Outdoor Holding Co

September 30, 2024

NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY

AMMO Inc. is a conglomerate of two premium positions in the shooting sports industry. AMMO Inc. started in ammunition manufacturing and broadened its portfolio with the acquisition of GunBroker.com (“GunBroker”) in 2021. GunBroker is an e-commerce marketplace (the “Marketplace”) that connects buyers and sellers with new/used firearms and ancillary gear and components for the outdoor community. Together, these two operating segments position AMMO, Inc. as a key force in both ammunition production and online firearm commerce.

The Company changed its name from AMMO, Inc. to Outdoor Holding Company on April 21, 2025. Unless the context otherwise requires, all references to "AMMO, Inc.," "Ammo," the "Company," "we," "us," "our," and similar terms refer to AMMO, Inc., a Delaware corporation, and its consolidated subsidiaries.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

Accounting Basis

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

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and related disclosures contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, as amended on July 29, 2024 and as further amended on May 20 ,2025 (as amended, the "Form 10-K/A"). The results for the three and six months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial information contains all normal and recurring adjustments necessary to fairly present the condensed consolidated balance sheets and statements of operations, cash flow and changes in stockholders’ equity of the Company for the interim periods presented.

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

Use of Estimates

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

Goodwill

Weevaluate 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 underthe 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 flow. Forecasts of future cash flow are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization in the year ended March 31, 2023, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flow 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. As of September 30, 2024, the Company had a goodwill carrying value of $90,870,094, all of which was assigned to the Marketplace segment. However, due to declines in the value of the Company's common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2025.

Accounts Receivable and Allowance for Credit Losses

Our accounts receivable represents amounts due from customers for products sold and include an allowance for estimated credit losses which is estimated based on the collectability and age of the accounts receivable balances and categorization of customers with similar financial condition. At September 30, 2024 and March 31, 2024, we reserved$4,212,299 and$3,666,078, respectively, of allowance for credit losses.

Cash and Cash Equivalents

For purposes of the condensed consolidated statements of cash flow, we consider highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.

License Agreements

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

Patents

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

Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the three months ended September 30, 2024 and 2023, the Company recognized royalty expenses of $3,636 and $2,610, respectively under this agreement. For the six months ended September 30, 2024 and 2023, the Company recognized royalty expenses of $5,500 and $7,670, respectively under this agreement.

In August 2018, we applied for additional patent coverage for the manufacturing methods or application of the Hybrid Luminescence Ammunition Technology on a variety of projectile and ammunition types. The costs of filing this patent were expensed.

On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ("SWK"). ATI acquired all of the assets of SWK and assumed all of the liabilities of SWK. The primary asset of SWK was a pending patent for modular projectiles. All rights to patent pending applications were assigned and transferred to ATI pursuant to an intellectual property rights agreement on September 27, 2018.

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

Other Intangible Assets

On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of the Company completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of an amended and restated asset purchase agreement (See Note 13 – Goodwill and Intangible Assets). The intangible assets acquired include a tradename, customer relationships, and intellectual property.

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

Impairment of Long-Lived Assets

We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flow. If the total of the future cash flow is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three and six months ended September 30, 2024 and 2023.

Revenue Recognition

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

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Identification of a contract with a customer

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Identification of the performance obligations in the contract

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Determination of the transaction price

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Allocation of the transaction price to the separate performance allocation

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Recognition of revenue when performance obligations are satisfied

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

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

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

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

Compliance fee revenue consists of fees charged to customers based on a percentage of the final price of an item at the time of purchase. The performance obligation is to process the transactions as initiated by the customer. Revenue is recognized at a point in time when the transaction is processed.

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

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

Advertising revenue consists of dedicated emails, e-newsletters, video production and advertising, market trends and banner advertising. The performance obligation is to deliver the advertising content. Revenue is recognized at a point in time when the advertising content is delivered.

The Company’s customers that comprised more than 10% of total revenues for the three and six months ended September 30, 2024, or more than 10% of accounts receivable as of September 30, 2024 or March 31, 2024 were as follows:

Disaggregated Revenue Information

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

(1)

Included in revenue for thethree and six months ended September 30, 2024 are excise taxes of$1,350,597 and$2,654,200, respectively. Included in revenue for the three and six months ended September 30, 2023 are excise taxes of$1,284,166 and$2,459,962, respectively.

