Outdoor Holding Co 10-Q for FY2025 Q2
Outdoor Holding Co (POWW)
About this 10-Q
Outdoor Holding Co filed this 10-Q on May 20, 2025, covering the quarter ended September 30, 2024 (FY2025 Q2).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $31.42M
- down 8.6% from $34.37M a year earlier
- Net loss
- $12.43M
- compared with a net loss of $7.67M a year earlier
- Diluted EPS
- -$0.11
- compared with -$0.07 a year earlier
F
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM
For the quarterly period ended
OR
For the transition period from ________ to ________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
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The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ |
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Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 15, 2025, there were
TABLE OF CONTENTS
3 |
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ITEM 1: |
3 |
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Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and March 31, 2024 |
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4 |
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5 |
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7 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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ITEM 2: |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION |
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ITEM 3: |
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ITEM 4: |
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ITEM 1: |
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ITEM 1A: |
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ITEM 2: |
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ITEM 3: |
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ITEM 4: |
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ITEM 5: |
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ITEM 6: |
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2
PART I
ITEM 1. FINANCIAL STATEMENTS
OUTDOOR HOLDING COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, 2024 |
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March 31, 2024 |
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(Unaudited) |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses |
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Total Current Assets |
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Equipment, net |
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Other Assets: |
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Deposits |
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Patents, net |
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Other intangible assets, net |
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Goodwill |
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Right of use assets - operating leases |
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Deferred income tax asset |
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TOTAL ASSETS |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current portion of operating lease liability |
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Current portion of construction note payable |
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Insurance premium note payable |
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- |
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Total Current Liabilities |
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Long-term Liabilities: |
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Contingent consideration payable |
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Income tax payable |
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Construction note payable, net of unamortized issuance costs |
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Operating lease liability, net of current portion |
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Total Liabilities |
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Shareholders' Equity: |
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Series A cumulative perpetual preferred stock |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Treasury Stock |
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( |
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Total Shareholders' Equity |
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
OUTDOOR HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months Ended September 30, |
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For the Six Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Revenues |
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Ammunition sales(1) |
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$ |
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$ |
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$ |
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$ |
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Marketplace revenue |
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Casing sales |
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Cost of Revenues |
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Gross Profit |
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Operating Expenses |
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Selling and marketing |
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Corporate general and administrative |
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Employee salaries and related expenses |
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Depreciation and amortization expense |
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Total operating expenses |
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Loss from Operations |
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Other Income |
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Other income |
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Interest expense |
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( |
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Total other income |
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Loss before Income Taxes |
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( |
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Benefit for Income Taxes |
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Net Loss |
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( |
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Preferred Stock Dividend |
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( |
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( |
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Net Loss Attributable to Common Stock Shareholders |
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$ |
( |
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$ |
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$ |
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$ |
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Net Loss per share |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
OUTDOOR HOLDING COMPANY
(Unaudited)
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Preferred Stock |
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Common Shares |
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Additional |
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Accumulated |
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Treasury |
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Number |
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Par Value |
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Number |
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Par Value |
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Capital |
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(Deficit) |
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Stock |
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Total |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Employee stock awards |
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- |
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Common stock purchase options |
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- |
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- |
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Repurchase of common shares (1) |
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- |
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( |
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( |
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( |
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( |
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Preferred stock dividends |
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- |
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- |
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( |
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Dividends accumulated on preferred stock |
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- |
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- |
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( |
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Net loss |
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- |
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- |
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Treasury shares purchased |
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- |
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( |
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( |
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Balance as of June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Employee stock awards |
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- |
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Common stock purchase options |
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- |
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- |
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Repurchase of common shares (1) |
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- |
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( |
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( |
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( |
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Preferred stock dividends |
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- |
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- |
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( |
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Dividends accumulated on preferred stock |
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- |
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- |
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( |
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Net loss |
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- |
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- |
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( |
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Treasury shares purchased |
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- |
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( |
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( |
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( |
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Balance as of September 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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(1)
(continued)
5
OUTDOOR HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(Unaudited)
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Preferred Stock |
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Common Shares |
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Additional |
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Accumulated |
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Treasury |
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Number |
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Par Value |
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Number |
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Par Value |
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Capital |
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(Deficit) |
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Stock |
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Total |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Employee stock awards |
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- |
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Dividends accumulated on preferred stock |
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- |
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- |
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( |
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( |
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Preferred stock dividends |
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- |
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- |
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( |
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Net loss |
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- |
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- |
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( |
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( |
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Treasury shares purchased |
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- |
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( |
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( |
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( |
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( |
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Balance as of June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Employee stock awards |
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- |
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Preferred stock dividends declared |
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- |
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- |
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( |
) |
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( |
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Dividends accumulated on preferred stock |
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- |
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- |
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( |
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|
|
|
( |
) |
||||
Net loss |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Treasury shares purchased |
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Balance as of September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
OUTDOOR HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
|
|
|
For the Six Months Ended |
|
|||||
|
|
|
2024 |
|
|
2023 |
|
||
Cash flow from operating activities: |
|
|
|
|
|
|
|
||
Net loss |
|
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by/(used in) operations: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
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|
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|
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|
||
Debt discount amortization |
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|
||
Employee stock awards |
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||
Common stock purchase options |
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|
||
Contingent consideration payable fair value |
|
|
|
( |
) |
|
|
( |
) |
Allowance for credit losses |
|
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|
|
|
|
|
||
Reduction in right of use asset |
|
|
|
|
|
|
|
||
Valuation allowance |
|
|
|
|
|
|
- |
|
|
Deferred income taxes |
|
|
|
( |
) |
|
|
( |
) |
Changes in Current Assets and Liabilities |
|
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
|
||
Inventories |
|
|
|
( |
) |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
|
||
Deposits |
|
|
|
( |
) |
|
|
|
|
Accounts payable |
|
|
|
( |
) |
|
|
|
|
Accrued liabilities |
|
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
( |
) |
|
|
( |
) |
Net cash provided by/(used in) operating activities |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||
Cash flow from investing activities: |
|
|
|
|
|
|
|
||
Purchase of property, plant, and equipment |
|
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash flow from financing activities: |
|
|
|
|
|
|
|
||
Proceeds from factoring liability |
|
|
|
- |
|
|
|
|
|
Payments on factoring liability |
|
|
|
- |
|
|
|
( |
) |
Payments on insurance premium note payment |
|
|
|
( |
) |
|
|
( |
) |
Payments on construction note payable |
|
|
|
( |
) |
|
|
( |
) |
Payments on note payable - related party |
|
|
|
- |
|
|
|
( |
) |
Preferred stock dividends paid |
|
|
|
( |
) |
|
|
( |
) |
Repurchase of common shares |
|
|
|
( |
) |
|
|
- |
|
Common stock repurchase plan |
|
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Net (decrease) increase in cash |
|
|
|
( |
) |
|
|
|
|
Restricted cash, beginning of period |
|
|
|
- |
|
|
|
|
|
Cash, beginning of period |
|
|
|
|
|
|
|
||
Cash and restricted cash, end of period |
|
|
$ |
|
|
$ |
|
||
Restricted cash, end of period |
|
|
$ |
|
|
$ |
- |
|
|
Cash, end of period |
|
|
$ |
|
|
$ |
|
||
(Continued)
7
OUTDOOR HOLDING COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
|
|
|
For the Six Months Ended |
|
|||||
|
|
|
2024 |
|
|
2023 |
|
||
Supplemental cash flow disclosures: |
|
|
|
|
|
|
|
||
Cash paid during the period for: |
|
|
|
|
|
|
|
||
Interest |
|
|
$ |
|
|
$ |
|
||
Income taxes |
|
|
$ |
- |
|
|
$ |
- |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
||
Insurance premium note payment |
|
|
$ |
|
|
$ |
|
||
Dividends accumulated on preferred stock |
|
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(Unaudited)
NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY
AMMO Inc. is a conglomerate of two premium positions in the shooting sports industry. AMMO Inc. started in ammunition manufacturing and broadened its portfolio with the acquisition of GunBroker.com (“GunBroker”) in 2021. GunBroker is an e-commerce marketplace (the “Marketplace”) that connects buyers and sellers with new/used firearms and ancillary gear and components for the outdoor community. Together, these two operating segments position AMMO, Inc. as a key force in both ammunition production and online firearm commerce.
The Company changed its name from AMMO, Inc. to Outdoor Holding Company on April 21, 2025. Unless the context otherwise requires, all references to "AMMO, Inc.," "Ammo," the "Company," "we," "us," "our," and similar terms refer to AMMO, Inc., a Delaware corporation, and its consolidated subsidiaries.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The condensed consolidated financial statements include the accounts of AMMO, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.
Accounting Basis
The accompanying unaudited condensed consolidated financial statements and related disclosures included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect all adjustments, which consist solely of normal recurring adjustments, needed to fairly present the financial results for these periods. Additionally, these condensed consolidated financial statements and related disclosures are presented pursuant to the rules and regulations of the Securities Exchange Commission (the “SEC”).
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and related disclosures contained in the Company’s Annual Report on Form 10-K for the year ended March 31, 2024, as amended on July 29, 2024 and as further amended on May 20 ,2025 (as amended, the "Form 10-K/A"). The results for the three and six months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial information contains all normal and recurring adjustments necessary to fairly present the condensed consolidated balance sheets and statements of operations, cash flow and changes in stockholders’ equity of the Company for the interim periods presented.
We use the accrual basis of accounting and U.S. GAAP, and all amounts are expressed in U.S. dollars. The Company has a fiscal year-end of March 31st.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates made in preparing the condensed consolidated financial statements include the valuation of allowances for credit losses, valuation of deferred tax assets, inventories, useful lives of assets, goodwill, intangible assets, stock-based compensation, and warrant-based compensation.
