NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
1. Overview and Summary of Significant Accounting Policies
Basis of Presentation:
Retrospettiva, Inc. (the "Company") was organized under the laws of the State of California in November, 1990 to manufacture and import textile products, including both finished garments and fabrics. The Company's manufacturing facilities and inventories were primarily located in Europe. The Company ceased operations in 2001 and has been inactive since 2002. Effective August 2, 2004, the Company was terminated, by administrative action of the State of California as a result of non-filing of required documents with the State of California. Effective February 15, 2007, the Company reinstated its charter. The Company was again terminated and then reinstated effective December, 2016.
Effective October 11, 2006 efforts commenced to revive the Company. Legal counsel was hired to address litigation involving the Company and activities were undertaken to prepare and file delinquent tax and financial reports. Furthermore, a financial judgment against the Company dating back to 2002 was addressed and a final settlement was reached in October, 2007. The Company filed various delinquent reports to become current in its reporting obligations to the Securities and Exchange Commission ("SEC") and various taxing authorities.
The Company intends to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. The Company may seek to acquire a controlling interest in such entities in contemplation of later completing an acquisition.
Revenue Recognition:
The Company has not generated any revenues during the years ended December 15, 2015 and 2014. It is the Company's policy that product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable, and collectability is reasonably assured.
Cash and Cash Equivalents:
The Company considers cash in banks, deposits in transit, and highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents.
Per Share Amounts:
Basic earnings (loss) per share is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted earnings (loss) per share reflects the potential dilution that could occur if potentially dilutive securities are converted into common shares. Potentially dilutive securities, such as stock options and warrants, are excluded from the calculation when their inclusion would be anti-dilutive, such as periods when a net loss is reported or when the exercise price of the instrument exceeds the fair market value.
Income Taxes:
Income taxes are recorded in accordance with Statement of Financial Accounting Standards (SFAS) ASC 740, Accounting for Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes and the effect of net operating loss carry-forwards. Deferred tax assets are evaluated to determine if it is more likely than not that they will be realized. Valuation allowances have been established to reduce the carrying value of deferred tax assets in recognition of significant uncertainties regarding their ultimate realization. Further, the evaluation has determined that there are no uncertain tax positions required to be disclosed.
Use of Estimates:
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amount 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. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying financial statements include the identification and valuation of assets and liabilities, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary.
Fair Value of Financial Instruments:
ASC 825, "Disclosures About Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments. ASC 820, "Fair Value Measurements" defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2015 and 2014.
The respective carrying values of certain on-balance-sheet financial instruments approximate their fair values. These financial instruments include accounts payable, advances payable, accrued liabilities and notes payable. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair value, or they are receivable or payable on demand.
Concentrations:
The Company is not currently a party to any financial instruments that potentially subject it to concentrations of credit risk.
Recently Issued Accounting Standards Updates.
The Company evaluates the pronouncements of various authoritative accounting organizations, primarily the Financial Accounting Standards Board ("FASB"), the SEC, and the Emerging Issues Task Force ("EITF"), to determine the impact of new pronouncements on US GAAP and the impact on the Company.
There were various accounting standards updates recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries. None of the recent updates are expected to have a material impact on the Company's financial position, operations, or cash flows.
2. Going Concern
The Company's financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business. However, the Company
has no business operations, has recurring losses, has negative working capital, and has a total stockholders' deficit.
The Company does not currently have any revenue generating operations. These conditions raise substantial doubt about the ability of the Company to continue as a going concern.
In view of these matters, continuation as a going concern is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meets its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.
Management has opted to file the Company's periodic financial reports with the Securities and Exchange Commission (SEC) and to seek potential candidates for a merger, acquisition, or similar transaction. Our plan is to evaluate prospects, structure a transaction, and ultimately combine with another entity. Management believes that this plan provides an opportunity for the Company to continue as a going concern.
