10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020
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. Identification Number)

7681 E Gray Road, Scottsdale, AZ 85260

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number including area code: (480) 947-0001

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	None	None

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [  ]	Smaller reporting company [X]
Emerging growth company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

As of February 5, 2021, there were 68,665,629 shares of $0.001 par value Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

TABLE OF CONTENTS

PART I
ITEM 1:	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets as of December 31, 2020 (Unaudited) and March 31, 2020	3
	Condensed Consolidated Statements of Operations (Unaudited) for the three and nine months ended December 31, 2020 and 2019	4
	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the three and nine months ended December 31, 2020 and 2019	5
	Condensed Consolidated Statements of Cash flow (Unaudited) for the nine months ended December 31, 2020 and 2019	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
ITEM 2:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	24
ITEM 3:	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	33
ITEM 4:	CONTROLS AND PROCEDURES	33
PART II
ITEM 1:	LEGAL PROCEEDINGS	34
ITEM 1A:	RISK FACTORS	34
ITEM 2:	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	34
ITEM 3:	DEFAULTS UPON SENIOR SECURITIES	34
ITEM 4:	MINE SAFETY DISCLOSURE	34
ITEM 5:	OTHER INFORMATION	35
ITEM 6:	EXHIBITS	35
SIGNATURES		36

2

PART I

ITEM 1. FINANCIAL STATEMENTS

AMMO, Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2020			March 31, 2020
	(Unaudited)
ASSETS
Current Assets:
Cash	$	19,007,893		$	884,274
Accounts receivable, net of allowance for doubtful account of $117,094 at December 31, 2020 and $62,248 at March 31, 2020		6,877,047			3,004,839
Due from related parties		15,657			15,807
Inventories, at lower cost or net realizable value, principally average cost method		9,548,591			4,408,073
Prepaid expenses		1,053,671			844,117
Total Current Assets		36,502,859			9,157,110
Equipment, net of accumulated depreciation of $5,100,920 at December 31, 2020 and $3,060,681 at March 31, 2020		19,403,855			18,046,329
Other Assets:
Deposits		52,183			216,571
Licensing agreements, net of accumulated amortization of $195,833 at December 31, 2020 and $158,833 at March 31, 2020		54,167			91,667
Patents, net of accumulated amortization of $931,102 at December 31, 2020 and $561,096 at March 31, 2019		6,142,903			6,512,909
Other Intangible Assets, net of accumulated amortization of $2,568,168 at December 31, 2020 and $1,496,833 at March 31, 2020		2,578,069			3,649,404
Right of Use Assets - Operating Leases		2,371,096			3,431,746
TOTAL ASSETS	$	67,105,132		$	41,105,736
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,404,029		$	5,197,354
Factoring liability		2,290,598			2,005,979
Accrued liabilities		3,952,438			1,619,619
Inventory credit facility		2,250,000			-
Current portion of operating lease liability		510,103			375,813
Current portion of note payable related party		611,290
Insurance premium note payable		103,792			329,724
Note payable related party		-			434,731
Total Current Liabilities		14,122,250			9,963,220
Long-term Liabilities:
Contingent consideration payable		621,517			709,623
Convertible promissory notes, net of note issuance cost of $121,325 at December 31, 2020 and $237,611 at March 31, 2020		817,675			2,262,389
Notes payable related party		2,427,726			5,803,800
Note payable		4,000,000			-
Paycheck protection program notes		427,385			-
Operating Lease Liability, net of current portion		1,913,904			3,107,911
Total Liabilities		24,330,457			21,846,943
Shareholders’ Equity:
Common stock, $0.001 par value, 200,000,000 shares authorized 63,498,045 at December 31, 2020 and 46,204,139 shares issued and outstanding at March 31, 2020, respectively		63,498			46,204
Additional paid-in capital		84,732,248			53,219,834
Stock subscription receivable		(664,975	)		-
Accumulated deficit		(41,356,096	)		(34,007,245	)
Total Shareholders’ Equity		42,774,675			19,258,793
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	67,105,132		$	41,105,736

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended December 31,						For the Nine Months Ended December 31,
	2020			2019			2020			2019
Net Sales
Ammunition sales	$	12,834,490		$	1,246,414		$	27,987,438		$	3,703,669
Casing sales		3,785,754			1,525,595			10,305,648			6,321,475
		16,620,244			2,772,009			38,293,086			10,025,144
Cost of Goods Sold, for the three and nine months ended December 31, 2020 and 2019 includes depreciation and amortization of $807,505, $771,463, $2,346,157, and $2,108,269 respectively, and federal excise taxes of $1,201,841, $138,529, $2,707,534, and $374,132, respectively		13,278,338			3,662,196			32,590,149			12,286,591
Gross Margin		3,341,906			(890,187	)		5,702,937			(2,261,447	)
Operating Expenses
Selling and marketing		542,271			238,439			1,244,323			748,014
Corporate general and administrative		1,639,052			730,991			3,805,230			2,784,984
Employee salaries and related expenses		1,172,765			846,724			3,329,511			2,898,932
Depreciation and amortization expense		416,625			(56,247	)		1,242,809			848,995
Loss on purchase		-			-			1,000,000			-
Total operating expenses		3,770,713			1,759,907			10,621,873			7,280,925
Loss from Operations		(428,807	)		(2,650,094	)		(4,918,936	)		(9,542,372	)
Other Expenses
Other income/(expense)		461,000			-			274,400			-
Interest income/(expense)		(1,938,630	)		(214,328	)		(2,704,315	)		(607,710	)
Total other expenses		(1,477,630	)		(214,328	)		(2,429,915	)		(607,710	)
Loss before Income Taxes		(1,906,437	)		(2,864,422	)		(7,348,851	)		(10,150,082	)
Provision for Income Taxes		-			-			-			-
Net Loss	$	(1,906,437	)	$	(2,864,422	)	$	(7,348,851	)	$	(10,150,082	)
Loss per share
Basic and fully diluted:
Weighted average number of shares outstanding		53,816,157			45,767,635			49,295,682			45,267,036
Loss per share	$	(0.04	)	$	(0.06	)	$	(0.15	)	$	(0.22	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the Three Months Ended December 31, 2020 and 2019

(Unaudited)

	Common Shares				Additional Paid-In			Stock Subscription			Accumulated
	Number		Par Value		Capital			Receivable			(Deficit)			Total
Balance as of September 30, 2020		48,324,347	$	48,323	$	56,895,422		$	-		$	(39,449,659	)	$	17,494,086
Common stock issued for cash		9,872,928		9,873		20,720,875			-			-			20,730,748
Common stock issued for convertible notes		2,667,358		2,667		3,872,292			-			-			3,874,959
Common stock issued for exercised warrants		975,726		977		2,045,476			-			-			2,046,453
Stock subscription receivable for exercised warrants		309,775		310		664,665			(664,975	)		-			-
Common stock issued for debt conversion		1,000,000		1,000		2,099,000			-			-			2,100,000
Common stock issued for cashless warrant exercise		159,995		160		(160	)		-			-			-
Common stock issuance costs		-		-		(3,274,436	)		-			-			(3,274,436	)
Common stock issued for services		50,000		50		87,450			-			-			87,500
Employee stock awards		137,916		138		240,715			-			-			240,853
Stock grants		-		-		65,455			-			-			65,455
Issuance of warrants for convertible notes		-		-		1,315,494			-			-			1,315,494
Net loss		-		-		-			-			(1,906,437	)		(1,906,437	)
Balance as of December 31, 2020		63,498,045	$	63,498	$	84,732,248		$	(664,975	)	$	(41,356,096	)	$	42,774,675

	Common Shares				Additional Paid-In		Stock Subscription		Accumulated
	Number		Par Value		Capital		Receivable		(Deficit)			Total
Balance as of September 30, 2019		45,751,628	$	45,751	$	52,517,726	$	-	$	(26,736,227	)	$	25,827,250
Common stock issued for cash		-		-		-		-		-			-
Common stock issued for convertible notes		-		-		-		-		-			-
Common stock issuance costs		-		-		-		-		-			-
Common stock issued for services		62,449		63		71,937		-		-			72,000
Employee stock awards		92,000		92		182,158		-		-			182,250
Stock grants		-		-		168,364		-		-			168,364
Net loss		-		-		-		-		(2,864,420	)		(2,864,420	)
Balance as of December 31, 2019		45,906,077	$	45,906	$	52,940,185	$	-	$	(29,600,647	)	$	23,385,444

For the Nine Months Ended December 31, 2020 and 2019

(Unaudited)

	Common Shares				Additional Paid-In			Stock Subscription			Accumulated
	Number		Par Value		Capital			Receivable			(Deficit)			Total
Balance as of March 31, 2020		46,204,139	$	46,204	$	53,219,834		$	-		$	(34,007,245	)	$	19,258,793
Common stock issued for cash		11,536,143		11,537		23,601,082			-			-			23,612,619
Common stock issued for convertible notes		2,667,358		2,667		3,872,292			-			-			3,874,959
Common stock issued for exercised warrants		1,096,939		1,097		2,287,781			-			-			2,288,878
Stock subscription receivable for exercised warrants		309,775		310		664,665			(664,975	)		-			-
Common stock issued for debt conversion - related party		1,000,000		1,000		2,099,000			-			-			2,100,000
Common stock issued for cashless warrant exercise		160,274		160		(160	)		-			-			-
Common stock issuance costs		-		-		(3,344,436	)		-			-			(3,344,436	)
Common stock issued for services		58,336		58		87,442			-			-			87,500
Employee stock awards		465,081		465		716,124			-			-			716,589
Stock grants		-		-		213,130			-			-			213,130
Issuance of warrants for convertible notes		-		-		1,315,494			-			-			1,315,494
Net loss		-		-		-			-			(7,348,851	)		(7,348,851	)
Balance as of December 31, 2020		63,498,045	$	63,498	$	84,732,248		$	(664,975	)	$	(41,356,096	)	$	42,774,675

	Common Shares				Additional Paid-In			Stock Subscription		Accumulated
	Number		Par Value		Capital			Receivable		(Deficit)			Total
Balance as of March 31, 2019		44,013,075	$	44,013	$	48,935,485		$	-	$	(19,450,565	)	$	29,528,933
Common stock issued for cash		1,232,770		1,233		2,464,307			-		-			2,465,540
Common stock issued for convertible notes		127,291		127		318,099			-		-			318,226
Common stock issuance costs		-		-		(285,981	)		-		-			(285,981	)
Common stock issued for services		125,941		126		271,874			-		-			272,000
Employee stock awards		407,000		407		688,343			-		-			688,750
Stock grants		-		-		548,058			-		-			548,058
Net loss		-		-		-			-		(10,150,082	)		(10,150,082	)
Balance as of December 31, 2019		45,906,077	$	45,906	$	52,940,185		$	-	$	(29,600,647	)	$	23,385,444

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	For the Nine Months Ended December 31,
	2020			2019
Cash flows from operating activities:
Net Loss	$	(7,348,851	)	$	(10,150,082	)
Adjustments to reconcile Net Loss to Net Cash used by operations:
Depreciation and amortization		3,588,966			2,957,337
Debt discount amortization		325,141			24,144
Employee stock awards		716,589			688,750
Stock grants		213,130			548,058
Stock for services		87,500			272,000
Contingent consideration payable fair value		(88,106	)		-
Interest on convertible promissory notes		146,104			-
Allowance for doubtful accounts		54,846			(124,313	)
Reduction in right of use asset		322,970			-
Paycheck protection program note forgiveness		(624,600	)		-
Loss on disposal of assets		25,400
Stock issued in lieu of cash payments		48,000			-
Loss on Jagemann Munition Components		1,000,000			-
Stock and warrants for note conversion		1,315,494			-
Changes in Current Assets and Liabilities
Accounts receivable		(3,927,054	)		91,995
Due to (from) related parties		150			2,858
Inventories		(5,140,518	)		(250,383	)
Prepaid expenses		16,985			301,241
Deposits		164,388			(93,830	)
Accounts payable		1,842,472			2,357,708
Accrued liabilities		2,332,819			271,063
Operating lease liability		(322,037	)		-
Net cash used in operating activities		(5,250,212	)		(3,103,454	)
Cash flows from investing activities
Purchase of equipment		(4,493,051	)		(356,022	)
Net cash used in investing activities		(4,493,051	)		(356,022	)
Cash flow from financing activities
Proceeds from inventory facility		2,250,000			-
Proceeds from factoring liability		26,079,000			936,750
Payments on factoring liability		(25,794,381	)		-
Proceeds from paycheck protection program notes		1,051,985			-
Proceeds from note payable related party issued		3,500,000			415,000
Payments on note payable - related party		(7,235,312	)		(1,500,000	)
Payments on insurance premium note payment		(452,471	)		(322,209	)
Proceeds from note payable		4,000,000			-
Proceeds from convertible promissory notes		1,959,000			-

(Continued)

6

AMMO, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	For the Nine Months Ended December 31,
	2020			2019
Sale of common stock		23,564,619			2,465,540
Common stock issued for exercised warrants		2,288,878			-
Common stock issuance costs		(3,344,436	)		(285,981	)
Contingent consideration payment		-			(300,000	)
Net cash provided by financing activities		27,866,882			1,409,100
Net increase/(decrease) in cash		18,123,619			(2,050,376	)
Cash, beginning of period		884,274			2,181,246
Cash, end of period	$	19,007,893		$	130,870
		-
Supplemental cash flow disclosures
Cash paid during the period for -
Interest	$	923,454		$	346,800
Income taxes	$	-		$	-
Non-cash investing and financing activities:
Accounts payable		(2,635,797	)		-
Note payable related party		2,635,797			-
Right of use assets - operating leases		(737,680	)		(4,168,771	)
Operating lease liability		737,680			4,168,771
Insurance premium note payment		226,539			165,120
Prepaid expenses		(226,539	)		(165,120	)
Convertible promissory note		(3,520,000	)		-
Note issuance costs		(208,855	)		-
Convertible promissory note conversion		3,728,855			318,226
Convertible promissory note and accrued interest		-			(318,226	)
Note payable related party conversion		2,100,000			-
Note payable related party		(2,100,000	)		(2,596,200	)
Other intangible assets		-			2,312,609
Deposits		-			(109,250	)
Equipment		-			392,841
Stock subscription receivable		(664,975	)		-
Common stock		310			-
Additional paid-in capital		664,665			-
	$	-		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020 and March 31, 2020

(Unaudited)

NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY

We were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished garments and fabrics. We were inactive until the following series of events in December 2016 and March 2017.

On December 15, 2016, the Company’s majority shareholders sold 475,681 (11,891,976 pre-split) of their outstanding shares to Mr. Fred W. Wagenhals (“Mr. Wagenhals”) resulting in a change in control of the Company. Mr. Wagenhals was appointed as sole officer and the sole member of the Company’s Board of Directors.

The Company also approved (i) doing business in the name AMMO, Inc., (ii) a change to the Company’s OTC trading symbol to POWW, (iii) an agreement and plan of merger to re-domicile and change the Company’s state of incorporation from California to Delaware, and (iv) a 1-for-25 reverse stock split (“Reverse Split”) of the issued and outstanding shares of the common stock of the Company. As a result of the reverse split, the previous issued and outstanding shares of common stock became 580,052 shares; no shareholder was reversed below 100 shares, and all fractional shares resulting from the reverse split were rounded up to the next whole share. All references to the outstanding stock have been retrospectively adjusted to reflect this split. These transactions were effective as of December 30, 2016.

On March 17, 2017, the Company entered into a definitive agreement with AMMO, Inc. a Delaware Corporation (PRIVCO) under which the Company acquired all of the outstanding shares of common stock of (PRIVCO). Under the terms of the Agreement, the Company issued 17,285,800 newly issued shares of common stock of the Company. In connection with this transaction the Company retired 475,681 shares of common stock and issued 500,000 shares of common stock to satisfy an issuance commitment. The acquisition was considered to be a capital transaction. The transaction was the equivalent to the issuance by PRIVCO of 604,371 shares to the Company’s shareholders accompanied by a recapitalization. The weighted average number of outstanding shares has been adjusted for this transaction. (PRIVCO) subsequently changes its name to AMMO Munitions, Inc.

8

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis

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

The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended March 31, 2020. The results for the three and nine month period ended December 31, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three and nine month periods ended December 31, 2020 and 2019, (b) the financial position at December 31, 2020, and (c) cash flows for the nine month period ended December 31, 2020 and 2019.

We use the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”) and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31^st.

Unless the context otherwise requires, all references to “Ammo”, “we”, “us”, “our,” or the “Company” are to AMMO, Inc., a Delaware corporation.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries, Enlight Group II, LLC (d/b/a Jagemann Munition Components), SNI, LLC, AMMO Munitions, Inc. and AMMO Technologies, Inc. (inactive). All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 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, intangible assets, and stock-based compensation.

9

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represents amounts due from customers for products sold and include an allowance for uncollectible accounts which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts. At December 31, 2020 and March 31, 2020, we reserved $117,094 and $62,248, respectively, of allowance for doubtful accounts.

License Agreements

We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company, or JJF. The license agreement grants us the exclusive worldwide rights through October 15, 2021 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James Branded Products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.

We are a party to a license agreement with Jeff Rann, a well-known wild game hunter and spokesman for the firearm and ammunition industries. The license agreement grants us through February 2022 the exclusive worldwide rights to Mr. Rann’s image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of all Jeff Rann Branded Products. We agreed to pay Mr. Rann 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.

Amortization expense for the license agreements for the three and nine months ended December 31, 2020 and 2019 was $12,500 and $37,500, respectively.

Patents

On September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with Hallam, Inc, a Texas corporation, with ATI being the survivor. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $21,269 and $21,268, respectively, and $63,806 for the nine months ended December 31, 2020 and 2019.

Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the nine months ended December 31, 2020 and 2019, the Company recognized royalty expenses of $70,793 and $20,261, respectively under this agreement.

10

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ATI succeeded all of the assets of SW Kenetics, Inc. and assumed all of the liabilities.

The primary asset of SW Kenetics Inc. was a pending patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc. pursuant to Intellectual Property Rights Agreement on September 27, 2018. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $102,067, respectively, and $306,200 and $239,253, respectively for the nine months ended December 31, 2020 and 2019.

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

Other Intangible Assets

On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement. The intangible assets acquired include a tradename, customer relationships, and intellectual property. For the three months ended December 31, 2020 and 2019, amortization of the other intangibles assets was $357,111 and $249,794, respectively, and $1,071,335 and $729,131, respectively for the nine months ended December 31, 2020 and 2019 and recognized in depreciation and amortization expense.

Impairment of Long-Lived Assets

We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three and nine months ended December 31, 2020 and 2019.

Revenue Recognition

We generate revenue from the production and sale of ammunition. We recognize revenue according to ASC 606. When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. The Company applies the following five-step model to determine revenue recognition:

● Identification of a contract with a customer

● Identification of the performance obligations in the contact

● determination of the transaction price

● allocation of the transaction price to the separate performance allocation

● recognition of revenue when performance obligations are satisfied

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product. In the current period, the Company began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities. The Company will recognize revenue when the performance obligation is met.

For the three and nine months ended December 31, 2020, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:

	Revenues at December 31, 2020						Accounts Receivable
PERCENTAGES	Three Months Ended			Nine Months Ended			December 31, 2020			March 31, 2020
Customers:
A		15.9	%		15.0	%		-	%		26.5	%
B		-			-			14.6	%		-
		15.9	%		15.0	%		14.6	%		26.5	%

Disaggregated Revenue Information

The following table represent a disaggregation of revenue from customers by segment. We attribute net sales to segments by product types; ammunition and ammunition casings. The Company notes that revenue recognition processes are consistent between product type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product type.

	For the Three Months Ended				For the Nine Months Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Ammunition Sales	$	12,834,490	$	1,246,414	$	27,987,438	$	3,703,669
Ammunition Casings Sales		3,785,754		1,525,595		10,305,648		6,321,475
Total Sales	$	16,620,244	$	2,772,009	$	38,293,086	$	10,025,144

Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell direct to customers online. In contrast, our ammunition casings products are sold to manufacturers.

Advertising Costs

We expense advertising costs as they are incurred in selling and marketing expenses of operating expenses. We incurred advertising of $51,700 and $190,277 for the three and nine months ended December 31, 2020, respectively and we incurred advertising expenses of $128,709 and $422,948 for the three and nine months ended December 31, 2019, respectively.

Inventories

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

12

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment

We state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method over estimated useful lives, which are generally five to ten years.

