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 December 31, ~~2021~~2022

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 February ~~11, 2022,~~10, 2023, there were ~~115,526,404~~ 117,844,417shares 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 December 31, ~~2021~~2022 (Unaudited) and March 31, ~~2021~~2022	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended December 31, ~~2021,~~2022, and ~~2020~~2021	4
	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three and nine months ended December 31, ~~2021,~~2022, and ~~2020~~2021	5
	Condensed Consolidated Statements of Cash flow (Unaudited) for the nine months ended December 31, ~~2021,~~2022, and ~~2020~~2021	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	25
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	3332
ITEM 4:	CONTROLS AND PROCEDURES	3332

PART II

ITEM 1:	LEGAL PROCEEDINGS	3433
ITEM 1A:	RISK FACTORS	3433
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	33
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	33
ITEM 4:	MINE SAFETY DISCLOSURE	33
ITEM 5:	OTHER INFORMATION	34
ITEM 3:6:	~~DEFAULTS UPON SENIOR SECURITIES~~EXHIBITS	34
~~ITEM 4:~~SIGNATURES		~~MINE SAFETY DISCLOSURE~~	34
~~ITEM 5:~~	~~OTHER INFORMATION~~	35
~~ITEM 6:~~	~~EXHIBITS~~	35
~~SIGNATURES~~		36

PART I

ITEM 1. FINANCIAL STATEMENTS

AMMO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2021 March 31, 2021
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 27,414,571 $ 118,341,471
Accounts receivable, net 45,653,542 8,993,920
Due from related parties 15,657 15,657
Inventories 46,466,594 15,866,918
Prepaid expenses 3,923,778 2,402,366
Total Current Assets 123,474,142 145,620,332

Equipment, net 32,368,131 21,553,226

Other Assets:
Deposits 15,585,668 1,833,429
Licensing agreements, net 4,167 41,667
Patents, net 5,649,562 6,019,567
Other intangible assets, net 139,652,716 2,220,958
Goodwill 90,870,094 -
Right of use assets - operating leases 2,707,546 2,090,162
Deferred income tax asset 892,258 -
TOTAL ASSETS $ 411,204,284 $ 179,379,341

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 24,425,343 $ 4,371,974
Factoring liability 4,097,867 1,842,188
Accrued liabilities 5,114,768 3,462,785
Inventory credit facility 194,810 1,091,098
Current portion of operating lease liability 825,343 663,784
Current portion of note payable related party 669,463 625,147
Insurance premium note payable 285,718 41,517
Total Current Liabilities 35,613,312 12,098,493

Long-term Liabilities:
Contingent consideration payable 227,139 589,892
Notes payable related party, net of current portion 358,263 865,771
Note payable - 4,000,000
Construction note payable, net of unamortized issuance costs 18,905 -
Operating lease liability, net of current portion 2,006,707 1,477,656
Deferred income tax liability 1,850,277 -
Total Liabilities 40,074,603 19,031,812

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 December 31, 2021 1,400 -
Common stock, $0.001 par value, 200,000,000 shares authorized 115,436,404 and 93,099,067 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively 115,437 93,100
Additional paid-in capital 382,015,310 202,073,968
Accumulated deficit (11,002,466 ) (41,819,539 )
Total Shareholders’ Equity 371,129,681 160,347,529
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 411,204,284 $ 179,379,341
December 31, 2022 March 31, 2022
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 27,093,614 $ 23,281,475
Accounts receivable, net 30,419,611 43,955,084
Due from related parties - 15,000
Inventories 67,145,401 59,016,152
Prepaid expenses 3,838,968 3,423,925
Current portion of restricted cash 500,000 -
Total Current Assets 128,997,594 129,691,636

Property and Equipment, net 55,290,328 37,637,806

Other Assets:
Deposits 9,656,907 11,360,322
Patents, net 5,156,120 5,526,218
Other intangible assets, net 126,870,205 136,300,387
Goodwill 90,870,094 90,870,094
Right of use assets - operating leases 1,378,711 2,791,850
TOTAL ASSETS $ 418,219,959 $ 414,178,313

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable $ 20,964,686 $ 26,817,083
Factoring liability 1,678,450 485,671
Accrued liabilities 4,298,739 6,178,814
Inventory credit facility - 825,675
Current portion of operating lease liability 518,778 831,429
Current portion of note payable related party 358,263 684,639
Current portion of construction note payable 258,430 -
Insurance premium note payable 119,449 -
Total Current Liabilities 28,196,795 35,823,311

Long-term Liabilities:
Contingent consideration payable 158,570 204,142
Notes payable related party, net of current portion - 181,132
Construction note payable, net of unamortized issuance costs 10,967,947 38,330
Operating lease liability, net of current portion 980,009 2,091,351
Deferred income tax liability 2,819,962 1,536,481
Total Liabilities 43,123,283 39,874,747

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 December 31, 2022 and March 31, 2022, respectively 1,400 1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 118,044,417 and 116,485,747 shares issued and 117,894,417 and 116,485,747 outstanding at December 31, 2022 and March 31, 2022, respectively 117,894 116,487
Additional paid-in capital 390,501,876 385,426,431
Accumulated deficit (15,233,633 ) (11,240,752 )
Treasury Stock (290,861 ) -
Total Shareholders’ Equity 375,096,676 374,303,566
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 418,219,959 $ 414,178,313

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

3

AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

2022 2021 2022 2021
For the Three Months Ended
December 31, For the Nine Months Ended
December 31, For the Three Months Ended
December 31, For the Nine Months Ended
December 31,
2021 2020 2021 2020 2022 2021 2022 2021

Net Revenues
Ammunition sales $ 44,069,473 $ 12,834,490 $ 112,629,655 $ 27,987,438 $ 20,250,965 $ 44,069,473 $ 90,607,817 $ 112,629,655
Marketplace revenue 17,596,769 - 46,646,051 - 15,419,202 17,596,769 46,486,842 46,646,051
Casing sales 3,022,944 3,785,754 10,891,897 10,305,648 3,041,327 3,022,944 10,661,420 10,891,897
Total Revenues 64,689,186 16,620,244 170,167,603 38,293,086 38,711,494 64,689,186 147,756,079 170,167,603

Cost of Revenues 42,166,320 13,278,338 102,457,775 32,590,149 26,184,315 42,166,320 104,257,529 102,457,775
Gross Profit 22,522,866 3,341,906 67,709,828 5,702,937 12,527,179 22,522,866 43,498,550 67,709,828

Operating Expenses
Selling and marketing 1,510,574 542,271 4,226,817 1,244,323 1,010,543 1,510,574 3,987,214 4,226,817
Corporate general and administrative 3,737,455 1,639,052 10,976,288 3,805,230 7,835,201 3,737,455 17,920,197 10,976,288
Employee salaries and related expenses 2,939,095 1,172,765 7,943,076 3,329,511 4,705,636 2,939,095 11,414,434 7,943,076
Depreciation and amortization expense 3,725,921 416,625 10,044,994 1,242,809 3,309,074 3,725,921 9,950,752 10,044,994
Loss on purchase - - - 1,000,000
Total operating expenses 11,913,045 3,770,713 33,191,175 10,621,873 16,860,454 11,913,045 43,272,597 33,191,175
Income/(Loss) from Operations 10,609,821 (428,807 ) 34,518,653 (4,918,936 ) (4,333,275 ) 10,609,821 225,953 34,518,653

Other Expenses
Other income 363 461,000 21,788 274,400
Other income/(expense) (170,403 ) 363 28,193 21,788
Interest expense (190,319 ) (1,938,630 ) (468,404 ) (2,704,315 ) (320,439 ) (190,319 ) (538,191 ) (468,404 )
Total other expenses (189,956 ) (1,477,630 ) (446,616 ) (2,429,915 )
Total other expense (490,842 ) (189,956 ) (509,998 ) (446,616 )

Income/(Loss) before Income Taxes 10,419,865 (1,906,437 ) 34,072,037 (7,348,851 ) (4,824,117 ) 10,419,865 (284,045 ) 34,072,037

Provision for Income Taxes 1,351,998 - 1,351,998 - (721,125 ) 1,351,998 1,369,427 1,351,998

Net Income/(Loss) 9,067,867 (1,906,437 ) 32,720,039 (7,348,851 ) (4,102,992 ) 9,067,867 (1,653,472 ) 32,720,039

Preferred Stock Dividend (782,582 ) - (1,902,966 ) - (782,639 ) (782,582 ) (2,339,409 ) (1,902,966 )

Net Income/(Loss) Attributable to Common Stock Shareholders $ 8,285,285 $ (1,906,437 ) $ 30,817,073 $ (7,348,851 ) $ (4,885,631 ) $ 8,285,285 $ (3,992,881 ) $ 30,817,073

Net Income/(Loss) per share
Basic $ 0.07 $ (0.04 ) $ 0.28 $ (0.15 ) $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.28
Diluted $ 0.07 $ (0.04 ) $ 0.27 $ (0.15 ) $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.27

Weighted average number of shares outstanding
Basic 114,757,014 47,790,105 111,289,024 47,023,094 117,348,511 114,757,014 116,950,013 111,289,024
Diluted 116,717,500 47,790,105 113,350,998 47,023,094 117,348,511 116,717,500 116,950,013 113,350,998

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

4

AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
~~For the Three and Nine Months Ended December 31, 2021 and 2020~~
(Unaudited)

Preferred Stock Common Shares Additional Stock
Number Par
Value Number Par
Value Paid-In
Capital Subscription Receivable Accumulated (Deficit) Total

Balance as of March 31, 2021 - $ - 93,099,967 $ 93,100 $ 202,073,968 $ - $ (41,819,539 ) $ 160,347,529

Acquisition stock issuances - - 20,000,000 20,000 142,671,282 - - 142,691,282
Common stock issued for cash
Common stock issued for cash,shares
Common stock issued for convertible notes
Common stock issued for convertible notes,shares
Stock subscription receivable for exercised warrants
Stock subscription receivable for exercised warrants, Shares
Common stock issued for debt conversion - related party
Common stock issued for debt conversion - related party, Shares
Common stock issuance costs
Issuance of warrants for convertible notes
Common stock issued for covertible notes
Common stock issued for covertible notes, Shares
Common stock issued for debt conversion
Common stock issued for debt conversion, Shares
Issurance of warrants for convertible notes
Common stock issued for exercised warrants - - 431,080 431 943,476 - - 943,907
Common stock issued for cashless warrant exercise - - 276,907 277 (277 ) - - -
Common stock issued for services and equipment - - 772,450 773 1,630,928 - - 1,631,701
Employee stock awards - - 856,000 856 2,897,394 - - 2,898,250
Stock grants - - - - 197,110 - - 197,110
Issuance of Series A Preferred Stock, net of issuance costs 1,400,000 1,400 - - 31,007,396 - - 31,008,796
Warrant issued for services 594,033 - - 594,033
Preferred stock dividends declared - - - - - - (1,758,405 ) (1,758,405 )
Dividends accumulated on preferred stock - - - - - - (144,561 ) (144,561 )
Net income - - - - - - 32,720,039 32,720,039

Balance as of December 31, 2021 1,400,000 $ 1,400 115,436,404 $ 115,437 $ 382,015,310 $ - $ (11,002,466 ) $ 371,129,681

Balance as of March 31, 2020 - $ - 46,204,139 $ 46,204 $ 53,219,834 $ - $ (34,007,245 ) $ 19,258,793

Common stock issued for cash - - 11,536,143 11,537 23,601,082 - - 23,612,619
Common stock issued for convertible notes - - 2,667,358 2,667 3,872,292 - - 3,874,959
Common stock issued for exercised warrants - - 1,096,939 1,097 2,287,781 - - 2,288,878
Stock subscription receivable for exercised warrants - - 309,775 310 664,665 (664,975 ) - -
Common stock issued for debt conversion - related party - - 1,000,000 1,000 2,099,000 - - 2,100,000
Common stock issued for cashless warrant exercise - - 160,274 160 (160 ) - - -
Common stock issuance costs - - - - (3,344,436 ) - - (3,344,436 )
Common stock issued for services - - 58,336 58 87,442 - - 87,500
Employee stock awards - - 465,081 465 716,124 - - 716,589
Stock grants - - - - 213,130 - - 213,130
Issuance of warrants for convertible notes - - - - 1,315,494 - - 1,315,494
Net loss - - - - - - (7,348,851 ) (7,348,851 )

Balance as of December 31, 2020 - $ - 63,498,045 $ 63,498 $ 84,732,248 $ (664,975 ) $ (41,356,096 ) $ 42,774,675

Preferred Stock Common Shares
Number Par Value Number Par Value Additional Paid-In Capital Accumulated (Deficit) Treasury 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

Common stock issued for exercised warrants - - 12,121 12 24,230 - - 24,242
Employee stock awards - - 338,750 339 1,176,036 - - 1,176,375
Stock grants - - - - 43,750 - - 43,750
Preferred stock dividend - - - - - (646,595 ) - (646,595 )
Dividends accumulated on preferred stock - - - - - (136,044 ) - (136,044 )
Net loss - - - - - (803,507 ) - (803,507 )

Balance as of September 30, 2022 1,400,000 $ 1,400 117,274,755 $ 117,275 $ 387,892,917 $ (10,348,003 ) $ - $ 377,663,589

Common stock issued for exercised warrants - - 165,152 165 31,639 - - 31,804
Employee stock awards - - 604,510 604 2,105,931 - - 2,106,535
Stock grants - - - - 43,750 - - 43,750
Warrants issued for services - - - - 427,639 - - 427,639
Preferred stock dividend - - - - - (638,304 ) - (638,304 )
Dividends accumulated on preferred stock - - - - - (144,334 ) - (144,334 )
Net loss - - - - - (4,102,992 ) - (4,102,992 )
Treasury shares purchased - - (150,000 ) (150 ) - - (290,861 ) (291,011 )

Balance as of December 31, 2022 1,400,000 $ 1,400 117,894,417 117,894 390,501,876 (15,233,633 ) (290,861 ) 375,096,676

Preferred Stock Common Shares Additional Stock Preferred Stock Common Shares
Number Par
Value Number Par
Value Paid-In
Capital Subscription Receivable Accumulated (Deficit) Total Number Par Value Number Par Value Additional Paid-In Capital Accumulated (Deficit) Treasury Stock Total

Balance as of September 30, 2021 1,400,000 $ 1,400 113,583,016 $ 113,583 $ 369,431,456 $ - $ (19,287,751 ) $ 350,258,688
Balance as of March 31, 2021 - $ - 93,099,967 $ 93,100 $ 202,073,968 $ (41,819,539 ) $ - $ 160,347,529

Acquisition stock issuances - - 18,500,000 18,500 132,626,500 - - 132,645,000
Common stock issued for exercised warrants - - 219,144 219 477,592 - - 477,811
Common stock issued for cashless warrant exercise - - 275,155 275 (275 ) - - -
Common stock issued for services - - 750,000 750 1,499,250 - - 1,500,000
Employee stock awards - - 202,500 203 699,297 - - 699,500
Stock grants - - - - 66,914 - - 66,914
Issuance costs - - - - (4,670,422 ) - - (4,670,422 )
Issuance of Series A Preferred Stock, net of issuance costs 1,400,000 1,400 - - 34,998,600 - - 35,000,000
Dividends accumulated on preferred stock - - - - - (337,745 ) - (337,745 )
Net income - - - - - 9,536,660 - 9,536,660

