Business context and reporting period
Entity and period discrepancy: The supplied filing is AMMO, Inc.’s Form 10-K, not a filing for Outdoor Holding Co. It reports the fiscal year ended March 31, 2021—not 2020 Q4—and compares it with the year ended March 31, 2020. The filing was signed June 29, 2021.
AMMO designs, manufactures, and sells ammunition and ammunition casings, and acquired the GunBroker.com online marketplace after year-end. Its fiscal 2021 business included ammunition manufacturing and Jagemann Munition Components (JMC); GunBroker.com’s acquisition closed April 30, 2021.
Financial performance and liquidity
| Metric | FY ended Mar. 31, 2021 | FY ended Mar. 31, 2020 |
|---|---|---|
| Net sales | $62.5 million | $14.8 million |
| Gross profit (loss) | $11.4 million; 18.2% margin | $(3.7) million; (24.9)% margin |
| Operating loss | $(5.4) million | $(13.8) million |
| Net loss | $(7.8) million; $(0.14) per share | $(14.6) million; $(0.32) per share |
| Adjusted EBITDA (non-GAAP) | $8.1 million | $(7.1) million |
| Cash from operating activities | $(14.4) million | $(5.4) million |
| Cash and cash equivalents at year-end | $118.3 million | $0.9 million |
- Sales rose 323%, driven mainly by approximately $40.7 million more bulk pistol and rifle ammunition sales, plus growth in proprietary ammunition and casings. Standard ammunition was $44.3 million of fiscal 2021 sales; proprietary ammunition was $5.3 million and casings were $12.9 million.
- Management attributed improved gross margin to higher volume absorbing fixed manufacturing costs. Cost of products sold was $51.1 million and included $4.3 million in federal excise taxes.
- Operating expenses were $16.8 million, including a $1.0 million loss on purchase relating to construction in progress previously expected in the JMC settlement. Interest expense was $3.0 million; other income was $0.6 million, including forgiveness of approximately $1.1 million in PPP loans.
- Operating cash use reflected higher receivables and inventory, which increased by approximately $6.1 million and $11.5 million, respectively. Investing activities used $7.4 million, primarily for equipment. Financing provided approximately $139.3 million, largely from equity issuance.
- At March 31, 2021, total liabilities were $19.0 million and working capital was $133.5 million. Notable obligations included a $4.0 million note payable, $1.5 million related-party note payable, factoring liability of $1.8 million, and inventory credit facility of $1.1 million. The company reported no income tax provision and maintained a full valuation allowance against net deferred tax assets.
Material changes, outlook, and risks
- Backlog increased to approximately $187 million from $12.7 million a year earlier. Management expected to fill it during fiscal 2022, but orders are generally cancellable and the filing cautions backlog may not predict future sales.
- Management’s stated priorities were expanding distribution and targeted commercial, law-enforcement, military, and international sales; growing proprietary products; and improving margins over the next 12–24 months. It provided no quantified revenue or earnings guidance.
- The company planned a roughly $12 million, 160,000-square-foot Wisconsin manufacturing plant, targeted to be operational by summer 2022. It acquired the land in April 2021 and broke ground in June 2021; the city development agreement contemplated an estimated $1.7 million incentive.
- GunBroker.com’s post-year-end acquisition involved $50 million cash consideration, 20 million AMMO common shares (with some shares subject to escrow or stockholder approval), and assumption of $50 million of target-company indebtedness. The filing does not provide post-acquisition operating results.
- After year-end, AMMO raised approximately $32.9 million net from Series A preferred-stock offerings. The preferred stock carries an 8.75% cumulative dividend and ranks junior to debt and other liabilities.
- Key risks include dependence on ammunition demand and a concentrated customer base (one customer represented 16.5% of fiscal 2021 revenue), supply and raw-material constraints, regulatory changes, seasonality, product liability, and the long sales cycle for government and military customers. COVID-19 had not materially harmed operations to the filing date, but future effects were uncertain.
- Management concluded that disclosure controls and internal control over financial reporting were ineffective at year-end, citing limited accounting personnel, inadequate segregation of duties, and controls that may not be adequately designed or operating effectively. The fiscal 2021 financial-statement auditor issued an unmodified opinion; the prior-year audit report included a going-concern explanatory paragraph. A former employee’s complaint remained under Department of Labor/OSHA investigation, and the company disclosed related litigation and counterclaims.
Important facts for investors to verify
- Confirm the correct issuer and reporting period: this is AMMO, Inc.’s fiscal 2021 10-K, notwithstanding the request metadata.
- Assess whether the unusually large backlog converts to shipments and cash, given cancellation rights, capacity constraints, and working-capital demands.
- Track cash burn, receivables and inventory growth, remaining debt obligations, and the financing and integration costs of GunBroker.com.
- Verify remediation of the disclosed material weaknesses and whether subsequent filings report improved control effectiveness.
- Evaluate whether sales mix shifts toward higher-margin proprietary products and whether reported adjusted EBITDA translates into sustainable operating cash flow.