UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q

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

For the quarterly period ended September 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 8, 2023, there were 118,460,743 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 30, 2023 (Unaudited) and March 31, 2023	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended September 30, 2023, and 2022	4
	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three and six months ended September 30, 2023, and 2022	5
	Condensed Consolidated Statements of Cash flow (Unaudited) for the six months ended September 30, 2023, and 2022	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	24
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	32
ITEM 4:	CONTROLS AND PROCEDURES	32

PART II

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

PART I

ITEM 1. FINANCIAL STATEMENTS

AMMO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2023			March 31, 2023
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	49,564,868		$	39,134,027
Accounts receivable, net		23,030,851			29,346,380
Inventories		53,014,205			54,344,819
Prepaid expenses		3,920,007			5,126,667
Current portion of restricted cash		-			500,000
Total Current Assets		129,529,931			128,451,893

Equipment, net		55,821,414			55,963,255

Other Assets:
Deposits		3,189,518			7,028,947
Patents, net		4,786,022			5,032,754
Other intangible assets, net		117,440,022			123,726,810
Goodwill		90,870,094			90,870,094
Right of use assets - operating leases		1,017,982			1,261,634
TOTAL ASSETS	$	402,654,983		$	412,335,387

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	19,598,548		$	18,079,397
Accrued liabilities		6,250,164			4,353,354
Current portion of operating lease liability		370,980			470,734
Note payable related party		-			180,850
Current portion of construction note payable		265,977			260,429
Insurance premium note payable		1,157,745			2,118,635
Total Current Liabilities		27,643,414			25,463,399

Long-term Liabilities:
Contingent consideration payable		99,302			140,378
Construction note payable, net of unamortized issuance costs		10,830,663			10,922,443
Operating lease liability, net of current portion		744,616			903,490
Deferred income tax liability		349,327			2,309,592
Total Liabilities		39,667,322			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, 2023 and March 31, 2023, respectively		1,400			1,400
Common stock, $0.001 par value, 200,000,000 shares authorized 119,665,700 and 118,562,806 shares issued and 118,460,743 and 118,294,478 outstanding at September 30, 2023 and March 31, 2023, respectively		118,461			118,294
Additional paid-in capital		394,331,516			391,940,374
Accumulated deficit		(29,086,926	)		(18,941,825	)
Treasury stock		(2,376,790	)		(522,158	)
Total Shareholders’ Equity		362,987,661			372,596,085
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	402,654,983		$	412,335,387

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

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

Net Revenues
Ammunition sales⁽¹⁾	$	15,516,589		$	29,386,969		$	29,622,618		$	70,356,852
Marketplace revenue		12,474,716			14,562,694			26,386,918			31,067,640
Casing sales		6,381,081			4,338,896			12,617,425			7,620,093
Total Revenues		34,372,386			48,288,559			68,626,961			109,044,585

Cost of Revenues		26,084,120			35,452,850			46,314,155			78,073,214
Gross Profit		8,288,266			12,835,709			22,312,806			30,971,371

Operating Expenses
Selling and marketing		289,952			1,068,501			585,533			2,976,671
Corporate general and administrative		7,855,624			5,055,699			15,803,187			10,084,996
Employee salaries and related expenses		5,590,035			3,923,700			9,706,315			6,708,798
Depreciation and amortization expense		3,371,802			3,291,322			6,715,845			6,641,678
Total operating expenses		17,107,413			13,339,222			32,810,880			26,412,143
Income/(Loss) from Operations		(8,819,147	)		(503,513	)		(10,498,074	)		4,559,228

Other Income/(Expenses)
Other income		(321,341	)		5,098			371,610			198,596
Interest expense		(212,314	)		(97,265	)		(416,515	)		(217,752	)
Total other income/(expense)		(533,655	)		(92,167	)		(44,905	)		(19,156	)

Income/(Loss) before Income Taxes		(9,352,802	)		(595,680	)		(10,542,979	)		4,540,072

Provision for Income Taxes		(1,857,505	)		207,827			(1,954,649	)		2,090,552

Net Income/(Loss)		(7,495,297	)		(803,507	)		(8,588,330	)		2,449,520

Preferred Stock Dividend		(782,639	)		(782,639	)		(1,556,771	)		(1,556,771	)

Net Income/(Loss) Attributable to Common Stock Shareholders	$	(8,277,936	)	$	(1,586,146	)	$	(10,145,101	)	$	892,749

Net Income/(Loss) per share
Basic	$	(0.07	)	$	(0.01	)	$	(0.09	)	$	0.01
Diluted	$	(0.07	)	$	(0.01	)	$	(0.09	)	$	0.01

Weighted average number of shares outstanding
Basic		118,167,228			116,927,607			117,941,755			116,744,972
Diluted		118,167,228			116,927,607			117,941,755			118,063,619

(1)	Included in revenue for the three months ended September 30, 2023 and 2022 are excise taxes of $1,284,166 and $2,435,051, respectively. Included in revenue for the six months ended September 30, 2023 and 2022 are excise taxes of $2,459,962 and $6,147,392, 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)			Treasury Stock			Total
	Preferred Stock				Common Shares						Additional
	Number		Par Value		Number			Par Value			Paid-In Capital		Accumulated(Deficit)			Treasury 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
Preferred stock dividends		-		-		-			-			-		(638,038	)		-			(638,038	)
Dividends accumulated on preferred stock		-		-		-			-			-		(136,094	)		-			(136,094	)
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

