AMMO(US:POWW)2025-08-08 21:02PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for Outdoor Holding Company, including the balance sheets, statements of operations, shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, discontinued operations, and other financial disclosures for the period ended June 30, 2025 Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets from $297.3 million to $269.5 million and a significant reduction in total liabilities from $75.3 million to $47.0 million between March 31, 2025, and June 30, 2025. Shareholders' equity slightly increased to $222.5 million Table: Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (Unaudited) | March 31, 2025 | | :-------------------------------- | :------------------------ | :------------- | | ASSETS | | | | Cash and cash equivalents | $63,363,812 | $30,227,796 | | Total Current Assets | $74,486,175 | $72,148,138 | | Total Assets | $269,467,322 | $297,329,629 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total Current Liabilities | $22,725,627 | $62,092,917 | | Total Liabilities | $46,961,667 | $75,303,066 | | Total Shareholders' Equity | $222,505,655 | $222,026,563 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported a net loss attributable to common stock shareholders of $7.2 million, a significant improvement from $15.5 million in the prior year. Net revenues slightly decreased, but the loss from continuing operations was nearly halved due to the absence of a large income tax provision seen in 2024 Table: Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net revenues | $11,857,376 | $12,281,991 | | Gross Profit | $10,334,978 | $10,537,201 | | Loss from Operations | $(6,010,675) | $(6,235,365) | | Net loss from continuing operations | $(5,862,693) | $(11,997,025) | | Net loss attributable to common stock shareholders | $(7,232,459) | $(15,534,107) | | Total basic loss per share of common stock | $(0.06) | $(0.13) | | Total diluted loss per share of common stock | $(0.06) | $(0.13) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity increased slightly from $222.0 million at March 31, 2025, to $222.5 million at June 30, 2025, primarily driven by increases in additional paid-in capital from stock-based compensation and warrants issued for legal settlement, partially offset by net loss and preferred stock dividends Table: Condensed Consolidated Statements of Shareholders' Equity | Metric | March 31, 2025 | June 30, 2025 | | :-------------------------------- | :------------- | :------------- | | Preferred Stock Par Value | $1,400 | $1,400 | | Common Shares Par Value | $116,816 | $117,113 | | Additional Paid-In Capital | $434,335,782 | $442,047,037 | | Accumulated Deficit | $(203,862,034) | $(211,094,494) | | Treasury Stock | $(8,565,401) | $(8,565,401) | | Total Shareholders' Equity | $222,026,563 | $222,505,655 | Changes during Q1 2025: * Stock based compensation: $787,399 increase in Additional Paid-In Capital * Warrants issued for legal settlement: $7,094,926 increase in Additional Paid-In Capital * Net loss: $(6,458,327) decrease in Accumulated Deficit * Preferred stock dividends: $(638,022) decrease in Accumulated Deficit Condensed Consolidated Statements of Cash Flow Cash and cash equivalents significantly increased by $33.1 million to $63.4 million at June 30, 2025, primarily driven by $42.9 million in proceeds from the sale of the Ammunition business, partially offset by net cash used in operating activities ($6.7 million) and financing activities ($0.8 million) Table: Cash Flow Activity | Cash Flow Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net cash provided by/(used in) operating activities | $(6,673,464) | $889,653 | | Net cash provided by/(used in) investing activities | $42,057,105 | $(802,396) | | Net cash used in financing activities | $(809,222) | $(2,821,709) | | Net cash used in discontinued operations | $(1,438,403) | $(2,097,419) | | Net increase/(decrease) in cash | $33,136,016 | $(4,831,871) | | Cash, end of period | $63,363,812 | $50,754,570 | - Sale of ammunition business assets generated $42,946,905 in cash from investing activities for the three months ended June 30, 202517 Table: Non-cash investing and financing activities (Q2 2025) | Activity | Amount | | :---------------------------------------------------- | :------------- | | Issuance of notes payable - related party in DE Litigation settlement | $51,000,000 | | Discount on notes payable - related party in DE Litigation settlement | $(28,891,590) | | Warrant issued for legal settlement - related party in DE Litigation settlement | $7,094,926 | | Dividends accumulated on preferred