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INCOME TAXES
 12 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13 – INCOME TAXES

The income tax (provision) benefit for the periods shown consist of the following:

 

2025

 

 

2024

 

 

2023

 

Current

 

 

 

 

 

 

 

 

 

US Federal

 

$

-

 

 

$

-

 

 

$

—

 

US State

 

 

-

 

 

 

-

 

 

 

—

 

Total current provision

 

 

-

 

 

 

-

 

 

 

—

 

Deferred

 

 

 

 

 

 

 

 

 

US Federal

 

 

(5,601,975

)

 

 

(718,757

)

 

 

(1,152,032

)

US State

 

 

(1,556,266

)

 

 

(229,535

)

 

 

(195,023

)

Total deferred benefit

 

 

(7,158,241

)

 

 

(948,292

)

 

 

(1,347,055

)

Change in valuation allowance

 

 

13,444,546

 

 

 

-

 

 

 

—

 

Income tax (provision) benefit

 

$

6,286,305

 

 

$

(948,292

)

 

$

(1,347,055

)

The reconciliation of income tax expense computed at the U.S. federal statutory rate of 21% to the income tax provision is as follows:

 

2025

 

 

 

2024

 

 

 

2023

 

 

U.S. Federal

 

 

21.0

 

%

 

 

21.0

 

%

 

 

21.0

 

%

State taxes, net of Federal income tax benefit

 

 

5.5

 

%

 

 

5.6

 

%

 

 

6.0

 

%

Change in valuation allowance

 

 

(11.5

)

%

 

 

0.0

 

%

 

 

0.0

 

%

Employee stock awards

 

 

0.1

 

%

 

 

(7.4

)

%

 

 

(33.3

)

%

Equity issuance costs

 

 

0.0

 

%

 

 

0.0

 

%

 

 

0.0

 

%

Stock and warrants on note conversion

 

 

0.0

 

%

 

 

0.0

 

%

 

 

(1.9

)

%

Stock for services

 

 

0.0

 

%

 

 

0.0

 

%

 

 

0.0

 

%

Non-deductible meals and entertainment

 

 

0.0

 

%

 

 

(0.1

)

%

 

 

(0.4

)

%

Contingent consideration fair value

 

 

0.0

 

%

 

 

0.1

 

%

 

 

0.2

 

%

Return to provision

 

 

0.0

 

%

 

 

0.0

 

%

 

 

0.0

 

%

Other

 

 

0.0

 

%

 

 

(0.4

)

%

 

 

(0.3

)

%

Total provision for income taxes

 

 

15.2

 

%

 

 

18.7

 

%

 

 

(8.8

)

%

 

The Company’s effective tax rates were 15.2%, 18.7% and (8.8%) for the years ended March 31, 2025, 2024 and 2023, respectively. Prior to the year ended March 31, 2022, we accumulated net operating losses in the amount of $61.5 million. These net operating losses created a deferred tax asset which carried a valuation allowance due to uncertainty regarding the timing and ability of the Company to utilize such losses against current income. During the year ended March 31, 2023, the Company generated significant taxable income which consumed $32.3 million of net operating loss carryforwards. This caused the release of the valuation allowance in the amount of $9.4 million. During the years ended March 31, 2025 and 2024, the effective tax rate differed from the U.S. federal statutory rate primarily due to employee stock awards and changes in valuation allowance. During the year ended March 31, 2025, the Company recorded a valuation allowance of $36.0 million due to uncertainty regarding the timing and utilization of losses in future periods.

Significant components of the Company’s deferred tax liabilities and assets are as follows:

 

 

 

 

 

 

 

 

As of March 31,

 

 

 

2025

 

 

2024

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforward

 

$

16,557,351

 

 

$

5,229,409

 

Loss on purchase

 

 

2,213,969

 

 

 

2,215,611

 

Impairment - Ammunition segment

 

 

12,398,990

 

 

 

-

 

Inventory capitalization - Section 263A

 

 

472,665

 

 

 

1,001,457

 

Bad debt allowance

 

 

1,045,220

 

 

 

973,565

 

Legal reserve settlement

 

 

7,978,747

 

 

 

-

 

Non qualified stock compensation expense

 

 

1,154,090

 

 

 

-

 

Other timing differences

 

 

481,036

 

 

 

297,195

 

Total deferred tax assets

 

$

42,302,068

 

 

$

9,717,237

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

Depreciation expense

 

$

(3,523,690

)

 

$

(3,580,271

)

Change in estimate and accounting method

 

 

(699,392

)

 

 

(699,910

)

Amortization - intangible assets

 

 

(2,114,232

)

 

 

(1,029,565

)

Total deferred tax liabilities

 

 

(6,337,314

)

 

 

(5,309,746

)

Net deferred tax asset

 

$

35,964,754

 

 

$

4,407,491

 

Valuation allowance

 

 

(35,964,754

)

 

 

-

 

Net deferred tax asset

 

$

-

 

 

$

4,407,491

 

 

The Company accounts for uncertain tax positions in accordance with ASC No. 740-10-25. ASC No. 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC No. 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC No. 740-10-25 also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities.

The Company has evaluated tax positions taken by the Company as of March 31, 2025 and 2024 in accordance with the recognition and measurement framework within ASC No. 740-10, and has concluded that the benefits associated with certain tax positions should not be recognized on the financial statements. As such, the Company has recorded an additional income tax payable on the consolidated balance sheet of $1.6 million as of March 31, 2025 and 2024. Included within this amount is accrued penalties and interest of $0.3 million. The Company records penalties and interest associated with uncertain tax positions as a component of income tax expense.

The tax periods ended March 31, 2021, 2022, 2023, 2024 and 2025 are subject to audit by the Internal Revenue Service.