3. Income Taxes
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company's deferred tax assets consist entirely of the benefit from net operating loss (NOL) carryforwards. The net operating loss carryforwards, if not used, will expire in various years through 2035, and are severely restricted as per the Internal Revenue code if there is a change in ownership. The Company's deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry forwards. Net operating loss carryforwards may be further limited by other provisions of the tax laws.
The Company's deferred tax assets, valuation allowance, and change in valuation allowance are as follows:
Period Ending
|
|
Estimated NOL Carry-forward
|
|
NOL Expires
|
|
Potential Tax Benefit from NOL
|
|
Valuation Allowance
|
|
Change in Valuation Allowance
|
Net Tax Benefit
|
December 31, 2015
|
|
$300,000
|
|
various
|
|
$67,950
|
|
$(67,950)
|
|
$--
|
$--
|
December 31, 2014
|
|
$300,000
|
|
various
|
|
$67,950
|
|
$(67,950)
|
|
$--
|
$--
|
Income taxes at the statutory rate are reconciled to the Company's actual income taxes as follows:
Income tax benefit at statutory rate resulting from net operating loss carryforward
|
|
|
(15.00
|
%)
|
State tax (benefit) net of federal benefit
|
|
|
(7.65
|
%)
|
Deferred income tax valuation allowance
|
|
|
22.65
|
%
|
Actual tax rate
|
|
|
0
|
%
|
The Company also is obligated to pay franchise taxes and related fees to the State of California. At December 31, 2015 and 2014 the Company was delinquent in its state filings, however it was reinstated to good standing in December, 2016.
4. Capital Stock
Preferred Stock
The Company has authorized 1,000,000 shares of no par value preferred stock. These shares may be issued in series with such rights and preferences as may be determined by the Board of Directors. The Company has not issued any preferred shares.
Common Stock
The Company has authorized 100,000,000 shares of no par value common stock. On September 22, 2008, the stockholders approved an increase in the authorized shares of common stock from 15,000,000 shares to 100,000,000 shares. As of December 31, 2015, there were 14,425,903 shares issued and outstanding. Effective February 3, 2017, the Company effected a 1 for 25 reverse stock split of its common stock, resulting in a reduction of its outstanding shares to 577,056. All references to outstanding stock have been retroactively adjusted to reflect this split.
During 2007, the Company issued 437,839 (10,945,987 pre-split) shares of common stock as additional consideration under loan arrangements provided by the President and a stockholder. The shares were valued by the Company at $0.001 per share, and the Company recorded financing costs and consulting fees totaling $10,946 related to this stock issuance.
In Addition, In December 2016, the Company re-domiciled to Delaware and changed its par value to $0.001.
5. Notes Payable – Stockholders
Effective July 2, 2007, the Company entered into a note payable agreement with a related party that provides for borrowings up to the principal amount of $64,871. The note is uncollateralized and bears interest at an annual rate of 8%. The Company issued 37,839 (945,987 pre-split) shares of its common stock as additional consideration for the note payable. As of December 31, 2015, the outstanding balance of the note payable was $64,871. The original due date of June 30, 2008 was extended to June 30, 2009, and effective June 30, 2009, the stockholder agreed to modify the terms of the note to make it due on demand.
Effective November 14, 2007, the Company entered into a revolving convertible loan agreement with the President and a stockholder. The agreement provides for borrowings up to the principal amount of $133,333. The note is due on demand, is uncollateralized, bears interest at an annual rate of 8%. As of December 31, 2015 and 2014, outstanding borrowings under the agreement totaled $133,395.
During the years ended December 31, 2015 and 2014, the Company accrued interest expense of $15,861 and $16,158, respectively, on the two notes payable to stockholders. Accrued interest payable to these stockholders totaled $106,336 and $90,475, at December 31, 2015 and 2014, respectively.
6. Related Party Transactions
The Company's President periodically advances funds to the Company so that it can meet its financial obligations. During 2015, the President advanced no additional funds to the Company. As of December 31, 2015, the aggregate amounts advanced, including amounts advanced and repayments during previous periods, were $6,934. These advances are due on demand, uncollateralized and bear no interest. In addition, during 2015 and 2014, two stockholders advanced $1,520 and $4,353, respectively, to the Company. These advances were recorded as additional paid-in capital.
