UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 4, 2002
American Ammunition, Inc.
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(Exact name of small business issuer as specified in its charter)
Commission File Number: 0-32379
California 91-2021594
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(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)
Item 5. Other Events
On October 4, 2002, the Company issued an 8.0% Convertible Debenture (Debenture)
in the face amount of $250,000 to La Jolla Cove Investors, Inc. (Holder) and a
Warrant which allows the Holder to purchase shares of common stock equal to ten
(10) times the number of shares of common stock issued to the Holder on
conversion of the Debenture. In no event shall the number of shares issued under
the Warrant exceed 30,000,000.
The Debenture bears interest at 8.0% and matures two years from the date of
issuance. The Debenture is convertible into common stock, at the option of the
Holder, at the lesser of $1.00 per share or 80.0% of the average of the 5 lowest
volume weighted average price days during the 20 trading days before, but not
including the date of the Holder's election to convert. The Warrant is
exercisable at the same price.
The full principal amount of the Debenture is due upon default, as defined in
the Debenture agreement. The Debenture interest is payable monthly in arrears
commencing on November 15, 2002.
The Company is obligated to file a Registration Statement under the Securities
Act of 1933 to register the underlying conversion shares on either Form SB-2 or
S-3 and have said Registration Statement effective no later than 120 days after
October 4, 2002. Further, the Holder has agreed to convert not less than 5.0%
and not more than 10.0% of the original face value of the Debenture monthly
beginning the month after the effective date of the Registration Statement and
the Holder is required to exercise warrants and purchase shares of common stock
equal to ten (10) times the number of shares of common stock issued to the
Holder on conversion of the Debenture.
The Holder has further contractually agreed to restrict its ability to convert
the Debenture or exercise their warrants and receive shares of the Company's
common stock such that the number of shares held by the Holder and its
affiliates after such conversion or exercise does not exceed 4.99% of the then
issued and outstanding shares of common stock of the Company.
In the event an election to convert is made and the volume weighted average
price of the Company's common stock is below $0.30 per share, the Company shall
have the right to prepay any portion of the outstanding Debenture that was
elected to be converted, plus any accrued and unpaid interest, at 125.0%.
The Holder may demand repayment of the Debenture of 125.0% of the face amount
outstanding, plus all accrued and unpaid interest, in cash at any time prior to
the date that underlying Registration Statement under the Securities Act of 1933
has not been declared effective by the U. S. Securities and Exchange Commission
within 3 business days of such demand. If the repayment is accelerated, the
Company is also obligated to issue to the Holder 25,000 shares of common stock
and $10,000 cash for each 30 day period, or portion thereof, during which the
face amount, including interest thereon, remains unpaid with the cash payment to
increase to $15,000 for each 30 day period the balance remains unpaid after the
initial 90 day period.
If the Holder does not elect to accelerate the Debenture, the Company shall
immediately issue and pay to the Holder 25,000 shares of common stock and
$10,000 cash for each 30 day period, or portion thereof, during which the face
amount, including interest thereon, remains unpaid with the cash payment to
increase to $15,000 for each 30 day period the balance remains unpaid after the
initial 90 day period.
Concurrent with the execution of the Debenture agreement, the Company executed
an engagement letter with the Holder's counsel for legal representation with
regard to the preparation of the aforementioned Registration Statement under the
Securities Act of 1933.
Item 7 - Financial Statements, ProForma Financial Information and Exhibits
None
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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.
Dated: October 18, 2002 /s/ Andres Fernandez
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Andres Fernandez
President and Director