Balance as of June 30, 2021 1,400,000 $ 1,400 113,046,766 $ 113,047 $ 367,771,424 $ (32,620,624 ) $ - $ 335,265,247

Acquisition stock issuances - - 1,500,000 1,500 10,753,500 - - 10,755,000 - - - - (29,500 ) - - (29,500 )
Common stock issued for exercised warrants - - 50,938 51 122,200 - - 122,251 - - 160,998 161 343,684 - - 343,845
Common stock issued for cashless warrant exercise - - - - - - - - - - 1,752 2 (2 ) - - -
Common stock issued for services and equipment - - 1,200 2 4,198 - - 4,200 - - 21,250 21 127,479 - - 127,500
Employee stock awards - - 301,250 301 1,044,824 - - 1,045,125 - - 352,250 352 1,153,273 - - 1,153,625
Stock grants - - - - 65,098 - - 65,098 - - - - 65,098 - - 65,098
Warrant issued for services 594,033 - - 594,033
Issuance of Series A Preferred Stock, net of issuance costs - - - - - - - -
Preferred stock dividends declared - - - - - - (638,021 ) (638,021 )
Dividends accumulated on preferred stock - - - - - - (144,561 ) (144,561 ) - - - - - (782,639 ) - (782,639 )
Net income - - - - - - 9,067,867 9,067,867 - - - - - 14,115,512 - 14,115,512

Balance as of December 31, 2021 1,400,000 $ 1,400 115,436,404 $ 115,437 $ 382,015,310 $ - $ (11,002,466 ) $ 371,129,681
Balance as of September 30, 2021 1,400,000 $ 1,400 113,583,016 $ 113,583 $ 369,431,456 $ (19,287,751 ) $ - $ 350,258,688
Beginning balance 1,400,000 $ 1,400 113,583,016 $ 113,583 $ 369,431,456 $ (19,287,751 ) $ - $ 350,258,688

Balance as of September 30, 2020 - $ - 48,324,347 $ 48,323 $ 56,895,422 $ - $ (39,449,659 ) $ 17,494,086

Common stock issued for cash - - 9,872,928 9,873 20,720,875 - - 20,730,748
Common stock issued for convertible notes - - 2,667,358 2,667 3,872,292 - - 3,874,959
Acquisition stock issuances - - 1,500,000 1,500 10,753,500 - - 10,755,000
Common stock issued for exercised warrants 975,726 977 2,045,476 - - 2,046,453 - - 50,938 51 122,200 - - 122,251
Stock subscription receivable for exercised warrants 309,775 310 664,665 (664,975 ) - -
Common stock issued for debt conversion 1,000,000 1,000 2,099,000 - - 2,100,000
Common stock issued for cashless warrant exercise 159,995 160 (160 ) - - -
Common stock issuance costs - - - - (3,274,436 ) - - (3,274,436 )
Common stock issued for services 50,000 50 87,450 - - 87,500
Common stock issued for services and equipment - - 1,200 2 4,198 - - 4,200
Employee stock awards - - 137,916 138 240,715 - - 240,853 - - 301,250 301 1,044,824 - - 1,045,125
Stock grants - - - - 65,455 - - 65,455 - - - - 65,098 - - 65,098
Issuance of warrants for convertible notes - - - - 1,315,494 - - 1,315,494
Net loss - - - - - - (1,906,437 ) (1,906,437 )
Net Income(loss) - - - - - - (1,906,437 ) (1,906,437 )
Common stock warrant issuance - - - - 594,034 - - 594,034
Preferred stock dividends declared - - - - - (638,021 ) - (638,021 )
Dividends accumulated on preferred stock - - - - - (144,561 ) - (144,561 )
Net income/(loss) - - - - - 9,067,867 - 9,067,867
Net income (loss) - - - - - 9,067,867 - 9,067,867

Balance as of December 31, 2020 - $ - 63,498,045 $ 63,498 $ 84,732,248 $ (664,975 ) $ (41,356,096 ) $ 42,774,675
Balance as of December 31, 2021 1,400,000 $ 1,400 115,436,404 $ 115,437 $ 382,015,310 $ (11,002,466 ) $ - $ 371,129,681
Ending balance 1,400,000 $ 1,400 115,436,404 $ 115,437 $ 382,015,310 $ (11,002,466 ) $ - $ 371,129,681

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

5

AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)

2022 2021
For the Nine Months Ended
December 31,
For the Nine Months Ended
December 31, 2022 2021
2021 2020
Cash flows from operating activities:
Net Income/(Loss) $ 32,720,039 $ (7,348,851 )
Adjustments to reconcile Net Loss to Net Cash used in operations:
Net Income (1,653,472 ) 32,720,039
Adjustments to reconcile Net Income/(Loss) to Net Cash provided by (used in) operations:
Depreciation and amortization 12,778,103 3,588,966 12,950,972 12,778,103
Debt discount amortization 18,905 325,141 62,440 18,905
Employee stock awards 2,898,250 716,589 4,457,973 2,898,250
Stock grants 197,110 213,130 135,344 197,110
Stock for services 4,200 87,500 - 4,200
Warrants issued for services 106,909 148,508
Contingent consideration payable fair value (362,753 ) (88,106 ) (45,572 ) (362,753 )
Allowance for doubtful accounts 1,097,985 54,846 1,327,419 1,097,985
(Gain)/loss on disposal of assets (12,044 ) 25,400
(Gain) on disposal of assets - (12,044 )
Reduction in right of use asset 496,469 322,970 512,063 496,469
Warrant issued for services 148,508 -
Deferred income taxes 958,019 - 1,283,481 958,019
Stock issued in lieu of cash payments - 48,000
Interest on convertible promissory notes - 146,104
Paycheck protection program note forgiveness - (624,600 )
Loss on Jagemann Munition Components - 1,000,000
Stock and warrants for note conversion - 1,315,494
Changes in Current Assets and Liabilities
Accounts receivable (20,755,245 ) (3,927,054 ) 12,208,054 (20,755,245 )
Due to (from) related parties - 150 15,000 -
Inventories (30,599,676 ) (5,140,518 ) (8,129,249 ) (30,599,676 )
Prepaid expenses 1,569,928 16,985 1,941,206 1,569,928
Deposits (13,051,850 ) 164,388 1,678,415 (13,051,850 )
Accounts payable 7,538,451 1,842,472 (5,852,397 ) 7,538,451
Accrued liabilities 1,310,641 2,332,819 (2,044,248 ) 1,310,641
Operating lease liability (514,872 ) (322,037 ) (522,917 ) (514,872 )
Net cash used in operating activities (3,559,832 ) (5,250,212 )
Net cash provided by (used in) operating activities 18,431,421 (3,559,832 )

Cash flows from investing activities:
Purchase of equipment (10,566,182 ) (50,517,840 )
Gemini acquisition (50,517,840 ) - - (12,868,156 )
Purchase of equipment (12,868,156 ) (4,493,051 )
Proceeds from disposal of assets 59,800 - - 59,800
Net cash used in investing activities (63,326,196 ) (4,493,051 ) (10,566,182 ) (63,326,196 )

Cash flow from financing activities:
Payments on inventory facility, net (896,287 ) 2,250,000 (825,675 ) (896,287 )
Proceeds from factoring liability 86,465,962 26,079,000 57,300,000 86,465,962
Payments on factoring liability (84,210,284 ) (25,794,381 ) (56,107,221 ) (84,210,284 )
Payments on assumed debt from Gemini (50,000,000 ) -
Payments on note payable - related party (463,192 ) (7,235,312 ) (507,508 ) (463,192 )
Payments on insurance premium note payment (1,922,651 ) (452,471 ) (1,916,070 ) (1,922,651 )
Proceeds from construction note payable 1,000,000 -
Payments on construction note payable (66,586 ) -
Preferred stock dividends paid (2,195,075 ) (1,758,405 )
Common stock repurchase plan (291,011 )
Common stock issued for exercised warrants 56,046 943,907
Payments on assumed debt from Gemini - (50,000,000 )
Payments on note payable (4,000,000 ) - - (4,000,000 )
Proceeds from paycheck protection program notes - 1,051,985
Proceeds from note payable related party issued - 3,500,000
Proceeds from note payable - 4,000,000
Proceeds from convertible promissory notes - 1,959,000
Sale of preferred stock 35,000,000 - - 35,000,000
Sale of common stock - 23,564,619
Common stock issued for exercised warrants 943,907 2,288,878
Stock issuance costs (3,199,922 ) (3,344,436 )
Preferred stock dividends paid (1,758,405 ) -
Net cash used in/(provided by) financing activities (24,040,872 ) 27,866,882
Common stock issuance costs - (3,199,922 )
Net cash used in financing activities (3,553,100 ) (24,040,872 )

Net increase/(decrease) in cash (90,926,900 ) 18,123,619 4,312,139 (90,926,900 )
Cash, beginning of period 118,341,471 884,274 23,281,475 118,341,471
Cash, end of period $ 27,414,571 $ 19,007,893
Cash and restricted cash, end of period $ 27,593,614 $ 27,414,571

(Continued)

6

AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Nine Months Ended
December 31,
2021 2020

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 474,454 $ 923,454
Income taxes $ - $ -

Non-cash investing and financing activities:
Acquisition stock issuances $ 143,400,000 $ -
Insurance premium note payment $ 2,166,852 $ 226,539
Dividends accumulated on preferred stock $ 144,561 $ -
Operating lease liability $ 501,125 $ 737,680
Construction note payable $ 387,968 $ -
Warrant issued for services $ 594,033 $ -
Note payable related party $ - $ 2,635,797
Convertible promissory note $ - $ 3,520,000
Note payable related party conversion $ - $ 2,100,000
Stock subscription receivable $ - $ 664,975
For the Nine Months Ended
December 31,
2022 2021

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 433,761 $ 474,454
Income taxes $ 1,302,811 $ -

Non-cash investing and financing activities:
Construction note payable $ 10,237,032 $ -
Insurance premium note payment $ 2,035,519 $ 2,166,852
Dividends accumulated on preferred stock $ 144,334 $ 144,561
Operating lease liability $ 901,076 $ 501,125
Warrants issued for services $ 427,639 $ 387,968
Acquisition stock issuances $ - $ 143,400,000
Warrants issued for services $ - $ 594,034

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

7

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, ~~2021~~2022 and March 31, ~~2021~~2022
(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.

8

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, ~~2021.~~2022. The results for the three and nine month ~~periods~~period ended December 31, ~~2021~~2022 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 and nine month periods ended December 31, ~~2021~~2022 and ~~2020,~~2021, (b) the financial position at December 31, ~~2021,~~2022, and (c) cash flows for the nine month periods ended December 31, ~~2021~~2022 and ~~2020.~~2021.

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 31^st.

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 doubtful accounts, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation and warrant-based compensation.
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 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 and nine months ended December 31, 2022. As of December 31, 2022, 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, 2023.

9

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represents amounts due from customers for products sold and include an allowance for uncollectible accounts which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts. At December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, we reserved $~~1,240,271~~4,382,671 and $~~148,540~~3,055,252, 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, ~~(“JJF”),~~LLC, a Texas limited liability company. The license agreement grants us the exclusive worldwide rights through ~~October 15, 2021~~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.~~
We are a party to a license agreement with Jeff Rann, a well-known wild game hunter and spokesman for the firearm and ammunition industries. The license agreement grants us through February 2022 the exclusive worldwide rights to Mr. Rann’s image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of all Jeff Rann Branded Products. We agreed to pay Mr. Rann 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 nine months ended December 31, ~~2021~~2022 and ~~2020,~~2021, the Company recognized royalty expenses of $~~18,558~~89,340 and $~~70,793~~18,558, 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. ~~NaN~~No impairment expense was recognized for the three and nine months ended December 31, ~~2021~~2022 and ~~2020.~~2021.

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 it transfers 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. ~~Our~~
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.
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 and nine months ended December 31, ~~2021,~~2022, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:
SCHEDULE OF CONCENTRATION OF RISKS

Revenues at
December 31, 2021
Accounts Receivable
PERCENTAGES Three Months
Ended Nine Months Ended December 31,
2021 March 31,
2021

Customers:
A - 12.2 % - -
B - - 11.2 %
C - - 18.9 %
D - - - 11.9 %
E - - 23.3 %
F - - 10.6 %
- 12.2 % 30.1 % 45.8 %
Revenues at
December 31, 2022 Accounts Receivable
PERCENTAGES Three Months
Ended Nine Months Ended December 31,
2022 March 31,
2022

Customers:
A 12.5 % - 18.4 % 11.8 %
12.5 % - 18.4 % 11.8 %

Disaggregated Revenue Information
The following table represent 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. ~~The Company notes~~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.
SCHEDULE OF DISAGGREGATED REVENUE FROM CUSTOMERS BY SEGMENT

For the Three Months Ended For the Nine Months Ended
For the Three Months Ended For the Nine Months Ended
December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 December 31,
2022 December 31, 2021 December 31, 2022 December 31, 2021
Ammunition Sales $ 44,069,473 $ 12,834,490 $ 112,629,655 $ 27,987,438 $ 20,250,965 $ 44,069,473 $ 90,607,817 $ 112,629,655
Marketplace fee revenue 17,596,769 - 46,646,051 - 15,419,202 17,596,769 46,486,842 46,646,051
Ammunition Casings Sales 3,022,944 3,785,754 10,891,897 10,305,648 3,041,327 3,022,944 10,661,420 10,891,897
Total Sales $ 64,689,186 $ 16,620,244 $ 170,167,603 $ 38,293,086 $ 38,711,494 $ 64,689,186 $ 147,756,079 $ 170,167,603

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~~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 expenses as they are incurred in cost of revenues. We incurred advertising expenses of $~~276,742~~912,959 and $~~448,368~~448,367 for the ~~three and~~ nine months ended December 31, 2022 and 2021, respectively, recognized in selling and ~~we incurred advertising~~marketing expenses ofand $~~51,700~~243,246 and $~~190,277~~ ~~for the three and nine months ended December 31, 2020, recognized in selling expenses and $102,042, and $193,753~~193,752 of marketplace advertising expenses recognized in cost of revenues for the ~~three and~~ nine months ended December 31, ~~2021.~~2022 and 2021, 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 December 31, 2022. 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. ~~These provisions~~
12
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 ~~based on our best estimates. At December 31, 2021, and March 31, 2021, we conducted~~generally five to ten years.
Compensated Absences
We accrue a ~~full analysis of inventory on hand and expensed all inventory not currently~~liability for compensated absences in ~~use, or for which there was no future demand.~~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.

