Outdoor Holding Co

Overview

In September 2024, a Special Committee of the Board of Directors initiated the Special Committee Investigation of certain matters impacting the Company's accounting procedures, disclosure controls and internal controls during prior periods. The Special Committee Investigation was undertaken through independent legal counsel, who received assistance from outside consultants. During the course of the Special Committee Investigation, the Special Committee discovered accounting and financial reporting errors that required restatement resulting primarily from (i) inaccurate valuation of, and accounting for, share-based compensation awards to employees, non-employee directors and other service providers, and shares issued in exchange for goods and services, (ii) inappropriate capitalization of certain share issuance costs and (iii) inappropriate accounting for certain convertible notes and warrants issued by the Company. During the course of the Special Committee Investigation, the Special Committee also found that the Company had not properly disclosed certain executive officers, related party transactions and executive compensation.

Based on the results of the Special Committee Investigation, our review of our financial records, and other work completed by our management, we restated our previously issued financial statements as of and for the quarter ended June 30, 2024, the fiscal years ended March 31, 2024, 2023 and 2022 and the quarters within the year ended March 31, 2024.

Evaluation of Disclosure Controls and Procedures

Our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of March 31, 2025. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Based upon that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective at a reasonable assurance level as of March 31, 2025, due to the material weaknesses previously identified and disclosed in Amendment No. 2 to the Annual Report on Form 10-K for the year ended March 31, 2024 and listed below.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and of the preparation of financial statements for external reporting purposes, in accordance with GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with the authorization of management and directors; and (iii) provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Management determined that the previously disclosed material weaknesses in its internal control over financial reporting processes that involve the control environment, information and communication, monitoring activities, and control activities components of the framework set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) continue to exist at March 31, 2025, and specifically include:

Control Environment, Information and Communication, and Monitoring Activities – Under the COSO framework, the Board of Directors and senior management establish the tone at the top regarding the importance of internal controls and management reinforces expectations at the various levels of the company.

We did not execute appropriately designed entity-level controls governing the control environment and effective monitoring controls to prevent or detect material misstatements to the consolidated financial statements. These deficiencies were attributed to (i) a lack of a sufficient complement of qualified personnel within the accounting and financial reporting function, including reliance on unqualified personnel, with an appropriate level of technical expertise to provide for sufficient oversight, accountability and monitoring over the performance of control activities, (ii) insufficient governance to monitor compliance with the Company's Code of Conduct to identify, evaluate, and report potential fraud as well as related director and management behavior, such as, among other things, director independence, and (iii) improper review and approval of disclosure regarding related party transactions and executive compensation.

Control Activities – These material weaknesses in the control environment resulted in certain instances of inappropriate accounting decisions and inappropriate changes in accounting methodology and contributed to the following additional material weaknesses whereby we did not design, implement and maintain effective controls within certain business processes:

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Complex Technical Accounting: Stock Compensation / Warrants / Convertible Notes – We did not design and maintain controls over the effective review of the models, assumptions and data used in developing estimates or changes made to models, assumptions and data to ensure the appropriate application of GAAP. It was further determined that the existence of complementary or compensating controls could not be relied upon to mitigate the identified deficiencies given failures were detected in all critical procedures from initiation to disclosure of the related transactions, including: timely and accurate accounting assessments performed over newly executed contracts to ensure appropriate application of GAAP; the review and approval of the issuance of stock awards to employees and third-party service providers including determining specific grant dates and key terms; determination of an appropriate fair value measurement for financial instruments; review of the classification and recording of equity compensation expenses; timely and accurate application of GAAP related to equity issuance costs; and recognition and disclosure of compensation expense for all share-based payment awards to employees, directors and third parties.

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Related Party Transactions and Executive Compensation – We did not properly maintain controls over the identification and disclosure of related party transactions and executive compensation. There were insufficient management review procedures to validate the completeness and accuracy of related party and executive compensation disclosures and to clearly define and evidence the process used and criteria and judgment applied to identify and disclose related party transactions and executive compensation.

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Financial Reporting – We did not properly maintain controls over period-end financial reporting, including tie-out and review of supporting documentation. There were insufficient management review procedures to validate the completeness and accuracy of complex technical accounting transactions and to clearly define and evidence the process used and criteria and judgment applied in the performance of critical business components.

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Segregation of Duties – We failed to properly separate the execution of certain controls by designated senior management, which did not provide for proper segregation between preparer and reviewer for select transactions. We further failed to fully resolve identified segregation of duties conflicts with system access for designated business and IT users, thus related user access review and application change management procedures could not be relied upon for select Company systems.

Management’s Remediation Initiatives for Existing Material Weaknesses

Following the identification of the material weaknesses described above, and with the oversight of the Audit Committee, management is committed to the planning and implementation of remediation efforts to address these material weaknesses. The remediation efforts, summarized below, which are either implemented or in process, are intended to both address the identified material weaknesses and strengthen our overall financial control environment. In this regard, our initiatives include:

Control Environment, Information and Communication, and Monitoring Activities:

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Executive Communications to Reinforce Compliance – The Company’s recently appointed CEO and other executives, at the direction of the Board of Directors, have reinforced the importance of adherence to the Company’s policies and procedures regarding ethics and compliance and the importance of identifying misconduct and raising and communicating concerns. This reinforcement has occurred through email and employee newsletter communications, staff meetings, remarks given to senior management, as well as other employee forums, including mandatory ethics training. The Company’s CEO and other executives, at the direction of the Board of Directors, have prioritized the remediation of the previously disclosed material weaknesses and are evaluating additional compliance efforts required to achieve remediation status.

