Filed
Pursuant to Rule 424(b)(5)
Registration No. 333-253192
The
information in this preliminary prospectus supplement is not complete and may be changed. A registration statement relating to
these securities has been filed with the Securities and Exchange Commission and is effective. This preliminary prospectus supplement
and the accompanying prospectus are not an offer to sell these securities and we are not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Subject
to completion, dated March 11, 2021
PRELIMINARY
PROSPECTUS SUPPLEMENT
(To the Prospectus dated February 24,
2021)
Shares
AMMO,
INC.
Common
Stock
We
are offering shares of our common stock.
Our common stock is listed for trading on the Nasdaq Capital Market under the symbol “POWW.” On March 10, 2021,
the last reported sale price of our common stock was $6.32 per share.
This
offering is being underwritten on a firm commitment basis. We have granted the underwriters an option to buy up to an additional
shares of common stock from it to cover over-allotments. The underwriters may exercise this option at any time and from time to
time during the 30-day period from the date of this prospectus supplement.
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No Exercise of
Over-Allotment
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Full Exercise of
Over-Allotment
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Per Share
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Total
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Per Share
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Total
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Public offering price
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$
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$
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$
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$
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Underwriting discounts and commissions(1)
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$
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$
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$
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$
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Proceeds to us, before expenses
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$
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$
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$
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$
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(1)
In addition, we have agreed to reimburse the underwriters for certain expenses. See “Underwriting” on page S-24
of this prospectus supplement for additional information.
Our
business and an investment in our common stock involve significant risks. These risks are described under the caption “Risk
Factors” beginning on page S-4 of this prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.
The
underwriters expect to deliver the shares against payment in New York, New York on March , 2021.
The
date of this prospectus supplement is March , 2021
Joint
Book-Running Managers
Roth
Capital Partners
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Alexander
Capital L.P.
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TABLE
OF CONTENTS
PROSPECTUS
SUPPLEMENT
PROSPECTUS
DATED FEBRUARY 24, 2021
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
document is in two parts. The first part is the prospectus supplement, which describes the specific terms of this offering. The
second part is the accompanying prospectus, which provides more general information, some of which may not apply to this offering.
Before investing in our common stock, we urge you to carefully read this prospectus supplement and the accompanying prospectus,
as well as the documents incorporated by reference herein and therein. This prospectus supplement may add to, update or change
information contained in the accompanying prospectus or the documents incorporated by reference herein or therein. If information
included in this prospectus supplement is inconsistent with the accompanying prospectus or the information incorporated by reference
herein or therein, then this prospectus supplement will be deemed to modify or supersede the information in the accompanying prospectus
and such documents incorporated by reference.
This
prospectus supplement and the accompanying prospectus dated February 24, 2021 are part of a registration statement (Registration
No. 333-253192) on Form S-3 that we filed with the Securities and Exchange Commission, or SEC, using a “shelf” registration
process under which we may from time to time offer and sell any combination of the securities described in that accompanying prospectus
up to a total dollar amount of $150 million. This prospectus supplement relates to the offering of shares of our common stock
by us.
This
prospectus supplement, the accompanying prospectus and any free writing prospectus prepared by us or on our behalf contain and
incorporate by reference information that you should consider when making your investment decision. We have not, and the underwriters
have not, authorized any other person to provide you with different or additional information. We and the underwriters take no
responsibility for, and can provide no assurance as to, the reliability of any other information that any other person may give
you. We are not, and the underwriters are not, making an offer to sell or soliciting an offer to buy these securities under any
circumstance in any jurisdiction where the offer or solicitation is not permitted. You should assume that the information contained
in this prospectus supplement, the accompanying prospectus and any free writing prospectus prepared by us or on our behalf is
accurate only as of the date of the respective document in which the information appears, and that any information in documents
that we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of
the time of delivery of this prospectus supplement or any sale of a security. Our business, financial condition, results of operations
and prospects may have changed since those dates.
References
in this prospectus supplement to “Ammo,” “the Company,” “we,” “our,” and “us”
refer to Ammo, Inc., a Delaware corporation and its subsidiaries, Enlight Group II, LLC (d/b/a Jagemann Munition Components),
SNI, LLC, Ammo Munitions, Inc. and Ammo Technologies, Inc. (inactive).
PROSPECTUS
SUPPLEMENT SUMMARY
Our
Business
We
are a designer, producer, and marketer of performance-driven, high-quality ammunition and ammunition component products for sale
to a variety of consumers, including sport and recreational shooters, hunters, individuals seeking home or personal protection,
manufacturers, and law enforcement and military agencies. To enhance the strength of our brands and drive product demand, we emphasize
product innovation and technology to improve the performance, quality, and affordability of our products while providing support
to our distribution channel and consumers. We seek to sell products at competitive prices that compete with high-end, custom,
hand-loaded ammunition. Additionally, through our acquisition of Jagemann Stamping Company’s ammunition casing manufacturing
and sales operations (“Jagemann Casings”) in March 2019, we now sell ammunition casings products of various types.
We emphasize an American heritage by using predominantly American-made components and raw materials in our products that are produced,
inspected, and packaged at our facilities in Payson, Arizona and Manitowoc, Wisconsin.
Our
production processes focus on safety, consistency, precision, and cleanliness. Each round is developed for a specific purpose
with a focus on a proper mix of consistency, velocity, accuracy, and recoil. Each round is chamber gauged and inspected with redundant
seven-step quality control processes.
Competition
The
ammunition and ammunition casing industry is dominated by a small number of companies, a number of which are divisions of large
public companies. We compete primarily on the quality, reliability, features, performance, brand awareness, and price of our products.
Our primary competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition division of Olin Corporation,
and various smaller manufacturers and suppliers, including Black-Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady Manufacturing
Company, PMC, Rio Ammunition, and Wolf.
Our
Growth Strategy
Our
goal is to enhance our position as a designer, producer, and marketer of ammunition products. Key elements of our strategy to
achieve this goal are as follows:
Design,
Produce, and Market Innovative, Distinctive, Performance-Driven, High-Quality Ammunition and Ammunition Components
We
are focused on designing, producing, and marketing innovative, distinctive, performance-driven, high-quality products that appeal
to retailers, manufacturers, and consumers that will enhance our users shooting experiences. Our ongoing research and development
activities; our safe, consistent, precision, and clean production processes; and our multi-faceted marketing programs are critical
to our success.
Continue
to Strengthen Relationships with Channel Partners and Retailers
We
continue to strive to strengthen our relationships with our current distributors, dealers, manufacturers and mass market and specialty
retailers and to attract additional distributors, dealers, retailers. The success of our efforts depends on the innovation, distinctive
features, quality, and performance of our products; the attractiveness of our packaging; the effectiveness of our marketing and
merchandising programs; and the effectiveness of our customer support.
Emphasis
on Customer Satisfaction and Loyalty
We
plan to continue to emphasize customer satisfaction and loyalty by offering innovative, distinctive, high-quality products on
a timely and cost-attractive basis and by offering effective customer service. We regard the features, quality, and performance
of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer
service and support.
Continuously
Improving Operations
We
plan to continue focusing on improving all aspects of our business, including research and development, component sourcing, production
processes, marketing programs, and customer support. We are continuing our efforts to enhance our production by increasing daily
production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability
of our equipment, reduced equipment down times, and increased overall efficiency.
Enhance
Market Share, Brand Recognition, and Customer Loyalty
We
strive to enhance our market share, brand recognition, and customer loyalty. Industry sources estimate that 70 million to 80 million
people in the United States own more than approximately 300 million firearms, creating a large installed base for our ammunition
products. We are focusing on the premium segment of the market through the quality, distinctiveness, and performance of our products;
the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
Pursue
Synergetic Strategic Acquisitions and Relationships
We
intend to pursue strategic acquisitions and develop strategic relationships designed to enable us to expand our technology and
knowhow, expand our product offerings, strengthen and expand our supply chain, enhance our production process, expand our marketing
and distribution, and attract new customers.
Strategic
Acquisitions
Planned
acquisition targets include sector specific technology companies with the objective of augmenting our current capabilities with
feature-rich (third-party) solutions. The acquisition metric includes, but is not limited to, weighing time, effort and approximate
cost to develop certain technologies in-house, versus acquiring or merging with one or more entities that we believe have a proven
record of successfully developing a technology sub-component. Additional criteria include an extended national footprint of available
manpower (predominantly technical and software engineering), and evaluating the potential acquisition target’s customer
base, stage of technology and merger or acquisition cost as compared to market conditions.
Recent
Developments
In
December 2020, in connection with the listing of our common stock on the Nasdaq Capital Market, we consummated a public offering
of common stock and raised total gross proceeds of approximately $20.7 million, before underwriter discount and commissions and
offering expense. On January 5, 2021, we announced entering into a term sheet with the City of Manitowoc, Wisconsin to acquire
in excess of 35 acres in Manitowoc Industrial Park for the purpose of constructing a best-in-class $12 million, 160,000 square
foot, expanded loaded ammunition and brass casing manufacturing plant, to be operational by the summer of 2022.
On
January 14, 2021, we announced that we entered into a significant international import/export transaction involving 7.62mm ammunition
and on February 2, 2021, we announced that we restarted our improved .50 caliber manufacturing line to address increased market
demand and fulfill current orders.
On
February 4, 2021, we announced a 256% year-over-year increase in orders shipped and have a $180 million backlog of booked orders
as of February 1, 2021.
On March 9, 2021, we
announced entering into an commercial distribution agreement with Bio Ammo, S.L., which provides the Company exclusive U.S. distribution
rights to sell Bio Ammo’s patented biodegradable shotgun shells.
Corporate
Information
Our
principal executive offices are located at 7681 East Gray Road, Scottsdale, AZ 85260, and our telephone number is (480) 947-0001.
Our website address is www.ammoinc.com. The information on our website is not a part of, and should not be construed as
being incorporated by reference into, this prospectus supplement.
THE
OFFERING
Common
stock offered by us
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Shares
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Common
stock to be outstanding immediately after this offering
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shares
(1)
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Underwriters’
over-allotment option
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Shares
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Use
of proceeds
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We
intend to use the net proceeds from this offering for general corporate purposes and working capital purposes including debt
reduction and capital expenditures. In addition, we may use a portion of the proceeds for potential acquisitions.
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Risk
factors
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Investing
in our common stock involves a high degree of risk. You should carefully read “Risk Factors” on page S-4 of this
prospectus supplement and page 5 of the accompanying prospectus as well as other information included and incorporated by
reference in this prospectus supplement for a discussion of factors that you should consider before deciding to invest in our
common stock.
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NASDAQ
Capital Market symbol
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POWW
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(1)
The number of shares of our common stock to be outstanding after this offering is based on 69,500,283 shares outstanding
as of March 5, 2021. Unless specifically stated otherwise, the information in this prospectus supplement excludes:
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3,741,529
shares of common stock issuable upon the exercise of outstanding warrants having a weighted
average exercise price of $2.31 per share; and
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4,077,919
shares of common stock reserved for future issuance under the Company’s 2017 Equity
Incentive Plan, as amended.
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Except
as otherwise indicated, all information in this prospectus supplement assumes no exercise by the underwriters of their over-allotment
option.
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. You should carefully consider the risks described below along with all of
the other information contained in this prospectus supplement and the accompanying prospectus and the information incorporated
herein and therein by reference, including our financial statements and the related notes, before deciding whether to purchase
our common stock. Additional risks and uncertainties not presently known to us or that we do not currently believe are important
to an investor may adversely affect our business, results of operations and financial condition. If any of the adverse events
described in the following risk factors, as well as other factors that are beyond our control, actually occur, our business, results
of operations and financial condition may suffer significantly. As a result, the trading price of our common stock could decline,
and you may lose all or part of your investment in our common stock.
Risks
Related to this Offering
Investors
in this offering will experience immediate substantial dilution in the net tangible book value per share of our common stock.
You
will suffer immediate and substantial dilution in the net tangible book value per share of common stock you purchase in this offering
because the price per share of our common stock being offered hereby is substantially higher than the book value per share of
our common stock. Our net tangible book value as of December 31, 2020 was approximately $0.54 per share of common stock. Based
on an offering price of $ per share in this offering, if you purchase shares of common stock in this offering, you will
suffer immediate and substantial dilution of $ per share in the net tangible book value of the common stock.
We
will likely issue additional common stock in the future, which would dilute the holdings of our existing stockholders.
In
the future, we will likely issue additional shares of our common stock or securities convertible into or exchangeable or exercisable
for our common stock, resulting in the dilution of the ownership interests of our stockholders. We may issue additional shares
of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring
or retaining personnel, future acquisitions or future capital-raising transactions or other business purposes. Moreover, the exercise
of our existing outstanding warrants and stock options, which are exercisable for or convertible into shares of our common stock,
would dilute our existing holders of common stock.
A
large number of shares may be sold in the market following this offering, which may depress the market price of our common stock.
Shares
of our common stock sold in the offering are freely tradable without restriction or further registration under the Securities
Act. Moreover, from time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock
by means of ordinary brokerage transactions in the open market or otherwise. As a result, a substantial number of shares of our
common stock may be sold in the public market following this offering, which may cause the market price of our common stock to
decline. If there are more shares of common stock offered for sale than buyers are willing to purchase, then the market price
of our common stock may decline.
Management
will have broad discretion as to the use of the proceeds from this offering, and may not use the proceeds to effectively improve
our business.
Our
management will have broad discretion as to the application of the net proceeds from this offering and could use them for purposes
other than those contemplated at the time of the offering. Our management may use the net proceeds for corporate purposes that
may not improve our operating results, financial condition or market value.
Risks
Related to Our Business
We
have a limited operating history on which you can evaluate our company.
We
have a limited operating history on which you can evaluate our company. Although the corporate entity has existed since 1990,
we have only operated as an ammunition manufacturer since March 2017. As a result, our business will be subject to many of the
problems, expenses, delays, and risks inherent in the establishment of a new business enterprise.
Our
performance is influenced by a variety of economic, social, and political factors.
Our
performance is influenced by a variety of economic, social, and political factors. General economic conditions and consumer spending
patterns can negatively impact our operating results. Economic uncertainty, unfavorable employment levels, declines in consumer
confidence, increases in consumer debt levels, increased commodity prices, and other economic factors may affect consumer spending
on discretionary items and adversely affect the demand for our products. In times of economic uncertainty, consumers tend to defer
expenditures for discretionary items, which affects demand for our products. Any substantial deterioration in general economic
conditions that diminish consumer confidence or discretionary income could reduce our sales and adversely affect our operating
results. Economic conditions also affect governmental political and budgetary policies. As a result, economic conditions also
can have an adverse effect on the sale of our products to law enforcement, government, and military customers.
Political
and other factors also can adversely affect our performance. Concerns about presidential, congressional, and state elections and
legislature and policy shifts resulting from those elections can adversely affect the demand for our products. In addition, uncertainty
surrounding the control of firearms, firearm products, and ammunition at the federal, state, and local level and heightened fears
of terrorism and crime can adversely affect consumer demand for our products. Often, such concerns result in an increase in near-term
consumer demand and subsequent softening of demand when such concerns subside. Inventory levels in excess of customer demand may
negatively impact operating results and cash flow.
Federal
and state legislatures frequently consider legislation relating to the regulation of firearms, including amendment or repeal of
existing legislation. Existing laws may also be affected by future judicial rulings and interpretations. If restrictive changes
to legislation develop, we could find it difficult, expensive, or even impossible to comply with them, impeding new product development
and distribution of existing products.
