# Outdoor Holding Co: Form 10-K/A for the period ended Mar 31, 2024 - Company: [Outdoor Holding Co](/companies/poww.md) (CIK 1015383) - Form: 10-K/A - Filed: 2025-05-20 - Accepted by EDGAR: May 20, 2025, 20:09 ET - Period: 2024-03-31 - Accession: 0000950170-25-075182 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1015383/000095017025075182/poww-20240331.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1015383/000095017025075182/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2024-03-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 3 months, 2024-01-01 to 2024-03-31 | $40.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Revenue | 12 months, 2023-04-01 to 2024-03-31 | $145.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $31.0m | us-gaap:CostOfRevenue | | Cost of revenue | 12 months, 2023-04-01 to 2024-03-31 | $102.5m | us-gaap:CostOfRevenue | | Gross profit | 3 months, 2024-01-01 to 2024-03-31 | $9.4m | us-gaap:GrossProfit | | Gross profit | 12 months, 2023-04-01 to 2024-03-31 | $42.6m | us-gaap:GrossProfit | | Selling, general and administrative | 12 months, 2023-04-01 to 2024-03-31 | $48.7m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 3 months, 2024-01-01 to 2024-03-31 | −$6.0m | us-gaap:OperatingIncomeLoss | | Operating income | 12 months, 2023-04-01 to 2024-03-31 | −$19.6m | us-gaap:OperatingIncomeLoss | | Income tax | 3 months, 2024-01-01 to 2024-03-31 | −$1.4m | us-gaap:IncomeTaxExpenseBenefit | | Income tax | 12 months, 2023-04-01 to 2024-03-31 | −$3.8m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 3 months, 2024-01-01 to 2024-03-31 | −$5.2m | us-gaap:NetIncomeLoss | | Net income | 12 months, 2023-04-01 to 2024-03-31 | −$16.6m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.05 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 12 months, 2023-04-01 to 2024-03-31 | −$0.17 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | −$0.05 | us-gaap:EarningsPerShareBasic | | Basic EPS | 12 months, 2023-04-01 to 2024-03-31 | −$0.17 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2023-04-01 to 2024-03-31 | 118,249,486 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2023-04-01 to 2024-03-31 | $32.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2023-04-01 to 2024-03-31 | $8.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Share repurchases | 12 months, 2023-04-01 to 2024-03-31 | $2.2m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2024-03-31 | $55.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2024-03-31 | $131.5m | us-gaap:AssetsCurrent | | Total assets | at 2024-03-31 | $403.0m | us-gaap:Assets | | Current liabilities | at 2024-03-31 | $31.0m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2024-03-31 | $45.0m | us-gaap:Liabilities | | Shareholders' equity | at 2024-03-31 | $358.0m | us-gaap:StockholdersEquity | ## Risk factors As filed, 86,502 characters. *The risk factors noted in this section and other factors noted throughout this Amendment, including those risks identified in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe examples of risks, uncertainties and events that may cause our actual results to differ materially from those contained in any forward-looking statement. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual outcomes may vary materially from those included in this Amendment. Other than the effect of the restatement, this section does not reflect any information or events occurring after June 13, 2024, the original filing date of the Original Filing, or modify or update those disclosures affected by events that occurred at a later date or facts that subsequently became known to the Company, except to the extent they are otherwise required to be included and discussed herein.* *Below is a summary of our risk factors with a more detailed discussion following.* - The matters relating to the restatement of our financial statements have required, and may continue to require, a significant amount of management time and accounting, financial and legal resources, which could adversely affect our business, financial condition and results of operations. - We are and may continue to be subject to litigation, regulatory proceedings, and government enforcement actions arising from the restatement of our financial statements and related matters, which could result in significant judgments, settlements, penalties, and legal expenses. - We have not been in compliance with SEC reporting requirements and Nasdaq continued listing rules. If we are unable to return to or remain in compliance with SEC reporting requirements and Nasdaq continued listing rules, there may be a material adverse effect on the Company and our stockholders. - Material weaknesses in our internal control over financial reporting could persist and could adversely affect the accuracy and timeliness of our financial reporting. - The restatement and related matters could cause increased volatility in the trading price of our securities. - If we are not able to expand our e-commerce business, our future growth could be curtailed. - We have a limited operating history on which you can evaluate our company. - Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss of sales. - A failure of our information technology systems, or an interruption in their operation due to internal or external factors including cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations. - If we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights. - We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention. - Our success depends upon our ability to introduce new products that match consumer preferences. - We depend on the sale of our ammunition products. - Our manufacturing facilities are critical to our success. - Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our results of operations. - We rely on third-party suppliers for most of our manufacturing equipment. - Our revenue depends primarily on sales by various retailers and distributors, some of which account for a significant portion of our sales. - Our gross margins depend upon our sales mix. - We face intense competition that could result in losing or failing to gain market share and suffering reduced sales. - Seasonality and weather conditions may cause our operating results to vary from quarter to quarter. - We manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation. - Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation would likely have a material adverse effect on our business. - A portion of our revenue is contingent on an exclusive license agreement with the University of Louisiana at Lafayette. - We are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements. - Changes in government policies and firearms legislation could adversely affect our financial results. - If we fail to comply with the rules of the Nasdaq Stock Market for continued listing or other requirements, our shares may be delisted. - Our charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover. - The Series A Preferred Stock ranks junior to all of our indebtedness and other liabilities. - The trading market for the Series A Preferred Stock may not provide investors with adequate liquidity. - We may issue additional shares of Series A Preferred Stock and additional series of preferred stock that rank on parity with the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights. - Market interest rates may materially and adversely affect the value of the Series A Preferred Stock. - We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash to make dividend payments. - Dividends or other payments with respect to the Series A Preferred Stock may be subject to withholding taxes in circumstances where we are not obliged to make gross up payments, and this could result in holders receiving less than expected in such circumstances. - Our Series A Preferred Stock has not been rated. - We may redeem the Series A Preferred Stock. - Holder of Series A Preferred Stock have extremely limited voting rights. - The Series A Preferred Stock is not convertible, and investors will not realize a corresponding upside if the market price of the Common Stock increases. ### Risks Related to the Restatement and Failure to Timely File Required Reports In addition to the other risks described elsewhere in this Amendment, you should carefully consider the following risks arising from the restatement of our previously issued financial statements, the related independent investigation, our identification of material weaknesses in internal control over financial reporting, and any resulting litigation, regulatory actions, and reputational harm. These risks, either individually or in the aggregate, could materially and adversely affect our business, financial condition, results of operations, stock price, and prospects. This section contains forward-looking statements regarding our expected future performance and the potential impacts of these risks, which are subject to significant uncertainties and contingencies, many of which are beyond our control. Please see the section titled "Special Note Regarding Forward-Looking Statements" elsewhere in this Amendment. **The matters relating to the restatement of our financial statements have required, and may continue to require, a significant amount of management time and accounting, financial and legal resources, which could adversely affect our business, financial condition and results of operations.** The Special Committee Investigation (the "Special Committee Investigation") and subsequent restatement process was highly time and resource-intensive and involved substantial attention from management and significant legal and accounting costs. Furthermore, as a result of the circumstances giving rise to the restatement, we have become subject to a number of additional risks and uncertainties, including unanticipated costs for accounting and legal fees in connection with or related to the restatement and a pending investigation by the SEC’s Division of Enforcement (the “SEC Investigation”). The SEC Staff has significant discretion in conducting investigations, and therefore, the Company cannot predict the scope or outcome of the SEC Investigation. If the SEC Staff recommends a civil enforcement action, and if such action is authorized by the SEC, the agency may seek injunctions, civil penalties or other relief, and the Company may incur additional legal and other professional fees in defending such action or negotiating a resolution. Management's attention and resources have been, and may continue to be, diverted from the operation of our business as a result of the ongoing impact of the restatement, the Special Committee Investigation, the SEC Investigation, potential litigation, and efforts to remediate material weaknesses. This diversion could adversely impact our operations, strategic initiatives, and ability to execute our business plans and could materially adversely affect our business, financial condition, and results of operations. **We are and may continue to be subject to litigation, regulatory proceedings, and government enforcement actions arising from the restatement of our financial statements and related matters, which could result in significant judgments, settlements, penalties, and legal expenses.** The restatement of our previously issued financial statements, along with the findings of the Special Committee Investigation and the SEC Investigation, exposes us to various legal and regulatory challenges. These challenges could include securities class action lawsuits, stockholder derivative suits, and enforcement actions by regulatory authorities such as the SEC and the Nasdaq Stock Market LLC ("Nasdaq"). Such proceedings may allege violations of federal securities laws, deficiencies in our disclosure controls and procedures, or other corporate governance issues. Defending against these matters is time-consuming and costly and will divert management's attention from our business operations. Adverse outcomes could result in substantial monetary damages, penalties, injunctive, or other relief, and even if resolved favorably, we may incur significant legal expenses. These potential liabilities and costs could materially and adversely impact our business, financial condition, and results of operations. **We expect to incur substantial costs in connection with remediation efforts following the restatement, which could adversely affect our results of operations.** We are undertaking significant efforts to remediate material weaknesses in our internal control over financial reporting and to enhance our disclosure controls and procedures. These efforts have required and will continue to require significant management time and financial resources. We expect to incur substantial costs in connection with these remediation activities, including consulting fees, audit and professional service fees, and upgrades to our financial reporting systems and controls. These additional expenses could materially adversely affect our results of operations and financial condition. **We may be required to indemnify our current and former directors, officers and employees in connection with litigation and other actions which could result in significant legal expenses and other costs to us.** Our corporate governance documents and applicable indemnification agreements require us to defend and indemnify our current and former directors and officers, and certain employees and contractors against enumerated liabilities and expenses incurred as a result of legal proceedings and investigations, including the pending SEC Investigation and potential litigation arising out of the matters related to the restatement. As a result, we may be obligated to advance and ultimately pay substantial legal costs, settlement amounts, or judgments on behalf of these individuals. These indemnification obligations could significantly increase our legal expenses and could materially adversely affect our financial condition and cash flows. **It may be difficult or costly to obtain director and officer insurance coverage in the future as a result of our equity compensation reporting problems.** As a result of the restatement, the Special Committee Investigation, the SEC Investigation and related risks, our current directors and officers liability (“D&O”) insurance providers may seek to increase premiums significantly, impose additional exclusions, or refuse to renew coverage altogether. In addition, we may face challenges in obtaining comparable coverage from alternative insurance carriers on commercially reasonable terms, or at all. A reduction in the scope or amount of D&O insurance coverage could adversely affect our ability to attract and retain qualified directors and officers, and expose us to greater potential liability, which could have a material adverse effect on our financial condition, governance, and ability to operate our business. **We may suffer adverse tax consequences in connection with our historical share-based compensation practices, which could have a negative impact on our results of operations and financial condition.** The Special Committee Investigation and restatement identified errors related to the valuation and accounting for share-based compensation awards issued to our directors, officers, employees, and other service providers. As a result, we may face adverse tax consequences, including the potential loss of tax deductions previously claimed, the requirement to amend prior tax returns, the payment of additional taxes, penalties, and interest, and exposure to potential Internal Revenue Service (“IRS”) audits or inquiries. Any such adverse tax consequences could materially negatively impact our results of operations, cash flows, and financial condition. **We have not been in compliance with SEC reporting requirements and Nasdaq continued listing rules. If we are unable to return to or remain in compliance with SEC reporting requirements and Nasdaq continued listing rules, there may be a material adverse effect on the Company and our stockholders.** Due to the delays in filing our periodic reports with the SEC, as a result of the Special Committee Investigation and the restatement we failed to timely file our Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30, 2024 and December 31, 2024. As a result, we have not been in compliance with the reporting requirements of the Exchange Act, and have received deficiency notifications from Nasdaq regarding our failure to comply with Nasdaq's continued listing requirements. Although we are actively working to regain compliance through the filing of our restated financial statements and other delayed reports, there is no assurance that Nasdaq will accept our compliance plans or that we will timely regain and maintain compliance. If we are unable to maintain our listing on Nasdaq, it could materially adversely affect the liquidity and trading price of our Common Stock and Series A Preferred Stock, reduce our access to the capital markets, and impair our ability to attract and retain employees, customers, and suppliers. **Our failure to prepare and timely file our periodic reports with the SEC limits our access to the public markets to raise debt or equity capital, impacts our ability to obtain alternative financing, and could have negative consequences under the terms of our existing credit agreements.** Our failure to timely file our periodic reports with the SEC restricts our ability to use a registration statement on Form S-3, which limits our ability to access the public markets quickly and efficiently. It may also restrict our ability to raise capital through traditional private placements, as potential investors may be reluctant to invest in a company that is not current or has a history of not being current in its SEC filings. In addition, our failure to file periodic reports could constitute a default under certain covenants in existing or future credit facilities, which could lead to the acceleration of outstanding indebtedness or other adverse consequences. The combined effect of these factors could materially and adversely affect our liquidity, financial condition, and results of operations. **Material weaknesses in our internal control over financial reporting could persist and could adversely affect the accuracy and timeliness of our financial reporting.** As a result of the Special Committee Investigation and the restatement of our financial statements, our management concluded that material weaknesses existed in our internal control over financial reporting during the Affected Periods. While we are actively engaged in remediation efforts as of the filing of this Amendment, including the implementation of new policies, procedures, and controls, these efforts may not be successful, we may not be able to remediate all identified material weaknesses in a timely manner, and additional material weaknesses may be identified in the future. Failure to maintain effective internal control over financial reporting could result in additional errors or misstatements in our financial statements, impair our ability to accurately and timely report financial results, harm our reputation and investor confidence, limit our ability to access capital markets, subject us to additional regulatory scrutiny, and adversely affect our business, financial condition, and results of operations. **Our reputation may be harmed by the Special Committee Investigation, the SEC Investigation, and the restatement, making it more difficult to attract business opportunities, employees, and investors.** The restatement of our financial statements, the impact of the Special Committee Investigation and the SEC Investigation into historical matters, and any resulting litigation, SEC enforcement action or other regulatory proceedings, or negative publicity could damage our reputation with investors, customers, suppliers, business partners, and regulators. Any reputational harm could adversely affect our relationships with existing and prospective stakeholders, diminish our ability to attract and retain key personnel, reduce the confidence of investors in our company, and limit our access to capital markets. Reputational damage may also make it more difficult to pursue business opportunities, negotiate favorable terms in future commercial relationships, and achieve our strategic objectives, any of which could materially adversely affect our business, financial condition, results of operations, and prospects. **The restatement and related matters could cause increased volatility in the trading price of our securities.