UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-13101 Outdoor Holding Company (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or ...

Exhibit 99.1 Outdoor Holding Company Reports First Quarter Fiscal 2026 Financial Results SCOTTSDALE, Ariz., August 8, 2025 (GLOBE NEWSWIRE) — Outdoor Holding Company (Nasdaq: POWW, POWWP) ("OHC," "we," "us," "our" or the "Company"), the owner of GunBroker.com, the largest online marketplace for firearms, hunting and related products, today reported its financial results for its first fiscal quarter ended June 30, 2025. First Quarter Fiscal 2026 vs. First Quarter Fiscal 2025 Financial Highlights Operational ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 001-13101 Outdoor Holding Company (Exact name of registrant as specified in its charter) State or other jurisdiction of incorporation ...

[Part I - Financial Information](index=3&type=section&id=Part%20I) [Financial Statements](index=3&type=section&id=ITEM%201%3A%20FINANCIAL%20STATEMENTS) The company reported increased net losses and decreased total assets, with a significant post-period ammunition business sale and impairment [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | Balance Sheet Items | September 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $33,525 | $55,586 | | Inventories | $51,839 | $45,563 | | Goodwill | $90,870 | $90,870 | | **Total Assets** | **$368,923** | **$403,039** | | **Liabilities** | | | | Total Current Liabilities | $29,750 | $30,975 | | **Total Liabilities** | **$43,351** | **$44,989** | | **Shareholders' Equity** | | | | Accumulated deficit | ($98,668) | ($69,923) | | **Total Shareholders' Equity** | **$325,572** | **$358,050** | - Total assets decreased by approximately **$34.1 million**, primarily driven by a **$22.1 million** decrease in cash and cash equivalents. The accumulated deficit widened by **$28.7 million** during the six-month period[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (in thousands) | Metric | Q2 2024 | Q2 2023 | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $31,420 | $34,372 | $62,373 | $68,627 | | Gross Profit | $7,219 | $8,276 | $16,997 | $22,289 | | Loss from Operations | ($12,464) | ($9,012) | ($22,872) | ($11,010) | | Net Loss | ($12,428) | ($7,666) | ($27,188) | ($8,970) | | Net Loss per Share (Basic & Diluted) | ($0.11) | ($0.07) | ($0.24) | ($0.09) | - Net revenues decreased by **8.6%** for the three months and **9.1%** for the six months ended September 30, 2024, compared to the prior year periods. The decline was driven by lower sales in both the Ammunition and Marketplace segments[12](index=12&type=chunk)[180](index=180&type=chunk) - Operating expenses increased significantly, leading to a larger loss from operations. For the three-month period, operating loss grew to **$12.5 million** from **$9.0 million** year-over-year[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flow](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20flow) Cash Flow Summary for the Six Months Ended September 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | ($9,885) | $18,151 | | Net cash used in investing activities | ($2,850) | ($2,618) | | Net cash used in financing activities | ($9,326) | ($5,602) | | **Net (decrease)/increase in cash** | **($22,061)** | **$9,931** | - Cash from operations turned negative, with a use of **$9.9 million**, a stark contrast to the **$18.2 million** provided in the same period last year. This was primarily due to an increase in inventories and a decrease in accounts payable[19](index=19&type=chunk)[197](index=197&type=chunk) - Financing activities used **$9.3 million** in cash, largely due to a **$5.9 million** stock repurchase plan, **$1.4 million** in preferred stock dividends, and **$1.4 million** in insurance premium note payments[19](index=19&type=chunk)[201](index=201&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's name change, ammunition business sale, major legal disputes, and subsequent asset impairment and potential settlement - The company changed its name from AMMO, Inc. to Outdoor Holding Company on **April 21, 2025**, following the sale of its ammunition manufacturing business[25](index=25&type=chunk)[168](index=168&type=chunk) - The company faces a significant legal challenge from director Steve Urvan, who is seeking rescission of the GunBroker Merger and damages of at least **$140 million**. The company is also suing Urvan for fraud. A trial is scheduled for **July 2025**[79](index=79&type=chunk) - Subsequent to the quarter end, on **January 20, 2025**, the company entered an agreement to sell its Ammunition Manufacturing Business to Olin Winchester, LLC for a gross purchase price of **$75.0 million**. The transaction was completed on **April 18, 2025**[144](index=144&type=chunk)[149](index=149&type=chunk) - In connection with the sale of the ammunition business, the company determined an impairment of assets totaling **$45.8 million** would be recorded in the year ended March 31, 2025, including **$17.1 million** in inventory and **$25.4 million** in property, plant, and equipment[150](index=150&type=chunk) - The company is under investigation by the SEC Staff regarding its accounting for share-based compensation, capitalization of costs, and disclosure of perquisites and related party transactions. The potential loss is currently inestimable[157](index=157&type=chunk) [Management's Discussion and Analysis (MD&A)](index=33&type=section&id=ITEM%202%3A%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) MD&A details the strategic business sale, revenue and margin declines, increased operating expenses, and reduced cash, while addressing future liquidity [Strategic Changes](index=33&type=section&id=Sale%20of%20Ammo%20Manufacturing%20Business%20and%20Name%20Change) - On **April 18, 2025**, the company completed the sale of its Ammunition Manufacturing Business to Olin Winchester, LLC for **$75 million**. The company will continue to operate its GunBroker online marketplace business[167](index=167&type=chunk) - In connection with the sale, the company changed its name from "AMMO, Inc." to "Outdoor Holding Company" on **April 21, 2025**[168](index=168&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Revenue by Category (in thousands) | Revenue Category | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | | Proprietary Ammunition | $4,078 | $2,335 | | Standard Ammunition | $25,241 | $27,287 | | Ammunition Casings | $8,789 | $12,617 | | Marketplace Revenue | $24,265 | $26,387 | | **Total Revenues** | **$62,373** | **$68,627** | - Net revenues decreased **9.1%** for the six months ended Sep 30, 2024, due to changes in market demand, pricing, and sales mix, particularly a decrease in brass customer demand[180](index=180&type=chunk) - Gross margin percentage for the six-month period decreased to **27.3%** from **32.5%** year-over-year, attributed to increased cost of materials, labor, and overhead in the Ammunition segment[187](index=187&type=chunk) - Operating expenses for the six months ended Sep 30, 2024 increased by **$6.6 million**, primarily due to a **$5.3 million** increase in legal fees and a **$3.2 million** settlement contingency[191](index=191&type=chunk) Adjusted EBITDA Reconciliation (Non-GAAP, in thousands) | Metric | Six Months 2024 | Six Months 2023 | | :--- | :--- | :--- | | Net loss | ($27,188) | ($8,970) | | Adjustments | $30,207 | $16,851 | | **Adjusted EBITDA** | **$3,019** | **$7,881** | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) - As of September 30, 2024, cash and cash equivalents were **$33.5 million**, a decrease of **$22.1 million** from March 31, 2024[195](index=195&type=chunk) - The decrease in cash was primarily due to an **$8.0 million** settlement payment, **$5.6 million** in legal fees, **$2.7 million** in excise tax payments, and **$1.1 million** in stock buybacks[195](index=195&type=chunk) - Working capital decreased from **$100.6 million** at March 31, 2024, to **$78.8 million** at September 30, 2024[196](index=196&type=chunk) - The company has an **$11.625 million** construction loan for its Manitowoc facility, with a maturity date of **October 14, 2026**, and a **$20.0 million** revolving loan facility with no outstanding balance as of September 30, 2024[205](index=205&type=chunk)[211](index=211&type=chunk)[214](index=214&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=ITEM%203%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company states that there have been no material changes from the market risks disclosed in its Annual Report on Form 10-K for the year ended March 31, 2024 - There have been no material changes to the market risks previously disclosed in the company's Form 10-K[219](index=219&type=chunk) [Controls and Procedures](index=41&type=section&id=ITEM%204%3A%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were ineffective due to material weaknesses identified by a Special Committee, with remediation efforts underway - A