UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

Quarterly Report of Small Business Issuers under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarter Ended July 31, 2001

Commission File No. 029015

SAF-T-HAMMER CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	87-0543688
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
14500 North Northsight, Suite 221, Scottsdale, Arizona	85260
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number, including area code: (480) 949-9700

         The issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) been subject to such filing requirements for the past 90 days.

Number of shares outstanding of each of the issuer’s classes of common equity:

Class	Outstanding as of September 14, 2001
Common stock, $.001 par value		17,931,355

         The issuer is not using the Transitional Small Business Disclosure format.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
	Consolidating Unaudited Balance Sheet — July 31, 2001
	Consolidating Unaudited Statement of Operations
	STATEMENTS OF CASH FLOWS
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
EX-10.19
EX-10.20
EX-10.21
EX-10.22

SAF-T-HAMMER CORPORATION

FORM 10-QSB
FOR THE QUARTER ENDED JULY 31, 2001

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidating Unaudited Balance Sheet – July 31,2001
	Consolidating Unaudited Statement of Operations for the three months ended July 31, 2001 and 2000
	Consolidated Unaudited Statements of Cash Flows for the three months ended July 31, 2001 and 2000
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits and Reports on Form 8-K

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PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Saf-T-Hammer Corporation
Consolidating Unaudited Balance Sheet — July 31, 2001

Assets:
Current assets:
	Cash and cash equivalents		$	27,057,426
	Accounts receivables			4,756,598
	Inventory			22,794,520
	Other current assets			10,232,552
	Due from Tomkins Corporation			2,699,500
		Total current assets		67,540,596
Property, plant and equipment, net				8,604,689
Intangibles, net				4,893,019
Other assets				5,372
	Total assets		$	81,043,676
Liabilities and Stockholders’ Deficit
Current liabilities:
	Accounts payables and accrued expenses		$	19,110,894
	Note payable, Individual, net of debt issue cost of $3 million			2,000,000
	Note payable, Tomkins			10,000,000
	Deferred income			237,878
		Total current liabilities		31,348,772
Non-current liabilities:
	Deferred tax liability			10,422,329
	Other non-current liabilities			11,164,911
	Note payable, Tomkins			30,000,000
		Total non-current liabilities		51,587,240
	Total liabilities			82,936,012
Stockholders’ Deficit:
	Common stock			16,327
	Additional paid in capital			9,770,973
	Accumulated deficit			(11,679,637	)
		Total stockholders’ deficit		(1,892,336	)
	Total liabilities and stockholders’ deficit		$	81,043,676

See accompanying notes to consolidated financial statements.

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Saf-T-Hammer Corporation
Consolidating Unaudited Statement of Operations

		Three months ended July 31,
		2001			2000
		(Unaudited)			(Unaudited)
Net sales		$	11,236,069		$	—
Cost of sales			10,824,483			—
Gross profit			411,586			—
Operating expenses:
	Research and development and other		143,677			79,831
	Selling, general and administrative		3,814,290			550,837
			3,957,967			630,668
Loss from operations			(3,546,381	)		(630,668	)
Interest expense, net			2,698,929			—
Loss before taxes			(6,245,310	)		(630,668	)
Provision for (benefit from) income taxes			(125,000	)		—
Net loss		$	(6,120,310	)	$	(630,668	)
Weighted average number of shares outstanding — basic and diluted			18,308,529			10,293,776
Net loss per share, basic and diluted		$	(0.33	)	$	(0.06	)

See accompanying notes to consolidated financial statements.

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SAF-T-HAMMER CORPORATION
STATEMENTS OF CASH FLOWS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

