OUTDOOR SPECIALTY PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
|
| For the Nine Months Ended
June 30,
|
|
| 2024
|
| 2023
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
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Net Loss
|
| $(35,605)
|
| $(29,215)
|
Adjustments to Reconcile Net Loss
|
|
|
|
|
To Net Cash Used by Operating Activities
|
|
|
|
|
Depreciation and Amortization
|
| -
|
| 306
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
Increase in prepaid expense
|
| (1,462)
|
| (1,375)
|
Decrease in inventory
|
| 12
|
| 47
|
Decrease in accounts payable
|
| (1,060)
|
| -
|
Increase in accrued interest
|
| 3,173
|
| 2,096
|
Net Cash Used by Operating Activities
|
| (34,942)
|
| (28,141)
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
Purchase of property, plant and equipment
|
| (4,278)
|
| -
|
Purchase of patent
|
| (2,230)
|
| -
|
Net Cash Used by Investing Activities
|
| (6,508)
|
| -
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
Proceeds from line of credit - related party
|
| 40,738
|
| 28,530
|
Net Cash Provided by Financing Activities
|
| 40,738
|
| 28,530
|
|
|
|
|
|
Net Increase (Decrease) in Cash
|
| (712)
|
| 389
|
Cash at Beginning of Period
|
| 3,162
|
| 1,241
|
Cash at End of Period
|
| $2,450
|
| $1,630
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
Cash Paid During the Period For:
|
|
|
|
|
Interest
|
| $-
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| $-
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
5
OUTDOOR SPECIALTY PRODUCTS, INC.
Notes to the Unaudited Condensed Financial Statements
June 30, 2024
NOTE 1 - Condensed Financial Statements
The accompanying unaudited financial statements of Outdoor Specialty Products, Inc. (the “Company”) were prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Management of the Company (“Management”) believes that the following disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended September 30, 2023.
These unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments that, in the opinion of Management, are necessary to present fairly the financial position and results of operations of the Company for the periods presented. Operating results for the nine months ended June 30, 2024, are not necessarily indicative of the results that may be expected for the year ending September 30, 2024.
NOTE 2 – Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company did not generate sufficient revenue to generate net income, has a negative working capital, and has a limited operating history. These factors, among others, may indicate that there is substantial doubt that the Company will be able to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. The Company intends to seek additional funding through additional stockholder loans and debt or equity offerings to fund its business plan. There is no assurance that the Company will be successful in raising additional funds.
6
OUTDOOR SPECIALTY PRODUCTS, INC.
Notes to the Unaudited Condensed Financial Statements
June 30, 2024
NOTE 3 – LINE OF CREDIT – RELATED PARTY
During the nine months ended June 30, 2024, the Company amended the revolving promissory note agreement with its related party to extend the maturity date to December 31, 2024 and increase the maximum principal indebtedness to $127,500. The revolving promissory note bears interest at the rate of 3.5%. The Company received proceeds under the line of credit of $35,350 during the nine months ended June 30, 2024, resulting in principal balances of $118,871 and $83,521, with accrued interest of $7,153 and $4,444, at June 30, 2024 and September 30, 2023, respectively.
Also, during the nine months ended June 30, 2024, the Company amended the revolving promissory note agreement with another principal stockholder to extend the maturity date to December 31, 2024 and increase the maximum principal indebtedness to $22,500. The revolving promissory note bears interest at the rate of 3.5% per annum. The Company received proceeds under the line of credit of $5,388 during the nine months ended June 30, 2024, resulting in principal balances of $20,227 and $14,839 with accrued interest of $1,032 and $568, at June 30, 2024, and September 30, 2023, respectively.
NOTE 4 – BASIC AND DILUTED LOSS PER SHARE
The following table sets forth the computation of basic and diluted loss per share for the periods ended June 30:
|
| 2024
|
|
| 2023
|
|
|
|
|
|
|
|
|
Loss (numerator)
|
| $
| (35,605
| )
|
| $
| (29,215
| )
|
Weighted average shares (denominator)
|
|
| 5,284,318
|
|
|
| 5,284,318
|
|
|
|
|
|
|
|
|
|
|
Net loss per share – basic and diluted
|
| $
| (0.01
| )
|
| $
| (0.01
| )
|
NOTE 5 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through the date of the financial statements were issued and determined that there are no events requiring disclosure.
7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion in conjunction with our financial statements, which are included elsewhere in this report.
