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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the quarterly period ended June 30, 2023

 

OR

   

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

   

For the transition period from ________ to ________

 

AMMO, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

delaware   001-13101   83-1950534

(State of incorporation)

 

(Commission File No.)

 

(I.R.S. Identification Number)

 

7681 E Gray Road, Scottsdale, AZ 85260

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number including area code: (480) 947-0001

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value   POWW  

The Nasdaq Stock Market LLC (Nasdaq

Capital Market)

8.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value   POWWP  

The Nasdaq Stock Market LLC (Nasdaq

Capital Market)

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 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  No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
Non-accelerated filer   Smaller reporting company
Emerging growth company    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

 

As of August 4, 2023, there were 117,957,921 shares of $0.001 par value Common Stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE: None.

 

 

 

 
 

 

TABLE OF CONTENTS

 

PART I    
       
ITEM 1: FINANCIAL STATEMENTS   3
  Condensed Consolidated Balance Sheets as of June 30, 2023 (Unaudited) and March 31, 2023   3
  Condensed Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2023, and 2022   4
  Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three months ended June 30, 2023, and 2022   5
  Condensed Consolidated Statements of Cash flow (Unaudited) for the three months ended June 30, 2023, and 2022   6
  Notes to Condensed Consolidated Financial Statements (Unaudited)   8
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION   23
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK   30
ITEM 4: CONTROLS AND PROCEDURES   30
       
PART II    
     
ITEM 1: LEGAL PROCEEDINGS   32
ITEM 1A: RISK FACTORS   32
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS   32
ITEM 3: DEFAULTS UPON SENIOR SECURITIES   32
ITEM 4: MINE SAFETY DISCLOSURE   32
ITEM 5: OTHER INFORMATION   33
ITEM 6: EXHIBITS   33
SIGNATURES   34

 

2
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

AMMO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30, 2023   March 31, 2023 
   (Unaudited)     
ASSETS          
Current Assets:          
Cash and cash equivalents  $47,505,047   $39,134,027 
Accounts receivable, net   21,348,226    29,346,380 
Inventories   55,924,655    54,344,819 
Prepaid expenses   5,294,454    5,126,667 
Current portion of restricted cash   500,000    500,000 
Total Current Assets   130,572,382    128,451,893 
           
Property and Equipment, net   55,923,867    55,963,255 
           
Other Assets:          
Deposits   4,064,582    7,028,947 
Patents, net   4,909,388    5,032,754 
Other intangible assets, net   120,583,416    123,726,810 
Goodwill   90,870,094    90,870,094 
Right of use assets - operating leases   1,141,418    1,261,634 
TOTAL ASSETS  $408,065,147   $412,335,387 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current Liabilities:          
Accounts payable  $16,356,614   $18,079,397 
Accrued liabilities   4,641,469    4,353,354 
Current portion of operating lease liability   421,477    470,734 
Note payable related party   -    180,850 
Current portion of construction note payable   277,216    260,429 
Insurance premium note payable   2,204,293    2,118,635 
Total Current Liabilities   23,901,069    25,463,399 
           
Long-term Liabilities:          
Contingent consideration payable   119,354    140,378 
Construction note payable, net of unamortized issuance costs   10,861,510    10,922,443 
Operating lease liability, net of current portion   825,043    903,490 
Deferred income tax liability   2,212,448    2,309,592 
Total Liabilities   37,919,424    39,739,302 
           
Shareholders’ Equity:          
Series A cumulative perpetual preferred Stock 8.75%, ($25.00 per share, $0.001 par value) 1,400,000 shares issued and outstanding as of June 30, 2023 and March 31, 2023, respectively   1,400    1,400 
Common stock, $0.001 par value, 200,000,000 shares authorized 118,952,886 and 118,562,806 shares issued and 117,945,758 and 118,294,478 outstanding at June 30, 2023 and March 31, 2023, respectively   117,946    118,294 
Additional paid-in capital   392,813,530    391,940,374 
Accumulated deficit   (20,808,990)   (18,941,825)
Treasury stock   (1,978,163)   (522,158)
Total Shareholders’ Equity   370,145,723    372,596,085 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $408,065,147   $412,335,387 

 

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

 

3
 

 

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   2023   2022 
  

For the Three Months Ended

June 30,

 
   2023   2022 
         
Net Revenues          
Ammunition sales(1)  $14,106,029   $40,969,883 
Marketplace revenue   13,912,202    16,504,946 
Casing sales   6,236,344    3,281,197 
Total Revenues   34,254,575    60,756,026 
           
Cost of Revenues   20,230,035    42,620,364 
Gross Profit   14,024,540    18,135,662 
           
Operating Expenses          
Selling and marketing   295,581    1,908,170 
Corporate general and administrative   7,947,563    5,029,297 
Employee salaries and related expenses   4,116,280    2,785,098 
Depreciation and amortization expense   3,344,043    3,350,356 
Total operating expenses   15,703,467    13,072,921 
Income/(Loss) from Operations   (1,678,927)   5,062,741 
           
Other Expenses          
Other income   692,951    193,498 
Interest expense   (204,201)   (120,487)
Total other expense   488,750    73,011 
           
Income/(Loss) before Income Taxes   (1,190,177)   5,135,752 
           
Provision/(benefit) for Income Taxes   (97,144)   1,882,725 
           
Net Income/(Loss)   (1,093,033)   3,253,027 
           
Preferred Stock Dividend   (774,132)   (774,132)
           
Net Income/(Loss) Attributable to Common Stock Shareholders  $(1,867,165)  $2,478,895 
           
Net Income/(Loss) per share          
Basic  $(0.02)  $0.02 
Diluted  $(0.02)  $0.02 
           
Weighted average number of shares outstanding          
Basic   117,713,805    116,560,372 
Diluted   117,713,805    117,879,639 

 

(1)Included in revenue for the three months ended June 30, 2023 and 2022 is excise taxes of $1,175,796 and $3,712,341, respectively.

 

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

 

4
 

 

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

   Number   Par Value   Number   Par Value   Capital   (Deficit)   Stock   Total 
   Preferred Stock   Common Shares   Additional Paid-In   Accumulated   Treasury     
   Number   Par Value   Number   Par Value   Capital   (Deficit)   Stock   Total 
                                 
Balance as of March 31, 2023   1,400,000   $1,400    118,294,478   $118,294   $391,940,374   $(18,941,825)  $(522,158)  $   372,596,085 
                                         
Employee stock awards   -    -    390,111    391    822,406    -    -    822,797 
Stock grants                       50,750              50,750 
Dividends accumulated on preferred stock   -    -    -    -    -    (136,094)   -    (136,094)
Preferred stock dividends   -    -    -    -    -    (638,038)   -    (638,038)
Net loss   -    -    -    -    -    (1,093,033)        (1,093,033)
Treasury shares purchased   -    -    (738,831)   (739)   -    -    (1,456,005)   (1,456,744)
                                         
Balance as of June 30, 2023   1,400,000   $1,400    117,945,758   $117,946   $392,813,530   $(20,808,990)  $(1,978,163)  $370,145,723 

 

   Preferred Stock   Common Shares   Additional Paid-In    Accumulated   Treasury     
   Number   Par Value   Number   Par Value   Capital   (Deficit)   Stock   Total 
                                 
Balance as of March 31, 2022   1,400,000   $1,400    116,485,747   $116,487   $385,426,431   $(11,240,752)  $       -   $   374,303,566 
                                         
Common stock issued for cashless warrant exercise   -    -    99,762    99    (99)   -    -    - 
Employee stock awards   -    -    338,375    338    1,174,725    -    -    1,175,063 
Stock grants   -    -    -    -    47,844    -    -    47,844 
Preferred stock dividends declared             -    -    -    (638,071)   -    (638,071)
Dividends accumulated on preferred stock   -    -    -    -    -    (136,061)   -    (136,061)
Net income   -    -    -    -    -    3,253,027    -    3,253,027 
                                         
Balance as of June 30, 2022   1,400,000   $1,400    116,923,884   $116,924   $386,648,901   $(8,761,857)  $-   $378,005,368 

 

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

 

5
 

 

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

   2023   2022 
  

For the Three Months Ended

June 30,

 
   2023   2022 
         
Cash flows from operating activities:          
Net Income/(Loss)  $(1,093,033)  $3,253,027 
Adjustments to reconcile Net Loss to Net Cash provided by operations:          
Depreciation and amortization   4,620,087    4,300,123 
Debt discount amortization   20,813    20,813 
Employee stock awards   822,797    1,175,063 
Stock grants   50,750    47,844 
Contingent consideration payable fair value   (21,024)   (1,302)
Allowance for doubtful accounts   909,717    711,372 
Reduction in right of use asset   120,216    208,506 
Deferred income taxes   (97,144)   500,964 
Changes in Current Assets and Liabilities          
Accounts receivable   7,088,437    4,246,175 
Due from related parties   -    (1,544,000)
Inventories   (1,579,836)   (5,572,096)
Prepaid expenses   888,412    882,620 
Deposits   2,964,365    (493,982)
Accounts payable   (1,722,783)   (3,009,351)
Accrued liabilities   152,021    697,799 
Operating lease liability   (127,704)   (211,082)
Net cash provided by operating activities   12,996,091    5,212,493 
           
