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What changed in Outdoor Holding Co's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Outdoor Holding Co's 2022 and 2023 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 2023 report.

+246 added−203 removedSource: 10-K (2023-06-14) vs 10-K (2022-06-29)

Top changes in Outdoor Holding Co's 2023 10-K

246 paragraphs added · 203 removed · 128 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

36 edited+31 added−39 removed27 unchanged
Biggest changeOne customer accounted for approximately 9.8% of our sales for the year ended March 31, 2022 in comparison to year ended March 31, 2021 in which one customers accounted for approximately 16.5% of our sales. Competition The ammunition and ammunition casing industry is dominated by a small number of companies, a number of which are divisions of large public companies.
Biggest changeCompetition The ammunition and ammunition casing industry is dominated by a small number of companies, a number of which are divisions of large public companies. We compete primarily on the quality, reliability, features, performance, brand awareness, and price of our products.
STREAK VISUAL AMMUNITION™ comes in 380 auto, 9 mm, 40 S&W, 44 magnum, 45 long colt, and 38 special among other calibers. 5 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 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.
Applicable laws and regulations provide for the following: ● require the licensing of all persons manufacturing, exporting, importing, or selling ammunition as a business; ● require serialization, labeling, and tracking of the acquisition and disposition of certain types of ammunition; ● regulate the interstate sale of certain ammunition; ● restrict or prohibit the ownership, use, or sale of specified categories of ammunition; ● require registries of so-called “ballistic images” of ammunition fired from new guns; ● govern the sale, export, and distribution of ammunition; ● regulate the use and storage of gun powder or other energetic materials; ● regulate the employment of personnel with certain criminal convictions; ● restrict access to ammunition manufacturing facilities for certain individuals from other countries or with criminal convictions; and ● require compliance with International Traffic in Arms Regulations. 10 The handling of our technical data and the international sale of our products may also be regulated by the U.S.
Applicable laws and regulations provide for the following: ● require the licensing of all persons manufacturing, exporting, importing, or selling ammunition as a business; ● require serialization, labeling, and tracking of the acquisition and disposition of certain types of ammunition; ● regulate the interstate sale of certain ammunition; ● restrict or prohibit the ownership, use, or sale of specified categories of ammunition; ● require registries of so-called “ballistic images” of ammunition fired from new guns; ● govern the sale, export, and distribution of ammunition; ● regulate the use and storage of gun powder or other energetic materials; ● regulate the employment of personnel with certain criminal convictions; ● restrict access to ammunition manufacturing facilities for certain individuals from other countries or with criminal convictions; and ● require compliance with International Traffic in Arms Regulations. 9 The handling of our technical data and the international sale of our products may also be regulated by the U.S.
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. 7 Suppliers We purchase certain of the 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 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.
A cartridge consists of four components: a case made of brass, steel, or copper 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.
These intangible assets are used in the operation and production of our ammunition casing business through our wholly owned subsidiary, Jagemann Munition Components. 9 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.
These 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.
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 Kenectics, 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”), we acquired the rights to a patent for modular projectiles. This technology is used in connection with our AP and HAPI lines of ammunition.
The first payment of $100,000 to the Hallam’s shareholders was paid on September 13, 2017, and the second payment of $100,000 was paid on February 6, 2018. 8 We hold the exclusive worldwide sales and distribution rights for the patented O.W.L. Technology™ used by our STREAK VISUAL AMMUNITION™ via our license agreement with ULL.
The first payment of $100,000 to Hallam’s shareholders was paid on September 13, 2017, and the second payment of $100,000 was paid on February 6, 2018. 7 We hold the exclusive worldwide sales and distribution rights for the patented O.W.L. Technology™ used by our STREAK VISUAL AMMUNITION™ via our license agreement with ULL.
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.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.
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, Jesse James and JMC.
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.
The luminescent material is applied only to the aft end 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.
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.
We also offer ammunition casings for pistol ammunition through large rifle ammunition. STREAK Visual Ammunition STREAK VISUAL AMMUNITION™ enables shooters to see the path of the bullets fired by them. 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.
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.
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, such as Jesse James.
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.
Based on currently available information, we do not believe that environmental matters will have a material adverse effect on our business, operating results, or financial condition. Regulatory Matters The manufacture, sale, and purchase of ammunition are subject to extensive federal, state, local, and foreign governmental laws.
Based on currently available information, we do not believe that environmental matters will have a material adverse effect on our business, operating results, or financial condition. Regulatory Matters The manufacture, sale, and purchase of ammunition are subject to extensive federal, state, local, and foreign governmental laws. We are also subject to the rules and regulations of the U.S.
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 “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell direct to customers online.
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.
As of March 31, 2022, the Company has made $350,000. As of March 31, 2022, 1,550,134 shares remain subject to clawback provisions. The patent will be amortized over 15 years.
As of March 31, 2023, the Company has made $350,000 in payments. As of March 31, 2023, 1,550,134 shares remain subject to clawback provisions. The patent will be amortized over 15 years.
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. The parties expect to complete the amendment to the A&R License Agreement prior to July 15, 2022.
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.
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 interested “2 nd Amendment” buyers and sellers within the US market.
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.
(“Hallam”), ATI succeeded to all of the assets of Hallam and assumed the liabilities of Hallam, which were none. The primary asset of Hallam was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana at Lafayette (“ULL”).
The primary asset of Hallam was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana at Lafayette (“ULL”).
Ownership policies and regulations are followed using licensed firearms dealers as transfer agents. GunBroker.com has over 7.3 million registered users and averages over 1.6 million items listed for sale on its site on a daily basis.
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.
GunBroker.com is a large online marketplace dedicated to firearms, hunting, shooting and related products. Aside from merchandise bearing its logo, GunBroker.com currently sells none of the items listed on its website. Third-party sellers list items on the site and federal and state laws govern the sale of firearms and other restricted items.
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.
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 pistol ammunition comes in 9mm, 40 S&W, and 45 AC3. It is also available in a 223 rifle round.
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.
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.
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.
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.
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.
Key elements of our strategy to achieve this goal are as follows: Design, Produce, and Market Innovative, Distinctive, Performance-Driven, High-Quality Ammunition and Ammunition Components We are focused on designing, producing, and marketing innovative, distinctive, performance-driven, high-quality products that appeal to retailers, manufacturers, and consumers that will enhance our users’ shooting experiences.