Goodwill
We evaluate goodwill for impairment annually or more frequently when an event occurs, or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. In testing for goodwill impairment, we may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If our qualitative assessment indicates that goodwill impairment is more likely than not, we perform a two-step impairment test. We test goodwill for impairment
9
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
under the two-step impairment test by first comparing the book value of net assets to the fair value of the reporting unit. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flow. Forecasts of future cash flow are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions. Due to the declines in the value of our stock price and market capitalization in the year ended March 31, 2023, we assessed qualitative factors to determine if it is more likely than not that the fair value of the Marketplace segment is less than its carrying amount. Through our analysis we determined our stock price and market capitalization decline is not indicative of a decrease in the fair value of our Marketplace segment and a fair value calculation using the discounted cash flow was more appropriate due to the operational performance of the reporting segment. Accordingly, the impairment of goodwill was not warranted for the year ended March 31, 2024. As of September 30, 2024, the Company had a goodwill carrying value of $
Accounts Receivable and Allowance for Credit Losses
Our accounts receivable represents amounts due from customers for products sold and include an allowance for estimated credit losses which is estimated based on the collectability and age of the accounts receivable balances and categorization of customers with similar financial condition. At September 30, 2024 and March 31, 2024, we reserved $
Cash and Cash Equivalents
For purposes of the condensed consolidated statements of cash flow, we consider highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents.
License Agreements
We are a party to a license agreement with Jesse James, a well-known motorcycle designer, and Jesse James Firearms, LLC, a Texas limited liability company. The license agreement grants us the exclusive worldwide rights through April 12, 2026 to Mr. James’ image rights and trademarks associated with him in connection with the marketing, promotion, advertising, sale, and commercial exploitation of Jesse James branded products. We agreed to pay Mr. James royalty fees on the sale of ammunition and non-ammunition branded products and to reimburse him for any out-of-pocket expenses and reasonable travel expenses.
Patents
On September 28, 2017, AMMO Technologies Inc., an Arizona corporation and wholly owned subsidiary of the Company (“ATI”), merged with Hallam, Inc, a Texas corporation, with ATI being the surviving corporation. The primary asset of Hallam, Inc. was an exclusive license to produce projectiles and ammunition using the Hybrid Luminescence Ammunition Technology under patent U.S. 8,402,896 B1 with a publication date of March 26, 2013, owned by University of Louisiana at Lafayette. The license was formally amended and assigned to ATI pursuant to an Assignment and First Amendment to Exclusive License Assumption Agreement dated to be effective as of August 22, 2017. This asset will be amortized from September 2017, the first full month of the acquired rights, through October 29, 2028.
Under the terms of the Exclusive License Agreement, the Company is obligated to pay a quarterly royalty to the patent holder, based on a $
In August 2018, we applied for additional patent coverage for the manufacturing methods or application of the Hybrid Luminescence Ammunition Technology on a variety of projectile and ammunition types. The costs of filing this patent were expensed.
10
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 5, 2018, we completed the acquisition of SW Kenetics Inc. ("SWK"). ATI acquired all of the assets of SWK and assumed all of the liabilities of SWK. The primary asset of SWK was a pending patent for modular projectiles. All rights to patent pending applications were assigned and transferred to ATI pursuant to an intellectual property rights agreement on September 27, 2018.
We intend to continue building our patent portfolio to protect our proprietary technologies and processes and will file new applications where appropriate to preserve our rights to manufacture and sell our branded lines of ammunition.
Other Intangible Assets
On March 15, 2019, Enlight Group II, LLC d/b/a Jagemann Munition Components, a wholly owned subsidiary of the Company completed its acquisition of assets of Jagemann Stamping Company’s ammunition casing manufacturing and sales operations pursuant to the terms of an amended and restated asset purchase agreement (See Note 13 – Goodwill and Intangible Assets). The intangible assets acquired include a tradename, customer relationships, and intellectual property.
On April 30, 2021, 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 ("SpeedLight"), and Gemini Direct Investments, LLC, a Nevada limited liability company ("Gemini"), whereby SpeedLight merged with and into Gemini, with SpeedLight surviving the merger as a wholly owned subsidiary of the Company (the "GunBroker Merger"). At the time of the GunBroker Merger, Gemini had nine subsidiaries, all of which are related to Gemini’s ownership of GunBroker, an online auction marketplace dedicated to firearms, hunting, shooting, and related products. The intangible assets acquired included a trade name, customer relationships, intellectual property, software, and domain names.
Impairment of Long-Lived Assets
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flow. If the total of the future cash flow is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.
Revenue Recognition
We generate revenue from the production and sale of ammunition, ammunition casings, and marketplace fee revenue, which includes auction revenue, payment processing revenue, and shipping income. We recognize revenue according to Accounting Standard Codification – Revenue from Contract with Customers (“ASC 606”). When the customer obtains control over the promised goods or services, we record revenue in the amount of consideration that we can expect to receive in exchange for those goods and services. We apply the following five-step model to determine revenue recognition:
We only apply the five-step model when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and assess whether each promised good or service is distinct.
For Ammunition Sales and Casing Sales, our contracts contain a single performance obligation and the entire transaction price is allocated to the single performance obligation. We recognize as revenues the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied
11
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
or as it is satisfied. Accordingly, we recognize revenues (net) when the customer obtains control of our product, which typically occurs upon shipment of the product or the performance of the service. In the year ended March 31, 2021, we began accepting contract liabilities or deferred revenue. We included Deferred Revenue in our Accrued Liabilities. We will recognize revenue when the performance obligation is met.
For Marketplace revenue, the performance obligation is satisfied, and revenue is recognized as follows:
Auction revenue consists of optional listing fees with variable pricing components based on customer options selected from the GunBroker website and final value fees based on a percentage of the final selling price of the listed item. The performance obligation is to process the transactions as initiated by the customer. Revenue is recognized at a point in time when the transaction is processed.
Compliance fee revenue consists of fees charged to customers based on a percentage of the final price of an item at the time of purchase. The performance obligation is to process the transactions as initiated by the customer. Revenue is recognized at a point in time when the transaction is processed.
Payment processing revenue consists of fees charged to customers on a transactional basis. The performance obligation is to process the transactions as initiated by the customer. The price is set by the GunBroker user agreement on the website based on stand-alone selling prices. Revenue is recognized at a point in time when the transaction is processed.
Shipping income consists of fees charged to customers for shipping of sold items listed on the GunBroker website. The performance obligation is to ship the item sold as initiated by the customer. The price is set based on the third-party service provider selected to be used by the customer as well as the speed and location of shipment. Revenue is recognized at a point in time when the shipping label is printed.
Advertising revenue consists of dedicated emails, e-newsletters, video production and advertising, market trends and banner advertising. The performance obligation is to deliver the advertising content. Revenue is recognized at a point in time when the advertising content is delivered.
The Company’s customers that comprised more than 10% of total revenues for the three and six months ended September 30, 2024, or more than 10% of accounts receivable as of September 30, 2024 or March 31, 2024 were as follows:
|
|
Revenues |
|
|
Accounts Receivable |
|
||||||||||
PERCENTAGES |
|
Three Months Ended September 30, 2024 |
|
|
Six Months Ended September 30, 2024 |
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||||
Customers: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
A |
|
|
|
|
|
|
|
|
% |
|
|
% |
||||
|
|
|
|
|
|
|
|
|
% |
|
|
% |
||||
Disaggregated Revenue Information
The following table presents a disaggregation of revenue from customers by category. We attribute net sales to categories by product or service types; ammunition, ammunition casings, and marketplace fees. The Company notes that revenue recognition processes are consistent between product and service type, however, the amount, timing and uncertainty of revenue and cash flow may vary by each product type due to the customers of each product and service type.
12
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||
Ammunition Sales(1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Marketplace Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Casings Sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Ammunition products are sold through “Big Box” retailers, manufacturers, local ammunition stores, and shooting range operators. In contrast, our ammunition casings products are sold to manufacturers. Marketplace fees are generated through our GunBroker online auction marketplace.
All ammunition product sales are recorded upon shipment and, depending on credit worthiness of customer, the payment terms will vary from 30 to 60 days. No refunds are allowed on any product shipped.
Each product manufactured by the Company has standard specifications and performance objectives. The Company has an extensive product testing program and, if the Company were given notice of a product defect by a customer, the Company would request the return of the product so that the manufacturing defect could be identified.
Contract Liabilities
Our contract liabilities consist of unearned revenue, which represents upfront payments received from customers for product to be delivered at a future date. Contract liabilities are classified as current or long-term based on the timing of contract obligation. As of September 30, 2024 we had
Advertising Costs
We expense advertising costs under our Ammunition segment as they are incurred in selling and marketing expenses of operating expenses. Marketplace segment advertising costs are expensed as they are incurred in cost of revenues. We incurred advertising expenses under our Ammunition segment of $
Inventories
We state inventories at the lower of cost or net realizable value. We determine cost using the average cost method. Our inventory consists of raw materials, work in progress, and finished goods. Cost of inventory includes cost of parts, labor, quality control, and all other costs incurred to bring our inventories to condition ready to be sold. We periodically evaluate and adjust inventories for obsolescence.
Leases
We determine if an arrangement is a lease at inception of the contract. Operating lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of fixed lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; instead, we recognize lease expense for these leases on a straight-line basis over the lease term. We do not account for lease components (e.g., fixed payments to use the underlying lease asset) separately from the non-lease components (e.g., fixed payments for common-area maintenance costs and other items that transfer a good or
13
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
service). Some of our leases include variable lease payments, which primarily result from changes in consumer price and other market-based indices, which are generally updated annually, and maintenance and usage charges. These variable payments are excluded from the calculation of our lease assets and lease liabilities.
We utilize the interest rate implicit in the lease to determine the lease liability when the interest rate can be determined. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
Property and Equipment
We state property and equipment at cost, less accumulated depreciation. We compute depreciation using the straight-line method at rates intended to depreciate the cost of assets over their estimated useful lives, which are generally to
We capitalize additions and expenditures for improving or rebuilding existing assets that extend the useful life. Leasehold improvements made either at the inception of the lease or during the lease term are amortized over the shorter of their economic lives or the lease term including any renewals that are reasonably assured.