The Company uses the offices of its President for its minimal office facility needs for no consideration. No provision for these costs has been provided since it has been determined that they are immaterial.
7. Subsequent Events
On December 15, 2016, the Company's Majority shareholders sold 475,679 (11,891,976 pre-split) of their outstanding shares to an individual resulting in a change in control of the Company.
On December 15, 2016, Retrospettiva, Inc., a California corporation (the "Company"), accepted the resignation of Borivoje Vukadinovic as the sole Officer and as a member of the Company's Board of Directors. His resignation did not involve any disagreement with the Company. On December 15, 2016, Mr. Fred W. Wagenhals ("Mr. Wagenhals") was appointed as sole Officer and the sole member of the Company's Board of Directors. On December 15, 2016, Mr. Wagenhals accepted the appointment.
On December 15, 2016, the Company's Board of Directors, in conjunction with the corporate actions referenced herein approved the following: (i) to change its name from Retrospettiva, Inc. to AMMO, Inc., and (ii) a change to the Company's OTC trading symbol.
On December 15, 2016, the Company's Board of Directors approved a 1-for-25 reverse stock split ("Reverse Split") of the issued and outstanding shares of Common Stock of the Company. As a result of the Reverse Split, the current 14,425,903 issued and outstanding shares of Common Stock shall represent 577,056 post Reverse Split shares; no shareholder shall be reversed below 100 shares and any and all fractional shares resulting from the Reverse Split shall be rounded up to the next whole share.
On December 15, 2016, our Board of Directors approved an agreement and plan of merger to re-domicile and change the Company's state of incorporation from California to the State of Delaware and to carry out a continuance of our company from the State of California to the State of Delaware.
On December 30, 2016, we filed articles of merger with the California Secretary of State to effect the domicile change to the State of Delaware and we filed a Certificate of Merger with the Delaware Secretary of State to effect the domicile change to the State of Delaware.
In conjunction with the domicile change, our Board of Directors adopted a new certificate of incorporation under the laws of the State of Delaware to increase our authorized number of shares of common stock from 15,000,000 to 100,000,000 shares of common stock, with a par value of $0.001.
On December 15, 2016, the Company owed approximately $317,000 in debt and related accrued interest payable to
Borivoje Vukadinovic and Gary Agron
("Debt Holders"). The Company authorized a Debt Conversion Agreement, dated December 15, 2016, between the Company and
the Debt Holders
pursuant to which Debt Holders and the Company mutually agree to the following: 1) cancel approximately $292,000 of the total debt owed to the Debt Holders ("Debt Cancellation"); and 2) in consideration for Debt Cancellation, the Company will convert a total amount of Twenty-Five Thousand Dollars ($25,000), which is equal to certain amounts remaining owed by Company to Debt Holders into a onetime conversion ratio of 500,000 restricted shares of the Company's common stock (post stock split) to be valued at $0.05 per share. The balance of the debt of approximately $292,000 was canceled by the debt holders. The Debt Conversion Agreement was not executed nor the 500,000 shares issued as of February 10, 2017.
On January 3, 2017 the Company and Ammo, Inc. a Delaware corporation (Ammo), executed a binding letter of intent (LOI) whereby the Company and Ammo will execute a Plan of Merger Agreement in which the Company will acquire 100% of Ammo in exchange for up to 18,000,000 post-split shares of common stock of the Company. As of the date of this filing, the Company is still in due diligence stages and has no plans to finalize the transaction until the completion of the due diligence stage and final documentation.
On February 3, 2017, the Financial Industry Regulatory Authority ("FINRA") approved: (i) the Company's name change to AMMO, Inc.; and (ii) the plan of merger to re-domicile and change the Company's state of incorporation from California to the State of Delaware and to carry out a continuance of our company from the State of California to the State of Delaware; and (iii) the 1-for-25 Reverse Split of the issued and outstanding shares of Common Stock of the Company. Additionally, the Company's ticker symbol will change from "RTRO" to "POWW".