the subject matter of this Agreement. This Agreement supersedes any prior written or oral agreements between the parties.
|
19. |
SEVERABILITY.
If any provision of this Agreement will be held invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
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20. |
ASSIGNMENT.
The rights of each party under this Agreement are personal to that party, and neither this Agreement, nor any of the rights or obligations contained herein, may be assigned (by contract, law, or otherwise) or transferred by any party without the prior, express written consent of the parties hereto. Notwithstanding the foregoing, AMMO may delegate or assign any or all of its rights under this Agreement to any of its subsidiaries or affiliates. Any purported assignment in violation of this section shall be null and void.
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21. |
AMENDMENT.
This Agreement may not be modified or amended except by a written document executed by an authorized representative of each party.
|
22. |
GOVERNING LAW.
This Agreement, any amendments hereto, and any and all issues or controversies arising hereunder, shall be governed by, construed, and enforced in accordance with the laws of the State of Nevada without regard to its choice of law provisions.
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23. |
NOTICES.
Any notice or communication required or permitted under this Agreement shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the following addresses, or to such other address as one party may have furnished to other in writing: (1) for JJFU, 800 Dripping Springs Ranch Rd., Dripping Springs, Texas 78620; (2) for AMMO, 6401 East Thmoas, Scottsdasle, AZ 85251, Attn: Fred Wagenhals; and (3) for JJ, to the address set forth in the opening paragraph.
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24. |
WAIVER OF CONTACTUAL RIGHT.
The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.
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25. |
RELATIONSHIP OF THE PARTIES
Nothing contained in this Agreement shall be deemed or construed to place the parties in relationship of partners, joint venturers, principal-agent, or employer-employee, it being understood that the parties hereto are and will remain independent contractors in all respects, and neither party shall have any right to obligate or bind the other in any manner whatsoever. Nothing herein shall be deemed to provide any right or remedy to any third party.
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26. |
CONSTRUCTION OF THE AGREEMENT
.
The parties acknowledge that they have jointly participated in the negotiation of this Agreement and no provision of the Agreement shall be construed against, or be interpreted in favor of, either party by reason of such party having or deemed to have structured, dictated, or drafted such provision.
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27. |
COUNTERPARTS
.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and taken together shall be construed as a single instrument. This Agreement may be executed by electronic submission and signatures on such a copy shall be deemed as an original signature.
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28. |
SIGNATORIES AUTHORITY TO CONTRACT
.
Each of the parties to this Agreement represent and warrant that it has the full right and power to enter into this Agreement, to perform all designated obligations, and grant all designated rights without violating the legal or equitable rights of any other party, and the execution and performance hereunder will not conflict with or result in breach of or default of any other agreement to which the party is bound.
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/s/ Fred Wagenhals
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Dated: |
11-14/16
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||
Fred Wagenhals
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|
|||
CEO
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/s/ Jesse James
|
Dated: |
11/14/2016
|
||
Jesse James, Individual
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|||
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/s/ Jesse James
|
Dated: |
11/14/2016
|
||
Jesse James, Principal
|
|
a. |
"Confidential Information" means all financial,
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b. |
"Image Rights" means the right to use the name, image, photographs, autograph, likeness, characterization, biography, visual and audio representation of JR as well as images, songs, name and logos for JR.
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c. |
"Intellectual Property Rights" means all patents and patent applications, utility models, rights in industrial designs, trademarks (whether registered or unregistered
|
d. |
"Products" means AMMO's Jeff Rann branded line of ammunition including the calibers of ammunition listed in "Schedule A" ("Products"), and other associated Jeff Rann branded promotional items related thereto. Such other promotional items include other items commonly promoted and sold by other ammunition manufacturers to promote the branding and recognition of their ammunition, for example, clothing, hats, etc.
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e. |
"Net Profit" means Net Sales minus cost of goods sold, minus operating expenses, minus taxes, minus interest.
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f. |
"Net Sales" means the revenue received from the wholesale sale of Jeff Rann Branded Products, less customary discounts, and allowances, and less any bona fide returns.
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g. |
"Potential Retailers" means retail and e-commerce companies with which JR already has commercial relationships for other JR branded products, and which
|
2. |
APPOINTMENT/ENGAGEMENT.
AMMO engages JR, and JR hereby accepts the engagement, to provide for his endorsement of, and assistance in offering/selling AMMO's Jeff Rann Branded Products pursuant to the terms herein.
|
3. |
TERM.