Special Committee investigation uncovered accounting errors requiring restatement for fiscal years **2022, 2023, and 2024**, primarily related to share-based compensation, capitalization of costs, and convertible notes[220](index=220&type=chunk)[221](index=221&type=chunk) - The CEO and CFO concluded that disclosure controls and procedures were not effective as of **September 30, 2024**, due to previously identified material weaknesses[223](index=223&type=chunk) - Material weaknesses persist in the control environment, complex technical accounting, related party transaction disclosure, financial reporting processes, and segregation of duties[224](index=224&type=chunk)[226](index=226&type=chunk)[228](index=228&type=chunk) - Remediation efforts include hiring a new CFO and VP of Accounting, enhancing finance organizational structure, implementing a new Related Party Transactions Policy, establishing a Disclosure Committee, and implementing a new accounting system[227](index=227&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) [Part II - Other Information](index=44&type=section&id=Part%20II) [Legal Proceedings](index=44&type=section&id=ITEM%201%3A%20LEGAL%20PROCEEDINGS) The company is involved in significant litigation, including a dispute with director Steve Urvan and a breach of contract claim from a digital payment processor - Director Steve Urvan sued the company seeking partial rescission of the GunBroker.com acquisition and compensatory damages of not less than **$140 million**. The company has countersued Urvan for fraud. A five-day trial is scheduled for **April 2026**[235](index=235&type=chunk) - Innovative Computer Professionals, Inc. (DCP) filed a civil action against a company subsidiary for breach of contract, alleging **$100 million** in damages. The matter is tentatively scheduled for trial in **November 2025**[236](index=236&type=chunk)[237](index=237&type=chunk) [Risk Factors](index=45&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K/A - There were no material changes to the "Risk Factors" disclosed in the Form 10-K/A[238](index=238&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=ITEM%202%3A%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU RITIES%20AND%20USE%20OF%20PROCEEDS) The company maintains an active share repurchase program, having repurchased shares with remaining funds available - The Board of Directors authorized a share repurchase program for up to **$30.0 million** of common stock, which is set to expire in **February 2025**[239](index=239&type=chunk) Share Repurchases for the Three Months Ended September 30, 2024 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that may yet be Purchased Under the Plan | | :--- | :--- | :--- | :--- | | July 2024 | - | - | - | | August 2024 | - | - | - | | September 2024 | 2,857,143 | $1.68 | - | | **Total** | **2,857,143** | **$1.68** | **$21,429,813** |

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q (Exact Name of Registrant as Specified in its Charter) Delaware 001-13101 83-1950534 (Commission File No.) (I.R.S. Identification No.) State or other jurisdiction of incorporation or organization 7681 E Gray Road, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 001-13101 State or other jurisdiction of incorporation or organization Delaware 83-1950534 (I.R.S. Identification No.) 7681 E Gray Ro ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2023 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ AMMO, Inc. (Exact Name of Registrant as Specified in its Charter) DELAWARE 001-13101 83-1950534 (State of incorporation) (Commission File No.) (I.R.S. Identi ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ AMMO, Inc. (Exact Name of Registrant as Specified in its Charter) DELAWARE 001-13101 83-1950534 (State of incorporation) (Commission File No.) (I.R.S. Ident ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ AMMO, Inc. (Exact Name of Registrant as Specified in its Charter) DELAWARE 001-13101 83-1950534 (State of incorporation) (Commission File No.) (I.R.S. Identifica ...

PART I [ITEM 1: BUSINESS](index=4&type=section&id=ITEM%201%3A%20BUSINESS) AMMO, Inc. operates in the shooting sports industry with two main segments: ammunition manufacturing and the GunBroker.com e-commerce marketplace, focusing on expanding services and proprietary ammunition lines [Introduction](index=5&type=section&id=Introduction) Ammo Inc. began in ammunition manufacturing and expanded into the e-commerce marketplace with the acquisition of Gunbroker.com, connecting millions of users with licensed dealers - Ammo Inc. began in ammunition manufacturing and expanded its portfolio in 2021 with the acquisition of Gunbroker.com, an e-commerce marketplace for firearms and related gear[22](index=22&type=chunk) - Gunbroker.com connects approximately **7.8 million users** with over **35,000 federally licensed firearms dealers**, ensuring compliance with state and federal regulations[22](index=22&type=chunk) [Reportable Segments](index=5&type=section&id=Reportable%20Segments) The company operates in two distinct segments: the GunBroker.com Marketplace and Ammunition Manufacturing - The company operates within two segments: Marketplace (GunBroker.com) and Ammunition (manufacturing business)[23](index=23&type=chunk)[31](index=31&type=chunk) [Marketplace Segment - GunBroker.com](index=5&type=section&id=Marketplace%20Segment%20-%20GunBroker.com) GunBroker.com is a major online marketplace for firearms, expanding services to include payment processing, analytics, and advertising for its millions of users - GunBroker.com, acquired on April 30, 2021, is a large online marketplace for firearms, hunting, shooting, and related products, facilitating transactions between buyers and sellers without holding inventory[25](index=25&type=chunk)[26](index=26&type=chunk) - The platform has approximately **7.8 million registered users** and averages over **1.8 million items listed daily**[26](index=26&type=chunk) - New services being implemented include payment processing, carting ability for multiple items, GunBroker.com Analytics (launched January 2023), and GunBroker.com Advertising (effective January 2023)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Ammunition Segment – Manufacturing](index=6&type=section&id=Ammunition%20Segment%20%E2%80%93%20Manufacturing) Ammunition manufacturing in Manitowoc, WI, focuses on deep drawing rifle brass, producing premium pistol and rifle ammunition, including proprietary brands and supporting military programs - Ammunition manufacturing operations are based in Manitowoc, Wisconsin, producing small arms ammunition and components for commercial, military, and law enforcement sectors[33](index=33&type=chunk) - The core competency is deep drawing rifle brass casings up to 50 caliber, with a case capacity exceeding **750 million to 1.0 billion pieces** at full utilization[33](index=33&type=chunk) - Focus is on premium pistol and rifle ammunition, proprietary brands like Streak Visual Ammunition and Stelth subsonic ammunition, and supporting US military developmental programs[34](index=34&type=chunk) [Our Growth Strategy](index=7&type=section&id=Our%20Growth%20Strategy) Growth strategy involves enhancing ammunition product design, leveraging Gunbroker.com data for market trends, strengthening partnerships, and expanding manufacturing capacity - The company aims to enhance its position as a designer, producer, and marketer of ammunition products while leveraging Gunbroker.com data to identify growing trends and demands[36](index=36&type=chunk) - Key strategies include designing innovative, high-quality ammunition, strengthening relationships with channel partners, emphasizing customer satisfaction, and continuously improving operations through equipment acquisition and process enhancements[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - The new state-of-the-art manufacturing plant in Manitowoc, WI, is expected to exponentially increase capacity through the end of calendar 2023 and into 2024[40](index=40&type=chunk) [Products](index=7&type=section&id=Products) The company designs and produces diverse ammunition and components, including proprietary STREAK Visual and Stelth Subsonic lines, with significant casing manufacturing capacity - The company designs, produces, and sells ammunition and components (cases, primers, gunpowder, bullets) in various types, sizes, and calibers for handguns and long guns[41](index=41&type=chunk) - Proprietary products include STREAK Visual Ammunition (non-flammable phosphor technology, visible only to shooter) and Stelth Subsonic Ammunition (designed for suppressed firearms, clean burning)[42](index=42&type=chunk)[44](index=44&type=chunk) - Through Jagemann Munitions Components (JMC), the company offers pistol and rifle ammunition casings, with a capacity to produce over **750 million pieces annually**, scalable to over **1 billion**[45](index=45&type=chunk) [Marketing](index=8&type=section&id=Marketing) Marketing