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RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 3 Months Ended
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Jun. 30, 2024
Accounting Changes and Error Corrections [Abstract] |
RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | NOTE 3 – RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In September 2024, the Special Committee initiated the Special Committee Investigation through independent legal counsel and independent forensic accountants. During the course of the investigation, the Special Committee discovered accounting and financial reporting errors that required restatement resulting primarily from (i) inaccurate valuation of, and accounting for share-based compensation awards to employees, non-employee directors, and other service providers, and shares issued in exchange for goods and services, (ii) inappropriate capitalization of certain share issuance costs, and (iii) inappropriate accounting for certain convertible notes and warrants issued by the Company. During the course of the Special Committee Investigation, the Special Committee also found that the Company had not properly disclosed certain executive officers, executive compensation and related party transactions. In conjunction with the restatement of the items above, we also made corresponding income tax adjustments to our consolidated financial statements as these balances were impacted by the aforementioned adjustments. The accounting and financial reporting errors identified as part of the investigation and subsequent restatement preparation are described and summarized as follows: Share-based payments The valuation and amortization of expense related to stock-based payments to employees and non-employee directors and shares issued to service providers in exchange for goods and services were historically calculated incorrectly. The Company previously accounted for stock-based payments using a grant date fair value that was discounted from the fair value under the incorrect interpretation that the shares were restricted. In addition, the determination of the grant date was incorrectly determined with respect to historically issued stock-based payments. The Company re-evaluated the grant date fair value of stock-based payments under ASC 718. Under ASC 718, the grant date is the date at which the grantor and grantee have a mutual understanding of the key terms and conditions of the stock-based compensation agreement. The Company reviewed all stock-based payment awards to ensure the correct grant date was identified going back to the year ending December 31, 2017. The Company then evaluated the grant date fair value of all stock-based payment awards. The Company used the publicly available closing price of its stock on the date nearest the grant date as this is considered the best indicator of value. Summary of the Effect of the Restatement of the Company’s Financial Statements The following tables set forth the restatement of the Company’s condensed consolidated balance sheets as of June 30, 2024 (unaudited), its condensed consolidated statements of operations and condensed consolidated statement of cash flow (unaudited) for the three months ended June 30, 2024. Unaudited Condensed Consolidated Balance Sheet
|  | As of June 30, 2024 |
|  | (Unaudited) |
|  |  |  |  | Adjustments |  |  |  |
|  | As Previously Reported |  |  | Stock Based Payments |  |  | Equity Issuance Costs |  |  | Convertible Notes |  |  | Warrants |  |  | Acquisitions |  |  | Other |  |  | As Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 50,754,570 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 50,754,570 |
Accounts receivable, net |  |  | 19,436,712 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 19,436,712 |
Due from related parties |  |  | 4,800,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,800,000 |
Inventories |  |  | 54,717,709 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 54,717,709 |
Prepaid expenses |  |  | 4,244,197 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,244,197 |
Current portion of restricted cash |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total current assets |  |  | 133,953,188 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 133,953,188 |
Equipment, net |  |  | 57,998,933 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 57,998,933 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 1,325,806 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,325,806 |
Patents, net |  |  | 4,415,924 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 204,895 |  |  |  | 4,620,819 |
Other intangible assets, net |  |  | 107,982,842 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 107,982,842 |
Goodwill |  |  | 90,870,094 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 90,870,094 |
Right of use assets operating leases |  |  | 1,825,564 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,825,564 |
Deferred income tax asset |  |  | 4,046,430 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,046,430 | ) |  |  | - |