** The restatement of our financial statements, the results of the Special Committee Investigation, any future findings, and related legal proceedings or regulatory actions could result in increased volatility in the price of our Common Stock and Series A Preferred Stock. We may also experience reduced analyst coverage and diminished interest from institutional investors, which could adversely impact the trading volume, liquidity, and market price of our securities. **Investors may view our historical financial statements as less reliable following the restatement, which could adversely effect our access to capital markets and our stock price.** As a result of the restatement of our historical financial statements and the identification of material weaknesses in our internal control over financial reporting, investors may view our historical financial information as less reliable. This perception could impact investor confidence, adversely affect the market price of our securities, impair our ability to access capital markets, and result in greater difficulty in achieving strategic or financial objectives. **Our management has concluded that we have material weaknesses in our internal control over financial reporting and that our disclosure controls and procedures are not effective. If we fail to develop or maintain an effective system of internal control, we may not be able to accurately report our financial results or prevent financial fraud. As a result, current and potential stockholders could lose confidence in our financial reporting.** As a public company, we are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year in our Annual Report on Form 10-K/A. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Based on the results of the Special Committee Investigation, our review of our financial records, and other work completed by our management, the Special Committee has concluded that there were material misstatements in the previously filed consolidated financial statements as of and for the fiscal years ended March 31, 2024, 2023 and 2022. Accordingly, our Board of Directors and management concluded that our consolidated financial statements for these periods should no longer be relied upon and that such financial statements required restatement. Based upon an evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2024. In addition, as further described in this Amendment in Item 9A “Controls and Procedures”, as of March 31, 2024, management has identified material weaknesses in our internal control processes that involve the control environment, information and communication, monitoring activities, and control activities components of the COSO framework. These material weaknesses, if not remediated, create an increased risk of misstatement of the Company’s financial results, which, if material, may require future restatement thereof. A failure to implement improved internal control over financial reporting, or difficulties encountered in their implementation or execution, could cause future delays in our reporting obligations, and could have a negative effect on us and the trading price of our Common Stock. If these weaknesses and inadequate disclosure controls and procedures continue, investors could lose confidence in the accuracy and completeness of our financial reports and other disclosures. Effective internal control over financial reporting and related controls and procedures are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we could be subject to regulatory action or other litigation and our business and operating results could be harmed. ### Risk Related to Our Business **If we are not able to expand our e-commerce business, our future growth could be curtailed.** Consumers are increasingly purchasing products online. We have operated direct-to-consumer e-commerce stores to maintain an online presence with our end users. The future success of our online operations depends on our ability to use our marketing resources to communicate with existing and potential customers. We face competitive pressure to offer promotional discounts, which could impact our gross margin and increase our marketing expenses. We are limited, however, in our ability to fully respond to competitor price discounting because we cannot market our products at prices that may produce adverse relationships with our customers that operate brick and mortar locations as they may perceive themselves to be at a disadvantage based on lower e-commerce pricing to end consumers. Further, we may not be able to successfully expand our e-commerce business to respond to shifting consumer traffic patterns and direct-to-consumer buying trends. In addition, e-commerce and direct-to-consumer operations are subject to numerous risks, including implementing and maintaining appropriate technology to support business strategies, reliance on third-party computer hardware/software and service providers, data breaches, violations of state, federal or international laws, including those relating to online privacy, credit card fraud, telecommunication failures, electronic break-ins and similar disruptions, and disruption of internet service. Our inability to adequately respond to these risks and uncertainties or to successfully maintain and expand our direct-to-consumer business may have an adverse impact on our business and operating results. The GunBroker auction website facilitates the lawful sale of firearms, ammunition and accessories between listing sellers and interested buyers and includes the direct transactional involvement of Federal Firearm Licenses (" FFL's") regulated by the Bureau of Alcohol, Tobacco, and Firearms ("ATF"). A change in applicable federal or state law and restrictions that prohibits GunBroker from providing its facilitative auction platform services would have a direct substantial financial impact on its operations that could cause an adverse effect on the continuity of its operations. ### We have a limited operating history on which you can evaluate our company. With the exception of GunBroker’s approximate 25-year history of operating as a private company preceding our acquisition, we have a limited operating history on which you can evaluate our Company. Although the corporate entity has existed since 1990, we have only operated as an ammunition manufacturer since March 2017, and we acquired GunBroker in 2021. As a result, our business is subject to many of the problems, expenses, delays, and risks inherent in the establishment of a new business enterprise. **Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss of sales.** There have been an increasing number of cybersecurity incidents affecting companies around the world, which have caused operational failures or compromised sensitive corporate data. Although we do not believe that our systems are at a greater risk of cybersecurity incidents than other similar organizations, any such cybersecurity incidents may result in the loss or compromise of customer, financial, or operational data, disruption of billing, collections, or normal operating activities, disruption of electronic monitoring and control of operational systems, and delays in financial reporting and other management functions. Possible impacts associated with a cybersecurity incident may include among others, remediation costs related to lost, stolen, or compromised data, repairs to data processing systems, increased cyber security protection costs, reputational damage, and adverse effects on our compliance with applicable privacy and other laws and regulations. **A failure of our information technology systems, or an interruption in their operation due to internal or external factors including cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations.** Our operations depend on our ability to protect our information systems, computer equipment, and information databases from systems failures. We rely on our information technology systems generally to manage the day-to-day operations of our business, operate elements of our manufacturing facility, manage relationships with our customers, fulfill customer orders, and maintain our financial and accounting records. Failure of our information technology systems could be caused by internal or external events, such as incursions by intruders or hackers, computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication fluctuations or failures. The failure of our information technology systems to perform as anticipated for any reason or any significant breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, increased costs, or loss of important information, any of which could have a material adverse effect on our business, operating results, and financial condition. Any technology and information security processes and disaster recovery plans we use to mitigate our risk to these vulnerabilities may not be adequate to ensure that our operations will not be disrupted should such an event occur. **Our performance is influenced by a variety of economic, social, and political factors.** Our performance is influenced by a variety of economic, social, and political factors. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand for our products. Economic conditions also affect governmental political and budgetary policies. As a result, economic conditions also can have an adverse effect on the sale of our products to law enforcement, government, and military customers. Political and other factors also can adversely affect our performance. Concerns about presidential, congressional, and state elections and legislature and policy shifts resulting from those elections can adversely affect the demand for our products. In addition, uncertainty surrounding the control of firearms, firearm products, and ammunition at the federal, state, and local level and heightened fears of terrorism and crime can adversely affect consumer demand for our products. Often, such concerns result in an increase in near-term consumer demand and subsequent softening of demand when such concerns subside. In addition, federal and state legislatures frequently consider legislation relating to the regulation of firearms, including amendment or repeal of existing legislation. Existing laws may also be affected by future judicial rulings and interpretations. If restrictive changes to legislation develop, we could find it difficult, expensive, or even impossible to comply with such changes, impeding new product development and distribution of existing products. The health of the global economy, the credit markets and the financial services industry, in particular, as well as the stability of the social fabric of our society, affects our business and operating results. If the credit markets are not favorable, we may be unable to raise additional financing when needed or on favorable terms. Our customers may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. **War, terrorism, other acts of violence, or natural, or manmade disasters, may affect the markets in which the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.** The Company’s business and supply chain could be adversely affected by instability, disruption or destruction in a geographic region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events, and spread of disease. Such events may cause customers to suspend their decisions on using the Company’s products and services, make it impossible to access some of our inventory, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods or services and commitments to develop new products and services. These events also pose significant risks to the Company’s personnel and to physical facilities, transportation and operations, which could materially adversely affect the Company’s financial results. Any significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures against a pandemic by governmental agencies, could make it difficult for the Company to deliver goods services to its customers. War, riots, or other disasters may increase the need for our products and demand by our government and military that may make it more difficult to provide our products to other customers. **If we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights.** Our future success depends upon our proprietary technology. Our protective measures, including patent and trade secret protection, may prove inadequate to protect our proprietary rights. The right to stop others from misusing our trademarks, service marks, and patents in commerce depends to some extent on our ability to show evidence of enforcement of our rights against such misuse in commerce. Our efforts to stop improper use, if insufficient, may lead to loss of trademark and service mark rights, brand loyalty, and notoriety among our customers and prospective customers. The scope of any patent that we have or may obtain may not prevent others from developing and selling competing products. The validity and breadth of claims covered in technology patents involve complex legal and factual questions, and the resolution of such claims may be highly uncertain, and expensive. In addition, our patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents. **We may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management attention from our business.** Any intellectual property infringement claims against us, with or without merit, could be costly and time-consuming to defend and divert our management’s attention from our business. If our products were found to infringe a third party’s proprietary rights, we could be required to enter into costly royalty or licensing agreements to be able to sell our products. Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all. **We are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our management’s time and attention.** On April 30, 2023, director and stockholder 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 and certain affiliated companies. Urvan’s claims include rescission, misrepresentation, and fraud. The Company has dedicated significant resources to defending this lawsuit. The claims made by Mr. Urvan and such other litigation or claims that may be made against the Company or its officers or directors, from time to time, could negatively affect our business, operations, or financial position. As we grow, we may see a rise in the number of litigation matters against us. These matters may include employment and labor claims, product liability, and other claims related to our products, as well as consumer and securities class actions, each of which are typically expensive to defend. Litigation and other disputes could cause us to incur unforeseen expenses and otherwise occupy a significant amount of our management’s time and attention, any of which could negatively affect our business operations and financial position. ### Risks Related to Our Products and Our Dependence on Third Parties **Our success depends upon our ability to introduce new products that match consumer preferences.** Our success depends upon our ability to introduce new products that match consumer preferences. Our efforts to introduce new products into the market may not be successful, and any new products that we introduce may not result in customer or market acceptance. We develop new products that we believe will match consumer preferences. The development of a new product is a lengthy and costly process and may not result in a successful product. Failure to develop new products that are attractive to consumers could decrease our sales, operating margins, and market share and could adversely affect our business, operating results, and financial condition. ### We depend on the sale of our ammunition products. We manufacture ammunition and ammunition casings for sale to a wide variety of consumers, including gun enthusiasts, collectors, hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, manufacturers, law enforcement and security agencies and officers in the United States and throughout the world. The sale of ammunition and ammunition components is influenced by the sale and usage of firearms. Sales of firearms are influenced by a variety of economic, social, and political factors, which may result in volatile sales. Ammunition sales represented a substantial amount of our net sales for the fiscal years ended March 31, 2024, 2023, and 2022. If ammunition sales decline, our financial results could be adversely impacted, and the market price of our Common Stock could decline. ### Our manufacturing facilities are critical to our success. Our manufacturing operations are currently based out of two facilities in Manitowoc, WI and are critical to our success, as we currently produce all of our products at these facilities. These facilities also house our principal research, development, engineering, and design functions. Any event that causes a disruption to the operation of these facilities for even a relatively short period of time would adversely affect our ability to produce and ship our products and to provide service to our customers. We make certain changes in our manufacturing operations from time to time to enhance the facilities and associated equipment and systems and to introduce certain efficiencies in manufacturing and other processes to produce our products in a more efficient and cost-effective manner. We have incurred significant capital and other expenditures with respect to our $26 million manufacturing plant, but we may not be successful in continuing to improve efficiencies. **Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our results of operations.** The inability to obtain sufficient quantities of raw materials and components, including brass, steel, or copper jackets, primers, propellant, and projectiles necessary for the production of our products could result in reduced or delayed sales or lost orders. Any delay in or loss of sales or orders could adversely impact our operating results. Many of the materials used in the production of our products are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers. As a result, we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components. As global conflicts escalate nitrocellulose and propellant production becomes in higher demand, which could constrain U.S. production for propellant destined for the commercial markets and have an unforeseen impact on the U.S. firearm and ammunition market. Our reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability, quality, and price of these raw materials and components. Our orders with certain of our suppliers may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. Quality issues experienced by third-party suppliers can also adversely affect the quality and effectiveness of our products and result in liability and reputational harm. ### We rely on third-party suppliers for most of our manufacturing equipment. We also rely on third-party suppliers for most of the manufacturing equipment necessary to produce our products. The failure of suppliers to supply manufacturing equipment in a timely manner or on commercially reasonable terms could delay our plans to expand our business and otherwise disrupt our production schedules and increase our manufacturing costs. Our orders with certain of our suppliers may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders. If any single-source supplier were to fail to supply our needs on a timely basis or cease providing us with manufacturing equipment or components, we would be required to locate and contract with substitute suppliers. We may have difficulty identifying a substitute supplier in a timely manner and on commercially reasonable terms. If this were to occur, our business would be harmed. In addition, adverse economic conditions, such as recent supply chain disruptions and labor shortages and persistent inflation, have impacted, and may continue to adversely impact our suppliers’ ability to provide us with materials and components, which may negatively impact our business. These economic conditions make it more difficult for us to accurately forecast and plan our future business activities. **Our revenue depends primarily on sales by various retailers and distributors, some of which account for a significant portion of our sales.