Excise Tax
As a result of regulations imposed by the Federal Government for sales of ammunition to non-government U.S. entities, we charge and collect an
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to us as of September 30, 2024. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. These financial instruments include cash, accounts receivable, accounts payable, amounts due to related parties, and the construction note payable. Fair values were assumed to approximate carrying values because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Stock-Based Compensation
We account for stock-based compensation at fair value in accordance with Accounting Standards Codification 718 – Compensation – Stock Compensation (“ASC 718”), which requires the recognition of the cost of employee, director and non-employee services received in exchange for an award of equity over the period the employee, director or non-employee is required to perform the services in exchange for the award. Stock-based compensation is measured based on the grant-date fair value of the award. Stock-based compensation is recognized on a straight line basis over the vesting periods and forfeitures are recognized in the periods they occur. There were
Concentrations of Credit Risk
Accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Income Taxes
We file federal and state income tax returns in accordance with the applicable rules of each jurisdiction. We account for income taxes under the asset and liability method in accordance with Accounting Standards Codification
14
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
740 - Income Taxes (“ASC 740”). The provision for income taxes includes federal, state, and local income taxes currently payable, and deferred taxes. We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable amounts in years in which those temporary differences are expected to be recovered or settled. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. In accordance with ASC 740, we recognize the effect of income tax positions only if those positions are more likely than not of being sustained.
Contingencies
Certain conditions may exist as of the date the condensed consolidated financial statements are issued that may result in a loss to us but will only be resolved when one or more future events occur or fail to occur. We assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we evaluate the perceived merits of any legal proceedings or unasserted claims and the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability is reasonably estimated, the estimated liability would be accrued in our condensed consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of range of possible loss if determinable and material, would be disclosed.
The Urvan Lawsuit
On April 30, 2023, director and stockholder Steve Urvan filed suit in the Delaware Court of Chancery (the "Delaware Court") against the Company, and certain AMMO directors, former directors, employees, former employees and consultants. Urvan’s claims include fraudulent inducement, unjust enrichment and violations of the Arizona Securities Act. The suit seeks a court order for partial rescission of the GunBroker Merger and compensatory damages of not less than $
The Books and Records Action
On December 6, 2023, Steve Urvan initiated a separate action against the Company in his capacity as director under 8 Del. C. § 220(d) to inspect certain of the Company’s books and records (the “Books and Records Action”). In the Books and Records Action, Mr. Urvan alleges that the Company wrongfully refused to provide him with access to certain categories of documents following demands that he made on the Company on March 3, 2023, and November 9, 2023. The Company asserted as an affirmative defense that Mr. Urvan’s primary purpose for his demands is, among other things, to obtain documents to support his claims in the Delaware Plenary Litigation, in which discovery was then stayed. The court held a one-day trial on February 26, 2024, in Georgetown, Delaware. On February 27, 2024, the court in the Delaware Plenary Litigation issued an opinion that had the effect of lifting the discovery stay. On February 28, 2024, AMMO informed the judge presiding over the Books and Records Action that “in AMMO’s view,
15
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the Plenary Action Opinion has effectively mooted this Books and Records action.” On April 9, 2024, AMMO began producing documents in response to Mr. Urvan’s demands pursuant to a Stipulation and Order Governing AMMO’s Document Productions. The court has not issued a post-trial ruling and document production remains ongoing.
The MN Action
On January 18, 2024, Innovative Computer Professionals, Inc. d/b/a Digital Cash Processing (“DCP”) filed a civil action in Minnesota state court against Outdoors Online, LLC d/b/a GunBroker.com (“GunBroker”) for breach of contract (the “MN Action”). In the MN Action, DCP alleges that GunBroker.com breached a May 2021 contract, pursuant to which DCP was to provide specified digital payment processing services, and it alleges $
The Triton Settlement
On June 24, 2024 the Company entered into a Confidential Settlement Agreement and Mutual General Release (the “Triton Settlement Agreement”) with Triton Value Partners, LLC, Donald Gasgarth, Paul Freischlag, Jr., Jeff Zwitter (the “Plaintiffs,” and together with the Defendants and the Company, the “Parties” or, individually, “Party”), and Steven Urvan and TVP Investments LLC (the “Urvan Defendants”) and GunBroker.com, LLC, IA TECH, LLC, and GB Investments, Inc. (the “GunBroker Defendants,” and collectively with the Urvan Defendants, the “Defendants”) to fully resolve and settle all disputes and claims related to the litigation between the Defendants and Plaintiffs captioned Triton Value Partners, LLC et al. v. TVP Investments, LLC et al., Cobb County Superior Court, CAFN 18104869 (the “Action”). Pursuant to the Triton Settlement Agreement, the GunBroker Defendants agreed to pay the Plaintiffs $
On August 8, 2024, the Company paid $
There were no other known contingencies as of September 30, 2024.
Recent Accounting Pronouncements
In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of
16
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the equity security and, therefore, is not considered in measuring fair value. The guidance also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires specific disclosures for equity securities subject to contractual sale restrictions. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. Additionally, it requires that a public entity (1) disclose an amount for “other segment items” by reportable segment, (2) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, and (3) requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this proposed ASU and all existing segment disclosures in Topic 280. The new guidance is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The amendments in this proposed ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. We are currently evaluating the potential impact of these changes.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures. The ASU requires that public business entities on an annual basis (1) disclose specific categories in the effective tax rate reconciliation and (2) provide additional information for reconciling items that meet or exceed a quantitative threshold. Additionally, it requires all entities disclose the following information about income taxes paid on an annual basis: (1) the year-to-date amounts of income taxes paid disaggregated by federal (national), state, and foreign taxes and (2) the amount of income taxes paid disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024. The amendments in this proposed ASU should be applied on a prospective basis, although retrospective application to all periods presented is permitted. Early adoption is permitted. We are currently evaluating the potential impact of these changes.
Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
17
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – LOSS PER COMMON SHARE
We calculate basic loss per share using the weighted average number of common shares outstanding during each period. Diluted earnings per share assumes the conversion, exercise or issuance of all potential common stock equivalents unless the effect is to reduce a loss or increase the income per share. Potential common shares consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method), the exercise of warrants (using the if-converted method) and the vesting of stock awards.
|
|
For the Three Months Ended September 30, |
|
|
For the Six Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
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|
||||
Numerator: |
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|
||||
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Preferred stock dividends |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss attributable to common stock holders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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||||
Denominator: |
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||||
Weighted average shares of common stock - basic |
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|
||||
Effect of dilutive common stock purchase warrants |
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||||
Effect of dilutive contingently issuable common stock |
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|
||||
Effect of dilutive equity incentive awards |
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|
||||
Weighted average shares of common stock – Diluted |
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||||
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||||
Basic earnings per share: |
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||||
Loss per share attributable to common stockholders - basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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||||
Diluted earnings per share: |
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||||
Loss per share attributable to common stockholders - diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following table presents the number of shares excluded from the calculation of diluted net loss per share attributable to common stockholders:
|
|
For the Three Months Ended September 30, |
|
|
For the Six Months Ended September 30, |
|
||||||||||
|
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2024 |
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2023 |
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2024 |
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2023 |
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||||
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||||
Common stock options |
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|
||||
Non-vested stock awards |
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|
||||
Warrants |
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|
||||
Total shares excluded from net income (loss) per share attributable to common stockholders |
|
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|
||||
18
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – INVENTORIES
At September 30, 2024 and March 31, 2024, the inventory balances were composed of:
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||
Finished product |
|
$ |
|
|
$ |
|
||
Raw materials |
|
|
|
|
|
|
||
Work in process |
|
|
|
|
|
|
||
Inventory net |
|
$ |
|
|
$ |
|
||
NOTE 5 – DUE FROM RELATED PARTIES
As a result of the contingency recognized for the Triton Settlement Agreement described in the Contingencies section of Note 2, we recorded a receivable of $
NOTE 6 – PROPERTY, PLANT, AND EQUIPMENT
Property and equipment consisted of the following at September 30, 2024 and March 31, 2024:
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||
Leasehold Improvements |
|
$ |
|
|
$ |
|
||
Building |
|
|
|
|
|
|
||
Furniture and Fixtures |
|
|
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|
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|
||
Vehicles |
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|
||
Equipment |
|
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|
||
Tooling |
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|
||
Construction in Progress |
|
|
|
|
|
|
||
Total property and equipment |
|
$ |
|
|
$ |
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Net property and equipment |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three and six months ended September 30, 2024 totaled $
19
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – ACCRUED LIABILITIES
At September 30, 2024 and March 31, 2024, accrued liabilities were as follows:
|
|
September 30, |
|
|
March 31, 2024 |
|
|
||||
Accrued federal excise tax |
|
$ |
|
|
|
$ |
|
|
|
||
Accrued bonus program |
|
|
|
|
|
|
|
|
|
||
Accrued professional fees |
|
|
|
|
|
|
|
|
|
||
Accrued payroll |
|
|
|
|
|
|
|
|
|
||
Other accruals |
|
|
|
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
|
|
|
||
Unearned revenue |
|
|
|
|
|
|
|
|
|
||
Accrued liabilities |
|
$ |
|
|
|
$ |
|
|
|
||
NOTE 8 – FACTORING LIABILITY
On July 1, 2019, we entered into a Factoring and Security Agreement with Factors Southwest, LLC (“FSW”). FSW may purchase from time to time the Company’s Accounts Receivables with recourse on an account by account basis. The twenty-four month agreement contained a maximum advance amount of $
NOTE 9 – LEASES
We lease office, manufacturing, and warehouse space in Scottsdale, AZ, Atlanta and Marietta, GA, and Manitowoc, WI under contracts we classify as operating leases. None of our leases are financing leases. The Scottsdale lease has been extended through 2029 and does not include a renewal option. We terminated our lease agreement in Marietta, GA during the year ended March 31, 2024, which decreased our right of use asset and operating lease liabilities on our condensed consolidated balance sheet by $
Consolidated lease expense for the three months ended September 30, 2024 was $
Consolidated lease expense for the six months ended September 30, 2024 was $
The weighted average remaining lease term and weighted average discount rate for operating leases were
20
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments under non-cancellable leases as of September 30, 2024, are as follows:
Years Ended March 31, |
|
|
|
|
2025(1) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Total Lease Payments |
|
|
|
|
Less: Amount Representing Interest |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
NOTE 10 – CONSTRUCTION NOTE PAYABLE
On October 14, 2021, we entered into a Construction Loan Agreement (the “Hiawatha Loan Agreement”) with Hiawatha National Bank (“Hiawatha”). The Hiawatha Loan Agreement specifies that Hiawatha may lend up to $
Additionally, on October 14, 2021, we issued a Promissory Note in favor of Hiawatha (the “Hiawatha Note”) in the amount of up to $
We can prepay the Hiawatha Note in whole or in part starting in July 2022 with a prepayment premium of
We are required to maintain a debt service coverage ratio, as defined in the terms of the Hiawatha Loan Agreement, of not less than
During the year ended March 31, 2023, approximately $
21
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – PREFERRED STOCK
On May 18, 2021, the Company filed a Certificate of Designations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware to establish the preferences, voting powers, limitations as to dividends or other distributions, qualifications, terms and conditions of redemption and other terms and conditions of the Series A Preferred Stock.
