U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-KSB/A

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 2002

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

For the transition period from _______________ to ________________

Commission File No.: 000-32379

                            American Ammunition, Inc.
                       ---------------------------------
               (Name of small business registrant in its charter)



         California                                      91-2021594
-------------------------------                        -------------------------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                               Identification No.)

3545 NW 71st Street
Miami, FL                                                      33147
----------------------------------------               -------------------------
(Address of principal executive offices)                     (Zip Code)


Registrant's telephone number: (305) 835-7400


Securities registered under Section 12(b) of the Exchange Act:

    Title of each class                                Name of each exchange
                                                       on which registered
         None
-----------------------------                     ------------------------------


Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
                            ------------------------
                                (Title of class)

Copies of Communications Sent to:

                                Mintmire & Associates
                                265 Sunrise Avenue, Suite 204
                                Palm Beach, FL 33480
                                Tel: (561) 832-5696 - Fax: (561) 659-5371

<PAGE>


Check  whether  the  registrant  (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 [_]


Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]


State registrant's revenues for its most recent fiscal year. $1,409,364


The aggregate market value of the voting common equity held by non-affiliates as
of December 31, 2002 was $22,131,266.40 based upon 55,328,166 shares outstanding
of which  24,333,746 was held by  non-affiliates  and a share price of $0.40. No
non-voting common equity is outstanding.






<PAGE>


                                     PART I

Item 1. Description of Business

                              Business Development

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-KSB  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.

American  Ammunition,  Inc. (the "Company") was incorporated on February 1, 2000
in the State of California as  FirsTelevision.com.  It 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.

On  September  29,  2001,  the  Company,  F&F  Equipment,  Inc.  d/b/a  American
Ammunition  ("AA") and the  individual  shareholders  of AA entered into a share
exchange  agreement  whereby the shareholders of AA exchanged 100% of the issued
and  outstanding  stock of AA for  21,000,000  post-  forward  split  shares  of
restricted common stock of the Company. AA then became a wholly-owned subsidiary
of the Company.

The  acquisition of AA, on September 29, 2001, by the Company  effected a change
in control and was  accounted for as a "reverse  acquisition"  whereby AA 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 AA from its  inception on October 4, 1983 and the  operations  of the Company
subsequent to September 29, 2001.


                                       3
<PAGE>


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.

AA 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  relied upon Section 4(2) of the  Securities Act of 1933, as amended
(the "Act") and Rule 506 of Regulation D promulgated thereunder ("Rule 506") for
recent issuances of its unregistered securities. In each instance, such reliance
was based upon the fact that (i) the  issuance  of the shares did not  involve a
public  offering,  (ii)  there  were no more  than  thirty-five  (35)  investors
(excluding  "accredited  investors"),   (iii)  each  investor  who  was  not  an
accredited  investor  either alone or with his purchaser  representative(s)  has
such  knowledge  and  experience  in financial  and business  matters that he is
capable of evaluating the merits and risks of the prospective investment, or the
issuer  reasonably  believes  immediately  prior to  making  any sale  that such
purchaser comes within this description,  (iv) the offers and sales were made in
compliance  with Rules 501 and 502, (v) the securities  were subject to Rule 144
limitations on resale and (vi) each of the parties was a sophisticated purchaser
and had full  access to the  information  on the  Company  necessary  to make an
informed  investment  decision by virtue of the due  diligence  conducted by the
purchaser or  available  to the  purchaser  prior to the  transaction  (the "506
Exemption").

In December 2001,  concurrent with a modification in the holding period prior to
conversion,  certain holders of the Series A Preferred Stock orally notified the
Company of their intent to exercise the conversion  features on 1,749,720 issued
and outstanding  shares of Series A Preferred  Stock into  19,246,920  shares of
common  stock prior to December  31,  2001.  Due to the timing of the  requisite
documentation,  the  clerical  activities  related to this  conversion  were not
completed until February 2002.

In February 2002, the Company converted  $100,000 in short-term debt payable and
accrued  interest  of  approximately  $25,000 to an  existing  shareholder  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.  The
Company utilizes a discount of  approximately  50.0% on the quoted closing price
to value all  transactions  settled with restricted,  unregistered  common stock
issued  pursuant to Rule 144 of the U. S.  Securities  and Exchange  Commission.
This transaction paid in full all outstanding short-term debt.


                                       4
<PAGE>


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.  These  proceeds were
used to supplement operational working capital.

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 his
payment of  previously  accrued  legal  fees  associated  with the bank  related
litigation,  which was  concluded in June 2001, on behalf of the Company and for
other  consulting  services  currently being provided by the  shareholder.  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.  The proceeds
of this transaction were used to supplement operational working capital.

During June,  July and September  2002, the Company  issued an aggregate  21,987
shares of  restricted,  unregistered  common  stock in payment of  approximately
$10,400  in accrued  dividends  payable on the  Company's  outstanding  Series A
Preferred  Stock for the quarters ended December 31, 2001,  March 31, 2002, June
30, 2002 and September 30, 2002.


                                       5
<PAGE>


In July 2002, the Company sold 384,615 shares of restricted, unregistered common
stock to an existing  shareholder for cash proceeds of  approximately  $100,000.
This  sale was  made at a price  of $0.26  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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In August  2002,  the Company sold 384,615  shares of  restricted,  unregistered
common stock to an existing shareholder for cash proceeds of $100,000. This sale
was made at a price of $0.26 per  share,  which was below 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.   The
differential between the discounted "fair value" (approximately $0.29 per share)
and the  selling  price  resulted  in a charge to  operations  of  approximately
$11,346 for compensation  expense related to common stock issuances at less than
"fair  value".  The  proceeds  of this  transaction  were  used  to pay  down an
equivalent portion of the Company's long-term note payable to a bank.

In August  2002,  the Company  sold 20,506  shares of  restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$6,152. This sale was made at a price of $0.30 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.  The proceeds of this  transaction  were used to directly  retire a
trade account payable to a specific vendor.

In August 2002,  the Company  issued 24,999 shares of  restricted,  unregistered
common stock to an unrelated  party for  shareholder  and other public  relation
services.  This  transaction was valued at  approximately  $6,875,  or $0.28 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 September  2002, the Company sold 277,778 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In September  2002, the Company sold 277,778 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 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. The proceeds from this transaction were used to support operational
working capital.


                                       6
<PAGE>


In September  2002, the Company sold 222,222 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made 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.  The proceeds of this transaction were used to support  operational
working capital.

On October 4, 2002, the Company issued an 8.0% Convertible Debenture (Debenture)
in the face  amount of  $250,000  and a Warrant  which  requires  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.

The Debenture Holder has  contractually  committed 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 concurrently  exercise warrants and purchase shares of
common stock equal to ten (10) times the number of shares of common stock issued
to the Holder upon the respective mandatory 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


                                       7
<PAGE>


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.

Due to the  contractually  agreed  mandatory  conversion of this Debenture,  the
Company has  reflected  this  transaction  in its balance sheet as a "mezzanine"
level debt  obligation on its balance  sheet,  between "Total  Liabilities"  and
"Shareholders'  Equity". Upon the respective mandatory  conversion,  the Company
will  relieve  the  respective  portion  of the  Debenture  and the any  related
accrued,  but unpaid interest,  and credit this amount to the respective "common
stock" and "additional  paid-in capital"  accounts in the  shareholder's  equity
section for the par value and excess amount over the par value of the respective
shares issued.

No value was assigned to the issued warrant.  Upon exercise of the warrant,  the
Company will record the issuance of the  underlying  shares as a new issuance of
common stock on the date of each respective exercise.

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.

In November 2002,  the Company sold 384,615  shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In December  2002,  the Company sold an aggregate  120,170 shares of restricted,
unregistered  common  stock  to  an  existing   shareholder  in  three  separate
transactions valued at an aggregate of approximately  $31,244.  These sales were
made at a price of $0.26 per share,  which was in excess of the discounted "fair
value" of the Company's common stock on the date of each respective transaction.
The proceeds of this  transaction  were used to directly  retire a trade account
payable to a specific vendor.


                                       8
<PAGE>


In December 2002,  the Company sold 384,615  shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 per share, which was in excess
of 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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In December 2002,  the Company issued 55,000 shares of restricted,  unregistered
common stock upon the exercise of 5,000 shares of outstanding Series A Preferred
Stock upon the exercise of the  conversion  option by the Holder of the Series A
Preferred Stock.

On February 28 and March 20, 2003,  respectively,  the Company  made  additional
principal  reductions of $100,000 and $350,000  fully  retiring the  outstanding
debt.

See (b) "Business of  Registrant"  immediately  below for a  description  of the
Company's business.

Business of Registrant

General

The Company changed its name to American Ammunition,  Inc. on September 26, 2001
and currently is quoted on the OTC-BB under the symbol "AAMI".

On September 29, 2001, the Company entered into a Share Exchange  Agreement with
AA whereby 100% of the shares of AA were acquired by the Company in exchange for
shares of the Company's common stock. A new Board of Directors  consisting of AA
directors took control of the Company.

The Company's  principal  executive  offices are located at 3545 NW 71st Street,
Miami, Florida 33147; and its telephone number is (305) 835-7400.

We had minimal  operations  until  September  2001,  when we  acquired  American
Ammunition  Inc.  and since such  acquisition  are  engaged  principally  in the
manufacture  and sale of  ammunition  for retail and wholesale  sales.  American
Ammunition is an established small arms munitions  manufacturer with an existing
distribution  network.  The  ammunition  market  is  dominated  by  three  major
manufacturers, however, we believe we are poised to enter and impact the growing
ammunition market with our manufacturing equipment and techniques.  In addition,
we are an approved Department of Defense contractor.

We began as an assembler and re-loader of ammunition in several calibers.  As we
grew,  management  realized  that the only way to break into the industry was to
become a vertically  integrated  manufacturer.  Our founders invested heavily in
research and  development,  equipment,  and technology and focused on increasing
our market share. As a result,  we continued  manufacturing our initial calibers
along with special  order  ammunition  for the  Department  of Defense.  Further
streamlining  of the  operations  resulted  in the  manufacture  of the  current
ammunition  product line: 9  millimeter,  .45  automatic,  .380  automatic,  .32
automatic,  .40 Smith and Wesson,  38 Special,  30 carbine,  223  Remington,  38
Super,  and 32 Smith and Wesson  Long . We have  identified  these  products  as
having the largest share of the market for the next several years.


                                       9
<PAGE>


Equipment and Production Line Capabilities

American  Ammunition  owns all the equipment  necessary to take the raw material
from cup, lead, primer and powder,  to the finished  product,  a loaded round of
ammunition.  The process of  manufacturing  diverse  calibers of  ammunition  is
extremely  complex  and  requires  tolerances  of +/-  .0005"  to be  maintained
throughout the process.

Our technology and equipment enable us to produce a large variety of handgun and
rifle  ammunition.  We have a machine  shop and  maintains  our own  testing and
quality  assurance  equipment  and program.  Ammunition  is a  performance-based
product.  Therefore, after the manufacturing process is complete, the ammunition
must comply with specific protocols such as velocity, accuracy, and pressure. We
purchases  raw  materials  in bulk and strive to take  advantage  of  prepayment
discounts to produce significant savings in the manufacturing process. There are
and have been  instances  when discounts have been and may be missed due to cash
flow restrictions.

We are  evaluating the addition of several  products to our existing  production
lines,  including  the  addition of high speed  projectile  forming  machines to
supplement the existing casting machines. This addition would effectively double
or triple projectile production capacity, while improving projectile quality and
performance.  We also  are  making  provisions  to  increase  other  aspects  of
production  capacity,  which would complement long term goals of both production
volume and product diversity.

Business Strategy

American  Ammunition  is an  autonomous  manufacturer  of  ammunition,  with the
technology and equipment to take advantage of the growing market.

The barrier to entry into the  ammunition  market is  extremely  high,  however,
American Ammunition is an established small arms munitions manufacturer, with an
existing distribution network. We manufacture our ammunition by creating most of
the components ourselves.

