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

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

~~For the quarterly period ended~~ ~~September 30,~~ ~~2022~~

OR

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

~~For the transition period from ________ to ________~~

For the quarterly period ended June 30, 2023

☐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 ~~November 11, 2022,~~August 4, 2023, there were ~~117,449,755~~117,957,921 shares of $0.001 par value Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

TABLE OF CONTENTS

PART I

ITEM 1:	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 (Unaudited) and March 31, ~~2022~~2023	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021~~2022	4
	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021~~2022	5
	Condensed Consolidated Statements of Cash flow (Unaudited) for the ~~six~~three months ended ~~September~~June 30, ~~2022,~~2023, and ~~2021~~2022	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	2423
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	3130
ITEM 4:	CONTROLS AND PROCEDURES	3130

~~PART II~~
PART II

ITEM 1:	LEGAL PROCEEDINGS	32
ITEM 1A:	RISK FACTORS	32
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	32
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	32
ITEM 4:	MINE SAFETY DISCLOSURE	32
ITEM 5:	OTHER INFORMATION	33
ITEM 6:	EXHIBITS	33
SIGNATURES		34

PART I

ITEM 1. FINANCIAL STATEMENTS

AMMO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2022			March 31, 2022			June 30, 2023			March 31, 2023
	(Unaudited)						(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	29,004,539		$	23,281,475		$	47,505,047		$	39,134,027
Accounts receivable, net		30,430,044			43,955,084			21,348,226			29,346,380
Due from related parties		6,000			15,000
Inventories		68,607,008			59,016,152			55,924,655			54,344,819
Prepaid expenses		4,328,855			3,423,925			5,294,454			5,126,667
Current portion of restricted cash		500,000			-			500,000			500,000
Total Current Assets		132,876,446			129,691,636			130,572,382			128,451,893

Property and Equipment, net		53,786,118			37,637,806			55,923,867			55,963,255

Other Assets:
Deposits		8,701,667			11,360,322			4,064,582			7,028,947
Restricted cash, net of current portion		500,000			-
Patents, net		5,279,486			5,526,218			4,909,388			5,032,754
Other intangible assets, net		130,013,599			136,300,387			120,583,416			123,726,810
Goodwill		90,870,094			90,870,094			90,870,094			90,870,094
Right of use assets – operating leases		2,393,817			2,791,850
Right of use assets - operating leases								1,141,418			1,261,634
TOTAL ASSETS	$	424,421,227		$	414,178,313		$	408,065,147		$	412,335,387

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	23,799,668		$	26,817,083		$	16,356,614		$	18,079,397
Factoring liability		794,389			485,671
Accrued liabilities		5,019,029			6,178,814			4,641,469			4,353,354
Inventory credit facility		-			825,675
Current portion of operating lease liability		836,544			831,429			421,477			470,734
Current portion of note payable related party		531,397			684,639
Note payable related party								-			180,850
Current portion of construction note payable		243,372			-			277,216			260,429
Insurance premium note payable		701,336			-			2,204,293			2,118,635
Total Current Liabilities		31,925,735			35,823,311			23,901,069			25,463,399

Long-term Liabilities:
Contingent consideration payable		178,896			204,142			119,354			140,378
Notes payable related party, net of current portion		-			181,132
Construction note payable, net of unamortized issuance costs		10,616,164			38,330			10,861,510			10,922,443
Operating lease liability, net of current portion		1,683,052			2,091,351			825,043			903,490
Deferred income tax liability		2,353,791			1,536,481			2,212,448			2,309,592
Total Liabilities		46,757,638			39,874,747			37,919,424			39,739,302

Shareholders’ Equity:
Series A cumulative perpetual preferred Stock 8.75%, ($25.00 per share, $0.001 par value) 1,400,000 shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively		1,400			1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 117,274,755 and 116,485,747 shares issued and outstanding at September 30, 2022 and March 31, 2022, respectively		117,275			116,487
Series A cumulative perpetual preferred Stock 8.75%, ($25.00 per share, $0.001 par value) 1,400,000 shares issued and outstanding as of June 30, 2023 and March 31, 2023, respectively								1,400			1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 118,952,886 and 118,562,806 shares issued and 117,945,758 and 118,294,478 outstanding at June 30, 2023 and March 31, 2023, respectively								117,946			118,294
Additional paid-in capital		387,892,917			385,426,431			392,813,530			391,940,374
Accumulated deficit		(10,348,003	)		(11,240,752	)		(20,808,990	)		(18,941,825	)
Treasury stock								(1,978,163	)		(522,158	)
Total Shareholders’ Equity		377,663,589			374,303,566			370,145,723			372,596,085
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	424,421,227		$	414,178,313		$	408,065,147		$	412,335,387

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

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2022			2021			2022			2021			2023			2022
	For the Three Months Ended September 30,						For the Six Months Ended September 30,						For the Three Months Ended June 30,
	2022			2021			2022			2021			2023			2022

Net Revenues
Ammunition sales(1)	$	29,386,969		$	40,208,402		$	70,356,852		$	68,560,182		$	14,106,029		$	40,969,883
Marketplace revenue		14,562,694			16,777,216			31,067,640			29,049,282			13,912,202			16,504,946
Casing sales		4,338,896			4,016,467			7,620,093			7,868,953			6,236,344			3,281,197
Total Revenues		48,288,559			61,002,085			109,044,585			105,478,417			34,254,575			60,756,026

Cost of Revenues		35,452,850			34,786,017			78,073,214			60,291,455			20,230,035			42,620,364
Gross Profit		12,835,709			26,216,068			30,971,371			45,186,962			14,024,540			18,135,662

Operating Expenses
Selling and marketing		1,068,501			1,550,394			2,976,671			2,716,243			295,581			1,908,170
Corporate general and administrative		5,055,699			4,082,236			10,084,996			7,238,833			7,947,563			5,029,297
Employee salaries and related expenses		3,923,700			2,647,108			6,708,798			5,003,981			4,116,280			2,785,098
Depreciation and amortization expense		3,291,322			3,708,012			6,641,678			6,319,073			3,344,043			3,350,356
Total operating expenses		13,339,222			11,987,750			26,412,143			21,278,130			15,703,467			13,072,921
Income/(Loss) from Operations		(503,513	)		14,228,318			4,559,228			23,908,832			(1,678,927	)		5,062,741

Other Expenses
Other income		5,098			-			198,596			21,425			692,951			193,498
Interest expense		(97,265	)		(112,806	)		(217,752	)		(278,085	)		(204,201	)		(120,487	)
Total other income/(expense)		(92,167	)		(112,806	)		(19,156	)		(256,660	)
Total other expense														488,750			73,011

Income/(Loss) before Income Taxes		(595,680	)		14,115,512			4,540,072			23,652,172			(1,190,177	)		5,135,752

Provision for Income Taxes		207,827			-			2,090,552			-
Provision/(benefit) for Income Taxes														(97,144	)		1,882,725

Net Income/(Loss)		(803,507	)		14,115,512			2,449,520			23,652,172			(1,093,033	)		3,253,027

Preferred Stock Dividend		(782,639	)		(782,639	)		(1,556,771	)		(1,120,384	)		(774,132	)		(774,132	)

Net Income/(Loss) Attributable to Common Stock Shareholders	$	(1,586,146	)	$	13,332,873		$	892,749		$	22,531,788		$	(1,867,165	)	$	2,478,895

Net Income/(Loss) per share
Basic	$	(0.01	)	$	0.12		$	0.01		$	0.21		$	(0.02	)	$	0.02
Diluted	$	(0.01	)	$	0.11		$	0.01		$	0.20		$	(0.02	)	$	0.02

Weighted average number of shares outstanding
Basic		116,927,607			113,174,363			116,744,972			109,545,553			117,713,805			116,560,372
Diluted		116,927,607			116,721,949			118,063,619			112,848,821			117,713,805			117,879,639

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

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

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

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

Balance as of March 31, 2023 1,400,000 $ 1,400 118,294,478 $ 118,294 $ 391,940,374 $ (18,941,825 ) $ (522,158 ) $    372,596,085

Employee stock awards - - 390,111 391 822,406 - - 822,797
Stock grants 50,750 50,750
Dividends accumulated on preferred stock - - - - - (136,094 ) - (136,094 )
Preferred stock dividends - - - - - (638,038 ) - (638,038 )
Net loss - - - - - (1,093,033 ) (1,093,033 )
Treasury shares purchased - - (738,831 ) (739 ) - - (1,456,005 ) (1,456,744 )

Balance as of June 30, 2023 1,400,000 $ 1,400 117,945,758 $ 117,946 $ 392,813,530 $ (20,808,990 ) $ (1,978,163 ) $ 370,145,723
Preferred Stock Common Shares Additional
Number Par Value Number Par Value
Paid-In Capital 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 - -
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 and equipment - - 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
Balance 1,400,000 $ 1,400.00 113,046,766 $ 113,047 $ 367,771,424 $ (32,620,624 ) $ 335,265,247

Acquisition stock issuances - - - - (29,500 ) - (29,500 )
Common stock issued for exercised warrants - - 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 - - 21,250 21 127,479 - 127,500
Employee stock awards - - 352,250 352 1,153,273 - 1,153,625
Stock grants - - - - 65,098 - 65,098
Dividends accumulated on preferred stock - - - - - (782,639 ) (782,639 )
Net income - - - - - 14,115,512 14,115,512

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 1,400,000 $ 1,400 113,583,016 $ 113,583 $ 369,431,456 $ (19,287,751 ) $ 350,258,688
Preferred Stock Common Shares Additional Paid-In Accumulated Treasury
Number Par Value Number Par Value Capital (Deficit) Stock Total

Balance as of March 31, 2022 1,400,000 $ 1,400 116,485,747 $ 116,487 $ 385,426,431 $ (11,240,752 ) $        - $    374,303,566
Beginning balance 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
Net income (loss) - - - - - 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
Ending balance 1,400,000 $ 1,400 116,923,884 $ 116,924 $ 386,648,901 $ (8,761,857 ) $ - $ 378,005,368
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

AMMO, Inc.
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW~~
~~(Unaudited)~~
2022 2021
For the Six Months Ended
September 30,
2022 2021

Cash flows from operating activities:
Net Income $ 2,449,520 $ 23,652,172
Adjustments to reconcile Net Income to Net Cash provided by operations:
Depreciation and amortization 8,594,968 8,154,748
Debt discount amortization 41,626 -
Employee stock awards 2,351,438 1,853,125
Stock grants 91,594 132,012
Contingent consideration payable fair value (25,246 ) (60,082 )
Allowance for doubtful accounts 934,135 585,260
Gain on disposal of assets - (12,044 )
Reduction in right of use asset 398,033 268,693
Deferred income taxes 817,310 -
Changes in Current Assets and Liabilities
Accounts receivable 12,590,905 (14,210,318 )
Due to (from) related parties 9,000 (277 )
Inventories (9,590,856 ) (19,093,960 )
Prepaid expenses 1,130,589 1,635,683
Deposits 2,633,655 (14,683,669 )
Accounts payable (3,017,415 ) 3,921,049
Accrued liabilities (1,295,829 ) 1,010,222
Operating lease liability (403,184 ) (284,694 )
Net cash provided by/(used in) operating activities 17,710,243 (7,132,080 )

Cash flows from investing activities:
Purchase of equipment (8,405,180 ) (50,520,840 )
Gemini acquisition - (5,235,749 )
Proceeds from disposal of assets - 59,800
Net cash used in investing activities (8,405,180 ) (55,696,789 )