War,
terrorism, other acts of violence or natural or manmade disasters, such as a global pandemic, may affect the markets in which
the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could
have a material adverse impact on our business, results of operations, or financial condition.
The
Company’s business and supply chain may be adversely affected by instability, disruption or destruction in a geographic
region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural
or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events and spread of disease (including the
coronavirus commonly referred to as “COVID- 19”).
Such
events may cause customers to suspend their decisions on using the Company’s products and services, make it impossible to
access some of our inventory, and give rise to sudden significant changes in regional and global economic conditions and cycles
that could interfere with purchases of goods or services and commitments to develop new products and services. These events also
pose significant risks to the Company’s personnel and to physical facilities, transportation and operations, which could
materially adversely affect the Company’s financial results.
Any
significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures
against a pandemic by governmental agencies, could make it difficult for the Company to deliver goods services to its customers.
War, riots, or other disasters may increase the need for our products and demand by our government and military and may make it
more difficult to provide our products to other customers. Further, travel restrictions and protective measures against COVID-19
could cause the Company to incur additional unexpected labor costs and expenses or could restrain the Company’s ability
to retain the highly skilled personnel the Company needs for its operations. The extent to which COVID-19 impacts the Company’s
business, sales and results of operations will depend on future developments, which are highly uncertain and cannot be predicted.
We
believe COVID-19 has not negatively affected our operational results in a material manner, but it may at any time and without
notice in the foreseeable future. As a result of COVID-19, at any time we may be subject to increased operating costs, supply
interruptions, and difficulties in obtaining raw materials and components. COVID-19 has resulted in restrictions, postponements
and cancelations of meetings, conferences, trade shows. The impact, extent and duration of the government imposed restrictions
on travel and public gatherings as well as the overall effect of the COVID-19 virus is currently unknown.
We
are engaged in legal proceedings that could cause us to incur unforeseen expenses and could occupy a significant amount of our
management’s time and attention.
On
September 24, 2019, the Company received notice that an individual who was former member of the Board of Directors (the “Board”)
who had been removed as a director by majority vote of the stockholders and who had voluntarily resigned as an employee filed
a complaint against the Company, and certain individuals (the “Complaint”), with the U.S. Department of Labor (“DOL”).
The Complaint alleges that the individual reported potential violations of SEC rules and regulations by management and that as
a result of such reports, 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 stockholders. The claims were investigated by a Special Committee of the Board made of up independent directors
represented by independent legal counsel. The Special Committee and independent legal counsel found the claims were unsubstantiated
and there were no SEC violations in the various allegations in the Complaint. The matter is currently the subject of administrative
investigation by the DOL via the Occupational Safety and Health Administration (“OSHA”). The Company filed
a timely Position Statement with the DOL in October of 2019 in response to the Complaint. An OSHA investigator is scheduled
to conduct interviews with the Company’s executives regarding this matter in March 2021. The Company disputes the allegations
of wrongdoing and believes the matters raised in the Complaint are without merit.
The
claims made to the DOL in the Complaint, and such other litigation or claims that may be made against the Company or its officers
or directors, from time to time, could negatively affect our business, operations or financial position. As we grow, we will likely
see a rise in the number of litigation matters against us. These matters may include employment and labor claims, product liability,
and other claims related to our products, as well as consumer and securities class actions, each of which are typically expensive
to defend. Litigation disputes could cause us to incur unforeseen expenses and otherwise occupy a significant amount of our management’s
time and attention, any of which could negatively affect our business operations and financial position.
We
may not be able to utilize our net operating loss carry forwards.
At
December 31, 2020, we had Federal net operating loss carry forwards (“NOLs”) for income tax purposes of approximately
$33 million which will begin to expire in 2036. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
signed into law on March 27, 2020 provided that NOLs generated in a taxable year beginning in 2018, 2019, or 2020, may now be
carried back five years and forward indefinitely. In addition, the 80% taxable income limitation is temporarily removed, allowing
NOLs to fully offset net taxable income. However, we do not know if or when we will have any earnings and capital gains against
which we could apply these carry forwards. Furthermore, if there were a sufficient change in the ownership of our common stock,
our ability to use our federal NOLs could be limited under Internal Revenue Code Section 382. State NOLs are subject to similar
limitations in many cases. As a result, our substantial NOLs may not have any value to us.
An
inability to expand our E-commerce business could reduce our future growth.
Consumers
are increasingly purchasing products online. We operate direct-to-consumer e-commerce stores to maintain an online presence with
our end users. The future success of our online operations depends on our ability to use our marketing resources to communicate
with existing and potential customers. We face competitive pressure to offer promotional discounts, which could impact our gross
margin and increase our marketing expenses. We are limited, however, in our ability to fully respond to competitor price discounting
because we cannot market our products at prices that may produce adverse relationships with our customers that operate brick and
mortar locations as they may perceive themselves to be at a disadvantage based on lower e-commerce pricing to end consumers. There
is no assurance that we will be able to successfully expand our e-commerce business to respond to shifting consumer traffic patterns
and direct-to-consumer buying trends.
In
addition, e-commerce and direct-to-consumer operations are subject to numerous risks, including implementing and maintaining appropriate
technology to support business strategies; reliance on third-party computer hardware/software and service providers; data breaches;
violations of state, federal or international laws, including those relating to online privacy; credit card fraud; telecommunication
failures; electronic break-ins and similar disruptions; and disruption of Internet service. Our inability to adequately respond
to these risks and uncertainties or to successfully maintain and expand our direct-to-consumer business may have an adverse impact
on our business and operating results.
If
we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs
to protect our rights.
Our
future success depends upon our proprietary technology. Our protective measures, including patent and trade secret protection,
may prove inadequate to protect our proprietary rights. The right to stop others from misusing our trademarks, service marks,
and patents in commerce depends to some extent on our ability to show evidence of enforcement of our rights against such misuse
in commerce. Our efforts to stop improper use, if insufficient, may lead to loss of trademark and service mark rights, brand loyalty,
and notoriety among our customers and prospective customers. The scope of any patent that we have or may obtain may not prevent
others from developing and selling competing products. The validity and breadth of claims covered in technology patents involve
complex legal and factual questions, and the resolution of such claims may be highly uncertain, and expensive. In addition, our
patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents.
We
may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management
attention from our business.
Any
intellectual property infringement claims against us, with or without merit, could be costly and time-consuming to defend and
divert our management’s attention from our business. If our products were found to infringe a third party’s proprietary
rights, we could be required to enter into costly royalty or licensing agreements to be able to sell our products. Royalty and
licensing agreements, if required, may not be available on terms acceptable to us or at all.
Breaches
of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss
sales.
There
have been an increasing number of cyber security incidents affecting companies around the world, which have caused operational
failures or compromised sensitive corporate data. Although we do not believe our systems are at a greater risk of cyber security
incidents than other similar organizations, such cyber security incidents may result in the loss or compromise of customer, financial,
or operational data; disruption of billing, collections, or normal operating activities; disruption of electronic monitoring and
control of operational systems; and delays in financial reporting and other management functions. Possible impacts associated
with a cyber security incident may include among others, remediation costs related to lost, stolen, or compromised data; repairs
to data processing systems; increased cyber security protection costs; reputational damage; and adverse effects on our compliance
with applicable privacy and other laws and regulations.
A
failure of our information technology systems, or an interruption in their operation due to internal or external factors including
cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations.
Our
operations depend on our ability to protect our information systems, computer equipment, and information databases from systems
failures. We rely on our information technology systems generally to manage the day-to-day operations of our business, operate
elements of our manufacturing facility, manage relationships with our customers, fulfill customer orders, and maintain our financial
and accounting records. Failure of our information technology systems could be caused by internal or external events, such as
incursions by intruders or hackers, computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication
fluctuations or failures. The failure of our information technology systems to perform as anticipated for any reason or any significant
breach of security could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and
efficiency of operations, increased costs, or loss of important information, any of which could have a material adverse effect
on our business, operating results, and financial condition. Any technology and information security processes and disaster recovery
plans we use to mitigate our risk to these vulnerabilities may not be adequate to ensure that our operations will not be disrupted
should such an event occur.
Risks
Related to Our Products and Our Dependence on Third Parties
Our
success depends upon our ability to introduce new products that match customer preferences.
Our
success depends upon our ability to introduce new products that match consumer preferences. Our efforts to introduce new products
into the market may not be successful, and any new products that we introduce may not result in customer or market acceptance.
We develop new products that we believe will match consumer preferences. The development of a new product is a lengthy and costly
process and may not result in a successful product. Failure to develop new products that are attractive to consumers could decrease
our sales, operating margins, and market share and could adversely affect our business, operating results, and financial condition.
We
depend on the sale of our ammunition products.
We
manufacture ammunition and ammunition casings for sale to a wide variety of consumers, including gun enthusiasts, collectors,
hunters, sportsmen, competitive shooters, individuals desiring home and personal protection, manufacturers, law enforcement and
security agencies and officers in the United States and throughout the world. The sale of ammunition and ammunition components
is influenced by the sale and usage of firearms. Sales of firearms are influenced by a variety of economic, social, and political
factors, which may result in volatile sales. Ammunition sales represented a substantial amount of our net sales for the fiscal
years ended March 31, 2020 and 2019. If ammunition sales decline, our financial results could be adversely impacted and the stock
price of our common stock could decline.
Our
manufacturing facilities are critical to our success.
Our
Arizona and Wisconsin manufacturing facilities are critical to our success, as we currently produce all of our products at these
facilities. The facilities also house our principal research, development, engineering, and design functions.
Any
event that causes a disruption of the operation of these facilities for even a relatively short period of time would adversely
affect our ability to produce and ship our products and to provide service to our customers. We make certain changes in our manufacturing
operations from time to time to enhance the facilities and associated equipment and systems and to introduce certain efficiencies
in manufacturing and other processes to produce our products in a more efficient and cost-effective manner. We anticipate that
we will continue to incur significant capital and other expenditures with respect to these facilities and our plans to construct
a new $12 million manufacturing plant, but we may not be successful in continuing to improve efficiencies.
Shortages
of components and materials may delay or reduce our sales and increase our costs, thereby harming our results of operations.
The
inability to obtain sufficient quantities of raw materials and components, including casings, primers, gun powder, projectiles,
and brass necessary for the production of our products could result in reduced or delayed sales or lost orders. Any delay in or
loss of sales or orders could adversely impact our operating results. Many of the materials used in the production of our products
are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers. As a result,
we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components.
Our
reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability,
quality, and price of these raw materials and components. Our orders with certain of our suppliers may represent a very small
portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation
of our orders. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions, price
increases, or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments
to customers or increase our operating costs. Quality issues experienced by third party suppliers can also adversely affect the
quality and effectiveness of our products and result in liability and reputational harm.
We
rely on third-party suppliers for most of our manufacturing equipment.
We
also rely on third-party suppliers for most of the manufacturing equipment necessary to produce our products. The failure of suppliers
to supply manufacturing equipment in a timely manner or on commercially reasonable terms could delay our plans to expand our business
and otherwise disrupt our production schedules and increase our manufacturing costs. Our orders with certain of our suppliers
may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to
potential delays in or cancellation of our orders. If any single-source supplier were to fail to supply our needs on a timely
basis or cease providing us with manufacturing equipment or components, we would be required to locate and contract with substitute
suppliers. We may have difficulty identifying a substitute supplier in a timely manner and on commercially reasonable terms. If
this were to occur, our business would be harmed.
Our
revenue depends primarily on sales by various retailers and distributors, some of which account for a significant portion of our
sales.
Our
revenue depends on our sales through various leading national and regional retailers, local specialty firearms stores, and online
merchants. The U.S. retail industry serving the outdoor recreation market has become relatively concentrated. Our sales could
become increasingly dependent on purchases by several large retail customers. Consolidation in the retail industry could also
adversely affect our business. If our sales were to become increasingly dependent on business with several large retailers, we
could be adversely affected by the loss or a significant decline in sales to one or more of these customers. In addition, our
dependence on a smaller group of retailers could result in their increased bargaining position and pressures on the prices we
charge.
The
loss of any one or more of our large or “Big Box” retail customers or significant or numerous cancellations, reductions,
delays in purchases or changes in business practices by our large or “Big Box” retail customers could have an adverse
effect on our business, operating results, and financial condition.
These
sales channels involve a number of special risks, including the following:
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we
may be unable to secure and maintain favorable relationships with retailers and distributors;
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we
may be unable to control the timing of delivery of our products to end-user consumers;
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our
retailers and distributors are not subject to minimum sales requirements or any obligation
to market our products to their customers;
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our
retailers and distributors may terminate their relationships with us at any time;
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our
retailers and distributors market and distribute competing products; and
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our
retailers may experience closure due to COVID-19 outbreaks or other natural or manmade
disasters in a particular region.
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We
have one customer that accounted for approximately 15.9% and 15.0%, respectively, of our revenues for the three and nine months
ended December 31, 2020. Although we intend to expand our customer base, our revenue would likely decline if we lost any major
customers or if one of these sizable customers were to significantly reduce its orders for any reason. Because our sales are made
by means of standard purchase orders rather than long-term contracts, we cannot assure you that our customers will continue to
purchase our products at current levels, or at all.
In
addition, periods of sluggish economies and consumer uncertainty regarding future economic prospects in our key markets can have
an adverse effect on the financial health of our customers, which may in turn have a material adverse effect on our business,
operating results, and financial condition.
We
extend credit to our customers for periods of varying duration based on an assessment of the customer’s financial condition,
generally without requiring collateral, which increases our exposure to the risk of uncollectable receivables. In addition, we
face increased risk of order reduction or cancellation when dealing with financially ailing retailers or retailers struggling
with economic uncertainty. We may reduce our level of business with customers and distributors experiencing financial difficulties
and may not be able to replace that business with other customers, which could have a material adverse effect on our business,
operating results, and financial condition.
Our
gross margins depend upon our sales mix.
Our
gross margin is higher when our sales mix is skewed toward our higher-margin proprietary product lines versus a lower contribution
from mid-market ammunition that we also manufacture. If our actual sales mix results in a lower overall percentage from our proprietary
lines, our gross margins will be reduced, affecting our results of operations.
We
face intense competition that could result in our losing or failing to gain market share and suffering reduced sales.
We
operate in intensely competitive markets that are characterized by price erosion and competition from major domestic and international
companies. Competition in the markets in which we operate is based on a number of factors, including price, quality, product innovation,
performance, reliability, styling, product features, and warranties, and sales and marketing programs. This intense competition
could result in pricing pressures, lower sales, reduced margins, and lower market share.
Our
competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition Division of Olin Corporation, and various
smaller manufacturers and importers, including Black Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady, PMC, Rio Ammunition,
and Wolf. Most of our competitors have greater market recognition, larger customer bases, long-term government contracts, and
substantially greater financial, technical, marketing, distribution, and other resources than we possess and that afford them
competitive advantages. As a result, they may be able to devote greater resources to the promotion and sale of products, to invest
more funds in intellectual property and product development, to negotiate lower prices for raw materials and components, to deliver
competitive products at lower prices, and to introduce new products and respond to consumer requirements more quickly than we
can.
Our
competitors could introduce products with superior features at lower prices than our products and could also bundle existing or
new products with other more established products to compete with us. Certain of our competitors may be willing to reduce prices
and accept lower profit margins to compete with us. Our competitors could also gain market share by acquiring or forming strategic
alliances with other competitors.