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

All ammunition product sales are recorded upon shipment and, depending on credit worthiness of customer, the payment terms will vary from 30 to 60 days. No refunds are allowed on any product shipped.

Each product manufactured by the Company has standard specifications and performance objectives. The Company has an extensive product testing program and, if the Company were given notice of a product defect by a customer, the Company would request the return of the product so that the manufacturing defect could be identified.

Contract Liabilities

Our contract liabilities consist of unearned revenue, which represents upfront payments received from customers for product to be delivered at a future date. Contract liabilities are classified as current or long-term based on the timing of contract obligation. As of September 30, 2024 we hadno unearned revenue. As of March 31, 2024, we had unearned revenue of$1.8 million which is included in accrued liabilities on the condensed consolidated balance sheet.

Advertising Costs

We expense advertising costs under our Ammunition segment as they are incurred in selling and marketing expenses of operating expenses. Marketplace segment advertising costs are expensed as they are incurred in cost of revenues. We incurred advertising expenses under our Ammunition segment of$202,815 and$94,026 for the three months ended September 30, 2024 and 2023, respectively, recognized in selling and marketing expenses and$92,145 and$200,514 of Marketplace segment advertising expenses recognized in cost of revenues for the three months ended September 30, 2024 and 2023, respectively. We incurred advertising expenses under our Ammunition segment of$311,617 and$213,664 for the six months ended September 30, 2024 and 2023, respectively, recognized in selling and marketing expenses and$202,687 and$339,171 of Marketplace segment advertising expenses recognized in cost of revenues for the six months ended September 30, 2024 and 2023, respectively.

Inventories

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

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.

Property and Equipment

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

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

Excise Tax

As a result of regulations imposed by the Federal Government for sales of ammunition to non-government U.S. entities, we charge and collect an 11% excise tax for all products sold into these channels. During thethree and six months ended September 30, 2024, we recognized approximately$1.4 million and$2.7 million, respectively in excise taxes. During the three and six months ended September 30, 2023, we recognized approximately$1.3 million and$2.5 million, respectively in excise taxes. For ease in selling to commercial markets, excise tax is included in our unit price for the products sold. We record this through net sales and expense the offsetting tax expense to cost of revenues on our condensed consolidated statement of operations.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of September 30, 2024. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts receivable, accounts payable, amounts due to related parties, and the construction note payable. Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

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 369,583 and 730,416 shares of common stock issued to employees, and members of the Board of Directors for services during the three and six months ended September 30, 2024, respectively. There were 712,873 and 1,102,894 shares of common stock issued to employees, members of the Board of Directors, and members of our advisory committee for services during the three and six months ended September 30, 2023, respectively.

Concentrations of Credit Risk

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of September 30, 2024, our bank account balances exceeded federally insured limits, however, we have not incurred losses related to these deposits.

Income Taxes

Wefile 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.

Contingencies

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

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

The Urvan Lawsuit

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 AMMO 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 GunBroker Merger and compensatory damages of not less than $140 million. The Company and named defendants are in alignment in all material respects and intend to vigorously defend Urvan’s claims. The Company has engaged Delaware Court litigation specialists to defend its interests in all respects in this case. The Company timely responded to the Urvan Complaint by filing a motion to dismiss. On August 1, 2023, AMMO filed a separate lawsuit against Urvan in the Delaware Court alleging, among other things, that Urvan committed fraud in connection with the GunBroker.com sale, and that Urvan breached his indemnification obligations to AMMO after the sale. On September 11, 2023, the Delaware Court consolidated AMMO’s lawsuit against Urvan with Urvan’s lawsuit against AMMO and the individual defendants. On September 18, 2023, AMMO filed an amended complaint that added a claim against Urvan for breach of the Arizona Securities Act. Urvan moved to dismiss AMMO’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 AMMO. The Delaware Court rejected Urvan’s motion to dismiss AMMO’s claims against him in its entirety. On May 8, 2024, the Delaware Court ordered a case schedule culminating in a five-day trial starting on July 28, 2025. See Note 17, "Subsequent Events" for more developments in this proceeding.