Cash flow from financing activities:
Payments on inventory facility, net (825,675 ) (896,287 )
Proceeds from factoring liability 45,600,000 50,355,962
Payments on factoring liability (45,291,282 ) (49,066,474 )
Payments on note payable – related party (334,374 ) (305,061 )
Payments on insurance premium note payment (1,334,183 ) (1,074,210 )
Proceeds from construction note payable 1,000,000 -
Preferred stock dividends paid (1,420,727 ) (337,745 )
Payments on assumed debt from Gemini - (50,000,000 )
Payments on note payable - (4,000,000 )
Sale of preferred stock - 35,000,000
Common stock issued for exercised warrants 24,242 949,156
Common stock issuance costs - (3,199,922 )
Net cash used in financing activities (2,581,999 ) (22,574,581 )

Net increase/(decrease) in cash 6,723,064 (85,403,450 )
Cash, beginning of period 23,281,475 118,341,471
Cash and restricted cash, end of period $ 30,004,539 $ 32,938,021
~~(Continued)~~
6
~~AMMO, Inc.~~
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Six Months Ended
September 30,
2022 2021

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 141,131 $ 308,695
Income taxes $ 1,302,811 $ -

Non-cash investing and financing activities:
Construction note payable $ 9,804,580 $ -
Insurance premium note payment $ 2,035,519 $ 2,166,852
Dividends accumulated on preferred stock $ 136,044 $ 782,639
Operating lease liability $ - $ 501,125
Acquisition stock issuances $ - $ 132,645,000
2023 2022

For the Three Months Ended
June 30,

2023 2022

Cash flows from operating activities:
Net Income/(Loss) $ (1,093,033 ) $ 3,253,027
Adjustments to reconcile Net Loss to Net Cash provided by operations:
Depreciation and amortization 4,620,087 4,300,123
Debt discount amortization 20,813 20,813
Employee stock awards 822,797 1,175,063
Stock grants 50,750 47,844
Contingent consideration payable fair value (21,024 ) (1,302 )
Allowance for doubtful accounts 909,717 711,372
Reduction in right of use asset 120,216 208,506
Deferred income taxes (97,144 ) 500,964
Changes in Current Assets and Liabilities
Accounts receivable 7,088,437 4,246,175
Due from related parties - (1,544,000 )
Inventories (1,579,836 ) (5,572,096 )
Prepaid expenses 888,412 882,620
Deposits 2,964,365 (493,982 )
Accounts payable (1,722,783 ) (3,009,351 )
Accrued liabilities 152,021 697,799
Operating lease liability (127,704 ) (211,082 )
Net cash provided by operating activities 12,996,091 5,212,493

Cash flows from investing activities:
Purchase of equipment (1,313,939 ) (5,264,863 )
Net cash used in investing activities (1,313,939 ) (5,264,863 )

Cash flow from financing activities:
Proceeds from factoring liability 14,610,314 24,700,000
Payments on factoring liability (14,610,314 ) (24,957,645 )
Payments on inventory facility, net - (733,343 )
Payments on note payable - related party (180,850 ) (165,264 )
Payments on insurance premium note payment (970,541 ) (533,673 )
Proceeds from construction note payable - 1,000,000
Payments on construction note payable (64,959 ) -
Preferred stock dividends paid (638,038 ) (638,071 )
Common stock repurchase plan (1,456,744 ) -
Net cash used in financing activities (3,311,132 ) (1,327,996 )

Net increase/(decrease) in cash 8,371,020 (1,380,366 )
Cash and restricted cash, beginning of period 39,634,027 23,281,475
Cash and restricted cash, end of period $ 48,005,047 $ 21,901,109
(Continued)
6
AMMO, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Three Months Ended June 30,
2023 2022

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 184,385 $ 100,876

Non-cash investing and financing activities:
Insurance premium note payment $ 1,056,199 $ 2,035,519
Dividends accumulated on preferred stock $ 136,094 $ 136,061
Construction note payable $ - $ 4,800,358
The accompanying notes are an integral part of these condensed consolidated financial statements.
7

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~September~~June 30, ~~2022 and March 31, 2022~~2023
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY
We were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished garments and fabrics. We were inactive until the following series of events in December 2016 and March 2017.
On December 15, 2016, the Company’s majority shareholders sold their common stock to Mr. Fred W. Wagenhals (“Mr. Wagenhals”) resulting in a change in control of the Company. Mr. Wagenhals was appointed as sole officer and the sole member of the Company’s Board of Directors.
The Company also approved (i) doing business in the name AMMO, Inc., (ii) a change to the Company’s OTC trading symbol to POWW, (iii) an agreement and plan of merger to re-domicile and change the Company’s state of incorporation from California to Delaware, and (iv) a 1-for-25 reverse stock split of the issued and outstanding shares of the common stock of the Company. These transactions were effective as of December 30, 2016.
On March 17, 2017, the Company entered into a definitive agreement with AMMO, Inc. a Delaware Corporation ~~(PRIVCO)~~(“PRIVCO”) under which the Company acquired all of the outstanding shares of common stock of ~~(PRIVCO). (PRIVCO)~~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, ~~2022.~~2023. The results for the three ~~and six~~ month period ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three ~~and six~~ month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, (b) the financial position at ~~September~~June 30, ~~2022,~~2023, and (c) cash flows for the ~~six~~three month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.
8
AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We use the accrual basis of accounting and U.S. GAAP and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 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,~~credit losses, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation and warrant-based compensation.
Critical Accounting Policies
A summary of our critical accounting policies is included in our Annual Report on Form 10-K for the year ended March 31, 2023, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We adopted ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) and ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” in the current period. These policy changes did not result in a material effect on the Company’s financial statements. There have been no other significant changes to these policies during the three months ended June 30, 2023. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2023.
Goodwill
We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline it is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flows was more appropriate due to the operational performance of the reporting segment. Accordingly, the impairment of Goodwill was not warranted for the three months ended June 30, 2023. As of June 30, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment. However, due to declines in the value of the Company’s common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2024.
9

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounts Receivable and Allowance for ~~Doubtful Accounts~~Credit Losses
Our accounts receivable represents amounts due from customers for products sold and include an allowance for ~~uncollectible accounts~~estimated credit losses which is estimated based on the ~~aging~~collectability and age of the accounts receivable balances and ~~specific identification~~categorization of ~~uncollectible accounts.~~customers with similar financial condition. At ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, we reserved ~~$4,053,047~~$4,229,537 and ~~$3,055,252,~~$3,246,551, respectively, of allowance for doubtful accounts.
Restricted Cash
We consider cash to be restricted when withdrawal or general use is legally restricted. Our restricted cash balance is comprised of cash on deposit with banks to secure the Construction Note Payable as discussed in Note ~~10 .~~10. We report restricted cash in the Consolidated Balance Sheets as current or non-current classification based on the expected duration of the restriction.
License Agreements
We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company. The license agreement grants us the exclusive worldwide rights through April 12, 2026 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James Branded Products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.
Patents
On September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with Hallam, Inc, a Texas corporation, with ATI being the survivor. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by the University of Louisiana at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028.
Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company recognized royalty expenses of $~~80,546~~5,060 and $~~3,404~~44,044, respectively under this agreement.
10

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ATI succeeded all of the assets of SW Kenetics, Inc. and assumed all of the liabilities.
The primary asset of SW Kenetics Inc. was a pending patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc. pursuant to Intellectual Property Rights Agreement on September 27, 2018.
We intend to continue building our patent portfolio to protect our proprietary technologies and processes, and will file new applications where appropriate to preserve our rights to manufacture and sell our branded lines of ammunition.
Other Intangible Assets
On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement. The intangible assets acquired include a tradename, customer relationships, and intellectual property.
On April 30, 2021, we entered into an agreement and plan of merger (the “Merger Agreement”), by and among the Company, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company and Gemini Direct Investments, LLC, a Nevada limited liability company. Whereby SpeedLight Group I, LLC merged with and into Gemini Direct Investments, LLC, with SpeedLight Group I, LLC surviving the merger as a wholly owned subsidiary of the Company. At the time of the Merger, Gemini Direct Investments, LLC had nine (9) subsidiaries, all of which are related to Gemini’s ownership of Gunbroker.com, an online auction marketplace dedicated to firearms, hunting, shooting, and related products. The intangible assets acquired include a tradename, customer relationships, intellectual property, software and domain names.
Impairment of Long-Lived Assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.
Revenue Recognition
We generate revenue from the production and sale of ammunition, ammunition casings, and marketplace fee revenue, which includes auction revenue, payment processing revenue, and shipping income. We recognize revenue according to Accounting Standard Codification – Revenue from Contract with Customers (“ASC 606”). When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. We apply the following five-step model to determine revenue recognition:
● Identification of a contract with a customer
● Identification of the performance obligations in the contact
● Determination of the transaction price
● Allocation of the transaction price to the separate performance allocation
● Recognition of revenue when performance obligations are satisfied
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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~~transferred to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct. ~~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.
12
AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Identity Verification consists of fees charged to customers for identity verification in order to gain access to the GunBroker website. The performance obligation is to process the identity verification as initiated by the customer. The price is set by the GunBroker user agreement on the website based on a stand-alone selling price. Revenue is recognized at a point in time when the identity verification is completed.
For the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, 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~~
~~September 30, 2022~~
~~Accounts Receivable~~
~~PERCENTAGES~~ Three Months
Ended ~~Six Months Ended~~ September 30,
2022 March 31,
2022
~~Customers:~~
A - - - ~~11.8~~ %
- - - ~~11.8~~ %

Revenues at
June 30, 2023
Accounts Receivable
PERCENTAGES
Three Months
Ended

June 30,
2023

March 31,
2023

Customers:
A 10.1 % 16.6 % -
10.1 % 16.6 % -
Disaggregated Revenue Information
The following table ~~represent~~represents a disaggregation of revenue from customers by category. We attribute net sales to categories by product or services types; ammunition, ammunition casings, and marketplace fees. We note that revenue recognition processes are consistent between product and service type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product and service type.
SCHEDULE OF DISAGGREGATED REVENUE FROM CUSTOMERS BY SEGMENT
September 30,
2022 September
30, 2021 September
30, 2022 September
30, 2021
For the Three Months Ended For the Six Months Ended
September 30,
2022 September
30, 2021 September
30, 2022 September
30, 2021
Ammunition Sales $ 29,386,969 $ 40,208,402 $ 70,356,852 $ 68,560,182
Marketplace fee revenue 14,562,694 16,777,216 31,067,640 29,049,282
Ammunition Casings Sales 4,338,896 4,016,467 7,620,093 7,868,953
Total Sales $ 48,288,559 $ 61,002,085 $ 109,044,585 $ 105,478,417
June 30, 2023 June 30, 2022
For the Three Months Ended
June 30, 2023 June 30, 2022
Ammunition sales $ 14,106,029 $ 40,969,883
Marketplace fee revenue 13,912,202 16,504,946
Ammunition casings sales 6,236,344 3,281,197
Total Revenues $ 34,254,575 $ 60,756,026
Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell directly to customers online. In contrast, our ammunition casings products are sold to manufacturers. Marketplace fees are generated through our GunBroker.com online auction marketplace.
Advertising Costs
We expense advertising costs as they are incurred in selling and marketing expenses of operating expenses. Marketplace advertising costs are ~~expenses~~expensed as they are incurred in cost of revenues. We incurred advertising expenses of $~~695,537~~119,638 and $~~55,194~~550,447 for the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, recognized in selling and marketing expenses and $~~220,219~~138,657 and $~~72,711~~182,104 of marketplace advertising expenses recognized in cost of revenues for the ~~six~~three months ended ~~September~~June 30, 2023 and 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 ~~September~~June 30, ~~2022.~~2023. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts receivable, accounts payable, ~~construction note payable and~~ amounts due to related ~~parties.~~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.
1213

