v3.26.1
INCOME TAXES
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 11 – INCOME TAXES

The income tax provision for the periods shown consist of the following:

 

 

For the year ended March 31,

 

 

2026

 

 

2025

 

Current

 

 

 

 

 

 

US Federal

 

$

-

 

 

$

-

 

US State

 

 

49,537

 

 

 

-

 

Total current provision

 

 

49,537

 

 

 

-

 

Deferred

 

 

 

 

 

 

US Federal

 

 

(304,882

)

 

 

(5,601,975

)

US State

 

 

(80,378

)

 

 

(1,556,266

)

Total deferred benefit

 

 

(385,260

)

 

 

(7,158,241

)

Change in valuation allowance

 

 

385,260

 

 

 

13,444,546

 

Income tax provision

 

$

49,537

 

 

$

6,286,305

 

The table below provides the updated requirements of ASU 2023-09 for our effective tax rate for the year ended March 31, 2026. See Note 2, Summary of Significant Accounting Policies for additional details on the adoption of ASU 2023-09.

 

 

For the year ended March 31,

 

 

 

2026

 

U.S. Federal

 

$

(1,017,769

)

 

 

 

21.0

 

%

 

State taxes, net of Federal income tax benefit

 

 

(268,321

)

 

 

 

5.5

 

%

 

Change in valuation allowance

 

 

1,140,184

 

 

 

 

(23.4

)

%

 

Non-deductible meals & entertainment

 

 

105,414

 

 

 

 

(2.2

)

%

 

Return-to-provision permanent non-deductible items

 

 

90,029

 

 

 

 

(1.9

)

%

 

Total provision for income taxes

 

$

49,537

 

 

 

 

(1.0

)

%

 

The reconciliation of income tax expense computed at the U.S. federal statutory rate of 21% to the effective tax rate, prior to the adoption of ASU 2023-09, is as follows:

 

 

For the year ended March 31,

 

2026

 

 

 

2025

 

 

U.S. Federal

 

 

21.0

 

%

 

 

21.0

 

%

State taxes, net of Federal income tax benefit

 

 

5.5

 

%

 

 

5.5

 

%

Change in valuation allowance

 

 

(23.4

)

%

 

 

(37.4

)

%

Other adjustments

 

 

0.0

 

%

 

 

0.1

 

%

Non-deductible meals & entertainment

 

 

(2.2

)

%

 

 

0.0

 

%

Return-to-provision permanent non-deductible items

 

 

(1.9

)

%

 

 

0.0

 

%

Effective tax rate

 

 

(1.0

)

%

 

 

(10.8

)

%

 

Our effective tax rates were (1.0%) and (10.8%) for the years ended March 31, 2026 and 2025, respectively. During the year ended March 31, 2026, the effective tax rate differed from the U.S. federal statutory rate primarily due to recovery of unrecognized tax benefits and changes in our valuation allowance. During the year ended March 31, 2026, we recorded a valuation allowance of $36.4 million due to uncertainty regarding the timing and utilization of losses in future periods. During the year ended March 31, 2025, the effective tax rate differed from the U.S. federal statutory rate primarily due to employee stock awards and changes in valuation allowance. During the year ended March 31, 2025, we recorded a valuation allowance of $36.0 million due to uncertainty regarding the timing and utilization of losses in future periods.

State taxes in Georgia, Arizona and Wisconsin represent the majority of the tax effect within this category. Following adoption of ASU 2023-09, our cash income taxes paid, net of refunds for the year ended March 31, 2026 were as follows:

U.S. Federal

 

$

-

 

State1

 

 

 

Georgia

 

 

49,287

 

Other states

 

 

250

 

Total cash paid for income taxes, net of refunds

 

$

49,537

 

1Georgia was the only jurisdiction to meet the 5% disaggregation threshold.

Significant components of our deferred tax liabilities and assets are as follows:

 

 

 

 

 

 

 

 

As of March 31,

 

 

 

2026

 

 

2025

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforward

 

$

35,465,705

 

 

$

16,557,351

 

Loss on purchase

 

 

—

 

 

 

2,213,969

 

Impairment - Ammunition segment

 

 

—

 

 

 

12,398,990

 

Inventory capitalization - Section 263A

 

 

—

 

 

 

472,665

 

Bad debt allowance

 

 

627,013

 

 

 

1,045,220

 

Legal reserve settlement

 

 

417,948

 

 

 

7,978,747

 

Compensation

 

 

1,480,036

 

 

 

1,154,090

 

Other timing differences

 

 

568,591

 

 

 

481,036

 

Total deferred tax assets

 

$

38,559,293

 

 

$

42,302,068

 

 

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

 

 

Depreciation expense

 

$

(134,837

)

 

$

(3,523,690

)

Change in estimate and accounting method

 

 

-

 

 

 

(699,392

)

Accounting method change - Section 481A

 

 

(587,500

)

 

 

-

 

Amortization - intangible assets

 

 

(1,328,882

)

 

 

(2,114,232

)

Total deferred tax liabilities

 

 

(2,051,219

)

 

 

(6,337,314

)

Net deferred tax asset

 

$

36,508,074

 

 

$

35,964,754

 

Valuation allowance

 

 

(36,508,074

)

 

 

(35,964,754

)

Net deferred tax asset

 

$

-

 

 

$

-

 

Net operating loss carryforwards have an indefinite useful life.

The following table summarizes the activity related to unrecognized tax benefits as follows:

 

 

As of March 31,

 

 

 

2026

 

 

2025

 

Opening balance

 

$

2,003,585

 

 

$

—

 

Charged to net income

 

 

(2,003,585

)

 

 

2,003,585

 

Write-offs, net of recoveries

 

 

-

 

 

 

-

 

Closing balance

 

$

-

 

 

$

2,003,585

 

We account for uncertain tax positions in accordance with ASC No. 740-10-25. ASC No. 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC No. 740-10-25, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax expense. ASC No. 740-10-25 also requires management to evaluate tax positions taken and recognize a liability if we have taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities.

We have evaluated tax positions taken by us as of March 31, 2026 and 2025 in accordance with the recognition and measurement framework within ASC No. 740-10, and have concluded that the benefits associated with certain tax positions should not be recognized on the financial statements for the year ended March 31, 2025. As such, we recorded an additional income tax payable on the consolidated balance sheet of $1.9 million as of March 31, 2025. Included within this amount is accrued penalties and interest of $0.3 million. We record penalties and interest associated with uncertain tax positions as a component of income tax expense. During the year ended March 31, 2026, we took corrective action with the IRS that now meets the more likely than not standard and therefore recognized a tax benefit related to the tax position and reversed the associated penalties. We recorded a reversal of income tax payable in the amount of $1.6 million and accrued penalties of $0.3 million in the year ended March 31, 2026.

The tax periods ended March 31, 2022, 2023, 2024, 2025, and 2026 are subject to audit by the Internal Revenue Service.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA makes permanent or introduces certain changes to the Internal Revenue Code, including 100% bonus depreciation, the deductibility of interest expense, and expensing domestic research costs. ASC No 740 requires that the effect of changes in tax rates and laws be recognized the period in which the legislation is enacted. The impact of this change primarily resulted in a reclassification from current to deferred taxes.