UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For
the Quarterly Period Ended
OR
for the transition period from ___ to ___
Commission
file number
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s
telephone number, including area code: |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of the registrant’s common stock outstanding as of May 14, 2025 was .
AMERICAN REBEL HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
| 2 |
Part I. Financial Information
Item 1.- Interim Condensed Consolidated Financial Statements (Unaudited)
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expense | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Lease deposits and other | ||||||||
| Right-of-use lease assets | ||||||||
| Intangible assets, net | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and other payables | $ | $ | ||||||
| Accrued expense and other | ||||||||
| Accrued interest | ||||||||
| Deferred revenue | ||||||||
| Loan – Officers – related party | ||||||||
| Loans – Working capital, net | ||||||||
| Loan – Director – related party | ||||||||
| Line of credit | ||||||||
| Right-of-use lease liability, current | ||||||||
| Total Current Liabilities | ||||||||
| Right-of-use lease liability, long-term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $ par value; shares authorized; and issued and outstanding, at March 31, 2025 and December 31, 2024, respectively, comprised of Preferred Shares A, B, and D | ||||||||
| Preferred Shares A | ||||||||
| Preferred Shares B | ||||||||
| Preferred Shares D | ||||||||
| Common Stock, $ par value; shares authorized; and issued and outstanding at March 31, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See Notes to Financial Statements and Note 1 regarding non-reliance on financial information.
| 3 |
AMERICAN REBEL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Revenue | ||||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | ||||||||
| Compensation expense – officers – related party | ||||||||
| Compensation expense – officers – deferred comp – related party | ||||||||
| Rental expense, warehousing, outlet expense | ||||||||
| Product development costs | ||||||||
| Marketing and brand development costs | ||||||||
| Administrative and other | ||||||||
| Depreciation and amortization expense | ||||||||
| Total operating expenses | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Loss on sale of equipment | ( | ) | ||||||
| Other income | ||||||||
| Loss on debt extinguishment | ( | ) | ||||||
| Loss on settlement of liability | ( | ) | ||||||
| Net loss before income tax provision | ( | ) | ( | ) | ||||
| Provision for income tax | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Basic and diluted income (loss) per share | ) | ) | ||||||
| Weighted average common shares outstanding - basic and diluted | ||||||||
See Notes to Financial Statements and Note 1 regarding non-reliance on financial information.
| 4 |
AMERICAN REBEL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)
FOR THE THREE MONTHS ENDED
MARCH 31, 2025 AND 2024 (UNAUDITED)
| Common Stock | Common Stock Amount | Preferred Stock | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Series A compensation expense | - | - | ||||||||||||||||||||||||||
| Issuance of Common Stock for liabilities settlement | ||||||||||||||||||||||||||||
| Issuance of Series D Preferred Stock in connection with loans – working capital, net | ||||||||||||||||||||||||||||
| Issuance of Common stock in connection with consulting and financing agreements | ||||||||||||||||||||||||||||
| Conversion of Series D Preferred Stock into Common Stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Conversion of notes payable into Common Stock | ||||||||||||||||||||||||||||
| Effect of reverse stock split | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common Stock | Common Stock Amount | Preferred Stock | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Series A compensation expense | - | - | ||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance - March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
See Notes to Financial Statements and Note 1 regarding non-reliance on financial statements.
| 5 |
AMERICAN REBEL HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| For the Three Months Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Depreciation and amortization | ||||||||
| Non-cash, in-kind interest settled | ||||||||
| (Gain) loss on disposition of property | ||||||||
| Deferred compensation in connection with Series A preferred shares | ||||||||
| Loss on debt extinguishment | ||||||||
| Loss on settlement of liability | ||||||||
| Adjustments to reconcile net loss to cash (used in) operating activities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expense and other | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Lease deposits and other | ||||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Accrued interest | ||||||||
| Deferred revenue | ( | ) | ||||||
| Right-of-use lease liabilities | ( | ) | ||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| (Purchase) Disposition of property and equipment | ( | ) | ||||||
| Net Cash (Used in) Provided by Investing Activities | ( | ) | ||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from line of credit | ||||||||
| Proceeds from loans - officer - related party | ||||||||
| Proceeds from working capital loans, net | ||||||||
| Repayments of working capital loans, net | ( | ) | ( | ) | ||||
| Origination fees | ( | ) | ||||||
| Proceeds of loans – officer - related party | ||||||||
| Payments on line of credit | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| CHANGE IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | ||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | ||||||||
| Income taxes | ||||||||
See Notes to Financial Statements and Note 1 regarding non-reliance on financial information.
| 6 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2205
(Unaudited)
NOTE 1 – PREVIOUSLY ISSUED FINANCIAL STATEMENTS
On May 3, 2024, the SEC entered an order instituting settled administrative and cease-and-desist proceedings against BF Borgers CPA PC (“Borgers”) and its sole audit partner, Benjamin F. Borgers CPA, permanently barring Mr. Borgers and Borgers (collectively, “BF Borgers”) from appearing or practicing before the SEC as an accountant (the “Order”). As a result of the Order, BF Borgers may no longer serve as the Company’s independent registered public accounting firm, nor can BF Borgers issue any audit reports included in Commission filings or provide consents with respect to audit reports.
As reported in the Current Report on Form 8-K filed with the Commission on May 6, 2024, in light of the Order, the Audit Committee (the “Committee”) of the Board of Directors of the Company on May 6, 2024, unanimously approved to dismiss, and dismissed BF Borgers as the Company’s independent registered public accounting firm.
On May 14, 2024, the Committee approved the engagement of GBQ Partners LLC (“GBQ”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024 and the reaudits of the years ended December 31, 2023 and 2022.
The Company filed its Form 10-K/A with the reaudits of the years ended December 31, 2023 and 2022 with the SEC on January 29, 2025.
The Company has included the comparative three months ended March 31, 2024 in this filing; however, these figures have not been restated due to the undue burden it would place on the Company. Additionally, the Company has not restated its Form 10-Q for the period ended June 30, 2024 due to the undue burden this would also have on the Company. The impact of any adjustments to the quarters ended March 31, 2024 and June 30, 2024 were included in the three months ended September 30, 2024 Form 10-Q. Accordingly, the accompanying consolidated statement of operations, the consolidated statement of stockholders’ equity/(deficit) and the consolidated statement of cash flows for the three months ended March 31, 2024, and the accompanying notes for the three months ended March 31, 2024 should not be relied upon.
NOTE 2 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The
Company was incorporated on
Nature of Operations
The Company develops and sells branded products in the self-defense, safe storage and other patriotic product areas using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. The Company’s products are marketed under the American Rebel Brand and are proudly imprinted with such branding. Through its “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.), the Company promotes and sells its safe and storage products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms retail outlets, as well as through online avenues, including website and e-commerce platforms. The Company sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands as well as the American Rebel Brand. On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer (“American Rebel Beer”). The Company established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold the licenses with respect to the beer business. American Rebel Beer launched in 2024.
| 7 |
To varying degrees, the development of geopolitical conflicts, supply chain disruptions, government actions to slow rapid inflation in recent years and predictable sales cycles have produced varying effects on the business. The economic effects from these events over the long term cannot be reasonably estimated at this time. Accordingly, estimates used in the preparation of the financial statements, including those associated with the evaluation of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to the Company (through accounts receivable) and the estimations of certain losses assumed under warranty and other liability contracts, may be subject to significant adjustments in future periods.
Interim Financial Statements and Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K of the Company for the period ended December 31, 2024, and notes thereto contained, filed on April 9, 2025.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, American Rebel, Inc., American Rebel Beverages, LLC, and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.
Year-end
The Company’s year-end is December 31.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Inventory and Inventory Deposits
Finished goods inventory primarily consists of backpacks, jackets, and related accessories, safes, and packaged beer available for sale. Raw materials primarily consists of component parts used in the assembly of safes and packaging materials. Apart from safes, the Company’s finished goods are manufactured or otherwise produced by outside parties to the Company’s specifications. Inventory is carried at the lower of cost (First-in, First-out Method) or net realizable value. The Company determines an estimate for the reserve of slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. From time-to-time, the Company makes deposit payments on certain inventory purchases that are presented separately in the accompanying consolidated financial statements as inventory deposits until the goods are received into inventory.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded using the straight-line method over the estimated useful life of the asset, which ranges from five to fifteen years.
| 8 |
Revenue Recognition and Accounts Receivable
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.
These steps are met when an order is received, a price is agreed to, and the product is shipped or delivered to that customer. Additionally, the Company offers extended warranties for the locking mechanism of its safes, which are separately purchased by customers. Warranty income is recognized over time based on the estimated useful life of the locks, which approximates 10 years. Unrecognized warranty income is presented as deferred revenue in the accompanying consolidated financial statements. Warranty income recognized was not significant for the three months ended March 31, 2025 and 2024.
The
carrying amount of accounts receivable is reduced by an allowance for bad debts and expected credit losses, as necessary, that reflects
management’s best estimate of the amount that will not be collected. This estimation takes into consideration historical experience,
current conditions and, as applicable, reasonable supportable forecasts. Actual results could vary from the estimate. Accounts are charged
against the allowance when management deems them to be uncollectible. The allowance for doubtful accounts was approximately $
The following table sets forth the approximate percentage of revenue by primary category:
| For the Three Months Ended March 31, | ||||||||
| Percentage of revenue: | 2025 | 2024 | ||||||
| Safes | % | % | ||||||
| Soft goods and other | % | % | ||||||
| Beverages | % | % | ||||||
| Total | % | % | ||||||
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2025 and December 31, 2024, respectively. The respective carrying value of certain financial instruments approximated their fair values. These financial instruments include cash and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
The three levels of inputs used to measure fair value are as follows:
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
| 9 |
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
The Company records stock-based compensation in accordance with the guidance in ASC Topic 718, which requires the Company to recognize expense related to the grant date fair value of its employee stock awards. The Company recognizes the cost of employee share-based awards over the requisite service period, which represents the vesting period of the award. Stock-based compensation primarily relates to the Company’s Series A Preferred Stock awards.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from non-employees in accordance with ASC 718-10 and the conclusions reached ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year and the effect of pre-funded warrants issued. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. Because the Company incurred net losses for each of the years presented, the effect of dilutive securities, excluding pre-funded warrants, have been excluded as the effect on EPS is antidilutive.
Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive.
| March 31, 2025 | March 31, 2024 | |||||||
| Shares used in computation of basic earnings per share for the year ended | ||||||||
| Pre-funded warrants | ||||||||
| Total denominator | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Fully diluted loss per share | $ | ( | ) | $ | ( | ) | ||
In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be antidilutive.
| 10 |
Income Taxes
The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change. For the three months ended March 31, 2025 and 2024, respectively, income tax expense has been recorded given significant losses incurred and resulting valuation allowance on such losses.
Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The
Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of
tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of March
31, 2025 and December 31, 2024, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions
with
Leases
ASC 842 requires lessees to recognize substantially all leases on the balance sheet as a Right-of-use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The Company elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating
leases are included in operating lease Right-of-use assets and operating lease liabilities, current and non-current, on the Company’s
condensed consolidated balance sheets. The Company had
| 11 |
Recent Accounting Pronouncements
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This update modifies the disclosure or presentation requirements of a variety of topics in the Accounting Standards Codification to conform with certain SEC amendments in Release No. 33-10532, Disclosure Update and Simplification. The amendments in this update should be applied prospectively, and the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or S-K becomes effective. However, if the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. We are currently evaluating the potential impact of this guidance on our consolidated financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.
Concentration Risk
The Company did not have any vendor or customer concentrations as of March 31, 2025 or December 31, 2024.
NOTE 3 – GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the
recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the
growth and acquisition stage and, accordingly, has not yet reached profitability from its operations. Since inception, the Company has
been engaged in financing activities and executing its plan of operations and incurring costs and expenses related to product development,
branding, inventory buildup and product launch. As a result, the Company has continued to incur significant net losses for the three
months ended March 31, 2025 and 2024 of ($
The ability of the Company to continue as a going concern is dependent upon its ability to raise capital from the sale of its equity and, ultimately, the achievement of significant operating revenues and profitability.
Management believes that sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock. However, no assurance can be given that the Company will obtain this additional working capital, or if obtained, that such funding will not cause substantial dilution to its existing stockholders. As indicated in the footnotes to the consolidated financial statements, most of the current debt instruments are charging high interest rates. These interest payments and/or premium repayments and prepayments may make it difficult for the Company to enter into new debt agreements. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay some of its business objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
| 12 |
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 4 – INVENTORY AND DEPOSITS
Inventory and deposits include the following:
March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| Inventory – raw materials | $ | $ | ||||||
| Inventory – finished goods | ||||||||
| Less reserve for excess and obsolete inventory | ( | ) | ( | ) | ||||
| Total Inventory | $ | $ | ||||||
The Company accounts for excess and obsolete inventory with a reserve that is established based on management’s estimates of the net realizable value of the related products. These reserves are product specific and are based upon analyses of product lines that are slow moving or expected to become obsolete due to significant product enhancements.
When
inventory is physically disposed of, the Company accounts for the write-offs by making a debit to the reserve and a credit to inventory
for the standard cost of the inventory item. The valuation reserve is applied as an estimate to specific product lines. Since the inventory
item retains its standard cost until it is either sold or written off, the reserve estimates will differ from the actual write-off. There
were
Included
in finished goods is approximately $
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| Plant, property and equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
For
the three months ended March 31, 2025 and 2024, the Company recognized $
NOTE 6 – RELATED PARTY NOTES PAYABLE AND RELATED PARTY TRANSACTIONS
Employment Agreements
Charles
A. Ross, Jr. serves as the Company’s Chief Executive Officer. Compensation for Mr. Ross was $
| 13 |
Doug
E. Grau serves as the Company’s President and Interim Principal Accounting Officer. Compensation for Mr. Grau was $
Corey
Lambrecht serves as the Company’s Chief Operating Officer. Mr. Lambrecht’s employment agreement provides for an initial annual
base salary of $
There
were no new stock awards granted and issued to Messrs. Ross, Grau and Lambrecht during 2025 and 2024. Additionally, the aforementioned
officers advanced the Company approximately $
Series A Convertible Preferred Stock
The Company, in connection with its employment agreements, as amended, reserved for the issuance of shares of its common stock that are convertible under the Series A preferred stock conversion terms. The Series A preferred stock is convertible into 500 shares of common stock for every one share of Series A preferred stock.
Per Mr. Lambrecht’s employment agreement entered into on November 20, 2023, the share-award grant is to vest 1/4th upon the signing of Mr. Lambrecht’s employment, another 1/4th on January 1, 2024, another 1/4th on January 1, 2025 and the remaining 1/4th on January 1, 2026. Mr. Lambrecht’s employment agreement has a term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. For the three months ended March 31, 2025 and 2024, the Company recognized $ and $ in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 another shares of Series A preferred stock vested for Mr. Lambrecht, providing for a total of shares of common stock that Mr. Lambrecht may convert his Series A preferred shares into.
Mr. Ross’s amended employment agreement had an effective date of November 20, 2023. The share-award grant will vest 1/5th on January 1, 2024, another 1/5th on January 1, 2025, 1/5th on January 1, 2026, 1/5th on January 1, 2027 and the remaining 1/5th on January 1, 2028. Mr. Ross’s amended employment agreement has an effective term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. For the three months ended March 31, 2025 and 2024, the Company recognized $ and $ in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional shares of Series A preferred stock vested for Mr. Ross, providing for a total of shares of common stock that Mr. Ross may convert his Series A preferred shares into at any time.
Mr. Grau’s amended employment agreement had an effective date of November 20, 2023. The share-award grant will vest 1/5th on January 1, 2024, another 1/5th on January 1, 2025, 1/5th on January 1, 2026, 1/5th on January 1, 2027 and the remaining 1/5th on January 1, 2028. Mr. Grau’s amended employment agreement has an effective term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. For the three months ended March 31, 2025 and 2024, the Company recognized $ and $ in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional shares of Series A preferred stock vested for Mr. Grau, providing for a total of shares of common stock that Mr. Grau may convert his Series A preferred shares into at any time.
For the three months ended March 31, 2025, shares of Series A preferred stock were converted to common stock.
| 14 |
Stock-Based Compensation
The Company, in connection with various employment and independent directors’ agreements, is required to issue shares of its common stock as payment for services performed or to be performed. The value of the shares issued is determined by the fair value of the Company’s common stock that trades on the Nasdaq Capital Market. This value on the date of grant is afforded to the Company for the recording of stock compensation to employees and other related parties or control persons and the recognition of this expense over the period in which the services were incurred or performed. Most of the Company’s agreement for stock compensation provide for services performed to have been satisfied by the initial grant, thereby incurring the cost immediately from the grant.
Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Under the provisions of ASC 718, the Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statements of operations. Where the stock-based compensation is not an award, option, warrant or other common stock equivalent, the Company values the shares based on fair value with respect to its grant date and the price that investors may have been paying for the Company’s common stock on that date in its various exempt private placement offerings. Stock-based compensation expense totaled $ and $ for the three months ended March 31, 2025 and 2024, respectively, and primarily relates to the aforementioned Series A preferred stock awards.
Taxable value of the stock-based compensation is recorded in accordance with the Internal Revenue Service’s regulations as it pertains to employees, control persons and others whereby they receive share-based payments. This may not always align with what the Company records these issuances in accordance with GAAP. There are no provisional tax agreements or gross-up provisions with respect to any of our share-based payments to these entities. The payment or withholding of taxes is strictly left to the recipient of the share-based payments, or the modification of share-based payments.
Director’s Note
On
June 28, 2024, the Company entered into a short-term loan with a director, Lawrence Sinks (“Mr. Sinks”), evidenced by a promissory
note in the principal amount of $
NOTE 7 – LINE OF CREDIT – FINANCIAL INSTITUTION
During
February 2023, the Company entered into a $
| March 31, 2025 | December 31, 2024 | |||||||
| (Unaudited) | (Audited) | |||||||
| Line of credit from a financial institution. | $ | $ | ||||||
| Total recorded as a current liability | $ | $ | ||||||
As
of March 31, 2025 and December 31, 2024 the total balance due of $
The
balance at the maturity was approximately $
| 15 |
NOTE 8 – NOTES PAYABLE – WORKING CAPITAL
The Company has several working capital loan agreements in place, which are described in detail below.
| March 31, 2025 | December 31, 2024 | |||||||
| Working capital loan agreement with a limited liability company domiciled in the state of Virginia. The working capital loan requires an initial payment of $ | ||||||||
| The Company has entered a number of working capital loan agreements structured as Revenue Interest Purchase Agreements (“revenue participation interest”, “RIP”). These working capital loans provided for a purchase of an ownership interest in the revenues of our Champion subsidiary. The revenue participation interest requires payments ranging from $ | ||||||||
| On November 11, 2024, the Company entered into a Purchase and Exchange Agreement among an investor (the “Purchaser”) and Altbanq Lending LLC (the “Seller”), pursuant to which the Purchaser agreed to purchase from the Seller a portion ($ | ||||||||
| Standard Merchant Cash Advance Agreement (the “Factoring Agreement”), with an accredited investor lending source (“Financier”). Under the Factoring Agreement, our wholly-owned subsidiary sold to Financier a specified percentage of its future receipts (as defined by the Factoring Agreement, which include any and future revenues of Champion Safe Company, Inc. (“Champion”), another wholly-owned subsidiary of the Company, and the Company) equal to $ | ||||||||
| Working Capital loan agreement with an accredited investor lending source and a subsidiary to that accredited investor lending source as collateral agent, which provides for a term loan in the amount of $ | ||||||||
| 16 |
| On September 4, 2024, the Company entered into a Securities Purchase Agreement with Coventry Enterprises, LLC, an accredited investor (“the Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| On August 8, 2024, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (“the Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| On August 27, 2024 through September 16, 2024, the Company entered into four loan advances with an investor. The principle of the advances ranged from $ | ||||||||
| On October 4, 2024, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (“the Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ |
| 17 |
| On October 30, 2024, the Company entered into a Securities Purchase Agreement with Alumni Capital LP, a Delaware limited partnership (“the Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| On November 6, 2024, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the “Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| On November 11, 2024, the Company entered into a twelve-month promissory note with an accredited investor (the “Lender”) in the principal amount of $ | ||||||||
| On December 13, 2024, the Company entered into a three-month promissory note with an accredited investor (the “Lender”) in the principal amount of $ |
| 18 |
| On January 10, 2025, the Company entered into two six-month promissory notes with accredited investors (the “Lenders”) in the principal amounts of $ | ||||||||
| On February 10, 2025, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the “Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| On March 3, 2025, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the “Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ | ||||||||
| Less: note discount | ( | ) | ( | ) | ||||
| Total recorded as a current liability | $ | $ |
| 19 |
Accrued
interest was approximately $
For
the year ended December 31, 2024, the Company recognized a net loss on debt extinguishment totaling $
| Description | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Common stock | $ | $ | $ | $ | ||||||||||||
Level 2 fair value measurements in the table above were primarily measured through the Company’s publicly traded common stock price, which is an observable input in determining fair value.
