AMMO, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINACIAL INFORMATION

 

Exhibit 99.2

 

AMMO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED

FINACIAL INFORMATION

 

INTRODUCTION

 

On April 30, 2021 (the “Effective Date”), Ammo, Inc. (“AMMO” or the “Company”), entered into an agreement and plan of merger (the “Merger Agreement”), by and among the Company, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sub”), Gemini Direct Investments, LLC, a Nevada limited liability company (“Gemini”), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual (the “Seller”), whereby Sub merged with and into Gemini, with Sub surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). Capitalized terms not defined in this unaudited pro forma condensed combined financial information have the meaning assigned to them in the Merger Agreement, which is attached to this Form 8-K/A as an exhibit. At the time of the Merger, Gemini had nine (9) subsidiaries, all of which are related to Gemini’s ownership of the ▇▇▇▇▇▇▇▇▇.▇▇▇ business. ▇▇▇▇▇▇▇▇▇.▇▇▇ is a large on-line auction marketplace dedicated to firearms, hunting, shooting, and related products. The Merger was completed on the Effective Date.

 

In consideration of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, on the Effective Date, (i) the Company assumed an aggregate amount of indebtedness of Gemini and its subsidiaries equal to $50,000,000 (the “Assumed Indebtedness”); and, (ii) the issued and outstanding membership interests in Gemini (the “Membership Interests”), held by the Seller, automatically converted into the right to receive (A) $50,000,000 (the “Cash Consideration”), and (B) 20,000,000 shares of common stock of the Company, $0.001 par value per share (the “Stock Consideration”).

 

In connection with the Merger Agreement, the Company and the Seller agreed that the Stock Consideration consisted of: (a) 14,500,000 shares issued without being held in escrow or requiring prior stockholder approval; (b) 4,000,000 shares issued subject to the Pledge and Escrow Agreement (as defined and described below); and (c) 1,500,000 shares that will not be issued prior to the Company obtaining stockholder approval for the issuance (the “Additional Securities”).

 

Pledge and Escrow Agreement

 

On the Effective Date, in connection with the Merger Agreement, the Company and the Seller entered into a Pledge and Escrow Agreement (the “Pledge and Escrow Agreement”). In order to secure the fulfilment of the obligations of the Seller set forth in the Merger Agreement relating to certain indemnification obligations provided by him to the Company, the Seller has agreed to irrevocably pledge and grant to the Company a continuing lien and security interest in and to 4,000,000 shares of the Stock Consideration (the “Pledged Securities”). The Seller will retain his voting rights with regard to the Pledged Securities.

 

The following unaudited pro forma condensed combined financial information is based on the historical financial statements of the Company and the historical financial statements of Gemini.

 

The Company’s fiscal year ends on March 31st and Gemini’s fiscal year ends on December 31st. Accordingly, as the fiscal year ends differ by 93 days or fewer, the pro forma condensed combined financial information provided herein are presented using different fiscal periods as discussed below.

 

The unaudited pro forma condensed combined balance sheet as of December 31, 2020, reflects the acquisition as if it occurred on December 31, 2020 and are based on the historical consolidated financial statements of AMMO and Gemini, as adjusted to give effect to the Merger. ▇▇▇▇’s statement of operations for the nine months ended December 31, 2020 have been combined with the operations of Gemini for the nine months ended December 31, 2020. This pro forma combined statement of operations give effect to the acquisition as if it had occurred April 1, 2020. ▇▇▇▇’s statement of operations for the year ended March 31, 2020 have been combined with the operations of Gemini for the year ended December 31, 2019. This pro forma combined statement of operations give effect to the acquisition as if it had occurred April 1, 2019. The unaudited pro forma condensed combined financial information should be read in conjunction with the audited financial statements and related disclosures contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended March 31, 2020, and the Company’s Quarterly Report on Form 10-Q for the three and nine month periods ended December 31, 2020 and the audited financial statements of Gemini that are attached to this Form 8-K/A as an exhibit.

 

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and are not necessarily indicative of the results of operations and financial position that would have been achieved had the acquisition been completed and taken place on the dates indicated or the future consolidated results of operations or financial position of the Company.

