UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-QSB
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(Mark one)
[X] Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the quarterly period ended: June 30, 2002
[_] Transition Report Under Section 13 or 15(d) of The Securities Exchange Act
of 1934
For the transition period from ______________ to _____________
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Commission File Number: 0-32379
American Ammunition, Inc.
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(Exact name of small business issuer as specified in its charter)
California 1-2021594
----------------------------- --------------------------
(State of incorporation) (IRS Employer ID Number)
3545 NW 71st Street, Miami, FL 33147
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(Address of principal executive offices)
(305) 835-7400
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(Issuer's telephone number)
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
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State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: July 21, 2002: 52,769,268
Transitional Small Business Disclosure Format (check one): YES NO X
--- ---
American Ammunition, Inc.
Form 10-QSB for the Quarter ended June 30, 2002
Table of Contents
Page
Part I - Financial Information
Item 1 Financial Statements F-3
Item 2 Management's Discussion and Analysis or Plan of Operation 19
Part II - Other Information
Item 1 Legal Proceedings 22
Item 2 Changes in Securities 22
Item 3 Defaults Upon Senior Securities 23
Item 4 Submission of Matters to a Vote of Security Holders 23
Item 5 Other Information 23
Item 6 Exhibits and Reports on Form 8-K 23
Signatures 21
Item 1 - Part 1 - Financial Statements
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Consolidated Balance Sheets
June 30, 2002 and 2001
(Unaudited)
June 30, 2002 June 30, 2001
----------------- ----------------
ASSETS
Current Assets
Cash on hand and in bank $ 191,108 $ 321,799
Accounts receivable - trade, net of factored accounts of
approximately $-0- and $-0- and allowance for doubtful accounts
of $-0- and $-0-, respectively 338,747 26,399
Inventory 766,659 239,106
Prepaid expenses 16,713 2,044
Total Current Assets 1,313,227 589,348
----------------- ----------------
Property and Equipment - at cost or contributed value
Manufacturing equipment 6,655,243 6,375,421
Office furniture and fixtures 50,856 48,802
Leasehold improvements 191,586 181,814
----------------- ----------------
6,897,685 6,606,037
Accumulated depreciation (3,060,828) (2,417,800)
----------------- ----------------
Net Property and Equipment 3,836,857 4,188,237
----------------- ----------------
Other Assets
Deposits and other 77,860 59,712
Total Other Assets 77,860 59,712
----------------- ----------------
TOTAL ASSETS $ 5,227,944 $ 4,837,297
----------------- ----------------
- Continued -
The accompanying notes are an integral part of these
consolidated financialstatements.
F-3
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Consolidated Balance Sheets - Continued
June 30, 2002 and 2001
(Unaudited)
June 30, 2002 June 30, 2001
----------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable to a bank $ - $ -
Current maturities of leases payable 8,365 28,409
Accounts payable - trade 328,456 696,386
Other accrued liabilities - 50,000
Accrued excise taxes payable 43,347 9,750
Accrued interest payable - -
Customer deposits 30,000 105,106
Note payable to stockholder - 4,007,327
Total Current Liabilities 410,168 8,363,658
Long -Term Liabilities
Note payable to a bank 950,000 950,000
Capital leases payable 13,290 65,118
----------------- ---------------
6,897,685 6,606,037
Total Liabilities 1,373,458 9,378,776
----------------- ---------------
Commitments and Contingencies
Mandatory Convertible Preferred Stock
46,000 shares issued and outstanding 230,000 -
Stockholders' Equity
Preferred stock - $0.001 par value 20,000,000 shares authorized.
1,795,320 shares allocated to Series A - -
Common stock - $0.001 par value 30,000,000 shares authorized.
52,769,268 and 26,850,000 shares issued and outstanding 52,769 26,850
Additional paid-in capital 15,636,353 4,974,150
Accumulated deficit (12,064,636) (9,542,479)
Total Stockholders' Equity 3,624,486 (4,541,479)
----------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,227,944 $ 4,837,297
----------------- ---------------
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Consolidated Statements of Operations
and Comprehensive Income (Loss)
Six and Three months ended June 30, 2002 and 2001
(Unaudited)
Six months Six months Three months Three months
ended ended ended ended
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
-------------- ------------ --------------- -------------
Revenues $ 707,134 $ 332,935 $ 434,641 $ 109,131
-------------- ------------ --------------- -------------
Cost of Sales
Materials, Direct Labor and other direct costs 605,904 366,368 346,137 160,621
Depreciation 320,299 314,463 162,602 157,232
Total Costs of Sales 926,202 680,831 508,739 317,853
-------------- ------------ --------------- -------------
Gross Profit (219,069) (347,896) (74,098) (208,722)
-------------- ------------ --------------- -------------
Operating Expenses
Research and development expenses 651 1,432 101 -
Marketing and promotion expenses 7,566 5,516 5,518 426
Other operating expenses 218,131 283,019 175,986 165,486
Interest expense 61,119 303,834 17,145 220,453
Depreciation expense 2,813 5,456 247 2,728
Total Operating Expenses 290,280 599,257 198,997 389,093
-------------- ------------ --------------- -------------
Loss from Operations (509,349) (947,153) (273,095) (597,815)
Other Income (Expense)
Settlement of litigation - 754,830 - 754,830
Interest and other income 10,533 3,777 10,533 3,777
-------------- ------------ --------------- -------------
Income (Loss) before Income Taxes (498,816) (188,546) (262,562) 160,792
Provision for Income Taxes - - - -
-------------- ------------ --------------- -------------
Net Income (Loss) (498,816) (188,546) (262,562) 160,792
Other Comprehensive Income - - - -
-------------- ------------ --------------- -------------
Comprehensive Income (Loss) $ (498,816) $ (188,546) (262,562) $ 160,792
============== ============ =============== =============
Loss per weighted-average share of common
stock outstanding, computed on net loss - basic