** Our loaded ammunition and munition components revenue depends on our sales through various leading national and regional retailers, local specialty firearms stores, and online merchants. The U.S. retail industry serving the outdoor recreation market has become relatively concentrated. Our sales could become increasingly dependent on purchases by several large retail customers. Consolidation in the retail industry could also adversely affect our business. If our sales were to become increasingly dependent on business with several large retailers, we could be adversely affected by the loss or a significant decline in sales to one or more of these customers. In addition, our dependence on a smaller group of retailers could result in their increased bargaining position and pressure on the prices we charge. The loss of any one or more of our large or “Big Box” retail customers or significant or numerous cancellations, reductions, delays in purchases or changes in business practices by our large or “Big Box” retail customers could have an adverse effect on our business, operating results, and financial condition. These sales channels involve a number of special risks, including the following: - we may be unable to secure and maintain favorable relationships with retailers and distributors; - we may be unable to control the timing of delivery of our products to end-user consumers; - our retailers and distributors are not subject to minimum sales requirements or any obligation to market our products to their customers; - our retailers and distributors may terminate their relationships with us at any time; - our retailers and distributors market and distribute competing products; and - our retailers may experience closure due to disease outbreaks or other natural or manmade disasters in a particular region. Although the Company did not have any customers that comprised more than 10% of total revenues for the years ended March 31, 2024 or March 31, 2022, one customer accounted for approximately 12% of our revenues for the year ended March 31, 2023. Although we intend to expand our customer base, our revenue would likely decline if we lost any major customers or if one of these sizable customers were to significantly reduce its orders for any reason. Because our sales are made by means of standard purchase orders rather than long-term contracts, we cannot assure you that our customers will continue to purchase our products at current levels, or at all. In addition, periods of sluggish economies and consumer uncertainty regarding future economic prospects in our key markets can have an adverse effect on the financial health of our customers, which may in turn have a material adverse effect on our business, operating results, and financial condition. General inflation, including rising energy prices, and interest rates and wages could have negative impacts on our business by increasing our operating costs and our borrowing costs as well as decreasing the capital available for our customers to purchase our products. Recently, general inflation in the United States, Europe, and other geographies has risen to levels not experienced in recent decades. Additionally, inflation and price volatility may cause our customers to reduce use of our products and would harm our business operations and financial position. We extend credit to our customers for periods of varying duration based on an assessment of the customer’s financial condition, generally without requiring collateral, which increases our exposure to the risk of uncollectible receivables. In addition, we face increased risk of order reduction or cancellation when dealing with financially ailing retailers or retailers struggling with economic uncertainty. We may reduce our level of business with customers and distributors experiencing financial difficulties and may not be able to replace that business with other customers, which could have a material adverse effect on our business, operating results, and financial condition. ### Our gross margins depend upon our sales mix. Our gross margin is higher when our sales mix is skewed toward our higher-margin proprietary product lines versus a lower contribution from mid-market ammunition that we also manufacture. If our actual sales mix results in a lower overall percentage from our proprietary lines, our gross margins will be reduced, which would negatively affect our results of operations. **We face intense competition that could result in losing or failing to gain market share and suffering reduced sales.** We operate in intensely competitive markets that are characterized by price erosion and competition from major domestic and international companies. Competition in the markets in which we operate is based on a number of factors, including price, quality, product innovation, performance, reliability, styling, product features and warranties, and sales and marketing programs. This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. Our competitors may have greater market recognition, larger customer bases, long-term government contracts, and substantially greater financial, technical, marketing, distribution, and other resources than we do and that afford them competitive advantages. As a result, they may be able to devote greater resources to the promotion and sale of products, to invest more funds in intellectual property and product development, to negotiate lower prices for raw materials and components, to deliver competitive products at lower prices, and to introduce new products and respond to consumer requirements more quickly than we can. Our competitors could introduce products with superior features at lower prices than our products and could also bundle existing or new products with other more established products to compete with us. Certain of our competitors may be willing to reduce prices and accept lower profit margins to compete with us. Our competitors could also gain market share by acquiring or forming strategic alliances with other competitors. Finally, we may face additional sources of competition in the future because new distribution methods offered by the Internet and electronic commerce have removed many of the barriers to entry historically faced by start-up companies. Retailers also demand that suppliers reduce their prices on products, which could lead to lower margins. Any of the foregoing effects could cause our sales to decline, which would harm our financial position and results of operations. Our ability to compete successfully depends on a number of factors, both within and outside our control. These factors include the following: - our success in developing, producing, marketing, and successfully selling new products; - our ability to address the needs of our consumer customers; - the pricing, quality, performance, and reliability of our products; - the quality of our customer service; - the efficiency of our production; and - product or technology introductions by our competitors. Because we believe technological and functional distinctions among competing products in our markets are perceived by many end-user consumers to be relatively modest, effectiveness in marketing and manufacturing are particularly important competitive factors in our business. **Seasonality and weather conditions may cause our operating results to vary from quarter to quarter.** Because many of our products are used for seasonal outdoor sporting activities, our operating results may be significantly impacted by unseasonable weather conditions. Accordingly, our operating results could suffer when weather patterns do not conform to seasonal norms. Shipments of ammunition for hunting are highest during the months of June through September to meet consumer demand for the fall hunting season and holidays. The seasonality of our sales may change in the future. Seasonal variations in our operating results may reduce our cash on hand, increase our inventory levels, and extend our accounts receivable collection periods. This in turn may cause us to increase our debt levels and interest expense to fund our working capital requirements. **We manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation.** Our products are used in activities and situations that involve risk of personal injury and death. Our products expose us to potential product liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products, including allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the product, negligence, and strict liability. If successful, any such claims could have a material adverse effect on our business, operating results, and financial condition. Defects in our products may result in a loss of sales, recall expenses, delay in market acceptance, and damage to our reputation and increased warranty costs, which could have a material adverse effect on our business, operating results, and financial condition. Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance coverage or may not be covered by our insurance policies. In addition, our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products. **Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation would likely have a material adverse effect on our business.** Our brand recognition and reputation are critical aspects of our business. We believe that maintaining and further enhancing our brands, particularly our STREAK VISUAL AMMUNITION™ brands, and our reputation are critical to retaining existing customers and attracting new customers. We also believe that the importance of our brand recognition and reputation will continue to increase as competition in our markets continues to develop. We anticipate that our advertising, marketing, and promotional efforts will increase in the foreseeable future as we continue to seek to enhance our brands and consumer demand for our products. Historically, we have relied on print and electronic media advertising to increase consumer awareness of our brands to increase purchasing intent and conversation. We anticipate that we will increasingly rely on other forms of media advertising, including social media and e-marketing. Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our advertising, promotion, public relations, and marketing programs. These brand promotion activities may not yield increased revenue, and the efficacy of these activities will depend on a number of factors, including our ability to do the following: - determine the appropriate creative message and media mix for advertising, marketing, and promotional expenditures; - select the right markets, media, and specific media vehicles in which to advertise; - identify the most effective and efficient level of spending in each market, media, and specific media vehicle; and - effectively manage marketing costs, including creative and media expenses, to maintain acceptable customer acquisition costs. In addition, certain of our current or future products may benefit from endorsements and support from particular sportsmen, athletes, or other celebrities, and those products and brands may become personally associated with those individuals. As a result, sales of the endorsed products could be materially and adversely affected if any of those individuals’ images, reputations, or popularity were to be negatively impacted. Increases in the pricing of one or more of our marketing and advertising channels could increase our marketing and advertising expenses or cause us to choose less expensive but possibly less effective marketing and advertising channels. If we implement new marketing and advertising strategies, we may incur significantly higher costs than our current channels, which in turn could adversely affect our operating results. Implementing new marketing and advertising strategies also could increase the risk of devoting significant capital and other resources to endeavors that do not prove to be cost effective. We also may incur marketing and advertising expenses significantly in advance of the time we anticipate recognizing revenue associated with such expenses and our marketing and advertising expenditures may not generate sufficient levels of brand awareness and conversation or result in increased revenue. Even if our marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures. If we are unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially, our customer base could be adversely affected, and our business, operating results, financial condition, and reputation could suffer. **A portion of our revenue is contingent on an exclusive license agreement with the University of Louisiana at Lafayette.** A significant portion of our revenue is attributable to the sale of our STREAK VISUAL AMMUNITION™. The manufacturing of our Streak products relies, in part, on a patent that is held by ULL. We have an exclusive license to use the licensed technology, derivative and related technology worldwide. We may renew this license agreement for successive four-year periods provided we are in compliance with the agreement. If we breach the license agreement, the licensor may terminate the agreement and if we fail to renew the license, we may be unable to use the technology, which, in either case, could significantly harm our results of operations, financial position, and prospects. **Excess inventory can lead to write-downs, impacting our financial statements and overall company performance.** Excess inventory can become obsolete, damaged, or unsellable over time. If the market value of our excess inventory, primarily consisting of primers, falls below its book value (the historical cost recorded on the balance sheet), we would be required to write-down the value of that inventory. Such a write-down would reduce the inventory balance, reflecting the impairment while still accounting for the remaining sellable inventory. The impact of excess inventory on our financial statements would include the following: - For the income statement, when an adjustment entry removes the excess inventory, it reduces the closing inventory and increases the cost of goods sold; - For the balance sheet, it is directly impacted by write-downs lowering the recorded value of inventory; and - For the statement of cash flows, excess inventory ties up cash and affects cash flow. Write-downs release some of that tied-up capital that adjusts our net income and impacting the company’s future cash flows. ### Risks Related to Regulation **We are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements.** Like many other manufacturers and distributors of consumer products, we are required to comply with a wide variety of laws, rules, and regulations, including those relating to labor, employment, the environment, the export and import of our products, and taxation. These laws, rules, and regulations currently impose significant compliance requirements on our business, and more restrictive laws, rules and regulations may be adopted in the future. As a manufacturer and distributor of consumer products, we are subject to the Consumer Products Safety Act, which empowers the Consumer Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances, the Consumer Products Safety Commission could require us to repurchase or recall one or more of our products. In addition, laws regulating certain consumer products exist in some cities and states, and in other countries in which we sell our products, and more restrictive laws and regulations may be adopted in the future. Any repurchase or recall of our products could be costly to us and could damage our reputation. If we were required to remove, or we voluntarily removed, our products from the market, our reputation could be tarnished, and we could have large quantities of finished products that we are unable to sell. We are also subject to the rules and regulations of the ATF. If we fail to comply with ATF rules and regulations, the ATF may limit our growth or business activities, levy fines against or revoke our license to do business. Our business, and the business of all producers and marketers of ammunition and firearms, is also subject to numerous federal, state, local, and foreign laws, regulations, and protocols. Our operations are subject to a variety of laws and regulations relating to environmental protection, including those governing the discharge, treatment, storage, transportation, remediation, and disposal of certain materials and wastes, and restoration of damages to the environment, and health and safety matters. We could incur substantial costs, including remediation costs, resource restoration costs, fines, penalties, and third-party property damage or personal injury claims as a result of liabilities under or violations of such laws and regulations or the permits required thereunder. While environmental laws and regulations have not had a material adverse effect on our business, operating results, financial condition, the ultimate cost of environmental liabilities is difficult to accurately predict and we could incur material additional costs as a result of requirements or obligations imposed or liabilities identified in the future. Several states currently have laws in effect that are similar to, and, in certain cases, more restrictive than, these federal laws. Compliance with all of these regulations is costly and time-consuming. Any violation of any of these regulations could cause us to incur fines and penalties, may also lead to restrictions on our ability to manufacture and sell our products and services and to import or export the products we sell and may otherwise harm our business. **Changes in government policies and firearms legislation could adversely affect our financial results.** The sale, purchase, ownership, and use of firearms are subject to numerous and varied federal, state, and local governmental regulations. Federal laws governing firearms include the National Firearms Act, the Federal Firearms Act, the Arms Export Control Act, and the Gun Control Act of 1968. These laws generally govern the manufacture, import, export, sale, and possession of firearms and ammunition. Currently, the federal legislature and several state legislatures are considering additional legislation relating to the regulation of firearms and ammunition. These proposed bills are extremely varied. If enacted, such legislation could effectively ban or severely limit the sale of affected firearms and ammunition. In addition, if such restrictions are enacted and are incongruent, we could find it difficult, expensive, or even practically impossible to comply with them, which could impede new product development and the distribution of existing products. We cannot assure you that the regulation of our business activities will not become more restrictive in the future and that any such restriction will not have a material adverse effect on our business. Any adverse change to the interpretations of the Second Amendment (Right to Bear Arms) could impact our ability to conduct business by restricting the ownership and use of firearms in the United States. ### Risks Related to our Common Stock **If we fail to comply with the rules of the Nasdaq Stock Market for continued listing or other requirements, our shares may be delisted.