Finally,
we may face additional sources of competition in the future because new distribution methods offered by the Internet and electronic
commerce have removed many of the barriers to entry historically faced by start-up companies. Retailers also demand that suppliers
reduce their prices on products, which could lead to lower margins. Any of the foregoing effects could cause our sales to decline,
which would harm our financial position and results of operations.
Our
ability to compete successfully depends on a number of factors, both within and outside our control. These factors include the
following:
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our
success in developing, producing, marketing, and successfully selling new products;
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our
ability to address the needs of our consumer customers;
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the
pricing, quality, performance, and reliability of our products;
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the
quality of our customer service;
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the
efficiency of our production; and
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product
or technology introductions by our competitors.
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Because
we believe technological and functional distinctions among competing products in our markets are perceived by many end-user consumers
to be relatively modest, effectiveness in marketing and manufacturing are particularly important competitive factors in our business.
Seasonality
and weather conditions may cause our operating results to vary from quarter to quarter.
Because
many of our products are used for seasonal outdoor sporting activities, our operating results may be significantly impacted by
unseasonable weather conditions. Accordingly, our operating results could suffer when weather patterns do not conform to seasonal
norms.
Shipments
of ammunition for hunting are highest during the months of June through September to meet consumer demand for the fall hunting
season and holidays. The seasonality of our sales may change in the future. The hunting for our 2022 fiscal year season may be
affected by travel restrictions and other limitations imposed as a result of COVID-19 that are unpredictable. Seasonal variations
in our operating results may reduce our cash on hand, increase our inventory levels, and extend our accounts receivable collection
periods. This in turn may cause us to increase our debt levels and interest expense to fund our working capital requirements.
We
manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims
and litigation.
Our
products are used in activities and situations that involve risk of personal injury and death. Our products expose us to potential
product liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products,
including allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or
activities associated with the product, negligence, and strict liability. If successful, any such claims could have a material
adverse effect on our business, operating results, and financial condition. Defects in our products may result in a loss of sales,
recall expenses, delay in market acceptance, and damage to our reputation and increased warranty costs, which could have a material
adverse effect on our business, operating results, and financial condition. Although we maintain product liability insurance in
amounts that we believe are reasonable, we may not be able to maintain such insurance on acceptable terms, if at all, in the future
and product liability claims may exceed the amount of insurance coverage or may not be covered by our insurance policies. In addition,
our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about
our products.
Our
business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition
or reputation would likely have a material adverse effect on our business.
Our
brand recognition and reputation are critical aspects of our business. We believe that maintaining and further enhancing our brands,
particularly our STREAK VISUAL AMMUNITION™ brands, and our reputation are critical to retaining existing customers
and attracting new customers. We also believe that the importance of our brand recognition and reputation will continue to increase
as competition in our markets continues to develop.
We
anticipate that our advertising, marketing, and promotional efforts will increase in the foreseeable future as we continue to
seek to enhance our brands and consumer demand for our products. Historically, we have relied on print and electronic media advertising
to increase consumer awareness of our brands to increase purchasing intent and conversation. We anticipate that we will increasingly
rely on other forms of media advertising, including social media and e-marketing. Our future growth and profitability will depend
in large part upon the effectiveness and efficiency of our advertising, promotion, public relations, and marketing programs. These
brand promotion activities may not yield increased revenue and the efficacy of these activities will depend on a number of factors,
including our ability to do the following:
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determine
the appropriate creative message and media mix for advertising, marketing, and promotional
expenditures;
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select
the right markets, media, and specific media vehicles in which to advertise;
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identify
the most effective and efficient level of spending in each market, media, and specific
media vehicle; and
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effectively
manage marketing costs, including creative and media expenses, to maintain acceptable
customer acquisition costs.
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In
addition, certain of our current or future products may benefit from endorsements and support from particular sportsmen, athletes,
or other celebrities, and those products and brands may become personally associated with those individuals. As a result, sales
of the endorsed products could be materially and adversely affected if any of those individuals’ images, reputations, or
popularity were to be negatively impacted.
Increases
in the pricing of one or more of our marketing and advertising channels could increase our marketing and advertising expenses
or cause us to choose less expensive but possibly less effective marketing and advertising channels. If we implement new marketing
and advertising strategies, we may incur significantly higher costs than our current channels, which in turn could adversely affect
our operating results. Implementing new marketing and advertising strategies also could increase the risk of devoting significant
capital and other resources to endeavors that do not prove to be cost effective. We also may incur marketing and advertising expenses
significantly in advance of the time we anticipate recognizing revenue associated with such expenses and our marketing and advertising
expenditures may not generate sufficient levels of brand awareness and conversation or result in increased revenue. Even if our
marketing and advertising expenses result in increased sales, the increase might not offset our related expenditures. If we are
unable to maintain our marketing and advertising channels on cost-effective terms or replace or supplement existing marketing
and advertising channels with similarly or more effective channels, our marketing and advertising expenses could increase substantially,
our customer base could be adversely affected, and our business, operating results, financial condition, and reputation could
suffer.
A
significant portion of our revenue is contingent on an exclusive license agreement with the University of Louisiana at Lafayette.
A
significant portion of our revenue is attributable to the sale of our STREAK VISUAL AMMUNITION™. The
manufacturing of our STREAK product relies, in part, on a patent that is held by the University of Louisiana at Lafayette. We
have an exclusive license to use the licensed technology, derivative and related technology worldwide for non-military
purposes. We may renew this license agreement for successive four-year periods provided we are in compliance with the
agreement. If we breach the license agreement, the licensor may terminate the agreement and if we fail to renew the license,
we may be unable to use the technology, which, in either case, could significantly harm our results of operations.
Regulatory
Risks
We
are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements.
Like
many other manufacturers and distributors of consumer products, we are required to comply with a wide variety of laws, rules,
and regulations, including those relating to labor, employment, the environment, the export and import of our products, and taxation.
These laws, rules, and regulations currently impose significant compliance requirements on our business, and more restrictive
laws, rules and regulations may be adopted in the future.
Our
operations are subject to a variety of laws and regulations relating to environmental protection, including those governing the
discharge, treatment, storage, transportation, remediation, and disposal of certain materials and wastes, and restoration of damages
to the environment, and health and safety matters. We could incur substantial costs, including remediation costs, resource restoration
costs, fines, penalties, and third-party property damage or personal injury claims as a result of liabilities under or violations
of such laws and regulations or the permits required thereunder. While environmental laws and regulations have not had a material
adverse effect on our business, operating results, financial condition, the ultimate cost of environmental liabilities is difficult
to accurately predict and we could incur material additional costs as a result of requirements or obligations imposed or liabilities
identified in the future.
As
a manufacturer and distributor of consumer products, we are subject to the Consumer Products Safety Act, which empowers the Consumer
Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances,
the Consumer Products Safety Commission could require us to repurchase or recall one or more of our products. In addition, laws
regulating certain consumer products exist in some cities and states, and in other countries in which we sell our products, and
more restrictive laws and regulations may be adopted in the future. Any repurchase or recall of our products could be costly to
us and could damage our reputation. If we were required to remove, or we voluntarily removed, our products from the market, our
reputation could be tarnished, and we could have large quantities of finished products that we are unable to sell. We are also
subject to the rules and regulations of the Bureau of Alcohol, Tobacco, Firearms and Explosives, or the ATF. If we fail to comply
with ATF rules and regulations, the ATF may limit our growth or business activities, levy fines against or revoke our license
to do business. Our business, and the business of all producers and marketers of ammunition and firearms, is also subject to numerous
federal, state, local, and foreign laws, regulations, and protocols. Applicable laws have the following effects:
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require
the licensing of all persons manufacturing, exporting, importing, or selling firearms
and ammunition as a business;
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require
background checks for purchasers of firearms;
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impose
waiting periods between the purchase of a firearm and the delivery of a firearm;
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prohibit
the sale of firearms to certain persons, such as those below a certain age and persons
with criminal records;
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regulate
the use and storage of gun powder or other energetic materials;
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regulate
our employment of personnel with criminal convictions; and
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restrict
access to firearm manufacturing facilities for individuals from other countries or with
criminal convictions.
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Also,
the export of our products is controlled by International Traffic in Arms Regulations, or ITAR, and Export Administration Regulations,
or EAR. The ITAR implements the provisions of the Arms Export Control Act and is enforced by the U.S. Department of State. The
EAR implements the provisions of the Export Administration Act and is enforced by the U.S. Department of Commerce. Among their
many provisions, the ITAR and the EAR require a license application for the export of many of our products. In addition, the ITAR
requires congressional approval for any firearms export application with a total value of $1 million or higher. Further, because
our manufacturing process includes certain toxic, flammable and explosive chemicals, we are subject to the Chemical Facility Anti-Terrorism
Standards, as administered by the U.S. Department of Homeland Security, which require that we take additional reporting and security
measures related to our manufacturing process.
Several
states currently have laws in effect that are similar to, and, in certain cases, more restrictive than, these federal laws. Compliance
with all of these regulations is costly and time-consuming. Any violation of any of these regulations could cause us to incur
fines and penalties, may also to restrictions on our ability to manufacture and sell our products and services and to import or
export the products we sell and may cause our business to be harmed.
Changes
in government policies and firearms legislation could adversely affect our financial results.
The
sale, purchase, ownership, and use of firearms are subject to numerous and varied federal, state, and local governmental regulations.
Federal laws governing firearms include the National Firearms Act, the Federal Firearms Act, the Arms Export Control Act, and
the Gun Control Act of 1968. These laws generally govern the manufacture, import, export, sale, and possession of firearms and
ammunition. We hold all necessary licenses to legally sell ammunition in the United States.
Currently,
the federal legislature and several state legislatures are considering additional legislation relating to the regulation of firearms
and ammunition. These proposed bills are extremely varied. If enacted, such legislation could effectively ban or severely limit
the sale of affected firearms and ammunition. In addition, if such restrictions are enacted and are incongruent, we could find
it difficult, expensive, or even practically impossible to comply with them, which could impede new product development and the
distribution of existing products. We cannot assure you that the regulation of our business activities will not become more restrictive
in the future and that any such restriction will not have a material adverse effect on our business.
Any
adverse change to the interpretations of the Second Amendment (Right to Bear Arms) could impact our ability to conduct business
by restricting the ownership and use of firearms in the United States.
Risks
Related to our Common Stock
Our
shares are listed on the Nasdaq Capital Market; however, if we fail to comply with Nasdaq’s rules for continued listing
or other requirements, our shares may be delisted.
Our
common stock is listed on the Nasdaq Capital Market (“Nasdaq) under the symbol “POWW. If we fail to comply with Nasdaq’s
rules for continued listing, including, without limitation, minimum market capitalization and other requirements, Nasdaq may take
steps to delist our shares. Failure to maintain our Nasdaq listing would make it more difficult for shareholders to sell our common
stock and more difficult to obtain accurate price quotations on our common stock. The delisting of our shares could have an adverse
effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise
to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not
traded on a national securities exchange.
The
exercise of warrants, and issuance of incentive stock grants may have a dilutive effective on our stock, and negatively impact
the price of our common stock.
As
of March 5, 2021, we had 3,741,529 warrants outstanding with a weighted average exercise price of $2.31. As of March 5,
2021, there were no options outstanding and 4,077,919 shares of common stock are reserved for future issuance under the 2017 Equity
Incentive Plan. We plan to adopt a new Incentive Stock Plan designed to assist us in attracting, motivating, retaining, and rewarding
high-quality executives, directors, officers, employees, and individual consultants by enabling such persons to acquire or increase
a proprietary interest in our company to strengthen the mutuality of interests between such persons and our stockholders and providing
such persons with performance incentives to expand their maximum efforts in the creation of stockholder value under the plan.
We will be able to grant stock options, restricted stock, restricted stock units, stock appreciation rights, bonus stocks, and
performance awards under the plan.
To
the extent that any of the outstanding warrants and future options are exercised, dilution to the interests of our stockholders
may occur. For the life of such warrants and options, the holders will have the opportunity to profit from a rise in the price
of the common stock with a resulting dilution in the interest of the other holders of common stock. The existence of such warrants
and options may adversely affect the market price of our common stock.
Our
management has concluded that we have material weaknesses in our internal controls over financial reporting and that our disclosure
controls and procedures are not effective. If we fail to develop or maintain an effective system of internal controls, we may
not be able to accurately report our financial results or prevent financial fraud. As a result, current and potential stockholders
could lose confidence in our financial reporting.
As
a public company, we are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section
404 requires us to include management’s assessment of the effectiveness of our internal control over financial reporting
as of the end of the fiscal year in our Annual Report on Form 10-K. This report must also include disclosure of any material weaknesses
in internal control over financial reporting that we have identified.
During
the audit of our financial statements for the year ended March 31, 2020, our management identified material weaknesses in our
internal control over financial reporting. 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. In addition,
as of March 31, 2020, our management concluded that our disclosure controls and procedures were not effective. These material
weaknesses, if not remediated, create an increased risk of misstatement of the Company’s financial results, which, if material,
may require future restatement thereof. A failure to implement improved internal controls, or difficulties encountered in their
implementation or execution, could cause future delays in our reporting obligations and could have a negative effect on us and
the trading price of our common stock. If these weaknesses and inadequate disclosure controls and procedures continue, investors
could lose confidence in the accuracy and completeness of our financial reports and other disclosures.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide
reliable financial reports or prevent fraud, we could be subject to regulatory action or other litigation and our operating results
could be harmed.
General
Risk Factors
Our
operating results may experience significant fluctuations.
Many
factors can contribute to significant fluctuations in our results of operations. These factors include the following:
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the
cyclicality of the markets we serve;
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the
timing and size of new orders;
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the
cancellation of existing orders;
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the
volume of orders relative to our capacity;
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product
introductions and market acceptance of new products or new generations of products;
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timing
of expenses in anticipation of future orders;
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changes
in product mix;
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availability
of production capacity;
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changes
in cost and availability of labor and raw materials;
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timely
delivery of products to customers;
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pricing
and availability of competitive products;
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new
product introduction costs;
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changes
in the amount or timing of operating expenses;
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introduction
of new technologies into the markets we serve;
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pressures
on reducing selling prices;
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our
success in serving new markets;
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adverse
publicity regarding the safety, performance, and use of our products;
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the
institution and adverse outcome of any litigation;
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political,
economic, or regulatory developments;
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changes
in economic conditions; and
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natural
and manmade disasters, including COVID-19.
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As
a result of these and other factors, we believe that period-to-period comparisons of our results of operations may not be meaningful
in the short term, and our performance in a particular period may not be indicative of our performance in any future period.
We
may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
In
the future, we may require additional capital to fund the planned expansion of our business and to respond to business opportunities,
challenges, potential acquisitions, or unforeseen circumstances. We could encounter unforeseen difficulties that may deplete our
capital resources rapidly, which could require us to seek additional financing in the near future. The timing and amount of any
additional financing that is required to continue the expansion of our business and the marketing of our products will depend
on our ability to improve our operating results and other factors. We may not be able to secure additional debt or equity financing
on a timely basis or on favorable terms, or at all. Such financing could result in substantial dilution of the equity interests
of existing stockholders. If we are unable to secure any necessary additional financing, we may need to delay expansion plans,
conserve cash, and reduce operating expenses. There is no assurance that any additional financing will be sufficient, that the
financing will be available on terms favorable to us or to existing stockholders and at such times as required, or that we will
be able to obtain the additional financing required for the continued operation and growth of our business. Any debt financing
obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial
and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities.
