10q10k10q10k.net

What changed in Outdoor Holding Co's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Outdoor Holding Co's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+286 added−298 removedSource: 10-K (2024-06-13) vs 10-K (2023-06-14)

Top changes in Outdoor Holding Co's 2024 10-K

286 paragraphs added · 298 removed · 225 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

61 edited+22 added−16 removed17 unchanged
Biggest changeThese intangible assets are used in the operation and production of our ammunition casing business through our wholly owned subsidiary, Jagemann Munition Components. 8 Environmental Matters Our operations are subject to a variety of federal, state, and local laws and regulations relating to environmental protection, including those governing the discharge, treatment, storage, transportation, remediation, and disposal of hazardous materials and wastes; the restoration of damages to the environment; and health and safety matters.
Biggest changeIncluded in the acquisition of Jagemann Munitions Components we acquired customer relationships, intellectual property, and the use of a tradename. These intangible assets are used in the operation and production of our ammunition casing business through Jagemann Munition Components. 8 Regulatory Matters The manufacture, sale, and purchase of ammunition are subject to extensive federal, state, local, and foreign governmental laws.
We pay ULL a royalty based on our product sales incorporating this patented technology. We have been using our O.W.L. Technology™ to compete for military contracts in part because we believe the glow of STREAK VISUAL AMMUNITION™ not being visible to the target (which is unlike conventional tracers) is important to the military and law enforcement.
We pay ULL a royalty based on our product sales incorporating this patented technology. We have been using our O.W.L. Technology™ to compete for military contracts in part because we believe that the glow of STREAK VISUAL AMMUNITION™ not being visible to the target (which is unlike conventional tracers) is important to the military and law enforcement.
Ammunition Segment – Manufacturing Our manufacturing operations are currently based out of Manitowoc, Wisconsin. We manufacture small arms ammunition and their components for the commercial, military, and law enforcement community. Our core competency lies in our ability to deep draw rifle brass casings with a high degree of precision up to 50 caliber.
Ammunition Segment – Manufacturing Our manufacturing operations are currently based out of Manitowoc, Wisconsin (“WI”). We manufacture small arms ammunition and their components for the commercial, military, and law enforcement community. Our core competency lies in our ability to deep draw rifle brass casings with a high degree of precision up to 50 caliber.
Stelth Subsonic Ammunition Stelth Subsonic ammunition is designed specifically for superior performance in suppressed firearms. Stelth ammunition finds applications in which silence is paramount, such as in tactical training, predator night hunts, and clandestine operations.
Stelth Subsonic Ammunition Stelth Subsonic Ammunition (“/stelTH/™”) is designed specifically for superior performance in suppressed firearms. Stelth ammunition finds applications in which silence is paramount, such as in tactical training, predator night hunts, and clandestine operations.
The core competency of our manufacturing facility lies in its ability to deep draw rifle cases. Our goal is to fill the capacity of our new facility with innovative products around this core competency.
The core competency of our manufacturing facility lies in its ability to deep draw rifle cases. Our goal is to fill the capacity of our new Manitowoc facility with innovative products around this core competency.
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. Through our acquisition of SW Kenetics, Inc. (“SWK”), we acquired the rights to a patent for modular projectiles. This technology is used in connection with our AP and HAPI lines of ammunition.
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. Through our acquisition of SW Kenetics, Inc. (“SWK”) in 2018, we acquired the rights to a patent for modular projectiles. We use this technology is used in connection with our AP and HAPI lines of ammunition.
Our net sales could be moderately higher in our second and third fiscal quarters because of the fall hunting and holiday seasons. Intellectual Property We believe our tradenames, trademarks, and service markets are important factors in distinguishing our products. In addition, we regard our trade secrets, technological resources, knowhow, licensing arrangements, and endorsements as important competitive factors.
In particular, our net sales could be moderately higher in our second and third fiscal quarters because of the fall hunting and holiday seasons. Intellectual Property We believe our that tradenames, trademarks, and service markets are important factors in distinguishing our products. In addition, we regard our trade secrets, technological resources, knowhow, licensing arrangements, and endorsements as important competitive factors.
We value diversity, engagement, and unique viewpoints that enable us to excel in the marketplace. Seasonality Our business has not exhibited a material degree of seasonality to date but as we move into more rifle production and strive to meet our customers projections and needs, seasonality will have a larger effect on our sales pipeline.
We value diversity, engagement, and unique viewpoints that enable us to excel in the marketplace. Seasonality Our business has not exhibited a material degree of seasonality to date but as we move into more rifle production and strive to meet our customers’ projections and needs, seasonality will have a larger effect on our sales pipeline.
On October 13, 2020, the Company further expanded its patent portfolio as a result of the U.S. Patent and Trademark Office (USPTO)’s issuance of Patent No. 10,801,821 recognizing the Company’s development of both a protectable and cutting-edge process to mass-produce luminescent projectiles, as well as the luminescent projectiles manufactured as a result of the protected process.
On October 13, 2020, the Company further expanded its patent portfolio as a result of the U.S. Patent and Trademark Office (“USPTO”)’s issuance of Patent No. 10,801,821 recognizing the Company’s development of both a protectable and cutting-edge process to mass-produce luminescent projectiles, as well as the luminescent projectiles manufactured as a result of the protected process.
Transactions taking place on the GunBroker.com site involving the lawful sale of firearms are facilitated from a listing and documentation standpoint by GunBroker.com.
Transactions taking place on the GunBroker site involving the lawful sale of firearms are facilitated from a listing and documentation standpoint by GunBroker.
Our human capital proposition is centered around a team-oriented work environment that promotes a culture that fosters engagement, hard work, a desire to win, and accountability. At our core, we strive to attract, develop, and retain employees that want to be a part of a dynamic workforce centered around delivering new products and services to our passionate userbase.
Our human capital proposition is centered around a team-oriented work environment that promotes a culture that fosters engagement, hard work, a desire to win, and accountability. At our core, we strive to attract, develop, and retain employees that want to be a part of a dynamic workforce centered around delivering new products and services to our passionate user base.
These reports are free of charge and are available as soon as reasonably practicable after they have been filed with, or furnished to, the U.S. Securities and Exchange Commission (SEC).
These reports are available free of charge and as soon as reasonably practicable after they have been filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”).
The transaction is consummated between a third-party buyer and seller and requires the direct involvement of an ATF Federal Firearms License (“FFL”) holder such as a gun shop or range that accepts receipt of the firearms and completes the transaction and delivery subject to confirmation of compliance with applicable federal and/or state laws.
The transaction is consummated between a third-party buyer and seller and requires the direct involvement of an ATF FFL holder such as a gun shop or range that accepts receipt of the firearms and completes the transaction and delivery subject to confirmation of compliance with applicable federal and/or state laws.
Enhance Market Share, Brand Recognition, and Customer Loyalty Our work to enhance and simplify the user experience on the GunBroker.com marketplace platform, while adding to its merchandise and related offerings, is designed to enhance the GunBroker.com brand by ensuring customer (both buyers and sellers) adhesion is amplified as they access one of the largest single on-line destinations for outdoor and shooting sports enthusiasts within the US market.
Enhance Market Share, Brand Recognition, and Customer Loyalty Our work to enhance and simplify the user experience on the GunBroker Marketplace platform, while adding to its merchandise and related offerings, is designed to enhance the GunBroker brand by ensuring customer (both buyers and sellers) adhesion is amplified as they access one of the largest single on-line destinations for outdoor and shooting sports enthusiasts within the U.S. market.
We emphasize an American heritage by using predominantly American-made components and raw materials in our products that are produced, inspected, and packaged at our facilities in Manitowoc. We are focused on manufacturing premium pistol and rifle ammunition and supporting industry partners for manufactured components.
We emphasize an American heritage by using predominantly American-made components and raw materials in our products that are produced, inspected, and packaged at our facilities in Manitowoc, WI. We focus on manufacturing premium pistol and rifle ammunition and supporting industry partners for manufactured components.
We will continue to add talent and engage best in class resources to enable AMMO, Inc. to continue down this path. Since the acquisition, we have evolved the GunBroker.com marketplace to push best in class ecommerce standards. By streamlining customer service, we push proactive customer engagement based around outreach to the seller and buyer community.
We will continue to add talent and engage best in class resources to enable AMMO, Inc. to continue down this path. Since the acquisition, we have evolved the GunBroker Marketplace to push best in class e-commerce standards. By streamlining customer service, we push proactive customer engagement based around outreach to the seller and buyer community.
STREAK VISUAL AMMUNITION™ comes in 380 auto, 9 mm, 40 S&W, 44 magnum, 45 long colt, and 38 special among other calibers. We hold the exclusive worldwide sales and distribution rights for the patented O.W.L. Technology™ used by our STREAK VISUAL AMMUNITION™ and pay a royalty based on our product sales incorporating this technology.
STREAK VISUAL AMMUNITION™ comes in 380 auto, 9 millimeter, 40 Smith& Wesson, 44 magnum, 45 long colt, and 38 special among other calibers. We hold the exclusive worldwide sales and distribution rights for the patented O.W.L. Technology™ used by our STREAK VISUAL AMMUNITION™ and pay a royalty based on our product sales incorporating this technology.
We are providing the address to our website solely for the information of investors and the information on our website is not a part of this or any report that we file with the SEC. 10
We are providing the address of our website solely for the information of investors and the information on our website is not a part of or incorporated into this or any report that we file with the SEC. 10
Research and Development We conduct research and development activities to enhance existing products and develop new products at our facilities in Manitowoc, Wisconsin, utilizing our personnel and strategic relationships.
Research and Development We conduct research and development activities to enhance existing products and develop new products at our facilities in Manitowoc, WI, by utilizing our personnel and strategic relationships.
Marketing, Analytics, and Advertising programs have been instrumental in the success of the prior year, we are continuing to build out teams and structure for our aggressive go to market campaigns for this fiscal year.
Marketing, analytics, and advertising programs have been instrumental in our success to date and we are continuing to build out our teams and structure for our aggressive go to market campaigns for this fiscal year.
Our buyers will be able finalize transactions including both regulated and nonregulated items, allowing one payment, while also affording them the ability to ship their purchases to more than one location.
Buyers will be able finalize transactions, including both regulated and nonregulated items, allowing one payment, while also having the ability to ship their purchases to more than one location.
ITEM 1. BUSINESS. Introduction Ammo Inc. is a conglomerate of two premium positions in the shooting sports industry. Ammo Inc. started in ammunition manufacturing and in 2021 broadened its portfolio with the acquisition of Gunbroker.com. Gunbroker.com is an ecommerce marketplace that connects buyers and sellers with new/used firearms and ancillary gear and componentry for the firearm community.