12
~~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 Codifications 710 – Compensation – General (“ASC 710”)~~.
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~~Which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors. 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 ~~301,250~~ 604,510and ~~856,000~~ 1,281,635shares of common stock issued to employees, members of the Board of Directors, and members of our advisory committee for services during the three and nine months ended December 31, ~~2021, respectively.~~ ~~There were~~ ~~137,916~~ ~~and~~ ~~465,081~~ ~~shares of common stock issued to employees, members of the Board of Directors, and members of the Advisory Committee for services during the three and nine ended December 31, 2020, 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 December 31, 2021. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts receivable, accounts payable, and amounts due to related parties. 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.2022

Concentrations of Credit Risk

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, ~~2021,~~2022, 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%~~11% excise tax for all products sold into these channels. During the ~~three months ended December 31, 2021 and 2020, we recognized approximately $4.0~~ ~~million and $1.2~~ ~~million respectively, in excise taxes. During the~~ nine months ended December 31, ~~2021~~2022 and ~~2020,~~2021, we recognized approximately $~~10.3~~7.8 million and $~~2.7~~10.3 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.

13

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contingencies

Certain conditions may exist as of the date the condensed 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. On September 24, 2019, the Company received notice that a former employee that had voluntarily terminated filed a complaint against the Company, and certain individuals, with the U.S. Department of Labor (“DOL”). The Complaint in alleges that the individual reported potential violations of SEC rules and regulations by management and that as a result of such disclosures, the individual experienced a hostile work environment; that the Company lacks sufficient internal controls, and that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the shareholders. The claims were investigated by a newly appointed Special Investigative Committee made up of independent directors represented by special independent legal counsel. The Special Investigative Committee and legal counsel found the material claims were unsubstantiated, including those concerning alleged SEC violations, and recommended enhancements to certain corporate governance charter documents and processes which the Company promptly implemented. The Parties participated in a successful mediation at the end of June 2022 and all matters relating to this former employee/claimant were confidentially resolved with the lawsuit dismissed with prejudice (Order pending). The settlement was covered by our Employment Practices Liability Policy and did not amount to a material amount. On February 10, 2022, AMMO filed a Texas state court complaint against Expansion Industries pursing eight (8) claims in pursuit of recovery of AMMO’s in primer acquisition deposit monies (i.e., Breach of Contract, Common Law Fraud, Violations of Texas Theft Liability Act, Conversion, Negligent Misrepresentation, Unjust Enrichment, Money Had and Received and Constructive Trust). AMMO has since moved aggressively to further the process, including successfully garnishing a portion of the deposit monies in Expansion bank accounts, filing a Motion for Summary Judgement, continuing to pursue written discovery, and amending the Complaint to add Expansion principal as an individual party. The putative primer manufacturer settled the two related lawsuits in September 2022 by repaying all deposit monies due AMMO, in addition to payment of principally all fees and costs incurred by the Company in pursuit of the resolution. The principal lawsuit and AMMO’s garnishment action adverse the defendant were dismissed with prejudice. Along with countless other suppliers of Remington Outdoors, AMMO was served with an avoidance claim lawsuit by the bankruptcy trustee. AMMO presented substantial “ordinary course” defense evidence to the Trustee and the case was settled for a nominal sum in September 2022, with the lawsuit dismissed with prejudice. AMMO is defending two contract arbitration cases involving 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. 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 subject of administrative investigation by the DOL via the Occupational Safety and Health Administration. The Company filed a timely Position Statement with the DOL in October of 2019 in response to the Complaint. The Company received a Due Process letter on January 13, 2022 and responded as directed with supplemental analysis on February 1, 2022. The Company disputes the allegations of wrongdoing and believes the matters raised in the Complaint are without merit and therefore has and will continue to aggressively defend its interests in this matter. On February 4, 2020, the Company filed suit against a former employee for violating merger agreements with SW Kenetics, Inc., employment agreements, and by unlawfully retaining property belonging to the Company following their termination. On March 11, 2020, the former employee filed a counterclaim against the Company citing breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and declaratory judgement. The matter was resolved in a confidential manner on or about December 12, 2021. The Company retrieved the unlawfully removed assets, obtained a full release of all claims arising in the subject lawsuit and that might arise in the future relating to contingent consideration the former employee might have been entitled to in the future, subject to certain sales targets being achieved. The lawsuit was dismissed with prejudice, all parties bearing their own fees and costs.agency level. There were no other known contingencies at December 31, ~~2021.~~2022.
14

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – ~~INCOME/(LOSS)~~INCOME PER COMMON SHARE

We calculate basic ~~income/(loss)~~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 ~~2,933,755~~ 2,781,482shares of common stock. Due to the net loss ~~from operations in the three and nine months ended December 31, 2020, there are no~~attributable to common ~~shares added to calculate the dilutive loss per share for that period as the effect would be antidilutive. The Company excluded warrants of~~ ~~150,000~~ ~~for the three months ended December 31, 2021 and warrants of~~ ~~8,910,205~~ ~~and~~ ~~8,629,432~~ shareholders for the three and nine months ended December 31, ~~2020,~~2022, potentially dilutive securities, which consists of 389,544 and 1,070,694 (536,311 and 150,000 warrants, respectively, for the three and nine months ended December 31, 2022 were excluded as a result of the treasury stock method) common stock purchase warrants and 5,281 and 19,095 equity incentive awards, respectively for the three and nine months ended December 31, 2022, have been excluded from the ~~weighted average diluted common shares outstanding because their inclusion~~dilutive EPS calculation as the effect would ~~have been~~be antidilutive.
SCHEDULE OF ~~INCOME/~~INCOME (LOSS) PER COMMON SHARE
2022 2021 2022 2021
For the Three Months Ended
December 31, For the Nine Months Ended
December 31,
2022 2021 2022 2021

Numerator:
Net income/(loss) $ (4,102,992 ) $ 9,067,867 $ (1,653,472 ) $ 32,720,039
Less: Preferred stock dividends (782,639 ) (782,582 ) (2,339,409 ) (1,902,966 )
Net income/(loss) attributable to common stockholders $ (4,885,631 ) $ 8,285,285 $ (3,992,881 ) $ 30,817,073

Denominator:
Weighted average shares of common stock – Basic 117,348,511 114,757,014 116,950,013 111,289,024
Effect of dilutive common stock purchase warrants - 1,835,395 - 1,934,172
Effect of dilutive equity incentive awards - 125,091 - 127,802
Weighted average shares of common stock - Diluted 117,348,511 116,717,500 116,950,013 113,350,998

Basic earnings per share:
Income/(loss) per share attributable to common stockholders – basic $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.28

Diluted earnings per share:
Income/(loss) per share attributable to common stockholders – diluted $ (0.04 ) $ 0.07 $ (0.03 ) $ 0.27

For the Three Months Ended
December 31, For the Nine Months Ended
December 31,
2021 2020 2021 2020

Numerator:
Net income/(loss) $ 9,067,867 $ (1,906,437 ) $ 32,720,039 $ (7,348,851 )
Less: Preferred stock dividends (782,582 ) - (1,902,966 ) -
Net income/(loss) attributable to common stockholders $ 8,285,285 $ (1,906,437 ) $ 30,817,073 $ (7,348,851 )

Denominator:
Weighted average shares of common stock - basic 114,757,014 47,790,105 111,289,024 47,023,094
Effect of dilutive common stock purchase warrants 1,835,395 - 1,934,172 -
Effect of dilutive equity incentive awards 125,091 - 127,802 -
Weighted average shares of common stock - Diluted 116,717,500 47,790,105 113,350,998 47,023,094

Basic earnings per share:
Income/(loss) per share attributable to common stockholders - basic $ 0.07 $ (0.04 ) $ 0.28 $ (0.15 )

Diluted earnings per share:
Income/(loss) per share attributable to common stockholders - diluted $ 0.07 $ (0.04 ) $ 0.27 $ (0.15 )
(1) Weighted average of contingently issuable shares measured from the effective date of merger, April 30, 2021
NOTE 4 – INVENTORIES

At December 31, ~~2021~~2022 and March 31, ~~2021,~~2022, the inventory balances are composed of:
SCHEDULE OF INVENTORIES
December 31, 2021 March 31, 2021
December 31,
2022

March 31,
2022

Finished product $ 3,948,574 $ 899,266 $ 20,760,747 $ 6,167,318
Raw materials 26,307,975 12,440,548 31,387,096 33,924,813
Work in process 16,210,045 2,527,104 14,997,558 18,924,021
Inventory net $ 46,466,594 $ 15,866,918 $ 67,145,401 $ 59,016,152

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.

15

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment consisted of the following at December 31, ~~2021~~2022 and March 31, ~~2021:~~2022:
SCHEDULE OF PROPERTY AND EQUIPMENT
December 31, 2021 March 31, 2021 December 31, 2022 March 31, 2022
Building $ 28,113,684 $ -
Construction in progress $ 9,282,292 $ 544,939 1,834,688 14,335,371
Leasehold Improvements 257,009 126,558 257,009 257,009
Furniture and Fixtures 331,490 87,790 368,359 343,014
Vehicles 153,254 142,691 153,254 153,254
Equipment 31,238,627 26,425,221 37,689,716 32,524,850
Tooling 143,710 121,790 143,710 143,710
Total property and equipment $ 41,406,382 $ 27,448,989 $ 68,560,420 $ 47,757,208
Less accumulated depreciation (9,038,251 ) (5,895,763 ) (13,270,092 ) (10,119,402 )
Net equipment $ 32,368,131 $ 21,553,226
Net property and equipment $ 55,290,328 $ 37,637,806

Depreciation Expense for the three and nine months ended December 31, 2022 totaled $1,089,243, and $3,150,691, respectively. Depreciation Expense for the three and nine months ended December 31, 2021 totaled $1,087,550, and $3,184,976~~, respectively. Depreciation Expense for the three and nine months ended December 31, 2020 totaled $731,183, and $~~ ~~2,110,125~~, respectively.

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 8585%% 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~~4.5%%. The agreement contains fee of 33%% ($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. As of December 31, ~~2021,~~2022, the outstanding balance of the Factoring Liability was $~~4,097,867~~1,678,450. For the three and nine months ended December 31, 2022, interest expense recognized on the Factoring Liability was $42,286 and $111,220 including $37,500 of amortization of the commitment fee and for the three and nine months ended December 31, 2021, interest expense recognized on the Factoring Liability was $103,876 and $216,242, respectively, including $37,500 ~~and $75,000~~ of ~~respective amortization of the commitment fee and for the three and nine months ended December 31, 2020 was $86,006~~ ~~and $313,747, respectively, including $37,500~~ ~~and $50,000~~ ~~of respective~~ amortization of the commitment fee.

On June 17, ~~2020,~~ 2021, this agreement was amended which extended the maturity date to June 17, ~~2022.~~2023.

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 22%% 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 December 31, ~~2021, the~~2022, there was no outstanding balance of the Inventory Credit ~~Facility was $194,810~~.Facility. Interest expense recognized on the Inventory Credit Facility for the nine months ended December 31, 2022 and 2021 was $6,580 and $24,256~~, including~~ (including $8,561 of amortization of the annual ~~fee for the nine months ended December 31, 2021 and $118,202~~fee), ~~including $24,962~~ ~~of amortization of the annual fee for the nine months ended December 31, 2020.~~respectively.

NOTE 8 – LEASES

We lease office, manufacturing, and warehouse space in Scottsdale, ~~and Payson,~~ AZ, Atlanta and Marietta, GA, and Manitowoc, ~~and Two Rivers,~~ WI under contracts we classify as operating leases. None of our leases are financing leases. The ~~Payson lease had an option to renew for~~ ~~five years~~ ~~and the lease expired in November of 2021. The~~ Scottsdale lease does not include a renewal option. ~~As of June 26, 2020, the Company entered into an amended agreement that modified the Manitowoc lease to monthly payments of $34,071~~ ~~and decrease the term to~~ ~~March 2025. The agreement does not contain a renewal option. Accordingly, we modified our Right of Use Assets and Operating Lease Liabilities by $737,680~~ ~~at June 30, 2020.~~ In August of 2021 we extended the lease of our Atlanta offices through May of 2027, accordingly we increased our Right of Use Assets and Operating Lease Liabilities by $501,125 at September 30, 2021.
~~Consolidated~~ In January of 2022, we extended the lease ~~expense for~~of our second Manitowoc, WI location and increased our Right of Use Assets and Operating Lease Liabilities by $308,326. We terminated our lease agreement in our first Manitowoc, WI location during the ~~three and~~ nine months ended December 31, ~~2021~~2022. Accordingly, we decreased our Right of Use Assets and Operating Lease Liabilities by $901,076.
As of December 31, 2022 and March 31, 2022, total Right of Use Assets were $~~309,766~~ 1,378,711and $~~896,594~~ 2,791,850~~including~~, respectively. As of December 31, 2022 and March 31, 2022, total Operating Lease Liabilities were $~~307,278~~ 1,498,787and $~~882,028~~ 2,922,780, respectively. The current portion of ~~respective operating lease expense~~our Operating Lease Liability on December 31, 2022 and March 31, 2022 is $518,778 and $~~2,488~~ 831,429 respectively and is reported as a current liability. The remaining $~~14,566~~ 980,009of ~~respective other lease associated expenses such as association dues, taxes. Consolidated lease expense~~the total $1,498,787 for the ~~three and nine months~~quarter ended December ~~2020 was~~31, 2022 and the $~~217,140~~ 2,091,351~~and~~ of the total $~~609,250, respectively, including $179,487~~2,922,780 ~~and $534,781~~ for the year ended March 31, 2022 of ~~respective operating lease expense and $37,653~~ ~~and $74,468~~ the Operating Lease Liability is presented as a long-term liability net of ~~respective other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.~~the current portion.

16

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The weighted average remaining lease term and weighted average discount rate for operating leases were ~~3.7~~3.4 years and ~~10.0~~10.0%%, respectively.

Future minimum lease payments under non-cancellable leases as of December 31, ~~2021~~2022 are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER NON-CANCELLABLE LEASES
Years Ended March 31,
2022 ⁽¹⁾ $ 291,808
2023 1,018,689
2023 ⁽¹⁾ $ 160,757
2024 873,420 583,768
2025 675,078 387,214
2026 250,008 351,962
2027 257,508
Thereafter 301,168 43,516
Total 3,410,171
Total Lease Payments 1,784,725
Less: Amount Representing Interest (578,121 ) (285,938 )
Operating lease liability, net $ 2,832,050
Present value of lease liabilities $ 1,498,787

(1) This amount represents future lease payments for the remaining three months of fiscal year ~~2022.~~2023. It does not include any lease payments for the nine months ended December 31, ~~2021.~~2022.
17
~~AMMO, Inc.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

NOTE 9 – NOTES PAYABLE – RELATED PARTY

For the three and nine months ended December 31, ~~2021,~~2022, the Company made $~~158,131~~173,134 and $~~463,192~~507,507 in ~~respective~~ principal payments, respectively, in connection with the Amended Note B, an amended related party note payable with Jagemann Stamping Company (“JSC”). We entered tointo the Amended Note B with JSC on November 4, 2020 and the note matures on June 26, ~~2023~~.2023. We recognized $~~31,438~~12,753 and $~~94,210~~41,450 in respective interest expenses for the three and nine months ended December 31, ~~2021,~~2022, respectively.