** Our Common Stock is listed on the Nasdaq Stock Market (“Nasdaq”) under the symbol “POWW.” If we fail to comply with Nasdaq’s rules for continued listing, including, without limitation, minimum market capitalization and other requirements, Nasdaq may take steps to delist our shares. For example, on November 20, 2024 and February 19, 2025, we received deficiency notification letters from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) as a result of the Company’s failure to timely file its Quarterly Reports on Form 10-Q for the quarters ended September 30, 2024 and December 31, 2024, respectively. In addition, on April 2, 2025, we received an additional deficiency notification letter from Nasdaq indicating that the Company was not in compliance with Nasdaq Listing Rule 5620(a) as a result of the Company’s failure to hold an annual meeting of stockholders within 12 months of the end of the Company’s fiscal year ended March 31, 2024. Failure to maintain our Nasdaq listing would make it more difficult for stockholders to sell our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. The de-listing of our shares could have an adverse effect on the market price of our Common Stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Common Stock is not traded on a national securities exchange. ### General Risk Factors ### Our operating results may experience significant fluctuations. Many factors can contribute to significant fluctuations in our results of operations. These factors include the following: - the cyclicality of the markets we serve; - the timing and size of new orders; - the cancellation of existing orders; - the volume of orders relative to our capacity; - product introductions and market acceptance of new products or new generations of products; - timing of expenses in anticipation of future orders; - changes in product mix; - availability of production capacity; - changes in cost and availability of labor and raw materials; - timely delivery of products to customers; - pricing and availability of competitive products; - new product introduction costs; - changes in the amount or timing of operating expenses; - introduction of new technologies into the markets we serve; - pressures on reducing selling prices; - excess inventory levels; - our success in serving new markets; - adverse publicity regarding the safety, performance, and use of our products; - the institution and adverse outcome of any litigation; - political, economic, or regulatory developments; - changes in economic conditions; and - natural and manmade disasters, including health emergencies such as the recent COVID-19 pandemic. As a result of these and other factors, we believe that period-to-period comparisons of our results of operations may not be meaningful in the short term, and our performance in a particular period may not be indicative of our performance in any future period. **We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.** In the future, we may require additional capital to fund the planned expansion of our business and to respond to business opportunities, challenges, potential acquisitions, or unforeseen circumstances. We could encounter unforeseen difficulties that may deplete our capital resources rapidly, which could require us to seek additional financing in the near future. The timing and amount of any additional financing that is required to continue the expansion of our business and the marketing of our products will depend on our ability to improve our operating results and other factors. We may not be able to secure additional debt or equity financing on a timely basis or on favorable terms, or at all. Further, such financing, if obtained, could result in substantial dilution of the equity interests of existing stockholders. If we are unable to secure any necessary additional financing, we may need to delay expansion plans, conserve cash, and reduce operating expenses. There is no assurance that any additional financing will be sufficient, that the financing will be available on terms favorable to us or to existing stockholders and at such times as required, or that we will be able to obtain the additional financing required for the continued operation and growth of our business. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we raise additional funds through further issuances of equity, convertible debt securities, or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our Common Stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited. **Our charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover.** Our certificate of incorporation, bylaws, and Delaware law contain certain provisions that may have the effect of deterring or discouraging, among other things, a non-negotiated tender or exchange offer for shares of Common Stock, a proxy contest for control of our company, the assumption of control of our company by a holder of a large block of Common Stock, and the removal of the management of our company. Such provisions also may have the effect of deterring or discouraging a transaction which might otherwise be beneficial to stockholders. Our certificate of incorporation also authorizes our Board of Directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of Common Stock. Delaware law also imposes conditions on certain business combination transactions with “interested stockholders.” Further, our Bylaws authorize our Board of Directors to fill vacancies on the Board, including as a result of newly created directorships. A majority of the remaining directors may elect a successor to fill any vacancies or newly created directorships. Such provisions could limit the price that investors might be willing to pay in the future for shares of our Common Stock and impede the ability of the stockholders to replace management. The elimination of monetary liability against our directors under Delaware law pursuant to our certificate of incorporation and the existence of indemnification rights to our directors and officers under Delaware law and our certificate of incorporation and bylaws, may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees. We also entered into contractual indemnification obligations under employment agreements with our executive officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and our stockholders. **Our certification of incorporation designates the Court of Chancery in the State of Delaware as the sole and exclusive forum for actions or proceedings that may be initiated by our stockholders, which could discourage claims or limit stockholders’ ability to make a claim against the Company, our directors, officers, and employees.** Our certificate of incorporation states that unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial) to bring (i) any derivative action or proceeding brought on behalf of the Company, (ii) an action asserting a claim of breach of fiduciary duty owed by any director, officer, or other employee of the Company to the Company or the Company’s stockholders, (iii) any action asserting a claim against the Company, its directors, officers, or employees arising pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against the Company, its directors, officers, or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within 10 days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. These exclusive forum provisions do not apply to claims under the Securities Act or the Exchange Act. The exclusive forum provision may discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may create additional costs as a result. If a court were to determine the exclusive forum provision to be inapplicable and unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations. ### Risks Related to our Series A Preferred Stock **The Series A Preferred Stock ranks junior to all of our indebtedness and other liabilities.** In the event of our bankruptcy, liquidation, dissolution or winding-up of our affairs, holders of the Series A Preferred Stock will be entitled to receive any of our assets remaining only after all of our indebtedness and other liabilities have been paid. The rights of holders of the Series A Preferred Stock to participate in the distribution of our assets rank junior to the prior claims of our current and future creditors and any future series or class of preferred stock we may issue that ranks senior to the Series A Preferred Stock. Also, the Series A Preferred Stock effectively ranks junior to all existing and future indebtedness and to the indebtedness and other liabilities of our existing subsidiaries and any future subsidiaries. Our existing subsidiaries are, and future subsidiaries would be, separate legal entities and have no legal obligation to pay any amounts to us in respect of dividends due on the Series A Preferred Stock. If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Preferred Stock then outstanding. We have incurred and may in the future incur substantial amounts of debt and other obligations that rank senior to the Series A Preferred Stock. At March 31, 2024, our total liabilities equaled approximately $45.0 million. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock. Also, future offerings of debt or senior equity securities may adversely affect the market price of the Series A Preferred Stock. If we decide to issue debt or senior equity securities in the future, it is possible that these securities will be governed by an indenture or other instruments containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of the Series A Preferred Stock and may result in dilution to owners of the Series A Preferred Stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. The holders of the Series A Preferred Stock will bear the risk of our future offerings, which may reduce the market price of the Series A Preferred Stock and will dilute the value of their holdings in us. **The trading market for the Series A Preferred Stock may not provide investors with adequate liquidity.** The Series A Preferred Stock is listed on Nasdaq under the symbol “POWWP.” We cannot assure you that holders of the Series A Preferred Stock will be able to sell their shares at favorable prices or at all. The difference between bid and ask prices in any secondary market for the Series A Preferred Stock could be substantial. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Series A Preferred Stock, and holders of the Series A Preferred Stock may be required to bear the financial risks of an investment in the Series A Preferred Stock for an indefinite period of time. **We may issue additional shares of Series A Preferred Stock and additional series of preferred stock that rank on parity with the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights.** We are allowed to issue additional shares of Series A Preferred Stock and additional series of preferred stock that would rank junior to the Series A Preferred Stock as to dividend payments and rights upon our liquidation, dissolution or winding up of our affairs pursuant to our certificate of incorporation and the certificate of designations relating to the Series A Preferred Stock without any vote of the holders of the Series A Preferred Stock. The issuance of additional shares of Series A Preferred Stock and additional series of preferred stock that have been authorized pursuant to our certificate of incorporation and the certificate of designations could have the effect of reducing the amounts available to the Series A Preferred Stock upon our liquidation or dissolution or the winding up of our affairs. It also may reduce dividend payments on the Series A Preferred Stock if we do not have sufficient funds to pay dividends on all Series A Preferred Stock outstanding and other classes or series of stock with greater or equal priority with respect to dividends. Also, although holders of Series A Preferred Stock are entitled to limited voting rights, with respect to the circumstances under which the holders of Series A Preferred Stock are entitled to vote, the Series A Preferred Stock votes separately as a class along with all other series of our preferred stock that we may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders of Series A Preferred Stock may be significantly diluted, and the holders of such other series of preferred stock that we may issue may be able to control or significantly influence the outcome of any vote. Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Series A Preferred Stock and our Common Stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us. **Market interest rates may materially and adversely affect the value of the Series A Preferred Stock.** One of the factors that influences the market price of the Series A Preferred Stock is the dividend yield on the Series A Preferred Stock (as a percentage of the market price of the Series A Preferred Stock) relative to market interest rates. An increase in market interest rates may lead prospective purchasers of the Series A Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease. **We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash to make dividend payments.** Our ability to pay cash dividends on the Series A Preferred Stock requires us to have either net profits or positive net assets (total assets less total liabilities) over our capital, to be able to pay our debts as they become due in the usual course of business. Further, even if we meet this criteria, we still may not have sufficient cash to pay dividends on the Series A Preferred Stock. Our ability to pay dividends may be impaired if any of the risks described in this report were to occur. Also, payment of our dividends depends upon our financial condition and other factors as our Board of Directors may deem relevant from time to time. We cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make distributions on our preferred stock, including the Series A Preferred Stock, to pay our indebtedness or to fund our other liquidity needs. **Dividends or other payments with respect to the Series A Preferred Stock may be subject to withholding taxes in circumstances where we are not obliged to make gross up payments, and this could result in holders receiving less than expected in such circumstances.** In the event of certain changes to current tax law that require tax to be withheld from dividends or other payments on the Series A Preferred Stock, we are not required to make gross up payments in respect of such taxes. This would result in holders of Series A Preferred Stock receiving less than expected and could materially adversely affect the return on your investment. ### Our Series A Preferred Stock has not been rated. We have not sought to obtain a rating for the Series A Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of the Series A Preferred Stock. Also, we may elect in the future to obtain a rating for the Series A Preferred Stock, which could adversely affect the market price of the Series A Preferred Stock. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward, placed on a watch list, or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision, placing on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Series A Preferred Stock. ### We may redeem the Series A Preferred Stock. On or after May 18, 2026, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time. Also, upon the occurrence of a Change of Control (as defined in the certificate of designations with respect to the Series A Preferred Stock), we may, at our option, redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred. We may have an incentive to redeem the Series A Preferred Stock voluntarily if market conditions allow us to issue other preferred stock or debt securities at a rate that is lower than the dividend on the Series A Preferred Stock. If we redeem the Series A Preferred Stock, then from and after the redemption date, dividends will cease to accrue on shares of Series A Preferred Stock, the shares of Series A Preferred Stock will no longer be deemed outstanding and all rights as a holder of those shares will terminate, except the right to receive the redemption price plus accumulated and unpaid dividends, if any, payable upon redemption. **The market price of the Series A Preferred Stock could be substantially affected by various factors.** The market price of the Series A Preferred Stock depends on many factors, which may change from time to time, including: - prevailing interest rates, increases in which may have an adverse effect on the market price of the Series A Preferred Stock; - trading prices of similar securities; - our history of timely dividend payments; - the annual yield from dividends on the Series A Preferred Stock as compared to yields on other financial instruments; - general economic and financial market conditions; - government action or regulation; - the financial condition, performance and prospects of us and our competitors; - changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; - our issuance of additional preferred equity or debt securities; and - actual or anticipated variations in quarterly operating results of us and our competitors. As a result of these and other factors, holders of the Series A Preferred Stock may experience a decrease, which could be substantial and rapid, in the market price of the Series A Preferred Stock, including decreases unrelated to our operating performance or prospects. ### Holders of Series A Preferred Stock have extremely limited voting rights. The voting rights for holders of Series A Preferred Stock are limited. Our shares of Common Stock are the only class of our securities that carry full voting rights. Voting rights for holders of the Series A Preferred Stock exist primarily with respect to the ability to elect, voting together with the holders of any other series of our preferred stock having similar voting rights, two additional directors to our board of directors, subject to certain limitations in the event that dividends payable on the Series A Preferred Stock are in arrears for four or more consecutive or non-consecutive quarterly dividend periods, and with respect to voting on amendments to our certificate of incorporation or certificate of designations relating to the Series A Preferred Stock that materially and adversely affect the rights of the holders of Series A Preferred Stock or authorize, increase or create additional classes or series of our capital stock that are senior to the Series A Preferred Stock. Other than the limited circumstances set forth in the certificate of designations for the Series A Preferred and except to the extent required by law, holders of Series A Preferred Stock do not have any voting rights. **The Series A Preferred Stock is not convertible, and investors will not realize a corresponding upside if the market price of the Common Stock increases.