Design, Produce, and Market Innovative, Distinctive, Performance-Driven, High-Quality Ammunition and Ammunition Components We are focused on designing, producing, and marketing innovative, distinctive, performance-driven, high-quality products that appeal to retailers, manufacturers, and consumers that will enhance our users’ shooting experiences. Our research and development activities continue to drive opportunity and market attractiveness for our brands.
We compete primarily on the quality, reliability, features, performance, brand awareness, and price of our products. 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.
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.
The success of our efforts depends on the innovation, distinctive features, quality, and performance of our products; the attractiveness of our packaging; the effectiveness of our marketing and merchandising programs; and the effectiveness of our customer support. 4 Emphasis on Customer Satisfaction and Loyalty We plan to continue to emphasize customer satisfaction and loyalty by offering innovative, distinctive, high-quality products on a timely and cost- attractive basis and by offering effective customer service, training, and support.
Emphasis on Customer Satisfaction and Loyalty We plan to continue to emphasize customer satisfaction and loyalty by offering innovative, distinctive, high-quality products on a timely basis and by offering effective customer service, training, and support for the user community.
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. 11 Our History We were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished garments and fabrics, but ceased operations in 2001.
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
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. Under the terms of the 2017 merger between our wholly-owned subsidiary, AMMO Technologies Inc., an Arizona corporation (“ATI”) and Hallam, Inc.
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.
We are also subject to the rules and regulations of the US 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.
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.
Employees As of June 24, 2022, we had a total of 359 employees. Of these employees, 276 were engaged in manufacturing, 33 in sales, marketing and customer service, 20 in research and development, manufacturing engineering, and software engineering, and 30 in various corporate and administrative functions (information technology, accounting, executives, etc.).
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.
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, Wisconsin. Our production processes focus on safety, consistency, precision, and cleanliness. Each round is developed for a specific purpose with a focus on a proper mix of consistency, velocity, accuracy, and recoil.
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.
Proud of its American-made components and capabilities, the Company now has complete control over the manufacturing process. This results in a number of advantages when it comes to the brass that leaves our state-of-the-art facility.
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.
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 the GunBroker.com brand and leveraging the information technologies platform to develop additional complimentary sales channels.
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.
We regard the features, quality, and performance of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer service and support. Continuously Improving Operations We plan to continue focusing on improving all aspects of our business, including research and development, component sourcing, production processes, marketing programs, and customer support.
We regard the features, quality, and performance of our products as the most important components of our customer satisfaction and loyalty efforts. Continuously Improving Operations We continue our efforts to enhance our production and lean out our operations by increasing daily production quantities through equipment acquisition, shift expansion, process improvements, increased operational availability of our equipment, and increased overall efficiency.
We continue to strive to strengthen our relationships with our current distributors, dealers, manufactures, and mass market and specialty retailers and to attract additional distributors, dealers, retailers, and manufacturers.
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.
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ITEM 1. BUSINESS. Introduction We are a designer, producer, and marketer of performance-driven, high-quality ammunition and ammunition component products for sale to a variety of consumers, including sport and recreational shooters, hunters, individuals seeking home or personal protection, manufacturers and law enforcement and military agencies.
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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.
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We also own an online auction site supporting the lawful sale of firearms, ammunition and hunting/shooting accessories. To enhance the strength of our brands and drive product demand, we emphasize product innovation and technology to improve the performance, quality, and affordability of our products while providing support to our distribution channel and consumers.
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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.
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We seek to sell products at competitive prices that compete with high-end, custom, hand-loaded ammunition at competitive prices. Additionally, through our ammunition casing manufacturing and sales operations. We sell ammunition casings products of various types.
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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.
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Each round is chamber gauged and inspected with redundant seven-step quality control processes. GunBroker.com is our online auction site.
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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.
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In its role as the auction site, GunBroker.com serves as the listing service and provides for the exchange of information in a secure manner supporting the third-party listing, sale and lawful purchase of firearms, ammunition and accessories connecting over 7.3 million registered users.
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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.
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Our ongoing research and development activities; our safe, consistent, precision, and clean production processes; and our multi-faceted marketing programs are critical to our success. Continue to Strengthen Relationships with Channel Partners and Retailers.
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Our vision is to expand the services on GunBroker.com and to become a partner to those in our industry.
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We are continuing our efforts to enhance our production by increasing daily production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability of our equipment, reduced equipment down times, and increased overall efficiency. Further, the Company is scheduled to open its new state-of-the-art manufacturing plant in Manitowoc, WI in the Summer of 2022.
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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.
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The opening and full operation of this new plant will permit the deployment of equipment that has been acquired over the past year and more efficient leverage operation of the factory all designed to exponentially increase capacity through the end of calendar 2022 and into 2023.
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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.
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We have also integrated the GunBroker.com operations into the Company and are focused at this time on deploying new content and coding to enhance the buying and selling visitor experience. We are also working to best leverage the GunBroker.com marketplace through the direct or affiliated marketing and sale of merchandise.
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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.
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Enhance Market Share, Brand Recognition, and Customer Loyalty We strive to enhance our market share, brand recognition, and customer loyalty. Industry sources estimate that 70 to 80 million people in the United States own more than approximately 393 million firearms creating a large installed base for our ammunition products.
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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.
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We are focusing on the premium segment of the market through the quality, distinctiveness, and performance of our products; the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
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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.
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Pursue Synergetic Strategic Acquisitions and Relationships We intend to pursue strategic acquisitions and develop strategic relationships designed to enable us to expand our technology and knowhow, expand our product offerings, strengthen and expand our supply chain, enhance our production process, expand our marketing and distribution, and attract new customers.
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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.
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Some of the bullets we produce for certain applications have a jacket, or outer shell, of brass or copper to improve performance and accuracy. We typically produce centerfire cartridges in which the primer is in the bottom, or center of the cartridge, rather than rimfire cartridges in which the primer is in the rim of the cartridge.
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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.
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Jesse James Ammunition Jesse James ammunition is jacketed hollow point projectiles designed for self-defense. The load specific development is designed to ensure accuracy, velocity, and consistency and a low recoil. Jesse James ammunition comes in 9mm, 40 S&W, 10mm, 357, 45 auto calibers.