stock | $136,111 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements, covering the company's organization, significant accounting policies, discontinued operations, capital structure, related party transactions, and contingencies NOTE 1 – ORGANIZATION AND BUSINESS ACTIVITY Outdoor Holding Company, formerly AMMO, Inc., transitioned from a dual-segment business (Ammunition and Marketplace) to solely operating its GunBroker e-commerce Marketplace after selling its Ammunition manufacturing business in April 2025 - Company changed its name from AMMO, Inc. to Outdoor Holding Company on April 21, 202524 - The company sold its Ammunition manufacturing business in April 2025, transitioning to focus solely on the GunBroker e-commerce Marketplace segment23 - The Marketplace segment, GunBroker, supports the lawful sale of firearms, ammunition, and hunting/shooting accessories, connecting buyers with sellers and federally licensed firearm dealers22 NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's key accounting policies, including principles of consolidation, U.S. GAAP basis, use of estimates, and specific treatments for discontinued operations, goodwill, accounts receivable, cash, long-lived assets, revenue recognition, leases, and stock-based compensation, also mentioning the adoption of ASU 2023-09 for income tax disclosures - The company's Ammunition segment was classified as held for sale and its results are presented as discontinued operations for all periods, following the sale completion on April 18, 202533 - Revenue is generated from marketplace fees (listing, final value, compliance, advertising, shipping) and recognized when performance obligations are satisfied, typically at the point of transaction processing or service delivery4142434445 - The company is evaluating the impact of ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 202459 NOTE 3 – INCOME (LOSS) PER COMMON SHARE Basic and diluted loss per share from continuing operations improved to $(0.06) for the three months ended June 30, 2025, from $(0.11) in the prior year. A significant number of common stock options, non-vested stock awards, and warrants were excluded from diluted EPS calculation due to their anti-dilutive effect Table: Income (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net loss from continuing operations | $(5,862,693) | $(11,997,025) | | Net loss attributable to common stockholders | $(7,232,459) | $(15,534,107) | | Basic loss per share (Continuing operations) | $(0.06) | $(0.11) | | Diluted loss per share (Continuing operations) | $(0.06) | $(0.11) | | Weighted average shares outstanding (Basic/Diluted) | 116,841,148 | 119,105,502 | Table: Shares Excluded from Diluted Net Loss Per Share | Instrument | 2025 | 2024 | | :---------------------------------------------------- | :------- | :--------- | | Common stock options | 400,000 | 200,000 | | Non-vested stock awards | - | 1,032,191 | | Warrants | 8,720,345 | 1,731,370 | | Total shares excluded | 9,120,345 | 2,963,561 | NOTE 4- DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE The Ammunition segment was sold to Olin Winchester, LLC on April 18, 2025, for approximately $42.9 million net proceeds. The segment's operations for the three months ended June 30, 2025 (April 1-18) resulted in a net loss of $0.6 million, a significant reduction from $2.8 million in the prior year, reflecting the divestiture - The Ammunition Manufacturing Business was sold to Olin Winchester, LLC for a gross purchase price of $75.0 million, with net proceeds of approximately $42.9 million after adjustments. The transaction closed on April 18, 202566 Table: Financial Information of Discontinued Operations (Ammunition Segment) | Metric | Three Months Ended June 30, 2025 (April 1-18) | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------------ | :------------------------------- | | Net revenues | $752,762 | $18,671,559 | | Gross profit | $(846,440) | $(759,900) | | Loss from operations | $(1,178,865) | $(4,172,829) | | Loss from discontinued operations, net of tax | $(595,634) | $(2,762,950) | Table: Ammunition Segment Assets and Liabilities (March 31, 2025) | Category | Amount | | :-------------------------------- | :------------- | | Total assets of discontinued operations | $57,890,362 | | Total liabilities of discontinued operations | $16,644,998 | NOTE 5 – SUPPLEMENTAL BALANCE SHEET INFORMATION This note provides detailed breakdowns of accounts receivable, property and equipment, and accrued liabilities. Net accounts receivable decreased to $8.9 million, while net property and equipment increased to $6.9 million. Accrued