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What changed in American Outdoor Brands, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of American Outdoor Brands, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+109 added−438 removedSource: 10-K (2023-06-28) vs 10-K (2022-07-14)

Top changes in American Outdoor Brands, Inc.'s 2023 10-K

109 paragraphs added · 438 removed · 79 edited across 4 sections

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Facility Columbia, Missouri Corporate Office and Warehouse Wilsonville, Oregon Office and Warehouse Holland, Michigan Storefront and Warehouse Dallas, Texas Storefront and Warehouse Chicopee, Massachusetts Administrative Office Shenzhen, Peoples Republic of China Office I tem 3.
Biggest changeLocation Facility Columbia, Missouri Corporate Office and Warehouse Holland, Michigan Storefront Chicopee, Massachusetts Administrative Office Shenzhen, Peoples Republic of China Office I tem 3. Legal Proceedings Information regarding our legal proceedings is discussed in Note 16 to our consolidated and combined financial statements, which is incorporated herein by reference. I tem 4.
Item 2. P roperties The following table sets forth information regarding our principal operating properties and other significant properties as of April 30, 2021. All the properties listed below are leased. In general, our operating properties are well maintained, suitably equipped, and in good operating condition.
Item 2. P roperties The following table sets forth information regarding our principal operating properties and other significant properties as of April 30, 2023. All the properties listed below are leased. In general, our operating properties are well maintained, suitably equipped, and in good operating condition.
Removed
Legal Proceedings Information regarding our legal proceedings is discussed in Note 15 to our consolidated and combined financial statements, which is incorporated herein by reference. I tem 4. Mine Safety Disclosures Not applicable. 48 P ART II
Added
Mine Safety Disclosures Not applicable. 45 P ART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the fiscal year ended April 30, 2022 (dollars in thousands, except per share data): Total # of Average Total # of Shares Purchased as Part of Publicly Announced Maximum Dollar Value of Shares that May Yet Be Purchased Shares Price Paid Plan or Under the Plan Period Purchased Per Share (2) Program (1) or Program December 1, 2021 to January 31, 2022 364,398 $ 19.18 364,398 $ 8,000 February 1 to April 30, 2022 472,566 16.91 472,566 — Total 836,964 $ 17.90 836,964 $ — (1) On December 6, 2021, our Board of Directors authorized the repurchase of up to $15.0 million of our common stock, subject to certain conditions, in the open market, or block purchases, executable through December 2023.
Biggest changeThe following table sets forth certain information relating to the purchases of our common stock by us and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the fiscal year ended April 30, 2023 (dollars in thousands, except per share data): Total # of Average Total # of Shares Purchased as Part of Publicly Announced Maximum Dollar Value of Shares that May Yet Be Purchased Shares Price Paid Plan or Under the Plan Period Purchased Per Share (2) Program (1) or Program Total second quarter fiscal year 2023 84,029 $ 8.97 84,029 $ 9,246 Total third quarter fiscal year 2023 191,632 9.43 275,661 7,440 February 1, 2023 to February 28, 2023 21,048 10.24 296,709 7,224 March 1, 2023 to March 31, 2023 41,031 9.44 337,740 6,837 April 1, 2023 to April 30, 2023 39,294 9.16 377,034 6,477 Total fourth quarter fiscal year 2023 101,373 9.50 377,034 6,477 Total year-to-date fiscal year 2023 377,034 $ 9.34 377,034 $ 6,477 (1) On September 30, 2022, our Board of Directors authorized the repurchase of up to $10.0 million of our common stock, subject to certain conditions, in the open market, in block purchases, or in privately negotiated transactions, executable through September 29, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Global Market under the symbol “AOUT.” The holders of our common stock are entitled to one vote per share on any matter to be voted upon by the stockholders.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock trades on the Nasdaq Global Select Market under the symbol “AOUT.” The holders of our common stock are entitled to one vote per share on any matter to be voted upon by the stockholders.
Securities Authorized for Issuance under Equity Compensation Plans For equity compensation plan information, refer to Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters) in Part III of this Annual Report on Form 10-K. 49 Performance Graph The following graph compares the cumulative total stockholder returns for the period from August 24, 2020 (the effective date of the registration of AOUT Common Stock) to April 30, 2022 for (i) our common stock; (ii) the Russell 2000 Index; and (iii) the S&P 500 Index.
Securities Authorized for Issuance under Equity Compensation Plans For equity compensation plan information, refer to Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters) in Part III of this Annual Report on Form 10-K. 46 Performance Graph The following graph compares the cumulative total stockholder returns for the period from August 25, 2020 (the effective date of the registration of AOUT Common Stock) to April 30, 2023 for (i) our common stock; (ii) the Russell 2000 Index; and (iii) the S&P 500 Index.
The graph assumes an investment of $100 on August 25, 2020 (first day of trading activity) through the last trading day of fiscal 2022.
The graph assumes an investment of $100 on August 25, 2020 (first day of trading activity) through the last trading day of fiscal 2023.
The performance graph above will not be deemed incorporated by reference into any filing of our company under the Securities Act of 1933, as amended, or the Securities Act. Repurchases of Common Stock As of April 30, 2022, we had no open authorized share repurchase programs.
The performance graph above will not be deemed incorporated by reference into any filing of our company under the Securities Act of 1933, as amended, or the Securities Act. 47 Repurchases of Common Stock As of April 30, 2023, we had one open authorized share repurchase program.
Holders On July 7, 2022, there were 224 record holders of our common stock. A substantially greater number of holders of common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions. Dividend Policy We have never declared or paid cash dividends on our common stock.
Holders On June 21, 2023, there were 228 record holders of our common stock. A substantially greater number of holders of common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers, and other financial institutions. Dividend Policy We have never declared or paid cash dividends on our common stock.
During fiscal 2022, we completed this stock repurchase program by purchasing 836,964 shares of our common stock, in the open market, for $15.0 million under this authorization. (2) The average price per share excludes fees paid to acquire the shares. 50 Item 6. RESERVED Not Applicable. 51
During the fiscal year ended April 30, 2023, under this authorization, we repurchased 377,034 shares of our common stock in the open market for $3.5 million utilizing cash on hand. (2) The average price per share excludes fees paid to acquire the shares. Item 6. RESERVED Not Applicable. 48

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+23 added−49 removed30 unchanged
Biggest changeWe had $19.5 million of cash equivalents on hand as of April 30, 2022 and had $60.8 million in cash and cash equivalents on hand as of April 30. 2021. 57 We expect to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; hire additional employees; fund growth strategies, including any potential acquisitions; repay our $25.2 million of borrowings under our revolving line of credit and any indebtedness we may incur over time; implement our enterprise resource planning systems; and repurchase our common stock if we are authorized to do so.
Biggest changeWe expect to continue to utilize our cash flows to invest in our business, including research and development for new product initiatives; hiring additional employees; funding growth strategies, including any potential acquisitions; repaying our $5.0 million of borrowings under our revolving line of credit and any indebtedness we may incur over time; and repurchasing our common stock under our existing authorized repurchase programs. 53 The following table sets forth certain cash flow information for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Operating activities $ 30,706 $ (17,953 ) $ 48,659 -271.0 % Investing activities (4,826 ) (33,588 ) 28,762 -85.6 % Financing activities (23,451 ) 10,261 (33,712 ) -328.5 % Total cash flow $ 2,429 $ (41,280 ) $ 43,709 -105.9 % Operating Activities Operating activities represent the principal source of our cash flow.
In March 2022, we acquired substantially all of the assets of Grilla Grills (including its branded products) from Fahrenheit Technologies, Inc., or FTI, for a purchase price of $27 million, subject to certain adjustments. Grilla Grills is a provider of high-quality, barbecue grills; Wi-Fi-enabled wood pellet grills; smokers; accessories; and modular outdoor kitchens.
In March 2022, we acquired substantially all of the assets of Grilla Grills, or Grilla, (including its branded products) from Fahrenheit Technologies, Inc., or FTI, for a purchase price of $27 million, subject to certain adjustments. Grilla is a provider of high-quality, barbecue grills; Wi-Fi-enabled wood pellet grills; smokers; accessories; and modular outdoor kitchens.
Other obligations represent other binding commitments for the expenditure of funds, including (i) amounts related to contracts not involving the purchase of inventories, such as the noncancelable portion of service or maintenance agreements for management information systems, (ii) capital spending, and (iii) advertising. 61
Other obligations represent other binding commitments for the expenditure of funds, including (i) amounts related to contracts not involving the purchase of inventories, such as the noncancelable portion of service or maintenance agreements for management information systems, (ii) capital spending, and (iii) advertising.
We establish valuation allowances if it is more likely than not that we will be unable to realize our deferred income tax assets. 60 In making this determination, we consider available positive and negative evidence and make certain assumptions.
We establish valuation allowances if it is more likely than not that we will be unable to realize our deferred income tax assets. In making this determination, we consider available positive and negative evidence and make certain assumptions.
The market approach estimates fair values based on the determination of 59 appropriate publicly traded market comparison companies and market multiples of revenue and earnings derived from those companies with similar operating and investment characteristics as the operating unit being valued.
The market approach estimates fair values based on the determination of appropriate publicly traded market comparison companies and market multiples of revenue and earnings derived from those companies with similar operating and investment characteristics as the operating unit being valued.
We are required to make interest payments for the unused portion of our revolving line of credit in accordance with the financing arrangement. Future unused loan fee obligations are not included above, which could accumulate up to approximately $190,000 per year, under certain circumstances, until the maturity date in fiscal 2026.