ITEM 1. BUSINESS. Introduction 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 (“Marketplace”) that connects buyers and sellers with new/used firearms and ancillary gear and componentry for the outdoor community.
A cartridge consists of four components: a case made of brass, steel, or polymer that holds together all the other components of the cartridge; the primer, which is an explosive chemical compound that ignites the gunpowder when struck by the firing pin; the gun powder, which is a chemical mixture that burns rapidly and creates an expanding gas when ignited and pushes the bullet out the barrel; and the bullet, or projectile, usually containing lead that is fired through the barrel to strike the target.
A cartridge consists of four components: a case made of brass, steel, or polymer that holds together all the other components of the cartridge; the primer, which is an explosive chemical compound that ignites the gunpowder when struck by the firing pin; the gun powder, which is a chemical mixture that burns rapidly and creates an expanding gas when ignited and pushes the bullet out the barrel; and the bullet, or projectile, usually containing lead that is fired through the barrel to strike the target. 5 STREAK VISUAL AMMUNITION™ STREAK VISUAL AMMUNITION™ enables shooters to see the path of the bullets.
Such military use is allowed pursuant to that certain Amended and Restated Exclusive License Agreement between ATI and ULL which was dated as of November 16, 2017 and effective as of January 1, 2018 (the “A&R License Agreement”).
Such military use is allowed pursuant to that certain Amended and Restated Exclusive License Agreement between ATI and ULL, dated as of November 16, 2017 and effective as of January 1, 2018, as amended(the “License Agreement”).
Of these employees, 236 were engaged in manufacturing, 31 in sales, marketing and customer service, 34 in research and development, manufacturing engineering, and software engineering, and 41 in various corporate and administrative functions (information technology, accounting, executives, etc.). None of our employees are represented by a union in collective bargaining with us. We believe that our employee relations are good.
Of these employees, 263 were engaged in manufacturing, 29 in sales, marketing and customer service, 33 in research and development, manufacturing engineering, and software engineering, and 49 in various corporate and administrative functions (information technology, accounting, executives, etc.). None of our employees are represented by a union in collective bargaining with us. We believe that our employee relations are good.
We believe we have reliable sources of supply for all our raw material and component needs, but from time to time raw materials and components are subject to shortages and price increases. Most of our suppliers are U.S.-based and provide us the materials and components at competitive rates. Our ownership of JMC supplies our ammunition casings.
We believe that we have reliable sources of supply for all our raw material and component needs, but from time to time raw materials and components are subject to shortages and price increases. Most of our suppliers are U.S.-based and provide us these materials and components at competitive rates.
Marketplace Segment - GunBroker.com On April 30, 2021 (the “Effective Date”), we entered into an agreement and plan of merger (the “Merger Agreement”), by and among us, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sub”), Gemini Direct Investments, LLC, a Nevada limited liability company (“Gemini”), and Steven F.
Marketplace Segment - GunBroker We acquired GunBroker.com on April 30, 2021, pursuant to an agreement and plan of merger by and among us, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sub”), Gemini Direct Investments, LLC, a Nevada limited liability company (“Gemini”), and Steven F.
Gunbroker.com helps facilitate this community with a state and federal compliant solution that connects buyers with sellers across the US with their local federally licensed firearm dealers. This allows our base of approximately 7.8 million users to follow ownership policies and regulations through our network of over 35,000 federally licensed firearms dealers as transfer agents.
GunBroker helps facilitate this community with a state and federal compliant solution that connects buyers with sellers across the United States (“U.S.”) with their local federally licensed firearm dealers. This allows our base of approximately 8.1 million users to follow ownership policies and regulations through our network of over 31,000 federally licensed firearms dealers as transfer agents.
The nature and operation of the Marketplace as an online auction and sales platform also affords our Company a unique view into the total domestic market for the purpose of understanding sales trends at a granular level across all elements of the outdoor and sports shooting space. Reportable Segments We operate our business within two operating segments.
The nature and operation of the Marketplace as an online auction and sales platform also affords our company a view into the total domestic market for the purpose of understanding sales trends at a granular level across all elements of the outdoor and sports shooting space.
We balance our R&D prowess with best-in-class operational efficiencies and continue to drive our cost down through rigorous continuous improvement initiatives. Continue to Strengthen Relationships with Channel Partners and Retailers. We continue to strive to strengthen our relationships with our current distributors, specialty retailers, dealers, and OEM manufacturers.
We balance our Research and Development (“R&D”) prowess with best-in-class operational efficiencies and continue to drive our costs down through rigorous continuous improvement initiatives. Continue to Strengthen Relationships with Channel Partners and Retailers. We continue to strive to strengthen our relationships with our current distributors, specialty retailers, dealers, and OEM manufacturers.
We maintain consumer-focused product marketing and promotional campaigns, which include print and digital advertising campaigns; social and electronic media; product demonstrations; point-of-sales materials; in-store training, and in-store retail merchandising. Our use of social media includes Instagram, Facebook, Twitter, and You Tube. We also utilize third-party endorsements, social influencers, and brand ambassadors.
We maintain consumer-focused product marketing and promotional campaigns, which include print and digital advertising campaigns; social and electronic media; product demonstrations; point-of-sales materials; in-store training, and in-store retail merchandising. Our use of social media includes Instagram, Facebook, X (formerly known as “Twitter”), LinkedIn, and YouTube. We also utilize third-party endorsements, social influencers, and brand ambassadors.
In its role as an auction site, GunBroker.com supports the lawful sale of firearms, ammunition and hunting/shooting accessories. See Note 19 of our consolidated financial statements for more information regarding our reportable segments.
In its role, GunBroker supports the lawful sale of firearms, ammunition, and hunting/shooting accessories. See Note 20 of our consolidated financial statements for more information regarding our reportable segments.
Product Innovation and Development The Company was founded on delivering new and innovative products such as Streak to the industry. Since initiating operations in 2017 and has developed proprietary products for the commercial and military sectors. We continue this passion with developing new calibers and products to meet and create market demand.
Product Innovation and Development The Company was founded on delivering new and innovative products, such as STREAK VISUAL AMMUNITION™ to the firearms industry. Since initiating operations in 2017, we have developed proprietary products for the commercial and military sectors. We continue to develop new product calibers and products to meet and create market demand.
Our Chief Executive Officer reviews financial performance based on two operating segments as described below. ● 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.com Ecommerce marketplace.
Reportable Segments We operate our business within, and our Chief Executive Officer reviews financial performance based on two operating segments as described below. ● Ammunition – which consists of our manufacturing business. The Ammunition segment engages in the design, production and marketing of ammunition, ammunition components and related products. ● Marketplace – which consists of the GunBroker e-commerce marketplace.
GunBroker.com is a large online marketplace dedicated to firearms, hunting, shooting and related products. Aside from merchandise bearing its logo, GunBroker.com does not hold any inventory and serves to facilitate transactions between buyers and sellers. Third-party sellers list items on the site and federal and state laws govern the sale of firearms and other restricted items.
Aside from merchandise bearing its logo, GunBroker does not hold any inventory listed on its site and serves to facilitate transactions between buyers and sellers. Third-party sellers list items on the site and federal and state laws govern the sale of firearms and other restricted items.
Our primary competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition division of Olin Corporation, and various smaller manufacturers and suppliers, including Black-Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady Manufacturing Company, PMC, Rio Ammunition, and Wolf. Human Capital As of June 9, 2023, we had a total of 342 employees.
Our primary competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition division of Olin Corporation, Hornady Manufacturing Company, and various smaller manufacturers and suppliers, including Black-Hills Ammunition, CBC Group, Fiocchi Ammunition, PMC, Rio Ammunition, and Wolf Ammunition.
We will continue to leverage our proprietary brands like Streak Visual Ammunition TM and Stelth subsonic ammunition and extend our product offering with premium rifle lines and brands. We also support the US military with our cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities.
We will continue to leverage our proprietary brands like STREAK VISUAL AMMUNITION ™ and stelTH/™ and extend our product offering with premium rifle lines and brands. We also support the U.S. military with our developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities. Our production processes focuses on safety, consistency, precision, and cleanliness.
The A&R License Agreement expires on January 1, 2022 and is renewable in the Company’s sole discretion for successive four (4) year periods provided the Company is not in breach of the A&R License Agreement.
The License Agreement has been renewed twice and currently expires on January 1, 2026, and is renewable in the Company’s sole discretion for successive four-year periods provided the Company is not in breach of the License Agreement.
We refer to the technology used by our STREAK VISUAL AMMUNITION™ as one-way luminescent or O.W.L. Technology™. Unlike conventional tracer ammunition, STREAK VISUAL AMMUNITION™ rounds are not incendiary and do not utilize burning metals to generate light, thereby eliminating heat generation and making them safer for use in various environments and avoiding serious fire hazards.
Unlike conventional tracer ammunition, STREAK VISUAL AMMUNITION™ rounds are not incendiary and do not utilize burning metals to generate light, thereby eliminating heat generation and making them safer for use in various environments and avoiding serious fire hazards.
There is continued development around listing processes and communication flow between buyers and sellers, as well as optimization of the immense amount of self-data. We currently use our platform data to present personalized marketing campaigns to the user base and will continue to evolve how we engage with our customer base.
We continue to develop listing processes and improve communication flow between buyers and sellers, while also optimizing the immense amount of market data. We currently use our platform data to present personalized marketing campaigns to the user base and will continue to evolve how we engage with our customer base.
By way of example, a buyer will be able to complete a transaction with a single payment, ship regulated items to a registered federal firearms license dealer, and also ship nonregulated items directly to their address. ● GunBroker.com Analytics – launched in January 2023 through the compilation and refinement of vast Marketplace data, we offer ecommerce market analytics to our industry peers allowing them to better manage business strategy and planning. ● GunBroker.com Advertising – effective as of January 2023 we offer additional resources to our seller community to promote their seller stores within GunBroker.com as well as the products they supply.
By way of example, a buyer will be able to complete a transaction with a single payment and ship the regulated items purchased to a registered federal firearms license dealer and the nonregulated items directly to their own address. ● 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.
We expense all costs associated with our research and development efforts through either our cost of goods sold, as they are performed by the same employees who produce our finished product, or through or general and administrative expenses if the product has not been brought to market. 6 Suppliers We purchase certain raw materials and components for our ammunition products, including brass, steel, or copper casings; ammunition primers to ignite gun powder; gun powder; and projectiles.
We expense all costs associated with our research and development efforts through either our cost of goods sold, as they are performed by the same employees who produce our finished product, or through our general and administrative expenses if the product has not been brought to market.
In our 2024 fiscal year, we will be delivering on calibers with high demand in premium segments of the market such as 7mm PRC, 35 Whelan, 350 Legend, and 45-70 both in our AMMO, Inc. Signature lines as well as brass for OEM manufacturers.