Cash flows from investing activities:          
Purchase of equipment   (1,313,939)   (5,264,863)
Net cash used in investing activities   (1,313,939)   (5,264,863)
           
Cash flow from financing activities:          
Proceeds from factoring liability   14,610,314    24,700,000 
Payments on factoring liability   (14,610,314)   (24,957,645)
Payments on inventory facility, net   -    (733,343)
Payments on note payable - related party   (180,850)   (165,264)
Payments on insurance premium note payment   (970,541)   (533,673)
Proceeds from construction note payable   -    1,000,000 
Payments on construction note payable   (64,959)   - 
Preferred stock dividends paid   (638,038)   (638,071)
Common stock repurchase plan   (1,456,744)   - 
Net cash used in financing activities   (3,311,132)   (1,327,996)
           
Net increase/(decrease) in cash   8,371,020    (1,380,366)
Cash and restricted cash, beginning of period   39,634,027    23,281,475 
Cash and restricted cash, end of period  $48,005,047   $21,901,109 

 

(Continued)

 

6
 

 

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

 

   For the Three Months Ended June 30, 
   2023   2022 
         
Supplemental cash flow disclosures:          
Cash paid during the period for:          
Interest   $184,385   $100,876 
           
Non-cash investing and financing activities:           
Insurance premium note payment  $1,056,199   $2,035,519 
Dividends accumulated on preferred stock   $136,094   $136,061 
Construction note payable  $-   $4,800,358 

 

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

 

7
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

(Unaudited)

 

NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY

 

We were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished garments and fabrics. We were inactive until the following series of events in December 2016 and March 2017.

 

On December 15, 2016, the Company’s majority shareholders sold their common stock to Mr. Fred W. Wagenhals (“Mr. Wagenhals”) resulting in a change in control of the Company. Mr. Wagenhals was appointed as sole officer and the sole member of the Company’s Board of Directors.

 

The Company also approved (i) doing business in the name AMMO, Inc., (ii) a change to the Company’s OTC trading symbol to POWW, (iii) an agreement and plan of merger to re-domicile and change the Company’s state of incorporation from California to Delaware, and (iv) a 1-for-25 reverse stock split of the issued and outstanding shares of the common stock of the Company. These transactions were effective as of December 30, 2016.

 

On March 17, 2017, the Company entered into a definitive agreement with AMMO, Inc. a Delaware Corporation (“PRIVCO”) under which the Company acquired all of the outstanding shares of common stock of PRIVCO. PRIVCO subsequently changes its name to AMMO Munitions, Inc.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Basis

 

The accompanying unaudited condensed consolidated financial statements and related disclosures included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. Additionally, these condensed consolidated financial statements and related disclosures are presented pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).

 

The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended March 31, 2023. The results for the three month period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three month periods ended June 30, 2023 and 2022, (b) the financial position at June 30, 2023, and (c) cash flows for the three month periods ended June 30, 2023 and 2022.

 

8
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

We use the accrual basis of accounting and U.S. GAAP and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31st.

 

Unless the context otherwise requires, all references to “Ammo”, “we”, “us”, “our,” or the “Company” are to AMMO, Inc., a Delaware corporation, and its consolidated subsidiaries.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the condensed consolidated financial statements include the valuation of allowances for credit losses, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation and warrant-based compensation.

 

Critical Accounting Policies

 

A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended March 31, 2023, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We adopted ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) and ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” in the current period. These policy changes did not result in a material effect on the Company’s financial statements. There have been no other significant changes to these policies during the three months ended June 30, 2023. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023.

 

Goodwill

 

We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline it is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flows was more appropriate due to the operational performance of the reporting segment. Accordingly, the impairment of Goodwill was not warranted for the three months ended June 30, 2023. As of June 30, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment. However, due to declines in the value of the Company’s common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2024.

 

9
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Accounts Receivable and Allowance for Credit Losses

 

Our accounts receivable represents amounts due from customers for products sold and include an allowance for estimated credit losses which is estimated based on the collectability and age of the accounts receivable balances and categorization of customers with similar financial condition. At June 30, 2023 and March 31, 2023, we reserved $4,229,537 and $3,246,551, respectively, of allowance for doubtful accounts.

 

Restricted Cash

 

We consider cash to be restricted when withdrawal or general use is legally restricted. Our restricted cash balance is comprised of cash on deposit with banks to secure the Construction Note Payable as discussed in Note 10. We report restricted cash in the Consolidated Balance Sheets as current or non-current classification based on the expected duration of the restriction.

 

License Agreements

 

We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company. The license agreement grants us the exclusive worldwide rights through April 12, 2026 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James Branded Products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.

 

Patents

 

On September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with Hallam, Inc, a Texas corporation, with ATI being the survivor. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by the University of Louisiana at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028.

 

Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the three months ended June 30, 2023 and 2022, the Company recognized royalty expenses of $5,060 and $44,044, respectively under this agreement.

 

10
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ATI succeeded all of the assets of SW Kenetics, Inc. and assumed all of the liabilities.

 

The primary asset of SW Kenetics Inc. was a pending patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc. pursuant to Intellectual Property Rights Agreement on September 27, 2018.

 

We intend to continue building our patent portfolio to protect our proprietary technologies and processes, and will file new applications where appropriate to preserve our rights to manufacture and sell our branded lines of ammunition.

 

Other Intangible Assets

 

On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement. The intangible assets acquired include a tradename, customer relationships, and intellectual property.

 

On April 30, 2021, we entered into an agreement and plan of merger (the “Merger Agreement”), by and among the Company, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company and Gemini Direct Investments, LLC, a Nevada limited liability company. Whereby SpeedLight Group I, LLC merged with and into Gemini Direct Investments, LLC, with SpeedLight Group I, LLC surviving the merger as a wholly owned subsidiary of the Company. At the time of the Merger, Gemini Direct Investments, LLC had nine (9) subsidiaries, all of which are related to Gemini’s ownership of Gunbroker.com, an online auction marketplace dedicated to firearms, hunting, shooting, and related products. The intangible assets acquired include a tradename, customer relationships, intellectual property, software and domain names.

 

Impairment of Long-Lived Assets

 

We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three months ended June 30, 2023 and 2022.

 

Revenue Recognition

 

We generate revenue from the production and sale of ammunition, ammunition casings, and marketplace fee revenue, which includes auction revenue, payment processing revenue, and shipping income. We recognize revenue according to Accounting Standard Codification – Revenue from Contract with Customers (“ASC 606”). When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. We apply the following five-step model to determine revenue recognition:

 

  Identification of a contract with a customer
  Identification of the performance obligations in the contact
  Determination of the transaction price
  Allocation of the transaction price to the separate performance allocation
  Recognition of revenue when performance obligations are satisfied

 

11
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

We only apply the five-step model when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct.

 

For Ammunition Sales and Casing Sales, our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of our product, which typically occurs upon shipment of the product or the performance of the service. In the year ended March 31, 2021, we began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities. We will recognize revenue when the performance obligation is met.

 

For Marketplace revenue, the performance obligation is satisfied, and revenue is recognized as follows:

 

Auction revenue consists of optional listing fees with variable pricing components based on customer options selected from the GunBroker website and final value fees based on a percentage of the final selling price of the listed item. The performance obligation is to process the transactions as initiated by the customer. Revenue is recognized at a point in time when the transaction is processed.

 

Payment processing revenue consists of fees charged to customers on a transactional basis. The performance obligation is to process the transactions as initiated by the customer. The price is set by the GunBroker user agreement on the website based on stand-alone selling prices. Revenue is recognized at a point in time when the transaction is processed.

 

Shipping income consists of fees charged to customers for shipping of sold items listed on the GunBroker website. The performance obligation is to ship the item sold as initiated by the customer. The price is set based on the third-party service provider selected to be used by the customer as well as the speed and location of shipment. Revenue is recognized at a point in time when the shipping label is printed.

 

Banner Advertising Campaign Revenue consists of fees charged to customers for advertisement placement and impressions generated through the GunBroker website. The performance obligation is to generate the number of impressions specified by the customer on banner advertisements on the GunBroker website using the placement selected by the customer. The price is set by the GunBroker user agreement on the website based on standalone selling prices, or by advertising insertion order as negotiated by media broker. If the number of impressions promised is not generated, the customer receives a refund and the refund is applied to the transaction price. Banner advertising campaigns generally run for one month, and revenue is recognized at a point in time at the end of the selected month.