We are required to make interest payments for the unused portion of our revolving line of credit in accordance with the financing arrangement. Future unused loan fee obligations are not included above, which could accumulate up to approximately $185,000 per year, under certain circumstances, until the maturity date in fiscal 2026.
Inflation We have been impacted by changes in prices of finished product inventory from our suppliers and logistics as well as other inflationary factors such as increased labor and overhead costs. We evaluate the need for price changes to offset these inflationary factors while taking into account the competitive landscape.
Inflation We have been impacted by changes in prices of finished product inventory from our suppliers and logistics as well as other inflationary factors, such as increased interest rates and increased labor and overhead costs. We evaluate the need for price changes to offset these inflationary factors while taking into account the competitive landscape.
Although we do not believe that inflation had a material impact on us during fiscal 2022, increased inflation in the future may have a negative effect on our ability to achieve certain expectations in gross margin and operating expenses.
Although we do not believe that inflation had a material impact on us during fiscal 2023, increased inflation in the future may have a negative effect on our ability to achieve certain expectations in gross margin and operating expenses.
Interest on debt is based on outstanding debt as of April 30, 2022, and includes debt issue costs to be amortized over the life of the financing arrangement. The interest rate used to calculate was 1.6% as of April 30, 2022. See Note 10, Debt , for additional information.
Interest on debt is based on outstanding debt as of April 30, 2023, and includes debt issue costs to be amortized over the life of the financing arrangement. The interest rate used to calculate was 6.1% as of April 30, 2023. See Note 10, Debt , for additional information.
Purchase obligations represent binding commitments to purchase raw materials, contract production, and finished products that are payable upon delivery of the inventory. This obligation excludes the amount included in accounts payable at April 30, 2022 related to inventory purchases.
Purchase obligations represent binding commitments to purchase raw materials, contract production, and finished products that are payable upon delivery of the inventory. This obligation excludes the amount included in accounts payable at April 30, 2023 related to inventory purchases.
Although we generally fulfill the majority of our order backlog, we allow orders received which have not yet shipped to be cancelled, and therefore, our backlog may not be indicative of future sales.
Although we generally fulfill the majority of our order backlog, we allow orders received that have not yet shipped to be cancelled, and therefore, our backlog may not be indicative of future sales.
Set forth below is a comparison of the results of operations and changes in financial condition for the fiscal years ended April 30, 2022 and 2021.
Set forth below is a comparison of the results of operations and changes in financial condition for the fiscal years ended April 30, 2023 and 2022.
The effective tax rates were (16.8%) and 24.2% for fiscal 2022 and 2021, respectively. Excluding the impact of the non-cash goodwill impairment charges, and establishing the full valuation allowance against our deferred taxes, our effective tax rate for the fiscal year ended April 30, 2022 was 19.6%.
The effective tax rates were 2.0% and (16.8%) for fiscal 2023 and 2022, respectively. Excluding the impact of the non-cash goodwill impairment charges and establishing the full valuation allowance against our deferred taxes, our effective tax rate for the fiscal year ended April 30, 2022 was 19.6%.
The net loss in fiscal 2022 included a $67.8 million non-cash goodwill impairment charge. • Non-GAAP Adjusted EBITDAS was $35.0 million, compared with $47.3 million for the prior fiscal year.
The net loss in the prior fiscal year included a $67.8 million non-cash goodwill impairment charge. • Non-GAAP Adjusted EBITDAS was $12.8 million, compared with $35.0 million for the prior fiscal year.
Operating income decreased primarily because of lower sales volumes and gross profit.
Operating income decreased primarily because of lower sales volumes and gross profit mentioned above.
Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the capital needed to operate as an independent publicly traded company, including the establishment of our enterprise resource planning systems, any acquisitions or strategic investments that we may determine to make, and our ability to navigate through the many negative business impacts from the COVID-19 pandemic.
Our future capital requirements will depend on many factors, including net sales, the timing and extent of spending to support product development efforts, the expansion of sales and marketing activities, the timing of introductions of new products and enhancements to existing products, the capital needed to operate as an independent publicly traded company, enhancements to our enterprise resource planning systems, and any acquisitions or strategic investments that we may determine to make.
Operating lease obligations represent required minimum lease payments during the noncancelable lease term. Most real estate leases also require payments of related operating expenses such as taxes, insurance, utilities, and maintenance, which are not included above. Our operating lease obligations are net of $605,000 of expected future sublease income. See Note 4, Leases , for additional information.
Operating lease obligations represent required minimum lease payments during the noncancelable lease term. Most real estate leases also require payments of related operating expenses such as taxes, insurance, utilities, and maintenance, which are not included above. See Note 4, Leases , for additional information.
We determined in the current period that is more likely than not that the benefit from the Company’s net deferred tax assets will not be realized and accordingly we established a full valuation allowance recorded as an increase to income tax expense.
We determined in the prior fiscal period that it was more likely than not that the benefit from our net deferred tax assets will not be realized and accordingly we established a full valuation allowance recorded as an increase to income tax expense.
Fiscal 2022 Highlights Our operating results for fiscal 2022 included the following: • Net sales were $247.5 million, a decrease of $29.2 million, or 10.5%, from the prior fiscal year, reflecting a decrease in net sales for both our e-commerce channels and our traditional channels, partially offset by an increase in our own direct-to-consumer business. • Gross margin was 46.2%, an increase of 40 basis points over the prior fiscal year. • Net loss was $64.9 million, or ($4.66) per diluted share, compared with net income of $18.4 million, or $1.29 per diluted share, for the prior fiscal year.
Fiscal 2023 Highlights Our operating results for fiscal 2023 included the following: • Net sales were $191.2 million, a decrease of $56.3 million, or 22.8%, from the prior fiscal year, reflecting a decrease in net sales for both our e-commerce channels and our traditional channels, partially offset by an increase in our own direct-to-consumer business. • Gross margin was 46.1%, a decrease of 10 basis points from the prior fiscal year. • Net loss was $12.0 million, or ($0.90) per diluted share, compared with a net loss of $64.9 million, or ($4.66) per diluted share, for the prior fiscal year.
The comparison of, and changes between, the fiscal years ended April 30, 2021 and 2020 can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K for the fiscal year ended April 30, 2021 filed with the SEC on July 15, 2021.
The comparison of, and changes between, the fiscal years ended April 30, 2022 and 2021 can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Form 10-K for the fiscal year ended April 30, 2022 filed with the SEC on July 14, 2022. Background We operate as one reporting segment.
Operating Income/(Loss) The following table sets forth certain information regarding operating income/(loss) for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Operating (loss)/income $ (56,523 ) $ 23,495 $ (80,018 ) -340.6 % % of net sales (operating margin) -22.8 % 8.5 % Fiscal 2022 Operating Income Compared with Fiscal 2021 Excluding our non-cash goodwill impairment charge, we had operating income of $11.3 million, a decrease of $12.2 million from the prior fiscal year.
Operating Loss The following table sets forth certain information regarding operating loss for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Operating (loss)/income $ (12,700 ) $ (56,523 ) $ 43,823 -77.5 % % of net sales (operating margin) -6.6 % -22.8 % Fiscal 2023 Operating Income Compared with Fiscal 2022 Excluding our non-cash goodwill impairment charge in fiscal 2022, we had a decrease of $24.0 million in operating income from the prior fiscal year.
We have a history of introducing approximately 250 to 350 new SKUs each year, the majority of which are introduced late in our third fiscal quarter. Our order backlog as of April 30, 2022 was $3.7 million, or $11.5 million lower than at the end of fiscal 2021.
We have a history of introducing over 200 new SKUs each year, the majority of which are introduced late in our third fiscal quarter. 50 Our order backlog as of April 30, 2023 was $7.0 million, or $3.3 million higher than at the end of fiscal 2022.
The applicable margin can range from a minimum of 0.25% to a maximum of 1.75% based on certain conditions as defined in the Amended Loan and Security Agreement. The financing arrangement contains covenants relating to minimum debt service coverage. During fiscal 2022, we recorded $192,000 of additional debt issuance costs associated with entering into the Amended Loan and Security Agreement.
The applicable margin can range from a minimum of 0.25% to a maximum of 1.75% based on certain conditions as defined in the Amended Loan and Security Agreement. The financing arrangement contains covenants relating to minimum debt service 54 coverage.
We evaluate the recoverability of long-lived assets on an annual basis on February 1 or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.
Based on our review of ASC 350-20, we have determined that we have one operating unit. 55 We evaluate the recoverability of long-lived assets on an annual basis on February 1 or whenever events or changes in circumstances indicate that carrying amounts may not be recoverable.
Results of operations for the fiscal year ended April 30, 2022 include activity for the period subsequent to the acquisition date of Grilla Grills.
We fully integrated Grilla into our business during fiscal 2023. Results of operations for the fiscal year ended April 30, 2022 include activity for the period subsequent to the acquisition date of Grilla.
Financing Activities Cash provided by financing activities was $10.3 million in fiscal 2022 compared with $31.4 million in the prior fiscal year. Cash provided by financing activity in fiscal 2022 was primarily from $25.2 million borrowings on our revolving line of credit, offset by $15.0 million to repurchase our common stock under our authorized stock repurchase program.
Cash provided by financing activity in fiscal 2022 was primarily from $25.2 million borrowings on our revolving line of credit used to acquire Grilla Grills, offset by $15.0 million to repurchase our common stock under an authorized stock repurchase program.