If we raise additional funds through further issuances of equity, convertible debt securities, or other securities convertible
into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any
new equity securities we issue could have rights, preferences, and privileges senior to those of holders of our common stock.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to grow
or support our business and to respond to business challenges could be significantly limited.
We
need to continue as a going concern if our business is to succeed.
Because
of our recurring losses and limited capital resources, the audit report of our independent registered public accountants on our
consolidated financial statements for the year ended March 31, 2020 contains an explanatory paragraph stating that there is substantial
doubt about our ability to continue as a going concern. Factors identified in the report include our significant historical net
losses, and the need for additional financing meet our financial obligations and sustain our operations. If we are not able to
attain profitability in the near future our financial condition could deteriorate further, which would have a material adverse
impact on our business and prospects and result in a significant or complete loss of your investment. Further, we may be unable
to pay our debt obligations as they become due, which include obligations to secured creditors. If we are unable to continue as
a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution
could be significantly lower than the values reflected in our financial statements. Additionally, we are subject to customary
operational covenants, including limitations on our ability to incur liens or additional debt, pay dividends, redeem stock, make
specified investments and engage in merger, consolidation or asset sale transactions, among other restrictions. The inclusion
of an explanatory paragraph in the audit report for the year ended March 31, 2020 regarding substantial doubt about our ability
to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter
into critical contractual relations with third parties.
Our
charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover.
Our
certificate of incorporation, bylaws, and Delaware law contain certain provisions that may have the effect of deterring or discouraging,
among other things, a non-negotiated tender or exchange offer for shares of common stock, a proxy contest for control of our company,
the assumption of control of our company by a holder of a large block of common stock, and the removal of the management of our
company. Such provisions also may have the effect of deterring or discouraging a transaction which might otherwise be beneficial
to stockholders. Our certificate of incorporation also may authorize our board of directors, without stockholder approval, to
issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the
voting power of the holders of common stock. Delaware law also imposes conditions on certain business combination transactions
with “interested stockholders.” Our certificate of incorporation authorizes our Board of Directors to fill vacancies
or newly created directorships. A majority of the directors then in office may elect a successor to fill any vacancies or newly
created directorships. Such provisions could limit the price that investors might be willing to pay in the future for shares of
our common stock and impede the ability of the stockholders to replace management.
The
elimination of monetary liability against our directors, officers, and employees under Delaware law and the existence of indemnification
rights to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against
our directors, officers, and employees. We also may have entered into contractual indemnification obligations under employment
agreements with our executive officers. The foregoing indemnification obligations could result in our incurring substantial expenditures
to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions
and resultant costs may also discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary
duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers
even though such actions, if successful, might otherwise benefit our company and our stockholders.
Our
certification of incorporation designates the Court of Chancery in the State of Delaware as the sole and exclusive forum for actions
or proceedings that may be initiated by our stockholders, which could discourage claims or limit stockholders’ ability to
make a claim against the Company, our directors, officers, and employees.
Our
Amended and Restated Certificate of Incorporation states that unless the Corporation consents in writing to the selection of an
alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including
a beneficial) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) an action asserting
a claim of breach of fiduciary duty owed by any director, officer, or other employee of the Corporation to the Corporation or
the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers, or
employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of
incorporation or bylaws, or (iv) any action asserting a claim against the Corporation, its directors, officers, or employees governed
by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery
determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable
party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which
is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery
does not have subject matter jurisdiction.
These
exclusive forum provisions do not apply to claims under the Securities Act or the Exchange Act. The exclusive forum provision
may discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may
create additional costs as a result. If a court were to determine the exclusive forum provision to be inapplicable and unenforceable
in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction,
which could have a negative impact on our results of operations.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus supplement, the accompanying prospectus and the documents we incorporate by reference in this prospectus supplement
and the accompanying prospectus contain forward-looking statements that involve risks and uncertainties. These statements relate
to future periods, future events or our future operating or financial performance. All statements other than statements of historical
fact, including statements identified by words such as “may,” “will,” “could,” “expect,”
“anticipate,” “continue,” “plan,” “intend,” “estimate,” “project,”
“believe” and similar expressions or variations, are forward-looking statements. Forward-looking statements include
but are not limited to statements regarding our strategy, future operations, financial condition, results of operations, projected
costs, and plans and objectives of management. Actual results may differ materially from those contemplated by the forward-looking
statements due to, among others, the risks and uncertainties described in this prospectus supplement under “Risk Factors”
in the accompanying prospectus, and in the documents incorporated by reference in this prospectus supplement and the accompanying
prospectus. Any forward-looking statement made by us in this prospectus supplement, the accompanying prospectus and the documents
incorporated by reference speaks only as of the date on which the statement is made. We undertake no obligation to update any
forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is
made or to reflect the occurrence of unanticipated events.
USE
OF PROCEEDS
We
estimate that the net proceeds to us from this offering, after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us, will be approximately $ million (or approximately $ million if the underwriters exercise their
over-allotment option in full).
We
currently intend to use the net proceeds from this offering for general corporate and working capital purposes, including debt
reduction and capital expenditures. In addition, we may use a portion of the proceeds for potential acquisitions.
We currently
intend on paying a total of approximately $5.5 million to two of our creditors to repay in full:
(a)
a promissory note issued to Jagemann Stamping Company (a related party) in June 2020, as amended in November 2020, which
has a remaining balance of approximately $1.5 million and whose proceeds were used to purchase inventory and services. This promissory note has a
maturity date of November 5, 2023 and an interest rate of 9% per annum; and
(b)
a promissory note issued to Lisa Kay in November 2020, which has a remaining balance of approximately $4 million and whose
proceeds were used for working capital. This promissory note has a maturity date of November 5, 2023 and an interest rate of 12% per
annum.
Our
management team will have broad discretion in using the net proceeds to be received by us from this offering.
Pending
use of the net proceeds, we intend to invest the net proceeds from this offering in a variety of capital preservation instruments,
including short-term, investment-grade, interest-bearing instruments.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our capital stock. We currently intend to retain all available funds and any
future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash
dividends on our common stock for the foreseeable future. In addition, the terms of our current debt arrangements limit our ability
to pay dividends. Any future determination related to our dividend policy will be made at the discretion of our board of directors
and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions,
business prospects and other factors our board of directors may deem relevant.
CAPITALIZATION
The
following table sets forth our cash and cash equivalents and capitalization as of December 31, 2020:
|
●
|
on
an actual basis; and
|
|
●
|
on
an as adjusted basis to reflect the sale of shares of common stock in this offering at
the public offering price of $ per share, after deducting the underwriting discounts
and commissions and estimated offering expenses payable by us, and assuming no exercise
by the underwriters of their over-allotment option.
|
You
should read this table along with our unaudited consolidated financial statements and related notes for the nine months ended
December 31, 2020 as well as the other financial information incorporated by reference in this prospectus supplement and the accompanying
prospectus.
|
|
As of December 31, 2020
|
|
|
|
Actual
|
|
|
As Adjusted
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Cash
|
|
$
|
19,007,893
|
|
|
$
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Factoring liability
|
|
$
|
2,290,598
|
|
|
$
|
|
|
Inventory credit facility
|
|
|
2,250,000
|
|
|
|
|
|
Convertible promissory notes, net of note issuance cost of $121,325 at December 31, 2020 and $237,611 at March 31, 2020
|
|
|
817,675
|
|
|
|
|
|
Notes payable related party
|
|
|
2,427,726
|
|
|
|
|
|
Note payable
|
|
|
4,000,000
|
|
|
|
|
|
Total other liabilities
|
|
|
12,544,458
|
|
|
|
|
|
Total liabilities
|
|
$
|
24,330,457
|
|
|
$
|
|
|
Stockholders’ 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
|
|
|
$
|
|
|
Additional paid-in capital
|
|
|
84,732,248
|
|
|
|
|
|
Accumulated (deficit)
|
|
|
(41,356,096
|
)
|
|
|
|
|
Total stockholders’ equity
|
|
$
|
42,774,675
|
|
|
$
|
|
|
Total Capitalization
|
|
$
|
67,105,132
|
|
|
$
|
|
|
The
number of shares of common stock outstanding in the table above excludes:
|
●
|
8,481,990
shares of common stock issuable upon the exercise of outstanding warrants having a weighted
average exercise price of $2.09 per share as of December 31, 2020; and
|
|
●
|
4,355,834
shares of common stock reserved for future issuance under the Company’s 2017 Equity
Incentive Plan, as amended, as of December 31, 2020.
|
DILUTION
If
you purchase our common stock in this offering, you will experience immediate dilution to the extent of the difference between
the public offering price per share you pay in this offering and the net tangible book value (deficit) per share of our common
stock immediately after this offering. We calculate net tangible book value (deficit) per share by subtracting total liabilities
from our total tangible assets and dividing the difference by the number of shares of common stock outstanding.
Our
net tangible book value (deficit) as of December 31, 2020 was approximately $34.0 million or $0.54 per share of common stock.
After giving effect to the sale in this offering of shares at a public offering price of $ per share, and after deducting the
underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value
(deficit) as of December 31, 2020 would have been approximately $ , or approximately $ per share. This represents an immediate
increase in net tangible book value of approximately $ per share to existing stockholders and an immediate dilution of approximately
$ per share to new investors. The following table illustrates the dilution to new investors on a per share basis, assuming the
underwriters do not exercise their over-allotment option:
Public offering price per share
|
|
|
|
|
|
$
|
|
|
Net tangible book value (deficit) per share as of December 31, 2020
|
|
$
|
0.54
|
|
|
|
|
|
Increase in net tangible book value (deficit) per share attributable to this offering
|
|
$
|
|
|
|
|
|
|
As adjusted net tangible book value (deficit) per share after giving effect to this offering
|
|
|
|
|
|
$
|
|
|
Dilution in net tangible book value per share to new investors
|
|
|
|
|
|
$
|
|
|
If
the underwriters exercise in full their option to purchase additional shares from us, the as adjusted net tangible book value
(deficit) per share after this offering would be $ per share, the increase in net tangible book value per share to existing stockholders
would be $ per share and the dilution to new investors purchasing shares in this offering would be $ per share.
The
above discussion and table exclude:
|
●
|
8,481,990
shares of common stock issuable upon the exercise of outstanding warrants having a weighted
average exercise price of $2.09 per share as of December 31, 2020; and
|
|
●
|
4,355,834
shares of common stock reserved for future issuance under the Company’s 2017 Equity
Incentive Plan, as amended, as of December 31, 2020.
|
To
the extent that additional shares are issued pursuant to the foregoing, investors purchasing our common stock in this offering
will experience further dilution.
INCORPORATION
OF DOCUMENTS BY REFERENCE
The
SEC’s rules allows us to incorporate by reference the information contained in documents we file with the SEC. This allows
us to disclose important information to you by referencing those filed documents rather than by including them in the prospectus
supplement or the accompanying prospectus.
We
have previously filed the following documents with the SEC and incorporate them by reference into this prospectus supplement:
|
●
|
Our
Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on August
19, 2020.
|
|
●
|
Our
Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020, September 30, 2020,
and December 31, 2020, filed with the SEC on August 19, 2020, November 13, 2020, and
February 12, 2021, respectively.
|
|
●
|
Our
Current Reports on Form 8-K filed with the SEC on April 28, 2020, June 29, 2020, July 2, 2020, September 2, 2020, September 29, 2020, October 28, 2020, November 6, 2020, December 4, 2020, December 17, 2020, January
25, 2021 and March
11, 2021.
|
|
●
|
The
description of our common stock contained in our Registration Statement on Form 8-A,
filed with the SEC on November 24, 2020, and any amendment or report filed with the SEC
for the purpose of updating such description.
|
We
also are incorporating by reference any future information filed (rather than furnished) by us with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) after the date of this
prospectus supplement and before the completion or termination of this offering. The most recent information that we file with
the SEC automatically updates and supersedes more dated information.
You
may request a free copy of any of the documents incorporated by reference in this prospectus supplement and the accompanying prospectus
(other than exhibits, unless they are specifically incorporated by reference in the documents) by writing or telephoning us at
the following address:
Ammo,
Inc.
7681 East Gray Road
Scottsdale, Arizona 85260
(480) 947-0001
Exhibits
to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this prospectus
supplement and the accompanying prospectus.
UNDERWRITING
We
have entered into an underwriting agreement with the several underwriters listed in the table below. Roth Capital Partners, LLC
and Alexander Capital, L.P. are acting as joint representatives of the underwriters. We refer to the several underwriters listed
in the table below as the “underwriters.” Subject to the terms and conditions of the underwriting agreement, we have
agreed to sell to the underwriters, and the underwriters have agreed to purchase from us, shares of our common stock. Our common
stock trades on the Nasdaq Capital Market under the symbol “POWW.”
Pursuant
to the terms and subject to the conditions contained in the underwriting agreement, we have agreed to sell to the underwriters
named below, and each underwriter severally has agreed to purchase from us, the respective number of shares of common stock set
forth opposite its name below:
Underwriter
|
|
Number of Shares
|
|
Roth Capital Partners, LLC
|
|
|
|
|
Alexander Capital, L.P.
|
|
|
|
|
Total
|
|
|
|
|
The
underwriting agreement provides that the obligation of the underwriters to purchase the shares of common stock offered by this
prospectus supplement and the accompanying prospectus is subject to certain conditions. The underwriters are obligated to purchase
all of the shares of common stock offered hereby if any of the shares are purchased.
We
have granted the underwriters an option to buy up to an additional shares of common stock from us at the public offering price,
less the underwriting discounts and commissions, to cover over-allotments, if any. The underwriters may exercise this option at
any time, in whole at any time or in part from time to time, during the 30-day period after the date of this prospectus supplement.
Discounts,
Commissions and Expenses
The
underwriters propose to offer the shares of common stock purchased pursuant to the underwriting agreement to the public at the
public offering price set forth on the cover page of this prospectus supplement and to certain dealers at that price less a concession
not in excess of $ per share. After this offering, the public offering price and concession may be changed by the underwriters.
No such change shall change the amount of proceeds to be received by us as set forth on the cover page of this prospectus supplement.
In
connection with the sale of the common stock to be purchased by the underwriters, the underwriters will be deemed to have received
compensation in the form of underwriting commissions and discounts. The underwriting commissions and discounts will be 7.5% of
the gross proceeds of this offering, or $ per share of common stock, based on the public offering price per share set forth on
the cover page of this prospectus supplement.
We
have also agreed to reimburse the representatives at closing for legal and other expenses incurred by them in connection with
the offering up to a maximum amount of 0.5% of the total gross proceeds from this offering, before deducting the underwriting
discount and commissions, including, for the avoidance of doubt, the gross proceeds attributable to shares purchased pursuant
to the underwriters’ exercise of their over-allotment option. We estimate that our total offering expenses for this offering,
net of the underwriting discounts and commissions, will be approximately $ .
The
following table shows the underwriting discounts and commissions payable to the underwriters by us in connection with this offering
(assuming both the exercise in full and non-exercise of the over-allotment option to purchase additional shares of common stock
that we have granted to the underwriters):
|
|
Per Share
|
|
|
Total
|
|
|
|
Without
|
|
|
With
|
|
|
Without
|
|
|
With
|
|
|
|
Over-allotment
|
|
|
Over-allotment
|
|
|
Over-allotment
|
|
|
Over-allotment
|
|
Public offering price
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Underwriting discounts and commissions paid by us
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Indemnification
Pursuant
to the underwriting agreement, we have agreed to indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments that the underwriters or such other indemnified parties may be required
to make in respect of those liabilities.
