The name "AGO" stood for either Actien-Gesellschaft Otto or Aerowerke Gustav Otto – there seems to be some ambiguity – but during the early years of World War I the company mostly licence-built Otto Flugmaschinenfabrik designs (as did Pfalz Flugzeugwerke). Otto's designs were initially successful, but constantly plagued with problems related to cost-effective production, and revenue. At the start of the war, Otto-Flugzeugwerke was supplying the German Air Force, but the production problems ended up being so great that government agencies urged the company to solve the issues. The stress of wartime seemed to prove too great a burden for Otto who suffered health issues which led to financial problems with the company: In 1915 he was admitted to a Munich mental hospital for treatment of depression. During his treatment, the company languished to the brink of bankruptcy. Eventually, Otto was forced to resign and was offered a buyout that would compensate him for the business and also cover his medical bills. The assets were finally taken over by a consortium which incorporated them into Bayerische Flugzeugwerke on 19 February 1916. Otto therefore no longer had a stake in this company and instead turned his interest to a just previously founded (1 February 1916) independent Otto-Werke Flugzeug- und Maschinenfabrik GmbH.