 

 
 

 

AMMO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

December 31, 2020

 

   AMMO   GEMINI             
   December 31, 2020   December 31, 2020   Adjustments   Note 4   Pro Forma 
                     
ASSETS  
Current Assets:                         
Cash   $19,007,893   $26,454,669   $(20,779,669)    (a)   $24,682,893 
Accounts receivable, net   6,877,047    6,868,934    127,374     (b)    13,873,355 
Due from related parties        15,657    -    -         15,657 
Inventories   9,548,591    -    -         9,548,591 
Prepaid expenses          1,053,671    490,605    (188,854)    (b)    1,355,422 
Debt securities to be held to maturity   -    1,960,000    (1,960,000)    (c)    - 
Total Current Assets        36,502,859    35,774,208    (22,801,149)        49,475,918 
                          
Equipment, net          19,403,855    5,830,332    (166,232)    (b)    25,067,955 
                          
Other Assets:                                  
Deposits   52,183    -    982,031     (b)    1,034,214 
Licensing agreements, net        54,167    -    -         54,167 
Patents, net   6,142,903    -    -         6,142,903 
Other Intangible Assets, net         2,578,069    38,996    

115,106,353

     (b)    

117,723,418

 
Goodwill   -    -    

115,145,348

     (b)    115,145,348 
Right of use assets - operating leases      2,371,096    -    -         2,371,096 
Other assets   -    1,161,226    (1,161,226)    (c)    - 
Due from related parties        -    26,348,772    (26,348,772)    (c)    - 
Investment securities, at fair value   -    13,909,346    (13,909,346)    (c)    - 
Note receivable - related party        -    28,500,000    (28,500,000)    (c)    - 
TOTAL ASSETS  $67,105,132   $111,562,880   $

138,347,007

        $317,015,019 
                          
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current Liabilities:                                
Accounts payable  $4,404,029   $1,090,066   $(1,047,243)    (d)   $4,446,852 
Factoring liability          2,290,598    -    -         2,290,598 
Accrued liabilities   3,952,438    2,153,504    (2,123,757)    (d)    3,982,185 
Inventory credit facility          2,250,000    -              2,250,000 
Current portion of operating lease liability   510,103    -    -         510,103 
Current portion of note payable related party      611,290    -    -         611,290 
Insurance premium note payable   103,792    -    -         103,792 
Current portion of notes payable        -    14,865,487    (14,865,487)   (f)    - 
Other liabilities   -    99,064    (36,747)    (d)    62,317 
Due to related parties          -    7,574,978    (7,574,978)    (h)    - 
Contingent consideration payable   -    -    

10,755,000

     (g)    10,755,000 
Total Current Liabilities      14,122,250    25,783,099    (14,893,212)        25,012,137 
                          
Long-term Liabilities:                                
Contingent consideration payable   621,517    -    -         621,517 
Convertible promissory notes, net         817,675    -    -         817,675 
Notes payable related party   2,427,726    -    -         2,427,726 
Note payable    4,000,000    36,670,680    (36,670,680)   (f)    4,000,000 
Paycheck protection program notes   427,385    -    -         427,385 
Operating Lease Liability, net of current portion    1,913,904    -    -         1,913,904 
Total Liabilities   24,330,457    62,453,779    

(51,563,892

)        

35,220,344

 
                          
Shareholders’ Equity:                         
Common stock, $0.001 par value, 200,000,000 shares authorized   63,498    -    41,500     (h)    104,998 
Additional paid-in capital   84,732,248    -    

238,978,500

     (h)    

323,710,748

 
Stock subscription receivable    (664,975)   -    -         (664,975)
Accumulated deficit   (41,356,096)   -    -         (41,356,096)
Member’s Equity     -    49,109,101    (49,109,101)    (i)    - 
Total Shareholders’ Equity   42,774,675    49,109,101    

189,910,899

         

281,794,675

 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $67,105,132   $111,562,880   $

138,347,007

        $317,015,019 

 

 
 

 

AMMO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended December 31, 2020

 

   AMMO   GEMINI             
   For the Nine Months Ended December 31,  

Constructed Nine Months

Ended December 31,		             
   2020  

2020

(Note 5)

   Adjustments   Note 4   Pro Forma 
                     
Net Sales  $38,293,086   $

50,117,181

   $-        $

88,410,267

 
Cost of Goods Sold   32,590,149    

5,921,680

    -         38,511,829 
Gross Margin   5,702,937    

44,195,501

    -         

49,898,438

 
                          
Operating Expenses                         
Selling and marketing   1,244,323    -    -         1,244,323 
Corporate general and administrative   3,805,230    

9,331,762

    -         

13,136,992

 
Employee salaries and related expenses   3,329,511    -    -         3,329,511 
Depreciation and amortization expense   1,242,809    -    

8,389,161

    

(j)

    

9,631,970

 
Loss on purchase   1,000,000    -    -         1,000,000 
Total operating expenses   10,621,873    

9,331,762

    

8,389,161

         

28,342,796

 
Income from Operations   (4,918,936)   

34,863,739

    (8,389,161)        21,555,642 
                          
Other Expenses                         
Other income/(expense)   274,400    (429,486)   429,486     (k)    274,400 
Interest income/(expense)   (2,704,315)   (4,146,684)   4,146,684     (l)    (2,704,315)
Total other expenses   (2,429,915)   