NOTE 9 – INTANGIBLE ASSETS
As
of March 31, 2025 and December 31, 2024, the Company had intangible assets, representing a trade name subject to amortization over a
The Company will review its trade name intangible asset for impairment periodically (based on indicators of impairment) and determine whether impairment is to be recognized within its consolidated statement of operations. impairment charge was recognized during the three months ended March 31, 2025 and 2024.
NOTE 10 – SHARE CAPITAL
The Company is authorized to issue shares of its $ par value common stock and shares of its $ par value preferred stock. The shares of $ par value preferred stock were comprised of shares authorized and shares issued and outstanding of its Series A convertible preferred stock at March 31, 2025 and December 31, 2024, shares authorized and shares issued and outstanding of its Series B convertible preferred stock at March 31, 2025 and December 31, 2024, shares authorized and shares issued and outstanding of its Series C convertible preferred stock at March 31, 2025 and December 31, 2024, and shares authorized and and shares issued and outstanding of its Series D convertible preferred stock at March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, there were and shares of common stock issued and outstanding, respectively.
The share numbers and pricing information in this report have been adjusted to reflect the effects of the following reverse stock splits, which occurred during 2024 and 2025:
| ● | On
October 2, 2024, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of | |
| ● | On
March 31, 2025, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of |
Shares Issuances
During
the three months ended March 31, 2025, the Company issued shares of common stock to Silverback Capital Corporation (“SCC”), representing total accounts payable
payments of $
On
January 10, 2025, the Company entered into two six-month promissory notes with accredited investors in the principal amounts of $
On January 10, 2025, the Company authorized the issuance of shares of common stock to a consultant pursuant to the terms of an amendment to a current consulting agreement.
| 20 |
On January 14, 2025, the Company authorized the issuance of shares of Series D Convertible Preferred Stock to seven service providers to the Company and its subsidiaries.
On February 10, 2025, the Company authorized the issuance of shares of common stock to an accredited investor upon the conversion of shares of Series D Convertible Preferred Stock.
On
February 10, 2025, the Company authorized the issuance of shares of common stock, valued at $
On
February 27, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19,
2025, sent the Company a second closing notice for the exchange of $
On
March 4, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a third closing notice for the exchange of $
On
March 5, 2025, the Company authorized the issuance of shares of common stock to an accredited investor upon the conversion of $
On
March 10, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a fifth closing notice for the exchange of $
On
March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a sixth closing notice for the exchange of $
On
March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a seventh closing notice for the exchange of $
On
March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company an eighth closing notice for the exchange of $
On
March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a nineth closing notice for the exchange of $
On
March 13, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a tenth closing notice for the exchange of $
On
March 17, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company an eleventh closing notice for the exchange of $
| 21 |
On
March 18, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a twelfth closing notice for the exchange of $
On
March 19, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a thirteenth closing notice for the exchange of $
On
March 24, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a fifteenth closing notice for the exchange of $
On
March 26, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a seventeenth closing notice for the exchange of $
On
March 28, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a twentieth closing notice for the exchange of $
On
March 31, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025,
sent the Company a twenty-first closing notice for the exchange of $
Shares Reserved for Issuance Pursuant to Certain Executive Employment Agreements
The Company in connection with its employment agreement with Messrs. Ross, Grau and Lambrecht reserved for issuance shares of its common stock that are convertible under the Series A preferred stock.
New Preferred Stock Series and Designations and Reg. A+ Offering
On May 10, 2024, the Company’s board of directors approved the designation of a new Series D Convertible Preferred Stock (the “Series D Designation”). The Series D Designation was filed by the Company with the Secretary of State of Nevada on May 10, 2024, and designated shares of Series D Preferred Stock, $ par value per share. The Series D Preferred Stock has the following rights:
Stated Value. Each share of Series D Preferred Stock has an initial stated value of $.
Conversion at Option of Holder. Each share of Series D Preferred Stock shall be convertible into shares of Common Stock at a fixed ratio of 1:5 ( share of Series D Preferred Stock converts into shares of Common Stock), at the option of the holder thereof, at any time following the issuance date of such share of Series D Preferred Stock at the Company’s office or any transfer agent for such stock. The conversion ratio shall not be adjusted for stock splits, stock dividends, recapitalizations or similar events.
Forced Conversion – If the closing price of the Company’s Common Stock during any ten consecutive trading day period has been at or above $ per share (as adjusted for stock splits, stock dividends recapitalizations and similar events), then the Company shall have the right to require the holder of the Series D Preferred Stock to convert all, or any portion of, the shares of Series D Preferred Stock held by such holder for shares of Common Stock. If the Company elects to cause a forced conversion of the shares of Series D Preferred Stock, then it must simultaneously take the same action with respect to all of the other shares of Series D Preferred Stock then outstanding on a pro rata basis.
| 22 |
Voting Rights. The Series D Preferred Stock has no voting rights relative to matters submitted to a vote of the Company’s stockholders (other than as required by law). The Company may not amend its articles of incorporation or the Series D Designation (whether by merger, consolidation, or otherwise) to materially and adversely change the rights, preferences or voting power of the Series D Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the Company’s outstanding shares of Series D Preferred Stock, voting together as a class.
Conversion of Revenue Interest Loan for Preferred Stock Series D and Potential Issuance of Common Stock Equivalents from the Conversion of Series D
On
May 13, 2024 the Company and the holder of one of the Revenue Interest Loans entered into a settlement and conversion agreement (“Securities
Exchange Agreement”), whereby the Company issued shares of Series D convertible preferred stock as full satisfaction for
the revenue participation interest agreement or loan. The Series D convertible preferred stock was purchased at $ per share. Total
loan balance and premium payment for inducement for this Revenue Interest Loan on the date of settlement and conversion was $
The Securities Exchange Agreement is intended to be effected as an exchange of securities issued by the Company pursuant to Section 3(a)(9) of the Securities Act. For the purposes of Rule 144, the Company acknowledges that the holding period of the Securities Exchange Agreement (and upon conversion thereof, if any, into shares of the Company’s common stock) may be tacked onto the holding period of the Series D Preferred Stock received by the holder. The Company agrees not to take a position contrary to this unless required by regulatory authorities and their determination to the contrary.
On
July 10, 2024, the Company entered into a separately negotiated Conversion Agreement (the “Conversion Agreement”) with the
Series D convertible preferred stock holder, pursuant to which the holder agreed to convert the shares of Series D convertible
preferred stock it held into shares of common stock, par value $
Refer to Note 8 – Notes Payable – Working Capital, for additional information regarding the settlement of debt liabilities through the issuances of Series D Preferred Stock, common stock, pre-funded warrants and convertible notes during the three months ended March 31, 2025.
NOTE 11 – LEASES AND LEASED PREMISES
Rental Payments under Non-cancellable Operating Leases and Equipment Leases
The Company, through its purchase of Champion, acquired several long-term leases for two manufacturing facilities, three office spaces, five distribution centers, and five retail spaces. Four of its distribution centers also have retail operations for which it leases its facilities. Lease terms on the various spaces’ range from a month-to-month lease (30 days) to a long-term lease expiring in September of 2028.
Rent
expense for operating leases totaled approximately $
The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.
| 23 |
Right of Use Assets and Lease Liabilities
Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term.
The Company’s operating leases are comprised primarily of facility leases. and as such we have no finance leases for our vehicles or equipment currently at this time.
Balance sheet information related to our leases is presented below:
| Balance Sheet location | March 31, 2025 | December 31, 2024 | ||||||||
| Operating leases: | ||||||||||
| Right-of-use lease assets | $ | $ | ||||||||
| Right-of-use lease liability, current | Other current liabilities | $ | $ | |||||||
| Right-of-use lease liability, long-term | Right-of-use operating lease liability | $ | $ | |||||||
As of March 31, 2025, weighted-average remaining lease term and discount rate were as follows:
| March 31, 2025 | ||||
| Weighted Average Remaining Lease Term: | ||||
| Operating leases | ||||
| Weighted Average Discount Rate: | ||||
| Operating leases | % | |||
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
| Operating leases | ||||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total future minimum lease payments, undiscounted | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
During the three months ended March 31, 2025 and 2024, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company. In the opinion of management, after consultation with legal counsel, resolution of any of these matters is not expected to have a material effect on the Company’s consolidated financial statements.
| 24 |
On July 23, 2024, the Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (“Liberty”), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products. As of the date of this Report, the complaint has not been served on the Company or Champion Safe. In the complaint, Liberty alleges trademark infringement as a result of the purported use of the term “Freedom” in the sale of safes, federal false designation of origin and unfair competition, violation of Utah deceptive trade practices, Utah unfair competition, and damages to Liberty. Management believes that this lawsuit is without merit; however has initiated settlement discussions with Liberty and anticipates an amicable settlement to be forthcoming. At this time, Management does not believe a settlement with Liberty will have a material effect on its business or financial condition.