TOTAL ASSETS |  | $ | 402,418,781 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (3,841,535 | ) |  | $ | 398,577,246 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  | $ | 22,678,651 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 22,678,651 |
Accrued liabilities |  |  | 17,141,591 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 34,778 |  |  |  | 17,176,369 |
Current portion of operating lease liability |  |  | 488,887 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 488,887 |
Current portion of construction note payable |  |  | 276,616 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 276,616 |
Insurance premium note payable |  |  | 1,680,594 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,680,594 |
Total current liabilities |  |  | 42,266,339 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 34,778 |  |  |  | 42,301,117 |
Long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration payable |  |  | 39,852 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 39,852 |
Income tax payable |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,609,520 |  |  |  | 1,609,520 |
Construction note payable, net of unamortized issuance costs |  |  | 10,710,081 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 10,710,081 |
Operating lease liability, net of current portion |  |  | 1,426,740 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,426,740 |
Total liabilities |  |  | 54,443,012 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,644,298 |  |  |  | 56,087,310 |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Series A cumulative perpetual preferred stock |  |  | 1,400 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,400 |
Common stock |  |  | 118,757 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 118,757 |
Additional paid-in capital |  |  | 397,079,854 |  |  |  | 13,894,620 |  |  |  | 7,420,492 |  |  |  | 6,024,240 |  |  |  | 1,298,336 |  |  |  | 5,225,000 |  |  |  | 653,000 |  |  |  | 431,595,542 |
Accumulated deficit |  |  | (45,455,985 | ) |  |  | (13,894,620 | ) |  |  | (7,420,492 | ) |  |  | (6,024,240 | ) |  |  | (1,298,336 | ) |  |  | (5,225,000 | ) |  |  | (6,138,833 | ) |  |  | (85,457,506 | )
Treasury stock |  |  | (3,768,257 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,768,257 | )
Total shareholders’ equity |  |  | 347,975,769 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (5,485,833 | ) |  |  | 342,489,936 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |  | $ | 402,418,781 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | (3,841,535 | ) |  | $ | 398,577,246 |
Unaudited Condensed Consolidated Statement of Operations
|  | Three Months Ended June 30, 2024 |  |
|  | (Unaudited) |  |
|  |  |  |  | Adjustments |  |  |  |  |
|  | As Previously Reported |  |  | Stock Based Payments |  |  | Other |  |  | As Restated |  |
Net revenues |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ammunition sales(1) |  | $ |  | 13,359,554 |  |  | $ |  | - |  |  | $ |  | - |  |  | $ |  | 13,359,554 |  |
Marketplace revenue |  |  |  | 12,281,991 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 12,281,991 |  |
Casing sales |  |  |  | 5,312,005 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 5,312,005 |  |
Total revenues |  |  |  | 30,953,550 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 30,953,550 |  |
Cost of revenues |  |  |  | 21,164,428 |  |  |  |  | - |  |  |  |  | 11,821 |  |  |  |  | 21,176,249 |  |
Gross profit |  |  |  | 9,789,122 |  |  |  |  | - |  |  |  |  | (11,821 | ) |  |  |  | 9,777,301 |  |
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Selling and marketing |  |  |  | 298,613 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 298,613 |  |
Corporate general and administrative |  |  |  | 11,323,078 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 11,323,078 |  |
Employee salaries and related expenses |  |  |  | 4,462,101 |  |  |  |  | 720,034 |  |  |  |  | - |  |  |  |  | 5,182,135 |  |
Depreciation and amortization expense |  |  |  | 3,381,669 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 3,381,669 |  |
Total operating expenses |  |  |  | 19,465,461 |  |  |  |  | 720,034 |  |  |  |  | - |  |  |  |  | 20,185,495 |  |
Income/(loss) from operations |  |  |  | (9,676,339 | ) |  |  |  | (720,034 | ) |  |  |  | (11,821 | ) |  |  |  | (10,408,194 | ) |
Other expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other income |  |  |  | 252,232 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 252,232 |  |
Interest expense |  |  |  | (196,522 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (196,522 | ) |
Total other expense |  |  |  | 55,710 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 55,710 |  |
Income/(loss) before income taxes |  |  |  | (9,620,629 | ) |  |  |  | (720,034 | ) |  |  |  | (11,821 | ) |  |  |  | (10,352,484 | ) |
Provision for income taxes |  |  |  | (2,559,342 | ) |  |  |  | - |  |  |  |  | 6,966,833 |  |  |  |  | 4,407,491 |  |
Net income/(loss) |  |  |  | (7,061,287 | ) |  |  |  | (720,034 | ) |  |  |  | (6,978,654 | ) |  |  |  | (14,759,975 | ) |
Preferred stock dividend |  |  |  | (774,132 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (774,132 | ) |
