AMMO, Inc. (Nasdaq: POWW, POWWP) (“AMMO” or the “Company”), the
owner of GunBroker.com, the largest online marketplace serving the
firearms and shooting sports industries, and a leading vertically
integrated producer of high-performance ammunition and
components, today provides a letter to shareholders from CEO
Fred Wagenhals to provide further insight regarding the Company’s
previously announced plan to separate its Ammunition and
Marketplace segments into two independent publicly-traded
companies.
To our valued shareholders:
We have received tremendous support for our plan
to separate the Ammunition and Marketplace units of our business
into two independently operated, publicly traded companies.
Although the presentation attached to our contemporaneously filed
8-K and posted to our website (see link) provides a more expansive
description of the proposed transaction than the description in our
August 15th press release, questions about the spin-off naturally
arise that we will strive to address both in this letter and
through follow-on status reports as we work to consummate this
exciting transaction.
At the outset, I want to reiterate the process
involved in spinning off our Ammunition business, followed with a
brief explanation of why we believe the time is right for the spin
and how shareholders will immediately benefit from the separation.
I will then review the strategy behind the separation, concluding
with milestones that we can expect during the process.
General Overview
As you recall, AMMO as we know it will spin off
its Ammunition business through a tax-free transaction resulting in
two entities. The first, Outdoor Online, Inc. (“Outdoor Online”),
will be comprised of GunBroker.com and its related online
businesses. Outdoor Online will be the successor to the current
AMMO, Inc. I will assume the role of Chairman and CEO of Outdoor
Online. The second entity, Action Outdoor Sports, Inc. (“AOS”) will
be spun-off from AMMO, Inc. and will retain AMMO’s current
ammunition and munition components business, including its
well-established STREAK™, Signature™, Blackline™, /stelTH/™,
Blueline™, AMMO Brass™, and Hunt Ammunition™ brands, along
with AMMO’s military and law enforcement contracts.
A CEO will be named shortly to head up AOS upon
the completion of the transaction, as well as management teams and
Boards for both entities. I am currently slated to serve as
founding AOS Chairman. The final legal structure of the spin-off is
still being refined by management in concert with our legal and
other advisors, and once complete, will be disclosed through
appropriate filings with the SEC and other public
communications.
Why Now?
As you would expect, management, the Board and
our advisors are focused on the valuation placed on the business
for the benefit of our loyal shareholders and have been doing so in
a critical manner since we closed on the GunBroker.com acquisition
in the Spring of 2021. As our team worked to integrate the
operations and teams, it became clear to us into the early Spring
of this year that the market was unable to consistently and
effectively value the distinct operating units given the disparate
metrics used to analyze manufacturing and marketplace performance.
We also determined over this past year that a true separation of
the business units would best enhance the GunBroker.com Marketplace
opportunity, allowing it to partner with a larger set of
manufacturers directly competing with our manufacturing unit. In
addition, it will open the platform to a host of weapons and
outdoor sports product manufacturers, which will further leverage
the incredible Marketplace platform and its approximate 7 million
registered users. Separation of the business units will also
support the sale of valuable (non-personally identifiable) market
data accumulated daily within our Marketplace based upon the
incredible scope, scale and reach of that operation. We are aware
of no other competing business operation that has this valuable
data available to use for refining and strategically focusing
marketing and sales activities.
Based upon the above and other supporting
analysis undertaken by the team, we reasonably believe that the
spin-off strategy is the best course of action to unlock
unrecognized long-term shareholder value – and that truly is the
singular goal my team and I focus on each day and night as we work
to build this business.
Share Ownership Post
Spin-Off
Current AMMO (Nasdaq: POWW) shareholders will
retain their full shares in Outdoor Online, which will be the new
name of that company. This means that if you own 100,000 shares of
POWW on the spin-off’s record date, you will own 100,000 shares of
Outdoor Online on the spin-off’s distribution date. In addition,
following the distribution of AOS’s shares, all POWW shareholders
will own the same percentage of AOS shares as they do of POWW. In
other words, if you own one-half of one percent (0.5%) of POWW on
the spin-off’s record date, you will own one-half of one percent
(0.5%) of AOS’s shares on the spin-off’s distribution date.