Unless terminated in accordance with Section 15,
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a. |
One or more television and/or radio commercials
|
b. |
Product packaging, promotion, and advertising
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c. |
Use on the interne, including AMMO's website
|
d. |
In AMMO press releases
|
e. |
Personal appearances, for example, speaking engagements, trade shows, and exhibitions
|
f. |
Throughout all AMMO controlled and operated social media pages and sites
|
g. |
Use in/on any advertising medium including magazine, billboard, electronic displays etc
|
b. |
Assist AMMO in promoting the Products through JR branded social media outlets, provide imagery and content as requested by AMMO to incorporate in social media and websites. JR agrees to provide content to do a minimum of 4 posts per month during Term on each social media platform operated by AMMO. JR will provide AMMO with both video content and static image posts to help promote and support AMMO.
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c. |
Provide proposed designs for the packaging of the Jeff Rann Branded Products, provided that the ultimate design and packaging shall be at AMMO's absolute discretion.
|
d. |
Review and provide input on the Jeff Rann Branded Products, provided that the ultimate technical specifications, function, and overall design of the Jeff Rann Branded Products shall be at AMMO's absolute discretion, notwithstanding the foregoing, the ten calibers listed on Schedule A attached hereto and the components used to manufacture said calibers shall be approved by both AMMO and JR.
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e. |
In coordination with, and subject to AMMO's approval, JR shall assist with introductions to, calling upon, and negotiations with Potential Retailers for the sale and distribution of Jeff Rann Branded Products.
|
f. |
If JR is involved in any sponsored photography sessions, internet, promotional, or television commercials, JR shall wear items of clothing and/or accessories that AMMO
|
g. |
JR agrees to make a minimum of four (4) appearances annually at, once at each of the following trade shows or promotional events: 1) Dallas Safari Club Convention, 2) Safari Club International Convention, 3) National Shooting Sports Foundation "Shot Show", and 4) National Rifle Association Convention . At such appearances, JR agrees to
sign
autographs for
at
least four (4) hours per appearance. Additional appearances
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h. |
JR hereby agrees that he shall not grant right to use the Jeff Rann, Image Rights to any other ammunition manufacturer or retailer of the same product(s), or similar product(s), to that of the Jeff Rann Branded Products.
|
i. |
JR agrees not to develop, sponsor, endorse, or promote (i) any other products that are substantially similar in purpose to, or competitive with the Jeff Rann Branded Products; or (ii) any other ammunition manufacturer, or retailer which sells products that are similar in purpose to, or competitive with the Jeff Rann Branded Products. The parties specifically agree that JR's promotion and sale of Products is authorized.
|
j. |
For all of the Services provided herein, JR agrees that none of the Services will contain any obscene or defamatory material and will not expose AMMO to criminal or civil proceedings.
|
k. |
JR agrees not to participate in any activities which would prejudice the goodwill and reputation of AMMO and/or the Jeff Rann Branded Products during the Term of the Agreement, and for a period of twelve (12) months thereafter.
|
m. |
JR will wear AMMO branded shirts and hats as required by AMMO.
|
n. |
JR shall host and guide a total of ten (10) hunts on his 777 Ranch for AMMO during the first five (5) years of this Agreement, and AMMO will be credited Ten Thousand Dollars ($10,000.00) to be applied towards the cost of each hunt (based on the pricing of the 777 Ranch in effect at the time of the hunt). In no event shall JR be required to credit AMMO more than One Hundred Thousand Dollars ($100,000.00) during the term of this Agreement. AMMO will facilitate and pay for the filming and photographing of the hunts on the 777 Ranch
|
o. |
JR will assist in Product development and have approvals over packaging and Products. After submission for approval, JR will have 72 hours to approve. Failure to approve within the 72 hours will deem to have been approved.
|
p. |
All Products must meet guidelines and standards as agreed on between AMMO and JR, JR shall specifically approve the calibers and components of the JR Branded ammunition. .
|
7. |
TRADEMARKS.
The Parties acknowledge and agree that AMMO may adopt, use, and/or seek trademark registration for, one or more trademarks relating to the Jeff Rann Branded Products, including but not limited to Jeff Rann Branded Line of ammunition. The Parties agree that AMMO shall own all rights to such trademarks, and all use of such trademarks shall inure to the benefit of AMMO, provided that AMMO shall cease using JEFF RANN as part of any such trademark(s) upon termination of this Agreement and expiration of the Transition Period. JR agrees to cooperate with AMMO in seeking federal registration of any such trademark by AMMO. Without limiting the foregoing, JR agrees to execute any necessary consent required by the United States Patent and Trademark Office ("USPTO") for use of the Jeff Rann name, and JR agrees, to the extent necessary, to execute any necessary consent and/or co-existence agreements required by the USPTO.
|
8. |
OWNERSHIP OF INTELLECTUAL PROPERTY.
