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 TalentEach 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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