In our fiscal year ended March 31, 2025, we will be delivering on product calibers with high demand in premium segments of the market such as 6.5 Precision Rifle Cartridge (“PRC”), 7 millimeter PRC, 450 Bushmaster, 35 Whelen, 350 Legend, and 45-70 both in our AMMO, Inc. Signature lines as well as brass for OEM manufacturers.
Further, the Company opened its new state-of-the-art manufacturing plant in Manitowoc, WI. The opening and full operation of this new plant has positioned Ammo Inc. to be the leader in brass case supply to the OEM market and under the many brands we go to market under.
Since the opening in August 2022 of the Company’s state-of-the-art manufacturing plant in Manitowoc, WI, it positioned AMMO, Inc. to be the leader in brass case supply to the OEM market and under the many brands we go to market under.
Bills have been introduced in Congress in the past several years that would affect the manufacture and sale of ammunition, including bills to regulate the manufacture, importation, and sale. We believe that existing federal, state, and local legislation relating to the regulation of firearms and ammunition have not had a material adverse effect on our sales of these products.
We believe that existing federal, state, and local legislation relating to the regulation of firearms and ammunition have not had a material adverse effect on our sales of these products.
Our failure to comply with applicable rules and regulations may result in the limitation of our growth or business activities and could result in the revocation of licenses necessary for our business.
Such regulations may adversely affect demand for our products by imposing limitations that increase the costs or limit the availability of our products. Our failure to comply with applicable rules and regulations may result in the limitation of our growth or business activities and could result in the revocation of licenses necessary for our business.
Jagemann Munitions Components is backed by decades of manufacturing experience that allows the production of high-quality pistol brass and rifle brass components.
Jagemann Munition Components Through our wholly owned subsidiary Jagemann Munitions Components (“JMC”), we offer ammunition casings for pistol and rifle ammunition. Jagemann Munitions Components is backed by decades of manufacturing experience that allows the production of high-quality pistol brass and rifle brass components.
In the short term, we will be implementing the following services; ● Payment Processing – facilitating payment between parties allowing sellers of all sizes to offer fast and secure electronic payments and allowing buyers to experience the ease of instant checkout using a single platform for payment of all items purchased. ● Carting Ability – enables our buyers to checkout multiple items from multiple sellers in a single transaction.
In this regard, we implemented the following services since January 2023; ● Payment Processing – facilitating payment between parties allowing sellers to offer fast and secure electronic payments and allowing buyers to experience the ease of instant checkout. ● Carting Ability – enabling buyers to checkout multiple items from multiple sellers in a single transaction.
Our consumers include sport and recreational shooters, hunters, competitive shooters, individuals desiring home and personal protection, manufacturers, and law enforcement and military agencies, and selected international markets. We distribute our products under four primary product lines: AMMO Inc. Signature, STREAK VISUAL AMMUNITION™, Stelth, and JMC.
Customers We sell our products through distributors, “Big Box” retailers, manufacturers, specialty retailers, local ammunition stores, and shooting range operators. Our consumers include sport and recreational shooters, hunters, competitive shooters, individuals desiring home and personal protection, manufacturers, law enforcement and military agencies, and selected international markets. We distribute our products under six primary product lines: AMMO, Inc.
Urvan, an individual (the “Seller”), whereby Sub merged with and into Gemini, with Sub surviving the merger as our wholly owned subsidiary (the “Merger”). At the time of the Merger, Gemini had nine subsidiaries, all of which are related to Gemini’s ownership of the GunBroker.com business. The Merger was completed on the Effective Date.
Urvan, dated as of such date, whereby Sub merged with and into Gemini, with Sub surviving the merger as our wholly owned subsidiary. At the time of the merger, Gemini had nine subsidiaries, all of which related to Gemini’s ownership of the GunBroker.com business. GunBroker is a large online marketplace dedicated to firearms, hunting, shooting and related products.
The Stelth ammunition is produced to be a clean burning total metal jacket round to slow baffle corrosion and reduce lead emissions that collect in the suppressor body. Stelth ammunition comes in 9mm, 40 S&W, and 45 ACP, 223, and 300BLK. JMC Through Jagemann Munitions Components (“JMC”), we offer ammunition casings for pistol and rifle ammunition.
The Stelth ammunition is produced to be a clean burning total metal jacket round to slow baffle corrosion and reduce lead emissions that collect in the suppressor body. Stelth ammunition comes in 9mm, 40 Smith & Wesson, and 45 Automatic Colt Pistol, 223, and 300 Blackout.
Each round is chamber gauged and inspected with redundant seven-step quality control processes and meet and exceed SAAMI and CIP standards. 4 Our Growth Strategy Our goal is to enhance our position as a designer, producer, and marketer of ammunition products via our manufacturing and related sales operations, while simultaneously enhancing and embracing the data we have in Gunbroker.com to allow us to see growing trends and demands form the US customer base.
Each round is chamber gauged, a dimension inspection process, and inspected with quality control processes that meet or exceed Sporting Arms and Ammunition Manufacturers’ Institute (“SAAMI”) and Commission Internationale Permanente pour l’Epreuve des Armes à Feu Portatives (“CIP”) standards. 4 Our Growth Strategy We intend to continue to enhance our position as a designer, producer, and marketer of ammunition products via our manufacturing and related sales operations, while simultaneously enhancing and embracing the data we have in GunBroker.com to allow us to see growing trends and demands in the U.S. customer base, and to adjust our business plans and strategies accordingly.
Our production processes focus on safety, consistency, precision, and cleanliness. Each round is developed for consistency, velocity, accuracy, and repeatability.
Each round is developed for consistency, velocity, accuracy, and repeatability.
Our vision is to expand the services on GunBroker.com and to become a partner to those in our industry.
We intend to continue to expand the services we provide on GunBroker, which will enable us to become a partner to those in our industry.
Content creation for manufactures, email campaigns and banner ads are all part of our advertising offerings that are ever evolving resources to the outdoor industry.
The analytics offering will be rebranded to Outdoor Analytics during fiscal year 2025 to expand service offerings. ● GunBroker Advertising – content creation for manufacturers, email campaigns, and banner ads are all part of our advertising offerings to the outdoor industry.
The luminescent material is applied only to the base of the projectile, making it visible only to the shooter and those within a 30-degree viewing window. As a result, the glow of STREAK VISUAL AMMUNITION™ is not visible to the target unlike conventional tracers, which we believe is important to the military and law enforcement.
As a result, the glow of STREAK VISUAL AMMUNITION™ is not visible to the target unlike conventional tracers, which we believe is important to the military and law enforcement. We refer to the technology used by our STREAK VISUAL AMMUNITION™ as one-way luminescent or O.W.L. Technology™.
Borne from the automotive industry and refined over time to deliver durable and consistent sporting components, Jagemann Munitions Components has become one of the largest brass manufacturers in the country, with the capacity to produce more than 750 million pieces of brass each year with the ability to scale to over 1 billion pieces of brass each year.
Borne from the automotive industry and refined over time to deliver durable and consistent sporting components, Jagemann Munitions Components has become one of the largest brass manufacturers in the country. Marketing We market our products and services to consumers through distributors, dealers, mass market, and specialty retailers.
Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and various state and international agencies that control the manufacture, export, import, distribution and sale of firearms, explosives, and ammunition. Such regulations may adversely affect demand for our products by imposing limitations that increase the costs or limit the availability of our products.
We are also subject to the rules and regulations of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (“ATF”) and various state and international agencies that control the manufacture, export, import, distribution and sale of firearms, explosives, and ammunition.
The competition will continue to fight for shelf space at retail and our market continues to normalize so we must default to new caliber design and introduction to create brand strength, market positioning, and loyalty.
We expect that we and our competitors will continue to fight for shelf space at retail outlets and that, as our market transitions from high demand periods, we must introduce new product caliber designs to foster brand strength, market positioning, and loyalty.
Ownership policies and regulations are followed using licensed firearms dealers as transfer agents offering a compliant solution to transact online. GunBroker.com has approximately 7.8 million registered users and averages over 1.8 million items listed for sale on its site on a daily basis.
Licensed firearms dealers act as transfer agents to ensure compliance with ownership policies and regulations during online transactions. GunBroker has approximately 8.1 million registered users and had over 2.6 million average daily listings on its site for the 2024 fiscal year.
We also offer ammunition casings for pistol ammunition through large rifle ammunition. 5 STREAK Visual Ammunition STREAK VISUAL AMMUNITION™ enables shooters to see the path of the bullets. STREAK VISUAL AMMUNITION™ rounds utilize non-flammable phosphor material that produces a glow by the utilization of the light emitted during the round discharge to make STREAK VISUAL AMMUNITION™ glow.
STREAK VISUAL AMMUNITION™ rounds utilize non-flammable phosphor material that produces a glow by the utilization of the light emitted during the round discharge to make STREAK VISUAL AMMUNITION™ glow. The luminescent material is applied only to the base of the projectile, making it visible only to the shooter and those within a 30-degree viewing window.
Removed
Our capacities are dependent upon mix, labor and the number of shifts we are running but our case capacity resides in excess of 750 million to 1.0 billion pieces based on full utilization of the factory.
Added
Further, we intend to implement the following additional services in our 2025 fiscal year: ● Collector’s Elite – a new initiative designed specifically for the discerning collector.
Removed
The plant will allow us to exponentially increase capacity through the end of calendar 2023 and into 2024. Products We design, produce, and sell ammunition and ammunition components in a variety of types, sizes, and calibers for use in handguns and long guns. We ship our ammunition in the form of cartridges (or rounds), and also ammunition casings.
Added
This premium program offers curated, high-end auctions featuring rare and distinct firearms and collectibles, with a unique, cost-effective structure tailored to enhance both buyer and seller experiences. ● Financing Partnerships – through our partnership with Gearfire Capital, we aim to empower retailers by offering flexible financing options to their customers, enhancing purchasing power and driving sales growth.
Removed
Proud of its American-made components and capabilities, the Company now has complete control over the manufacturing process. Marketing We market our products and services to consumers through distributors, dealers, mass market, and specialty retailers.
Added
This initiative will enable participating retailers to offer their customers competitive financing options, making it easier for buyers to purchase the products they need and want.
Removed
We will provide our ammunition customers with a stronger line up of high precision hunting cartridges and continue to deliver to the OEM market with an offering that provides our customers the ability to reach their fullest potential.
Added
As the ability to deep draw rifle cases allows our manufacturing facility to have precise control over dimensions, ensuring consistent cartridge dimensions for reliable firearm function. Our manufacturing capacities are dependent upon mix, labor, and the number of shifts we are running.
Removed
We will continue to push into niche markets to find margins and create opportunities for our newfound capacity at the new 185,000 sq ft facility in Manitowoc. We do all this while following strict industry standards to ensure we deliver safe and effective products to our customers.