			Three months ended
			July 31,			July 31,
			2001			2001
Cash flows provided by (used for) operating activities:
		Net loss	$	(6,120,310	)	$	(630,668	)
Adjustments to reconcile net loss to net cash provided by (used for) operating activities:
	Depreciation and amortization			447,517			13,574
	Amortization of income tax benefit arising from business combination			(125,000	)		—
	Stock compensation for services rendered			—			7,500
	Interest			2,000,000			166,834
Changes in operating assets and liabilities:
	(Increase) decrease in assets:
	Accounts receivables			2,980,823			—
	Inventory			1,486,118			—
	Prepaid expense and other current asset			2,083,770			(21,192	)
	Increase (decrease) in liabilities:
	Accounts payable and accrued expenses			(2,737,535	)		(30,874	)
	Deferred income			(1,374,829	)		—
	Total adjustments			4,760,864			135,842
	Net cash used for operating activities			(1,359,446	)		(494,826	)
Cash flows used for investing activities:
	Net cash and cash equivalents acquired from business combination			28,598,168			—
	Payments to acquire property and equipment			(350,407	)		(20,906	)
	Net cash provided by (used for) investing activities			28,247,761			(20,906	)
Cash flows provided by (used for) financing activities:
	Proceeds from notes payable, related parties, net			—			46,975
	Payments on loans payable			(500,000	)		—
	Proceeds from sale of common stock			—			667,525
	Proceeds from exercise of warrants to acquire common stock			600,000			—
	Net cash provided by financing activities			100,000			714,500
Net increase in cash				26,988,316			198,768
Cash, beginning of year/period				69,110			387,932
Cash, end of period			$	27,057,426		$	586,700

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Supplemental disclosure of non-cash financing and investing activities:

Issuance of stock for services	$	—	$	7,500
Warrants issued to raise debt to acquire Smith & Wesson Corp.	$	5,000,000	$	—
Payments on behalf of the Company to acquire Smith & Wesson Corp.	$	5,000,000	$	—
Note issued to Tomkins as consideration to acquire Smith & Wesson Corp.	$	10,000,000	$	—
Conversion of debt	$	—	$	250,000

A summary of net cash and cash equivalents arising from the acquisition of Smith & Wesson Corp. is as follows:

Acquisition cost:
Cash paid on May 11, 2001	$	5,000,000
Note payable, Tomkins, due May 11, 2002		10,000,000
Total consideration given up		15,000,000
As of May 11, 2001:
Fair values of assets acquired (unaudited):
Accounts receivables		(7,733,517	)
Inventory		(24,258,858	)
Collaterized cash deposits		(5,150,000	)
Other current assets		(1,287,519	)
Due from Tomkins Corporation		(7,699,500	)
Receivable from Walther USA, LLC		(689,343	)
Property, plant and equipment, at Fair Value		(8,608,110	)
Intangibles, at Fair Value		(16,500,000	)
Adjustment for negative goodwill allocation to Intangibles		11,545,044
		(60,381,803	)
Fair values of liabilities assumed (unaudited):
Accounts payables and accrued expenses		21,252,449
Deferred income		1,612,707
Deferred tax liability, at FV		10,547,329
Other non-current liabilities		10,567,486
Note payable, Tomkins		30,000,000
		73,979,971
Net cash and cash equivalents acquired	$	28,598,168

See accompanying notes to unaudited financial statements.

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SAF-T-HAMMER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2001

NOTE 1 – BASIS OF PRESENTATION

         Organization and Business Activity

         Prior to incorporation as Saf-T-Hammer Corporation in 1998, the Company existed as De Oro Mines, Inc. De Oro Mines, Inc. was incorporated on June 17, 1991 in the State of Nevada. Its original Articles of Incorporation provided for 1,000,000 shares of common stock with a par value of $0.01 per share.

         On August 15, 1996, the shareholders of the Company authorized the recapitalization of the Company and the amendment of its Articles of Incorporation to allow the corporation to issue up to 100,000,000 shares of a single class of Common Stock with a par value of $0.001. The amended Articles were duly adopted as stated and were filed on October 16, 1996 with the State of Nevada. From its inception, De Oro Mines, Inc. was in the development stage and was primarily engaged in the business of developing mining properties. During 1992, De Oro lost its remaining assets and settled its liabilities, and from that date forward remained dormant.

         Effective October 20, 1998, the Company acquired the assets of Saf-T-Hammer, Inc. and changed its name from De Oro Mines, Inc. to Saf-T-Hammer Corporation. The acquisition was accounted for under the purchase method. Prior to this agreement becoming effective, De Oro Mines, Inc. had a total of 532,788 shares of common stock issued and outstanding. Pursuant to the Asset Acquisition Agreement, the Company issued 1,331,250 shares of common stock to Saf-T-Hammer, Inc., which then resulted in a total of 1,864,038 shares of common stock being issued and outstanding.

