ACQUISITION

9 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

ACQUISITION

NOTE 12 - ACQUISITION

Gemini Direct Investments, LLC

On April 30, 2021 (the “Effective Date”) we entered into an agreement and plan of merger (the “Merger Agreement”), by and among the Company, SpeedLight Group I, LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company (“Sub”), Gemini Direct Investments, LLC, a Nevada limited liability company (“Gemini”), and Steven F. Urvan, an individual (the “Seller”), whereby Sub merged with and into Gemini, with Sub surviving the merger as a wholly owned subsidiary of the Company (the “Merger”). At the time of the Merger, Gemini had nine (9) subsidiaries, all of which are related to Gemini’s ownership of the Gunbroker.com business. Gunbroker.com is an on-line auction marketplace dedicated to firearms, hunting, shooting, and related products. The Merger was completed on the Effective Date.

In consideration of the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, on the Effective Date, (i) the Company assumed and repaid an aggregate amount of indebtedness of Gemini and its subsidiaries equal to $50,000,000 (the “Assumed Indebtedness”); and, (ii) the issued and outstanding membership interests in Gemini (the “Membership Interests”), held by the Seller, automatically converted into the right to receive (A) $50,000,000 (the “Cash Consideration”), and (B) 20,000,000 shares of common stock of the Company, $0.001 par value per share (the “Stock Consideration”).

In connection with the Merger Agreement, the Company and the Seller agreed that the Stock Consideration consisted of: (a) 14,500,000 shares issued without being held in escrow or requiring prior stockholder approval; (b) 4,000,000 shares issued subject to the Pledge and Escrow Agreement; and (c) 1,500,000 shares that will not be issued prior to the Company obtaining stockholder approval for the issuance (the “Additional Securities”).

The total estimated consideration consisted of cash payment of $50,000,000 less $1,350,046 of acquired cash, a working capital adjustment of $2,000,000, debt assumption and repayment upon closing of $50,000,000, contingent consideration of $10,755,000 for 1,500,000 Additional Securities, and 18,500,000 shares of AMMO Inc. Common Stock. The shares were valued at $7.17 per share, the five-day average closing price of the Company’s Common Stock immediately preceding the signing of the binding agreement.

Pursuant to the Merger Agreement, the Company completed a Post-Closing Adjustment following the close of the Merger equal to the Closing Working Capital minus the Estimated Working Capital at closing of the Merger. Accordingly, the Company received a cash payment of $129,114 and adjusted the $2,000,000 Estimated Working Capital Adjustment in the fair value of the consideration transferred to $1,870,886.

In accordance with the acquisition method of accounting for business combinations, the assets acquired, and the liabilities assumed have been recorded at their respective fair values. The consideration in excess of the fair values of assets acquired, and liabilities assumed are recorded as goodwill.

The preliminary fair value of the consideration transferred was valued as of the date of the acquisition as follows:

Cash	$	48,649,954
Estimated working capital adjustment		1,870,886
Contingent consideration		10,755,000
Common stock		132,645,000
Assumed debt		50,000,000
	$	243,920,840

The preliminary allocation for the consideration recorded for the acquisition is as follows:

Accounts receivable, net	$	17,002,362
Prepaid expenses		478,963
Equipment		1,051,980
Deposits		703,389
Other Intangible assets(1)		146,617,380
Goodwill(1)		90,870,094
Right of use assets - operating leases		612,727
Accounts payable		(12,514,919	)
Accrued expenses		(196,780	)
Operating lease liability		(704,356	)
Total Consideration	$	243,920,840

⁽¹⁾ Preliminary estimate of Other Intangible Assets and Goodwill. Other intangible assets consist of Tradenames, Customer Relationships, Intellectual Property, and other tangible assets related to the acquired business.

AMMO, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We recorded approximately $1.3 million in transaction costs in the three and nine months ended December 31, 2021.

The purchase price allocation is preliminary. The preliminary estimated fair value recorded for the acquired assets and liabilities assumed with excess consideration recorded as goodwill represent management’s estimate of fair value and are subject to change when additional information may become available. The purchase price allocation will continue to be preliminary until the Company is able to finalize the allocation. The Company expects to finalize the purchase price allocation within the measurement period, but not more than one year following the closing date of the Merger. The final amounts from the valuation may significantly and materially differ from the preliminary allocation herein.

Unaudited Pro Forma Results of Operations

These pro forma results of operations gives effect to the acquisition as if it had occurred on April 1, 2021. Material pro forma adjustments include the removal of approximately $1.8 million of interest expenses and debt discount amortization and the addition of approximately $0.9 million of depreciation and amortization expenses.

INCOME STATEMENT DATA	For the Nine Months Ended December 31, 2021
Net revenues	$	178,213,024
Net income	$	37,266,527