Valuation of Goodwill and Long-lived Intangible Assets We test goodwill for impairment on an annual basis on February 1 and between annual tests if indicators of potential impairment exist. As of our valuation date in fiscal 2022, we had $64.3 million of goodwill.
Valuation of Goodwill and Long-lived Intangible Assets As of April 30, 2023 and 2022, we had no goodwill recorded on our consolidated balance sheet. In the instance we have recorded goodwill, we test goodwill for impairment on an annual basis on each February 1 and between annual tests if indicators of potential impairment exist.
Results of Operations Net Sales and Gross Profit The following table sets forth certain information regarding consolidated and combined net sales for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Net sales $ 247,526 $ 276,687 $ (29,161 ) -10.5 % Cost of sales 133,287 149,859 (16,572 ) -11.1 % Gross profit $ 114,239 $ 126,828 $ (12,589 ) -9.9 % % of net sales (gross margin) 46.2 % 45.8 % The following table sets forth certain information regarding trade channel net sales for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change e-commerce channels $ 97,418 $ 108,726 $ (11,308 ) -10.4 % Traditional channels 150,108 167,961 (17,853 ) -10.6 % Total net sales $ 247,526 $ 276,687 $ (29,161 ) -10.5 % 53 Our e-commerce channels include net sales from customers that do not traditionally operate a physical brick-and-mortar store, but generate the majority of their revenue from consumer purchases from their retail websites.
Results of Operations Net Sales and Gross Profit The following table sets forth certain information regarding consolidated and combined net sales for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Net sales $ 191,209 $ 247,526 $ (56,317 ) -22.8 % Cost of sales 103,145 133,287 (30,142 ) -22.6 % Gross profit $ 88,064 $ 114,239 $ (26,175 ) -22.9 % % of net sales (gross margin) 46.1 % 46.2 % 49 The following table sets forth certain information regarding trade channel net sales for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change e-commerce channels $ 87,219 $ 97,418 $ (10,199 ) -10.5 % Traditional channels 103,990 150,108 (46,118 ) -30.7 % Total net sales $ 191,209 $ 247,526 $ (56,317 ) -22.8 % Our e-commerce channels include net sales from customers that do not traditionally operate physical brick-and-mortar stores, but generate the majority of their revenue from consumer purchases from their retail websites.
During the annual impairment review process, we performed a step one analysis to assess the recoverability of our goodwill. The step one analysis estimates the fair value of our reporting unit and compares it to the carrying value of the reporting unit, including goodwill, to assess whether impairment is present.
When we perform a step one analysis to assess the recoverability of our goodwill, we determine the estimated fair value of our reporting unit and compare it to the carrying value of the reporting unit, including goodwill. The impairment test compares the fair value of our operating unit to its carrying amounts to assess whether impairment is present.
We have reviewed the provisions of ASC 350-20, with respect to the criteria necessary to evaluate the number of reporting units that exist. Based on our review of ASC 350-20, we have determined that we have one operating unit.
We have reviewed the provisions of Accounting Standard Codification, or ASC, 350-20, with respect to the criteria necessary to evaluate the number of reporting units that exist.
Interest (Expense)/Income, Net The following table sets forth certain information regarding interest income/(expense), net for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Interest (expense)/income, net $ (324 ) $ 300 $ (624 ) -208.0 % Interest (expense)/income, net decreased $624,000 from the prior fiscal year because of interest to service the $25.2 million of borrowings on our revolving line of credit and lower related party notes receivable balances.
Interest Expense, Net The following table sets forth certain information regarding interest expense, net for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Interest expense, net $ (761 ) $ (324 ) $ (437 ) 134.9 % 51 Interest expense, net increased $437,000 from the prior fiscal year because of interest to service our borrowings on our revolving line of credit during fiscal 2023.
Adjusted EBITDAS is a non-GAAP measure and may not be comparable to similar measures reported by other companies. In addition, non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.
In addition, non-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. We address the limitations of non-GAAP measures through the use of various GAAP measures.
Our presentation of Adjusted EBITDAS should not be construed as an inference that our future results will be unaffected by these items. 56 The following table sets forth our calculation of non-GAAP Adjusted EBITDAS for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): For the Years Ended April 30, 2022 2021 GAAP net (loss)/income $ (64,880 ) $ 18,405 Interest expense 324 111 Income tax expense 9,344 5,887 Depreciation and amortization 16,967 19,827 Related party interest income — (424 ) Stock compensation 2,812 2,910 Goodwill impairment 67,849 — Transition costs — 264 Technology implementation 1,948 — COVID-19 expenses — 223 Fair value inventory step-up 27 — Acquisition costs 599 — Other 40 125 Non-GAAP Adjusted EBITDAS $ 35,030 $ 47,328 Liquidity and Capital Resources Historically, we have generated strong annual cash flow from operating activities.
The following table sets forth our calculation of non-GAAP Adjusted EBITDAS for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): For the Years Ended April 30, 2023 2022 (Unaudited) GAAP net loss $ (12,024 ) $ (64,880 ) Interest expense 761 324 Income tax (benefit)/expense (249 ) 9,344 Depreciation and amortization 16,048 16,967 Stock compensation 4,050 2,812 Goodwill impairment — 67,849 Technology implementation 2,138 1,948 Fair value inventory step-up — 27 Acquisition costs 47 599 Facility consolidation costs 866 — Stockholder cooperation agreement costs 1,177 — Other — 40 Non-GAAP Adjusted EBITDAS $ 12,814 $ 35,030 Liquidity and Capital Resources Historically, we have generated strong annual cash flow from operating activities.
Income Taxes The following table sets forth certain information regarding income tax expense for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Income tax expense $ 9,344 $ 5,887 $ 3,457 58.7 % % of income from operations (effective tax rate) -16.8 % 24.2 % -41.1 % 55 We recorded an income tax expense of $9.3 million for fiscal 2022 compared with income tax expense of $5.9 million for fiscal 2021, primarily because of recording a full valuation allowance against our deferred tax assets.
Income Taxes The following table sets forth certain information regarding income tax expense for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Income tax (benefit)/expense $ (249 ) $ 9,344 $ (9,593 ) -102.7 % % of income from operations (effective tax rate) 2.0 % -16.8 % 18.8 % We recorded an income tax benefit of $249,000 for fiscal 2023 because of lower operating profit compared to income tax expense of $9.3 million for fiscal 2022.
We also use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate our performance in connection with compensation decisions. We believe it is useful to investors and analysts to evaluate this non-GAAP measure on the same basis as we use to evaluate our operating results.
We believe it is useful to investors and analysts to evaluate this non-GAAP measure on the same basis as we use to evaluate our operating results. 52 Adjusted EBITDAS is a non-GAAP measure and may not be comparable to similar measures reported by other companies.
Cash used in operating activities was $17.9 million for fiscal 2022 compared with cash generated of $33.3 million for the prior fiscal year.
Cash generated in operating activities was $30.7 million for fiscal 2023 compared with cash usage of $18.0 million for the prior fiscal year.
Cash provided by financing activities in fiscal 2022 was a result of changes in net transfers from our former parent company and the $25.0 million cash capital contribution from our former parent company as part of the Separation. 58 Credit Facility On August 24, 2020, we entered into a five-year financing arrangement in anticipation of the Separation, consisting of a $50.0 million revolving line of credit secured by substantially all our assets, maturing five years from the start date, with available borrowings determined by a borrowing base calculation.
Credit Facility On August 24, 2020, we entered into a five-year financing arrangement consisting of a $50.0 million revolving line of credit secured by substantially all our assets, maturing five years from the start date, with available borrowings determined by a borrowing base calculation. The revolving line included an option to increase the credit commitment for an additional $15.0 million.
Investing Activities Cash used in investing activities was $33.6 million in fiscal 2022 compared with a cash usage of $4.2 million in the prior fiscal year.
Investing Activities Cash used in investing activities was $4.8 million for fiscal 2023 compared with cash usage of $33.6 million for the prior fiscal year. This decrease was primarily because of the $27.0 million used to acquire Grilla Grills during fiscal 2022.
General and administrative expenses was relatively flat as compared to the prior year with $3.7 million of increased standalone expenses, such as our information technology infrastructure costs, subscription and software costs, and insurance premium costs, partially offset by $2.5 million of lower acquired intangible asset amortization and $2.7 million of lower employee compensation-related expenses.
General and administrative expenses increased $1.4 million compared with the prior fiscal year primarily because of $1.2 million of legal and advisory fees associated with the completed cooperation agreement with a stockholder and $461,000 of increased standalone expenses, such as our information technology infrastructure costs, subscription and software costs, and insurance premium costs, partially offset by lower employee compensation-related expenses.
The increase in capital expenditures was a result of the development and implementation of our independent information technology infrastructure noted above. We recorded spending of $3.9 million of capital expenditures during fiscal 2022 related to our development and implementation of our independent information technology infrastructure.
We have incurred capital expenditures in fiscal 2023 and 2022 related to the development and implementation of our independent information technology infrastructure, including our new enterprise resource planning system, D365. We recorded spending of $2.0 million and $3.9 million of capital expenditures for fiscal 2023 and 2022, respectively, related to our development and implementation of our independent information technology infrastructure.
In addition, net sales in fiscal 2022 were negatively impacted by lower demand of our shooting sports products partially offset by increased net sales of our outdoor lifestyle products. New products, defined as any new SKU introduced over the prior two fiscal years, represented 25.8% of net sales for fiscal 2022.
Our international net sales declined primarily because of reduced demand for our shooting sports products and timing of customer shipments. New products, defined as any new SKU introduced over the prior two fiscal years, represented 25.5% of net sales for fiscal 2023 compared to 25.8% of net sales for fiscal 2022.