In  management's  opinion,  the  ammunition  market  has grown  each year and it
appears that supply is not keeping up with demand,  thus  allowing for companies
like  American  Ammunition  to  make  a  significant  impact  in  sales  through
distributors in commercial markets and in addition sales to government agencies,
the military  and  exports.  American  Ammunition  has been  seeking  additional
capital  to  allow  it to  enlarge  its  operations  to  take  advantage  of its
technological capacities, equipment and the existing marketplace.

Marketing and Sales Distribution

American  Ammunition  currently  has a domestic  sales  network  of twenty  (20)
distributors and sales representatives and four (4) foreign distributors.  Ellet
Brothers, Inc. accounted for 51% and 42% of the Company's total sales for fiscal
year 2001 and 2002 respectively.  In addition,  Ellet Brothers is not one of our
national  distributors  for which we have an agreement.  Ellet Brothers does not
have an ongoing  commitment to purchase  goods from us because it determines its
needs on an annual basis. Exports accounted for 25% of the Company's total sales
for fiscal year 2002. The Company has exported its


                                       10
<PAGE>


products to South  America,  the Caribbean and the Middle East.  The Company has
also entered into an "Assured  Payment Program" with a National Buying Syndicate
which represents 200 members with 1200 retail locations,  and has begun shipping
to them in the first quarter of 2003.  The agreement  with this National  Buying
Syndicate  guarantees  payment to the Company from all of individual  members of
the  syndicate.  The  Company  plans to  continue  to  aggressively  pursue  new
customers through promotions, advertising and trade shows. It intends to solicit
original  equipment  manufacturer  subcontract  work  from the  three  (3) major
manufacturers;  seek additional means of commercial  distribution;  seek further
Department of Defense and law  enforcement  contracts;  solicit  further  export
sales and increase its dealings with mass merchandisers/chain stores.

American  Ammunition  has been  certified by the United  States  Small  Business
Administration  as a "qualified  HUBZone  small  business  concern."  Under this
program , small businesses can qualify for special set-aside  contracts,  get up
to a 10% edge in competitive  contract bidding or even be the sole-source bidder
in some cases. The program's name signifies the effort to promote  businesses in
"historically  under-utilized  business zones," generally blighted areas and its
purpose is to create jobs for those who live in such areas as well.

We are marketing our manufacturing flexibility to numerous Department of Defense
and  commercial  munitions   manufacturers  as  subcontractors   allowing  prime
contractors  to  reap  the  benefits  of our  "HUBZone  certification",  thereby
allowing such prime contractors to comply with Federal Acquisition  Requirements
for the use of  "small  and  under-utilized  minority  business"  in  fulfilling
government contracts.

The Small Business  Reauthorization Act of 1997 increased the overall government
agencies'  procurement  goals for small  business  to 23% and calls for  HUBZone
contracts to increase from 1.5% of these procurements to 3% by 2003.

Pricing and Value

We have been able to price our products  competitively at a price lower than any
of the "big three" manufacturers,  Remington, ATK, and Winchester. We capitalize
on the fact that the "big three" have very large corporate  infrastructures and,
in  management's  opinion,  have to pay much  higher  labor costs to their plant
personnel.  This  pricing  strategy  permits the  distributor  to  purchase  our
product,  add significant profit and sell such product at a retail price that is
lower than that at which the distributor can purchase the competitors' product.

Advertising & Promotion

American  Ammunition intends to gear its advertising  towards magazine and print
media,  focused on the gun and  Ammunition,  handgun and  shooting  markets.  We
believe  that such  advertising  will result in greater name  recognition  among
individual  consumers.  Currently,  our sales  are  generated  with very  little
advertising  and  we  believe  that  advertising  could  significantly   improve
retail/mass merchandiser sales and increase market share.


                                       11
<PAGE>


Status of Publicly Announced Products and Services

Aircraft Bullet

We were assigned a serial number (60/325,046) from the U.S. Patent and Trademark
Office for our provisional  patent application filed on September 26, 2001 for a
bullet that will not pierce an aircraft  fuselage but will penetrate  human soft
tissue. The product has been specifically designed for use inside the cabin of a
commercial aircraft;  however, it has additional applications for use in nuclear
power plants, at hazardous materials storage facilities, and for home defense.

We  departed  completely  from  standard  ballistics  for  the  design  of  this
projectile to meet what American Ammunition  perceives as a growing and unfilled
need.  Two of the basic  design  criteria  in  ballistics  are  penetration  and
expansion  of the  projectile.  In this  design,  these  two  factors  have been
controlled to meet the specific  requirements  of weapons  discharged  inside an
aircraft cabin, while insuring fuselage integrity.  This design is a new concept
in close quarter  ammunition:  a bullet capable of  incapacitating  an assailant
without damaging surrounding structure.

Design and material selection allows for the inverted expansion and aft internal
collapse of the projectile  mass.  Upon impact with the aircraft  fuselage,  the
bullet internally collapses;  therefore not allowing for the transfer of kinetic
energy forward or penetration  above that required for soft tissue  penetration.
Testing has been successful using test sections of various  commercial  airliner
fuselages as well as ballistic  testing using both ordinance  gelatin and bovine
tissue.  This  performance  criterion is  accomplished  without  sacrificing the
standard velocity and accuracy of the caliber being used. A video of those tests
can be viewed on our website at  www.a-merc.com  in the New Product Section.  We
believe that these research and  development  efforts will provide a new product
to the public safety and security marketplace.

Industrial Plating Enterprise Company

Industrial  Plating  Enterprise  Company (IPE), a wholly owned subsidiary,  is a
high volume "barrel plating" facility  currently  operating at approximately 30%
of its capacity.  IPE is meeting all of the parent company's  projectile plating
needs at this  time.  As the parent  company's  projectile  plating  requirement
grows,  IPE  will  increase  production  to meet  that  need.  IPE's  innovative
hazardous materials and hazardous waste management and treatment system is fully
capable of meeting increased production requirements.  IPE's management, intends
to explore adding  additional  metallization  and coating processes to diversify
its  services to the parent  company as well as offering  its  services to other
industries with the eventual goal of generating revenue to the parent company.

Competition

The market for small  arms  ammunition  is  becoming  increasingly  competitive.
Companies such as Remington,  Federal and  Winchester  are all better  equipped,
more experienced and better financed than us.

For years,  the large  manufacturers  have supplied the  component  parts of the
manufacturing process to smaller companies to assemble and distribute. A company
making its own components,  can produce and market a quality lower cost product.
This concept,  coupled with technology and progressive and environmentally sound
manufacturing practices (i.e. cans and recycled plastic packaging), has resulted
in a quality, affordable product reaching the marketplace.


                                       12
<PAGE>


We believe it is  feasible to increase  our  production  capacity by 50% to 100%
over the next 3 years  utilizing  existing  equipment by increasing  only labor,
material and other  incidental  costs.  Management  bases this prediction on the
fact that we had reduced sales in fiscal 2001 due to a lack of funding.  We have
already received  significant bank and private  placement funding in fiscal 2002
to ramp up  operations  thereby  significantly  increasing  our  presence in the
market.

Sources and Availability of Raw Materials

We manufacture our ammunition by creating most of the components ourselves.  The
materials  needed to produce our ammunition  products are widely  available from
numerous third parties.  No shortage of materials is expected in the foreseeable
future.

Research and Development

The Company believes that research and development is an important factor in its
future  growth.  The small arms  ammunition  industry  is closely  linked to the
latest technological advances. Therefore, the Company must continually invest in
the  technology  to  provide  the best  quality  product  to the  public  and to
effectively  compete with other  companies in the industry.  No assurance can be
made that the  Company  will have  sufficient  funds to  purchase  technological
advances as they become available.

Patents, Copyrights and Trademarks

We intend to protect our original intellectual property with patents, copyrights
and/or trademarks as appropriate.

Our head stamp "A-MERC " was  registered as a trademark on May 10,1994.  We were
assigned a serial number  (60/325,046) from the U.S. Patent and Trademark Office
for our provisional  patent application filed on September 26, 2001 for a bullet
that will not pierce an aircraft fuselage but will penetrate human soft tissue.

Governmental Regulation

In  accordance  with the  provisions of Title 1, Gun Control Act of 1968, we are
required  to be licensed  to import  firearms  and  manufacture  ammunition  for
firearms.  Such  licensing  is subject to  limitations  in Chapter 44, Title 18,
United  States Code.  In the event such licenses are not renewed for any reason,
we would have to cease our operations

In  accordance  with these  requirements,  we carry two  licenses  issued by the
Department of Treasury, Bureau of Alcohol, Tobacco and Firearms:

License  No.  1-59-025-06-3D  69152 for "06 -  Manufacturer  of  Ammunition  for
Firearms", which license expires on May 2, 2003; and

License  No.   1-59-025-08-3D-69454  for  "08-Importer  of  Firearm  other  than
Destructive Devices", which license expires on May 2, 2003.


                                       13
<PAGE>


In the  event  such  licenses  were  not  renewed  for any  reason,  we would be
precluded from continuing our operations.

We are not aware of any other license requirements or government regulation at a
state or federal level  specific to their  business and believes that it in full
compliance with its existing licenses.

Effect of Probable Governmental Regulation on the Business

We are not aware of any pending legislation at either the state or federal level
that would change the  requirements  under which it is licensed and is not aware
of any reason why the existing  licenses  cannot be renewed at their  expiration
dates.  There can be no  assurance  that  legislation  will not be proposed  and
enacted at some time in the future that would  preclude us from  continuing  our
operations.  Should such legislation be enacted,  and should the we be precluded
from continuing our operations,  it would have a materially  adverse effect upon
our business and future.

Cost and Effects of Compliance with Environmental Laws

As  a  manufacturer,  we  are  subject  to  general  local,  state  and  federal
regulations  governing  environmental  concerns.  We believe that we have always
been and continue to be in compliance with all such laws.

Special  precautions  have been  taken us to ensure  that  adequate  ventilation
exists  for the  portion of our  operations  that  utilize  lead  and/or  brass.
Additionally,  our gunpowder supply is humidity and temperature  controlled in a
secure facility.

Employees

At May 1, 2003, we employed 45 persons.  None of these employees are represented
by a labor  union  for  purposes  of  collective  bargaining.  We  consider  our
relations  with  our  employees  to  be  excellent.  We  may  employ  additional
personnel,   as  necessary,   to   accommodate   future  sales  and   production
requirements.

Item 2.  Description Of Property

We lease 24,000  square feet of warehouse  space,  owned by the family of one of
our officers and directors, Andres Fernandez, at a rate of $3,931 per month plus
applicable  sales  taxes.  This  equates to a rate per square  foot of $2.71 per
year. We believe  comparable  rentals in the area average about $4.50 per square
foot. We are operating under a five-year lease agreement expiring on October 31,
2003 that  contains a clause that the lease may be renewed for an  additional 10
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 market
value for  similar  space in a similar  location  at the time of  renewal.  This
facility is used as our production facility and headquarters.


                                       14
<PAGE>


The wholly owned subsidiary,  Industrial  Plating  Enterprise  Company (IPE), is
fully operational and filling the immediate needs of projectile  plating for the
parent company. IPE is located in a 5,000 square foot facility operating under a
5 year lease  agreement  expiring in March 2007 that  contains a clause that the
lease may be extended for an additional 5 years 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 market value for similar space in a similar location at
the time of  renewal.  The  monthly  cost  varies  between  $1,700 and  $1913.36
throughout  the  lease.  IPE is in full  compliance  with all  Local,  State and
Federal regulations in its operations.

We believe that our  facilities  are adequate for our needs for the  foreseeable
future.

Item 3. Legal Proceedings

The Company is not a party to any pending  litigation at this time nor is any of
its property subject to any pending legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

None.

                                     Part II

Item 5. Market for Common Equity and Related Stockholder Matters.

a) Market Information.