Compensated Absences

We accrue a liability for compensated absences in accordance with Accounting Standards Codifications 710 – Compensation – General.

Stock-Based Compensation

We account for stock-based compensation at fair value in accordance with ASC 718. There were 137,916 shares of common stock issued to employees, members of the Board of Directors, and members of the Advisory Committee for services during the quarter ended December 31, 2020.

Effective April 1, 2020, we entered into an employment agreement with Robert D. Wiley, Chief Financial Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

Effective June 18, 2020, we entered into an employment agreement with Steve Hilko, Chief Operating Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

From September 2018 through December 2020, we entered into eight separate employment agreements that included in total, among other provisions, equity grants of 540,382 shares of restricted common stock that vests annually over the next three years. The total compensation value is being recognized on a straight-line basis over the periods covered by each agreement, up to four years.

Concentrations of Credit Risk

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2020, our bank account balances exceeded federally insured limits.

Income Taxes

We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change in judgment occurs. We currently have substantial net operating loss carryforwards. We have recorded a valuation allowance equal to the net deferred tax assets due to the uncertainty of the ultimate realization of the deferred tax assets.

Furthermore, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act was enacted in response to the COVID-19 pandemic and contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest, technical corrections to tax depreciation methods for qualified improvement property and net operating loss carryback periods. The Company is implementing applicable benefits of the CARES Act, such as deferring employer payroll taxes and evaluating potential employee retention credits.

13

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contingencies

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

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is reasonably estimated, the estimated liability would be accrued in our condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed. On September 24, 2019, the Company received notice that a former employee that had voluntarily terminated filed a complaint against the Company, and certain individuals, with the U.S. Department of Labor (“DOL”). The Complaint in alleges that the individual reported potential violations of SEC rules and regulations by management and that as a result of such disclosures, the individual experienced a hostile work environment; that the Company lacks sufficient controls internal controls, and that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the shareholders. The claims were investigated by a newly appointed Special Investigative Committee made of up independent directors represented by special independent legal counsel. The Special Investigative Committee and legal counsel found the material claims were unsubstantiated, including those concerning alleged SEC violations, and recommended enhancements to certain corporate governance charter documents and processes which the Company promptly implemented. The matter is currently the subject of administrative investigation by the DOL via the Occupational Safety and Health Administration. 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 and therefore has and will continue to aggressively defend its interests in this matter. On February 4, 2020, the Company filed suit against a former employee for violating merger agreements with SW Kenetics, Inc., employment agreements, and by unlawfully retaining property belonging to the Company following their termination. On March 11, 2020, the former employee filed a counterclaim against the Company citing breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and declaratory judgement. The Company plans to aggressively pursue its offensive claims in order to recover economic damages as a result of its claims while seeking dismissal of the counterclaim. There were no other known contingencies at December 31, 2020.

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Loss Per Common Share

We calculate basic loss per share using the weighted-average number of shares of common stock outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants, using various methods, such as the treasury stock or modified treasury stock method, in the determination of dilutive shares outstanding during each reporting period. We have issued warrants to purchase 8,910,205 shares of common stock. All weighted average numbers were adjusted for the reverse stock split and merger transaction. Due to the loss from operations in the three and nine months ended December 31, 2020 and 2019, there are no common shares added to calculate the dilutive EPS for those periods as the effect would be antidilutive. The Company excluded warrants of 8,910,205 and 8,629,432 for the nine months ended December 31, 2020 and 2019, respectively, from the weighted average diluted common shares outstanding because their inclusion would have been antidilutive.

NOTE 4 – INVENTORIES

At December 31, 2020 and March 31, 2020, the inventory balances are composed of:

	December 31, 2020		March 31, 2020
Finished product	$	351,171	$	1,916,417
Raw materials		7,010,713		1,771,006
Work in process		2,186,707		720,650
	$	9,548,591	$	4,408,073

NOTE 5 – PROPERTY AND EQUIPMENT

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

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

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment consisted of the following at December 31, 2020 and March 31, 2020:

	December 31, 2020			March 31, 2020
Leasehold Improvements	$	126,558		$	118,222
Furniture and Fixtures		87,790			87,790
Vehicles		103,511			103,511
Equipment		23,411,433			19,578,035
Tooling		126,190			126,190
Construction in Progress		649,293			1,093,262
Total property and equipment	$	24,504,775		$	21,107,010
Less accumulated depreciation		(5,100,920	)		(3,060,681	)
Net property and equipment		19,403,855			18,046,329

Depreciation Expense for the three and nine months ended December 31, 2020 and 2019 totaled $731,183, $677,407, $2,110,125, and $1,887,573, respectively.

NOTE 6 – FACTORING LIABILITY

On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contains a maximum advance amount of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus 4.5%. The agreement contains fee of 3% ($150,000) of the Maximum Facility assessed to the Company. Our obligations under this agreement are secured by present and future accounts receivables and related assets, inventory, and equipment. The Company has the right to terminate the agreement, with 30 days written notice, upon obtaining a non-factoring credit facility. This agreement provides the Company with the ability to convert our account receivables into cash. As of December 31, 2020, the outstanding balance of the Factoring Liability was $2,290,598. Interest expense recognized on the Factoring Liability was $313,747, including $50,000 of amortization of the commitment fee. Interest expense for the comparable period ending December 31, 2019 was $116,196, including $62,500 of amortization of the commitment fee.

On June 17, 2020, this agreement was amended which extended the maturity date to June 17, 2022.

NOTE 7 – INVENTORY CREDIT FACILITY

On June 17, 2020, we entered into a Revolving Inventory Loan and Security Agreement with FSW. FSW will establish a revolving credit line, and make loans from time to time to the Company for the purpose of providing capital. The twenty-four month agreement secured by our inventory, among other assets, contains a maximum loan amount of $1,750,000 on eligible inventory and has an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The agreement contains a fee of 2% of the maximum loan amount ($35,000) assessed to the Company. On July 31, 2020, the Company amended its Revolving Loan and Security Agreement to increase the maximum inventory loan amount to $2,250,000. As of December 31, 2020, the outstanding balance of the Inventory Credit Facility was $2,250,000. Interest expense recognized on the Inventory Credit Facility was $118,202, including $24,962 of amortization of the annual fee. There was no interest expense for the comparable period ending December 31, 2019 as this transaction was not yet consummated.

NOTE 8 – LEASES

We lease office, manufacturing, and warehouse space in Scottsdale and Payson, AZ and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Payson lease has an option to renew for five years. As of December 31, 2020, we are fairly certain that we will exercise the renewal option, and we have included such renewal option in the lease liabilities and the disclosures herein. The Scottsdale lease does not include a renewal option. As of June 26, 2020, the Company entered into an amended agreement that modified the Manitowoc lease to monthly payments of $34,071 and decrease the term to March 2025. The agreement does not contain a renewal option. Accordingly, we modified our Right of Use Assets and Operating Lease Liabilities by $737,680 at June 30, 2020.

As of December 31, 2020, the total Right of Use Assets and Operating Lease Liabilities on the Balance Sheet were $2,371,096 and $1,913,304, respectively. As of March 31, 2020, the total Right of Use Assets and Operating Lease Liabilities on the Balance Sheet were $3,431,746 and $3,107,911, respectively. The Operating Lease Liabilities were net of current portions of $510,103 at December 31, 2020 and $375,813 at March 31, 2020.

Consolidated lease expense for the three and nine months ended December 2020 was $217,140 and $609,250, respectively, including $179,487 and $534,781 of respective operating lease expense and $37,653 and $74,468 of respective other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The weighted average remaining lease term and weighted average discount rate for operating leases were 4.2 years and 10.0%, respectively.

Futures minimum lease payments under non-cancellable leases as of December 31, 2020 are as follows:

Years Ended March 31,
2021 (1)	$	181,987
2022		732,111
2023		742,108
2024		684,836
2025		495,528
Thereafter		144,460
		2,981,030
Less: Amount Representing Interest		(557,023	)
	$	2,424,007

(1) This amount represents future lease payments for the remaining three months of fiscal year 2021. It does not include any lease payments for the nine months ended December 31, 2020.

NOTE 9 – CONVERTIBLE PROMISSORY NOTES

On January 15, 2020, the Company consummated the initial closing of a private placement offering whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $1,650,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).

On January 30, 2020, the Company consummated the final closing of a private placement whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $850,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share.

The Notes accrue interest at a rate of 8% per annum and mature on October 15, 2020 and October 30, 2020. Additionally, the Notes contain a mandatory conversion mechanism whereby any principal and accrued interest on the Notes, upon the closing of a Qualified Financing (as defined in the Notes), converts into shares of the Company’s Common Stock at a conversion price of 66.7% of the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the Notes shall become convertible into shares of the Company’s Common Stock at a conversion price that is equal to 50.0% of the arithmetic mean of the VWAP in the ten consecutive Trading Days immediately preceding the Maturity Date. The Notes contain customary events of default. If an Event of Default occurs, interest under the Notes will accrue at a rate of fifteen percent (15%) per annum and the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Notes will become, at the Note holder’s election, immediately due and payable in cash.

17

The Company analyzed embedded conversion options of the convertible notes at issuance to determine whether the embedded conversion options should be bifurcated and accounted for as derivative liabilities or if the embedded conversion options contain a beneficial conversion feature. The Company notes that this determination must be performed at each balance sheet date and makes it possible for certain instruments to be reclassified between debt and equity at different points in their life. The Company determined that it will defer recognition of its accounting until such notes become convertible. Additionally, the Company determined that the embedded conversion options do not require bifurcation and treatment as derivative liabilities, but they included contingent beneficial conversion features that are indeterminable on the commitment date. The Company notes the embedded conversion options will be accounted for and recognized, if necessary, when the contingencies are resolved (the date of a Qualified Financing or during the 10 days prior to the Maturity Date). Through the maturity date a Qualified Financing had not occurred and the Note is not yet convertible under the Voluntary Conversion Option.

Pursuant to the Subscription Agreements, each Investor will receive the number of Warrants to purchase shares of Common Stock equal to the quotient obtained by dividing 50% of the principal amount of the Note by the Conversion Price of the Note. The Warrants are exercisable at the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the warrants shall become exercisable at a price per share that is equal to the closing ten-day VWAP in the ten trading days immediately preceding the Maturity Date (the “Exercise Price”). The Warrants contain an anti-dilution protection feature, to adjust the Exercise Price if shares are sold or issued for a consideration per share less than the exercise price then in effect.

Joseph Gunnar & Co., LLC acted as placement agent for the Offering. The Placement Agent received cash compensation of $200,000 and is scheduled to be issued five (5) year warrants to purchase such number of shares of Common Stock equal to five percent (5%) of the shares underlying the Notes and the Warrants, at an exercise price equal to 125% of the Conversion Price of the Notes, which price shall not be known until the earlier of the Maturity Date or the closing of the Qualified Financing.

From October 8, 2020 to October 26, 2020, the Company received notices for voluntary conversion for the total outstanding principal ($2,500,000) and interest ($146,104) of the Convertible Promissory Notes and issued 2,157,358 shares of our Common Stock as a result of the conversion. The principal and interest related to the Initial Closing and Final Closing were converted at a conversion prices of $1.21 and $1.26, respectively. Additionally, the Company issued a total of 1,019,121 warrants to purchase shares of our Common Stock at exercise prices ranging from $2.19 to $2.67. The Company recognized $1,198,983 in interest expense as a result of the issuance of warrants. Subsequent to the issuance of the warrants, the exercise prices of the warrants were adjusted to $2.00. As a result the Company recognized $116,511 in interest expense for the change in the valuation of the warrants.

Additionally, pursuant to the Subscription Agreements, the Company issued 152,868 warrants to purchase shares of our Common Stock to Joseph Gunnar & Co. LLC with exercise prices ranging from $1.51 to $1.58. The Company has no further obligation with respect to the Convertible Promissory Notes.

On November 5, 2020 to November 25, 2020, the Company entered into Convertible Promissory Notes with four (4) accredited investors (the “Investors”), for an aggregate purchase price of $1,959,000 (each a “8% Note,” collectively, the “8% Notes”). The 8% Notes accrue interest at a rate of 8% per annum and mature from November 5, 2022 to November 25, 2022. Additionally, the 8% Notes contain a voluntary conversion mechanism whereby any principal and accrued interest on the 8% Notes, may be converted in holder’s discretion into shares of the Company’s Common Stock at a conversion price of $2.00 per share (“Conversion Price”). If not previously paid in full or converted, on the 180^th day following the Maturity Date, the principal and interest due under the 8% Notes shall automatically be converted to common stock shares at the Conversion Price The 8% Notes contain customary events of default (each an “Event of Default”). If an Event of Default occurs, the outstanding principal amount of the 8% Notes, plus accrued but unpaid interest, and other amounts owing with respect to the 8% Notes will become, at the 8% Note holder’s election, due and payable in cash. The Company performed analysis at the 8% Notes respective commitment dates and determined the 8% Notes contained beneficial conversion features. The Company recorded the $208,855 beneficial conversion feature as a note issuance cost. The Company recognized $17,000 in interest expense related to the convertible promissory notes in the current period.

On December 5, 2020, $1,020,000 of the 8% Notes were converted into 510,000 shares of common stock. There were $939,000 in 8% Notes remaining as of December 31, 2020. The Company recognized $73,313 in interest expense for the unamortized issuance costs upon conversion.

Subsequent to December 31, 2020, the remaining $939,000 in principal balance and $17,247 in accrued interest were converted into 478,123 shares of common stock at a conversion price of $2.00 per share.

18

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – NOTES PAYABLE – RELATED PARTY

In connection with the acquisition of the casing division of Jagemann Stamping Company, a $10,400,000 promissory note was executed. The promissory note, under which $500,000 was paid on March 25, 2019 using funds raised for the acquisition, had a remaining balance at March 31, 2019 of $9,900,000. On April 30, 2019, the original due date of the note was subsequently extended to April 1, 2020. The note bears interest per annum at approximately 4.6% payable in arrears monthly. In May of 2019, the Company paid $1,500,000 on the balance of the note. The note was secured by all the equipment purchased from Jagemann Stamping Company.

Post-closing of the transaction, it was made apparent that certain equipment that was agreed to be delivered free and clear by the Seller was not achievable as Seller was not able to purchase equipment that Seller had leased. Accordingly, the remaining value of the promissory note was reduced by $2,596,200. As a result of the change to the purchase price of the transaction, the Company reduced Equipment for a net value of $1,871,306, decreased Other Intangible Assets by $766,068, increased Accounts Receivable by $31,924, and recorded an increase to Deposits for $9,250 worth of equipment that the Company agreed to transfer back to Seller. Consequently, accumulated amortization has decreased by $159,530. Additionally, the Company entered into a lease to gain possession of the assets that were originally to be transferred.

On June 26, 2020, the Company, Enlight Group II, LLC (“Enlight”), the Company’s wholly owned subsidiary and Jagemann Stamping Company’s (“JSC”) entered into a Settlement Agreement pursuant to which the parties mutually agreed to settle all disputes and mutually release each other from liabilities related to the Amended APA occurring prior to June 26, 2020. Pursuant to the Settlement Agreement, the Company shall pay JSC $1,269,977 and shall provide JSC with: (i) two new promissory notes, a note of $5,803,800 related to the Seller Note and note of $2,635,797 for inventory and services, which was reclassed from accounts payable, both with a maturity date of August 15, 2021, (ii) general business security agreements granting JSC a security interest in all personal property of the Company. Pursuant to the Notes, the Company is obligated to make monthly payments totaling $204,295 to JSC. In addition, the Notes have a mandatory prepayment provision that comes into effect if the Company conducts a publicly registered offering. Pursuant to such provision, the Company: (a) upon the closing of an Offering of less than $10,000,000 would be obligated to pay the lesser of ninety percent (90%) of the Offering proceeds or seventy (70%) of the then aggregate outstanding balance of the Notes; and (b) upon the closing of an Offering of more than $10,000,000 would be obligated to pay one hundred percent (100%) of the then aggregate outstanding balance of the Notes. The Company was granted an option to repurchase up to 1,000,000 of the shares of the Company’s common stock issued to JSC under the Amended APA at a price of $1.50 per share through April 1, 2021 so long as there are no defaults under the Settlement Agreement.

As a result of the Settlement Agreement, the Company agreed to not receive $1,000,000 in Construction in Progress that the parties had previously agreed to exchange. As a result, the Company recognized a loss in operating expenses for the nine months ended December 31, 2020.

On November 5, 2020, the Company paid $6,000,000 to JSC allocated as follows: (i) payment in full of Note A, representing the balance due from the Company to JSC relating to the acquisition of Jagemann Munition Components in March 2019 and (ii) $592,982 remitted in partial payment of Note B, resulting in the parties’ execution of Amended Note B which has a starting principal balance of $1,687,664 (“Amended Note B”). The Amended Note B principal balance carries a 9% per annum interest rate and is amortized equally over the thirty six (36) month term. As a result of the payment in full of Note A JSC shall release the accompanying security interest in Company assets which secured Note A. Concurrently, upon entry into Amended Note B, JSC and the Company entered into the First Amendment to General Business Security Agreement to reflect a revised list of collateral in which JSC has a security interest.

19

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The total interest expense recognized on Note A was $84,248 and $216,160, respectively for the three and nine months ended December 31, 2020. The total interest expense recognized on the original Note B was $32,413 and $62,876, respectively, for the three and nine months ended December 31, 2020

The Company’s balance of Amended Note B was $1,639,016 at December 31, 2020. The accompany recognized $16,455 in interest expense on Amended Note B for the three and nine months ended December 31, 2020.

Subsequent to December 31, 2020, the Company repurchased 1,000,000 shares of the Company’s common stock issued to JSC at a price of $1.50 per share pursuant to the Amended APA.

On May 3, 2019, the Company entered into a promissory note of $375,000 with a shareholder of the Company. The original interest rate was the applicable LIBOR Rate. The promissory note has since been amended and the balance at June 30, 2020 was $260,000. The note’s original a maturity date of August 3, 2019 was extended to September 18, 2020. The amended note bears interest at 1.25% per month. The Company made $18,195 in principal payments during the nine months ended December, 2020 and the Note was paid in full in July of 2020. We recognized $10,327 of interest expenses related to the note during the nine months ended December 31, 2020.

In December of 2019, the Company entered into a Promissory Note of $90,000 with Fred Wagenhals, the Company’s Chief Executive Officer and Chairman of the Board of Directors. The Note originally matured on June 12, 2020 and had an interest rate at the applicable LIBOR Rate. The promissory note has since been amended and the balance at June 30, 2020 was $131,536 and the amended maturity date is September 18, 2020. The Company made $25,000 in principal payments during the nine months ended December 31, 2020 and the Note was paid in full in July of 2020. The amended note bears interest at 1.25% per month. We recognized $5,350 of interest expense on the note for the nine months ended December 31, 2020.

On September 23, 2020, the Company and Enlight entered into a promissory note (the “Forest Street Note”) with Forest Street, LLC (“Lender”), an Arizona limited liability company wholly owned by our current Chief Executive Officer, Fred Wagenhals, for the principal sum of Three Million Five Hundred Thousand & 00/100 Dollars ($3,500,000.00), which accrues interest at 12% per annum. The Note has a maturity date of September 23, 2022.

Pursuant to the terms of the Forest Street Note, the Company and Enlight (collectively, the borrower pursuant to the note) shall pay Lender; (i) on a monthly basis, beginning October 23, 2020, all accrued interest (only), (ii) on a quarterly basis, a monitoring fee of 1% of the principal amount and then accrued interest; and (iii) on the maturity date, the remaining outstanding principal balance of the Loan, together with all unpaid accrued interest thereon.

On December 14, 2020, the Company entered into a Debt Conversion Agreement with the Lender Pursuant to the Agreement, the Company and Forest Street agreed to convert $2,100,000.00 of the Note’s principal into one million (1,000,000) shares of the Company’s common stock. The share issuance occurred on December 15, 2020. As a result of the Debt Conversion Agreement the outstanding balance on December 31, 2020 was $1,400,000. The Company recognized $137,666 in interest expense related to the Forest Street Note for the nine months ended December 31, 2020.

Subsequent to December 31, 2020, the Company paid the remaining $1,400,000 in principal and accrued interest of the Forest Street Note.