liabilities significantly decreased to $5.7 million, primarily due to the resolution of an accrued contingency Table: Accounts Receivable, Net | Metric | June 30, 2025 | March 31, 2025 | | :------------------------ | :------------ | :------------- | | Accounts receivable | $12,544,721 | $13,994,499 | | Less: allowance for credit losses | $(3,596,273) | $(3,805,488) | | Accounts receivable, net | $8,948,448 | $10,189,011 | Table: Net Property and Equipment | Metric | June 30, 2025 | March 31, 2025 | | :----------------------- | :------------ | :------------- | | Total property and equipment | $11,238,698 | $10,562,538 | | Less accumulated depreciation | $(4,352,985) | $(4,084,854) | | Net property and equipment | $6,885,713 | $6,477,684 | Depreciation expense for the three months ended June 30, 2025, was $479,663, up from $315,445 in 2024 Table: Accrued Liabilities | Metric | June 30, 2025 | March 31, 2025 | | :------------------ | :------------ | :------------- | | Accrued bonus program | $627,017 | $1,831,250 | | Accrued professional fees | $1,977,999 | $4,682,183 | | Accrued contingency | — | $29,067,229 | | Accrued liabilities | $5,708,093 | $37,413,636 | NOTE 6 – LEASES The company leases office space under operating leases, with a weighted average remaining lease term of 3.0 years and a discount rate of 10.0% as of June 30, 2025. Total lease expense for the three months ended June 30, 2025, was $149,659 - Consolidated lease expense for the three months ended June 30, 2025, was $149,659, including $135,734 of operating lease expense77 - As of June 30, 2025, the weighted average remaining lease term for operating leases was 3.0 years, and the weighted average discount rate was 10.0%78 Table: Future Minimum Lease Payments (as of June 30, 2025) | Years Ended March 31, | Amount | | :-------------------- | :------------- | | 2026 | $412,507 | | 2027 | $564,681 | | 2028 | $360,055 | | 2029 | $242,595 | | Total Lease Payments | $1,579,838 | | Present Value of Lease Liabilities | $1,357,412 | NOTE 7 – PREFERRED STOCK The company has Series A Cumulative Redeemable Perpetual Preferred Stock with an 8.75% annual dividend rate, payable quarterly. Dividends paid for the quarter ended June 30, 2025, totaled $765,625, with $136,111 accumulated as of that date - Series A Preferred Stock has an 8.75% annual cumulative cash dividend rate ($2.1875 per year), payable quarterly80 - The Series A Preferred Stock is generally not redeemable by the Company prior to May 18, 2026, except under specific change of control or de-listing events81 Table: Preferred Stock Dividends Paid | Period | Dividend Amount (2025) | Per Share Amount (2025) | Dividend Amount (2024) | Per Share Amount (2024) | | :----------------------------- | :--------------------- | :---------------------- | :--------------------- | :---------------------- | | March 15 - June 14 | $765,625 | $0.54687500 | $782,634 | $0.55902778 | Preferred dividends accumulated as of June 30, 2025, were $136,111 NOTE 8 – CAPITAL STOCK The company has 200 million authorized common shares. The 2017 Equity Incentive Plan has 1.8 million shares available. As of June 30, 2025, 8.7 million warrants were outstanding, including 7.0 million issued in May 2025 as part of a legal settlement. Stock options are fully vested, and no unvested stock awards remain - The company has 200,000,000 authorized shares of common stock with a par value of $0.001 per share84 - As of June 30, 2025, there were 1,797,164 shares available to be issued under the 2017 Equity Incentive Plan85 Table: Warrants Outstanding at June 30, 2025 | Metric | Value | | :-------------------------- | :-------- | | Number of Shares | 8,720,345 | | Weighted Average Exercise Price | $1.85 | | Weighted Average Life Remaining (Years) | 4.04 | Includes 7,000,000 warrants issued on May 30, 2025, at an exercise price of $1.81 with a 5-year term, as part of a legal settlement - Stock options to purchase 400,000 shares were fully vested on May 30, 2025, upon the former CEO's separation agreement. No unrecognized compensation expense remains for unvested stock options or stock awards as of June 30, 2025878889 NOTE 9 – GOODWILL AND INTANGIBLE ASSETS Goodwill remained stable at $90.9 million. Net intangible assets decreased to $95.9 million from $98.9 million due to amortization. Amortization expense for the three months ended June 30, 2025, was $3.0 million - Goodwill carrying value remained at $90,870,094 as of June 30, 2025, and March 31, 202590 - Amortization expense for intangible assets was $3,030,358 for the three months ended June 30, 2025, compared to $3,201,411 in the