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Our production processes focus on safety, consistency, precision, and cleanliness. Each round is developed for consistency, velocity, accuracy, and repeatability.
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AP and HAPI Ammunition Our innovative line of match grade armor piercing (“AP”) and hard armor piercing incendiary (“HAPI”) tactical rounds are the centerpiece of the Company’s strategy to address the unique needs of the armed forces community. This ammunition was designed around a match grade portfolio of projectiles, that include a solid copper boat tail and armor piercing configuration.
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The success of our efforts depends on new caliber introduction, innovation in our operations, quality, performance of our products, attractiveness of our retail packaging, and the guarantees we bring to our user community through our customer support efforts.
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The distinction between these rounds and other sold, is that the manufacturing process was engineered to ensure extremely tight tolerances between each projectile manufactured, ensuring for the end user that the ballistic trajectory remains consistent between rounds without regard to the actual configuration or round fired. Our AP and HAPI line is also available with our O.W.L. Technology™.
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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.
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The Company has aligned its manufacturing operations to support the large caliber demand from military personnel, such as the 12.7 mm and .50 caliber BMG configurations.
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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.
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On February 2, 2021, we announced that we restarted our improved .50 caliber manufacturing line to address increased market demand and fulfill current orders. 6 JMC Through Jagemann Munitions Components (“JMC”), we offer ammunition casings for pistol ammunition through large rifle ammunition.
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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.
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Ownership policies and regulations are followed using licensed firearms dealers as transfer agents. GunBroker.com has over 7.3 million registered users and averages over 1.6 million items listed for sale on its site on a daily basis. Marketing We market our products to consumers through distributors, dealers, mass market and specialty retailers, and direct to consumer through e-commerce.
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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.
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Manufacturing Our manufacturing operations are currently based out of Manitowoc and Two Rivers, Wisconsin. We conduct ammunition and ammunition casing manufacturing, research and development, and inspection operations at these leased properties.
Added
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.
Removed
On an annual basis, we can produce 450 million rounds of ammunition with the ability to scale to 1 billion rounds and 750 million ammunition casings with the ability to scale in excess of 1 billion on an annual basis. Our inspection process is intended to enhance the performance and reliability of our products.
Added
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.
Removed
The Company is scheduled to relocate and consolidate most manufacturing and related operations in the Summer of 2022 into its new state-of-the-art plant located in Manitowoc, Wisconsin, near the current leased plant location.
Added
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

38 edited+11 added−14 removed174 unchanged
Biggest changeGeneral economic conditions and consumer spending patterns can negatively impact our operating results. Economic uncertainty, unfavorable employment levels, declines in consumer confidence, increases in consumer debt levels, increased commodity prices, and other economic factors may affect consumer spending on discretionary items and adversely affect the demand for our products.
Biggest changeIn 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.
The facilities also house our principal research, development, engineering, and design functions. Any event that causes a disruption to the operation of these facilities for even a relatively short period of time would adversely affect our ability to produce and ship our products and to provide service to our customers.
These facilities also house our principal research, development, engineering, and design functions. Any event that causes a disruption to the operation of these facilities for even a relatively short period of time would adversely affect our ability to produce and ship our products and to provide service to our customers.
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. 24 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; ● 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.
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; 28 ● 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; 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.
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. 25 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. 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.
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, 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, 2023, 2022, and 2021.
If restrictive changes to legislation develop, we could find it difficult, expensive, or even impossible to comply with them, impeding new product development and distribution of existing products. 13 War, terrorism, other acts of violence or natural or manmade disasters, such as a global pandemic, may affect the markets in which the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
If restrictive changes to legislation develop, we could find it difficult, expensive, or even impossible to comply with them, impeding new product development and distribution of existing products. 11 War, terrorism, other acts of violence or natural or manmade disasters, such as a global pandemic, may affect the markets in which the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.
Applicable laws have the following effects: ● require the licensing of all persons manufacturing, exporting, importing, or selling firearms and ammunition as a business; 21 ● require background checks for purchasers of firearms; ● impose waiting periods between the purchase of a firearm and the delivery of a firearm; ● prohibit the sale of firearms to certain persons, such as those below a certain age and persons with criminal records; ● regulate the use and storage of gun powder or other energetic materials; ● regulate our employment of personnel with criminal convictions; and ● restrict access to firearm manufacturing facilities for individuals from other countries or with criminal convictions.
Applicable laws have the following effects: ● require the licensing of all persons manufacturing, exporting, importing, or selling firearms and ammunition as a business; 19 ● require background checks for purchasers of firearms; ● impose waiting periods between the purchase of a firearm and the delivery of a firearm; ● prohibit the sale of firearms to certain persons, such as those below a certain age and persons with criminal records; ● regulate the use and storage of gun powder or other energetic materials; ● regulate our employment of personnel with criminal convictions; and ● restrict access to firearm manufacturing facilities for individuals from other countries or with criminal convictions.
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. 22 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. 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.
In addition, our dependence on a smaller group of retailers could result in their increased bargaining position and pressures on the prices we charge. 17 The loss of any one or more of our large or “Big Box” retail customers or significant or numerous cancellations, reductions, delays in purchases or changes in business practices by our large or “Big Box” retail customers could have an adverse effect on our business, operating results, and financial condition.
In addition, our dependence on a smaller group of retailers could result in their increased bargaining position and pressures on the prices we charge. 15 The loss of any one or more of our large or “Big Box” retail customers or significant or numerous cancellations, reductions, delays in purchases or changes in business practices by our large or “Big Box” retail customers could have an adverse effect on our business, operating results, and financial condition.
As a result, sales of the endorsed products could be materially and adversely affected if any of those individuals’ images, reputations, or popularity were to be negatively impacted. 20 Increases in the pricing of one or more of our marketing and advertising channels could increase our marketing and advertising expenses or cause us to choose less expensive but possibly less effective marketing and advertising channels.
As a result, sales of the endorsed products could be materially and adversely affected if any of those individuals’ images, reputations, or popularity were to be negatively impacted. 18 Increases in the pricing of one or more of our marketing and advertising channels could increase our marketing and advertising expenses or cause us to choose less expensive but possibly less effective marketing and advertising channels.