and fully diluted $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============== ============ =============== =============
Weighted -average number of common shares
outstanding 51,118,328 26,850,000 52,023,409 26,850,000
============== ============ =============== =============
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Consolidated Statements of Cash Flows
Six months ended June 30, 2002 and 2001
(Unaudited)
Six months Six months
ended ended
June 30, 2002 June 30, 2001
---------------- ----------------
Cash flows from operating activities
Net loss for the year $ (498,816) $ (188,546)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization 323,112 319,919
Gain on litigation settlement - (754,830)
Common stock issued for fees and services 50,520 -
(Increase) Decrease in
Accounts receivable (338,747) 34,016
Inventory (451,918) 94,304
Prepaid expenses, deposits and other (10,805) (2,044)
Increase (Decrease) in
Accounts payable - trade 55,409 11,712
Interest payable - 286,305
Excise taxes payable 34,706 (17,630)
Customer deposits 30,000 105,106
Net cash used in operating activities (806,539) (111,688)
---------------- ----------------
Cash flows from investing activities
Purchase of property and equipment (194,714) (8,722)
Net cash used in investing activities (194,714) (8,722)
---------------- ----------------
Cash flows from financing activities
Decrease in cash overdraft - 7,760
Cash received (paid) on short ter loans - net - (501,652)
Cash received on long-term loans - 950,000
Principal paid on long-term capital leases (4 0,58) (14,757)
Cash received on sale of common stock 600,000 -
Net cash provided by financing activities 595,942 441,351
---------------- ----------------
Increase (Decrease) in Cash (405,311) 320,351
Cash at beginning of year 596,419 858
Cash at end of year $ 191,108 $ 321,799
================ ================
- Continued -
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Consolidated Statements of Cash Flows
Six months ended June 30, 2002 and 2001
(Unaudited)
Six months Six months
ended ended
June 30,2002 June 30, 2001
Supplemental disclosure of interest
and income taxes paid
Interest paid for the period $ 37,119 $ 17,529
============= =============
Income taxes paid for the period $ - $ -
============= =============
Supplemental disclosure of non-cash
investing and financing activities
Conversion of debt and accrued interest
payable to a shareholder into common stock $ 125,000 $ -
============= =============
Common stock issued in payment of trade accounts payable $ 188,855 $ -
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements
Note A - Organization and Description of Business
American Ammunition, Inc. (AAI or Company) was incorporated on February 1, 2000
in the State of California as FirsTelevision.com. AAI subsequently changed its
corporate name to FBI Fresh Burgers International with a business plan of
marketing the concept of a national "fast food" restaurant chain to children and
young adults, with a menu of fresh burgers, fries and sandwiches. However, there
was no assurance that this business concept would be successful.
On September 29, 2001, the Company, F&F Equipment, Inc. (F&F) and the individual
shareholders of F&F entered into an "Agreement For The Exchange Of Common Stock"
(Exchange Agreement) whereby the shareholders of F&F exchanged 100.0% of the
issued and outstanding stock of F&F for 21,000,000 post-forward split shares of
restricted, unregistered common stock of the Company. F&F Equipment, Inc. then
became a wholly-owned subsidiary of the Company.
The acquisition of F&F Equipment, Inc., on September 29, 2001, by the Company
effected a change in control and was accounted for as a "reverse acquisition"
whereby F&F Equipment, Inc. is the accounting acquiror for financial statement
purposes. Accordingly, for all periods subsequent to the September 29, 2001
change in control transaction, the financial statements of the Company reflect
the historical financial statements of F&F Equipment, Inc. from its inception on
October 4, 1983 and the operations of the Company subsequent to September 29,
2001.
Concurrent with the September 29, 2001 reverse acquisition transaction, the
Company amended its Articles of Incorporation to change the Company's name to
American Ammunition, Inc. and modified the Company's capital structure to allow
for the issuance of up to 320,000,000 total equity shares consisting of
20,000,000 shares of preferred stock and 300,000,000 shares of common stock.
Both classes of stock have a par value of $0.001 per share.
On October 9, 2001, the Company effected a three (3) for one (1) forward stock
split. This action caused the then issued and outstanding shares to increase
from 2,990,400 to 8,971,200 on the action date. The effect of this action is
reflected in the accompanying financial statements as of the first day of the
first period presented.
F&F Equipment, Inc.(Company) was incorporated on October 4, 1983 under the laws
of the State of Florida. The Company was formed to engage principally in the
"import, export, retail & wholesale of firearms equipment, ammunition & other
devices and for the purpose of transacting any and/or all lawful business." The
Company conducts its business operations under the assumed name of "American
Ammunition".
In June 2002, American Ammunition, Inc. formed a wholly owned subsidiary,
Industrial Plating Enterprise Co. (IPE), which has started production on June
14, 2002. IPE is a fully licensed and approved state of the art electrochemical
metallization facility with enormous capacity for processing the Company's line
of projectiles as well as other products and services while employing
environmentally sound water conservation and proven waste treatment techniques.
The facility meets or exceeds all current environmental requirements and enjoys
the "conditionally exempt small quantity generator" status for State and Federal
regulations.
The Company and its subsidiaries have a year-end of December 31 and use the
accrual method of accounting.
The accompanying consolidated financial statements contain the accounts of
American Ammunition, Inc. (formerly FBI Fresh Burgers International) and its
wholly-owned subsidiaries, F&F Equipment, Inc. and Industrial Plating Enterprise
Co. All significant intercompany transactions have been eliminated. The
consolidated entities are collectively referred to as "Company".