Lock-Up
Agreements
Without
the prior written consent of Roth Capital Partners, LLC and Alexander Capital, L.P., for a period of 90 days following the date
of this prospectus supplement (the “Lock-Up Period”), we have agreed not to (i) offer, pledge, issue, sell, contract
to sell, purchase, contract to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for common stock of the Company, (ii) enter into any swap
or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of shares of common stock
or (iii) file any registration statement with the SEC relating to the offering of any shares of common stock or any securities
convertible into or exercisable or exchangeable for shares of common stock, except for (a) the issuance of the shares of our common
stock in this offering, (b) the issuance of shares of our common stock pursuant to our existing stock option plan and (c) the
issuance of shares in connection with any acquisition consummated by us during the Lock-Up Period, as long as the aggregate number
of shares issued or issuable does not exceed 5% of the number of shares of common stock outstanding immediately after giving effect
to this offering and certain other restrictions are met.
In
addition, each of our directors and executive officers has entered into a lock-up agreement with the underwriters. Under the lock-up
agreements, without the prior written consent of Roth Capital Partners, LLC, the foregoing persons may not, directly or
indirectly, (i) sell, assign, transfer, pledge, offer to sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option for sale (including any short sale), right or warrant to purchase, lend, establish
an open “put equivalent position” (within the meaning of Rule 16a-1(h) under the Exchange Act), or otherwise dispose
of, or enter into any transaction which is designed to or could be expected to result in the disposition of, any shares of common
stock or securities convertible into or exercisable or exchangeable for any equity securities of the Company (including, without
limitation, shares of common stock or any such securities which may be deemed to be beneficially owned by such persons in accordance
with the rules and regulations promulgated by the SEC from time to time (such shares or securities, the “Beneficially Owned
Shares”)), or publicly announce any intention to do any of the foregoing, other than the exercise of options or warrants
so long as there is no sale or disposition of the common stock underlying such options or warrants during the Lock-Up Period,
(ii) enter into any swap, hedge or other agreement or arrangement that transfers in whole or in part, the economic risk of ownership
of any Beneficially Owned Shares, common stock or securities convertible into or exercisable or exchangeable for any equity securities
of the Company, or (iii) engage in any short selling of any Beneficially Owned Shares, common stock or securities convertible
into or exercisable or exchangeable for any equity securities of the Company, whether any such transaction described in clause
(i), (ii) or (iii) above is to be settled by delivery of shares of common stock or such other securities, in cash or otherwise,
for a period of 90 days from the date of this prospectus supplement. This consent may be given at any time without public notice.
These restrictions on future dispositions by our directors and executive officers are subject to certain exceptions for transfers
of Beneficially Owned Shares, including, but not limited to, transfers (i) as a bona fide gift or gifts, (ii) by operation of
law, including pursuant to a qualified domestic order or in connection with a divorce settlement, (iii) to the immediate family
of the transferor, (iv) to any trust for the direct or indirect benefit of such person or the immediate family of the transferor,
(v) to any beneficiary of the transferor pursuant to a will or other testamentary document or applicable laws of descent and (vi)
to any corporation, partnership, limited liability company or other entity all of the beneficial ownership interests of which
are held by the transferor or the immediate family of the transferor.
Electronic
Distribution
This
prospectus supplement and the accompanying prospectus may be made available in electronic format on websites or through other
online services maintained by the underwriters or by their affiliates. In those cases, prospective investors may view offering
terms online and prospective investors may be allowed to place orders online. Other than this prospectus supplement and the accompanying
prospectus in electronic format, the information on the underwriters’ websites or our website and any information contained
in any other websites maintained by the underwriters or by us is not part of this prospectus supplement, the accompanying prospectus
or the registration statement of which this prospectus supplement and the accompanying prospectus form a part, has not been approved
and/or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.
Price
Stabilization, Short Positions and Penalty Bids
In
connection with the offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate
covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:
Stabilizing
transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
|
●
|
Over-allotment
involves sales by the underwriters of shares in excess of the number of shares the underwriters
are obligated to purchase, which creates a syndicate short position. The short position
may be either a covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not greater than
the number of shares that they may purchase pursuant to the over-allotment option. In
a naked short position, the number of shares involved is greater than the number of shares
that the underwriters may purchase pursuant to the over-allotment option. The underwriters
may close out any covered short position by either exercising the over-allotment option
and/or purchasing shares in the open market.
|
|
●
|
Syndicate
covering transactions involve purchases of the common stock in the open market after
the distribution has been completed in order to cover syndicate short positions. In determining
the source of shares to close out the short position, the underwriters will consider,
among other things, the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through the over-allotment option.
A naked short position occurs if the underwriters sell more shares than could be covered
by the over-allotment option. This position can only be closed out by buying shares in
the open market. A naked short position is more likely to be created if the underwriters
are concerned that there could be downward pressure on the price of the shares in the
open market after pricing that could adversely affect investors who purchase in the offering.
|
|
●
|
Penalty
bids permit the underwriters to reclaim a selling concession from a syndicate member
when the common stock originally sold by the syndicate member is purchased in a stabilizing
or syndicate covering transaction to cover syndicate short positions.
|
These
stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market
price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price
of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be discontinued
at any time.
Neither
we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of our shares of common stock. In addition, neither we nor the underwriters make any representation
that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without
notice.
Other
Relationships
Certain
of the underwriters (including the representatives) and their respective affiliates have engaged in, and may in the future engage
in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates for which they
have received, or may in the future receive, customary fees and commissions for these transactions. Alexander Capital, L.P. acted
as lead underwriter in a public offering of our common stock that closed in December 2020. In connection with such offering, in
addition to an underwriting discount of 8.5%, a non-accountable expense allowance of 1.0% of the total public offering price (excluding
the over-allotment option) and the payment of certain other expenses, we agreed to issue to the underwriters warrants to purchase
up to a total of 428,214 shares of common stock (5% of the shares of common stock sold in the offering (excluding the shares sold
through the exercise of the over-allotment option)). The warrants are exercisable at $2.63 per share (125% of the public offering
price of the common stock in the offering) commencing on a date which is 180 days from the effective date of the offering and
expiring on a date which is no more than five years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G).
Offer
restrictions outside the United States
Other
than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities
offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus
may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in
connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances
that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this
prospectus comes are advised to inform themselves about and to observe any restrictions relating to this offering and the distribution
of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered
by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This
prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian
Securities and Investments Commission and does not purport to include the information required of a disclosure document under
Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made
to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act
under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available
in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance
that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and,
unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities
sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
Canada
The
securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors,
as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are
permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus
requirements of applicable securities laws. Securities legislation in certain provinces or territories of Canada may provide a
purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation,
provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities
legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities
legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor. Pursuant
to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply
with the disclosure requirements of NI33-105 regarding underwriters’ conflicts of interest in connection with this offering.
China
The
information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in
the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau
Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal
or natural persons other than directly to “qualified domestic institutional investors.”
European
Economic Area
In
relation to each Member State of the European Economic Area and the United Kingdom (each a “Relevant State”), no shares
of our common stock have been offered or will be offered pursuant to this offering to the public in that Relevant State prior
to the publication of a prospectus in relation to such shares which has been approved by the competent authority in that Relevant
State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State,
all in accordance with the Prospectus Regulation, except that it may make an offer to the public in that Relevant State of any
shares of our common stock at any time under the following exemptions under the Prospectus Regulation:
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to
any legal entity which is a qualified investor as defined in the Prospectus Regulation;
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to
fewer than 150 natural or legal persons (other than qualified investors as defined in
the Prospectus Regulation), subject to obtaining the prior consent of the underwriters;
or
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in
any other circumstances falling within Article 1(4) of the Prospectus Regulation,
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provided
that no such offer of shares of common stock shall require us or any underwriter to publish a prospectus pursuant to Article 3
of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation.
In
the case of any shares of common stock being offered to a financial intermediary as that term is used in Article 5(1) of the Prospectus
Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares of common
stock acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired
with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares of common stock
to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in
which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For
the purposes of this provision, the expression an “offer of shares of common stock to the public” in relation to any
shares of common stock in any Relevant State means the communication in any form and by means of sufficient information on the
terms of the offer and the shares of common stock to be offered so as to enable an investor to decide to purchase shares of common
stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
France
This
document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers)
in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier)
and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”).
The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This
document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval
in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such
offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés)
acting for their own account, as defined in and in accordance with Articles L.411-2-II-2 and D.411-1 to D.411-3, D. 744-1, D.754-1
and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified
investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles
L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant
to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed
(directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and
L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The
information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been
filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering
of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus
Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly
in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations
and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The
securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the ISA), or
ISA, nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly,
to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection
with this offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability
or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly,
to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected
only in compliance with the Israeli securities laws and regulations.
Italy
The
offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission
(Commissione Nazionale per le Società e la Borsa, “CONSOB” pursuant to the Italian securities legislation and,
accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered
or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree
No. 58”), other than:
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to
Italian qualified investors, as defined in Article 100 of Decree no. 58 by reference
to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no.
1197l”) as amended (“Qualified Investors”); and
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in
other circumstances that are exempt from the rules on public offer pursuant to Article
100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended.
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Any
offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding
placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
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made
by investment firms, banks or financial intermediaries permitted to conduct such activities
in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended),
Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable
laws; and
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in
compliance with all relevant Italian securities, tax and exchange controls and any other
applicable laws.
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Any
subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement
rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure
to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity
transferring the securities for any damages suffered by the investors.
Japan
The
securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law
of Japan (Law No. 25 of 1948), as amended (the “FIEL”) pursuant to an exemption from the registration requirements
applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article
2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold,
directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors.
Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified
Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to
that effect.
New
Zealand
The
shares of common stock offered hereby have not been offered or sold, and will not be offered or sold, directly or indirectly in
New Zealand and no offering materials or advertisements have been or will be distributed in relation to any offer of shares in
New Zealand, in each case other than:
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to
persons whose principal business is the investment of money or who, in the course of
and for the purposes of their business, habitually invest money;
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to
persons who in all the circumstances can properly be regarded as having been selected
otherwise than as members of the public;
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to
persons who are each required to pay a minimum subscription price of at least NZ$500,000
for the shares before the allotment of those shares (disregarding any amounts payable,
or paid, out of money lent by the issuer or any associated person of the issuer); or
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in
other circumstances where there is no contravention of the Securities Act 1978 of New
Zealand (or any statutory modification or reenactment of, or statutory substitution for,
the Securities Act 1978 of New Zealand).
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Portugal
This
document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários)
in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários).
The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese
Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly,
may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances
that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of
securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities
Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any
other person.
Sweden
This
document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority).
Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances
that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980)
om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors”
(as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute
it or the information contained in it to any other person.
Switzerland
The
securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or
on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the
disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure
standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange
or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities
may be publicly distributed or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss
regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised
by, the Swiss Financial Market Supervisory Authority (FINMA). This document is personal to the recipient only and not for general
circulation in Switzerland.
United
Arab Emirates
Neither
this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab
Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from
the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell
the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer
or invitation. We may not render services relating to the securities within the United Arab Emirates, including the receipt of
applications and/or the allotment or redemption of such shares.
No
offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United
Kingdom
The
communication of this prospectus supplement, the accompanying prospectus and any other documents or materials relating to the
issue of the shares of our common stock offered hereby is not being made, and such documents and/or materials have not been approved,
by an authorised person for purposes of Section 21 of the United Kingdom’s Financial Services and Markets Act 2000,
as amended (the “FSMA”). Accordingly, such documents and/or materials are not being distributed to, and must not be
passed on to, the general public in the United Kingdom.
In
the United Kingdom, this prospectus supplement and the accompanying prospectus are being distributed only to, and are directed
only at, persons who: (i) have professional experience in matters relating to investments falling within Article 19(5) of the
Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”); and/or (ii) are
high net worth entities (or persons to whom they may otherwise lawfully be communicated) falling within Article 49(2)(a) to (d)
of the Order (all such persons together being referred to as “relevant persons”). Any person in the United Kingdom
that is not a relevant person should not act or rely on the information included in this prospectus supplement or the accompanying
prospectus or use it as basis for taking any action. In the United Kingdom, any investment or investment activity to which this
prospectus supplement or the accompanying prospectus relates is only available to, and will be engaged in with, relevant persons.
Any
invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the
issue or sale of the shares of our common stock may only be communicated or caused to be communicated in circumstances in which
Section 21(1) of the FSMA does not apply to us.
Anything
done by any person or entity in relation to the shares of our common stock in, from or otherwise involving the United Kingdom
must only be done in compliance with all applicable provisions of the FSMA.
LEGAL
MATTERS
The
validity of the shares of common stock offered hereby will be passed upon for us by Lucosky Brookman LLP, Woodbridge, New Jersey.
Certain legal matters in connection with this offering will be passed upon for the underwriters by Pillsbury Winthrop Shaw Pittman
LLP, New York, New York.
EXPERTS
The
consolidated balance sheets as of March 31, 2020 and the related consolidated statements of operations, stockholders’ equity,
and cash flows included in our Annual Report on Form 10-K for the year ended March 31, 2020 and incorporated herein by reference
have been audited by Marcum LLP, our independent registered public accounting firm. The report therein contains an explanatory
paragraph which describes the conditions that raise substantial doubt about the Company’s ability to continue as a going
concern.
The
consolidated balance sheets as of March 31, 2019 and the related consolidated statements of operations, stockholders’ equity,
and cash flows included in our Annual Report on Form 10-K for the year ended March 31, 2019 and incorporated herein by reference
have been audited by KWCO, PC, our independent registered public accounting firm for the period presented in such consolidated
financial statements..
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus supplement and the accompanying prospectus are part of the registration statement that we have filed with the SEC and
omit certain information contained in the registration statement. We have also filed exhibits with the registration statement
that are excluded from this prospectus supplement and the accompanying prospectus, and you should refer to the applicable exhibit
for a complete description of any statement referring to any contract or other document. We file annual, quarterly and current
reports, proxy statements and other information with the SEC. Such filings are made available on our Internet website, https://www.ammoinc.com,
as soon as reasonably practicable after they are filed with, or furnished to, the SEC. Our website and the information contained
on that site, or connected to that site, are not incorporated into and are not a part of this prospectus supplement or the accompanying
prospectus. The SEC maintains an Internet site, www.sec.gov, which contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, including the Company.
PROSPECTUS
AMMO,
INC.
$150,000,000
Common
Stock
Preferred
Stock
Debt
Securities
Warrants
Rights
Units
We
may offer and sell up to $150 million in the aggregate of the securities identified above from time to time in one or more offerings.
This prospectus provides you with a general description of the securities.
Each
time we offer and sell securities, we will provide a supplement to this prospectus that contains specific information about the
offering and the amounts, prices and terms of the securities. The supplement may also add, update or change information contained
in this prospectus with respect to that offering. You should carefully read this prospectus and the applicable prospectus supplement
before you invest in any of our securities.
We
may offer and sell the securities described in this prospectus and any prospectus supplement to or through one or more underwriters,
dealers and agents, or directly to purchasers, or through a combination of these methods. If any underwriters, dealers or agents
are involved in the sale of any of the securities, their names and any applicable purchase price, fee, commission or discount
arrangement between or among them will be set forth, or will be calculable from the information set forth, in the applicable prospectus
supplement. See the sections of this prospectus entitled “About this Prospectus” and “Plan of Distribution”
for more information. No securities may be sold without delivery of this prospectus and the applicable prospectus supplement describing
the method and terms of the offering of such securities.