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – PAYCHECK PROTECTION NOTES PAYABLE

In April of 2020, the Company determined it was necessary to obtain additional funds as a result of the foregoing uncertainty cause by COVID-19. The Company received approximately $1.0 million in funds through itself and its wholly owned subsidiary Jagemann Munition Components, which was established under the federal Coronavirus Aid, Relief, and Economic Security Act and is administered by the U.S. Small Business Administration. The Company received approximately $600,000 from Western State Bank and its wholly owned subsidiary, Jagemann Munition Components, received approximately $400,000 from BMO Harris. The Paycheck Protection Notes provide for an interest rate of 1.00% per year and matures two years after the issuance date. Principal and accrued interest are payable monthly in equal installments commencing on the date that is six months after the date funds are first disbursed on the loan and continuing through the maturity date, unless the Paycheck Protection Notes are forgiven. To be available for loan forgiveness, the Paycheck Protection Note may only be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that existed before February 15, 2020.

On November 11, 2020, the Company applied for forgiveness of the $1.0 million Paycheck Protection Program Notes as these funds were used for qualified expenses. No assurance can be given that the Company will be granted forgiveness of these Paycheck Protection Program Notes.

On November 23, 2020, the Company received forgiveness in full on the Paycheck Protection Note Payable from Western State Bank. The Company has recognized the forgiven amount in Other Income.

Subsequent to December 31, 2020, the Company received forgiveness in full on the Paycheck Protection Note Payable from BMO Harris.

NOTE 12 – CAPITAL STOCK

During the nine month period ended December 31, 2020, we issued 17,293,906 shares of common stock as follows:

● 11,512,143 shares were sold to investors for $23,564,619

● 2,667,358 shares were issued for the conversion of convertible promissory notes for $3,874,959

● 1,096,939 shares were issued to investors for exercised warrants valued for $2,288,878

● 160,274 shares were issued for cashless exercise of 287,657 warrants

● 1,000,000 shares were issued pursuant to a debt conversion agreement for $2,100,000

● 58,336 shares were issued for services provided to the Company value at $87,500

● 465,081 shares valued at $716,589 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

● 24,000 shares were issued to investors for $48,000 in liquidation damage fees

● 309,775 shares were recorded as a stock subscription receivable for exercised warrants for $664,975

On November 30, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P. (“Alexander Capital”), as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 8,564,285 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $2.10 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 1,284,643 shares of Common Stock. The Offering closed on December 3, 2020.

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company conducted the Offering pursuant to a Registration Statement on Form S-1, as amended, which was declared effective by the United States Securities and Exchange Commission on November 30, 2020 (the “Registration Statement”).

The net proceeds to the Company from the Offering, after deducting the underwriting discount, the underwriters’ fees and expenses and the Company’s estimated Offering expenses, were $15,850,448.

On December 11, 2020, the Company completed the closing of the Over-allotment Option. The Underwriters purchases 1,284,643 shares of the Company’s common stock at the public offering price of $2.10 per share. The net proceeds to the Company from the Offering, after deducting the underwriting discount, were $2,467,799.

The Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company (for a period of one year after the date of the Underwriting Agreement), and each director and executive officer of the Company (for a period of six months after the date of the final prospectus relating to the Public Offering), have agreed, subject to customary exceptions, not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of Alexander Capital.

On December 3, 2020, pursuant to the Underwriting Agreement, the Company entered into an Underwriter’s warrant agreement (the “Underwriters’ Warrant Agreement”) with the Underwriters and certain affiliates of the Underwriters. Pursuant to the Underwriters’ Warrant Agreement, the Company provided the Underwriters and certain affiliates of the Underwriters with a warrant to purchase 428,215 shares of Common Stock in the aggregate. Such warrant may be exercised beginning on May 29, 2021 (the date that is 180 days after the date on which the Registration Statement became effective) until November 30, 2025 (the date that is five years after the date on which the Registration Statement became effective). The initial exercise price of the Underwriters’ Warrant Agreement is $2.63 per share.

Pursuant to subscription agreements with certain investors, the Company agreed to file a registration statement for shares purchased by investors on or before the 75^th day following closing. The Company was unable to meet this obligation and is required to pay a liquidated damage fee to investors on a monthly basis to avoid default until such registration statement is filed. Accordingly, the Company paid $245,500 in the current period, of which $48,000 was paid by the issuance of 24,000 share of common stock at a price per share of $2.00, and accrued $84,300 for fees payable subsequent to December 31, 2020. The Company recorded these fees as issuance costs in Other Expenses.

At December 31, 2020, outstanding and exercisable stock purchase warrants consisted of the following:

	Number of Shares			Weighted Averaged Exercise Price		Weighted Average Life Remaining (Years)
Outstanding at March 31, 2020		8,504,372		$	2.10		3.60
Granted		2,100,204			2.09		4.90
Exercised		(1,694,371	)		2.01		-
Forfeited or cancelled		-			-		-
Outstanding at December 31, 2020		8,910,205		$	2.11		3.14
Exercisable at December 31, 2020		8,481,990		$	2.09		3.05

As of December 31, 2020, we had 8,910,205 warrants outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price. The outstanding warrants consist of (1) warrants to purchase 838,590 shares of Common Stock at an exercise price of $1.65 per share until April 2025; (2) warrants to purchase 5,098,329 shares of our Common Stock at an exercise price of $2.00 per share consisting of 71% of the warrants until April 2023, 8% until August 2024, and 21% until December 2025; (3) warrants to purchase 2,545,071 shares of Common Stock at an exercise price of $2.40 until September 2024; and (4) warrants to purchase 428,215 shares of Common Stock at an exercise price of $2.63 until November 2025, but not exercisable before May 29, 2021.

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AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – INCOME TAXES

As of December 31, 2020, we had net operating loss carryforwards of approximately $33 million which will expire beginning at the end of 2036. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income.

The Company’s effective tax rates were 0% and 0% for the three and nine months ended December 31, 2020 and 2019, respectively. During the nine months ended December 31, 2020 and 2019, the effective tax rate differed from the U.S. federal statutory rate primarily due to the change in the valuation allowance.

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended December 31, 2016, December 31, 2017, and March 31, 2018, 2019, and 2020 are subject to audit.

NOTE 14 – SUBSEQUENT EVENTS

From January 1, 2021 to February 5, 2021, the Company issued shares of its Common Stock for the exercise of warrants. There were 4,194,623 shares of Common Stock issued for warrants exercised at per share prices ranging from $2.00 to $2.40 for an aggregate value of $9,014,006. Additionally, there were 543,589 shares of Common Stock issued pursuant to cashless exercises of 974,076 warrants with exercise prices ranging from $1.65 to $2.00.

On January 1, 2021, The Company issued 70,000 shares of Common Stock to employees as compensation for a total value of $122,500 or $1.75 per share. Subsequent to December 31, 2020, the Company issued 881,250 shares of Common Stock for services at per share prices ranging from $1.75 to $2.00 for a total value of $1,612,500.

On February 4, 2020, the Company entered into a Settlement Agreement and Release with a third party. Per the terms of the agreement, the Company issued 150,000 warrants with an exercise price of $6.72 and paid $125,000. The agreement releases both the Company and the third party from all claims or disputes that have arisen surrounding previous agreements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is provided to assist the reader in understanding the results of operations, financial condition, and liquidity through the eyes of our management team. This section should be read in conjunction with other sections of this Quarterly Report, specifically, Selected Financial Statements and Supplementary Data.

FORWARD-LOOKING STATEMENTS

This document contains certain “forward-looking statements”. 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.

Forward looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect,” or “anticipate,” or other similar words, or the negative thereof. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. 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.

In our filings with the Securities and Exchange Commission, references to “AMMO, Inc.”, “AMMO”, “the Company”, “we,” “us,” “our” and similar terms refer to AMMO, Inc. and its wholly owned operating subsidiaries AMMO Munitions, Inc., Enlight Group II, LLC d/b/a Jagemann Munition Components (“Jagemann Munition Components”), SNI, LLC and AMMO Technologies, Inc. (inactive).

Overview

Our vision is to modernize the ammunition industry by bringing new technologies to market. 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.

When we began our operations in early 2017, our focus was to sell the inventory of ammunition we acquired through an asset purchase of a private company located in northern Arizona. The inventory consisted primarily of standard pistol and rifle rounds and two proprietary lines that had not received much traction in the market. We sold the remaining inventory at a discount during 2017 to help fund the development of our manufacturing operations. This accounted for the majority of our sales through the end of the third quarter of the calendar year of 2017.

With the prior inventory successfully sold and new products being produced, our next objective for the calendar year ending December 31, 2017 was to identify ammunition technologies unique to the industry that could be quickly implemented by our manufacturing team. We met with several organizations and projectile manufacturers looking for innovative products that could be used to establish us as a niche or high-end manufacturer for the recreational shooter, the American hunter, law enforcement, and military forces. Among the first of these technologies to meet our requirements was STREAK VISUAL AMMUNITION™, a one-way luminescent or OWL Technology application. We believe our STREAK VISUAL AMMUNITION™ line is the only non-incendiary tracer round in the ammunition market today. We secured the exclusive license to manufacture and sell the STREAK VISUAL AMMUNITION™ line of ammunition in 2017. We have filed for and received Trademark Protection for the STREAK VISUAL AMMUNITION™ product name from the United States Patent and Trademark Office (USPTO) on July 17, 2018 Additionally, we filed for Trademark Protection for the O.W.L. Technology^TM product name on June 6, 2018.

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We formally introduced the STREAK VISUAL AMMUNITION™ portfolio of calibers, along with our rebranded One Precise Shot (OPS) and Stelth subsonic line of suppression ammunition, to the general public at the SHOT Show in Las Vegas held in January 2018. This product introduction resulted in the opening of major retail outlets across the United States and attracted the attention of distributors in the international community. We believe this was a critical milestone in establishing us as a significant player in technology-based ammunition.

To help promote our new products, we hired new sales and marketing personnel in late 2017, and early 2018. We also augmented our Board of Directors to include professionals who could provide guidance for our teams through their prior experience in the industries we have targeted: commercial retail – focused on the gun or hunting enthusiast; US Law Enforcement; the US Military; and international markets for both military and law enforcement. Together this team has worked to open sales channels and distribution networks and capitalize on industry relationships to introduce our products to the influencers required to grow our sales.

During the summer of 2018, we also began conversations to acquire a small technology company named SW Kenetics Inc. SW Kenetics Inc. developed an innovative line of modular projectiles primarily geared toward tactical military operations. On July 6, 2018 we signed a letter of intent to purchase their company, as we believe their designs, coupled with our STREAK or O.W.L. Technology will position us to more aptly complete for military contracts. On September 27, 2018, we entered into a definitive agreement and plan of merger to acquire SW Kenetics Inc. for a total of up to $1,500,000 in cash and issue 1,700,002 restricted shares of the Company’s common stock. The agreement specifies that $1,250,000 of the cash is deferred pending completion of specific milestones and the 1,700,002 shares of common stock are subject to claw back provisions to ensure agreed upon objective are met. The acquisition was completed on October 5, 2018. As of December 31, 2020, the Company has made $350,000 in payments to SW Kenetics, Inc. in connection with the completion of a milestone. As of December 31, 2020, 1,550,134 shares remain subject to clawback provisions.

On March 15, 2019, Enlight Group II, LLC, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of 100% of the assets of Jagemann Stamping Company’s ammunition casing, projectile manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement dated March 14, 2019. In accordance with the terms of the Amended APA, Enlight Group II, LLC paid Jagemann Stamping Company a combination of $7,000,000 in cash, $10,400,000 delivered in the form of a Promissory Note, and 4,750,000 shares of AMMO, Inc. common stock.

This acquisition was a critical element in the Company’s long-term strategy as it secures its supply chain for these important components and creates a more competitive pricing structure that it can leverage across all its targeted markets. This also greatly enhances the Company’s plant capacity and technical expertise required for the further development of military grade projectiles.

The Company’s 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 the armed forces community demands are met by their equipment. Following AMMO’s acquisition of Jagemann Casings in March, the Company has aligned its manufacturing operations to support the large caliber demand from military personnel, such as the 12.7mm and .50 caliber BMG configurations.

The focus for our 2020 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. 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.

We also intend to increase our product offerings through potential acquisitions that bring new technologies that provide solutions for United States Military requirements. Our first step in this process is the addition of equipment to support the manufacture of 50 caliber ammunition. Not only is there an increasing demand for quality ammunition in this category for military applications, it also has a growing demand from commercial markets, and gun enthusiasts.

Our addressable market includes the 2.6 million law enforcement officers around the world (800,000 domestically and 1.8 million internationally) who annually recertify with their firearms; 1.3 million enlisted personnel in the U.S. Armed Forces, and more than 30 million handgun owning households in the United States with later expansion to international markets for civilian purchasers which, based on industry statistics, represents addressable revenue of billions of dollars annually. Each of these markets has unique challenges or barriers to entry. We believe with the strategies we are developing; we will be well positioned to grow our future market share based on our commitment to innovation and meeting the changing needs and demographics of ammunition buyers.

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Our History

Our ammunition manufacturing business has been fully operational for three years. Although our corporate entity commenced in 1990 as a textile manufacturer and importer, then called Retrospettiva, our manufacturing operations formally began in March of 2017 when we acquired our ammunition business.

Results of Operations

Our financial results for the three and nine months ended December 31, 2020 reflect our newly positioned organization. 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. We continue to focus on growing our top line revenue, and streamlining our operations, we did experience an increase in our gross profit margin for the three and nine months ended December 31, 2020. This was the result of a significant increase in sales allowing us to cover a greater percentage of our fixed manufacturing costs, which include our non-cash amortization and depreciation expense.

The following table presents summarized financial information taken from our condensed consolidated statements of operations for the three and nine months ended December 31, 2020 compared with the three and nine months ended December 31, 2019:

	For the Three Months Ending						For the Nine Months Ending
	December 31, 2020			December 31, 2019			December 31, 2020			December 31, 2019
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Net Sales	$	16,620,244		$	2,772,009		$	38,293,086		$	10,025,144
Cost of Products Sold		13,278,338			3,662,196			32,590,149			12,286,591
Gross Margin		3,341,906			(890,187	)		5,702,937			(2,261,447	)
Sales, General & Administrative Expenses		3,770,713			1,759,907			10,621,873			7,280,925
Loss from Operations		(428,807	)		(2,650,094	)		(4,918,936	)		(9,542,372	)
Other income (expense)
Other income (expense)		(1,477,630	)		(214,328	)		(2,429,915	)		(607,710	)
Loss before provision for income taxes	$	(1,906,437	)	$	(2,864,422	)	$	(7,348,851	)	$	(10,150,082	)
Provision for income taxes		-			-			-			-
Net Loss	$	(1,906,437	)	$	(2,864,422	)	$	(7,348,851	)	$	(10,150,082	)

Non-GAAP Financial Measures

We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total net sales, net loss, and other results under generally accepted accounting principles (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. 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. Accordingly, we believe these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Adjusted EBITDA

	For the Three Months Ended						For the Nine Months Ended
		31-Dec-20			31-Dec-19			31-Dec-20			31-Dec-19
Reconciliation of GAAP net income to Adjusted EBITDA
Net Loss	$	(1,906,437	)	$	(2,864,422	)	$	(7,348,851	)	$	(10,150,082	)
Depreciation and amortization		1,224,130			883,692			3,588,966			2,957,337
Loss on Jagemann Munition Components		-			-			1,000,000			-
Excise Taxes		1,201,841			138,529			2,707,534			374,132
Interest expense, net		1,938,630			214,326			2,704,315			607,710
Employee stock awards		240,853			182,250			716,589			688,750
Stock grants		65,455			168,363			213,130			548,057
Stock for services		87,500			72,000			87,500			272,000
Other income, net		(461,000	)		-			(274,400	)		-
Contingent consideration fair value		(30,748	)		-			(88,106	)		-
Adjusted EBITDA	$	2,360,224		$	(1,205,262	)	$	3,306,677		$	(4,702,096	)

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Adjusted EBITDA is a non-GAAP financial measures that displays our net loss, adjusted to eliminate the effect of certain items as described below.

We have excluded the following non-cash expenses from our non-GAAP financial measures: depreciation and amortization, loss on purchase, share-based compensation expenses, and changes to the contingent consideration fair value. We believe it is useful to exclude these non-cash expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.

Adjusted EBITDA as a non-GAAP financial measure also excludes other cash interest income and expense, as these items are not components of our core operations. We have not included adjustment for any provision or benefit for income taxes as we currently record a valuation allowance and we have included adjustment for 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. These limitations include the following:

● Employee stock awards and stock grants expense has been, and will continue to be for the foreseeable future, a significant recurring expense in the Company and an important part of our compensation strategy;

● the assets being depreciated or amortized may have to be replaced in the future, and the non-GAAP financial measures do not reflect cash capital expenditure requirements for such replacements or for new capital expenditures or other capital commitments; and

● non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs

● other companies, including companies in our industry, may calculate the non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures

Because of these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including our net loss and our other financial results presented in accordance with GAAP.

Net Sales

The following table shows our net sales by proprietary ammunition versus standard ammunition for the three and nine months ended December 31, 2020 and 2019. “Proprietary Ammunition” include those lines of ammunition manufactured by our facilities that are sold under the brand names: STREAK VISUAL AMMUNITION™, One Precise Shot (OPS), Night Ops, Jeff Rann, and Stelth. We define “Standard Ammunition” as non-proprietary ammunition that directly competes with other brand manufacturers. 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. Ammunition within this product line typically carries much lower gross margins.

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	For the Three Months Ending				For the Nine Months Ending
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Proprietary Ammunition	$	1,464,202	$	536,595	$	4,973,857	$	1,410,444
Standard Ammunition		11,370,288		709,819		23,013,581		2,293,225
Ammunition Casings		3,785,754		1,525,595		10,305,648		6,321,475
Total Sales	$	16,620,244	$	2,772,009	$	38,293,086	$	10,025,144

Sales for the three and nine months ended December 31, 2020 increased 500% and 282% or approximately $13.8 million and $28.3 million, over the three and nine months ended December 31, 2019. This increase was the result of approximately $10.7 million and $20.7 million of respective increased sales in bulk pistol and rifle ammunition, an increase of approximately $920,000 and $3.6 million of respective sales of Proprietary Ammunition and an increase of approximately $2.3 million and $4.0 million of sales from our recently acquired casing operations. Management expects the sales of Proprietary Ammunition to outpace the sales of our Standard Ammunition.

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 initiate sales to U.S. law enforcement, military, and international markets.

We added ammunition casings to our product offerings at March 15, 2019 and expect the ammunition casing sales to continue to be a significant part of our sales moving forward.

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. 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.

It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our company, they also have a long sales cycle. The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, which are reasonably anticipated to drive sustained sales opportunity in the military, law enforcement, and commercial markets.

Sales outside of the United States require licenses and approval from either the U.S. Department of Commerce or the U.S. State Department, which typically takes approximately 30 days to receive. On July 21, 2020, we renewed our annual registration with the International Traffic in Arms Regulations (ITAR), which remains valid through the report date. This permits the Company to export and broker ammunition and other controlled items covered under ITAR.

Cost of Goods Sold

Cost of goods sold increased by approximately $9.6 million and $20.3 million from $3.7 million and $12.3 million to $13.3 million and $32.6 million, respectively for the three and nine months ended December 31, 2020 compared comparable periods ended in 2019. This was the result of a significant increase in net sales as well increases to non-cash depreciation related to our newly acquired casing operations, expensing of increased labor, overhead, and raw materials used to produce finished product during 2020 as compared to 2019. As a percentage of sales, cost of goods sold decreased by 39.5% and 30.6% when comparing the three and nine months ended December 31, 2020 to the three and nine months ended December 31, 2019.

Gross Margin

Our gross margin percentage increased to 20.1% and 14.9% from -32.1% and -22.6% during the three and nine months ended December 31, 2020 as compared to the same period in 2019. This was a result of increased sales allowing us to cover a greater percentage of our fixed manufacturing costs, which include our non-cash amortization and depreciation expense.

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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. This will be accomplished through the following:

● Increased product sales, specifically of proprietary lines of ammunition, like the STREAK VISUAL AMMUNITION™, OPS, 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 acquisition our recent casing operation acquisition 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.