Overview
We are and have since our inception in 2014 been engaged in the business of developing, selling, and marketing products in niche markets within the specialty outdoor products marketplace. We introduced our proprietary “Reel Guard” product in 2014 and continue to offer it for sale. We are continuing our efforts to design and develop a new slow-sinking sinker product that involves the use of a single injection molded component made of a material with a density heavier than water to achieve a slow sinking rate with enough overall weight to accomplish long distance casting. We believe the use of a single injection molded product will allow us to accelerate the manufacturing process, which we anticipate will increase production capacity and reduce costs. To date we have identified an injection molding manufacturer for the product and engaged it to produce the initial product molds. We have also filed a patent application for the product. No assurances can be given that the proposed injection molded product will be successfully completed and available for sale, or that there will be consumer demand for the product. We do not currently plan to commence manufacturing of the new product until the design has been finalized, a prototype run has been completed, and additional debt or equity funding has been received to cover the manufacturing costs.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We did not generate sufficient revenue to generate net income, we have negative working capital, and we have a limited operating history. These factors, among others, may indicate that there is substantial doubt that we will be able to continue as a going concern for a reasonable period of time. Our financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. We intend to seek additional funding through additional stockholder loans and debt or equity offerings. We also intend to increase our sales through the addition of our proposed new slow-sinking sinker when it has been completed and we have received adequate financing to commence manufacturing beyond the prototype run. There is no assurance that we will be successful in raising additional funds or that the slow-sinking sinker will result in an increase in sales.
Results of Operations for the Three and Nine months Ended June 30, 2024 and 2023
Revenue
From our inception in 2014 through the present, our revenue has resulted solely from sales of our proprietary Reel Guard product and our cost of sales also relate solely to that product. Our Reel Guard product is offered for sale on our website and on eBay and sales vary from quarter to quarter based on the number of customers that become aware of the product and decide to make a purchase. Total revenue for the three months ended June 30, 2024, was $52, compared to $155 for the three months ended June 30, 2023, a decrease of $103 or approximately 67%. Total revenue for the nine months ended June 30, 2024, was $130, compared to $480 for the nine months ended June 30, 2023, a decrease of $350, or approximately 73%. We are not aware of any particular reason for the decline in sales of the Reel Guard product in 2024.
Cost of Sales
Cost of sales for the three months ended June 30, 2024 was $5, compared to $14 for the three months ended June 30, 2023, a decrease of $9, or approximately 64%. Cost of sales for the nine months ended June 30, 2024 was $12, compared to $46 for the nine months ended June 30, 2023, a decrease of $34, or approximately 74%. Cost of sales as a percentage of revenue for the nine months ended June 30, 2024 and 2023 was approximately 9% and 10%, respectively. Our cost of sales as a percentage of revenue did not differ significantly from 2023 to 2024 since we offered only one product for sale and there have been no material changes in the sales price or manufacturing cost of our product.
8
General and Administrative Expenses
General and administrative expenses were $8,210 for the three months ended June 30, 2024, compared to $5,857 for the three months ended June 30, 2023, an increase of $2,353 or approximately 40%. General and administrative expenses were $32,550 for the nine months ended June 30, 2024, compared to $27,553 for the nine months ended June 30, 2023, an increase of $4,997 or approximately 18%. General and administrative expenses consist primarily of legal, accounting, and Edgar filing expenses.
Depreciation and Amortization Expense
Depreciation and amortization expenses currently are not material to our business. Depreciation and amortization expense was $0 for the nine months ended June 30, 2024 as compared to $306 for the nine months ended June 30, 2023. As of September 30, 2023, the Company wrote off the remaining net balance on its patent for the Reel Guard product after it was determined an impairment existed in accordance with ASC 360 which requires that a company recognize an impairment loss if, and only if, the carrying amount of a long-lived asset (asset group) is not recoverable from the sum of the undiscounted cash flows expected to result from the use and eventual disposal of the asset.
Research and Development Expenses
Research and development expenses are not currently material to our business. We did not incur research and development expenses in the nine months ended June 30, 2024 or 2023.
Liquidity and Capital Resources
As of June 30, 2024, we had total current assets of $8,019, including cash of $2,450, and current liabilities of $148,553, resulting in a working capital deficit of $140,514. Our current liabilities include a principal outstanding balance of $139,098, and $8,185 in accrued interest, under the short-term revolving loan agreements with our president and another principal stockholder that are due on or before December 31, 2024. As of June 30, 2024, we had an accumulated deficit of $238,523 and a total stockholders’ deficit of $134,006. We have financed our operations to date from sales of our Reel Guard product, proceeds from our 2014 private placement, and proceeds from the short-term revolving loan agreements.
For the nine months ended June 30, 2024, net cash used by operating activities was $34,942, as a result of a net loss of $35,605, which was (i) reduced by a decrease in inventory of $12 and an increase in accrued interest of $3,173, and (ii) increased by an increase in prepaid expense of $1,462 and a decrease in accounts payable of $1,060. By comparison, for the nine months ended June 30, 2023 net cash used by operating activities was $28,141, as a result of a net loss of $29,215, which was (i) reduced by depreciation and amortization of $306, a decrease in inventory of $47, and an increase in accrued interest of $2,096, and (ii) increased by an increase in prepaid expense of $1,375.