The Books and Records Action

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 “in 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 and document production remains ongoing.

The MN Action

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”) for breach of contract (the “MN Action”). In the MN Action, DCP alleges that GunBroker.com breached a May 2021 contract, pursuant to which DCP was to provide specified digital payment processing services, and it alleges $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. On February 14, 2024, GunBroker 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”). The court denied the Motion and GunBroker filed its Answer and Counterclaims. GunBroker denies the allegations in the MN Action, and it plans to vigorously defend the claims asserted against it. The parties’ initial disclosure statements were exchanged in August, 2024. The Company will continue to participate in the discovery process. This matter is scheduled for trial in November 2025.

The Triton Settlement

On June 24, 2024 the Company entered into a Confidential Settlement Agreement and Mutual General Release (the “Triton Settlement Agreement”) with Triton Value Partners, LLC, Donald Gasgarth, Paul Freischlag, Jr., Jeff Zwitter (the “Plaintiffs,” and together with the Defendants and the Company, the “Parties” or, individually, “Party”), and Steven Urvan and TVP Investments LLC (the “Urvan Defendants”) and GunBroker.com, LLC, IA TECH, LLC, and GB Investments, Inc. (the “GunBroker Defendants,” and collectively with the Urvan Defendants, the “Defendants”) to fully resolve and settle all disputes and claims related to the litigation between the Defendants and Plaintiffs captioned Triton Value Partners, LLC et al. v. TVP Investments, LLC et al., Cobb County Superior Court, CAFN 18104869 (the “Action”). Pursuant to the Triton Settlement Agreement, the GunBroker Defendants agreed to pay the Plaintiffs $8,000,000 (the “Settlement Amount”) in a single lump sum payment. AMMO agreed to tender the Settlement Amount to an escrow agent on behalf of the GunBroker Defendants within 45 days of the Triton Settlement Agreement’s execution. Within five business days of the receipt of the Settlement Amount from the escrow agent, the Plaintiffs agreed to dismiss the Action with prejudice, and the Urvan Defendants agreed to dismiss all counterclaims against the Plaintiffs with prejudice. Pursuant to the Merger Agreement (as defined above), Urvan has the exclusive right to settle the Action on behalf of all Defendants and Urvan is obligated to indemnify the Company for certain liabilities, including certain liabilities incurred in connection with the Action. In connection with the Merger Agreement, on April 30, 2021, the Company and Urvan entered into a Pledge and Escrow Agreement (the “Pledge and Escrow Agreement”), pursuant to which ten stock certificates in the name of Urvan, with each certificate representing $2.8 million worth of shares of the Company’s common stock as of the date of the Pledge and Escrow Agreement (the “Pledged Securities”) were placed in escrow pending resolution of the Action. Pursuant to the Triton Settlement Agreement, a portion of the Pledged Securities in the form of a stock certificate for 2,857,143 shares (the “Stock Certificate”) were sent to the Company’s transfer agent for cancellation on September 30, 2024. Pursuant to the Triton Settlement Agreement, each of the Plaintiffs and the Defendants provided mutual releases of all claims as of June 24, 2024, arising from any allegations set forth in the Action. Notwithstanding the foregoing, the Company and the GunBroker Defendants do not release any claims asserted against Urvan, and Urvan did not release any claims asserted against the Company, the GunBroker Defendants or any individual or entity related to or affiliated with the Company. Upon the Stock Certificate’s cancellation on September 30, 2024, the parties payment obligations under the Triton Settlement Agreement were complete.

On August 8, 2024, the Company paid $8.0 million to the escrow agent in connection with the Triton Settlement Agreement. This resulted in $4.8 million being recorded as a receivable that was reclassed to treasury stock upon Mr. Urvan’s transfer of the shares related to the settlement payment to the Company on September 30, 2024 (see Note 5 – Due from Related Parties).

There were no other known contingencies as of September 30, 2024.