1817

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.
For the nine months ended December 31, 2022, approximately $11.2 million of Loan funds were advanced including $1.0 million of cash collateral or restricted cash as security for the Loan. We made $66,585 in principal payments for the three and nine months ended December 31, 2022. 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 nine months ended December 31, 2022, $500,000 of restricted cash was released to the Company.
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 nine ~~months~~month period ended December 31, ~~2021,~~2022, we issued ~~22,336,437~~ 1,558,670shares of common stock as follows:

● ~~20,000,000~~ ~~shares were issued in connection with our merger of Gemini Direct Investments, LLC valued at $142,691,282~~
● ~~431,080~~ ~~shares were issued to investors for exercised warrants valued for $943,907~~
● ~~276,907~~99,762 shares were issued for cashless exercise of ~~343,110~~100,000 warrants
● ~~772,450~~177,273 shares ~~valued at $1,631,701~~ were issued for ~~services and equipment provided to~~ the ~~Company~~exercise of warrants for a total value of $56,046
● ~~856,000~~1,281,635 shares valued at $~~2,898,250~~4,457,973 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

1918

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At December 31, ~~2021,~~2022, outstanding and exercisable stock purchase warrants consisted of the following:
SCHEDULE OF OUTSTANDING AND EXERCISABLE STOCK PURCHASE WARRANTS

Number of
Shares
Weighted Averaged
Exercise Price
Weighted
Average Life
Remaining
(Years)
Number of
Shares Weighted
Average
Exercise
Price
Weighted
Average Life
Remaining
(Years)

Outstanding at March 31, 2021 3,607,945 $ 2.31 3.24
Outstanding at March 31, 2022 2,933,755 $ 2.32 2.29
Granted 100,000 0.01 4.91 150,000 0.01 -
Exercised (774,190 ) 1.99 - (277,273 ) 0.21 -
Forfeited or cancelled - - - (25,000 ) 2.00 -
Outstanding at December 31, 2021 2,933,755 $ 2.32 2.53
Exercisable at December 31, 2021 2,933,755 $ 2.32 2.53
Outstanding at December 31, 2022 2,781,482 $ 2.41 1.60
Exercisable at December 31, 2022 2,781,482 $ 2.41 1.60

As of December 31, ~~2021,~~2022, we had ~~2,933,755~~2,781,482 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 ~~100,000~~ ~~shares of Common Stock at an exercise price of $0.01~~ ~~per share until December 2026, (2) warrants to purchase~~ 911 shares of Common Stock at an exercise price of $1.65 per share until April 2025; ~~(3)~~(2) warrants to purchase ~~1,821,567~~1,769,294 shares of our Common Stock at an exercise price of $2.00 per share consisting of ~~32%~~30% of the warrants until August 2024, and ~~68%~~70% until February 2026; ~~(4)~~(3) warrants to purchase 474,966 shares of Common Stock at an exercise price of $2.40 until September 2024; ~~(5)~~(4) warrants to purchase 386,311 shares of Common Stock at an exercise price of $2.63 until November 2025, and ~~(6)~~(5) warrants to purchase 150,000 shares of Common Stock at an exercise price of $6.72 until February 2024.

During the three months ended December 31, 2022, the Company issued 150,000 warrants for services to purchase 150,000 shares of Common Stock at an exercise price of $0.01. The total value of the 150,000 warrants was $427,639.
2019

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1112 – 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 Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred Stock”), as to dividend rights and rights as to the distribution of assets upon the Company’s liquidation, dissolution or winding-up, ranks: (1) senior to all classes or series of Common Stock and to all other capital stock issued by the Company expressly designated as ranking junior to the Series A Preferred Stock; (2) on parity with any future class or series of the Company’s capital stock expressly designated as ranking on parity with the Series A Preferred Stock; (3) junior to any future class or series of the Company’s capital stock expressly designated as ranking senior to the Series A Preferred Stock; and (4) junior to all the Company’s existing and future indebtedness.
The Series A Preferred Stock has no stated maturity and is not subject to mandatory redemption or any sinking fund. In the event of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of shares for the Series A Preferred Stock are entitled to be paid out of the Company’s assets legally available for distribution to its stockholders (~~i.e.~~~~, after satisfaction of all the Company’s liabilities to creditors, if any) an amount equal to $25.00~~ per share of the Series A Preferred Stock, plus any amount equal to any accumulated and unpaid dividends to the date of payment before any distribution or payment may be made to holders of shares of Common Stock or any other class of or series of the Corporation’s capital stock ranking, as to rights to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up, junior to 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~~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.~~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.

On May 19, 2021, we entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P., as representative of several underwriters (collectively, the “Underwriters”), relating to a firm commitment public offering of ~~1,097,200~~ ~~newly issued shares of our 8.75% Series A Preferred Stock at a public offering price of $25.00~~ ~~per share. Under the terms of the Underwriting Agreement, we granted the Underwriters a 45-day option to purchase up to an additional~~ ~~164,580~~ ~~shares of Series A Preferred Stock from us. The gross proceeds to us from the sale of~~ ~~1,097,200~~ ~~shares of Series A Preferred Stock, before deducting underwriting discounts and commissions and estimated offering expenses payable by us, was $27,430,000. The closing of the offering took place on May 21, 2021.~~
~~On May 25, 2021, we entered into an additional underwriting agreement with Alexander Capital, L.P. relating to a firm commitment public offering of~~ ~~138,220~~ ~~newly issued shares of our Series A Preferred Stock at a public offering price of $25.00~~ ~~per share. The closing of the offering took place on May 27, 2021. The gross proceeds to us from the sale of~~ ~~138,220~~ ~~shares of Series A Preferred Stock, before deducting underwriting discounts and commissions and estimated offering expenses payable by us, were $3,455,500. Additionally, the Underwriters exercised its previously announced over-allotment option to purchase~~ ~~164,580~~ shares of Series A Preferred Stock pursuant to that certain Underwriting Agreement dated May 19, 2021, by and between us and Alexander Capital, L.P., as representative of the several underwriters identified therein. We closed the exercise of the over-allotment option on May 27, 2021. The gross proceeds from the exercise of the over-allotment option were $~~4,114,500, before deducting underwriting discounts and commissions.~~
Preferred dividends accumulated as of December 31, ~~2021~~2022 were $~~144,561~~144,334. On ~~August 27, 2021~~November 18, 2022, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning ~~May 21, 2021 (the first issuance date of the Series A Preferred Stock)~~September 15, 2022 through and including ~~June 30, 2021~~December 14, 2022 payable on ~~September~~December 15, ~~2021~~2022 to holders of record of Series A Preferred Stock on ~~August 31, 2021~~November 30, 2022 equal to $~~0.241246528~~ 0.5529514per share. Dividends totaling $~~337,745~~ 774,132were paid on ~~September~~December 15, ~~2021.~~2022. On ~~November~~August 17, ~~2021,~~2022, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning ~~July 1, 2021~~June 15, 2022 through and including ~~December~~September 14, ~~2021~~2022 payable on ~~December~~September 15, ~~2021~~20221 to holders of record of Series A Preferred Stock on ~~November 30, 2021~~August 31, 2022 equal to $$$~~1.01475694444444~~ 0.55902778per share. Dividends totaling $~~1,420,660~~782,639 were paid on ~~December~~September 15, ~~2021.~~2022. On May 12, 2022, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning March 15, 2022 through and including June 14, 2022 payable on June 15, 2022 to holders of record of Series A Preferred Stock on May 31, 2022 equal to $0.559027777777778 per share. Dividends totaling $782,639 were paid on June 15, 2022.

2120

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE ~~12 -~~13 – ACQUISITION

Gemini Direct Investments, LLC

On April 30, 2021 (the “Effective Date”) 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 (“Sub”), Gemini Direct Investments, LLC, a Nevada limited liability company (“Gemini”), and Steven F. Urvan, an individual (the “Seller”), whereby Sub merged with and into Gemini, with Sub surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). At the time of the Merger, Gemini had nine (9) subsidiaries, all of which are related to Gemini’s ownership of the ~~Gunbroker.com~~GunBroker.com business. ~~Gunbroker.com~~GunBroker.com is an on-line auction marketplace dedicated to firearms, hunting, shooting, and related products. The Merger was completed on the Effective Date.

In consideration of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, on the Effective Date, (i) the Company assumed and repaid an aggregate amount of indebtedness of Gemini and its subsidiaries equal to $50,000,000 (the “Assumed Indebtedness”); and, (ii) the issued and outstanding membership interests in Gemini (the “Membership Interests”), held by the Seller, automatically converted into the right to receive (A) $50,000,000 (the “Cash Consideration”), and (B) 20,000,000 shares of common stock of the Company, $0.001 par value per share (the “Stock Consideration”).

In connection with the Merger Agreement, the Company and the Seller agreed that the Stock Consideration consisted of: (a) 14,500,000 shares issued without being held in escrow or requiring prior stockholder approval; (b) 4,000,000 shares issued subject to the Pledge and Escrow Agreement; and (c) 1,500,000 shares that will not be issued prior to the Company obtaining stockholder approval for the issuance (the “Additional Securities”).

The total estimated consideration consisted of cash payment of $50,000,000 less $1,350,046 of acquired cash, a working capital adjustment of $2,000,000, debt assumption and repayment upon closing of $50,000,000, contingent consideration of $10,755,000 for 1,500,000 Additional Securities, and 18,500,000 shares of AMMO Inc. Common Stock. The shares were valued at $7.17 per share, the five-day average closing price of the Company’s Common Stock immediately preceding the signing of the binding agreement.

Pursuant to the Merger Agreement, the Company completed a Post-Closing Adjustment following the close of the Merger equal to the Closing Working Capital minus the Estimated Working Capital at closing of the Merger. Accordingly, the Company received a cash payment of $129,114and adjusted the $2,000,000 Estimated Working Capital Adjustment in the fair value of the consideration transferred to $1,870,886.

In accordance with the acquisition method of accounting for business combinations, the assets acquired, and the liabilities assumed have been recorded at their respective fair values. The consideration in excess of the fair values of assets acquired, and liabilities assumed are recorded as goodwill.

The ~~preliminary~~ fair value of the consideration transferred was valued as of the date of the acquisition as follows:
SCHEDULE OF FAIR VALUE OF CONSIDERATION TRANSFERRED

Cash $ 48,649,954 $ 48,649,954
Estimated working capital adjustment 1,870,886
Working capital adjustment 1,870,886
Contingent consideration 10,755,000 10,755,000
Common stock 132,645,000 132,645,000
Assumed debt 50,000,000 50,000,000

Fair value of Patent $ 243,920,840
Fair value of consideration transferred $ 243,920,840

The ~~preliminary~~ allocation for the consideration recorded for the acquisition is as follows:
SCHEDULE OF ALLOCATION FOR CONSIDERATION

Accounts receivable, net $ 17,002,362 $ 17,002,362
Prepaid expenses 478,963 478,963
Equipment 1,051,980 1,051,980
Deposits 703,389 703,389
Other Intangible assets⁽¹⁾ (1) 146,617,380 146,617,380
Goodwill⁽¹⁾ (1) 90,870,094 90,870,094
Right of use assets - operating leases 612,727
Right of use assets – operating leases 612,727
Accounts payable (12,514,919 ) (12,514,919 )
Accrued expenses (196,780 ) (196,780 )
Operating lease liability (704,356 ) (704,356 )

Total Consideration $ 243,920,840 $ 243,920,840

⁽¹⁾ ~~Preliminary estimate of Other Intangible Assets and Goodwill.~~ Other intangible assets consist of Tradenames, Customer Relationships, Intellectual Property, and other tangible assets related to the acquired business.

Unaudited Pro Forma Results of Operations
This pro forma results of operations gives effect to the acquisition as if it had occurred April 1, 2021. Material pro forma adjustments include the removal of approximately $1.8 million of interest expenses and debt discount amortization and the addition of approximately $0.9 million depreciation and amortization expenses.
SCHEDULE OF UNAUDITED PRO FORMA RESULTS OF OPERATIONS
INCOME STATEMENT DATA For the Nine Months
Ended
December 31, 2021

Net revenues $ 178,213,024
Net income $ 37,266,527
2221

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~We recorded approximately $1.3~~ ~~million in transaction costs in the three and nine months ended December 31, 2021.~~
The purchase price allocation is preliminary. The preliminary estimated fair value recorded for the acquired assets and liabilities assumed with excess consideration recorded as goodwill represent management’s estimate of fair value and are subject to change when additional information may become available. The purchase price allocation will continue to be preliminary until the Company is able to finalize the allocation. The Company expects to finalize the purchase price allocation within the measurement period, but not more than one year following the closing date of the Merger. The final amounts from the valuation may significantly and materially differ from the preliminary allocation herein.
~~Unaudited Pro Forma Results of Operations~~
~~These~~ ~~pro forma results of operations gives effect to the acquisition as if it had occurred on April 1, 2021. Material pro forma adjustments include the removal of approximately $1.8~~ ~~million of interest expenses and debt discount amortization and the addition of approximately $0.9~~ ~~million of depreciation and amortization expenses.~~
~~SCHEDULE OF UNAUDITED PRO FORMA RESULTS OF OPERATIONS~~
INCOME STATEMENT DATA
For the Nine Months Ended
December 31, 2021

Net revenues $ 178,213,024
Net income $ 37,266,527

NOTE 1314 – GOODWILL AND INTANGIBLE ASSETS

~~In the current period,~~During our fiscal year ended March 31, 2022, we recorded $90,870,094 of Goodwill generated from our Merger with Gemini.

Amortization expenses related to our intangible assets for the three and nine months ended December 31, ~~2021~~2022 were $~~3,535,805~~3,266,761 and $~~9,593,127~~9,800,281, respectively. Amortization expenses related to our intangible assets for the three and nine months ended December 31, ~~2020~~2021 were $~~492,947~~3,535,805 and $~~1,478,841~~9,593,127~~, respectively.~~.
SCHEDULE OF INTANGIBLE ASSETS
December 31, 2021 December 31, 2022
Life Licenses Patent Other Intangible Assets Life Licenses Patent Other
Intangible
Assets
Licensing Agreement – Jesse James 5 $ 125,000 $ - $ - 5 $ 125,000 $ - $ -
Licensing Agreement – Jeff Rann 5 125,000 - - 5 125,000 - -
Streak Visual Ammunition patent 11.2 - 950,000 - 11.2 - 950,000 -
SWK patent acquisition 15 - 6,124,005 - 15 - 6,124,005 -
Jagemann Munition Components:
Customer Relationships 3 - - 1,450,613 3 - - 1,450,613
Intellectual Property 3 - - 1,543,548 3 - - 1,543,548
Tradename 5 - - 2,152,076 5 - - 2,152,076
GDI Acquisition:
Tradename 15 - - 76,532,389 15 - - 76,532,389
Customer List 10 - - 65,252,802 10 - - 65,252,802
Intellectual Property 10 - - 4,224,442 10 - - 4,224,442
Other Intangible Assets 5 - - 607,747 5 - - 607,747
250,000 7,074,005 151,763,617 250,000 7,074,005 151,763,617

Accumulated amortization – Licensing Agreements (245,833 ) - - (250,000 ) - -
Accumulated amortization – Patents - (1,424,443 ) - - (1,917,885 ) -
Accumulated amortization – Intangible Assets - - (12,110,901 ) - - (24,893,412 )
$ 4,167 $ 5,649,562 $ 139,652,716 $ - $ 5,156,120 $ 126,870,205

Annual amortization of intangible assets for the next five fiscal years are as follows:
SCHEDULE OF ANNUAL AMORTIZATION OF INTANGIBLE ASSET
Years Ended March 31, Estimates for
Fiscal Year Estimates for
Fiscal Year
2022 (1) $ 3,479,832
2023 13,095,215
2023 (1) $ 3,294,934
2024 13,074,489 13,074,489
2025 12,664,775 12,664,775
2026 12,674,904 12,664,775
2027 12,553,355
Thereafter 90,317,230 77,773,997
Annual amortization of intangible assets $ 145,306,445 $ 132,026,325

(1) This amount represents future amortization for the remaining ~~three~~nine months of fiscal year ~~2022.~~2023. It does not include any amortization for the nine months ended December 31, ~~2021.~~2022.