Added
We believe that the shift in our operational strategy focusing on higher 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.
Removed
We are in the final testing stages of a centralized payment system that will allow all, including smaller sellers, merchant processing and carting ability for the entire platform. Centralized payment processing will allow for advanced fraud prevention, reduce manual reviews & reductions in chargebacks for the seller community.
Added
The plant grants us the ability to increase capacity based upon the needs of the market and through further expansion of our casing and loading lines. Products We design, produce, and sell small caliber ammunition and components for commercial and military applications for a variety of calibers ranging from 25 auto to 50 caliber.
Removed
We plan to continue to broaden our supplier base and secure multiple sources for all the raw materials and components we require. Customers We sell our products through distribution, “Big Box” retailers, manufacturers, specialty retailers, local ammunition stores, and shooting range operators.
Added
We ship our ammunition in the form of cartridges (or rounds), and ammunition casings for pistol ammunition through large rifle ammunition.
Removed
While the parties have agreed that, effective January 1, 2022, the A&R License Agreement was extended to January 1, 2026, the parties are still finalizing the documentation of this extension via the signing of an amendment.
Added
The targeted markets that we’ve expanded into encompass sport shooting enthusiasts, hunting-specific ammunition, self-defense ammunition, law enforcement and military agencies. We aim to further penetrate these sectors through product differentiation, focusing on our STREAK VISUAL AMMUNITION™, /stelTH/™, Signature-on-Target, and HUNT product lines, all of which offer higher profit margins relative to their selling price.
Removed
On July 7, 2022, the Company and the Licensor entered into a Second Amendment to Amended and Restated Exclusive License Agreement, effective as of January 1, 2022 (the “Second Amendment”).
Added
In March 2024, GunBroker went live with a multi-item cart and payment application to facilitate credit card processing empowering our buyer and sellers with a streamlined checkout process. This will enable GunBroker to facilitate cross selling and drive revenue for our marketplace community.
Removed
Pursuant to the Second Amendment, the term of the Original License Agreement is extended for a period of four (4) years from the date of the start of the current term, such that the term will expire on January 1, 2026.

… 19 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

67 edited+10 added−19 removed137 unchanged
Biggest changeAdditionally, inflation and price volatility may cause our customers to reduce use of our products 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 uncollectable receivables.
Biggest changeWe 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 uncollectable receivables. In addition, we face increased risk of order reduction or cancellation when dealing with financially ailing retailers or retailers struggling with economic uncertainty.
Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all. Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss sales.
Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all. Breaches of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss of sales.
Market interest rates may materially and adversely affect the value of the Series A Preferred Stock. One of the factors that influences the 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.
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.
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 shall 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.
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.
Possible impacts associated with a cyber security 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.
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.
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; 26 ● 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.
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; 25 ● 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.
Our Common Stock is listed on the Nasdaq Capital 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.
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.
Our management has concluded that we have material weaknesses in our internal controls 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 controls, we may not be able to accurately report our financial results or prevent financial fraud.
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.
On April 30, 2023, Director and shareholder Steve Urvan filed suit in the Delaware Chancery Court against the Company, certain Directors, former directors, employees, former employees and consultants, seeking rescission of the Company’s acquisition of GunBroker.com and certain affiliated companies. Plaintiff Urvan’s claims include rescission, misrepresentation and fraud.
On April 30, 2023, Director and shareholder Steve Urvan filed suit in the Delaware Chancery Court against the Company, certain Directors, former directors, employees, former employees, and consultants, seeking rescission of the Company’s acquisition of GunBroker and certain affiliated companies. Plaintiff Urvan’s claims include rescission, misrepresentation, and fraud.
If we cannot provide reliable financial reports or prevent fraud, we could be subject to regulatory action or other litigation and our operating results could be harmed. General Risk Factors Our operating results may experience significant fluctuations. Many factors can contribute to significant fluctuations in our results of operations.
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. General Risk Factors Our operating results may experience significant fluctuations. Many factors can contribute to significant fluctuations in our results of operations.
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, 2023, 2022, and 2021.
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, 2022 and 2021.
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. 23 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.
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. 22 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.
The Company and named defendants are in alignment and reasonably believe at this date that the claims are without merit and the Company has engaged Delaware Chancery Court litigation specialists to defend its interests in all respects in this case. The claims made by Mr.
The Company and named defendants are in alignment and believe at this date that the claims are without merit and the Company has engaged Delaware Chancery Court litigation specialists to defend its interests in all respects in this case. The claims made by Mr.
For the life of such warrants and options, the holders will have the opportunity to profit from a rise in the price of the Common Stock with a resulting dilution in the interest of the other holders of Common Stock. The existence of such warrants and options may adversely affect the market price of our Common Stock.
For the life of such warrants and options, the holders will have the opportunity to profit from a rise in the price of the Common Stock with a resulting dilution in the interest of the other holders of Common Stock. Further, the existence of such warrants and options may adversely affect the market price of our Common Stock.
Failure to maintain our Nasdaq listing would make it more difficult for shareholders to sell our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. The delisting of our shares could have an adverse effect on the price of our Common Stock.
Failure to maintain our Nasdaq listing would make it more difficult for shareholders to sell our Common Stock and more difficult to obtain accurate price quotations on our Common Stock. The delisting of our shares could have an adverse effect on the market price of our Common Stock.
The GunBroker.com auction website facilitates the lawful sale of firearms, ammunition and accessories between listing sellers and interested buyers and includes the direct transactional involvement of FFLs regulated by the ATF.
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 FFLs regulated by the ATF.
In the year ended March 31, 2023, we believe that general economic conditions and consumer spending patterns negatively impacted our operating results because consumers bought fewer discretionary items such as our products. These economic conditions included, but were not limited to, declines in consumer confidence and increases in consumer debt levels.
In the year ended March 31, 2024, we believe that general economic conditions and consumer spending patterns negatively impacted our operating results because consumers bought fewer discretionary items such as our products. These economic conditions included, but were not limited to, declines in consumer confidence, and increases in consumer debt levels.
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 COVID-19 outbreaks or other natural or manmade disasters in a particular region.
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.
Risks Related to Our Products and Our Dependence on Third Parties Our success depends upon our ability to introduce new products that match customer preferences. Our success depends upon our ability to introduce new products that match consumer preferences.
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.
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. ITEM 1B.
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.
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 product relies, in part, on a patent that is held by ULL.
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.
Such financing 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.
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.
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. 24 The trading market for the Series A preferred stock may not provide investors with adequate liquidity.
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. 23 The trading market for the Series A preferred stock may not provide investors with adequate liquidity.
Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease. 25 We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash to make dividend payments.
Thus, higher market interest rates could cause the market price of the Series A Preferred Stock to materially decrease. 24 We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash to make dividend payments.
We operate 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 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.
Our Amended and Restated 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 Corporation, (ii) an action asserting a claim of breach of fiduciary duty owed by any director, officer, or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers, or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws, or (iv) any action asserting a claim against the Corporation, 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 ten 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.
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.
If ammunition sales decline, our financial results could be adversely impacted and the stock price of our Common Stock could decline. 14 Our manufacturing facilities are critical to our success. Our manufacturing operations are currently based out of two facilities in Manitowoc, Wisconsin and are critical to our success, as we currently produce all of our products at these facilities.
If ammunition sales decline, our financial results could be adversely impacted and the market price of our Common Stock could decline. 14 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.
Our certificate of incorporation also may authorize 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.
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.
The Company’s business and supply chain has been 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.
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.
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 Common Stock, if any, and preferred stock, including the Series A Preferred Stock to pay our indebtedness or to fund our other liquidity needs.
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.
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; ● 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 COVID-19. 22 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.
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. 21 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.
Although we do not believe our systems are at a greater risk of cyber security incidents than other similar organizations, such cyber security 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.
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.
A failure to implement improved internal controls, 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.
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.
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 limitations described in this prospectus supplement entitled “Description of the Series A Preferred Stock—Voting Rights,” 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.
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.
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, affecting our results of operations.
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.
There have been an increasing number of cyber security incidents affecting companies around the world, which have caused operational failures or compromised sensitive corporate data.
There have been an increasing number of cybersecurity incidents affecting companies around the world, which have caused operational failures or compromised sensitive corporate data.
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 Bureau of Alcohol, Tobacco, Firearms and Explosives, or the ATF.
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.
At March 31, 2023, our total liabilities equaled approximately $38.9 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.
At March 31, 2024, our total liabilities equaled approximately $43.3 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 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. 21 Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
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. 20 Effective internal control over financial reporting and related controls and procedures are necessary for us to provide reliable financial reports and effectively prevent fraud.
Also, although holders of Series A Preferred Stock are entitled to limited voting rights, as described in this prospectus supplement under “Description of the Series A Preferred Stock—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.
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.
The inability to obtain sufficient quantities of raw materials and components, including casings, primers, gun powder, projectiles, and brass 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.
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.
With the exception of GunBroker.com’s approximate 20 year history operating as a private company preceding the merger, 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.
With the exception of GunBroker’s approximate 25 year history operating as a private company preceding the merger, 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.
Litigation 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. 12 An inability to expand our E-commerce business could reduce our future growth. Consumers are increasingly purchasing products online.
Litigation 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. 12 If we are not able to expand our e-commerce business, our future growth could be curtailed. Consumers are increasingly purchasing products online.
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.
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.
Also, upon the occurrence of a Change of Control (as defined below under “Description of the Series A Preferred Stock - Redemption”), 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.
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.
Other than the limited circumstances described in the prospectus and except to the extent required by law, holders of Series A Preferred Stock do not have any voting rights.
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.
An increase in market interest rates, which in recent years have been at low levels relative to historical 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).
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).
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.
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.
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.
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.
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. General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades.
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.
Delaware law also imposes conditions on certain business combination transactions with “interested stockholders.” Our certificate of incorporation authorizes our Board of Directors to fill vacancies or newly created directorships. A majority of the directors then in office may elect a successor to fill any vacancies or newly created directorships.
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.
Inventory levels in excess of customer demand may negatively impact operating results and cash flow. 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.
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.
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 cause our business to be harmed.
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 exercise of warrants, and issuance of incentive stock grants may have a dilutive effect on our stock, and negatively impact the price of our Common Stock. As of June 9, 2023, we had 2,460,946 warrants outstanding with a weighted average exercise price of $2.46.
The exercise of warrants, and issuance of incentive stock grants may have a dilutive effect on our stock, and negatively impact the market price of our Common Stock. As of June 10, 2024, we had outstanding warrants to purchase 1,664,555 shares of our Common Stock with a weighted average exercise price of $2.15.
Further, notwithstanding these factors, we 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 prospectus, including the documents incorporated by reference herein, were to occur.