The common  stock of the  Company  currently  is quoted on the Over the  Counter
Bulletin  Board under the symbol  "AAMI" and has been since  October  23,  2001.
Prior to that time, it was approved for trading under symbol "FBIB," although it
never traded under that symbol.  The ask/high and bid/low  information  for each
quarter since October 23, 2001 are as follows:

Quarter                    Ask/High     Bid/Low
---------------------      --------     --------
09/01/2001-12/31/2001      1.75         0.53

01/01/2002-03/31/2002      0.81         0.33

04/01/2002-06/31/2002      0.65         0.36

07/01/2002 - 09/30/2002    0.57         0.31

10/01/2002 - 12/31/2002    0.47         0.38

12/31/2002 - 03/31/2003    0.78         0.53

Please note that  over-the-counter  market quotations have been provided herein.
The quotations reflect inter-dealer prices, without retail markup,  mark-down or
commission and may not represent actual transactions.


                                       15
<PAGE>


(b) Holders.

As of December 31, 2002 the Company had one hundred twelve (112) shareholders of
record of its 55,328,166 outstanding shares of common stock, 33,733,598 of which
were  restricted Rule 144 shares and 23,438,760 of which were  free-trading.  Of
the Rule 144  shares,  30,962,420  shares  have been held by  affiliates  of the
Company for more than one (1) year.

(c) Dividends.

The Company has never paid or declared  any  dividends  on its common  stock and
does not anticipate paying cash dividends in the foreseeable future.

Item 6. Management's Discussion and Analysis

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward-Looking Information

Certain   statements   contained  in  this  Annual  Report  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  Annual  Report 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.

Overview

We  were  incorporated  on  February  1,  2000 in the  State  of  California  as
FirsTelevision.com.  We  subsequently  changed our  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.


                                       16
<PAGE>


On September 29, 2001, FBI Fresh Burgers, F&F Equipment, Inc. and the individual
shareholders of F&F entered into an "Agreement For The Exchange Of Common Stock"
whereby the  shareholders  of F&F exchanged  100% of the issued and  outstanding
stock  of  F&F  for   21,000,000   post-forward   split  shares  of  restricted,
unregistered common stock of FBI Fresh Burgers. F&F Equipment,  Inc. then became
a wholly-owned subsidiary of FBI Fresh Burgers.

F&F Equipment,  Inc. 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." F&F conducts its
business operations under the assumed name of "American Ammunition."

The acquisition of F&F Equipment,  Inc., on September 29, 2001, by us 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,  our financial statements reflect the historical financial
statements of F&F Equipment,  Inc. from its inception on October 4, 1983 and the
operations of FBI Fresh Burgers subsequent to September 29, 2001.

Concurrent  with the  September  29, 2001 reverse  acquisition  transaction,  we
amended our articles of incorporation to change our name to American Ammunition,
Inc.  and  modified  our 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, we effected a three for one forward stock split. This action
caused the then issued and  outstanding  shares to increase  from  2,990,400  to
8,971,200 on the effective  date.  The effect of this action is reflected in the
accompanying  financial  statements  as of the  first  day of the  first  period
presented.

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.

In June  2002,  American  Ammunition,  Inc.  formed a wholly  owned  subsidiary,
Industrial  Plating  Enterprise Co., which started  production on June 14, 2002.
Industrial   Plating  is  a  fully   licensed   and   approved   electrochemical
metallization  facility with  significant  capacity for  processing  our line of
projectiles   as  well  as  other   products   and  services   while   employing
environmentally sound water conservation and proven waste treatment techniques.

During the quarter ended September 30, 2002, the Company expanded its production
capability with the addition of a second  production shift. Due to the necessary
lead times for hiring and training qualified personnel,  the Company experienced
significant  increases in direct labor, payroll taxes and other related expenses
during 2002.  Management  continues  to  anticipate  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.


                                       17
<PAGE>


Results of Operations

Year ended December 31, 2002 compared with the year ended December 31, 2001.

During the year ended December 31, 2002, we  experienced  aggregate net revenues
of approximately  $1,409,000 as compared to approximately  $428,000 for the year
ended December 31, 2001.  The 2002 levels compare  favorably to the 2000 revenue
levels of approximately $1,716,000.

We  experienced  costs of goods sold of  approximately  $2,457,000  for the year
ended  December 31, 2002 as compared to  approximately  $1,385,000  for the year
ended  December 31, 2001. We experience  variable  costs in the area of material
consumption  and  direct  labor.  We have  recognized  depreciation  expense  on
production equipment of approximately  $653,000 and $629,000,  respectively,  in
the above cost of goods expense totals.

These  depreciation  levels are anticipated to remain fairly constant for future
periods as management  does not anticipate  any  significant  capital  equipment
acquisitions in future periods.  Further, the addition of the Industrial Plating
Enterprise Co.  equipment  allows us to produce  certain  components  which were
previously outsourced to unrelated third parties.

For the year ended December 31, 2002 and 2001, respectively, we have generated a
negative  gross  profit  of  approximately   $(1,047,000),   or  (74.31%),   and
approximately  $(957,000),  or (223.84%). We cannot determine when or if we will
achieve a positive gross profit.  Further,  based on production cost information
developed  during the 4th quarter of 2002,  management has developed a new model
for the pricing of its products to its customers.  It is  anticipated  that this
model will allow management to better manage expense levels, control labor costs
and maximize revenue opportunities.

We experienced nominal research and development expenses of approximately $3,700
and $4,000,  respectively,  during the years ended  December  31, 2002 and 2001,
principally  related to the  expansion of our product line to add a .223 caliber
round and the evolving 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.

Other  general  and  administrative   expenses   decreased   significantly  from
approximately  $845,000  for the year ended  December  31,  2002 as  compared to
approximately  $1,806,433  for the  year  ended  December  31,  2001.  The  most
significant  reductions  came in interest  expense as a result of  settling  all
litigation with the Company's former lending  institution,  savings in the areas
of legal and professional fees and other general and administrative fees.

Included  in our  results  of  operations  for both  2002  and 2001 are  various
non-cash expenditure charges.  During 2002, we experienced charges to operations
of  approximately  $11,500  for  compensation  expense  related to common  stock
issuances at less than "fair value".  The  calculation  of these charges  result
from our issuing  common stock for either cash or services at  valuations  below


                                       18
<PAGE>


the  closing  quoted  market  price  of our  common  stock  (as  discounted,  as
applicable)  and either the cash received or the value of the services  provided
to us by third parties.  During 2001, we  experienced a charge of  approximately
$1,208,000 for the amortization of the Beneficial Conversion Feature Discount on
our Preferred Stock. This charge results from the difference between the closing
quoted market price on our common stock and the  equivalent  converted  price of
our Mandatory  Convertible  Preferred Stock which was sold and converted  during
2001.

We recognized a net loss of approximately  $(1,883,000) and $(3,216,577) for the
respective years ended December 31, 2002 and 2001, respectively,  or $(0.04) and
$(0.11) per share.

Year ended December 31, 2001 compared with the year ended December 31, 2000.

Our  operations  were  hampered  during 2001 as a result of on-going  litigation
between us and our financial  lending  institution.  As we were unable to access
credit  lines  for  working  capital,  we were  unable  to offer  selling  terms
comparable  to our  competitors  and,  accordingly,  experienced  a  significant
reduction in sales from prior years.  This  litigation  was settled  during June
2001 and we  negotiated a new working  capital  note with a different  financial
institution which provided liquidity for the remainder of 2001.

During  the  year  ended   December  31,  2001,  we   experienced   revenues  of
approximately  $428,000  as compared to  approximately  $1,716,000  for the year
ended December 31, 2000.

We experienced  costs of goods sold of  approximately  $1,384,510 and $2,026,000
for the years ended  December  31, 2001 and 2000,  respectively.  We  experience
variable  costs  in the  area of  material  consumption  and  direct  labor.  We
recognized   depreciation  expense  on  production  equipment  of  approximately
$629,000 and $617,000,  respectively, in the above cost of goods expense totals.
These  depreciation  levels are anticipated to remain fairly constant for future
periods unless we are successful in our plans to expand production.

We have realized a gross profit of  approximately  ($957,000),  or (223.84%) for
the year ended December 31, 2001 and approximately  ($310,000),  or (18.07%). We
anticipated that with adequate liquidity,  we would have been able to generate a
positive gross profit during Calendar 2002. However we did not generate positive
gross  profit  because  we did not have  the  startup  capital  to  achieve  the
production levels in order to increase our sales. We cannot determine when or if
we will achieve a positive gross profit.

We incurred  nominal research and development  expenses of approximately  $4.000
during 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 Home Defense
Market.

Other general and administrative  expenses increased from approximately  $87,000
during  Calendar 2000 to  approximately  $1.806.000  during  Calendar  2001. The
majority of this  increase  was a result of  professional  and  consulting  fees
related to our reverse  acquisition  transaction in September 2001, and includes
approximately $540,000 for non-cash charges related to fees and services charged
to operations which were paid with common stock.


                                       19
<PAGE>


We also  experienced  non-cash income  (charges) to operations  resulting from a
one-time gain of  approximately  $755,000 for the  settlement of the  litigation
with  our  former  lending   institution  and   approximately   ($1.208,000)  in
amortization of a beneficial conversion feature discount on preferred stock with
an  equivalent  post-conversion  common  stock  price at an amount less than the
quoted  closing  market  price of our  common  stock as of the sale  date of the
underlying convertible preferred stock.

We recognized a net loss of approximately  $(3.217,000) and $(1,216,000) for the
years ended December 31, 2001 and 2000, respectively, or $(0.11) and $(0.05) per
share.

Liquidity And Capital Resources

As of  December  31,  2002 and 2001,  respectively,  we had  working  capital of
approximately  $56,000 and  $152,000.  Our  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.

We have  used cash in  operating  activities  of  approximately  $1,236,000  and
$1,100,000 during the years ended December 31, 2002 and 2001, respectively.

The most  significant  use of cash in operations  during the year ended December
31, 2002 was the  rebuilding of our  operations  after the problems  encountered
during  2001  while  we were in  litigation  with  our  former  primary  lending
institution.  We further used cash in building up our inventory in  anticipation
of Calendar 2003 orders as communicated to us by our customer base.

We  experience  relatively  consistent  expenditure  levels  for  executive  and
administrative  compensation,  interest expense and depreciation expense. During
the third  quarter of 2001,  we  renegotiated  our working  capital  note in the
principal  amount of  $950,000.  This note  bears  interest  at the Wall  Street
Journal  published prime rate plus 2.0%. During 2002, we reduced the outstanding
principal on five (5) separate occasions to a balance of approximately $450,000.
The note payment terms were also modified as follows:  payments of interest only
through  January 28,  2004.  Thereafter,  starting on January  28,  2004,  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. As of
December 31, 2002, we owe $450,000 on this note.

The note is  secured  by  virtually  all of our 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, we anticipate
relatively  stable  interest  expense,  or declining  levels,  in future periods
depending on expansion and additional  equipment financing  requirements.  We do
not   anticipate   the   addition  of   significant   additions  to  office  and
administrative personnel.


                                       20
<PAGE>


On February 28 and March 20, 2003, we made  additional  principal  reductions of
$100,000 and $350,000,  respectively,  fully retiring the  outstanding  debt. We
retired  the note with  proceeds  we received  from a private  placement  of our
common stock in February and March 2003.

We anticipate that our improved  liquidity  position will continue to improve as
management is of the opinion that the production capacity is in place to support
all existing  orders and accept  existing  inquiries  which have previously been
denied due to the lack of production capacity and liquidity.

During the year ended December 31, 2002, we added approximately  $387,000 in new
equipment,  of which approximately $225,000 was acquired in our new wholly-owned
subsidiary,  Industrial  Plating  Enterprise  Co.  This  equipment  allows us to
replace  previously  outsourced  portions  of  our  manufacturing  process  with
internally  managed  processes  which resulted in cost savings to us and improve
turnaround time on this process.

Depending on future  demand for our  products,  we may develop plans to increase
our  production  capability  in  the  foreseeable  future  by 50%  to  100%,  as
influenced by the availability of manufacturing equipment on the open market and
product sales demand. This expansion,  when undertaken,  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, we have no definitive
budgets or timetables  for such  expansion and this  expansion,  if any, will be
dependent upon market demand for our 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, we may
not be able to obtain  additional  funding or, that such funding,  if available,
will not be obtained on terms favorable to or affordable by us.