prior year90 Table: Intangible Assets (Net) | Asset Type | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Tradename | $76,532,389 | $76,532,389 | | Customer List | $65,252,802 | $65,252,802 | | Intellectual Property | $4,224,442 | $4,224,442 | | Other Intangible Assets | $357,747 | $357,747 | | Gross Intangibles Assets | $146,367,380 | $146,367,380 | | Accumulated Amortization | $(50,505,971) | $(47,475,613) | | Net Intangible Assets | $95,861,409 | $98,891,767 | NOTE 10 – SEGMENTS The company's Chief Operating Decision Maker (CODM) assesses performance and allocates resources based on consolidated EBITDA. For the three months ended June 30, 2025, consolidated EBITDA was a loss of $2.5 million, an improvement from a $2.9 million loss in the prior year - The CODM (Chief Executive Officer) reviews consolidated EBITDA to analyze performance and allocate resources92 Table: Consolidated EBITDA | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net revenues | $11,857,376 | $12,281,991 | | Cost of revenues | $1,522,398 | $1,744,790 | | Selling and marketing | $56,531 | $83,404 | | Corporate and administrative | $7,337,936 | $8,632,953 | | Employee salaries and related expenses | $5,441,165 | $4,710,406 | | Consolidated EBITDA | $(2,500,654) | $(2,889,562) | NOTE 11 – INCOME TAXES The effective tax rate for the three months ended June 30, 2025, was 0.0% due to a full valuation allowance against U.S. federal and state deferred tax assets, indicating that the company concluded it is more likely than not that these assets will not be realized - The income tax provision effective tax rate was 0.0% for the three months ended June 30, 2025, compared to (99.0%) for the same period in 202494 - The 0.0% effective tax rate in 2025 was primarily due to recording a full valuation allowance against U.S. federal and state deferred tax assets, as it was concluded that the net deferred tax assets are more likely than not to not be realized94 NOTE 12 – RELATED PARTY TRANSACTIONS Related party transactions include $201,646 in accounts receivable from entities owned by Mr. Urvan. As part of the Delaware Litigation settlement, the company issued a warrant to purchase 7.0 million common shares and two unsecured promissory notes totaling $51.0 million to an affiliated designee of Mr. Urvan - Accounts receivable from entities owned by Mr. Urvan (Chairman and CEO) totaled $201,646 as of June 30, 2025, and March 31, 202596 - A warrant to purchase 7.0 million shares of common stock at an exercise price of $1.81 with a 5-year term was issued to an affiliated designee of Mr. Urvan as partial consideration for the Delaware Litigation settlement. The warrant was valued at $7,094,92697100 - Two unsecured promissory notes were issued to an affiliated designee of Mr. Urvan: Note 1 for $12.0 million (6.50% interest, due May 2037) and Note 2 for $39.0 million (4.62% interest, due May 2035). Both notes require annual prepayments and were recorded at fair value with significant debt discounts101103104107 NOTE 13 – REVOLVING LOAN The company's revolving loan agreement with Sunflower Bank was amended in April and May 2025. The Second Amendment reduced the available amount to zero dollars and released collateral upon the Ammunition Manufacturing Business sale. As of June 30, 2025, there was no outstanding balance on the Revolving Loan - The Loan and Security Agreement with Sunflower Bank, N.A. (Revolving Loan) was amended on April 18, 2025, to reduce the available amount to zero dollars and release collateral upon the sale of the Ammunition Manufacturing Business112 - A Third Amendment on May 13, 2025, updated company name definitions within the agreement114 - As of June 30, 2025, the company did not have an outstanding balance on the Revolving Loan114 NOTE 14 – CONTINGENCIES The Delaware Litigation was settled on May 30, 2025, involving the issuance of warrants and promissory notes to a related party. The MN Action, a breach of contract lawsuit seeking $100 million in damages, is ongoing with a trial expected in 2026. The company also faces an inestimable loss contingency from an ongoing SEC investigation into various accounting and disclosure practices - The Delaware Litigation, involving claims by and against Mr. Urvan related to the GunBroker.com acquisition, was settled on May 30, 2025, with all claims dismissed. The settlement included the issuance of a warrant and two unsecured promissory notes to an affiliate of Mr. Urvan121 - The MN Action, a breach of contract lawsuit filed by Digital Cash Processing against GunBroker.com, alleges $100 million in damages. The company denies the