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 6, 2024, was shares, which includes 67,723 shares of common stock authorized but unissued as of this date.
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, 2024 | December 31, 2023 | |||||||
| (audited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expense | ||||||||
| Inventory | ||||||||
| Inventory deposits | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Lease deposits and other | ||||||||
| Right-of-use lease assets | ||||||||
| Goodwill | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and other payables | $ | $ | ||||||
| Accrued expenses | ||||||||
| Loan – Officer – related party | ||||||||
| Loans – Working capital | ||||||||
| Line of credit | ||||||||
| Right-of-use lease liabilities, current | ||||||||
| Total Current Liabilities | ||||||||
| Right-of-use lease liabilities, long-term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $ par value; shares authorized; , and issued and outstanding, respectively at March 31, 2024 and December 31, 2023 | ||||||||
| Series A Preferred Shares | ||||||||
| Series B Preferred Shares | ||||||||
| Common Stock, $ par value; shares authorized; and issued and outstanding, respectively at March 31, 2024 and December 31, 2023 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See Notes to Financial Statements.
| 3 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | |||||||
| 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 | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Interest income | ||||||||
| Gain/(loss) on sale of equipment | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| Net income (loss) before income tax provision | ( | ) | ( | ) | ||||
| Provision for income tax | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per share | $ | ) | $ | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||
See Notes to Financial Statements.
| 4 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)
Common Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | |||||||||||||||||||
| Balance – December 31, 2021 (audited) | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Net loss for the three months ending March 31, 2023 | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance – March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance – December 31, 2023 (audited) | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Vested shares reserved for through deferred compensation plan – one (1) related party | ( | ) | ||||||||||||||||||||||
| Vested shares reserved for through deferred compensation plan – two (2) related parties | ( | ) | ||||||||||||||||||||||
| Compensation component of vested and non-vested common stock equivalents attributable to Series A preferred stock – three (3) related parties | - | |||||||||||||||||||||||
| Net loss for the three months ending March 31, 2024 | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance – March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See Notes to Financial Statements.
| 5 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| For the three months ended March 31, 2024 | For the three months ended March 31, 2023 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Depreciation and amortization | ||||||||
| Loss on sale of equipment | ||||||||
| Recognition of deferred compensation attributable to convertibility of Series A preferred stock issued to three (3) related parties | ||||||||
| Adjustments to reconcile net loss to cash (used in) operating activities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ( | ) | ||||||
| Inventory, deposits and other | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Disposition/(purchase) of fixed assets, net | ||||||||
| Net Cash Provided by Investing Activities | ||||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from line of credit | ||||||||
| Proceeds from line of credit, net | ||||||||
| Proceeds from loans – officer - related party, net | ||||||||
| Proceeds from working capital loans | ||||||||
| Principal payments on working capital loans | ( | ) | ( | ) | ||||
| Principal payment on loans – nonrelated parties | ( | ) | ||||||
| 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 | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Notes payable principal increase from assessed interest obligations | $ | $ | ||||||
See Notes to Financial Statements.
| 6 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(unaudited)
NOTE 1 – 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”). We established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold our licenses with respect to the beer business. American Rebel Beer plans to launch regionally in 2024.
To varying degrees, the development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our 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 our 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 us (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, 2023, and notes thereto contained, filed on April 12, 2024.
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.
| 7 |
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
Inventory consists of backpacks, jackets, safes, other storage products and accessories manufactured to our design and held for resale and are 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. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
Fixed Assets and Depreciation
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 to
Revenue Recognition
In accordance with Financial Accounting Standards Board’s (“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. Accounts receivable totaled $
The carrying amount of accounts receivables is reduced by a valuation allowance for 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 not material as of March 31, 2024, and December 31, 2023.
Advertising Costs
Advertising
costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $
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, 2024, and December 31, 2023, respectively. The respective carrying value of certain on-balance-sheet 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.
Fair value is defined as the exchange value that would be received on the measurement date to sell an asset or to value the amount paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants. The three levels of the fair value hierarchy are as follows:
Level 1: Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Level 1 inputs provide the most reliable measure of fair value as of the measurement date.
| 8 |
Level 2: Inputs are based on significant observable inputs, including unadjusted quoted market prices for similar assets and liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs are significant unobservable inputs for the asset or liability.
