CORRESP 1 filename1.htm
Correspondence
August 3, 2017
Mr. Craig Arakawa
Accounting Branch Chief
Office of Beverages, Apparel, and Mining
Division of Corporate Finance
Securities and Exchange Commission
Washington, DC 20549
Mail Stop 3561

RE: | August 1, 2017 Comment Letter Form 10-Q for the quarter ended March 31, 2017 File No. 001-13101

Dear Mr. Arakawa:
We have read your letter and our answer to the inquiry is as follows:
Form 10-Q for the quarter ended March 31, 2017
Note 3–Vendor Notes Receivable, page 12

| 1. | We note you have recorded $1.77 million of goodwill as a result of your successful credit bid for the collateral related to the note receivable you held with ATAC. Please tell us your basis for recording goodwill related to this transaction, citing the authoritative literature that supports your accounting.

Answer:
On February 20, 2017, AMMO as a result of a successful credit bid foreclosed on the assets of ATAC. At February 20, 2017 the fair value of the assets acquired was:

Assets |  | $ | 117,517 |
Collectible receivables |  |  | 509,447 |
Inventory |  |  | 187,815 |
Equipment |  |  | 814,779 |
Notes payable owned by AMMO |  |  | 2,585,000 |
Recognized goodwill |  | $ | 1,770,221 |

The fair value of each asset was assessed by management and a valuation expert was employed to ascertain the fair value of the manufacturing equipment. The ATAC inventory was originally valued at $1,129,000 in ATAC’s general ledger; however, the ATAC packaging and certain manufactured ATAC products bearing the ATAC brand could not be used by AMMO. Basically, the only inventory that could be used was the raw materials, which were priced at replacement cost which management felt was its fair value. There were no intangible assets, such as customer lists, trade secrets, or brand names due to the bad reputation of the ATAC brand.
In FASB ASC 805-30-30-1, goodwill should be recognized at the acquisition date (in this case the foreclosure date), measured as the excess of (a) over (b) as follows:

| a. | The aggregate of the (1) consideration transferred, (2) fair value of any noncontrolling interest in the acquiree, and (3) acquisition-date fair value of any previously held equity interest in the acquiree, if the business combination was achieved in stages.

| b. | Net amount of identifiable assets acquired and liabilities assumed as of the acquisition date.

It is AMMO’s management’s opinion that the goodwill recognized was determined in accordance with FASB ASC 805-30-30-1.
Very truly yours,
/s/ Fred Wagenhals
Fred Wagenhals