** The Series A Preferred Stock is not convertible into shares of Common Stock and earns dividends at a fixed rate. Accordingly, an increase in market price of our Common Stock will not necessarily result in an increase in the market price of our Series A Preferred Stock. The market value of the Series A Preferred Stock may depend more on dividend and interest rates for other preferred stock, commercial paper and other investment alternatives and our actual and perceived ability to pay dividends on, and in the event of dissolution satisfy the liquidation preference with respect to, the Series A Preferred Stock. ## Cybersecurity As filed, 5,709 characters. ### Risk Management and Strategy As a publicly traded ammo manufacturer and e-commerce outdoor company, we are acutely aware of the importance of robust cybersecurity measures in safeguarding our information assets, operational integrity, and reputation. Our approach to cybersecurity risk management is integrated into our broader risk management framework and overseen by our Board of Directors. We have established comprehensive processes to assess, identify, and manage material risks from cybersecurity threats. These processes include continuous evaluation of potential threats, regular security assessments of third-party service providers, and stringent monitoring procedures to mitigate risks related to data breaches and other security incidents. We periodically engage third-party consultants, legal advisors, and audit firms to evaluate and assess our risk management systems and to assist in the remediation of potential cybersecurity incidents, as necessary. Our Information Security Program (the “Program”) is designed to protect personal and proprietary information in compliance with federal and state requirements. The Program aims to: - ensure the security and confidentiality of employee and customer personal information, as well as Company proprietary information; - protect against anticipated threats or hazards to the security or integrity of such information; and - prevent unauthorized access to, use of, or transfer of such information, thereby protecting the Company, its employees, and customers from potential harm or inconvenience. We use a variety of tools and services, including network monitoring, vulnerability assessments, and tabletop exercises, to enhance our cybersecurity posture. Our incident response plan is comprehensive, detailing procedures for preparing for, detecting, responding to, and recovering from cybersecurity incidents. This plan includes processes for triaging, assessing the severity of, escalating, containing, investigating, and remediating cybersecurity incidents, while ensuring compliance with relevant legal obligations. In addition to internal measures, we manage cybersecurity risks associated with third-party suppliers, particularly those with access to our systems or confidential data. We perform due diligence on critical third-party suppliers and monitor identified cybersecurity threats. We require these suppliers to contractually agree to manage their cybersecurity risks according to our standards or to submit to cybersecurity audits conducted by our agents. We regularly engage third-party experts to conduct information security testing, including penetration testing, on our systems and infrastructure. Our information security program undergoes periodic external assessments aligned with the National Institute of Standards and Technology Cybersecurity Framework and the Payment Card Industry Data Security Standard. This alignment helps us identify, assess, and manage cybersecurity risks relevant to our business. ### Governance Our Board of Directors oversees our cybersecurity risk management. Directors receive reports as requested from management, including senior information technology (“IT”) leadership and third parties, on cybersecurity matters. Additionally, the Board of Directors is kept informed about cybersecurity risks as part of our overall enterprise risk management program and through regular business updates. Senior IT leaders and our compliance officer are responsible for developing and implementing appropriate cybersecurity programs and ensuring our compliance with applicable laws and regulations. These leaders, equipped with relevant degrees, certifications, and extensive work experience, are informed by their cybersecurity teams about ongoing efforts to prevent, detect, mitigate, and remediate cybersecurity incidents. Information regarding cybersecurity risks is communicated through various channels, including direct discussions between key leaders and Company management, and reports to the Board of Directors and its committees. The Board of Directors regularly receives updates from our compliance officer and senior IT leadership on the status of our cybersecurity measures and any significant developments. Our commitment to cybersecurity is a fundamental aspect of our operational strategy, ensuring the protection of our information assets, the continuity of our operations, and the trust of our stakeholders. We have experienced cybersecurity incidents in the ordinary course of business and will continue to experience risks from cybersecurity threats that could have a material adverse effect on our business strategy, results of operations, or financial condition. Although prior cybersecurity incidents have not had a material adverse effect on our business strategy, results of operations, or financial condition to date, any actual or perceived breach of our security could damage our reputation, adversely affect our operations, or subject us to third-party lawsuits, regulatory investigations and fines or other actions or liabilities, any of which could materially adversely affect our business strategy, results of operations, or financial condition. For more information on our cybersecurity related risks, see “Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss of sales.” and “A failure of our information technology systems, or an interruption in their operation due to internal or external factors including cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations.” in Item 1A “Risk Factors” of this Amendment. ## Legal proceedings As filed, 7,484 characters. From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business, including commercial, intellectual property, and employment-related matters, as well as stockholder derivative actions, class action lawsuits and other matters. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters were material to our business or financial condition based upon the standard set forth in the SEC’s rules. We believe we have substantial defenses in each unresolved matter, and we intend to vigorously defend against the claims brought by plaintiffs in the pending lawsuits. ### Matters Pending as of March 31, 2022 On September 24, 2019, the Company received notice that a former employee filed a complaint against the Company and certain individuals with the U.S. Department of Labor (the “DOL”). In the complaint, the former employee alleged (i) potential violations of SEC rules and regulations by management and that as a result of such allegations, the individual experienced a hostile work environment; (ii) that the Company lacked sufficient internal controls; and (iii) that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the stockholders. The claims were investigated by a 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. As of March 31, 2022, the complaining party had filed suit in the District Court of Arizona pursuing the claim and seeking monetary damages and injunctive relief in that venue, bringing to an end the DOL proceedings. All matters relating to this former employee were confidentially resolved via mediation in June 2022, and the lawsuit was dismissed with prejudice. ### Matters Pending as of March 31, 2023 The Company received notice in February 2022 that an OSHA whistleblower complaint had been filed with the DOL by an employee that had been terminated for cause. The complaint alleged multiple violations of DOL and OSHA regulations and the complainant sought money damages. As of March 31, 2023, the Company had produced documents and submitted its position statement to OSHA, and the matter was pending at the agency level. The Company and the former employee subsequently agreed to arbitrate the case, and the parties reached a resolution of all outstanding claims in November 2023. In July, 2022, a former employee filed to arbitrate a dispute arising out of his employment contract - AAA Case No. 01-22-0002-8470. The former employee sought an award of severance payments, attorneys fees, and costs. In April, 2023, an arbitrator concluded that the Company breached the employee's employment agreement and issued an interim award of severance payments in the amount of $459,722.59 and awarded him attorney’s fees and costs. ### Matters Pending as of March 31, 2024 On April 30, 2023, director and stockholder Steve Urvan filed suit in the Delaware Court of Chancery (the “Delaware Court”) against the Company, and certain Company directors, former directors, employees, former employees and consultants. Urvan’s claims include fraudulent inducement, unjust enrichment and violations of the Arizona Securities Act. The suit seeks a court order for partial rescission of the Company’s acquisition of GunBroker.com in April 2021 and compensatory damages of not less than $140 million. On August 1, 2023, the Company filed a separate lawsuit against Urvan in the Delaware Court alleging, among other things, that Urvan committed fraud in connection with the sale of GunBroker to the Company, and that Urvan breached his indemnification obligations to the Company after the sale. The Company timely responded to the Urvan complaint by filing a motion to dismiss. On September 11, 2023, the Delaware Court consolidated the Company’s lawsuit against Urvan with Urvan’s lawsuit against the Company and the individual defendants. On September 18, 2023, the Company filed an amended complaint that added a claim against Urvan for breach of the Arizona Securities Act. Urvan moved to dismiss the Company’s complaint in full. On December 18, 2023, the Delaware Court heard argument on the parties’ motions to dismiss in the consolidated action. On February 27, 2024, the Delaware Court issued an opinion resolving all pending motions to dismiss. The Delaware Court dismissed Urvan’s aiding and abetting claims against the individual defendants, but it declined to dismiss Urvan’s other claims against the individuals and declined to dismiss Urvan’s claims against the Company. The Delaware Court rejected Urvan’s motion to dismiss the Company’s claims against him in its entirety. The Delaware Court scheduled the matter for a five-day trial in April, 2026. On December 6, 2023, Steve Urvan initiated a separate action against the Company in his capacity as director under 8 *Del. C. §* 220(d) to inspect certain of the Company’s books and records (the “Books and Records Action”). In the Books and Records Action, Mr. Urvan alleges that the Company wrongfully refused to provide him with access to certain categories of documents following demands that he made on the Company on March 3, 2023 and November 9, 2023. The Company asserted as an affirmative defense that Mr. Urvan’s primary purpose for his demands is, among other things, to obtain documents to support his claims in the Delaware Plenary Litigation, in which discovery was then stayed. The court held a one-day trial on February 26, 2024 in Georgetown, Delaware. On February 27, 2024, the court in the Delaware Plenary Litigation issued an opinion that had the effect of lifting the discovery stay. On February 28, 2024, AMMO informed the judge presiding over the Books and Records Action that “\[i\]n AMMO’s view, the \[Plenary Action\] Opinion has effectively mooted this \[Books and Records\] action.” On April 9, 2024, AMMO began producing documents in response to Mr. Urvan’s demands pursuant to a Stipulation and Order Governing AMMO’s Document Productions. The court has not issued a post-trial ruling. On January 18, 2024, Innovative Computer Professionals, Inc. d/b/a Digital Cash Processing (“DCP”) filed a civil action in Minnesota state court against Outdoors Online, LLC d/b/a GunBroker.com (“GunBroker.com”) for breach of contract (the “MN Action”). In the MN Action, DCP alleged that GunBroker.com breached a May 2021 contract, pursuant to which DCP was to provide specified digital payment processing services, and it alleged $100 million in damages. On February 7, 2024, GunBroker.com removed the MN Action to the United States District Court for the District of Minnesota (Case No. 24-CV-00373-DWF-DTS). On February 14, 2024, GunBroker.com moved to dismiss the MN Action for lack of personal jurisdiction and for failure to adequately state a claim, or, in the alternative, to transfer the MN Action to the United States District Court for the District of Arizona (the “Motion”). As of March 31, 2024, the Motion had been fully briefed and submitted to the Court. ## Management's discussion and analysis As filed, 55,022 characters. This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements (prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and related notes as of and for the years ended March 31, 2024, 2023 and 2022 included elsewhere in this Amendment No. 2 to Form 10-K (this “Amendment”). The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Special Note Regarding Forward-Looking Statements.” Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Amendment, particularly in the section entitled “Risk Factors.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Outdoor Holding Company (formerly AMMO, Inc.) and its consolidated subsidiaries. ### Sale of Ammo Manufacturing Business and Name Change As further discussed in the Explanatory Note, on April 18, 2025, the Company sold its ammunition manufacturing business to Olin Winchester, LLC (the “Transaction”). The Company will continue to operate its online marketplace business associated with selling ammunition and firearms as a brokering agent or through direct sales through the Company’s subsidiary Speedlight Group I, LLC d/b/a GunBroker and its subsidiaries. In connection with the closing of the Transaction, the Company changed its name from “AMMO, Inc.” to “Outdoor Holding Company” on April 21, 2025. Except as otherwise provided in this Item 7, all references to the Company in this Item 7 refer to the Company and its subsidiaries on a consolidated basis prior to the closing of the Transaction. For additional information regarding the Transaction, see the Explanatory Note and Note 23, “Subsequent Events” of the consolidated financial statements included in this Amendment. ### Restatement of Previously Issued Consolidated Financial Statements As discussed in the Explanatory Note, this Management’s Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the effects of the restatements described in Note 3, “Restatement of Previously Issued Consolidated Financial Statements” of the notes to the consolidated financial statements in Item 8 “Financial Statements and Supplementary Data” of this Amendment. In addition, we have included unaudited restated financial statements for each fiscal quarter of 2024, which unaudited financial statements follow our full fiscal year 2024 financial statements in this Amendment. The impact of the adjustments were reductions to net income of $1.0 million, $4.2 million, and $7.4 million in the years ended March 31, 2024, 2023 and 2022, respectively. Except with respect to the restatement, this section does not reflect any information or events occurring after June 13, 2024, the original filing date of the Annual Report on Form 10-K for the year ended March 31, 2024, or modify or update those disclosures affected by events that occurred at a later date or facts that subsequently became known to the Company, except to the extent they are otherwise required to be included and discussed herein. ### Overview AMMO, Inc., owner of the GunBroker Marketplace ("GunBroker" or the "Marketplace"), the largest online marketplace serving the firearms and shooting sports industries, and a vertically integrated producer of high-performance ammunition and premium components began its operations in 2017. Through our GunBroker Marketplace segment (acquired in April 2021), we allow third party sellers to list items consisting of firearms, hunting gear, fishing equipment, outdoor gear, collectibles, and much more on our site, while facilitating compliance with federal and state laws that govern the sale of firearms and other restricted items. This allows our base of over 8.1 million users to follow ownership policies and regulations through our network of over 31,000 federally licensed firearms dealers who serve as transfer agents. The nature and operation of the Marketplace as an online auction and sales platform also affords us 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 and to become a peer to those in our industry. Recent expansions we have made to the platform include the following: - Payment Processing – facilitating payment between parties allowing third-party sellers to offer fast and secure electronic payments and allowing buyers to experience the ease of instant checkout. - Carting Ability – enables our buyers to checkout multiple items from multiple sellers in a single transaction. Our buyers are able to finalize one transaction including both regulated and nonregulated items, while also affording them the ability to ship their purchases to more than one location. - GunBroker Analytics – through the compilation and refinement of vast Marketplace data, we offer e-commerce market analytics to our industry peers allowing them to better manage business strategy and planning. The analytics offering will be rebranded to Outdoor Analytics during fiscal year 2025 to expand service offerings. - GunBroker Advertising – content creation for manufactures, email campaigns and banner ads are all part of our advertising offerings to the outdoor industry. Through our Ammunition segment, we are tailoring the focus of our manufacturing operations to the production of premium pistol and rifle ammunition and supporting industry partners with manufactured components such as premium pistol and rifle brass casings. We will continue to leverage our flagship brands that are proprietary in nature, including STREAK VISUAL AMMUNITION™, /stelTH/™, Signature-on-Target, and HUNT and extend our product offering with premium rifle lines and brands that complement our technologically innovative heritage. We also continue to ensure dynamic performance under the exacting standards of the U.S. military complex in support of our cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities. ### Results of Operations ### Fiscal Year 2024 Compared to Fiscal Year 2023 Our financial results for the year ended March 31, 2024 reflected our transition into our new operational strategic position, focusing on higher margin rifle brass casing production and sales. We believe that we have hired a strong team of professionals and developed innovative products to establish our presence as a high-quality ammunition provider and marketplace. We continued to focus on building profitability through our rifle brass manufacturing. We experienced a 24.2% decrease in our net revenues for the year ended March 31, 2024 compared with the year ended March 31, 2023. This decrease was the result of decreased revenue in both of our reporting segments due to changes in market demand as discussed below, and specifically for our ammunition division, changes in pricing, and sales mix. We believe that the shift in our operational strategy focusing on higher margin rifle brass casing production and sales negatively impacted our sales in the year ended March 31, 2024 as compared to the year ended March 31, 2023. Additionally, equipment malfunction related to rifle ammunition production in our manufacturing facility in Manitowoc caused lower production output, which contributed to lower sales results. Our focus on creating profitability is in contrast to revenue growth. The following table presents summarized financial information for the years ended March 31, 2024 and 2023, taken from our consolidated statements of operations: | | For the Year Ended March 31, 2024 (Restated) | March 31, 2023 (Restated) | | --- | ---: | ---: | | Net revenues | $145,054,572 | $191,439,801 | | Cost of revenues | 102,479,087 | 136,078,488 | | Gross margin | 42,575,485 | 55,361,313 | | Operating expenses | 62,196,146 | 62,808,879 | | Loss from operations | (19,620,661) | (7,447,566) | | Other income (expense) | | | | Other income (expense) | (779,066) | (606,881) | | Loss before provision for income taxes | (20,399,727) | (8,054,447) | | Provision for income taxes | (3,806,118) | 712,239 | | Net loss | $(16,593,609) | $(8,766,686) | 33 ### 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 GAAP, the following information includes key operating metrics and non-GAAP financial measures that we use to evaluate our business. We believe that these measures are useful for period-to-period comparisons of the Company's performance. We have included these non-GAAP financial measures in this Amendment because they are key measures management uses 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 that 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 | Reconciliation of Net Loss to Adjusted EBITDA | For the Year Ended March 31, 2024 (Restated) | March 31, 2023 (Restated) | | --- | ---: | ---: | | Net loss(1) | $(16,593,609) | $(8,766,686) | | Provision for income taxes | (3,806,118) | 712,239 | | Depreciation and amortization(1) | 18,861,181 | 17,567,233 | | Interest expense, net | 446,473 | 632,062 | | Employee stock awards(1) | 5,281,288 | 10,128,236 | | Common stock purchase options | 430,458 | - | | Warrants issued for services(1) | - | 427,639 | | Other income (expense), net | 332,593 | (25,181) | | Contingent consideration fair value | (80,540) | (63,764) | | Proxy contest fees | - | 4,255,135 | | Other nonrecurring expenses(2) | 11,663,506 | 1,248,865 | | Adjusted EBITDA | $16,535,232 | $26,115,778 | (1) See Note 3, “Restatement of Consolidated Financial Statements,” of the notes to the consolidated financial statements. (2) For the year ended March 31, 2024, other nonrecurring expenses consist of settlement costs and the associated contingent liabilities, legal fees associated with the Delaware litigation and the SEC Investigation and non-recurring compliance expenses, and other professional and legal fees that are nonrecurring in nature. For the year ended March 31, 2023, other nonrecurring expenses consist of executive severance costs, penalties and assessments on abatements of excise taxes and legal fees associated with the Special Committee and SEC Investigations. Adjusted EBITDA is a non-GAAP financial measure that displays our net loss, adjusted to eliminate the effect of certain items as described below. We define Adjusted EBITDA as net income (loss) excluding (i) interest expense, net, (ii) other income (expense), net, (iii) provision or benefit for income taxes, (iv) depreciation and amortization, (v) share-based or warrant-based compensation expenses, (vi) changes to the contingent consideration fair value, (vii) proxy contest fees and (viii) other nonrecurring expenses, such as professional and legal fees. We believe that it is useful to exclude these expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. 