Following the Separation, our capital structure and sources of liquidity changed from the historical capital structure because we no longer participate in our former parent company’s centralized cash management program. Our ability to fund our operating needs depends on our future ability to continue to generate positive cash flow from operations and obtain financing on acceptable terms.
We have generated $45.5 million of cash from operating activities since the Separation in fiscal 2021. Our ability to fund our operating needs depends on our future ability to continue to generate positive cash flow from operations and obtain financing on acceptable terms.
The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Domestic net sales $ 234,803 $ 267,573 $ (32,770 ) -12.2 % International net sales 12,723 9,114 3,609 39.6 % Total net sales $ 247,526 $ 276,687 $ (29,161 ) -10.5 % Fiscal 2022 Net Sales Compared with Fiscal 2021 Total net sales decreased $29.2 million, or 10.5%, from the prior year.
The following table sets forth certain information regarding geographic makeup of net sales included in the above table for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Domestic net sales $ 182,299 $ 234,803 $ (52,504 ) -22.4 % International net sales 8,910 12,723 (3,813 ) -30.0 % Total net sales $ 191,209 $ 247,526 $ (56,317 ) -22.8 % The following table sets forth certain information regarding net sales categories for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Shooting sports $ 88,885 $ 128,180 $ (39,295 ) -30.7 % Outdoor lifestyle 102,324 119,346 (17,022 ) -14.3 % Total net sales $ 191,209 $ 247,526 $ (56,317 ) -22.8 % Fiscal 2023 Net Sales Compared with Fiscal 2022 Total net sales decreased $56.3 million, or 22.8%, from the prior fiscal year.
The lower net sales in shooting sports was partially offset by increased net sales of our outdoor lifestyle products, specifically for our fishing, hunting, and rugged outdoor products.
Our shooting sports category includes net sales of shooting accessories and our products used for personal protection. Our outdoor lifestyle category includes net sales of our products used in hunting, fishing, camping, rugged outdoor activities, and outdoor cooking.
Net Income The following table sets forth certain information regarding net income and the related per share data for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands, except per share data): 2022 2021 $ Change % Change Net (loss)/income $ (64,880 ) $ 18,405 $ (83,285 ) -452.5 % Net (loss)/income per share Basic $ (4.66 ) $ 1.31 $ (5.97 ) -455.7 % Diluted $ (4.66 ) $ 1.29 $ (5.95 ) -461.2 % Fiscal 2022 Net (Loss)/Income Compared with Fiscal 2021 Excluding our non-cash goodwill impairment charge and related income tax effect, we had net income of $9.9 million, or $0.71 per diluted share, a decrease of $8.6 million, or ($0.58) per diluted share, from the prior fiscal year, primarily because of lower sales volumes and gross profit.
Net Loss The following table sets forth certain information regarding net loss and the related per share data for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands, except per share data): 2023 2022 $ Change % Change Net loss $ (12,024 ) $ (64,880 ) $ 52,856 -81.5 % Net loss per share Basic $ (0.90 ) $ (4.66 ) $ 3.76 -80.7 % Diluted $ (0.90 ) $ (4.66 ) $ 3.76 -80.7 % Fiscal 2023 Net Loss Compared with Fiscal 2022 We had a net loss of $12.0 million, or ($0.90) per diluted share in fiscal 2023.
Fiscal 2022 Cost of Sales and Gross Profit Compared with Fiscal 2021 Gross margin for fiscal 2022 increased 40 basis points over the prior fiscal year, primarily because of favorable impacts of price increases and recoveries from tariff drawbacks, partially offset by increased promotional product discounts and higher freight expense. 54 Operating Expenses The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2022 and 2021 (dollars in thousands): 2022 2021 $ Change % Change Research and development $ 5,501 $ 5,378 $ 123 2.3 % Selling, marketing, and distribution 56,168 56,773 (605 ) -1.1 % General and administrative 41,244 41,182 62 0.2 % Goodwill impairment 67,849 — 67,849 N/A Total operating expenses $ 170,762 $ 103,333 $ 67,429 65.3 % % of net sales 69.0 % 37.3 % Fiscal 2022 Operating Expenses Compared with Fiscal 2021 Excluding the impact of our non-cash goodwill impairment charge recorded during fiscal 2022, operating expenses were relatively flat as compared to fiscal 2021.
Operating Expenses The following table sets forth certain information regarding operating expenses for the fiscal years ended April 30, 2023 and 2022 (dollars in thousands): 2023 2022 $ Change % Change Research and development $ 6,361 $ 5,501 $ 860 15.6 % Selling, marketing, and distribution 51,791 56,168 (4,377 ) -7.8 % General and administrative 42,612 41,244 1,368 3.3 % Impairment of long-lived assets — 67,849 (67,849 ) -100.0 % Total operating expenses $ 100,764 $ 170,762 $ (69,998 ) -41.0 % % of net sales 52.7 % 69.0 % Fiscal 2023 Operating Expenses Compared with Fiscal 2022 Excluding the impact of our non-cash goodwill impairment charge recorded during fiscal 2022, operating expenses in fiscal 2023 decreased $2.1 million compared with the prior fiscal year.
We address the limitations of non-GAAP measures through the use of various GAAP measures. In the future, we may incur expenses or charges such as those added back to calculate Adjusted EBITDAS.
In the future, we may incur expenses or charges such as those added back to calculate Adjusted EBITDAS. Our presentation of Adjusted EBITDAS should not be construed as an inference that our future results will be unaffected by these items.
Net sales in our traditional channels decreased $17.9 million, or 10.6%, from the prior year, primarily because of lower net sales of our shooting sports products.
In addition, lower net sales of our shooting sports products to our OEM customers resulted in lower traditional channel net sales from the prior fiscal year.
Contractual Obligations and Commercial Commitments The following table sets forth a summary of our material contractual obligations and commercial commitments as of April 30, 2022 (in thousands): Less Than More Than Total 1 Year 1-3 Years 3-5 Years 5 Years Long-term debt obligations 25,170 — — 25,170 — Interest on debt 2,425 485 970 970 — Operating lease obligations 37,758 3,092 6,119 4,102 24,445 Purchase obligations 50,768 50,768 — — — Total obligations $ 116,121 $ 54,345 $ 7,089 $ 30,242 $ 24,445 As of April 30, 2022, we had $25.2 million of borrowings outstanding on our revolving line of credit, which included $170,000 of interest and other fees.
Recent Accounting Pronouncements The nature and impact of recent accounting pronouncements is discussed in Note 2 — Summary of Significant Accounting Policies to our consolidated and combined financial statements, which is incorporated herein by reference. 56 Contractual Obligations and Commercial Commitments The following table sets forth a summary of our material contractual obligations and commercial commitments as of April 30, 2023 (in thousands): Less Than More Than Total 1 Year 1-3 Years 3-5 Years 5 Years Long-term debt obligations $ 5,000 $ — $ — $ 5,000 $ — Interest on debt 1,563 399 798 366 — Operating lease obligations 37,541 2,251 4,419 4,445 26,426 Purchase obligations 35,691 35,691 — — — Total obligations $ 79,795 $ 38,341 $ 5,217 $ 9,811 $ 26,426 As of April 30, 2023, we had $5.0 million of borrowings outstanding on our revolving line of credit.
For those periods prior to the Separation, the combined financial statements were prepared on a “carve-out” basis as described below. We operate as one reporting segment. We analyze revenue streams in various ways, including customer group, brands, and customer channels. However, this information does not include a full set of discrete financial information.
We analyze revenue streams in various ways, including customer group, brands, categories, and customer channels. However, this information does not include a full set of discrete financial information. The following discussion and analysis includes references to net sales of our products in shooting sports and outdoor lifestyle categories.
The revolving line included an option to increase the credit commitment for an additional $15.0 million. The revolving line bore interest at a fluctuating rate equal to the Base Rate or LIBOR, as applicable, plus the applicable margin. During fiscal 2021, we recorded $410,000 of debt issuance costs associated with entering into this financing arrangement.
During fiscal 2022, we recorded $192,000 of additional debt issuance costs associated with entering into the Amended Loan and Security Agreement. As of April 30, 2023, we had $5.0 million of borrowings outstanding on the revolving line of credit, which bore interest at 6.05%, equal to SOFR plus the applicable margin.
In addition, our anticipated new products that have a higher average cost; increases in pricing from our suppliers; and increased freight costs increased our average finished goods per unit cost value during fiscal 2022, $4.5 million of reduced accounts payable due to timing of inventory shipments, $4.0 million of lower accrued payroll and incentives primarily because of lower management incentive accruals, and $2.1 million of lower sales volume variable expense accruals, partially offset by $8.6 million of lower accounts receivable due to lower net sales and timing of customer product shipments.
The cash generated in fiscal 2023 was partially offset by $1.3 million of reduced accounts payable due to timing of inventory shipments and $2.0 million of lower accrued payroll, incentives, and profit sharing primarily because of lower management incentive accruals.
We will continue to assess the adequacy of the valuation allowance on a quarterly basis. Recent Accounting Pronouncements The nature and impact of recent accounting pronouncements is discussed in Note 2 — Summary of Significant Accounting Policies to our consolidated and combined financial statements, which is incorporated herein by reference.
We will continue to assess the adequacy of the valuation allowance on a quarterly basis.
As of April 30, 2022, we had $25.2 million of borrowings outstanding on the revolving line of credit, which bore interest at 1.56%, equal to SOFR plus the applicable margin. The proceeds from the borrowings on our revolving line of credit were used to acquire Grilla Grills.