         Pursuant to Accounting Principles Board Opinion No. 16, “Accounting for Business Combinations,” Saf-T-Hammer, Inc. was the acquirer and De Oro Mines, Inc., the acquiree, and accordingly, this transaction was accounted for as a reverse merger since effective control of the Company was with the officer/shareholders of Saf-T-Hammer, Inc.

         The primary asset of Saf-T-Hammer Corporation is a childproof gun safety device that the Company plans to manufacture and sell throughout the world. Currently, the Company is in the product development stage and has a patent pending for rights to the childproof gun safety device.

         Interim Financial Statements

         The accompanying unaudited interim consolidated financial statements of Saf-T-Hammer Corporation, for the respective periods presented reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are

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necessary for a fair presentation of the results for the interim periods presented. These financial statements have been prepared in accordance with the instructions to Form 10-QSB and Article 10 of Regulation SB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the Company’s annual audited financial statements for the year ended December 31, 2000. In addition, the Company filed a Form 8-K on May 29, 2001 and a Form 8-K/A on July 30, 2001, disclosing significant material transactions and pro forma financial information relating to a business combination and debt financing arrangement, which are hereby referenced. Operating results for the three months ended July 31, 2001 are not necessarily indicative of the results that may be expected for the new full fiscal year ending April 30, 2002.

         Change of Fiscal Year End

         On June 29, 2001, the Company changed its fiscal year end from December 31 to April 30. Accordingly, pursuant to Regulation § 240.13a-10 (Rule 13a-10) “Transition reports” of the 1934 Act, the required consolidated financial statements for the transition period from January 1, 2001 to April 30, 2001 have previously been filed with the Securities and Exchange Commission on Form 10-QSB.

NOTE 2 – ACQUISITION OF SMITH & WESSON CORP.

         The Acquisition

         Pursuant to a Stock Purchase Agreement (the “Acquisition Agreement”) dated as of May 11, 2001 between Tomkins Corporation (“Tomkins”) and Saf-T-Hammer Corporation (“Company”), the Company acquired (the “Acquisition”) all of the issued and outstanding shares of the Smith & Wesson Corp. (“Smith & Wesson”). As a result of the Acquisition, Smith & Wesson became a wholly owned subsidiary of the Company. The Company paid $15 million dollars (the “Purchase Price”) in exchange for all of the issued and outstanding shares of Smith & Wesson as follows:

• $5 million (See the “Loan”) of which was paid at closing in cash

• $10 million must be paid on or before May 11, 2002 pursuant to the terms of an unsecured promissory note issued by The Company to Tomkins (the “Acquisition Note”). The Acquisition Note accrues interest at a rate of 9% per year.

         The Purchase Price was the result of arm’s length negotiations between the Company and Tomkins.

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         Acquisition Note

         Pursuant to the Acquisition Agreement, the Company issued a promissory note in the amount of $10 million as partial consideration for the acquisition of Smith & Wesson. This note is due on May 11, 2002, is unsecured and bears interest at 9% per annum. In the event of default by the Company, the interest rate would increase by an additional 2% per annum on the outstanding balance.

         Tomkins Note

         The Acquisition Agreement required the Company to guaranty Smith & Wesson’s existing obligations to Tomkins under a promissory note issued on April 30, 1997 by Smith & Wesson to Tomkins (the “Tomkins Note”). The original Tomkins Note was in the amount of $73,830,000, due April 30, 2004 and bore interest at the rate of 9% per annum. Prior to the Acquisition, Tomkins contributed to the capital of Smith & Wesson, $23,830,000 of the Tomkins Note, thereafter leaving a balance of $50,000,000. Immediately subsequent to the Acquisition, Smith & Wesson paid $20,000,000 of the Tomkins Note. The outstanding principal balance on the Tomkins Note is $30 million. In satisfaction of this condition, the Company executed a guaranty in favor of Tomkins dated May 11, 2001. The terms of the Tomkins Note was amended as follows:

(a)	Commencing on May 11, 2001, the new due date was extended by ten years to May 11, 2011.
(b)	Unpaid principal balance shall be paid in 84 equal monthly payments commencing on May 11, 2004.
(c)	Until paid in full, dividends declared and paid to the Company shall not exceed $600,000 for the twelve month period ended May 11, 2002, and not exceed $1,800,000 for annual periods thereafter.
(d)	Until the payment of $10 million under the Acquisition Note owed by the Company to Tomkins, Smith & Wesson shall not, either directly or indirectly, incur, assume, guaranty, or otherwise become liable to any indebtedness, except in the ordinary course of business.
(e)	Smith & Wesson shall not liquidate, wind-up or dissolve any business assets, including tangible and intangible assets.
(f)	In the event of default by the Company on the Acquisition Note, or default by Smith & Wesson on the Tomkins Note, the Tomkins Note shall be accelerated and become due and payable in full immediately.

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         The Loan

         The initial payment of $5 million was obtained as a loan from an individual, pursuant to a Promissory Note & Loan Agreement dated May 6, 2001 between the Company and this individual (the “Note”). Interest accrues on the Note at a rate of 12% per annum and matures on May 15, 2002. Pursuant to the terms of the Note, the Company prepaid the annual interest of $600,000 on the latter of five business days after the consummation of the Acquisition or May 15, 2001. Related to this loan, the Company also issued warrants to purchase, in aggregate, approximately 8.7 million shares at exercise prices ranging from $0.40 per share to $2.00 per share. Using the Black Scholes Option pricing model, debt issue costs of $5 million (value of 8.7 million shares up to the loan value) has been netted against the proceeds of the loan. This debt issue costs is being amortized over the life (1 year) of the note using the effective interest method into interest expense pursuant to EITF-00-27. During the three months ended July 31, 2001, the Company amortized $2,000,000 into expense.

         The Note is secured by a pledge of all of the issued and outstanding stock of Smith & Wesson, as evidenced by a Stock Pledge Agreement dated and effective as of May 11, 2001 between the Company and this individual (the “Pledge Agreement”).

         Promissory Note and Loan Agreement

         Effective May 15, 2001, Smith & Wesson entered into an agreement to loan the Company an aggregate of $1,600,000. This loan is secured by all assets of the Company, including intangible assets, bears interest payable monthly at prime plus 1% per annum, and is due by May 15, 2002.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULT OF OPERATIONS

         Net Sales

         Net sales for the three months ended July 31, 2001 were $11,236,069 compared to no sales for the three months ended July 31, 2000. Substantially all of this increase is attributable to the acquisition May 11, 2001 of Smith & Wesson Corp. (“SW”), as detailed in the Company’s Form 8K/A, filed July 30, 2001 with the Securities and Exchange Commission.

         Gross Profit

         Gross profit for the three months ended July 31, 2001 was $411,586 compared to none for the three months ended July 31, 2000. Gross profit as a percentage of sales was 3.7% for the three months ended July 31. The change in Gross profit between periods is due to the application of purchase accounting to the acquisition of SW and the resulting step up in basis of SW inventory.

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         Research and Development and Other Expenses

         Research and development and other expenses for the three months ended July 31, 2001 were $143,677 compared to $79,831 for the three months ended July 31, 2000. This increase of 80% reflects additional projects, including gun safety and technology, which the Company has undertaken as well as the purchase of SW.

         Selling, General and Administrative Expenses

         Selling, general and administrative expenses for the three months ended July 31, 2001 were $3,814,290 compared to $550,837 for the three months ended July 31, 2000. This increase of 592.5% is mostly reflective of the inclusion of the results of operations of the acquired entities, as mentioned above.

         Interest Expense

         Interest expense, net of interest income for the three months ended July 31, 2001 was $2,698,929 compared to no interest expense or interest income for the corresponding period of the previous year. The increase in net interest expense in the three months ended July 31, 2001 is attributable to the acquisition of SW, mainly the $15 million of debt entered into according to the terms of the acquisition agreement.

         Income Taxes

         For the three months ended July 31, 2001 there is a tax benefit of $125,000, resulting from the amortization of the deferred tax liability arising out of the SW acquisition pursuant to Statement of Financial Accounting Standards No. 109. There was no tax expense in the three months ended July 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has cash and cash equivalents of $27,057,426 at July 31, 2001.