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 common stock purchase options expense has been, and will continue to be for the foreseeable future, a significant recurring expense for 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; - non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs; and - other companies, including companies in our industry, may calculate their 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 Revenues The following table presents our revenues by the various categories that comprised our total revenues for the years ended March 31, 2024 and March 31, 2023. “Proprietary ammunition” includes those lines of ammunition that we manufacture at our facilities and sell 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” includes ammunition that we manufacture at our facilities as well as any completed ammunition that we acquire 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 that we manufacture using reprocessed brass casings. Ammunition within the standard ammunition product line typically carries much lower gross margins than our proprietary ammunition. | | For the Year Ended March 31, 2024 | March 31, 2023 | | --- | ---: | ---: | | **Proprietary ammunition** | $6,265,500 | $10,779,035 | | **Standard ammunition** | 63,125,301 | 103,337,009 | | **Ammunition casings** | 21,721,695 | 14,174,084 | | **Marketplace revenue** | 53,942,076 | 63,149,673 | | **Total net revenues** | $145,054,572 | $191,439,801 | Net revenues for the year ended March 31, 2024 decreased by $46.4 million, or 24.2%, from the prior year due to changes in market conditions. This decrease was due to decreases of $40.2 million in sales of bulk pistol and rifle ammunition, $4.5 million in sales of proprietary ammunition, and $9.2 million in sales generated from our GunBroker Marketplace, which primarily consists of auction revenue, as well as payment processing revenue, and shipping income, partially offset by an increase of $7.5 million in our casing sales. We believe that the shift in our operational strategy focusing on higher margin brass casing production and sales negatively impacted our sales in the year ended March 31, 2024 as compared to the year ended March 31, 2023. Additionally, an equipment malfunction related to rifle ammunition production in our manufacturing facility in Manitowoc caused lower production output, which contributed to lower sales results. Management anticipates an increase in ammunition casings sales as capacities come online in its new Manitowoc facility during fiscal year 2025. With our new Manitowoc facility coming online in August 2022, we will continue to expand distribution into commercial markets, introduce new product lines, and continue to initiate sales to U.S. law enforcement, military, and international markets. For example, through our acquisition of SW Kenetics, Inc., the Company has developed and deployed a line of tactical armor piercing (“AP”) and hard armor piercing incendiary (“HAPI”) precision ammunition to meet the lethality requirements of both U.S. and foreign military customers. We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions. The Company has since developed the ballistic match (“BMMPR”) and Signature-on-Target rounds under contract with the U.S. Government in support of U.S. special operations, which contracts have been publicly announced pursuant to governmental authorization. Additional work continues in support of the military operations of the United States and its allied military components, the status of 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, that we anticipate will drive sustained sales opportunity in the military, law enforcement, and commercial markets. ### Cost of Revenues Cost of revenues decreased by approximately $33.6 million from $136.1 million to $102.5 million for the year ended March 31, 2024 compared to the year ended March 31, 2023. This decrease was the result of a significant decrease in net sales as well as increases to non-cash depreciation related to increases in production equipment, expensing of increased labor, and overhead used to produce finished product during 2024 as compared to 2023. Cost of revenues for our ammunition segment consisted of product cost and cost directly and indirectly associated with getting those products to a sellable state. Cost of revenues for our marketplace segment consisted of costs associated with facilitating transactions on the platform. ### Gross Margin Our gross margin percentage, which measures our gross profit as a percentage of sales increased to 29.4% during the year ended March 31, 2024 from 28.9% for the year ended March 31, 2023. This increase was primarily a result of our Marketplace, which, by its nature has significantly higher margins than our manufactured products, offset by increases in labor costs and overhead in our ammunition segment. We believe that as we grow ammunition segment sales through new markets and expanded distribution, our gross margins will continue to increase. Our goal in the next 12 to 24 months is to continue to improve our gross margins. We expect to accomplish this through the following: - Capacity improvements at the Manitowoc, WI facility and expansion of our rifle casing and loading lines; - Increased product sales, specifically of proprietary and flagship lines of ammunition, such as the STREAK VISUAL AMMUNITION™, /stelTH/™, Signature-on-Target, and HUNT, all of which carry higher margins as a percentage of their selling price; - Introduction of new lines of ammunition that carry higher margins in the consumer and government sectors; - Reduced component costs through insourced operations of our ammunition segment and expansion of strategic relationships with component providers resulting in cost savings; - Expanded use of automation equipment that reduces the total labor required to assemble finished products; - Vertical integration into tooling manufacturing and annealing of rifle cases that have previously been outsourced; - Better leverage of our fixed costs through expanded production to support the sales objectives; - Enhancing the recently implemented multi-item cart and related payment processing, which adjusts our category fees for nonregulated items that will enable us to increase our take rate across the platform as we enable cross selling; and - Growing our advertising sales, financing partnerships, and bringing enhanced shipping options to our community. ### Operating Expenses Operating expenses consisted of selling and marketing expenses, corporate general and administrative expenses, and employee salaries and related expenses. Operating expenses decreased by approximately $0.6 million for the year ended March 31, 2024 compared to the prior year, and increased as a percentage of sales to 42.9% in the 2024 fiscal year from 32.8% for the year ended March 31, 2023. This decrease was primarily due to a $3.4 million, or 71.0%, decrease in selling and marketing expenses and a $2.1 million or 10.7% decrease in employee salaries and related expenses, offset by a $4.6 million, or 18.4%, increase in corporate general and administrative expenses, during the year ended March 31, 2024 compared to the prior year. Selling and marketing expenses consisted of commissions related to our sales, as well as advertising and marketing expenses. During the year ended March 31, 2024, our selling and marketing expenses decreased primarily as a result of decreases in sales commission due to the decrease in the amount of sales of our products and services compared to the year ended March 31, 2023. The increase in our corporate general and administrative expenses was due primarily to an increase of $9.2 million of nonrecurring expenses, consisting of professional and legal fees that are nonrecurring in nature, partially offset by the lack of expenses relating to a proxy contest in connection with our annual meeting of stockholders held on January 5, 2023, in connection with which we incurred $4.7 million in expenses in the year ended March 31, 2023. In addition, employee salaries and related expenses decreased approximately $2.1 million for the year ended March 31, 2024 compared to the year ended March 31, 2023. The decrease was primarily due to the decrease in the stock-based compensation of $2.8 million partially offset by $0.8 million of additional payroll expenses that we incurred as a result of the implementation of an employee bonus program during the 2024 fiscal year. ### Other Income and Expenses Other expense for the year ended March 31, 2024, increased by $0.4 million compared to the year ended March 31, 2023. This increase was primarily the result of $0.2 million in losses recorded on the disposal of assets. The decrease in interest expense was mainly due to additional interest on the Construction Loan (defined below) of approximately $0.2 million during the year ended March 31, 2024 compared to the prior year, offset by approximately $0.3 million of interest income. ### Income Taxes For the year ended March 31, 2024, we recorded a benefit for federal and state income taxes of approximately $3.8 million in comparison to a $0.7 million provision for federal and state income taxes in the year ended March 31, 2023, as a result of the increase in our net loss before taxes during fiscal 2024 compared to the prior year. ### Fiscal Year 2023 Compared to Fiscal Year 2022 ### Results of Operations Our financial results for the year ended March 31, 2023 reflect our newly positioned organization as we transitioned into our new manufacturing facility. We believe that we have hired a strong team of professionals and developed innovative products to support our efforts to establish our presence as a high-quality ammunition provider and marketplace. We continue to focus on growing our top-line revenue and streamlining our operations. We experienced a 20.3% decrease in our net revenues for the year ended March 31, 2023 compared with the year ended March 31, 2022. This decrease resulted from decreased ammunition sales due to changes in market demand. The following table presents summarized financial information for the years ended March 31, 2023 and 2022, taken from our consolidated statements of operations: | | For the Year Ended March 31, 2023 (Restated) | March 31, 2022 (Restated) | | --- | ---: | ---: | | Net revenues | $191,439,801 | $240,269,166 | | Cost of revenues | 136,078,488 | 151,552,941 | | Gross margin | 55,361,313 | 88,716,225 | | Operating expenses | 62,808,879 | 60,190,172 | | Income (loss) from operations | (7,447,566) | 28,526,053 | | Other income (expense) | | | | Other income (expense) | (606,881) | (615,957) | | Income (loss) before provision for income taxes | (8,054,447) | 27,910,096 | | Provision for income taxes | 712,239 | 2,042,918 | | Net income (loss) | $(8,766,686) | $25,867,178 | 37 ### Non-GAAP Financial Measures #### Adjusted EBITDA | Reconciliation of Net (Loss) Income to Adjusted EBITDA | For the Year Ended March 31, 2023 (Restated) | March 31, 2022 (Restated) | | --- | ---: | ---: | | Net (loss) income(1) | $(8,766,686) | $25,867,178 | | Provision for income taxes | 712,239 | 2,042,918 | | Depreciation and amortization(1) | 17,567,233 | 17,409,294 | | Interest expense, net | 632,062 | 637,797 | | Employee stock awards(1) | 10,128,236 | 7,430,458 | | Stock for services(1) | — | 6,446,260 | | Warrants issued for services(1) | 427,639 | 1,782,175 | | Contingent consideration fair value | (63,764) | (385,750) | | Other income | (25,181) | (21,840) | | Proxy contest fees | 4,255,135 | - | | Other nonrecurring expenses(2) | 1,248,865 | - | | Adjusted EBITDA | $26,115,778 | $61,208,490 | (1) See Note 3, “Restatement of Consolidated Financial Statements,” of the notes to the consolidated financial statements. (2) For the year ended March 31, 2023, other nonrecurring expenses consist of executive severance costs, penalties and assessments on abatements of excise taxes and legal fees associated with the Special Committee and SEC Investigations. In addition to the adjustments described above, we modified the calculation of adjusted EBITDA in our 2023 fiscal year to remove the adjustment for excise taxes, as we believe removal of that adjustment is a better representation of our operations. In prior periods, we included an adjustment for excise taxes, but will not include this adjustment in future periods. Adjusted EBITDA for the year ended March 31, 2022 has been recast to conform to the current definition. ### Net Revenues The following table presents our revenues by the various categories that comprised our total net revenues for the years ended March 31, 2023 and March 31, 2022. | | For the Year Ended March 31, 2023 | March 31, 2022 | | --- | ---: | ---: | | **Proprietary ammunition** | $10,779,035 | $10,071,659 | | **Standard ammunition** | 103,337,009 | 151,387,366 | | **Ammunition casings** | 14,174,084 | 14,201,625 | | **Marketplace revenue** | 63,149,673 | 64,608,516 | | **Total net revenues** | $191,439,801 | $240,269,166 | Revenues for the year ended March 31, 2023 decreased by $48.8 million, or 20.3%, from the prior year almost entirely as the result of a $48.1 million decrease in sales of bulk pistol and rifle ammunition. Sales of bulk pistol and rifle ammunition decreased year-over-year due to changes in market conditions. ### Cost of Revenues Cost of revenues decreased by $15.5 million, or 10.2%, for the year ended March 31, 2023 compared to the year ended March 31, 2022. This decrease was the result of the decrease in sales of our products, as discussed in “Net Revenues” above, 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 2023 as compared to 2022. ### Gross Margin Our gross margin percentage decreased to 28.9% for the year ended March 31, 2023 from 36.9% for the year ended March 31, 2022. This was primarily a result of increases in the costs of materials, labor, and overhead in our ammunition segment, the effect of which was partially offset by our Marketplace. Our Marketplace has significantly higher margins than our manufactured products. ### Operating Expenses Operating expenses increased by $2.6 million for the year ended March 31, 2023 compared to the prior year, and increased as a percentage of sales to 32.8% from 25.1% for the year ended March 31, 2022. This increase was primarily due to increases of $4.8 million, or 31.8%, in employee salaries and related expenses, partially offset by a $2.6 million, or 35.3%, decrease in selling and marketing expenses and a $0.9 million, or 3.6%, decrease in corporate general and administrative expenses during the year ended March 31, 2023 compared to the prior year. Selling and marketing expenses decreased during the year ended March 31, 2023, compared to the prior year, primarily as a result of the decreases in sales commission due to the year-over-year decrease in the amount of sales of our products. Corporate general and administrative expenses increased year-over-year due to $6.6 million of legal and professional fees and expenses incurred during 2023, largely related to the proxy contest, as discussed above, and $1.2 million of nonrecurring expenses, which consisted of professional and legal fees that were nonrecurring in nature, for which there were no comparable expenses during the year ended March 31, 2022. In addition, the year ended March 31, 2022 had $6.4 million of expense related to equity issuance costs incurred in association with our Series A Preferred Stock fundraising. Employee salaries and related expenses increased $4.8 million for the year ended March 31, 2023 compared to the year ended March 31, 2022, primarily as a result of $2.1 million of additional payroll expenses incurred as a result of payments due upon termination in connection with a proxy settlement agreement (as discussed in Note 18, "Related Party Transactions" of our consolidated financial statements), $2.4 million of additional stock-based compensation expenses, and the addition of employees in our Marketplace segment. ### Other Income and Expense For the year ended March 31, 2023, other income and interest expense remained constant compared with the year ended March 31, 2022. The change to interest expense from the prior period was mainly due to increases related to the Construction Loan of approximately $0.3 million and decreases in activity related to our Factoring Agreement and our Inventory Credit Facility (each term as defined below) of approximately $0.3 million. ### Income Taxes For the year ended March 31, 2023, we recorded a provision for federal and state income taxes of approximately $0.7 million compared to $2.0 million in the year ended March 31, 2022, as a result of the decrease in net income(loss) before taxes. ### Liquidity and Capital Resources As of March 31, 2024, we had $55.6 million of cash and cash equivalents, an increase of $16.5 million from $39.1 million of cash and cash equivalents as of March 31, 2023. As of March 31, 2022, we had $23.3 million of cash and cash equivalents. Working capital is summarized and compared as follows: | | March 31, 2024 | March 31, 2023 | March 31, 2022 | | --- | ---: | ---: | ---: | | Current assets | $131,525,266 | $128,451,893 | $129,691,636 | | Current liabilities | 30,975,049 | 25,498,177 | 35,858,089 | | | $100,550,217 | $102,953,716 | $93,833,547 | 39 ### Liquidity We expect existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities to be adequate to fund our operations over the next 12 months. 