8-K: AMMO, Inc. Faces Nasdaq Delisting Threat Due to Delayed Quarterly Report and Financial Restatements

AMMO, Inc. received a deficiency notification from Nasdaq due to the delayed filing of its Q4 2024 report and is working on a plan to regain compliance, while also restating several years of past financial statements.

Summary

• AMMO, Inc. received a notification from Nasdaq for failing to timely file its Quarterly Report on Form 10-Q for the quarter ended December 31, 2024.
• The delay is due to the need to restate financial statements for certain historical periods and an ongoing independent investigation.
• The company has until March 6, 2025, to submit an updated plan to regain compliance with Nasdaq listing rules.
• Nasdaq may grant an exception of up to 180 days, until May 19, 2025, for the company to regain compliance.
• The company is working to complete and file the Form 10-Q as soon as practicable.
• There is no assurance that the company will regain compliance with Nasdaq listing rules.
• The company's Audit Committee concluded that previously reported financial statements for the years ended March 31, 2020, 2019, 2018, and December 31, 2017, as well as interim periods within those years, should no longer be relied upon.
• The restatements are due to errors in share-based compensation, capitalization of share issuance costs, and accounting for convertible notes and warrants.
• Management concluded that a material weakness existed in the company's internal control over financial reporting during the prior periods.

Sentiment

Score: 3

Explanation: The sentiment is negative due to the delisting threat, financial restatements, and material weakness in internal controls. While the company is taking steps to address the issues, significant uncertainty remains.

Positives

• The company intends to submit an updated plan to Nasdaq by the deadline.
• The company is working diligently to complete the Form 10-Q and intends to file it as soon as practicable.
• Nasdaq has the discretion to grant an exception of up to 180 days to regain compliance.

Negatives

• The company failed to timely file its Quarterly Report on Form 10-Q for the quarter ended December 31, 2024.
• The company's prior financial statements from 2017 to 2020 should no longer be relied upon.
• A material weakness existed in the company's internal control over financial reporting during the prior periods.
• There is no assurance that the company will regain compliance with Nasdaq listing rules.

Risks

• The company may not be able to regain compliance with Nasdaq listing rules.
• Nasdaq could provide notice that the company's securities will become subject to delisting.
• The company may face additional delays in filing the Form 10-Q and other SEC filings.
• The company may be unable to implement and maintain effective internal control over financial reporting in the future.
• Accounting errors or corrections may be identified during the preparation of the Form 10-Q.

Future Outlook

The company intends to timely submit the Updated Plan to Nasdaq and complete and file the Form 10-Q as soon as practicable to regain compliance with the Listing Rule within the Compliance Period.

Management Comments

• The Company intends to timely submit the Updated Plan.
• The Company continues to work diligently to complete the Form 10-Q and intends to file the Form 10-Q as soon as practicable to regain compliance with the Listing Rule within the Compliance Period.

Industry Context

The delay in filing and the need for restatements could negatively impact investor confidence and potentially affect the company's competitive position within the ammunition and firearms industry.

Comparison to Industry Standards

• Comparable companies like Vista Outdoor and Olin Corporation are expected to maintain timely financial reporting and robust internal controls.
• Failure to meet these standards can lead to delisting and reputational damage, as seen in other cases of companies with accounting irregularities.

Stakeholder Impact

• Shareholders face the risk of delisting and potential loss of investment value.
• Employees may experience uncertainty due to the company's financial and regulatory challenges.
• Customers and suppliers may be concerned about the company's long-term viability.

Next Steps

• Submit an updated plan to Nasdaq by March 6, 2025.
• Complete and file the Form 10-Q as soon as practicable.
• Regain compliance with Nasdaq listing rules by May 19, 2025 (if an extension is granted).
• Remediate control and procedures deficiencies.

Key Dates