The Company will pay cumulative cash dividends on the Series A Preferred Stock when, as and if declared by the Board of Directors (or a duly authorized committee of the Board of Directors), only out of funds legally available for payment of dividends. Dividends on the Series A Preferred Stock will accrue on the stated amount of $
Generally, the Series A Preferred Stock is not redeemable by the Company prior to May 18, 2026. However, upon a change of control or de-listing event (each as defined in the Certificate of Designations), the Company will have a special option to redeem the Series A Preferred Stock for a limited period of time.
Dividend |
|
Record |
|
Dividend |
|
Dividend |
|
Dividend |
|
|
Per Share |
|
||||
|
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Preferred dividends accumulated as of September 30, 2024, were $
Dividend |
|
Record |
|
Dividend |
|
Dividend |
|
Dividend |
|
|
Per Share |
|
||||
|
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
$ |
|
|
|
$ |
|
|
||||||
Preferred dividends accumulated as of September 30, 2023, were $
NOTE 12 – CAPITAL STOCK
Our authorized capital consists of
2017 Equity Incentive Plan
In October 2017, the Board of Directors approved the 2017 Equity Incentive Plan ("2017 Plan"). Our 2017 Plan initially permitted the issuance of equity-based instruments covering up to a total of
22
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Warrants
At September 30, 2024, outstanding and exercisable stock purchase warrants consisted of the following:
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|||
Outstanding at March 31, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Granted |
|
|
|
|
|
- |
|
|||||
Exercised |
|
|
|
|
|
- |
|
|||||
Forfeited or cancelled |
|
|
( |
) |
|
|
|
|
- |
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
As of September 30, 2024, we had
Options Granted
During the year ended March 31, 2023, we granted stock options (“Options”) to purchase
The following is a summary of our stock option activity during the six months ended September 30, 2024:
|
Number of Options |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Remaining Life in Years |
|
|||||||||
Outstanding, April 1, 2024 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
||||
Granted |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
Exercised |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
Canceled/Forfeited |
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
- |
|
Outstanding, September 30, 2024 |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|||||
As of September 30, 2024, there was $
23
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Stock Awards
A summary of stock award activity for the six months ended September 30, 2024 is as follows:
|
|
Number of Shares |
|
|
Weighted-Average Grant-Date Fair Value Per Share |
|
|||
Outstanding at April 1, 2024 |
|
|
|
|
$ |
|
|
||
Granted |
|
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
||
As of September 30, 2024, there was $
NOTE 13 – GOODWILL AND INTANGIBLE ASSETS
Amortization expense related to our intangible assets for the three and six months ended September 30, 2024 was $
Intangible assets consisted of the following:
|
|
|
|
|
September 30, 2024 |
|
||||||||||
|
|
Life |
|
|
Licenses |
|
|
Patent |
|
|
Other |
|
||||
Licensing Agreement – Jesse James |
|
|
|
|
$ |
|
|
$ |
- |
|
|
$ |
- |
|
||
Licensing Agreement – Jeff Rann |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
||
Streak Visual Ammunition patent |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
SWK patent acquisition |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Jagemann Munition Components: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer Relationships |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Intellectual Property |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Tradename |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
GDI Acquisition: |
|
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|
|
|
|
|
|
|
|
|
||||
Tradename |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Customer List |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Intellectual Property |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Other Intangible Assets |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accumulated amortization – Licensing Agreements |
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
Accumulated amortization – Patents |
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
Accumulated amortization – Intangible Assets |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
24
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Annual amortization of intangible assets for the next five fiscal years are as follows:
Years Ended March 31, |
|
Estimates for |
|
|
2025(1) |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
Thereafter |
|
|
|
|
Annual amortization of intangible assets |
|
$ |
|
|
NOTE 14 – SEGMENTS
Our Chief Executive Officer reviews financial performance based on our two operating segments as follows:
The following tables set forth certain financial information utilized by management to evaluate our operating segments for the interim period presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Three Months Ended September 30, 2024 |
|
|||||||||||||
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
||||
|
|
|
|
|
|
|
|
and other |
|
|
|
|
||||
|
|
Ammunition |
|
|
Marketplace |
|
|
expenses |
|
|
Total |
|
||||
Net revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income/(loss) from Operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Six Months Ended September 30, 2024 |
|
|||||||||||||
|
|
|
|
|
|
|
|
Corporate |
|
|
|
|
||||
|
|
|
|
|
|
|
|
and other |
|
|
|
|
||||
|
|
Ammunition |
|
|
Marketplace |
|
|
expenses |
|
|
Total |
|
||||
Net Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income/(Loss) from Operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
25
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Three Months Ended September 30, 2023 |
|
|||||||||||||
|
|
Ammunition |
|
|
Marketplace |
|
|
Corporate |
|
|
Total |
|
||||
Net Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income/(Loss) from Operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Six Months Ended September 30, 2023 |
|
|||||||||||||
|
|
Ammunition |
|
|
Marketplace |
|
|
Corporate |
|
|
Total |
|
||||
Net Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income/(Loss) from Operations |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
NOTE 15 – INCOME TAXES
The income tax provision effective tax rates were
The Company has never had an Internal Revenue Service audit; therefore, the tax periods ended March 31, 2021, 2022, 2023, and 2024 are subject to audit.
NOTE 16 – RELATED PARTY TRANSACTIONS
Letter of Credit
Effective July 12, 2024, our $
Triton Settlement Agreement Payment
On August 8, 2024, the Company paid $
Gemini Accounts Receivable
Through our acquisition of Gemini, a related party relationship was created through one of our directors,Mr. Steve Urvan, by virtue of his ownership of entities that provided services to Gemini. There was $
26
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 – SUBSEQUENT EVENTS
Olin Asset Purchase Agreement
On
The closing of the Transaction was subject to the satisfaction of customary closing conditions, including, among others, (i) the absence of any notice (whether temporary, preliminary or permanent) from a governmental authority or federal or state court of competent jurisdiction which is in effect and prevents or prohibits consummation of the Transaction, (ii) the accuracy of the representations and warranties of the parties, (iii) the parties’ compliance with their respective covenants in all material respects, (iv) the delivery by the Company to Buyer of certain consents and approvals, permits, and policies, surveys, and reports related to the owned real property used in the Ammunition Manufacturing Business, and (v) the release of all liens relating to the assets being purchased in the Transaction.
The Asset Purchase Agreement contained customary representations, warranties and covenants as well as customary post-signing and post-closing covenants.
On April 18, 2025, we entered into a First Amendment (the “First Amendment”) to the Asset Purchase Agreement. Pursuant to the First Amendment, the Company and Buyer agreed to, among other things: (i) the removal of the escrow mechanisms for the purchase price adjustments contemplated under the Asset Purchase Agreement; (ii) the addition of a pre-closing inventory count rather than a post-closing inventory count; (iii) the revision of the net working capital adjustment provisions to agree upon certain pre-determined assets and liabilities and remove deductions for certain types of inventory and account for inventory based on the Company’s historical accounting practices; (iv) the addition of a reserve to adjust for upgrades to equipment and inventory issues; and (v) the addition of a purchase price adjustment collar in the event the final net working capital amount is less the estimated net working capital exceeds, which entitles the Buyer to receive from the Company amounts in excess of the collar for such a shortfall.
The Company and the Buyer also entered into certain additional agreements, including, among other things: (a) the addition of a mutual non-disparagement provision; (b) the removal of the closing condition related to the process hazard analysis report and the amendment of one of the representations to account for such report; (c) the addition of a mutual release related to certain disputed items; and (d) the addition of an indemnification related to an item excluded from coverage in the representations and warranties insurance policy.
The Transaction was completed on
In connection with the Transaction, we evaluated the Transaction in accordance with ASC Topic 205, "Presentation of Financial Statement" ("ASC 205") and concluded this was a triggering event to reassess the carrying value of the segment's assets.
|
|
Impairment Amount |
|
|
Inventory |
|
$ |
|
|
Property, plant and equipment |
|
|
|
|
Other assets |
|
|
|
|
Intangible assets |
|
|
|
|
Total Impairment |
|
$ |
|
|
27
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Wagenhals Separation Agreement
On April 8, 2025, in connection with Fred W. Wagenhals’s resignation from his position as the Executive Chairman of the Company and as Chairman of the Board on April 4, 2025, the Company and Mr. Wagenhals entered into an Executive Separation Agreement, effective April 4, 2025, pursuant to which Mr. Wagenhals is entitled to receive certain separation benefits, including: (i) payment of all compensation and benefits to which Mr. Wagenhals is legally entitled under the Wagenhals Employment Agreement through the Separation Date; (ii) a cash separation payment equal to $
Sunflower Loan Amendment
On April 18, 2025, we entered into a Consent and Second Amendment to Loan and Security Agreement (the “Sunflower Loan Amendment”) by and among the Company and other borrowers party thereto (collectively, the “Borrower”), and Sunflower Bank, N.A., as administrative agent and collateral agent (the “Agent”). The Sunflower Loan Amendment amends that certain Loan and Security Agreement, dated as of December 29, 2019, by and among the Borrower, the Lenders and the Agent (as amended by the Sunflower Loan Amendment, the “Sunflower Loan Agreement”).