We borrowed $25.0 million in March 2022 to help fund the acquisition of Grilla Grills in the prior fiscal year. We had $5.0 million of borrowings on our revolving line as of April 30, 2023.
Removed
Background On August 24, 2020, Smith & Wesson Brands, Inc., or our former parent company, completed the spin-off of its outdoor products and accessories business to us, or the Separation.
Added
See non-GAAP financial measure disclosures below for our reconciliation of non-GAAP Adjusted EBITDAS. • We repurchased 377,034 shares of our common stock, in the open market, for a total of $3.5 million during fiscal 2023 leaving $6.5 million available to be purchased under our authorized repurchase program.
Removed
The Separation was effected through the transfer of all of the assets and legal entities, subject to any related liabilities, associated with its outdoor products and accessories business to us, or the Transfer, and the distribution of all the outstanding shares of our common stock to the holders of the common stock of our former parent company, or the Distribution, as of the close of business on August 10, 2020, the record date for the Distribution, or the Record Date.
Added
Net sales in our e-commerce channel decreased $10.2 million, or 10.5%, from the prior fiscal year, primarily as a result of lower net sales to the world’s largest e-commerce retailer because of reduced demand primarily in our shooting sports category as well as their efforts to reduce their overall inventory.
Removed
As a result of the Distribution, we became an independent public company and our common stock became listed under the symbol “AOUT” on the Nasdaq Global Select Market. Prior to the Separation, the combined financial statements reflected the financial position, results of operations, and cash flows for the periods presented as historically managed by our former parent.
Added
The lower net sales to our online retailers were partially offset by a 76.0% increase in our direct-to-consumer net sales over the prior year, primarily in our outdoor lifestyle products, which also include sales resulting from the acquisition of Grilla Grills.
Removed
Basis of Presentation Our financial statements for the periods through the Separation date of August 24, 2020 are combined financial statements prepared on a “carve-out” basis as discussed below. Our financial statements for the period from August 24, 2020 through April 30, 2022 are consolidated financial statements based on the reported results of our company as a standalone company.
Added
We believe the increase in our direct-to-consumer net sales represents the demand for our products in the market that are not typically hindered by retailer inventory management.
Removed
Accordingly, the period subsequent to the Separation in fiscal 2021 included consolidated and combined financial statements. Prior to the Separation, we operated as part of our former parent and not as a standalone company.
Added
Our brands that are only sold on our direct-to-consumer websites represented $24.4 million, or 28.0%, of fiscal 2023 total e-commerce channel net sales, which includes net sales from a business acquisition completed in the prior fiscal year.
Removed
The accompanying combined financial statements, prior to the Separation, were prepared in connection with the Separation and were derived from the consolidated financial statements and accounting records of our former parent.
Added
Net sales in our traditional channels decreased $46.1 million, or 30.7%, from the prior fiscal year, primarily because of lower net sales for most of our products as a result of decreased orders from retailers, which we believe was caused by a combination of lower foot traffic because of less discretionary consumer spending and retailers’ efforts to reduce their overall inventory levels.
Removed
The combined financial statements, prior to the Separation, reflect our historical financial position, results of operations, and cash flows as they were historically managed in accordance with accounting principles generally accepted in the United States, or GAAP.
Added
We also believe the decrease in traditional channel net sales was a result of a build in traditional channel inventories of our products during the first fiscal quarter last year as certain customers accelerated their purchases to offset the possibility of delays caused by global supply chain disruptions.
Removed
In addition, for purposes of preparing the combined financial statements, prior to the Separation, on a “carve-out” basis, a portion of our former parent’s total corporate expenses were allocated to us.
Added
Fiscal 2023 Cost of Sales and Gross Profit Compared with Fiscal 2022 Gross margin for fiscal 2023 decreased 10 basis points from the prior fiscal year, primarily because of lower sales volumes, product and customer mix, increased promotional product discounts that are consistent with pre-pandemic promotional discount levels, and increased expense related to provisions on inventory, partially offset by lower freight and tariff expenses from the planned reduction in inventory purchases and new product introductions that typically have higher gross margins.
Removed
These expense allocations included the cost of corporate functions and resources provided by our former parent, including executive management, finance, accounting, legal, human resources, internal audit, and the related benefit costs associated with such functions, such as stock-based compensation and the cost of our former parent’s Springfield, Massachusetts corporate headquarters.
Added
Research and development expenses increased $860,000, primarily from increased consulting expenses; higher depreciation expense from new product tooling; and increased compensation-related expenses from additional headcount.
Removed
In fiscal 2020, our former parent began operating a new distribution facility in Columbia, Missouri, which involved shared distribution expenses between our former parent and us. In addition to the portion of our former parent’s corporate expenses allocated to us prior to the Separation, a portion of our former parent’s total distribution expenses was allocated to us.
Added
Selling, marketing, and distribution expenses decreased $4.4 million, primarily because of lower sales volume-related expenses, lower advertising expenses, and reduced facility-related costs as a result of consolidating the Crimson Trace and Grilla operations into our headquarters in Columbia, Missouri.
Removed
These expense allocations included selling, distribution, inventory management, warehouse, and fulfillment services provided by our former parent and the related benefit costs associated with such functions, such as stock-based compensation and the cost of our former parent’s Columbia, Missouri distribution facility.
Added
Fiscal 2023 income tax benefit was primarily because of recording return to provision adjustments relating to the Federal and State tax returns filed for the prior fiscal year and the impact of refundable state tax credits. Fiscal 2022 income tax expense was primarily due to recording a full valuation allowance against our deferred tax assets.
Removed
For the period prior to the Separation in fiscal 2021, we were allocated $2.7 million for such corporate expenses, which were included within general and administrative expenses in our consolidated and combined statements of operations and comprehensive income/(loss).
Added
Excluding our non-cash goodwill impairment charge and related income tax effect in fiscal 2022, we had net income of $9.9 million, or $0.71 per diluted share. The decrease in net income from the prior fiscal year was primarily because of lower sales volumes and gross profit. Non-GAAP Financial Measure We use GAAP net income as our primary financial measure.
Removed
We were also allocated $1.9 million of such distribution expenses, which were included within our cost of sales; selling, marketing, and distribution expenses; and general and administrative expenses in the consolidated and combined statements of operations and comprehensive income/(loss). 52 Prior to the Separation, costs were allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net sales, employee headcount, delivery units, or square footage, as applicable.
Added
We also use Adjusted EBITDAS to supplement GAAP measures of performance to evaluate our performance in connection with compensation decisions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

16 edited+6 added−309 removed7 unchanged
Biggest change(b) Exhibits Incorporated by Reference Exhibit Number Exhibit Form Exhibit Filing Date 2.1 Separation and Distribution Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 2.1 8/26/2020 3.1 Amended and Restated Certificate of Incorporation 8-K 3.1 8/26/2020 3.2 Amended and Restated Bylaws 8-K 3.2 8/26/2020 4.2 Description of Securities 10-K 4.2 7/15/2021 10.1 * Transition Services Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.1 8/26/2020 10.2 * Tax Matters Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.2 8/26/2020 10.3 * Employee Matters Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.3 8/26/2020 10.4 * Trademark License Agreement, dated as of August 24, 2020, by and between Smith & Wesson Inc. and AOB Products Company, a wholly owned subsidiary of the Registrant 8-K 10.4 8/26/2020 10.5 * Sublease, dated as of August 24, 2020, by and between Smith & Wesson Sales Company and the Registrant 8-K 10.5 8/26/2020 10.6 * Supply Agreement, dated as of August 24, 2020, by and between Crimson Trace Corporation, a wholly owned subsidiary of the Registrant, as Supplier, and Smith & Wesson Inc. 8-K 10.6 8/26/2020 10.7 * Supply Agreement, dated as of August 24, 2020, by and between AOB Products Company, a wholly owned subsidiary of the Registrant, as Supplier, and Smith & Wesson Inc. 8-K 10.7 8/26/2020 10.8 + 2020 Incentive Compensation Plan 8-K 10.8 8/26/2020 10.9 + Form of Non-Qualified Stock Option Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.9 8/26/2020 10.10 + Form of Restricted Stock Unit Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.10 8/26/2020 10.11 + Form of Performance Stock Unit Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.11 8/26/2020 10.12 + 2020 Employee Stock Purchase Plan 8-K 10.12 8/26/2020 10.13 + Employment Agreement by and between the Registrant and Brian D.