 

Product Sales consists of fees charged for the liquidation of excess inventory for partner distributors. The performance obligation is to sell and ship the inventory item as initiated by the customer. The price depends on whether the inventory is a fixed price item or an auction item. For a fixed price item, the Company performs research to determine the current market rate for such an item, and the item is listed at that price. For an auction item, the price is set by what the buyer is willing to pay. The Company acts as a principal in these transactions due to the extent of control they have over the product prior to the sale. Due to the principal determination, gross revenue is recognized at a point in time when the item has been shipped.

 

12
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Identity Verification consists of fees charged to customers for identity verification in order to gain access to the GunBroker website. The performance obligation is to process the identity verification as initiated by the customer. The price is set by the GunBroker user agreement on the website based on a stand-alone selling price. Revenue is recognized at a point in time when the identity verification is completed.

 

For the three months ended June 30, 2023, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:

 

  

Revenues at

June 30, 2023

   Accounts Receivable 
PERCENTAGES 

Three Months

Ended

  

June 30,

2023

  

March 31,

2023

 
             
Customers:               
A   10.1%   16.6%   - 
    10.1%   16.6%   - 

 

Disaggregated Revenue Information

 

The following table represents a disaggregation of revenue from customers by category. We attribute net sales to categories by product or services types; ammunition, ammunition casings, and marketplace fees. We note that revenue recognition processes are consistent between product and service type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product and service type.

 

   June 30, 2023   June 30, 2022 
   For the Three Months Ended 
   June 30, 2023   June 30, 2022 
Ammunition sales  $14,106,029   $40,969,883 
Marketplace fee revenue   13,912,202    16,504,946 
Ammunition casings sales   6,236,344    3,281,197 
Total Revenues  $34,254,575   $60,756,026 

 

Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell directly to customers online. In contrast, our ammunition casings products are sold to manufacturers. Marketplace fees are generated through our GunBroker.com online auction marketplace.

 

Advertising Costs

 

We expense advertising costs as they are incurred in selling and marketing expenses of operating expenses. Marketplace advertising costs are expensed as they are incurred in cost of revenues. We incurred advertising expenses of $119,638 and $550,447 for the three months ended June 30, 2023 and 2022, respectively, recognized in selling and marketing expenses and $138,657 and $182,104 of marketplace advertising expenses recognized in cost of revenues for the three months ended June 30, 2023 and 2022, respectively.

 

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of June 30, 2023. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts receivable, accounts payable, amounts due to related parties, factoring liability, and the construction note payable. Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

 

Inventories

 

We state inventories at the lower of cost or net realizable value. We determine cost using the average cost method. Our inventory consists of raw materials, work in progress, and finished goods. Cost of inventory includes cost of parts, labor, quality control, and all other costs incurred to bring our inventories to condition ready to be sold. We periodically evaluate and adjust inventories for obsolescence.

 

13
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Property and Equipment

 

We state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method over estimated useful lives, which are generally five to ten years.

 

Compensated Absences

 

We accrue a liability for compensated absences in accordance with Accounting Standards Codification 710 – Compensation – General (“ASC 710”).

 

Research and Development

 

To date, we have expensed all costs associated with developing our product specifications, manufacturing procedures, and products through our cost of products sold, as this work was done by the same employees who produced the finished product. We anticipate that it may become necessary to reclassify research and development costs into our operating expenditures for reporting purposes as we begin to develop new technologies and lines of ammunition.

 

Stock-Based Compensation

 

We account for stock-based compensation at fair value in accordance with Accounting Standards Codification 718 – Compensation – Stock Compensation (“ASC 718”). Which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors. On April 1, 2023 we adopted ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. Accordingly, stock based compensation is valued using market value of our Common Stock. Stock-based compensation is recognized on a straight line basis over the vesting periods and forfeitures are recognized in the periods they occur. There were 390,111 and 338,375 shares of common stock issued to employees, members of the Board of Directors, and members of our advisory committee for services during the three months ended June 30, 2023 and June 30, 2022, respectively.

 

Concentrations of Credit Risk

 

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2023, our bank account balances exceeded federally insured limits.

 

Income Taxes

 

We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 – Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change in judgment occurs.

 

Excise Tax

 

As a result of regulations imposed by the Federal Government for sales of ammunition to non-government U.S. entities, we charge and collect an 11% excise tax for all products sold into these channels. During the three months ended June 30, 2023 and 2022, we recognized approximately $1.2 million and $3.7 million, respectively, in excise taxes. For ease in selling to commercial markets, excise tax is included in our unit price for the products sold. We record this through net sales and expense the offsetting tax expense to cost of goods sold.

 

14
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Contingencies

 

Certain conditions may exist as of the date the consolidated financial statements are issued that may result in a loss to us but will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims and the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is reasonably estimated, the estimated liability would be accrued in our condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed.

 

AMMO is defending two contract arbitration cases adverse former employees that are presently in discovery, one involving an employee terminated for cause and the second action involving a termination without cause wherein the former employee is seeking contract wages, commissions and allegedly earned common stock. Discovery is almost completed in the first case and the arbitration is scheduled to take place at the end of July 2023 in the first matter. While discovery continues, the Company received a favorable ruling on a partial motion for summary judgment in the “for cause” arbitration case wherein the arbitrator ruled the employee had stolen funds and thus granted the Company’s dispositive motion. Discovery continues at this time with a fall 2023 arbitration date currently set.

 

The Company also received notice in October that an OSHA whistleblower complaint had been filed with the US Department of Labor by an employee that had been terminated for cause. The regulatory filing was received after AMMO refused to capitulate to the former employee’s demands. AMMO has produced documents and submitted its position statement to OSHA and the matter is currently pending at the agency level. AMMO uncovered additional information through work with counsel and investigators and a supplemental response was provided to OHSA on or about July 10, 2023.

 

On April 30, 2023, Director and Shareholder Steve Urvan filed suit in the Delaware Chancery Court against the Company, certain Directors, former directors, employees, former employees and consultants, seeking rescission of the Company’s acquisition of GunBroker.com and certain affiliated companies. Plaintiff Urvan’s claims include rescission, misrepresentation and fraud. The Company received a declination of coverage from one insurer and is investigating additional available actions with counsel concerning that opinion, while continued pursuit of other available coverage concerning a separate policy. The Company and named defendants are in alignment in all respects, reasonably believe at this date that the claims are without merit and the Company has engaged Delaware Chancery Court litigation specialists to defend its interests in all respects in this case. The Company timely responded to the Urvan Complaint via the filing of a Motion to Dismiss which, if successful in full, will result in the complete dismissal of the Urvan lawsuit, at which time the Company will pursue recovery of all incurred fees and costs. There were no other known contingencies at June 30, 2023.

 

15
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 3 – INCOME PER COMMON SHARE

 

We calculate basic income per share using the weighted-average number of shares of common stock outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants. We use the treasury stock method, in the determination of dilutive shares outstanding during each reporting period. We have issued warrants to purchase 2,256,296 shares of common stock. Due to the net loss attributable to common shareholders for the three months ended June 30, 2023, potentially dilutive securities, which consists of 911 warrants and 9,090 equity incentive awards were excluded, as a result of the treasury stock method, from the dilutive EPS calculation as the effect would be antidilutive. For the three months ended June 30, 2022, 150,000 warrants were excluded, as a result of the treasury stock method, from the dilutive EPS calculation as the effect would be antidilutive.

 

   2023   2022 
  

For the Three Months Ended

June 30,

 
   2023   2022 
         
Numerator:          
Net income/(loss)  $(1,093,033)  $3,253,027 
Less: Preferred stock dividends   (774,132)   (774,132)
Net income attributable to common stockholders  $(1,867,165)  $2,478,895 
           
Denominator:          
Weighted average shares of common stock - basic   117,713,805    116,560,372 
Effect of dilutive common stock purchase warrants   -    1,287,280 
Effect of dilutive equity incentive awards   -    31,987 
Weighted average shares of common stock - Diluted   117,713,805    117,879,639 
           
Basic earnings per share:          
Income/(loss) per share attributable to common stockholders - basic  $(0.02)  $0.02 
           
Diluted earnings per share:          
Income/(loss) per share attributable to common stockholders - diluted  $(0.02)  $0.02 

 

NOTE 4 – INVENTORIES

 

At June 30, 2023 and March 31, 2023, the inventory balances are composed of:

 

  

June 30, 2023

  

March 31, 2023

 
Finished product  $18,663,314   $14,362,514 
Raw materials   22,004,128    23,898,596 
Work in process   15,257,213    16,083,709 
Inventory net  $55,924,655   $54,344,819 

 

NOTE 5 – PROPERTY AND EQUIPMENT

 

We state equipment at historical cost less accumulated depreciation. We compute depreciation using the straight-line method at rates intended to depreciate the cost of assets over their estimated useful lives, which are generally five to ten years. Upon retirement or sale of property and equipment, we remove the cost of the disposed assets and related accumulated depreciation from the accounts and any resulting gain or loss is credited or charged to other income. We charge expenditures for normal repairs and maintenance to expense as incurred.