Recent Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires specific disclosures for equity securities subject to contractual sale restrictions. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. Additionally, it requires that a public entity (1) disclose an amount for “other segment items” by reportable segment, (2) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, and (3) requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this proposed ASU and all existing segment disclosures in Topic 280. The new guidance is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments in this proposed ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. We are currently evaluating the potential impact of these changes.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires that public business entities on an annual basis (1) disclose specific categories in the effective tax rate reconciliation and (2) provide additional information for reconciling items that meet or exceed a quantitative threshold. Additionally, it requires all entities disclose the following information about income taxes paid on an annual basis: (1) the year-to-date amounts of income taxes paid disaggregated by federal (national), state, and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024. The amendments in this proposed ASU should be applied on a prospective basis, although retrospective application to all periods presented is permitted. Early adoption is permitted. We are currently evaluating the potential impact of these changes.

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

NOTE 3 – LOSS PER COMMON SHARE

We calculate basic loss per share using the weighted average number of common shares outstanding during each period. Diluted earnings per share assumes the conversion, exercise or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), the exercise of warrants (using the if-converted method) and the vesting of stock awards.

The following table presents the number of shares excluded from the calculation of diluted net loss per share attributable to common stockholders:

NOTE 4 – INVENTORIES

At September 30, 2024 and March 31, 2024, the inventory balances were composed of:

NOTE 5 – DUE FROM RELATED PARTIES

As a result of the contingency recognized for the Triton Settlement Agreement described in the Contingencies section of Note 2, we recorded a receivable of $4,800,000. During the six months ended September 30, 2024, we recognized the value of shares returned to the Company in lieu of the settlement payment. On September 30, 2024, Mr. Urvan transferred the shares to the Company and the shares have since been reclassified to treasury stock. As described in Note 2, Mr. Urvan is a director and shareholder of the Company. Please refer to the description of the Triton Settlement Agreement in Note 2 for additional information.

NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT

Property and equipment consisted of the following at September 30, 2024 and March 31, 2024:

Depreciation expense for the three and six months ended September 30, 2024 totaled $1,568,466 and $3,071,431, respectively. Of these totals $1,223,349 and $2,410,869 were included in cost of revenues for thethree and six months ended September 30, 2024, respectively. Additionally, $345,118 and $660,563 were included in depreciation and amortization expenses in operating expenses for thethree and six months ended September 30, 2024, respectively. Depreciation expense for the three and six months ended September 30, 2023 totaled $1,406,719 and $2,760,046, respectively. Of these totals $1,178,311 and $2,330,989 were included in cost of revenues for the three and six months ended September 30, 2023, respectively. Additionally, $228,408 and $429,057 were included in depreciation and amortization expenses in operating expenses for thethree and six months ended September 30, 2023, respectively.

NOTE 7 – ACCRUED LIABILITIES

At September 30, 2024 and March 31, 2024, accrued liabilities were as follows:

NOTE 8 – FACTORING LIABILITY

On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contained a maximum advance amount of $5,000,000 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 agreement provided for a fee of 3% ($150,000) of the Maximum Facility assessed to the Company. Our obligations under this 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. This agreement provides the Company with the ability to convert our account receivables into cash. On June 17, 2021, this agreement was amended which extended the maturity date to June 17, 2025. On November 29, 2023, we provided FSW notice of termination of the agreement. The agreement terminated on December 29, 2023.

NOTE 9 – LEASES

We lease office, manufacturing, and warehouse space in Scottsdale, AZ, Atlanta and Marietta, GA, and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Scottsdale lease has been extended through 2029 and does not include a renewal option. We terminated our lease agreement in Marietta, GA during the year ended March 31, 2024, which decreased our right of use asset and operating lease liabilities on our condensed consolidated balance sheet by $38,185.

Consolidated lease expense for the three months ended September 30, 2024 was $167,357 including $161,916 of operating lease expense and $5,440 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals. Consolidated lease expense for the three months ended September 30, 2023 was $167,809 including $160,757 of operating lease expense and $6,851 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.

Consolidated lease expense for the six months ended September 30, 2024 was $334,713 including $323,833 of operating lease expense and $10,880 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals. Consolidated lease expense for the six months ended September 30, 2023 was $335,217 including $321,515 of operating lease expense and $13,703 of other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.