F-8
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note A - Organization and Description of Business - Continued
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB for the year ended
December 31, 2001. The information presented within these interim financial
statements may not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending December 31, 2002.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
For Statement of Cash Flows purposes, the Company considers all cash on hand and
in banks, including accounts in book overdraft positions, certificates of
deposit and other highly-liquid investments with maturities of three months or
less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of making
bank deposits and releasing checks, in accordance with the Company's cash
management policies.
2. Accounts receivable
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers which are located throughout the United States.
Because of the credit risk involved, management has provided an allowance for
doubtful accounts which reflects its opinion of amounts which will eventually
become uncollectible. In the event of complete non-performance, the maximum
exposure to the Company is the recorded amount of trade accounts receivable
shown on the balance sheet at the date of non-performance.
3. Inventory
Inventory consists of raw materials, work-in-process and finished goods related
to the production and sale of small arms ammunition. Inventory is valued at the
lower of cost or market using the first-in, first-out method.
F-9
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note B - Summary of Significant Accounting Policies - Continued
4. Property, plant and equipment
Property and equipment are recorded at historical cost. These costs are
depreciated over the estimated useful lives of the individual assets using the
straight-line method, generally three to ten years.
Gains and losses from disposition of property and equipment are recognized as
incurred and are included in operations.
5. Loan costs
Amounts paid for origination fees related to loans payable are amortized over
the scheduled maturity of the corresponding debt.
6. Income Taxes
The Company uses the asset and liability method of accounting for income taxes.
At June 30, 2002 and 2001, the deferred tax asset and deferred tax liability
accounts, as recorded when material to the financial statements, are entirely
the result of temporary differences. Temporary differences represent differences
in the recognition of assets and liabilities for tax and financial reporting
purposes, primarily accumulated depreciation and amortization, allowance for
doubtful accounts and vacation accruals.
As of June 30, 2002 and 2001, the deferred tax asset related to the Company's
net operating loss carryforward is fully reserved. If these carryforwards are
not utilized, they will begin to expire in 2005.
7. Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net income (loss) by
the weighted-average number of shares of common stock and common stock
equivalents (primarily outstanding options and warrants). Common stock
equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method. The
calculation of fully diluted earnings (loss) per share assumes the dilutive
effect of the exercise of outstanding options and warrants at either the
beginning of the respective period presented or the date of issuance, whichever
is later. As of June 30, 2002 and 2001, and subsequent thereto, the Company had
no warrants and/or options outstanding.
8. Advertising costs
The Company does not conduct any direct response advertising activities. For
non-direct response advertising, the Company charges the costs of these efforts
to operations at the first time the related advertising is published.
Note C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
F-10
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note D - Inventory
As of June 30, 2002 and 2001, inventory consisted of the following components:
June 30 June 30,
2002 2001
--------------------------
Raw materials $214,862 $ 76,383
Work in process 503,377 145,728
Finished goods 48,420 16,995
--------- ---------
Totals $766,659 $239,106
========= =========
Note E - Property and Equipment
Property and equipment consist of the following components:
June 30, June 30, Estimated
2002 2001 useful life
---------------------------------------------------
Manufacturing equipment $6,655,243 $6,375,421 10 years
Office furniture and fixtures 50,856 48,802 7 years
Leasehold improvements 191,586 181,814 20 years
---------- ----------
6,897,685 6,606,037
Accumulated depreciation (3,060,828) (2,417,800)
--------- ---------
Net property and equipment $3,836,857 $4,188,237
========= =========
Total depreciation expense charged to operations for the six months ended June
30, 2002 and 2001, respectively, was approximately $323,223 and $319,918,
respectively.
Included in the amounts reflected in the accompanying balance sheet are the
following fixed assets on long-term capital leases:
June 30, June 30,
2002 2001
--------------------------
Manufacturing and processing equipment $153,400 $153,400
Less accumulated depreciation (46,849) (31,509)
-------- --------
$106,551 $121,891
======= =======
F-11
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note F - Notes payable to a Bank
Notes payable to a Bank consist of the following at June 30, 2002 and 2001,
respectively:
June 30, June 30,
2002 2001
----------------------------
$200,000 line of credit payable to a bank. Interest at the
Bank's prime rate plus 1.50% or 2.00%, respectively. (11.00
% at December 31, 2000). Interest payable monthly. Advances
and accrued, but unpaid, interest mature on the 60th day
following funding. Agreement is renegotiable annually on the
anniversary date in November of each calendar year.
Collateralized by all accounts receivable, inventory and
fixed assets of the Company and the personal guaranty of the
Company's President. $ - $ -
$250,000 installment note payable to a bank. Interest at the
Wall Street Journal published prime rate plus 2.0% (11.00%
at December 31, 2000). Payable in monthly installments of
approximately $2,083, plus accrued interest. Final payment
due in December 2009. Collateralized by all accounts
receivable, inventory and fixed assets of the Company, the
personal guaranty of the Company's President and a mortgage
on the Company's corporate offices and manufacturing
facility owned by the Company's stockholder. - -
$738,090 (originally $1,000,000) installment note payable to
a bank. Interest at the Wall Street Journal published prime
rate plus 2.50% (11.0% at December 31, 2000). Payable in
monthly installments of approximately $7,530, plus accrued
interest. Final payment due in March 2008. Collateralized by
all accounts receivable, inventory and fixed assets of the
Company and the personal guaranty of the Company's
President.. - -
------------- -------------
Total notes payable to a bank $ - $ -
============= =============
During 2001, the Company was operating under a bank approved moratorium on the
payment of principal and interest on all of the above listed notes payable and
the Company and its President commenced litigation against the lending
institution. On June 29, 2001, the Company and the Bank executed a Settlement
and Compromise Agreement whereby all loans and debts of the Company to the Bank
were settled and cancelled for a one-time cash payment of $550,000. The source
of funds for the $550,000 settlement came from a new $950,000 note payable to
another financial institution.