Pursuant to the Sunflower Loan Amendment, the Borrower and the Agent agreed to, among other things: (i) release the Agent’s security interest in all collateral securing the Borrower’s obligations under the Sunflower Loan Agreement upon consummation of the sale of the Ammunition Manufacturing Business; (ii) reduce all amounts available under the Revolving Loan to
Contingencies
On December 20, 2024, the Board of Directors held a meeting during which it voted to pursue a settlement in the Plenary Action between Ammo and Mr. Urvan (which is further described in Note 2 above) and voted to approve terms outlined in a non-binding term sheet. We recorded an estimated liability of $
On February 3, 2025, the Delaware Court granted a joint stipulated motion to postpone the five-day trial to April 27, 2026 and order a stay of litigation of approximately three months, during which all depositions and discovery is postponed. Settlement negotiations between the Company and Mr. Urvan are ongoing. There can be no assurance that a final settlement agreement will be reached. If an agreement is not reached, the Company intends to continue to vigorously defend against this litigation.
The Company faces an inestimable loss contingency stemming from a pending investigation of the Staff of the SEC Division of Enforcement (the "SEC Investigation"). The Company has produced documents responsive to document subpoenas and cooperated by, among other things, providing other information to the SEC Staff on a voluntary basis. The SEC Staff has significant discretion in conducting investigations, and therefore, the Company cannot predict the scope or outcome of the SEC Investigation. Based upon document subpoenas to the Company and other communications in January, 2025, it appears that the SEC Staff is investigating and will likely recommend that the SEC bring an enforcement action relating to the Company’s: (i) valuation of, and accounting for share-based compensation awards to employees, non-employee directors and other service providers, and issued in exchange for goods and services; (ii) capitalization of certain share issuance costs; (iii) disclosure of perquisites and the valuation of equity-based compensation paid to certain executives; (iv) disclosure of certain executive officers and related party transactions; and (v) disclosure concerning the calculation of Adjusted EBITDA. The SEC Staff have not issued a Wells Notice to the Company. If the SEC Staff issues a Wells Notice, the Company will have the opportunity to present factual evidence, legal arguments and mitigating circumstances to the SEC. If, notwithstanding the Company’s Wells submission, the SEC authorizes a civil enforcement action, the agency may seek injunctions, civil penalties or
28
OUTDOOR HOLDING COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
other relief, and the Company may incur additional legal and other professional fees in defending such action or negotiating a resolution. Given the ongoing nature and complexity of the SEC Investigation, we cannot yet reasonably estimate a loss or range of loss that may arise from its resolution. The Company will continue to evaluate information to determine when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable.
29
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are any statements that refer to our estimated or anticipated results, other non-historical facts or future events and include, but are not limited to, statements regarding our business strategy; anticipated future operating results and operating expenses, cash flow, capital resources, dividends and liquidity; competition; trends, opportunities and risks affecting our business, industry and financial results; future expansion or growth plans and potential for future growth, including our plan to expand our e-commerce platform; our ability to attract new customers and retain existing customers; our ability to accurately forecast future revenues and appropriately plan our expenses; our expectations regarding future revenues; our ability to attract and retain qualified employees and key personnel; future regulatory, judicial and legislative changes; and the sufficiency of our existing cash and cash equivalents to meet our working capital and capital expenditure needs over the next 12 months. In addition, forward-looking statements also consist of statements involving trend analyses and statements including such words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “should,” “will,” “would,” "hope" and similar expressions or the negative of such terms or other comparable terminology.
Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on management’s current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following:
Forward-looking statements speak only as of the date of the Original Filing. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date of the Original Filing, except to the extent required by law.
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to provide a reader of our financial statements with management’s perspective on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (i) the accompanying unaudited consolidated financial statements and notes thereto for the three and six months ended September 30, 2024, (ii) the audited consolidated financial statements and notes thereto for the year ended March 31, 2024 included in our Annual Report on Form 10-K/A (as amended, the “Form 10-K/A”) filed with the Securities and Exchange Commission (the “SEC”) on May 20 ,2025 and (iii) the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K/A. Except for certain information as of March 31, 2024, all amounts herein are unaudited. Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Outdoor Holding Company (formerly AMMO, Inc.) and its consolidated subsidiaries.
Sale of Ammo Manufacturing Business and Name Change
On April 18, 2025, the Company, together with its subsidiaries AMMO Technologies, Inc., an Arizona corporation (“AMMO Tech”), Enlight Group II, LLC d/b/a Jagemann Munition Components d/b/a Buythebullets, a Delaware limited liability company (“Enlight”), Firelight Group I, LLC, a Delaware limited liability company (“Firelight”, and together with AMMO Tech, and Enlight, collectively, the “Sellers”, and the Sellers together with the Company, the “Seller Group”) completed the previously announced (i) sale of all assets of the Sellers related to the Sellers’ business of designing, manufacturing, marketing, distributing and selling ammunition and ammunition components (collectively, the “Ammunition Manufacturing Business”) along with certain assets of the Company related to the Ammunition Manufacturing Business, and (ii) assumption of certain liabilities of the Seller Group related to the Ammunition Manufacturing Business, for a gross purchase price of $75,000,000, subject to certain adjustments, in accordance with the terms of that certain Asset Purchase Agreement, dated January 20, 2025, by and among the Seller Group and Olin Winchester, LLC, a Delaware limited liability company (the “Buyer”), as amended on April 18, 2025 by the First Amendment to the Asset Purchase Agreement (the “Purchase Agreement” and the transaction contemplated thereby, the “Transaction"). The assets acquired, and the liabilities assumed, by the Buyer were those primarily related to the Ammunition Manufacturing Business, including the Ammunition Manufacturing Business’ dedicated manufacturing facility in Manitowoc, Wisconsin. The Company will continue to operate its online marketplace business associated with selling ammunition and firearms as a brokering agent or through direct sales through the Company’s subsidiary Speedlight Group I, LLC d/b/a GunBroker and its subsidiaries.
On April 21, 2025 and in connection with the closing of the Transaction, the Company changed its name from “AMMO, Inc.” to “Outdoor Holding Company.” Except as otherwise provided in this Item 2, all references to the Company in this Item 2 refer to the Company and its subsidiaries on a consolidated basis prior to the closing of the Transaction. For additional information regarding the Transaction, see Note 17, "Subsequent Events" of the unaudited condensed consolidated financial statements included in this report.
Overview
AMMO, Inc., owner of the GunBroker Marketplace ("GunBroker" or the "Marketplace"), the largest online marketplace serving the firearms and shooting sports industries, and a producer of high-performance ammunition and premium components began its operations in 2017.
Through our GunBroker Marketplace segment, we allow third-party sellers to list firearms, hunting gear, fishing equipment, outdoor gear, collectibles, and much more on our site. In addition to offering a wide breadth of products, GunBroker helps facilitate the legal transfer of regulated goods by stipulating these purchases be transferred through our network of more than 32,000 local Federal Firearms License holders. This requirement helps our 8.2 million users stay compliant with federal and state laws that govern the sale of firearms and other restricted items. As an online auction and sales platform, GunBroker also affords us a unique analytical view into the total domestic market for the purpose of understanding sales trends at a granular level across the shooting sports industry, with ever-growing data capabilities in associated outdoor segments. Our vision is to continue to expand services under the GunBroker umbrella and to become a valued and trusted partner to those in our industry. Recent expansions we have made to the platform include the following:
31
Through our Ammunition segment, we are tailoring our focus of our manufacturing operations to the production of premium pistol and rifle ammunition and supporting industry partners with manufactured components such as premium pistol and rifle brass casings. We will continue to leverage our flagship brands that are proprietary in nature, including STREAK VISUAL AMMUNITION™ , /stelTH/™, Signature-on-Target, and HUNT and extend our product offering with premium rifle lines and brands that complement our technologically innovative heritage. We also continue to ensure dynamic performance under the exacting standards of the United States military complex in support of our cutting-edge developmental ammunition programs as we seek out and effectively execute upon new governmental-based opportunities.
Results of Operations
Our financial results for the three and six months ended September 30, 2024, reflect our transition into our new operational strategic position, focusing on higher brass casing production and sales. We believe that we have hired a strong team of professionals and developed innovative products to establish our presence as a high-quality ammunition provider and marketplace. We continue to focus on building profitability through our rifle brass manufacturing.
The following table presents summarized financial information taken from our consolidated statements of operations for the three and six months ended September 30, 2024, compared with the three and six months ended September 30, 2023:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||
Net revenues |
|
$ |
31,419,585 |
|
|
$ |
34,372,386 |
|
|
$ |
62,373,135 |
|
|
$ |
68,626,961 |
|
Cost of revenues |
|
|
24,200,326 |
|
|
|
26,095,941 |
|
|
|
45,376,575 |
|
|
|
46,337,797 |
|
Gross margin |
|
|
7,219,259 |
|
|
|
8,276,445 |
|
|
|
16,996,560 |
|
|
|
22,289,164 |
|
Operating expenses |
|
|
19,683,377 |
|
|
|
17,288,398 |
|
|
|
39,868,872 |
|
|
|
33,299,517 |
|
Loss from operations |
|
|
(12,464,118 |
) |
|
|
(9,011,953 |
) |
|
|
(22,872,312 |
) |
|
|
(11,010,353 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income |
|
|
36,005 |
|
|
|
(533,655 |
) |
|
|
91,715 |
|
|
|
(44,905 |
) |
Loss before provision for income taxes |
|
|
(12,428,113 |
) |
|
|
(9,545,608 |
) |
|
|
(22,780,597 |
) |
|
|
(11,055,258 |
) |
Benefit for income taxes |
|
|
- |
|
|
|
(1,879,641 |
) |
|
|
4,407,491 |
|
|
|
(2,085,229 |
) |
Net Loss |
|
$ |
(12,428,113 |
) |
|
$ |
(7,665,967 |
) |
|
$ |
(27,188,088 |
) |
|
$ |
(8,970,029 |
) |
Non-GAAP Financial Measures
We analyze operational and financial data to evaluate our business, allocate our resources, and assess our performance. In addition to total net sales, net loss, and other results under accounting principles generally accepted
32
in the United States (“GAAP”), the following information includes key operating metrics and non-GAAP financial measures that we use to evaluate our business. We believe that these measures are useful for period-to-period comparisons of the Company's performance. We have included these non-GAAP financial measures because they are key measures management uses to evaluate our operational performance, produce future strategies for our operations, and make strategic decisions, including those relating to operating expenses and the allocation of our resources. Accordingly, we believe that these measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and Board of Directors.