 

We capitalize additions and expenditures for improving or rebuilding existing assets that extend the useful life. Leasehold improvements made either at the inception of the lease or during the lease term are amortized over the shorter of their economic lives or the lease term including any renewals that are reasonably assured.

 

16
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Property and Equipment consisted of the following at June 30, 2023 and March 31, 2023:

 

   June 30, 2023   March 31, 2023 
Leasehold Improvements  $257,009   $257,009 
Building   28,980,156    28,623,329 
Furniture and Fixtures   384,650    384,650 
Vehicles   153,255    153,254 
Equipment   40,979,806    40,233,186 
Tooling   143,710    143,710 
Construction in Progress   945,272    734,781 
Total property and equipment  $71,843,858   $70,529,919 
Less accumulated depreciation   (15,919,991)   (14,566,664)
Net property and equipment  $55,923,867   $55,963,255 

 

Depreciation Expense for the three months ended June 30, 2023 and 2022 totaled $1,353,327, and $1,033,363, respectively. Of these totals, $1,152,678 and $826,401 were included in cost of goods sold for the three months ending June 30, 2023 and 2022. Additionally, $200,648 and $206,962 were included in depreciation and amortization expenses in operating expenses.

 

NOTE 6 – FACTORING LIABILITY

 

On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contains a maximum advance amount of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus 4.5%. The agreement contains a fee of 3% ($150,000) of the Maximum Facility assessed to the Company. Our obligations under this agreement are secured by present and future accounts receivables and related assets, inventory, and equipment. The Company has the right to terminate the agreement, with 30 days written notice, upon obtaining a non-factoring credit facility. This agreement provides the Company with the ability to convert our account receivables into cash. We did not have an outstanding balance on our Factoring liability as of June 30, 2023. For the three months ended June 30, 2023, interest expense recognized on the Factoring Liability was $45,385. For the three months ended June 30, 2022, interest expense recognized on the Factoring Liability was $59,816 including $37,500 of amortization of the commitment fee.

 

On June 17, 2021, this agreement was amended which extended the maturity date to June 17, 2024.

 

NOTE 7 – INVENTORY CREDIT FACILITY

 

On June 17, 2020, we entered into a Revolving Inventory Loan and Security Agreement with FSW. FSW will establish a revolving credit line, and make loans from time to time to the Company for the purpose of providing capital. The twenty-four month agreement secured by our inventory, among other assets, contains a maximum loan amount of $1,750,000 on eligible inventory and has an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The agreement contains a fee of 2% of the maximum loan amount ($35,000) assessed to the Company. On July 31, 2020, the Company amended its Revolving Loan and Security Agreement to increase the maximum inventory loan amount to $2,250,000. As of June 30, 2023, there was no outstanding balance of the Inventory Credit Facility. There was no interest expense for the three months ended June 30, 2023. Interest expense recognized on the Inventory Credit Facility was $5,142 for the three months ended June 30, 2022.

 

NOTE 8 – LEASES

 

We lease office, manufacturing, and warehouse space in Scottsdale, AZ, Atlanta and Marietta, GA, and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Scottsdale lease does not include a renewal option. We terminated our lease agreement in our first Manitowoc, WI location during the year ended March 31, 2023. Accordingly, we decreased our Right of Use Assets and Operating Lease Liabilities by $901,076.

 

As of June 30, 2023 and March 31, 2023, total Right of Use Assets were $1,141,418 and $1,261,634, respectively. As of June 30, 2023 and March 31, 2023, total Operating Lease Liabilities were $1,246,520 and $1,374,224, respectively. The current portion of our Operating Lease Liability on June 30, 2023 and March 31, 2023 is $421,477 and $470,734, respectively, and is reported as a current liability. The remaining $825,043 of the total $1,246,520 as of June 30, 2023 and the $903,490 of the total $1,374,224 as of March 31, 2023 of the Operating Lease Liability is presented as a long-term liability net of the current portion.

 

17
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Consolidated lease expense for the three months ended June 30, 2023 was $167,609 including $160,758 of operating lease expense and $6,851 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals. Consolidated lease expense for the three months ended June 30, 2022 was $283,233 including $282,058 of operating lease expense and $1,175 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.

 

The weighted average remaining lease term and weighted average discount rate for operating leases were 3.1 years and 10.0%, respectively.

 

Future minimum lease payments under non-cancellable leases as of June 30, 2023 are as follows:

 

Years Ended March 31,    
2024 (1)  $423,011 
2025   387,214 
2026   351,962 
2027   257,508 
2028   43,660 
Thereafter   - 
Total Lease Payments   1,463,355 
Less: Amount Representing Interest   (216,835)
Present value of lease liabilities  $1,246,520 

 

  (1) This amount represents future lease payments for the remaining nine months of fiscal year 2024. It does not include any lease payments for the three months ended June 30, 2023.

 

NOTE 9 – NOTES PAYABLE – RELATED PARTY

 

For the three months ended June 30, 2023, the Company made $180,850 in principal payments, respectively, in connection with the Amended Note B, an amended related party note payable with Jagemann Stamping Company (“JSC”). We entered into the Amended Note B with JSC on November 4, 2020 and the note matured on June 26, 2023. We recognized $1,788 and $18,652 in respective interest expenses for the three months ended June 30, 2023 and 2022, respectively.

 

18
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 10 – CONSTRUCTION NOTE PAYABLE

 

On October 14, 2021, we entered into a Construction Loan Agreement (the “Loan Agreement”) with Hiawatha National Bank (“Hiawatha”). The Loan Agreement specifies that Hiawatha may lend up to $11,625,000 to the Borrower to pay a portion of the construction costs of an approximately 160,000 square foot manufacturing facility to be constructed on our property (the “Loan”). The first advance of Loan funds by Hiawatha was made on October 14, 2021 in the amount of $329,843. We expect to receive further advances of Loan funds approximately every month as our “owner’s equity” is fully funded into the ongoing new plant construction project. The Loan is an advancing term loan and not a revolving loan so any portion of the principal repaid cannot be reborrowed.

 

Additionally, on October 14, 2021, we issued a Promissory Note in favor of Hiawatha (the “Note”) in the amount of up to $11,625,000 with an interest rate of four and one-half percent (4.5%). The maturity date of the Note is October 14, 2026.

 

We can prepay the Note in whole or in part starting in July 2022 with a prepayment premium of one percent (1%) of the principal being prepaid.

 

The Loan Agreement contains customary events of default including, but not limited to, a failure to make any payments pursuant to the Loan Agreement or Note, a failure to complete construction of the project, a lien of $100,000 or more against the property, or a transfer of the property without Hiawatha’s consent. Upon the occurrence of an event of default, among other remedies, the amounts due pursuant to the Loan can be accelerated, Hiawatha can foreclose on the property pursuant to the mortgage, and a late charge of five percent (5%) of the amount due will be owed with all amounts then owed pursuant to the Note bearing interest at an increased rate.

 

We made $64,959 in principal payments for the three months ended June 30, 2023. The restricted cash can be released per the terms documented in the Loan Agreement filed with the Commission on Form 10-Q on February 14, 2022. During the year ended March 31, 2023, $500,000 of restricted cash was released with $500,000 remaining restricted.

 

NOTE 11 – CAPITAL STOCK

 

Our authorized capital consists of 200,000,000 shares of common stock with a par value of $0.001 per share.

 

During the three month period ended June 30, 2023, we issued 390,111 shares of common stock as follows:

 

  390,111 shares valued at $822,797 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

 

19
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

At June 30, 2023, outstanding and exercisable stock purchase warrants consisted of the following:

 SCHEDULE OF OUTSTANDING AND EXERCISABLE STOCK PURCHASE WARRANTS 

  

Number of

Shares

  

Weighted

Average

Exercise

Price

  

Weighted

Average Life

Remaining

(Years)

 
Outstanding at March 31, 2023   2,460,946   $2.46    1.59 
Granted   -    -    - 
Exercised   -    -    - 
Forfeited or cancelled   (204,650)   2.00    - 
Outstanding at June 30, 2023   2,256,296   $2.51    1.51 
Exercisable at June 30, 2023   2,256,296   $2.51    1.51 

 

As of June 30, 2023, we had 2,256,296 warrants outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price. The outstanding warrants consist of (1) warrants to purchase 911 shares of Common Stock at an exercise price of $1.65 per share until April 2025; (2) warrants to purchase 1,244,108 shares of our Common Stock at an exercise price of $2.00 per share consisting of 1% of the warrants until August 2024, and 99% until February 2026; (3) warrants to purchase 474,966 shares of Common Stock at an exercise price of $2.40 until September 2024; (4) warrants to purchase 386,311 shares of Common Stock at an exercise price of $2.63 until November 2025, and (5) warrants to purchase 150,000 shares of Common Stock at an exercise price of $6.72 until February 2024.

 

NOTE 12 – PREFERRED STOCK

 

On May 18, 2021, the Company filed a Certificate of Designations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware to establish the preferences, voting powers, limitations as to dividends or other distributions, qualifications, terms and conditions of redemption and other terms and conditions of the Series A Preferred Stock.