Convertible Debenture

On October 4, 2002, we signed a Securities Purchase Agreement with La Jolla Cove
Investors,  Inc.  for the sale of a  $250,000  8%  convertible  debenture  and a
warrant to purchase up  30,000,000  shares of our common  stock.  The  debenture
bears  interest  at 8%,  mature in two years from the date of  issuance,  and is
convertible into our common stock, at the selling  stockholder's  option, at the
lesser  of (i)  $1.00  or (ii) 80% of the  average  of the  five  lowest  volume
weighted  average price days during the 20 trading days before but not including
the  conversion  date.  The warrant may only be  exercised  concurrently  with a
conversion  of the  debenture  and then only for that number of shares of common
stock equal to 10 times the number of shares  common stock issued to the denture
holder on that conversion  date. The exercise price of the warrant is the lesser
of (i) $1.00;  or (ii) 80% of the  average of the five  lowest  volume  weighted
average  price  during the 20 trading  days prior to the  holder's  election  to
convert.  See  the  "Selling  Stockholders"  section  for a  description  of the
convertible debenture and warrant issued to the La Jolla Cove Investors, Inc.

We are 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.


                                       21
<PAGE>


La Jolla Cove Investors,  Inc. (La Jolla) has contractually committed 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  concurrently  exercise
warrants and purchase  shares of common stock equal to ten (10) times the number
of shares of common  stock  issued to the Holder upon the  respective  mandatory
conversion of the Debenture.

La Jolla has further contractually agreed to restrict its ability to convert the
Debenture or exercise their warrants and receive shares of our 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 our common stock.

In the event an  election  to convert is made and the  volume  weighted  average
price of our common stock is below $0.30 per share,  we 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%.

La Jolla 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,  we are
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 La Jolla  does not elect to  accelerate  the  Debenture,  the  Company  shall
immediately  issue and pay La Jolla  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.

Due to the contractually agreed mandatory conversion of this Debenture,  we have
reflected  this  transaction  in our balance sheet as a  "mezzanine"  level debt
obligation on its balance sheet,  between "Total Liabilities" and "Shareholders'
Equity".  Upon  the  respective  mandatory  conversion,   we  will  relieve  the
respective  portion of the  Debenture  and the any related  accrued,  but unpaid
interest,   and  credit  this  amount  to  the  respective  "common  stock"  and
"additional  paid-in capital" accounts in the  shareholder's  equity section for
the par value and  excess  amount  over the par value of the  respective  shares
issued.

No value was assigned to the warrant  issued to La Jolla.  Upon  exercise of the
warrant,  we will record the issuance of the underlying shares as a new issuance
of common stock on the date of each respective exercise.


                                       22
<PAGE>


Research and Development

We plan on  significantly  increasing  our spending on research and  development
activities  during  Calendar  2003.  We believe 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,  we anticipate
completing the design,  development and  introduction of our 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
us 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.

Subsequent Events

On April 8, 2003, we announced  that we received a 1,040,000  round export order
from our  Peruvian  distributor,  which is our first  order from  Peru.  We will
continue to take steps to increase our foreign sales.

On April 14,  2003,  we  announced  that we expanded  our product  line with the
addition of two new calibers,  the 38 Super and the 32 Smith and Wesson Long. In
addition,  we  announcd  that over the past  eighteen  (18)  months we have been
pursuing our three (3) point plan to (a) reduce debt,  (b) increase our customer
base, and (c) diversify our product lines.  We have completed  phase one (1) and
are now debt free except for  short-term  payables,  which are current.  We have
succeeded in  releasing  our  corporate  assets from any and all other liens and
encumbrances.  We have  increased our sales force by completing a U.S.  domestic
sales network of twenty (20) distributors and sales  representatives  increasing
the number of  foreign  distributors  to four (4),  specifically  in  Argentina,
Colombia,  Dominican  Republic and Peru. We believe that our conservative  brick
and mortar approach will enable us to continue our growth.

We believe that the financing provided by the selling stockholder will assist in
providing  us with  the  financial  support  we need in order  to  increase  our
production lines. In this April 14, 2003 press release,  we included a statement
from  the  selling  stockholder  which  stated  that we have  "all of the  right
ingredients  for  success...  the  manufacture  of high  quality  products in an
industry whose demand is greater than supply, a clearly defined growth strategy,
and a dynamic,  experienced  management  team. We are very pleased to be part of
American's  Ammunition's future and look forward to helping the company maximize
profitability."  The selling  stockholder made those statements at the inception
of the  financing  with us in  October  2002,  rather  than on April  14,  2003.
Furthermore,  the selling  stockholder takes no position as to whether our stock
is properly valued.

On April  28,  2003,  we  announced  that we signed a sales  agreement  with Don
Hatfield & Associates,  Cumberland,  Ontario,  Canada. Don Hatfield & Associates
has agreed to undertake sales and distribution or our products in Canada.


                                       23
<PAGE>


Item 7. Financial Statements

The  required  consolidated  financial  statements  begin  on  page  F-1 of this
document.

Item 8.  Changes  In  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure.

On January 29, 2002 the Company notified its accountants,  Roger G. Castro,  CPA
that they were being dismissed as the Company's independent auditors. The stated
reasons  were  that  the  Registrant   wanted  to  retain  the  auditor  of  its
wholly-owned  subsidiary,  needed to  consolidate  the  audits of the parent and
subsidiary  to  comply  with SEC  requirements  and did not want to  engage  the
services of more than one (1) auditor. The Company's Board of Directors made the
decision to change accountants.

During  the  Registrant's  past two (2) fiscal  years and during any  subsequent
interim  period  preceding  the  date  of  dismissal,  the  Company  has  had no
disagreements with Roger G. Castro,  CPA on any matter of accounting  principles
or practices, financial statement disclosure or auditing scope or procedure.

The report of Roger G. Castro, CPA on the financial  statements for the past two
(2) fiscal years did not contain an adverse  opinion nor a disclaimer of opinion
nor was the report  qualified  or  modified  as to  uncertainty,  audit scope or
accounting principles.

On January 29, 2002 the Company  provided  Roger G.  Castro,  CPA with a copy of
this disclosure and requested that it furnish a letter to the Company, addressed
to the SEC,  stating  that it  agreed  with the  statements  made  herein or the
reasons why it  disagreed.  On January 29, 2002,  the Company  received a letter
from Roger G. Castro, CPA that it agreed with the statements contained herein.

On January 29, 2002, the Company  engaged the firm of S.W.  Hatfield,  CPA, P.O.
Box  820392,  Dallas,  TX  75382 as the  Company's  independent  auditors.  Such
appointment was accepted by S.W. Hatfield,  President of the firm. Prior to such
engagement,  the Registrant had not consulted  S.W.  Hatfield,  CPA on any prior
matters,  including  any  matters  relative  to the  application  of  accounting
principles or any subject of disagreement with Roger G. Castro, CPA.

                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act


                                       24
<PAGE>


Set forth below are the names,  ages,  positions,  with the Company and business
experiences of the executive officers and directors of the Company.

Name                 Age   Position(s) with Company
---------------      ---   -----------------------------------------
J.A. Fernandez, Sr.  66    Chairman of the Board and Director of Sales

Andres F. Fernandez  37    President and Chief Executive Officer

Emilio D. Jara       38    Vice-President of Operations, Secretary and Director

Amelia Fernandez     66    Vice President and Director

Maria A. Fernandez   43    Director

Len Hale             58    Director

All  directors  hold  office  until the next  annual  meeting  of the  Company's
shareholders and until their successors have been elected and qualify.  Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary  to  perform  their  responsibilities  as  executive  officers  and/or
directors of the Company.

Family Relationships

J.A. Fernandez, Sr. and Amelia Fernandez are the father and mother of Andres and
Maria Fernandez.  There are no other family  relationships  between or among the
executive officers and directors of the Company.

Business Experience

J. A. Fernandez,  Sr., age 66, currently serves as the Chairman of the Board and
Director or Sales.  He has been employed by AA since its inception in 1983.  Mr.
Fernandez is the patriarch of what began as a family business and is responsible
for the  sales  activities  of the  Company.  Mr.  Fernandez  has  over 40 years
experience  in  diverse  industries   including   aerospace,   advanced  polymer
manufacturing,  munitions, mining and processing of gemstones and metal ores and
has utilized such experience for the growth and  development of the Company.  He
is fluent in Spanish.

Andres  Fernandez,  age 37,  currently  serves as President and Chief  Executive
Officer.  Mr.  Fernandez has served in each of these  capacities since September
2001. He has been employed by AA for over a decade. Mr. Fernandez is responsible
for day to day  operations  and has been a driving  force behind the Company and
its success in becoming a vertically integrated manufacturer. He studied physics
and calculus at St. Thomas University, FL and at the University of Miami, FL. He
is  a  licensed  pilot,   having  graduated  from  the  American   Institute  of
Aeronautics, FL, and received his certificate as a private pilot (fixed wing) as
well as private  helicopter  (rotary)in 1989. In 1989, Mr.  Fernandez  graduated


                                       25
<PAGE>


from  the  Institute  of  Public  Service  (Pan  Am),  GA as a  tactical  rappel
instructor.  In 1990, he graduated from Omni Explosives,  TN with a specialty in
tactical  explosives.  Mr. Fernandez was certified by the Florida  Department of
Law Enforcement Academy in special  operations/entry  techniques in 1990. He has
served as a tactical  advisor to U.S.  Treasury  Department,  Bureau of Alcohol,
Tobacco and Firearms,  U.S.  Customs  Service and the Florida  Department of Law
Enforcement. He has received numerous commendations and letters of appreciation.
He also  served on the Board of  Veterans  Affairs  (Hialeah  , FL) from 1990 to
1991. He is fluent in Spanish.

Emilio Jara, age 38, currently serves as Vice President of Operations, Secretary
and a Director.  Mr. Jara has served in each of these capacities since September
2001.  He has been  employed with AA since 1988. He has been an integral part of
the Company's  technological  growth.  His  abilities  have  contributed  to the
Company's  research and  development  and  subsequent  increase in the number of
production  lines.  Mr.  Jara is  extremely  well  versed in  metallurgical  and
ballistic  issues. He studied business  administration  at Miami-Dade  Community
College (1984/1985).  In 1989, he graduated from the Institute of Public Service
(Pan Am), GA as a Tactical Rappel  Instructor.  In 1990, Mr. Jara graduated from
Omni  Explosives,  TN with a specialty in Tactical  Explosives.  He is fluent in
Spanish.

Amelia Fernandez,  age 66, currently serves as Vice President and Director. Mrs.
Fernandez  has served in each of these  capacities  since  September  2001.  She
graduated  from  Conservatorio  Falcon (1950) and the National  Conservatory  of
Music in Havana,  Cuba in 1952. Mrs. Fernandez holds the degrees of Professor of
Piano and Professor of  Solmization  Theory.  She is an  accomplished  classical
pianist,  opera singer and artist.  As a diamond  importer and  wholesaler,  she
completed and graduated from numerous Gemological  Institute of America courses,
including  the diamond and colored  stone  courses.  She  achieved  success as a
jewelry  designer for a select group of buyers,  both corporate and  individual.
She  has  managed,  owned  and  operated  several  business  enterprises  in the
competitive world of wholesale and retail diamonds and precious stones.  She has
been  employed  by AA since  1986 as its  Office  Manager  and  Human  Resources
Coordinator,  including  the research and  development  of training  manuals and
procedures for the selection of personnel. She is fluent in Spanish.

Maria A. Fernandez,  age 43, currently serves as a Director.  Mrs. Fernandez has
served as a Director since September 2001. She has been the managing  partner at
Fernandez  Friedman Grossman & Kohn PLLC since May 1998. Prior to that date, she
was a partner at Taustine Post Sotsky Berman  Fineman & Kohn.  She  concentrates
her legal practice in the areas of estate planning,  probate and administration.
She also practices in the areas of Medicaid and disability  planning,  corporate
and  individual  taxation and  Corporate  law,  with an emphasis in closely held
corporations.  She is a graduate of the  University  of Miami,  FL  (Bachelor of
Business Administration and Master of Professional  Accounting) and the Brandeis
School of Law at the University of Louisville,  KY. Ms. Fernandez is licensed to


                                       26
<PAGE>


practice  in  Kentucky  and  Florida.  She has  lectured  in the areas of estate
planning  and probate,  Medicaid  planning and elder law. She is a member of the
Louisville,  Florida,  Kentucky and American Bar  Associations  and is fluent in
Spanish. Ms. Fernandez is the past President of the Women Lawyers Association of
Jefferson  County,  Kentucky  and current  Board  Member of the  Louisville  Bar
Association.  A Graduate of the  Kentucky  Women's  Leadership  Network,  she is
active in various civic  organizations and is on the board of several non-profit
corporations.