Adjusted EBITDA
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||||
|
|
September 30, 2024 |
|
|
|
September 30, 2023 |
|
|
September 30, 2024 |
|
|
|
September 30, 2023 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reconciliation of GAAP net income to Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(12,428,113 |
) |
|
|
$ |
(7,665,967 |
) |
|
$ |
(27,188,088 |
) |
|
|
$ |
(8,970,029 |
) |
Provision for income taxes |
|
|
- |
|
|
|
|
(1,879,641 |
) |
|
|
4,407,491 |
|
|
|
|
(1,954,649 |
) |
Depreciation and amortization |
|
|
4,734,011 |
|
|
|
|
4,661,658 |
|
|
|
9,438,388 |
|
|
|
|
9,293,566 |
|
Interest expense, net |
|
|
166,848 |
|
|
|
|
212,314 |
|
|
|
363,370 |
|
|
|
|
416,515 |
|
Employee stock awards |
|
|
1,153,426 |
|
|
|
|
1,699,684 |
|
|
|
2,548,409 |
|
|
|
|
2,880,883 |
|
Common stock purchase options |
|
|
33,568 |
|
|
|
|
- |
|
|
|
74,623 |
|
|
|
|
- |
|
Other income (expense), net |
|
|
(202,853 |
) |
|
|
|
321,341 |
|
|
|
(455,085 |
) |
|
|
|
(371,610 |
) |
Contingent consideration fair value |
|
|
232,663 |
|
|
|
|
651,875 |
|
|
|
(19,569 |
) |
|
|
|
(41,076 |
) |
Acquisition and divestitures |
|
|
154,228 |
|
|
|
|
- |
|
|
|
134,242 |
|
|
|
|
- |
|
Independent investigation |
|
|
954,857 |
|
|
|
|
- |
|
|
|
954,857 |
|
|
|
|
- |
|
Other nonrecurring expenses(1) |
|
|
5,831,284 |
|
|
|
|
3,867,692 |
|
|
|
12,760,296 |
|
|
|
|
6,627,418 |
|
Adjusted EBITDA |
|
$ |
629,919 |
|
|
|
$ |
1,868,956 |
|
|
$ |
3,018,934 |
|
|
|
$ |
7,881,018 |
|
Adjusted EBITDA is a non-GAAP financial measure that displays our net loss, adjusted to eliminate the effect of certain items as described below. We define Adjusted EBITDA as net income (loss) excluding (i) interest expense, net, (ii) other income (expense), net, (iii) provision or benefit for income taxes, (iv) depreciation and amortization, (v) share-based or warrant-based compensation expenses, (vi) changes to the contingent consideration fair value, (vii) proxy contest fees and (viii) other nonrecurring expenses, such as professional and legal fees.
We believe that it is useful to exclude these non-cash expenses and non-recurring expenses because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations.
Non-GAAP financial measures have limitations, should be considered as supplemental in nature and are not meant as a substitute for the related financial information prepared in accordance with GAAP. These limitations include the following:
33
Due to these limitations, you should consider the non-GAAP financial measures alongside other financial performance measures, including our net loss and our other financial results presented in accordance with GAAP.
Net Revenues
The following table presents our revenues by the various categories that comprise our total revenues for the three and six months ended September 30, 2024 and 2023. “Proprietary ammunition” includes those lines of ammunition that we manufacture at our facilities and sell under the brand names “STREAK VISUAL AMMUNITION™” and “/stelTH/™”. We define “standard ammunition” as non-proprietary ammunition that directly competes with other brand manufacturers. Our “standard ammunition” includes ammunition that we manufacture at our facilities as well as any completed ammunition that we acquire in the open market for sale to others. Also included in this category is low-cost target pistol and rifle ammunition as well as bulk packaged ammunition that we manufacture using reprocessed brass casings. Ammunition within the standard ammunition product line typically carries much lower gross margins than our proprietary ammunition.
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Proprietary Ammunition |
|
$ |
2,718,987 |
|
|
$ |
1,180,373 |
|
|
$ |
4,078,250 |
|
|
$ |
2,335,174 |
|
Standard Ammunition |
|
|
13,240,925 |
|
|
|
14,336,216 |
|
|
|
25,241,216 |
|
|
|
27,287,444 |
|
Ammunition Casings |
|
|
3,476,652 |
|
|
|
6,381,081 |
|
|
|
8,788,657 |
|
|
|
12,617,425 |
|
Marketplace Revenue |
|
|
11,983,021 |
|
|
|
12,474,716 |
|
|
|
24,265,012 |
|
|
|
26,386,918 |
|
Total Revenues |
|
$ |
31,419,585 |
|
|
$ |
34,372,386 |
|
|
$ |
62,373,135 |
|
|
$ |
68,626,961 |
|
We experienced an 8.6% and 9.1% decrease in our net revenues for the three and six months ended September 30, 2024, respectively, compared with the three and six months ended September 30, 2023. These decreases were the result of decreased revenue in both of our reporting segments due to changes in market demand, and specifically for our ammunition division, changes in pricing, and sales mix. In addition, our brass customer demand decreased due to a shortage of powder available in the market. We believe that the shift in our operational strategy focusing on higher margin brass casing production and sales negatively impacted our sales in the three and six months ended September 30, 2024, as compared to the three and six months ended September 30, 2023. Our focus on creating profitability is in contrast to revenue growth. In our Marketplace segment, revenue declined in three and six months ended September 30, 2024 compared to the three and six months ended September 30, 2023 due to lower volume partially offset by an increase in the take rate over the prior year periods.
The opening of our manufacturing plant in Manitowoc, WI in August 2022 allows us the ability to increase capacity based upon the needs of the market and through further expansion of our casing and loading lines and allows us to continue to expand distribution into commercial markets, introduce new product lines, and continue to initiate sales to U.S. law enforcement, military, and international markets.
For example, through our acquisition of SW Kenetics, Inc., the Company developed and deployed a line of tactical armor piercing (“AP”) and hard armor piercing incendiary (“HAPI”) precision ammunition to meet the lethality requirements of both the U.S. and foreign military customers. We continue to demonstrate our AP and HAPI ammunition to military personnel at scheduled and invite only events, resulting in increased interest and procurement discussions. The Company has since developed the ballistic match (“BMMPR”) and Signature-on-Target rounds under contract with the U.S. Government in support of U.S. special operations, which contracts have been publicly announced pursuant to governmental authorization. Additional work continues in support of the military operations of the United States and its allied military components, the status of which is not currently subject to disclosure.
It is important to note that, although U.S. law enforcement, military and international markets represent significant opportunities for our Company, they also have a long sales cycle. The Company’s sales team has been effective in establishing sales and distribution channels, both in the United States and abroad, that we anticipated will drive sustained sales opportunity in the military, law enforcement, and commercial markets.
34
Cost of Revenues
Cost of revenues for our Ammunition segment consists of product cost and cost directly and indirectly associated with getting those products to a sellable state. Cost of revenues for our Marketplace segment, consists of costs associated with facilitating transactions on the platform.
Cost of revenues decreased by approximately $1.9 million and $1.0 million to $24.2 million and $45.4 million, respectively, for the three and six months ended September 30, 2024, compared to the three and six months ended September 30, 2023. These decreases were the result of a decrease in net sales as well increases to non-cash depreciation related to increases in production equipment, expensing of increased labor, and overhead used to produce finished product during the three and six months ended September 30, 2024 as compared to the prior year periods.
Gross Margin
Our gross margin percentage, which measures our gross profit as a percentage of sales decreased to 23.0% from 24.1% during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. Our gross margin percentage decreased to 27.3% from 32.5% during the six months ended September 30, 2024, as compared to the six months ended September 30, 2023. These decreases were a result of increased cost of materials, labor, and overhead in our Ammunition segment, the impact of which was partially offset by contributions from our marketplace, GunBroker.com, which improved margins period over period by increased fees and services.
We believe that as we grow Ammunition segment sales through new markets and expanded distribution, our gross margins will continue to increase. Our goal in the next 12 to 24 months is to continue to improve our gross margins. We expect to accomplish this through the following:
Operating Expenses
Operating expenses consist of selling and marketing expenses, which include advertising, tradeshows, commissions and marketing expenses, corporate general and administrative expenses, which include legal and professional fees and as well as insurance and rent, employee salaries and related expenses, which include salaries, benefits and stock based compensation as well as depreciation and amortization expenses.
Operating expenses increased by approximately $2.4 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and increased as a percentage of sales to 62.6% for the
35
three months ended September 30, 2024 from 50.2% for the three months ended September 30, 2023. The increase was primarily due to a $3.7 million increase in legal fees associated with the Delaware litigation and professional fees associated with investments in manufacturing efficiencies, partially offset by $0.6 million in an insurance audit refund during the three months ended September 30, 2024.
Operating expenses increased by approximately $6.6 million for the six months ended September 30, 2024, compared to prior period in 2023, and increased as a percentage of sales to 63.9% for the six months ended September 30, 2024 from 48.5% for the six months ended September 30, 2023. The increase was primarily due to a $5.3 million increase in legal fees associated with Delaware litigation and professional fees associated with investments in manufacturing efficiencies and $3.2 million in expenses related to a settlement contingency, partially offset by a $1.3 million decrease due to insurance audit refunds, and a decrease of $0.2 million in bad debt expenses due to increased collection efforts during the six months ended September 30, 2024 compared to the six months ended September 30, 2023.
Other Income
Other income for the three and six months ended September 30, 2024, increased by $0.6 million and $0.1 million, respectively, compared to the three and six months ended September 30, 2023. The increase during the three months ended September 30, 2024, was associated with increased interest income earned on cash and an expense in the three months ended September 30, 2023 related to a prepayment for inventory we were unable to realize which is not included in the current period. The increase during the six months ended September 30, 2024 was a result of increased interest earned on cash.
Interest expense remained relatively constant for the three and six months ended September 30, 2024 compared the three and six months ended September 30, 2023.
Income Taxes
For the three and six months ended September 30, 2024, we recorded a benefit for federal and state income taxes of approximately zero and $4.4 million, respectively. For the three and six months ended September 30, 2023, we recorded a benefit for federal and state income taxes of approximately $1.9 million and $2.0 million, respectively. The change in tax benefit for the three and six months ended September 30, 2024 is a result of recording a full valuation allowance against our deferred tax assets as we concluded it is more likely than not that the net deferred tax assets will not be realized.