Biggest change(b) Exhibits riIncorporated by Reference Exhibit Number Exhibit Form Exhibit Filing Date 2.1 Separation and Distribution Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 2.1 8/26/2020 3.1 Amended and Restated Certificate of Incorporation 8-K 3.1 8/26/2020 3.2 Second Amended and Restated Bylaws 8-K 3.2(a) 9/27/2021 4.2 Description of Securities 10-K 4.2 7/15/2021 10.1 * Transition Services Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.1 8/26/2020 10.2 * Tax Matters Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.2 8/26/2020 10.3 * Employee Matters Agreement, dated as of August 21, 2020, by and between Smith & Wesson Brands, Inc. and the Registrant 8-K 10.3 8/26/2020 10.4 * Trademark License Agreement, dated as of August 24, 2020, by and between Smith & Wesson Inc. and AOB Products Company, a wholly owned subsidiary of the Registrant 8-K 10.4 8/26/2020 10.5 * Sublease, dated as of August 24, 2020, by and between Smith & Wesson Sales Company and the Registrant 8-K 10.5 8/26/2020 10.6 * Assignment and Assumption of Lease Agreement, dated as of January 31, 2023, by and between Smith & Wesson Sales Company (f/k/a Smith & Wesson Corp.) and the Registrant, and consented to by Smith & Wesson Brands, Inc. 8-K 10.1 2/1/2023 10.7 * Lease Agreement, dated as of October 26, 2017, by and between Ryan Boone County, LLC and Smith & Wesson Corp. 8-K 10.2 2/1/2023 10.8 * First Amendment to Lease Agreement, dated October 25, 2018, by and among Ryan Boone County, LLC, Smith & Wesson Corp., and American Outdoor Brands Corporation 8-K 10.3 2/1/2023 10.9 * Second Amendment to Lease Agreement, dated as of January 31, 2019, by and among Ryan Boone County, LLC, American Outdoor Brands Sales Company (f/k/a Smith & Wesson Corp.), and American Outdoor Brands Corporation 8-K 10.4 2/1/2023 10.10 * Supply Agreement, dated as of August 24, 2020, by and between Crimson Trace Corporation, a wholly owned subsidiary of the Registrant, as Supplier, and Smith & Wesson Inc. 8-K 10.6 8/26/2020 10.11 * Supply Agreement, dated as of August 24, 2020, by and between AOB Products Company, a wholly owned subsidiary of the Registrant, as Supplier, and Smith & Wesson Inc. 8-K 10.7 8/26/2020 10.12 + 2020 Incentive Compensation Plan 8-K 10.8 8/26/2020 10.13 + Form of Non-Qualified Stock Option Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.9 8/26/2020 10.14 + Form of Restricted Stock Unit Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.10 8/26/2020 61 10.15 + Form of Performance Stock Unit Award Grant Notice and Agreement to the 2020 Incentive Compensation Plan 8-K 10.11 8/26/2020 10.16 + 2020 Employee Stock Purchase Plan 8-K 10.12 8/26/2020 10.17 + Employment Agreement by and between the Registrant and Brian D.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. I tem 13.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders. I tem 13.
The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. + Management contract or compensatory arrangement. # Filed herewith ## Furnished herewith Item 16.
The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the registrant may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. + Management contract or compensatory arrangement. # Filed herewith ## Furnished herewith
Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. I tem 14.
Certain Relationships and Related Transactions, and Director Independence The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders. I tem 14.
Directors, Executive Officers and Corporate Governance The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2021 Annual Meeting of Stockholders.
Directors, Executive Officers and Corporate Governance The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders.
Executive Compensation The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. I tem 12.
Executive Compensation The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders. I tem 12.
Murphy 8-K 10.13 8/26/2020 10.14 + Executive Severance Pay Plan 8-K 10.14 8/26/2020 65 10.15 Form of Indemnification Agreement entered into between the Registrant and the following directors and executive officers: As of August 24,2020 with Brian D. Murphy, H. Andrew Fulmer, Mary E. Gallagher, Gregory J. Gluchowski, Jr., Barry M. Monheit, and I.
Murphy 8-K 10.13 8/26/2020 10.18 + Executive Severance Pay Plan 8-K 10.14 8/26/2020 10.19 Form of Indemnification Agreement entered into between the Registrant and the following directors and executive officers: As of August 24,2020 with Brian D. Murphy, H. Andrew Fulmer, Mary E. Gallagher, Gregory J. Gluchowski, Jr., Barry M. Monheit, and I.
Marie Wadecki 8-K 10.15 8/26/2020 10.16 Loan and Security Agreement, dated as of August 24, 2020, by and among AOB Products Company, Crimson Trace Corporation, American Outdoor Brands, Inc., Battenfeld Acquisition Company Inc., BTI Tools, LLC, Ultimate Survival Technologies, LLC, AOBC Asia Consulting, LLC, TD Bank, N.A., and the other banks, financial institutions, and other entities from time to time parties thereto 8-K 10.16 8/26/2020 10.17 Amendment No. 1 to Loan and Security Agreement, dated as of March 25, 2022, by and among AOB Products Company, Crimson Trace Corporation, American Outdoor Brands, Inc., Battenfeld Acquisition Company Inc., BTI Tools, LLC, Ultimate Survival Technologies, LLC, AOBC Asia Consulting, LLC, TD Bank, N.A., and the other banks, financial institutions, and other entities from time to time parties thereto 8-K 10.1 3/28/2022 21.1 # Subsidiaries of the Registrant 23.1 # Consent of Grant Thornton LLP, an Independent Registered Public Accounting Firm 23.2 # Consent of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm 31.1 # Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer 31.2 # Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32.1 ## Section 1350 Certification of Principal Executive Officer 32.2 ## Section 1350 Certification of Principal Financial Officer 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Marie Wadecki 8-K 10.15 8/26/2020 10.20 Loan and Security Agreement, dated as of August 24, 2020, by and among AOB Products Company, Crimson Trace Corporation, American Outdoor Brands, Inc., Battenfeld Acquisition Company Inc., BTI Tools, LLC, Ultimate Survival Technologies, LLC, AOBC Asia Consulting, LLC, TD Bank, N.A., and the other banks, financial institutions, and other entities from time to time parties thereto 8-K 10.16 8/26/2020 10.21 Amendment No. 1 to Loan and Security Agreement, dated as of March 25, 2022, by and among AOB Products Company, Crimson Trace Corporation, American Outdoor Brands, Inc., Battenfeld Acquisition Company Inc., BTI Tools, LLC, Ultimate Survival Technologies, LLC, AOBC Asia Consulting, LLC, TD Bank, N.A., and the other banks, financial institutions, and other entities from time to time parties thereto 8-K 10.1 3/28/2022 10.22 Cooperation Agreement, dated August 7, 2022, by and among the Engine Group and the Registrant 8-K 10.1 8/8/2022 10.23 First Amendment to Cooperation Agreement, dated May 24, 2023, by and among the Engine Group and the Registrant 8-K 10.1 5/26/2023 21.1 # Subsidiaries of the Registrant 23.1 # Consent of Grant Thornton LLP, an Independent Registered Public Accounting Firm 31.1 # Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer 31.2 # Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer 32.1 ## Section 1350 Certification of Principal Executive Officer 32.2 ## Section 1350 Certification of Principal Financial Officer 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Principal Accountant Fees and Services The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2022 Annual Meeting of Stockholders. 64 P ART IV I tem 15.
Principal Accountant Fees and Services The information required by this Item is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2023 Annual Meeting of Stockholders. 60 P ART IV I tem 15.
As of April 30, 2022, we had $25.2 million of borrowings outstanding under the revolving line of credit. I tem 8. Financial Statements and Supplementary Data Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements, notes, and report are incorporated herein by reference.
As of April 30, 2023, we had $5.0 million of borrowings outstanding under the revolving line of credit. I tem 8. Financial Statements and Supplementary Data Reference is made to the financial statements, the notes thereto, and the report thereon, commencing on page F-1 of this report, which financial statements, notes, and report are incorporated herein by reference.
Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as our internal control our financial reporting is to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
I tem 9B. Other Information Not applicable. Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 63 P ART III I tem 10.
Ite m 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. 59 P ART III I tem 10.
Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. 57 Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form-10-K.
The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. 62 Changes to Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during our most recent fiscal quarter ended April 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Inherent Limitations on the Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
This annual report does not include an attestation report of our registered public accounting firm on our internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.” Inherent Limitations on the Effectiveness of Controls and Procedures In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.
Internal Control over Financial Reporting Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Removed
Our management, under the supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report on Form-10-K.
Added
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in condition, or that the degree of compliance with the policies may deteriorate.
Removed
This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm as we are not required to formally attest to the effectiveness of our internal controls while we remain an emerging growth company.
Added
Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Tradeway Commission (the COSO Framework). Based on that evaluation, management believes that our internal control over financial reporting was effective as of April 30, 2023.
Removed
Form 10-K Summary None. 66 S IGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN OUTDOOR BRANDS, INC. /s/ Brian D. Murphy Brian D.
Added
Changes to Internal Control over Financial Reporting During our most recent fiscal quarter ended April 30, 2023, we had a change in our internal control over financial reporting that occurred as a result of our implementation of a new ERP system, D365, for one of our subsidiaries that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Removed
Murphy President and Chief Executive Officer Date: July 14, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Signature Capacity Date /s/ Brian D.
Added
The new ERP system for one of our subsidiaries replaced our legacy system in which a significant portion of our business transactions originate, are processed, and recorded. We have now transitioned all of our subsidiaries to D365.
Removed
Murphy President and Chief Executive Officer (Principal Executive Officer) July 14, 2022 Brian D. Murphy /s/ H. Andrew Fulmer Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) July 14, 2022 H. Andrew Fulmer /s/ Barry M. Monheit Chairman of the Board July 14, 2022 Barry M. Monheit /s/ Mary E. Gallagher Director July 14, 2022 Mary E.
Added
D365 is intended to provide us with enhanced transactional processing and management tools compared with our legacy system and is intended to enhance internal controls over financial reporting. We believe D365 will facilitate better transactional reporting and oversight, enhance our internal control over financial reporting, and function as an important component of our disclosure controls and procedures.
Removed
Gallagher /s/ Gregory J. Gluchowski, Jr. Director July 14, 2022 Gregory J. Gluchowski, Jr. /s/ Luis G. Marconi Director July 14, 2022 Luis G. Marconi /s/ I. Marie Wadecki Director July 14, 2022 I. Marie Wadecki 67 I NDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS AMERICAN OUTDOOR BRANDS, INC.