         Cash used for operating activities for the three months ended July 31, 2001 was $1,359,446 compared to net cash used by operating activities of $494,826 in the three months ended July 31, 2000. The increased use of cash reflects the increased operations of the acquired entity as compared to pre-acquisition operations at July 31, 2000.

         Cash provided by investing activities was $28,247,761 in the three months ended July 31, compared to cash used for investing activities of $20,906 in the three months ended July 31, 2001. Substantially all of the cash provided by investing activities in the current period related to the net cash and cash equivalents acquired in the business combination.

         Cash provided by financing activities was $100,000 in the three months ended July 31, 2001, representing proceeds from the exercise of warrants reduced by payments made on loans. For the three months ended July 31, 2000, cash provided by financing activities was $714,500, the majority of which was from the sale of common stock.

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         In connection with the acquisition of Smith & Wesson, the Company issued a $10 million note to Tomkins (the “Tomkins Note”) as a portion of the purchase price. The Tomkins note is due on May 11, 2002 and bears interest at 9% per annum. The Company also issued a $5 million note to Colton Melby, presently a director of the Company (the “Melby Note”), in order to obtain the funds necessary to make the initial payment for Smith & Wesson. The Melby Note note is due on May 15, 2002 and bears interest at 12% per annum, which interest has been paid through the due date.

         Also in connection with the acquisition of Smith & Wesson, the Company agreed to guaranty the obligations of Smith & Wesson under an existing $30 million note to Tomkins. The note bears interest at 9% per annum and is to be paid by Smith & Wesson in 84 equal monthly payments commencing May 11, 2004. As part of the guaranty, the Company agreed to certain restrictions on the transfer of capital and assets from Smith & Wesson to the Company.

         Effective May 15, 2001, the Company issued a $1,600,000 promissory note to Smith & Wesson. Interest on the note is payable monthly at prime plus 1% per annum and the note is due on May 15, 2002. The note is secured by all of the assets of the Company.

         Additional sources of liquidity, such as debt or equity financings, will be required to meet the Company’s capital needs with respect to the repayment of the Company’s indebtedness. Management is seeking to obtain financing from various sources. There can be no assurance that additional capital will be available to the Company on reasonable terms, if at all.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND RISK FACTORS

         This report on Form 10-QSB contains “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. The Company is hereby providing cautionary statements identifying important factors that could cause the Company’s actual results to differ materially from those projected in forward-looking statements of the Company herein. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions, future events or performances (often, but not always through the use of words or phrases such as “will result,” “expects to,” “will continue,” “anticipates,” “plans,” “intends,” “estimated,” “projects,” and “outlook”) are not historical facts and may be forward-looking and, accordingly, such statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Such uncertainties include, among others, the following factors:

         Declining Handgun Market

         Over the last few years the handgun industry has had a significant decline in production and sales of handguns. In concert with the rest of the industry, the

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Company’s sales have also declined substantially over the last few years. Possible causes may include a saturated marketplace, the enactment of tougher gun laws and the adverse trade and consumer reaction to the settlement agreements reached with certain governmental agencies. A continued decline in the handgun market in general and in the production and sale of handguns by the Company in particular would likely have a material adverse effect on the Company’s business, financial condition and results of operations.

         Lawsuits

         The Company’s subsidiary Smith & Wesson is a defendant in numerous lawsuits relating to its production, marketing and distribution of handguns. A number of these suits are products liability suits alleging defects in the design and manufacture of Smith & Wesson’s products. In addition, Smith & Wesson is a defendant in several suits brought by state and local governments seeking substantial damages as well as injunctive relief that could materially restrict the Company’s production and distribution of firearms. Adverse results in these lawsuits could have a material adverse effect on the Company’s business, financial condition and results of operations.