Operating Expenses

Overall, for the three and nine months ended December 31, 2020, our operating expenses increased by approximately $2.0 million and $3.3 million over the three and nine months ended December 31, 2019, and decreased as a percentage of sales from 63.5% and 72.6% for the three and nine months ended December 31, 2019 to 22.7% and 27.7% for the three and nine months ended December 31, 2020. The increase was related to a non-cash adjustment to recognize a loss on $1,000,000 of Construction in Progress that the Company had previously agreed to exchange with Jagemann Stamping Company, as well as increases in Operating Expenses from our increases in Net Sales and from our efforts to uplist to Nasdaq. Our operating expenses included of non-cash depreciation and amortization expense of approximately $417,000 and $1.2 million for the three and nine months ended December 31, 2020. Our operating expenses consisted of cost for the expansion our sales and support team, stock compensation expense associated with issuance of our Common Stock in lieu of cash compensation for employees, board members, and key consultants for the organization during the period, and trade show and marketing costs associated with introducing our lines of ammunition. Operating expenses for the nine months ended December 31, 2020 and 2019 periods included noncash expenses of approximately $3.2 million and $2.2 million, respectively. We also experienced increases as a result of new investor and public relations programs, and professional fees associated with our acquisition activity, our public filings, and our efforts to uplist the Company from the OTC to Nasdaq. We expect to see administrative expenditures to continue to decrease as a percentage of sales in the 2021 fiscal year, as we leverage our work force and expand our sales opportunities.

During the three months and nine months ended December 31, 2020, our selling and marketing expenses increased by approximately $304,000 and $496,000. The increase was primarily related to commission on the increases in the sale of our products resulting of approximately $446,000 and $922,000 of increase in commissions and a reduction in our advertising expenses of $77,000 and $232,000 for the three and nine months ended December 31, 2020 in comparison to the comparable prior periods.

Our corporate general & administrative expenses increased approximately $908,000 and $1,020,000 in the three and nine months ended December 31, 2020 from the comparable prior period mainly due to increased general corporate expenses and increased professional and legal fees of $516,000 and $461,000 for the three and nine months ended December 31, 2020 in comparison to the prior period due to the increase in sales activity and our successful efforts of uplisting the Company to Nasdaq concurrent with a public equity offering.

Employee salaries and related expenses increased approximately $326,000 and $431,000 for the three and nine months ended December 31, 2020 compared to the comparable period ended in 2019. The increase for the three and nine months ended December 31, 2020, when compared to the prior period, was primary related to an increase in salaries and wages of approximately $280,000 and $660,000 due to our expanded work force and a decrease of stock compensation of $39,000 and $307,000.

Depreciation and amortization expenses for the three and nine months ended December 31, 2020 increased by approximately $473,000 and $394,000 from the comparable prior periods due to reduced amortization expenses in connection with the adjusted purchase price of our newly acquired subsidiary, Jagemann Munition Components.

Interest and Other Expenses

For the three and nine months ended December 31, 2020, interest expense increased by approximately $1.7 million and $2.1 million compared with the comparable three and nine months ended December 31, 2019. The change from the prior periods was mainly due to approximately $1.3 million of non-cash interest expense recognized on the issuance of warrants to purchase common stock as well as increases in interest expense and debt discount amortization related to Note Payables Related Party, Note Payable, and Convertible Promissory Notes. For the three and nine months ended December 31, 2020, the Company recorded approximately $461,000 and $274,000 of other income primarily related the forgiveness of the company Paycheck Protection Note and for liquidation damage fees for being unable to meet agreed upon registration statement timing obligations. There were no other expenses in the comparable prior periods.

Net Loss

As a result of higher production, selling, and payroll expenses, the loss on Jagemann Munition Components, and non-cash interest expense recognized on the issuance of warrants to purchase common stock, we ended the three and nine months ended December 31, 2020 with a net loss of approximately $1.9 million and $7.3 million compared with a net loss of approximately $2.9 million and $10.2 million for the three and nine months ended December 31, 2019.

29

Our goal is to continue to improve our operating results as we focus on increasing sales and controlling our operating expenses.

Liquidity and Capital Resources

As of December 31, 2020, we had $19,007,893 of cash and cash equivalents, an increase of $18,123,619 from March 31, 2020.

Working Capital is summarized and compared as follows:

	December 31, 2020		March 31, 2020
Current assets	$	36,502,859	$	9,157,110
Current liabilities		14,122,250		12,225,609
	$	22,380,609	$	(3,068,499	)

Changes in cash flows are summarized as follows:

Operating Activities

For the nine months ended December 31, 2020, net cash used in operations totaled $5,250,212. This was primarily the result of a net loss of $7,348,851, increases in our period end inventories and accounts receivable of $5,140,518 and $3,927,054, respectively, increases in accounts payable and accrued liabilities of $1,842,472 and $2,332,819, respectively, and a loss on Jagemann Munition Components of $1,000,000. The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of $3,588,966, non-cash interest expensed recognized for the issuance of warrants of $1,315,494, employee stock compensation of $716,589, and stock grants totaling $213,130.

For the nine months ended December 31, 2019, net cash used in operations totaled $3,103,454. This was primarily the result of a net loss of $10,150,082, increases in our period end accounts payables and inventories of $2,357,708 and $250,383, respectively, and increases accrued liabilities of $271,063. The cash used in operations were partially offset by the benefit of non-cash expenses for depreciation and amortization of $2,957,337, employee stock compensation of $688,750, stock issued for services of $272,000, and stock grants totaling $548,058.

Investing Activities

During the nine months ended December 31, 2020, we used $4,493,051 in net cash for investing activities to purchase fixed assets such as new production equipment.

During the three months ended December 31, 2019, we used $356,022 in net cash for investing activities to purchase fixed assets such as new production equipment and to acquire end cap displays for the sale of our product at retailers.

Financing Activities

During the nine months ended December 31, 2020, net cash provided by financing activities was $27,866,882. This was the net effect of $23,564,619 of proceeds from the sale of common stock net of $3,344,436 of issuance costs, $3,500,000 of proceeds from a related party note, $4,000,000 of proceeds from a note payable, $2,250,000 generated from our Inventory Credit Facility, $2,288,878 was generated from common stock issued for exercised warrants, $1,959,000 from the issuance of convertible promissory notes, and $1,051,985 proceeds from our paycheck protection program notes payable. Additionally, $26,079,000 was generated from accounts receivable factoring, which was offset by payments of $25,794,381. $7,235,312 of cash was used for payments on related party notes payable, and $452,471 toward our insurance premium notes payable.

30

We financed our operations primarily from the issuance of equity instruments. During the nine months ended December 31, 2019, net cash provided by financing activities was $1,409,100. This was the net effect of $2,465,540 generated from the sale of Common Stock, net of cash payments of $285,981 in conjunction with the Unit offerings. Additionally, $936,750 was generated from accounts receivable factoring and $415,000 of cash was generated from the issuance of a related party note payable. These increases to our financing activities were offset by payment of $1,500,000 on the related party notes payable, $322,209 toward our insurance premium note payable and a $300,000 payment of our Contingent Consideration Payable.

Liquidity and Capital Resources

Existing working capital, cash used in 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.

We believe financing will be available, both through conventional financing relationships and through the continued sales of our Common Stock. However, there is no assurance that such funding will be available on terms acceptable to us or at all. We believe that our current cash on hand, coupled with alternative sources of funding, will be sufficient to satisfy intended capital expenditures, potential acquisitions and general liquidity requirements through at least the next twelve months.

Off-Balance Sheet Arrangements

As of December 31, 2020, 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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates. 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, intangible assets, and stock-based compensation.

31

Inventory

We state inventories at the lower of cost and net realizable value. We determine cost by using the weighted-average cost of raw materials method, which approximates the first-in, first-out method and includes allocations of manufacturing labor and overhead. We make provisions when necessary, to reduce excess, potential damaged or obsolete inventories. These provisions are based on our best estimates. At December 31, 2020, and March 31, 2020, 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.

Research and Development

To date, we have expensed all costs associated with developing our product specifications, manufacturing procedures, and products through our cost of products sold, as this work was done by the same employees who produced the finished product. We 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. We recognize revenue according to ASC 606. When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. The Company applies the following five-step model to determine revenue recognition:

● Identification of a contract with a customer

● Identification of the performance obligations in the contact

● determination of the transaction price

● allocation of the transaction price to the separate performance allocation

● recognition of revenue when performance obligations are satisfied

The Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product. In the current period, the Company began accepting contract liabilities or deferred revenue. We included Unearned Revenue in our accrued liabilities. The Company will recognize revenue when the performance obligation is met.

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 three months ended December 31, 2020 and 2019, we recognized $1,201,841 and $138,529 respectively, in excise taxes. During the nine months ended December 31, 2020 and 2019, we recognized $2,707,534 and $374,132, 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.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of December 31, 2020. 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 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.

32

Income Taxes

We follow ASC subtopic 740-10, “Accounting for Income Taxes”) for recording the provision for income taxes. ASC 740-10 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggest that is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change.

Stock-Based Compensation

We grant stock-based compensation to key employees and directors as a means of attracting and retaining highly qualified personnel. We also grant stock in lieu of cash compensation for key consultants and service providers. 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.

In addition to our base of employees, we also use the services of several contract personnel and other professionals on an “as needed basis”. We plan to continue to use consultants, legal and patent attorneys, engineers, and accountants, as necessary. We may also expand our staff to support the market roll-out of our products to both the commercial and government related organizations. A portion of any key employee compensation likely would include direct stock grants, which would dilute the ownership interest of holders of existing shares of our Common Stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based on the evaluation of these disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures not effective. Our controls were ineffective 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 (ii) ineffective corporative governance controls (iii) controls that may not be adequately designed or operating effectively and (iv) ineffective or delayed communication of certain contracts entered into in the ordinary course of business, whether written or oral. Despite the existence of material weaknesses, The Company believes the financial information presented herein is materially correct and fairly presents the financial position and operating results of the three and nine months ended December 31, 2020, in accordance with U.S. GAAP.

Changes in internal controls

There were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the Quarterly period from April 1, 2020 to December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

33

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in or subject to, or may become involved in or subject to, routine litigation, claims, disputes, proceedings, and investigations in the ordinary course of business. While the outcome of lawsuits and other proceedings against us cannot be predicted with certainty, in the opinion of management, individually or in the aggregate, no such lawsuits are expected to have a material effect on our financial position, results of operations or cash flows. We record accruals for contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated.

Please reference the Contingencies section of Note 3 of our Financial Statements for additional disclosure.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The authorized capital of the Company is 200,000,000 shares of Common Stock with a par value of $0.001 per share and 10,000,000 shares of Preferred Stock with a $0.001 par value per share. During the Quarterly period from October 1, 2020 to December 31, 2020, The Company issued 50,000 shares of Common Stock for services for $87,500 or $1.75 per share. The Company issued 510,000 shares of Common Stock for the conversion of convertible promissory notes for a total value of $1,020,000.

The previously mentioned securities were issued in reliance on the exemptions from registration under the Securities Act in Section 4(a)(2) of the Securities Act and Regulation D thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

34

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

Exhibit Number	Exhibit
2.1	Agreement and Plan of Merger to Redomicile dated December 30, 2016 (Corrected Version) changing our status to Delaware (1)
2.2	Articles of Merger dated December 30, 2016 filed with the California Secretary of State (2)
2.3	Certificate of Merger dated December 21, 2016 filed with the California Secretary of State (2)
2.4	Share Exchange Agreement dated March 17, 2017 (3)
2.5	Agreement and Plan of Merger with SW KENETICS INC. (4)
2.6	Amended and Restated Asset Purchase Agreement dated March 14, 2019 (5)
3.1(a)	Certificate of Incorporation (Amended and Restated) filed with the Delaware Secretary of State on October 24, 2018 (6)
3.2	Bylaws (2)
4.1	Promissory Note with Linda Kay dated November 5, 2020
4.2	Form of Convertible Promissory Note dated November 5, 2020
4.3	Compilation of JSC Agreements dated November 4, 2020
14.0	Code of Business Ethic (7)
14.1	Code of Conduct (7)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Fred W. Wagenhals.
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Fred W. Wagenhals.
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Rob Wiley.

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

*Filed Herewith.

(1)	Incorporated by reference to Form S-1A filed with the Commission on December 14, 2018.
(2)	Filed as an exhibit to Form 8-K filed with the Commission on February 9, 2017.
(3)	Filed as an exhibit to Form 8-K filed with the Commission on March 23, 2017.
(4)	Filed as an exhibit to Form 8-K filed with the Commission on October 4, 2018.
(5)	Filed as an exhibit to Form 8-K filed with the Commission on March 18, 2019.
(6)	Filed as an exhibit to Form 8-K filed with the Commission on October 26, 2018.
(7)	Incorporated by reference to Form S-1 filed with the Commission on July 6, 2018.

35

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMMO, INC.
		/s/ Fred W. Wagenhals
Dated: February 12, 2021	By:	Fred W. Wagenhals, Chief Executive Officer

		/s/ Rob Wiley
Dated: February 12, 2021	By:	Rob Wiley, Chief Financial Officer

36

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Fred W. Wagenhals, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ammo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 12, 2021	By:	/s/ Fred W. Wagenhals
	Name:	Fred W. Wagenhals
	Title:	Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Rob Wiley, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Ammo, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 12, 2021	By:	/s/ Rob Wiley
	Name:	Rob Wiley
	Title:	Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Quarterly Report of AMMO, Inc. (the “ Company”) on Form 10-Q for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Fred W. Wagenhals, Chief Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 12, 2021	By:	/s/ Fred W. Wagenhals
	Name:	Fred W. Wagenhals
	Title:	Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Quarterly Report of AMMO, Inc. (the “ Company”) on Form 10-Q for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Rob Wiley, Chief Financial Officer (Principal Financial Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 12, 2021	By:	/s/ Rob Wiley
	Name:	Rob Wiley
	Title:	Chief Financial Officer (Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Dec. 31, 2020	Feb. 05, 2021
Cover [Abstract]
Entity Registrant Name	AMMO, INC.
Entity Central Index Key	0001015383
Document Type	10-Q
Document Period End Date	Dec. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		68,665,629
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021

XML

Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Current Assets:
Cash	$ 19,007,893	$ 884,274
Accounts receivable, net of allowance for doubtful account of $117,094 at December 31, 2020 and $62,248 at March 31, 2020	6,877,047	3,004,839
Due from related parties	15,657	15,807
Inventories, at lower cost or net realizable value, principally average cost method	9,548,591	4,408,073
Prepaid expenses	1,053,671	844,117
Total Current Assets	36,502,859	9,157,110
Equipment, net of accumulated depreciation of $5,100,920 at December 31, 2020 and $3,060,681 at March 31, 2020	19,403,855	18,046,329
Other Assets:
Deposits	52,183	216,571
Licensing agreements, net of accumulated amortization of $195,833 at December 31, 2020 and $158,833 at March 31, 2020	54,167	91,667
Patents, net of accumulated amortization of $931,102 at December 31, 2020 and $561,096 at March 31, 2019	6,142,903	6,512,909
Other Intangible Assets, net of accumulated amortization of $2,568,168 at December 31, 2020 and $1,496,833 at March 31, 2020	2,578,069	3,649,404
Right of Use Assets - Operating Leases	2,371,096	3,431,746
TOTAL ASSETS	67,105,132	41,105,736
Current Liabilities:
Accounts payable	4,404,029	5,197,354
Factoring liability	2,290,598	2,005,979
Accrued liabilities	3,952,438	1,619,619
Inventory credit facility	2,250,000
Current portion of operating lease liability	510,103	375,813
Insurance premium note payable	103,792	329,724
Note payable related party	611,290	434,731
Total Current Liabilities	14,122,250	9,963,220
Long-term Liabilities:
Contingent consideration payable	621,517	709,623
Convertible promissory notes, net of note issuance cost of $121,325 at December 31, 2020 and $237,611 at March 31, 2020	817,675	2,262,389
Notes payable related party	2,427,726	5,803,800
Note payable	4,000,000
Paycheck protection program notes	427,385
Operating Lease Liability, net of current portion	1,913,904	3,107,911
Total Liabilities	24,330,457	21,846,943
Shareholders' Equity:
Common stock, $0.001 par value, 200,000,000 shares authorized 63,498,045 at December 31, 2020 and 46,204,139 shares issued and outstanding at March 31, 2020, respectively	63,498	46,204
Additional paid-in capital	84,732,248	53,219,834
Stock subscription receivable	(664,975)
Accumulated deficit	(41,356,096)	(34,007,245)
Total Shareholders' Equity	42,774,675	19,258,793
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 67,105,132	$ 41,105,736

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Allowance for doubtful accounts	$ 117,094	$ 62,248
Accumulated depreciation	5,100,920	3,060,681
Convertible promissory notes, issuance costs current	$ 121,325	$ 237,611
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	63,498,045	46,204,139
Common stock, shares outstanding	63,498,045	46,204,139
Licensing Agreements [Member]
Accumulated amortization	$ 195,833	$ 158,833
Patents [Member]
Accumulated amortization	931,102	561,096
Other Intangible Assets [Member]
Accumulated amortization	$ 2,568,168	$ 1,496,833

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Net Sales
Net Sales	$ 16,620,244	$ 2,772,009	$ 38,293,086	$ 10,025,144
Cost of Goods Sold, for the three and nine months ended December 31, 2020 and 2019 includes depreciation and amortization of $807,505, $771,463, $2,346,157, and $2,108,269 respectively, and federal excise taxes of $1,201,841, $138,529, $2,707,534, and $374,132, respectively	13,278,338	3,662,196	32,590,149	12,286,591
Gross Margin	3,341,906	(890,187)	5,702,937	(2,261,447)
Operating Expenses
Selling and marketing	542,271	238,439	1,244,323	748,014
Corporate general and administrative	1,639,052	730,991	3,805,230	2,784,984
Employee salaries and related expenses	1,172,765	846,724	3,329,511	2,898,932
Depreciation and amortization expense	416,625	(56,247)	1,242,809	848,995
Loss on purchase			1,000,000
Total operating expenses	3,770,713	1,759,907	10,621,873	7,280,925
Loss from Operations	(428,807)	(2,650,094)	(4,918,936)	(9,542,372)
Other Expenses
Other income/(expense)	461,000		274,400
Interest income/(expense)	(1,938,630)	(214,328)	(2,704,315)	(607,710)
Total other expenses	(1,477,630)	(214,328)	(2,429,915)	(607,710)
Loss before Income Taxes	(1,906,437)	(2,864,422)	(7,348,851)	(10,150,082)
Provision for Income Taxes
Net Loss	$ (1,906,437)	$ (2,864,422)	$ (7,348,851)	$ (10,150,082)
Loss per share Basic and fully diluted:
Weighted average number of shares outstanding	53,816,157	45,767,635	49,295,682	45,267,036
Loss per share	$ (0.04)	$ (0.06)	$ (0.15)	$ (0.22)
Ammunition Sales [Member]
Net Sales
Net Sales	$ 12,834,490	$ 1,246,414	$ 27,987,438	$ 3,703,669
Casing Sales [Member]
Net Sales
Net Sales	$ 3,785,754	$ 1,525,595	$ 10,305,648	$ 6,321,475

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Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Income Statement [Abstract]
Depreciation and amortization	$ 807,505	$ 771,463	$ 2,346,157	$ 2,108,269
Federal excise taxes	$ 1,201,841	$ 138,529	$ 2,707,534	$ 374,132