INVESTING
IN OUR SECURITIES INVOLVES RISKS. SEE THE “RISK FACTORS” ON PAGE 5 OF THIS PROSPECTUS AND ANY SIMILAR
SECTION CONTAINED IN THE APPLICABLE PROSPECTUS SUPPLEMENT CONCERNING FACTORS YOU SHOULD CONSIDER BEFORE INVESTING IN OUR
SECURITIES.
Our
common stock is listed on The NASDAQ Capital Market under the symbol “POWW”. On February 12, 2021, the last reported
sale price of our common stock on The NASDAQ Capital Market was $9.32 per share.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is February 24, 2021.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the U.S. Securities and Exchange Commission, or the SEC, using
a “shelf” registration process. By using a shelf registration statement, we may sell securities from time to time
and in one or more offerings up to a total dollar amount of $150 million as described in this prospectus. Each time that we offer
and sell securities, we will provide a prospectus supplement to this prospectus that contains specific information about the securities
being offered and sold and the specific terms of that offering. The prospectus supplement may also add, update or change information
contained in this prospectus with respect to that offering. If there is any inconsistency between the information in this prospectus
and the applicable prospectus supplement, you should rely on the prospectus supplement. Before purchasing any securities, you
should carefully read both this prospectus and the applicable prospectus supplement, together with the additional information
described under the heading “Where You Can Find More Information; Incorporation by Reference.”
We
have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We will not make an offer to sell these securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information appearing in this prospectus and the applicable prospectus supplement
to this prospectus is accurate as of the date on its respective cover, and that any information incorporated by reference is accurate
only as of the date of the document incorporated by reference, unless we indicate otherwise. Our business, financial condition,
results of operations and prospects may have changed since those dates.
When
we refer to “Ammo,” “we,” “our,” “us” and the “Company” in this prospectus,
we mean Ammo, Inc., unless otherwise specified. When we refer to “you,” we mean the holders of the applicable series
of securities.
WHERE
YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
Available
Information
We
file reports, proxy statements and other information with the SEC. The SEC maintains a web site that contains reports, proxy and
information statements and other information about issuers, such as us, who file electronically with the SEC. The address of that
website is http://www.sec.gov.
Our
website address is https://www.ammoinc.com. The information on our website, however, is not, and should not be deemed to
be, a part of this prospectus.
This
prospectus and any prospectus supplement are part of a registration statement that we filed with the SEC and do not contain all
of the information in the registration statement. The full registration statement may be obtained from the SEC or us, as provided
below. Forms of the documents establishing the terms of the offered securities are or may be filed as exhibits to the registration
statement. Statements in this prospectus or any prospectus supplement about these documents are summaries and each statement is
qualified in all respects by reference to the document to which it refers. You should refer to the actual documents for a more
complete description of the relevant matters. You may view a copy of the registration statement through the SEC’s website,
as provided above.
Incorporation
by Reference
The
SEC’s rules allow us to “incorporate by reference” information into this prospectus, which means that we can
disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated
by reference is deemed to be part of this prospectus, and subsequent information that we file with the SEC will automatically
update and supersede that information. Any statement contained in a previously filed document incorporated by reference will be
deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus
modifies or replaces that statement.
We
incorporate by reference our documents listed below and any future filings made by us with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act” in this prospectus,
between the date of this prospectus and the termination of the offering of the securities described in this prospectus. We are
not, however, incorporating by reference any documents or portions thereof, whether specifically listed below or filed in the
future, that are not deemed “filed” with the SEC, including any information furnished pursuant to Items 2.02 or 7.01
of Form 8-K or related exhibits furnished pursuant to Item 9.01 of Form 8-K.
This
prospectus and any accompanying prospectus supplement incorporate by reference the documents set forth below that have previously
been filed with the SEC:
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Our
Annual Report on Form 10-K for the year ended March 31, 2020, filed with the SEC on August
19, 2020.
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Our
Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020, September 30, 2020,
and December 31, 2020, filed with the SEC on August 19, 2020, November 13, 2020, and
February 12, 2021, respectively.
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Our
Current Reports on Form 8-K filed with the SEC on April 28, 2020, June 29, 2020, July 2, 2020, September 2, 2020, September 29, 2020, October 28, 2020, November 6, 2020, December 4, 2020, December 17, 2020, January
25, 2021, and February 16, 2021.
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The
description of our common stock contained in our Registration Statement on Form 8-A,
filed with the SEC on November 24, 2020, and any amendment or report filed with the SEC
for the purpose of updating such description.
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All
reports and other documents we subsequently file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this Offering, including all such documents we may file with the SEC after the date of the initial registration
statement and prior to the effectiveness of the registration statement, but excluding any information furnished to, rather than
filed with, the SEC, will also be incorporated by reference into this prospectus and deemed to be part of this prospectus from
the date of the filing of such reports and documents.
You
may request a free copy of any of the documents incorporated by reference in this prospectus (other than exhibits, unless they
are specifically incorporated by reference in the documents) by writing or telephoning us at the following address:
Ammo,
Inc.
7681
East Gray Road
Scottsdale,
Arizona 85260
(480)
947-0001
Exhibits
to the filings will not be sent, however, unless those exhibits have specifically been incorporated by reference in this prospectus
and any accompanying prospectus supplement.
THE
COMPANY
Our
Business
We
are a designer, producer, and marketer of performance-driven, high-quality ammunition and ammunition component products for sale
to a variety of consumers, including sport and recreational shooters, hunters, individuals seeking home or personal protection,
manufacturers, and law enforcement and military agencies. To enhance the strength of our brands and drive product demand, we emphasize
product innovation and technology to improve the performance, quality, and affordability of our products while providing support
to our distribution channel and consumers. We seek to sell products at competitive prices that compete with high-end, custom,
hand-loaded ammunition. Additionally, through our acquisition of Jagemann Stamping Company’s ammunition casing manufacturing
and sales operations (“Jagemann Casings”), we are now able to sell ammunition casings products of various types. We
emphasize an American heritage by using predominantly American-made components and raw materials in our products that are produced,
inspected, and packaged at our facilities in Payson, Arizona and Manitowoc, Wisconsin.
Our
production processes focus on safety, consistency, precision, and cleanliness. Each round is developed for a specific purpose
with a focus on a proper mix of consistency, velocity, accuracy, and recoil. Each round is chamber gauged and inspected with redundant
seven-step quality control processes.
Competition
The
ammunition and ammunition casing industry is dominated by a small number of companies, a number of which are divisions of large
public companies. We compete primarily on the quality, reliability, features, performance, brand awareness, and price of our products.
Our primary competitors include Federal Premium Ammunition, Remington Arms, the Winchester Ammunition division of Olin Corporation,
and various smaller manufacturers and suppliers, including Black-Hills Ammunition, CBC Group, Fiocchi Ammunition, Hornady Manufacturing
Company, PMC, Rio Ammunition, and Wolf.
Our
Growth Strategy
Our
goal is to enhance our position as a designer, producer, and marketer of ammunition products. Key elements of our strategy to
achieve this goal are as follows:
Design,
Produce, and Market Innovative, Distinctive, Performance-Driven, High-Quality Ammunition and Ammunition Components
We
are focused on designing, producing, and marketing innovative, distinctive, performance-driven, high-quality products that appeal
to retailers, manufacturers, and consumers that will enhance our users shooting experiences. Our ongoing research and development
activities; our safe, consistent, precision, and clean production processes; and our multi-faceted marketing programs are critical
to our success.
Continue
to Strengthen Relationships with Channel Partners and Retailers
We
continue to strive to strengthen our relationships with our current distributors, dealers, manufacturers and mass market and specialty
retailers and to attract additional distributors, dealers, retailers. The success of our efforts depends on the innovation, distinctive
features, quality, and performance of our products; the attractiveness of our packaging; the effectiveness of our marketing and
merchandising programs; and the effectiveness of our customer support.
Emphasis
on Customer Satisfaction and Loyalty
We
plan to continue to emphasize customer satisfaction and loyalty by offering innovative, distinctive, high-quality products on
a timely and cost-attractive basis and by offering effective customer service. We regard the features, quality, and performance
of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer
service and support.
Continuously
Improving Operations
We
plan to continue focusing on improving all aspects of our business, including research and development, component sourcing, production
processes, marketing programs, and customer support. We are continuing our efforts to enhance our production by increasing daily
production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability
of our equipment, reduced equipment down times, and increased overall efficiency.
Enhance
Market Share, Brand Recognition, and Customer Loyalty
We
strive to enhance our market share, brand recognition, and customer loyalty. Industry sources estimate that 70 million to 80 million
people in the United States own more than approximately 300 million firearms, creating a large installed base for our ammunition
products. We are focusing on the premium segment of the market through the quality, distinctiveness, and performance of our products;
the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
Pursue
Synergetic Strategic Acquisitions and Relationships
We
intend to pursue strategic acquisitions and develop strategic relationships designed to enable us to expand our technology and
knowhow, expand our product offerings, strengthen and expand our supply chain, enhance our production process, expand our marketing
and distribution, and attract new customers.
Strategic
Acquisitions
Planned
acquisition targets include sector specific technology companies with the objective of augmenting our current capabilities with
feature-rich (third-party) solutions. The acquisition metric includes, but is not limited to, weighing time, effort and approximate
cost to develop certain technologies in-house, versus acquiring or merging with one or more entities that we believe have a proven
record of successfully developing a technology sub-component. Additional criteria include an extended national footprint of available
manpower (predominantly technical and software engineering), and evaluating the potential acquisition target’s customer
base, stage of technology and merger or acquisition cost as compared to market conditions.
Our
History
We
were formed under the name Retrospettiva, Inc. in November 1990 to manufacture and import textile products, including both finished
garments and fabrics, but ceased operations in 2001. We were inactive from 2001 until December 2016. On December 15, 2016, our
then principal stockholders sold their outstanding Common Stock to Fred W. Wagenhals, who is our Chairman of the Board, President,
Chief Executive Officer, and largest stockholder. On the same date, Mr. Wagenhals became the sole officer and director of our
company. As of December 30, 2016, we changed our trading symbol to POWW; we merged into a Delaware corporation, thereby changing
our state of incorporation from California to Delaware; we engaged in a 1-for-25 reverse stock split; and we commenced our current
business as AMMO, Inc.
Our
largest stockholder, Mr. Wagenhals, had organized another company on October 13, 2016, which immediately began to take steps to
commence the ammunition business. We combined with that company in March 2017, resulting in our acquisition of all the shares
of its common stock for 17,285,800 shares of our Common Stock and our succession to its business.
RISK
FACTORS
Investment
in any securities offered pursuant to this prospectus and the applicable prospectus supplement involves risks. You should carefully
consider the risk factors incorporated by reference to our Registration Statement on Form S-1, filed with the SEC on September
15, 2020, as amended, our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q or Current
Reports on Form 8-K we file after the date of this prospectus, and all other information contained or incorporated by reference
into this prospectus, as updated by our subsequent filings under the Exchange Act, and the risk factors and other information
contained in the applicable prospectus supplement before acquiring any of such securities. The occurrence of any of these risks
might cause you to lose all or part of your investment in the offered securities.
SPECIAL
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements that involve risks and uncertainties, principally in the sections entitled “Risk
Factors.” All statements other than statements of historical fact contained in this prospectus, including statements regarding
future events, our future financial performance, business strategy and plans and objectives of management for future operations,
are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,”
“believes,” “can,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “should,”
or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking
statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are
only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk
Factors” or elsewhere in this prospectus, which may cause our or our industry’s actual results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements.
Forward-looking
statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications
of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information
available at the time they are made and/or management’s good faith belief as of that time with respect to future events,
and are subject to risks and uncertainties that could cause actual performance or results to differ materially from what is expressed
in or suggested by the forward-looking statements.
Forward-looking
statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume
no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors
affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more
forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking
statements.
USE
OF PROCEEDS
We
intend to use the net proceeds from the sale of the securities as set forth in the applicable prospectus supplement.
DESCRIPTION
OF CAPITAL STOCK
The
following description of our capital stock is not complete and may not contain all the information you should consider before
investing in our capital stock. This description is summarized from, and qualified in its entirety by reference to, our Certificate
of Incorporation and Bylaws, which have been publicly filed with the SEC. See “Where You Can Find More Information; Incorporation
by Reference.”
Our
authorized capital stock consists of 200,000,000 shares of common stock, par value of $0.001 per share, and 10,000,000 shares
of preferred stock, par value of $0.001 per share. As of February 11, 2021, there were 68,675,629 shares of our common stock issued
and outstanding held by approximately 447 holders of record.
Common
Stock
Each
share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally
by our stockholders. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority
of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to
do so.
Holders
of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion
may declare out of funds legally available for the payment of dividends. We currently do not anticipate paying any cash dividends
on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after
taking into account various factors, including:
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general
business conditions;
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industry
practice;
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our
financial condition and performance;
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our
future prospects;
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our
cash needs and capital investment plans;
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our
obligations to holders of any preferred stock we may issue;
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income
tax consequences; and
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the
restrictions Delaware and other applicable laws and our credit arrangements may impose, from time to time.
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If
we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available
for distribution to our stockholders after our creditors are paid in full and the holders of all series of our outstanding preferred
stock, if any, receive their liquidation preferences in full.
Our
common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase
fund.
Preferred
Stock
The
Company has 10,000,000 authorized shares of preferred stock par value $0.001 per share. As of February 11, 2021, no shares of
preferred stock are outstanding.
Our
Board has the authority, within the limitations and restrictions in our certificate of incorporation, to issue shares of preferred
stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of any series, without further vote or action by the stockholders. The issuance
of shares of preferred stock may have the effect of delaying, deferring or preventing a change in our control without further
action by the stockholders. The issuance of shares of preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of our common stock. In some circumstances, this issuance could have the effect of decreasing the
market price of our common stock.
Undesignated
preferred stock may enable our Board to render more difficult or to discourage an attempt to obtain control of the Company by
means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance
of shares of preferred stock may adversely affect the rights of our common stockholders. For example, any shares of preferred
stock issued may rank senior to the common stock as to dividend rights, liquidation preference or both, may have full or limited
voting rights and may be convertible into shares of common stock. As a result, the issuance of shares of preferred stock, or the
issuance of rights to purchase shares of preferred stock, may discourage an unsolicited acquisition proposal or bids for our common
stock or may otherwise adversely affect the market price of our common stock or any existing preferred stock.
Options
and Warrants
As
of February 11, 2021, there are no outstanding options to purchase our securities.
As
of February 11, 2021, we had 3,885,256 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 288,833
shares of Common Stock at an exercise price of $1.65 per share until April 2025; (2) warrants to purchase 2,016,287 shares of
our Common Stock at an exercise price of $2.00 per share consisting of 56% of the warrants until April 2023, 6% until August 2024,
and 38% until December 2025; (3) warrants to purchase 1,001,921 shares of Common Stock at an exercise price of $2.40 until September
2024; (4) warrants to purchase 428,215 shares of Common Stock at an exercise price of $2.63 per share until November 2025; and
(5) warrants to purchase 150,000 shares of Common Stock at an exercise price of $6.72 per share until February 2024.