 

The Company will pay cumulative cash dividends on the Series A Preferred Stock when, as and if declared by its board of directors (or a duly authorized committee of its board of directors), only out of funds legally available for payment of dividends. Dividends on the Series A Preferred Stock will accrue on the stated amount of $25.00 per share of the Series A Preferred Stock at a rate per annum equal to 8.75% (equivalent to $2.1875 per year), payable quarterly in arrears. Dividends on the Series A Preferred Stock declared by our board of directors (or a duly authorized committee of our board of directors) will be payable quarterly in arrears on March 15, June 15, September 15 and December 15.

 

Generally, the Series A Preferred Stock is not redeemable by the Company prior to May 18, 2026. However, upon a change of control or delisting event (each as defined in the Certificate of Designations), the Company will have a special option to redeem the Series A Preferred Stock for a limited period of time.

 

Preferred dividends accumulated as of June 30, 2023 were $136,094. On May 15, 2023, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning March 15, 2023 through and including June 14, 2023 payable on June 15, 2023 to holders of record of Series A Preferred Stock on May 31, 2023 equal to $0.55902778 per share. Dividends totaling $782,639 were paid on June 15, 2023.

 

20
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 13 – GOODWILL AND INTANGIBLE ASSETS

 

Amortization expenses related to our intangible assets for the three months ended June 30, 2023 and 2022 was $3,266,760.

  

       June 30, 2023 
   Life   Licenses   Patent  

Other

Intangible

Assets

 
Licensing Agreement – Jesse James   5   $125,000   $-   $- 
Licensing Agreement – Jeff Rann   5    125,000    -    - 
Streak Visual Ammunition patent   11.2    -    950,000    - 
SWK patent acquisition   15    -    6,124,005    - 
Jagemann Munition Components:                    
Customer Relationships   3    -    -    1,450,613 
Intellectual Property   3    -    -    1,543,548 
Tradename   5    -    -    2,152,076 
GDI Acquisition:                    
Tradename   15    -    -    76,532,389 
Customer List   10    -    -    65,252,802 
Intellectual Property   10    -    -    4,224,442 
Other Intangible Assets   5    -    -    607,747 
         250,000    7,074,005    151,763,617 
                     
Accumulated amortization – Licensing Agreements        (250,000)   -    - 
Accumulated amortization – Patents        -    (2,164,617)   - 
Accumulated amortization – Intangible Assets        -    -    (31,180,201)
        $-   $4,909,388   $120,583,416 

 

Annual amortization of intangible assets for the next five fiscal years are as follows:

 

Years Ended March 31, 

Estimates for

Fiscal Year

 
2024 (1)  $9,836,025 
2025   12,664,775 
2026   12,664,775 
2027   12,553,355 
2028   12,543,226 
Thereafter   65,230,648 
Annual amortization of intangible assets   $125,492,804 

 

(1) This amount represents future amortization for the remaining nine months of fiscal year 2024. It does not include any amortization for the three months ended June 30, 2023.

 

21
 

 

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 14 – SEGMENTS

 

Our Chief Executive Officer reviews financial performance based on our two operating segments as follows:

 

  Ammunition – which consists of our manufacturing business. The Ammunition segment engages in the design, production and marketing of ammunition and ammunition component products.
  Marketplace – which consists of the GunBroker.com marketplace. In its role as an auction site, GunBroker.com supports the lawful sale of firearms, ammunition and hunting/shooting accessories.

 

The reporting of the separate allocation of certain corporate general and administrative expenses includes non-cash stock compensation expense. The following tables set forth certain financial information utilized by management to evaluate our operating segments for the interim period presented:

  

   Ammunition   Marketplace  

Corporate

and other

expenses

   Total 
   For the Three Months Ended June 30, 2023 
   Ammunition   Marketplace  

Corporate

and other

expenses

   Total 
                 
Net Revenues  $20,342,373   $13,912,202   $-   $34,254,575 
Cost of Revenues   18,414,961    1,815,074    -    20,230,035 
General and administrative expense   3,478,749    2,178,370    6,702,305    12,359,424 
Depreciation and amortization   132,102    3,211,941    -    3,344,043 
Income/(Loss) from Operations  $(1,683,439)  $6,706,817   $(6,702,305)  $(1,678,927)

 

   Ammunition   Marketplace  

Corporate

and other

expenses

   Total 
   For the Three Months Ended June 30, 2022 
   Ammunition   Marketplace  

Corporate

and other

expenses

   Total 
                 
Net Revenues  $44,251,080   $16,504,946   $-   $60,756,026 
Cost of Revenues   40,337,015    2,283,349    -    42,620,364 
General and administrative expense   3,673,112    2,433,729    3,615,724    9,722,565 
Depreciation and amortization   146,412    3,203,944    -    3,350,356 
Income/(Loss) from Operations  $94,541   $8,583,924   $(3,615,724)  $5,062,741 

 

NOTE 15 – INCOME TAXES

 

The income tax provision effective tax rates were 8.6% and 37.0% for the three months ended June 30, 2023 and 2022, respectively. During the three months ended June 30, 2023, the effective tax rate differed from the U.S. federal statutory rate primarily due to employee stock awards. For the three months ended June 30, 2022 the effective tax rate differed from the U.S. federal statutory rate due to state income taxes and employee stock awards.

 

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended March 31, 2021, 2022 and 2023 are subject to audit.

 

NOTE 16 – RELATED PARTY TRANSACTIONS

 

During the three months ended June 30, 2023, we paid 75,000 in service fees to two independent contractors. The two independent contractors were issued 34,341 shares of our common stock for a total value of $69,784. We issued 25,000 shares in the aggregate to our advisory committee members for service for a total value of $53,250. Through our acquisition of Gemini, a related party relationship was created through one of our Members of the Board of Directors by ownership of entities that transacts with Gemini. There was $201,646 included in our Accounts Receivable at June 30, 2023 as a result of this relationship.

 

NOTE 17 – SUBSEQUENT EVENTS

 

Common Stock Issuances

 

Subsequent to the June 30, 2023, the Company issued 12,163 as employee stock awards for a total value of $25,299.

 

Related party transactions

 

On July 26, 2023, we obtained a $1.6 million letter of credit with Northern Trust for collateral for a bond related to a judgement assessed to GunBroker.com. On July 17, 2023, we generated a $1.6 million certificate of deposit with Northern Trust for security on the letter of credit. The term of the certificate of deposit is twelve months and includes interest of approximately 5%. Per the terms of the Merger Agreement, filed with the Commission on a Current Report on Form 8-K on May 6, 2021 (the “Current Report), the Seller is required to pay or be liable for these losses (capitalized terms are defined the Current Report)

 

In July of 2023, the Company filed suit in the Delaware Chancery Court against Director and Shareholder Steve Urvan for claims arising out of the Company’s acquisition of certain companies referenced as the GunBroker.com family of companies. The claims arise based upon Mr. Urvan’s repeated failure and refusal to honor contractual defense and indemnification obligations arising under that certain Merger Agreement, along with alleged misrepresentations.

 

22
 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided to assist the reader in understanding the results of operations, financial condition, and liquidity through the eyes of our management team. This section should be read in conjunction with other sections of this Quarterly Report, specifically, our Consolidated Financial Statements and Supplementary Data.

 

FORWARD-LOOKING STATEMENTS

 

This document contains certain “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.

 

Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect,” or “anticipate,” or other similar words, or the negative thereof. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we included in the section titled Risk Factors contained herein.

 

In our filings with the Securities and Exchange Commission, references to “AMMO, Inc.”, “AMMO”, “the Company”, “we,” “us,” “our” and similar terms refer to AMMO, Inc., a Delaware corporation, and its wholly owned consolidated subsidiaries.

 

Overview

 

AMMO, Inc., owner of the GunBroker.com Marketplace, the largest online marketplace serving the firearms and shooting sports industries, and a vertically integrated producer of high-performance ammunition and premium components began its operations in 2016.

 

Through our GunBroker.com Marketplace segment (acquired in April 2021), we allow third party sellers to list items consisting of firearms, hunting gear, fishing equipment, outdoor gear, collectibles, and much more on our site, while facilitating compliance with federal and state laws that govern the sale of firearms and restricted items. This allows our base of over 7.8 million users to follow ownership policies and regulations through our network of over 35,000 federally licensed firearms dealers as transfer agents. The nature and operation of the Marketplace as an online auction and sales platform also affords our Company a unique view into the total domestic market for the purpose of understanding sales trends at a granular level across all elements of the outdoor sports and shooting space. Our vision is to expand the services on GunBroker.com and to become a peer to those in our industry. In the short term, we will be implementing the following services;

 

● Payment Processing - facilitating payment between parties allowing sellers of all sizes to offer fast and secure electronic payments and allowing buyers to experience the ease of using a single form of payment for all items purchased,

 

● Carting Ability - allowing our buyers to purchase multiple items from multiple sellers at one point in time, and,

 

● GunBroker.com Analytics – through the compilation and refinement of vast Marketplace data, we plan to offer domestic market analytics to our industry peers to allow them to better manage their businesses.