This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. 18 Our competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition Division of Olin Corporation, and various smaller manufacturers and importers, including Black Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady, PMC, Rio Ammunition, and Wolf.
This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share. 16 Our competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition Division of Olin Corporation, and various smaller manufacturers and importers, including Black Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady, PMC, Rio Ammunition, and Wolf.
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. 14 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 An inability to expand our E-commerce business could reduce our future growth. Consumers are increasingly purchasing products online.
This in turn may cause us to increase our debt levels and interest expense to fund our working capital requirements. 19 We manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation. Our products are used in activities and situations that involve risk of personal injury and death.
This in turn may cause us to increase our debt levels and interest expense to fund our working capital requirements. 17 We manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation. Our products are used in activities and situations that involve risk of personal injury and death.
In addition, our patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents. 15 We may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management attention from our business.
In addition, our patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents. 13 We may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management attention from our business.
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. 23 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. 21 Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.
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. 26 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. 24 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. 27 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. 25 We may not be able to pay dividends on the Series A Preferred Stock if we have insufficient cash to make dividend payments.
The claims made to the DOL in the Complaint, and such other litigation or claims that may be made against the Company or its officers or directors, from time to time, could negatively affect our business, operations or financial position. As we grow, we will likely see a rise in the number of litigation matters against us.
Urvan and such other litigation or claims that may be made against the Company or its officers or directors, from time to time, could negatively affect our business, operations or financial position. As we grow, we will likely see a rise in the number of litigation matters against us.
During the audit of our financial statements for the year ended March 31, 2022, our management identified material weaknesses in our internal control over financial reporting.
During the audit of our financial statements for the year ended March 31, 2023, our management identified material weaknesses in our internal control over financial reporting.
We have two customers that accounted for approximately 18% of our revenues for the years ended March 31, 2022 in comparison to one customer that accounted for approximately 17% of our revenues for the year ended March 31, 2021.
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.
An increase in market interest rates, which are currently 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, 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).
At March 31, 2022, our total liabilities equaled approximately $40.8 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, 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.
The Company’s business and supply chain may 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 (including the coronavirus commonly referred to as “COVID- 19”).
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.
As of June 24, 2022, there were no options outstanding and 1,965,304 shares of Common Stock are reserved for future issuance under the 2017 Equity Incentive Plan.
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.
Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our results of operations. The inability to obtain sufficient quantities of raw materials and components, including casings, primers, gun powder, projectiles, and brass necessary for the production of our products could result in reduced or delayed sales or lost orders.
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 exercise of warrants, and issuance of incentive stock grants may have a dilutive effective on our stock, and negatively impact the price of our Common Stock. As of June 24, 2022, we had 2,833,755 warrants outstanding with a weighted average exercise price of $2.40.
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.
Our orders with certain of our suppliers may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders.
As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders.
War, riots, or other disasters may increase the need for our products and demand by our government and military and may make it more difficult to provide our products to other customers.
War, riots, or other disasters may increase the need for our products and demand by our government and military and may make it more difficult to provide our products to other customers. Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.
Shipments of ammunition for hunting are highest during the months of June through September to meet consumer demand for the fall hunting season and holidays. The seasonality of our sales may change in the future.
Shipments of ammunition for hunting are highest during the months of June through September to meet consumer demand for the fall hunting season and holidays. The seasonality of our sales may change in the future. Seasonal variations in our operating results may reduce our cash on hand, increase our inventory levels, and extend our accounts receivable collection periods.
As a result, economic conditions also can have an adverse effect on the sale of our products to law enforcement, government, and military customers. Political and other factors also can adversely affect our performance. Concerns about presidential, congressional, and state elections and legislature and policy shifts resulting from those elections can adversely affect the demand for our products.
Political and other factors also can adversely affect our performance. Concerns about presidential, congressional, and state elections and legislature and policy shifts resulting from those elections can adversely affect the demand for our products.
In addition, as of March 31, 2022, our management concluded that our disclosure controls and procedures were not effective. 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.
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.
If ammunition sales decline, our financial results could be adversely impacted and the stock price of our Common Stock could decline. 16 Our manufacturing facilities are critical to our success.
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.
Any delay in or loss of sales or orders could adversely impact our operating results. Many of the materials used in the production of our products are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers.
Many of the materials used in the production of our products are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers. As a result, we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components.
As a result, we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components. Our reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability, quality, and price of these raw materials and components.
Our reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability, quality, and price of these raw materials and components. Our orders with certain of our suppliers may represent a very small portion of their total orders.
The claims were investigated by a Special Committee of the Board made up of independent directors represented by independent legal counsel. The Special Committee and independent legal counsel found the claims were unsubstantiated and there were no SEC violations in the various allegations in the Complaint.
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.
We anticipate that we will continue to incur significant capital and other expenditures with respect to these facilities and our plans to construct a new $26 million manufacturing plant, but we may not be successful in continuing to improve efficiencies.
We have incurred significant capital and other expenditures with respect to our $26 million manufacturing plant, but we may not be successful in continuing to improve efficiencies. Shortages of components and materials may delay or reduce our sales and increase our costs, thereby harming our results of operations.
In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand for our products. Any substantial deterioration in general economic conditions that diminish consumer confidence or discretionary income could reduce our sales and adversely affect our operating results. Economic conditions also affect governmental political and budgetary policies.
In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand for our products. Economic conditions also affect governmental political and budgetary policies. As a result, economic conditions also can have an adverse effect on the sale of our products to law enforcement, government, and military customers.
Removed
Further, travel restrictions and protective measures against COVID-19 could cause the Company to incur additional unexpected labor costs and expenses or could restrain the Company’s ability to retain the highly skilled personnel the Company needs for its operations.
Added
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.
Removed
The extent to which COVID-19 impacts the Company’s business, sales and results of operations will depend on future developments, which are highly uncertain and cannot be predicted. We believe COVID-19 has not negatively affected our operational results in a material manner, but it may at any time and without notice in the foreseeable future.
Added
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.
Removed
As a result of COVID-19, at any time we may be subject to increased operating costs, supply interruptions, and difficulties in obtaining raw materials and components. COVID-19 has resulted in restrictions, postponements and cancelations of meetings, conferences, trade shows.
Added
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.