2322

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1415 – SEGMENTS

On April 30, 2021, ~~the Company~~we entered into an agreement and plan of merger with Gemini, which, along with its subsidiaries, engages primarily in the operation of an online marketplace dedicated to firearms, hunting, shooting and related ~~products. As~~products, which created a ~~result, at December 31, 2021, our~~second reportable segment. 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.

~~Ammunition generated approximately~~ 73%In the current period, we began the reporting of ~~our revenue in~~ the ~~three~~separate allocation of certain corporate general and ~~nine months ended December 31, 2021, while Marketplace generated approximately~~ 92~~% and~~ 76~~% of our operating income in~~administrative expenses including non-cash stock compensation expense, as such we have updated the ~~three and nine months ended December 31, 2021, respectively.~~prior period disclosure herein. The following tables set forth certain financial information utilized by management to evaluate our operating segments for the interim period presented:
SCHEDULE OF OPERATING SEGMENTS
Ammunition Marketplace Corporate
and other
expenses Total
For the Three Months Ended December 31, 2021 For the Three Months Ended December 31, 2022
Ammunition Marketplace Total Ammunition Marketplace Corporate
and other
expenses Total

Net Revenues $ 47,092,417 $ 17,596,769 $ 64,689,186 $ 23,292,292 $ 15,419,202 $ - $ 38,711,494
Cost of Revenues 39,904,811 2,261,509 42,166,320 23,865,275 2,319,040 - 26,184,315
General and administrative expense 5,935,949 2,251,175 8,187,124 4,838,081 1,719,707 6,993,592 13,551,380
Depreciation and amortization 420,077 3,305,844 3,725,921 143,378 3,165,696 - 3,309,074
Income from Operations $ 831,580 $ 9,778,241 $ 10,609,821
Income/(Loss) from Operations $ (5,554,442 ) $ 8,214,759 $ (6,993,592 ) $ (4,333,275 )

Ammunition Marketplace Corporate
and other
expenses Total
For the Nine Months Ended December 31, 2021

For the Nine Months Ended December 31, 2022

Ammunition Marketplace Total Ammunition Marketplace Corporate
and other
expenses Total

Net Revenues $ 123,521,552 $ 46,646,051 $ 170,167,603 $ 101,269,237 $ 46,486,842 $ - $ 147,756,079
Cost of Revenues 96,203,543 6,254,232 102,457,775 97,555,732 6,701,797 - 104,257,529
General and administrative expense 17,745,255 5,400,926 23,146,181 12,117,828 6,713,561 14,490,456 33,321,845
Depreciation and amortization 1,260,064 8,784,930 10,044,994 437,694 9,513,058 - 9,950,752
Income from Operations $ 8,312,690 $ 26,205,963 $ 34,518,653
Income/(Loss) from Operations $ (8,842,017 ) $ 23,558,426 $ (14,490,456 ) $ 225,953
Ammunition Marketplace
Corporate
and other
expenses
Total
For the Three Months Ended December 31, 2021
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 47,092,417 $ 17,596,769 $ - $ 64,689,186
Cost of Revenues 39,904,811 2,261,509 - 42,166,320
General and administrative expense 3,941,639 2,251,146 1,994,339 8,187,124
Depreciation and amortization 420,077 3,305,844 - 3,725,921
Income/(loss) from Operations $ 2,825,890 $ 9,778,270 $ (1,994,339 ) $ 10,609,821
Ammunition Marketplace
Corporate
and other
expenses
Total
For the Nine Months Ended December 31, 2021
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 123,521,552 $ 46,646,051 $ - $ 170,167,603
Cost of Revenues 96,203,542 6,254,233 - 102,457,775
General and administrative expense 10,068,430 5,400,925 7,676,826 23,146,181
Depreciation and amortization 1,260,064 8,784,930 - 10,044,994
Income/(Loss) from Operations $ 15,989,516 $ 26,205,963 $ (7,676,826 ) $ 34,518,653
23
AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1516 – INCOME TAXES

The income tax provision ~~reflective~~ effective tax rates were ~~13.0~~14.9%% and ~~4.0~~482.1%% for the three and nine months ended December 31, ~~2021. Our effective tax rates were~~2022, ~~0.0~~13.0%% and ~~0.0~~4.0%% for the three and nine months ended December 31, ~~2020,~~2021, respectively. During the three and nine months ended December 31, ~~2021 and 2020,~~2022, the effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes. For the ~~change in~~three and nine months ended December 31, 2021 the ~~valuation allowance.~~effective tax rate differed from the U.S. federal statutory rate due to our valuation. The effective tax rates increased during the three and nine months ended December 31, ~~2021~~2022 compared to the prior year ~~periods~~period due to ~~an increase in income from operations.~~the removal of our valuation allowance.

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended December 31, 2016, December 31, 2017, and March 31, 2018, 2019, 2020, 2021, and ~~2021~~2022 are subject to audit.

~~Furthermore,~~NOTE 17 – RELATED PARTY TRANSACTIONS
Through our acquisition of Gemini, a related party relationship was created through one of our Members of the ~~Coronavirus Aid, Relief~~Board of Directors by ownership of entities that transacts with Gemini. Our Accounts Receivable consisted of $182,344 in receivables from these entities at December 31, 2022. We recognized $222,300 in Marketplace Revenue for the nine months ended December 31, 2022 that was attributable to that relationship. We issued 30,000 shares of Common Stock for a total value of $105,000 to this Member of the Board of Directors as consideration for service on the Board.
During the nine months ended December 31, 2022, we paid $211,712 in service fees to two independent contractors and ~~Economic Security Act (“CARES Act”~~45,000 shares in the aggregate to our advisory committee members for service for a total value of $129,705.
Settlement Agreement
On November 3, 2022, AMMO, Inc. (the “Company”) ~~was signed~~entered into ~~law on March 27, 2020. The CARES Act was enacted in response~~a Settlement Agreement (the “Settlement Agreement”) with Steven F. Urvan and Susan T. Lokey (collectively with each of their respective affiliates and associates, the “Urvan Group”).
Pursuant to the ~~COVID-19 pandemic~~Settlement Agreement, the Urvan Group has agreed to withdraw its notice of stockholder nomination of its seven director candidates (the “Urvan Candidates”) and ~~contains numerous income tax provisions,~~its demand to inspect books and records, pursuant to Section 220 of the General Corporation Law of the State of Delaware, and the Company agreed to immediately increase the size of the Board from seven to nine directors and appoint Christos Tsentas and Wayne Walker (each, a “New Director” and the New Directors together with Mr. Urvan, the “Urvan Group Directors”) to the Board to serve as directors with terms expiring at the 2022 annual meeting of stockholders (the “2022 Annual Meeting”). The Company will include the Urvan Group Directors in its director candidates slate for the 2022 Annual Meeting and any subsequent annual meeting of stockholders of the Company occurring prior to the Termination Date (as defined below). The Company has agreed to not increase the size of the Board above nine directors prior to the Termination Date unless the increase is approved by at least seven directors. Mr. Wagenhals will continue to serve as a director and Chairman of the Board.
Unless otherwise mutually agreed to in writing by each party, the Settlement Agreement will remain in effect until the date that is the earlier of (i) 30 days prior to the earlier of (A) the deadline set forth in the notice requirements of Federal “Universal Proxy Rules” promulgated under Rule 14a-19(a) and Rule 14a-19(b) under the Securities Exchange Act of 1934, as amended (the “UPR Deadline”) relating to the Company’s 2023 annual meeting of stockholders (the “2023 Annual Meeting”) and (B) any deadline that may be set forth in the Company’s Amended and Restated Certificate of Incorporation (as amended from time to time, the “Certificate”) or Bylaws (the “Bylaws”) following the execution of the Settlement Agreement relating to the nomination of director candidates for election to the Board at the 2023 Annual Meeting, and (ii) 90 days prior to the first anniversary of the 2022 Annual Meeting (such date, the “Termination Date”). However, if the Company notifies Mr. Urvan in writing at least 15 days prior to such Termination Date that the Board irrevocably offers to re-nominate the Urvan Group Directors for election at the 2023 Annual Meeting and Mr. Urvan accepts such offer within 15 days of receipt of such notice, the Termination Date will be automatically extended until the earlier of (i) 30 days prior to the earlier of (A) the UPR Deadline relating to the Company’s 2024 annual meeting of stockholders (the “2024 Annual Meeting”) and (B) any deadline that may be set forth in the Certificate or the Bylaws following execution of the Settlement Agreement relating to the nomination of director candidates for election to the Board at the 2024 Annual Meeting, and (ii) 90 days prior to the first anniversary of the 2023 Annual Meeting. Notwithstanding the foregoing, the “Termination Date” shall not occur prior to 20 days after Mr. Urvan’s departure from the Board.
Pursuant to the Settlement Agreement, the Company will suspend the previously announced separation of Company into Action Outdoor Sports, Inc. and Outdoor Online, Inc., pending the further evaluation of strategic options by the Board. The Company paid approximately $500,000 of the Urvan Group’s costs, fees and expenses per the terms of the Settlement Agreement. Additionally, the Company issued 125,000 shares of Common Stock for a total value of $437,500 to an employee and issued 110,000 shares of Common Stock for a total value of $385,000 to an independent contractor as ~~relaxing limitations~~a result of termination without cause per the terms of the Settlement Agreement.
The foregoing summary of the Settlement Agreement does not purport to be complete and is subject to, and qualified in its entirety, by reference to the full text of the Settlement Agreement, a copy of which was previously filed as Exhibit 10.1 in the Form 8-K filed with the SEC on ~~the deductibility of interest, technical corrections to tax depreciation methods for qualified improvement property~~November 7, 2022, and ~~net operating loss carryback periods.~~incorporated herein by reference.

NOTE 1618 – SUBSEQUENT EVENTS
Common Stock Issuances
Subsequent to the December 31, ~~2021, we~~2022, the Company issued ~~90,000~~22,730 shares pursuant the exercise of ~~Common Stock to employees as compensation~~warrants for a total value of $45,460 and cancelled ~~315,000~~25,000 ~~or $3.50~~ ~~per share.~~
~~Board~~ shares previously issued as employee stock awards for a total value of ~~Directors Share Repurchase Plan~~
~~On February 7, 2021, our Board of Directors authorized a share repurchase program for up to~~ $~~30.0~~87,500 million dollars of our outstanding Common Stock. Purchases made pursuant to the program will be made from time to time, at the Company’s discretion, in the open market, through privately negotiated transactions or through other manners as permitted by federal securities laws. The timing, manner, price and amount of any repurchases will be determined by the Company and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program is expected to commence following the public disclosure of our 2022 fiscal third quarter financial results and filing of this report on Form 10-Q and may be suspended or discontinued at any time..

24

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 ~~corporate,~~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 7.6 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 ~~modernize~~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 ~~by bringing~~partners for manufactured components. We will continue to leverage our proprietary brands like Streak Visual Ammunition^TM 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 technologies to market. We intend to do that through acquisition and application of intellectual property that is unique to the industry and through investing in manufacturing equipment and processes that enable us to compete globally.governmental-based opportunities.

Our innovative line of match grade armor piercing (“AP”) and hard armor piercing incendiary (“HAPI”) tactical rounds are the centerpiece of the Company’s strategy to address the unique needs of the armed forces community. This ammunition was designed around a match grade portfolio of projectiles, that include a solid copper boat tail and armor piercing configuration. The distinction between these rounds and others sold, is that the manufacturing process was engineered to ensure extremely tight tolerances between each projectile manufactured, ensuring for the end user that the ballistic trajectory remains consistent between rounds without regard to the actual configuration or round fired. Our AP and HAPI line are also available with our O.W.L. Technology™. The Company has aligned its manufacturing operations to support the large caliber demand from military personnel, such as the 12.7 mm and .50 caliber BMG configurations. On February 2, 2021, we announced that we restarted our improved .50 caliber manufacturing line to address increased market demand and fulfill current orders.
We offer ammunition casings for pistol ammunition through large rifle ammunition. Our casing operations is backed by decades of manufacturing experience that allows the production of high-quality pistol brass and rifle brass components. Born from the automotive industry and refined over time to deliver durable and consistent sporting components, Jagemann™ Casings, has become one of the largest brass manufacturers in the country, with the capacity to produce more than 750 million pieces of brass each year with the ability to scale to 1 billion rounds on an annual basis. Proud of its American-made components and capabilities, the Company now has complete control over the manufacturing process. This results in a number of advantages when it comes to the brass that leaves our state-of-the-art facility.
25

~~On April 30, 2021, we acquired Gemini Direct Investments, LLC (“Gemini”) and nine of its subsidiaries, all of which are related to Gemini’s ownership of the Gunbroker.com marketplace.~~

~~GunBroker.com~~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 ~~a large online marketplace dedicated to firearms, hunting, shooting and related products. Aside from merchandise bearing its logo, GunBroker.com currently sells none~~part of the items listed on its website. Third-party sellers list items on the site and federal and state laws govern the sale of firearms and other restricted items. Ownership policies and regulations are followed using licensed firearms dealers as transfer agents.
~~With~~ our ~~recent addition of the Gunbroker.com marketplace, we aim to further enhance our vision of bringing technologies~~commitment to the ~~industry. Gunbroker.com is a marketplace that connects millions~~continuing development of ~~buyers and sellers allowing our users to access a daily average of over one million unique items.~~differentiated, cutting-edge technology.
The focus for our 2022 fiscal year is to continue to expand our brand presence into the markets identified above and to continue to grow our sales within our targeted markets. We intend to do this through establishing key strategic relationships, enrolling in government procurement programs, establishing relationships with leading law enforcement associations and programs, expanding distributor channels, and revitalized marketing campaigns.
26

Results of Operations

Our financial results for the three and nine months ended December 31, ~~2021~~2022 reflect our newly positioned ~~organization.~~organization as we transition into our new manufacturing facility. 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, and as~~operations. We experienced a ~~result, we experienced an increase~~13.2% decrease in our ~~gross profit margin~~Net Revenues for the ~~three and~~nine months ended December 31, 2022 compared with the nine months ended December 31, 2021. This was the result of ~~a significant increase~~decreased ammunition sales due to changes in sales allowing us to cover a greater percentage of our fixed manufacturing costs, which include our non-cash amortization and depreciation expense as well as the addition of our new marketplace, Gunbroker.com.market demand.