allegations and expects the matter to be scheduled for trial in 2026122 - The company is subject to an ongoing SEC investigation concerning valuation of share-based compensation, capitalization of share issuance costs, disclosure of perquisites and executive compensation, related party transactions, and Adjusted EBITDA calculation. The potential loss is currently inestimable123 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This section highlights that the document contains forward-looking statements based on management's current beliefs and expectations, which are subject to inherent uncertainties, risks, and changes in circumstances. Readers are cautioned not to rely on these statements, and the company does not undertake to update them unless required by law - Forward-looking statements relate to estimated or anticipated results, future events, business strategy, operating results, cash flow, and other non-historical facts127 - These statements are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of the company's control128 - The company does not undertake any obligation to update or revise forward-looking statements, except as required by law129 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION This section provides management's perspective on the company's financial condition, results of operations, and liquidity for the three months ended June 30, 2025, covering the transition to a single Marketplace segment, the impact of the Delaware Litigation settlement, and key financial performance metrics Overview Outdoor Holding Company operates the GunBroker Marketplace, a leading online platform for firearms and shooting sports, generating revenue from marketplace fees. Key strategic initiatives for fiscal year 2026 include enhancing payment processing, share repurchases, business streamlining, and platform user experience improvements - Outdoor Holding Company owns the GunBroker Marketplace, an online platform for firearms and shooting sports, serving over 8.5 million users and facilitating compliance through 32,000 federally licensed firearms dealers132 - Revenue is generated from marketplace fees, including listing, compliance, advertising, and shipping revenue132 - Strategic initiatives for FY2026 include launching universal payment processing, repurchasing shares, streamlining the business to reduce costs, and implementing user enhancements to the platform132 Recent Developments The company completed the sale of its Ammunition segment on April 18, 2025, for approximately $42.9 million net proceeds, and subsequently changed its name to Outdoor Holding Company. The Delaware Litigation was settled on May 30, 2025, resulting in leadership changes, including Steven F. Urvan's appointment as CEO and Chairman, and the issuance of warrants and promissory notes as part of the settlement - The Ammunition segment was sold to Olin Winchester, LLC on April 18, 2025, for net proceeds of approximately $42.9 million, leading to its classification as discontinued operations134135 - The company changed its name from AMMO, Inc. to Outdoor Holding Company on April 21, 2025134 - The Delaware Litigation was settled on May 30, 2025, resulting in the appointment of Steven F. Urvan as CEO and Chairman of the Board, and the issuance of a warrant for 7.0 million shares and two unsecured promissory notes totaling $51.0 million to an affiliated designee of Mr. Urvan137138139 Results of Operations Net revenues decreased by 3.5% to $11.9 million for the three months ended June 30, 2025, primarily due to a decline in gross merchandise sales in the Marketplace. Gross margin improved to 87.2% from 85.8%. Operating expenses decreased by $0.4 million, largely due to a reduction in settlement contingencies and stock-based compensation, partially offset by increased employee salaries (including severance) and legal fees. The net loss from continuing operations significantly improved to $(5.9) million from $(12.0) million Table: Condensed Consolidated Statements of Operations (Continuing Operations) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net revenues | $11,857,376 | $12,281,991 | | Cost of revenues | $1,522,398 | $1,744,790 | | Gross profit | $10,334,978 | $10,537,201 | | Operating expenses | $16,345,653 | $16,772,566 | | Loss from operations | $(6,010,675) | $(6,235,365) | | Net loss from continuing operations | $(5,862,693) | $(11,997,025) | Table: Adjusted EBITDA Reconciliation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | | Net loss from continuing operations | $(5,862,693) | $(11,997,025) | | Provision for income taxes | — | $5,968,414 | | Depreciation