Outdoor Holding Co annual report, FY2016

Business context and reporting period

The filing is AMMO, Inc.’s Form 10-K for the fiscal year ended December 31, 2016; it does not report a standalone fourth quarter. The request identifies Outdoor Holding Co., but the filing names AMMO, Inc. (formerly Retrospettiva, Inc.), so the company identity should be verified. During 2016, AMMO was a non-operating company seeking a merger or acquisition, not an operating ammunition business. It reported no revenue and no business operations.

Key financial metrics

At December 31, 2016, cash and total current assets were $0; current liabilities were $625,575, producing a working-capital deficit of $625,575, versus $318,815 at year-end 2015. The 2016 liabilities consisted primarily of a $625,000 stock-issuance liability; the filing reports no notes payable or accrued interest remaining at year-end. Stockholders’ deficit was $625,575. No meaningful operating margin can be assessed given the absence of revenue.

Material changes versus the prior comparable period

Net loss increased by $313,457 year over year, driven chiefly by a $306,304 financing expense related to debt forgiveness and an agreed share issuance. The company recorded a $318,696 gain from settlement of related-party debt, offset by a $625,000 expense for 500,000 restricted post-split shares, yielding the net financing expense. The shares were not issued until March 2017. Operating expenses rose by $7,670, including higher accounting, audit, and investor-relations costs. Operating cash use increased, and the working-capital deficit nearly doubled.

Outlook, risks, and unusual items

• Management planned to seek a merger, acquisition, or similar transaction, but gave no revenue, earnings, or other quantitative guidance and could not predict whether or when a transaction would occur.
• A January 3, 2017 binding letter of intent proposed acquiring 100% of a private company also named Ammo, Inc. for up to 18 million post-split shares. Due diligence and final documentation remained incomplete as of the filing; completion was not assured.
• The independent auditor stated that recurring losses, negative working capital, stockholders’ deficit, and lack of revenue-generating operations raised substantial doubt about the company’s ability to continue as a going concern. The financial statements include no adjustments for a possible failure to continue.
• Management concluded disclosure controls and internal control over financial reporting were ineffective, citing inadequate segregation of duties and accounting software limitations, both identified as material weaknesses.
• Other notable corporate actions included a change of control, a 1-for-25 reverse split, a change of name and Delaware domicile, and an increase in authorized common shares to 100 million. The filing reports no property, salaried employees, dividends, or material legal proceedings.
• Risks include the need to raise capital, limited resources and acquisition-analysis experience, potential dilution or loss of existing shareholders’ control in a transaction, and volatility and limited liquidity in the OTC penny-stock market. The filing says the company did not plan to raise capital at that time, but also said additional funding would be needed.

Most important facts to verify

• Confirm that this AMMO, Inc. filing—not an Outdoor Holding Co. filing—is the intended document.
• Verify the proposed acquisition’s status, final terms, due diligence, and the potential issuance of up to 18 million shares.
• Review the $625,000 stock-issuance liability and the related debt-forgiveness accounting, including the March 2017 share issuance and its effect on dilution.
• Assess the company’s ability to fund operations and address the auditor’s going-concern warning and management-identified control weaknesses.
• Reconcile share counts and dates: the year-end statements reflect 577,056 shares after retrospective split adjustment, while the filing reports 1,077,056 outstanding as of March 2017.