Len Hale,  age 58,  currently  serves as a  Director.  Mr.  Hale has served as a
Director since  September 2001. He is the President of Hale  Consulting,  LLC in
Montgomery,  AL, a management  consulting firm focusing on sales,  marketing and
management  systems.  Mr.  Hale has more  than 20 years  experience  as a proven
leader in the firearms industry. From 1995-1998, he served as group president of
Blount  International,  Inc.  (AL).  As president  of this public  manufacturing
company  consisting of 10 sporting goods brands,  he oversaw a $300 million plus
operation with three (3) division Presidents and increased sales from $84M to in
excess of $300M through  internal growth and  acquisitions,  improved  operating
income  and return on capital  employed.  From  1990-1995,  Mr.  Hale  served as
Executive  Vice-President  and  Chief  Operating  Officer  of  Ellett  Brothers,
Inc.(SC)  Under his  leadership,  sales improved from $69M to $160 M and profits
grew from a  negative  profit to in excess of $6M.  He also  installed  a marine
division,  archery  division  and  manufacturing  divisions.  He has  served  on
numerous boards and industry organizations,  including the Board of Governors of
SAAMI (Sporting Arms and Ammunition Manufacturers  Association) and the Board of
Governors of the National Shooting Sports Foundation.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

No Director,  Officer,  Beneficial  Owner of more than ten percent  (10%) of any
class of equity  securities  of the Company  failed to file reports  required by
Section  16(a) of the Exchange  Act during the most recent  fiscal year or prior
fiscal years.

Item 10. Executive Compensation

The  following  summary   compensation  table  sets  forth  the  aggregate  cash
compensation  paid or accrued by the Company to each of the Company's  executive
officers  and key  employees  for  services  rendered to the Company  during the
Company's  fiscal  year  ended  2002,  2001 and  2000 and all plan and  non-plan
compensation  awarded  to,  earned by or paid to  certain  designated  executive
officers.



                                       27
<PAGE>


SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                           Long Term Compensation
                         Annual Compensation                       Awards            Payouts
(a)               (b)     (c)       (d)      (e)          (f)         (g)          (h)      (i)
                                             Other        Restricte   Securities   LTIP     All
Name and                                     Annual       d Stock     Underlying   Pay-     Other
Principal         Year    Salary    Bonus    Compen-      Award(s)    Options/     outs     Compen-
Position                  ($)       ($)      sation ($)   ($)         SARs  (f)             sation ($)
(1)
----------------- ------  --------  -------- ------------ ----------  ------------ -------- ----------
<S>               <C>     <C>       <C>      <C>          <C>         <C>          <C>      <C>
J.A.              2000    $59,202   $0       $0           $0          $0           $0       $0
Fernandez, Sr.,   2001    $50,859   $0       $0           $0          $0           $0       $0
Chairman,         2002    $77,770   $0       $0           $0          $0           $0       $0
Director of
Sales

Andres F.         2000    $88,438   $0       $0           $0          $0           $0       $0
Fernandez,        2001    $74,290   $0       $0           $0          $0           $0       $0
President and     2002    $103,508  $0       $0           $0          $0           $0       $0
Chief Executive
Officer

Emilio D.         2000    $36,400   $0       $0           $0          $0           $0       $0
Jara, Vice-       2001    $42,500   $0       $0           $0          $0           $0       $0
President         2002    $43,000   $0       $0           $0          $0           $0       $0
of
Operations,
Secretary
and
Director

Amelia            2000    $59,202   $0       $0           $0          $0           $0       $0
Fernandez,        2001    $59,923   $0       $0           $0          $0           $0       $0
Vice              2002    $64,598   $0       $0           $0          $0           $0       $0
President
and
Director

Maria A.          2000    $0        $0       $0           $0          $0           $0       $0
Fernandez,        2001    $0        $0       $0           $0          $0           $0       $0
Director          2002    $0        $0       $0           $0          $0           $0       $0

Len               2000    $0        $0       $0           $0          $0           $0       $0
Hale,             2001    $0        $0       $0           $0          $0           $0       $0
Director          2002    $0        $0       $0           $0          $0           $0       $0
</TABLE>


                                       28
<PAGE>


Compensation of Directors

The Company has no standard  arrangements  for compensating the directors of the
Company for their attendance at meetings of the Board of Directors.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership of our common stock as of May 1, 2003 by:

o    each  person  who is known by us to  beneficially  own more  than 5% of our
     common stock;
o    each of our officers and directors;
o    all of our officers and directors as a group.

Except as otherwise  noted,  each person's  address is c/o American  Ammunition,
Inc., 3545 NW 71st Street, Miami, FL 33147.

<TABLE>
<CAPTION>
                                                           Shares Beneficially Owned
                                                          ---------------------------
                                                                 Percent Before   Percent After
Name and Address of Beneficial Owner              Number          the Offering    the Offering
------------------------------------------------ -------------- --------------- ------------------
<S>                                               <C>             <C>              <C>
Andres F. Fernandez, President, CEO and CFO       30,740,420      53.77%           42.78%

J. A. Fernandez, Sr., Chairman of the Board
                      and Director of Sales       30,740,420      53.77%           42.78%


Amelia C. Fernandez, Vice President and Director  30,740,420      53.77%           42.78%

Maria A. Fernandez, Director                      30,740,420      53.77%           42.78%

Emilio D. Jara, Director                             504,000           *                *

Len C. Hale, Director                                168,000           *                *

Total securities held by officers
and directors as a group (6 people):              31,412,420      54.21%           54.21%
</TABLE>


* Less than 1%

Beneficial  Ownership  is  determined  in  accordance  with  the  rules  of  the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within  60 days of March 28,  2003 are  deemed  outstanding  for  computing  the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.


                                       29
<PAGE>


J.A. Fernandez, Sr. and Amelia Fernandez are the father and mother of Andres and
Maria Fernandez.

The number of shares  beneficially  owned by the Fernandez  family  includes the
following:

a.   11,293,115 shares of common stock owned by Andres F. Fernandez
b.   14,905,905 shares of common stock owned by J.A. Fernandez, Sr.
c.   4,281,900 shares of common stock owned by Amelia C. Fernandez
d.   259,500  shares of common  stock owned by Maria A.  Fernandez.  This number
     does not include the 384,500 shares Maria  Fernandez holds as a Trustee for
     an Irrevocable  Trust in which neither she nor any of the other Officers or
     Directors is the beneficial owner.

Item 12. Certain Relationships and Related 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 $3,931, plus 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.

Item 13. Exhibits and Reports on Form 8-K.

(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B, as
described  in the  following  index of  exhibits,  are  incorporated  herein  by
reference, as follows:

<TABLE>
<CAPTION>
Exhibit No.    Description
----------  -------------------------------------
<S>  <C>    <C>
 2.1 [1]    Share Exchange  Agreement  Between FBI Fresh Burgers  International  and F&F
            Equipment,  Inc.,  dated September 29, 2001  (Incorporated  by referenced to
            our Form 8-K filed with the SEC on October 4, 2001).

 3.1 [1]    Articles of  Incorporation  (Incorporated  by reference to our  registration
            statement  on Form SB-2 filed with the SEC on September  20, 2000,  File No.
            333-4660).

 3.2 [1]    Certificate of Amendment of Articles of Incorporation
            (Incorporated by referenced to our Form 8-K filed with the SEC on October 4, 2001).

 3.4 [1]    Certificate  of  Amendment  of Articles of  Incorporation  (Incorporated  by
            reference to our  registration  statement on Form SB-2 filed with the SEC on
            September 20, 2000, File No. 333-4660).

 3.5 [1]    Amended and Restated Bylaws (Incorporated by reference to our Form 10QSB for the
            quarter ended September 30, 2001).

 3.6 [3]    Articles of  Incorporation for Industrial Plating Enterprise Co., subsidiary of
            American Ammunition, Inc.
</TABLE>


                                       30
<PAGE>

<TABLE>
<S>  <C>    <C>
 3.7 [3]    ByLaws of Incorporation for Industrial Plating Enterprise Co., subsidiary of
            American Ammunition, Inc.

 4.1 [1]    Common Stock  Purchase  Warrant with La Jolla Cove  Investors,  Inc.,  dated
            October 4, 2002.

 4.2 [1]    Convertible  Debenture with La Jolla Cove Investors,  Inc., dated October 4, 2002.

 4.3 [1]    Addendum with La Jolla Cove Investors, Inc., dated October 4, 2002.

 4.4 [1]    Letter Agreement with La Jolla Cove Investors, dated October 4, 2002.

 4.5 [1]    Registration  Rights  Agreement with La Jolla Cove Investors,  dated October 4, 2002.

 4.6 [2]    Letter Agreement with La Jolla Cove, dated December 2002.

 5.1 [2]    Sichenzia Ross Friedman Ference LLP Opinion and Consent.

23.1 [2]    Consent of accountants.

23.2 [2]    Consent of legal counsel.

99.1 *      Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350.

99.2 *      Certification by Chief Financial Officer pursuant to 18 U.S.C. 1350.
</TABLE>


[1]  Previously  filed with the  Company's  Registration  Statement on Form SB-2
     filed October 24, 2002
[2]  Previously  filed with the  Company's  Registration  Statement on Form SB-2
     which was refiled in its entirety on January 6, 2003.
[3]  Previously file with the Company's Annual Report on Form 10-KSB filed March
     31, 2003.
*    Filed herewith

(b) A report  on Form 8-K was  filed on  October  4,  2001  reporting  the Share
Exchange conducted between the Company, F&F Equipment, Inc. and the shareholders
of F&F Equipment, Inc. on September 29, 2001.

A report on Form 8-K was filed on January  29,  2002  reporting  a change in the
Registrant's Certifying Accountant.

A report on Form 8-K was filed on  October  21,  2002  reporting  a  Convertible
Debenture and a Warrant to La Jolla Cove Investors, Inc.


                                       31
<PAGE>


Item 14 - Controls and Procedures

As required by Rule 13a-15 under the Exchange  Act,  within the 90 days prior to
the filing date of this report,  the Company  carried out an  evaluation  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive  Officer along with the Company's  Chief Financial  Officer.
Based upon that evaluation,  the Company's President and Chief Executive Officer
along with the Company's  Chief Financial  Officer  concluded that the Company's
disclosure controls and procedures are effective. There have been no significant
changes in the  Company's  internal  controls or in other  factors,  which could
significantly  affect  internal  controls  subsequent  to the date  the  Company
carried out its evaluation.

Disclosure  controls and procedures are controls and other  procedures  that are
designed to ensure that information  required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported,  within the time  periods  specified  in the  Securities  and Exchange
Commission's  rules and  forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required to be  disclosed  in Company  reports  filed under the  Exchange Act is
accumulated  and  communicated  to  management,  including the  Company's  Chief
Executive  Officer and Chief Financial  Officer as appropriate,  to allow timely
decisions regarding required disclosure.








                [Balance of this page intentionally left blank.]



                                       32
<PAGE>

                                   SIGNATURES

In  accordance  with  Section 13 and 15(d) of the Exchange  Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                            American Ammunition, Inc.
                                  (Registrant)


Date: May 13, 2003      By: /s/ J.A. Fernandez, Sr.
                        --------------------------------------------------------
                          J.A. Fernandez, Sr., Chairman and Director of Sales

                        By: /s/ Andres F. Fernandez
                       ---------------------------------------------------------
                          Andres F. Fernandez, President and CEO

                        By: /s/ Emilio D. Jara
                        --------------------------------------------------------
                          Emilio D. Jara, V.P. of Operations, Secretary and
                          Director

                        By: /s/ Amelia Fernandez
                        --------------------------------------------------------
                          Amelia Fernandez, V.P. and Director

                        By: /s/ Maria A. Fernandez
                        --------------------------------------------------------
                          Maria A. Fernandez, Director


Pursuant to the requirements of the Exchange Act, this report has been signed by
the following persons in the capacities and on the dates indicated.