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment
We state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method over estimated useful lives, which are generally five to ten years.
Compensated Absences
We accrue a liability for compensated absences in accordance with Accounting Standards Codification 710 – Compensation – General (“ASC 710”).
Research and Development
To date, we have expensed all costs associated with developing our product specifications, manufacturing procedures, and products through our cost of products sold, as this work was done by the same employees who produced the finished product. We anticipate that it may become necessary to reclassify research and development costs into our operating expenditures for reporting purposes as we begin to develop new technologies and lines of ammunition.
Stock-Based Compensation
We account for stock-based compensation at fair value in accordance with Accounting Standards Codification 718 – Compensation – Stock Compensation (“ASC 718”). Which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors. On April 1, 2023 we adopted ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. Accordingly, stock based compensation is valued using market value of our Common Stock. Stock-based compensation is recognized on a straight line basis over the vesting periods and forfeitures are recognized in the periods they occur. There were ~~338,375~~390,111 and ~~558,375~~338,375 shares of common stock issued to employees, members of the Board of Directors, and members of our advisory committee for services during the three ~~and six~~ months ended ~~September~~June 30, 2023 and June 30, 2022, respectively.
Concentrations of Credit Risk
Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of ~~September~~June 30, ~~2022,~~2023, our bank account balances exceeded federally insured limits.
Income Taxes
We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 – Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being ~~realized~~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 ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we recognized approximately $~~6.1~~1.2 million and $~~6.3~~3.7 million, respectively, in excise taxes. For ease in selling to commercial markets, excise tax is included in our unit price for the products sold. We record this through net sales and expense the offsetting tax expense to cost of goods sold.
1314

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 ~~defended~~defending two contract arbitration cases adverse former employees that are presently in discovery, one involving an employee terminated for cause and the second action involving a termination without cause wherein the former employee is seeking contract wages, commissions and allegedly earned common stock. Discovery is almost completed in the first case and the arbitration is scheduled to take place at the end of July 2023 in the first matter. While discovery continues, the Company received a favorable ruling on a partial motion for summary judgment in the “for cause” arbitration case wherein the arbitrator ruled the employee had stolen funds and thus granted the Company’s dispositive motion. Discovery continues at this time with a fall 2023 arbitration date currently set.
The Company also received notice in October that an OSHA whistleblower complaint had been filed with the US Department of Labor by an employee that had been terminated for cause. The regulatory filing was received after AMMO refused to capitulate to the former employee’s demands. AMMO has produced documents and submitted its position statement to OSHA and the matter is ~~presently reviewing~~currently pending at the ~~OSHA Complaint for discussion~~agency level. AMMO uncovered additional information through work with ~~its~~counsel and investigators and a supplemental response was provided to OHSA on or about July 10, 2023.
On April 30, 2023, Director and Shareholder Steve Urvan filed suit in the Delaware Chancery Court against the Company, certain Directors, former directors, employees, former employees and consultants, seeking rescission of the Company’s acquisition of GunBroker.com and certain affiliated companies. Plaintiff Urvan’s claims include rescission, misrepresentation and fraud. The Company received a declination of coverage from one insurer and ~~potential participation~~is investigating additional available actions with counsel concerning that opinion, while continued pursuit of other available coverage concerning a separate policy. The Company and named defendants are in alignment in all respects, reasonably believe at this date that the claims are without merit and the Company has engaged Delaware Chancery Court litigation specialists to defend its interests in all respects in this case. The Company timely responded to the Urvan Complaint via the filing of a ~~voluntary mediation.~~Motion to Dismiss which, if successful in full, will result in the complete dismissal of the Urvan lawsuit, at which time the Company will pursue recovery of all incurred fees and costs. There were no other known contingencies at ~~September~~June 30, ~~2022.~~2023.
1415

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – INCOME PER COMMON SHARE
We calculate basic income per share using the weighted-average number of shares of common stock outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants. We use the treasury stock method, in the determination of dilutive shares outstanding during each reporting period. We have issued warrants to purchase ~~2,821,634~~2,256,296 shares of common stock. Due to the net loss attributable to common shareholders for the three months ended ~~September~~June 30, ~~2022,~~2023, potentially dilutive securities, which consists of ~~1,319,091~~ ~~common stock purchase~~911 warrants and ~~18,469~~9,090 equity incentive awards ~~have been~~were excluded, as a result of the treasury stock method, from the dilutive EPS calculation as the effect would be antidilutive. ~~The Company excluded warrants of~~For the three months ended June 30, 2022, 150,000 ~~for~~warrants were excluded, as a result of the ~~six months ended September 30, 2022,~~treasury stock method, 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/(LOSS) PER COMMON SHARE
2022 2021 2022 2021 2023 2022
For the Three Months Ended
September 30, For the Six Months Ended
September 30,
For the Three Months Ended
June 30,

2022 2021 2022 2021 2023 2022

Numerator:
Net income/(loss) $ (803,507 ) $ 14,115,512 $ 2,449,520 $ 23,652,172 ) $ (1,093,033 ) $ 3,253,027
Less: Preferred stock dividends (782,639 ) (782,639 ) (1,556,771 ) (1,120,384 ) (774,132 ) (774,132 )
Net income/(loss) attributable to common stockholders $ (1,586,146 ) $ 13,332,873 $ 892,749 $ 22,531,788
Net income attributable to common stockholders $ (1,867,165 ) $ 2,478,895

Denominator:
Weighted average shares of common stock – Basic 116,927,607 113,174,363 116,744,972 109,545,553
Weighted average shares of common stock - basic 117,713,805 116,560,372
Effect of dilutive common stock purchase warrants - 1,922,749 1,300,609 1,916,315 - 1,287,280
Effect of dilutive contingently issuable common stock ⁽¹⁾ - 1,500,000 - 1,262,295
Effect of dilutive equity incentive awards - 124,837 18,038 124,658 - 31,987
Weighted average shares of common stock - Diluted 116,927,607 116,721,949 118,063,619 112,848,821 117,713,805 117,879,639

Basic earnings per share:
Income/(loss) per share attributable to common stockholders – basic $ (0.01 ) $ 0.12 $ 0.01 $ 0.21
Income/(loss) per share attributable to common stockholders - basic $ (0.02 ) $ 0.02

Diluted earnings per share:
Income/(loss) per share attributable to common stockholders – diluted $ (0.01 ) $ 0.11 $ 0.01 $ 0.20
Income/(loss) per share attributable to common stockholders - diluted $ (0.02 ) $ 0.02
~~(1)~~ ~~Weighted average of contingently issuable shares measured from the effective date of merger, April 30, 2021~~

NOTE 4 – INVENTORIES
At ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, the inventory balances are composed of:
SCHEDULE OF INVENTORIES
September 30, 2022 March 31, 2022
June 30, 2023

March 31, 2023

Finished product $ 16,979,313 $ 6,167,318 $ 18,663,314 $ 14,362,514
Raw materials 34,413,831 33,924,813 22,004,128 23,898,596
Work in process 17,213,864 18,924,021 15,257,213 16,083,709
Inventory net $ 68,607,008 $ 59,016,152 $ 55,924,655 $ 54,344,819
NOTE 5 – PROPERTY AND EQUIPMENT
We state equipment at historical cost less accumulated depreciation. We compute depreciation using the straight-line method at rates intended to depreciate the cost of assets over their estimated useful lives, which are generally five to ten years. Upon retirement or sale of property and equipment, we remove the cost of the disposed assets and related accumulated depreciation from the accounts and any resulting gain or loss is credited or charged to other income. We charge expenditures for normal repairs and maintenance to expense as incurred.
We capitalize additions and expenditures for improving or rebuilding existing assets that extend the useful life. Leasehold improvements made either at the inception of the lease or during the lease term are amortized over the shorter of their economic lives or the lease term including any renewals that are reasonably assured.
1516

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment consisted of the following at ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022:~~2023:
SCHEDULE OF PROPERTY AND EQUIPMENT
September 30, 2022 March 31, 2022 June 30, 2023 March 31, 2023
Leasehold Improvements $ 257,009 $ 257,009
Building $ 26,394,651 $ - 28,980,156 28,623,329
Construction in progress
1,837,308

14,335,371

Leasehold Improvements 257,009 257,009
Furniture and Fixtures 362,806 343,014 384,650 384,650
Vehicles 153,254 153,254 153,255 153,254
Equipment 36,818,229 32,524,850 40,979,806 40,233,186
Tooling 143,710 143,710 143,710 143,710
Construction in Progress 945,272 734,781
Total property and equipment $ 65,966,967 $ 47,757,208 $ 71,843,858 $ 70,529,919
Less accumulated depreciation (12,180,849 ) (10,119,402 ) (15,919,991 ) (14,566,664 )
Net property and equipment $ 53,786,118 $ 37,637,806 $ 55,923,867 $ 55,963,255
Depreciation Expense for the three ~~and six~~ months ended ~~September~~June 30, 2023 and 2022 totaled $~~1,025,085~~1,353,327, and $~~2,061,448~~1,033,363, respectively. ~~Depreciation Expense~~Of these totals, $1,152,678 and $826,401 were included in cost of goods sold for the three months ending June 30, 2023 and ~~six months ended September 30, 2021 totaled~~2022. Additionally, $~~1,101,987~~200,648, and $~~2,054,938~~206,962~~, respectively.~~ were included in depreciation and amortization expenses in operating expenses.
NOTE 6 – FACTORING LIABILITY
On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contains a maximum advance amount of $5,000,000on ~~85%~~85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus ~~4.5%~~4.5%. The agreement contains a fee of 3%3% ($150,000) of the Maximum Facility assessed to the Company. Our obligations under this agreement are secured by present and future accounts receivables and related assets, inventory, and equipment. The Company has the right to terminate the agreement, with 30 days written notice, upon obtaining a non-factoring credit facility. This agreement provides the Company with the ability to convert our account receivables into cash. ~~As of September 30, 2022, the~~We did not have an outstanding balance on our Factoring liability as of June 30, 2023. For the three months ended June 30, 2023, interest expense recognized on the Factoring Liability was $~~794,389~~45,385. For the three ~~and six~~ months ended ~~September~~June 30, 2022, interest expense recognized on the Factoring Liability was $~~9,119~~59,816 ~~and $68,935~~including $37,500 ~~of amortization of the commitment fee and~~ ~~for the three and six months ended September 30, 2021, interest expense recognized on the Factoring Liability was $70,795~~ ~~and $112,374, respectively, including $37,500~~ of amortization of the commitment fee.
On June 17, 2021, this agreement was amended which extended the maturity date to June 17, ~~2023~~2024.
NOTE 7 – INVENTORY CREDIT FACILITY
On June 17, 2020, we entered into a Revolving Inventory Loan and Security Agreement with FSW. FSW will establish a revolving credit line, and make loans from time to time to the Company for the purpose of providing capital. The twenty-four month agreement secured by our inventory, among other assets, contains a maximum loan amount of $1,750,000 on eligible inventory and has an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The agreement contains a fee of 2%2% of the maximum loan amount ($35,000) assessed to the Company. On July 31, 2020, the Company amended its Revolving Loan and Security Agreement to increase the maximum inventory loan amount to $2,250,000. As of ~~September~~June 30, ~~2022,~~2023, there was no outstanding balance of the Inventory Credit Facility. There was no interest expense for the three months ended June 30, 2023. Interest expense recognized on the Inventory Credit Facility was $5,142for the ~~six~~three months ended ~~September~~June 30, ~~2022 and 2021 was $6,580~~ ~~and~~ $~~21,333~~ ~~(including $8,561~~ ~~of amortization of the annual fee),~~ ~~respectively.~~2022.
NOTE 8 – LEASES
We lease office, manufacturing, and warehouse space in Scottsdale, AZ, Atlanta and Marietta, GA, and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Scottsdale lease does not include a renewal option. ~~In August of 2021~~We terminated our lease agreement in our first Manitowoc, WI location during the year ended March 31, 2023. Accordingly, we ~~extended the lease of our Atlanta offices through May of 2027, accordingly we increased~~decreased our Right of Use Assets and Operating Lease Liabilities by $~~501,125~~ ~~at September 30, 2021. In January of 2022, we extended the lease of our second Manitowoc, WI location and increased our Right of Use Assets and Operating Lease Liabilities by $308,326~~901,076.
As of ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, total Right of Use Assets were $~~2,393,817~~1,141,418 and $~~2,791,850~~1,261,634, respectively. As of ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022,~~2023, total Operating Lease Liabilities were $~~2,519,596~~1,246,520 and $~~2,922,780~~1,374,224, respectively. The current portion of our Operating Lease Liability on ~~September~~June 30, ~~2022~~2023 and March 31, ~~2022~~2023 is $~~836,544~~421,477 and $~~831,429~~470,734, respectively, and is reported as a current liability. The remaining $~~1,683,052~~825,043 of the total $~~2,519,596~~1,246,520 ~~for the quarter ended September~~as of June 30, ~~2022~~2023 and the $~~2,091,351~~903,490 of the total $~~2,922,780~~1,374,224 ~~for the year ended~~as of March 31, ~~2022~~2023 of the Operating Lease Liability is presented as a long-term liability net of the current portion.
1617