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.
The elimination of monetary liability against our directors, officers, and employees under Delaware law and the existence of indemnification rights to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees. We also may have entered into contractual indemnification obligations under employment agreements with our executive officers.
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.
Please see the section in this prospectus supplement entitled “Description of the Series A Preferred Stock—Voting Rights.” The Series A Preferred Stock is not convertible, and investors will not realize a corresponding upside if the price of the Common Stock increases. The Series A Preferred Stock is not convertible into the Common Stock and earns dividends at a fixed rate.
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.
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.
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.
These laws generally govern the manufacture, import, export, sale, and possession of firearms and ammunition. We hold all necessary licenses to legally sell ammunition in the United States. 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.
These laws generally govern the manufacture, import, export, sale, and possession of firearms and ammunition. 19 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.
Most of our competitors have greater market recognition, larger customer bases, long-term government contracts, and substantially greater financial, technical, marketing, distribution, and other resources than we possess and that afford them competitive advantages.
This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. 16 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.
A change in applicable federal or state law that prohibited GunBroker.com from providing its facilitative auction platform services would have a direct substantial financial impact on the operations and adverse effect on the continuity 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.
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 may potentially cause an adverse effect on the continuity of its operations.
As of June 9, 2023, there were no options outstanding and 1,428,659 shares of Common Stock are reserved for future issuance under the 2017 Equity Incentive Plan.
As of June 10, 2024, there were options to purchase 175,000 shares of Common Stock outstanding and 2,303,159 shares of Common Stock are reserved for future issuance under the Ammo, Inc. 2017 Equity Incentive Plan.
We have one customer that accounted for approximately 12% of our revenues for the years ended March 31, 2023 in comparison to two customers that accounted for approximately 18% of our revenues for the year ended March 31, 2022 and one customer that accounted for approximately 17% of our revenues for the year ended March 31, 2021.
Although the Company did not have any customers that comprised more than 10% of total revenues for the year ended March 31, 2024, one customer accounted for approximately 12% of our revenues for the year ended March 31, 2023 and two customers accounted for approximately 18% of our revenues for the year ended March 31, 2022.
We will be able to grant stock options, restricted stock, restricted stock units, stock appreciation rights, bonus stocks, and performance awards under the plan. To the extent that any of the outstanding warrants and future options are exercised, dilution to the interests of our stockholders may occur.
We expect to be able to grant stock options, restricted stock, restricted stock units, stock appreciation rights, bonus stocks, and performance awards under our existing equity incentive plan and any similar plans that we adopt in the future.
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. Regulatory Risks We are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements.
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.
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. 20 Risks Related to our Common Stock Our shares are listed on the Nasdaq Capital Market; however, if we fail to comply with Nasdaq’s rules for continued listing or other requirements, our shares may be delisted.
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.
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.
During the audit of our financial statements for the year ended March 31, 2024, our management identified material weaknesses in our internal control over financial reporting, as described in “Item 9 Controls and Procedures - Management’s Annual Report on Internal Control Over Financial Reporting.” 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.
Removed
We believe that one of the reasons our sales went down in the year ended March 31, 2023 as compared to the year ended March 31, 2022 was due to decreased demand. We believe there was heightened demand for our products during the year ended March 31, 2022 due to the pandemic and the political environment.
Added
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.
Removed
In building our main new manufacturing facility in Manitowoc, Wisconsin, the delivery of some of the main components needed in the building process were delayed due to supply chain disruptions.
Added
As global conflicts escalate nitrocellulose and propellant production becomes in higher demand, and as a result in these events could constrain U.S. production for propellant destined for the commercial markets, which could have an unforeseen impact on the U.S. firearm and ammunition market.
Removed
These delays caused our manufacturing capacity to be lower than it otherwise would have been causing a drop in sales in the year ended March 31, 2023, but have since been corrected.
Added
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 would harm our business operations and financial position.
Removed
On September 24, 2019, the Company received notice that an individual who was former member of the Board of Directors (the “Board”) who had been removed as a director by majority vote of the stockholders and who had voluntarily resigned as an employee filed a complaint against the Company, and certain individuals (the “Complaint”), with the U.S.
Added
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.
Removed
The Complaint alleges that the individual reported potential violations of SEC rules and regulations by management and that as a result of such reports, the individual experienced a hostile work environment; that the Company lacks sufficient internal controls, and that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the stockholders.
Added
Such a write-down would reduce the inventory balance, reflecting the impairment while still accounting for the remaining sellable inventory.
Removed
The claims were investigated by a Special Committee of the Board made up of independent directors represented by 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.
Added
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.
Removed
The parties participated in a successful mediation at the end of June 2022 and all matters relating to this former employee/claimant were confidentially resolved with the lawsuit dismissed with prejudice. The settlement was covered by our Employment Practices Liability Policy and did not amount to a material amount.

… 16 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed0 unchanged
Biggest changeThe purpose of this space is for warehousing related to our GunBroker.com operations. We own a 185,000 square foot facility in Manitowoc, Wisconsin. Since our second fiscal quarter in the year ended March 31, 2023, we have utilized this facility for ammunition and casing manufacturing, research and development, packing, and shipping activities.
Biggest changeSince our second fiscal quarter in the year ended March 31, 2023, we have utilized this facility for ammunition and casing manufacturing, research and development, packing, and shipping activities. A portion of this facility was financed by our Construction Loan. The terms of the Construction Loan are documented in Note 12 of our consolidated financial statements.
ITEM 2. PROPERTIES Our executive offices are located in Scottsdale, Arizona where we lease approximately 21,000 square feet under a month-to-month triple net lease for approximately $20,000 per month. This space houses our principal executive, administration, and marketing functions. 27 We lease a 10,000 square foot facility located in Atlanta, Georgia for approximately $19,000 per month.
ITEM 2. PROPERTIES Our executive offices are located in Scottsdale, Arizona (“AZ”) where we lease approximately 21,000 square feet under a month-to-month triple net lease for approximately $25,000 per month. This space houses our principal executive, administration, and marketing functions. 27 We lease a 10,000 square foot facility located in Atlanta, Georgia (“GA”) for approximately $20,000 per month.
This space houses our GunBroker.com offices and operations. We lease a 36,000 square foot facility located in Manitowoc, Wisconsin for approximately $10,000 per month. We utilize this facility for manufacturing and packaging. We lease a 5,000 square foot facility located in Marietta, Georgia for approximately $3,000 per month.
This space houses our GunBroker offices and operations. We lease a 36,000 square foot facility located in Manitowoc, WI for approximately $10,000 per month. We utilize this facility for manufacturing and packaging . We own a 185,000 square foot facility in Manitowoc, WI.
Removed
A portion of this facility was financed by our Construction Loan. The terms of the Construction Loan are documented in Note 11 of our financial statements.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed1 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business.
Biggest changeUrvan seeks partial rescission of the transaction, monetary damages and other relief. The Company and the individual defendants plan to vigorously defend the Company and themselves against Mr. Urvan. In addition, we are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings and investigations in the ordinary course of business.
We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Please reference the Contingencies section of Note 2 of our Financial Statements for additional disclosure. ITEM 4. MINE SAFETY DISCLOSURE None. PART II
We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Please reference the Contingencies section of Note 2 of our Financial Statements for additional disclosure. ITEM 4. MINE SAFETY DISCLOSURE Not applicable. PART II
Added
ITEM 3. LEGAL PROCEEDINGS On April 30, 2023, Steve Urvan, one of our directors, filed a lawsuit against the Company and certain individuals (including some of its officers and directors) in the Delaware Court of Chancery. Mr. Urvan’s complaint alleges that he was fraudulently induced to sell GunBroker.com to the Company. Mr.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 4: MINE SAFETY DISCLOSURE 28 PART II ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES 28 ITEM 6: RESERVED 29 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 29 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 41 ITEM 8: FINANCIAL STATEMENTS 41 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 41 ITEM 9A: CONTROLS AND PROCEDURES 42 ITEM 9B: OTHER INFORMATION 44
Biggest changeITEM 4: MINE SAFETY DISCLOSURE 28 PART II ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES 28 ITEM 6: RESERVED 30 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 30 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 42 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 42 ITEM 9A: CONTROLS AND PROCEDURES 43

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−3 removed6 unchanged
Biggest changePerformance Graph The following graph compares the cumulative total stockholder return of our common stock (Nasdaq: POWW) in comparison to the cumulative total return of the NASDAQ Capital Market Composite (“NASDAQ CMC”) and the Russell 2000 Index (“Russell 2000”) for the period from March 31, 2018 through March 31, 2023.
Biggest changeThe current plan is in effect until February 2025 and the remaining funds available to the Company pursuant to the repurchase plan is approximately $27.4 million. 29 Performance Graph The following graph compares the cumulative total stockholder return of our common stock (Nasdaq: POWW) in comparison to the cumulative total return of the Nasdaq Capital Market Composite (“Nasdaq CMC”) and the Russell 2000 Index (“Russell 2000”) for the period from March 31, 2019 through March 31, 2024.
Accordingly, we may not be able to declare a dividend on our Common Stock unless full cumulative dividends on the Series A Preferred Stock have been or contemporaneously are declared and paid or declared. 28 Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information as of March 31, 2023 with respect to our compensation plans under which equity securities may be issued.
Accordingly, we may not be able to declare a dividend on our Common Stock unless full cumulative dividends on the Series A Preferred Stock have been or contemporaneously are declared and paid or declared. 28 Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information as of March 31, 2024 with respect to our compensation plans under which equity securities may be issued.
At the present time, we intend to retain any earnings in our business, and therefore do not anticipate paying dividends in the foreseeable future. We paid preferred dividends on our Series A Preferred Stock in the amount of $3.0 million for the year ended March 31, 2023.
At the present time, we intend to retain any earnings in our business, and therefore do not anticipate paying dividends in the foreseeable future. We paid preferred dividends on our Series A Preferred Stock in the amount of $3.0 million for the year ended March 31, 2024.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders: 2017 Equity Incentive Plan - - 1,946,929 Total - - 1,946,929 Transfer Agent We have appointed Securities Transfer Corporation (“STC”) as the transfer agent for our Common Stock and Series A Preferred Stock.
Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by security holders: 2017 Equity Incentive Plan - - 2,303,159 Total - - 2,303,159 Transfer Agent We have appointed Securities Transfer Corporation (“STC”) as the transfer agent for our Common Stock and Series A Preferred Stock.
The graph assumes an investment of $100 in our common stock and in each of the indexes on March 31, 2018.
The graph assumes an investment of $100 in our common stock and in each of the indexes on March 31, 2019.
Holders of Common Equity As of June 9, 2023, there were 117,580,758 shares of $0.001 par value Common Stock outstanding and there were approximately 290 holders of record. Dividend Information We have never declared or paid dividends on our Common Stock.