and amortization | $3,510,021 | $3,345,804 | | Interest expense, net | $348,330 | $45,478 | | Stock based compensation | $787,826 | $1,436,038 | | Other income (expense), net | $(496,312) | $(252,232) | | Acquisitions and divestitures | $79,398 | — | | Special Committee Investigation and restatement | $1,304,908 | — | | SEC Investigation | $676,080 | $1,588,809 | | Delaware Litigation legal and professional fees | $1,354,864 | $679,119 | | Corporate restructuring costs | $1,435,693 | — | | Other nonrecurring expenses | — | $3,299,933 | | Adjusted EBITDA | $3,138,115 | $4,114,338 | - Net revenues decreased by $0.4 million (3.5%) YoY due to a decrease in gross merchandise sales from the Marketplace, partially offset by a minor increase in the take rate148 - Gross margin increased to 87.2% in Q2 2025 from 85.8% in Q2 2024, driven by improved platform monetization and a higher mix of high-margin seller services150 - Operating expenses decreased by approximately $0.4 million, primarily due to a $3.2 million reduction in settlement contingencies and a $0.7 million decrease in stock-based compensation, partially offset by a $1.4 million increase in severance costs and a $1.9 million increase in legal and professional fees153 Liquidity and Capital Resources Cash and cash equivalents increased to $63.4 million as of June 30, 2025, primarily from $42.9 million in net proceeds from the Ammunition business sale. Working capital significantly improved to $51.8 million. The company expects existing working capital and cash flows to be adequate for the next 12 months, with ongoing funding from stock sales, bank financings, and related-party notes. The $51.0 million in promissory notes issued in the Delaware Litigation settlement require annual prepayments of $2.95 million starting May 2026. The revolving loan facility was reduced to zero and has no outstanding balance - Cash and cash equivalents increased by $33.1 million to $63.4 million as of June 30, 2025, primarily due to $42.9 million in net proceeds from the sale of the Ammunition manufacturing business156 Table: Working Capital | Metric | June 30, 2025 | March 31, 2025 | | :-------------- | :------------ | :------------- | | Current assets | $74,486,175 | $72,148,138 | | Current liabilities | $22,725,627 | $62,092,917 | | Working Capital | $51,760,548 | $10,055,221 | - Net cash used in operations for Q2 2025 was $6.7 million, primarily due to reductions in accounts payable and accrued liabilities and increased prepaid expenses158 - The company expects existing working capital and cash flows from operations to be adequate to fund operations over the next 12 months163 - The $51.0 million aggregate principal amount of promissory notes issued in the Delaware Litigation settlement requires aggregate annual prepayments of $2.95 million beginning May 30, 2026165 - The revolving loan facility with Sunflower Bank was reduced to zero dollars and had no outstanding balance as of June 30, 2025170 Off-Balance Sheet Arrangements As of June 30, 2025, and March 31, 2025, the company did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its financial condition or results of operations - The company did not have any off-balance sheet arrangements as of June 30, 2025, and March 31, 2025, that are material or reasonably likely to have a material effect on its financial condition or results of operations171 Critical Accounting Estimates The company's critical accounting estimates, which require significant management judgment, remain consistent with those disclosed in the Annual Report on Form 10-K for the year ended March 31, 2025, with no material changes - There have been no material changes to the critical accounting policies disclosed in the Annual Report on Form 10-K for the year ended March 31, 2025173 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK There have been no material changes to the quantitative and qualitative disclosures about market risk from those reported in the company's Annual Report on Form 10-K - There have been no material changes from the market risks disclosed in Part II, Item 7A of the Form 10-K174 ITEM 4. CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to previously identified material weaknesses in internal control over financial reporting. The company is actively implementing remediation initiatives, including organizational enhancements, policy implementations, a new accounting system, and enhanced review procedures Evaluation of Disclosure Controls and Procedures As of June 30, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective at a reasonable assurance level due to continuing