Removed
The impact, extent and duration of the government imposed restrictions on travel and public gatherings as well as the overall effect of the COVID-19 virus is currently unknown. Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.
Added
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.
Removed
The matter is currently the subject of administrative investigation by the DOL via the Occupational Safety and Health Administration (“OSHA”). The Company filed a timely Position Statement with the DOL in October of 2019 in response to the Complaint. The Company disputes the allegations of wrongdoing and believes the matters raised in the Complaint are without merit.
Added
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.
Removed
The DOL investigator issued a “for cause” finding, and the Company filed a notice of hearing to participate in a de novo regulatory hearing before an independent DOL hearing officer. The Complaining Party filed suit in the District Court of Arizona pursuing the claim in that venue, bringing to an end the DOL proceedings.
Added
The Company is currently in communications with its insurance carriers as concerns coverage (defense and indemnification), has engaged counsel and formal/legal service of process is being coordinated at this time.
Removed
The Company will be filing its responsive pleading shortly and will vigorously defend this matter as it continues to believe the claim is without legal or factual merit.
Added
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.
Removed
On January 5, 2021, we announced entering into a term sheet with the City of Manitowoc, Wisconsin to acquire in excess of 35 acres in Manitowoc Industrial Park for the purpose of constructing an estimated $12 million, 160,000 square foot, expanded loaded ammunition and brass casing manufacturing plant, to be operational by the summer of 2022.
Added
The Company failed to maintain an effective control environment due to the following: ● the Company’s management and the governance did not maintain appropriately designed entity-level controls impacting the control environment to prevent or detect material misstatements to the consolidated financial statements.
Removed
On April 8, 2021, we acquired the 35 acres via a wholly-owned subsidiary formed for that purpose, Firelight Group I, LLC and broke ground on the construction on June 21, 2021.
Added
These deficiencies were attributed to limited personnel to assist with the accounting and financial reporting function and inadequate oversight and accountability over the performance of control activities, including establishment of a Whistleblower Hotline and lack of formalization of certain key governance elements: management delegation, annual board committee charter review, acknowledgement of code of conduct, and approval of the annual budget; ● the Company failed to maintain properly designed segregation of duties, both within manual processes and system access; ● the Company failed to maintain effectively designed controls over journal entries, both recurring and nonrecurring, account reconciliations, and periodic flux analysis.
Removed
The land is located in a Tax Increment Finance District and the acquisition was, in part, funded through Tax Incremental Financing (“TIF”) via a Development Agreement entered into between Firelight Group I, LLC and the City of Manitowoc. The Development Agreement provides for an estimated Total Incentive of $1.7 million.
Added
Journal entries were not always accompanied by sufficient supporting documentation and were not adequately reviewed and approved for validity, completeness, and accuracy.
Removed
The Development Agreement included an initial $750,000 TIF Payment provided to Firelight by the City of Manitowoc via TID 21 in which the Manitowoc Industrial Park and subject parcel is located.
Added
In most instances, persons responsible for reviewing journal entries and account reconciliations for validity, completeness, and accuracy were also responsible for preparation. ● the Company failed to maintain effectively designed controls over the period-end financial reporting process, including adequate tie-out and review of documentation that supports the financial statements; and ● the Company failed to maintain effectively designed controls over information technology general controls in the areas of user provisioning and de-provisioning, application change management, operating system and logical access controls, and segregation of duties for information technology (“IT”) systems that supports the Company’s financial reporting process.
Removed
Construction efforts on the new manufacturing plant are approaching the end and the Company is scheduled to relocate principally all of its manufacturing operations into the new facility in the Summer of 2022. Our manufacturing facilities are critical to our success, as we currently produce all of our products at these facilities.
Removed
The hunting season for our 2023 fiscal year season may be affected by travel restrictions and other limitations imposed as a result of COVID-19 that are unpredictable. Seasonal variations in our operating results may reduce our cash on hand, increase our inventory levels, and extend our accounts receivable collection periods.
Removed
Due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in: (i) a lack of segregation of duties and (ii) controls that may not be adequately designed or operating effectively.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−1 removed0 unchanged
Biggest changeThe purpose of this space is for warehousing related to our GunBroker.com operations. We are in the process of constructing a 160,000 square foot facility in Manitowoc, Wisconsin. We will utilize this facility for ammunition and casing manufacturing, research and development, packing, and shipping activities. A portion of this facility will be financed by our Construction Loan.
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.
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. 29 We lease a 50,000 square foot facility located in Manitowoc, Wisconsin for approximately $34,000 per month.
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.
We utilize this facility for ammunition manufacturing, packaging, and shipping activities. 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.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.
Removed
We utilize this facility for our ammunition casing manufacturing, research and development, packing and shipping activities. We lease a 10,000 square foot facility located in Atlanta, Georgia for approximately $19,000 per month. This space houses our GunBroker.com offices and operations. We lease a 50,000 square foot facility located in Two Rivers, Wisconsin for approximately $12,000 per month.
Added
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 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4: MINE SAFETY DISCLOSURE 30 PART II ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES 30 ITEM 6: RESERVED 31 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 31 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 40 ITEM 8: FINANCIAL STATEMENTS 40 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 40 ITEM 9A: CONTROLS AND PROCEDURES 41
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

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders of Common Equity As of June 24, 2022, a total of 116,588,009 shares of our Common Stock were outstanding and there were approximately 293 holders of record. Dividend Information We have never declared or paid dividends on our Common Stock.
Biggest changeHolders 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.
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. 30 Securities Authorized for Issuance under Equity Compensation Plans The following table sets forth information as of March 31, 2022 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, 2023 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 $2.7 million for the year ended March 31, 2022.
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.
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 - - 2,005,304 Total - - 2,005,304 Transfer Agent We have appointed Action Stock Transfer Corporation (“AST”) 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 - - 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.
Removed
The principal office of AST is located at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121, and its telephone number is (801) 274-1088. Recent Sales of Unregistered Securities On January 14, 2022, we issued 97,677 shares of our Common Stock in accordance with the cashless exercise of a warrant for a total value of $594,030.
Added
The principal office of STC is located at 2901 N. Dallas Parkway, Suite 380 Plano, Texas 75093, and its telephone number is (469) 633-0101. Recent Sales of Unregistered Securities None.