Holders of Common Equity As of June 10, 2024, there were 119,181,067 shares of Common Stock outstanding and there were approximately 271 holders of record of the Common Stock. Dividend Information We have never declared or paid dividends on our Common Stock.
Removed
The following table summarizes our share repurchases under our repurchase program for our fourth fiscal quarter of our 2023 fiscal year: Period Total Number of Shares Repurchased Average Price Paid per Share Total Number of Shares Repurchased as Part of Publicly Announced Plan or Programs Maximum Number of Shares that may yet be Repurchased Under the Plan or Programs (1) March 2023 118,328 1.93 118,328 Total 118,328 - 118,328 14,963,235 (1) As reported on the Current Report on Form 8-K filed with the Commission on December 6, 2022, we initiated our Common Stock share repurchase program in December of 2022.
Added
On February 8, 2024, we announced that our Board of Directors authorized the extension of our repurchase program until February 2025. There we no share repurchases under our repurchase program during the fourth fiscal quarter of the 2024 fiscal year. As of June 10, 2024, approximately 1.4 million shares have been repurchased in total.
Removed
We previously reported the repurchase of 150,000 shares of our Common Stock under this plan. The maximum number of shares that may yet be repurchased included herein is determined based on the closing price of our Common Stock of $1.97 on March 31, 2023. This amount may change based on the price that our Common Stock trades at.
Removed
As of June 9, 2023, approximately 1 million shares have been repurchased in total. The current plan is in effect until February 2024 and the remaining funds available to the Company pursuant to the repurchase plan is approximately $28 million.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

83 edited+27 added−34 removed39 unchanged
Biggest changeThis will be accomplished through the following: ● Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, Stelth and now our tactical Armor Piercing (AP) and Hard Armor Piercing Incendiary (HAPI) precision ammunition, all of which carry higher margins as a percentage of their selling price; ● Introduction of new lines of ammunition that historically carry higher margins in the consumer and government sectors; ● Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers; ● Expanded use of automation equipment that reduces the total labor required to assemble finished products ● And, better leverage of our fixed costs through expanded production to support the sales objectives. 33 Operating Expenses Overall, for the year ended March 31, 2023, our operating expenses increased by approximately $7.1 million and increased as a percentage of sales from 21.5% to 30.6% in comparison to the year ended March 31, 2022.
Biggest changeThis will be accomplished through the following: ● Capacity improvements at the Plant and expansion of our rifle casing and loading lines; ● Increased product sales, specifically of proprietary and flagship lines of ammunition, like 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 ● With the addition of the multi-item cart, the payment processing, we’ve adjusted our category fees for nonregulated items that will enable us to increase our take rate across the platform as we enable cross selling; ● And, we are growing our advertising sales, financing partnerships, and bringing shipping options to our community. 34 Operating Expenses Operating expenses consists of selling and marketing expenses, corporate general & administrative, and employee salaries and related expenses.
Through our GunBroker.com Marketplace segment (acquired in April 2021), we allow third party sellers to list items consisting of firearms, hunting gear, fishing equipment, outdoor gear, collectibles, and much more on our site, while facilitating compliance with federal and state laws that govern the sale of firearms and restricted items.
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 restricted items.
In addition to total net sales, net loss, and other results under accounting principles generally accepted in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures we use to evaluate our business. We believe these measures are useful for period-to-period comparisons of the Company.
In addition to total net sales, net loss, and other results under accounting principles generally accepted in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures that we use to evaluate our business. We believe that these measures are useful for period-to-period comparisons of the Company.
Investing Activities During the year ended March 31, 2023, we used approximately $12.5 million in net cash for investing activities. 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, GunBroker.com.
During the year ended March 31, 2023, we used approximately $12.5 million in net cash for investing activities. 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, GunBroker.
All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. 29 Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect,” or “anticipate,” or other similar words, or the negative thereof.
All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing. 30 Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect,” or “anticipate,” or other similar words, or the negative thereof.
We believe it is useful to exclude these non-cash expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.
We believe that it is useful to exclude these non-cash expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.
Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
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.
These limitations include the following: ● Employee stock awards and stock grants expense has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company and an important part of our compensation strategy; ● the assets being depreciated or amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and ● non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs ● other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
These limitations include the following: ● Employee stock awards, stock grants, and common stock purchase options expense has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company and an important part of our compensation strategy; ● the assets being depreciated or amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; ● 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.
Adjusted EBITDA is a non-GAAP financial measures that displays our net loss, adjusted to eliminate the effect of certain items as described below. 31 We have excluded the following non-cash expenses from our non-GAAP financial measures: provision or benefit for income taxes, depreciation and amortization, share-based or warrant-based compensation expenses, and changes to the contingent consideration fair value.
Adjusted EBITDA is a non-GAAP financial measures that displays our net loss, adjusted to eliminate the effect of certain items as described below. 32 We have excluded the following non-cash expenses from our non-GAAP financial measures: provision or benefit for income taxes; depreciation and amortization; share-based or warrant-based compensation expenses; and changes to the contingent consideration fair value.
Off-Balance Sheet Arrangements As of March 31, 2023, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources.
Off-Balance Sheet Arrangements As of March 31, 2024, 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.
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. 40 Income Taxes We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction.
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. 41 Income Taxes We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction.
This was primarily the result of net loss of approximately $4.6 million, decreases to our period end accounts receivable of $14.4 million, inventories of $4.7 million, prepaid expenses of 2.8 million, and deposits of $4.3 million which was offset by increases in accounts payable and accrued liabilities of $8.7 million and $2.8 million, respectively.
This was primarily the result of our net loss of $4.6 million, decreases to our period end accounts receivable of $14.4 million, inventories of $4.7 million, deposits of $4.3 million, and prepaid expenses of $2.8 million offset by increases in accounts payable and accrued liabilities of $8.7 million and $2.8 million, respectively.
Our vision is to expand the services on GunBroker.com and to become a peer to those in our industry.
Our vision is to expand the services on GunBroker and to become a peer to those in our industry.
The change from the prior periods was mainly due to increases related to our Construction Note Payable of approximately $0.3 million and decreases in activity related to our Factoring Liability and our Inventory Credit Facility of approximately $0.3 million.
The change to interest expense from the prior periods was mainly due to increases related to our Construction Note Payable of approximately $0.3 million and decreases in activity related to our Factoring Liability and our Inventory Credit Facility of approximately $0.3 million.
Accordingly, the impairment of Goodwill was not warranted for the year ended March 31, 2023. As of March 31, 2023, the Company has a goodwill carrying value of $90,870,094, all of which is assigned to the Marketplace segment.
Accordingly, the impairment of Goodwill was not warranted for the year ended March 31, 2024. As of March 31, 2024, the Company has a goodwill carrying value of $90,870,094 , all of which is assigned to the Marketplace segment.
At March 31, 2023, and March 31, 2022, 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. 39 Research and Development To date, we have expensed all costs associated with developing our product specifications, manufacturing procedures, and products through our cost of products sold, as this work was done by the same employees who produced the finished product.
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. 40 Research and Development To date, we have expensed all costs associated with developing our product specifications, manufacturing procedures, and products through our cost of products sold, as this work was done by the same employees who produced the finished product.
We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions. The Company has since developed the ballistic match (BMMPR) and signature-on-target (SoT) rounds under contract with the U.S. Government in support of US special operations which have been publicly announced pursuant to governmental authorization.
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 have been publicly announced pursuant to governmental authorization.
We also continue to ensure dynamic performance under the exacting standards of the US military complex in support of our cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities.
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.
Overview AMMO, Inc., owner of the GunBroker.com Marketplace, the largest online marketplace serving the firearms and shooting sports industries, and a vertically integrated producer of high-performance ammunition and premium components began its operations in 2016.
Overview AMMO, Inc., owner of the GunBroker 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.
Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results.
Results of Operations The following discussion is intended to provide our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results.
Accounts Receivable and Allowance for Doubtful Accounts Our accounts receivable represents amounts due from customers for products sold and include an allowance for uncollectible accounts which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts.
Accounts Receivable and Allowance for Credit Losses Our accounts receivable represents amounts due from customers for products sold and include an allowance for credit losses which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts.
This was the result of a significant decrease in net sales as well increases to non-cash depreciation related to increases in production equipment, expensing of increased labor, overhead, and raw materials used to produce finished product during 2023 as compared to 2022.
This was the result of a significant decrease in net sales as well 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.
During the years ended March 31, 2023, 2022, and 2021, we recognized approximately $9.8 million, $14.6 million, and $4.3 million respectively, in excise taxes. For ease in selling to commercial markets, excise tax is included in our unit price for the products sold. We record this through net sales and expense the offsetting tax expense to cost of goods sold.
During the years ended March 31, 2024, 2023, and 2022, we recognized $6.2 million, $9.8 million, and $14.6 million respectively, in excise taxes. For ease in selling to commercial markets, excise tax is included in our unit price for the products sold. We record this through net sales and expense the offsetting tax expense to cost of goods sold.
Significant estimates made in preparing the condensed consolidated financial statements include the valuation of allowances for doubtful accounts, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation and warrant-based compensation.
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.
The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of approximately $17.5 million, employee stock compensation of $5.8 million, $1.6 million of deferred income taxes, stock grants totaling $0.2 million, $0.2 million of allowance for doubtful accounts, and $0.2 million of warrants issued for services.
The cash used in operations was partially offset by the benefit of non-cash expenses for depreciation and amortization of approximately $17.5 million, employee stock compensation of $5.8 million, $1.6 million of deferred income taxes, stock grants totaling $0.2 million, $0.2 million of allowance for credit losses, and $0.2 million of warrants issued for services.
We intend to continue to use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases and any potential acquisitions. Leases We lease four locations that are used for our offices, production, and warehousing. As of March 31, 2023, we had $1.6 million of fixed lease payment obligations with $0.6 million payable within the next 12 months.
We intend to continue to use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases, and any potential acquisitions. 38 Leases We 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.
However, due to declines in the value of the Company’s common stock and market capitalization, it is possible that the book values of our Marketplace segment could exceed its fair value, which may result in the recognition of a material, noncash impairment of goodwill for the year ending March 31, 2024.
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.
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.
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 based upon the terms of the contract. In the year ended March 31, 2021, we began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities.
Income Taxes For the year ended March 31, 2023, we recorded a provision for federal and state income taxes of approximately $0.7 million in comparison to $3.3 million in the prior year period ended March 31, 2022. The decreases was related to a decrease in Net Income(Loss) before Taxes.
Income Taxes For the year ended March 31, 2023, we recorded a provision for federal and state income taxes of approximately $0.7 million in comparison to $3.3 million in the year ended March 31, 2022, as a result of the decrease in net income(loss) before taxes.