Added
Other than the change to our ERP system for one of our subsidiaries, there have been no changes in our internal control over financial reporting during our most recent fiscal quarter ended April 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 58 I tem 9B. Other Information Not applicable.
Removed
AND SUBSIDIARIES Page Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) F- 2 Report of Independent Registered Public Accounting Firm (PCAOB ID Number 34) F- 3 Consolidated Balance Sheets as of April 30, 2022 and 2021 F- 4 Consolidated and Combined Statements of Operations and Comprehensive Income/(Loss) for the years ended April 30, 2022, 2021, and 2020 F- 5 Consolidated and Combined Statements of Equity for the years ended April 30, 2022, 2021, and 2020 F- 6 Consolidated and Combined Statements of Cash Flows for the years ended April 30, 2022, 2021, and 2020 F- 7 Notes to Consolidated and Combined Financial Statements F- 9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders American Outdoor Brands, Inc.
Removed
Opinion on the financial statements We have audited the accompanying consolidated balance sheets of American Outdoor Brands, Inc.
Removed
(a Delaware corporation) and subsidiaries (the “Company”) as of April 30, 2022 and 2021, the related consolidated and combined statements of operations and comprehensive income/(loss), equity, and cash flows for each of the two years in the period ended April 30, 2022, and the related notes (collectively referred to as the “financial statements”).
Removed
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Removed
Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits.
Removed
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Removed
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Removed
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Removed
Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Removed
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2020.
Removed
Hartford, Connecticut July 14, 2022 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and Board of Directors of American Outdoor Brands, Inc.
Removed
Opinion on the Financial Statements We have audited the accompanying combined statements of operations and comprehensive loss, cash flows, and equity, for the year ended April 30, 2020, and the related notes (collectively referred to as the "financial statements") of American Outdoor Brands, Inc., formerly the Outdoor Products & Accessories Business of Smith & Wesson Brands, Inc. (the "Company").
Removed
In our opinion, the financial statements present fairly, in all material respects, the Company’s results of operations and cash flows for the year ended April 30, 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management.
Removed
Our responsibility is to express an opinion on the Company's financial statements based on our audit.
Removed
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Removed
We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Removed
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Removed
Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Removed
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Boston, Massachusetts July 1, 2020 We began serving as the Company's auditor in 2020.
Removed
In 2020 we became the predecessor auditor. F- 3 AMERICAN OUTDOOR BRANDS, INC.
Removed
AND SUBSIDIARIES C ONSOLIDATED BALANCE SHEETS As of: April 30, 2022 April 30, 2021 (In thousands, except par value and share data) ASSETS Current assets: Cash and cash equivalents $ 19,521 $ 60,801 Accounts receivable, net of allowance for credit losses of $ 129 on April 30, 2022 and $ 119 on April 30, 2021 28,879 37,487 Inventories 121,683 74,296 Prepaid expenses and other current assets 8,491 7,098 Income tax receivable 1,231 149 Total current assets 179,805 179,831 Property, plant, and equipment, net 10,621 9,715 Intangible assets, net 63,194 54,920 Goodwill — 64,315 Right-of-use assets 23,884 25,375 Deferred income taxes — 6,683 Other assets 336 424 Total assets $ 277,840 $ 341,263 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 13,563 $ 16,021 Accrued expenses 7,853 9,843 Accrued payroll and incentives 2,788 6,774 Lease liabilities, current 1,803 1,771 Accrued profit sharing 998 1,933 Total current liabilities 27,005 36,342 Notes and loans payable, net of current portion 24,697 — Lease liabilities, net of current portion 23,076 24,780 Other non-current liabilities 31 236 Total liabilities 74,809 61,358 Commitments and contingencies (Note 15) Equity: Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no shares issued or outstanding — — Common stock, $ 0.001 par value, 100,000,000 shares authorized, 14,240,290 shares issued and 13,403,326 shares outstanding on April 30, 2022 and 14,059,440 shares issued and outstanding on April 30, 2021 14 14 Additional paid in capital 268,393 265,362 Retained (deficit)/earnings ( 50,351 ) 14,529 Treasury stock, at cost ( 836,964 shares on April 30, 2022) ( 15,025 ) — Total equity 203,031 279,905 Total liabilities and equity $ 277,840 $ 341,263 The accompanying notes are an integral part of these consolidated and combined financial statements.
Removed
AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENTS OF OP ERATIONS AND COMPREHENSIVE INCOME/(LOSS) For the Years ended April 30, 2022 2021 2020 (In thousands, except per share data) Net sales (including $ 2.4 million of related party sales for the four months of our fiscal year 2021 prior to the Separation, and $ 15.1 million of related party sales for our fiscal year 2020) $ 247,526 $ 276,687 $ 167,379 Cost of sales 133,287 149,859 96,363 Gross profit 114,239 126,828 71,016 Operating expenses: Research and development 5,501 5,378 4,995 Selling, marketing, and distribution 56,168 56,773 38,596 General and administrative 41,244 41,182 41,292 Goodwill impairment 67,849 — 98,929 Total operating expenses 170,762 103,333 183,812 Operating (loss)/income ( 56,523 ) 23,495 ( 112,796 ) Other income/(expense), net: Other income/(loss), net 1,311 497 ( 21 ) Interest (expense)/income, net ( 324 ) 300 4,963 Total other income, net 987 797 4,942 (Loss)/income from operations before income taxes ( 55,536 ) 24,292 ( 107,854 ) Income tax expense/(benefit) 9,344 5,887 ( 11,653 ) Net (loss)/income/comprehensive (loss)/income $ ( 64,880 ) $ 18,405 $ ( 96,201 ) Net (loss)/income per share: Basic $ ( 4.66 ) $ 1.31 $ ( 6.88 ) Diluted $ ( 4.66 ) $ 1.29 $ ( 6.88 ) Weighted average number of common shares outstanding: Basic 13,930 13,997 13,975 Diluted 13,930 14,225 13,975 The accompanying notes are an integral part of these consolidated and combined financial statements.
Removed
AND SUBSIDIARIES C ONSOLIDATED AND COMBINED STATEMENTS OF EQUITY Common Stock Former Net Parent Additional Treasury Stock (In thousands) Shares Amount Company Investment Paid-In Capital Retained (Deficit)/Earnings Shares Amount Total Equity Balance at April 30, 2019 — $ — $ 324,614 $ — $ — — $ — $ 324,614 Net loss — — ( 96,201 ) — — — — ( 96,201 ) Net transfers to former parent — — ( 4,315 ) — — — — ( 4,315 ) Balance at April 30, 2020 — $ — $ 224,098 $ — $ — — $ — $ 224,098 Net income — — 3,876 — 14,529 — — 18,405 Stock-based compensation — — — 2,486 — — — 2,486 Shares issued under employee stock purchase plan 35 — — 386 — 386 Issuance of common stock under restricted stock unit awards, net of tax 49 — — ( 33 ) — — — ( 33 ) Net transfers from former parent — — 34,563 — — — — 34,563 Issuance of common stock and reclassification of former net parent company investment 13,975 14 ( 262,537 ) 262,523 — — — — Balance at April 30, 2021 14,059 $ 14 $ — $ 265,362 $ 14,529 — $ — $ 279,905 Net loss — — — — ( 64,880 ) — — ( 64,880 ) Stock-based compensation — — — 2,812 — — — 2,812 Shares issued under employee stock purchase plan 77 — — 870 — — — 870 Proceeds from exercise of stock options 3 — — 5 — — — 5 Issuance of common stock under restricted stock unit awards, net of tax 101 — — ( 656 ) — — — ( 656 ) Repurchase of treasury stock — — — — — 837 ( 15,025 ) ( 15,025 ) Balance at April 30, 2022 14,240 $ 14 $ — $ 268,393 $ ( 50,351 ) 837 $ ( 15,025 ) $ 203,031 The accompanying notes are an integral part of these consolidated and combined financial statements.
Removed
AND SUBSIDIARIES C ONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS For the Years Ended April 30, 2022 2021 2020 (In thousands) Cash flows from operating activities: Net (loss)/income $ ( 64,880 ) $ 18,405 $ ( 96,201 ) Adjustments to reconcile net income to net cash (used in)/provided by operating activities: Depreciation and amortization 16,967 19,827 23,639 Loss on sale/disposition of assets 161 107 819 Provision for credit losses on accounts receivable 17 ( 48 ) 688 Impairment of long-lived tangible assets — — 720 Goodwill impairment 67,849 — 98,929 Deferred income taxes 6,683 ( 3,103 ) ( 12,499 ) Stock-based compensation expense 2,812 2,910 850 Changes in operating assets and liabilities: Accounts receivable 8,591 ( 2,343 ) ( 8,763 ) Inventories ( 41,431 ) ( 14,297 ) 942 Prepaid expenses and other current assets ( 1,393 ) ( 5,816 ) ( 250 ) Income taxes ( 1,082 ) ( 45 ) ( 132 ) Accounts payable ( 4,521 ) 7,632 12 Accrued payroll and incentives ( 3,986 ) 4,751 ( 1,397 ) Right-of-use assets 1,650 1,337 939 Accrued profit sharing ( 935 ) 1,716 ( 61 ) Accrued expenses ( 2,140 ) 3,691 1,434 Other assets ( 279 ) 9 ( 55 ) Lease liabilities ( 1,831 ) ( 1,543 ) ( 1,146 ) Other non-current liabilities ( 205 ) 130 ( 21 ) Net cash (used in)/provided by operating activities ( 17,953 ) 33,320 8,447 Cash flows from investing activities: Acquisition of business ( 27,000 ) — — Payments to acquire patents and software ( 3,191 ) ( 558 ) ( 383 ) Payments to acquire property and equipment ( 3,397 ) ( 3,623 ) ( 1,480 ) Net cash used in investing activities ( 33,588 ) ( 4,181 ) ( 1,863 ) Cash flows from financing activities: Proceeds from loans and notes payable 25,170 — — Payments to acquire treasury stock ( 15,025 ) — — Net transfers from former parent — 31,485 ( 6,512 ) Cash paid for debt issuance costs ( 103 ) ( 410 ) — Proceeds from exercise of options to acquire common stock, including employee stock purchase plan 875 386 — Payment of employee withholding tax related to restricted stock units ( 656 ) ( 33 ) — Net cash provided by/(used in) financing activities 10,261 31,428 ( 6,512 ) Net (decrease)/increase in cash and cash equivalents ( 41,280 ) 60,567 72 Cash and cash equivalents, beginning of period 60,801 234 162 Cash and cash equivalents, end of period $ 19,521 $ 60,801 $ 234 Supplemental disclosure of cash flow information Cash paid for: Interest $ 125 $ 111 $ — Income taxes $ 3,819 $ 7,951 $ — The accompanying notes are an integral part of these consolidated and combined financial statements.
