Dive Brief:

• Ammo Inc., a manufacturer of ammunition and related components, placed its Chief Strategy Officer Steven Urvan as well as Susan Lokey, CFO of GunBroker.com, on administrative leave with immediate effect, according to a Tuesday press release. GunBroker is an online marketplace for firearms and shooting sports goods wholly owned by Ammo Inc.
• The firm suspended the two executives from their duties following allegations of misappropriated data and digital assets belonging to the company.
• “The company has reason to believe these individuals may have misappropriated the Company’s data and digital assets and transmitted that data to a third party controlled by Mr. Urvan and with which Ms. Lokey is associated,” the firm wrote in the press release.

Dive Insight:

Ammo Inc. also conducted an internal investigation into the alleged misconduct a few weeks ago, the company stated in the release, and noted both executives will remain suspended from their duties for the “pendency of the investigation.”

The company’s board of directors also formed a special committee surrounding the misappropriation, with the committee noting it was “deeply concerned by the preliminary results of our investigation to date” in a statement detailing the executives’ suspensions.  

“It is untenable to allow these individuals continued access to the Company’s systems, data, property or employees while the investigation is underway and until we fully understand the nature and scope of their prior actions,” the special committee wrote.

The executives’ suspension comes only a few weeks after Urvan, as the head of Ammo’s largest shareholder Urvan Group, released a letter to shareholders detailing intentions to replace Ammo Inc.’s board. Urvan Group has a 17.1% stake in Ammo Inc.

Urvan, the original founder of GunBroker.com, served as the marketplace’s CEO until its acquisition by Ammo Inc. in April 2021, according to a June 24 filing by the latter company. The now-CSO and investor notified his intent to file a preliminary proxy statement with the SEC in a letter to fellow shareholders on Aug. 29.

Ammo Inc. acquired GunBroker via a $240 million merger with Speedlight Group I, LLC, a limited liability company based in Delaware and a wholly-owned subsidiary of Gemini Direct Investments, and Urvan as an individual, listed as Seller, according to an April 2021 filing with the SEC. Per the merger agreement, Urvan was slated to take on a position on the company’s board per a May 2021 press release. He is currently listed as a board member on Ammo Inc’s website.

Lokey, who acts as CFO for Ammo Inc subsidiary Speedlight Group I LLC/GunBroker.com, is also associated with the Urvan Group, per the letter, and is named as an anticipated participant in the solicitation alongside Urvan and five other named individuals. Lokey directly owns 40,000 shares of common stock in Ammo Inc, according to the Aug. 29 letter, while Urvan directly owns 20,040,000 shares of common stock.

GunBroker.com has over 7.3 million registered users, per Ammo’s June 24 filing.

Urvan exercised his shareholder right to “nominate a full slate of highly qualified director candidates, including myself, for election to the Company’s Board at this year’s Annual Meeting,” he wrote in his Aug. 29 letter to shareholders.

“I recognize this is a relatively extraordinary step for a sitting director,” Urvan wrote. “That is why I am writing to you today in my capacity as the leader of the Urvan Group.”

Urvan Group has no comment upon the executives’ suspension from their Ammo Inc. duties at this time.

Ammo Inc. released a response to Urvan’s letter also on Aug. 29, including a statement by the company’s board stating they “disagree with many of the assertions and analysis contained in the public comments from Mr. Urvan and will be providing additional information for our shareholders in coming days and weeks.”

“We continue to invite all shareholders and other stakeholders to share with us their views and perspectives on these topics,” the Aug. 29 statement reads.

The special committee also pointed to the proxy statement issued by Urvan in its Sept. 6 comments following his and Lokey’s suspension.

“We believe that his recently announced proxy contest to replace the entire Board may be, at least in part, an attempt by Mr. Urvan to thwart our investigation and driven by his desire to avoid accountability,” the committee’s statement reads.  “Nevertheless, we will continue our thorough investigation into the alleged misconduct.”

Ammo announces plans to split

The tussle over the board also occurred only a few short days after Ammo Inc announced plans to split its business into two distinct entities.

One entity will be comprised of GunBroker.com and its related online businesses — known as Outdoor Online, Inc. — which will act “successor” to the current Ammo Inc, per an Aug. 25 release by the company. The other entity, to be known as Action Outdoor Sports Inc or AOS, will be comprised of the firm’s current ammunition and munition component businesses.

Fred Wagenhals, the present chairman and CEO of Ammo Inc., is slated to take on both positions for Outdoor Online, as well as founding AOS chairman.

It is unclear what roles Urvan, Lokey, or Ammo Inc. CFO Robin Wiley will take on following the company’s split.

Ammo Inc also recently came under fire from the U.S. Occupational Safety and Health Administration (OSHA) and the Department of Labor following allegations by an unnamed whistleblower of illegal stock transactions. The employee served as a member of the company’s board of directors.

OSHA ordered the company to reinstate the employee preliminarily to their previous position and also ordered the company to pay the employee $485,000 in compensatory damages, over $61,000 in back wages and $51,000 in attorney fees, per a Mar. 14, 2022 release. The company appealed the order to OSHA’s Office of Administrative Law Judges.

Ammo Inc. did not respond to requests for comment.