 

Through our Ammunition segment, we are tailoring our focus to build a new future for our manufacturing operations focused on premium pistol and rifle ammunition and supporting industry partners for manufactured components. We will continue to leverage our proprietary brands like Streak Visual AmmunitionTM and Stelth subsonic ammunition and extend our product offering with premium rifle lines and brands that complement our technologically innovative heritage. We also continue to ensure dynamic performance under the exacting standards of the US military complex in support of our cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities.

 

23
 

 

In September of 2022, we began operating out of our new 185,000 square foot manufacturing facility. This new, state-of-the-art ammunition production facility is part of our commitment to the continuing development of differentiated, cutting-edge technology.

 

Results of Operations

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following information should be read in conjunction with our consolidated financial statements included in this Quarterly Report beginning on page 3.

 

Our financial results for the three months ended June 30, 2023 reflect our newly positioned organization as we transition into our new strategic direction. We believe that we have hired a strong team of professionals, developed innovative products, and continue to raise capital sufficient to establish our presence as a high-quality ammunition provider and marketplace. We continue to focus on growing our top line revenue and streamlining our operations. We experienced a 43.6% decrease in our Net Revenues for the three months ended June 30, 2023 compared with the year ended June 30, 2022. This was the result of decreased ammunition sales due to changes in market demand as well as a shift in operations to an increased focus in ammunition casing sales.

 

The following table presents summarized financial information taken from our condensed consolidated statements of operations for the three ended June 30, 2023 compared with the three months ended June 30, 2022:

 

   For the Three Months Ending 
   June 30, 2023   June 30, 2022 
   (Unaudited)   (Unaudited) 
Net Sales  $34,254,575   $60,756,026 
Cost of Revenues   20,230,035    42,620,364 
Gross Profit   14,024,540    18,135,662 
Sales, General & Administrative Expenses   15,703,467    13,072,921 
Income from Operations   (1,678,927)   5,062,741 
Other income (expense)          
Other income (expense)   488,750    73,011 
Income (loss) before provision (benefit) for income taxes  $(1,190,177)  $5,135,752 
Provision (benefit) for income tax expense   (97,144)   1,882,725 
Net Income (loss)  $(1,093,033)  $3,253,027 

 

Non-GAAP Financial Measures

 

We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total net sales, net loss, and other results under accounting principles generally accepted in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these measures are useful for period-to-period comparisons of the Company. We have included these non-GAAP financial measures in this Quarterly Report on Form 10-Q because they are key measures we use to evaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating to operating expenses and the allocation of our resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

 

Adjusted EBITDA

 

   For the Three Months Ended 
   June 30, 2023   June 30, 2022 
         
Reconciliation of GAAP net income to Adjusted EBITDA          
Net Income (loss)  $(1,093,033)  $3,253,027 
Depreciation and amortization   4,620,087    4,300,123 
Provision (benefit) for income taxes   (97,144)   1,882,725 
Interest expense, net   204,201    120,487 
Employee stock awards   822,797    1,175,063 
Stock grants   50,750    47,844 
Other income, net   (692,951)   (193,498)
Contingent consideration fair value   (21,024)   (1,302)
Other nonrecurring expenses(1)   2,759,726    - 
Adjusted EBITDA  $6,553,409   $10,584,469 

 

  (1) Other nonrecurring expenses consist of professional and legal fees that are nonrecurring in nature.

 

24
 

 

Adjusted EBITDA is a non-GAAP financial measure that displays our net income (loss), adjusted to eliminate the effect of certain items as described below.

 

We have excluded the following non-cash expenses from our non-GAAP financial measures: provision or benefit for income taxes, depreciation and amortization, share-based or warrant-based compensation expenses, and changes to the contingent consideration fair value. We believe it is useful to exclude these non-cash expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.

 

We have modified our Adjusted EBITDA calculation in the current period to remove the adjustment for Excise Taxes as we believe this is a better representation of our operations. In prior periods, we included an adjustment for Excise Taxes.

 

Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:

 

  Employee stock awards and stock grants expense has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company and an important part of our compensation strategy;
  the assets being depreciated or amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and
  non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs
  other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

 

Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including our net loss and our other financial results presented in accordance with GAAP.

 

Net Sales

 

The following table shows our net sales by proprietary ammunition versus standard ammunition for the three months ended June 30, 2023 and 2022. “Proprietary Ammunition” include those lines of ammunition manufactured by our facilities that are sold under the brand names: STREAK VISUAL AMMUNITION™ and Stelth. We define “Standard Ammunition” as non-proprietary ammunition that directly competes with other brand manufacturers. Our “Standard Ammunition” is manufactured within our facility and may also include completed ammunition that has been acquired in the open market for sale to others. Also included in this category is low cost target pistol and rifle ammunition, as well as bulk packaged ammunition manufactured by us using reprocessed brass casings. Ammunition within this product line typically carries lower gross margins.

 

    For the Three Months Ending  
    June 30, 2023     June 30, 2022  
Proprietary Ammunition   $ 1,154,802     $ 2,855,934  
Standard Ammunition     12,951,227       38,113,949  
Ammunition Casings     6,236,344       3,281,197  
Marketplace Revenue     13,912,202       16,504,946  
Total Sales   $ 34,254,575     $ 60,756,026  

 

25
 

 

Sales for the three months ended June 30, 2023 decreased 43.6% or approximately $26.5 million due to changes in market conditions and our shift to increase ammunition casing sales. The decrease for the three month period was largely the result of a decrease of $25.2 million in sales of bulk pistol and rifle ammunition, a decrease of $1.7 million of sales of Proprietary Ammunition, and a decrease of $2.6 million generated from our marketplace, GunBroker.com, which includes auction revenue, payment processing revenue, and shipping income. Our ammunition casings sales increased $3.0 million or 90.1% over the prior year period. Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of our Standard Ammunition.

 

We are focused on continuing to grow top line revenue quarter-over-quarter as we continue to further expand distribution into commercial markets, introduce new product lines, and continue to initiate sales to U.S. law enforcement, military, and international markets.

 

Through our acquisition of SWK, the Company has developed and deployed a line of tactical armor piercing (AP) and hard armor piercing incendiary (HAPI) precision ammunition to meet the lethality requirements of both the US and foreign military customers. We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions. The Company has since developed the ballistic match (BMMPR) and signature-on-target (SoT) rounds under contract with the U.S. Government in support of US special operations which have been publicly announced pursuant to governmental authorization. Additional work continues in support of the military operations of the U.S. and its ally military components which is not currently subject to disclosure.

 

It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our Company, they also have a long sales cycle. The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, which are reasonably anticipated to drive sustained sales opportunity in the military, law enforcement, and commercial markets.

 

Sales outside of the United States require licenses and approval from either the U.S. Department of Commerce or the U.S. State Department, which typically takes approximately 30 days to receive. On June 12, 2023, we renewed our annual registration with the International Traffic in Arms Regulations (“ITAR”), which remains valid through the report date. This permits the Company to export and broker ammunition and other controlled items covered under ITAR.

 

Cost of Revenues

 

Cost of Revenues decreased by approximately $22.4 million to $20.2 million for the three months ended June 30, 2023 compared to the comparable period ended in 2022. This was the result of a significant decrease in net sales during 2023 as compared to 2022.

 

Gross Margin

 

Our gross margin percentage increased to 40.9% from 29.8% during the three months ended June 30, 2023, respectively, as compared to the same period in 2022. The increase in our gross margin was related to our Marketplace revenue, which produces higher gross profit, contributing to a higher portion of the overall sales for the period.

 

26
 

 

We believe as we continue to grow sales through new markets and expanded distribution that our gross margins will also increase by efficiencies added through our new production facility. Our goal in the next 12 to 24 months is to continue to improve our gross margins. This will be accomplished through the following:

 

  Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, Stelth and now our tactical Armor Piercing (AP) and Hard Armor Piercing Incendiary (HAPI) precision ammunition, all of which carry higher margins as a percentage of their selling price;
     
  Introduction of new lines of ammunition that historically carry higher margins in the consumer and government sectors;
     
  Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers;
     
  Expanded use of automation equipment that reduces the total labor required to assemble finished products;
     
  And better leverage of our fixed costs through expanded production to support the sales objectives.

 

Operating Expenses

 

Overall, for the three months ended June 30, 2023, our operating expenses increased by approximately $2.6 million over the three months ended June 30, 2022 and increased as a percentage of sales from 21.5% to 45.8% for the three months ended June 30, 2023. Our operating expenses include non-cash depreciation and amortization expense of approximately $3.3 million for the three months June 30, 2023. Our operating expenses consisted of commissions related to our sales, stock compensation expense associated with issuance of our Common Stock in lieu of cash compensation for employees, board members, and key consultants for the organization during the period. Operating expenses for the three months ended June 30, 2023 and June 30, 2022 included noncash expenses of approximately $4.2 million and $4.6 million, respectively.