Signature                   Title                             Date

/s/ J.A. Fernandez, Sr.
----------------------      Chairman of the Board             May 13, 2003
J.A. Fernandez, Sr.         and Director of Sales

/s/ Andres F. Fernandez
----------------------      President and Chief               May 13, 2003
Andres F. Fernandez         Executive Officer

/s/ Emilio D. Jara
----------------------      Vice-President of Operations,     May 13, 2003
Emilio D. Jara              Secretary and Director

/s/ Amelia Fernandez
----------------------      Vice President and Director       May 13, 2003
Amelia Fernandez

/s/ Maria A. Fernandez
----------------------      Director                          May 13, 2003
Maria A. Fernandez


                                       33
<PAGE>

                                 CERTIFICATIONS

I, Andres Fernandez, certify that:

1. I have  reviewed  this annual  report on Form 10-KSB of American  Ammunition,
Inc.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report.

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
exchange act rules 13a-14 and 15d- 14) for the registrant and have:

     (a.)  designed  such  disclosure  controls  and  procedures  to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b.) evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report (the "evaluation date"); and

     (c.)   presented  in  this  annual   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the evaluation date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     (a.) all  significant  deficiencies  in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b.) any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls.

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

By:      /s/ Andres Fernandez
         ---------------------------------------------
         Andres Fernandez,
         Chief Executive Officer or equivalent thereof


                                       34
<PAGE>

I, Andres Fernandez, certify that:

1. I have  reviewed  this annual  report on form 10-KSB of American  Ammunition,
Inc.

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report.

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report.

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
exchange act rules 13a-14 and 15d- 14) for the registrant and have:

     (a.)  designed  such  disclosure  controls  and  procedures  to ensure that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b.) evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  as of a date  within 90 days prior to the  filing  date of this
annual report (the "evaluation date"); and

     (c.)   presented  in  this  annual   report  our   conclusions   about  the
effectiveness of the disclosure  controls and procedures based on our evaluation
as of the evaluation date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

     (a.) all  significant  deficiencies  in the design or operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b.) any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls.

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

By:      /s/ Andres Fernandez
         ---------------------------------------------
         Andres Fernandez,
         Chief Financial Officer or equivalent thereof



                                       35
<PAGE>


                            AMERICAN AMMUNITION, INC.

                                    CONTENTS


                                                                            Page

Report of Independent Certified Public Accountants                           F-2

Consolidated Financial Statements

   Consolidated Balance Sheets
     as of December 31, 2002 and 2001                                        F-3

   Consolidated Statement of Operations and Comprehensive Loss
     for the years ended December 31, 2002 and 2001                          F-5

   Consolidated Statement of Changes in Stockholders' Equity
     for the years ended December 31, 2002 and 2001                          F-6

   Consolidated Statement of Cash Flows
     for the years ended December 31, 2002 and 2001                          F-7

   Notes to Consolidated Financial Statements                                F-9




<PAGE>


S. W. HATFIELD, CPA
certified public accountants

Member:    Texas Society of Certified Public Accountants
           Press Club of Dallas


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
American Ammunition, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets  of  American
Ammunition,   Inc.  (a  California   corporation)  and   Subsidiaries   (Florida
corporations)  as of December 31, 2002 and December 31, 2001 (as  restated)  and
the related  consolidated  statements  of  operations  and  comprehensive  loss,
changes in  stockholders'  equity and cash flows for the year ended December 31,
2002 and for the year ended December 31, 2001 (as restated), respectively. These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
American  Ammunition,  Inc. as of December  31, 2002 and  December  31, 2001 (as
restated)  and the related  consolidated  statements of  operations,  changes in
stockholders' equity and cash flows for the year ended December 31, 2002 and for
the year ended December 31, 2001 (as restated), respectively, in conformity with
generally accepted accounting principles generally accepted in the United States
of America.

As noted in Note D, the  Company  detected  errors  in the  inventory  valuation
calculations for the recorded carrying cost of inventory on the balance sheet as
of December  31, 2001  whereby the  inventory  valuation  had not been  properly
calculated  using the "lower of cost or market" method by recognizing a targeted
gross profit percentage based on Management's best estimate.  This error created
an  overstatement  in the inventory  carrying  value at December 31, 2001 and an
understatement  in cost of goods  sold for the year  ended  December  31,  2001.
Additionally,  the  Company  determined  that it's  interpretation  for the most
appropriate  method  of  accounting  for  the  amortization  of  the  Beneficial
Conversion  Discount  Feature  related  to  the  2001  issuance  of  Convertible
Preferred  Stock was  incorrect.  This error  created an  understatement  in the
amortization  expense and calculation of additional paid-in capital for the year
ended  December  31, 2001.  The effect of these errors has been  restated in the
accompanying  consolidated  financial  statements  as of and for the year  ended
December 31, 2001.

                                                          /s/S. W. HATFIELD, CPA
                                                             S. W. HATFIELD, CPA
Dallas, Texas
March 7, 2003 (except for Note J
   as to which the date is March 20, 2003)

                      Use our past to assist your future sm
(secure mailing address)                   (overnight delivery/shipping address)
P. O. Box 820395                               9002 Green Oaks Circle, 2nd Floor
Dallas, Texas  75382-0395                               Dallas, Texas 75243-7212
214-342-9635 (voice)                                          (fax) 214-342-9601
800-244-0639                                                      SWHCPA@aol.com

                                                                             F-2

<PAGE>



<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2002 and 2001


                                                                                    (Restated)
                                                                  December 31,      December 31,
                                                                      2002             2001
                                                                ----------------------------------
<S>                                                                <C>          <C>
                        ASSETS
Current Assets
   Cash on hand and in bank                                        $    157,316 $    596,419
   Accounts receivable - trade, net of allowance for
     doubtful accounts of $-0- and $-0-, respectively                    31,288            -
   Inventory                                                            384,814      125,930
   Prepaid expenses                                                      19,391        9,458
                                                                   ------------ ------------

     Total Current Assets                                               592,809      731,807
                                                                   ------------ ------------


Property and Equipment - at cost
   Manufacturing equipment                                            6,843,135    6,470,064
   Office furniture and fixtures                                         58,528       50,856
   Leasehold improvements                                               188,263      182,052
                                                                   ------------ ------------
                                                                      7,089,926    6,702,972
   Accumulated depreciation                                          (3,393,301)  (2,737,717)
                                                                   ------------ ------------

     Net Property and Equipment                                       3,696,625    3,965,255
                                                                   ------------ ------------


Other Assets
   Deposits and other                                                    77,860       74,310
                                                                   ------------ ------------

TOTAL ASSETS                                                       $  4,367,294 $  4,771,372
                                                                   ============ ============
</TABLE>


                                  - Continued -




<PAGE>



<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
                     CONSOLIDATED BALANCE SHEETS - CONTINUED
                           December 31, 2002 and 2001


                                                                                    (Restated)
                                                                  December 31,      December 31,
                                                                      2002             2001
                                                                ----------------------------------
<S>                                                                <C>          <C>

                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
   Current maturities of leases payable                            $      9,507 $      8,365
   Customer deposits                                                     80,953            -
   Accounts payable - trade                                             414,910      469,543
   Accrued interest payable                                              18,709        1,000
   Accrued dividends payable                                             12,600            -
   Note payable to stockholder                                                -      100,000
                                                                   ------------ ------------

     Total Current Liabilities                                          536,679      579,908

Long-Term Liabilities
   Note payable to a bank                                               450,000      950,000
   Capital leases payable                                                 7,841       17,348
                                                                   ------------ ------------

     Total Liabilities                                                  994,520    1,547,256
                                                                   ------------ ------------


Commitments and Contingencies


Mandatory Convertible Debenture                                         250,000            -
                                                                   ------------ ------------


Mandatory Convertible Preferred Stock
   41,000 and 46,000 shares issued and outstanding                      205,000      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.
     300,000,000 shares authorized.
     55,328,166 and 49,975,614 shares issued and outstanding             55,328       49,971
   Additional paid-in capital                                        16,523,164   14,700,776
   Accumulated deficit                                              (13,660,718) (11,754,631)
                                                                   ------------ ------------

   Total Stockholders' Equity                                         2,917,774    2,996,116
                                                                   ------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                         $  4,367,294 $  4,771,372
                                                                   ============ ============
</TABLE>


The accompanying notes are an integral part
of these consolidated financial statements.

                                                                             F-3

<PAGE>


<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                     Years ended December 31, 2002 and 2000


                                                                                  (Restated)
                                                                 Year ended        Year ended
                                                                December 31,      December 31,
                                                                    2002               2001
                                                               --------------------------------

<S>                                                            <C>              <C>
Revenues                                                       $     1,409,364  $     427,529
                                                               ---------------  -------------

Cost of Sales
   Materials                                                         1,041,553        428,909
   Direct Labor                                                        633,787        260,012
   Other direct costs and expenses                                     128,371         66,664
   Depreciation                                                        652,943        628,925
                                                               ---------------  -------------
     Total Cost of Sales                                             2,456,654      1,384,510
                                                               ---------------  -------------

Gross Profit                                                        (1,047,290)      (956,981)
                                                               ---------------  -------------

Operating Expenses
   Research and development expenses                                     3,662          3,963
   Marketing and promotion expenses                                     23,453          4,043
   Salaries, wages and related expenses                                341,532        365,079
   Other operating expenses                                            389,732        968,494
   Interest expense                                                     72,444        453,943
   Depreciation expense                                                  2,642         10,911
   Compensation expense related to common stock
     issuances at less than "fair value"                                11,538              -
                                                               ---------------  -------------

     Total Operating Expenses                                          845,003      1,806,433
                                                               ---------------  -------------

Loss from Operations                                                (1,892,293)    (2,763,414)

Other Income (Expense)
   Other income (expense)                                               9,206
   Settlement of litigation                                                 -         754,830
   Amortization of Beneficial Conversion
     Feature Discount on Preferred Stock                                    -      (1,207,993)
                                                               ---------------  -------------

Loss before Income Taxes                                            (1,883,087)    (3,216,577)

Provision for Income Taxes                                                   -              -
                                                               ---------------  -------------

Net Loss                                                            (1,883,087)    (3,216,577)

Other Comprehensive Income                                                   -              -
                                                               ---------------  -------------

Comprehensive Loss                                             $    (1,883,087) $  (3,216,577)
                                                               ===============  =============

Loss per weighted-average share of common stock outstanding,
   computed on net loss - basic and fully diluted              $         (0.04) $       (0.11)
                                                               ===============  =============

Weighted-average number of common shares outstanding                52,605,993     28,019,722
                                                               ===============  =============
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

                                                                             F-4

<PAGE>



<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                     Years ended December 31, 2002 and 2001

                                               Mandatory Convertible
                                                 Preferred Stock        Common Stock       Additional
                                               ------------------     -------------------   paid-in     Accumulated
                                                Shares     Amount      Shares    Amount     capital       deficit         Total
                                             -----------------------------------------------------------------------------------

<S>                                          <C>       <C>         <C>        <C>         <C>          <C>           <C>
                                            ---------- ---------- ----------- ---------   -----------   -----------    ----------
Balances at January 1, 2001 - Restated               -          -  25,121,000 $  25,121   $ 4,553,076  $ (8,518,054) $ (3,939,857)

Recapitalization due to reverse
   acquisition transaction with
   FBI Fresh Burgers International                   -          -   4,850,000     4,850        (4,850)            -             -
Issuance of common stock for
   Payment of short-term note payable                -          -     222,222       222        99,778             -       100,000
   Settlement of accounts payable                    -          -     535,272       535       240,337             -       240,872
Private placement of Preferred Stock           284,600  1,423,000           -         -             -             -             -
   Less costs of raising capital                     -          -           -         -      (144,915)            -      (144,915)
   Beneficial Conversion Feature
     Discount on Preferred Stock                     -          -           -         -     1,207,993             -     1,207,993
Conversion of shareholder debt and
   accrued interest into Preferred Stock     1,510,720  7,553,600           -         -             -             -             -
Conversion of Preferred Stock to
   Common Stock                             (1,749,320)(8,746,600) 19,242,520    19,243     8,727,357             -     8,746,600
Net loss for the year                                -          -           -         -             -    (3,216,577)   (3,216,577)
                                            ---------- ---------- ----------- ---------   -----------   -----------    ----------

Balances at December 31, 2001 - Restated        46,000    230,000  49,971,214    49,971    14,678,776   (11,734,631)    2,994,116

Issuance of common stock for Cash                    -          -   4,123,582     4,124     1,344,809             -     1,348,933
   Conversion of debt and accrued interest           -          -     277,777       278       124,722             -       125,000
   Conversion of trade accounts payable              -          -     779,944       780       306,237             -       307,017
   Consulting fees                                   -          -      98,664        98        33,297             -        33,395
   Payment of preferred stock dividends              -          -      21,985        22        10,378             -        10,400
   Conversion of Preferred Stock                (5,000)   (25,000)     55,000        55        24,945             -        25,000
Costs of acquiring convertible debenture             -          -           -         -             -       (20,000)      (20,000)
Dividends declared on Preferred Stock                -          -           -         -             -       (23,000)      (23,000)
Net loss for the year                                -          -           -         -             -    (1,883,087)   (1,883,087)
                                            ---------- ---------- ----------- ---------   -----------   -----------    ----------

Balances at December 31, 2002                   41,000 $  205,000  55,328,166 $  55,328   $16,523,164  $(13,660,718)  $ 2,917,774
                                            ========== ========== =========== =========   ===========   ===========    ==========
</TABLE>

The accompanying notes are an integral part
of these consolidated financial statements.