The weighted average remaining lease term and weighted average discount rate for operating leases were 3.5 years and 10.0%, respectively.

Future minimum lease payments under non-cancellable leases as of September 30, 2024, are as follows:

(1)

This amount represents future lease payments for the remaining six months of fiscal year 2025. It does not include any lease payments for thesix months ended September 30, 2024.

NOTE 10 – CONSTRUCTION NOTE PAYABLE

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 $11,625,000 to us to pay a portion of the construction costs of an approximately 185,000 square foot manufacturing facility to be constructed on our property (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 reborrowed.

Additionally, on October 14, 2021, we issued a Promissory Note in favor of Hiawatha (the “Hiawatha Note”) in the amount of up to $11,625,000 with an interest rate of 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 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 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 shall be tested on an annual basis, as of July 1, for each previous year. We maintained compliance 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 including $1.0 million of cash collateral or restricted cash as security for the Construction Loan. We made $115,272 and $127,858 in principal payments for the six months ended September 30, 2024 and September 30, 2023, respectively. The restricted cash can be released per the terms documented in the Hiawatha Loan Agreement. 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.

NOTE 11 – PREFERRED STOCK

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

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

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

Preferred dividends accumulated as of September 30, 2024, were $136,111.

Preferred dividends accumulated as of September 30, 2023, were $136,094.

NOTE 12 – CAPITAL STOCK

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

2017 Equity Incentive Plan

In October 2017, the Board of Directors approved the 2017 Equity Incentive Plan ("2017 Plan"). Our 2017 Plan initially permitted the issuance of equity-based instruments covering up to a total of 485,000 shares of common stock. The Board of Directors and our stockholders approved an increase of 4,515,000 shares in October 2020 an additional increase of 1,000,000 shares in March 2023, and an additional increase of 3,000,000 shares in February 2024, bringing the total shares issuable under the 2017 Plan to 9,000,000. As of September 30, 2024, there were 2,704,900 shares available to issue under the 2017 Plan.

Warrants

At September 30, 2024, outstanding and exercisable stock purchase warrants consisted of the following:

As of September 30, 2024, we had 1,721,256 warrants outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price. The outstanding warrants consist of(1) warrants to purchase 100,000 shares of Common Stock at an exercise price of $0.01 per share until December 2026; (2) warrants to purchase 911 shares of Common Stock at an exercise price of $1.65 per share until April 2025; (3) warrants to purchase 1,234,034 shares of our Common Stock at an exercise price of $2.00 per share consisting of 1% of the warrants that expired on August 2024, and 99% until February 2026; and (4) warrants to purchase 386,311 shares of Common Stock at an exercise price of $2.63 until November 2025.

Options Granted

During the year ended March 31, 2023, we granted stock options (“Options”) to purchase 400,000 shares of our Common Stock to our Chief Executive Officer, of which (i)100,000 Options vested on July 24, 2023, and (ii)300,000 Options shall vest in equal quarterly installments of 25,000 over three years beginning on September 30, 2023. The Options shall (a) be exercisable at an exercise price per share equal to the closing market price of the Company’s common stock on the date of the grant, (b) have a term of ten years, and (c) be on such other terms as shall be determined by the Board of Directors (or the Compensation Committee of the Board of Directors) and set forth in a customary form of stock option agreement under the 2017 Plan. We recognized $33,568 and $74,623 in expense related to the Options for thethree and six months ended September 30, 2024, respectively.

The following is a summary of our stock option activity during the six months ended September 30, 2024:

As of September 30, 2024, there was $98,040 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average vesting period of approximately 1.75 years.

Stock Awards

A summary of stock award activity for the six months ended September 30, 2024 is as follows:

As of September 30, 2024, there was $2,238,380 of unrecognized compensation expense related to unvested stock awards which is expected to be recognized over a weighted-average period of approximately 2.49 years.

NOTE 13 – GOODWILL AND INTANGIBLE ASSETS

Amortization expense related to our intangible assets for the three and six months ended September 30, 2024 was $3,165,545 and $6,366,957, respectively. Amortization expense related to our intangible assets for thethree and six months ended September 30, 2023 was $3,278,581 and $6,557,163, respectively.