As a result of the June 29, 2001, the Company recognized a one-time gain on the
settlement of approximately $754,830 on the settlement date.
F-12
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note G - Capital Leases Payable
Capital leases payable consist of the following as of June 30, 2002 and 2001,
respectively:
June 30, June 30,
2002 2001
----------------------------
Three and six capital leases, respectively, payable to
various equipment financing companies. Interest, at December
31, 2001, ranging between 11.37% and 14.05%. Payable in
aggregate monthly installments of approximately $935,
including accrued interest, as of March 31, 2002. Final
maturities occur between September 2004 and December 2004.
Collateralized the underlying leased manufacturing
equipment. $ 21,655 $ 93,527
Less current maturities (8,365) (28,409)
------------ ------------
Long-term portion $ 13,290 $ 65,118
============ ============
Future maturities of capital leases payable are as follows:
Year ending
December 31 Amount
------------------------
2002 $ 8,365
2003 9,507
2004 5,833
-------
Totals $23,705
=======
Note H - Loan payable to Stockholder
June 30, June 30,
2002 2001
----------------------------
$4,007,327 note payable to the Company's stockholder.
Interest at 8.0%. Principal and accrued interest payable at
maturity. Maturity at December 31 annually and automatically
renews for an equivalent annual period unless called by the
Stockholder at least 90 days prior to maturity. Unsecured.
Converted to preferred stock during 2001. $ - $ 4,007,327
============ =============
F-13
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note I - Long-Term Debt Payable to a Bank
On June 28, 2001, in anticipation of the settlement of litigation with a
financial institution, the Company executed a new $950,000 note payable to
another financial institution. This new note bears interest at the Wall Street
Journal published prime rate plus 2.0%. The new note has payment terms as
follows: For the first year (through June 28, 2002), interest only, payable
monthly. Thereafter, starting on July 28, 2002, equal monthly payments of
principal and interest shall be due until June 28, 2007 which payments shall
represent the amount necessary to fully amortize the remaining principal balance
of the note. The monthly payments shall be recalculated at the time of any
change in the applicable interest rate. The note is secured by virtually all of
the Company's real and personal property. A portion of the proceeds from the
financing were used to pay the $550,000 required in the Settlement and
Compromise Agreement.
Note J - Preferred Stock Transactions
In September and October 2001, the Company issued 222,600 shares of $5.00 Series
A Convertible Preferred Stock (Series A Preferred Stock) for total proceeds of
approximately $1,113,000 through an ongoing private placement. The Series A
Convertible Preferred Stock provides for cumulative dividends at a rate of 8.0%
per year, payable quarterly, in cash or shares of the Company's common stock at
the Company's election. Each share of Series A Preferred Stock is convertible
into 11 shares of the Company's common stock at any time after 6 months of the
date of issue and prior to the notice of redemption at the option of the holder,
subject to adjustments for customary anti- dilution events.
In September 2001, the Company's principal shareholder converted approximately
$4,007,327 of unsecured debt and approximately $3,546,273 of cumulative and
unpaid accrued interest into 1,510,710 shares of Series A Preferred Stock.
In September 2001, a creditor of the Company agreed to convert approximately
$10,000 of trade accounts payable into 2,000 shares of Series A Preferred Stock.
In February 2002, certain holders of the Series A Preferred Stock notified the
Company of their intent to exercise the conversion features on 1,749,320 issued
and outstanding shares of Series A Preferred Stock into 19,242,520 shares of
common stock. Due to the timing of the conversion in relation to the Company's
year-end and the first available date for such conversion, the effect of the
conversion exercise is reflected in the accompanying financial statements as if
the conversion had occurred on December 31, 2001.
In conjunction with the issuance of certain shares of the Series A Preferred
Stock, certain shares were issued with an equivalent per share value of common
stock below the ending quoted market price of the Company's common stock on the
issue date. This difference created a Beneficial Conversion Feature Discount of
approximately $1,207,993. This discount was then amortized over the unexpired
time period between the date of issue of the eligible shares and the initial
eligible conversion date. Approximately $392,114 was amortized to operations and
the unamortized balance was reclassified to additional paid-in capital on
December 31, 2001 as a result of the February 2002 conversion exercise.
F-14
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note K - Common Stock Transactions
Concurrent with the September 29, 2001 reverse acquisition transaction, the
Company amended its Articles of Incorporation to change the Company's name to
American Ammunition, Inc. and modified the Company's capital structure to allow
for the issuance of up to 320,000,000 total equity shares consisting of
20,000,000 shares of preferred stock and 300,000,000 shares of common stock.
Both classes of stock have a par value of $0.001 per share.
On October 9, 2001, the Company effected a three (3) for one (1) forward stock
split. This action caused the then issued and outstanding shares to increase
from 2,990,400 to 8,971,200 on the action date. The effect of this action is
reflected in the accompanying financial statements as of the first day of the
first period presented.
In February 2000, the Company issued 5,430,000 post-forward split shares
(1,810,000 pre-forward split shares) of restricted, unregistered common stock to
its founders for administrative services and services related to the development
and implementation of the Company's business plan, in effect at the time. These
transactions were cumulatively valued at approximately $1,810, which
approximates the "fair value" of the services provided. These amounts are
charged to operations in the accompanying pre-acquisition consolidated financial
statements.