efforts span distributors, retailers, and digital platforms, utilizing advertising, social media, product demonstrations, and third-party endorsements - Products and services are marketed through distributors, dealers, mass market, and specialty retailers, utilizing print and digital advertising, social media (Instagram, Facebook, Twitter, YouTube), product demonstrations, and third-party endorsements[46](index=46&type=chunk) [Product Innovation and Development](index=8&type=section&id=Product%20Innovation%20and%20Development) Innovation focuses on new ammunition calibers and enhancing the GunBroker.com platform with streamlined services, advanced payment systems, and personalized marketing - The company focuses on developing new calibers and products, particularly around its core competency of deep drawing rifle cases, to meet and create market demand[47](index=47&type=chunk) - For fiscal year 2024, new calibers with high demand in premium segments (e.g., 7mm PRC, 35 Whelan, 350 Legend, 45-70) will be introduced under AMMO, Inc. Signature lines and as brass for OEM manufacturers[47](index=47&type=chunk) - GunBroker.com marketplace is evolving with streamlined customer service, a centralized payment system for advanced fraud prevention, and personalized marketing campaigns based on platform data[48](index=48&type=chunk)[49](index=49&type=chunk) [Research and Development](index=9&type=section&id=Research%20and%20Development) R&D activities at Manitowoc, Wisconsin, aim to enhance existing products and develop new ones, with associated costs expensed - R&D activities are conducted at the Manitowoc, Wisconsin facilities to enhance existing products and develop new ones, with associated costs expensed through cost of goods sold or general and administrative expenses[50](index=50&type=chunk) [Suppliers](index=10&type=section&id=Suppliers) Raw materials and components are primarily sourced from U.S. suppliers, with efforts to diversify the supplier base to mitigate supply chain risks - Raw materials and components (casings, primers, gunpowder, projectiles) are primarily sourced from U.S.-based suppliers, with JMC supplying ammunition casings[51](index=51&type=chunk) - The company aims to broaden its supplier base and secure multiple sources to mitigate risks of shortages and price increases[51](index=51&type=chunk) [Customers](index=10&type=section&id=Customers) Customers include diverse retailers, manufacturers, and agencies, serving sport shooters, hunters, and military, with key brands like AMMO Inc. Signature and STREAK - Products are sold through distribution, 'Big Box' retailers, manufacturers, specialty retailers, local ammunition stores, and shooting range operators[52](index=52&type=chunk) - Consumers include sport and recreational shooters, hunters, competitive shooters, individuals seeking home/personal protection, manufacturers, and law enforcement/military agencies[52](index=52&type=chunk) - Primary product lines are AMMO Inc. Signature, STREAK VISUAL AMMUNITION™, Stelth, and JMC[52](index=52&type=chunk) [Competition](index=10&type=section&id=Competition) The ammunition and casing industry is highly competitive, dominated by large players, with competition centered on product quality, reliability, brand, and pricing - The ammunition and casing industry is dominated by a few large companies, with competition based on quality, reliability, features, performance, brand awareness, and price[53](index=53&type=chunk) - Primary competitors include Federal Premium Ammunition, Remington Arms, Winchester Ammunition (Olin Corporation), and various smaller manufacturers[53](index=53&type=chunk) [Human Capital](index=10&type=section&id=Human%20Capital) The company employs 342 individuals across manufacturing, sales, R&D, and corporate functions, fostering a team-oriented environment that values diversity - As of June 9, 2023, the company had **342 employees**, with **236 in manufacturing**, **31 in sales/marketing/customer service**, **34 in R&D/engineering**, and **41 in corporate/administrative functions**[54](index=54&type=chunk) - The human capital strategy focuses on a team-oriented environment that promotes engagement, hard work, and accountability, valuing diversity and unique viewpoints[55](index=55&type=chunk) [Seasonality](index=10&type=section&id=Seasonality) The business has not shown material seasonality, but increased rifle production may lead to higher sales in the second and third fiscal quarters - The business has not shown material seasonality to date, but increased rifle production may lead to higher net sales in the second and third fiscal quarters due to fall hunting and holiday seasons[56](index=56&type=chunk) [Intellectual Property](index=10&type=section&id=Intellectual%20Property) Key intellectual property includes trademarks, trade secrets, and exclusive licensing for STREAK VISUAL AMMUNITION™ technology, extended through 2026 - Key intellectual property includes tradenames, trademarks, service marks, trade secrets, technological resources, know-how, and licensing arrangements[57](index=57&type=chunk) - The company holds exclusive worldwide sales and distribution rights for the patented O.W.L. Technology™ used in STREAK VISUAL AMMUNITION™ via a license agreement with the University of Louisiana at Lafayette (ULL), extended to January 1, 2026[59](index=59&type=chunk)[60](index=60&type=chunk) - Other IP includes rights to modular projectiles (AP and HAPI ammunition) acquired through SW Kenetics, Inc., and customer relationships, IP, and tradename from the JMC acquisition[62](index=62&type=chunk)[63](index=63&type=chunk) [Environmental Matters](index=12&type=section&id=Environmental%20Matters) Operations comply with environmental laws, with no material adverse effects anticipated, though future regulatory changes could increase compliance costs - Operations are subject to federal, state, and local environmental laws regarding hazardous materials, waste disposal, and health/safety[65](index=65&type=chunk) - The company believes it is in material compliance and does not anticipate a material adverse effect from environmental matters, though future costs could increase due to stricter regulations[65](index=65&type=chunk)[66](index=66&type=chunk) [Regulatory Matters](index=12&type=section&id=Regulatory%20Matters) The company is subject to extensive federal and state regulations, including ATF and export controls, with potential future legislative changes posing risks to operations - The manufacture, sale, and purchase of ammunition are subject to extensive federal, state, local, and foreign governmental laws, including those from the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF)[67](index=67&type=chunk) - Regulations cover licensing, serialization, interstate sales, ownership restrictions, ballistic image registries, and export controls (ITAR, EAR)[68](index=68&type=chunk)[69](index=69&type=chunk) - While existing regulations have not had a material adverse effect, future restrictions or legislative proposals could negatively impact the business, operating results, financial condition, and cash flows[71](index=71&type=chunk) - GunBroker.com facilitates lawful firearm sales between third parties, requiring direct involvement of ATF Federal Firearms License (FFL) holders for compliance[72](index=72&type=chunk) [ITEM 1A: RISK FACTORS](index=14&type=section&id=ITEM%201A%3A%20RISK%20FACTORS) The company faces significant risks including a limited operating history, susceptibility to economic, social, and political factors affecting demand, and potential disruptions from global events, alongside operational, intellectual property, cybersecurity, and financial risks, and material weaknesses in internal controls - The company has a limited operating history as an ammunition manufacturer since March 2017, making it subject to inherent risks of a new business enterprise[76](index=76&type=chunk) - Performance is influenced by economic, social, and political factors, with decreased demand in FY2023 attributed to general economic conditions and a softening of demand after heightened periods (e.g., pandemic, political environment)[77](index=77&type=chunk)[78](index=78&type=chunk) - The company is engaged in legal proceedings, including a lawsuit seeking rescission of the GunBroker.com acquisition, which could incur unforeseen expenses and divert management attention[87](index=87&type=chunk)[88](index=88&type=chunk) - Material weaknesses in internal controls over financial reporting were identified as of March 31, 2023, including an ineffective control environment, improper segregation of duties, and inadequate controls over financial reporting processes and IT general controls[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Risks Related to Our Business](index=14&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include economic and political demand fluctuations, global event disruptions, challenges in