The following table presents summarized financial information taken from our condensed consolidated statements of operations for the three and nine months ended December 31, ~~2021~~2022 compared with the three and nine months ended December 31, ~~2020:~~2021:

For the Three Months Ended For the Nine Months Ended For the Three Months Ended For the Nine Months Ended
December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 December 31,
2022 December 31,
2021 December 31,
2022 December 31,
2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 64,689,186 $ 16,620,244 $ 170,167,603 $ 38,293,086 $ 38,711,494 $ 64,689,186 $ 147,756,079 $ 170,167,603
Cost of Revenues 42,166,320 13,278,338 102,457,775 32,590,149 26,184,315 42,166,320 104,257,529 102,457,775
Gross Margin 22,522,886 3,341,906 67,709,828 5,702,937 12,527,179 22,522,866 43,498,550 67,709,828
Sales, General & Administrative Expenses 11,913,045 3,770,713 33,191,175 10,621,873 16,860,454 11,913,045 43,272,597 33,191,175
Income (loss) from Operations 10,609,821 (428,807 ) 34,518,653 (4,918,936 ) (4,333,275 ) 10,609,821 225,953 34,518,653
Other income (expense)
Other expense (189,956 ) (1,477,630 ) (446,616 ) (2,429,915 )
Other income (expense) (490,842 ) (189,956 ) (509,998 ) (446,616 )
Income (loss) before provision for income taxes $ 10,419,865 $ (1,906,437 ) $ 34,072,037 $ (7,348,851 ) $ (4,824,117 ) $ 10,419,865 $ (284,045 ) $ 34,072,037
Provision for income taxes 1,351,998 - 1,351,998 - (721,125 ) 1,351,998 1,369,427 1,351,998
Net Income (Loss) $ 9,067,867 $ (1,906,437 ) $ 32,720,039 $ (7,348,851 ) $ (4,102,992 ) $ 9,067,867 $ (1,653,472 ) $ 32,720,039

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 For the Nine Months Ended For the Three Months Ended For the Nine Months Ended
31-Dec-21 31-Dec-20 31-Dec-21 31-Dec-20 31-Dec-22 31-Dec -21 31-Dec -22 31-Dec -21

Reconciliation of GAAP net income to Adjusted EBITDA
Net Income (Loss) $ 9,067,867 $ (1,906,437 ) $ 32,720,039 $ (7,348,851 ) $ (4,102,992 ) $ 9,067,867 $ (1,653,472 ) $ 32,720,039
Provision for income taxes 1,351,998 1,351,998
Provision for Income Taxes (721,125 ) 1,351,998 1,369,427 1,351,998
Depreciation and amortization 4,623,355 1,224,130 12,778,103 3,588,966 4,356,004 4,623,355 12,950,972 12,778,103
Loss on purchase - - - 1,000,000
Excise Taxes 3,982,221 1,201,841 10,317,110 2,707,534
Interest expense, net 190,319 1,938,630 468,404 2,704,315 320,439 190,319 538,191 468,404
Employee stock awards 1,045,125 240,853 2,898,250 716,589
Employee stock awards⁽¹⁾ 2,106,535 1,045,125 4,457,973 2,898,250
Stock grants 65,098 65,455 197,110 213,130 43,750 65,098 135,344 197,110
Stock for services 4,200 87,500 4,200 87,500 - 4,200 - 4,200
Warrant Issuance 145,508 - 145,508 - 106,909 145,508 106,909 145,508
Other income, net (363 ) (461,000 ) (21,788 ) (274,400 )
Other income/(expenses), net 170,403 (363 ) (28,193 ) (21,788 )
Contingent consideration fair value (359,309 ) (30,748 ) (362,753 ) (88,106 ) (20,326 ) (359,309 ) (45,572 ) (362,753 )
Proxy contest fees 3,983,254 - 4,724,385 -
Tax effect⁽²⁾ (1,438,439 ) (5,476,081 ) (5,350,584 ) (5,290,304 )
Adjusted EBITDA $ 20,116,019 $ 2,360,224 $ 60,496,181 $ 3,306,677 $ 4,804,412 $ 10,657,717 $ 17,205,380 $ 44,888,767

(1) Includes proxy contest fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in our Quarterly Report on Form 10-Q.
(2) Tax effect computed at statutory rates.
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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, ~~loss on purchase,~~ 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.

Adjusted EBITDA as a non-GAAP financial measure also excludes other cash interest income and expense, and non-recurring expenses incurred as a result of a proxy contest as these items are not components of our core 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 and nine months ended December 31, ~~2021~~2022 and ~~2020.~~2021. “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.

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For the Three Months Ended For the Nine Months Ended
December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020
Proprietary Ammunition $ 3,784,380 $ 1,464,202 $ 6,228,348 $ 4,973,857
Standard Ammunition 40,285,093 11,370,288 106,401,307 23,013,581
Ammunition Casings 3,022,944 3,785,754 10,891,897 10,305,648
Marketplace Revenue 17,596,769 - 46,646,051 -
Total Sales $ 64,689,186 $ 16,620,244 $ 170,167,603 $ 38,293,086
For the Three Months Ended For the Nine Months Ended
December 31,
2022 December 31,
2021 December 31,
2022 December 31,
2021
Proprietary Ammunition $ 2,090,785 $ 3,784,380 $ 8,298,711 $ 6,228,348
Standard Ammunition 18,160,180 40,285,093 82,309,106 106,401,307
Ammunition Casings 3,041,327 3,022,944 10,661,420 10,891,897
Marketplace Revenue 15,419,202 17,596,769 46,486,842 46,646,051
Total Sales $ 38,711,494 $ 64,689,186 $ 147,756,079 $ 170,167,603

Sales for the three and nine months ended December 31, ~~2021 increased 289%~~2022 decreased 40% and ~~344%~~13%, respectively, or approximately ~~$48.1~~$26 million ~~or $132.0~~and $22.4 million, ~~respectively~~ over the three and nine months ended December 31, ~~2020. This increase~~2021 due to changes in market conditions. The decrease for the three month period was largely the result of ~~approximately $29.0~~a decrease of $22.1 million ~~and $83.4 million~~in sales of ~~respective increased sales in~~ bulk pistol and rifle ammunition, ~~an increase~~a decrease of ~~approximately $2.3~~$1.7 million ~~and $1.3 million~~ of ~~respective~~ sales of Proprietary Ammunition, and a decrease of ~~approximately $0.8~~$2.2 million ~~and an increase of approximately $0.6 million of respective sales from our casing operations, and $17.6 million and $46.6 million in respective revenue~~ generated from our ~~recently acquired~~ marketplace, ~~Gunbroker.com,~~GunBroker.com, which includes auction revenue, payment processing revenue, and shipping income. The decrease for the nine month period was the result of an increase of approximately $2.0 million of sales of Proprietary Ammunition, a decrease of $24.1 million of sales in bulk pistol and rifle ammunition, and a decrease of approximately and $0.2 million of sales from our casing operations. 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 ~~new~~ 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 ~~July 21, 2020,~~June 16, 2022, 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.

On June 23, 2021, we announced that we were awarded a U.S. Department of Defense contract for the development and manufacture of ballistically matched multi-purpose rounds to design and manufacture multiple Ballistically Matched Multi-Purpose Rounds (BM-MPR) in support of U.S. military operations.
On September 23, 2021, we announced that we were awarded a U.S. Department of Defense contract to design and manufacture signature-on-target rounds (“SoT”) in support of U.S. military operations. The SoT ammunition allows the machine gunner to see bullet impacts without a visible signature in flight exposing their firing location in the manner which occurs with currently utilized tracer ammunition.
Cost of Revenues

Cost of Revenues ~~increased~~decreased by approximately ~~$28.9~~$16 million and ~~$69.9~~increased $1.8 million from ~~$13.3 million and $32.6 million to~~ $42.2 million and $102.5 million to $26.2 million and $104.3 million for the three and nine months ended December 31, ~~2021~~2022 compared to the comparable period ended in ~~2020.~~2021. This was the result of a significant ~~increase~~decrease in net sales as well increases to non-cash depreciation related to increases in production equipment, expensing of increased labor, overhead, and raw materials used to produce finished product during ~~2021~~2022 as compared to 2020, and additional cost of revenues from our recent acquisition of our marketplace, Gunbroker.com. As a percentage of sales, cost of goods sold decreased by 18.4% and 29.3 % when comparing the three and nine months ended December 31, 2021 and 2020.2021.

Gross Margin

Our gross margin percentage ~~increased~~decreased to 32.4% and 29.4% from 34.8% and 39.8% ~~from 20.1% and 14.9%~~ during the three and nine months ended December 31, ~~2021,~~2022, respectively, as compared to the same period in ~~2020. This~~2021. The decrease in our gross margin was ~~a result~~related to increased costs of ~~increased sales allowing us to cover a greater percentage of our fixed manufacturing costs, which include our non-cash amortization~~raw materials, labor, and ~~depreciation expense, and the inclusion of our newly acquired marketplace, Gunbroker.com which, by nature has significantly higher margins than our manufactured products.~~overhead costs.

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We believe as we continue to grow sales through new markets and expanded distribution that our gross margins will also increase ~~as evidenced~~ by ~~the improvement over this time last year.~~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;

● ~~Leverage~~Reduced component costs through operation of our ~~newly acquired marketplace, Gunbroker.com, through the introduction~~ammunition segment and expansion of ~~additional services and product offerings;~~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 and nine months ended December 31, ~~2021,~~2022, our operating expenses increased by approximately ~~$8.1~~$4.9 million and ~~$22.6~~$10 million over the three and nine months ended December 31, ~~2020,~~2021 and ~~decreased~~increased as a percentage of sales from ~~22.7% and 27.7% for the three and nine months ended December 31, 2020 to~~ 18.4% and 19.5% for the three and nine months ended December 31, ~~2021. The increase was primarily related~~2021 to ~~approximately $14.2 million of additional operating expenses following our merger with Gemini, including $8.8 million of depreciation~~43.6% and ~~amortization expenses.~~29.3% for the three and nine months ended December 31, 2022. Our operating expenses include non-cash depreciation and amortization expense of approximately ~~$3.7~~$3.3 million and ~~$10.0~~$9.9 million for the three and nine months ended December 31, ~~2021.~~2022, respectively. Our operating expenses consisted of commissions related to our sales, ~~increases,~~ stock compensation expense associated with issuance of our Common Stock in lieu of cash compensation for employees, ~~and~~ board members, and key consultants for the organization during the period. Operating expenses for the three and nine months ended December 31, ~~2021 and 2020 periods~~2022 included noncash expenses of approximately ~~$12.9~~$6.6 million and ~~$3.2~~$19.0 million, respectively. ~~We expect to see administrative expenditures to continue to decrease as a percentage of sales in the 2022 fiscal year, as we leverage our work force and expand our sales opportunities.~~

During the three months ended December 31, 2022, our selling and marketing expenses decreased by approximately $0.5 million, while for the nine months ended December 31, ~~2021,~~2022 our selling and marketing expenses ~~increased~~decreased by approximately ~~$1.0 million and $3.0~~$0.2 million, in comparison to the three and nine months ended December 31, ~~2020.~~2021. The ~~increase~~decrease was primarily related to ~~commissions on~~decreases in sales commission due to the ~~increases~~decrease in the sale of our products resulting of approximately ~~$0.7~~$2.2 million ~~and $2.5 million of additional expenses~~ for the ~~three and~~ nine months ended December 31, ~~2021 in comparison to the comparable prior period.~~2022.

Our corporate general & administrative expenses increased approximately ~~$2.1~~$4.1 million and ~~$7.2~~$7.0 million in the three and nine months ended December 31, ~~2021~~2022 from the comparable prior period ~~mainly~~ due to ~~increased general corporate expenses related to the addition of Gemini of approximately $1.3~~$3.3 million and ~~$3.3~~$4.0 million of respective ~~increases in insurance~~legal and professional fees and expenses ~~of $0.8 million and $1.6 million. and increased professional and legal fees of $0.5 million primarily~~largely related to our proxy contest in the three and nine months ended December 31, 2022.The increase was also partly due to inclusion of the full nine months of Gemini expenses for the nine month period ended December 31, 2022, as compared to partial inclusion during the period ended December 31, 2021, as a result of the acquisition ~~of Gemini.~~occurring on April 30, 2021.

Employee salaries and related expenses increased approximately $1.8 million and ~~$4.6~~$3.5 million for the three and nine months ended December 31, ~~2021~~2022 compared to the comparable period ended in ~~2020.~~2021. The increase for the ~~three and~~ nine months ended December 31, ~~2021~~2022 when compared to the prior period, was primary related to ~~an increase~~$1.2 million of additional payroll expenses incurred in the three months ended December 31, 2022 as a result of payments due upon termination without cause as a result of the proxy contest and as well as $1.5 million in additional stock compensation ~~of approximately $0.8 million and $2.2 million, respectively.~~expenses.

Depreciation and amortization expenses for the three months ended December 31, 2022 decreased by approximately $0.4 million, and decreased for the nine months ended December 31, ~~2021 increased~~2022 by approximately ~~$3.3 million and $8.8 million from the comparable prior periods due to depreciation and amortization expenses in connection with the acquisition of Gemini.~~$0.1 million.

Interest and Other Expenses

For the three and nine months ended December 31, ~~2021,~~2022, interest expense ~~decreased~~increased by approximately ~~$1.7~~$0.3 million and ~~$2.2~~$0.1 million compared with the comparable three and nine months ended December 31, ~~2020.~~2021. The change from the prior periods was mainly due to the repayment of notes during the three and ~~conversion of convertible promissory notes in current and prior periods.~~nine months ended December 31, 2022.

Income Taxes

For the three and nine months ended December 31, 2022, we recorded a provision for federal and state income taxes of approximately ($0.7) million and $1.4 million, respectively. For the three and nine months ended December 31, 2021, we recorded a provision for federal and state income taxes of ~~approximate~~approximately $1.4 ~~million. There was no provision for federal and state income taxes during the three and nine months ended December 31, 2020.~~million, respectively.

Net Income

~~As a result of increases in revenues from increased production as well as our acquisition of Gemini, we~~We ended the three ~~and nine~~ months ended December 31, ~~2021~~2022 with a net loss of approximately $4 million compared with a net income of approximately $9.1 million ~~and $32.7 million, respectively, compared with net losses of approximately $1.9 million and $7.3 million~~ for the three ~~and~~months ended December 31, 2021. We ended the nine months ended December 31, ~~2020.~~2022 with a net loss of approximately $1.6 million compared with a net income of approximately $32.7 million for the nine months ended December 31, 2021.

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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 December 31, ~~2021,~~2022, we had ~~$27,414,571~~$27,093,614 of cash and cash equivalents, ~~a decrease~~an increase of ~~$90,926,900~~$3,812,139 from March 31, ~~2021.~~2022.

