Business context and reporting period
The supplied metadata names Outdoor Holding Co, but the filing identifies the registrant as AMMO, Inc. This unaudited Form 10-Q covers the three and nine months ended December 31, 2019, the company’s fiscal third quarter and first nine months of fiscal 2020. AMMO manufactures and sells ammunition and casings; its March 2019 acquisition of Jagemann’s casing operations expanded its manufacturing capacity and product mix.
Financial performance and position
| Metric | Three months ended Dec. 31, 2019 | Nine months ended Dec. 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Net sales | $2.77 million | $10.03 million | $0.49 million; $3.20 million |
| Gross profit (loss) | $(0.89) million | $(2.26) million | $(0.09) million; $0.24 million |
| Gross margin | −32.1% | −22.6% | −18.6%; 7.5%, calculated from reported sales and cost of goods sold |
| Operating loss | $(2.65) million | $(9.54) million | $(2.17) million; $(5.53) million |
| Net loss | $(2.86) million | $(10.15) million | $(0.61) million; $(3.97) million |
| Loss per share | $(0.06) | $(0.22) | $(0.02); $(0.12) |
| Adjusted EBITDA, non-GAAP | $(1.34) million | $(5.08) million | Not presented in the supplied filing text for comparison |
- Revenue rose 467% for the quarter and 213% for the nine-month period, driven mainly by casing sales of $1.53 million and $6.32 million, respectively. Standard ammunition sales also increased; proprietary ammunition sales fell 34% for the nine-month period.
- Cost of goods sold exceeded sales in both 2019 periods. Management attributed weak gross margins to acquisition-related depreciation and amortization, raw-material and overhead costs, lower-margin products, and production volumes insufficient to absorb fixed manufacturing costs.
- Nine-month operating cash use was $3.10 million, compared with $5.20 million in 2018. Investing cash use was $0.36 million; financing provided $1.41 million. Cash declined by $2.05 million to $130,870.
- At December 31, 2019, current assets were $7.22 million and current liabilities $12.79 million, a working-capital deficit of $5.57 million. Total assets were $40.75 million, total liabilities $17.36 million, and shareholders’ equity $23.39 million.
- Current liabilities included $936,750 of factoring, $5.80 million of current related-party notes, a separate $415,000 related-party note, and $496,095 of current operating-lease liability. Long-term liabilities included $900,000 of contingent consideration and $3.67 million of operating-lease liability. The filing reports no convertible-note balance at quarter-end.
Changes, outlook, and risks
- The Jagemann acquisition materially changed the revenue mix by adding casing sales, while also increasing depreciation, amortization, payroll, and manufacturing costs. Management said the plant was operating at a fraction of its designed capacity.
- Management’s stated priorities were expanding commercial distribution, pursuing law-enforcement, military, and international sales, launching higher-margin products, reducing component and labor costs, and increasing automation and production. It aimed to improve gross margins over the following 12–24 months. No quantified revenue or earnings guidance was provided.
- Management expected cash, operating cash flow, and alternative financing to fund operations for at least 12 months, but cautioned that financing might not be available on acceptable terms or at all. Liquidity was tight, and the company relied on equity issuance, factoring, and related-party borrowing.
- A $5.80 million related-party note was described as extended to April 1, 2020, with its rate increasing to 9% from October 2019; the contractual-obligations schedule instead lists $5.80 million under 2021. The filing also reports a subsequent $2.5 million private placement of convertible notes bearing 8% interest and maturing nine months after issuance.
- A former employee filed a Department of Labor complaint alleging retaliation and constructive discharge; the company said it considered the allegations without merit and intended to defend itself. Management reported no other known contingencies at December 31, 2019.
- For the nine months, stock-based compensation and stock issued for services were significant non-cash costs. The filing’s Adjusted EBITDA is non-GAAP and management cautioned it should be considered alongside GAAP results.
Important facts for investors to verify
- Confirm the issuer identity: the filing is for AMMO, Inc., not the company named in the request metadata.
- Reconcile the related-party note’s stated April 2020 maturity with its classification and the schedule showing payment in 2021; assess repayment or refinancing plans.
- Assess near-term liquidity, including the $130,870 cash balance, working-capital deficit, factoring terms and collateral, and the subsequent short-term convertible financing.
- Track whether sales growth—particularly in casings and proprietary ammunition—can lift utilization and margins enough to cover fixed manufacturing costs.
- Review customer concentration: four customers accounted for 49.8% of quarterly sales, and five customers accounted for 32.8% of receivables, according to the filing.