Employee stock awards		-		-		712,783			713			1,467,236		-			-			1,467,949
Stock grants		-		-		-			-			50,750		-			-			50,750
Preferred stock dividends declared		-		-		-			-			-		(646,545	)		-			(646,545	)
Dividends accumulated on preferred stock		-		-		-			-			-		(136,094	)		-			(136,094	)
Net loss		-		-		-			-			-		(7,495,297	)		-			(7,495,297	)
Treasury shares purchased		-		-		(197,798	)		(198	)		-		-			(398,627	)		(398,825	)

Balance as of September 30, 2023		1,400,000	$	1,400		118,460,743		$	118,461		$	394,331,516	$	(29,086,926	)	$	(2,376,790	)	$	362,987,661

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

Balance as of March 31, 2022		1,400,000	$	1,400		116,485,747	$	116,487	$	385,426,431		$	(11,240,752	)	$	-	$	374,303,566

Common stock issued for cashless warrant exercise		-		-		99,762		99		(99	)		-			-		-
Employee stock awards		-		-		338,375		338		1,174,725			-			-		1,175,063
Stock grants		-		-		-		-		47,844			-			-		47,844
Preferred stock dividends declared		-		-		-		-		-			(638,071	)		-		(638,071	)
Dividends accumulated on preferred stock		-		-		-		-		-			(136,061	)		-		(136,061	)
Net income		-		-		-		-		-			3,253,027			-		3,253,027

Balance as of June 30, 2022		1,400,000	$	1,400		116,923,884	$	116,924	$	386,648,901		$	(8,761,857	)	$	-	$	378,005,368
Beginning balance		1,400,000	$	1,400		116,923,884	$	116,924	$	386,648,901		$	(8,761,857	)	$	-	$	378,005,368

Common stock issued for cashless warrant exercise		-		-		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 dividends declared		-		-		-		-		-			(646,595	)		-		(646,595	)
Dividends accumulated on preferred stock		-		-		-		-		-			(136,044	)		-		(136,044	)
Net loss		-		-		-		-		-			(803,507	)		-		(803,507	)
Net income (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
Ending balance		1,400,000	$	1,400		117,274,755	$	117,275	$	387,892,917		$	(10,348,003	)	$	-	$	377,663,589

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

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	2023			2022
	For the Six Months Ended September 30,
	2023			2022

Cash flows from operating activities:
Net Income/(Loss)	$	(8,588,330	)	$	2,449,520
Adjustments to reconcile Net Income/(Loss) to Net Cash provided by operations:
Depreciation and amortization		9,293,566			8,594,968
Debt discount amortization		41,626			41,626
Employee stock awards		2,290,746			2,351,438
Stock grants		101,500			91,594
Contingent consideration payable fair value		(41,076	)		(25,246	)
Allowance for doubtful accounts		1,047,587			934,135
Reduction in right of use asset		243,652			398,033
Deferred income taxes		(1,960,265	)		817,310
Changes in Current Assets and Liabilities
Accounts receivable		5,267,942			12,590,905
Due from related parties		-			9,000
Inventories		1,330,614			(9,590,856	)
Prepaid expenses		2,262,859			1,130,589
Deposits		3,839,429			2,633,655
Accounts payable		1,519,151			(3,017,415	)
Accrued liabilities		1,760,716			(1,295,829	)
Operating lease liability		(258,628	)		(403,184	)
Net cash provided by operating activities		18,151,089			17,710,243

Cash flows from investing activities:
Purchase of equipment		(2,618,205	)		(8,405,180	)
Net cash used in investing activities		(2,618,205	)		(8,405,180	)

Cash flow from financing activities:
Proceeds from factoring liability		26,047,370			45,600,000
Payments on factoring liability		(26,047,370	)		(45,291,282	)
Payments on inventory facility, net		-			(825,675	)
Payments on note payable - related party		(180,850	)		(334,374	)
Payments on insurance premium note payment		(2,017,089	)		(1,334,183	)
Proceeds from construction note payable		-			1,000,000
Payments on construction note payable		(127,858	)		-
Preferred stock dividends paid		(1,420,677	)		(1,420,727	)
Common stock repurchase plan		(1,855,569	)		-
Common stock issued for exercised warrants		-			24,242
Net cash used in financing activities		(5,602,043	)		(2,581,999	)

Net increase in cash		9,930,841			6,723,064
Restricted cash, beginning of period		500,000			-
Cash, beginning of period		39,134,027			23,281,475
Cash and restricted cash, end of period	$	49,564,868		$	30,004,539
Restricted cash, end of period	$	-		$	1,000,000
Cash, end of period	$	49,564,868		$	29,004,539

(Continued)

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	For the Six Months Ended September 30,
	2023		2022

Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	375,885	$	141,131
Income taxes	$	-	$	1,302,811

Non-cash investing and financing activities:
Insurance premium note payment	$	1,056,199	$	2,035,519
Dividends accumulated on preferred stock	$	136,094	$	136,044
Construction note payable	$	-	$	9,804,580

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

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY

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

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

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

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis

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

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

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 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 and six months ended September 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 in the year ended March 31, 2023, 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 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 and six months ended September 30, 2023. As of September 30, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment. However, should there continue to be a decline in the Company’s 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.

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represents amounts due from customers for products sold and include an allowance for estimated credit losses which is estimated based on the collectability and age of the accounts receivable balances and categorization of customers with similar financial condition. At September 30, 2023 and March 31, 2023, we reserved $4,345,847 and $3,246,551, respectively, of allowance for doubtful accounts.

Restricted Cash

We consider cash to be restricted when withdrawal or general use is legally restricted. Our restric

SEC Form 10-Q filed by AMMO Inc.