In June 2000, the Company issued 420,000 post-forward split shares (140,000
pre-forward split shares) of restricted, unregistered common stock to two
unrelated individuals for services related to the implementation of the
Company's business plan, in effect at the time. These transactions were
cumulatively valued at approximately $140, which approximates the "fair value"
of the services provided. These amounts are charged to operations in the
accompanying pre-acquisition consolidated financial statements.
In March and May 2001, the Company issued an aggregate 496,200 post-reverse
split shares (165,400 pre-forward split shares) of common stock, pursuant to a
Registration Statement on Form SB-2, to various individuals providing
investment, financial and acquisition consulting services to the Company. These
transactions were cumulatively valued at approximately $165,400, which
approximates the "fair value" of the services provided. These amounts are
charged to operations in the accompanying pre-acquisition consolidated financial
statements.
In September 2001, the Company issued 2,625,000 post-reverse split shares
(875,000 pre-forward split shares) of common stock, pursuant to a Registration
Statement on Form SB-2, to six individuals providing investment and financial
consulting services to the Company. These transactions were cumulatively valued
at approximately $875,000, which approximates the "fair value" of the services
provided. These amounts are charged to operations in the accompanying
pre-acquisition consolidated financial statements.
In September 2001, the Company issued an aggregate 21,000,000 post-forward split
shares of restricted, unregistered common stock to the shareholders of F&F
Equipment, Inc. in exchange for 100.0% of the issued and outstanding stock of
F&F Equipment, Inc. F&F Equipment, Inc. became a wholly-owned subsidiary of the
Company as a result of this transaction.
In December 2001, the Company issued 222,222 shares of post-forward split shares
of restricted, unregistered common stock to an unrelated entity in exchange for
the cancellation of $100,000 of short-term debt. On February 27, 2002, the
Company issued an additional 277,777 shares of restricted, unregistered common
stock in payment for $100,000 in short-term debt payable and $25,000 in
agreed-upon interest payable to a shareholder, thereby satisfying all
outstanding short-term debt in full.
F-15
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note K - Common Stock Transactions - Continued
In December 2001, the Company issued 535,272 shares of restricted, unregistered
common stock to a creditor in settlement of approximately $242,872 in open trade
accounts payable.
In February 2002, the Company converted $125,000 in short-term debt payable to
an existing shareholder and accrued interest of approximately $24,000 into
277,778 shares of restricted, unregistered common stock. This transaction was
consummated at a price of $0.45 per share, which approximates the discounted
"fair value" of the Company's common stock based on the quoted closing price of
the Company's common stock on the date of the respective transaction.
In March 2002, in two separate transactions, the Company sold an aggregate
1,388,890 shares of restricted, unregistered common stock to two separate
investors for aggregate proceeds of approximately $500,000. Each sale was made
at a price of $0.36 per share, which approximates the discounted "fair value" of
the Company's common stock based on the quoted closing price of the Company's
common stock on the date of each respective transaction.
In March 2002, the Company issued 32,000 shares of restricted, unregistered
common stock to a member of the Company's Board of Directors for consulting
services related to the Company's reverse merger transaction and for various
marketing services. This transaction was valued at approximately $11,520, or
$0.36 per share, which approximates the discounted "fair value" of the Company's
common stock based on the quoted closing price of the Company's common stock on
the date of the respective transaction.
In March 2002, the Company issued 41,665 shares of restricted, unregistered
common stock to an unrelated party for shareholder and other public relation
services. This transaction was valued at approximately $15,000, or $0.36 per
share, which approximates the discounted "fair value" of the Company's common
stock based on the quoted closing price of the Company's common stock on the
date of the respective transaction.
In April and May 2002, the Company issued an aggregate 432,721 shares of
restricted, unregistered common stock to three creditors in settlement of
approximately $182,017 in open trade accounts payable. Each issuance was made at
a price of either $0.45 or $0.36 per share, which approximates the discounted
"fair value" of the Company's common stock based on the quoted closing price of
the Company's common stock on the date of each respective transaction.
In June 2002, the Company issued 347,223 shares of restricted, unregistered
common stock to an existing shareholder to reimburse said shareholder for the
payment of legal fees associated with the bank related litigation concluded in
June 2001 and related consulting services. This transaction was valued at
approximately $125,000, or $0.36 per share, which approximates the discounted
"fair value" of the Company's common stock based on the quoted closing price of
the Company's common stock on the date of the respective transaction.
In June 2002, the Company sold 277,778 shares of restricted, unregistered common
stock to an investor for aggregate proceeds of approximately $100,000. This sale
was made at a price of $0.36 per share, which approximates the discounted "fair
value" of the Company's common stock based on the quoted closing price of the
Company's common stock on the date of the respective transaction.
F-16
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note L - Related Party Transactions
The Company leases its corporate office and manufacturing facility from its
controlling stockholder under a long- term operating lease agreement. The lease
requires a monthly payment of approximately $5,410, inclusive of applicable
sales taxes. Further, the Company is responsible for all utilities and
maintenance expenses. The lease expires on October 31, 2003 and contains a
clause that the lease may be renewed for an additional ten year period upon
written notification to the lessor no later than 120 days prior to the scheduled
expiration date at a rental rate based upon the fair value for similar space in
a similar location.