Net income/(loss) attributable to common stock shareholders |  | $ |  | (7,835,419 | ) |  | $ |  | (720,034 | ) |  | $ |  | (6,978,654 | ) |  | $ |  | (15,534,107 | ) |
Net income/(loss) per share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ |  | (0.07 | ) |  |  |  |  |  |  |  |  |  | $ |  | (0.13 | ) |
Diluted |  | $ |  | (0.07 | ) |  |  |  |  |  |  |  |  |  | $ |  | (0.13 | ) |
(1) Included in revenue for the three months ended June 30, 2024 are excise taxes of $1,303,603. Unaudited Condensed Consolidated Statement of Cash Flow
|  | Three Months Ended June 30, 2024 |  |
|  | (Unaudited) |  |
|  |  |  |  |  | Adjustments |  |  |  |  |  |
|  | As Previously Reported |  |  |  | Stock Based Payments |  |  |  | Other |  |  |  | As Restated |  |
Cash flows from operating activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (7,061,287 | ) |  |  | $ | (720,034 | ) |  |  | $ | (6,978,654 | ) |  |  | $ | (14,759,975 | ) |
Adjustments to reconcile net loss to net cash used in operations: |  |  |  |  |  |  | - |  |  |  |  | - |  |  |  |  | - |  |
Depreciation and amortization |  |  | 4,692,556 |  |  |  |  | - |  |  |  |  | 11,821 |  |  |  |  | 4,704,377 |  |
Debt discount amortization |  |  | 20,813 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 20,813 |  |
Employee stock awards |  |  | 674,949 |  |  |  |  | 720,034 |  |  |  |  | - |  |  |  |  | 1,394,983 |  |
Common stock purchase options |  |  | 41,055 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 41,055 |  |
Contingent consideration payable fair value |  |  | (19,986 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (19,986 | ) |
Allowance for doubtful accounts |  |  | 87,689 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 87,689 |  |
Reduction in right of use asset |  |  | 174,529 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 174,529 |  |
Valuation allowance |  |  | - |  |  |  |  | - |  |  |  |  | 7,182,561 |  |  |  |  | 7,182,561 |  |
Deferred income taxes |  |  | (2,559,342 | ) |  |  |  | - |  |  |  |  | (215,728 | ) |  |  |  | (2,775,070 | ) |
Changes in Current Assets and Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable |  |  | 8,696,920 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 8,696,920 |  |
Due from related parties |  |  | (4,800,000 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (4,800,000 | ) |
Inventories |  |  | (9,154,375 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (9,154,375 | ) |
Prepaid expenses |  |  | 312,409 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 312,409 |  |
Deposits |  |  | (976,528 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (976,528 | ) |
Accounts payable |  |  | (477,844 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (477,844 | ) |
Accrued liabilities |  |  | 9,974,813 |  |  |  |  | - |  |  |  |  | - |  |  |  |  | 9,974,813 |  |
Operating lease liability |  |  | (173,860 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (173,860 | ) |
Net cash used in operating activities |  |  | (547,489 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (547,489 | ) |
Cash flows from investing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase of equipment |  |  | (1,419,857 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (1,419,857 | ) |
Net cash used in investing activities |  |  | (1,419,857 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (1,419,857 | ) |
|  |  |  |  |  |  | - |  |  |  |  | - |  |  |  |  | - |  |
Cash flow from financing activities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Payments on insurance premium note payment |  |  | (721,842 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (721,842 | ) |
Payments on construction note payable |  |  | (42,816 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (42,816 | ) |
Preferred stock dividends paid |  |  | (638,021 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (638,021 | ) |
Repurchase of common shares |  |  | (366,164 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (366,164 | ) |
Common stock repurchase plan |  |  | (1,095,682 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (1,095,682 | ) |
Net cash used in financing activities |  |  | (2,864,525 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (2,864,525 | ) |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | - |  |
Net decrease in cash |  |  | (4,831,871 | ) |  |  |  | - |  |  |  |  | - |  |  |  |  | (4,831,871 | ) |
Cash, beginning of period |  |  | 55,586,441 |  |  |  |  |  |  |  |  |  |  |  |  | 55,586,441 |  |
Cash, end of period |  | $ | 50,754,570 |  |  |  | $ | - |  |  |  | $ | - |  |  |  | $ | 50,754,570 |  |
The following table presents the Additional Paid-In Capital (“APIC”) as previously reported, restatement adjustments and the APIC as restated for the three months ended June 30, 2024.
|  | For the three months ended June 30, 2024 |  |
|  | As Previously Reported |  |  | Reclassification |  |  | Current Period Adjustment |  |  |  | As Restated |  |
Employee stock awards |  | $ |  | 605,838 |  |  | $ |  | 68,750 |  |  | $ |  | 720,034 |  |  |  | $ |  | 1,394,622 |  |
Stock grants |  | $ |  | 68,750 |  |  | $ |  | (68,750 | ) |  | $ |  | - |  |  |  | $ |  | - |  |

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