At March 31, 2023 and March 31, 2022, we reserved $3,246,551 and $3,055,252, respectively, of allowance for doubtful accounts. 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.
At March 31, 2024 and March 31, 2023, we reserved $3,666,078 and $3,246,551, respectively, of allowance for credit losses. 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.
This allows our base of over 7.6 million users to follow ownership policies and regulations through our network of over 35,000 federally licensed firearms dealers as transfer agents.
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 as transfer agents.
Through our acquisition of SWK, 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 the US and foreign military customers.
For example, through our acquisition of SWK, 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 the U.S. and foreign military customers.
Net Income We ended the year ended March 31, 2023 with a net loss of approximately $4. 6 million compared with a Net Income of approximately $33.2 million for the year ended March 31, 2022.
Net Loss We ended the year ended March 31, 2024 with a net loss of approximately $15.6 million compared with a Net Loss of approximately $4.6 million for the year ended March 31, 2023.
“Proprietary Ammunition” include those lines of ammunition manufactured by our facilities that are sold under the brand names: STREAK VISUAL AMMUNITION™ and Stelth. We define “Standard Ammunition” as non-proprietary ammunition that directly competes with other brand manufacturers.
“Proprietary ammunition” include 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.
These items were offset by $1.0 million generated from our construction note payable and $0.1 million of proceeds from warrants exercised for common stock.
These items were offset by $0.1 million of proceeds from warrants exercised for common stock.
We will continue to leverage our proprietary brands like Streak Visual Ammunition TM and Stelth subsonic ammunition and extend our product offering with premium rifle lines and brands that complement our technologically innovative heritage.
We will continue to leverage our flagship brands that are proprietary in nature like 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.
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 Sales $ 191,439,801 $ 240,269,166 Sales for the year ended March 31, 2023 decreased 20.3%, or approximately $48.8 million from the prior year due to changes in market conditions.
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.
Financing Activities During the year ended March 31, 2023, net cash used in financing activities was approximately $6.7 million. This was the result of approximately $3.0 million of preferred stock dividends paid, $2.1 million of insurance premium note payments, $0.7 million in payments of our related party note payable, and an approximate $0.8 million reduction in our Inventory Credit Facility.
Additionally, $37.3 million was generated from accounts receivable factoring, which was offset by payments of $37.3 million. 39 During the year ended March 31, 2023, net cash used in financing activities was $6.7 million, consisting 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.
Cost of Revenues Cost of Revenues decreased by approximately $15.5 million from $151.5 million to $136.0 million for the year ended March 31, 2023 compared to the comparable period ended in 2022.
Cost of Revenues Cost of Revenues decreased by approximately $33.6 million from $136.0 million to $102.4 million for the year ended March 31, 2024 compared to the comparable period ended in 2023.
Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including our net loss and our other financial results presented in accordance with GAAP. Net Sales The following table shows our net sales by proprietary ammunition versus standard ammunition for the periods ended March 31, 2023 and March 31, 2022.
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 shows our revenues by the various categories that comprise our total revenues for the years ended March 31, 2024 and March 31, 2023.
Our “Standard Ammunition” is manufactured within our facilities and may also include completed ammunition that has been acquired in the open market for sale to others. Also included in this category is low cost target pistol and rifle ammunition, as well as bulk packaged ammunition manufactured by us using reprocessed brass casings.
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.
We recognize expense related to stock-based payment transactions in which we receive employee or non-employee services in exchange for equity. We account for stock-based compensation at fair value in accordance with Accounting Standards Codification 718 – Compensation – Stock Compensation (“ASC 718”). Which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors.
We reflect changes in recognition or measurement in the period in which the change in judgment occurs. Stock-Based Compensation We account for stock-based compensation at fair value in accordance with Accounting Standards Codification 718 – Compensation – Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors.
Construction Note Payable We financed a portion of our new production facility with our Construction Note Payable. We expect to make $0.8 million in principal and interest payments within the next 12 months. The total principal balance of the Construction Note is expected to be $11.4 million upon completion of the project and will mature on October 14, 2026.
Please refer to Note 10 – Leases for additional information. Construction Note Payable We financed a portion of our new production facility with our Construction Note Payable. 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.
Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of March 31, 2023. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value.
Fair Value of Financial Instruments Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of March 31, 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.
Working Capital is summarized and compared as follows: March 31, 2023 March 31, 2022 Current assets $ 128,451,893 $ 129,691,636 Current liabilities 25,463,399 35,823,311 $ 102,988,494 $ 93,868,325 Liquidity Existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year.
Working capital is summarized and compared as follows: March 31, 2024 March 31, 2023 Current assets $ 131,525,266 $ 128,451,893 Current liabilities 30,940,272 25,463,399 $ 100,584,994 $ 102,988,494 Liquidity We expect existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year.
This was primarily the result of net income of approximately $33.2 million, increases to our period end inventories of $43.1 million, accounts receivable of $20.7 million, and deposits of $8.8 million which was offset by increases in accounts payable and accrued liabilities of $9.9 million and $2.3 million, respectively, and decreases of prepaid expenses of $1.9 million.
This was primarily the result of our net loss of $15.6 million, offset by decreases to our period end inventories of $8.8 million, deposits of $6.7 million, prepaid expenses of $4.0 million, accounts receivable of $0.4 million, increases in accounts payable of $5.1 million and increases in accrued liabilities of $2.5 million.
The following information should be read in conjunction with our consolidated financial statements included in this Annual Report beginning on page F-1 . Fiscal Year 2023 Compared to Fiscal Year 2022 Our financial results for the year ended March 31, 2023 r eflect our newly positioned organization as we transition into our new manufacturing facility.
The following information should be read in conjunction with our consolidated financial statements included in this Annual Report beginning on page F-1 . Fiscal Year 2024 Compared to Fiscal Year 2023 Our financial results for the year ended March 31, 2024 r eflect our transition into our new operational strategic position, focusing on higher brass casing production and sales .
For the year ended March 31, 2022, net cash provided by operations totaled approximately $2.9 million.
For the year ended March 31, 2023, net cash provided by operations totaled $35.6 million.
Adjusted EBITDA For the For the Year Ended Year Ended March 31, 2023 March 31, 2022 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ (4,596,038 ) $ 33,247,436 Provision for income taxes 730,238 3,285,969 Depreciation and amortization 17,519,949 17,339,093 Interest expense, net 632,062 637,797 Employee stock awards 5,807,779 5,759,000 Stock grants 179,094 252,488 Stock for services - 4,200 Warrants issued for services 213,819 718,045 Contingent consideration fair value (63,764 ) (385,750 ) Other income (25,181 ) (21,840 ) Proxy contest fees (1) 4,724,385 - Other nonrecurring expenses (2) 1,248,865 - Adjusted EBITDA $ 26,371,208 $ 60,836,438 (1) Includes proxy contest fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in Note 16 of our financial statements.
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 March 31, 2022 Net Revenues $ 191,439,801 $ 240,269,166 Cost of Revenues 136,031,204 151,505,657 Gross Margin 55,408,597 88,763,509 Sales, general & administrative expenses 58,667,516 51,614,147 Income (loss) from Operations (3,258,919 ) 37,149,362 Other income (expense) Other income (expense) (606,881 ) (615,957 ) Income (loss) before provision for income taxes $ (3,865,800 ) $ 36,533,405 Provision for income taxes 730,238 3,285,969 Net Income (Loss) $ (4,596,038 ) $ 33,247,436 Non-GAAP Financial Measures Adjusted EBITDA For the For the Year Ended Year Ended March 31, 2023 March 31, 2022 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ (4,596,038 ) $ 33,247,436 Provision for income taxes 730,238 3,285,969 Depreciation and amortization 17,519,949 17,339,093 Interest expense, net 632,062 637,797 Employee stock awards 5,807,779 5,759,000 Stock grants 179,094 252,488 Stock for services - 4,200 Warrants issued for services 213,819 718,045 Contingent consideration fair value (63,764 ) (385,750 ) Other income (25,181 ) (21,840 ) Proxy contest fees (1) 4,724,385 - Other nonrecurring expenses (2) 1,248,865 - Adjusted EBITDA $ 26,371,208 $ 60,836,438 (1) Includes proxy contest fees of $910,000 for Employee Stock Awards issued as a result of the Settlement Agreement as discussed in Note 17 of our consolidated financial statements.
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.
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 was the result of decreased ammunition sales due to changes in market demand.
Ammunition within this product line typically carries much lower gross margins.
Ammunition within the standard ammunition product line typically carries much lower gross margins than our proprietary ammunition.
Critical Accounting Policies Our discussion and analysis of our financial condition and results of operation are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses.
Critical Accounting Estimates and Policies Our discussion and analysis of our financial condition and results of operation are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
Changes in cash flows are summarized as follows: Operating Activities For the year ended March 31, 2023, net cash provided by operations totaled approximately $35.6 million.
We have not made use of the Revolving Loan as of the date of this filing. Changes in cash flows are summarized as follows: Operating Activities For the year ended March 31, 2024, net cash provided by operations totaled $32.6 million.
Through our Ammunition segment, we are tailoring our focus to build a new future for our manufacturing operations focused on premium pistol and rifle ammunition and supporting industry partners for manufactured components.
Through our Ammunition segment, we are tailoring our 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.
Our operating expenses include non-cash depreciation and amortization expense of approximately $13.3 million. For the year ended March 31, 2023, we incurred additional expenses in the amounts of $5.6 million related to a proxy contest, of which $0.9 million was included non-cash stock compensation, and $1.2 million of nonrecurring expenses.
For the year ended March 31, 2023, we incurred additional expenses in the amounts of $5.6 million related to a proxy contest, of which $0.9 million was included non-cash stock compensation, and $1.2 million of nonrecurring expenses. 37 Selling and marketing expenses decreased during the year ended Marh 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.
This was a result of the inclusion of our newly acquired marketplace, GunBroker.com which, by nature has significantly higher margins than our manufactured products.
This was primarily a result of increases in the costs of materials, labor, and overhead in our ammunition segment, which was offset by our online marketplace, GunBroker.com which, by nature has significantly higher margins than our manufactured products.
The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, which are reasonably anticipated to drive sustained sales opportunity in the military, law enforcement, and commercial markets. Sales outside of the United States require licenses and approval from either the U.S. Department of Commerce or the U.S.
The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, that we anticipated will drive sustained sales opportunity in the military, law enforcement, and commercial markets.
Our goal is to continue to improve our operating results as we focus on increasing sales and reducing our operating expenses. 34 Fiscal Year 2022 Compared to Fiscal Year 2021 Results of Operations We experienced an increase in our gross profit margin for the year ended March 31, 2022.