e-commerce expansion, and threats to intellectual property and cybersecurity - Economic conditions, consumer spending patterns, and political factors (e.g., elections, firearm control uncertainty) can negatively impact demand for products[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - War, terrorism, natural disasters, or pandemics can disrupt supply chains, delay manufacturing (as experienced with the Manitowoc facility), and affect customer decisions[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - An inability to expand the e-commerce business, protect intellectual property, or prevent breaches of information systems could reduce future growth, competitive advantage, and reputation[89](index=89&type=chunk)[92](index=92&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Risks Related to Our Products and Our Dependence on Third Parties](index=17&type=section&id=Risks%20Related%20to%20Our%20Products%20and%20Our%20Dependence%20on%20Third%20Parties) Product and third-party risks include new product acceptance, volatile ammunition sales, supplier dependence, customer concentration, intense competition, and reliance on a key licensing agreement - Success depends on introducing new products matching customer preferences; failure in development or market acceptance could decrease sales and margins[96](index=96&type=chunk) - The business is highly dependent on ammunition sales, which are volatile due to economic, social, and political factors affecting firearm sales[97](index=97&type=chunk) - Reliance on a limited number of suppliers for raw materials and components (casings, primers, gunpowder, projectiles) and manufacturing equipment exposes the company to shortages, price increases, and production delays[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Revenue depends on sales through retailers and distributors, with one customer accounting for **12% of FY2023 revenues**, posing risks if major customers are lost or reduce orders[103](index=103&type=chunk)[105](index=105&type=chunk) - Intense competition from larger companies with greater resources could lead to pricing pressures, reduced margins, and loss of market share[110](index=110&type=chunk)[112](index=112&type=chunk) - A significant portion of revenue is contingent on an exclusive license agreement with the University of Louisiana at Lafayette for STREAK VISUAL AMMUNITION™ technology; breach or non-renewal could harm operations[125](index=125&type=chunk) [Regulatory Risks](index=22&type=section&id=Regulatory%20Risks) Regulatory risks encompass extensive compliance requirements, potential fines, and adverse impacts from changes in firearms legislation or Second Amendment interpretations - The company is subject to extensive regulations (labor, environment, export/import, taxation, Consumer Products Safety Act, ATF, ITAR, EAR), with non-compliance potentially leading to fines, penalties, and business limitations[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - Changes in government policies and firearms legislation, including potential bans or severe limits on sales, could adversely affect financial results[131](index=131&type=chunk)[132](index=132&type=chunk) - Any adverse change to interpretations of the Second Amendment could restrict firearm ownership and use, impacting the company's ability to conduct business[133](index=133&type=chunk) [Risks Related to our Common Stock](index=24&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) Common stock risks include potential Nasdaq delisting, dilution from warrants and stock grants, and material weaknesses in internal controls over financial reporting - Failure to comply with Nasdaq listing rules could lead to delisting, making it harder for shareholders to sell common stock and affecting future financing[135](index=135&type=chunk) - The exercise of outstanding warrants (**2,460,946 as of June 9, 2023**) and future incentive stock grants may have a dilutive effect on common stock and negatively impact its price[136](index=136&type=chunk)[137](index=137&type=chunk) - Material weaknesses in internal controls over financial reporting (e.g., control environment, segregation of duties, journal entry controls, IT general controls) could lead to misstatements, regulatory action, and loss of investor confidence[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Risks Related to our Series A Preferred Stock](index=28&type=section&id=Risks%20Related%20to%20our%20Series%20A%20Preferred%20Stock) Series A Preferred Stock risks include junior ranking to debt, potential dividend restrictions, limited liquidity, interest rate sensitivity, and restricted voting rights - Series A Preferred Stock ranks junior to all indebtedness and other liabilities, meaning holders would receive assets only after creditors in bankruptcy or liquidation[150](index=150&type=chunk) - Future debt or senior equity offerings may restrict dividend payments on Series A Preferred Stock and adversely affect its market price[151](index=151&type=chunk)[155](index=155&type=chunk) - The trading market for Series A Preferred Stock may lack adequate liquidity, and its market price can be substantially affected by prevailing interest rates and other factors unrelated to operating performance[152](index=152&type=chunk)[156](index=156&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) - Holders of Series A Preferred Stock have extremely limited voting rights and the stock is not convertible into common stock, limiting upside potential[163](index=163&type=chunk)[164](index=164&type=chunk) [ITEM 1B: UNRESOLVED STAFF COMMENTS](index=31&type=section&id=ITEM%201B%3A%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments to report - No unresolved staff comments[165](index=165&type=chunk) [ITEM 2: PROPERTIES](index=31&type=section&id=ITEM%202%3A%20PROPERTIES) The company operates from leased executive offices in Scottsdale, AZ, GunBroker.com offices in Atlanta, GA, and a manufacturing/packaging facility in Manitowoc, WI, additionally owning a new 185,000 sq ft manufacturing plant in Manitowoc, WI, fully operational in Q2 FY2023 - Executive offices are leased in Scottsdale, Arizona (**21,000 sq ft**)[166](index=166&type=chunk) - GunBroker.com offices are leased in Atlanta, Georgia (**10,000 sq ft**), with additional warehousing in Marietta, Georgia (**5,000 sq ft**)[168](index=168&type=chunk)[169](index=169&type=chunk) - The company owns a new **185,000 sq ft** manufacturing plant in Manitowoc, Wisconsin, utilized for ammunition and casing manufacturing, R&D, packing, and shipping since Q2 FY2023[170](index=170&type=chunk) [ITEM 3: LEGAL PROCEEDINGS](index=32&type=section&id=ITEM%203%3A%20LEGAL%20PROCEEDINGS) The company is involved in routine litigation and claims in the ordinary course of business, none of which are expected to have a material effect on its financial position, results of operations, or cash flows, with accruals for contingencies recorded when probable and estimable - The company is subject to routine litigation, claims, disputes, proceedings, and investigations in the ordinary course of business[171](index=171&type=chunk) - Management believes no current lawsuits, individually or in aggregate, are expected to have a material effect on financial position, results of operations, or cash flows[171](index=171&type=chunk) - Accruals for contingencies are recorded when a liability is probable and the amount of loss can be reasonably estimated[171](index=171&type=chunk) [ITEM 4: MINE SAFETY DISCLOSURE](index=32&type=section&id=ITEM%204%3A%20MINE%20SAFETY%20DISCLOSURE) The company has no mine safety disclosures to report - No mine safety disclosures[173](index=173&type=chunk) PART II Part II covers market information for common equity, management's discussion and analysis of financial condition, market risk disclosures, financial statements, and controls and procedures [ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES](index=32&type=section&id=ITEM%205%3A%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's Common Stock is listed on Nasdaq under 'POWW', with 117,580,758 shares outstanding as of June 9, 2023, and while no common stock dividends have been paid, $3.0 million in preferred dividends were paid in FY2023, alongside a $30 million share repurchase program - Common Stock is listed on Nasdaq under the symbol 'POWW' since December 1, 2020[174](index=174&type=chunk) - As of June 9, 2023, there were **117,580,758 shares** of Common Stock outstanding with approximately **290 holders of record**[175](index=175&type=chunk) - The company has never declared or paid dividends on its Common Stock and intends to retain earnings for business growth[176](index=176&type=chunk) Preferred Stock Dividends Paid | Fiscal Year Ended March 31 | Amount (Millions) | | :------------------------- | :---------------- | | 2023 | $3.0 | | 2022 | $2.5 | - A share repurchase program for up to **$30 million** of common stock was authorized on February 8, 2022, and