As
reported by the Company in the Form 8-K dated August 7, 2024, during February 2023, the Company entered into a $
Contractual Obligations
The
Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect
on the condensed consolidated financial statements. As of March 31, 2025 and December 31, 2024 there were
Nasdaq Compliance
On February 19, 2025, the Company received a notification letter Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) because the stockholders’ equity of the Company as of September 30, 2024, as reported in the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 7, 2025, was below the minimum requirement of $2,500,000 (the “Stockholders’ Equity Requirement”). The Notification Letter has no immediate effect on the Company’s continued listing on the Nasdaq Capital Market, subject to the Company’s compliance with the other continued listing requirements. Pursuant to Nasdaq’s Listing Rules, the Company has 45 calendar days (until April 7, 2025), to submit a plan to evidence compliance with the Rule (a “Compliance Plan”). The Company intends to submit a Compliance Plan within the required time, although there can be no assurance that the Compliance Plan will be accepted by Nasdaq. If the Compliance Plan is accepted by Nasdaq, the Company will be granted an extension of up to 180 calendar days from February 19, 2025 to evidence compliance with the Rule. In the event the Compliance Plan is not accepted by Nasdaq, or in the event the Compliance Plan is accepted but the Company fails to evidence compliance within the extension period, the Company will have the right to a hearing before Nasdaq’s Hearing Panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing. The Company submitted the Compliance Plan on April 7, 2025, will continue to monitor its stockholders’ equity and, if appropriate, consider further available options to evidence compliance with the Stockholders’ Equity Requirement.
| 25 |
Executive Employment Agreements and Independent Contractor Agreements
The Company has written employment agreements with various other executive officers. All payments made to its executive officers and significant outside service providers are analyzed and determined by the board of directors’ compensation committee; some payments made to independent contractors (or officer payments characterized as non-employee compensation) may be subject to backup withholding or general withholding of payroll taxes, may make the Company responsible for the withholding and remittance of those taxes. Generally outside service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis and Company policy.
NOTE 13 – SEGMENT REPORTING
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance.
The Company views its operations and manages its business as one operating segment engaged in patriotic goods comprised of safes, soft goods, and beer. The Company’s Chief Executive Officer, as the CODM, regularly reviews the entity-wide financial and operational performance as a single unit. No financial information is disaggregated into separate lines of business. The CODM makes resource allocation and business process decisions regarding the overall level of resources available and how to best deploy the resources.
The single segment’s principal measure of segment profit and loss is consolidated revenue, gross margin, and total operating expenses. The CODM considers actual and forecasted numbers when evaluating performance.
NOTE 14 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of March 31, 2025, through the date the financial statements were issued and determined that there were the following subsequent events:
LTIP Shares
On April 9, 2025, the Company registered an aggregate of shares of common stock pursuant to the 2021 Long-Term Incentive Plan and the 2025 Stock Incentive Plan.
Private Placement
On
April 4, 2025, the Company entered into a Securities Purchase Agreement with several institutional Investors for the issuance and sale
in a Private Placement of
A holder of the Pre-Funded Warrants and the Warrants may not exercise any portion of such holder’s Pre-Funded Warrants or Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. In the event of certain fundamental transactions, holders of the Warrants will have the right to receive the Black Scholes Value of their Warrants calculated pursuant to a formula set forth in the Warrants, payable either in cash or in the same type or form of consideration that is being offered and being paid to the holders of common stock.
| 26 |
The
aggregate gross proceeds to the Company from the Private Placement were approximately $
H.C.
Wainwright & Co., LLC (“Wainwright”) acted as the Company’s exclusive placement agent in connection with the Private
Placement, pursuant to that certain engagement letter, dated as of October 3, 2024, as amended on April 2, 2025, between the Company
and Wainwright (the “Engagement Letter”). Pursuant to the Engagement Letter,
1800 Diagonal Note
On
April 10, 2025, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, pursuant to which the Lender
made a loan to the Company, evidenced by a promissory note in the principal amount of $
Upon
the occurrence and during the continuation of any Event of Default, the Note shall become immediately due and payable and the Company
will be obligated to pay to the Lender, in full satisfaction of its obligations, an amount equal to 150% times the sum of (w) the then
outstanding principal amount of the Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note to the date
of payment plus (y) default interest, if any, at the rate of
Only
upon an occurrence of an event of default under the Note, the Lender may convert the outstanding unpaid principal amount of the Note
into restricted shares of common stock of the Company at a discount of
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “may,” “could,” “should,” “anticipate,” “expect,” “project,” “position,” “intend,” “target,” “plan,” “seek,” “believe,” “foresee,” “outlook,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include, but are not limited to, the following:
| ● | our ability to maintain compliance with the continued listing standards of Nasdaq; |
| 27 |
| ● | the effect of new tariffs on our business and financial condition; | |
| ● | we consummated the purchase of our safe manufacturer and sales organizations, and future acquisitions and operations of new manufacturing facilities and/or sales organizations might prove unsuccessful and could fail; | |
| ● | risk that we will not be able to remediate identified material weaknesses in our internal control over financial reporting and disclosure controls and procedures; | |
| ● | our failure to timely file certain periodic reports with the SEC and our prior restatements have had, and may in the future have further, material adverse consequences to our business, our financial condition, results of operations and our cash flows; | |
| ● | our success depends on our ability to introduce new products that track customer preferences; | |
| ● | if we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights; | |
| ● | as a significant portion of our revenues are derived by demand for our safes and the personal security products for firearms storage, we depend on the availability and regulation of ammunition and firearm storage; | |
| ● | as we continue to integrate the purchase of our safe manufacturer and sales organization, any compromised operational capacity may affect our ability to meet the demand for our safes, which in turn may affect our generation of revenue; | |
| ● | shortages of components and materials, as well as supply chain disruptions, may delay or reduce our sales and increase our costs, thereby harming our results of operations; | |
| ● | we do not have long-term purchase commitments from our customers, and their ability to cancel, reduce, or delay orders could reduce our revenue and increase our costs; | |
| ● | our inability to effectively meet our short- and long-term obligations; | |
| ● | given our limited corporate history, it is difficult to evaluate our business and future prospects, and increases the risks associated with an investment in our securities; | |
| ● | our inability to raise additional financing for working capital; | |
| ● | our ability to generate sufficient revenue in our targeted markets to support operations; | |
| ● | significant dilution resulting from our financing activities; | |
| ● | the actions and initiatives taken by both current and potential competitors; | |
| ● | our ability to diversify our operations; | |
| ● | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; | |
| ● | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; | |
| ● | the deterioration in general of global economic, market and political conditions; | |
| ● | the inability to efficiently manage our operations; | |
| ● | the inability to achieve future operating results; | |
| ● | the unavailability of funds for capital expenditures; | |
| ● | the inability of management to effectively implement our strategies and business plans; and | |
| ● | the other risks and uncertainties detailed in this report. |
Because the factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and their emergence is impossible for us to predict. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
This Quarterly Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Quarterly Report are made as of the date of this Quarterly Report and should be evaluated with consideration of any changes occurring after the date of this Quarterly Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Except as otherwise indicated by the context, references in this report to “Company,” “American Rebel Holdings,” “American Rebel,” “we,” “us” and “our” are references to American Rebel Holdings, Inc. and its operating subsidiaries, American Rebel, Inc., American Rebel Beverages, LLC, Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC and Champion Safe De Mexico, S.A. de C.V. All references to “USD” or United States Dollar refer to the legal currency of the United States of America.
| 28 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis should be read along with the financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). As described in Note 1 to the Financial Statements, we have included the comparative three months ended March 31, 2024 in this filing; however, these figures have not been restated due to the undue burden it would place on us. Additionally, we have not restated our Form 10-Q for the period ended June 30, 2024 due to the undue burden this would also have on us. The impact of any adjustments to the quarters ended March 31, 2024 and June 30, 2024 have been included in the three months ended September 30, 2024. Accordingly, the accompanying consolidated statement of operations, the consolidated statement of stockholders’ equity/(deficit) and the consolidated statement of cash flows for the three months ended March 31, 2024, and the accompanying notes for the three months ended March 31, 2024, including references thereon within Management’s Discussion and Analysis, should not be relied upon.
Apart from the matter above, the Financial Statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
Description of Our Business
Overview
We are boldly positioning ourselves as America’s Patriotic Brand. We have identified the market opportunity to design, manufacture, and market beverages and innovative concealed carry products and safes. We access our market uniquely through our positioning as America’s Patriotic Brand and the appeal of our products as well as through the profile and public persona of our founder and Chief Executive Officer, Andy Ross. Andy hosted his own television show for 12 years, has made multiple appearances over the years at trade shows, and is well-known in the archery world as the founder of Ross Archery, which was the world’s fastest-growing bow company in 2007 and 2008. Andy has released 3 CDs, done numerous radio and print interviews, and performed many concerts in front of thousands of people. Andy has the ability to present American Rebel to large numbers of potential customers through the appeal of his music and other supporting appearances. For example, his appearance on the History Channel hit show Counting Cars in February 2014 has been viewed by over 2 million times. Bringing innovative products that satisfy an existing demand to the market through exciting means is the American Rebel blueprint for success.
As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in “Liquidity” below or elsewhere in this Quarterly Report. We believe that the perception that many people have of a public company makes it more likely that they will accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. Additionally, the issuance of restricted shares will dilute the percentage of ownership interest of our stockholders.
The Company operates primarily as a designer, manufacturer and marketer of beverages, branded safes and personal security and self-defense products. Additionally, the Company designs and produces branded apparel and accessories.
We believe that when it comes to their homes, consumers place a premium on their security and privacy. Our products are designed to offer our customers convenient, efficient and secure home and personal safes from a provider that they can trust. We are committed to offering products of enduring quality that allow customers to keep their valuable belongings protected and to express their patriotism and style, which is synonymous with the American Rebel brand.
| 29 |
Our safes and personal security products are constructed primarily of U.S.-made steel. We believe our products are designed to safely store firearms, as well as store our customers’ priceless keepsakes, family heirlooms and treasured memories and other valuables, and we aim to make our products accessible at various price points for home and office use. We believe our products are designed for safety, quality, reliability, features and performance.
To enhance the strength of our brand and drive product demand, we work with our manufacturing facilities and various suppliers to emphasize product quality and mechanical development in order to improve the performance and affordability of our products while providing support to our distribution channel and consumers. We seek to sell products that offer features and benefits of higher-end safes at mid-line price ranges.
We believe that safes are becoming a ‘must-have appliance’ in a significant portion of households. We believe our current safes provide safety, security, style and peace of mind at competitive prices.
In addition to branded safes, we offer an assortment of personal security products as well as apparel and accessories for men and women under the Company’s American Rebel brand. Our backpacks utilize what we believe is a distinctive sandwich-method concealment pocket, which we refer to as Personal Protection Pocket, to hold firearms in place securely and safely. The concealment pockets on our Freedom 2.0 Concealed Carry Jackets incorporate a silent operation opening and closing with the use of a magnetic closure.
