Filing summary
Company and period: The supplied filing is AMMO, Inc.’s unaudited Form 10-Q for the three months ended June 30, 2018, its fiscal first quarter (the company has a March 31 year-end). This does not match the request metadata naming Outdoor Holding Co; confirm the issuer before relying on this summary.
Financial results
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Net sales | $1.25 million | $315,579 |
| Gross profit | $144,572 | $20,815 |
| Gross margin | 11.57% | 6.60% |
| Operating expenses | $1.92 million | $800,926 |
| Operating loss | $1.78 million | $780,111 |
| Net loss | $1.78 million | $802,852 |
| Loss per share | $0.06 | $0.04 |
| Cash used in operations | $1.77 million | $952,957 |
Sales increased 296% year over year. Proprietary ammunition sales rose to $725,915 from $38,808, while standard ammunition sales were $524,113 versus $276,771. Management attributed the sales growth to product introductions, distribution and online sales. Cost of goods sold was 88.4% of sales, down from 93.4%; management cited improved production efficiencies and better absorption of fixed manufacturing costs. The gross-margin percentage improved, but the company remained loss-making as payroll, marketing, stock compensation and other operating costs increased.
Operating cash outflow reflected the net loss and working-capital investment, including a $718,232 increase in inventory. Investing cash outflow was $566,364, primarily for production-related equipment and improvements. Financing provided $5.03 million, including $3.25 million from stock sales and $2.35 million from warrant exercises, partly offset by $545,359 of offering-related costs. Cash rose to $7.07 million from $4.38 million at March 31, 2018.
Financial position and capital
At June 30, 2018, current assets were $11.22 million and current liabilities were $926,291, yielding reported working capital of $10.30 million. Total assets were $14.18 million; total shareholders’ equity was $13.26 million. Current liabilities included a $69,773 insurance-premium note; the balance sheet reported no other debt. The company funded operations primarily through equity issuance and warrant exercises. Shares outstanding increased to 31.54 million from 28.39 million at March 31; the filing reports 32,490,655 shares outstanding as of July 31.
Outlook, risks and notable events
Management said existing working capital, operating cash flow and potential financing sources were expected to fund operations for at least 12 months, but cautioned that financing might not be available on acceptable terms or at all. Its stated priorities include growing proprietary product sales, expanding distribution and production, adding automation, and pursuing law-enforcement, military and international markets. Management cited a 12-to-24-month goal of improving gross margins and expected administrative costs to decline as a percentage of sales. No numerical revenue or earnings guidance was provided.
- Management noted long sales cycles in government and international markets; export licensing and approvals may take six months to a year.
- Customer concentration was significant: one customer represented 62.37% of quarterly revenue, and another accounted for 53.89% of period-end accounts receivable.
- Cash balances exceeded FDIC-insured limits. The company also noted that future hiring and stock compensation could dilute existing shareholders.
- Subsequent events included a $665,500 equipment purchase, a letter of intent to acquire an Arizona R&D company (due diligence ongoing), and a July 29 agreement to raise up to $13 million through 24-month debt bearing 10% simple interest and convertible at $2.50 per share. An August 2 $1 million deposit related to financing for an industry participant was described as returnable until September 1.
- The filing reported no known contingencies at June 30 and no known legal proceedings. Management said disclosure controls were effective and reported no material change in internal control over financial reporting.
Most important facts to verify
- Confirm issuer identity: the filing is for AMMO, Inc., not Outdoor Holding Co.
- Review subsequent financing terms, actual proceeds raised, conversion and registration requirements, and the effect of potential dilution.
- Assess whether the company can sustain cash needs given operating losses, inventory investment and planned capital expenditures.
- Track customer concentration, repeat demand for proprietary products, and progress in government and export markets.
- Reconcile the filing’s stockholders’ equity statement, which labels the quarter’s net loss as for the period ended March 31, 2018, against the income statement and cash-flow statement showing the June 30 quarter.