(4,576,170

)   4,576,170         (2,429,915)
                          
Income before Income Taxes   (7,348,851)   30,287,569    

(3,812,991

)        19,125,727 
                          
Provision for Income Taxes   -    -    -     (m)    - 
                          
Net Income(loss)  $(7,348,851)  $30,287,569   $(3,812,991)       $19,125,727 
                          
Income/(Loss) per share                         
Basic and fully diluted:                         
Weighted average basic shares outstanding   49,295,682    -    41,500,000     (n)    90,795,682 
Weighted average diluted shares outstanding   

58,205,887

    -    

43,000,000

    (o)    

101,205,887

 
                          
Basic Income/(Loss) per share  $(0.15)   -    -        $0.21 
                          
Diluted Income per share   

-

    

-

    

-

        $0.19 

 

 
 

 

AMMO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended March 31, 2020

 

   AMMO   GEMINI             
   For the Year Ended
March 31,		  

For the Year Ended

December 31,

             
   2020   2019   Adjustments   Note 4   Pro Forma 
                     
Net Sales          $14,780,365   $28,656,130   $-        $43,436,495 
Cost of Goods Sold   18,455,903    3,255,574    -         21,711,477 
Gross Margin           (3,675,538)   25,400,556    -         21,725,018 
                          
Operating Expenses                                 
Selling and marketing   1,192,010    -    -         1,192,010 
Corporate general and administrative   3,731,914    10,850,097    -         14,582,011 
Employee salaries and related expenses   3,638,540    -    -         3,638,540 
Depreciation and amortization expense   1,599,491    -    11,185,548    (j)    12,785,039 
Total operating expenses   10,161,955    10,850,097    

11,185,548

         

32,197,600

 
Income from Operations         (13,837,493)   14,550,459    

(11,185,548

)        

(10,472,582

)
                          
Other Expenses                                 
Other income/(expense)   -    (157,210)   157,210     (k)    - 
Interest income/(expense)         (719,187)   (8,519,206)   8,519,206     (l)    (719,187)
    (719,187)   (8,676,416)   8,676,416         (719,187)
                          
Income before Income Taxes   (14,556,680)   5,874,043    

(2,509,132

)        

(11,191,769

)
                          
Provision for Income Taxes   -    -    -     (m)    - 
                          
Net Income  $(14,556,680)  $5,874,043   $

(2,509,132

)       $

(11,191,769

)
                          
Income/(Loss) per share                         
Basic and fully diluted:                               
Weighted average basic and diluted shares outstanding   45,607,937    -    41,500,000     (n)   87,107,937 

Basic and Diluted Income/(Loss) per share

  $(0.32)   -    -        $(0.13)

 

 
 

 

AMMO, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINACIAL INFORMATION

 

NOTE 1 - BASIS OF PRESENTATION

 

The unaudited pro forma condensed combined financial statements reflected the combined historical financial information of AMMO, Inc. (“AMMO”) and Gemini Direct Investments, LLC (“Gemini”). The pro forma adjustments are based on estimates and have been prepared to show the effects of the acquisition of Gemini.

 

In accordance with the acquisition method of accounting for business combinations, the assets acquired, and the liabilities assumed will be recorded as of the completion of the merger at their respective fair values. The consideration in excess of the fair values of assets acquired, and liabilities assumed will be recorded as goodwill.

 

NOTE 2 - DESCRIPTION OF THE TRANSACTION

 

On April 30, 2021 (the “Effective Date”), AMMO, entered into an agreement and plan of merger (the “Merger Agreement”), by and among the Company, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sub”), Gemini, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual (the “Seller”), whereby Sub merged with and into Gemini, with Sub surviving the merger as a wholly owned subsidiary of the Company (the “Merger”).

 

NOTE 3 - PURCHASE PRICE ALLOCATION

 

The total estimated consideration consisted of cash payment of $50,000,000 less $1,300,000 of acquired cash, a working capital adjustment of $2,000,000, debt assumption and repayment upon closing of $50,000,000, contingent consideration of $10,755,000 for the Additional Shares, and 18,150,000 shares of AMMO Inc. Common Stock. The shares were valued at $7.17 per share, the five-day average closing price of the Company’s Common Stock immediately preceding the signing of the binding agreement.