Although the AOS share count hasn’t yet been finalized, solely by
way of example, if the total AOS share count outstanding at the
closing of the spin-off transaction is the same as the outstanding
shares in POWW, you would receive one AOS share for every share of
POWW you own.
Strategic Benefits to
Spin-Off
As we stated before, the Company believes there
are a number of compelling reasons supporting the separation of
these two vibrant business units, including:
- Better Positioned to
Enhance Shareholder Value: Compelling and distinct
investment opportunities derived from each particular business
model. As independent and separate companies, AMMO expects each
will be better situated to be appropriately valued by the
market.
- Enhancement of Brand
Strength: The separation and renewed focus by each newly
organized business is expected to facilitate the enhancement and
expansion of the valuable brand strength developed in both separate
operational units, thus further supporting increased enterprise and
therefore shareholder value.
- Prioritize and Refine
Capital Allocation: With separated business models
and short- and long-term goals, each company will be better
positioned to refine and focus capital allocation strategies moving
forward.
- Expanded strategic
opportunities: With a renewed focus, Action Outdoor
Sports, Inc. will solidify its reputation as an attractive acquirer
through enhanced M&A work in the outdoor recreation
marketplace, allowing it to secure best-in-class partnerships with
other manufacturers.
- Reinforce and Amplify the
Ability to
Attract and
Retain Top Market
Talent: Each company’s short- and
long-term objectives will be enhanced by a renewed ability to
attract and retain the top industry talent best situated for each
operation’s separate operational and financial objectives.
- Enhanced strategic focus
with supporting resources: Financial and human
capital resources will be deployed in a focused manner to best
support the specific operational needs and growth drivers of each
separate company.
Key Milestones
While it is premature to give a solid timeline
of activities given the regulatory process involved, we believe it
is reasonable to outline some of the necessary steps toward the
successful spin-off and the launch of these exciting new
companies.
Auditor – As we prepare to spin
out AOS from the original company, it is essential that we have
audited financials of what will become AOS for it to become public.
Therefore, we initiated that process with our existing outside
auditors upon Board approval of the transaction and
pre-announcement of the spin-off. Our work with the auditors
continues without delay and we have been informed their work should
be completed in approximately four (4) weeks.
Moving Assets from
AMMO (to be Outdoor Online) to AOS – In
order for AOS to become an operating company, we will legally
transfer and assign AMMO’s manufacturing assets, including the
Manitowoc, Wisc. factory, to AOS.
Filing Form 10 – The entire
procedure of spinning off the two companies is dependent upon the
filing of the Form 10 with the Securities and Exchange Commission
(SEC). We started the preparation process with our legal advisors
promptly upon receipt of the Board’s approval of the spin-off
transaction. This work will continue in parallel while we work with
the outside auditors as described above. We are advised that the
filing of the Form 10 is reasonably anticipated to take place
relatively close in time to delivery of the newly prepared audited
financials to management and counsel. We will keep shareholders
updated on the developments with respect to the audit and Form 10
milestones. We have currently targeted an early February 2023
timeframe for completion of this regulatory process, and it will
not be delayed based upon the actions or inaction of your AMMO
team. In any event, it is important to keep in mind the closing
date of the spin-off transaction is dependent upon successful
completion of this regulatory filing, review and approval process,
coupled with the work which will be undertaken with Nasdaq as
outlined below.
Manitowoc Factory
Optimization – In addition to the significant capacity
increase we are adding as we complete the move into our new
Wisconsin plant, we will continue to see our capacity thereafter
increase each quarter as operations are ramped up with respect to
loaded ammunition and brass manufacturing.
Appointing AOS Executives and a Board of
Directors – We have an incredibly talented management team
in place currently, supervising and directing the operations of
both units within our company. Those team members will be slotted
to the correct supporting position within each separate company
and, as noted above, we will be announcing shortly the engagement
of a CEO to lead the AOS team. We are also currently working to
develop a separate and independent AOS Board. As with the above
milestones, we will ensure shareholders are updated regularly as
these appointments and assignments are solidified.