                                                                             F-5

<PAGE>



<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2002 and 2001


                                                                                         (Restated)
                                                                         Year ended      Year ended
                                                                        December 31,    December 31,
                                                                            2002            2001
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
Cash flows from operating activities
   Net loss for the year                                                $ (1,883,087)   $ (3,216,577)
   Adjustments to reconcile net loss to net
     cash provided by operating activities
       Depreciation and amortization                                         655,585         639,836
       Gain on litigation settlement                                               -        (754,830)
       Common stock issued for fees and services                              33,395         540,534
       Accrued interest converted to preferred stock                               -         240,440
       Amortization of conversion discount on preferred stock                      -       1,207,993
       Accrued interest converted to common stock                             24,000               -
       Compensation expense related to common stock
         issuances at less than "fair value"                                  11,538               -
       (Increase) Decrease in
         Accounts receivable                                                 (31,288)         60,415
         Inventory                                                          (258,884)        207,480
         Prepaid expenses, deposits and other                                (13,483)        (24,056)
       Increase (Decrease) in
         Accounts payable and accrued liabilities                            251,384            (639)
         Interest payable                                                     18,709          (1,000)
         Customer deposits                                                    80,953               -
                                                                        ------------    ------------
Net cash provided by (used in) operating activities                       (1,111,178)     (1,100,404)
                                                                        ------------    ------------

Cash flows from investing activities
   Purchase of property and equipment                                       (386,955)       (105,657)
                                                                        ------------    ------------
Net cash used in investing activities                                       (386,955)       (105,657)
                                                                        ------------    ------------

Cash flows from financing activities
   Increase in cash overdraft                                                      -           7,760
   Cash received (paid) on short term loans - net                                  -        (351,652)
   Cash received on long-term loans                                                -         950,000
   Principal paid on long-term loans                                        (500,000)              -
   Principal paid on long-term capital leases                                 (8,365)        (82,571)
   Cash received on sale of Mandatory Convertible Preferred Stock                  -       1,423,000
   Cash received on issuance of Mandatory Convertible Debenture              250,000               -
   Cash received on sale of common stock                                   1,337,395               -
   Cash paid to acquire capital                                              (20,000)       (144,915)
                                                                        ------------    ------------
Net cash provided by financing activities                                  1,059,030       1,801,622
                                                                        ------------    ------------

INCREASE (DECREASE) IN CASH                                                 (439,103)        595,561

Cash at beginning of year                                                    596,419             858
                                                                        ------------    ------------

Cash at end of year                                                     $    157,316    $    596,419
                                                                        ============    ============
</TABLE>


                                  - Continued -



<PAGE>



<TABLE>
<CAPTION>
                            AMERICAN AMMUNITION, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                     Years ended December 31, 2001 and 2000


                                                                                         (Restated)
                                                                         Year ended      Year ended
                                                                        December 31,    December 31,
                                                                            2002            2001
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
Supplemental disclosure of interest
   and income taxes paid
     Interest paid for the period                                       $     29,735    $    214,503
                                                                        ============    ============
     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 preferred stock                    $          -    $  7,553,600
                                                                        ============    ============
     Conversion of debt and prior period accrued
       interest into common stock                                       $    101,000    $    100,000
                                                                        ============    ============
     Payment of accounts payable with
       issuance of common stock                                         $    307,017    $    240,872
                                                                        ============    ============
     Payment of accrued dividends on preferred
       stock with common stock                                          $     10,400    $          -
                                                                        ============    ============
</TABLE>


The accompanying notes are an integral part
of these consolidated financial statements.

                                                                             F-6

<PAGE>


                            AMERICAN AMMUNITION, INC.

                   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.

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.  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 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.


Note B - Preparation of Financial Statements

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,  the historical  financial statements of the Company are
those of F&F Equipment,  Inc. from it's inception and those of the  consolidated
entity subsequent to the September 29, 2001 transaction date.

The  Company and its  subsidiaries  follow the accrual  basis of  accounting  in
accordance with accounting principles generally accepted in the United States of
America and have adopted a year-end of December 31 for all entities.

                                                                             F-7

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note B - Preparation of Financial Statements - Continued

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America 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.

Management further acknowledges that it is solely responsible for adopting sound
accounting  practices,   establishing  and  maintaining  a  system  of  internal
accounting  control and preventing and detecting  fraud. The Company's system of
internal  accounting  control is designed to assure,  among other items, that 1)
recorded  transactions  are valid; 2) valid  transactions  are recorded;  and 3)
transactions  are  recorded in the proper  period in a timely  manner to produce
financial  statements which present fairly the financial  condition,  results of
operations  and cash  flows of the  Company  for the  respective  periods  being
presented

For  segment  reporting  purposes,  the Company  operated  in only one  industry
segment during the periods represented in the accompanying  financial statements
and makes all  operating  decisions and  allocates  resources  based on the best
benefit to the Company as a whole.

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".


Note C - 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 and Revenue Recognition

     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.

     The Company ships all product on an FOB-Plant basis.  Accordingly,  revenue
     is recognized by the Company at the point at which an order is shipped at a
     fixed price, collection is reasonably assured, the Company has no remaining
     performance obligations and no right of return by the purchaser exists.

                                                                             F-8

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note C - Summary of Significant Accounting Policies - Continued

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.

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.   Income Taxes

     The Company uses the asset and liability  method of  accounting  for income
     taxes.  At December 31, 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 December 31, 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.

6.   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  September  30,  2002 and 2001,  and
     subsequent thereto, the Company had no warrants and/or options outstanding.

7.   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.

8.   Reclassifications

     Certain amounts in the  accompanying  financial  statements for the quarter
     ended  September 30, 2001 have been  reclassified  to conform to the Fiscal
     2002 presentations.

                                                                             F-9

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note D - Correction of an Error

During Management's  review of the Company's internal control structure,  it was
noted that the Company continues to realize a negative gross profit and that the
inventory valuation  calculations for the recorded carrying cost of inventory on
the balance sheet as of December 31, 2001 had not been properly calculated using
the "lower of cost or market"  method by  recognizing  a targeted  gross  profit
percentage  based  on  Management's   best  estimate.   This  error  created  an
overstatement  in the  inventory  carrying  value at  December  31,  2001 and an
understatement in cost of goods sold for the year ended December 31, 2001.

Additionally,  during 2002,  Management  determined that it's interpretation for
the most appropriate method of accounting for the amortization of the Beneficial
Conversion  Discount  Feature  related  to  the  2001  issuance  of  Convertible
Preferred  Stock was  incorrect.  This error  created an  understatement  in the
amortization  expense and in the  calculation of additional  paid-in capital for
the year ended December 31, 2001.

The effect of any and all changes are  reflected in the  accompanying  financial
statements as of the respective  date of each  transaction and the effect of the
corrections are summarized below by fiscal period and cumulatively.

<TABLE>
<CAPTION>
                                                    Year ended
                                                     December 31,     Cumulative
                                                       2001        effect of changes
                                                   --------------- -----------------
<S>                                                      <C>           <C>
Net Loss, as previously reported                    $  (2,211,887)

Effect of the correction of an error
   Recalculation of the carrying value
     of inventory at December 31, 2001                   (187,811)     (187,811)
   Recalculation of amortization of Beneficial
     Conversion Feature Discount on Preferred Stock      (816,879)     (816,879)
                                                     ------------   -----------
       Total effect of changes on
         Loss from Operations and Net Loss             (1,004,690)   (1,004,690)
                                                     ------------   -----------

Net Loss, as restated                               $  (3,216,577)  $(1,004,690)
                                                     ============   ===========

Earnings per share, as previously reported          $       (0.08)
Total effect of changes                                     (0.03)  $     (0.03)
                                                     ============   ===========

Earnings per share, as restated                     $       (0.11)
                                                     ============   ===========
</TABLE>


Note E - 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.

Interest  rate risk is the risk  that the  Company's  earnings  are  subject  to
fluctuations  in interest  rates on either  investments  or on debt and is fully
dependent  upon  the  volatility  of  these  rates.  The  Company  does  not use
derivative instruments to moderate its exposure to interest rate risk, if any.

                                                                            F-10

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note E - Fair Value of Financial Instruments - Continued

Financial  risk  is  the  risk  that  the  Company's  earnings  are  subject  to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the  volatility  of  these  rates.  The  company  does  not use  derivative
instruments to moderate its exposure to financial risk, if any.


Note F - Inventory

As of  December  31,  2002  and  2001,  inventory  consisted  of  the  following
components:

                                      December 31,     December 31,
                                          2002               2001
                                     --------------------------------

         Raw materials                  $ 149,824        $  82,454
         Work in process                  116,216           24,232
         Finished goods                   118,774           19,244
                                        ---------        ---------

         Totals                         $ 384,814        $ 125,930
                                        =========        =========


Note G - Property and Equipment

Property and equipment consist of the following components:

                                       December 31,  December 31,     Estimated
                                           2002          2001        useful life
                                      -------------  ---------------------------

   Manufacturing equipment            $  6,843,135    $  6,470,064      10 years
   Office furniture and fixtures            58,528          50,856       7 years
   Leasehold improvements                  188,263         182,052      20 years
                                        ----------      ----------
                                         7,089,926       6,702,972
   Accumulated depreciation             (3,393,301)     (2,737,717)
                                         ---------      ----------

   Net property and equipment         $  3,696,625     $ 3,965,255
                                         =========       =========

Total  depreciation  expense  charged to operations for the years ended December
31, 2002 and 2001 was approximately $655,585 and $639,836, respectively.

Included in the amounts  reflected  in the  accompanying  balance  sheet are the
following fixed assets on long-term capital leases:

                                                December 31,     December 31,
                                                    2001            2000
                                               ---------------  --------------

     Manufacturing and processing equipment      $  153,400       $  153,400
     Less accumulated depreciation                  (54,519)         (39,179)
                                                    --------        --------

                                                 $   98,881       $  114,221
                                                    ========         =======

                                                                            F-11

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note H - 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 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 transaction,  the Company recognized a one-time
gain on the settlement of approximately $754,830 on the settlement date.