Delaware
Anti-takeover Law
We
are subject to Section 203 of Delaware Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation
from engaging in a “business combination” with an “interested stockholder” for a period of three years
following the date the person became an interested stockholder, unless:
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the
board of directors approves the transaction in which the stockholder became an interested stockholder prior to the date the
interested stockholder attained that status;
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when
the stockholder became an interested stockholder, he or she owned at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced, excluding shares owned by persons who are directors and also officers and certain shares
owned by employee benefits plans; or
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on
or subsequent to the date the business combination is approved by the board of directors, the business combination is authorized
by the affirmative vote of at least 66 2/3% of the voting stock of the corporation at an annual or special meeting of stockholders.
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Generally,
a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit
to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and
associates, owns, or is an affiliate or associate of the corporation and within three years prior to the determination of interested
stockholder status did own, 15% or more of a corporation’s voting stock.
The
existence of Section 203 of Delaware Law would be expected to have an anti-takeover effect with respect to transactions not approved
in advance by our board of directors, including discouraging attempts that might result in a premium over the market price for
the shares of our common stock.
The
NASDAQ Capital Market Listing
Our
common stock is listed on the NASDAQ Capital Market under the symbol “POWW”.
Transfer
Agent
The
transfer agent and registrar for our common stock is Action Stock Transfer Corporation (“AST”). The principal office
of AST is located at 2469 E. Fort Union Blvd, Suite 214, Salt Lake City, UT 84121, and its telephone number is (801) 274-1088.
DESCRIPTION
OF DEBT SECURITIES
General
The
debt securities that we may offer by this prospectus consist of notes, debentures, or other evidences of indebtedness. The debt
securities may constitute either senior or subordinated debt securities, and in either case may be either secured or unsecured.
Any debt securities that we offer and sell will be our direct obligations. Debt securities may be issued in one or more series.
All debt securities of any one series need not be issued at the same time, and unless otherwise provided, a series of debt securities
may be reopened, with the required consent of the holders of outstanding debt securities, for issuance of additional debt securities
of that series or to establish additional terms of that series of debt securities (with such additional terms applicable only
to unissued or additional debt securities of that series). The form of indenture has been filed as an exhibit to the registration
statement of which this prospectus is a part and is subject to any amendments or supplements that we may enter into with the trustee(s),
however, we may issue debt securities not subject to the indenture provided such terms of debt securities are not otherwise required
to be set forth in the indenture. The material terms of the indenture are summarized below and we refer you to the indenture for
a detailed description of these material terms. Additional or different provisions that are applicable to a particular series
of debt securities will, if material, be described in a prospectus supplement relating to the offering of debt securities of that
series. These provisions may include, among other things and to the extent applicable, the following:
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the
title of the debt securities, including, as applicable, whether the debt securities will be issued as senior debt securities,
senior subordinated debt securities or subordinated debt securities, any subordination provisions particular to the series
of debt securities;
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any
limit on the aggregate principal amount of the debt securities;
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whether
the debt securities are senior debt securities or subordinated debt securities and applicable subordination provisions, if
any;
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whether
the debt securities will be secured or unsecured;
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if
other than 100% of the aggregate principal amount, the percentage of the aggregate principal amount at which we will sell
the debt securities, such as an original issuance discount;
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the
date or dates, whether fixed or extendable, on which the principal of the debt securities will be payable;
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the
rate or rates, which may be fixed or variable, at which the debt securities will bear interest, if any, the date or dates
from which any such interest will accrue, the interest payment dates on which we will pay any such interest, the basis upon
which interest will be calculated if other than that of a 360-day year consisting of twelve 30-day months, and, in the case
of registered securities, the record dates for the determination of holders to whom interest is payable;
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the
place or places where the principal of and any premium or interest on the debt securities will be payable and where the debt
securities may be surrendered for conversion or exchange;
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whether
we may, at our option, redeem the debt securities, and if so, the price or prices at which, the period or periods within which,
and the terms and conditions upon which, we may redeem the debt securities, in whole or in part, pursuant to any sinking fund
or otherwise;
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if
other than 100% of the aggregate principal amount thereof, the portion of the principal amount of the debt securities which
will be payable upon declaration of acceleration of the maturity date thereof or provable in bankruptcy, or, if applicable,
which is convertible or exchangeable;
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any
obligation we may have to redeem, purchase or repay the debt securities pursuant to any sinking fund or analogous provisions
or at the option of a holder of debt securities, and the price or prices at which, the currency in which and the period or
periods within which, and the terms and conditions upon which, the debt securities will be redeemed, purchased or repaid,
in whole or in part, pursuant to any such obligation, and any provision for the remarketing of the debt securities;
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the
issuance of debt securities as registered securities or unregistered securities or both, and the rights of the holders of
the debt securities to exchange unregistered securities for registered securities, or vice versa, and the circumstances under
which any such exchanges, if permitted, may be made;
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the
denominations, which may be in United States Dollars or in any foreign currency, in which the debt securities will be issued,
if other than denominations of $1,000 and any integral multiple thereof;
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whether
the debt securities will be issued in the form of certificated debt securities, and if so, the form of the debt securities
(or forms thereof if unregistered and registered securities are issuable in that series), including the legends required by
law or as we deem necessary or appropriate, the form of any coupons or temporary global security which may be issued and the
forms of any other certificates which may be required under the indenture or which we may require in connection with the offering,
sale, delivery or exchange of the debt securities;
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if
other than United States Dollars, the currency or currencies in which payments of principal, interest and other amounts payable
with respect to the debt securities will be denominated, payable, redeemable or repurchasable, as the case may be;
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whether
the debt securities may be issuable in tranches;
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the
obligations, if any, we may have to permit the conversion or exchange of the debt securities into common stock, preferred
stock or other capital stock or property, or a combination thereof, and the terms and conditions upon which such conversion
or exchange will be effected (including conversion price or exchange ratio), and any limitations on the ownership or transferability
of the securities or property into which the debt securities may be converted or exchanged;
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if
other than the trustee under the indenture, any trustees, authenticating or paying agents, transfer agents or registrars or
any other agents with respect to the debt securities;
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any
deletions from, modifications of or additions to the events of default with respect to the debt securities or the right of
the Trustee or the holders of the debt securities in connection with events of default;
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any
deletions from, modifications of or additions to the covenants with respect to the debt securities;
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if
the amount of payments of principal of, and make-whole amount, if any, and interest on the debt securities may be determined
with reference to an index, the manner in which such amount will be determined;
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whether
the debt securities will be issued in whole or in part in the global form of one or more debt securities and, if so, the depositary
for such debt securities, the circumstances under which any such debt security may be exchanged for debt securities registered
in the name of, and under which any transfer of debt securities may be registered in the name of, any person other than such
depositary or its nominee, and any other provisions regarding such debt securities;
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whether,
under what circumstances and the currency in which, we will pay additional amounts on the debt securities to any holder of
the debt securities who is not a United States person in respect of any tax, assessment or governmental charge and, if so,
whether we will have the option to redeem such debt securities rather than pay such additional amounts, and the terms of any
such option;
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whether
the debt securities will be secured by any collateral and, if so, a general description of the collateral and the terms of
any related security, pledge or other agreements;
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the
persons to whom any interest on the debt securities will be payable, if other than the registered holders thereof on the regular
record date therefor; and
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any
other material terms or conditions upon which the debt securities will be issued.
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Unless
otherwise indicated in the applicable prospectus supplement, we will issue debt securities in fully registered form without coupons
and in denominations of $1,000 and in integral multiples of $1,000, and interest will be computed on the basis of a 360-day year
of twelve 30-day months. If any interest payment date or the maturity date falls on a day that is not a business day, then the
payment will be made on the next business day without additional interest and with the same effect as if it were made on the originally
scheduled date. “Business day” means any calendar day that is not a Saturday, Sunday or legal holiday in New York,
New York, and on which the trustee and commercial banks are open for business in New York, New York.
Unless
we inform you otherwise in a prospectus supplement, each series of our senior debt securities will rank equally in right of payment
with all of our other unsubordinated debt. The subordinated debt securities will rank junior in right of payment and be subordinate
to all of our unsubordinated debt.
Unless
otherwise indicated in the applicable prospectus supplement, the trustee will act as paying agent and registrar for the debt securities
under the indenture. We may act as paying agent under the indenture.
The
prospectus supplement will contain a description of United States federal income tax consequences relating to the debt securities,
to the extent applicable.
Covenants
The
applicable prospectus supplement will describe any covenants, such as restrictive covenants restricting us or our subsidiaries,
if any, from incurring, issuing, assuming or guarantying any indebtedness or restricting us or our subsidiaries, if any, from
paying dividends or acquiring any of our or its capital stock.
Consolidation,
Merger and Transfer of Assets
The
indenture permits a consolidation or merger between us and another entity and/or the sale, conveyance or lease by us of all or
substantially all of our property and assets, provided that:
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the
resulting or acquiring entity, if other than us, is organized and existing under the laws of a United States jurisdiction
and assumes all of our responsibilities and liabilities under the indenture, including the payment of all amounts due on the
debt securities and performance of the covenants in the indenture;
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immediately
after the transaction, and giving effect to the transaction, no event of default under the indenture exists; and
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we
have delivered to the trustee an officers’ certificate stating that the transaction and, if a supplemental indenture
is required in connection with the transaction, the supplemental indenture comply with the indenture and that all conditions
precedent to the transaction contained in the indenture have been satisfied.
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If
we consolidate or merge with or into any other entity, or sell or lease all or substantially all of our assets in compliance with
the terms and conditions of the indenture, the resulting or acquiring entity will be substituted for us in the indenture and the
debt securities with the same effect as if it had been an original party to the indenture and the debt securities. As a result,
such successor entity may exercise our rights and powers under the indenture and the debt securities, in our name and, except
in the case of a lease, we will be released from all our liabilities and obligations under the indenture and under the debt securities.
Notwithstanding
the foregoing, we may transfer all of our property and assets to another entity if, immediately after giving effect to the transfer,
such entity is our wholly owned subsidiary. The term “wholly owned subsidiary” means any subsidiary in which we and/or
our other wholly owned subsidiaries, if any, own all of the outstanding capital stock.
Modification
and Waiver
Under
the indenture, some of our rights and obligations and some of the rights of the holders of the debt securities may be modified
or amended with the consent of the holders of not less than a majority in aggregate principal amount of the outstanding debt securities
affected by the modification or amendment. However, the following modifications and amendments will not be effective against any
holder without its consent:
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a
change in the stated maturity date of any payment of principal or interest;
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a
reduction in the principal amount of or interest on any debt securities;
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an
alteration or impairment of any right to convert at the rate or upon the terms provided in the indenture;
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a
change in the currency in which any payment on the debt securities is payable;
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an
impairment of a holder’s right to sue us for the enforcement of payments due on the debt securities; or
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a
reduction in the percentage of outstanding debt securities required to consent to a modification or amendment of the indenture
or required to consent to a waiver of compliance with certain provisions of the indenture or certain defaults under the indenture.
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Under
the indenture, the holders of not less than a majority in aggregate principal amount of the outstanding debt securities may, on
behalf of all holders of the debt securities:
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waive
compliance by us with certain restrictive provisions of the indenture; and
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waive
any past default under the indenture in accordance with the applicable provisions of the indenture, except a default in the
payment of the principal of or interest on any series of debt securities.
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Events
of Default
Unless
we indicate otherwise in the applicable prospectus supplement, “event of default” under the indenture will mean, with
respect to any series of debt securities, any of the following:
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failure
to pay interest on any debt security for 30 days after the payment is due;
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failure
to pay the principal of any debt security when due, either at maturity, upon redemption, by declaration or otherwise;
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failure
on our part to observe or perform any other covenant or agreement in the indenture that applies to the debt securities for
90 days after we have received written notice of the failure to perform in the manner specified in the indenture; and
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certain
events of bankruptcy, insolvency or reorganization.
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Remedies
Upon an Event of Default
If
an event of default occurs and continues, the trustee or the holders of not less than 25% in aggregate principal amount of the
outstanding debt securities of such series may declare the entire principal of all the debt securities to be due and payable immediately,
except that, if the event of default is caused by certain events in bankruptcy, insolvency or reorganization, the entire principal
of all of the debt securities of such series will become due and payable immediately without any act on the part of the trustee
or holders of the debt securities. If such a declaration occurs, the holders of a majority of the aggregate principal amount of
the outstanding debt securities of such series can, subject to conditions, rescind the declaration.
The
indenture requires us to furnish to the trustee not less often than annually, a certificate from our principal executive officer,
principal financial officer or principal accounting officer, as the case may be, as to such officer’s knowledge of our compliance
with all conditions and covenants under the indenture. The trustee may withhold notice to the holders of debt securities of any
default, except defaults in the payment of principal of or interest on any debt securities if the trustee in good faith determines
that the withholding of notice is in the best interests of the holders. For purposes of this paragraph, “default”
means any event which is, or after notice or lapse of time or both would become, an event of default under the indenture.
The
trustee is not obligated to exercise any of its rights or powers under the indenture at the request, order or direction of any
holders of debt securities, unless the holders offer the trustee satisfactory security or indemnity. If satisfactory security
or indemnity is provided, then, subject to other rights of the trustee, the holders of a majority in aggregate principal amount
of the outstanding debt securities may direct the time, method and place of:
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conducting
any proceeding for any remedy available to the trustee; or
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exercising
any trust or power conferred upon the trustee.
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The
holder of a debt security will have the right to begin any proceeding with respect to the indenture or for any remedy only if:
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the
holder has previously given the trustee written notice of a continuing event of default;
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the
holders of not less than a majority in aggregate principal amount of the outstanding debt securities have made a written request
of, and offered reasonable indemnity to, the trustee to begin such proceeding;
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the
trustee has not started such proceeding within 60 days after receiving the request; and
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no
direction inconsistent with such written request has been given to the trustee under the indenture.
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However,
the holder of any debt security will have an absolute right to receive payment of principal of and interest on the debt security
when due and to institute suit to enforce this payment.
Satisfaction
and Discharge; Defeasance
Satisfaction
and Discharge of Indenture. Unless otherwise indicated in the applicable prospectus supplement, if at any time,
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we
have paid the principal of and interest on all the debt securities of any series, except for debt securities which have been
destroyed, lost or stolen and which have been replaced or paid in accordance with the indenture, as and when the same shall
have become due and payable, or
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we
have delivered to the trustee for cancellation all debt securities of any series theretofore authenticated, except for debt
securities of such series which have been destroyed, lost or stolen and which have been replaced or paid as provided in the
indenture, or
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all
the debt securities of such series not theretofore delivered to the trustee for cancellation have become due and payable,
or are by their terms are to become due and payable within one year or are to be called for redemption within one year, and
we have deposited with the trustee, in trust, sufficient money or government obligations, or a combination thereof, to pay
the principal, any interest and any other sums due on the debt securities, on the dates the payments are due or become due
under the indenture and the terms of the debt securities,
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then
the indenture shall cease to be of further effect with respect to the debt securities of such series, except for:
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rights
of registration of transfer and exchange, and our right of optional redemption;
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substitution
of mutilated, defaced, destroyed, lost or stolen debt securities;
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rights
of holders to receive payments of principal thereof and interest thereon upon the original stated due dates therefor (but
not upon acceleration) and remaining rights of the holders to receive mandatory sinking fund payments, if any;
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the
rights, obligations and immunities of the trustee under the indenture; and
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the
rights of the holders of such series of debt securities as beneficiaries thereof with respect to the property so deposited
with the trustee payable to all or any of them.