Intangible assets consisted of the following:

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

(1)

This amount represents future amortization for the remaining six months of fiscal year 2025. It does not include any amortization for thesix months ended September 30, 2024.

NOTE 14 – SEGMENTS

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

•

Ammunition – which consists of our manufacturing business. The Ammunition segment engages in the design, production and marketing of ammunition, ammunition component and related products.

•

Marketplace – which consists of the GunBroker E-commerce marketplace. In its role as an auction site, GunBroker supports the lawful sale of firearms, ammunition, and hunting/shooting accessories.

The following tables set forth certain financial information utilized by management to evaluate our operating segments for the interim period presented:

NOTE 15 – INCOME TAXES

The income tax provision effective tax rates were zero and (19.3)% for the three and six months ended September 30, 2024, respectively, and 19.8% and 18.5% for thethree and six months ended September 30, 2023, respectively. During the three and six months ended September 30, 2024, the effective tax rate differed from the U.S. federal statutory rate primarily due to the change in valuation allowance. We recorded a full valuation allowance against our U.S. federal and state net deferred tax assets for the three and six months ended September 30, 2024 as we concluded it is more likely than not that the net deferred tax assets will not be realized. During the three and six months ended September 30, 2023, the effective tax rate differed from the U.S. federal statutory rate primarily due to employee stock awards.

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended March 31, 2021, 2022, 2023, and 2024 are subject to audit.

NOTE 16 – RELATED PARTY TRANSACTIONS

Letter of Credit

Effective July 12, 2024, our $1.6 million letter of credit with Northern Trust for collateral for a bond related to a judgment assessed to GunBroker.com was extended until July 26, 2025. Effective July 26, 2024, our $1.6 million certificate of deposit with Northern Trust for security on the letter of credit was extended until July 28, 2025. The term of the certificate of deposit is twelve months and includes interest of approximately 5%. Per the terms of the Merger Agreement, Mr. Urvan is required to pay or be liable for these losses.

Triton Settlement Agreement Payment

On August 8, 2024, the Company paid $8.0 million to the escrow agent in connection with the Triton Settlement Agreement described in the Contingencies section of Note 2.

Gemini Accounts Receivable

Through our acquisition of Gemini, a related party relationship was created through one of our directors,Mr. Steve Urvan, by virtue of his ownership of entities that provided services to Gemini. There was $201,646 included in our accounts receivable at September 30, 2024 from entities owned by Mr. Urvan. For additional information on related party transactions involving Mr. Urvan, please refer to the description of the Triton Settlement Agreement in Note 2.

NOTE 17 – SUBSEQUENT EVENTS

Olin Asset Purchase Agreement

On January 20, 2025, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Olin Winchester, LLC (the “Buyer”), pursuant to which the Buyer agreed to (i) acquire all assets of our business of designing, manufacturing, marketing, distributing and selling ammunition and ammunition components (collectively, the “Ammunition Manufacturing Business”) along with certain assets related to the Ammunition Manufacturing Business, and (ii) assume certain liabilities related to the Ammunition Manufacturing Business, for a gross purchase price of $75.0 million, subject to customary adjustments for estimated net working capital and real property costs and pro-rations (the “Transaction”). The assets acquired, and the liabilities assumed, by the Buyer were those primarily related to the Ammunition Manufacturing Business, including the Ammunition Manufacturing Business’ dedicated manufacturing facility in Manitowoc, Wisconsin.

The closing of the Transaction was subject to the satisfaction of customary closing conditions, including, among others, (i) the absence of any notice (whether temporary, preliminary or permanent) from a governmental authority or federal or state court of competent jurisdiction which is in effect and prevents or prohibits consummation of the Transaction, (ii) the accuracy of the representations and warranties of the parties, (iii) the parties’ compliance with their respective covenants in all material respects, (iv) the delivery by the Company to Buyer of certain consents and approvals, permits, and policies, surveys, and reports related to the owned real property used in the Ammunition Manufacturing Business, and (v) the release of all liens relating to the assets being purchased in the Transaction.