extended until February 2024[182](index=182&type=chunk) Share Repurchases (March 2023) | Period | Total Number of Shares Repurchased | Average Price Paid per Share | | :--------- | :--------------------------------- | :--------------------------- | | March 2023 | 118,328 | $1.93 | - As of June 9, 2023, approximately **1 million shares** have been repurchased in total, with about **$28 million** remaining in the repurchase plan[183](index=183&type=chunk) [ITEM 6: RESERVED](index=34&type=section&id=ITEM%206%3A%20RESERVED) This item is reserved and not required for this filing - Item 6 is reserved and not required[186](index=186&type=chunk) [ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION](index=34&type=section&id=ITEM%207%3A%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATION) AMMO, Inc. experienced a **20.3% decrease in net revenues** in FY2023 compared to FY2022, primarily due to decreased ammunition sales and a slight decline in marketplace revenue, resulting in a net loss of **$4.6 million**, contrasting with a significant increase in FY2022 driven by the GunBroker.com acquisition and increased production, with the company now focused on growing proprietary ammunition sales, expanding distribution, and improving gross margins while managing liquidity - AMMO, Inc. began operations in 2016 and is a vertically integrated producer of high-performance ammunition and premium components, also owning the GunBroker.com Marketplace[189](index=189&type=chunk) - The company is transitioning into a new manufacturing facility, focusing on premium pistol and rifle ammunition, proprietary brands (Streak, Stelth), and supporting US military programs[191](index=191&type=chunk) - Net Revenues decreased by **20.3% in FY2023** compared to FY2022, primarily due to decreased ammunition sales[193](index=193&type=chunk) Key Financial Highlights (FY2023 vs. FY2022) | Metric | FY2023 ($) | FY2022 ($) | Change ($) | Change (%) | | :------------------------- | :------------ | :------------ | :------------ | :--------- | | Net Sales | 191,439,801 | 240,269,166 | (48,829,365) | (20.3%) | | Cost of Revenues | 136,031,204 | 151,505,657 | (15,474,453) | (10.2%) | | Gross Margin | 55,408,597 | 88,763,509 | (33,354,912) | (37.6%) | | Income (loss) from Operations | (3,258,919) | 37,149,362 | (40,408,281) | (108.8%) | | Net Income (Loss) | (4,596,038) | 33,247,436 | (37,843,474) | (113.8%) | | Adjusted EBITDA | 26,371,208 | 60,836,438 | (34,465,230) | (56.7%) | - The company ended FY2023 with a net loss of approximately **$4.6 million**, a significant decline from a net income of **$33.2 million** in FY2022[218](index=218&type=chunk) [Overview](index=35&type=section&id=Overview) AMMO, Inc. operates the GunBroker.com marketplace for firearms and is a vertically integrated producer of high-performance ammunition, including proprietary brands and military programs - AMMO, Inc. operates the GunBroker.com Marketplace, the largest online marketplace for firearms and shooting sports, and is a vertically integrated producer of high-performance ammunition[189](index=189&type=chunk) - The GunBroker.com segment facilitates compliant sales of firearms and related gear to over **7.6 million users** through a network of **35,000+ federally licensed firearms dealers**[190](index=190&type=chunk) - The Ammunition segment focuses on premium pistol and rifle ammunition, proprietary brands (Streak, Stelth), and developmental programs for the US military[191](index=191&type=chunk) [Fiscal Year 2023 Compared to Fiscal Year 2022](index=35&type=section&id=Fiscal%20Year%202023%20Compared%20to%20Fiscal%20Year%202022) FY2023 saw a **20.3% decrease in net sales**, a decline in gross margin to **28.9%**, increased operating expenses due to proxy fees, and a net loss of **$4.6 million** Net Sales by Segment (FY2023 vs. FY2022) | Category | FY2023 ($) | FY2022 ($) | Change ($) | Change (%) | | :------------------- | :------------ | :------------ | :------------ | :--------- | | Proprietary Ammunition | 10,779,035 | 10,071,659 | 707,376 | 7.0% | | Standard Ammunition | 103,337,009 | 151,387,366 | (48,050,357) | (31.7%) | | Ammunition Casings | 14,174,084 | 14,201,625 | (27,541) | (0.2%) | | Marketplace Revenue | 63,149,673 | 64,608,516 | (1,458,843) | (2.3%) | | **Total Sales** | **191,439,801** | **240,269,166** | **(48,829,365)** | **(20.3%)** | - Gross margin percentage decreased to **28.9% in FY2023** from **36.9% in FY2022**, due to increased cost of materials, labor, and overhead in the ammunition segment, partially offset by higher margins from GunBroker.com[209](index=209&type=chunk) - Operating expenses increased by approximately **$7.1 million in FY2023**, rising to **30.6% of sales** from **21.5% in FY2022**, largely due to **$5.6 million in proxy contest fees** and **$1.2 million in nonrecurring expenses**[211](index=211&type=chunk) - Net loss for FY2023 was approximately **$4.6 million**, compared to a net income of **$33.2 million** in FY2022[218](index=218&type=chunk) [Fiscal Year 2022 Compared to Fiscal Year 2021](index=40&type=section&id=Fiscal%20Year%202022%20Compared%20to%20Fiscal%20Year%202021) FY2022 experienced a **284.6% increase in net sales**, a significant rise in gross margin to **36.9%**, increased operating expenses from the Gemini merger, and a net income of **$33.2 million** Net Sales by Segment (FY2022 vs. FY2021) | Category | FY2022 ($) | FY2021 ($) | Change ($) | Change (%) | | :------------------- | :------------ | :----------- | :------------ | :--------- | | Proprietary Ammunition | 10,071,659 | 5,340,823 | 4,730,836 | 88.6% | | Standard Ammunition | 151,387,366 | 44,279,707 | 107,107,659 | 241.9% | | Ammunition Casings | 14,201,625 | 12,861,800 | 1,339,825 | 10.4% | | Marketplace Revenue | 64,608,516 | - | 64,608,516 | N/A | | **Total Sales** | **240,269,166** | **62,482,330** | **177,786,836** | **284.6%** | - Gross margin percentage significantly increased to **36.9% in FY2022** from **18.2% in FY2021**, primarily due to the inclusion of the newly acquired GunBroker.com marketplace, which has higher margins[230](index=230&type=chunk) - Operating expenses increased by approximately **$34.8 million in FY2022**, mainly due to **$20.6 million in additional expenses** from the Gemini merger (including **$12.1 million in D&A**) and increased payroll[231](index=231&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) - The company achieved a net income of approximately **$33.2 million in FY2022**, a substantial improvement from a net loss of **$7.8 million in FY2021**, driven by increased revenues from production and the Gemini acquisition[237](index=237&type=chunk) [Non-GAAP Financial Measures](index=36&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA is a non-GAAP measure used to assess operational performance, excluding non-cash and non-recurring items, but has limitations regarding comparability and capital expenditures - Adjusted EBITDA is a non-GAAP financial measure used to evaluate operational performance, excluding non-cash expenses (income taxes, depreciation, amortization, share-based compensation, contingent consideration fair value changes) and non-recurring items (proxy contest fees)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) Adjusted EBITDA Reconciliation | Metric | FY2023 ($) | FY2022 ($) | | :------------------------- | :------------ | :------------ | | 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 | | Warrants issued for services | 213,819 | 718,045 | | Contingent consideration fair value | (63,764) | (385,750) | | Proxy contest fees | 4,724,385 | - | | Other nonrecurring expenses | 1,248,865 | - | | **Adjusted EBITDA** | **26,371,208** | **60,836,438** | - Limitations of non-GAAP measures include significant recurring stock compensation, non-reflection of capital expenditure requirements, and potential incomparability with other companies' calculations[200](index=200&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with increased cash and working capital, expected to fund operations, while managing fixed lease obligations and various notes payable - As of March 31, 2023, cash and cash equivalents increased by **$15.85 million** to **$39.13 million** from March 31, 2022[238](index=238&type=chunk) Working Capital Summary | Metric | March 31, 2023 ($) | March 31, 2022 ($) | | :---------------- | :----------------- | :----------------- | | Current assets | 128,451,893 | 129,691,636 | | Current liabilities | 25,463,399 | 35,823,311 | | **Working Capital** | **102,988,494** | **93,868,325** | - Existing working capital, cash flow from operations, bank borrowings, and equity/debt sales are expected to fund operations for the next year[240](index=240&type=chunk) Cash Flow Summary (FY2023 vs. FY2022) | Activity | FY2023 ($) | FY2022 ($) | | :----------------------- | :------------- | :------------- | | Operating Activities | 35,556,366 | 2,852,583 | | Investing Activities | (12,541,325) | (69,677,022) | | Financing