         Government Regulation and Settlements

         The Company’s business of producing and marketing firearms and firearm parts is governed by various federal, state and local laws and regulations. The Company’s subsidiary Smith & Wesson has previously entered into settlement agreements with certain federal and local agencies which place restrictions on the production, marketing and distribution of Smith & Wesson’s firearms products. These restrictions materially impair the Company’s ability to compete with other firearm manufacturers who are not subject to such restrictions. Any changes in local, state or federal laws or regulations regarding the manufacture and distribution of firearms could have a material adverse effect on the Company’s business, financial condition and results of operations.

         Competition

         The firearms market is highly competitive and is dominated by a small number of well-known companies. These companies compete on product image, quality, innovation, price and customer service and support. Negative competitive developments could have a material adverse effect on the Company’s business, financial condition and results of operations.

         Debt Financing and Restrictive Covenants

         The Company incurred substantial indebtedness to finance the acquisition of Smith & Wesson. As a result, the Company is highly leveraged and subject to substantial repayment obligations. In addition, the terms of the debt financing contain restrictions on the transfer of capital and assets from Smith & Wesson to the Company as well as numerous restrictions on, among other things, the ability of the

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Company and Smith & Wesson to create liens, incur additional indebtedness and sell or otherwise dispose of assets. The Company’s debt and accompanying restrictions could negatively impact the Company’s ability to meet its debt repayment obligations, as well as potentially limit the Company’s ability to obtain additional financing for working capital or other purposes. Such limitations may make the Company more vulnerable to adverse economic conditions and could impair the Company’s ability to compete.

         Need for Additional Financing

         The Company has limited available funds, which may not be adequate to fund the Company’s operations and service its debt obligations. The Company’s future success may be dependent upon the Company’s ability to raise additional capital. In light of the Company’s current debt and restrictive covenants, there is no assurance that additional financing may be obtained on terms acceptable to the Company, if at all. The failure of the Company to raise additional capital would likely have a material adverse effect on the Company’s financial condition.

         Integration

         The future success of the Company is dependent upon the Company’s ability to successfully integrate its business, operations and products with those of Smith & Wesson. If the Company is unable to successfully integrate its management and operations, or is unable to successfully integrate its safety products into Smith & Wesson’s product lines and marketing channels, such inability could negatively impact the Company’s business, financial condition and results of operations.

         Reliance On Outside Suppliers

         The Company purchases its die molds, raw materials and all of its other unprocessed products from outside suppliers. There is no guarantee that these suppliers will be able to continue to meet the Company’s needs, nor that the Company will be able to find alternative sources for such goods at reasonable prices, if at all. The inability to procure necessary raw materials and other supplies at reasonable prices could have a material adverse effect on the Company’s business, financial condition and results of operations.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Part II, Item 1 of the Company’s Form 10-QSB for the transition period from January 1, 2001 to April 30, 2001 is hereby incorporated by reference.

ITEM 2. CHANGES IN SECURITIES

(c) Recent Sales of Unregistered Securities

         The Company issued the following warrants:

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         1.     In consideration for making a short-term loan to the Company in the amount of $500,000, the Company issued to two unrelated parties Common Stock Purchase Warrants, each dated February 5, 2001. These warrants allow each holder to purchase up to 625,000 shares of the Company’s Common Stock, par value $.001 per share (“Common Stock”) at an exercise price of $.40 per share, subject to adjustment as set forth therein. The warrants are exercisable immediately and expire two years from the date of issuance. The Company relied upon Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the issuance of these warrants.

         2.     In consideration for making a $5 million loan to the Company (the “Melby Loan”), the Company issued to Colten Melby, a director of the Company, a Common Stock Purchase Warrant dated May 6, 2001 (the “Melby Warrant”). The Melby Warrant allows Mr. Melby to purchase up to 7,094,500 shares of Common Stock at an exercise price of $.40 per share, subject to adjustment as set forth therein. The Melby warrant is exercisable immediately and expires six years from the date of issuance. The Company relied upon Section 4(2) of the Securities Act with respect to the issuance of the Melby Warrant.

         3.     Also in consideration for the Melby Loan, the Company issued Common Stock Purchase Warrants, each dated May 11, 2001, to three affiliates of Mr. Melby (the “Affiliate Warrants”). The Affiliate Warrants allow each holder to purchase up to 300,000 shares of Common Stock at an exercise price of (a) $.80 per share if exercised on or before May 21, 2001, (b) $2.00 per share if exercised from May 22, 2001 through June 30, 2001, and (c) $5.00 per share if exercised after June 30, 2001. The Affiliate Warrants are exercisable immediately and expire one year from the date of issuance. The Company relied upon Section 4(2) of the Securities Act with respect to the issuance of the Affiliate Warrants.