The Asset Purchase Agreement contained customary representations, warranties and covenants as well as customary post-signing and post-closing covenants.

On April 18, 2025, we entered into a First Amendment (the “First Amendment”) to the Asset Purchase Agreement. Pursuant to the First Amendment, the Company and Buyer agreed to, among other things: (i) the removal of the escrow mechanisms for the purchase price adjustments contemplated under the Asset Purchase Agreement; (ii) the addition of a pre-closing inventory count rather than a post-closing inventory count; (iii) the revision of the net working capital adjustment provisions to agree upon certain pre-determined assets and liabilities and remove deductions for certain types of inventory and account for inventory based on the Company’s historical accounting practices; (iv) the addition of a reserve to adjust for upgrades to equipment and inventory issues; and (v) the addition of a purchase price adjustment collar in the event the final net working capital amount is less the estimated net working capital exceeds, which entitles the Buyer to receive from the Company amounts in excess of the collar for such a shortfall.

The Company and the Buyer also entered into certain additional agreements, including, among other things: (a) the addition of a mutual non-disparagement provision; (b) the removal of the closing condition related to the process hazard analysis report and the amendment of one of the representations to account for such report; (c) the addition of a mutual release related to certain disputed items; and (d) the addition of an indemnification related to an item excluded from coverage in the representations and warranties insurance policy.

The Transaction was completed on April 18, 2025.

In connection with the Transaction, we evaluated the Transaction in accordance with ASC Topic 205, "Presentation of Financial Statement" ("ASC 205") andconcluded this was a triggering event to reassess the carrying value of the segment's assets. In accordance with ASC Topic 360, "Property, Plant, and Equipment" ("ASC 360"), we reassessed the carrying value of its assets and determined that an impairment of assets would be recorded in the year ended March 31, 2025 as follows:

Wagenhals Separation Agreement

On April 8, 2025, in connection with Fred W. Wagenhals’s resignation from his position as the Executive Chairman of the Company and as Chairman of the Board on April 4, 2025, the Company and Mr. Wagenhals entered into an Executive Separation Agreement, effective April 4, 2025, pursuant to which Mr. Wagenhals is entitled to receive certain separation benefits, including: (i) payment of all compensation and benefits to which Mr. Wagenhals is legally entitled under the Wagenhals Employment Agreement through the Separation Date; (ii) a cash separation payment equal to $700,000, consisting of (a) a lump sum payment of $300,000 (an amount equal to nine months of Mr. Wagenhals’s annual base salary) and (b) an aggregate of $400,000 (an amount equal to 12 months of Mr. Wagenhals’s annual base salary) to be paid in substantially equal installments in accordance with the Company’s normal payroll practices; (iii) reimbursement for all reimbursable expenses due to Mr. Wagenhals under the Wagenhals Employment Agreement; and (iv) a lump sum payment equal to the value of Mr. Wagenhals’s accrued and unused vacation and paid time off balance.

Sunflower Loan Amendment

On April 18, 2025, we entered into a Consent and Second Amendment to Loan and Security Agreement (the “Sunflower Loan Amendment”) by and among the Company and other borrowers party thereto (collectively, the “Borrower”), and Sunflower Bank, N.A., as administrative agent and collateral agent (the “Agent”). The Sunflower Loan Amendment amends that certain Loan and Security Agreement, dated as of December 29, 2019, by and among the Borrower, the Lenders and the Agent (as amended by the Sunflower Loan Amendment, the “Sunflower Loan Agreement”).

Pursuant to the Sunflower Loan Amendment, the Borrower and the Agent agreed to, among other things: (i) release the Agent’s security interest in all collateral securing the Borrower’s obligations under the Sunflower Loan Agreement upon consummation of the sale of the Ammunition Manufacturing Business; (ii) reduce all amounts available under the Revolving Loan tozero dollars as of the effective date of the Sunflower Loan Amendment; (iii) enter into an Amended and Restated Revolving Line Promissory Note in the amount of $5.0 million, representing 100% of the Revolving Line Commitment available under the Sunflower Loan Agreement, executed by Borrower in favor of Agent as of the effective date of the Sunflower Loan Amendment; and (iv) certain other amendments to Borrower’s customary covenants and obligations under the Loan Agreement that only take effect in the event the Revolving Line Availability is greater than zero dollars.