Liquidity and Capital Resources
As of September 30, 2024, we had $33.5 million of cash and cash equivalents, a decrease of $22.1 million from March 31, 2024. For the six months ended September 30, 2024, the $22.1 million decrease in cash and cash equivalents is primarily due to $8.0 million related to the settlement with Triton Value Partners, LLC, $5.6 million in legal fees, $2.7 million in unpaid Firearms and Ammunition Excise Tax from the prior fiscal year, $1.9 million in consulting fees related to the improvement of the manufacturing process in rifle brass at our manufacturing facility in Manitowoc, WI, $1.5 million due to the purchase of inventory, a $1.4 million increase in capital expenditures related to acquiring an annealing oven and tooling equipment, and $1.1 million in stock-buybacks.
Working capital is summarized and compared as follows:
|
|
September 30, 2024 |
|
|
March 31, 2024 |
|
||
Current assets |
|
$ |
108,597,011 |
|
|
$ |
131,525,266 |
|
Current liabilities |
|
|
29,750,077 |
|
|
|
30,975,049 |
|
|
|
$ |
78,846,934 |
|
|
$ |
100,550,217 |
|
Changes in cash flow are summarized as follows:
Operating Activities
For the six months ended September 30, 2024, net cash used in operations was primarily the result of an increase in inventories due to anticipated increased production in our Manitowoc, WI facility and decreased sales as well as a decrease in accounts payable as the result of a decrease in unpaid invoices, partially offset by a decrease in accounts receivable due to a decrease in sales as well as non-cash depreciation and amortization.
36
For the six months ended September 30, 2023, net cash provided by operations was primarily the result of non-cash depreciation and amortization, non-cash expense associated with stock awards, a decrease in accounts receivable due to collections on sales made in the prior year and an increase in deposits made for inventories.
Investing Activities
For the six months ended September 30, 2024, net cash used in investing activities consisted of $2.8 million related to purchases of production equipment, and capitalized development costs related to our marketplace, GunBroker.
For the six months ended September 30, 2023, net cash used in investing activities consisted of approximately $2.6 million related to purchases of production equipment for our new manufacturing facility in Manitowoc, WI and capitalized software development costs related to our marketplace, GunBroker.
Financing Activities
For the six months ended September 30, 2024, net cash used in financing activities consisted of $5.9 million under the stock repurchase plan which included shares repurchased related to a settlement contingency, $1.4 million of insurance premium note payments, $1.4 million of Preferred Stock dividends paid, $1.1 million used to repurchase shares of Common Stock pursuant to our repurchase plan, and $0.5 million used in the repurchase of common stock to cover taxes on share awards issued to employees.
For the six months ended September 30, 2023, net cash used in financing activities consisted of $1.9 million used in our common stock repurchase plan, $2.0 million in payments toward our insurance premium note, $1.4 million of dividends paid on Preferred Stock, and the generation of approximately $26.0 million from accounts receivable factoring, which was offset by repayments on the factoring liability of approximately $26.0 million.
Liquidity
We expect existing working capital, cash flow from operations, bank borrowings, and sales of equity and debt securities to be adequate to fund our operations over the next 12 months. Generally, we have financed operations to date through the proceeds of stock sales, bank financings, and related-party notes. These sources have been adequate to fund our recurring cash expenditures including but not limited to our working capital requirements, capital expenditures to expand our operations, debt repayments, and acquisitions. We intend to continue to use the aforementioned sources of funding for capital expenditures, debt repayments, share repurchases and any potential acquisitions.
Leases
We currently lease three locations that are used for our offices, production, and warehousing. As of September 30, 2024, we had $1.8 million of fixed lease payment obligations with $0.7 million payable within the next 12 months. Please refer to Note 9, "Leases" in our financial statements for additional information.
Construction Loan
On October 14, 2021, we entered into a Construction Loan Agreement (the “Hiawatha Loan Agreement”) with Hiawatha National Bank (“Hiawatha”). The Hiawatha Loan Agreement specifies that Hiawatha may lend up to $11.625 million to AMMO, INC. and Firelight Group I, LLC (together, the "Borrower") to pay a portion of the construction costs of the approximately 185,000 square foot Manitowoc manufacturing facility (the “Construction Loan”). The first advance of Construction Loan funds by Hiawatha was made on October 14, 2021 in the amount of $329,843. We received advances of Construction Loan funds approximately every month as our “owner’s equity” was fully funded into the ongoing new plant construction project. The Construction Loan is an advancing term loan and not a revolving loan so any portion of the principal repaid cannot be re-borrowed.
Additionally, on October 14, 2021, we issued a Promissory Note in favor of Hiawatha (the “Hiawatha Note”) in the amount of up to $11.625 million with an interest rate of four and one-half percent (4.5%). The maturity date of the Hiawatha Note is October 14, 2026. Under the terms of the Hiawatha Loan Agreement, we are required to make monthly payments of $64,620, which consists of principal and interest until the maturity date, at which time the remaining principal balance of the Construction Loan would become due.
We can prepay the Hiawatha Note in whole or in part starting in July 2022 with a prepayment premium of 1% of the principal being prepaid.
37
The Hiawatha Loan Agreement contains customary events of default including, but not limited to, a failure to make any payments pursuant to the Hiawatha Loan Agreement or Hiawatha Note, a failure to complete construction of the project, a lien of $100,000 or more against the property, or a transfer of the property without Hiawatha’s consent. Upon the occurrence of an event of default, among other remedies, the amounts due pursuant to the Construction Loan can be accelerated, Hiawatha can foreclose on the property pursuant to the mortgage, and a late charge of five percent (5%) of the amount due will be owed with all amounts then owed pursuant to the Hiawatha Note bearing interest at an increased rate.
We are required to maintain a debt service coverage ratio (as defined in the terms of the Hiawatha Loan Agreement) of not less than 1.25 to 1.00 for the period defined below and continuing to and including the maturity date. The debt service coverage ratio is tested on an annual basis, as of July 1, for each previous year. We have maintained compliance with the debt service coverage ratio under the Hiawatha Loan Agreement since its inception.
We financed a portion of our Manitowoc, WI facility with the Construction Loan. As of September 30, 2024, we expect to make $0.8 million in principal and interest payments within the next 12 months. The principal balance of the Construction Loan will mature on October 14, 2026.
Revolving Loan
On December 29, 2023, we entered into a Loan and Security Agreement (the “Sunflower Agreement”) by and among the Company and the other borrowers party to the Sunflower Agreement, the lenders party thereto (collectively, the “Lenders”) and Sunflower Bank, N.A., as administrative agent and collateral agent (the “Agent”), pursuant to which the Lenders provided us a revolving loan in the principal amount of the lesser of (a) $20.0 million (the “Total Commitment Amount”) and (b) the Borrowing Base (a formula based on certain amounts owed to Borrower for goods sold or services provided and eligible inventory) (the “Revolving Loan”). The proceeds of loans under the Sunflower Agreement may be used for working capital, general corporate purposes, permitted acquisitions, to pay fees and expenses incurred in connection with the Revolving Loan, to facilitate our stock repurchase program and to fund our general business requirements.
The Revolving Loan bears interest at a rate of the greater of (x) 3.50% and (y) Term SOFR, plus 3.00% (the “Revolving Facility Applicable Rate”) and is computed on the basis of a 360-day year for the actual number of days elapsed. Except in an event of default, advances under the Revolving Loan bear interest, on the outstanding daily balance thereof, at the Revolving Facility Applicable Rate. Interest is due and payable on the first calendar day of each month during the term of the Sunflower Agreement. We are also obligated to pay to Agent, for the ratable benefit of Lenders, an origination fee, prepayment fee, unused facility fee, collateral monitoring fee and Lender expenses.
We may borrow, repay and re-borrow under the Revolving Loan until December 29, 2026, at which time the commitments will terminate and all outstanding loans, together with all accrued and unpaid interest, must be repaid. If the Revolving Loan is refinanced by another lender prior to December 29, 2026, there is an additional fee payable concurrently with such refinancing based on a percentage (ranging from 1.0% to 3.0%) of the Total Commitment Amount depending on the date of the refinancing. Upon an event of default under the Sunflower Agreement, all obligations under the Sunflower Agreement will bear interest at a rate equal to three percentage points above the interest rate applicable immediately prior to the occurrence of the event of default.
As of September 30, 2024, we did not have an outstanding balance on the Revolving Loan.
Off-Balance Sheet Arrangements
As of September 30, 2024 and March 31, 2024, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, net sales, expenses, results of operations, liquidity capital expenditures, or capital resources.
Critical Accounting Estimates
Our condensed consolidated financial statements were prepared in accordance with GAAP. Critical accounting estimates are those that we believe are most important to the portrayal of our financial condition and results of operations. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our estimates are evaluated on an ongoing basis and are drawn from historical operations, current trends, future business plans and other factors that management believes are relevant at the time our consolidated financial statements are prepared. Actual results
38
may differ from our estimates. Management believes that the accounting estimates reflect the more significant judgments and estimates we use in preparing our consolidated financial statements.
Certain accounting policies that require significant management estimates, and are deemed critical to our results of operations or financial position, are discussed in the critical accounting policies and estimates section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K/A. There have been no material changes to the critical accounting policies disclosed in the Form 10-K/A.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from the market risks disclosed under the caption “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of the Annual Report on Form 10-K for the year ended March 31, 2024 filed with the SEC on June 13, 2024 and is hereby incorporated by reference.
ITEM 4. CONTROLS AND PROCEDURES
Background and Results of Special Committee Investigation
As described in additional detail in the Explanatory Note to the Form 10-K/A, in September 2024, a Special Committee of the Board of Directors initiated an independent investigation of certain matters impacting the Company's accounting procedures, disclosure controls and internal controls during prior periods. The investigation was undertaken through independent legal counsel, who received assistance from outside consultants. During the course of the investigation, the Special Committee discovered accounting and financial reporting errors that required restatement resulting primarily from (i) inaccurate valuation of, and accounting for, share-based compensation awards to employees, non-employee directors and other service providers, and shares issued in exchange for goods and services, (ii) inappropriate capitalization of certain share issuance costs and (iii) inappropriate accounting for certain convertible notes and warrants issued by the Company. During the course of the investigation, the Special Committee also found that the Company had not properly disclosed certain executive officers, related party transactions and executive compensation.