Removed
AND SUBSIDIARIES CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - (Continued) Supplemental Disclosure of Non-cash Investing and Financing Activities: For the Years Ended April 30, 2022 2021 2020 (In thousands) Purchases of property and equipment and intangibles included in accounts payable $ 1,277 $ 254 $ 54 Non-cash transfers to/from former parent — 1,398 — Changes in right-of-use assets for operating lease obligations 158 23,940 3,369 Changes in lease liabilities for operating lease obligations 158 23,940 4,449 Charges of debt issuance costs included in accrued expenses 89 — — The accompanying notes are an integral part of these consolidated and combined financial statement F- 8 AMERICAN OUTDOOR BRANDS, INC.
Removed
AND SUBSIDIARIES N OTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS 1. Background, Description of Business, and Basis of Presentation Background On August 24, 2020, Smith & Wesson Brands, Inc., or our former parent, completed the spin-off of its outdoor products and accessories business, or the Separation, to our company (our “company,” “we,” “us,” or “our”).
Removed
The consolidated and combined financial statements for the period prior to the Separation do not necessarily reflect what the financial position, results of operations, and cash flows would have been had we operated as an independent, publicly traded company during the historical periods presented.
Removed
For the period prior to the Separation, the combined financial statements were prepared on a “carve-out” basis. Description of Business We are a leading provider of outdoor lifestyle products and shooting sports accessories encompassing hunting, fishing, outdoor cooking, camping, shooting, and personal security and defense products for rugged outdoor enthusiasts.
Removed
We conceive, design, source, and sell our outdoor lifestyle products, including premium sportsman knives and tools for fishing and hunting; land management tools for hunting preparedness; harvesting products for post-hunt or post-fishing activities; outdoor cooking products; and camping, survival, and emergency preparedness products.
Removed
We conceive, design, produce or source, and sell our shooting sports accessories, such as rests, vaults, and other related accessories; electro-optical devices, including hunting optics, firearm aiming devices, flashlights, and laser grips; and reloading, gunsmithing, and firearm cleaning supplies.
Removed
We develop and market our products at our facility in Columbia, Missouri and contract for the manufacture and assembly of most of our products with third-parties located in Asia. We also manufacture some of our electro-optics products at our facility in Wilsonville, Oregon.
Removed
We focus on our brands and the establishment of product categories in which we believe our brands will resonate strongly with the activities and passions of consumers and enable us to capture an increasing share of our overall addressable markets. Our owned brands include BOG, BUBBA, Caldwell, Crimson Trace, Frankford Arsenal, Grilla Grills, Hooyman, Imperial, LaserLyte, Lockdown, MEAT!
Removed
Your Maker, Old Timer, Schrade, Tipton, Uncle Henry, ust, and Wheeler, and and we license for use in association with certain products we sell additional brands, including M&P, Smith & Wesson, Performance Center by Smith & Wesson, and T/C.
Removed
In focusing on the growth of our brands, we organize our creative, product development, sourcing, and e-commerce teams into four brand lanes, each of which focuses on one of four distinct consumer verticals – Adventurer, Harvester, Marksman, and Defender – with each of our brands included in one of the brand lanes. • Our Adventurer brands include products that help enhance consumers’ fishing and camping experiences. • Our Harvester brands focus on the activities hunters typically engage in, including the activities to prepare for the hunt, the hunt itself, and the activities that follow a hunt, such as meat processing. • Our Marksman brands address product needs arising from consumer activities that take place primarily at the shooting range and where firearms are cleaned, maintained, and worked on. • Our Defender brands include products that help consumers aim their firearms more accurately, including situations that require self-defense, and products that help safely secure and store, as well as maintain connectivity to those possessions that many consumers consider to be high value or high consequence.
Removed
Basis of Presentation – Consolidated Financial Statements Subsequent to the Separation Our financial statements for the periods through the Separation date of August 24, 2020 are combined financial statements prepared on a “carve-out” basis as discussed below.
Removed
Our financial statements for all periods subsequent to August 24, 2020 are consolidated financial statements based on our reported results as a standalone company, and have been prepared in conformity with accounting principles generally accepted in the United States, or GAAP.
Removed
Basis of Presentation – Combined Financial Statements Prior to the Separation For the period prior to the Separation, the combined financial statements reflected the financial position, results of operations, and cash flows for the periods presented as historically managed by our former parent and were derived from the consolidated financial statements and accounting records of our former parent in accordance with GAAP.
Removed
AND SUBSIDIARIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) In addition, for purposes of preparing the combined financial statements, prior to the Separation, on a “carve-out” basis, a portion of our former parent’s total corporate expenses was allocated to us based on direct usage when identifiable or, when not directly identifiable, on the basis of proportional net revenue, employee headcount, delivered units, or square footage, as applicable.
Removed
These expense allocations included the cost of corporate functions and resources provided by our former parent, including executive management, finance, accounting, legal, human resources, internal audit, and the related benefit costs associated with such functions, such as stock-based compensation and the cost of our former parent’s Springfield, Massachusetts corporate headquarters.
Removed
For the period prior to the Separation in fiscal 2021, we were allocated $ 2.7 million for such corporate expenses, which were included within general and administrative expenses in the consolidated and combined statements of operations and comprehensive income.
Removed
We were also allocated $ 1.9 million of such distribution expenses, which were included within cost of sales; selling, marketing, and distribution expenses; and general and administrative expenses in the consolidated and combined statements of operations and comprehensive income.
Removed
Reclassification We have adjusted the accompanying consolidated balance sheet as of April 30, 2021 to reclassify $ 4.8 million from accounts receivable, net, to other current assets, and $ 1.2 million, net, from Property, Plant, and Equipment, net to Intangibles, net, to conform with our current presentation.
Removed
This reclassification had no impact on the previously reported net income and comprehensive income and operating cash flows. 2. Summary of Significant Accounting Policies Use of Estimates In preparing the consolidated and combined financial statements in accordance with GAAP, we make estimates and assumptions that affect amounts reported in the consolidated and combined financial statements and accompanying notes.
Removed
Our significant estimates include provisions for excess and obsolete inventory, accruals for freight, duty, and tariff costs on international inventory purchases, valuation of goodwill and long-lived intangible assets, and realization of deferred tax assets. Actual results may differ from those estimates.
Removed
Principles of Consolidation The accompanying consolidated and combined financial statements include the accounts of our company and our wholly owned subsidiaries, including AOB Products Company, or AOBPC (formerly Battenfeld Technologies, Inc., or BTI), BTI Tools LLC, Crimson Trace Corporation, Ultimate Survival Technologies, LLC, or ust, and AOB Consulting (Shenzhen), Co., LTD.
Removed
In our opinion, all adjustments, which include only normal recurring adjustments necessary to fairly present the financial position, results of operations, changes in equity, and cash flows at April 30, 2022, 2021, and 2020 and for the periods presented, have been included. All intercompany accounts and transactions have been eliminated in consolidation.
Removed
Fair Value of Financial Instruments Unless otherwise indicated, the fair values of all reported assets and liabilities, which represent financial instruments not held for trading purposes, approximate the carrying values of such amounts because of their short-term nature or market rates of interest.
Removed
Cash and Cash Equivalents We consider all highly liquid investments purchased with original maturities of three months or less at the date of acquisition to be cash equivalents.
Removed
Accounts Receivable and Allowance for Estimated Credit Losses We record trade accounts receivable at net realizable value that include estimated allowances for trade terms, sales incentive programs, discounts, markdowns, chargebacks, and returns as discussed under Revenue Recognition. We extend credit to our domestic customers and some foreign distributors based on their credit worthiness.
Removed
We sometimes offer discounts for early payment on invoices. When we believe the extension of credit is not advisable, we rely on either a prepayment or a letter of credit. We write off balances deemed uncollectible by us against our allowance for credit loss accounts. F- 10 AMERICAN OUTDOOR BRANDS, INC.
Removed
AND SUBSIDIARIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS — (Continued) We maintain an allowance for credit losses related to accounts receivable for future expected credit losses resulting from the inability or unwillingness of our customers to make required payments.
Removed
We estimate our allowance for credit losses based on relevant information such as historical experience, current conditions, and future expectation and in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics and similar financial assets.

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Other AOUT 10-K year-over-year comparisons