Contingencies

On December 20, 2024, the Board of Directors held a meeting during which it voted to pursue a settlement in the Plenary Action between Ammo and Mr. Urvan (which is further described in Note 2 above) and voted to approve terms outlined in a non-binding term sheet. We recorded an estimated liability of $20.4 million in the year ended March 31, 2025.

On February 3, 2025, the Delaware Court granted a joint stipulated motion to postpone the five-day trial to April 27, 2026 and order a stay of litigation of approximately three months, during which all depositions and discovery is postponed. Settlement negotiations between the Company and Mr. Urvan are ongoing. There can be no assurance that a final settlement agreement will be reached. If an agreement is not reached, the Company intends to continue to vigorously defend against this litigation.

The Company faces an inestimable loss contingency stemming from a pending investigation of the Staff of the SEC Division of Enforcement (the "SEC Investigation"). The Company has produced documents responsive to document subpoenas and cooperated by, among other things, providing other information to the SEC Staff on a voluntary basis. The SEC Staff has significant discretion in conducting investigations, and therefore, the Company cannot predict the scope or outcome of the SEC Investigation. Based upon document subpoenas to the Company and other communications in January, 2025, it appears that the SEC Staff is investigating and will likely recommend that the SEC bring an enforcement action relating to the Company’s: (i) valuation of, and accounting for share-based compensation awards to employees, non-employee directors and other service providers, and issued in exchange for goods and services; (ii) capitalization of certain share issuance costs; (iii) disclosure of perquisites and the valuation of equity-based compensation paid to certain executives; (iv) disclosure of certain executive officers and related party transactions; and (v) disclosure concerning the calculation of Adjusted EBITDA. The SEC Staff have not issued a Wells Notice to the Company. If the SEC Staff issues a Wells Notice, the Company will have the opportunity to present factual evidence, legal arguments and mitigating circumstances to the SEC. If, notwithstanding the Company’s Wells submission, the SEC authorizes a civil enforcement action, 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. Given the ongoing nature and complexity of the SEC Investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from its resolution. The Company will continue to evaluate information to determine when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are any statements that refer to our estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flow, capital resources, dividends and liquidity; competition; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth, including our plan to expand our e-commerce platform; our ability to attract new customers and retain existing customers; our ability to accurately forecast future revenues and appropriately plan our expenses; our expectations regarding future revenues; our ability to attract and retain qualified employees and key personnel; future regulatory, judicial and legislative changes; and the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” "hope" and similar expressions or the negative of such terms or other comparable terminology.

Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on management’s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:

•

our ability to maintain and expand our e-commerce business;

•

our ability to introduce new products that match consumer preferences;

•

the reliability and productivity of our manufacturing facilities, including our ability to maintain and, to the extent demand for our products increase, enhance our manufacturing production capacity;

•

our ability to retain and grow our customer base;

•

the impact of lawsuits, including product liability claims, securities class action lawsuits, stockholder derivative suits and enforcement actions by regulatory authorities;

•

our ability to maintain effective internal control over financial reporting;

•

our reliance on relationships with third parties;

•

the impact of adverse economic market conditions, including from social and political factors;

•

our ability to meet our future capital requirements;

•

our ability to maintain compliance with our debt obligations;

•

the effect of security breaches on our information systems and other disruptions;

•

our ability to retain and recruit key personnel;

•

the intense competition in the markets in which we operate and our ability to compete within our markets;

•

changes in laws, government regulations and policies and interpretations thereof;

•

our ability to develop and maintain our brand cost-effectively;

•

our failure to adequately protect our intellectual property rights;

•

the loss of relationships with retailers and distributors;

•

fluctuations in our financial results due to factors beyond our control; and

•

the other factors set forth in Part I, Item 1A, “Risk Factors” of the Form 10-K/A and our other reports filed with the SEC.

Forward-looking statements speak only as of the date of the Original Filing. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date of the Original Filing, except to the extent required by law.