Note I - Capital Leases Payable

Capital  leases  payable  consist of the  following  as of December 31, 2002 and
2001, respectively:

<TABLE>
<CAPTION>
                                                                   December 31, December 31,
                                                                        2002       2001
                                                                   ------------ -------------
<S>                                                                     <C>          <C>
Three  capital  leases,  respectively,  payable  to  various
equipment  financing  companies.  Interest,  at December 31,
2002,   ranging  between  11.37%  and  14.05%.   Payable  in
aggregate  monthly   installments  of  approximately   $935,
including accrued  interest,  as of December 31, 2002. Final
maturities  occur between  September 2004 and December 2004.
Collateralized    the   underlying   leased    manufacturing
equipment.                                                         $    17,348  $    25,713

     Less current maturities                                            (9,507)      (8,365)
                                                                   -----------  -----------

     Long-term portion                                             $     7,841  $    17,348
                                                                   ===========  ===========
</TABLE>

Future maturities of capital leases payable are as follows:

                     Year ending
                    December 31         Amount

                        2003            $  9,507
                        2004               7,841
                                         -------

                       Totals           $ 17,348
                                         =======




                (Remainder of this page left blank intentionally)

                                                                            F-12

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note J - 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 $950,000 note payable to another
financial  institution.  This note bears  interest  at the Wall  Street  Journal
published prime rate plus 2.0%.

During Calendar 2002, the Company made five (5) lump-sum principal reductions of
$100,000 each (or an aggregate of $500,000) to the  outstanding  balance on this
note. As of December 31, 2002, the Company owes $450,000 on this note. Upon each
lump-sum  payment,  the Company  executed a modification to the payment terms on
the note.

At  December  31,  2002,  the note  payment  terms are as  follows:  payments of
interest  only  beginning  July 28, 2003 through  January 28, 2004.  Thereafter,
starting on January 28, 2004,  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.

On February 28 and March 20, 2003,  respectively,  the Company  made  additional
principal  reductions of $100,000 and $350,000  fully  retiring the  outstanding
debt.


Note K - Convertible Debenture

On October 4, 2002, the Company issued an 8.0% Convertible Debenture (Debenture)
in the face  amount of  $250,000  and a Warrant  which  requires  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.

In  December   2002,   the  Company  and  the  Debenture   Holder   amended  the
above-referenced debenture and warrants as follows:

     The number of common  shares into which the  debenture  may be converted is
     equal to the dollar amount of the debenture being  converted  multiplied by
     eleven, minus the product of the conversion price,  multiplied by ten times
     the  dollar  amount  of  the  debenture  being  converted,  divided  by the
     conversion  price.  The  conversion  price is obtained by  multiplying  the
     average of the five (5) lowest Volume Weighted Average Prices (VWAP) during
     the 20  trading  days  prior  to the  date of  conversion  by the  Discount
     Multiplier of 80%.

     The warrants are exercisable at $1.00 per share for up to 2,500,000 shares.
     The warrant holder is obligated to exercise the warrant  concurrently  with
     the  conversion  of the debenture for a number of shares equal to ten times
     the dollar amount of the debenture being converted.

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.


                                                                            F-13

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note K - Convertible Debenture - Continued

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.

The Debenture Holder has  contractually  committed 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 concurrently  exercise warrants and purchase shares of
common stock equal to ten (10) times the number of shares of common stock issued
to the Holder upon the respective mandatory 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.

Due to the  contractually  agreed  mandatory  conversion of this Debenture,  the
Company has  reflected  this  transaction  in its balance sheet as a "mezzanine"
level debt  obligation on its balance  sheet,  between "Total  Liabilities"  and
"Shareholders'  Equity". Upon the respective mandatory  conversion,  the Company
will  relieve  the  respective  portion  of the  Debenture  and the any  related
accrued,  but unpaid interest,  and credit this amount to the respective "common
stock" and "additional  paid-in capital"  accounts in the  shareholder's  equity
section for the par value and excess amount over the par value of the respective
shares issued.

As the warrant is  non-detachable  from the Debenture and requires  simultaneous
exercise upon  conversion of the Debenture,  no value was assigned to the issued
warrant.  Upon exercise of the warrant,  the Company will record the issuance of
the  underlying  shares as a new  issuance  of common  stock on the date of each
respective exercise.

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.

                                                                            F-14

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note L - Preferred Stock Transactions

In September,  October and November 2001, the Company sold an aggregate  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
initially  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 December 2001, at the request of the holders
of the Series A Preferred Stock, the Company and the individual holders modified
the holding period for conversion to allow for conversion in December 2001.

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 December 2001,  concurrent with a modification in the holding period prior to
conversion,  certain holders of the Series A Preferred Stock orally notified the
Company of their intent to exercise the conversion  features on 1,749,720 issued
and outstanding  shares of Series A Preferred  Stock into  19,246,920  shares of
common  stock prior to December  31,  2001.  Due to the timing of the  requisite
documentation,  the  clerical  activities  related to this  conversion  were not
completed until February 2002.

In conjunction with the Series A Preferred Stock, certain shares were sold after
the Company's common stock was approved for trading by the National  Association
of Securities  Dealers on the OTC Bulletin  Board in October 2001. The shares of
Series A Preferred  Stock sold  subsequent  to this date had an  equivalent  per
share  value of  common  stock  below  the  ending  quoted  market  price of the
Company's common stock on their respective issue dates. 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 eligible  conversion date, as amended.  All
of the shares sold  subsequent  to the initial  trading  date were  converted in
December  2001  and,  accordingly,  the  approximate  $1,207,993  in  Beneficial
Conversion Feature Discount was fully amortized to operations.

In December 2002, a holder of 5,000 shares of Series A Preferred Stock exercised
his  conversion  rights and converted  these shares of Series A Preferred  Stock
into 55,000 shares of restricted, unregistered common stock.


Note M - 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.  The effect of this action is  reflected  in the  accompanying  financial
statements as of the first day of the first period presented.

                                                                            F-15

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note M - Common Stock Transactions

In  September  2001,  the  Company  issued  an  aggregate  21,000,000  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 restricted,  unregistered
common stock to an unrelated entity in exchange for the cancellation of $100,000
of short-term  debt.  In March 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.

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  $100,000 in short-term debt payable and
accrued  interest  of  approximately  $25,000 to an  existing  shareholder  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.  This
transaction paid in full all outstanding short-term debt.

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.  These  proceeds were
used to supplement operational working capital.

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 his
cash  payment  on  behalf  of the  Company  of  previously  accrued  legal  fees
associated with the bank related  litigation,  which was concluded in June 2001,
and for other consulting  services  currently being provided by the shareholder.
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.

                                                                            F-16

<PAGE>

                            AMERICAN AMMUNITION, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note M - Common Stock Transactions - Continued

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.  The proceeds
of this transaction were used to supplement operational working capital.

In July 2002, the Company sold 384,615 shares of restricted, unregistered common
stock to an existing  shareholder for cash proceeds of  approximately  $100,000.
This  sale was  made at a price  of $0.26  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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In August  2002,  the Company sold 384,615  shares of  restricted,  unregistered
common stock to an existing shareholder for cash proceeds of $100,000. This sale
was made at a price of $0.26 per  share,  which was below 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.   The
differential between the discounted "fair value" (approximately $0.29 per share)
and the  selling  price  resulted  in a charge to  operations  of  approximately
$11,346 for compensation  expense related to common stock issuances at less than
"fair  value".  The  proceeds  of this  transaction  were  used  to pay  down an
equivalent portion of the Company's long-term note payable to a bank.

In August  2002,  the Company  sold 20,506  shares of  restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$6,152. This sale was made at a price of $0.30 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.  The proceeds of this  transaction  were used to directly  retire a
trade account payable to a specific vendor.

In August 2002,  the Company  issued 24,999 shares of  restricted,  unregistered
common stock to an unrelated  party for  shareholder  and other public  relation
services.  This  transaction was valued at  approximately  $6,875,  or $0.28 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 September  2002, the Company sold 277,778 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In September  2002, the Company sold 277,778 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 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. The proceeds from this transaction were used to support operational
working capital.

In September  2002, the Company sold 222,222 shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made 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.  The proceeds of this transaction were used to support  operational
working capital.

                                                                            F-17

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note M - Common Stock Transactions - Continued

In November 2002,  the Company sold 384,615  shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In December  2002,  the Company sold an aggregate  120,170 shares of restricted,
unregistered  common  stock  to  an  existing   shareholder  in  three  separate
transactions valued at an aggregate of approximately  $31,244.  These sales were
made at a price of $0.26 per share,  which was in excess of the discounted "fair
value" of the Company's common stock on the date of each respective transaction.
The proceeds of this  transaction  were used to directly  retire a trade account
payable to a specific vendor.

In December 2002,  the Company sold 384,615  shares of restricted,  unregistered
common  stock to an existing  shareholder  for cash  proceeds  of  approximately
$100,000.  This sale was made at a price of $0.26 per share, which was in excess
of 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.  The  proceeds  of  this  transaction  were  used  to pay  down  an
equivalent portion of the Company's long-term note payable to a bank.

In December 2002,  the Company issued 55,000 shares of restricted,  unregistered
common stock upon the exercise of 5,000 shares of outstanding Series A Preferred
Stock upon the exercise of the  conversion  option by the Holder of the Series A
Preferred Stock.

During June,  July and September  2002, the Company  issued an aggregate  21,987
shares of  restricted,  unregistered  common  stock in payment of  approximately
$10,400  in accrued  dividends  payable on the  Company's  outstanding  Series A
Preferred  Stock for the quarters ended December 31, 2001,  March 31, 2002, June
30, 2002 and September 30, 2002.


Note N - 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 $3,931, plus 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.



                (Remainder of this page left blank intentionally)

                                                                            F-18

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note O - Income Taxes

The components of income tax (benefit)  expense for the years ended December 31,
2002 and 2001, respectively, are as follows:

                                 Year ended          Year ended
                                December 31,        December 31,
                                    2002                2001
                               ---------------    ----------------
       Federal:
         Current                  $      -            $     -
         Deferred                        -                  -
                                   -------             ------
                                         -                  -
                                   -------             ------
       State:
         Current                         -                  -
         Deferred                        -                  -
                                   -------             ------
                                         -                  -
                                   -------             ------
         Total                    $      -            $     -
                                   =======             ======

As of December 31, 2002,  the Company has a net operating loss  carryforward  of
approximately  $6,600,000 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 years ended December 31, 2002
and 2001,  respectively,  differed from the statutory federal rate of 34 percent
as follows:

                                                       Year ended    Year ended
                                                      December 31,  December 31,
                                                          2002         2001
                                                      ----------- -------------

Statutory rate applied to loss before income taxes    $ (640,000) $ (1,094,000)
Increase (decrease) in income taxes resulting from:
     State income taxes                                        -             -
     Other, including reserve for deferred tax asset     640,000     1,094,000
                                                        --------     ---------

       Income tax expense                             $        -   $         -
                                                        ========   ===========






                (Remainder of this page left blank intentionally)

                                                                            F-19

<PAGE>


                            AMERICAN AMMUNITION, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


Note O - 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 December 31, 2002 and 2001, respectively:

                                                 Year ended      Year ended
                                                December 31,    December 31,
                                                    2002            2001
                                               ---------------  -------------
     Deferred tax assets - long-term
       Net operating loss carryforwards          $  2,244,000    $ 1,615,000
     Deferred tax liabilities - long-term
       Statutory depreciation differences            (250,000)      (250,000)
                                                  -----------     ----------
                                                    1,994,000      1,365,000
     Less valuation allowance                      (1,994,000)    (1,365,000)
                                                  -----------     ----------

       Net Deferred Tax Asset                    $          -   $          -
                                                  ===========    ===========

During the years ended December 31, 2002 and 2001,  respectively,  the valuation
allowance increased by approximately $629,000 and $815,000.


Note P - 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.  This  Agreement  was  terminated  in
conjunction  with the execution of the Settlement  and  Compromise  Agreement on
June 29, 2001.


Note Q - Significant Customers

During the year ended December 31, 2002, the Company had two separate  customers
responsible  for  an  aggregate  of   approximately   66.0%  (43.2%  and  22.8%,
respectively) of total sales. There were no other customers responsible for more
than 10.0% of total net sales during 2002.

During the year ended  December  31,  2001,  the Company  had a single  customer
responsible for an aggregate of approximately  51.0% of total sales.  There were
no other  customers  responsible  for more than 10.0% of total net sales  during
2001.

                                                                            F-20