Subject to the limitations herein, and in consideration of the Royalty paid to JR, JR agrees to assign, and does hereby assign, all present and future Intellectual Property Rights related to the Services, including but not limited to in all media and advertising related to the Jeff Rann Branded Products, and any other material created for the purpose of this Agreement, including but not limited to the trademarks, and any packaging designs of JR. AMMO shall be entitled to use, exploit or license any of the material produced or created as a result of the Services provided by JR. JR shall give AMMO immediate written notice of any actual, threatened, or suspected infringement of AMMO's Intellectual Property Rights. JR represents
|
9. |
COMPENSATION.
In exchange for JR's performance of the Services, AMMO agrees to pay JR a royalty, calculated by method of: (a) for all ammunition Products, JR will be paid three percent (3%) of the Net Sales for which payment has been received from the applicable customer ("Ammunition Royalty"); and (b) for non-ammunition Jeff Rann Branded Products (e.g., t-shirts, hats, and other promotional items), JR will be paid twenty-five percent (25%) of the Net Profit for which payment has been received from the applicable customer ("Promotional Item Royalty"). The Ammunition Royalty and Promotional Item Royalty are collectively referred to as "Royalty". Royalty payments to be paid quarterly. AMMO will make this payment to JR within 45 days of the close of each fiscal quarter. Along with the payment of the Royalties, AMMO shall provide a royalty statement showing the Net Sales or Net Profit (as applicable) of the Jeff Rann Branded Products, and the amount of Royalties due to JR. Upon reasonable request by JR, but not more than annually, AMMO shall make its applicable books and records available for review by JR to confirm payment of the applicable Royalties.
|
10. |
STOCK COMPENSATION
. JR will receive a onetime signing bonus of 50,000 shares of AMMO common stock. Annual Performance Bonus are as follows:
Gross sales of Products reach $2,500,000-$5,000,000 —10,000 shares
|
The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and are
"
restricted securities" within the meaning of Rule 144 promulgated under the Securities Act. The securities have been acquired for investment and may not be sold or transferred without complying with Rule 144 in the absence of an effective registration or other compliance under the Securities Act.
|
11. |
DISCOUNTS.
Notwithstanding the foregoing, the parties recognize that Potential Retailers may seek special discounts for Products. In such event, the parties agree to negotiate in good faith appropriate adjustments to the Royalty to ensure the overall decrease in revenue is equitably shared between JR and AMMO.
|
12. |
PRODCT PURCHASE.
JR may purchase Product to sell across his website(s) at AMMO's lowest pricing offered to wholesale vendors. If requested, JR will receive 100 rounds of each caliber of the Jeff Rann Branded Products per month during the Term.
|
13. |
INDEMNITY.
AMMO and JR mutually agree
to defend, indemnify, and hold harmless the other against all third party claims, losses (including attorneys' fees), liabilities, judgement, and settlements arising from or relating to its own breach of this Agreement. In addition, AMMO shall indemnify JR and hold JR, harmless from and against any and all claims, demands, damages, liabilities, losses and expenses (including reasonable attorneys' fees), relating directly or indirectly to the Products and the manufacturing of the Products, provided however that AMMO shall not indemnify JR against any claims, demands, damages, liabilities, losses or expenses arising from JR's gross negligence or willful misconduct. In the event of a claim hereunder, JR and AMMO agree to provide full details in writing to the other party at the earliest opportunity and
|
14. |
INSURANCE
.
During the term of this Agreement, AMMO shall maintain in full force and effect commercial general liability insurance and product liability insurance , in amounts of not less than Ten Million ($10,000,000) dollars for a single accident occurrence or in the aggregate. JR shall be named as an additional insured and AMMO shall provide JR a certificate evidencing the aforementioned insurance is in effect.
|
15. |
DEFAULT AND TERMINATION
.
If either party at any time during the Term shall (a) fail to make a required payment when due; (b) goes into voluntary or involuntary liquidation or is declared insolvent; or (c) fail to observe or perform any of the covenants, agreements or obligations under this Agreement , the non-defaulting party may terminate this Agreement if such default is not cured within thirty (30) days after the defaulting party shall have received written notice of such failure specifying in reasonable detail the nature of such default. The termination rights shall not constitute the exclusive remedy.
Upon any termination of this Agreement, AMMO shall be entitled to a transition period of twelve (12) months ("Transition Period") during which it can continue to use the Image Rights to enable it to liquidate all inventory and in-process orders for Products.
|
16. |
LIMITED LIABILITY.
Notwithstanding anything to the contrary in this Agreement, except for AMMO's indemnification obligations in Section 13, AMMO's liability to JR shall not exceed the remuneration, excluding reimbursement of expenses, actually paid by AMMO to JR over the preceding twenty-four (24) months. In no event will AMMO be liable for any indirect, incidental, reliance, special, consequential, or punitive damages for any claim or cause of action (including negligence) arising out of or related to this Agreement, even if AMMO has been advised of the possibility of such damages.
|
17. |
FORCE MAJEURE.