Working Capital is summarized and compared as follows:

December 31,
2021 March 31,
2021 December 31, 2022 March 31, 2022
Current assets $ 123,474,142 $ 145,620,332 $ 128,997,594 $ 129,691,636
Current liabilities 35,613,312 12,098,493 28,196,795 35,823,311
$ 87,860,830 $ 133,521,839 $ 100,800,799 $ 93,868,325

Changes in cash flows are summarized as follows:

Operating Activities
For the nine months ended December 31, 2022, net cash provided by operations totaled approximately $18.4 million. This was primarily the result of net loss of approximately $1.7 million, which was offset by decreases in our accounts receivable of approximately $12.2 million, decreases in prepaid expenses of approximately $1.9 million, and decreases in our accounts payable of approximately $5.8 million, increases in our inventories of approximately $8.1 million, and decreases in deposits of approximately $1.7 million. Non-cash expenses for depreciation and amortization totaled approximately $13.0 million and non-cash expenses for employee stock awards totaled $4.5 million.

For the nine months ended December 31, 2021, net cash used in operations totaled approximately $3.6 million. This was primarily the result of net income of approximately $32.7 million, which was offset by increases in our inventories of approximately $30.1 million, increases in deposits of approximately $13.1 million, increases in our accounts receivable of approximately $20.7 million, decreases in prepaid expenses of approximately $1.6 million, and increases in our accounts payable and accrued liabilities of $7.5 million and $1.3 million, respectively. Non-cash expenses for depreciation and amortization totaled approximately $12.8 million and non-cash expenses for employee stock awards totaled $2.9 million.
~~For~~Investing Activities
During the nine months ended December 31, ~~2020,~~2022, we used approximately $10.6 million in net cash for investing activities. Net cash used in ~~operations totaled $5.3 million. This was primarily~~investing activities consisted of approximately $9.3 million related to purchases of production equipment and the ~~result~~construction of ~~a net loss of $7.3 million, increases~~our new manufacturing facility in our period end inventories and accounts receivable of $5.1 million and $3.9 million, respectively, increases in accounts payable and accrued liabilities of $1.8 million and $2.3 million, respectively, and a loss on Jagemann Munition Components of $1.0 million. The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of $3.6 million, non-cash interest expensed recognized for the issuance of warrants of $1.3 million, employee stock compensation of $0.7 million, and stock grants totaling $0.2 million.
~~Investing Activities~~Manitowoc, WI.

During the nine months ended December 31, 2021, we used approximately $63.3 million in net cash for investing activities. Net cash used in investing activities consisted of approximately $50.5 million ~~uses~~used in connection with the merger of Gemini, and approximately $12.9 million related to purchases of production equipment and the construction of our new manufacturing facility in Manitowoc, WI.

Financing Activities
During the nine months ended December 31, ~~2020, we used $4.5 million in~~2022, net cash ~~for investing~~used in financing activities ~~to purchase fixed assets such as new production equipment.~~was approximately $3.6 million. This was the net effect of an approximate $0.8 million reduction in our Inventory Credit Facility, approximately $1.9 million from insurance premium note payments, approximately $2.2 million of Preferred Stock dividends paid, generation of approximately $57.3 million from accounts receivable factoring, which was offset by payments of approximately $56.1 million, and proceeds from our Construction Note Payable of $1.0 million.

~~Financing Activities~~
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During the nine months ended December 31, 2021, net cash used in financing activities was approximately $24.0 million. This was the net effect of a $50.0 million payment on debt assumed from Gemini, $35.0 million of proceeds from the sale of our preferred stock net of approximately $3.2 million of issuance costs, approximately $0.9 million was generated from common stock issued for exercised warrants, the $4.0 million repayment of a note payable, and an approximate $0.9 million reduction in our Inventory Credit Facility. Additionally, approximately $86.5 million was generated from accounts receivable factoring, which was offset by payments of approximately $84.2 million.

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During the nine months ended December 31, 2020, net cash provided by financing activities was $27.9 million. This was the net effect of $23.6 million of proceeds from the sale of common stock net of $3.3 million of issuance costs, $3.5 million of proceeds from a related party note, $4.0 million of proceeds from a note payable, $2.3 million generated from our Inventory Credit Facility, $2.3 million was generated from common stock issued for exercised warrants, $2.0 million from the issuance of convertible promissory notes, and $1.0 million proceeds from our paycheck protection program notes payable. Additionally, $26.1 million was generated from accounts receivable factoring, which was offset by payments of $25.8 million. $7.2 million of cash was used for payments on related party notes payable, and $0.5 million toward our insurance premium notes payable.
Liquidity ~~and Capital Resources~~

Existing working capital, cash ~~used in~~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 ~~believe financing~~lease four locations that are used for our offices, production, and warehousing. As of December 31, 2022, we had $1.8 million of fixed lease payment obligations with $.6 million payable within the next 12 months. Please refer to Note 8– Leases for additional information.
Related Party Note Payable
As of December 31, 2022, we had an outstanding balance on our Related Party Note Payable of approximately $0.4 million, which is due within the next 12 months.
Construction Note Payable
We will ~~be available, both through conventional financing relationships and through the continued sales~~finance a portion of our ~~Common Stock. However, there is no assurance that such funding will be available on terms acceptable~~new production facility with our Construction Note Payable. We expect to ~~us or at all. We believe that our current cash on hand, coupled with alternative sources of funding, will be sufficient to satisfy intended capital expenditures, potential acquisitions~~make $0.3 million in principal and ~~general liquidity requirements through at least~~interest payments within the next ~~twelve~~12 months. The principal balance of the Construction Note will mature on October 14, 2026.

Off-Balance Sheet Arrangements

As of December 31, ~~2021,~~2022, 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 ~~stock-based~~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, ~~2021,~~2022, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no significant changes to these policies during the three and nine months ended December 31, ~~2021.~~2022. 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, ~~2021.~~2022.
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 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 and nine months ended December 31, 2022. As of December 31, 2022, 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, 2023.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, ~~2021.~~2022. Based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were not effective. Our controls were ineffective due to the size of the Company and available resources. There are limited personnel to assist with the accounting and financial reporting function, which results in: (i) a lack of segregation of duties and (ii) controls that may not be adequately designed or operating effectively. Despite the existence of material weaknesses, the Company believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the three ~~and nine~~ months ended December 31, ~~2021,~~2022, in accordance with GAAP.

Changes in internal controls

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the ~~Quarterly periods~~quarterly period from ~~April~~October 1, ~~2021~~2022 to December 31, ~~2021,~~2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3332

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 of our Financial Statements for additional disclosure.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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.

During the three months ended December 31, 2022, the Company issued 150,000 warrants to purchase 150,000 shares of common stock at an exercise price of $0.01 for services provided to the Company. The total value of the warrants were $427,639.
There were no other unregistered sales of the Company’s equity securities during the quarter ended December 31, ~~2021~~2022 that were not previously reported in a Current Report on Form ~~8-K except as follows:~~8-K.
Share Repurchases
On February 8, 2022, the Company announced that its Board of Directors approved a share repurchase program (the “Share Repurchase Program”), providing for the repurchase of up to $30 million of the Company’s outstanding shares of common stock. The share repurchase program expires on February 7, 2023.The Share Repurchase Program commenced in December 2022.

~~During~~Under the ~~quarterly period from October 1, 2021 to December 31, 2021,~~Share Repurchase Program, the Company ~~issued 1.5 million~~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 ~~unregistered Common Stock related to~~ the ~~Merger Agreement with Gemini for $7.17 per share~~Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or ~~a total value~~discontinued completely at any time. The specific timing and amount of ~~$10,755,000.~~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 ~~previously mentioned~~Company made the following purchases of its equity securities ~~were issued~~ in ~~reliance on the exemptions from registration under the Securities Act in Section 4(a)(2) of the Securities Act and/or Regulation D thereunder.~~December 2022.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
December 1, 2022 to December 31, 2022 150,000 $ 1.92 150,000 $ 29,700,000

Total 150,000 150,000 $ 29,700,000

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

3433

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit No. Exhibit

4.1* ~~Promissory Note issued by Ammo, Inc., Firelight Group I, LLC in favor of Hiawatha National Bank, dated October 14, 2021.~~
10.1* ~~Construction Loan~~Exclusive License Agreement between AMMO Technologies Inc. and University of Louisiana at Lafayette, dated November 16, 2017, as amended in 2018 and 2022
10.2
Settlement Agreement, by and among ~~Ammo,~~AMMO, Inc., ~~Firelight Group I, LLC,~~Steven F. Urvan and ~~Hiawatha National Bank,~~Susan T. Lokey, dated ~~October 14, 2021.~~November 3, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 7, 2022)
10.3 Amendment to Settlement Agreement, by and among AMMO, Inc., Steven F. Urvan and Susan T. Lokey, dated November 21, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 22, 2022)
10.4* Employment Agreement of Jared R. Smith, dated December 15, 2022
31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fred W. Wagenhals.
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 Fred W. Wagenhals.
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.

3534

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/ Fred W. Wagenhals
Dated: February 14, ~~2022~~2023 By: Fred W. Wagenhals, Chief Executive Officer

/s/ Robert D. Wiley
Dated: February 14, ~~2022~~2023 By: Robert D. Wiley, Chief Financial Officer

3635

	December 31, 2021			March 31, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	27,414,571		$	118,341,471
Accounts receivable, net		45,653,542			8,993,920
Due from related parties		15,657			15,657
Inventories		46,466,594			15,866,918
Prepaid expenses		3,923,778			2,402,366
Total Current Assets		123,474,142			145,620,332

Equipment, net		32,368,131			21,553,226

Other Assets:
Deposits		15,585,668			1,833,429
Licensing agreements, net		4,167			41,667
Patents, net		5,649,562			6,019,567
Other intangible assets, net		139,652,716			2,220,958
Goodwill		90,870,094			-
Right of use assets - operating leases		2,707,546			2,090,162
Deferred income tax asset		892,258			-
TOTAL ASSETS	$	411,204,284		$	179,379,341

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	24,425,343		$	4,371,974
Factoring liability		4,097,867			1,842,188
Accrued liabilities		5,114,768			3,462,785
Inventory credit facility		194,810			1,091,098
Current portion of operating lease liability		825,343			663,784
Current portion of note payable related party		669,463			625,147
Insurance premium note payable		285,718			41,517
Total Current Liabilities		35,613,312			12,098,493

Long-term Liabilities:
Contingent consideration payable		227,139			589,892
Notes payable related party, net of current portion		358,263			865,771
Note payable		-			4,000,000
Construction note payable, net of unamortized issuance costs		18,905			-
Operating lease liability, net of current portion		2,006,707			1,477,656
Deferred income tax liability		1,850,277			-
Total Liabilities		40,074,603			19,031,812

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 December 31, 2021		1,400			-
Common stock, $0.001 par value, 200,000,000 shares authorized 115,436,404 and 93,099,067 shares issued and outstanding at December 31, 2021 and March 31, 2021, respectively		115,437			93,100
Additional paid-in capital		382,015,310			202,073,968
Accumulated deficit		(11,002,466	)		(41,819,539	)
Total Shareholders’ Equity		371,129,681			160,347,529
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	411,204,284		$	179,379,341

	December 31, 2022			March 31, 2022
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	27,093,614		$	23,281,475
Accounts receivable, net		30,419,611			43,955,084
Due from related parties		-			15,000
Inventories		67,145,401			59,016,152
Prepaid expenses		3,838,968			3,423,925
Current portion of restricted cash		500,000			-
Total Current Assets		128,997,594			129,691,636

Property and Equipment, net		55,290,328			37,637,806

Other Assets:
Deposits		9,656,907			11,360,322
Patents, net		5,156,120			5,526,218
Other intangible assets, net		126,870,205			136,300,387
Goodwill		90,870,094			90,870,094
Right of use assets - operating leases		1,378,711			2,791,850
TOTAL ASSETS	$	418,219,959		$	414,178,313

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	20,964,686		$	26,817,083
Factoring liability		1,678,450			485,671
Accrued liabilities		4,298,739			6,178,814
Inventory credit facility		-			825,675
Current portion of operating lease liability		518,778			831,429
Current portion of note payable related party		358,263			684,639
Current portion of construction note payable		258,430			-
Insurance premium note payable		119,449			-
Total Current Liabilities		28,196,795			35,823,311

Long-term Liabilities:
Contingent consideration payable		158,570			204,142
Notes payable related party, net of current portion		-			181,132
Construction note payable, net of unamortized issuance costs		10,967,947			38,330
Operating lease liability, net of current portion		980,009			2,091,351
Deferred income tax liability		2,819,962			1,536,481
Total Liabilities		43,123,283			39,874,747

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 December 31, 2022 and March 31, 2022, respectively		1,400			1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 118,044,417 and 116,485,747 shares issued and 117,894,417 and 116,485,747 outstanding at December 31, 2022 and March 31, 2022, respectively		117,894			116,487
Additional paid-in capital		390,501,876			385,426,431
Accumulated deficit		(15,233,633	)		(11,240,752	)
Treasury Stock		(290,861	)		-
Total Shareholders’ Equity		375,096,676			374,303,566
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	418,219,959		$	414,178,313

													2022			2021			2022			2021
	For the Three Months Ended December 31,						For the Nine Months Ended December 31,						For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2021			2020			2021			2020			2022			2021			2022			2021

Net Revenues
Ammunition sales	$	44,069,473		$	12,834,490		$	112,629,655		$	27,987,438		$	20,250,965		$	44,069,473		$	90,607,817		$	112,629,655
Marketplace revenue		17,596,769			-			46,646,051			-			15,419,202			17,596,769			46,486,842			46,646,051
Casing sales		3,022,944			3,785,754			10,891,897			10,305,648			3,041,327			3,022,944			10,661,420			10,891,897
Total Revenues		64,689,186			16,620,244			170,167,603			38,293,086			38,711,494			64,689,186			147,756,079			170,167,603

Cost of Revenues		42,166,320			13,278,338			102,457,775			32,590,149			26,184,315			42,166,320			104,257,529			102,457,775
Gross Profit		22,522,866			3,341,906			67,709,828			5,702,937			12,527,179			22,522,866			43,498,550			67,709,828

Operating Expenses
Selling and marketing		1,510,574			542,271			4,226,817			1,244,323			1,010,543			1,510,574			3,987,214			4,226,817
Corporate general and administrative		3,737,455			1,639,052			10,976,288			3,805,230			7,835,201			3,737,455			17,920,197			10,976,288
Employee salaries and related expenses		2,939,095			1,172,765			7,943,076			3,329,511			4,705,636			2,939,095			11,414,434			7,943,076
Depreciation and amortization expense		3,725,921			416,625			10,044,994			1,242,809			3,309,074			3,725,921			9,950,752			10,044,994
Loss on purchase		-			-			-			1,000,000
Total operating expenses		11,913,045			3,770,713			33,191,175			10,621,873			16,860,454			11,913,045			43,272,597			33,191,175
Income/(Loss) from Operations		10,609,821			(428,807	)		34,518,653			(4,918,936	)		(4,333,275	)		10,609,821			225,953			34,518,653

Other Expenses
Other income		363			461,000			21,788			274,400
Other income/(expense)														(170,403	)		363			28,193			21,788
Interest expense		(190,319	)		(1,938,630	)		(468,404	)		(2,704,315	)		(320,439	)		(190,319	)		(538,191	)		(468,404	)
Total other expenses		(189,956	)		(1,477,630	)		(446,616	)		(2,429,915	)
Total other expense														(490,842	)		(189,956	)		(509,998	)		(446,616	)