Removed
On March 3, 2022, we issued 100,000 warrants for services for a total value of $496,043. These warrants have an exercise price of $0.01 and also contain a cashless exercise feature.
Added
Issuers Repurchase of Equity Securities On February 8, 2022, we announced that our Board of Directors authorized a share repurchase program for up to $30 million of our outstanding common stock. On March 28, 2023, we announced that our Board of Directors authorized the extension of our repurchase program until February 2024.
Added
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
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.
Added
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.
Added
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, 2018 through March 31, 2023.
Added
The graph assumes an investment of $100 in our common stock and in each of the indexes on March 31, 2018.
Added
The calculation of cumulative stockholder return on the NASDAQ CMC and Russell 2000 include reinvestment of dividends, but the calculation of cumulative stockholder return on our common stock does not include reinvestment of dividends because we did not pay any dividends during the measurement period. The performance shown is not necessarily indicative of future performance.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe Company has since developed the ballistic match (BMMPR) and signature-on-target (SoT) rounds under contract with the U.S. Government in support of US special operations which have been publicly announced pursuant to governmental authorization. Additional work continues in support of the military operations of the U.S. and its ally military components which is not currently subject to disclosure.
Biggest changeWe 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.
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, $1.1 million of warrants issued for services, $1.3 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 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.
Investing Activities 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.
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.
We anticipate that it may become necessary to reclassify research and development costs into our operating expenditures for reporting purposes as we begin to develop new technologies and lines of ammunition. Revenue Recognition We generate revenue from the production and sale of ammunition, and marketplace fee revenue, which includes auction revenue, payment processing revenue, and shipping income.
We anticipate that it may become necessary to reclassify research and development costs into our operating expenditures for reporting purposes as we begin to develop new technologies and lines of ammunition. Revenue Recognition We generate revenue from the production and sale of ammunition, ammunition casings, and marketplace fee revenue, which includes auction revenue, payment processing revenue, and shipping income.
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 $3.2 million, respectively, and decreases of prepaid expenses of $1.6 million.
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.
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. During 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. 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.
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. 31 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. 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.
Through our acquisition of SWK, the Company has developed and deployed a new line of tactical armor piercing (AP) and hard armor piercing incendiary (HAPI) precision ammunition to meet the lethality requirements of both the US and foreign military customers.
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.
Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of our Standard Ammunition. 34 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 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.
Our “Standard Ammunition” is manufactured within our facility and may also include completed ammunition that has been acquired in the open market for sale to others. Also included in this category is low cost target pistol and rifle ammunition, as well as bulk packaged ammunition manufactured by us using reprocessed brass casings.
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.
Off-Balance Sheet Arrangements As of March 31, 2022, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources.
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.
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. 39 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. 40 Income Taxes We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction.
At March 31, 2022, and March 31, 2021, 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. 38 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, 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.
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 GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounted of assets, liabilities, revenues, and expenses.
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.
We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting units.
We test goodwill for impairment under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit.
At March 31, 2022 and March 31, 2021, we reserved $3,055,252 and $148,540, 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, 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.
Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
For Ammunition Sales and Casing Sales, our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
This will be accomplished through the following: ● Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, Stelth and now our tactical Armor Piercing (AP) and Hard Armor Piercing Incendiary (HAPI) precision ammunition, all of which carry higher margins as a percentage of their selling price; ● Introduction of new lines of ammunition that historically carry higher margins in the consumer and government sectors; ● Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers; ● Expanded use of automation equipment that reduces the total labor required to assemble finished products ● And, better leverage of our fixed costs through expanded production to support the sales objectives. 35 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.
This will be accomplished through the following: ● Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, Stelth and now our tactical Armor Piercing (AP) and Hard Armor Piercing Incendiary (HAPI) precision ammunition, all of which carry higher margins as a percentage of their selling price; ● Introduction of new lines of ammunition that historically carry higher margins in the consumer and government sectors; ● Reduced component costs through operation of our ammunition segment and expansion of strategic relationships with component providers; ● Expanded use of automation equipment that reduces the total labor required to assemble finished products ● And, better leverage of our fixed costs through expanded production to support the sales objectives. 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.
Adjusted EBITDA For the For the Year Ended Year Ended March 31, 2022 March 31, 2021 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ 33,247,436 $ (7,812,294 ) Provision for income taxes 3,285,969 - Depreciation and amortization 17,339,093 4,876,756 Interest expense, net 637,797 3,009,094 Excise taxes 14,646,983 4,286,258 Employee stock awards 5,759,000 1,450,359 Stock grants 252,488 278,585 Stock for services 4,200 1,707,500 Warrants issued for services 718,045 - Contingent consideration fair value (385,750 ) (119,731 ) Other income (21,840 ) (576,785 ) Loss on purchase - 1,000,000 Adjusted EBITDA $ 75,483,421 $ 8,099,742 Adjusted EBITDA is a non-GAAP financial measures that displays our net loss, adjusted to eliminate the effect of certain items as described below. 33 We have excluded the following non-cash expenses from our non-GAAP financial measures: provision or benefit for income taxes, depreciation and amortization, loss on purchase, share-based or warrant-based compensation expenses, and changes to the contingent consideration fair value.
Adjusted EBITDA For the For the Year Ended Year Ended March 31, 2022 March 31, 2021 Reconciliation of GAAP net income to Adjusted EBITDA Net Income (Loss) $ 33,247,436 $ (7,812,294 ) Provision for income taxes 3,285,969 - Depreciation and amortization 17,339,093 4,876,756 Interest expense, net 637,797 3,009,094 Employee stock awards 5,759,000 1,450,359 Stock grants 252,488 278,585 Stock for services 4,200 1,707,500 Warrants issued for services 718,045 - Contingent consideration fair value (385,750 ) (119,731 ) Other income (21,840 ) (576,785 ) Loss on purchase - 1,000,000 Adjusted EBITDA $ 60,836,438 $ 3,813,484 Adjusted EBITDA is a non-GAAP financial measures that displays our net loss, adjusted to eliminate the effect of certain items as described below. 35 We have excluded the following non-cash expenses from our non-GAAP financial measures: provision or benefit for income taxes, depreciation and amortization, loss on purchase, share-based or warrant-based compensation expenses, and changes to the contingent consideration fair value.