Activities | (6,662,489) | (28,235,557) | | **Net Increase/(Decrease) in Cash** | **16,352,552** | **(95,059,996)** | - The company has **$1.6 million** in fixed lease payment obligations and an outstanding Related Party Note Payable of **$0.2 million** due within 12 months[241](index=241&type=chunk)[242](index=242&type=chunk) - The Construction Note Payable is expected to be **$11.4 million** upon project completion[243](index=243&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Of%20-Balance%20Sheet%20Arrangements) The company reported no material off-balance sheet arrangements as of March 31, 2023 - As of March 31, 2023, the company had no off-balance sheet arrangements with a material current or future effect on its financial condition, net sales, expenses, results of operations, liquidity, capital expenditures, or capital resources[250](index=250&type=chunk) [Critical Accounting Policies](index=45&type=section&id=Critical%20Accounting%20Policies) Critical accounting policies involve significant estimates for goodwill, revenue recognition (ASC 606), and various asset valuations, with potential for goodwill impairment in FY2024 - Key accounting policies involve significant estimates and judgments, including valuation of allowances for doubtful accounts, deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation, and warrant-based compensation[251](index=251&type=chunk)[253](index=253&type=chunk) - Goodwill is evaluated for impairment annually, with a carrying value of **$90.87 million** assigned to the Marketplace segment as of March 31, 2023; a material non-cash impairment is possible for FY2024 due to declines in stock price and market capitalization[252](index=252&type=chunk) - Revenue is recognized using a five-step model (ASC 606) when the customer obtains control of goods or services; for marketplace revenue, this includes auction, payment processing, shipping, banner advertising, product sales, and identity verification fees[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) - An **11% excise tax** on ammunition sales to non-government U.S. entities is included in net sales and expensed to cost of goods sold[267](index=267&type=chunk) [ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=49&type=section&id=ITEM%207A%3A%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, particularly affecting its Factoring Liability which is indexed to market rates, where a 100 basis point increase would result in **$50,000** additional interest expense if the maximum facility amount of **$5.0 million** were utilized - The primary market risk is interest rate risk, affecting the Factoring Liability which is indexed to market rates[274](index=274&type=chunk) - A **100 basis point increase** in market rates would result in **$50,000 additional interest expense** if the maximum Factoring Liability of **$5.0 million** were utilized[274](index=274&type=chunk) - Interest rates on the Construction Note Payable are not indexed to market rates[274](index=274&type=chunk) [ITEM 8: FINANCIAL STATEMENTS](index=49&type=section&id=ITEM%208%3A%20FINANCIAL%20STATEMENTS) The consolidated financial statements are submitted as a separate section of this Annual Report on Form 10-K, beginning on page F-1 - Consolidated financial statements are provided in a separate section starting on page F-1[275](index=275&type=chunk) [ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=49&type=section&id=ITEM%209%3A%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There are no changes in or disagreements with accountants on accounting and financial disclosure to report - Not applicable[276](index=276&type=chunk) [ITEM 9A: CONTROLS AND PROCEDURES](index=50&type=section&id=ITEM%209A%3A%20CONTROLS%20AND%20PROCEDURES) As of March 31, 2023, the company's CEO and CFO concluded that disclosure controls and procedures were not effective due to identified material weaknesses in internal control over financial reporting, including an ineffective control environment, lack of segregation of duties, and deficiencies in journal entry, period-end financial reporting, and IT general controls, with management initiating remediation efforts - As of March 31, 2023, the CEO and CFO concluded that disclosure controls and procedures were not effective[278](index=278&type=chunk)[280](index=280&type=chunk) - Management concluded that internal control over financial reporting was not effective as of March 31, 2023, due to material weaknesses[284](index=284&type=chunk) - Identified material weaknesses include an ineffective control environment (limited personnel, inadequate oversight, lack of formalization of governance elements), improper segregation of duties, ineffective controls over journal entries and account reconciliations, deficiencies in period-end financial reporting, and weaknesses in IT general controls[288](index=288&type=chunk) - Remediation initiatives include retaining a third-party consulting firm for internal audit work, formalizing management delegation, implementing a whistleblower hotline, approving new accounting policies, and initiating an IT Remediation Project[291](index=291&type=chunk)[297](index=297&type=chunk) - The independent registered public accounting firm, Pannell Kerr Forster of Texas, P.C., issued an adverse opinion on the company's internal control over financial reporting as of March 31, 2023, due to the material weaknesses[296](index=296&type=chunk) [ITEM 9B: OTHER INFORMATION](index=53&type=section&id=ITEM%209B%3A%20OTHER%20INFORMATION) On June 12, 2023, the Board approved a one-time cash bonus of **$129,000** for CFO Robert D. Wiley and amended his employment agreement to an annual salary of **$325,000** - On June 12, 2023, the Board approved a one-time cash bonus payment of **$129,000** to Robert D. Wiley, the Chief Financial Officer[307](index=307&type=chunk) - Mr. Wiley's employment agreement was amended to set his annual salary at **$325,000**[308](index=308&type=chunk) [ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=54&type=section&id=ITEM%209C%3A%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) There are no disclosures regarding foreign jurisdictions that prevent inspections - Not applicable[309](index=309&type=chunk) PART III Part III incorporates information on directors, executive compensation, security ownership, related party transactions, and accounting fees by reference from the proxy statement [ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE](index=55&type=section&id=ITEM%2010%3A%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%2C%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[311](index=311&type=chunk) [ITEM 11: EXECUTIVE COMPENSATION](index=55&type=section&id=ITEM%2011%3A%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[312](index=312&type=chunk) [ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=55&type=section&id=ITEM%2012%3A%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[313](index=313&type=chunk) [ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=55&type=section&id=ITEM%2013%3A%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[314](index=314&type=chunk) [ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES](index=55&type=section&id=ITEM%2014%3A%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders - Information is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders[315](index=315&type=chunk) PART IV Part IV details exhibits, financial statement schedules, and the required signatures for the Annual Report on Form 10-K [ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=56&type=section&id=ITEM%2015%3A%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists all exhibits and financial statement schedules filed as part of the Annual Report on Form 10-K, including descriptions and references to their filing forms and dates - Financial Statements and Financial Statement Schedules are set forth under Part II, Item 8 of this report[318](index=318&type=chunk) - A comprehensive list of exhibits, including merger agreements, certificates of incorporation, bylaws, equity incentive plans, and employment agreements, is provided[319](index=319&type=chunk)[320](index=320&type=chunk) [SIGNATURES](index=58&type=section&id=SIGNATURES) The Annual Report on Form 10-K is duly signed on behalf of AMMO, Inc. by its Chief Executive Officer, Fred W. Wagenhals, and Chief Financial Officer, Robert D. Wiley, along with other directors, as of June 14, 2023 - The report is signed by Fred W. Wagenhals (CEO and Chairman) and Robert D. Wiley (CFO) on June 14, 2023[325](index=325&type=chunk)[326](index=326&type=chunk) Index to Consolidated Financial Statements This index provides an overview of the consolidated financial statements, including the independent auditor's report, balance sheets, statements of operations, equity, cash flows, and detailed notes [Report of Independent Registered Public Accounting Firm](index=60&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Pannell