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated lease expense for the three months ended June 30, 2023 was $167,609 including $160,758 of operating lease expense and $6,851of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals. Consolidated lease expense for the three months ended June 30, 2022 was $283,233 including $282,058 of operating lease expense and $1,175of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.
The weighted average remaining lease term and weighted average discount rate for operating leases were ~~3.2~~3.1 years and ~~10.0%~~10.0%, respectively.
Future minimum lease payments under non-cancellable leases as of ~~September~~June 30, ~~2022~~2023 are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS UNDER NON-CANCELLABLE LEASES
Years Ended March 31,
2023 ⁽¹⁾ $ 524,011
2024 992,620
2024 ⁽¹⁾ $ 423,011
2025 796,066 387,214
2026 351,962 351,962
2027 257,508 257,508
2028 43,660
Thereafter 43,660 -
Total Lease Payments 2,965,827 1,463,355
Less: Amount Representing Interest (446,231 ) (216,835 )
Present value of lease liabilities $ 2,519,596 $ 1,246,520
(1) This amount represents future lease payments for the remaining ~~six~~nine months of fiscal year ~~2023.~~2024. It does not include any lease payments for the ~~six~~three months ended ~~September~~June 30, ~~2022.~~2023.

NOTE 9 – NOTES PAYABLE – RELATED PARTY
For the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, the Company made $~~169,110~~ ~~and $334,374~~180,850 in principal payments, respectively, in connection with the Amended Note B, an amended related party note payable with Jagemann Stamping Company (“JSC”). We entered into the Amended Note B with JSC on November 4, 2020 and the note ~~matures~~matured on June 26, 2023. We recognized $~~12,745~~1,788 and $~~31,397~~18,652 in respective interest expenses for the three ~~and six~~ months ended ~~September~~June 30, 2023 and 2022, respectively.
1718

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%~~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%1%) of the principal being prepaid.
The Loan Agreement contains customary events of default including, but not limited to, a failure to make any payments pursuant to the Loan Agreement or Note, a failure to complete construction of the project, a lien of $100,000 or more against the property, or a transfer of the property without Hiawatha’s consent. Upon the occurrence of an event of default, among other remedies, the amounts due pursuant to the Loan can be accelerated, Hiawatha can foreclose on the property pursuant to the mortgage, and a late charge of five percent (5%) of the amount due will be owed with all amounts then owed pursuant to the Note bearing interest at an increased rate.
We made $~~For~~64,959 in principal payments for the ~~six~~three months ended ~~September~~June 30, ~~2022, approximately $10.9~~ ~~million of Loan funds were advanced including $1.0~~ ~~million of cash collateral or restricted cash as security for the Loan.~~2023. The restricted cash can be released per the terms documented in the Loan Agreement filed with the Commission on Form 10-Q on February 14, 2022. During the year ended March 31, 2023, $500,000 of restricted cash was released with $500,000 remaining restricted.
NOTE 11 – CAPITAL STOCK
Our authorized capital consists of 200,000,000 shares of common stock with a par value of $0.001 per share.
During the ~~six~~three month period ended ~~September~~June 30, ~~2022,~~2023, we issued ~~789,008~~390,111 shares of common stock as follows:
● ~~99,762~~ ~~shares were issued for cashless exercise of~~ ~~100,000~~ ~~warrants~~
● ~~12,121~~ ~~shares were issued for the exercise of warrants for a total value of $24,242~~
● ~~677,125~~390,111 shares valued at $~~2,351,438~~822,797 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation
1819

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
At ~~September~~June 30, ~~2022,~~2023, outstanding and exercisable stock purchase warrants consisted of the following:
SCHEDULE OF OUTSTANDING AND EXERCISABLE STOCK PURCHASE WARRANTS
Number of
Shares Weighted
Average
Exercise
Price
Weighted
Average Life
Remaining
(Years)

Number of
Shares

Weighted
Average
Exercise
Price

Weighted
Average Life
Remaining
(Years)

Outstanding at March 31, 2022 2,933,755 $ 2.32 2.29
Outstanding at March 31, 2023 2,460,946 $ 2.46 1.59
Granted - - - - - -
Exercised (112,121 ) 0.23 - - - -
Forfeited or cancelled - - - (204,650 ) 2.00 -
Outstanding at September 30, 2022 2,821,634 $ 2.40 1.79
Exercisable at September 30, 2022 2,821,634 $ 2.40 1.79
Outstanding at June 30, 2023 2,256,296 $ 2.51 1.51
Exercisable at June 30, 2023 2,256,296 $ 2.51 1.51
As of ~~September~~June 30, ~~2022,~~2023, we had ~~2,821,634~~2,256,296 warrants outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price. The outstanding warrants consist of (1) warrants to purchase 911 shares of Common Stock at an exercise price of $1.65 per share until April 2025; (2) warrants to purchase ~~1,809,446~~1,244,108 shares of our Common Stock at an exercise price of $2.00 per share consisting of ~~32%~~1% of the warrants until August 2024, and ~~68%~~99% until February 2026; (3) warrants to purchase 474,966 shares of Common Stock at an exercise price of $2.40 until September 2024; (4) warrants to purchase 386,311 shares of Common Stock at an exercise price of $2.63 until November 2025, and (5) warrants to purchase 150,000 shares of Common Stock at an exercise price of $6.72 until February ~~2024.~~2024.
19

~~AMMO, Inc.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
NOTE 12 – PREFERRED STOCK
On May 18, 2021, the Company filed a Certificate of Designations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware to establish the preferences, voting powers, limitations as to dividends or other distributions, qualifications, terms and conditions of redemption and other terms and conditions of the Series A Preferred Stock.
The Company will pay cumulative cash dividends on the Series A Preferred Stock when, as and if declared by its board of directors (or a duly authorized committee of its board of directors), only out of funds legally available for payment of dividends. Dividends on the Series A Preferred Stock will accrue on the stated amount of $25.00 per share of the Series A Preferred Stock at a rate per annum equal to ~~8.75%~~8.75% (equivalent to $2.1875 per year), payable quarterly in arrears. Dividends on the Series A Preferred Stock declared by our board of directors (or a duly authorized committee of our board of directors) will be payable quarterly in arrears on March 15, June 15, September 15 and December 15.
Generally, the Series A Preferred Stock is not redeemable by the Company prior to May 18, 2026. However, upon a change of control or delisting event (each as defined in the Certificate of Designations), the Company will have a special option to redeem the Series A Preferred Stock for a limited period of time.
Preferred dividends accumulated as of ~~September~~June 30, ~~2022~~2023 were $~~136,044~~136,094. On ~~August 17, 2022, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning June~~May 15, ~~2022 through and including September 14, 2022 payable on September 15, 20221 to holders of record of Series A Preferred Stock on August 31, 2022 equal to $$0.55902778~~ ~~per share. Dividends totaling $782,639~~ ~~were paid on September 15, 2022. On May 12, 2022,~~2023, the Board of Directors of the Company declared a dividend on the Company’s Series A Preferred Stock for the period beginning March 15, ~~2022~~2023 through and including June 14, ~~2022~~2023 payable on June 15, ~~2022~~2023 to holders of record of Series A Preferred Stock on May 31, ~~2022~~2023 equal to $~~0.559027777777778~~0.55902778 per share. Dividends totaling $782,639 were paid on June 15, ~~2022.~~2023.
20

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~NOTE 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 business. 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 $~~129,114~~ ~~and 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 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
Working capital adjustment 1,870,886
Contingent consideration 10,755,000
Common stock 132,645,000
Assumed debt 50,000,000

Fair value of Patent $ 243,920,840
~~The allocation for the consideration recorded for the acquisition is as follows:~~
~~SCHEDULE OF ALLOCATION FOR CONSIDERATION~~

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

Total Consideration $ 243,920,840
⁽¹⁾ ~~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 Six Months
Ended
September 30, 2022

Net revenues $ 113,523,838
Net income $ 28,314,732
21
~~AMMO, Inc.~~
~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~We recorded approximately $1.3~~ ~~million in transaction costs during the six months ended September 30, 2021.~~
NOTE 1413 – GOODWILL AND INTANGIBLE ASSETS
~~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 six~~ months ended ~~September~~June 30, 2023 and 2022 ~~were~~was $3,266,760 ~~and $6,533,520, respectively.~~ ~~Amortization expenses related to our intangible assets for the three and six months ended September 30, 2021 were $3,535,805~~ ~~and $6,057,322~~.
SCHEDULE OF INTANGIBLE ASSETS
September 30, 2022
Life Licenses Patent Other
Intangible
Assets
Licensing Agreement – Jesse James 5 $ 125,000 $ - $ -
Licensing Agreement – Jeff Rann 5 125,000 - -
Streak Visual Ammunition patent 11.2 - 950,000 -
SWK patent acquisition 15 - 6,124,005 -
Jagemann Munition Components:
Customer Relationships 3 - - 1,450,613
Intellectual Property 3 - - 1,543,548
Tradename 5 - - 2,152,076
GDI Acquisition:
Tradename 15 - - 76,532,389
Customer List 10 - - 65,252,802
Intellectual Property 10 - - 4,224,442
Other Intangible Assets 5 - - 607,747
250,000 7,074,005 151,763,617

Accumulated amortization – Licensing Agreements (250,000 ) - -
Accumulated amortization – Patents - (1,794,519 ) -
Accumulated amortization – Intangible Assets - - (21,750,018 )
$ - $ 5,279,486 $ 130,013,599
June 30, 2023
Life Licenses Patent
Other
Intangible
Assets

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

Accumulated amortization – Licensing Agreements (250,000 ) - -
Accumulated amortization – Patents - (2,164,617 ) -
Accumulated amortization – Intangible Assets - - (31,180,201 )
$ - $ 4,909,388 $ 120,583,416
Annual amortization of intangible assets for the next five fiscal years are as follows:
SCHEDULE OF ANNUAL AMORTIZATION OF INTANGIBLE ASSET
Years Ended March 31, Estimates for
Fiscal Year
Estimates for
Fiscal Year

2023 (1) $ 6,561,695
2024 13,074,489
2024 (1) $ 9,836,025
2025 12,664,775 12,664,775
2026 12,664,775 12,664,775
2027 12,553,355 12,553,355
2028 12,543,226
Thereafter 77,773,996 65,230,648
Annual amortization of intangible assets $ 135,293,085 $ 125,492,804
(1) This amount represents future amortization for the remaining ~~six~~nine months of fiscal year ~~2023.~~2024. It does not include any amortization for the ~~six~~three months ended ~~September~~June 30, ~~2022.~~2023.
2221