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Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - USD ($)	Common Shares [Member]	Additional Paid-In Capital [Member]	Stock Subscription Receivable [Member]	Accumulated (Deficit) [Member]	Total
Beginning Balance at Mar. 31, 2019	$ 44,013	$ 48,935,485		$ (19,450,565)	$ 29,528,933
Beginning Balance, shares at Mar. 31, 2019	44,013,075
Common stock issued for cash	$ 1,233	2,464,307			2,465,540
Common stock issued for cash , shares	1,232,770
Common stock issued for convertible notes	$ 127	318,099			318,226
Common stock issued for convertible notes, shares	127,291
Common stock issuance costs		(285,981)			(285,981)
Common stock issued for services	$ 126	271,874			272,000
Common stock issued for services, shares	125,941
Employee stock awards	$ 407	688,343			688,750
Employee stock awards, shares	407,000
Stock grants		548,058			548,058
Net loss				(10,150,082)	(10,150,082)
Ending Balance at Dec. 31, 2019	$ 45,906	52,940,185		(29,600,647)	23,385,444
Ending Balance, shares at Dec. 31, 2019	45,906,077
Beginning Balance at Sep. 30, 2019	$ 45,751	52,517,726		(26,736,227)	25,827,250
Beginning Balance, shares at Sep. 30, 2019	45,751,628
Common stock issued for cash
Common stock issued for cash , shares
Common stock issued for convertible notes
Common stock issued for convertible notes, shares
Common stock issuance costs
Common stock issued for services	$ 63	71,937			72,000
Common stock issued for services, shares	62,449
Employee stock awards	$ 92	182,158			182,250
Employee stock awards, shares	92,000
Stock grants		168,364			168,364
Net loss				(2,864,420)	(2,864,422)
Ending Balance at Dec. 31, 2019	$ 45,906	52,940,185		(29,600,647)	23,385,444
Ending Balance, shares at Dec. 31, 2019	45,906,077
Beginning Balance at Mar. 31, 2020	$ 46,204	53,219,834		(34,007,245)	19,258,793
Beginning Balance, shares at Mar. 31, 2020	46,204,139
Common stock issued for cash	$ 11,537	23,601,082			23,612,619
Common stock issued for cash , shares	11,536,143
Common stock issued for convertible notes	$ 2,667	3,872,292			3,874,959
Common stock issued for convertible notes, shares	2,667,358
Common stock issued for exercised warrants	$ 1,097	2,287,781			2,288,878
Common stock issued for exercised warrants, shares	1,096,939
Stock subscription receivable for exercised warrants	$ 310	664,665	(664,975)
Stock subscription receivable for exercised warrants, shares	309,775
Common stock issued for debt conversion - related party	$ 1,000	2,099,000			2,100,000
Common stock issued for debt conversion - related party, shares	1,000,000
Common stock issued for cashless warrant exercise	$ 160	(160)
Common stock issued for cashless warrant exercise, shares	160,274
Common stock issuance costs		(3,344,436)			(3,344,436)
Common stock issuance costs, shares
Common stock issued for services	$ 58	87,442			87,500
Common stock issued for services, shares	58,336
Employee stock awards	$ 465	716,124			716,589
Employee stock awards, shares	465,081
Stock grants		213,130			213,130
Issuance of warrants for convertible notes		1,315,494			1,315,494
Net loss				(7,348,851)	(7,348,851)
Ending Balance at Dec. 31, 2020	$ 63,498	84,732,248	(664,975)	(41,356,096)	42,774,675
Ending Balance, shares at Dec. 31, 2020	63,498,045
Beginning Balance at Sep. 30, 2020	$ 48,323	56,895,422		(39,449,659)	17,494,086
Beginning Balance, shares at Sep. 30, 2020	48,324,347
Common stock issued for cash	$ 9,873	20,720,875			20,730,748
Common stock issued for cash , shares	9,872,928
Common stock issued for convertible notes	$ 2,667	3,872,292			3,874,959
Common stock issued for convertible notes, shares	2,667,358
Common stock issued for exercised warrants	$ 977	2,045,476			2,046,453
Common stock issued for exercised warrants, shares	975,726
Stock subscription receivable for exercised warrants	$ 310	664,665	(664,975)
Stock subscription receivable for exercised warrants, shares	309,775
Common stock issued for debt conversion - related party	$ 1,000	2,099,000			2,100,000
Common stock issued for debt conversion - related party, shares	1,000,000
Common stock issued for cashless warrant exercise	$ 160	(160)
Common stock issued for cashless warrant exercise, shares	159,995
Common stock issuance costs		(3,274,436)			(3,274,436)
Common stock issuance costs, shares
Common stock issued for services	$ 50	87,450			87,500
Common stock issued for services, shares	50,000
Employee stock awards	$ 138	240,715			240,853
Employee stock awards, shares	137,916
Stock grants		65,455			65,455
Issuance of warrants for convertible notes		1,315,494			1,315,494
Net loss				(1,906,437)	(1,906,437)
Ending Balance at Dec. 31, 2020	$ 63,498	$ 84,732,248	$ (664,975)	$ (41,356,096)	$ 42,774,675
Ending Balance, shares at Dec. 31, 2020	63,498,045

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Condensed Consolidated Statements of Cash Flow (Unaudited) - USD ($)	9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities:
Net Loss	$ (7,348,851)	$ (10,150,082)
Adjustments to reconcile Net Loss to Net Cash used by operations:
Depreciation and amortization	3,588,966	2,957,337
Debt discount amortization	325,141	24,144
Employee stock awards	716,589	688,750
Stock grants	213,130	548,058
Stock for services	87,500	272,000
Contingent consideration payable fair value	(88,106)
Interest on convertible promissory notes	146,104
Allowance for doubtful accounts	54,846	(124,313)
Reduction in right of use asset	322,970
Paycheck protection program note forgiveness	(624,600)
Loss on disposal of assets	25,400
Stock issued in lieu of cash payments	48,000
Loss on Jagemann Munition Components	1,000,000
Stock and warrants for note conversion	1,315,494
Changes in Current Assets and Liabilities
Accounts receivable	(3,927,054)	91,995
Due to (from) related parties	150	2,858
Inventories	(5,140,518)	(250,383)
Prepaid expenses	16,985	301,241
Deposits	164,388	(93,830)
Accounts payable	1,842,472	2,357,708
Accrued liabilities	2,332,819	271,063
Operating lease liability	(322,037)
Net cash used in operating activities	(5,250,212)	(3,103,454)
Cash flows from investing activities
Purchase of equipment	(4,493,051)	(356,022)
Net cash used in investing activities	(4,493,051)	(356,022)
Cash flow from financing activities
Proceeds from inventory facility	2,250,000
Proceeds from factoring liability	26,079,000	936,750
Payments on factoring liability	(25,794,381)
Proceeds from paycheck protection program notes	1,051,985
Proceeds from note payable related party issued	3,500,000	415,000
Payments on note payable - related party	(7,235,312)	(1,500,000)
Payments on insurance premium note payment	(452,471)	(322,209)
Proceeds from note payable	4,000,000
Proceeds from convertible promissory notes	1,959,000
Sale of common stock	23,564,619	2,465,540
Common stock issued for exercised warrants	2,288,878
Common stock issuance costs	(3,344,436)	(285,981)
Contingent consideration payment		(300,000)
Net cash provided by financing activities	27,866,882	1,409,100
Net increase/(decrease) in cash	18,123,619	(2,050,376)
Cash, beginning of period	884,274	2,181,246
Cash, end of period	19,007,893	130,870
Supplemental cash flow disclosures
Cash paid during the period for - Interest	923,454	346,800
Cash paid during the period for - Income taxes
Non-cash investing and financing activities:
Accounts payable	(2,635,797)
Note payable related party	2,635,797
Right of use assets - operating leases	(737,680)	(4,168,771)
Operating lease liability	737,680	4,168,771
Insurance premium note payment	226,539	165,120
Prepaid expenses	(226,539)	(165,120)
Convertible promissory note	(3,520,000)
Note issuance costs	(208,855)
Convertible promissory note conversion	3,728,855	318,226
Convertible promissory note and accrued interest		(318,226)
Note payable related party conversion	2,100,000
Note payable related party	(2,100,000)	(2,596,200)
Other intangible assets		2,312,609
Deposits		(109,250)
Equipment		392,841
Stock subscription receivable	(664,975)
Common stock	310
Additional paid-in capital	664,665
Total non-cash investing and financing activities

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Organization and Business Activity

9 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Business Activity

NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY

We were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished garments and fabrics. We were inactive until the following series of events in December 2016 and March 2017.

On December 15, 2016, the Company’s majority shareholders sold 475,681 (11,891,976 pre-split) of their outstanding shares to Mr. Fred W. Wagenhals (“Mr. Wagenhals”) resulting in a change in control of the Company. Mr. Wagenhals was appointed as sole officer and the sole member of the Company’s Board of Directors.

The Company also approved (i) doing business in the name AMMO, Inc., (ii) a change to the Company’s OTC trading symbol to POWW, (iii) an agreement and plan of merger to re-domicile and change the Company’s state of incorporation from California to Delaware, and (iv) a 1-for-25 reverse stock split (“Reverse Split”) of the issued and outstanding shares of the common stock of the Company. As a result of the reverse split, the previous issued and outstanding shares of common stock became 580,052 shares; no shareholder was reversed below 100 shares, and all fractional shares resulting from the reverse split were rounded up to the next whole share. All references to the outstanding stock have been retrospectively adjusted to reflect this split. These transactions were effective as of December 30, 2016.

On March 17, 2017, the Company entered into a definitive agreement with AMMO, Inc. a Delaware Corporation (PRIVCO) under which the Company acquired all of the outstanding shares of common stock of (PRIVCO). Under the terms of the Agreement, the Company issued 17,285,800 newly issued shares of common stock of the Company. In connection with this transaction the Company retired 475,681 shares of common stock and issued 500,000 shares of common stock to satisfy an issuance commitment. The acquisition was considered to be a capital transaction. The transaction was the equivalent to the issuance by PRIVCO of 604,371 shares to the Company’s shareholders accompanied by a recapitalization. The weighted average number of outstanding shares has been adjusted for this transaction. (PRIVCO) subsequently changes its name to AMMO Munitions, Inc.

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Summary of Significant Accounting Policies

9 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis

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

The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended March 31, 2020. The results for the three and nine month period ended December 31, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three and nine month periods ended December 31, 2020 and 2019, (b) the financial position at December 31, 2020, and (c) cash flows for the nine month period ended December 31, 2020 and 2019.

We use the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”) and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31^st.

Unless the context otherwise requires, all references to “Ammo”, “we”, “us”, “our,” or the “Company” are to AMMO, Inc., a Delaware corporation.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries, Enlight Group II, LLC (d/b/a Jagemann Munition Components), SNI, LLC, AMMO Munitions, Inc. and AMMO Technologies, Inc. (inactive). All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 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, intangible assets, and stock-based compensation.

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represents amounts due from customers for products sold and include an allowance for uncollectible accounts which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts. At December 31, 2020 and March 31, 2020, we reserved $117,094 and $62,248, respectively, of allowance for doubtful accounts.

License Agreements

We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company, or JJF. The license agreement grants us the exclusive worldwide rights through October 15, 2021 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James Branded Products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.

We are a party to a license agreement with Jeff Rann, a well-known wild game hunter and spokesman for the firearm and ammunition industries. The license agreement grants us through February 2022 the exclusive worldwide rights to Mr. Rann’s image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of all Jeff Rann Branded Products. We agreed to pay Mr. Rann 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.

Amortization expense for the license agreements for the three and nine months ended December 31, 2020 and 2019 was $12,500 and $37,500, respectively.

Patents

On September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with Hallam, Inc, a Texas corporation, with ATI being the survivor. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $21,269 and $21,268, respectively, and $63,806 for the nine months ended December 31, 2020 and 2019.

Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the nine months ended December 31, 2020 and 2019, the Company recognized royalty expenses of $70,793 and $20,261, respectively under this agreement.

On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ATI succeeded all of the assets of SW Kenetics, Inc. and assumed all of the liabilities.

The primary asset of SW Kenetics Inc. was a pending patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc. pursuant to Intellectual Property Rights Agreement on September 27, 2018. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $102,067, respectively, and $306,200 and $239,253, respectively for the nine months ended December 31, 2020 and 2019.

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

Other Intangible Assets

On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement. The intangible assets acquired include a tradename, customer relationships, and intellectual property. For the three months ended December 31, 2020 and 2019, amortization of the other intangibles assets was $357,111 and $249,794, respectively, and $1,071,335 and $729,131, respectively for the nine months ended December 31, 2020 and 2019 and recognized in depreciation and amortization expense.

Impairment of Long-Lived Assets

We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three and nine months ended December 31, 2020 and 2019.

Revenue Recognition

We generate revenue from the production and sale of ammunition. We recognize revenue according to ASC 606. When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. The Company applies the following five-step model to determine revenue recognition:

● Identification of a contract with a customer

● Identification of the performance obligations in the contact

● determination of the transaction price

● allocation of the transaction price to the separate performance allocation

● recognition of revenue when performance obligations are satisfied

The Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product. In the current period, the Company began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities. The Company will recognize revenue when the performance obligation is met.

For the three and nine months ended December 31, 2020, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:

	Revenues at December 31, 2020						Accounts Receivable
PERCENTAGES	Three Months Ended			Nine Months Ended			December 31, 2020			March 31, 2020
Customers:
A		15.9	%		15.0	%		-	%		26.5	%
B		-			-			14.6	%		-
		15.9	%		15.0	%		14.6	%		26.5	%

Disaggregated Revenue Information

The following table represent a disaggregation of revenue from customers by segment. We attribute net sales to segments by product types; ammunition and ammunition casings. The Company notes that revenue recognition processes are consistent between product type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product type.

	For the Three Months Ended				For the Nine Months Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Ammunition Sales	$	12,834,490	$	1,246,414	$	27,987,438	$	3,703,669
Ammunition Casings Sales		3,785,754		1,525,595		10,305,648		6,321,475
Total Sales	$	16,620,244	$	2,772,009	$	38,293,086	$	10,025,144

Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell direct to customers online. In contrast, our ammunition casings products are sold to manufacturers.

Advertising Costs

We expense advertising costs as they are incurred in selling and marketing expenses of operating expenses. We incurred advertising of $51,700 and $190,277 for the three and nine months ended December 31, 2020, respectively and we incurred advertising expenses of $128,709 and $422,948 for the three and nine months ended December 31, 2019, respectively.

Inventories

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

Property and Equipment

We state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method over estimated useful lives, which are generally five to ten years.

Compensated Absences

We accrue a liability for compensated absences in accordance with Accounting Standards Codifications 710 – Compensation – General.

Stock-Based Compensation

We account for stock-based compensation at fair value in accordance with ASC 718. There were 137,916 shares of common stock issued to employees, members of the Board of Directors, and members of the Advisory Committee for services during the quarter ended December 31, 2020.

Effective April 1, 2020, we entered into an employment agreement with Robert D. Wiley, Chief Financial Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

Effective June 18, 2020, we entered into an employment agreement with Steve Hilko, Chief Operating Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

From September 2018 through December 2020, we entered into eight separate employment agreements that included in total, among other provisions, equity grants of 540,382 shares of restricted common stock that vests annually over the next three years. The total compensation value is being recognized on a straight-line basis over the periods covered by each agreement, up to four years.

Concentrations of Credit Risk

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2020, our bank account balances exceeded federally insured limits.

Income Taxes

We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change in judgment occurs. We currently have substantial net operating loss carryforwards. We have recorded a valuation allowance equal to the net deferred tax assets due to the uncertainty of the ultimate realization of the deferred tax assets.

Furthermore, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act was enacted in response to the COVID-19 pandemic and contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest, technical corrections to tax depreciation methods for qualified improvement property and net operating loss carryback periods. The Company is implementing applicable benefits of the CARES Act, such as deferring employer payroll taxes and evaluating potential employee retention credits.

Contingencies

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

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is reasonably estimated, the estimated liability would be accrued in our condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed. On September 24, 2019, the Company received notice that a former employee that had voluntarily terminated filed a complaint against the Company, and certain individuals, with the U.S. Department of Labor (“DOL”). The Complaint in alleges that the individual reported potential violations of SEC rules and regulations by management and that as a result of such disclosures, the individual experienced a hostile work environment; that the Company lacks sufficient controls internal controls, and that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the shareholders. The claims were investigated by a newly appointed Special Investigative Committee made of up independent directors represented by special independent legal counsel. The Special Investigative Committee and legal counsel found the material claims were unsubstantiated, including those concerning alleged SEC violations, and recommended enhancements to certain corporate governance charter documents and processes which the Company promptly implemented. The matter is currently the subject of administrative investigation by the DOL via the Occupational Safety and Health Administration. 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 and therefore has and will continue to aggressively defend its interests in this matter. On February 4, 2020, the Company filed suit against a former employee for violating merger agreements with SW Kenetics, Inc., employment agreements, and by unlawfully retaining property belonging to the Company following their termination. On March 11, 2020, the former employee filed a counterclaim against the Company citing breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and declaratory judgement. The Company plans to aggressively pursue its offensive claims in order to recover economic damages as a result of its claims while seeking dismissal of the counterclaim. There were no other known contingencies at December 31, 2020.

Loss Per Common Share

We calculate basic loss per share using the weighted-average number of shares of common stock outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants, using various methods, such as the treasury stock or modified treasury stock method, in the determination of dilutive shares outstanding during each reporting period. We have issued warrants to purchase 8,910,205 shares of common stock. All weighted average numbers were adjusted for the reverse stock split and merger transaction. Due to the loss from operations in the three and nine months ended December 31, 2020 and 2019, there are no common shares added to calculate the dilutive EPS for those periods as the effect would be antidilutive. The Company excluded warrants of 8,910,205 and 8,629,432 for the nine months ended December 31, 2020 and 2019, respectively, from the weighted average diluted common shares outstanding because their inclusion would have been antidilutive.

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Inventories

9 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Inventories

NOTE 3 – INVENTORIES

At December 31, 2020 and March 31, 2020, the inventory balances are composed of:

	December 31, 2020		March 31, 2020
Finished product	$	351,171	$	1,916,417
Raw materials		7,010,713		1,771,006
Work in process		2,186,707		720,650
	$	9,548,591	$	4,408,073

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Property and Equipment

9 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Property and Equipment

NOTE 5 – PROPERTY AND EQUIPMENT

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

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

Property and equipment consisted of the following at December 31, 2020 and March 31, 2020:

	December 31, 2020			March 31, 2020
Leasehold Improvements	$	126,558		$	118,222
Furniture and Fixtures		87,790			87,790
Vehicles		103,511			103,511
Equipment		23,411,433			19,578,035
Tooling		126,190			126,190
Construction in Progress		649,293			1,093,262
Total property and equipment	$	24,504,775		$	21,107,010
Less accumulated depreciation		(5,100,920	)		(3,060,681	)
Net property and equipment		19,403,855			18,046,329

Depreciation Expense for the three and nine months ended December 31, 2020 and 2019 totaled $731,183, $677,407, $2,110,125, and $1,887,573, respectively.

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Factoring Liability

9 Months Ended

Dec. 31, 2020

Factoring Liability

Factoring Liability

NOTE 5 – FACTORING LIABILITY

On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contains a maximum advance amount of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus 4.5%. The agreement contains fee of 3% ($150,000) of the Maximum Facility assessed to the Company. Our obligations under this agreement are secured by present and future accounts receivables and related assets, inventory, and equipment. The Company has the right to terminate the agreement, with 30 days written notice, upon obtaining a non-factoring credit facility. This agreement provides the Company with the ability to convert our account receivables into cash. As of December 31, 2020, the outstanding balance of the Factoring Liability was $2,290,598. Interest expense recognized on the Factoring Liability was $313,747, including $50,000 of amortization of the commitment fee. Interest expense for the comparable period ending December 31, 2019 was $116,196, including $62,500 of amortization of the commitment fee.

On June 17, 2020, this agreement was amended which extended the maturity date to June 17, 2022.

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Inventory Credit Facility

9 Months Ended

Dec. 31, 2020

Inventory Credit Facility

Inventory Credit Facility

NOTE 6 – INVENTORY CREDIT FACILITY

On June 17, 2020, we entered into a Revolving Inventory Loan and Security Agreement with FSW. FSW will establish a revolving credit line, and make loans from time to time to the Company for the purpose of providing capital. The twenty-four month agreement secured by our inventory, among other assets, contains a maximum loan amount of $1,750,000 on eligible inventory and has an annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%. The agreement contains a fee of 2% of the maximum loan amount ($35,000) assessed to the Company. On July 31, 2020, the Company amended its Revolving Loan and Security Agreement to increase the maximum inventory loan amount to $2,250,000. As of December 31, 2020, the outstanding balance of the Inventory Credit Facility was $2,250,000. Interest expense recognized on the Inventory Credit Facility was $118,202, including $24,962 of amortization of the annual fee. There was no interest expense for the comparable period ending December 31, 2019 as this transaction was not yet consummated.

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Leases

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

NOTE 8 – LEASES

We lease office, manufacturing, and warehouse space in Scottsdale and Payson, AZ and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Payson lease has an option to renew for five years. As of December 31, 2020, we are fairly certain that we will exercise the renewal option, and we have included such renewal option in the lease liabilities and the disclosures herein. The Scottsdale lease does not include a renewal option. As of June 26, 2020, the Company entered into an amended agreement that modified the Manitowoc lease to monthly payments of $34,071 and decrease the term to March 2025. The agreement does not contain a renewal option. Accordingly, we modified our Right of Use Assets and Operating Lease Liabilities by $737,680 at June 30, 2020.

As of December 31, 2020, the total Right of Use Assets and Operating Lease Liabilities on the Balance Sheet were $2,371,096 and $1,913,304, respectively. As of March 31, 2020, the total Right of Use Assets and Operating Lease Liabilities on the Balance Sheet were $3,431,746 and $3,107,911, respectively. The Operating Lease Liabilities were net of current portions of $510,103 at December 31, 2020 and $375,813 at March 31, 2020.