Kerr Forster of Texas, P.C. issued an unqualified opinion on AMMO, Inc.'s consolidated financial statements for the three-year period ended March 31, 2023, but expressed an adverse opinion on the company's internal control over financial reporting as of March 31, 2023, due to identified material weaknesses, with goodwill impairment noted as a critical audit matter - Pannell Kerr Forster of Texas, P.C. issued an unqualified opinion on the consolidated financial statements for the three-year period ended March 31, 2023[331](index=331&type=chunk) - An adverse opinion was expressed on the company's internal control over financial reporting as of March 31, 2023, due to material weaknesses[332](index=332&type=chunk) - Goodwill impairment was identified as a critical audit matter due to the judgment and subjectivity involved in reviewing management's estimates for the **$90.8 million goodwill**[336](index=336&type=chunk) [Consolidated Balance Sheets](index=62&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, AMMO, Inc. reported total assets of **$412.3 million**, a slight decrease from **$414.2 million** in 2022, with current assets decreasing, property and equipment increasing significantly due to the new manufacturing facility, total liabilities remaining stable at approximately **$39.7 million**, and total shareholders' equity seeing a minor decrease to **$372.6 million** Consolidated Balance Sheet Summary | Metric | March 31, 2023 ($) | March 31, 2022 ($) | | :--------------------------- | :----------------- | :----------------- | | Cash and cash equivalents | 39,134,027 | 23,281,475 | | Accounts receivable, net | 29,346,380 | 43,955,084 | | Inventories | 54,344,819 | 59,016,152 | | Total Current Assets | 128,451,893 | 129,691,636 | | Property and Equipment, net | 55,963,255 | 37,637,806 | | Goodwill | 90,870,094 | 90,870,094 | | **TOTAL ASSETS** | **412,335,387** | **414,178,313** | | Total Current Liabilities | 25,463,399 | 35,823,311 | | Total Liabilities | 39,739,302 | 39,874,747 | | Total Shareholders' Equity | 372,596,085 | 374,303,566 | - Property and Equipment, net, increased significantly from **$37.6 million in 2022** to **$56.0 million in 2023**, reflecting investments in the new manufacturing facility[340](index=340&type=chunk) - Current liabilities decreased from **$35.8 million in 2022** to **$25.5 million in 2023**, driven by reductions in accounts payable, factoring liability, and inventory credit facility[340](index=340&type=chunk) [Consolidated Statements of Operations](index=63&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations show a net loss of **$4.6 million** in FY2023, a significant reversal from a net income of **$33.2 million** in FY2022, driven by a **20.3% decrease in net revenues** and a substantial increase in operating expenses, particularly due to proxy contest fees and nonrecurring expenses Consolidated Statements of Operations Summary | Metric | FY2023 ($) | FY2022 ($) | FY2021 ($) | | :--------------------------- | :------------ | :------------ | :----------- | | Net Revenues | 191,439,801 | 240,269,166 | 62,482,330 | | Cost of Revenues | 136,031,204 | 151,505,657 | 51,095,679 | | Gross Profit | 55,408,597 | 88,763,509 | 11,386,651 | | Total operating expenses | 58,667,516 | 51,614,147 | 16,766,636 | | Income/(Loss) from Operations | (3,258,919) | 37,149,362 | (5,379,985) | | Net Income/(Loss) | (4,596,038) | 33,247,436 | (7,812,294) | | Net Income/(Loss) Attributable to Common Stock Shareholders | (7,701,072) | 30,578,787 | (7,812,294) | | Basic EPS | (0.07) | 0.27 | (0.14) | | Diluted EPS | (0.07) | 0.27 | (0.14) | - Ammunition sales decreased from **$161.5 million in FY2022** to **$114.1 million in FY2023**, while marketplace revenue slightly decreased from **$64.6 million to $63.1 million**[342](index=342&type=chunk) - Operating expenses increased by **$7.05 million in FY2023**, with corporate general and administrative expenses rising by **$8.0 million**, partly due to proxy contest fees[342](index=342&type=chunk) [Consolidated Statements of Stockholders' Equity](index=64&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total shareholders' equity decreased slightly from **$374.3 million in FY2022** to **$372.6 million in FY2023**, primarily due to the net loss of **$4.6 million** and preferred stock dividends, partially offset by stock issuances for compensation and warrant exercises Consolidated Statements of Stockholders' Equity Summary | Metric | March 31, 2023 ($) | March 31, 2022 ($) | March 31, 2021 ($) | | :--------------------------- | :----------------- | :----------------- | :----------------- | | Preferred Stock Par Value | 1,400 | 1,400 | - | | Common Stock Par Value | 118,294 | 116,487 | 93,100 | | Additional Paid-In Capital | 391,940,374 | 385,426,431 | 202,073,968 | | Accumulated Deficit | (18,941,825) | (11,240,752) | (41,819,539) | | Treasury Stock | (522,158) | - | - | | **Total Shareholders' Equity** | **372,596,085** | **374,303,566** | **160,347,529** | - Common shares issued for employee stock awards totaled **1,777,294 shares** valued at **$5.8 million in FY2023**[346](index=346&type=chunk) - Preferred stock dividends declared amounted to **$3.1 million in FY2023**[342](index=342&type=chunk) [Consolidated Statements of Cash Flows](index=66&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In FY2023, net cash provided by operating activities significantly increased to **$35.6 million** from **$2.9 million** in FY2022, driven by a decrease in net loss and favorable changes in working capital, while net cash used in investing activities decreased to **$12.5 million**, and net cash used in financing activities decreased to **$6.7 million**, primarily due to reduced debt payments and factoring activity Consolidated Statements of Cash Flows Summary | Activity | FY2023 ($) | FY2022 ($) | FY2021 ($) | | :------------------------------------- | :------------- | :------------- | :------------- | | Net cash provided by (used in) operating activities | 35,556,366 | 2,852,583 | (14,415,560) | | Net cash used in investing activities | (12,541,325) | (69,677,022) | (7,437,265) | | Net cash used in financing activities | (6,662,489) | (28,235,557) | 139,310,022 | | **Net increase/(decrease) in cash** | **16,352,552** | **(95,059,996)** | **117,457,197** | - Net cash provided by operating activities in FY2023 was **$35.6 million**, primarily due to a net loss of **$4.6 million** offset by non-cash expenses and decreases in accounts receivable and inventories[244](index=244&type=chunk) - Net cash used in investing activities in FY2023 was **$12.5 million**, mainly for purchases of production equipment and construction of the new manufacturing facility[246](index=246&type=chunk) - Net cash used in financing activities in FY2023 was **$6.7 million**, including preferred stock dividends paid (**$3.0 million**) and insurance premium note payments (**$2.1 million**), partially offset by proceeds from the construction note payable[248](index=248&type=chunk) [Notes to Consolidated Financial Statements](index=69&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on the company's organization, significant accounting policies, financial statement line items, acquisitions, related party transactions, and internal control weaknesses [NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY](index=69&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20BUSINESS%20ACTIVITY) This note details the company's organizational history, including its formation as Retrospettiva, Inc. and subsequent transformation into AMMO, Inc. through acquisitions - The company, originally Retrospettiva, Inc. (formed 1990), became AMMO, Inc. in December 2016 following a change in control and a 1-for-25 reverse stock split[355](index=355&type=chunk)[356](index=356&type=chunk)[357](index=357&type=chunk) - In March 2017, AMMO, Inc. (Delaware Corporation) acquired AMMO, Inc. (PRIVCO), which was treated as a capital transaction[358](index=358&type=chunk) [NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=69&type=section&id=NOTE%202%20-%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines significant accounting policies, including consolidation, critical estimates for asset valuations and revenue recognition, and the treatment of excise taxes and contingencies - Consolidated financial statements include AMMO, Inc. and its wholly-owned subsidiaries, eliminating intercompany accounts[359](index=359&type=chunk) - Significant estimates include valuation of doubtful accounts, deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, and stock/warrant-based compensation[360](index=360&type=chunk) - Goodwill, with a carrying value of **$90.87 million** assigned to the Marketplace segment, is tested for impairment annually; a material non-cash impairment is possible for FY2024[361](index=361&type=chunk) - Revenue recognition follows ASC 606, applying a five-step model for ammunition sales, casing