RESTATEMENT OF PREVIOUSLY ISSUED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 Months Ended

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	)	$	-	$	-