Consolidated lease expense for the three and nine months ended December 2020 was $217,140 and $609,250, respectively, including $179,487 and $534,781 of respective operating lease expense and $37,653 and $74,468 of respective other lease associated expenses such as association dues, taxes, utilities, and other month to month rentals.

The weighted average remaining lease term and weighted average discount rate for operating leases were 4.2 years and 10.0%, respectively.

Futures minimum lease payments under non-cancellable leases as of December 31, 2020 are as follows:

Years Ended March 31,
2021 (1)	$	181,987
2022		732,111
2023		742,108
2024		684,836
2025		495,528
Thereafter		144,460
		2,981,030
Less: Amount Representing Interest		(557,023	)
	$	2,424,007

(1) This amount represents future lease payments for the remaining three months of fiscal year 2021. It does not include any lease payments for the nine months ended December 31, 2020.

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Convertible Promissory Notes

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Convertible Promissory Notes

NOTE 9 – CONVERTIBLE PROMISSORY NOTES

On January 15, 2020, the Company consummated the initial closing of a private placement offering whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $1,650,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share (“Common Stock”).

On January 30, 2020, the Company consummated the final closing of a private placement whereby pursuant to the Subscription Agreements entered into by the Company with five (5) accredited investors, the Company issued certain Convertible Promissory Notes for an aggregate purchase price of $850,000 and five (5) year warrants to purchase shares of the Company’s common stock, par value $0.001 per share.

The Notes accrue interest at a rate of 8% per annum and mature on October 15, 2020 and October 30, 2020. Additionally, the Notes contain a mandatory conversion mechanism whereby any principal and accrued interest on the Notes, upon the closing of a Qualified Financing (as defined in the Notes), converts into shares of the Company’s Common Stock at a conversion price of 66.7% of the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the Notes shall become convertible into shares of the Company’s Common Stock at a conversion price that is equal to 50.0% of the arithmetic mean of the VWAP in the ten consecutive Trading Days immediately preceding the Maturity Date. The Notes contain customary events of default. If an Event of Default occurs, interest under the Notes will accrue at a rate of fifteen percent (15%) per annum and the outstanding principal amount of the Notes, plus accrued but unpaid interest, liquidated damages and other amounts owing with respect to the Notes will become, at the Note holder’s election, immediately due and payable in cash.

The Company analyzed embedded conversion options of the convertible notes at issuance to determine whether the embedded conversion options should be bifurcated and accounted for as derivative liabilities or if the embedded conversion options contain a beneficial conversion feature. The Company notes that this determination must be performed at each balance sheet date and makes it possible for certain instruments to be reclassified between debt and equity at different points in their life. The Company determined that it will defer recognition of its accounting until such notes become convertible. Additionally, the Company determined that the embedded conversion options do not require bifurcation and treatment as derivative liabilities, but they included contingent beneficial conversion features that are indeterminable on the commitment date. The Company notes the embedded conversion options will be accounted for and recognized, if necessary, when the contingencies are resolved (the date of a Qualified Financing or during the 10 days prior to the Maturity Date). Through the maturity date a Qualified Financing had not occurred and the Note is not yet convertible under the Voluntary Conversion Option.

Pursuant to the Subscription Agreements, each Investor will receive the number of Warrants to purchase shares of Common Stock equal to the quotient obtained by dividing 50% of the principal amount of the Note by the Conversion Price of the Note. The Warrants are exercisable at the per share purchase price of shares or other units in the Qualified Financing. If a Qualified Financing has not occurred on or before the Maturity Date, the warrants shall become exercisable at a price per share that is equal to the closing ten-day VWAP in the ten trading days immediately preceding the Maturity Date (the “Exercise Price”). The Warrants contain an anti-dilution protection feature, to adjust the Exercise Price if shares are sold or issued for a consideration per share less than the exercise price then in effect.

Joseph Gunnar & Co., LLC acted as placement agent for the Offering. The Placement Agent received cash compensation of $200,000 and is scheduled to be issued five (5) year warrants to purchase such number of shares of Common Stock equal to five percent (5%) of the shares underlying the Notes and the Warrants, at an exercise price equal to 125% of the Conversion Price of the Notes, which price shall not be known until the earlier of the Maturity Date or the closing of the Qualified Financing.

From October 8, 2020 to October 26, 2020, the Company received notices for voluntary conversion for the total outstanding principal ($2,500,000) and interest ($146,104) of the Convertible Promissory Notes and issued 2,157,358 shares of our Common Stock as a result of the conversion. The principal and interest related to the Initial Closing and Final Closing were converted at a conversion prices of $1.21 and $1.26, respectively. Additionally, the Company issued a total of 1,019,121 warrants to purchase shares of our Common Stock at exercise prices ranging from $2.19 to $2.67. The Company recognized $1,198,983 in interest expense as a result of the issuance of warrants. Subsequent to the issuance of the warrants, the exercise prices of the warrants were adjusted to $2.00. As a result the Company recognized $116,511 in interest expense for the change in the valuation of the warrants.

Additionally, pursuant to the Subscription Agreements, the Company issued 152,868 warrants to purchase shares of our Common Stock to Joseph Gunnar & Co. LLC with exercise prices ranging from $1.51 to $1.58. The Company has no further obligation with respect to the Convertible Promissory Notes.

On November 5, 2020 to November 25, 2020, the Company entered into Convertible Promissory Notes with four (4) accredited investors (the “Investors”), for an aggregate purchase price of $1,959,000 (each a “8% Note,” collectively, the “8% Notes”). The 8% Notes accrue interest at a rate of 8% per annum and mature from November 5, 2022 to November 25, 2022. Additionally, the 8% Notes contain a voluntary conversion mechanism whereby any principal and accrued interest on the 8% Notes, may be converted in holder’s discretion into shares of the Company’s Common Stock at a conversion price of $2.00 per share (“Conversion Price”). If not previously paid in full or converted, on the 180^th day following the Maturity Date, the principal and interest due under the 8% Notes shall automatically be converted to common stock shares at the Conversion Price The 8% Notes contain customary events of default (each an “Event of Default”). If an Event of Default occurs, the outstanding principal amount of the 8% Notes, plus accrued but unpaid interest, and other amounts owing with respect to the 8% Notes will become, at the 8% Note holder’s election, due and payable in cash. The Company performed analysis at the 8% Notes respective commitment dates and determined the 8% Notes contained beneficial conversion features. The Company recorded the $208,855 beneficial conversion feature as a note issuance cost. The Company recognized $17,000 in interest expense related to the convertible promissory notes in the current period.

On December 5, 2020, $1,020,000 of the 8% Notes were converted into 510,000 shares of common stock. There were $939,000 in 8% Notes remaining as of December 31, 2020. The Company recognized $73,313 in interest expense for the unamortized issuance costs upon conversion.

Subsequent to December 31, 2020, the remaining $939,000 in principal balance and $17,247 in accrued interest were converted into 478,123 shares of common stock at a conversion price of $2.00 per share.

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Notes Payable - Related Party

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Notes Payable - Related Party

NOTE 9 – NOTES PAYABLE – RELATED PARTY

In connection with the acquisition of the casing division of Jagemann Stamping Company, a $10,400,000 promissory note was executed. The promissory note, under which $500,000 was paid on March 25, 2019 using funds raised for the acquisition, had a remaining balance at March 31, 2019 of $9,900,000. On April 30, 2019, the original due date of the note was subsequently extended to April 1, 2020. The note bears interest per annum at approximately 4.6% payable in arrears monthly. In May of 2019, the Company paid $1,500,000 on the balance of the note. The note was secured by all the equipment purchased from Jagemann Stamping Company.

Post-closing of the transaction, it was made apparent that certain equipment that was agreed to be delivered free and clear by the Seller was not achievable as Seller was not able to purchase equipment that Seller had leased. Accordingly, the remaining value of the promissory note was reduced by $2,596,200. As a result of the change to the purchase price of the transaction, the Company reduced Equipment for a net value of $1,871,306, decreased Other Intangible Assets by $766,068, increased Accounts Receivable by $31,924, and recorded an increase to Deposits for $9,250 worth of equipment that the Company agreed to transfer back to Seller. Consequently, accumulated amortization has decreased by $159,530. Additionally, the Company entered into a lease to gain possession of the assets that were originally to be transferred.

On June 26, 2020, the Company, Enlight Group II, LLC (“Enlight”), the Company’s wholly owned subsidiary and Jagemann Stamping Company’s (“JSC”) entered into a Settlement Agreement pursuant to which the parties mutually agreed to settle all disputes and mutually release each other from liabilities related to the Amended APA occurring prior to June 26, 2020. Pursuant to the Settlement Agreement, the Company shall pay JSC $1,269,977 and shall provide JSC with: (i) two new promissory notes, a note of $5,803,800 related to the Seller Note and note of $2,635,797 for inventory and services, which was reclassed from accounts payable, both with a maturity date of August 15, 2021, (ii) general business security agreements granting JSC a security interest in all personal property of the Company. Pursuant to the Notes, the Company is obligated to make monthly payments totaling $204,295 to JSC. In addition, the Notes have a mandatory prepayment provision that comes into effect if the Company conducts a publicly registered offering. Pursuant to such provision, the Company: (a) upon the closing of an Offering of less than $10,000,000 would be obligated to pay the lesser of ninety percent (90%) of the Offering proceeds or seventy (70%) of the then aggregate outstanding balance of the Notes; and (b) upon the closing of an Offering of more than $10,000,000 would be obligated to pay one hundred percent (100%) of the then aggregate outstanding balance of the Notes. The Company was granted an option to repurchase up to 1,000,000 of the shares of the Company’s common stock issued to JSC under the Amended APA at a price of $1.50 per share through April 1, 2021 so long as there are no defaults under the Settlement Agreement.

As a result of the Settlement Agreement, the Company agreed to not receive $1,000,000 in Construction in Progress that the parties had previously agreed to exchange. As a result, the Company recognized a loss in operating expenses for the nine months ended December 31, 2020.

On November 5, 2020, the Company paid $6,000,000 to JSC allocated as follows: (i) payment in full of Note A, representing the balance due from the Company to JSC relating to the acquisition of Jagemann Munition Components in March 2019 and (ii) $592,982 remitted in partial payment of Note B, resulting in the parties’ execution of Amended Note B which has a starting principal balance of $1,687,664 (“Amended Note B”). The Amended Note B principal balance carries a 9% per annum interest rate and is amortized equally over the thirty six (36) month term. As a result of the payment in full of Note A JSC shall release the accompanying security interest in Company assets which secured Note A. Concurrently, upon entry into Amended Note B, JSC and the Company entered into the First Amendment to General Business Security Agreement to reflect a revised list of collateral in which JSC has a security interest.

The total interest expense recognized on Note A was $84,248 and $216,160, respectively for the three and nine months ended December 31, 2020. The total interest expense recognized on the original Note B was $32,413 and $62,876, respectively, for the three and nine months ended December 31, 2020

The Company’s balance of Amended Note B was $1,639,016 at December 31, 2020. The accompany recognized $16,455 in interest expense on Amended Note B for the three and nine months ended December 31, 2020.

Subsequent to December 31, 2020, the Company repurchased 1,000,000 shares of the Company’s common stock issued to JSC at a price of $1.50 per share pursuant to the Amended APA.

On May 3, 2019, the Company entered into a promissory note of $375,000 with a shareholder of the Company. The original interest rate was the applicable LIBOR Rate. The promissory note has since been amended and the balance at June 30, 2020 was $260,000. The note’s original a maturity date of August 3, 2019 was extended to September 18, 2020. The amended note bears interest at 1.25% per month. The Company made $18,195 in principal payments during the nine months ended December, 2020 and the Note was paid in full in July of 2020. We recognized $10,327 of interest expenses related to the note during the nine months ended December 31, 2020.

In December of 2019, the Company entered into a Promissory Note of $90,000 with Fred Wagenhals, the Company’s Chief Executive Officer and Chairman of the Board of Directors. The Note originally matured on June 12, 2020 and had an interest rate at the applicable LIBOR Rate. The promissory note has since been amended and the balance at June 30, 2020 was $131,536 and the amended maturity date is September 18, 2020. The Company made $25,000 in principal payments during the nine months ended December 31, 2020 and the Note was paid in full in July of 2020. The amended note bears interest at 1.25% per month. We recognized $5,350 of interest expense on the note for the nine months ended December 31, 2020.

On September 23, 2020, the Company and Enlight entered into a promissory note (the “Forest Street Note”) with Forest Street, LLC (“Lender”), an Arizona limited liability company wholly owned by our current Chief Executive Officer, Fred Wagenhals, for the principal sum of Three Million Five Hundred Thousand & 00/100 Dollars ($3,500,000.00), which accrues interest at 12% per annum. The Note has a maturity date of September 23, 2022.

Pursuant to the terms of the Forest Street Note, the Company and Enlight (collectively, the borrower pursuant to the note) shall pay Lender; (i) on a monthly basis, beginning October 23, 2020, all accrued interest (only), (ii) on a quarterly basis, a monitoring fee of 1% of the principal amount and then accrued interest; and (iii) on the maturity date, the remaining outstanding principal balance of the Loan, together with all unpaid accrued interest thereon.

On December 14, 2020, the Company entered into a Debt Conversion Agreement with the Lender Pursuant to the Agreement, the Company and Forest Street agreed to convert $2,100,000.00 of the Note’s principal into one million (1,000,000) shares of the Company’s common stock. The share issuance occurred on December 15, 2020. As a result of the Debt Conversion Agreement the outstanding balance on December 31, 2020 was $1,400,000. The Company recognized $137,666 in interest expense related to the Forest Street Note for the nine months ended December 31, 2020.

Subsequent to December 31, 2020, the Company paid the remaining $1,400,000 in principal and accrued interest of the Forest Street Note.

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Paycheck Protection Notes Payable

9 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Paycheck Protection Notes Payable

NOTE 10 – PAYCHECK PROTECTION NOTES PAYABLE

In April of 2020, the Company determined it was necessary to obtain additional funds as a result of the foregoing uncertainty cause by COVID-19. The Company received approximately $1.0 million in funds through itself and its wholly owned subsidiary Jagemann Munition Components, which was established under the federal Coronavirus Aid, Relief, and Economic Security Act and is administered by the U.S. Small Business Administration. The Company received approximately $600,000 from Western State Bank and its wholly owned subsidiary, Jagemann Munition Components, received approximately $400,000 from BMO Harris. The Paycheck Protection Notes provide for an interest rate of 1.00% per year and matures two years after the issuance date. Principal and accrued interest are payable monthly in equal installments commencing on the date that is six months after the date funds are first disbursed on the loan and continuing through the maturity date, unless the Paycheck Protection Notes are forgiven. To be available for loan forgiveness, the Paycheck Protection Note may only be used for payroll costs, costs related to certain group health care benefits and insurance premiums, rent payments, utility payments, mortgage interest payments and interest payments on any other debt obligation that existed before February 15, 2020.

On November 11, 2020, the Company applied for forgiveness of the $1.0 million Paycheck Protection Program Notes as these funds were used for qualified expenses. No assurance can be given that the Company will be granted forgiveness of these Paycheck Protection Program Notes.

On November 23, 2020, the Company received forgiveness in full on the Paycheck Protection Note Payable from Western State Bank. The Company has recognized the forgiven amount in Other Income.

Subsequent to December 31, 2020, the Company received forgiveness in full on the Paycheck Protection Note Payable from BMO Harris.

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Capital Stock

9 Months Ended

Dec. 31, 2020

Stockholders' Equity Note [Abstract]

Capital Stock

NOTE 12 – CAPITAL STOCK

During the nine month period ended December 31, 2020, we issued 17,293,906 shares of common stock as follows:

● 11,512,143 shares were sold to investors for $23,564,619

● 2,667,358 shares were issued for the conversion of convertible promissory notes for $3,874,959

● 1,096,939 shares were issued to investors for exercised warrants valued for $2,288,878

● 160,274 shares were issued for cashless exercise of 287,657 warrants

● 1,000,000 shares were issued pursuant to a debt conversion agreement for $2,100,000

● 58,336 shares were issued for services provided to the Company value at $87,500

● 465,081 shares valued at $716,589 were issued to employees, members of the Board of Directors, and members of the Advisory Committee as compensation

● 24,000 shares were issued to investors for $48,000 in liquidation damage fees

● 309,775 shares were recorded as a stock subscription receivable for exercised warrants for $664,975

On November 30, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Alexander Capital, L.P. (“Alexander Capital”), as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 8,564,285 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $2.10 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 1,284,643 shares of Common Stock. The Offering closed on December 3, 2020.

The Company conducted the Offering pursuant to a Registration Statement on Form S-1, as amended, which was declared effective by the United States Securities and Exchange Commission on November 30, 2020 (the “Registration Statement”).

The net proceeds to the Company from the Offering, after deducting the underwriting discount, the underwriters’ fees and expenses and the Company’s estimated Offering expenses, were $15,850,448.

On December 11, 2020, the Company completed the closing of the Over-allotment Option. The Underwriters purchases 1,284,643 shares of the Company’s common stock at the public offering price of $2.10 per share. The net proceeds to the Company from the Offering, after deducting the underwriting discount, were $2,467,799.

The Underwriting Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company (for a period of one year after the date of the Underwriting Agreement), and each director and executive officer of the Company (for a period of six months after the date of the final prospectus relating to the Public Offering), have agreed, subject to customary exceptions, not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of Alexander Capital.

On December 3, 2020, pursuant to the Underwriting Agreement, the Company entered into an Underwriter’s warrant agreement (the “Underwriters’ Warrant Agreement”) with the Underwriters and certain affiliates of the Underwriters. Pursuant to the Underwriters’ Warrant Agreement, the Company provided the Underwriters and certain affiliates of the Underwriters with a warrant to purchase 428,215 shares of Common Stock in the aggregate. Such warrant may be exercised beginning on May 29, 2021 (the date that is 180 days after the date on which the Registration Statement became effective) until November 30, 2025 (the date that is five years after the date on which the Registration Statement became effective). The initial exercise price of the Underwriters’ Warrant Agreement is $2.63 per share.

Pursuant to subscription agreements with certain investors, the Company agreed to file a registration statement for shares purchased by investors on or before the 75^th day following closing. The Company was unable to meet this obligation and is required to pay a liquidated damage fee to investors on a monthly basis to avoid default until such registration statement is filed. Accordingly, the Company paid $245,500 in the current period, of which $48,000 was paid by the issuance of 24,000 share of common stock at a price per share of $2.00, and accrued $84,300 for fees payable subsequent to December 31, 2020. The Company recorded these fees as issuance costs in Other Expenses.

At December 31, 2020, outstanding and exercisable stock purchase warrants consisted of the following:

	Number of Shares			Weighted Averaged Exercise Price		Weighted Average Life Remaining (Years)
Outstanding at March 31, 2020		8,504,372		$	2.10		3.60
Granted		2,100,204			2.09		4.90
Exercised		(1,694,371	)		2.01		-
Forfeited or cancelled		-			-		-
Outstanding at December 31, 2020		8,910,205		$	2.11		3.14
Exercisable at December 31, 2020		8,481,990		$	2.09		3.05

As of December 31, 2020, we had 8,910,205 warrants outstanding. Each warrant provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price. The outstanding warrants consist of (1) warrants to purchase 838,590 shares of Common Stock at an exercise price of $1.65 per share until April 2025; (2) warrants to purchase 5,098,329 shares of our Common Stock at an exercise price of $2.00 per share consisting of 71% of the warrants until April 2023, 8% until August 2024, and 21% until December 2025; (3) warrants to purchase 2,545,071 shares of Common Stock at an exercise price of $2.40 until September 2024; and (4) warrants to purchase 428,215 shares of Common Stock at an exercise price of $2.63 until November 2025, but not exercisable before May 29, 2021.

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Income Taxes

9 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 12 – INCOME TAXES

As of December 31, 2020, we had net operating loss carryforwards of approximately $33 million which will expire beginning at the end of 2036. A valuation allowance has been provided for the deferred tax asset as it is uncertain whether the Company will have future taxable income.

The Company’s effective tax rates were 0% and 0% for the nine months ended December 31, 2020 and 2019, respectively. During the nine months ended December 31, 2020 and 2019, the effective tax rate differed from the U.S. federal statutory rate primarily due to the change in the valuation allowance.

The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended December 31, 2016, December 31, 2017, and March 31, 2018, 2019, and 2020 are subject to audit.