We believe that we have the potential to continue to create a brand community presence around the core ideals and beliefs of America, in part through Andy Ross, who has written, recorded and performs a number of songs about the American spirit of independence. We believe our customers identify with the values expressed by our Chief Executive Officer through the “American Rebel” brand.
Through our growing network of dealers, we promote and sell our products in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including our website and e-commerce platforms such as Amazon.com.
American Rebel is boldly positioning itself as “America’s Patriotic Brand” in a time when national spirit and American values are being rekindled and redefined. American Rebel is an advocate for the 2nd Amendment and conveys a sense of responsibility to teach and preach good common practices of gun ownership. American Rebel products keep you concealed and safe inside and outside the home. American Rebel Safes protect your firearms and valuables from children, theft, fire and natural disasters inside the home; and American Rebel Concealed Carry Products provide quick and easy access to your firearm utilizing American Rebel’s Proprietary Protection Pocket in its backpacks and apparel outside the home. The initial company product releases embrace the “concealed carry lifestyle” with a focus on concealed carry products, apparel, personal security and defense. “There’s a growing need to know how to protect yourself, your family, your neighbors or even a room full of total strangers,” says Andy Ross. “That need is in the forethought of every product we design.”
The “concealed carry lifestyle” refers to a set of products and a set of ideas around the emotional decision to carry a gun everywhere you go. The American Rebel brand strategy is similar to the successful Harley-Davidson Motorcycle philosophy, referenced in this quote from Richard F. Teerlink, Harley’s chairman and former chief executive, “It’s not hardware; it is a lifestyle, an emotional attachment. That’s what we have to keep marketing to.” As an American icon, Harley has come to symbolize freedom, rugged individualism, excitement and a sense of “bad boy rebellion.” American Rebel – America’s Patriotic Brand has significant potential for branded products as a lifestyle brand. Its innovative Concealed Carry Product line and Safe line serve a large and growing market segment; but it is important to note we have product opportunities beyond Concealed Carry Products and Safes. One such opportunity is American Rebel Light Lager. American Rebel Light Beer is “America’s Patriotic, God-Fearing, Constitution-Loving, National Anthem-Singing, Stand Your Ground Beer.” Management believes a significant opportunity exists to enter the $110+ billion-dollar beer industry with a premium domestic beer. Current distribution agreements are in place for the states of Kansas and Tennessee and portions of Ohio and Connecticut.
| 30 |
American Rebel Safes
Keeping your guns in a location only appropriate trusted members of the household can access should be one of the top priorities for every responsible gun owner. Whenever a new firearm is purchased, the owner should look for a way to store and secure it. Storing the firearm in a gun safe will prevent it from being misused by young household members, and it will prevent it from being stolen in a burglary or damaged in a fire or natural disaster. Gun safes may seem pricy at first glance, but once the consumer is educated on their role to protect expensive firearms and other valuables such as jewelry and important documents, the price is justified.
American Rebel produces large floor safes in a variety of sizes as well as small portable keyed safes. Additional opportunities exist for us to develop Wall Safes and Handgun Boxes.
Reasons gun owners should own a gun safe:
| ● | If you are a gun owner and you have children, many states have a law in place that require you to store your gun locked in a safe, away from children. This will prevent your children from getting the gun and hurting themselves or someone else. | |
| ● | Some states have a law in place that require you to keep your gun locked away when it is not in use, even if you don’t have children in your home. California has a law that requires you to have your gun locked in a firearms safety device that is considered safe by the California Department of Justice (DOJ). When you buy a safe, you should see if it has approval from the California DOJ. | |
| ● | Many gun owners own more guns than insurance will cover. Many insurance companies only cover $3,000 worth of guns. Are your weapons worth more? If so, you should invest in a gun safe to make sure your guns are protected from fire, water, and thieves. | |
| ● | Many insurance companies may give you a discount if you own a gun safe. If you own a gun safe or you purchase one, you should see if your insurance company is one that offers a discount for this. A safe can protect your guns and possibly save you money. | |
| ● | Do people know you own guns? You might not know that many burglaries are carried out by people they know. | |
| ● | If a person you know breaks into your home, steals your gun, and murders someone, you could be charged with a crime you didn’t commit, or the victim’s family could sue you. | |
| ● | Gun safes can protect your guns in the event your home goes up in flames. When buying a safe, you should see if it will protect your firearm or any other valuables from fire damage. | |
| ● | You might be the type of person that has a gun in your home for protection. A gun locked in a safe can still offer you protection. There are quick access gun safes on the market. With a quick access gun safe, you can still retrieve your gun in a few seconds, but when it is not needed, it will be protected. |
A gun safe is the best investment a gun owner can make because the safe can protect guns from thieves, fire, water, or accidents. Bills or ballot measures to require safe storage have been discussed in Delaware, Washington, Oregon, Missouri and Virginia; and various laws are on the books in California and Massachusetts. Even a figure as staunchly pro-gun as Texas’s Republican lieutenant governor, Dan Patrick, called on gun-owning parents to lock up their weapons after the Santa Fe shooting. The gun safe industry is experiencing rapid growth and innovation. Andy Ross and the rest of the American Rebel team are committed to fulfilling the opportunity in the gun safe market and filling the identified void with American Rebel Gun Safes.
Below is a summary of the different safes we offer:
| i. | Large Safes – our current large model safe collection consists of six premium safes. All of our large safes share the same high-quality workmanship, are constructed out of 11-gauge U.S.-made steel and feature a double plate steel door, double-steel door casements and reinforced door edges. Each of these safes provide up to 75 minutes of fire protection at 1200 degrees Fahrenheit. Our safes offer a fully adjustable interior to fit our customers’ needs. Depending on the model, one side of the interior may have shelves and the other side set up to accommodate long guns. There are optional additions such as Rifle Rod Kits and Handgun Hangers to increase the storage capacity of the safe. These large safes offer greater capacity for secure storage and protection, and our safes are designed to prevent unauthorized access, including in the event of an attempted theft, natural disaster or fire. We believe that a large, highly visible safe acts as a deterrent to any prospective thief. |
| 31 |
| ii. | Personal Safes – the safes in our compact safe collection are easy to operate and carry as they fit into briefcases, desks or under vehicle seats. These personal safes meet Transportation Security Administration (“TSA”) airline firearm guidelines and fit comfortably in luggage when required by travel regulations. | |
| iii. | Vault Doors – our U.S.-made vault doors combine style with theft and fire protection for a look that fits any decor. Newly-built, higher-end homes often add vault rooms and we believe our vault doors, which we designed to facilitate secure access to such vault rooms, provide ideal solutions for the protection of valuables and shelter from either storms or intruders. Whether it’s in the context of a safe room, a shelter, or a place to consolidate valuables, our American Rebel in- and out-swinging vault doors provide maximum functionality to facilitate a secure vault room. American Rebel vault doors are constructed of 4 ½” double steel plate thickness, A36 carbon steel panels with sandwiched fire insulation, a design that provides greater rigidity, security and fire protection. Active boltworks, which is the locking mechanism that bolts the safe door closed so that it cannot be pried open and three external hinges that support the weight of the door, are some of the features of the vault door. For safety and when the door is used for a panic or safe room, a quick release lever is installed inside the door. | |
| iv. | Dispensary Safes - our HG-INV Inventory Safe, a safe tailor-made for the cannabis community, provides cannabis and horticultural plant home growers a reliable and safe solution to protect their inventory. Designed with medical marijuana or recreational cannabis dispensaries in mind and increasing governmental and insurance industry regulation to lock inventory after hours, we believe our HG-INV Inventory Safe delivers a high-level user experience. |
Upcoming Product Offerings
To further complement our diverse product offerings, we intend to introduce additional products throughout 2025.
Below is a summary of potential upcoming product offerings:
i. Biometrics Safes – we intend to introduce a line of handgun boxes with biometrics, Wi-Fi and Bluetooth technologies. These Biometric Safes have been designed, engineered and are ready for production.
ii. 2A Lockers – we have developed a unique steel lockbox with a 5-point locking mechanism to provide a secure place to lock up ammunition and other items that may not require the safety and security of a safe, but prevents unauthorized access. We believe there is a strong market for this product that is priced between $349 - $449 depending on the model.
iii. Wall Safes – wall safes can be easily hidden and provide “free” storage space since they are able to be tucked into the space between your wall and studs.
iv. Economy Safe Line – we are exploring enhancing our safe line through the introduction of entry level safes built in North America to compete with other safes imported from overseas.
Our results of operations and financial condition may be impacted positively and negatively by certain general macroeconomic and industry wide conditions
Recent Developments
Establishment of American Rebel Beer
On August 9, 2023, we entered into a Master Brewing Agreement with Associated Brewing. Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. American Rebel Light Beer launched regionally in 2024. We paid a setup fee and security deposit to Associated Brewing. We established American Rebel Beverages, LLC as a wholly-owned subsidiary specifically to hold our alcohol licenses and conduct operations for our beer business.
| 32 |
Expansion into New Business Categories
Expanding Scope of Operations Activities by Offering Servicing Dispensaries and Brand Licensing
We continually seek to target new consumer segments for our safes. As we believe that safes are becoming a must-have household appliance, we strive to establish authenticity by selling our products to additional groups, and to expand our direct-to-consumer presence through our website and our showroom currently in Lenexa, Kansas.
Further, we expect the cannabis dispensary industry to be a material growth segment for our business. Several cannabis dispensary operators have expressed interest in the opportunity to help them with their inventory locking needs. Cannabis dispensaries have various insurance requirements and local ordinances requiring them to secure their inventory when the dispensary is closed. Dispensary operators have been purchasing gun safes and independently taking out the inside themselves to allow them to store cannabis inventory. Recognizing what seems to be a growing need for cannabis dispensary operators, we have designed a safe tailor-made for the cannabis industry. American Rebel has a long list of dispensary operators, growers, and processors interested in the Company’s inventory control solutions. We believe that dispensary operators, growers, and processors are another fertile new growth market for our Vault Doors products, as many in the cannabis space have chosen to install entire vault rooms instead of individual inventory control safes—the American Rebel Vault Door has been the choice for that purpose.