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 to use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases, and any potential acquisitions. #### Leases We currently lease three locations that are used for our offices, production, and warehousing. As of March 31, 2024, we had $2.6 million of fixed lease payment obligations with $0.7 million payable within the next 12 months. As of March 31, 2023, we had $1.6 million of fixed lease payment obligations, with $0.6 million payable within the next 12 months. As of March 31, 2022, we had $3.5 million of fixed lease payment obligations, with $1.1 million payable within the next 12 months. Please refer to Note 11, "Leases" for additional information. #### Factoring and Security Agreement On July 1, 2019, we entered into a Factoring and Security Agreement (the “Factoring Agreement”) with Factors Southwest, LLC (“FSW”). Pursuant to the Factoring Agreement, FSW was permitted to purchase from time to time the Company’s accounts receivables with recourse on an account-by-account basis. The 24-month agreement contained a maximum advance amount of $5.0 million on 85% of eligible accounts and had an annualized interest rate of the prime rate published from time to time by the Wall Street Journal plus 4.5%. The Factoring Agreement provided for a fee of 3% ($150,000) of the Maximum Facility (as defined in the Factoring Agreement) assessed to the Company. Our obligations under the Factoring Agreement were secured by present and future accounts receivables and related assets, inventory, and equipment. The Company had the right to terminate the agreement, with 30 days’ written notice, upon obtaining a non-factoring credit facility. The Factoring Agreement provided the Company with the ability to convert our account receivables into cash. We did not have an outstanding balance on our factoring liability as of March 31, 2024, March 31, 2023 and March 31, 2022. Interest expense recognized on the factoring liability for the year ended March 31, 2024 was $185,319, including $62,500 of amortization of the commitment fee. Interest expense recognized on the factoring liability for the year ended March 31, 2023 was $153,646, including $37,500 of amortization of the commitment fee. Interest expense recognized on the factoring liability for the year ended March 31, 2022 was $327,746, including $100,000 of amortization of the commitment fee. On June 17, 2021, the Factoring Agreement was amended to extend the maturity date to June 17, 2025. On November 29, 2023, we provided FSW notice of termination of the Factoring Agreement, which agreement terminated on December 29, 2023. We recognized an expense of $281,108 in relation to the termination of the Factoring Agreement with FSW. #### Inventory Credit Facility On June 17, 2020, we entered into a Revolving Inventory Loan and Security Agreement (the “Inventory Credit Facility”) with FSW. Pursuant to the Inventory Credit Facility, FSW agreed to establish a revolving credit line, and make loans from time to time to the Company for the purpose of providing capital. The 24-month agreement was secured by our inventory, among other assets, contained a maximum loan amount of $1,750,000 on eligible inventory and had an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The Inventory Credit Facility contained an initiation fee of 2% of the maximum loan amount ($35,000) assessed to the Company. On July 31, 2020, the Company amended the Inventory Credit Facility to increase the maximum inventory loan amount to $2,250,000. No outstanding balance remained as of March 31, 2024 and March 31, 2023. The outstanding balance on the Inventory Credit Facility as of March 31, 2022 was $825,675. There was no interest expense recognized on the Inventory Credit Facility for the year ended March 31, 2024. Interest expense for the year ended March 31, 2023 was $6,580, and for the year ended March 31, 2022 was $40,940, including $8,561 of amortization of the annual fee. On November 29, 2023, we provided FSW notice of termination of the Inventory Credit Facility, which agreement terminated on December 29, 2023. #### Construction Loan On October 14, 2021, we entered into a Construction Loan Agreement (the “Hiawatha Loan Agreement”) with Hiawatha National Bank (“Hiawatha”). The Hiawatha Loan Agreement specifies that Hiawatha may lend up to $11.625 million to AMMO, INC. and Firelight Group I, LLC (together, the "Borrower") to pay a portion of the construction costs of the approximately 185,000 square foot Manitowoc manufacturing facility (the “Construction Loan”). The first advance of Construction Loan funds by Hiawatha was made on October 14, 2021 in the amount of $329,843. We received advances of Construction Loan funds approximately every month as our “owner’s equity” was fully funded into the ongoing new plant construction project. The Construction Loan is an advancing term loan and not a revolving loan so any portion of the principal repaid cannot be re-borrowed. Additionally, on October 14, 2021, we issued a Promissory Note in favor of Hiawatha (the “Hiawatha Note”) in the amount of up to $11.625 million with an interest rate of four and one-half percent (4.5%). The maturity date of the Hiawatha Note is October 14, 2026. Under the terms of the Hiawatha Loan Agreement, we are required to make monthly payments of $64,620, which consists of principal and interest until the maturity date, at which time the remaining principal balance of the Construction Loan would become due. We can prepay the Hiawatha Note in whole or in part starting in July 2022 with a prepayment premium of one percent (1%) of the principal being prepaid. The Hiawatha Loan Agreement contains customary events of default including, but not limited to, a failure to make any payments pursuant to the Hiawatha Loan Agreement or Hiawatha 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 Construction 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 Hiawatha Note bearing interest at an increased rate. We are required to maintain a debt service coverage ratio (as defined in the terms of the Hiawatha Loan Agreement) of not less than 1.25 to 1.00 for the period defined below and continuing to and including the maturity date. The debt service coverage ratio is tested on an annual basis, as of July 1, for each previous year. We have maintained compliance with the debt service coverage ratio under the Hiawatha Loan Agreement since its inception. During the year ended March 31, 2023, approximately $11.2 million of Construction Loan funds were advanced to the Borrower, including $1.0 million of cash collateral or restricted cash as security for the Construction Loan. We made $257,425 and $150,743 in principal payments for the years ended March 31, 2024 and March 31, 2023, respectively. The restricted cash can be released per the terms of the Hiawatha Loan Agreement. During the year ended March 31, 2023, $500,000 of restricted cash was released with $500,000 remaining restricted. During the year ended March 31, 2024, the remaining $500,000 of restricted cash was released, resulting in a zero balance for restricted cash as of March 31, 2024. We financed a portion of our new Manitowoc, WI facility with the Construction Loan. As of March 31, 2024, we expect to make $0.8 million in principal and interest payments within the next 12 months. The principal balance of the Construction Note will mature on October 14, 2026. #### Revolving Loan On December 29, 2023, we entered into a Loan and Security Agreement (the “Sunflower Agreement”) by and among the Company and the other borrowers party to the Sunflower Agreement, the lenders party thereto (collectively, the “Lenders”) and Sunflower Bank, N.A., as administrative agent and collateral agent (the “Agent”), pursuant to which the Lenders provided us a revolving loan in the principal amount of the lesser of (a) $20.0 million (the “Total Commitment Amount”) and (b) the Borrowing Base (a formula based on certain amounts owed to Borrower for goods sold or services provided and eligible inventory) (the “Revolving Loan”). The proceeds of loans under the Sunflower Agreement may be used for working capital, general corporate purposes, permitted acquisitions, to pay fees and expenses incurred in connection with the Revolving Loan, to facilitate our stock repurchase program and to fund our general business requirements. The Revolving Loan bears interest at a rate of the greater of (x) 3.50% and (y) Term SOFR, plus 3.00% (the “Revolving Facility Applicable Rate”) and is computed on the basis of a 360-day year for the actual number of days elapsed. Except in an event of default, advances under the Revolving Loan bear interest, on the outstanding daily balance thereof, at the Revolving Facility Applicable Rate. Interest is due and payable on the first calendar day of each month during the term of the Sunflower Agreement. We are also obligated to pay to the Agent, for the ratable benefit of Lenders, an origination fee, prepayment fee, unused facility fee, collateral monitoring fee and Lender expenses. We may borrow, repay and re-borrow under the Revolving Loan until December 29, 2026, at which time the commitments will terminate and all outstanding loans, together with all accrued and unpaid interest, must be repaid. If the Revolving Loan is refinanced by another lender prior to December 29, 2026, there is an additional fee payable concurrently with such refinancing based on a percentage (ranging from 1.0% to 3.0%) of the Total Commitment Amount depending on the date of the refinancing. Upon an event of default under the Sunflower Agreement, all obligations under the Sunflower Agreement will bear interest at a rate equal to three (3.0) percentage points above the interest rate applicable immediately prior to the occurrence of the event of default. As of March 31, 2024, we did not have an outstanding balance on the Revolving Loan. ### Changes in cash flows are summarized as follows: ### Operating Activities For the year ended March 31, 2024, net cash provided by operations was attributable to non-cash transactions for depreciation and amortization, stock compensation expense for stock awards and a decrease in our allowance for doubtful accounts due to increased collection efforts, in addition to reductions in inventory for sales and slower production, a reduction in deposits for receipts of raw materials paid in advance, an increase in accounts payable related to legal fees, sales taxes and purchases of inventory and equipment and a reduction in accounts receivable as a result of lower sales and increased collection efforts. For the year ended March 31, 2023, net cash provided by operations was attributable to a reduction in accounts receivable as a result of a decrease in sales, a decrease in inventories in correlation with our decreased sales and non-cash transactions for depreciation and amortization as well as stock-based compensation expense for stock awards offset by a decrease in accounts payable. For the year ended March 31, 2022 net cash provided by operations was attributable to non-cash transactions for depreciation and amortization, stock compensation expense for stock awards, and a decrease in allowance for doubtful accounts, issuing stock for services related to the acquisition of Gemini Direct Investments, LLC (“Gemini") as well as an increase in accounts payable due to raw material purchases. These items were partially offset by an increase in accounts receivable due to increased sales and the acquisition of Gemini, an increase in inventory as our Manitowoc manufacturing facility ramped up production due to an increase in sales volume and an increase in deposits for raw material and equipment purchases. ### Investing Activities During the year ended March 31, 2024, net cash used in investing activities consisted of $8.0 million related to purchases of production equipment, and capitalized development costs related to our Marketplace. During the year ended March 31, 2023, net cash used in investing activities consisted of approximately $12.5 million related to purchases of production equipment, the construction of our new manufacturing facility in Manitowoc, WI, and capitalized development costs related to our Marketplace. During the year ended March 31, 2022, net cash used in investing activities primarily consisted of our acquisition of Gemini for approximately $50.5 million and purchases of production equipment for approximately $19.2 million. ### Financing Activities During the year ended March 31, 2024, net cash used in financing activities consisted of $3.2 million of insurance premium note payments, $3.0 million of preferred stock dividends paid, $2.2 million used to repurchase shares of Common Stock pursuant to our repurchase plan, and $0.2 million in payments of our related party note payable. These items were offset by $0.1 million of proceeds from warrants exercised for common stock. Additionally, $37.3 million was generated from accounts receivable factoring, which was offset by payments of $37.3 million. During the year ended March 31, 2023, net cash used in financing activities consisted of $3.0 million of preferred stock dividends paid, $2.1 million of insurance premium note payments, an $0.8 million reduction in our Inventory Credit Facility, and $0.7 million in payments of our related party note payable. These items were partially offset by $1.0 million generated from the Construction Loan and $0.1 million of proceeds from warrants exercised for common stock. Additionally, approximately $71.3 million was generated from accounts receivable factoring, which was offset by payments of approximately $71.8 million. During the year ended March 31, 2022, net cash used in financing activities consisted of a $50.0 million payment for our acquisition of Gemini, $2.2 million in payments toward the insurance premium note, $4.0 million repayment of notes payable, $2.5 million in preferred stock dividends paid and $0.6 million payment toward our related party note offset partially by $35.0 million in proceeds from our sale of preferred stock and $0.9 million in proceeds from warrants exercised in the period. Additionally, approximately $121.5 million was generated from accounts receivable factoring, which was offset by payments of approximately $122.8 million. ### Off-Balance Sheet Arrangements As of March 31, 2024, 2023 and 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources. ### Critical Accounting Estimates Our critical accounting estimates are included in our significant accounting policies as described in Note 2 of the consolidated financial statements included in Item 8, *Financial Statements and Supplemental Data*, of this Amendment. Those consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates are evaluated on an ongoing basis and are drawn from historical operations, current trends, future business plans and other factors that management believes are relevant at the time our consolidated financial statements are prepared. Actual results may differ from our estimates. Management believes that the following accounting estimates reflect the more significant judgments and estimates we use in preparing our consolidated financial statements. ### Allowance for Credit Losses We estimate our allowance for credit losses based on the collectability and age of the accounts receivable balances and categorization of customers that have similar financial condition. ### 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 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 year ended March 31, 2024, 2023, and 2022. As of March 31, 2024, 2023, and 2022, the Company has a goodwill carrying value of $90.9 million , 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 in previous years which have since stabilized, 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, 2025. ### Leases We determine if an arrangement is a lease at inception of the contract. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, we recognize lease expense for these leases on a straight-line basis over the lease term. We do not account for lease components (e.g., fixed payments to use the underlying lease asset) separately from the non-lease components (e.g., fixed payments for common-area maintenance costs and other items that transfer a good or service). Some of our leases include variable lease payments, which primarily result from changes in consumer price and other market-based indices, which are generally updated annually, and maintenance and usage charges. These variable payments are excluded from the calculation of our lease assets and lease liabilities. We utilize the interest rate implicit in the lease to determine the lease liability when the interest rate can be determined. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. ### 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 recognition of the cost of employee, director and non-employee services received in exchange for an award of equity over the period the employee, director or non-employee is required to perform the services in exchange for the award. Stock-based compensation is measured based on the grant-date fair value of the award. 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 1,936,951, 1,777,294 and 1,807,666 shares of common stock issued to employees, members of the Board of Directors, and members of our advisory committee for services for the years ended March 31, 2024, March 31, 2023, and March 31, 2022, respectively. ### Inventory We state inventories at the lower of cost or net realizable value. We determine cost by using the weighted-average cost of raw materials method, which approximates the first-in, first-out method and includes allocations of manufacturing labor and overhead. We make provisions when necessary, to reduce excess, potential damaged or obsolete inventories. These provisions are based on our best estimates. At March 31, 2024, and March 31, 2023, we conducted a full analysis of inventory on hand and expensed all inventory not currently in use, or for which there was no future demand. ### Income Taxes We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change in judgment occurs. ## Controls and procedures As filed, 29,349 characters. ### Overview As described in additional detail in the Explanatory Note to this Amendment, in September 2024, a Special Committee of the Board of Directors initiated the Special Committee Investigation of certain matters impacting the Company's accounting procedures, disclosure controls and internal controls during prior periods. The Special Committee Investigation was undertaken through independent legal counsel, who received assistance from outside consultants. During the course of the Special Committee Investigation, the Special Committee discovered accounting and financial reporting errors that required restatement resulting primarily from (i) inaccurate valuation of, and accounting for, share-based compensation awards to employees, non-employee directors and other service providers, and shares issued in exchange for goods and services, (ii) inappropriate capitalization of certain share issuance costs and (iii) inappropriate accounting for certain convertible notes and warrants issued by the Company. During the course of the Special Committee Investigation, the Special Committee also found that the Company had not properly disclosed certain executive officers, related party transactions and executive compensation. Based on the results of the Special Committee Investigation, our review of our financial records, and other work completed by our management, the Special Committee has concluded that there were material misstatements in the consolidated financial statements as of and for the fiscal years ended March 31, 2024, 2023 and 2022. Accordingly, our Board of Directors and management concluded that our consolidated financial statements for these periods should no longer be relied upon and that such financial statements required restatement. The restated consolidated financial statements as of and for the fiscal years ended March 31, 2024, 2023 and 2022 are provided in this Amendment. See Note 3, “Restatement of Consolidated Financial Statements,” of the consolidated financial statements for further discussion of the restatement issues. ### Evaluation of Disclosure Controls and Procedures Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2024. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2024. ### Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and of the preparation of financial statements for external reporting purposes, in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorization of management and directors; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. A material weakness is a deficiency, or a combination of deficiencies, 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. In Part II, Item 9A. "Controls and Procedures" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on June 29, 2022, we identified a material weakness in our internal control over financial reporting. Due to the size of the Company and available resources, there were limited personnel to assist with the accounting and financial reporting function, which resulted in: (i) a lack of segregation of duties, and (ii) controls that may not be adequately designed or operating effectively. In our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the SEC on June 14, 2023, our management concluded that this material weakness continued to exist as of March 31, 2023 and identified additional material weaknesses existing as of March 31, 2023. Specifically, management provided additional clarity that these material weaknesses arose due to the Company's failure to maintain: (i) appropriately designed entity-level controls impacting the control environment to prevent or detect material misstatements to the consolidated financial statements; (ii) properly designed segregation of duties, both within manual processes and system access; (iii) effectively designed controls over journal entries, account reconciliations, and period flux analysis; (iv) effectively designed controls over the period-end financial reporting process, including, tie-out and review of supporting documentation; and (v) effectively designed controls over Information Technology General Controls (“ITGC ”). In the Original Filing, management concluded that, with the exception of a continuing lack of a sufficient number of qualified personnel and ongoing enhancement of management review procedures, the material weaknesses related to entity-level controls and the design of controls related to journal entries, account reconciliations, and period flux analysis were remediated through the formal approval of the annual budget and delegation of authority by the Board of Directors, the establishment and monitoring of a whistleblower hotline, the creation and adoption of both accounting and information technology (“IT”) policies and procedures, and the hiring of personnel in key positions. Due to accounting system limitations, management was limited in its ability to effectively design and implement ITGCs around select systems that support the underlying business cycle controls. Our management also concluded that certain material weaknesses continued to exist. We identified three material weaknesses in our internal control over financial reporting as of March 31, 2024, related to the following: (i) the Company failed to fully resolve identified segregation of duties conflicts with system access for designated business and IT users, thus related user access review and application change management procedures could not be relied upon for select Company systems; (ii) the Company failed to maintain effectively designed ITGCs in the areas of user access, application change management, logical access controls, and segregation of duties for one of the Company’s third-party IT systems that supports the Company’s financial reporting process; and (iii) the Company failed to effectively execute management review procedures to validate the completeness and accuracy of transactions and to clearly define and evidence the process used and criteria and judgment applied in performance of critical business activities. ### Updated Evaluation of Controls and Procedures Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an updated evaluation of the effectiveness of our internal control over financial reporting based on criteria established in the framework set forth in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, and because of the material weaknesses described below, our management continued to conclude that our internal control over financial reporting was not effective as of March 31, 2024. The material weaknesses described below resulted in the restatement of our consolidated financial statements for fiscal years 2022 through 2024 and our quarterly financial statements for the quarters ended June 30, 2023, September 30, 2023, December 31, 2023 and June 30, 2024. Pannell Kerr Forster of Texas, P.C., the Company’s independent registered public accounting firm that audited the annual financial statements included in this Amendment has also issued an updated audit report on the Company’s internal control over financial reporting, which is included in at the end of this Item 9A. “Controls and Procedures.” ### Material Weaknesses and Management’s Remediation Plan As of March 31, 2024, management has identified material weaknesses in our internal control processes that involve the control environment, information and communication, monitoring activities, and control activities components of the COSO framework. Specifically, the material weaknesses relate to the following as of March 31, 2024: *Control Environment, Information and Communication, and Monitoring Activities –* Under the COSO framework, the board of directors and senior management establish the tone at the top regarding the importance of internal controls and management reinforces expectations at the various levels of the company. We did not execute appropriately designed entity-level controls governing the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) a lack of a sufficient complement of qualified personnel within the accounting and financial reporting function, including reliance on unqualified personnel, with an appropriate level of technical expertise to provide for sufficient oversight, accountability and monitoring over the performance of control activities, (ii) insufficient governance to monitor compliance with the Company's Code of Conduct to identify, evaluate, and report potential fraud as well as related director and management behavior, such as, among other things, director independence, and (iii) improper review and approval of disclosure regarding related party transactions and executive compensation. *Control Activities –* These material weaknesses in the control environment resulted in certain instances of inappropriate accounting decisions and inappropriate changes in accounting methodology and contributed to the following additional material weaknesses whereby we did not design, implement and maintain effective controls within certain business processes: - Complex Technical Accounting: Stock Compensation / Warrants / Convertible Notes – We did not design and maintain controls over the effective review of the models, assumptions and data used in developing estimates or changes made to models, assumptions and data to ensure the appropriate application of GAAP. It was further determined that the existence of complementary or compensating controls could not be relied upon to mitigate the identified deficiencies given failures were detected in all critical procedures from initiation to disclosure of the related transactions, including: timely and accurate accounting assessments performed over newly executed contracts to ensure appropriate application of GAAP; the review and approval of the issuance of stock awards to employees and third-party service providers including determining specific grant dates and key terms; determination of an appropriate fair value measurement for financial instruments; review of the classification and recording of equity compensation expenses; timely and accurate application of GAAP related to equity issuance costs; and recognition and disclosure of compensation expense for all share-based payment awards to employees, directors and third parties. - Related Party Transactions and Executive Compensation – We did not properly maintain controls over the identification and disclosure of related party transactions and executive compensation. There were insufficient management review procedures to validate the completeness and accuracy of related party and executive compensation disclosures and to clearly define and evidence the process used and criteria and judgment applied to identify and disclose related party transactions and executive compensation. - Financial Reporting – We did not properly maintain controls over period-end financial reporting, including tie-out and review of supporting documentation. There were insufficient management review procedures to validate the completeness and accuracy of complex technical accounting transactions and to clearly define and evidence the process used and criteria and judgment applied in the performance of critical business components. - Segregation of Duties – We failed to properly separate the execution of certain controls by designated senior management, which did not provide for proper segregation between preparer and reviewer for select transactions. We further failed to fully resolve identified segregation of duties conflicts with system access for designated business and IT users, thus related user access review and application change management procedures could not be relied upon for select Company systems. ### Management’s Remediation Initiatives Following the identification of the material weaknesses described above, and with the oversight of the Audit Committee, management is committed to the planning and implementation of remediation efforts to address these material weaknesses. The remediation efforts, summarized below, which are either implemented or in process, are intended to both address the identified material weaknesses and strengthen our overall financial control environment. In this regard, our initiatives include: #### Control Environment, Information and Communication, and Monitoring Activities: - *Executive Communications to Reinforce Compliance –* The Company’s CEO and other executives, at the direction of the Board of Directors, has reinforced the importance of adherence to the Company’s policies and procedures regarding ethics and compliance and the importance of identifying misconduct and raising and communicating concerns. This reinforcement has occurred through email and employee newsletter communications, staff meetings, remarks given to senior management, as well as other employee forums, including mandatory ethics training. - *Organizational Enhancements –* The Company has identified and begun to implement several organizational enhancements, as follows: (i) the identification and hiring of a Chief Financial Officer, who brings extensive knowledge across finance, strategy, and transformation; (ii)the identification and hiring of a Vice President of Accounting and External Reporting, who has the responsibility and authority to ensure that GAAP and accounting for complex or non-routine transactions that require specialized accounting are appropriately applied corporate-wide (iii) the enhancement of the Company’s organizational structure over all finance functions and an increase in the Company’s accounting personnel with the requisite knowledge, experience, and training in GAAP to ensure that a formalized process for determining, documenting, communicating, implementing and monitoring controls over the period-end financial close and reporting processes is maintained and proper segregation exists between the preparer and reviewer for select transactions, and (iv) enhancement of accounting policies and procedures related to journal entries, invoice approval, account reconciliations and variance thresholds. - *Significant and Unusual Transactions* - The Company continues to evaluate its practices related to significant non-recurring transactions and has begun implementing improvements in those practices, including: (i) updating the process to address agreements with non-standard terms, including formalized review and approval (ii) more formalized practices for assessing the need for utilization of a third-party expert for unusual or complex transactions and (iii) the development of a more comprehensive review process and monitoring controls over significant transactions to ensure accurate accounting and the preparation of accounting memoranda. - *Related Party Transaction Policy –* The Company implemented a new Related Party Transactions Policy in June, 2024 to proactively identify transactions and improve disclosures. Guidance is provided by new corporate disclosure counsel with review/approval by the Audit Committee. - *Perquisites Policy –* The Company implemented a new Perquisites Policy in May, 2025 to better define its perquisites disclosure requirements, perquisite identification, training, and employee compliance requirements. - *Establishment of Disclosure Committee -* In June 2024, the Company established a formal disclosure committee that includes key members of management that have responsibility for disclosure information necessary for periodic reports filed with the SEC. Going forward, this committee will meet on an as-needed basis as well as prior to the Audit Committee meeting in which the Form 10-K, Form 10-Q or other relevant Exchange Act document will be approved and will conduct follow-up meetings as necessary. The meeting will cover all significant events from the period being reported upon and supporting information. A charter was created governing the conduct of this committee, a formal agenda will be distributed prior to each meeting, and minutes will be maintained for each meeting. #### Control Activities: - *Implementation of New Accounting System –* The Company has implemented a new accounting system intended to allow management to effectively design and implement appropriate general information technology and automated system controls, including system enforced segregation of duties. The Company continues to evaluate other systems and applications for additional controls. Management will also continue the rollout of IT remediation action plans, including developing an enhanced risk assessment process for third-party IT systems and implementation of IT monitoring procedures. - *Implementation and Enhancement of Entity Level Controls* - The Company intends to enhance existing entity level controls as a result of the control design remediation efforts and Audit Committee recommendations, and implement the following new entity level controls around the quarterly/annual financial reporting process: - Enhanced Review Procedures : The Company has initiated enhancements to its management review procedures through additional training of accounting staff, improved evidence of review through tick marks and screenshots to validate the completeness and accuracy of transactions and to clearly define and evidence the process used and criteria and judgment applied in performance of critical business activities. The Company has also hired additional personnel and engaged third-party accounting experts, as needed, in its financial reporting and accounting function to ensure we have a sufficient complement of personnel with an appropriate level of knowledge, experience, and training commensurate with our financial reporting requirements. - We believe the foregoing efforts, when fully implemented and operational, will effectively remediate the material weaknesses described above and strengthen our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address these control deficiencies or modify the remediation plan described above. ### Changes in Internal Control Over Financial Reporting During the year ended March 31, 2024, we made enhancements to our control environment by improving guidance, communication of expectations, and importance of internal controls. Specifically, the Board of Directors formally approved the annual budget and delegation of authority over Company transactions, and a whistleblower hotline and accompanying reporting process was implemented. In addition, accounting policies related to journal entries and invoice approval were adopted and IT policies and procedures were developed. The Company hired personnel in key positions, and management continues to assess the hiring of additional personnel to ensure that the Company has a sufficient complement of qualified personnel at the right levels, based on any identified gaps in personnel requirements. Except as described in the preceding sentence, there were no changes in our internal control over financial reporting during the year ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of the filing of this Amendment, we continue to implement the changes and remediation plan described above. ### REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of AMMO, Inc. ### Adverse Opinion on Internal Control over Financial Reporting We have audited AMMO, Inc.’s (the “Company’s”) internal control over financial reporting as of March 31, 2024 based on criteria established in *Internal Control—Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2024 based on criteria established in *Internal Control—Integrated Framework (2013)* issued by COSO. A material weakness is a control deficiency, or a combination of deficiencies, 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. Management and we previously concluded that the Company did not maintain effective internal controls over financial reporting as of March 31, 2024 related the below material weaknesses: - Certain information technology (“IT”) controls for security and administration of key IT systems did not operate effectively throughout the year. Specifically, (i) periodic user access reviews of roles and permissions were not performed sufficiently throughout the period for certain key IT systems, (ii) certain key IT systems were not logically restricted between business and IT administration access privileges, resulting in improper segregation of duties for certain business processes, and (iii) log monitoring was not in place to track business and IT administrator activities. - Controls were not effectively designed in the areas of user access, application change management, logical access and segregation of duties for one third party system which supports the Company’s financial reporting process, and - Controls were not appropriately executed or evidenced related to management review procedures and validation of the accuracy and completeness of information used in the performance of controls. Management has subsequently determined that additional material weaknesses in internal control over financial reporting existed. Accordingly, management’s report has been restated, and the following additional material weaknesses have been identified and included in management’s assessment. - The Company failed to execute appropriately designed entity-level controls governing the control environment and effective monitoring controls. These deficiencies were attributed to (i) a lack of a sufficient complement of qualified personnel within the accounting and financial reporting function, (ii) insufficient governance to monitor compliance with the Company's Code of Conduct, and (iii) improper review and approval of disclosure regarding related party transactions and executive compensation. - These material weaknesses resulted in certain instances of inappropriate accounting decisions and inappropriate accounting methodologies and contributed to the following additional material weaknesses whereby the Company did not design, implement and maintain effective controls within certain business processes related to (i) complex technical accounting, such as stock compensation, warrants and convertible notes, (ii) related party transactions and executive compensation, (iii) financial reporting, and (iv) segregation of duties. The material weaknesses referred to above are described in more detail in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2024 financial statements, and this report does not affect our report dated May 20 ,2025, on those financial statements. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets and the related consolidated statements of operations, stockholders’ equity, and cash flows of the Company, and our report dated May 20 ,2025, expressed an unqualified opinion. ### Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying *Management’s Annual Report on Internal Control over Financial Reporting*. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. ### Definition and Limitations of Internal Control over Financial Reporting A company’s 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 for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ PANNELL KERR FORSTER OF TEXAS, P.C. Houston, Texas May 20 ,2025 Filed May 20, 2025. Source: SEC EDGAR, the filing index for accession 0000950170-25-075182. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.