AMMO, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1514 – SEGMENTS
On April 30, 2021, 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, which created a 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.
~~In the current period, we began the~~The reporting of the separate allocation of certain corporate general and administrative expenses ~~including~~includes non-cash stock compensation ~~expense, as such we have updated the prior period disclosure herein.~~expense. 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 June 30, 2023
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 20,342,373 $ 13,912,202 $ - $ 34,254,575
Cost of Revenues 18,414,961 1,815,074 - 20,230,035
General and administrative expense 3,478,749 2,178,370 6,702,305 12,359,424
Depreciation and amortization 132,102 3,211,941 - 3,344,043
Income/(Loss) from Operations $ (1,683,439 ) $ 6,706,817 $ (6,702,305 ) $ (1,678,927 )
Ammunition Marketplace
Corporate
and other
expenses
Total
For the Three Months Ended June 30, 2022
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 44,251,080 $ 16,504,946 $ - $ 60,756,026
Cost of Revenues 40,337,015 2,283,349 - 42,620,364
General and administrative expense 3,673,112 2,433,729 3,615,724 9,722,565
Depreciation and amortization 146,412 3,203,944 - 3,350,356
Income/(Loss) from Operations $ 94,541 $ 8,583,924 $ (3,615,724 ) $ 5,062,741
Ammunition Marketplace Corporate
and other
expenses Total
For the Three Months Ended September 30, 2022
Ammunition Marketplace Corporate
and other
expenses Total

Net Revenues $ 33,725,865 $ 14,562,694 $ - $ 48,288,559
Cost of Revenues 33,353,443 2,099,407 - 35,452,850
General and administrative expense 3,606,635 2,560,125 3,881,140 10,047,900
Depreciation and amortization 147,904 3,143,418 - 3,291,322
Income from Operations $ (3,382,117 ) $ 6,759,744 $ (3,881,140 ) $ (503,513 )
Ammunition Marketplace Corporate
and other
expenses Total
For the Six Months Ended September 30, 2022
Ammunition Marketplace Corporate
and other
expenses Total

Net Revenues $ 77,976,945 $ 31,067,640 $ - $ 109,044,585
Cost of Revenues 73,690,458 4,382,756 - 78,073,214
General and administrative expense 7,279,747 4,993,854 7,496,864 19,770,465
Depreciation and amortization 294,316 �� 6,347,362 - 6,641,678
Income from Operations $ (3,287,576 ) $ 15,343,668 $ (7,496,864 ) $ 4,559,228
Ammunition Marketplace Total
For the Three Months Ended September 30, 2021
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 44,224,870 $ 16,777,215 $ - $ 61,002,085
Cost of Revenues 32,450,484 2,335,533 - 34,786,017
General and administrative expense 3,249,434 2,147,217 2,883,085 8,279,738
Depreciation and amortization 419,745 3,288,267 - 3,708,012
Income from Operations $ 8,105,207 $ 9,006,198 $ (2,883,085 ) $ 14,228,318
Ammunition Marketplace Total
For the Six Months Ended September 30, 2021
Ammunition Marketplace
Corporate
and other
expenses
Total

Net Revenues $ 76,429,136 $ 29,049,281 $ - $ 105,478,417
Cost of Revenues 56,298,732 3,992,723 - 60,291,455
General and administrative expense 6,126,788 3,149,782 5,682,487 14,959,057
Depreciation and amortization 839,987 5,479,086 - 6,319,073
Income from Operations $ 13,163,629 $ 16,427,690 $ (5,682,487 ) $ 23,908,832
NOTE 1615 – INCOME TAXES
The income tax provision effective tax rates were ~~35.0%~~8.6% and ~~46.0%~~37.0% for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~0.0%~~ ~~and~~ ~~0.0%~~ ~~for the three and six months ended September 30, 2021,~~2022, respectively. During the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, the effective tax rate differed from the U.S. federal statutory rate primarily due to ~~state income taxes.~~employee stock awards. For the three ~~and six~~ months ended ~~September~~June 30, ~~2021~~2022 the effective tax rate differed from the U.S. federal statutory rate due to ~~our valuation. The effective tax rates increased during the three~~state income taxes and ~~six months ended September 30, 2022 compared to the prior year period due to the removal of our valuation allowance.~~employee stock awards.
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, 2022 and ~~2022~~2023 are subject to audit.
NOTE 1716 – RELATED PARTY TRANSACTIONS
During the three months ended June 30, 2023, we paid 75,000
in service fees to two independent contractors. The two independent contractors were issued 34,341 shares of our common stock for a total value of $69,784. We issued 25,000 shares in the aggregate to our advisory committee members for service for a total value of $53,250. Through our acquisition of Gemini, a related party relationship was created through one of our Members of the Board of Directors by ownership of entities that transacts with Gemini. ~~Our~~There was $201,646 included in our Accounts Receivable ~~consisted~~at June 30, 2023 as a result of $~~203,233~~ ~~in receivables from these entities at September 30, 2022 . We recognized $224,808~~ ~~in Marketplace Revenue for the six months ended September 30, 2022 that was attributable to that~~this relationship.
NOTE 1817 – SUBSEQUENT EVENTS

Common Stock Issuances
Subsequent to the June 30, 2023, the Company issued 12,163 as employee stock awards for a total value of $25,299.
~~Settlement Agreement~~Related party transactions

On ~~November 3, 2022, AMMO, Inc. (the “~~~~Company~~~~”) entered into~~July 26, 2023, we obtained a ~~Settlement Agreement (the “~~~~Settlement Agreement~~”)$1.6 million letter of credit with ~~Steven F. Urvan and Susan T. Lokey (collectively~~Northern Trust for collateral for a bond related to a judgement assessed to GunBroker.com. On July 17, 2023, we generated a $1.6 million certificate of deposit with ~~each~~Northern Trust for security on the letter of ~~their respective affiliates and associates, the “~~~~Urvan Group~~~~”).~~
credit.
~~Pursuant to the Settlement Agreement, the Urvan Group has agreed to withdraw its notice of stockholder nomination of its seven director candidates (the “~~~~Urvan Candidates~~~~”) and its demand to inspect books and records, pursuant to Section 220~~The term of the ~~General Corporation Law~~certificate of deposit is twelve months and includes interest of approximately 5%. Per the terms of the ~~State of Delaware, and~~Merger Agreement, filed with the ~~Company agreed~~Commission on a Current Report on Form 8-K on May 6, 2021 (the “Current Report), the Seller is required to ~~immediately increase~~pay or be liable for these losses (capitalized terms are defined 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~~”)Current Report). 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.
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 foregoing summary~~In July of 2023, the Company filed suit in the Delaware Chancery Court against Director and Shareholder Steve Urvan for claims arising out of the ~~Settlement~~Company’s acquisition of certain companies referenced as the GunBroker.com family of companies. The claims arise based upon Mr. Urvan’s repeated failure and refusal to honor contractual defense and indemnification obligations arising under that certain Merger Agreement, 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 filedalong with ~~the SEC on November 7,2022, and incorporated herein by reference.~~alleged misrepresentations.

~~Common Stock Issuances~~
~~Subsequent to the September 30, 2022, the Company issued~~ ~~25,000~~ ~~shares for employees as compensation for a total value of $87,500~~ ~~or $3.50~~ ~~per share. Additionally,~~ ~~150,000~~ ~~shares were issued pursuant the exercise of warrants for a total value of $1,500~~.
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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
Our vision is to modernize the ammunition industry by bringing 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.
Our innovative line of match grade armor piercing (“AP”), hard armor piercing incendiary (“HAPI”) tactical and ballistically matched (“BMMPR”) 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 other 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. The Company has aligned its manufacturing operations to support the large caliber demand from military personnel, such as the 7.62x39, .300NM, .338 Lapua, 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.
Through JMC, we offer ammunition casings for pistol ammunition through large rifle ammunition. Jagemann Munitions Components is backed by decades of manufacturing experience that allows the production of high-quality pistol brass and rifle brass components. Borne from the automotive industry and refined over time to deliver durable and consistent sporting components, Jagemann Munition Components™, 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.
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~~On April 30, 2021, we acquired Gemini and nine of its subsidiaries, all of which are related to Gemini’s ownership~~AMMO, Inc., owner of the GunBroker.com ~~business.~~
~~GunBroker.com is a large~~Marketplace, the largest online marketplace ~~dedicated~~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 ~~shooting~~gear, fishing equipment, outdoor gear, collectibles, and ~~related products. Third-party sellers list items~~much more on ~~the~~our site, ~~and~~while facilitating compliance with federal and state laws that govern the sale of firearms and ~~other~~ restricted items. ~~Ownership~~This allows our base of over 7.8 million users to follow ownership policies and regulations ~~are followed using~~through our network of over 35,000 federally licensed firearms dealers as transfer agents. The nature and operation of the Marketplace as an online auction and sales platform also affords our Company a unique view into the total domestic market for the purpose of understanding sales trends at a granular level across all elements of the outdoor sports and shooting space. Our vision is to expand the services on GunBroker.com and to become a peer to those in our industry. In the short term, we will be implementing the following services;
~~The~~● 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 ~~2023 fiscal year is to~~manufacturing operations focused on premium pistol and rifle ammunition and supporting industry partners for manufactured components. We will continue to ~~expand~~leverage our ~~brand presence into the markets identified above~~proprietary brands like Streak Visual Ammunition^TM and toStelth subsonic ammunition and extend our product offering with premium rifle lines and brands that complement our technologically innovative heritage. We also continue to ~~grow~~ensure dynamic performance under the exacting standards of the US military complex in support of our ~~sales within~~cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities.
23
In September of 2022, we began operating out of our ~~targeted markets. We intend~~new 185,000 square foot manufacturing facility. This new, state-of-the-art ammunition production facility is part of our commitment 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.the continuing development of differentiated, cutting-edge technology.
Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following information should be read in conjunction with our consolidated financial statements included in this Quarterly Report beginning on page 3.
Our financial results for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~ 2023 reflect our newly positioned organization as we transition into our new ~~manufacturing facility.~~strategic direction. We believe that we have hired a strong team of professionals, developed innovative products, and continue to raise capital sufficient to establish our presence as a high-quality ammunition provider and marketplace. We continue to focus on growing our top line revenue and streamlining our ~~operations, and as a result, we~~operations. We experienced a ~~3.4% increase~~43.6% decrease in our Net Revenues for the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 compared with the ~~six months~~year ended ~~September~~June 30, ~~2021.~~2022. This was the result of ~~production capacity increase,~~decreased ammunition sales due to changes in market demand as well as a ~~full quarter of~~shift in operations ~~for our new marketplace, GunBroker.com,~~to an increased focus in ~~comparison to the prior year period.~~ammunition casing sales.
The following table presents summarized financial information taken from our condensed consolidated statements of operations for the three ~~and six months~~ ended ~~September~~June 30, ~~2022~~2023 compared with the three ~~and six~~ months ended ~~September~~June 30, ~~2021:~~2022:
For the Three Months Ended For the Six Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net Sales $ 48,288,559 $ 61,002,085 $ 109,044,585 $ 105,478,417
Cost of Revenues 35,452,850 34,786,017 78,073,214 60,291,455
Gross Margin 12,835,709 26,216,068 30,971,371 45,186,962
Sales, General & Administrative Expenses 13,339,222 11,987,750 26,412,143 21,278,130
Income (loss) from Operations (503,513 ) 14,228,318 4,559,228 23,908,832
Other income (expense)
Other expense (92,167 ) (112,806 ) (19,156 ) (256,660 )
Income (loss) before provision for income taxes $ (595,680 ) $ 14,115,512 $ 4,540,072 $ 23,652,172
Provision for income taxes 207,827 - 2,090,552 -
Net Income (Loss) $ (803,507 ) $ 14,115,512 $ 2,449,520 $ 23,652,172
For the Three Months Ending
June 30, 2023 June 30, 2022
(Unaudited) (Unaudited)
Net Sales $ 34,254,575 $ 60,756,026
Cost of Revenues 20,230,035 42,620,364
Gross Profit 14,024,540 18,135,662
Sales, General & Administrative Expenses 15,703,467 13,072,921
Income from Operations (1,678,927 ) 5,062,741
Other income (expense)
Other income (expense) 488,750 73,011
Income (loss) before provision (benefit) for income taxes $ (1,190,177 ) $ 5,135,752
Provision (benefit) for income tax expense (97,144 ) 1,882,725
Net Income (loss) $ (1,093,033 ) $ 3,253,027
Non-GAAP Financial Measures
We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total net sales, net loss, and other results under accounting principles generally accepted in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these measures are useful for period-to-period comparisons of the Company. We have included these non-GAAP financial measures in this Quarterly Report on Form 10-Q because they are key measures we use to evaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating to operating expenses and the allocation of our resources. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted EBITDA
For the Three Months Ended For the Six Months Ended For the Three Months Ended
30-Sep-22 30-Sep-21 30-Sep-22 30-Sep-21 June 30, 2023 June 30, 2022