This was the result of our newly acquired marketplace, GunBroker.com which, by nature has significantly higher margins than our manufactured products. 32 The following table presents summarized financial information taken from our consolidated statements of operations for the year ended March 31, 2022 compared with the year ended March 31, 2021: For the Year Ended March 31, 2022 March 31, 2021 Net Sales $ 240,269,166 $ 62,482,330 Cost of Revenues 151,505,657 51,095,679 Gross Margin 88,763,509 11,386,651 Sales, General & Administrative Expenses 51,614,147 16,766,636 Income (loss) from Operations 37,149,362 (5,379,985 ) Other income (expense) Other income (expense) (615,957 ) (2,432,309 ) Income (loss) before provision for income taxes $ 36,533,405 $ (7,812,294 ) Provision for income taxes 3,285,969 - Net Income (Loss) $ 33,247,436 $ (7,812,294 ) Non-GAAP Financial Measures We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance.
The following table presents summarized financial information taken from our consolidated statements of operations for the year ended March 31, 2022 compared with the year ended March 31, 2021: For the Year Ended March 31, 2022 March 31, 2021 Net Sales $ 240,269,166 $ 62,482,330 Cost of Revenues 151,505,657 51,095,679 Gross Margin 88,763,509 11,386,651 Sales, General & Administrative Expenses 51,614,147 16,766,636 Income (loss) from Operations 37,149,362 (5,379,985 ) Other income (expense) Other income (expense) (615,957 ) (2,432,309 ) Income (loss) before provision for income taxes $ 36,533,405 $ (7,812,294 ) Provision for income taxes 3,285,969 - Net Income (Loss) $ 33,247,436 $ (7,812,294 ) Non-GAAP Financial Measures We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance.
Actual results could differ from those estimates. Significant estimates made in preparing the 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 doubtful accounts, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation and warrant-based compensation.
We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. The measurement date of our annual goodwill impairment test is March 31.
We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we included in the section titled Risk Factors contained herein. Overview Our vision is to modernize the ammunition industry by bringing new technologies to market.
We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we included in the section titled Risk Factors contained herein.
We expect to make $0.6 million in principal and interest payments within the next 12 months. The total principal balance of the Construction Note is expected to be $11.6 million upon completion of the project and will mature on October 14, 2026.
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.
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, 2022. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts payable, and amounts due to related parties.
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.
Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
We have included an adjustments for our provision or benefit for income taxes and excise taxes. Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP.
Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP.
Cost of Revenues Cost of revenues increased by approximately $100.4 million from $51.1 million to $151.5 million, respectively for the year ended March 31, 2022 compared with the year ended March 31, 2021.
Management expects the sales growth rate of Proprietary Ammunition to greatly outpace the sales of our Standard Ammunition. 36 Cost of Revenues Cost of revenues increased by approximately $100.4 million from $51.1 million to $151.5 million, respectively for the year ended March 31, 2022 compared with the year ended March 31, 2021.
This was primarily the result of a net loss of approximately $7.8 million, increases in our period end accounts receivable of $6.1 million and our period end Inventories of $11.5 million, which was offset by increases in accounts payable and accrued liabilities of $1.8 million and $1.8 million, respectively, and a loss on purchase of $1.0 million.
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.
It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our Company, they also have a long sales cycle.
Additional work continues in support of the military operations of the U.S. and its ally military components which is not currently subject to disclosure. It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our Company, they also have a long sales cycle.
Additionally, approximately $121.5 million was generated from accounts receivable factoring, which was offset by payments of approximately $122.8 million. 37 During the year ended March 31, 2021, net cash provided by financing activities was $139.3 million.
Additionally, approximately $71.3 million was generated from accounts receivable factoring, which was offset by payments of approximately $72.3 million. 38 During the year ended March 31, 2022, net cash used in financing activities was approximately $28.2 million.
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, 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.
We have hired a strong team of professionals, developed innovative products, and continue to establish our presence as a high-quality ammunition provider. We continue to focus on growing our top line revenue, and streamlining our operations. We experienced an increase in our gross profit margin for the year ended March 31, 2022.
We believe that we have hired a strong team of professionals, developed innovative products, and continue to raise capital sufficient to establish our presence as a high-quality ammunition provider and marketplace. We continue to focus on growing our top line revenue and streamlining our operations. We continue to focus on growing our top line revenue, and streamlining our operations.
Excise Tax As a result of regulations imposed by the Federal Government for sales of ammunition to non-government U.S. entities, we charge and collect an 11% excise tax for all products sold into these channels. During the year ended March 31, 2022 and 2021, we recognized $14,646,983 and $4,286,258, respectively, in excise taxes.
Revenue is recognized at a point in time when the identity verification is completed. Excise Tax As a result of regulations imposed by the Federal Government for sales of ammunition to non-government U.S. entities, we charge and collect an 11% excise tax for all products sold into these channels.
Our goal is to continue to improve our operating results as we focus on increasing sales and controlling our operating expenses. 36 Liquidity and Capital Resources As of March 31, 2022, we had $23,281,475 of cash and cash equivalents, a decrease of $95,059,996 from March 31, 2021.
Our goal is to continue to improve our operating results as we focus on increasing sales and controlling our operating expenses. 37 Liquidity and Capital Resources As of March 31, 2023, we had $39,134,027 of cash and cash equivalents, an increase of $15,852,552 from March 31, 2022.
Goodwill We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.
Goodwill We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.
These sources have been adequate to fund our recurring cash expenditures including but not limited to our working capital requirements, capital expenditures to expand our operations, debt repayments, and acquisitions. We intend to continue use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases and any potential acquisitions.
Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes. These sources have been adequate to fund our recurring cash expenditures including but not limited to our working capital requirements, capital expenditures to expand our operations, debt repayments, and acquisitions.
For the year ended March 31, 2021, net cash used in operations totaled approximately $14.4 million.
For the year ended March 31, 2022, net cash provided by operations totaled approximately $2.9 million.
Related Party Note Payable As of March 31, 2022, we had an outstanding balance on our Related Party Note Payable of approximately $0.9 million, of which $0.7 million is due within the next 12 months. Construction Note Payable We will finance a portion of our new production facility with our Construction Note Payable.