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Subsequent Events

9 Months Ended

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

NOTE 14 – SUBSEQUENT EVENTS

From January 1, 2021 to February 5, 2021, the Company issued shares of its Common Stock for the exercise of warrants. There were 4,194,623 shares of Common Stock issued for warrants exercised at per share prices ranging from $2.00 to $2.40 for an aggregate value of $9,014,006. Additionally, there were 543,589 shares of Common Stock issued pursuant to cashless exercises of 974,076 warrants with exercise prices ranging from $1.65 to $2.00.

On January 1, 2021, The Company issued 70,000 shares of Common Stock to employees as compensation for a total value of $122,500 or $1.75 per share. Subsequent to December 31, 2020, the Company issued 881,250 shares of Common Stock for services at per share prices ranging from $1.75 to $2.00 for a total value of $1,612,500.

On February 4, 2020, the Company entered into a Settlement Agreement and Release with a third party. Per the terms of the agreement, the Company issued 150,000 warrants with an exercise price of $6.72 and paid $125,000. The agreement releases both the Company and the third party from all claims or disputes that have arisen surrounding previous agreements.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Accounting Basis

Accounting Basis

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

The accompanying condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures contained in the Company’s Annual Report filed with the SEC on Form 10-K for the year ended March 31, 2020. The results for the nine month period ended December 31, 2020 are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, all adjustments have been made, which consist only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three and nine month periods ended December 31, 2020 and 2019, (b) the financial position at December 31, 2020, and (c) cash flows for the nine month period ended December 31, 2020 and 2019.

We use the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP”) and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31^st.

Unless the context otherwise requires, all references to “Ammo”, “we”, “us”, “our,” or the “Company” are to AMMO, Inc., a Delaware corporation.

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries, Enlight Group II, LLC (d/b/a Jagemann Munition Components), SNI, LLC, AMMO Munitions, Inc. and AMMO Technologies, Inc. (inactive). All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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. 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, intangible assets, and stock-based compensation.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts

Our accounts receivable represents amounts due from customers for products sold and include an allowance for uncollectible accounts which is estimated based on the aging of the accounts receivable and specific identification of uncollectible accounts. At December 31, 2020 and March 31, 2020, we reserved $117,094 and $62,248, respectively, of allowance for doubtful accounts.

License Agreements

License Agreements

We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company, or JJF. The license agreement grants us the exclusive worldwide rights through October 15, 2021 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James Branded Products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition Branded Products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.

We are a party to a license agreement with Jeff Rann, a well-known wild game hunter and spokesman for the firearm and ammunition industries. The license agreement grants us through February 2022 the exclusive worldwide rights to Mr. Rann’s image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of all Jeff Rann Branded Products. We agreed to pay Mr. Rann 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.

Amortization expense for the license agreements for the three and nine months ended December 31, 2020 and 2019 was $12,500 and $37,500, respectively.

Patents

Patents

On September 28, 2017, AMMO Technologies Inc. (“ATI”), an Arizona corporation, which is 100% owned by us, merged with Hallam, Inc, a Texas corporation, with ATI being the survivor. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013 owned by University of Louisiana at Lafayette. The license was formally amended and assigned to AMMO Technologies Inc. pursuant to an Assignment and First Amendment to Exclusive License Agreement. Assumption Agreement dated to be effective as of August 22, 2017, the Merger closing date. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $21,269 and $21,268, respectively, and $63,806 for the nine months ended December 31, 2020 and 2019.

Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028. For the nine months ended December 31, 2020 and 2019, the Company accrued $70,793 and $20,261, respectively under this agreement.

On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ATI succeeded all of the assets of SW Kenetics, Inc. and assumed all of the liabilities.

The primary asset of SW Kenetics Inc. was a pending patent for modular projectiles. All rights to patent pending application were assigned and transferred to AMMO Technologies, Inc. pursuant to Intellectual Property Rights Agreement on September 27, 2018. Patent amortization expense for the three months ended December 31, 2020 and 2019 was $102,067, respectively, and $306,200 and $239,253, respectively for the nine months ended December 31, 2020 and 2019.

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

Other Intangible Assets

Other Intangible Assets

On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of AMMO, Inc., completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of the Amended and Restated Asset Purchase Agreement. The intangible assets acquired include a tradename, customer relationships, and intellectual property. For the three months ended December 31, 2020 and 2019, amortization of the other intangibles assets was $357,111 and $249,794, respectively, and $1,071,335 and $729,131, respectively for the nine months ended December 31, 2020 and 2019 and recognized in depreciation and amortization expense.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. No impairment expense was recognized for the three and nine months ended December 31, 2020 and 2019.

Revenue Recognition

Revenue Recognition

We generate revenue from the production and sale of ammunition. We recognize revenue according to ASC 606. When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. The Company applies the following five-step model to determine revenue recognition:

● Identification of a contract with a customer

● Identification of the performance obligations in the contact

● determination of the transaction price

● allocation of the transaction price to the separate performance allocation

● recognition of revenue when performance obligations are satisfied

The Company only applies the five-step model when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. Our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product. In the current period, the Company began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities. The Company will recognize revenue when the performance obligation is met.

For the three and nine months ended December 31, 2020, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:

	Revenues at December 31, 2020						Accounts Receivable
PERCENTAGES	Three Months Ended			Nine Months Ended			December 31, 2020			March 31, 2020
Customers:
A		15.9	%		15.0	%		-	%		26.5	%
B		-			-			14.6	%		-
		15.9	%		15.0	%		14.6	%		26.5	%

Disaggregated Revenue Information

The following table represent a disaggregation of revenue from customers by segment. We attribute net sales to segments by product types; ammunition and ammunition casings. The Company notes that revenue recognition processes are consistent between product type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product type.

	For the Three Months Ended				For the Nine Months Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Ammunition Sales	$	12,834,490	$	1,246,414	$	27,987,438	$	3,703,669
Ammunition Casings Sales		3,785,754		1,525,595		10,305,648		6,321,475
Total Sales	$	16,620,244	$	2,772,009	$	38,293,086	$	10,025,144

Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. We also sell direct to customers online. In contrast, our ammunition casings products are sold to manufacturers.

Advertising Costs

Advertising Costs

We expense advertising costs as they are incurred in selling and marketing expenses of operating expenses. We incurred advertising of $51,700 and $190,277 for the three and nine months ended December 31, 2020, respectively and we incurred advertising expenses of $128,709 and $422,948 for the three and nine months ended December 31, 2019, respectively.

Inventories

Inventories

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

Property and Equipment

Property and Equipment

We state property and equipment at cost, less accumulated depreciation. We capitalize major renewals and improvements, while we charge minor replacements, maintenance, and repairs to current operations. We compute depreciation by applying the straight-line method over estimated useful lives, which are generally five to ten years.

Compensated Absences

Compensated Absences

We accrue a liability for compensated absences in accordance with Accounting Standards Codifications 710 – Compensation – General.

Stock-Based Compensation

Stock-Based Compensation

We account for stock-based compensation at fair value in accordance with ASC 718. There were 137,916 shares of common stock issued to employees, members of the Board of Directors, and members of the Advisory Committee for services during the quarter ended December 31, 2020.

Effective April 1, 2020, we entered into an employment agreement with Robert D. Wiley, Chief Financial Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

Effective June 18, 2020, we entered into an employment agreement with Steve Hilko, Chief Operating Officer, that included, among other provisions, an equity grant of 33,333 shares of restricted common stock each year for three years that vests at the rate of 8,333 shares per quarter. The compensation value is being recognized on a straight-line basis each year over the three-year period covered by the agreement.

From September 2018 through December 2020, we entered into eight separate employment agreements that included in total, among other provisions, equity grants of 540,382 shares of restricted common stock that vests annually over the next three years. The total compensation value is being recognized on a straight-line basis over the periods covered by each agreement, up to four years.

Concentrations of Credit Risk

Concentrations of Credit Risk

Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of December 31, 2020, our bank account balances exceeded federally insured limits.

Income Taxes

Income Taxes

We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification 740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized. We reflect changes in recognition or measurement in the period in which the change in judgment occurs. We currently have substantial net operating loss carryforwards. We have recorded a valuation allowance equal to the net deferred tax assets due to the uncertainty of the ultimate realization of the deferred tax assets.

Furthermore, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act was enacted in response to the COVID-19 pandemic and contains numerous income tax provisions, such as relaxing limitations on the deductibility of interest, technical corrections to tax depreciation methods for qualified improvement property and net operating loss carryback periods. The Company is implementing applicable benefits of the CARES Act, such as deferring employer payroll taxes and evaluating potential employee retention credits.

Contingencies

Contingencies

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

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is reasonably estimated, the estimated liability would be accrued in our condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed. On September 24, 2019, the Company received notice that a former employee that had voluntarily terminated filed a complaint against the Company, and certain individuals, with the U.S. Department of Labor (“DOL”). The Complaint in alleges that the individual reported potential violations of SEC rules and regulations by management and that as a result of such disclosures, the individual experienced a hostile work environment; that the Company lacks sufficient controls internal controls, and that the individual was the victim of retaliation and constructive discharge after being removed as a director by majority vote of the shareholders. The claims were investigated by a newly appointed Special Investigative Committee made of up independent directors represented by special independent legal counsel. The Special Investigative Committee and legal counsel found the material claims were unsubstantiated, including those concerning alleged SEC violations, and recommended enhancements to certain corporate governance charter documents and processes which the Company promptly implemented. The matter is currently the subject of administrative investigation by the DOL via the Occupational Safety and Health Administration. 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 and therefore has and will continue to aggressively defend its interests in this matter. On February 4, 2020, the Company filed suit against a former employee for violating merger agreements with SW Kenetics, Inc., employment agreements, and by unlawfully retaining property belonging to the Company following their termination. On March 11, 2020, the former employee filed a counterclaim against the Company citing breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, and declaratory judgement. The Company plans to aggressively pursue its offensive claims in order to recover economic damages as a result of its claims while seeking dismissal of the counterclaim. There were no other known contingencies at December 31, 2020.

Loss Per Common Share

Loss Per Common Share

We calculate basic loss per share using the weighted-average number of shares of common stock outstanding during each reporting period. Diluted loss per share includes potentially dilutive securities, such as outstanding options and warrants, using various methods, such as the treasury stock or modified treasury stock method, in the determination of dilutive shares outstanding during each reporting period. We have issued warrants to purchase 8,910,205 shares of common stock. All weighted average numbers were adjusted for the reverse stock split and merger transaction. Due to the loss from operations in the three and nine months ended December 31, 2020 and 2019, there are no common shares added to calculate the dilutive EPS for those periods as the effect would be antidilutive. The Company excluded warrants of 8,910,205 and 8,629,432 for the nine months ended December 31, 2020 and 2019, respectively, from the weighted average diluted common shares outstanding because their inclusion would have been antidilutive.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Schedule of Concentration of Risks

For the three and nine months ended December 31, 2020, the Company’s customers that comprised more than ten percent (10%) of total revenues and accounts receivable were as follows:

	Revenues at December 31, 2020						Accounts Receivable
PERCENTAGES	Three Months Ended			Nine Months Ended			December 31, 2020			March 31, 2020
Customers:
A		15.9	%		15.0	%		-	%		26.5	%
B		-			-			14.6	%		-
		15.9	%		15.0	%		14.6	%		26.5	%

Schedule of Disaggregated Revenue from Customers by Segment

The following table represent a disaggregation of revenue from customers by segment. We attribute net sales to segments by product types; ammunition and ammunition casings. The Company notes that revenue recognition processes are consistent between product type, however, the amount, timing and uncertainty of revenue and cash flows may vary by each product type due to the customers of each product type.

	For the Three Months Ended				For the Nine Months Ended
	December 31, 2020		December 31, 2019		December 31, 2020		December 31, 2019
Ammunition Sales	$	12,834,490	$	1,246,414	$	27,987,438	$	3,703,669
Ammunition Casings Sales		3,785,754		1,525,595		10,305,648		6,321,475
Total Sales	$	16,620,244	$	2,772,009	$	38,293,086	$	10,025,144

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Inventories (Tables)

9 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Schedule of Inventory

At December 31, 2020 and March 31, 2020, the inventory balances are composed of:

	December 31, 2020		March 31, 2020
Finished product	$	351,171	$	1,916,417
Raw materials		7,010,713		1,771,006
Work in process		2,186,707		720,650
	$	9,548,591	$	4,408,073

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Property and Equipment (Tables)

9 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

Property and equipment consisted of the following at December 31, 2020 and March 31, 2020:

	December 31, 2020			March 31, 2020
Leasehold Improvements	$	126,558		$	118,222
Furniture and Fixtures		87,790			87,790
Vehicles		103,511			103,511
Equipment		23,411,433			19,578,035
Tooling		126,190			126,190
Construction in Progress		649,293			1,093,262
Total property and equipment	$	24,504,775		$	21,107,010
Less accumulated depreciation		(5,100,920	)		(3,060,681	)
Net property and equipment		19,403,855			18,046,329

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Leases (Tables)

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Schedule of Future Minimum Lease Payments Under Non-cancellable Leases

Futures minimum lease payments under non-cancellable leases as of December 31, 2020 are as follows:

Years Ended March 31,
2021 (1)	$	181,987
2022		732,111
2023		742,108
2024		684,836
2025		495,528
Thereafter		144,460
		2,981,030
Less: Amount Representing Interest		(557,023	)
	$	2,424,007

(1) This amount represents future lease payments for the remaining three months of fiscal year 2021. It does not include any lease payments for the nine months ended December 31, 2020.

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Capital Stock (Tables)

9 Months Ended

Dec. 31, 2020

Stockholders' Equity Note [Abstract]

Schedule of Outstanding and Exercisable Stock Purchase Warrants

At December 31, 2020, outstanding and exercisable stock purchase warrants consisted of the following:

	Number of Shares			Weighted Averaged Exercise Price		Weighted Average Life Remaining (Years)
Outstanding at March 31, 2020		8,504,372		$	2.10		3.60
Granted		2,100,204			2.09		4.90
Exercised		(1,694,371	)		2.01		-
Forfeited or cancelled		-			-		-
Outstanding at December 31, 2020		8,910,205		$	2.11		3.14
Exercisable at December 31, 2020		8,481,990		$	2.09		3.05

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Organization and Business Activity (Details Narrative) - shares	Mar. 17, 2017	Dec. 15, 2016
Number of shares sold		475,681
Number of shares issued for pre-split		11,891,976
Reverse stock split		1-for-25 reverse stock split ("Reverse Split") of the issued and outstanding shares of the common stock of the Company. As a result of the reverse split, the previous issued and outstanding shares of common stock became 580,052 shares; no shareholder was reversed below 100 shares, and all fractional shares resulting from the reverse split were rounded up to the next whole share.
Number of shares issued, post reverse split		580,052
Definitive Agreement [Member] | PRIVCO [Member]
Number of common stock shares issued	17,285,800
Number of shares retired	475,681
Number of shares issued to satisfy issuance commitment	500,000
Shares equivalent to issuance recapitalization	604,371

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Summary of Significant Accounting Policies (Details Narrative) - USD ($)			3 Months Ended		9 Months Ended		28 Months Ended
	Jun. 18, 2020	Apr. 02, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Mar. 31, 2020	Sep. 28, 2017
Allowance for doubtful accounts			$ 117,094		$ 117,094		$ 117,094	$ 62,248
Amortization of other intangible assets			357,111	$ 249,794	1,071,335	$ 729,131
Impairment expense
Concentration Percentage			10.00%	10.00%	10.00%	10.00%
Advertising expenses			$ 51,700	$ 128,709	$ 190,277	$ 422,948
Income tax, description					We measure recognized income tax positions at the largest amount that is greater than 50% likely of being realized.
Contingencies
Warrants [Member]
Antidilutive securities excluded from computation of earnings per share, amount					8,910,205
Weighted average diluted common shares outstanding					8,910,205	8,629,432
Employees, Members of Board of Directors and Advisory Committee [member]
Number of shares issued for services			137,916
Minimum [Member]
Property and equipment useful life					5 years
Maximum [Member]
Property and equipment useful life					10 years
Federal deposit insurance corporation limit			$ 250,000		$ 250,000		$ 250,000
Patents [Member]
Patent amortization expense			21,269	21,268	$ 63,806	$ 63,806
License agreement term, description					This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028.
Royalty expense			70,793	20,261
Patents [Member] | SW Kenetics Inc. [Member]
Patent amortization expense			102,067	102,067	$ 306,200	239,253
Hallam, Inc [Member]
Ownership percentage in ATI									100.00%
License agreement term, description					Under the terms of the Exclusive License Agreement, the Company is obligated to pay a royalty to the patent holder, based on a $0.01 per unit basis for each round of ammunition sold that incorporates this patented technology through October 29, 2028
Licensing Agreements [Member]
Amortization expense			$ 12,500	$ 37,500	$ 12,500	$ 37,500
Employment agreement [Member] | Robert D. Wiley [Member]
Option granted		33,333
Options vesting in period		8,333
Vesting period		3 years
Employment agreement [Member] | Steve Hilko [Member]
Option granted	33,333
Options vesting in period	8,333
Vesting period	3 years
Employment agreement [Member] | Four Separate Employee Agreements [Member]
Option granted							540,382
Vesting period							3 years
Employment agreement [Member] | Maximum [Member] | Four Separate Employee Agreements [Member]
Vesting period							4 years

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Summary of Significant Accounting Policies - Schedule of Concentration of Risks (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Mar. 31, 2020
Concentration percentage	10.00%	10.00%	10.00%	10.00%
Customer Concentration Risk [Member] | Revenues [Member]
Concentration percentage	15.90%		15.00%
Customer Concentration Risk [Member] | Revenues [Member] | Customer A [Member]
Concentration percentage	15.90%		15.00%
Customer Concentration Risk [Member] | Revenues [Member] | Customer B [Member]
Concentration percentage
Customer Concentration Risk [Member] | Accounts receivable [Member]
Concentration percentage			14.60%		26.50%
Customer Concentration Risk [Member] | Accounts receivable [Member] | Customer A [Member]
Concentration percentage					26.50%
Customer Concentration Risk [Member] | Accounts receivable [Member] | Customer B [Member]
Concentration percentage			14.60%

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Summary of Significant Accounting Policies - Schedule of Disaggregated Revenue from Customers by Segment (Details) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Total Sales	$ 16,620,244	$ 2,772,009	$ 38,293,086	$ 10,025,144
Ammunition Sales [Member]
Total Sales	12,834,490	1,246,414	27,987,438	3,703,669
Casing Sales [Member]
Total Sales	$ 3,785,754	$ 1,525,595	$ 10,305,648	$ 6,321,475

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Inventories - Schedule of Inventory (Details) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Inventory Disclosure [Abstract]
Finished product	$ 351,171	$ 1,916,417
Raw materials	7,010,713	1,771,006
Work in process	2,186,707	720,650
Inventory, net	$ 9,548,591	$ 4,408,073

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Property and Equipment (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Depreciation expense	$ 731,183	$ 677,407	$ 2,110,125	$ 1,887,573
Minimum [Member]
Property and equipment useful life			5 years
Maximum [Member]
Property and equipment useful life			10 years
Property and Equipment [Member] | Minimum [Member]
Property and equipment useful life			5 years
Property and Equipment [Member] | Maximum [Member]
Property and equipment useful life			10 years

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Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)	Dec. 31, 2020	Mar. 31, 2020
Total property and equipment	$ 24,504,775	$ 21,107,010
Less accumulated depreciation	(5,100,920)	(3,060,681)
Net property and equipment	19,403,855	18,046,329
Leasehold Improvements [Member]
Total property and equipment	126,558	118,222
Furniture and Fixtures [Member]
Total property and equipment	87,790	87,790
Vehicles [Member]
Total property and equipment	103,511	103,511
Equipment [Member]
Total property and equipment	23,411,433	19,578,035
Tooling [Member]
Total property and equipment	126,190	126,190
Construction in Progress [Member]
Total property and equipment	$ 649,293	$ 1,093,262

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Factoring Liability (Details Narrative) - USD ($)			9 Months Ended
	Jun. 17, 2020	Jul. 02, 2019	Dec. 31, 2020	Dec. 31, 2019
Maximum advance amount	$ 35,000
Factoring liability			$ 2,290,598
Interest expenses on factoring liability			313,747
Amortization of commitment fee			$ 50,000	$ 62,500
Interest expenses				$ 116,196
Agreement extended maturity date	Jun. 17, 2022
Factoring And Security Agreement [Member]
Maximum advance amount		$ 5,000,000
Annualized interest rate		85.00%
Maximum facility, description		The twenty-four month agreement contains a maximum advance amount of $5,000,000 on 85% of eligible accounts and has an annualized interest rate of the Prime Rate published from time to time by the Wall Street Journal plus 4.5%. The agreement contains fee of 3% ($150,000) of the Maximum Facility assessed to the Company.
Facility fee percentage		3.00%
Maximum facility amount		$ 150,000

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Inventory Credit Facility (Details Narrative) - USD ($)		9 Months Ended
	Jun. 17, 2020	Dec. 31, 2020	Dec. 31, 2019
Maximum loan amount	$ 35,000
Inventory credit facility		$ 2,250,000
Interest expense on inventory credit facility		118,202
Amortization of annual fee		$ 24,962
Revolving Inventory Loan and Security Agreement [Member]
Maximum loan amount	$ 1,750,000
Interest rate description	Annualized interest rate of the greater of the three-month LIBOR rate plus 3.09% or 8%.
Interest rate	2.00%

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Leases (Details Narrative) - USD ($)		3 Months Ended	9 Months Ended
	Jun. 26, 2020	Dec. 31, 2020	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020
Leases [Abstract]
Lease renewal term		5 years	5 years
Payments for rent	$ 34,071
Lease agreement date	Mar. 31, 2025
Right use of asset		$ 2,371,096	$ 2,371,096	$ 737,680	$ 3,431,746
Operating lease liability		2,424,007	2,424,007	$ 737,680	3,107,911
Operating lease liability, current		510,103	510,103		$ 375,813
Consolidated lease expense		217,140	609,250
Operating lease expense		179,487	534,781
Other lease associated expenses		$ 37,653	$ 74,468
Weighted average remaining lease term		4 years 2 months 12 days	4 years 2 months 12 days
Weighted average discount rate for operating leases		10.00%	10.00%

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Leases - Schedule of Future Minimum Lease Payments Under Non-cancellable Leases (Details) - USD ($)		Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020
Leases [Abstract]
2021	[1]	$ 181,987
2022		732,111
2023		742,108
2024		684,836
2025		495,528
Thereafter		144,460
Total lease payments		2,981,030
Less: Amount Representing Interest		(557,023)
Present value of lease liabilities		$ 2,424,007	$ 737,680	$ 3,107,911

[1] This amount represents future lease payments for the remaining three months of fiscal year 2021. It does not include any lease payments for the nine months ended December 31, 2020.