 

During the three months ended June 30, 2023, our selling and marketing expenses decreased by approximately $1.6 million, in comparison to the three months ended June 30, 2022. The decrease was primarily related to decreases in sales commission due to the decrease in the sale of our products.

 

Our corporate general & administrative expenses increased approximately $2.9 million for the three months ended June 30, 2023 from the comparable prior period due to $2.8 million in nonrecurring legal and professional fees and expenses.

 

Employee salaries and related expenses increased approximately $1.3 million for the three months ended June 30, 2023 compared to the comparable period ended in 2022. The increase for the three months ended June 30, 2023 when compared to the prior period, was primarily related to $1.0 million of additional payroll expenses incurred, $0.7 million in expenses related to our new employee bonus plan, and a decrease of $0.4 million in employee stock compensation.

 

Depreciation and amortization expenses for the three months ended June 30, 2023 decreased by approximately $0.01 million.

 

Interest and Other Expenses

 

For the three months ended June 30, 2023, interest expense increased by approximately $0.1 million compared with the comparable three months ended June 30, 2022. The change from the prior periods was mainly due to an increase in our Construction Note Payable.

 

Income Taxes

 

For the three months ended June 30, 2023 and 2022, we recorded a provision (benefit) for federal and state income taxes of approximately ($0.1) million and $1.9 million, respectively.

 

Net Income (Loss)

 

We ended the three months ended June 30, 2023 with a net loss of approximately $1.1 million compared with a net income of approximately $3.3 million for the three months ended June 30, 2022.

 

27
 

 

Our goal is to continue to improve our operating results as we focus on increasing sales and controlling our operating expenses.

 

Liquidity and Capital Resources

 

As of June 30, 2023, we had $47,505,047 of cash and cash equivalents, an increase of $8,371,020 from March 31, 2023.

 

Working Capital is summarized and compared as follows:

 

   June 30, 2023   March 31, 2023 
Current assets  $130,572,382   $128,451,893 
Current liabilities   23,901,069    25,463,399 
   $106,671,313   $102,988,494 

 

Changes in cash flows are summarized as follows:

 

Operating Activities

 

For the three months ended June 30, 2023, net cash provided by operations totaled approximately $13.0 million. This was primarily the result of net loss of approximately $1.1 million, which was offset by decreases in our accounts receivable of approximately $7.1 million, decreases in prepaid expenses of approximately $0.9 million, and decreases in our accounts payable of approximately $1.7 million, increases in our inventories of approximately $1.6 million, and decreases in deposits of approximately $3.0 million. Non-cash expenses for depreciation and amortization totaled approximately $4.6 million and non-cash expenses for employee stock awards totaled $0.8 million.

 

For the three months ended June 30, 2022, net cash provided by operations totaled approximately $5.2 million. This was primarily the result of net income of approximately $3.3 million, which was offset by increases in our inventories of approximately $5.6 million, increases in deposits of approximately $0.5 million and increases in due from related parties of approximately $1.6 million, decreases in our accounts receivable of approximately $4.2 million, decreases in prepaid expenses of approximately $0.9 million, and decreases in our accounts payable of $3.0 million. Non-cash expenses for depreciation and amortization totaled approximately $4.3 million and non-cash expenses for employee stock awards totaled $1.2 million.

 

Investing Activities

 

For the three months ended June 30, 2023, we used approximately $1.3 million in net cash for investing activities. Net cash used in investing activities consisted of approximately $1.3 million related to purchases of production equipment for our new manufacturing facility in Manitowoc, WI and capitalized development costs related to our marketplace, GunBroker.com.

 

During the three months ended June 30, 2022, we used approximately $5.3 million in net cash for investing activities. Net cash used in investing activities consisted of approximately $5.3 million related to purchases of production equipment and the construction of our new manufacturing facility in Manitowoc, WI.

 

Financing Activities

 

For the three months ended June 30, 2023, net cash used in financing activities was approximately $3.3 million. This was the net effect of approximately $1.5 million used in our common stock repurchased plan, $1.0 million from insurance premium note payments, approximately $0.6 million of Preferred Stock dividends paid, and the generation of approximately $14.6 million from accounts receivable factoring, which was offset by payments of approximately $14.6 million.

 

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During the three months ended June 30, 2022, net cash used in financing activities was approximately $1.3 million. This was the net effect of an approximate $0.7 million reduction in our Inventory Credit Facility, approximately $0.5 million from insurance premium note payments, generation of approximately $24.7 million from accounts receivable factoring, which was offset by payments of approximately $25.0 million and $1.0 million in proceeds of restricted cash from our construction note payable.

 

Liquidity

 

Existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year. Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes. These sources have been adequate to fund our recurring cash expenditures including but not limited to our working capital requirements, capital expenditures to expand our operations, debt repayments, and acquisitions. We intend to continue use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases and any potential acquisitions.

 

Leases

 

We lease four locations that are used for our offices, production, and warehousing. As of June 30, 2023, we had $1.2 million of fixed lease payment obligations with $0.4 million payable within the next 12 months. Please refer to Note 8– Leases for additional information.

 

Construction Note Payable

 

We will finance a portion of our new production facility with our Construction Note Payable. We expect to make $0.3 million in principal and interest payments within the next 12 months. The principal balance of the Construction Note will mature on October 14, 2026.

 

Off-Balance Sheet Arrangements

 

As of June 30, 2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources.

 

Critical Accounting Policies

 

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affected 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the condensed consolidated financial statements include the valuation of allowances for doubtful accounts, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation, and warrant-based compensation. A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended March 31, 2023, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We adopted ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) and ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” in the current period. These policy changes did not result in a material effect on the Company’s financial statements. There have been no other significant changes to these policies during the three months ended June 30, 2023. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023.

 

Goodwill

 

We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline it is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flows was more appropriate due to the operational performance of the reporting segment. Accordingly, the impairment of Goodwill was not warranted for the three months ended June 30, 2023. As of July 30, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment. However, due to declines in the value of the Company’s common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2024.

 

29
 

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Our market risks are similar to those disclosed under the caption “Quantitative And Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended March 31, 2023 and filed with the SEC on June 14, 2023 and is hereby incorporated by reference.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(c) and 15d-15(e) under the Exchange Act, as of June 30, 2023. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

 

Based on this evaluation, and because of the material weaknesses described below, our CEO and CFO have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2023.

 

Notwithstanding the material weaknesses that were identified and continued to exist as of June 30, 2023, management believes that the financial statements included in this report present fairly in all material respects our financial position, results of operations and cash flows for the period presented, nor were there changes to previously released financial results.

 

Material weaknesses and management’s remediation plan

 

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. The following material weaknesses in our internal control over financial reporting remained as of June 30, 2023:

 

The Company failed to maintain an effective control environment due to the following:

 

the Company’s management and the governance did not maintain appropriately designed entity-level controls impacting the control environment to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to limited personnel to assist with the accounting and financial reporting function and inadequate oversight and accountability over the performance of control activities, including establishment of a Whistleblower Hotline and lack of formalization of certain key governance elements: management delegation, annual board committee charter review, acknowledgement of code of conduct, and approval of the annual budget;
   
the Company failed to maintain properly designed segregation of duties, both within manual processes and system access;
   
the Company failed to maintain effectively designed controls over journal entries, both recurring and nonrecurring, account reconciliations, and periodic flux analysis. Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness, and accuracy. In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness, and accuracy were also responsible for preparation.
   
the Company failed to maintain effectively designed controls over the period-end financial reporting process, including adequate tie-out and review of documentation that supports the financial statements; and
   
the Company failed to maintain effectively designed controls over information technology general controls in the areas of user provisioning and de-provisioning, application change management, operating system and logical access controls, and segregation of duties for information technology (“IT”) systems that supports the Company’s financial reporting process.

 

30
 

 

Management’s Remediation Initiatives

 

We have concluded that these material weaknesses arose because we did not have the necessary business processes, systems, personnel, and related internal controls.

 

In response to the material weaknesses, management, with the oversight of the Audit Committee of the Board of Directors, has continued the process of, and is committed to, designing and implementing effective measures to strengthen our internal controls over financial reporting and remediate the material weaknesses. The Company is committed to ensuring that a proper, consistent tone is communicated throughout the organization, which emphasizes the expectation that previously existing deficiencies will be rectified through implementation of processes and controls to ensure strict compliance with U.S. GAAP and regulatory requirements.

 

Our third–party consulting firm that specializes in internal audit work, and more specifically internal controls over financial reporting work, has assisted management and will continue to assist management with our risk assessment of internal control over financial reporting as well as documentation and testing of our internal control structure and evaluation of material weaknesses, with special focus on assisting management in the establishment and evaluation of proper segregation of duties procedures and monitoring and controls over ITGCs for the systems that support our financial reporting process. Specifically, with the right compliment of accounting and finance team members now in place, our entire control environment is being evaluated for enhancement of our internal controls over financial reporting.