For the nine months ended June 30, 2024, we had net cash used by investing activities of $6,508 in connection with the development of our new slow sinking sinker product, consisting of the purchase of property, plant and equipment of $4,278 for the injection molds and purchase of patent of $2,230. For the nine months ended June 30, 2023, we had no cash flows used in or provided by investing activities.
For the nine months ended June 30, 2024, we had net cash provided by financing activities of $40,738 consisting of proceeds from the revolving loan agreements. For the nine months ended June 30, 2023, we had net cash provided by financing activities of $28,530, also consisting of proceeds from the revolving loan agreements.
Following our incorporation in 2014, we completed the private placement of 285,714 shares of our common stock to accredited investors in a private placement at a price of $0.35 per share for total proceeds of $100,011. The proceeds from the private placement together with our limited product sales were sufficient to fund our operations through our fiscal year ended September 30, 2020. On January 4, 2021, we entered into a revolving promissory note agreement with our president and principal stockholder that, as amended, provides for total loans of up to $127,500 at an interest rate 3.5% per annum, which is repayable on or before December 31, 2024. We received proceeds under the revolving promissory note of $35,350 during the nine months ended June 30, 2024, resulting in principal balances of $118,871 and $83,521, with accrued interest of $7,153 and $4,444, at June 30, 2024 and September 30, 2023, respectively.
9
During December 2021, we entered into a revolving promissory note agreement with another principal stockholder that, as amended, provides for loans of up to $22,500 at an interest rate of 3.5% per annum, which is repayable on or before December 31, 2024. We received proceeds under the second revolving promissory note of $5,388 during the nine months ended June 30, 2024, resulting in principal balances of $20,227 and $14,839, with accrued interest of $1,032 and $568, at June 30, 2024 and September 30, 2023, respectively.
We do not believe we will generate adequate revenues to meet our obligations for the next twelve months and believe we will require additional financing in order to meet such obligations. Cash flow from operations has not historically been sufficient to sustain our operations without the additional sources of capital described below. Our future working capital requirements will depend on many factors, including our revenues, an increase in the amounts and extension of the due dates of the revolving loan agreements if required, and the costs of completing the design and manufacturing our proposed new slow-sinking sinker. To the extent our cash, cash equivalents, and cash flows from operating activities and the revolving note agreements are insufficient to fund our future activities, we may need to raise additional funds through additional stockholder loans or private equity or debt financing. We also may need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies, or products. If additional funding is required, we may not be able to obtain additional stockholder loans or effect an equity or debt financing on terms acceptable to us or at all.
Cash Requirements
As of June 30, 2024 and September 30, 2023, we did not have any lease obligations or requirements or other agreements requiring a significant commitment of cash.
Off-Balance Sheet Arrangements
As of June 30, 2024 and September 30, 2023, we did not have any off-balance sheet financing arrangements.
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable. The Company is a “smaller reporting company.”
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow for timely decisions regarding required disclosure. Due to inherent limitations, a controls system may not prevent or detect misstatements. Further, 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 degree of compliance with the policies and procedures may deteriorate. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
10
Under the supervision and with the participation of our management, including our President and Treasurer who serves as our principal executive and principal financial officer, we 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 Securities Exchange Act of 1934 (“the Exchange Act”) as of June 30, 2024, the end of the period covered by this report. Based upon that evaluation, our principal executive and financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.
Changes in internal controls over financial reporting.
Except as described below, there was no change in our internal control over financial reporting during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. During such quarter, in order to continue to address the material weaknesses in our internal control over financial reporting described in our annual report on Form 10-K for the year ended September 30, 2023, we engaged a certified public accountant to assist us with the preparation of our quarterly and annual financial statements, which we believe strengthened our procedures around complex accounting issues such as asset impairments and our guidelines for how to conduct and document the reviews of those complex topics. We believe these steps remediated the previously identified material weaknesses in our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not a party to any material pending legal proceedings.
Item 1A. Risk Factors
Not Applicable. The Company is a “smaller reporting company.”
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
None.
11
Item 6: Exhibits
The following are included as exhibits to this report:
| (1)
| Incorporated by reference to the Company’s Registration Statement on Form 10-12G filed June 24, 2021.
|
12
SIGNATURES
Pursuant to the requirements 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.
| Outdoor Specialty Products, Inc.
|
|
|
|
Dated: August 13 , 2024
| By
| /s/ Kirk Blosch
|
|
| Kirk Blosch
|
|
| President, Secretary and Treasurer
|
|
| (Principal Executive and Accounting Officer)
|
13
Exhibit 31.1
I, Kirk Blosch, certify that:
1.I have reviewed this report on Form 10-Q of Outdoor Specialty Products, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 13, 2024
| /s/ Kirk Blosch
|
| Kirk Blosch
|
| President, Secretary and Treasurer
|
| (Principal Executive Officer and
|
| Principal Financial Officer)
|