Note M - Income Taxes
The components of income tax (benefit) expense for the six months ended June 30,
2002 and 2001, respectively, are as follows:
Six months Six months
ended ended
June 30, 2002 June 30, 2001
------------------------------
Federal:
Current $ - $ -
Deferred - -
------- ------
- -
------- ------
State:
Current - -
Deferred - -
------- ------
- -
------- ------
Total $ - $ -
======= ======
As of June 30, 2002, the Company has a net operating loss carryforward of
approximately $3,000,000 to offset future taxable income. Subject to current
regulations, components of this carryforward will begin to expire in 2003. The
amount and availability of the net operating loss carryforwards may be subject
to limitations set forth by the Internal Revenue Code. Factors such as the
number of shares ultimately issued within a three year look-back period; whether
there is a deemed more than 50 percent change in control; the applicable
long-term tax exempt bond rate; continuity of historical business; and
subsequent income of the Company all enter into the annual computation of
allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for the six months ended June 30,
2002 and 2001, respectively, differed from the statutory federal rate of 34
percent as follows:
Six months Six months
ended ended
June 30, 2002 June 30, 2001
-----------------------------
Statutory rate applied to income before income taxes $(170,000) $ (64,000)
Increase (decrease) in income taxes resulting from:
State income taxes - -
Other, including reserve for deferred tax asset 170,000 64,000
--------- ----------
Income tax expense $ - $ -
========== ==========
F-17
American Ammunition, Inc. and Subsidiaries
(formerly FBI Fresh Burgers International)
Notes to Consolidated Financial Statements - Continued
Note M - Income Taxes - Continued
Temporary differences, consisting primarily of statutory differences in the
depreciable lives for property and equipment, between the financial statement
carrying amounts and tax bases of assets and liabilities give rise to deferred
tax assets and liabilities as of June 30, 2002 and 2001, respectively:
Six months Six months
ended ended
June 30, 2002 June 30, 2001
-----------------------------
Deferred tax assets - long-term
Net operating loss carryforwards $ 1,020,000 $ -
Less valuation allowance (1,020,000) -
---------- ----------
Net Deferred Tax Asset $ - $ -
=========== ==========
During the six months ended June 30, 2002 and 2001, respectively, the valuation
allowance increased (decreased) by approximately $1,020,000 and $-0-.
Note N - Contingencies
In May 1998, the Company entered into a $500,000 accounts receivable factoring
facility with its then financial institution. The facility provided for the
purchase of various trade accounts receivable by the bank from the Company at
80.0% of the face value of the underlying invoice. The Company paid a discount
fee of 1.5% for invoices settled between 1 and 30 days of invoice date, 3.0% for
invoices settled between 31 and 60 days of invoice date and an additional 1.5%
for each additional 30 days thereafter. All accounts receivable invoices were
factored with full recourse to the Company and the Company bears all credit risk
associated with the factored invoices. At June 30, 2001, the Company was at risk
for approximately $-0- of factored invoices. The Company experienced no losses
related to the factoring agreement. This Agreement was terminated in conjunction
with the execution of the Settlement and Compromise Agreement on June 29, 2001.
Note O - Significant Customers
During the years ended December 31, 2001 and 2000, respectively, the Company had
a single customer responsible for approximately 51% and 32% of total sales.
There were no other customers responsible for more than 10.0% of total net sales
during 2001 and 2000, respectively. These trends were also in place at June 30,,
2002 and 2001, respectively, and are anticipated to continue for the foreseeable
future.
(Remainder of this page left blank intentionally)
F-18
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(1) Caution Regarding Forward-Looking Information
Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) Summary
American Ammunition, Inc. (AAI or Company) was incorporated on February 1, 2000
in the State of California as FirsTelevision.com. AAI subsequently changed its
corporate name to FBI Fresh Burgers International with a business plan of
marketing the concept of a national "fast food" restaurant chain to children and
young adults, with a menu of fresh burgers, fries and sandwiches. However, there
was no assurance that this business concept would be successful.
On September 29, 2001, the Company, F&F Equipment, Inc. (F&F) and the individual
shareholders of F&F entered into an "Agreement For The Exchange Of Common Stock"
(Exchange Agreement) whereby the shareholders of F&F exchanged 100.0% of the
issued and outstanding stock of F&F for 21,000,000 post-forward split shares of
restricted, unregistered common stock of the Company. F&F Equipment, Inc. then
became a wholly-owned subsidiary of the Company.
The acquisition of F&F Equipment, Inc., on September 29, 2001, by the Company
effected a change in control and was accounted for as a "reverse acquisition"
whereby F&F Equipment, Inc. is the accounting acquiror for financial statement
purposes. Accordingly, for all periods subsequent to the September 29, 2001
change in control transaction, the financial statements of the Company reflect
the historical financial statements of F&F Equipment, Inc. from its inception on
October 4, 1983 and the operations of the Company subsequent to September 29,
2001.
Concurrent with the September 29, 2001 reverse acquisition transaction, the
Company amended its Articles of Incorporation to change the Company's name to
American Ammunition, Inc. and modified the Company's capital structure to allow
for the issuance of up to 320,000,000 total equity shares consisting of
20,000,000 shares of preferred stock and 300,000,000 shares of common stock.
Both classes of stock have a par value of $0.001 per share.
On October 9, 2001, the Company effected a three (3) for one (1) forward stock
split. This action caused the then issued and outstanding shares to increase
from 2,990,400 to 8,971,200 on the action date. The effect of this action is
reflected in the accompanying financial statements as of the first day of the
first period presented.
19
F&F Equipment, Inc.(Company) was incorporated on October 4, 1983 under the laws
of the State of Florida. The Company was formed to engage principally in the
"import, export, retail & wholesale of firearms equipment, ammunition & other
devices and for the purpose of transacting any and/or all lawful business." The
Company conducts its business operations under the assumed name of "American
Ammunition".
In June 2002, American Ammunition, Inc. formed a wholly owned subsidiary,
Industrial Plating Enterprise Co. (IPE), which has started production on June
14, 2002. IPE is a fully licensed and approved state of the art electrochemical
metallization facility with enormous capacity for processing the Company's line
of projectiles as well as other products and services while employing
environmentally sound water conservation and proven waste treatment techniques.