Reconciliation of GAAP net income to Adjusted EBITDA
Net Income (Loss) $ (803,507 ) $ 14,115,512 $ 2,449,520 $ 23,652,172
Provision for Income Taxes 207,827 - 2,090,552 -
Net Income (loss) $ (1,093,033 ) $ 3,253,027
Depreciation and amortization 4,294,845 4,667,957 8,594,968 8,154,748 4,620,087 4,300,123
Excise Taxes 2,435,051 3,937,118 6,147,392 6,334,889
Provision (benefit) for income taxes (97,144 ) 1,882,725
Interest expense, net 97,265 112,806 217,752 278,085 204,201 120,487
Employee stock awards 1,176,375 1,153,625 2,351,438 1,853,125 822,797 1,175,063
Stock grants 43,750 65,098 91,594 132,012 50,750 47,844
Other income, net (5,098 ) - (198,596 ) (21,425 ) (692,951 ) (193,498 )
Contingent consideration fair value (23,944 ) (3,444 ) (25,246 ) (60,082 ) (21,024 ) (1,302 )
Proxy contention fees 741,131 - 741,131 -
Other nonrecurring expenses⁽¹⁾ 2,759,726 -
Adjusted EBITDA $ 8,163,695 $ 24,048,672 $ 22,460,505 $ 40,323,524 $ 6,553,409 $ 10,584,469
(1) Other nonrecurring expenses consist of professional and legal fees that are nonrecurring in nature.
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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, share-based or warrant-based compensation expenses, and changes to the contingent consideration fair ~~value, expenses incurred as a result of a proxy contention.~~value. We believe it is useful to exclude these non-cash expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.
We have modified our Adjusted EBITDA calculation in the current period to remove the adjustment for Excise Taxes as we believe this is a ~~non-GAAP financial measure also excludes other cash interest income and expense, as these items are not components~~better representation of our ~~core operations~~ ~~and~~operations. In prior periods, we ~~have~~ included an adjustment for ~~excise taxes.~~.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 six~~ months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. “Proprietary Ammunition” include those lines of ammunition manufactured by our facilities that are sold under the brand names: STREAK VISUAL AMMUNITION™ and Stelth. We define “Standard Ammunition” as non-proprietary ammunition that directly competes with other brand manufacturers. Our “Standard Ammunition” is manufactured within our facility and may also include completed ammunition that has been acquired in the open market for sale to others. Also included in this category is low cost target pistol and rifle ammunition, as well as bulk packaged ammunition manufactured by us using reprocessed brass casings. Ammunition within this product line typically carries lower gross margins.
For the Three Months Ending
June 30, 2023 June 30, 2022
Proprietary Ammunition $ 1,154,802 $ 2,855,934
Standard Ammunition 12,951,227 38,113,949
Ammunition Casings 6,236,344 3,281,197
Marketplace Revenue 13,912,202 16,504,946
Total Sales $ 34,254,575 $ 60,756,026
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For the Three Months Ended For the Six Months Ended
September 30,
2022 September 30,
2021 September 30,
2022 September 30,
2021
Proprietary Ammunition $ 3,351,993 $ 1,333,347 $ 6,207,926 $ 2,443,968
Standard Ammunition 26,034,976 38,875,055 64,148,926 66,116,214
Ammunition Casings 4,338,896 4,016,467 7,620,093 7,868,953
Marketplace Revenue 14,562,694 16,777,216 31,067,640 29,049,282
Total Sales $ 48,288,559 $ 61,002,085 $ 109,044,585 $ 105,478,417
Sales for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 decreased ~~21% and increased 3%, respectively,~~43.6% or approximately ~~$12.7~~$26.5 million due to changes in market conditions and ~~$3.6 million, over the three and six months ended September 30, 2021.~~our shift to increase ammunition casing sales. The decrease for the three month period was largely the result of a decrease of ~~$12.8~~$25.2 million in sales inof bulk pistol and rifle ammunition, ~~an increase~~a decrease of ~~$2.0~~$1.7 million of sales of Proprietary Ammunition, and a decrease of ~~$2.2~~$2.6 million generated from our marketplace, GunBroker.com. The increase for the six month period was the result of an increase of approximately $3.8 million of sales of Proprietary Ammunition, a decrease of $2.0 million of sales in bulk pistol and rifle ammunition, an increase of approximately and $0.2 million of sales from our casing operations, and an increase of approximately $2.0 million of revenue generated from our marketplace, GunBroker.com, which includes auction revenue, payment processing revenue, and shipping income. Our ammunition casings sales increased $3.0 million or 90.1% over the prior year period. Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of our Standard Ammunition.
We are focused on continuing to grow top line revenue quarter-over-quarter as we continue to further expand distribution into commercial markets, introduce new product lines, and continue to initiate sales to U.S. law enforcement, military, and international markets.
Through our acquisition of SWK, the Company has developed and deployed a ~~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. ~~This line was formally launched at SHOT Show in Las Vegas, where our team demonstrated or presented the capability to more than 15 countries around the world.~~ We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions. The Company has since developed the ballistic match (BMMPR) and signature-on-target (SoT) rounds under contract with the U.S. Government in support of US special operations which have been publicly announced pursuant to governmental authorization. Additional work continues in support of the military operations of the U.S. and its ally military components which is not currently subject to disclosure.
It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our Company, they also have a long sales cycle. The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, which are reasonably anticipated to drive sustained sales opportunity in the military, law enforcement, and commercial markets.
Sales outside of the United States require licenses and approval from either the U.S. Department of Commerce or the U.S. State Department, which typically takes approximately 30 days to receive. On June ~~16, 2022,~~12, 2023, we renewed our annual registration with the International Traffic in Arms Regulations (“ITAR”), which remains valid through the report date. This permits the Company to export and broker ammunition and other controlled items covered under ITAR.
Cost of Revenues
Cost of Revenues ~~increased~~decreased by approximately ~~$.7 million and $17.8 million from $34.8 million and $60.3~~$22.4 million to ~~$ 35.5 million and $78.1~~$20.2 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the comparable period ended in ~~2021.~~2022. 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 ~~2022~~2023 as compared to ~~2021.~~2022.
Gross Margin
Our gross margin percentage ~~decreased~~increased to ~~26.6% and 28.4%~~40.9% from ~~42.9% and 42.8%~~29.8% during the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same period in ~~2021.~~2022. The ~~decrease~~increase in our gross margin was related to ~~increased costs~~our Marketplace revenue, which produces higher gross profit, contributing to a higher portion of ~~raw materials, labor, and overhead costs.~~the overall sales for the period.
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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 by efficiencies added through our new production ~~facility scheduled to come online this fiscal year.~~facility. Our goal in the next 12 to 24 months is to continue to improve our gross margins. This will be accomplished through the following:
● Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, Stelth and now our tactical Armor Piercing (AP) and Hard Armor Piercing Incendiary (HAPI) precision ammunition, all of which carry higher margins as a percentage of their selling price;

● Introduction of new lines of ammunition that historically carry higher margins in the consumer and government sectors;

● Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers;

● Expanded use of automation equipment that reduces the total labor required to assemble finished products;