If performance of this Agreement or any obligation under this Agreement is prevented, restricted, or interfered with by causes beyond either party's reasonable control ("Force Majeure"), and if the party unable to carry out its obligations gives the other party prompt written notice of such event, then the obligations of the party invoking this provision shall be suspended to the extent necessary by such event. The term Force Majeure shall include, without limitation, acts of God, fire, explosion, vandalism, storm or other similar occurrence, orders or acts of military or civil authority, or by natural emergencies, insurrections, riots, or wars, strikes, lock-outs, work stoppages. The excused party shall use reasonable efforts under the circumstances to avoid or remove such causes of non-performance and shall proceed to perfoint with reasonable dispatch whenever such caused are removed or ceased. An act or omission shall be deemed within the reasonable control of a party if committed, omitted, or caused by such party, or its employees, officers, agents, or affiliates.
|
18. |
ARBITRATION.
Any controversies or disputes arising
|
20. |
SEVERABILITY.
If any provision of this Agreement will be held invalid or unenforceable for any reason, the remaining provisions will continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid and enforceable, then such provision will be deemed to be written, construed, and enforced as so limited.
|
21. |
ASSIGNMENT.
The rights of each party under this Agreement are personal to that party, and neither this Agreement, nor any of the rights or obligations contained herein, may be assigned (by contract, law, or otherwise) or transferred by any party without the prior, express written consent of the parties hereto. Notwithstanding the foregoing, AMMO may delegate or assign any or all of its rights under this Agreement to any of its subsidiaries or affiliates. Any purported assignment in violation of this section shall be null and void.
|
22. |
AMENDMENT.
This Agreement may not be modified or amended except by a written document executed by an authorized representative of each party.
|
23. |
GOVERNING LAW.
This Agreement, any amendments hereto, and any and all issues or controversies arising hereunder, shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware without regard to its choice of law provisions.
|
24. |
NOTICES.
Any notice or communication required or permitted under this Agreement shall be sufficiently given if delivered in person or by certified mail, return receipt requested, to the following addresses, or to such other address as one party may have furnished to other in writing:
|
25. |
WAIVER OF CONTACTUAL RIGHT.
The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.
|
26. |
RELATIONSHIP OF THE PARTIES.
Nothing contained in this Agreement shall be deemed or construed to place the parties in relationship of partners, joint venturers, principal-agent, or employer-employee, it being understood that the parties hereto are and will remain independent contractors in all respects, and neither party shall have any right to obligate or bind the other in any manner whatsoever. Nothing herein shall be deemed to provide any right or remedy to any third party.
|
27. |
CONSTRUCTION OF THE AGREEMENT.
The parties acknowledge that they have jointly participated in the negotiation of this Agreement and no provision of the Agreement shall be construed against, or be interpreted in favor of, either party by reason of such party having or deemed to have structured, dictated, or drafted such provision.
|
28. |
COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and taken together shall be construed as a single instrument. This Agreement may be executed by electronic submission and signatures on such a copy shall be deemed as an original signature.
|
29. |
SIGNATORIES AUTHORITY TO CONTRACT.
Each of the parties to this Agreement represent and warrant that it has the full right and power to enter into this Agreement, to perform all designated obligations; and grant all designated rights without violating the legal or equitable rights of any other party, and the execution and performance hereunder will not conflict with or result in breach of or default of any other agreement to which the party is bound
|
AMMO, Inc.
|
||||
/s/ Fred Wagenhals
|
Dated: |
4-14-17
|
||
Fred Wagenhals
|
|
|||
CEO
|
|
Jeff Rann - Individual
|
||||
/s/ Jeff Rann
|
Dated: |
4-14-17
|
||
Jeff Rann - Individual
|
|
|||
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
||
|
|
|
|
Date: May 24, 2018
|
By:
|
/s/ Fred W. Wagenhals
|
|
|
|
Name: Fred W. Wagenhals
|
|
|
|
Title: Chief Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
|
||
|
|
|
|
Date: May 24, 2018
|
By:
|
/s/ Ron Shostack
|
|
|
|
Name: Ron Shostack
|
|
|
|
Title: Chief Financial Officer (Principal Financial Officer)
|
|
|
|
|
|
|
|
|
|
Date: May 24, 2018
|
By:
|
/s/ Fred W. Wagenhals
|
|
|
|
Name: Fred W. Wagenhals
|
|
|
|
Title: Chief Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
|
|
||
|
|
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Date: May 24, 2018
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By:
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/s/ Ron Shostack
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Name: Ron Shostack
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Title: Chief Financial Officer (Principal Financial Officer)
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