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Convertible Promissory Notes (Details Narrative)				1 Months Ended				3 Months Ended	9 Months Ended
	Dec. 05, 2020 USD ($) shares	Jan. 30, 2020 USD ($) $ / shares	Jan. 15, 2020 USD ($) $ / shares	Feb. 11, 2021 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) $ / shares	Nov. 25, 2020 USD ($)	Oct. 26, 2020 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2019 USD ($)	Feb. 05, 2021 $ / shares	Mar. 31, 2020 $ / shares
Proceeds from convertible debt									$ 1,959,000
Common stock, par value | $ / shares					$ 0.001			$ 0.001	$ 0.001			$ 0.001
Debt interest rate		8.00%
Debt instrument maturity date description		Mature on October 15, 2020 and October 30, 2020.
Conversion rate		0.667
Debt instrument, description		If a Qualified Financing has not occurred on or before the Maturity Date, the Notes shall become convertible into shares of the Company's Common Stock at a conversion price that is equal to 50.0% of the arithmetic mean of the VWAP in the ten consecutive Trading Days immediately preceding the Maturity Date.
Debt instrument effective interest percentage		15.00%
Common Shares [Member]
Shares issued for conversion of debt | shares								1,000,000	1,000,000
Minimum [Member] | Warrants [Member] | Subsequent Event [Member]
Exercise price of warrant | $ / shares											$ 2.00
Maximum [Member] | Warrants [Member] | Subsequent Event [Member]
Exercise price of warrant | $ / shares											$ 2.40
Promissory Note [Member]
Outstanding principal amount converted							$ 2,500,000
Interest amount converted							$ 146,104
Shares issued for conversion of debt | shares							2,157,358
Warrants issued | shares							1,019,121
Interest expense on issuance of warrants					$ 116,511		$ 1,198,983
Promissory Note [Member] | Warrants [Member]
Exercise price of warrant | $ / shares					$ 2.00			$ 2.00	$ 2.00
Promissory Note [Member] | Minimum [Member]
Exercise price of warrant | $ / shares							$ 2.19
Promissory Note [Member] | Maximum [Member]
Exercise price of warrant | $ / shares							2.67
Promissory Note [Member] | Initial Closing [Member]
Conversion price per share | $ / shares							1.21
Promissory Note [Member] | Final Closing [Member]
Conversion price per share | $ / shares							$ 1.26
Convertible Promissory Note [Member]
Debt interest rate	8.00%				8.00%			8.00%	8.00%
Debt instrument, face amount	$ 1,020,000				$ 939,000			$ 939,000	$ 939,000
Debt, interest expense								$ 73,313
Convertible Promissory Note [Member] | Subsequent Event [Member]
Outstanding principal amount converted				$ 939,000
Interest amount converted				$ 17,247
Shares issued for conversion of debt | shares				478,123
Conversion price per share | $ / shares				$ 2.00
Convertible Promissory Note [Member] | 4 Accredited Investors [Member]
Debt interest rate						8.00%
Debt instrument maturity date description						November 5, 2022 to November 25, 2022
Debt instrument, description						Additionally, the 8% Notes contain a voluntary conversion mechanism whereby any principal and accrued interest on the 8% Notes, may be converted in holder's discretion into shares of the Company's Common Stock at a conversion price of $2.00 per share ("Conversion Price"). If not previously paid in full or converted, on the 180th day following the Maturity Date, the principal and interest due under the 8% Notes shall automatically be converted to common stock shares at the Conversion Price The 8% Notes contain customary events of default (each an "Event of Default"). If an Event of Default occurs, the outstanding principal amount of the 8% Notes, plus accrued but unpaid interest, and other amounts owing with respect to the 8% Notes will become, at the 8% Note holder's election, due and payable in cash.
Debt instrument, face amount						$ 1,959,000
Debt, interest expense						17,000
Debt instrument conversion feature						$ 208,855
Convertible Promissory Note [Member] | Common Shares [Member]
Shares issued for conversion of debt | shares	510,000
Joseph Gunnar & Co LLC [Member]
Proceeds from convertible debt		$ 200,000
Warrant terms		5 years
Conversion rate		1.25
Common stock percentage		5.00%
Joseph Gunnar & Co LLC [Member] | Promissory Note [Member]
Warrants issued | shares							152,868
Joseph Gunnar & Co LLC [Member] | Promissory Note [Member] | Minimum [Member]
Exercise price of warrant | $ / shares							$ 1.51
Joseph Gunnar & Co LLC [Member] | Promissory Note [Member] | Maximum [Member]
Exercise price of warrant | $ / shares							$ 1.58
Subscription Agreements [Member]
Conversion rate		0.50
Subscription Agreements [Member] | Five Accredited Investors [Member]
Proceeds from convertible debt		$ 850,000	$ 1,650,000
Warrant terms		5 years	5 years
Common stock, par value | $ / shares		$ 0.001	$ 0.001

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Notes Payable - Related Party (Details Narrative) - USD ($)										1 Months Ended				3 Months Ended	9 Months Ended
	Dec. 14, 2020	Nov. 05, 2020	Nov. 05, 2020	Sep. 23, 2020	Jun. 26, 2020	Jan. 30, 2020	May 03, 2019	Mar. 31, 2019	Mar. 25, 2019	Feb. 11, 2021	Oct. 26, 2020	Dec. 31, 2019	May 31, 2019	Dec. 31, 2020	Dec. 31, 2020	Jan. 02, 2021	Jun. 30, 2020
Debt instrument maturity date description						Mature on October 15, 2020 and October 30, 2020.
Debt interest rate						8.00%
Debt description						If a Qualified Financing has not occurred on or before the Maturity Date, the Notes shall become convertible into shares of the Company's Common Stock at a conversion price that is equal to 50.0% of the arithmetic mean of the VWAP in the ten consecutive Trading Days immediately preceding the Maturity Date.
Debt conversion, converted Instrument, amount														$ 2,100,000	$ 2,100,000
Common Shares [Member]
Debt conversion, converted Instrument, amount														$ 1,000	$ 1,000
Debt conversion, converted instrument, shares issued														1,000,000	1,000,000
Subsequent Event [Member] | Common Shares [Member]
Share price per share																$ 1.75
Settlement Agreement [Member]
Payment of note payable related party			$ 6,000,000
Proceeds from construction in progress															$ 1,000,000
Post Closing Transaction Note Reduction [Member]
Post-closing changes to the purchase price of transaction															2,596,200
Decreased Equipment Net [Member]
Post-closing changes to the purchase price of transaction															1,871,306
Reduction in Other Intangible Assets [Member]
Post-closing changes to the purchase price of transaction															766,068
Increased Accounts Receivable [Member]
Post-closing changes to the purchase price of transaction															31,924
Increase to Deposits [Member]
Post-closing changes to the purchase price of transaction															9,250
Decreased Accumulated Amortization [Member]
Post-closing changes to the purchase price of transaction															159,530
Promissory Note [Member]
Debt conversion, converted instrument, shares issued											2,157,358
Promissory Note [Member] | Shareholder [Member]
Debt instrument maturity date description							The note's original a maturity date of August 3, 2019 was extended to September 18, 2020.
Debt interest rate							1.25%
Interest expenses															10,327
Promissory note							$ 375,000							$ 260,000	260,000
Principal payments															$ 18,195
Promissory Note [Member] | Fred Wagenhals [Member]
Debt interest rate														1.25%	1.25%
Debt instrument maturity date												Jun. 12, 2020			Sep. 18, 2020
Interest expenses															$ 5,350
Promissory note												$ 90,000					$ 131,536
Principal payments															25,000
Note B [Member] | Settlement Agreement [Member]
Payment of note payable related party		$ 592,982
Interest expenses														$ 32,413	62,876
Amended Note B [Member]
Notes payable related party														1,639,016	1,639,016
Interest expenses															16,455
Amended Note B [Member] | Settlement Agreement [Member]
Debt interest rate		9.00%	9.00%
Notes payable related party		$ 1,687,664	$ 1,687,664
Debt maturity term			36 months
Note A [Member] | Settlement Agreement [Member]
Interest expenses														$ 84,248	216,160
Jagemann Stamping Company [Member]
Payment of note payable related party					$ 1,269,977
Debt monthly payments					$ 204,295
Debt description					Upon the closing of an Offering of less than $10,000,000 would be obligated to pay the lesser of ninety percent (90%) of the Offering proceeds or seventy (70%) of the then aggregate outstanding balance of the Notes; and (b) upon the closing of an Offering of more than $10,000,000 would be obligated to pay one hundred percent (100%) of the then aggregate outstanding balance of the Notes.
Jagemann Stamping Company [Member] | Settlement Agreement [Member]
Debt instrument maturity date					Apr. 01, 2021
Shares repurchase					1,000,000
Share price per share					$ 1.50
Jagemann Stamping Company [Member] | Amended APA [Member] | Subsequent Event [Member]
Shares repurchase										1,000,000
Share price per share										$ 1.50
Jagemann Stamping Company [Member] | Inventory and Services [Member]
Payment of note payable related party					$ 2,635,797
Debt instrument maturity date					Aug. 15, 2021
Jagemann Stamping Company [Member] | Promissory Note [Member]
Payment of note payable related party								$ 9,900,000	$ 500,000				$ 1,500,000		$ 10,400,000
Debt instrument maturity date description															On April 30, 2019, the original due date of the note was subsequently extended to April 1, 2020.
Debt interest rate														4.60%	4.60%
Jagemann Stamping Company [Member] | Two New Promissory Notes [Member]
Payment of note payable related party					$ 5,803,800
Debt instrument maturity date					Aug. 15, 2021
Forest Street, LLC [Member] | Promissory Note [Member]
Debt interest rate				12.00%
Debt instrument maturity date				Sep. 23, 2022
Promissory note				$ 3,500,000
Percentage of monitoring fee on principal and interest				1.00%
Forest Street, LLC [Member] | Forest Street Note [Member] | Debt Conversion Agreement [Member]
Notes payable related party														$ 1,400,000	$ 1,400,000
Interest expenses															$ 137,666
Debt conversion, converted Instrument, amount	$ 2,100,000
Forest Street, LLC [Member] | Forest Street Note [Member] | Debt Conversion Agreement [Member] | Common Shares [Member]
Debt conversion, converted instrument, shares issued	1,000,000
Forest Street, LLC [Member] | Forest Street Note [Member] | Debt Conversion Agreement [Member] | Subsequent Event [Member]
Payment of note payable related party										$ 1,400,000

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Paycheck Protection Notes Payable (Details Narrative) - USD ($)		1 Months Ended
	Nov. 11, 2020	Apr. 30, 2020	Jan. 30, 2020
Debt interest rate			8.00%
Paycheck Protection Program [Member]
Proceeds from funds		$ 1,000,000
Debt interest rate		1.00%
Debt maturity term		2 years
Debt forgiveness	$ 1,000,000
Paycheck Protection Program [Member] | BMO Harris [Member]
Proceeds from funds		$ 400,000
Paycheck Protection Program [Member] | Western State Bank [Member]
Proceeds from funds		$ 600,000

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Capital Stock (Details Narrative) - USD ($)				3 Months Ended		9 Months Ended
	Dec. 11, 2020	Nov. 30, 2020	Dec. 15, 2016	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Feb. 11, 2021	Feb. 05, 2021	Dec. 03, 2020	Mar. 31, 2020
Number of stock sold			475,681
Number of shares issued, value				$ 20,730,748		$ 23,612,619	$ 2,465,540
Common stock issued for services, value				$ 87,500	$ 72,000	$ 87,500	$ 272,000
Common stock, par value				$ 0.001		$ 0.001					$ 0.001
Debt Conversion Agreement [Member]
Number of shares issued for conversion of notes, shares						1,000,000
Number of shares issued for conversion of notes						$ 2,100,000
Shares Issued for Services [Member]
Number of shares issued for services						58,336
Common stock issued for services, value						$ 87,500
Stock Subscription Receivable [Member]
Shares issued warrants exercise						309,775
Shares issued warrants exercise, value						$ 664,975
Underwriters Warrant Agreement [Member]
Warrants issued to purchase common stock										428,215
Warrants exercise price										$ 2.63
Subscription Agreement [Member]
Shares issued price per share				$ 2.00		$ 2.00
Issuance costs, fees payable						$ 245,500
Value of shares issued for fee						$ 48,000
Shares issued for fee						24,000
Subscription Agreement [Member] | Subsequent Event [Member]
Accrued fees payable								$ 84,300
Warrants [Member]
Shares issued warrants exercise						287,657
Shares issued cashless exercise of warrants						160,274
Warrants outstanding				8,910,205		8,910,205
Warrants [Member] | Subsequent Event [Member]
Warrants issued to purchase common stock									4,194,623
Warrant One [Member] | Until April 2025 [Member]
Warrants issued to purchase common stock				838,590		838,590
Warrants exercise price				$ 1.65		$ 1.65
Warrant Two [Member] | Warrants Until April 2023, August 2024, December 2025 [Member]
Warrants issued to purchase common stock				5,098,329		5,098,329
Warrants exercise price				$ 2.00		$ 2.00
Issuance of warrants, description						Warrants to purchase 5,073,329 shares of our Common Stock at an exercise price of $2.00 per share consisting of 71% of the warrants until April 2023, 8% until August 2024, and 21% until December 2025
Warrant Three [Member] | Until September 2024 [Member]
Warrants issued to purchase common stock				2,545,071		2,545,071
Warrants exercise price				$ 2.40		$ 2.40
Warrant Four [Member] | Until November 2025, Not Exercisable Before May 29, 2021 [Member]
Warrants issued to purchase common stock				428,215		428,215
Warrants exercise price				$ 2.63		$ 2.63
Convertible Promissory Note [Member]
Number of shares issued for conversion of notes, shares						2,667,358
Number of shares issued for conversion of notes						$ 3,874,959
Investors [Member]
Number of stock sold						11,512,143
Number of stock sold, value						$ 23,564,619
Investors [Member] | Liquidation Damage Fees [Member]
Number of common stock shares issued						24,000
Number of shares issued, value						$ 48,000
Investors [Member] | Warrants [Member]
Shares issued warrants exercise						1,096,939
Shares issued warrants exercise, value						$ 2,288,878
Employees, Board of Directors, Advisory Committee [Member]
Shares issued for employees benefit						465,081
Shares issued for employees benefit, value						$ 716,589
Underwriters [Member] | Alexander Capital [Member] | Over-Allotment Option [Member]
Number of common stock shares issued	1,284,643
Shares issued price per share	$ 2.10
underwriting discount	$ 2,467,799
Underwriters [Member] | Underwriting Agreement [Member] | Alexander Capital [Member]
Number of common stock shares issued		8,564,285
Common stock, par value		$ 0.001
Shares issued price per share		$ 2.10
Underwriters [Member] | Underwriting Agreement [Member] | Alexander Capital [Member] | Over-Allotment Option [Member]
Number of common stock shares issued		1,284,643
Proceeds from offering		$ 15,850,448
New Issuance of Shares [Member]
Number of common stock shares issued						17,293,906

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Capital Stock - Schedule of Outstanding and Exercisable Stock Purchase Warrants (Details) - Warrants [Member]	9 Months Ended
	Dec. 31, 2020 $ / shares shares
Number of Shares, Outstanding Beginning | shares	8,504,372
Number of Shares, Granted | shares	2,100,204
Number of Shares, Exercised | shares	(1,694,371)
Number of Shares, Forfeited or Cancelled | shares
Number of Shares, Outstanding Ending | shares	8,910,205
Number of Shares, Exercisable | shares	8,481,990
Weighted Average Exercise Price, Outstanding Beginning | $ / shares	$ 2.10
Weighted Average Exercise Price, Granted | $ / shares	2.09
Weighted Average Exercise Price, Exercised | $ / shares	2.01
Weighted Average Exercise Price, Forfeited or Cancelled | $ / shares
Weighted Average Exercise Price, Outstanding Ending | $ / shares	2.11
Weighted Average Exercise Price, Exercisable | $ / shares	$ 2.09
Weighted Average Life Remaining (Years), Outstanding Beginning	3 years 7 months 6 days
Weighted Average Life Remaining (Years), Granted	4 years 10 months 25 days
Weighted Average Life Remaining (Years), Outstanding Ending	3 years 1 month 20 days
Weighted Average Life Remaining (Years), Exercisable	3 years 18 days

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Net operating loss carryforwards	$ 33,000,000		$ 33,000,000
Operating loss carryforwards, expiration date, description			Expire beginning at the end of 2036.
Effective interest tax rate	0.00%	0.00%	0.00%	0.00%

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Subsequent Events (Details Narrative) - USD ($)			1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 04, 2021	Jan. 02, 2021	Feb. 11, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Feb. 05, 2021
Common stock issued for services, value				$ 87,500	$ 72,000	$ 87,500	$ 272,000
Common Shares [Member]
Common stock issued for services, value				$ 50	$ 63	$ 58	$ 126
Common stock issued for services, shares				50,000	62,449	58,336	125,941
Subsequent Event [Member] | Settlement Agreement [Member]
Exercise price per share	$ 6.71
Warrants issued	150,000
Cash paid for settlement	$ 125,000
Subsequent Event [Member] | Warrants [Member]
Common stock shares issued for warrant exercise								4,194,623
Common stock shares issued for warrant exercise, value								9,014,006
Cashless exercise of warrants								974,076
Subsequent Event [Member] | Warrants [Member] | Minimum [Member]
Exercise price per share								$ 2.00
Exercise price of cashless warrants								1.65
Subsequent Event [Member] | Warrants [Member] | Maximum [Member]
Exercise price per share								2.40
Exercise price of cashless warrants								$ 2.00
Subsequent Event [Member] | Common Shares [Member]
Shares issued as compensation		70,000
Value of shares issued as compensation		$ 122,500
Share price per share		$ 1.75
Common stock issued for services, value			$ 881,250
Common stock issued for services, shares			1,612,500
Subsequent Event [Member] | Common Shares [Member] | Minimum [Member]
Share price per share			$ 1.75
Subsequent Event [Member] | Common Shares [Member] | Maximum [Member]
Share price per share			$ 2.00