Nasdaq Approval – In close
proximity to the filing of the Form 10, we will file AOS’s Nasdaq
listing application which management and counsel will dutifully
shepherd in a focused manner to pursue listing approval in a timely
manner consistent with the regulatory timeline outlined above.
Record Date and Distribution
Date – These are the final steps prior to AOS becoming a
public company, and this entails setting the date as of which POWW
shareholders need to own shares in order receive their shares of
AOS and the date the AOS shares are distributed to POWW’s
shareholders. We expect AOS shares will first regularly trade on
Nasdaq on the first trading day after the distribution date.
Please note that each of these milestones
require multiple steps, and as prudent and appropriate, we will
ensure that we keep our valued POWW/POWWP shareholders apprised of
progress and completion of each significant milestone.
We continue to be grateful for our shareholders’
interest and support of AMMO. We trust this additional
communication helps to clear up some of the questions that
understandably emerged from the original announcement. As we have
stated, it continues to be our intention to be transparent in
reporting the progress of these activities as they occur. Our
singular goal remains to ensure that our long-term and supportive
shareholders realize the full potential value of both of these
amazing businesses, which we believe will be reflected in our
financial performance and the share price of both companies.
Sincerely yours,
Fred WagenhalsChairman and CEOAMMO, Inc.
About AMMO, Inc.
With its corporate offices headquartered in
Scottsdale, Arizona, AMMO designs and manufactures products for a
variety of aptitudes, including law enforcement, military, sport
shooting and self-defense. The Company was founded in 2016 with a
vision to change, innovate and invigorate the complacent munitions
industry. AMMO promotes branded munitions as well as its patented
STREAK™ Visual Ammunition, /stelTH/™ subsonic munitions,
and specialty rounds for military and law enforcement use via
government programs. For more information, please
visit: www.ammo-inc.com.
About GunBroker.com
GunBroker.com is the largest online marketplace
dedicated to firearms, hunting, shooting and related products.
Aside from merchandise bearing its logo, GunBroker.com currently
sells none of the items listed on its website. Third-party sellers
list items on the site and Federal and state laws govern the sale
of firearms and other restricted items. Ownership policies and
regulations are followed using licensed firearms dealers as
transfer agents. Launched in 1999, GunBroker.com is an informative,
secure and safe way to buy and sell firearms, ammunition, air guns,
archery equipment, knives and swords, firearms accessories and
hunting/shooting gear online. GunBroker.com promotes responsible
ownership of guns and firearms. For more information, please
visit: www.gunbroker.com.
Forward Looking Statements
This document contains “forward-looking
statements” within the meaning of the safe harbor provisions of the
U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by words like “may,”
“will,” “likely,” “should,” “expect,” “anticipate,” “future,”
“plan,” “believe,” “intend,” “goal,” “seek,” “estimate,” “project,”
“continue,” and similar expressions. Forward-looking statements are
neither historical facts nor assurances of future performance.
Instead, they are based only on current beliefs, expectations and
assumptions regarding the future of the business, future plans and
strategies, projections, anticipated events and trends, the
economy, and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent
uncertainties, risks, and changes in circumstances that are
difficult to predict. Actual results and financial condition may
differ materially from those indicated in the forward-looking
statements. Therefore, you should not rely on any of these
forward-looking statements. The risks and uncertainties which
forward-looking statements are subject to include, but are not
limited to: risks related to the separation of our ammunition and
marketplace businesses, including that the process of exploring the
transaction and potentially completing the transaction could
disrupt or adversely affect the consolidated or separate
businesses, results of operations and financial condition, risks
related to AOS not being able to recruit the appropriate members of
its executive management team or board of directors, risks related
to the transaction not being completed in accordance with our
expected plans or anticipated timelines, or at all, risks related
to the transaction not achieving some or all of any of the
anticipated benefits with respect to either business, and risks
related to AOS’s ability to succeed as a standalone publicly traded
company. We do not undertake to update forward-looking statements
to reflect the impact of circumstances or events that arise after
the dates they are made. You should, however, consult further
disclosures and risk factors we include in Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q, and Current Reports filed on
Form 8-K.
Investor Contact:
Matt BlazeiPhone: (516)
386-0430IR@ammo-inc.com
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