The facility meets or exceeds all current environmental requirements and enjoys
the "conditionally exempt small quantity generator" status for State and Federal
regulations.
The Company and its subsidiary have a year-end of December 31 and uses the
accrual method of accounting.
(3) Results of Operations
Six months ended June 30, 2002 compared to Six months ended June 30, 2001
During the first quarter of 2001, the Company filed a lawsuit against its
financial institution extending the Company various working capital credit. As a
result of this litigation, the Company became unable to access credit lines for
working capital, offer selling terms comparable to its competitors and,
accordingly, experienced a significant reduction in sales from prior years. This
litigation was settled during June 2001 and the Company negotiated a new working
capital note with a different financial institution which provided liquidity for
the remainder of 2001.
During the six months ended June 30, 2002, the Company experienced revenues of
approximately $707,000 as compared to approximately $333,000 for the first six
months ended June 30, 2001. The Company continues to experience positive demand
for the Company's products. During the quarter ended March 31, 2002, management
elected to focus its efforts, capital resources and energies in streamlining
production methods, securing key sources of raw material and exploring the
addition of equipment to allow the Company to produce certain components of its
manufacturing process which are currently being outsourced to unrelated third
parties. During June 2002, the Company initiated production of plating
operations for projectiles utilized in the Company's small-arms ammunition
manufacturing process through it's newly formed wholly-owned subsidiary,
Industrial Plating Enterprise Co. Further, during the three months ended June
30, 2002, management began to actively seek and process orders for products,
resulting in an increase in sales of approximately $374,000, or 112.3% over the
same period of the preceding year.
Management continues anticipates several events occurring in future quarters
including increased levels of expenditures for marketing, increased product
demand as a result of increased market exposure and the introduction of new
products under development.
The Company experienced costs of goods sold of approximately $926,000 and
$681,000 for the six months ended June 30, 2002 and 2001, respectively. The
Company experiences variable costs in the area of material consumption and
direct labor. The Company has recognized depreciation expense on production
equipment of approximately $320,000 and $314,000, respectively, in the above
cost of goods expense totals. These depreciation levels are anticipated to
remain fairly constant for future periods unless the Company is successful in
its plans to expand production or add equipment to produce certain components
which are being outsourced to unrelated third parties.
The Company continues to make progress towards achieving a break-even operating
status. For the six months ended June 30, 2002 and 2001, respectively, has
generated a negative gross profit of approximately $(219,000), or (30.98%), and
approximately $(348,000), or (104.5%). For the comparable three month period
ended June 30, 2002 and 2001, respectively, the Company's gross margin was
approximately $(74,000), or (17.1%), and $(209,000), or (191.3%). The Company
anticipates that with continued demand for its profit, anticipated lower
production costs
20
from internally generated plating activities and adequate liquidity, it will be
able to generate a positive gross profit during Calendar 2002.
The Company experiences relatively consistent expenditure levels for executive
and administrative compensation, interest expense and depreciation expense. The
Company renegotiated its working capital note payable in June 2001. This note
bears interest at the Wall Street Journal published prime rate plus 2.0%. The
new note has payment terms as follows: For the first year (through June 28,
2002), interest only, payable monthly. Thereafter, starting on July 28, 2002,
equal monthly payments of principal and interest shall be due until June 28,
2007 which payments shall represent the amount necessary to fully amortize the
remaining principal balance of the note. The monthly payments shall be
recalculated at the time of any change in the applicable interest rate. The note
is secured by virtually all of the Company's real and personal property. A
portion of the proceeds from the financing were used to pay the $550,000
required in the Settlement and Compromise Agreement. Accordingly, the Company
anticipates relatively stable interest expense, or declining levels, in future
periods depending on expansion and additional equipment financing requirements.
The Company does not anticipate the addition of significant additions to office
and administrative personnel.
The Company experienced nominal research and development expenses during the six
months ended June 30, 2002 and 2001 related to the development of a new
patent-pending projectile for use in ammunition specifically for the public
safety and security marketplace, especially in the rapidly expanding U. S. Air
Marshall program and other product improvements.
Due to the lack of liquidity in 2001 and prior years, the Company has not
developed an extensive marketing effort. Accordingly, expenditures in this area
have been nominal. Due to improved liquidity during the last 1/2 of 2001 and for
future periods, the Company anticipates, as internally generated funds are
available, to increase its marketing efforts to boost sales.
Other general and administrative expenses decreased significantly from
approximately $599,257 for the first six months of 2001 to approximately
$290,280 for the first six months of 2002. The most significant reductions came
in interest expense as a result of settling all litigation with the Company's
former lending institution and lesser savings in the areas of legal and
professional fees and other general and administrative fees.
The Company recognized a net loss of approximately $(499,000) and $(189,000) for
the respective six month periods ended June 30, 2002 and 2001, respectively, or
$(0.01) and $(0.01) per share.
(4) Liquidity and Capital Resources
As of June 30, 2002, December 31, 2001, and June 30, 2001, respectively, the
Company had working capital of approximately $903,000, $341,000, and
$(7,774,000). The Company's working capital position improved significantly in
Calendar 2001 with the settlement of litigation involving its outstanding debt
to its-then financial institution and the concurrent restructuring of working
capital debt into a long-term instrument.
The Company has generated (used) cash in operating activities of approximately
$(807,000), $(1,100,000) and $(112,000) during the six months ended June 30,
2002, the year ended December 31, 2001 and the six months ended June 30, 2001.