Further, we believe that American Rebel has significant potential for branded products as a lifestyle brand. As the American Rebel Brand continues to grow in popularity, we anticipate generating additional revenues from licensing fees earned from third parties who wish to engage the American Rebel community. While the Company does not currently generate material revenues from licensing fees, our management team believes the American Rebel brand name may in the future have significant licensing value to third parties that seek the American Rebel name to brand their products to market to the American Rebel target demographic. For example, a tool manufacturer that wants to pursue an alternative marketing plan for a different look and feel could license the American Rebel brand name for their line of tools and market their tools under our distinct brand. This licensee would benefit from the strong American Rebel brand with their second line of American Rebel branded tools as they would continue to sell both of the lines of tools. Conversely, American Rebel could potentially benefit as a licensee of products. If American Rebel determines a third party has designed, engineered, and manufactured a product that would be a strong addition to the American Rebel catalog of products, American Rebel could license that product from the third-party and sell the licensed product under the American Rebel brand.
Results of Operations
From inception through March 31, 2025, we have generated an accumulated deficit of $70,145,456. We expect to incur additional losses during fiscal year ending December 31, 2025, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.
| 33 |
Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024
| For the Three Months Ended | ||||||||
| March 31, 2025 | March 31, 2024 | |||||||
| Revenue | 2,511,324 | 4,043,837 | ||||||
| Cost of goods sold | 2,222,270 | 3,202,514 | ||||||
| Gross margin | 289,054 | 841,323 | ||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | 738,977 | 551,913 | ||||||
| Compensation expense – officers – related party | - | 212,500 | ||||||
| Compensation expense – officers – deferred comp – related party | 164,063 | 1,134,000 | ||||||
| Rental expense, warehousing, outlet expense | 57,114 | 151,666 | ||||||
| Product development costs | 93,467 | 98,629 | ||||||
| Marketing and brand development costs | 695,491 | 265,055 | ||||||
| Administrative and other | 1,470,587 | 680,514 | ||||||
| Depreciation and amortization expense | 35,774 | 24,315 | ||||||
| Total operating expenses | 3,255,473 | 3,118,592 | ||||||
| Operating income (loss) | (2,966,419 | ) | (2,277,269 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | (723,942 | ) | (423,859 | ) | ||||
| Interest income | 264 | 512 | ||||||
| Gain/(loss) on sale of equipment | - | (662 | ) | |||||
| Other income | 18,000 | - | ||||||
| Loss on debt extinguishment | (499,794 | ) | - | |||||
| Loss on settlement of liability | (887,365 | ) | - | |||||
| Net income (loss) before income tax provision | (5,059,256 | ) | (2,701,278 | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | (5,059,256 | ) | (2,701,278 | ) | ||||
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
For the three months ended March 31, 2025, we reported Revenues of $2,511,324 compared to Revenues of $4,043,837 for the three months ended March 31, 2025. The decrease in Revenues of $1,532,513 (or (38%) period over period) for the current period compared to the three months ended March 31, 2024 is attributable to slower sales for 2025 and current market conditions. For the three months ended March 31, 2025, we reported Cost of Goods Sold of $2,222,270 compared to Cost of Goods Sold of $3,202,514 for the three months ended March 31, 2024. The decrease in Cost of Goods Sold of $980,242 (or (31%) period over period) for the current period is primarily attributable to the decrease in revenue. For the three months ended March 31, 2025, we reported Gross Margin of $289,054, compared to Gross Margin of $841,323 for the three months ended March 31, 2024. The decrease in Gross Margin of $552,269 (or (66%) period over period) for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentage for the three months ended March 31, 2025 was 12% compared to 21% for the three months ended March 31, 2024. In general, second amendment businesses have experienced a slowdown in sales volume during the past twelve months and this is in line with what we have experienced in our business.
| 34 |
Operating Expenses
Total operating expenses for the three months ended March 31, 2025 were $3,255,473 compared to $3,118,592 for the three months ended March 31, 2024 as further described below. Overall, we experienced a $136,881 increase in operating expenses period over period. This increase is primarily due to an increase in administrative and other expenses due to increased accounting and legal fees and increased marketing and brand development costs.
For the three months ended March 31, 2025, we incurred consulting/payroll and other costs (along with officer compensation) of $903,040 compared to consulting/payroll and other costs (along with officer compensation) of $1,898,413 for the three months ended March 31, 2024. The decrease in consulting/payroll and other costs of $(995,373) was due to the adjustment in the deferred compensation expense due to common stock equivalents on our Series A preferred stock as identified and corrected during the period ended September 30, 2024 upon finalization of the 2023 re-audit. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.
For the three months ended March 31, 2025, we incurred rental expense, warehousing, outlet expense of $57,114, compared to rental expense, warehousing, outlet expense of $151,666 for the three months ended March 31, 2024. The decrease in rental expense, warehousing, outlet expense of $94,552 is due to cost cutting on leases and properties that the Company rents to conduct the Champion business acquisition as well as other cost cutting measures or efficiencies put in place.
For the three months ended March 31, 2025, we incurred product development expenses of $93,467 compared to product development expenses of $98,629 for the three months ended March 31, 2024. The decrease in product development expenses of $5,162 is due to the timing of development expenses in connection with the private label beer. We expect to maintain some level of expense on a go-forward basis with new products and efforts being expended for future sales growth and product needs.
For the three months ended March 31, 2025, we incurred marketing and brand development expenses of $695,491 compared to marketing and brand development expenses of $265,055 for the three months ended March 31, 2024. The increase in marketing and brand development expenses of $430,436 (or 162% period over period) relates primarily to market awareness efforts for American Rebel Beer as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.
For the three months ended March 31, 2025, we incurred administrative and other expense of $1,470,587 compared to administrative and other expense of $680,514 for the three months ended March 31, 2025. The increase in administrative and other expense of $790,073 (or 116% period over period) relates directly to increased professional fees including accounting and legal fees.
For the three months ended March 31, 2025, we incurred depreciation and amortization expense of $35,774 compared to depreciation and amortization expense of $24,315 for the three months ended March 31, 2025. The increase primarily relates to amortization related to intangible assets.
Other income and expenses
For the three months ended March 31, 2025, we incurred interest expense of $723,942 compared to interest expense of $423,859 for the three months ended March 31, 2024. The increase in interest expense of $300,083 is due to a significant number of notes we have entered into and subsequently converted or modified.
For the three months ended March 31, 2025, we incurred a loss on debt extinguishment of $499,794 and loss on settlement of liability of $887,365. This is due to the conversion of debt into equity, which was not present during the three months ended March 31, 2024.
Net Loss
Net loss for the three months ended March 31, 2025 amounted to $5,059,256, resulting in a loss per share of $(23.45), compared to a net loss of $2,701,278 for the three months ended March 31, 2024, resulting in a loss per share of $(27.47) (adjusted for various reverse stock splits). The increase in the net loss for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to a myriad of expenses that we incurred in the quarter, such as professional and legal fees, increased costs in marketing, and the softening of gross margin on sales.
| 35 |
Liquidity and Capital Resources
We are a company still in the growth and acquisition stage and our revenue from operations does not cover our operating expenses. Working capital decreased by $507,743 period over period where we had a working capital deficit of $(8,940,228) at December 31, 2024 compared to a working capital deficit balance of $(9,447,971) at March 31, 2025. This working capital decrease was due to increased expenses launching new products and slowing sales in its legacy business. We have funded our operations primarily through the issuance of capital stock, convertible debt, and other securities and will continue so into the near future and beyond.
During the three months ended March 31, 2025, we reduced anticipated cash outflows of $1.8 million through the issuance of common stock.
As we continue with the launch of American Rebel Beer and continue to maintain the American Rebel branded safes and concealed carry product line, as well our Champion line of products, we expect to continue to devote significant resources in the areas of capital expenditures, marketing, sales, and operational expenditures. We may from time to time incur significant capital needs for these expenditures and for our business. We cannot fully predict what those needs will be and the impact to our business.
We expect to require additional funds to further develop our business and acquisition plan, including the launch of additional products in addition to aggressively marketing our safes and concealed carry product line. Since it is impossible to predict with certainty the timing and amount of funds required to establish profitability, we anticipate that we will raise additional funds through equity or debt offerings or otherwise in order to meet our expected future liquidity requirements. Any such financing that we undertake will likely be dilutive to existing stockholders.
In addition, we expect to need additional funds to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines.
Promissory Notes – Working Capital
Over the past twelve months, we entered into various working capital notes with a total balance of $4,603,859 as of March 31, 2025. The promissory notes have various terms – refer to Note 8 of our consolidated financial statements for the specific terms of each promissory note.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. Management has determined that the Company has no critical accounting estimates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
| 36 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the CEO and Interim Principal Accounting Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e). Based on that evaluation, the CEO and Interim Principal Accounting Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were not effective.
Management has concluded that there is a material weakness in internal control over financial reporting due to deficiencies in the design and operation of internal controls. The material weakness resulted in material adjustments to the financial statements included in the Original Form 10-K for the years ended December 31, 2023 and 2022, which were driven by the following: (1) inadequate management reviews, and (2) insufficient technical accounting competencies within the organization.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. As a result of the material weakness, our CEO and Interim Principal Accounting Officer have concluded that, as of March 31, 2025, the end of the period covered by this report, our disclosure controls and procedures were not effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred during the period ended March 31, 2025 that have materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
| 37 |
Part II: Other Information
Item 1 - Legal Proceedings
On July 23, 2024, the Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (“Liberty”), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products. As of the date of this Report, the complaint has not been served on the Company or Champion Safe. In the complaint, Liberty alleges trademark infringement as a result of the purported use of the term “Freedom” in the sale of safes, federal false designation of origin and unfair competition, violation of Utah deceptive trade practices, Utah unfair competition, and damages to Liberty. Management believes that this lawsuit is without merit; however has initiated settlement discussions with Liberty and anticipates an amicable settlement to be forthcoming. At this time, Management does not believe a settlement with Liberty will have a material effect on its business or financial condition.