Please refer to Note 9 – Leases for additional information. Related Party Note Payable As of March 31, 2023, we had an outstanding balance on our Related Party Note Payable of approximately $0.2 million, of which the balance in its entirety million is due within the next 12 months.
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. 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.
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.
Leases We lease six locations that are used for our offices, production, and warehousing. As of March 31, 2022, we had $3.5 million of fixed lease payment obligations with $1.1 million payable within the next 12 months. Please refer to Note 8 – Leases for additional information.
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 recognize expense related to stock-based payment transactions in which we receive employee or non-employee services in exchange for equity. We measure stock compensation based on the closing fair market value of our Common Stock on the date of grant.
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.
The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of $4.9 million, employee stock compensation of $1.5 million, stock issued for services of $1.7 million, stock grants totaling $0.3 million, and a decrease related to an adjustment to the fair value of contingent consideration of $0.1 million and forgiveness of our paycheck protection program notes of $1.1 million.
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.
Working Capital is summarized and compared as follows: March 31, 2022 March 31, 2021 Current assets $ 129,691,636 $ 145,620,332 Current liabilities 35,823,311 12,098,493 $ 93,868,325 $ 133,521,839 Changes in cash flows are summarized as follows: Operating Activities For the year ended March 31, 2022, net cash provided by operations totaled approximately $2.9 million.
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.
Liquidity Existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year. Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes.
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.
During the year ended March 31, 2021, we used $7.4 million in net cash for investing activities to purchase fixed assets such as new production equipment. Financing Activities During the year ended March 31, 2022, net cash used in financing activities was approximately $28.2 million.
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.
Removed
We intend to do that through acquisition and application of intellectual property that is unique to the industry and through investing in manufacturing equipment and processes that enable us to compete globally.
Added
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.
Removed
Our innovative line of match grade armor piercing (AP), hard armor piercing incendiary (HAPI) tactical and ballistically matched (BMMPR) rounds are the centerpiece of the Company’s strategy to address the unique needs of the armed forces community. This ammunition was designed around a match grade portfolio of projectiles, that include a solid copper boat tail and armor piercing configuration.
Added
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.
Removed
The distinction between these rounds and other sold, is that the manufacturing process was engineered to ensure extremely tight tolerances between each projectile manufactured, ensuring for the end user that the ballistic trajectory remains consistent between rounds without regard to the actual configuration or round fired.
Added
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.
Removed
The Company has aligned its manufacturing operations to support the large caliber demand from military personnel, such as the 7.62x39, .300NM, .338 Lapua, 12.7 mm and .50 caliber BMG configurations. On February 2, 2021, we announced that we restarted our improved .50 caliber manufacturing line to address increased market demand and fulfill current orders.
Added
The nature and operation of the Marketplace as an online auction and sales platform also affords our Company a unique view into the total domestic market for the purpose of understanding sales trends at a granular level across all elements of the outdoor sports and shooting space.
Removed
Through JMC, we offer ammunition casings for pistol ammunition through large rifle ammunition. Jagemann Munitions Components is backed by decades of manufacturing experience that allows the production of high-quality pistol brass and rifle brass components.
Added
Our vision is to expand the services on GunBroker.com and to become a peer to those in our industry.
Removed
Borne from the automotive industry and refined over time to deliver durable and consistent sporting components, Jagemann Munition Components™, has become one of the largest brass manufacturers in the country, with the capacity to produce more than 750 million pieces of brass each year with the ability to scale to 1 billion rounds on an annual basis.
Added
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 using a single form of payment for all items purchased, ● Carting Ability - allowing our buyers to purchase multiple items from multiple sellers at one point in time, and, ● GunBroker.com Analytics – through the compilation and refinement of vast Marketplace data, we plan to offer domestic market analytics to our industry peers to allow them to better manage their businesses.
Removed
Proud of its American-made components and capabilities, the Company now has complete control over the manufacturing process. This results in a number of advantages when it comes to the brass that leaves our state-of-the-art facility. On April 30, 2021, we acquired Gemini and nine of its subsidiaries, all of which are related to Gemini’s ownership of the Gunbroker.com business.
Added
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.
Removed
GunBroker.com is a large online marketplace dedicated to firearms, hunting, shooting and related products. Third-party sellers list items on the site and federal and state laws govern the sale of firearms and other restricted items. Ownership policies and regulations are followed using licensed firearms dealers as transfer agents.
Added
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.
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The focus for our 2023 fiscal year is to continue to expand our brand presence into the markets identified above and to continue to grow our sales within our targeted markets.
Added
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.
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We intend to do this through establishing key strategic relationships, enrolling in government procurement programs, establishing relationships with leading law enforcement associations and programs, expanding distributor channels, and revitalized marketing campaigns. Results of Operations Our financial results for the year ended March 31, 2022 reflect our newly positioned organization.
Added
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.
Removed
This line was formally launched at SHOT Show in Las Vegas, where our team demonstrated or presented the capability to more than 15 countries around the world. We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions.
Added
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.
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Our goal in the next 12 to 24 months is to continue to improve our gross margins.
Added
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.
Removed
Existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities are expected to be adequate to fund our operations over the next year. Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes.
Added
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.
Removed
This was the net effect of $138.6 million generated from the sale of Common Stock, net of cash payments of $13.9 million in conjunction with Common Stock offerings. Additionally, $40.3 million was generated from accounts receivable factoring, which was offset by payments of $40.4 million. There was $3.5 million cash generated from the issuance of a related party note payable.
Added
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.
Removed
These increases to our financing activities were offset by payment of $8.8 million on the related party notes payable, $0.5 million toward our insurance premium note payable and a $1.5 million payment on the repurchase and cancellation of 1,000,000 shares of our Common Stock.
Added
We have included these non-GAAP financial measures in this Quarterly Report on Form 10-Q because they are key measures we use to evaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating to operating expenses and the allocation of our resources.
Removed
Net Operating Loss Carry Forwards At March 31, 2021, we had Federal net operating loss carry forwards (“NOLs”) for income tax purposes of approximately $31.9 million which will begin to expire in 2036.
Added
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.
Removed
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020 provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may now be carried back five years and forward indefinitely. In addition, the 80% taxable income limitation is temporarily removed, allowing NOLs to fully offset net taxable income.
Added
(2) Other nonrecurring expenses consist of professional and legal fees that are nonrecurring in nature.

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