Business context and reporting period
The supplied filing is AMMO, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2017, not a filing identifying Outdoor Holding Co. The company describes itself as a designer, manufacturer and marketer of ammunition; its operating business followed a March 2017 acquisition of a private AMMO entity. The filing reflects a recently launched business and is not directly comparable with a full-year operating history.
Financial results and liquidity
| Metric | Three months ended September 30, 2017 | Nine months ended September 30, 2017 |
|---|---|---|
| Net sales | $152,612 | $1,121,975 |
| Gross profit / margin | $53,493 / approximately 35.0% | $253,202 / approximately 22.6% |
| Operating expenses | $598,017 | $2,262,544 |
| Net loss | $568,785 | $3,892,444 |
| Loss per share | $0.03 | $0.21 |
The filing’s operations statement does not provide clear prior-year comparable results. At September 30, cash was $41,929; current assets were $2.18 million and current liabilities $2.86 million, resulting in reported negative working capital of $677,307. Total assets were $3.87 million and shareholders’ equity $1.01 million. Current liabilities included a $1.775 million convertible note, $426,837 in related-party notes payable, and $394,692 in accounts payable.
For the nine months, operating cash use was $2.03 million, investing cash use was $40,187, and financing cash provided was $2.11 million, principally from common-stock sales. Cash increased by $31,813. Inventory was $1.61 million. The filing reports no material off-balance-sheet arrangements.
Material changes and unusual items
- The company acquired rights to a patented ammunition technology through a merger with Hallam, Inc.; it recorded a $950,000 patent asset, funded by shares valued at $750,000 and cash consideration. A further $100,000 payment was due by February 22, 2018.
- A February 2017 foreclosure on collateral securing vendor notes receivable resulted in a $1,414,921 loss on collectibility. The company took possession of inventory and equipment, among other assets.
- During the nine months, the company sold 2,343,700 shares for reported proceeds of $2,929,625 and issued shares for legal services and other consideration. Subsequent to quarter-end through November 16, it sold additional shares and warrants for $1,825,525, according to the financial-statement note.
- Revenue concentration was significant: approximately 71% of nine-month revenue came from two customers, and 55% of accounts receivable was due from one customer.
Outlook, risks and contingencies
Management expected the company to become fully operational in the coming year with substantial sales and stated that available working capital, operating cash flow and potential financing were expected to fund the next 12 months. These are forward-looking expectations, not guaranteed results. The company reported accumulated losses of $4,047,468 and acknowledged that additional equity or debt financing may be needed and might not be available on acceptable terms; equity financing could dilute shareholders. The filing also describes regulatory and licensing requirements for ammunition and firearms manufacturing, sales and exports. Management reported disclosure controls as effective, no material changes in internal controls, and no known pending or threatened legal proceedings.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing names AMMO, Inc., while the request metadata names Outdoor Holding Co.
- Reconcile the filing’s financing and subsequent-issuance disclosures, including reported share-sale proceeds and the number of shares and warrants issued.
- Assess cash runway, working-capital needs, debt repayment terms and access to additional financing.
- Monitor customer concentration, receivable collection and inventory conversion into sales.
- Evaluate the commercial value and amortization of the acquired patent rights and branded-product licenses.