 

In addition to the measures noted above, we have made progress in our remediation plan including the following items:

 

Management has presented, and the Board of Directors has approved the formal management delegation and the Company’s Annual Budget during the first quarter of fiscal year 2024.
   
The Company formally initiated the implementation of a whistleblower hotline during the first quarter of fiscal year 2024.
   
Approved, adopted, and implemented accounting policies related to journal entries and invoice approval.
   
Improved formalization of procedures and documentation for all journal entries, account reconciliations, flux analysis and variance thresholds, vendor set-up.
   
Progressed IT Remediation Project with third-party consultants to design and implement controls over user provisioning and de-provisioning, application change management, operating system and logical access controls, segregation of duties, and third-party service provider report review process.
   
Implemented improvements surrounding review and approval of controls with a review element, including proper segregation, enhanced documentation, and consistency of application.

 

Beginning the second quarter of fiscal year 2024, management, with the help of our third-party consulting firm, will perform walkthroughs of our key controls, including those that would be necessary to effectively remediate the existing material weaknesses. A walkthrough is performed to gain comfort regarding the design effectiveness of the key controls. Based on our assessment of the walkthrough results, we will determine if our key controls have been designed effectively. Further assessments will be made of these controls to ascertain operating effectiveness, after which we will be able to determine if the existing material weaknesses have been remediated.

 

While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.

 

Changes in internal controls

 

Other than the changes described above, there have not been any changes in our internal control over financial reporting (as such term is defined in Exchange Act in Rule 13a-15(c) and 15d-15(e) under the Exchange Act) during the quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

31
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings, and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

 

Please reference the Contingencies section of Note 2 and Note 17 of our Financial Statements for additional disclosure.

 

ITEM 1A. RISK FACTORS

 

Our market risks at are similar to those disclosed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2023 and filed with the SEC on June 14, 2023. There have been no material changes to our Risk Factors disclosed in Annual Report on Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuances

 

The authorized capital of the Company is 200,000,000 shares of Common Stock with a par value of $0.001 per share and 10,000,000 shares of Preferred Stock with a $0.001 par value per share.

 

There were no unregistered sales of the Company’s equity securities during the quarter ended June 30, 2023.

 

Share Repurchases

 

On February 8, 2022, we announced that our Board of Directors authorized a share repurchase program for up to $30.0 million of our outstanding common stock. On March 28, 2023, we announced that our Board of Directors authorized the extension of our repurchase program until February 2024.

 

Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash resources.

 

The following table summarizes our share repurchases under our repurchase program for our first fiscal quarter of our 2024 fiscal year.

 

Period  Total Number of Shares Purchased   Average Price Paid per Share   Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs   Maximum
Number of
Shares that
may yet be Purchased Under the Plan or Programs(1)
 
April 2023   609,509   $1.95    609,509      
May 2023   129,322   $1.95    129,322      
June 2023   -         -      
Total   738,831   $1.95    738,831    13,165,171 

 

(1)The maximum number of shares that may yet be repurchased included herein is determined based on the closing price of our Common Stock of $2.13 on June 30, 2023. This amount may change based on the price that our Common Stock trades at.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

32
 

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibit No.   Exhibit
     
10.1+   Employment Agreement of Robert D. Wiley, as amended as of June 12, 2023 (Incorporated by Reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on June 14, 2023)
31.1*   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Jared R. Smith.
31.2*   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
32.1**   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jared R. Smith.
32.2**   Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
101.INS*   Inline XBRL Instance Document
101.SCH*   Inline XBRL Taxonomy Extension Schema Document
101.CAL*   Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*   Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*   Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*   Inline XBRL Taxonomy Extension Definition Linkbase Document
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*Filed Herewith.

 

** Furnished Herewith.

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  AMMO, INC.
     
    /s/ Jared R. Smith
Dated: August 9, 2023 By:  Jared R. Smith, Chief Executive Officer

 

    /s/ Robert D. Wiley
Dated: August 9, 2023 By:  Robert D. Wiley, Chief Financial Officer

 

34

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Jared R. Smith, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of AMMO, Inc.;

 

2. Based on my knowledge, this 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 report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
     
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 9, 2023 By: /s/ Jared R. Smith
  Name:  Jared R. Smith
  Title: Chief Executive Officer (Principal Executive Officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Robert D. Wiley, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of AMMO, Inc.;

 

2. Based on my knowledge, this 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 report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this 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 report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;
     
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 9, 2023 By: /s/ Robert D. Wiley
  Name:  Robert D. Wiley
  Title: Chief Financial Officer (Principal Financial Officer)

 

 

 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with Quarterly Report of AMMO, Inc. (the “ Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Jared R. Smith, Chief Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 9, 2023 By: /s/ Jared R. Smith
  Name:  Jared R. Smith
  Title: Chief Executive Officer (Principal Executive Officer)

 

 

 

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with Quarterly Report of AMMO, Inc. (the “ Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Rob Wiley, Chief Financial Officer (Principal Financial Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: August 9, 2023 By: /s/ Robert D. Wiley
  Name:  Robert D. Wiley
  Title: Chief Financial Officer (Principal Financial Officer)

 

 

 

v3.23.2
Cover - shares
3 Months Ended
Jun. 30, 2023
Aug. 04, 2023
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2023  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --03-31  
Entity File Number 001-13101  
Entity Registrant Name AMMO, Inc.  
Entity Central Index Key 0001015383  
Entity Tax Identification Number 83-1950534  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 7681 E Gray Road  
Entity Address, City or Town Scottsdale  
Entity Address, State or Province AZ  
Entity Address, Postal Zip Code 85260  
City Area Code (480)  
Local Phone Number 947-0001  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   117,957,921
Common Stock 0.001 Par Value [Member]    
Title of 12(b) Security Common Stock, $0.001 par value  
Trading Symbol POWW  
Security Exchange Name NASDAQ  
Sec8.75 Series Cumulative Redeemable Perpetual Preferred Stock 0.001 Par Value [Member]    
Title of 12(b) Security 8.75% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value  
Trading Symbol POWWP  
Security Exchange Name NASDAQ  
v3.23.2
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2023
Mar. 31, 2023
Current Assets:    
Cash and cash equivalents $ 47,505,047 $ 39,134,027
Accounts receivable, net 21,348,226 29,346,380
Inventories 55,924,655 54,344,819
Prepaid expenses 5,294,454 5,126,667
Current portion of restricted cash 500,000 500,000
Total Current Assets 130,572,382 128,451,893
Property and Equipment, net 55,923,867 55,963,255
Other Assets:    
Deposits 4,064,582 7,028,947
Patents, net 4,909,388 5,032,754
Other intangible assets, net 120,583,416 123,726,810
Goodwill 90,870,094 90,870,094
Right of use assets - operating leases 1,141,418 1,261,634
TOTAL ASSETS 408,065,147 412,335,387
Current Liabilities:    
Accounts payable 16,356,614 18,079,397
Accrued liabilities 4,641,469 4,353,354
Current portion of operating lease liability 421,477 470,734
Current portion of construction note payable 277,216 260,429
Insurance premium note payable 2,204,293 2,118,635
Total Current Liabilities 23,901,069 25,463,399
Long-term Liabilities:    
Contingent consideration payable 119,354 140,378
Construction note payable, net of unamortized issuance costs 10,861,510 10,922,443
Operating lease liability, net of current portion 825,043 903,490
Deferred income tax liability 2,212,448 2,309,592
Total Liabilities 37,919,424 39,739,302
Shareholders’ Equity:    
Series A cumulative perpetual preferred Stock 8.75%, ($25.00 per share, $0.001 par value) 1,400,000 shares issued and outstanding as of June 30, 2023 and March 31, 2023, respectively 1,400 1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 118,952,886 and 118,562,806 shares issued and 117,945,758 and 118,294,478 outstanding at June 30, 2023 and March 31, 2023, respectively 117,946 118,294
Additional paid-in capital 392,813,530 391,940,374
Accumulated deficit (20,808,990) (18,941,825)
Treasury stock (1,978,163) (522,158)
Total Shareholders’ Equity 370,145,723 372,596,085
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 408,065,147 412,335,387
Related Party [Member]    
Current Liabilities:    
Note payable related party $ 180,850
v3.23.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
3 Months Ended 12 Months Ended
Jun. 30, 2023
Mar. 31, 2023
Statement of Financial Position [Abstract]    
Preferred stock, dividend rate, percentage 8.75% 8.75%
Preferred stock, stated value per share $ 25.00 $ 25.00
Preferred stock, par value per share $ 0.001 $ 0.001
Preferred stock, shares issued 1,400,000 1,400,000
Preferred stock, shares outstanding 1,400,000 1,400,000
Common stock, par or stated value per share $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 118,952,886 118,562,806
Common stock, shares outstanding 117,945,758 118,294,478