● And better leverage of our fixed costs through expanded production to support the sales objectives.
Operating Expenses
Overall, for the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, our operating expenses increased by approximately ~~$1.4 million and $5.1~~$2.6 million over the three ~~and six~~ months ended ~~September~~June 30, ~~2021~~2022 and increased as a percentage of sales from ~~19.7% and 20.1%~~21.5% to 45.8% for the three ~~and six~~ months ended ~~September~~June 30, ~~2021 to 27.6% and 24.2% for the three and six months ended September 30, 2022.~~2023. Our operating expenses include non-cash depreciation and amortization expense of approximately ~~$3.2 million and $6.6~~$3.3 million for the three ~~and six~~ months ~~ended September~~June 30, ~~2022, respectively.~~2023. 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, board members, and key consultants for the organization during the period. Operating expenses for the three ~~and six~~ months ended ~~September~~June 30, 2023 and June 30, 2022 included noncash expenses of approximately ~~$7.2~~$4.2 million and ~~$13.4~~$4.6 million, respectively. ~~We expect to see administrative expenditures decrease as a percentage of sales in the 2023 fiscal year, as we leverage our work force and expand our sales opportunities.~~
During the three months ended ~~September~~June 30, ~~2022,~~2023, our selling and marketing expenses decreased by approximately ~~$0.5 million, while for the six months ended September 30, 2022 our selling and marketing expenses increased by approximately $0.3~~$1.6 million, in comparison to the three ~~and six~~ months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease was primarily related to decreases in sales commission ondue to the ~~increases~~decrease in the sale of our ~~products resulting of approximately $2.0 million for the six months ended September 30, 2022.~~products.
Our corporate general & administrative expenses increased approximately ~~$1.0 million and~~ $2.9 million infor the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 from the comparable prior period ~~mainly~~ due to inclusion of the full six months of Gemini expenses for the six month period ended September 30, 2022, as compared to partial inclusion during the period ended September 30, 2021, as a result of the acquisition occurring on April 30, 2021, as well as, $0.7$2.8 million ofin nonrecurring legal and professional fees ~~related to our proxy contention in the three months ended September 30, 2022.~~and expenses.
Employee salaries and related expenses increased approximately $1.3 million ~~and $1.7 million~~ for the three ~~and six~~ months ended ~~September~~June 30, ~~2022~~2023 compared to the comparable period ended in ~~2021.~~2022. The increase for the ~~six~~three months ended ~~September~~June 30, ~~2022~~2023 when compared to the prior period, was ~~primary~~primarily related to ~~an increase~~$1.0 million of additional payroll expenses incurred, $0.7 million in expenses related to our new employee bonus plan, and a decrease of $0.4 million in employee stock ~~compensation of approximately $0.5 million.~~compensation.
Depreciation and amortization expenses for the three months ended ~~September~~June 30, ~~2022~~2023 decreased by approximately ~~$0.4 million, and increased for the 6 months ended September 30, 2022 by approximately $0.3~~$0.01 million.
Interest and Other Expenses
For the three ~~and six~~ months ended ~~September~~June 30, ~~2022,~~2023, interest expense ~~decreased~~increased by approximately ~~$0.1 million and~~ $0.1 million compared with the comparable three ~~and six~~ months ended ~~September~~June 30, ~~2021.~~2022. The change from the prior periods was mainly due to ~~the repayment of notes during the three and six months ended September 30, 2022.~~an increase in our Construction Note Payable.
Income Taxes
For the three ~~and six~~ months ended ~~September~~June 30, 2023 and 2022, we recorded a provision (benefit) for federal and state income taxes of approximately ~~$0.2~~($0.1) million and ~~$2.1~~$1.9 million, respectively. ~~There was no provision for federal and state income taxes during the three and six months ended September 30, 2021.~~
Net Income (Loss)
We ended the three months ended ~~September~~June 30, ~~2022~~2023 with a net loss of approximately ~~$.8~~$1.1 million compared with a net income of approximately ~~$14.1~~$3.3 million for the three months ended ~~September~~June 30, 2021. We ended the six months ended September 30, 2022 with a net income of approximately $2.5 million compared with a net income of approximately $23.7 million for the six months ended September 30, 2021.2022.
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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 ~~September~~June 30, ~~2022,~~2023, we had ~~$29,004,539~~$47,505,047 of cash and cash equivalents, an increase of ~~$5,723,064~~$8,371,020 from March 31, ~~2022.~~2023.
Working Capital is summarized and compared as follows:
September 30, 2022 March 31, 2022 June 30, 2023 March 31, 2023
Current assets $ 132,876,446 $ 129,691,636 $ 130,572,382 $ 128,451,893
Current liabilities 31,925,735 35,823,311 23,901,069 25,463,399
$ 100,950,711 $ 93,868,325 $ 106,671,313 $ 102,988,494
Changes in cash flows are summarized as follows:
Operating Activities
For the ~~six~~three months ended ~~September~~June 30, 2023, net cash provided by operations totaled approximately $13.0 million. This was primarily the result of net loss of approximately $1.1 million, which was offset by decreases in our accounts receivable of approximately $7.1 million, decreases in prepaid expenses of approximately $0.9 million, and decreases in our accounts payable of approximately $1.7 million, increases in our inventories of approximately $1.6 million, and decreases in deposits of approximately $3.0 million. Non-cash expenses for depreciation and amortization totaled approximately $4.6 million and non-cash expenses for employee stock awards totaled $0.8 million.
For the three months ended June 30, 2022, net cash provided by operations totaled approximately ~~$17.7~~$5.2 million. This was primarily the result of net income of approximately ~~$2.5~~$3.3 million, which was offset by increases in our inventories of approximately ~~$9.6~~$5.6 million, ~~decreases~~increases in deposits of approximately ~~$2.6~~$0.5 million and increases in due from related parties of approximately $1.6 million, decreases in our accounts receivable of approximately ~~$12.5~~$4.2 million, decreases in prepaid expenses of approximately ~~$1.1~~$0.9 million, and decreases in our accounts payable of ~~approximately~~ $3.0 ~~million, and decreases of other liabilities of approximately $1.3~~ million. Non-cash expenses for depreciation and amortization totaled approximately ~~$8.6~~$4.3 million and non-cash expenses for employee stock awards totaled ~~$2.4~~$1.2 million.
For the six months ended September 30, 2021, net cash used in operations totaled approximately $7.1 million. This was primarily the result of net income of approximately $23.7 million, which was offset by increases in our inventories of approximately $19.1 million, increases in deposits of approximately $14.7 million, increases in our accounts receivable of approximately $14.2 million, decreases in prepaid expenses of approximately $1.6 million, and increases in our accounts payable and accrued liabilities of $3.9 million and $1.0 million, respectively. Non-cash expenses for depreciation and amortization totaled approximately $8.2 million and non-cash expenses for employee stock awards totaled $1.9 million.
Investing Activities
~~During~~For the ~~six~~three months ended ~~September~~June 30, ~~2022,~~2023, we used approximately ~~$8.4~~$1.3 million in net cash for investing activities. Net cash used in investing activities consisted of approximately ~~$8.4~~$1.3 million related to purchases of production equipment ~~and the construction of~~for our new manufacturing facility in Manitowoc, ~~WI.~~WI and capitalized development costs related to our marketplace, GunBroker.com.
During the ~~six~~three months ended ~~September~~June 30, ~~2021,~~2022, we used approximately ~~$55.7~~$5.3 million in net cash for investing activities. Net cash used in investing activities consisted of approximately ~~$50.5 million used in connection with the merger of Gemini, and approximately $5.2~~$5.3 million related to purchases of production equipment and the construction of our new manufacturing facility in Manitowoc, WI.
Financing Activities
~~During~~For the ~~six~~three months ended ~~September~~June 30, ~~2022,~~2023, net cash used in financing activities was approximately ~~$2.6~~$3.3 million. This was the net effect of ~~an approximate $0.8~~approximately $1.5 million ~~reduction~~used in our ~~Inventory Credit Facility, approximately $1.3~~common stock repurchased plan, $1.0 million from insurance premium note payments, approximately ~~$1.4~~$0.6 million of Preferred Stock dividends paid, and the generation of approximately ~~$45.6~~$14.6 million from accounts receivable factoring, which was offset by payments of approximately ~~$45.3 million, and proceeds from our Construction Note Payable of $1.0~~$14.6 million.
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During the ~~six~~three months ended ~~September~~June 30, ~~2021,~~2022, net cash used in financing activities was approximately ~~$22.5~~$1.3 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, payments on insurance premium note of approximately $1.1 million and an approximate ~~$0.9~~$0.7 million reduction in our Inventory Credit ~~Facility. Additionally,~~Facility, approximately ~~$50.4~~$0.5 million ~~was generated~~from insurance premium note payments, generation of approximately $24.7 million from accounts receivable factoring, which was offset by payments of approximately ~~$49.1 million.~~$25.0 million and $1.0 million in proceeds of restricted cash from our construction note payable.
Liquidity
Existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year. Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes. These sources have been adequate to fund our recurring cash expenditures including but not limited to our working capital requirements, capital expenditures to expand our operations, debt repayments, and acquisitions. We intend to continue use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases and any potential acquisitions.
Leases
We lease four locations that are used for our offices, production, and warehousing. As of ~~September~~June 30, ~~2022,~~2023, we had ~~$3.0~~$1.2 million of fixed lease payment obligations with ~~$1.0~~$0.4 million payable within the next 12 months. Please refer to Note 8– Leases for additional information.
~~Related Party Note Payable~~
~~As of September 30, 2022, we had an outstanding balance on our Related Party Note Payable of approximately $0.5 million, which is due within the next 12 months.~~
Construction Note Payable
We will finance a portion of our new production facility with our Construction Note Payable. We expect to make ~~$0.8~~$0.3 million in principal and interest payments within the next 12 months. The ~~total~~ principal balance of the Construction Note ~~is expected to be $11.6 million upon completion of the project and~~ will mature on October 14, 2026.
Off-Balance Sheet Arrangements
As of ~~September~~June 30, ~~2022,~~2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the condensed consolidated financial statements include the valuation of allowances for doubtful accounts, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation, and ~~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, ~~2022,~~2023, under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We adopted ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326) and ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” in the current period. These policy changes did not result in a material effect on the Company’s financial statements. There have been no other significant changes to these policies during the three ~~and six~~ months ended ~~September~~June 30, ~~2022.~~2023. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, ~~2022.~~2023.
Goodwill
We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline it is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flows was more appropriate due to the operational performance of the reporting segment. Accordingly, the impairment of Goodwill was not warranted for the three months ended June 30, 2023. As of July 30, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment. However, due to declines in the value of the Company’s common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2024.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
WeOur market risks are ~~a smaller reporting company as defined~~similar to those disclosed under the caption “Quantitative And Qualitative Disclosures About Market Risk” in Part II, Item 7A of our Annual Report on Form 10-K for the year ended March 31, 2023 and filed with the SEC on June 14, 2023 and is hereby incorporated by ~~Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.~~reference.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

~~We maintain~~Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule ~~13a-15(e) promulgated~~13a-15(c) and 15d-15(e) under the ~~Securities~~ Exchange Act, as of ~~1934 (the “Exchange Act”), that~~June 30, 2023. Our disclosure controls and procedures are designed to ~~ensure~~provide reasonable assurance that information we are required to ~~be disclosed by us~~disclose in the reports ~~that~~ we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the ~~Securities and Exchange Commission’s~~SEC’s rules and ~~forms~~forms.
Based on this evaluation, 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,because of the ~~effectiveness of the design~~material weaknesses described below, our CEO and operation of our disclosure controls and procedures as of September 30, 2022. Based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial OfficerCFO have concluded that our disclosure controls and procedures were not ~~effective. Our controls were ineffective due to~~effective at the ~~size~~reasonable assurance level as of June 30, 2023.
Notwithstanding 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~~that were identified and continued to exist as of June 30, 2023, management believes that the financial ~~information presented herein is materially correct and~~statements included in this report present fairly ~~presents the~~in all material respects our financial position, ~~and operating~~ results of operations and cash flows for the ~~three months ended September 30, 2022, in accordance with GAAP.~~period presented, nor were there changes to previously released financial results.

~~Changes~~Material weaknesses and management’s remediation plan
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. The following material weaknesses in our internal control over financial reporting remained as of June 30, 2023:
The Company failed to maintain an effective control environment due to the following:
● the Company’s management and the governance did not maintain appropriately designed entity-level controls impacting the control environment to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to limited personnel to assist with the accounting and financial reporting function and inadequate oversight and accountability over the performance of control activities, including establishment of a Whistleblower Hotline and lack of formalization of certain key governance elements: management delegation, annual board committee charter review, acknowledgement of code of conduct, and approval of the annual budget;
● the Company failed to maintain properly designed segregation of duties, both within manual processes and system access;
● the Company failed to maintain effectively designed controls over journal entries, both recurring and nonrecurring, account reconciliations, and periodic flux analysis. Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness, and accuracy. In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness, and accuracy were also responsible for preparation.
● the Company failed to maintain effectively designed controls over the period-end financial reporting process, including adequate tie-out and review of documentation that supports the financial statements; and
● the Company failed to maintain effectively designed controls over information technology general controls in the areas of user provisioning and de-provisioning, application change management, operating system and logical access controls, and segregation of duties for information technology (“IT”) systems that supports the Company’s financial reporting process.
30
Management’s Remediation Initiatives

~~There were no~~We have concluded that these material weaknesses arose because we did not have the necessary business processes, systems, personnel, and related internal controls.
In response to the material weaknesses, management, with the oversight of the Audit Committee of the Board of Directors, has continued the process of, and is committed to, designing and implementing effective measures to strengthen our internal controls over financial reporting and remediate the material weaknesses. The Company is committed to ensuring that a proper, consistent tone is communicated throughout the organization, which emphasizes the expectation that previously existing deficiencies will be rectified through implementation of processes and controls to ensure strict compliance with U.S. GAAP and regulatory requirements.
Our third–party consulting firm that specializes in internal audit work, and more specifically internal controls over financial reporting work, has assisted management and will continue to assist management with our risk assessment of internal control over financial reporting as well as documentation and testing of our internal control structure and evaluation of material weaknesses, with special focus on assisting management in the establishment and evaluation of proper segregation of duties procedures and monitoring and controls over ITGCs for the systems that support our financial reporting process. Specifically, with the right compliment of accounting and finance team members now in place, our entire control environment is being evaluated for enhancement of our internal controls over financial reporting.
In addition to the measures noted above, we have made progress in our remediation plan including the following items:
● Management has presented, and the Board of Directors has approved the formal management delegation and the Company’s Annual Budget during the first quarter of fiscal year 2024.
● The Company formally initiated the implementation of a whistleblower hotline during the first quarter of fiscal year 2024.
● Approved, adopted, and implemented accounting policies related to journal entries and invoice approval.
● Improved formalization of procedures and documentation for all journal entries, account reconciliations, flux analysis and variance thresholds, vendor set-up.
● Progressed IT Remediation Project with third-party consultants to design and implement controls over user provisioning and de-provisioning, application change management, operating system and logical access controls, segregation of duties, and third-party service provider report review process.
● Implemented improvements surrounding review and approval of controls with a review element, including proper segregation, enhanced documentation, and consistency of application.
Beginning the second quarter of fiscal year 2024, management, with the help of our third-party consulting firm, will perform walkthroughs of our key controls, including those that would be necessary to effectively remediate the existing material weaknesses. A walkthrough is performed to gain comfort regarding the design effectiveness of the key controls. Based on our assessment of the walkthrough results, we will determine if our key controls have been designed effectively. Further assessments will be made of these controls to ascertain operating effectiveness, after which we will be able to determine if the existing material weaknesses have been remediated.
While these actions and planned actions are subject to ongoing management evaluation and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, we are committed to the continuous improvement of our internal control over financial reporting and will continue to diligently review our internal control over financial reporting.
Changes in internal controls
Other than the changes described above, there have not been any changes in our internal control over financial reporting as(as such term is defined in Exchange Act in Rule ~~13a-15(f) promulgated~~13a-15(c) and 15d-15(e) under the Exchange ~~Act,~~Act) during the ~~quarterly period from July 1, 2022 to September~~quarter ended June 30, ~~2022,~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
31

PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings, and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.
Please reference the Contingencies section of Note 2 and Note 17 of our Financial Statements for additional disclosure.
ITEM 1A. RISK FACTORS
WeOur market risks at are ~~a smaller reporting company as defined by Rule 12b-2~~similar to those disclosed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the ~~Securities Exchange Act of 1934~~year ended March 31, 2023 and ~~are not required~~filed with the SEC on June 14, 2023. There have been no material changes to ~~provide the information under this item.~~our Risk Factors disclosed in Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuances
The authorized capital of the Company is 200,000,000 shares of Common Stock with a par value of $0.001 per share and 10,000,000 shares of Preferred Stock with a $0.001 par value per share.
There were no unregistered sales of the Company’s equity securities during the quarter ended ~~September~~June 30, 2023.
Share Repurchases
On February 8, 2022, we announced that ~~were not previously reported~~our Board of Directors authorized a share repurchase program for up to $30.0 million of our outstanding common stock. On March 28, 2023, we announced that our Board of Directors authorized the extension of our repurchase program until February 2024.
Under the Share Repurchase Program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in ~~a Current Report~~accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on ~~Form 8-K.~~available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash resources.
The following table summarizes our share repurchases under our repurchase program for our first fiscal quarter of our 2024 fiscal year.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum
Number of
Shares that
may yet be Purchased Under the Plan or Programs(1)
April 2023 609,509 $ 1.95 609,509
May 2023 129,322 $ 1.95 129,322
June 2023 - -
Total 738,831 $ 1.95 738,831 13,165,171
(1) The maximum number of shares that may yet be repurchased included herein is determined based on the closing price of our Common Stock of $2.13 on June 30, 2023. This amount may change based on the price that our Common Stock trades at.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
~~None~~None.
ITEM 4. MINE SAFETY DISCLOSURES
Not ~~applicable~~applicable.
32
ITEM 5. OTHER INFORMATION
~~None~~None.
ITEM 6. EXHIBITS
Exhibit No. Exhibit

31.1*10.1+ Employment Agreement of Robert D. Wiley, as amended as of June 12, 2023 (Incorporated by Reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on June 14, 2023)
31.1* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for ~~Fred W. Wagenhals.~~Jared R. Smith.
31.2* Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
32.1** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for ~~Fred W. Wagenhals.~~Jared R. Smith.
32.2** Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
101.INS* Inline XBRL Instance Document
101.SCH* Inline XBRL Taxonomy Extension Schema Document
101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB* Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*Filed Herewith.
** Furnished Herewith.
33

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~~Jared R. Smith
Dated: ~~November 14, 2022~~August 9, 2023 By: ~~Fred W. Wagenhals,~~Jared R. Smith, Chief Executive Officer
/s/ Robert D. Wiley
Dated: ~~November 14, 2022~~August 9, 2023 By: Robert D. Wiley, Chief Financial Officer
34

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

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

Balance as of March 31, 2022		1,400,000	$	1,400		116,485,747	$	116,487	$	385,426,431		$	(11,240,752	)	$	-	$	374,303,566
Beginning balance		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
Net income (loss)		-		-		-		-		-			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
Ending balance		1,400,000	$	1,400		116,923,884	$	116,924	$	386,648,901		$	(8,761,857	)	$	-	$	378,005,368

	For the Three Months Ended June 30,
	2023		2022

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	184,385	$	100,876

Non-cash investing and financing activities:
Insurance premium note payment	$	1,056,199	$	2,035,519
Dividends accumulated on preferred stock	$	136,094	$	136,061
Construction note payable	$	-	$	4,800,358

	●	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 June 30, 2023			Accounts Receivable
PERCENTAGES	Three Months Ended			June 30, 2023			March 31, 2023

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

	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
	For the Three Months Ended				For the Six Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Ammunition Sales	$	29,386,969	$	40,208,402	$	70,356,852	$	68,560,182
Marketplace fee revenue		14,562,694		16,777,216		31,067,640		29,049,282
Ammunition Casings Sales		4,338,896		4,016,467		7,620,093		7,868,953
Total Sales	$	48,288,559	$	61,002,085	$	109,044,585	$	105,478,417

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

	September 30, 2022		March 31, 2022		June 30, 2023		March 31, 2023
Finished product	$	16,979,313	$	6,167,318	$	18,663,314	$	14,362,514
Raw materials		34,413,831		33,924,813		22,004,128		23,898,596
Work in process		17,213,864		18,924,021		15,257,213		16,083,709
Inventory net	$	68,607,008	$	59,016,152	$	55,924,655	$	54,344,819

Years Ended March 31,
2023 ⁽¹⁾	$	524,011
2024		992,620
2024 ⁽¹⁾				$	423,011
2025		796,066			387,214
2026		351,962			351,962
2027		257,508			257,508
2028					43,660
Thereafter		43,660			-
Total Lease Payments		2,965,827			1,463,355
Less: Amount Representing Interest		(446,231	)		(216,835	)
Present value of lease liabilities	$	2,519,596		$	1,246,520

	●	~~99,762~~ ~~shares were issued for cashless exercise of~~ ~~100,000~~ ~~warrants~~
	●	~~12,121~~ ~~shares were issued for the exercise of warrants for a total value of $24,242~~
	●	~~677,125~~390,111 shares valued at $~~2,351,438~~822,797 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

	Number of Shares			Weighted Average Exercise Price		Weighted Average Life Remaining (Years)		Number of Shares			Weighted Average Exercise Price		Weighted Average Life Remaining (Years)
Outstanding at March 31, 2022		2,933,755		$	2.32		2.29
Outstanding at March 31, 2023									2,460,946		$	2.46		1.59
Granted		-			-		-		-			-		-
Exercised		(112,121	)		0.23		-		-			-		-
Forfeited or cancelled		-			-		-		(204,650	)		2.00		-
Outstanding at September 30, 2022		2,821,634		$	2.40		1.79
Exercisable at September 30, 2022		2,821,634		$	2.40		1.79
Outstanding at June 30, 2023									2,256,296		$	2.51		1.51
Exercisable at June 30, 2023									2,256,296		$	2.51		1.51


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

Fair value of Patent	$	243,920,840


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

Total Consideration	$	243,920,840

INCOME STATEMENT DATA	For the Six Months Ended September 30, 2022

Net revenues	$	113,523,838
Net income	$	28,314,732

			September 30, 2022
	Life		Licenses			Patent			Other Intangible Assets
Licensing Agreement – Jesse James		5	$	125,000		$	-		$	-
Licensing Agreement – Jeff Rann		5		125,000			-			-
Streak Visual Ammunition patent		11.2		-			950,000			-
SWK patent acquisition		15		-			6,124,005			-
Jagemann Munition Components:
Customer Relationships		3		-			-			1,450,613
Intellectual Property		3		-			-			1,543,548
Tradename		5		-			-			2,152,076
GDI Acquisition:
Tradename		15		-			-			76,532,389
Customer List		10		-			-			65,252,802
Intellectual Property		10		-			-			4,224,442
Other Intangible Assets		5		-			-			607,747
				250,000			7,074,005			151,763,617

Accumulated amortization – Licensing Agreements				(250,000	)		-			-
Accumulated amortization – Patents				-			(1,794,519	)		-
Accumulated amortization – Intangible Assets				-			-			(21,750,018	)
			$	-		$	5,279,486		$	130,013,599

Years Ended March 31,	Estimates for Fiscal Year		Estimates for Fiscal Year
2023 (1)	$	6,561,695
2024		13,074,489
2024 (1)			$	9,836,025
2025		12,664,775		12,664,775
2026		12,664,775		12,664,775
2027		12,553,355		12,553,355
2028				12,543,226
Thereafter		77,773,996		65,230,648
Annual amortization of intangible assets	$	135,293,085	$	125,492,804

	●	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 June 30, 2023
	Ammunition			Marketplace		Corporate and other expenses			Total

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

	Ammunition			Marketplace		Corporate and other expenses			Total
	For the Three Months Ended September 30, 2022
	Ammunition			Marketplace		Corporate and other expenses			Total

Net Revenues	$	33,725,865		$	14,562,694	$	-		$	48,288,559
Cost of Revenues		33,353,443			2,099,407		-			35,452,850
General and administrative expense		3,606,635			2,560,125		3,881,140			10,047,900
Depreciation and amortization		147,904			3,143,418		-			3,291,322
Income from Operations	$	(3,382,117	)	$	6,759,744	$	(3,881,140	)	$	(503,513	)

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

	●	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;

	●	Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers;

	●	Expanded use of automation equipment that reduces the total labor required to assemble finished products;

	●	And better leverage of our fixed costs through expanded production to support the sales objectives.

	●	the Company’s management and the governance did not maintain appropriately designed entity-level controls impacting the control environment to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to limited personnel to assist with the accounting and financial reporting function and inadequate oversight and accountability over the performance of control activities, including establishment of a Whistleblower Hotline and lack of formalization of certain key governance elements: management delegation, annual board committee charter review, acknowledgement of code of conduct, and approval of the annual budget;

	●	the Company failed to maintain properly designed segregation of duties, both within manual processes and system access;

	●	the Company failed to maintain effectively designed controls over journal entries, both recurring and nonrecurring, account reconciliations, and periodic flux analysis. Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness, and accuracy. In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness, and accuracy were also responsible for preparation.

	●	the Company failed to maintain effectively designed controls over the period-end financial reporting process, including adequate tie-out and review of documentation that supports the financial statements; and

	●	the Company failed to maintain effectively designed controls over information technology general controls in the areas of user provisioning and de-provisioning, application change management, operating system and logical access controls, and segregation of duties for information technology (“IT”) systems that supports the Company’s financial reporting process.

	●	Management has presented, and the Board of Directors has approved the formal management delegation and the Company’s Annual Budget during the first quarter of fiscal year 2024.

	●	The Company formally initiated the implementation of a whistleblower hotline during the first quarter of fiscal year 2024.

	●	Approved, adopted, and implemented accounting policies related to journal entries and invoice approval.

	●	Improved formalization of procedures and documentation for all journal entries, account reconciliations, flux analysis and variance thresholds, vendor set-up.

	●	Progressed IT Remediation Project with third-party consultants to design and implement controls over user provisioning and de-provisioning, application change management, operating system and logical access controls, segregation of duties, and third-party service provider report review process.

	●	Implemented improvements surrounding review and approval of controls with a review element, including proper segregation, enhanced documentation, and consistency of application.

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

Exhibit No.		Exhibit

31.1*10.1+		Employment Agreement of Robert D. Wiley, as amended as of June 12, 2023 (Incorporated by Reference to Exhibit 10.6 to the Annual Report on Form 10-K filed on June 14, 2023)
31.1*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for ~~Fred W. Wagenhals.~~Jared R. Smith.
31.2*		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
32.1**		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for ~~Fred W. Wagenhals.~~Jared R. Smith.
32.2**		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.

101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	AMMO, INC.

		/s/ ~~Fred W. Wagenhals~~Jared R. Smith
Dated: ~~November 14, 2022~~August 9, 2023	By:	~~Fred W. Wagenhals,~~Jared R. Smith, Chief Executive Officer

		/s/ Robert D. Wiley
Dated: ~~November 14, 2022~~August 9, 2023	By:	Robert D. Wiley, Chief Financial Officer