The most significant use of cash during the six months ended June 30, 2002 was
the buildup of inventory and the cost of sales related to the sale of
merchandise on "industry standard" credit terms causing an increase in accounts
receivable and an increase in inventory, particularly raw materials and work in
process, to fulfill existing and anticipated product orders.
The Company anticipates that its improved liquidity position beginning in the
last half of Calendar 2001 will allow for improved sales and, accordingly,
improved liquidity in future periods.
During the six months ended June 30, 2002, the Company added approximately
$195,000 in new equipment, principally in it's new wholly-owned subsidiary,
Industrial Plating Enterprise Co. This equipment allows the Company to replace
previously outsourced portions of it's manufacturing process with internally
managed processes
21
which is anticipated to result in additional cost savings to the Company and
improved turnaround time on this process.
The Company continues to have plans to increase its production capability in the
foreseeable future by 50% to 100%, as influenced by market conditions,
availability of manufacturing equipment on the open market and product sales
demand. Accordingly, this expansion will require additional capital which is
anticipated to be raised in various combinations of capital leases, bank debt
and/or equity offerings. At this time, the Company has no definitive budgets or
timetables for such expansion and this expansion, if any, will be dependent upon
market demand for the Company's products. Management is of the opinion that
sufficient demand will be present, as supported by new product development and
increased product marketing efforts, to justify this expansion. However, there
can be no assurance that the Company will be able to obtain additional funding
or, that such funding, if available, will be obtained on terms favorable to or
affordable by the Company.
(5) Product Research and Development
The Company believes that research and development activities will allow for the
development and introduction of new products into the ammunition marketplace.
Over the next 12 calendar months, the Company anticipates completing the design,
development and introduction of its new patent-pending projectile for use in
ammunition specifically for the public safety and security marketplace,
especially in the rapidly expanding U. S. Air Marshall program. Management also
believes that this projectile will have wide acceptance in the home security and
sport hunting markets.
Further, additional ammunition calibers and/or projectiles may be developed by
the Company depending upon market research, acceptance in the marketplace of
existing products and production capabilities. At this time, there are no
definitive plans for the further introduction of other new products into the
marketplace.
Part II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
On February 27, 2002, the Company issued an aggregate 277,777 shares of
restricted, unregistered common stock, at $0.45 per share, to Forus Investments,
Inc., an existing shareholder, in satisfaction of a $100,000 short-term working
capital loan payable and $25,000 in agreed-upon interest payable to a
shareholder, thereby satisfying all outstanding short-term debt in full. The
valuation of this transaction was based on the discounted "fair value" of the
Company's common stock based upon the quoted closing price on the date of the
transaction.
On March 25, 2002, the Company sold 611,110 shares of restricted, unregistered
common stock, at $0.36 per share, to Kissimmul, Inc., a Toronto, Ontario, Canada
corporation, for gross proceeds of approximately $220,000. The valuation of this
transaction was based on the discounted "fair value" of the Company's common
stock based upon the quoted closing price on the date of the transaction. The
Company relied upon Section 4(2) of The Securities Act of 1933, as amended, for
an exemption from registration on these shares.
On March 28, 2002, the Company sold 777,775 shares of restricted, unregistered
common stock, at $0.36 per share, to Tomina Associates, Ltd., a Vancouver, B.
C., Canada corporation, for gross proceeds of approximately $280,000. The
valuation of this transaction was based on the discounted "fair value" of the
Company's common stock based upon the quoted closing price on the date of the
transaction. The Company relied upon Section 4(2) of The Securities Act of 1933,
as amended, for an exemption from registration on these shares.
On March 5, 2002, the Company issued 32,000 shares of restricted, unregistered
common stock to Len Hale, a
22
member of the Company's Board of Directors, for consulting services related to
the Company's reverse merger transaction and for various marketing services.
This transaction was valued at approximately $11,520, or $0.36 per share, which
approximates the discounted "fair value" of the Company's common stock based on
the quoted closing price of the Company's common stock on the date of the
respective transaction.
On March 5, 2002, the Company issued 41,665 shares of restricted, unregistered
common stock to D. P. Martin & Associates, an unrelated party for shareholder
and other public relation services. This transaction was valued at approximately
$15,000, or $0.36 per share, which approximates the discounted "fair value" of
the Company's common stock based on the quoted closing price of the Company's
common stock on the date of the respective transaction.
In April and May 2002, the Company issued an aggregate 432,721 shares of
restricted, unregistered common stock to Ammunition Accessories, Inc., Saunders
Lead Co. and Airco Plating Co., three unrelated trade creditors in settlement of
approximately $182,017 in open trade accounts payable. Each issuance was made at
a price of either $0.45 or $0.36 per share, which approximates the discounted
"fair value" of the Company's common stock based on the quoted closing price of
the Company's common stock on the date of each respective transaction.
On June 21, 2002, the Company issued 347,223 shares of restricted, unregistered
common stock to Access Investments, Inc., an existing shareholder, to reimburse
said shareholder for the payment of legal fees associated with the bank related
litigation concluded in June 2001 and related consulting services. This
transaction was valued at approximately $125,000, or $0.36 per share, which
approximates the discounted "fair value" of the Company's common stock based on
the quoted closing price of the Company's common stock on the date of the
respective transaction.
On June 26, 2002, the Company sold 277,778 shares of restricted, unregistered
common stock to Gala Investments, an unrelated investor, for aggregate proceeds
of approximately $100,000. This sale was made at a price of $0.36 per share,
which approximates the discounted "fair value" of the Company's common stock
based on the quoted closing price of the Company's common stock on the date of
the respective transaction.
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibits - None
Reports on Form 8-K - None
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
American Ammunition, Inc.
June 21 , 2002
/s/ Andres Fernandez
-----------------------
Andres Fernandez
President and Director
24