 

The preliminary fair value of the consideration transferred was valued as of the date of the acquisition as follows:

 

Cash  $48,700,000 
Working Capital Adjustment   2,000,000 
Contingent Consideration   

10,755,000

 
Common Stock   

132,645,000

 
Assumed debt   50,000,000 
      
   $

244,100,000

 

 

The preliminary allocation for the consideration recorded for the acquisition is as follows:

 

Accounts Receivable  $6,996,308 
Prepaids   301,751 
Equipment   5,664,100 
Deposits   982,031 
Accounts Payable   (42,823)
Accrued Expenses   (29,747)
Other Liabilities   (62,317)
Other Intangible Assets(1)   

115,145,349

 
Goodwill(1)   

115,145,348

 
      
   $

244,100,000

 

 

(1) Preliminary estimate of Other Intangible Assets and Goodwill. Other intangible assets to consist of Tradenames, Customer Relationships, and Intellectual Property.     

 

The purchase price allocation is preliminary. The preliminary estimated fair value recorded for the acquired assets and liabilities assumed with excess consideration recorded as goodwill represent management’s estimate of fair value and are subject to change when additional information, such as post-close working capital adjustments and valuations become available. The purchase price allocation will continue to be preliminary until the Company is able to finalize the allocation. The Company expects to finalize the purchase price allocation within the measurement period, but not more than one year following the closing data of the Merger. The final amounts from the valuation may significantly and materially differ from the preliminary allocation herein.

 

 
 

  

AMMO, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINACIAL INFORMATION

 

NOTE 4 - ADJUSTMENTS TO FINANCIAL INFORMATION

 

Explanation of Pro Forma Adjustments

 

  (a)

To record cash consideration paid of $50,000,000, debt repayment of $50,000,000 for debt assumed and paid at closing, $2,000,000 of cash consideration for working capital, and eliminate Gemini cash in excess of $1,300,000. Additionally, to record $106,375,000 for the Company’s underwritten offering completed March 16, 2021.

  (b) To record various assets at fair value.
  (c)

To eliminate assets distributed from Gemini prior to close.

  (d) To record various liabilities at fair value.
  (e) To eliminate liabilities resolved by Gemini prior to close.
  (f) To record the repayment of $50,000,000 of assumed debt and the elimination of debt in excess of $50,000,000.
  (g)

To record contingent consideration payable for Additional Securities valued at $7.17 per share, the five-day average closing price of the Company’s Common Stock immediately preceding the signing of the binding agreement.

  (h)

To record 18,500,000 shares of Common Stock, value at $7.17 per shares the five-day average closing price of the Company’s Common Stock immediately preceding the signing of the binding agreement.

  (i) To eliminate ▇▇▇▇▇▇’s Member Equity.
  (j) To record the preliminary estimated effect of amortization of Other Intangible Assets, with a preliminary estimated weighted average useful life of 11.8 years.
  (k) To eliminate interest income from assets distributed by Gemini prior to closing.
  (l) To eliminate interest expense from liabilities resolved prior to closing.
  (m) Income taxes calculated at the U.S. Federal statutory rate of 21% would be offset by the Company’s net operating loss carryforwards.
  (n) To record the issuance of 18,500,000 shares at closing and to record the issuance of 23,000,000 shares for the Company’s underwritten offering completed March 16, 2021.
  (o) To record the effect of the issuance of Additional Shares.

 

 

 

 

AMMO, INC.

NOTES TO UNAUDITED PRO FORMA

CONDENSED COMBINED FINACIAL INFORMATION

 

NOTE 5 - ADJUSTMENTS TO THE HISTORICAL FINANCIAL INFORMATION OF GEMINI

 

The Consolidated Statement of Income of Gemini for the year ended December 31, 2020 has been adjusted to exclude Gemini’s activity for the three month period ended March 31, 2020. Gemini’s fiscal year end is December 31, and historical financial information was used to present pro forma financial information based on the Company’s fiscal year end of March 31.

 

ADJUSTED UNAUDITED CONSENDED CONSOLIDATED STATEMENTS OF INCOME OF GEMINI

 

  

For the Year Ended

December 31,

   For the Three Months Ended
March 31,		   Constructed Nine Months Ended
December 31,		 
   2020   2020   2020 
             
Net Sales  $58,881,861   $8,764,680   $50,117,181 
Cost of Goods Sold   7,018,475    1,096,795    5,921,680 
Gross Margin   51,863,386    7,667,885    44,195,501 
                
Operating Expenses               
Corporate general and administrative   11,485,857    2,154,095    9,331,762 
    11,485,857    2,154,095    9,331,762 
Income from Operations   40,377,529    5,513,790    34,863,739 
                
Other Expenses               
Other income/(expense)   (488,860)   (59,374)   (429,486)
Interest income/(expense)   (5,717,476)   (1,570,792)   (4,146,684)
Total other expenses   (6,206,336)   (1,630,166)   (4,576,170)
                
Income before Income Taxes   34,171,193    3,883,624    30,287,569 
                
Provision for Income Taxes   -    -    - 
                
Net Income  $34,171,193   $3,883,624   $30,287,569 

 

 

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Filed: May 13th, 2021