Based on the results of the independent investigation, our review of our financial records, and other work completed by our management, the Special Committee concluded that there were material misstatements in the consolidated financial statements as of and for the fiscal years ended March 31, 2024, 2023 and 2022. Accordingly, the Board of Directors and management concluded that our consolidated financial statements for these periods should no longer be relied upon and that such financial statements required restatement. The restated consolidated financial statements as of and for the fiscal years ended March 31, 2024, 2023 and 2022 were provided in the Form 10-K/A.
Evaluation of Disclosure Controls and Procedures
Our management evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(c) and 15d-15(e) under the Exchange Act, as of September 30, 2024. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.
Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of September 30, 2024 due to the material weaknesses previously identified and disclosed in the Form 10-K/A and listed below.
Material Weaknesses and Management’s Remediation Plan
Management determined that the previously disclosed material weaknesses in its internal control over financial reporting processes that involve the control environment, information and communication, monitoring activities, and control activities components of the framework set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) continue to exist at September 30, 2024, and specifically include:
Control Environment, Information and Communication, and Monitoring Activities – Under the COSO framework, the Board of Directors and senior management establish the tone at the top regarding the importance of internal controls and management reinforces expectations at the various levels of the company.
39
We did not execute appropriately designed entity-level controls governing the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) a lack of a sufficient complement of qualified personnel within the accounting and financial reporting function, including reliance on unqualified personnel, with an appropriate level of technical expertise to provide for sufficient oversight, accountability and monitoring over the performance of control activities, (ii) insufficient governance to monitor compliance with the Company's Code of Conduct to identify, evaluate, and report potential fraud as well as related director and management behavior, such as, among other things, director independence, and (iii) improper review and approval of disclosure regarding related party transactions and executive compensation.
Control Activities – These material weaknesses in the control environment resulted in certain instances of inappropriate accounting decisions and inappropriate changes in accounting methodology and contributed to the following additional material weaknesses whereby we did not design, implement and maintain effective controls within certain business processes:
Management’s Remediation Initiatives for Existing Material Weaknesses
Following the identification of the previously disclosed material weaknesses described above, and with the oversight of the Audit Committee, management remains committed to the planning and implementation of remediation efforts to address these material weaknesses. The remediation efforts, summarized below, which are either implemented or in process, are intended to both address the identified material weaknesses and strengthen our overall financial control environment. In this regard, our initiatives include:
Control Environment, Information and Communication, and Monitoring Activities:
40
Control Activities:
41
Changes in Internal Control over Financial Reporting
Other than the changes described above, there have not been any changes in our internal control over financial reporting (as such term is defined in Exchange Act in Rule 13a-15(c) and 15d-15(e) under the Exchange Act) during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of the filing of this report, we continue to implement the changes and remediation plan described above.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in various disputes, claims, suits, investigations and legal proceedings arising in the ordinary course of business, including commercial, intellectual property, and employment-related matters, as well as stockholder derivative actions, class action lawsuits and other matters. The litigation matters described below involve issues or claims that may be of particular interest to our stockholders, regardless of whether any of these matters were material to our business or financial condition based upon the standard set forth in SEC rules. We believe we have substantial defenses in each unresolved matter, and we intend to vigorously defend against the claims brought by plaintiffs in the pending lawsuits.
On April 30, 2023, director and stockholder Steve Urvan filed suit in the Delaware Court of Chancery (the “Delaware Court”) against the Company, and certain Company directors, former directors, employees, former employees and consultants. Urvan’s claims include fraudulent inducement, unjust enrichment and violations of the Arizona Securities Act. The suit seeks a court order for partial rescission of the Company’s acquisition of GunBroker.com in April 2021 and compensatory damages of not less than $140 million. On August 1, 2023, the Company filed a separate lawsuit against Urvan in the Delaware Court alleging, among other things, that Urvan committed fraud in connection with the sale of GunBroker to the Company, and that Urvan breached his indemnification obligations to the Company after the sale. The Company timely responded to the Urvan complaint by filing a motion to dismiss. On September 11, 2023, the Delaware Court consolidated the Company’s lawsuit against Urvan with Urvan’s lawsuit against the Company and the individual defendants. On September 18, 2023, the Company filed an amended complaint that added a claim against Urvan for breach of the Arizona Securities Act. Urvan moved to dismiss the Company’s complaint in full. On December 18, 2023, the Delaware Court heard argument on the parties’ motions to dismiss in the consolidated action. On February 27, 2024, the Delaware Court issued an opinion resolving all pending motions to dismiss. The Delaware Court dismissed Urvan’s aiding and abetting claims against the individual defendants, but it declined to dismiss Urvan’s other claims against the individuals and declined to dismiss Urvan’s claims against the Company. The Delaware Court rejected Urvan’s motion to dismiss the Company’s claims against him in its entirety. The Delaware Court scheduled the matter for a five-day trial in April 2026.
On January 18, 2024, Innovative Computer Professionals, Inc. d/b/a Digital Cash Processing (“DCP”) filed a civil action in Minnesota state court against Outdoors Online, LLC d/b/a Gunbroker.com for breach of contract (the “MN Action”). In the MN Action, DCP alleged that GunBroker.com breached a May 2021 contract, pursuant to which DCP was to provide specified digital payment processing services, and it alleged $100 million in damages. On February 7, 2024, GunBroker.com removed the MN Action to the United States District Court for the District of Minnesota (Case No. 24-CV-00373-DWF-DTS) ("Federal Action"). On February 14, 2024, GunBroker.com moved to dismiss the MN Action for lack of personal jurisdiction and for failure to adequately state a claim, or, in the alternative, to transfer the MN Action to the United States District Court for the District of Arizona (the “Motion”). The court denied the motion, after which GunBroker filed and Answer and counterclaims against DCP and certain individuals. GunBroker denies the allegations in the Federal Action and plans to vigorously defend against DCP's
42
claims. As of September 30, 2024, the parties have exchanged initial disclosures and are engaged in fact discovery. Pursuant to the scheduling order, the matter is tentatively scheduled for trial in November of 2025.
ITEM 1A. RISK FACTORS
There were no material changes to the “Risk Factors” disclosed in Part I, Item 1A of the Form 10-K/A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Common Stock
On February 8, 2022, we announced that the Board of Directors authorized a share repurchase program for up to $30.0 million of our outstanding Common Stock. On March 28, 2023, we announced that the Board of Directors authorized the extension of our repurchase program until February 2024. On February 6, 2024, the Board of Directors authorized the extension of our repurchase program until February 2025.
Under the share repurchase program, the Company is authorized to repurchase shares through open market purchases, privately-negotiated transactions, accelerated share repurchases or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The repurchases have no time limit and may be suspended or discontinued completely at any time. The specific timing and amount of repurchases will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. The repurchases will be made using the Company’s cash resources.
The following table summarizes our share repurchases under our repurchase program for the three months ended September 30, 2024.
Period |
|
Total |
|
|
Average |
|
|
Total |
|
|
Approximate Dollar Value of |
|
||||
July 1, 2024 - July 31, 2024 |
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
August 1, 2024 - August 31, 2024 |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
September 1, 2024 - September 30, 2024 |
|
|
2,857,143 |
|
|
|
1.68 |
|
|
|
2,857,143 |
|
|
|
- |
|
Total |
|
|
2,857,143 |
|
|
$ |
1.68 |
|
|
|
2,857,143 |
|
|
$ |
21,429,813 |
|
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
43
ITEM 6. EXHIBITS
Exhibit No. |
|
Exhibit |
|
|
|
2.1# |
|
|
2.2+ |
|
|
2.3 |
|
|
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
4.1 |
|
|
4.2 |
|
|
4.3 |
|
|
4.4 |
|
|
31.1* |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Jared R. Smith. |
31.2* |
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Paul J. Kasowski. |
32.1** |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Jared R. Smith. |
32.2** |
|
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Paul J. Kasowski. |
101.INS* |
|
Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page formatted as Inline XBRL and contained in Exhibit 101 |
* Filed Herewith.
** The certifications attached as Exhibit 32.1 and Exhibit 32.2 are not deemed “filed” with the SEC and are not to be incorporated by reference into any filing of Outdoor Holding Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
# Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish supplementally copies of omitted schedules and exhibits to the Securities and Exchange Commission or its staff upon its request.
+ Portions of Exhibit 2.2 have been redacted in accordance with Item 601(b)(2)(ii) of Regulation S-K and certain schedules, annexes or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K, but will be furnished supplementally to the SEC upon request.
44
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
Outdoor Holding Company |
|
|
|
|
|
By: |
/s/ Jared R. Smith |
Dated: May 20, 2025 |
|
Jared R. Smith, Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
|
By: |
/s/ Paul J. Kasowski |
Dated: May 20, 2025 |
|
Paul J. Kasowski, Chief Financial Officer |
|
|
(Principal Accounting Officer and Principal Financial Officer) |
45
Exhibit 31.1
CERTIFICATION
I, Jared R. Smith, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Outdoor Holding Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: May 20, 2025 |
By: |
|
/s/ Jared R. Smith |
|
Name: |
|
Jared R. Smith |
|
Title: |
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Paul J. Kasowski, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Outdoor Holding Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
Date: May 20, 2025 |
By: |
|
/s/ Paul J. Kasowski |
|
Name: |
|
Paul J. Kasowski |
|
Title: |
|
Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Quarterly Report of Outdoor Holding Company (the “ Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Jared R. Smith, Chief Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2025 |
By: |
|
/s/ Jared R. Smith |
|
Name: |
|
Jared R. Smith |
|
Title: |
|
Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with Quarterly Report of Outdoor Holding Company (the “ Company”) on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Paul J. Kasowski, Chief Financial Officer (Principal Financial Officer) of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Quarterly Report fully complies with the requirements of Section 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2025 |
By: |
|
/s/ Paul J. Kasowski |
|
Name: |
|
Paul J. Kasowski |
|
Title: |
|
Chief Financial Officer (Principal Financial Officer) |