As reported by the Company in the Form 8-K dated August 7, 2024, during February 2023, the Company entered into a $2 million master credit agreement (credit facility) with Bank of America. The credit facility is secured by all the assets of the Company’s Champion subsidiaries and guaranteed by the Company, the Champion subsidiaries and the Company’s CEO. The Line of Credit expired on February 28, 2024, but the Company and Champion Safe Company have been actively working with the bank to extend or modify the credit facility. Despite being current on all payments under the credit facility and actively working with the bank for a long-term solution to repay the credit facility, on July 25, 2024, Champion Safe Company received a notice of default and demand for payment from the bank. On March 21, 2025, Bank of America filed a complaint in the Fourth Judicial District Court in and for Utah County, State of Utah (Case No. 250401345) against the Company and its subsidiaries (Champion Safe Company, Inc., American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC) alleging four causes of action related to the credit facility: (i) Breach of the Loan Documents – Champion Safe; (ii) Breach of the Loan Documents – Guarantors (the Company, American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC); (iii) Breach of the Implied Covenant of Good Faith and Fair Dealing – all parties; and (iv) Unjust Enrichment – Champion Safe. The Company plans to defend the complaint, while continuing to work with Bank of America on a settlement.
From time to time, however, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
| 38 |
Item 1a – Risk Factors
Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1A of our Annual Report on Form 10-K, as amended, for the year ended December 31, 2024. These risks are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.
Item 2 - Unregistered Sales of Equity Securities
On January 10, 2025, the Company entered into two six-month promissory notes with accredited investors in the principal amounts of $617,100 and $123,420. An original issue discount of $117,100 and $23,420 was applied on the issuance date and was paid through the issuance of 15,613 and 3,123 shares of the Company’s Series D Convertible Preferred Stock, resulting in net loan proceeds to the Company of $500,000 and $100,000.
On January 10, 2025, the Company authorized the issuance of 2,200 shares of common stock to a consultant pursuant to the terms of an amendment to a current consulting agreement.
On January 13, 2025, SCC requested the issuance of 2,800 shares of common stock to SCC, representing a payment of approximately $99,750.
On January 14, 2025, the Company authorized the issuance of 43,335 shares of Series D Convertible Preferred Stock to seven service providers to the Company and its subsidiaries.
On January 15, 2025, SCC requested the issuance of 4,140 shares of common stock to SCC, representing a payment of approximately $147,487.50.
On January 24, 2025, SCC requested the issuance of 4,400 shares of common stock to SCC, representing a payment of approximately $133,200.
On February 3, 2025, SCC requested the issuance of 4,600 shares of common stock to SCC, representing a payment of approximately $99,187.50.
On February 10, 2025, the Company authorized the issuance of 17,667 shares of common stock to an accredited investor upon the conversion of 88,334 shares of Series D Convertible Preferred Stock.
On February 10, 2025, the Company authorized the issuance of 2,480 shares of common stock, valued at $75,000, to a lender for a fee related to a financing agreement.
On February 10, 2025, SCC requested the issuance of 4,800 shares of common stock to SCC, representing a payment of approximately $92,772.
| 39 |
On February 10, 2025, 1800 Diagonal Lending converted a portion of their debt into 30,303 shares of common stock.
On February 11, 2025, 1800 Diagonal Lending converted a portion of their debt into 32,627 shares of common stock.
On February 12, 2025, 1800 Diagonal Lending converted a portion of their debt into 42,424 shares of common stock.
On February 14, 2025, 1800 Diagonal Lending converted a portion of their debt into 45,752 shares of common stock.
On February 18, 2025, SCC requested the issuance of 5,000 shares of common stock to SCC, representing a payment of approximately $92,081.25.
On February 18, 2025, 1800 Diagonal Lending converted a portion of their debt into 42,917 shares of common stock.
On February 20, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a first closing notice for the exchange of $55,423.57 of assigned note portion for 3,145 shares of the Company’s common stock. These shares were subsequently cancelled.
On February 21, 2025, 1800 Diagonal Lending converted a portion of their debt into 52,497 shares of common stock.
On February 24, 2025, SCC requested the issuance of 3,200 shares of common stock to SCC, representing a payment of approximately $40,068.00.
On February 25, 2025, SCC requested the issuance of 5,700 shares of common stock to SCC, representing a payment of approximately $65,193.75.
On February 25, 2025, 1800 Diagonal Lending converted a portion of their debt into 84,507 shares of common stock.
On February 26, 2025, 1800 Diagonal Lending converted a portion of their debt into 56,831 shares of common stock.
On February 27, 2025, SCC requested the issuance of 6,000 shares of common stock to SCC, representing a payment of approximately $63,855.00.
On February 27, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a second closing notice for the exchange of $55,000 of assigned note portion for 5,168 shares of the Company’s common stock.
On March 4, 2025, SCC requested the issuance of 6,800 shares of common stock to SCC, representing a payment of approximately $63,750.00.
On March 4, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a third closing notice for the exchange of $52,712.25 of assigned note portion for 5,623 shares of the Company’s common stock.
On March 5, 2025, the Company authorized the issuance of 8,000 shares of common stock to an accredited investor upon the conversion of $64,950 due under a promissory note dated September 4, 2024.
On March 5, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fourth closing notice for the exchange of $55,000 of assigned note portion for 8,334 shares of the Company’s common stock.
On March 6, 2025, SCC requested the issuance of 3,200 shares of common stock to SCC, representing a payment of approximately $47,655.
On March 7, 2025, SCC requested the issuance of 7,400 shares of common stock to SCC, representing a payment of approximately $48,978.75.
On March 10, 2025, SCC requested the issuance of 7,600 shares of common stock to SCC, representing a payment of approximately $43,335.20.
On March 10, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fifth closing notice for the exchange of $50,000 of assigned note portion for 8,723 shares of the Company’s common stock.
On March 12, 2025, SCC requested the issuance of 11,160 shares of common stock to SCC, representing a payment of approximately $63,006.57.
On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a sixth closing notice for the exchange of $50,000 of assigned note portion for 8,723 shares of the Company’s common stock.
| 40 |
On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a seventh closing notice for the exchange of $50,000 of assigned note portion for 8,723 shares of the Company’s common stock.
On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company an eighth closing notice for the exchange of $50,000 of assigned note portion for 8,723 shares of the Company’s common stock.
On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a nineth closing notice for the exchange of $65,000 of assigned note portion for 11,339 shares of the Company’s common stock.
On March 13, 2025, SCC requested the issuance of 11,600 shares of common stock to SCC, representing a payment of approximately $47,818.10.
On March 13, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a tenth closing notice for the exchange of $50,000 of assigned note portion for 12,289 shares of the Company’s common stock.
On March 14, 2025, SCC requested the issuance of 12,200 shares of common stock to SCC, representing a payment of approximately $46,558.25.
On March 17, 2025, SCC requested the issuance of 12,800 shares of common stock to SCC, representing a payment of approximately $48,457.60.
On March 17, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company an eleventh closing notice for the exchange of $50,000 of assigned note portion for 12,289 shares of the Company’s common stock.
On March 18, 2025, SCC requested the issuance of 13,200 shares of common stock to SCC, representing a payment of approximately $49,971.90.
On March 18, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twelfth closing notice for the exchange of $50,000 of assigned note portion for 13,202 shares of the Company’s common stock.
On March 19, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a thirteenth closing notice for the exchange of $50,000 of assigned note portion for 13,202 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a fourteenth closing notice for the exchange of $50,000 of assigned note portion for 15,528 shares of the Company’s common stock.
On March 19, 2025, SCC requested the issuance of 13,600 shares of common stock to SCC, representing a payment of approximately $51,486.20.
On March 20, 2025, SCC requested the issuance of 14,000 shares of common stock to SCC, representing a payment of approximately $42,605.50.
On March 21, 2025, SCC requested the issuance of 21,120 shares of common stock to SCC, representing a payment of approximately $59,400.
On March 24, 2025, SCC requested the issuance of 21,680 shares of common stock to SCC, representing a payment of approximately $45,219.06.
On March 24, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fifteenth closing notice for the exchange of $35,000 of assigned note portion for 16,868 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a sixteenth closing notice for the exchange of $35,000 of assigned note portion for 16,868 shares of the Company’s common stock.
| 41 |
On March 25, 2025, SCC requested the issuance of 23,200 shares of common stock to SCC, representing a payment of approximately $45,240.
On March 26, 2025, SCC requested the issuance of 24,400 shares of common stock to SCC, representing a payment of approximately $45,750.
On March 26, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a seventeenth closing notice for the exchange of $35,000 of assigned note portion for 18,667 shares of the Company’s common stock. On the same day, the Purchaser sent the Company an eighteenth closing notice for the exchange of $35,000 of assigned note portion for 18,667 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a nineteenth closing notice for the exchange of $35,000 of assigned note portion for 18,667 shares of the Company’s common stock.
On March 27, 2025, SCC requested the issuance of 29,920 shares of common stock to SCC, representing a payment of approximately $48,433.80.
On March 28, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twentieth closing notice for the exchange of $35,000 of assigned note portion for 23,333 shares of the Company’s common stock.
On March 31, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twenty-first closing notice for the exchange of $25,000 of assigned note portion for 29,070 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a twenty-second closing notice for the exchange of $20,000 of assigned note portion for 23,257 shares of the Company’s common stock.
Subsequent Issuances after Quarter-End
On April 2, 2025, SCC requested the issuance of 34,000 shares of Common Stock to SCC, representing a payment of approximately $28,050.
On April 2, 2025, SCC requested the issuance of 35,000 shares of Common Stock to SCC, representing a payment of approximately $28,875.
On April 2, 2025, the Company entered into a second Settlement Agreement and Stipulation (the “ Second Settlement Agreement”) with Silverback Capital Corporation (“SCC”) to settle outstanding claims owed to SCC. Pursuant to the Settlement Agreement, SCC has agreed to purchase certain outstanding payables between the Company and designated vendors of the Company totaling $4,690,773.09 (the “Payables”) and will exchange such Payables for a settlement amount payable in shares of common stock of the Company (the “Settlement Shares”). The Settlement Shares shall be priced at 75% of the average of the three lowest traded prices during the five trading day period prior to a share request, which is subject to a floor price of $2.92. The Company agreed to issue SCC 2,800 shares of Common Stock as a settlement fee.
On April 3, 2025, SCC requested the issuance of 36,000 shares of Common Stock to SCC, representing a payment of approximately $29,700.
On April 4, 2025, SCC requested the issuance of 31,956 shares of Common Stock to SCC, representing a payment of approximately $26,363.70.