sales, and various marketplace fee revenues (auction, payment processing, shipping, advertising, product sales, identity verification)[377](index=377&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk)[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) Excise Tax Recognized | Fiscal Year Ended March 31 | Amount (Millions) | | :------------------------- | :---------------- | | 2023 | $9.8 | | 2022 | $14.6 | | 2021 | $4.3 | - Contingencies, including legal proceedings, are assessed for probable material losses and accrued if estimable; recent settlements include a DOL complaint and a primer acquisition deposit lawsuit[415](index=415&type=chunk)[417](index=417&type=chunk)[418](index=418&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk)[421](index=421&type=chunk)[422](index=422&type=chunk) [NOTE 3 – INCOME/(LOSS) PER COMMON SHARE](index=80&type=section&id=NOTE%203%20%E2%80%93%20INCOME%2F%28LOSS%29%20PER%20COMMON%20SHARE) This note details the calculation of basic and diluted income or loss per common share, noting the exclusion of antidilutive securities in certain periods - Basic income/(loss) per share is calculated using weighted-average common stock outstanding; diluted loss per share includes potentially dilutive securities, but warrants were excluded in FY2023 due to their antidilutive effect[428](index=428&type=chunk) Income/(Loss) Per Share | Metric | FY2023 ($) | FY2022 ($) | FY2021 ($) | | :----------------------------------------- | :--------- | :--------- | :--------- | | Net income/(loss) attributable to common stockholders | (7,701,072) | 30,578,788 | (7,182,294) | | Weighted averaged shares of common stock - basic | 117,177,885 | 112,328,680 | 55,041,502 | | Weighted averaged shares of common stock - diluted | 117,177,885 | 114,189,720 | 55,041,502 | | Basic earnings per share | (0.07) | 0.27 | (0.14) | | Diluted earnings per share | (0.07) | 0.27 | (0.14) | [NOTE 4 – ACCOUNTS RECEIVABLE](index=81&type=section&id=NOTE%204%20%E2%80%93%20ACCOUNTS%20RECEIVABLE) This note provides a breakdown of accounts receivable, net of the allowance for doubtful accounts, and a reconciliation of changes in that allowance Accounts Receivable, Net | Metric | March 31, 2023 ($) | March 31, 2022 ($) | | :--------------------------- | :----------------- | :----------------- | | Accounts receivable | 32,592,931 | 47,010,336 | | Less: allowance for doubtful accounts | (3,246,551) | (3,055,252) | | **Net accounts receivable** | **29,346,380** | **43,955,084** | Allowance for Doubtful Accounts Reconciliation | Period | Amount ($) | | :--------------------- | :--------- | | March 31, 2021 | 148,540 | | Increase in allowance | 2,903,304 | | Write-off | (12,703) | | Purchase accounting | 16,111 | | March 31, 2022 | 3,055,252 | | Increase in allowance | 2,160,323 | | Write-off | (1,969,024)| | **March 31, 2023** | **3,246,551** | [NOTE 5 – INVENTORIES](index=81&type=section&id=NOTE%205%20%E2%80%93%20INVENTORIES) This note details inventory balances by category, valued at the lower of cost or net realizable value using the weighted-average method, with provisions for obsolescence Inventory Balances | Category | March 31, 2023 ($) | March 31, 2022 ($) | | :-------------- | :----------------- | :----------------- | | Finished product | 14,362,514 | 6,167,318 | | Raw materials | 23,898,596 | 33,924,813 | | Work in process | 16,083,709 | 18,924,021 | | **Total** | **54,344,819** | **59,016,152** | - Inventories are stated at the lower of cost or net realizable value, using the weighted-average cost method; provisions are made for excess, damaged, or obsolete inventories[255](index=255&type=chunk)[403](index=403&type=chunk) [NOTE 6 – PROPERTY, PLANT AND EQUIPMENT](index=81&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%2C%20PLANT%20AND%20EQUIPMENT) This note presents the net property and equipment by category, including buildings, equipment, and construction in progress, along with associated depreciation expense Property and Equipment, Net | Category | March 31, 2023 ($) | March 31, 2022 ($) | | :----------------------- | :----------------- | :----------------- | | Building and Improvements | 28,623,329 | - | | Equipment | 40,233,186 | 32,524,850 | | Construction in Progress | 734,781 | 14,335,371 | | Total property and equipment | 70,529,919 | 47,757,208 | | Less accumulated depreciation | (14,566,664) | (10,119,402) | | **Net property and equipment** | **55,963,225** | **37,637,806** | - Depreciation expense for FY2023 was **$4.45 million**, with **$3.75 million** included in cost of goods sold[433](index=433&type=chunk) [NOTE 7 – FACTORING LIABILITY](index=81&type=section&id=NOTE%207%20%E2%80%93%20FACTORING%20LIABILITY) This note describes the factoring liability agreement with FSW for up to **$5.0 million**, its interest rate, and the interest expense recognized, with no outstanding balance in FY2023 - The company has a Factoring and Security Agreement with Factors Southwest, LLC (FSW) for up to **$5.0 million** on eligible accounts receivable, with recourse and an annualized interest rate of Prime Rate plus **4.5%**[434](index=434&type=chunk) - There was no outstanding balance on the Factoring Liability as of March 31, 2023, down from **$485,671** as of March 31, 2022[435](index=435&type=chunk) - Interest expense recognized on the Factoring Liability was **$153,646 in FY2023**[435](index=435&type=chunk) [NOTE 8 – INVENTORY CREDIT FACILITY](index=82&type=section&id=NOTE%208%20%E2%80%93%20INVENTORY%20CREDIT%20FACILITY) This note details the revolving inventory loan with FSW for up to **$2.25 million**, its interest rate, and the interest expense recognized, with no outstanding balance in FY2023 - The company has a Revolving Inventory Loan and Security Agreement with FSW for up to **$2.25 million**, secured by inventory, with an interest rate of the greater of three-month LIBOR plus **3.09% or 8%**[437](index=437&type=chunk) - There was no outstanding balance on the Inventory Credit Facility as of March 31, 2023, down from **$825,675** as of March 31, 2022[437](index=437&type=chunk) - Interest expense recognized on the Inventory Credit Facility was **$6,580 in FY2023**[437](index=437&type=chunk) [NOTE 9 – LEASES](index=82&type=section&id=NOTE%209%20%E2%80%93%20LEASES) This note outlines the company's operating leases for various facilities, detailing Right of Use Assets, Operating Lease Liabilities, lease expense, and future minimum lease payment obligations - The company leases office, manufacturing, and warehouse space under operating leases in Scottsdale, AZ, Atlanta and Marietta, GA, and Manitowoc, WI[438](index=438&type=chunk) - Total Right of Use Assets were **$1.26 million** and Operating Lease Liabilities were **$1.37 million** as of March 31, 2023[439](index=439&type=chunk) - Consolidated lease expense for FY2023 was **$881,171**, including operating lease expense of **$861,777**[441](index=441&type=chunk) Future Minimum Lease Payments (as of March 31, 2023) | Years Ended March 31, | Amount ($) | | :-------------------- | :--------- | | 2024 | 583,768 | | 2025 | 387,214 | | 2026 | 351,962 | | 2027 | 257,508 | | 2028 | 43,660 | | Thereafter | - | | **Total** | **1,624,112** | [NOTE 10 – NOTES PAYABLE – RELATED PARTY](index=83&type=section&id=NOTE%2010%20%E2%80%93%20NOTES%20PAYABLE%20%E2%80%93%20RELATED%20PARTY) This note details the Amended Note B balance with a related party, associated interest expense, and the resolution of previous related party notes - The company had an Amended Note B balance of **$180,850** at March 31, 2023, with **$48,665** in interest expense recognized in FY2023[450](index=450&type=chunk) - Previous related party notes, including a **$3.5 million Forest Street Note** with CEO Fred Wagenhals, were either repaid or converted into common stock by January 2021[453](index=453&type=chunk)[455](index=455&type=chunk) [NOTE 11 – CONSTRUCTION NOTE PAYABLE](index=86&type=section&id=NOTE%2011%20%E2%80%93%20CONSTRUCTION%20NOTE%20PAYABLE) This note describes the construction loan for the new manufacturing facility, including its principal amount, interest rate, maturity, and payment details - On October 14, 2021, the company entered into a Construction Loan Agreement with Hiawatha National Bank for up to **$11.625 million** to finance a new manufacturing facility[459](index=459&type=chunk) - The loan has a **4.5% interest rate**, matures on October 14, 2026, and requires monthly payments of **$64,620**[460](index=460&type=chunk) - Approximately **$11.2 million** of loan funds were advanced in FY2023, and **$150,743** in principal payments were made[463](index=463&type=chunk) [NOTE 12 – CAPITAL STOCK](index=87&type=section&id=NOTE%2012%20%E2%80%93%20CAPITAL%20STOCK) This note details the company's authorized capital stock, shares issued, including employee stock awards, and a summary of outstanding warrants - The company's authorized capital consists of **200,000,000 shares of common stock** with a par value