Income/(Loss) before Income Taxes		10,419,865			(1,906,437	)		34,072,037			(7,348,851	)		(4,824,117	)		10,419,865			(284,045	)		34,072,037

Provision for Income Taxes		1,351,998			-			1,351,998			-			(721,125	)		1,351,998			1,369,427			1,351,998

Net Income/(Loss)		9,067,867			(1,906,437	)		32,720,039			(7,348,851	)		(4,102,992	)		9,067,867			(1,653,472	)		32,720,039

Preferred Stock Dividend		(782,582	)		-			(1,902,966	)		-			(782,639	)		(782,582	)		(2,339,409	)		(1,902,966	)

Net Income/(Loss) Attributable to Common Stock Shareholders	$	8,285,285		$	(1,906,437	)	$	30,817,073		$	(7,348,851	)	$	(4,885,631	)	$	8,285,285		$	(3,992,881	)	$	30,817,073

Net Income/(Loss) per share
Basic	$	0.07		$	(0.04	)	$	0.28		$	(0.15	)	$	(0.04	)	$	0.07		$	(0.03	)	$	0.28
Diluted	$	0.07		$	(0.04	)	$	0.27		$	(0.15	)	$	(0.04	)	$	0.07		$	(0.03	)	$	0.27

Weighted average number of shares outstanding
Basic		114,757,014			47,790,105			111,289,024			47,023,094			117,348,511			114,757,014			116,950,013			111,289,024
Diluted		116,717,500			47,790,105			113,350,998			47,023,094			117,348,511			116,717,500			116,950,013			113,350,998


	Preferred Stock				Common Shares				Additional			Stock
	Number		Par Value		Number		Par Value		Paid-In Capital			Subscription Receivable			Accumulated (Deficit)			Total

Balance as of March 31, 2021		-	$	-		93,099,967	$	93,100	$	202,073,968		$	-		$	(41,819,539	)	$	160,347,529

Acquisition stock issuances		-		-		20,000,000		20,000		142,671,282			-			-			142,691,282
Common stock issued for cash
Common stock issued for cash,shares
Common stock issued for convertible notes
Common stock issued for convertible notes,shares
Stock subscription receivable for exercised warrants
Stock subscription receivable for exercised warrants, Shares
Common stock issued for debt conversion - related party
Common stock issued for debt conversion - related party, Shares
Common stock issuance costs
Issuance of warrants for convertible notes
Common stock issued for covertible notes
Common stock issued for covertible notes, Shares
Common stock issued for debt conversion
Common stock issued for debt conversion, Shares
Issurance of warrants for convertible notes
Common stock issued for exercised warrants		-		-		431,080		431		943,476			-			-			943,907
Common stock issued for cashless warrant exercise		-		-		276,907		277		(277	)		-			-			-
Common stock issued for services and equipment		-		-		772,450		773		1,630,928			-			-			1,631,701
Employee stock awards		-		-		856,000		856		2,897,394			-			-			2,898,250
Stock grants		-		-		-		-		197,110			-			-			197,110
Issuance of Series A Preferred Stock, net of issuance costs		1,400,000		1,400		-		-		31,007,396			-			-			31,008,796
Warrant issued for services										594,033			-			-			594,033
Preferred stock dividends declared		-		-		-		-		-			-			(1,758,405	)		(1,758,405	)
Dividends accumulated on preferred stock		-		-		-		-		-			-			(144,561	)		(144,561	)
Net income		-		-		-		-		-			-			32,720,039			32,720,039

Balance as of December 31, 2021		1,400,000	$	1,400		115,436,404	$	115,437	$	382,015,310		$	-		$	(11,002,466	)	$	371,129,681

Balance as of March 31, 2020		-	$	-		46,204,139	$	46,204	$	53,219,834		$	-		$	(34,007,245	)	$	19,258,793

Common stock issued for cash		-		-		11,536,143		11,537		23,601,082			-			-			23,612,619
Common stock issued for convertible notes		-		-		2,667,358		2,667		3,872,292			-			-			3,874,959
Common stock issued for exercised warrants		-		-		1,096,939		1,097		2,287,781			-			-			2,288,878
Stock subscription receivable for exercised warrants		-		-		309,775		310		664,665			(664,975	)		-			-
Common stock issued for debt conversion - related party		-		-		1,000,000		1,000		2,099,000			-			-			2,100,000
Common stock issued for cashless warrant exercise		-		-		160,274		160		(160	)		-			-			-
Common stock issuance costs		-		-		-		-		(3,344,436	)		-			-			(3,344,436	)
Common stock issued for services		-		-		58,336		58		87,442			-			-			87,500
Employee stock awards		-		-		465,081		465		716,124			-			-			716,589
Stock grants		-		-		-		-		213,130			-			-			213,130
Issuance of warrants for convertible notes		-		-		-		-		1,315,494			-			-			1,315,494
Net loss		-		-		-		-		-			-			(7,348,851	)		(7,348,851	)

Balance as of December 31, 2020		-	$	-		63,498,045	$	63,498	$	84,732,248		$	(664,975	)	$	(41,356,096	)	$	42,774,675

	●	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

	Revenues at December 31, 2021					Accounts Receivable
PERCENTAGES	Three Months Ended		Nine Months Ended			December 31, 2021			March 31, 2021

Customers:
A		-		12.2	%		-			-
B		-		-			11.2	%
C		-		-			18.9	%
D		-		-			-			11.9	%
E		-		-						23.3	%
F		-		-						10.6	%
		-		12.2	%		30.1	%		45.8	%

	Revenues at December 31, 2022					Accounts Receivable
PERCENTAGES	Three Months Ended			Nine Months Ended		December 31, 2022			March 31, 2022

Customers:
A		12.5	%		-		18.4	%		11.8	%
		12.5	%		-		18.4	%		11.8	%


									For the Three Months Ended				For the Nine Months Ended
	For the Three Months Ended				For the Nine Months Ended
	December 31, 2021		December 31, 2020		December 31, 2021		December 31, 2020		December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Ammunition Sales	$	44,069,473	$	12,834,490	$	112,629,655	$	27,987,438	$	20,250,965	$	44,069,473	$	90,607,817	$	112,629,655
Marketplace fee revenue		17,596,769		-		46,646,051		-		15,419,202		17,596,769		46,486,842		46,646,051
Ammunition Casings Sales		3,022,944		3,785,754		10,891,897		10,305,648		3,041,327		3,022,944		10,661,420		10,891,897
Total Sales	$	64,689,186	$	16,620,244	$	170,167,603	$	38,293,086	$	38,711,494	$	64,689,186	$	147,756,079	$	170,167,603

Years Ended March 31,
2022 ⁽¹⁾	$	291,808
2023		1,018,689
2023 ⁽¹⁾				$	160,757
2024		873,420			583,768
2025		675,078			387,214
2026		250,008			351,962
2027					257,508
Thereafter		301,168			43,516
Total		3,410,171
Total Lease Payments					1,784,725
Less: Amount Representing Interest		(578,121	)		(285,938	)
Operating lease liability, net	$	2,832,050
Present value of lease liabilities				$	1,498,787

	●	~~20,000,000~~ ~~shares were issued in connection with our merger of Gemini Direct Investments, LLC valued at $142,691,282~~
	●	~~431,080~~ ~~shares were issued to investors for exercised warrants valued for $943,907~~
	●	~~276,907~~99,762 shares were issued for cashless exercise of ~~343,110~~100,000 warrants
	●	~~772,450~~177,273 shares ~~valued at $1,631,701~~ were issued for ~~services and equipment provided to~~ the ~~Company~~exercise of warrants for a total value of $56,046
	●	~~856,000~~1,281,635 shares valued at $~~2,898,250~~4,457,973 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

	Number of Shares			Weighted Averaged Exercise Price		Weighted Average Life Remaining (Years)		Number of Shares			Weighted Average Exercise Price		Weighted Average Life Remaining (Years)
Outstanding at March 31, 2021		3,607,945		$	2.31		3.24
Outstanding at March 31, 2022									2,933,755		$	2.32		2.29
Granted		100,000			0.01		4.91		150,000			0.01		-
Exercised		(774,190	)		1.99		-		(277,273	)		0.21		-
Forfeited or cancelled		-			-		-		(25,000	)		2.00		-
Outstanding at December 31, 2021		2,933,755		$	2.32		2.53
Exercisable at December 31, 2021		2,933,755		$	2.32		2.53
Outstanding at December 31, 2022									2,781,482		$	2.41		1.60
Exercisable at December 31, 2022									2,781,482		$	2.41		1.60


Cash	$	48,649,954	$	48,649,954
Estimated working capital adjustment		1,870,886
Working capital adjustment				1,870,886
Contingent consideration		10,755,000		10,755,000
Common stock		132,645,000		132,645,000
Assumed debt		50,000,000		50,000,000

Fair value of Patent	$	243,920,840
Fair value of consideration transferred			$	243,920,840


Accounts receivable, net		$	17,002,362		$	17,002,362
Prepaid expenses			478,963			478,963
Equipment			1,051,980			1,051,980
Deposits			703,389			703,389
Other Intangible assets⁽¹⁾	(1)		146,617,380			146,617,380
Goodwill⁽¹⁾	(1)		90,870,094			90,870,094
Right of use assets - operating leases			612,727
Right of use assets – operating leases						612,727
Accounts payable			(12,514,919	)		(12,514,919	)
Accrued expenses			(196,780	)		(196,780	)
Operating lease liability			(704,356	)		(704,356	)

Total Consideration		$	243,920,840		$	243,920,840

INCOME STATEMENT DATA	For the Nine Months Ended December 31, 2021

Net revenues	$	178,213,024
Net income	$	37,266,527

INCOME STATEMENT DATA	For the Nine Months Ended December 31, 2021

Net revenues	$	178,213,024
Net income	$	37,266,527

			December 31, 2021											December 31, 2022
	Life		Licenses			Patent			Other Intangible Assets			Life		Licenses			Patent			Other Intangible Assets
Licensing Agreement – Jesse James		5	$	125,000		$	-		$	-			5	$	125,000		$	-		$	-
Licensing Agreement – Jeff Rann		5		125,000			-			-			5		125,000			-			-
Streak Visual Ammunition patent		11.2		-			950,000			-			11.2		-			950,000			-
SWK patent acquisition		15		-			6,124,005			-			15		-			6,124,005			-
Jagemann Munition Components:
Customer Relationships		3		-			-			1,450,613			3		-			-			1,450,613
Intellectual Property		3		-			-			1,543,548			3		-			-			1,543,548
Tradename		5		-			-			2,152,076			5		-			-			2,152,076
GDI Acquisition:
Tradename		15		-			-			76,532,389			15		-			-			76,532,389
Customer List		10		-			-			65,252,802			10		-			-			65,252,802
Intellectual Property		10		-			-			4,224,442			10		-			-			4,224,442
Other Intangible Assets		5		-			-			607,747			5		-			-			607,747
				250,000			7,074,005			151,763,617					250,000			7,074,005			151,763,617

Accumulated amortization – Licensing Agreements				(245,833	)		-			-					(250,000	)		-			-
Accumulated amortization – Patents				-			(1,424,443	)		-					-			(1,917,885	)		-
Accumulated amortization – Intangible Assets				-			-			(12,110,901	)				-			-			(24,893,412	)
			$	4,167		$	5,649,562		$	139,652,716				$	-		$	5,156,120		$	126,870,205

Years Ended March 31,	Estimates for Fiscal Year		Estimates for Fiscal Year
2022 (1)	$	3,479,832
2023		13,095,215
2023 (1)			$	3,294,934
2024		13,074,489		13,074,489
2025		12,664,775		12,664,775
2026		12,674,904		12,664,775
2027				12,553,355
Thereafter		90,317,230		77,773,997
Annual amortization of intangible assets	$	145,306,445	$	132,026,325

	●	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.

							Ammunition			Marketplace		Corporate and other expenses			Total
	For the Three Months Ended December 31, 2021						For the Three Months Ended December 31, 2022
	Ammunition		Marketplace		Total		Ammunition			Marketplace		Corporate and other expenses			Total

Net Revenues	$	47,092,417	$	17,596,769	$	64,689,186	$	23,292,292		$	15,419,202	$	-		$	38,711,494
Cost of Revenues		39,904,811		2,261,509		42,166,320		23,865,275			2,319,040		-			26,184,315
General and administrative expense		5,935,949		2,251,175		8,187,124		4,838,081			1,719,707		6,993,592			13,551,380
Depreciation and amortization		420,077		3,305,844		3,725,921		143,378			3,165,696		-			3,309,074
Income from Operations	$	831,580	$	9,778,241	$	10,609,821
Income/(Loss) from Operations							$	(5,554,442	)	$	8,214,759	$	(6,993,592	)	$	(4,333,275	)

	Ammunition		Marketplace		Corporate and other expenses			Total
	For the Three Months Ended December 31, 2021
	Ammunition		Marketplace		Corporate and other expenses			Total

Net Revenues	$	47,092,417	$	17,596,769	$	-		$	64,689,186
Cost of Revenues		39,904,811		2,261,509		-			42,166,320
General and administrative expense		3,941,639		2,251,146		1,994,339			8,187,124
Depreciation and amortization		420,077		3,305,844		-			3,725,921
Income/(loss) from Operations	$	2,825,890	$	9,778,270	$	(1,994,339	)	$	10,609,821

	(1)	Includes proxy contest fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in our Quarterly Report on Form 10-Q.
	(2)	Tax effect computed at statutory rates.

	●	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.

	●	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;

	●	~~Leverage~~Reduced component costs through operation of our ~~newly acquired marketplace, Gunbroker.com, through the introduction~~ammunition segment and expansion of ~~additional services and product offerings;~~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.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
December 1, 2022 to December 31, 2022		150,000	$	1.92		150,000	$	29,700,000

Total		150,000				150,000	$	29,700,000

Exhibit No.		Exhibit

4.1*		~~Promissory Note issued by Ammo, Inc., Firelight Group I, LLC in favor of Hiawatha National Bank, dated October 14, 2021.~~
10.1*		~~Construction Loan~~Exclusive License Agreement between AMMO Technologies Inc. and University of Louisiana at Lafayette, dated November 16, 2017, as amended in 2018 and 2022
10.2		Settlement Agreement, by and among ~~Ammo,~~AMMO, Inc., ~~Firelight Group I, LLC,~~Steven F. Urvan and ~~Hiawatha National Bank,~~Susan T. Lokey, dated ~~October 14, 2021.~~November 3, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 7, 2022)
10.3		Amendment to Settlement Agreement, by and among AMMO, Inc., Steven F. Urvan and Susan T. Lokey, dated November 21, 2022 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 22, 2022)
10.4*		Employment Agreement of Jared R. Smith, dated December 15, 2022
31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fred W. Wagenhals.
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 Fred W. Wagenhals.
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)

	AMMO, INC.

		/s/ Fred W. Wagenhals
Dated: February 14, ~~2022~~2023	By:	Fred W. Wagenhals, Chief Executive Officer

		/s/ Robert D. Wiley
Dated: February 14, ~~2022~~2023	By:	Robert D. Wiley, Chief Financial Officer