         4.     As a portion of a finder’s fee for arranging the Melby Loan, the Company issued Common Stock Purchase Warrants, each dated May 11, 2001, to two unrelated parties (the “Finders Warrants”). The Finders Warrants expire one year from the date of issuance and allow each holder to purchase up to 354,725 shares of Common Stock at an exercise price of $1.00 per share. The Company relied upon Section 4(2) of the Securities Act with respect to the issuance of the Finders Warrants.

         5.     In consideration for past services to the Company, including services rendered in connection with the acquisition of Smith and Wesson, the Company issued a Common Stock Purchase Warrant, dated May 11, 2001, to Mitchell Saltz, Chief Executive Officer and a director of the Company and a director of Smith & Wesson (the “Saltz Warrant”). The Saltz Warrant entitles Mr. Saltz to purchase up to 5,000,000 shares of Common Stock at an exercise price of $.89 per share, subject to adjustment as set forth therein. The Saltz Warrant is exercisable immediately and expires five years from the date of issuance. The Company relied upon Section 4(2) of the Securities Act with respect to the issuance of the Saltz Warrant.

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         6.     In consideration for past services to the Company, including services rendered in connection with the acquisition of Smith and Wesson, the Company issued a Common Stock Purchase Warrant, dated May 11, 2001, to Robert L. Scott, President and a director of both the Company and Smith & Wesson (the “Scott Warrant”). The Scott Warrant entitles Mr. Scott to purchase up to 5,000,000 shares of Common Stock at an exercise price of $.89 per share, subject to adjustment as set forth therein. The Scott Warrant is exercisable immediately and expires five years from the date of issuance. The Company relied upon Section 4(2) of the Securities Act with respect to the issuance of the Scott Warrant.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Not applicable.

ITEM 5. OTHER INFORMATION

         Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

10.19	Promissory Note & Loan Agreement, dated as of May 15, 2001, between the Company and Smith & Wesson Corp.
10.20	Security Agreement, dated as of May 15, 2001, between the Company and Smith & Wesson Corp.
10.21	Special Order Agreement, dated May 11, 1999, between Smith & Wesson Corp. and Schrader-Bridgeport International Inc.
10.22	Master Supply Agreement, dated August 1, 2001, between Smith & Wesson Corp. and Remington Arms Company, Inc.

(b) Reports on Form 8-K:

         The Company filed the following Reports on Form 8-K on the following dates:

1.

Form 8-K, filed on May 29, 2001, reporting under Item 2 thereof the acquisition of Smith & Wesson Corp. and excluding the related financial information.

2.

Form 8-K/A, filed on July 30, 2001, reporting under Item 2 thereof the acquisition of Smith and Wesson Corp. and including under Item 7 thereof (i) the audited financial statements of Smith & Wesson Corp. at April 28, 2001 and for the two years then ended, and (ii) the unaudited pro forma consolidated condensed financial statements of the Company for the three months ended March 31, 2001 and the year ended December 31, 2000.

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3. Form 8-K, filed on August 13, 2001, reporting under Item 8 thereof the change in the Company’s fiscal year end from December 31st to April 30th.

SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated this 14th day of September, 2001.

SAF-T-HAMMER CORPORATION, a Nevada corporation
By:	/s/ Mitchell A. Saltz
Mitchell A. Saltz, CEO, Director

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EXHIBIT INDEX

Number	Description
10.19	Promissory Note & Loan Agreement, dated as of May 15, 2001, between the Company and Smith & Wesson Corp.
10.20	Security Agreement, dated as of May 15, 2001, between the Company and Smith & Wesson Corp.
10.21	Special Order Agreement, dated May 11, 1999, between Smith & Wesson Corp. and Schrader-Bridgeport International Inc.
10.22	Master Supply Agreement, dated August 1, 2001, between Smith & Wesson Corp. and Remington Arms Company, Inc.

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