Our goal is to continue to improve our operating results as we focus on increasing sales and reducing our operating expenses. 35 Fiscal Year 2023 Compared to Fiscal Year 2022 Results of Operations Our financial results for the year ended March 31, 2023 r eflect our newly positioned organization as we transition into our new manufacturing facility.
The decrease for period was largely the result of a decrease of $48.1 million in sales of bulk pistol and rifle ammunition, a decrease of $0.7 million of sales of Proprietary Ammunition, a decrease of $0.1 million of our casing sales, and a decrease of $1.5 million generated from our marketplace, GunBroker.com, which includes auction revenue, payment processing revenue, and shipping income.
This was due to the result of a decrease 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.
Our corporate general & administrative expenses increased approximately $8.0 million in the year ended March 31, 2023 from the comparable prior period due to $6.6 million of respective legal and professional fees and expenses largely related to our proxy contest and $1.2 million of nonrecurring expenses.
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 consist of professional and legal fees that are nonrecurring in nature, for which there were no comparable expenses during the year ended March 31, 2022.
Operating Expenses Overall, for the year ended March 31, 2022, our operating expenses increased by approximately $34.8 million over the year ended March 31, 2021, but decreased as a percentage of sales from 26.8% for the year ended March 31, 2021 to 21.5% for the year ended March 31, 2022.
Operating Expenses Operating expenses increased by $7.1 million for the year ended March 31, 2023 compared to the prior year, and increased as a percentage of sales to 30.6% from 21.5% for the year ended March 31, 2022.
We measure stock compensation based on reference to the closing fair market value of our Common Stock on the date of grant. Stock-based compensation is recognized on a straight line basis over the vesting periods and forfeitures are recognized in the periods they occur.
On April 1, 2023 we adopted ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” Accordingly, stock-based compensation is valued using market value of our Common Stock. Stock-based compensation is recognized on a straight-line basis over the vesting periods and forfeitures are recognized in the periods they occur.
The increase when compared to the prior period, was primarily related to $2.1 million of additional payroll expenses incurred as a result of payments due upon termination without cause as a result of the proxy contest and the addition of employees in our Marketplace.
Employee salaries and related expenses increased $2.1 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 without cause as a result of the Proxy Settlement Agreement (as discussed in Note 17 – Related Party Transactions of our consolidated financial statements) and the addition of employees in our Marketplace segment.
This was the result of a significant increase in net sales as well increases to non-cash depreciation related to our newly acquired casing operations, expensing of increased labor, overhead, and raw materials used to produce finished product during our 2022 fiscal year as compared to the 2021 fiscal year and additional cost of revenues from our recent acquisition of our marketplace, GunBroker.com .
This was the result of the decrease in sales of our products, as discussed in “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.
Depreciation and amortization expenses for the year ended March 31, 2023 decreased by approximately $0.4 million in comparison to the prior year period. Interest and Other Expenses For the year ended March 31, 2023, interest expense remained constant compared with year ended March 31, 2022.
Other Income and Expense For the year ended March 31, 2023, other income and interest expense remained constant compared with year ended March 31, 2022.
This was the result of decreased ammunition sales due to changes in market demand. 30 The following table presents summarized financial information taken from our consolidated statements of operations for the year ended March 31, 2023 compared with the year ended March 31, 2022: For the Year Ended March 31, 2023 March 31, 2022 Net Sales $ 191,439,801 $ 240,269,166 Cost of Revenues 136,031,204 151,505,657 Gross Margin 55,408,597 88,763,509 Sales, General & Administrative Expenses 58,667,516 51,614,147 Income (loss) from Operations (3,258,919 ) 37,149,362 Other income (expense) Other income (expense) (606,881 ) (615,957 ) Income (loss) before provision for income taxes $ (3,865,800 ) $ 36,533,405 Provision for income taxes 730,238 3,285,969 Net Income (Loss) $ (4,596,038 ) $ 33,247,436 Non-GAAP Financial Measures We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance.
Our focus on creating profitability is in contrast to revenue growth. 31 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 March 31, 2023 Net Revenues $ 145,054,572 $ 191,439,801 Cost of Revenues 102,431,803 136,031,204 Gross Margin 42,622,769 55,408,597 Sales, general & administrative expenses 61,199,966 58,667,516 Income (loss) from Operations (18,577,197 ) (3,258,919 ) Other income (expense) Other income (expense) (779,066 ) (606,881 ) Income (loss) before provision for income taxes $ (19,356,263 ) $ (3,865,800 ) Provision for income taxes (3,791,063 ) 730,238 Net Income (Loss) $ (15,565,200 ) $ (4,596,038 ) Non-GAAP Financial Measures We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance.
We have modified our Adjusted EBITDA calculation in the current period to remove the adjustment for Excise Taxes as we believe this is a better representation of our operations. In prior periods, we included an adjustment for Excise Taxes.
(2) Other nonrecurring expenses consist of professional and legal fees that are nonrecurring in nature. In addition to the adjustments described above, we have modified our adjusted EBITDA calculation in our 2023 fiscal year to remove the adjustment for excise taxes as we believe this is a better representation of our operations.
Operating expenses for the year ended March 31, 2023 and 2022 included noncash expenses of approximately $19.5 million and $20.1 million, respectively. During the year ended March 31, 2023, our selling and marketing expenses decreased by approximately $2.6 million. The decrease was primarily related to decreases in sales commission due to the decrease in the sale of our products.
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.
During the year ended March 31, 2022, we used approximately $69.7 million in net cash for investing activities. Net cash used in investing activities consisted of approximately $50.5 million uses in connection with the merger of Gemini, and approximately $19.2 million related to purchases of production equipment and the construction of our new manufacturing facility in Manitowoc, WI.
Investing Activities During the year ended March 31, 2024, we used $8.0 million in net cash for investing activities. 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, GunBroker.
The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of approximately $17.3 million, employee stock compensation of $5.8 million, stock grants totaling $0.3 million, $2.7 million of allowance for doubtful accounts, $0.8 million of warrants issued for services, $1.5 million of deferred income taxes and a decrease related to an adjustment to the fair value of contingent consideration of $0.4 million.
The cash provided by operations included the benefit of non-cash expenses for depreciation and amortization of $18.8 million, employee stock compensation of $4.1 million, $0.4 million of allowance for credit losses, common stock purchase options of $0.4 million, and stock grants totaling $0.2 million, which was offset by $3.8 million of deferred income taxes.
Gross Margin Our gross margin percentage decreased to 28.9% from 36.9% during the year ended March 31, 2023 as compared to the same period in 2022. This was a result of increased cost of materials, labor, and overhead in our ammunition segment, which was offset by our marketplace, GunBroker.com which, by nature has significantly higher margins than our manufactured products.
This was primarily a result of our marketplace, GunBroker which, by 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 that our gross margins will continue to increase.
Employee salaries and related expenses increased approximately $2.1 million for the year ended March 31, 2023 compared to the comparable period ended in 2022.
Operating expenses increased by approximately $2.5 million for the year ended March 31, 2024 compared to the prior year, and increased as a percentage of sales to 42.2% in the 2024 fiscal year from 30.6% for the year ended March 31, 2023.
As a percentage of sales, cost of goods sold decreased by 22.8% when comparing the year ended March 31, 2022 to the year ended March 31, 2021. Gross Margin Our gross margin percentage increased to 36.9% from 18.2% during the year ended March 31, 2022 as compared to the same period in 2021.
Gross Margin Our gross margin percentage decreased to 28.9% during the year ended March 31, 2023 from 36.9% during the year ended March 31, 2022.
Employee salaries and related expenses increased approximately $8.6 million for the year ended March 31, 2022 compared to the comparable period ended in 2021. This was a result of increased payroll and related expenses of $4.2 million, including $2.9 million from the addition of Gemini, and employee stock compensation of approximately $4.3 million.
In addition, employee salaries and related expenses increased approximately $1.0 million for the year ended March 31, 2024 compared to the year ended March 31, 2023. Such increase was primarily the result of $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.
Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of our Standard Ammunition. 32 We are focused on continuing to grow top line revenue quarter-over-quarter as we continue to further expand distribution into commercial markets, introduce new product lines, and continue to initiate sales to U.S. law enforcement, military, and international markets.
Management anticipates an increase in ammunition casings sales as capacities come online in its new Manitowoc facility. 33 With our new Manitowoc facility coming online 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.
Depreciation and amortization expenses increased approximately $12.0 million from the period principally due to the addition of assets from the Gemini Acquisition. Interest and Other Expenses For the year ended March 31, 2022, interest expense decreased by approximately $2.4 million compared with the year ended March 31, 2021.
Other Income and Expenses Total other expense for the year ended March 31, 2024, increased by $0.4 million compared to the year ended March 31, 2023. This was primarily the result of $0.2 million in losses recorded on the disposal of assets.
We have identified several accounting principles that we believe are key to the understanding of our financial statements. These important accounting policies require our most difficult subjective judgements.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, however actual results may differ from these estimates. We have identified several accounting principles that we believe are key to the understanding of our financial statements.
Net Income As a result of increases in revenues from increased production as well as our acquisition of Gemini , we ended the year ended March 31, 2022 with net income of approximately $33.2 million compared with net losses of approximately $7.8 million for the year ended March 31, 2021.
Net Income We ended the year ended March 31, 2023 with a net loss of approximately $4.6 million compared with a Net Income of approximately $33.2 million for the year ended March 31, 2022. Our goal is to continue to improve our operating results as we focus on increasing sales and reducing our operating expenses.
We believe as we continue to grow sales through new markets and expanded distribution that our gross margins will also increase, as evidenced by the improvement over this time last year. Our goal in the next 12 to 24 months is to continue to improve our gross margins.
Our goal in the next 12 to 24 months is to continue to improve our gross margins.
Additionally, approximately $121.5 million was generated from accounts receivable factoring, which was offset by payments of approximately $122.8 million.
These items were offset by $1.0 million generated from our construction note payable 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 $72.3 million.

… 64 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

2 edited+0 added−0 removed2 unchanged
Biggest changeAlthough we did not have a balance outstanding under our Factoring Liability at March 31, 2023, if were to make use of the maximum facility amount of $5.0 million, a 100 basis point increase would result in an impact of $50,000 additional interest expense for the year ended March 31, 2023.
Biggest changeAlthough we did not have a balance outstanding under our Revolving Loan at March 31, 2024, if we were to make use of the total commitment amount of $20.0 million, a 100 basis point increase would result in an impact of $200,000 additional interest expense for the year ended March 31, 2024.
We believe our primary market risk is interest rate risk. Our Factoring Liability is indexed to market rates.
We believe our primary market risk is interest rate risk. Our Revolving Loan is indexed to market rates.

Other POWW 10-K year-over-year comparisons