On April 4, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twenty-third closing notice for the exchange of $72,500 of assigned note portion for 87,879 shares of the Company’s common stock. The shares under this request were never issued and on April 9, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a revised twenty-third closing notice for the exchange of $99,000 of assigned note portion for 100,763 shares of the Company’s common stock.
| 42 |
On April 4, 2025, the Company entered into a conversion agreement with a current noteholder, whereby the noteholder agreed to convert all $617,100 of the principal amount owed under its OID Note dated January 10, 2025 into 82,280 shares of Series D Convertible Preferred Stock.
On April 4, 2025, the Company entered into definitive agreements for the purchase and sale of an aggregate of 724,640 shares of common stock (or pre-funded warrant in lieu thereof), series A warrants to purchase up to 724,640 shares of common stock and short-term series B warrants to purchase up to 2,173,920 shares of common stock at a purchase price of $3.45 per share of common stock (or per pre-funded warrant in lieu thereof) and accompanying warrants in a private placement priced at-the-market under Nasdaq rules. The series A warrants and the short-term series B warrants will have an exercise price of $2.95 per share and will be exercisable immediately upon issuance. The series A warrants will expire five years from the date of issuance and the short-term series B warrants will expire eighteen months from the date issuance. The private placement closed on April 8, 2025.
On April 7 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twenty-third closing notice for the exchange of $60,000 of assigned note portion for 72,727 shares of the Company’s common stock. The shares under this request were never issued and on April 9, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a revised twenty-fourth closing notice for the exchange of $50,000 of assigned note portion for 50,891 shares of the Company’s common stock.
On April 8, 2025, Coventry Enterprises converted a portion of their debt into 20,000 shares of common stock.
On April 9, 2025, Coventry Enterprises converted a portion of their debt into 27,000 shares of common stock.
On April 9, 2025, Coventry Enterprises converted a portion of their debt into 49,083 shares of common stock.
On April 9, 2025, 1800 Diagonal Lending converted a portion of their debt into 49,083 shares of common stock.
On April 10, 2025, Coventry Enterprises converted a portion of their debt into 61,000 shares of common stock.
On April 10, 2025, Coventry Enterprises converted a portion of their debt into 20,000 shares of common stock.
On April 10, 2025, Coventry Enterprises converted a portion of their debt into 25,000 shares of common stock.
On April 10, 2025, the Company authorized the issuance of 50,050 shares of common stock to an accredited investor upon the conversion of 10,010 shares of Series D Convertible Preferred Stock.
On April 10, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a twenty-fifth closing notice for the exchange of $66,022.56 of assigned note portion for 31,552 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a twenty-sixth closing notice for the exchange of $26,191.62 of assigned note portion for 12,514 shares of the Company’s common stock. This last closing notice repaid all the note balances currently due.
On April 11, 2025, Coventry Enterprises converted a portion of their debt into 96,000 shares of common stock.
On April 13, 2025, the Company received a conversion notice from a current noteholder, whereby the noteholder converted all $107,500 of the amount owed under its OID Note dated January 10, 2025 into 14,333 shares of Series D Convertible Preferred Stock.
On April 14, 2025, the Company authorized the issuance of 82,437 shares of common stock, valued at $5.58 per share, to a financier pursuant to the terms of a settlement and conversion agreement.
On April 14, 2025, the Company authorized the issuance of 72,581 shares of common stock, valued at $5.58 per share, to a lender pursuant to the terms of a settlement and conversion agreement.
On April 14, 2025, Coventry Enterprises converted a portion of their debt into 95,000 shares of common stock.
On April 15, 2025, SCC requested the issuance of 25,200 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $105,651, plus 2,800 shares of Common Stock as a settlement fee (a total of 28,000 shares of Common Stock).
On April 16, 2025, SCC requested the issuance of 93,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $406,014.75.
On April 23, 2025, SCC requested the issuance of 95,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $277,400.
| 43 |
On April 24, 2025, SCC requested the issuance of 200,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $584,000.
On April 24, 2025, SCC requested the second issuance of 200,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a second payment of approximately $584,000.
On April 25, 2025, SCC requested the issuance of 220,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $642,400.
On April 28, 2025, SCC requested the issuance of 240,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $700,800.
On May 6, 2025, SCC requested the issuance of 245,000 shares of Common Stock to SCC pursuant to the Second Settlement Agreement, representing a payment of approximately $715,400.
On May 6, 2025, 1800 Diagonal Lending converted a portion of their debt into 38,666 shares of common stock.
All of the above-described issuances (if any) were exempt from registration pursuant to Section 4(a)(2), Section 3(a)(9), Section 3(a)(10) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities, and may not be offered or sold absent registration or pursuant to an exemption therefrom.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended March 31, 2025.
Item 3 – Defaults upon Senior Securities
Bank of America
As reported by the Company in the Form 8-K dated August 7, 2024, during February 2023, the Company entered into a $2 million master credit agreement (credit facility) with Bank of America. The credit facility is secured by all the assets of the Company’s Champion subsidiaries and guaranteed by the Company, the Champion subsidiaries and the Company’s CEO. The Line of Credit expired on February 28, 2024, but the Company and Champion Safe Company have been actively working with the bank to extend or modify the credit facility. Despite being current on all payments under the credit facility and actively working with the bank for a long-term solution to repay the credit facility, on July 25, 2024, Champion Safe Company received a notice of default and demand for payment from the bank. On March 21, 2025, Bank of America filed a complaint in the Fourth Judicial District Court in and for Utah County, State of Utah (Case No. 250401345) against the Company and its subsidiaries (Champion Safe Company, Inc., American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC) alleging four causes of action related to the credit facility: (i) Breach of the Loan Documents – Champion Safe; (ii) Breach of the Loan Documents – Guarantors (the Company, American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC); (iii) Breach of the Implied Covenant of Good Faith and Fair Dealing – all parties; and (iv) Unjust Enrichment – Champion Safe. The Company plans to defend the complaint, while continuing to work with Bank of America on a settlement.
| 44 |
Altbanq
During March of 2023, the Company entered into a Business Loan and Security Agreement with Altbanq Lending LLC. The loan is secured by a second lien on all the assets of the Company and its Champion subsidiaries and guaranteed by the Company, the Champion subsidiaries and the Company’s CEO.
On November 11, 2024, the Company entered into a Purchase and Exchange Agreement among an investor (the “Purchaser”) and Altbanq Lending LLC (the “Seller”), pursuant to which the Purchaser agreed to purchase from the Seller a portion ($150,469.11) of a promissory note dated March 27, 2024 in the original principal amount of $1,330,000 (the “Note”), with a current balance payable of $1,229,350 (the “Note Balance”). Contemporaneously with assignment of the assigned note portion to the Purchaser, the Company exchanged the $150,469.11 of assigned note portion for 78,615 shares of the Company’s common stock as a 3(a)(9) exchange.
In December of 2024, the Purchaser cancelled the exchange and the Seller returned the $150,469.11 to the Purchaser. The 78,615 shares of common stock were issued and subsequently cancelled. These shares were issued, but were never delivered to Purchaser. On February 19, 2025, the Purchaser, the Seller and the Company entered into an amendment to the Purchase and Exchange Agreement (the “Amendment”), which extended the time for the Purchaser to purchase additional portions of the Note from the Seller. As of the date of this Quarterly Report on Form 10-Q, the Purchaser has converted the entire note balance; however, Altbanq has claimed interest is due on the Note Balance, which the Company disputes. The Company is currently working with Altbanq and the Purchaser to reach an agreement regarding this dispute.
Coventry
On September 4, 2024, the Company entered into a Securities Purchase Agreement with Coventry Enterprises, LLC, an accredited investor (“Coventry”), pursuant to which Coventry made a loan to the Company, evidenced by a promissory note in the principal amount of $300,000 (the “Note”). The Note required eight $37,333.33 monthly payments, with the first payment due on September 30, 2024 with seven (7) subsequent payments due on the last day of each month thereafter. The Company was put on notice from Coventry that it is in default of the Note, for failure to make the full payment due as of September 30, 2024. As of the date of this Quarterly Report on Form 10-Q, Coventry has converted the entire Note balance into shares of the Company’s common stock.
| 45 |
Other Debts
The Company is in the growth and acquisition stage and, accordingly, has not yet reached profitability from its operations. Since inception, the Company has been engaged in financing activities and executing its plan of operations and incurring costs and expenses related to product development, branding, inventory buildup and product launch. As a result, the Company has continued to incur significant net losses from operations and cash flow difficulties. The Company’s accumulated deficit was ($70,145,456) as of March 31, 2025 and ($65,086,200) as of December 31, 2024. The Company has experienced cash flow restraints and has missed payments due under several financing agreements. To date, the majority of lenders have been working with the Company towards amenable solutions to remedy any issues related to such agreements.
The ability of the Company to continue as a going concern is dependent upon its ability to raise capital from the sale of its equity and, ultimately, the achievement of significant operating revenues and profitability. The Company had previously had an effective Reg. A+ offering seeking to raise approximately $20.0 million; however, due to the termination of its prior PCAOB accountants and the requirement to re-audit its financial statements for the past two years for inclusion in the Reg. A+ offering documents the Company is unable to access any capital under the offering and the offering expired. The Company anticipates filing a new Reg. A+ offering in 2025.
Management believes that sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock. However, no assurance can be given that the Company will obtain this additional working capital, or if obtained, that such funding will not cause substantial dilution to its existing stockholders. Most of the Company’s current debt instruments are charging high interest rates. These interest payments and/or premium repayments and prepayments may make it difficult for it to enter into new debt agreements. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay some of its business objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
Item 4 – Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
| 46 |
Item 6 – Exhibits
| 47 |
| 48 |
| 49 |
# Filed herewith.
‡ Furnished herewith.
† Indicates management contract or compensatory plan or arrangement.
** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
| 50 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 15, 2025
| AMERICAN REBEL HOLDINGS, INC. | ||||
| (Registrant) | ||||
| By: | /s/ Charles A. Ross, Jr. | By: | /s/ Doug E. Grau | |
| Charles A. Ross, Jr., CEO | Doug E. Grau | |||
| (Principal Executive Officer) | President (Interim Principal Accounting Officer) | |||
| 51 |