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Defeasance
and Covenant Defeasance. Unless otherwise indicated in the applicable prospectus supplement, we may elect with respect to
any debt securities of any series either:
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to
defease and be discharged from all of our obligations with respect to such debt securities (“defeasance”), with
certain exceptions described below; or
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to
be released from our obligations with respect to such debt securities under such covenants as may be specified in the applicable
prospectus supplement, and any omission to comply with those obligations will not constitute a default or an event of default
with respect to such debt securities (“covenant defeasance”).
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We
must comply with the following conditions before the defeasance or covenant defeasance can be effected:
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we
must irrevocably deposit with the indenture trustee or other qualifying trustee, under the terms of an irrevocable trust agreement
in form and substance satisfactory to the trustee, trust funds in trust solely for the benefit of the holders of such debt
securities, sufficient money or government obligations, or a combination thereof, to pay the principal, any interest and any
other sums on the due dates for those payments; and
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we
must deliver to the trustee an opinion of counsel to the effect that the holders of such debt securities will not recognize
income, gain or loss for federal income tax purposes as a result of defeasance or covenant defeasance, as the case may be,
to be effected with respect to such debt securities and will be subject to federal income tax on the same amount, in the same
manner and at the same times as would be the case if such defeasance or covenant defeasance, as the case may be, had not occurred.
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In
connection with defeasance, any irrevocable trust agreement contemplated by the indenture must include, among other things, provision
for:
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payment
of the principal of and interest on such debt securities, if any, appertaining thereto when due (by redemption, sinking fund
payments or otherwise),
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the
payment of the expenses of the trustee incurred or to be incurred in connection with carrying out such trust provisions,
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rights
of registration, transfer, substitution and exchange of such debt securities in accordance with the terms stated in the indenture,
and
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continuation
of the rights, obligations and immunities of the trustee as against the holders of such debt securities as stated in the indenture.
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The
accompanying prospectus supplement may further describe any provisions permitting or restricting defeasance or covenant defeasance
with respect to the debt securities of a particular series.
Global
Securities
Unless
otherwise indicated in the applicable prospectus supplement, each debt security offered by this prospectus will be issued in the
form of one or more global debt securities representing all or part of that series of debt securities. This means that we will
not issue certificates for that series of debt securities to the holders. Instead, a global debt security representing that series
will be deposited with, or on behalf of, a securities depositary and registered in the name of the depositary or a nominee of
the depositary. Any such depositary must be a clearing agency registered under the Exchange Act. We will describe the specific
terms of the depositary arrangement with respect to a series of debt securities to be represented by a global security in the
applicable prospectus supplement.
Notices
We
will give notices to holders of the debt securities by mail at the addresses listed in the security register. In the case of notice
in respect of unregistered securities or coupon securities, we may give notice by publication in a newspaper of general circulation
in New York, New York.
Governing
Law
The
particular terms of a series of debt securities will be described in a prospectus supplement relating to such series of debt securities.
Any indentures will be subject to and governed by the Trust Indenture Act of 1939, as amended, and may be supplemented or amended
from time to time following their execution. Unless otherwise stated in the applicable prospectus supplement, we will not be limited
in the amount of debt securities that we may issue, and neither the senior debt securities nor the subordinated debt securities
will be secured by any of our property or assets. Thus, by owning debt securities, you are one of our unsecured creditors.
Regarding
the Trustee
From
time to time, we may maintain deposit accounts and conduct other banking transactions with the trustee to be appointed under the
indenture or its affiliates in the ordinary course of business.
DESCRIPTION
OF WARRANTS
We
may offer to sell warrants from time to time. If we do so, we will describe the specific terms of the warrants in a prospectus
supplement. In particular, we may issue warrants for the purchase of common stock, preferred stock and/or debt securities in one
or more series. We may also issue warrants independently or together with other securities and the warrants may be attached to
or separate from those securities.
We
will evidence each series of warrants by warrant certificates that we will issue under a separate agreement. We will enter into
the warrant agreement with a warrant agent. We will indicate the name and address of the warrant agent in the applicable prospectus
supplement relating to a particular series of warrants.
We
will describe in the applicable prospectus supplement the terms of the series of warrants, including:
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the
offering price and aggregate number of warrants offered;
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the
currency for which the warrants may be purchased;
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if
applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued
with each such security or each principal amount of such security;
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if
applicable, the date on and after which the warrants and the related securities will be separately transferable;
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in
the case of warrants to purchase debt securities, the principal amount of debt securities purchasable upon exercise of one
warrant and the price at, and currency in which, this principal amount of debt securities may be purchased upon such exercise;
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in
the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock,
as the case may be, purchasable upon the exercise of one warrant and the price at which these shares may be purchased upon
such exercise;
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the
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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the
terms of any rights to redeem or call the warrants;
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any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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the
dates on which the right to exercise the warrants will commence and expire;
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the
manner in which the warrant agreement and warrants may be modified;
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certain
United States federal income tax consequences of holding or exercising the warrants;
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the
terms of the securities issuable upon exercise of the warrants; and
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any
other specific material terms, preferences, rights or limitations of or restrictions on the warrants.
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Holders
may exercise the warrants by delivering the warrant certificate representing the warrants to be exercised together with other
requested information, and paying the required amount to the warrant agent in immediately available funds, as provided in the
applicable prospectus supplement. We will set forth in the applicable prospectus supplement the information that the holder of
the warrant will be required to deliver to the warrant agent.
Upon
receipt of the required payment and the warrant certificate properly completed and duly executed at the office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If a holder exercises fewer than all of the warrants represented by the warrant certificate, then we will
issue a new warrant certificate for the remaining amount of warrants.
Holder
will not have any of the rights of the holders of the securities purchasable upon the exercise of warrants until you exercise
them. Accordingly, holder will not be entitled to, among other things, vote or receive dividend payments or similar distributions
on the securities you can purchase upon exercise of the warrants.
The
information provided above is only a summary of the terms under which we may offer warrants for sale. Accordingly, investors must
carefully review the applicable warrant agreement for more information about the specific terms and conditions of these warrants
before investing in us. In addition, please carefully review the information provided in the applicable prospectus supplement,
which contains additional information that is important for you to consider in evaluating an investment in our securities.
DESCRIPTION
OF RIGHTS
We
may issue rights to our stockholders to purchase shares of our common stock or preferred stock described in this prospectus. We
may offer rights separately or together with one or more additional rights, preferred stock, common stock, warrants or any combination
of those securities in the form of units, as described in the applicable prospectus supplement. Each series of rights will be
issued under a separate rights agreement to be entered into between us and a bank or trust company, as rights agent. The rights
agent for any rights we offer will be set forth in the applicable prospectus supplement. The rights agent will act solely as our
agent in connection with the certificates relating to the rights of the series of certificates and will not assume any obligation
or relationship of agency or trust for or with any holders of rights certificates or beneficial owners of rights. The following
description sets forth certain general terms and provisions of the rights to which any prospectus supplement may relate. The particular
terms of the rights to which any prospectus supplement may relate and the extent, if any, to which the general provisions may
apply to the rights so offered will be described in the applicable prospectus supplement. To the extent that any particular terms
of the rights, rights agreement or rights certificates described in a prospectus supplement differ from any of the terms described
below, then the terms described below will be deemed to have been superseded by that prospectus supplement. We encourage you to
read the applicable rights agreement and rights certificate for additional information before you decide whether to purchase any
of our rights.
The
prospectus supplement relating to any rights that we offer will include specific terms relating to the offering, including, among
other matters:
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the
date of determining the stockholders entitled to the rights distribution;
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the
aggregate number of shares of common stock, preferred stock or other securities purchasable upon exercise of the rights;
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the
exercise price;
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the
aggregate number of rights issued;
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whether
the rights are transferrable and the date, if any, on and after which the rights may be separately transferred;
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the
date on which the right to exercise the rights will commence, and the date on which the right to exercise the rights will
expire;
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the
method by which holders of rights will be entitled to exercise;
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the
conditions to the completion of the offering;
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the
withdrawal, termination and cancellation rights;
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whether
there are any backstop or standby purchaser or purchasers and the terms of their commitment;
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whether
stockholders are entitled to oversubscription right;
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any
U.S. federal income tax considerations; and
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any
other terms of the rights, including terms, procedures and limitations relating to the distribution, exchange and exercise
of the rights.
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If
less than all of the rights issued in any rights offering are exercised, we may offer any unsubscribed securities directly to
persons other than stockholders, to or through agents, underwriters or dealers or through a combination of such methods, including
pursuant to standby arrangements, as described in the applicable prospectus supplement. In connection with any rights offering,
we may enter into a standby underwriting or other arrangement with one or more underwriters or other persons pursuant to which
such underwriters or other persons would purchase any offered securities remaining unsubscribed for after such rights offering.
DESCRIPTION
OF UNITS
We
may issue units consisting of any combination of the other types of securities offered under this prospectus in one or more series.
We may evidence each series of units by unit certificates that we will issue under a separate agreement. We may enter into unit
agreements with a unit agent. We will indicate the name and address of the unit agent in the applicable prospectus supplement
relating to a particular series of units.
The
following description, together with the additional information included in any applicable prospectus supplement, summarizes the
general features of the units that we may offer under this prospectus. You should read any prospectus supplement and any free
writing prospectus that we may authorize to be provided to you related to the series of units being offered, as well as the complete
unit agreements that contain the terms of the units. Specific unit agreements will contain additional important terms and provisions
and we will file as an exhibit to the registration statement of which this prospectus is a part, or will incorporate by reference
from another report that we file with the SEC, the form of each unit agreement relating to units offered under this prospectus.
If
we offer any units, certain terms of that series of units will be described in the applicable prospectus supplement, including,
without limitation, the following, as applicable:
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the
title of the series of units;
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identification
and description of the separate constituent securities comprising the units;
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the
price or prices at which the units will be issued;
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the
date, if any, on and after which the constituent securities comprising the units will be separately transferable;
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a
discussion of certain United States federal income tax considerations applicable to the units; and
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any
other terms of the units and their constituent securities.
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PLAN
OF DISTRIBUTION
We
may sell the securities from time to time pursuant to underwritten public offerings, negotiated transactions, block trades or
a combination of these methods or through underwriters or dealers, through agents and/or directly to one or more purchasers. The
securities may be distributed from time to time in one or more transactions:
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at
a fixed price or prices, which may be changed;
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at
market prices prevailing at the time of sale;
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at
prices related to such prevailing market prices; or
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at
negotiated prices.
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Each
time that we sell securities covered by this prospectus, we will provide a prospectus supplement or supplements that will describe
the method of distribution and set forth the terms and conditions of the offering of such securities, including the offering price
of the securities and the proceeds to us, if applicable.
Offers
to purchase the securities being offered by this prospectus may be solicited directly. Agents may also be designated to solicit
offers to purchase the securities from time to time. Any agent involved in the offer or sale of our securities will be identified
in a prospectus supplement.
If
a dealer is utilized in the sale of the securities being offered by this prospectus, the securities will be sold to the dealer,
as principal. The dealer may then resell the securities to the public at varying prices to be determined by the dealer at the
time of resale.
If
an underwriter is utilized in the sale of the securities being offered by this prospectus, an underwriting agreement will be executed
with the underwriter at the time of sale and the name of any underwriter will be provided in the prospectus supplement that the
underwriter will use to make resales of the securities to the public. In connection with the sale of the securities, we or the
purchasers of securities for whom the underwriter may act as agent, may compensate the underwriter in the form of underwriting
discounts or commissions. The underwriter may sell the securities to or through dealers, and those dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers for which they
may act as agent. Unless otherwise indicated in a prospectus supplement, an agent will be acting on a best efforts basis and a
dealer will purchase securities as a principal, and may then resell the securities at varying prices to be determined by the dealer.
Any
compensation paid to underwriters, dealers or agents in connection with the offering of the securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers will be provided in the applicable prospectus supplement. Underwriters,
dealers and agents participating in the distribution of the securities may be deemed to be underwriters within the meaning of
the Securities Act of 1933, as amended, and any discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and commissions. We may enter into agreements to indemnify
underwriters, dealers and agents against civil liabilities, including liabilities under the Securities Act, or to contribute to
payments they may be required to make in respect thereof and to reimburse those persons for certain expenses.
Any
common stock will be listed on the Nasdaq Capital Market, but any other securities may or may not be listed on a national securities
exchange. To facilitate the offering of securities, certain persons participating in the offering may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities. This may include over-allotments or short sales of the securities,
which involve the sale by persons participating in the offering of more securities than were sold to them. In these circumstances,
these persons would cover such over-allotments or short positions by making purchases in the open market or by exercising their
over-allotment option, if any. In addition, these persons may stabilize or maintain the price of the securities by bidding for
or purchasing securities in the open market or by imposing penalty bids, whereby selling concessions allowed to dealers participating
in the offering may be reclaimed if securities sold by them are repurchased in connection with stabilization transactions.
The
effect of these transactions may be to stabilize or maintain the market price of the securities at a level above that which might
otherwise prevail in the open market. These transactions may be discontinued at any time.
We
may engage in at the market offerings into an existing trading market in accordance with Rule 415(a)(4) under the Securities Act.
In
addition, we may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third
parties in privately negotiated transactions. If the applicable prospectus supplement so indicates, in connection with those derivatives,
the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short
sale transactions. If so, the third party may use securities pledged by us or borrowed from us or others to settle those sales
or to close out any related open borrowings of stock, and may use securities received from us in settlement of those derivatives
to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and, if not
identified in this prospectus, will be named in the applicable prospectus supplement (or a post-effective amendment). In addition,
we may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities
short using this prospectus and an applicable prospectus supplement. Such financial institution or other third party may transfer
its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
We
do not make any representation or prediction as to the direction or magnitude of any effect that the transactions described above
might have on the price of the securities. In addition, we do not make any representation that underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued without notice.
The
specific terms of any lock-up provisions in respect of any given offering will be described in the applicable prospectus supplement.
To
comply with applicable state securities laws, the securities offered by this prospectus will be sold, if necessary, in such jurisdictions
only through registered or licensed brokers or dealers. In addition, securities may not be sold in some states unless they have
been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement
is available and is complied with.
The
underwriters, dealers and agents may engage in transactions with us, or perform services for us, in the ordinary course of business
for which they receive compensation.
LEGAL
MATTERS
Lucosky
Brookman LLP will pass upon certain legal matters relating to the issuance and sale of the securities offered hereby on behalf
of Ammo, Inc. Additional legal matters may be passed upon for us or any underwriters, dealers or agents, by counsel that we will
name in the applicable prospectus supplement.
EXPERTS
The
consolidated balance sheet as of March 31, 2020 and the related consolidated statements of operations, stockholders’ equity,
and cash flows included in this prospectus and in the registration statement have been so included in reliance on the reports
of Marcum LLP, independent registered public accounting firms, included herein, given on the authority of said firm as experts
in accounting and auditing. The report thereon contains an explanatory paragraph which describe the conditions that raise substantial
doubt about the Company’s ability to continue as a going concern and are contained in Note 2 to the consolidated financial
statements.
The
consolidated balance sheets as of March 31, 2019 and the related consolidated statements of operations, stockholders’ equity,
and cash flows included in this prospectus and in the registration statement have been so included in reliance on the reports
of KWCO, PC, independent registered public accounting firms, included herein, given on the authority of said firm as experts in
accounting and auditing.
Shares
AMMO,
INC.
Common
Stock
PRELIMINARY
PROSPECTUS SUPPLEMENT
Joint
Book-Running Managers
Roth
Capital Partners
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Alexander
Capital L.P.
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March , 2021
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