material weaknesses. These weaknesses include issues in the control environment, complex technical accounting (stock compensation, warrants, convertible notes), related party transactions and executive compensation, financial reporting, and segregation of duties - As of June 30, 2025, disclosure controls and procedures were deemed not effective at a reasonable assurance level176 - Material weaknesses identified include deficiencies in the control environment, information and communication, monitoring activities, complex technical accounting (stock compensation, warrants, convertible notes), related party transactions and executive compensation, financial reporting, and segregation of duties177178179 Management's Remediation Initiatives for Existing Material Weaknesses The company has initiated and is focused on designing and implementing effective measures to strengthen internal controls. Remediation efforts include organizational enhancements (hiring a CFO and VP of Accounting), reinforcing compliance communications, improving processes for significant transactions, implementing related party transaction and perquisites policies, establishing a disclosure committee, implementing a new accounting system, and enhancing entity-wide review procedures - Remediation initiatives include organizational enhancements (hiring a CFO and VP of Accounting), executive communications to reinforce compliance, improved processes for significant and unusual transactions, and implementation of Related Party Transaction and Perquisites Policies181182 - A formal disclosure committee was established in fiscal year 2025 to coordinate disclosures and ensure completeness and accuracy of information182183 - Control activities remediation includes implementing a new accounting system for improved IT and automated controls, and enhancing existing entity-wide controls around financial reporting processes, including additional staff training and improved evidence of review187 Changes in Internal Control Over Financial Reporting Other than the ongoing remediation activities described, there have been no material changes in the company's internal control over financial reporting during the three months ended June 30, 2025 - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025, other than the described remediation efforts186 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS This section provides updates on legal proceedings, noting the settlement of the Delaware Litigation on May 30, 2025, and the ongoing MN Action, a breach of contract lawsuit against GunBroker.com seeking $100 million in damages, with a trial expected in 2026 - The Delaware Litigation was settled on May 30, 2025, with all claims dismissed, as partial consideration for which the company issued a warrant and two unsecured promissory notes to an affiliate of Mr. Urvan189 - The MN Action, a civil action alleging breach of contract and seeking $100 million in damages against GunBroker.com, is ongoing, with the company denying allegations and expecting a trial in 2026190 ITEM 1A. RISK FACTORS There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended March 31, 2025 - No material changes to the risk factors disclosed in Part I, Item 1A of the Form 10-K for the year ended March 31, 2025191 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report during the period - None192 ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report during the period - None193 ITEM 4. MINE SAFETY DISCLOSURE This item is not applicable to the company's operations - Not applicable194 ITEM 5. OTHER INFORMATION There was no other information to disclose under this item - None195 ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q, including merger agreements, asset purchase agreements, corporate governance documents, warrant forms, executive separation agreements, loan amendments, and settlement agreements - The exhibits include various agreements such as the Asset Purchase Agreement for the Ammunition segment sale, forms of warrants and promissory notes related to the Delaware Litigation settlement, and amendments to the Loan and Security Agreement197 - Also included are executive separation agreements and certifications pursuant to the Sarbanes-Oxley Act of 2002197198 SIGNATURES The report is signed by Steven F. Urvan, Chief Executive Officer, and Paul Kasowski, Chief Financial Officer, on behalf of Outdoor Holding Company, certifying its submission in accordance with the Exchange Act of 1934 - The report was signed by Steven F. Urvan, Chief Executive Officer, and Paul Kasowski, Chief Financial Officer, on August 8, 2025205