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Organizational Enhancements –The Company has identified and continues to implement several organizational enhancements, as follows: (i) the identification and successful hiring of a Chief Financial Officer, who brings extensive knowledge across finance, strategy, and transformation; (ii)the identification and successful hiring of a Vice President of Accounting and External Reporting, who has the responsibility and authority to ensure that GAAP and accounting for complex or non-routine transactions that require specialized accounting are appropriately applied corporate-wide (iii) the enhancement of the Company’s organizational structure over all finance functions and an increase in the Company’s accounting personnel with the requisite knowledge, experience, and training in GAAP to ensure that a formalized process for determining, documenting, communicating, implementing and monitoring controls over the period-end financial close and reporting processes is maintained and proper segregation exists between the preparer and reviewer for select transactions, and (iv) enhancement of accounting policies and procedures related to journal entries, invoice approval, account reconciliations and variance thresholds.

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Significant and Unusual Transactions- The Company continues to evaluate its practices related to significant non-recurring transactions and continues to implement improvements in those practices, including: (i) updating the process to address agreements with non-standard terms, including formalized review and approval (ii) more formalized practices for assessing the need for utilization of a third-party expert for unusual or complex transactions and (iii) the development of a more comprehensive review process and monitoring controls over significant transactions to ensure accurate accounting and the preparation of accounting memoranda.

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Related Party Transaction Policy – The Company implemented a new Related Party Transactions Policy in June, 2024 to proactively identify transactions and improve disclosures. Guidance is provided by new corporate disclosure counsel with review/approval by the Audit Committee.

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Perquisites Policy –The Company implemented a new Perquisites Policy in May, 2025 to better define its perquisites disclosure requirements, perquisite identification, training, and employee compliance requirements.

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Establishment of Disclosure Committee -In June 2024, the Company established a formal disclosure committee that includes key members of management that have responsibility for disclosure information necessary for periodic reports filed with the SEC. This committee has met, and will continue to meet, on an as-needed basis as well as prior to the Audit Committee meeting in which a Form 10-K, Form 10-Q or other relevant Exchange Act document will be approved and will conduct follow-up meetings as necessary. The meetings cover all significant events from the period being reported upon and supporting information. A charter was created governing the conduct of this committee, a formal agenda is distributed prior to each meeting, and minutes are maintained for each meeting.

Control Activities:

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Implementation of New Accounting System– The Company has implemented a new accounting system intended to allow management to effectively design and implement appropriate general information technology and automated system controls, including system enforced segregation of duties. While the implementation of the new accounting system is complete, the previously reported material weakness for failure to maintain effectively designed Information Technology General Controls for one of the third-party information technology systems that supports the Company’s financial reporting process remains for the year ended March 31, 2025, as the superseded system was in place for the majority of the year. The Company continues to evaluate other systems and applications for additional controls. Management will also continue the rollout of IT remediation action plans, including developing an enhanced risk assessment process for third-party IT systems and implementation of IT monitoring procedures.

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Implementation and Enhancement of Entity Wide Controls - The Company is in the process of enhancing existing entity-wide controls as a result of the control design remediation efforts and Audit Committee recommendations, and implementing the following new controls entity wide around the quarterly/annual financial reporting process:

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Enhanced Review Procedures : The Company has initiated enhancements to its management review procedures through additional training of accounting staff, improved evidence of review through tick marks and screenshots to validate the completeness and accuracy of transactions and to clearly define and evidence the process used and criteria and judgment applied in performance of critical business activities.

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The Company has also hired additional personnel and engaged third-party accounting experts, as needed, in its financial reporting and accounting function to ensure we have a sufficient complement of personnel with an appropriate level of knowledge, experience, and training commensurate with our financial reporting requirements.

We believe the foregoing efforts, when fully implemented and operational, will effectively remediate the material weaknesses described above and strengthen our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address these control deficiencies or modify the remediation plan described above.

Changes in Internal Control Over Financial Reporting

Other than the changes described above, there have not been any changes in our internal control over financial reporting (as such term is defined in Exchange Act in Rule 13a-15(c) and 15d-15(e) under the Exchange Act) during the fiscal quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of the filing of this Annual Report, we continue to implement the changes and remediation plan described above.

To the Stockholders and Board of Directors of

Opinion on Internal Control over Financial Reporting

We have audited Outdoor Holding Company’s (the “Company’s”) internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses described in the following paragraph on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control—Integrated Framework (2013) issued by COSO.

A material weakness is a control deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment.

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The Company failed to execute appropriately designed entity-level controls governing the control environment and effective monitoring controls. These deficiencies were attributed to (i) a lack of a sufficient complement of qualified personnel within the accounting and financial reporting function, (ii) insufficient governance to monitor compliance with the Company's Code of Conduct, and (iii) improper review and approval of disclosure regarding related party transactions and executive compensation.

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These material weaknesses resulted in certain instances of inappropriate accounting decisions and inappropriate accounting methodologies and contributed to the following additional material weaknesses whereby the Company did not design, implement and maintain effective controls within certain business processes related to (i) complex technical accounting, such as stock compensation, warrants and convertible notes, (ii) related party transactions and executive compensation, (iii) financial reporting, and (iv) segregation of duties.

The material weaknesses referred to above are described in more detail in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 financial statements, and this report does not affect our report dated June 16, 2025, on those financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets and the related consolidated statements of operations, stockholders’ equity, and cash flows of the Company, and our report dated June 16, 2025, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PANNELL KERR FORSTER OF TEXAS, P.C. Houston, TexasJune 16, 2025