The level of the fair value hierarchy within which the fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than 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. 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. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended March 31, 2024, and March 31, 2023, net loss per share was $ and $, respectively.
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. Out-of-the-money stock options totaled none as of March 31, 2024 and December 31, 2023, respectively. All other dilutive securities are listed below.
| March 31, 2024 | March 31, 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| Shares used in computation of basic earnings per share for the periods ended | ||||||||
| Total dilutive effect of outstanding stock awards or common stock equivalents | ||||||||
| Shares used in computation of fully diluted earnings per share for the periods ended March 31, 2024 and March 31, 2023, respectively | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
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 anti-dilutive.
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.
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.
| 9 |
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, 2024, and December 31, 2023, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax
positions with
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month periods ended March 31, 2024, and 2023, respectively, income tax benefit has been recorded due to the recognition of a full valuation allowance.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Warranties
The
Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with
respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its
recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense
accounts in the accompanying condensed consolidated balance sheets. We estimate that the warranty liability is nominal or negligible
based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of March 31, 2024
and December 31, 2023 was less than $
Right of Use Assets and Lease Liabilities
ASC 842, Leases requires lessees to recognize almost 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.
Recent Pronouncements
The Company evaluated recent accounting pronouncements through March 31, 2024, and believes that none have a material effect on the Company’s financial statements.
| 10 |
Concentration Risks
Prior
to the closing of the Champion Entities in 2022, the Company purchased a substantial portion (over
NOTE 2 – 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, 2024, and 2023 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. The Company is currently conducting a Reg. A+ offering
on Form 1-A that became effective on March 13, 2024. Total amount to be sought under this Reg. A+ offering is approximately $
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. 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.
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 3 – INVENTORY AND DEPOSITS
Inventory and deposits include the following:
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Inventory – Finished Goods and Work in Progress | $ | $ | ||||||
| Inventory – Raw Materials | ||||||||
| Total Inventory | $ | $ | ||||||
The Company accounts for excess or 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.
Included
in inventory – finished goods are approximately $
When
inventory is physically disposed of, we account for the write-offs by making a debit to the reserve and a credit to inventory for the
standard cost of the inventory item. Our 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
| 11 |
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Plant, property and equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
For
the three-month periods ended March 31, 2024 and 2023 we recognized $
NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
Charles
A. Ross, Jr. serves as the Company’s Chief Executive Officer. Compensation for Mr. Ross was $
Both
Messrs. Ross and Grau serve as the Company’s Chief Executive Officer and President, respectively. Compensation for both,
Messrs. Ross and Grau, includes a base salary and a bonus based upon certain performance measures approved by the board of
directors. Three of our officers lent the Company approximately $
Corey
Lambrecht serves as the Company’s Chief Operating Officer. Mr. Lambrecht and the Company entered into an employment agreement
on November 20, 2023. Mr. Lambrecht’s employment agreement provides for an initial annual base salary of $
The Company in connection with its employment agreements (both recently entered (for Mr. Lambrecht) into as well as amended (for Mr. Ross and Mr. Grau)) with Messrs. Ross, Grau and Lambrecht reserved for issuance shares of its common stock that are convertible under the Series A preferred stock conversion terms.
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. The Company on November 20, 2023 for Mr. Lambrecht recognized $
Per
Mr. Ross’s amended employment agreement with an effective date of November 20, 2023, the already issued or existing share-award
grant is to 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. The Company on October
31, 2023 for Mr. Ross recognized $
| 12 |
Per
Mr. Grau’s amended employment agreement with an effective date of November 20, 2023, the already issued or existing share-award
grant is to 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. The Company on October
31, 2023 for Mr. Grau recognized $
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.
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.
NOTE 6 – LINE OF CREDIT – FINANCIAL INSTITUTION
During
February 2023, the Company entered into a $
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Line of credit from a financial institution. | $ | $ | ||||||
| Total recorded as a current liability | $ | $ | ||||||
Current
and long-term portion. As of March 31, 2024 and December 31, 2023 the total balance due of $
| 13 |
Initially
the Company drew down on the Line of Credit in the amount of $
NOTE 7 – NOTES PAYABLE – WORKING CAPITAL
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Working capital loans with an irrevocable trust established in the state of Georgia, managed and owned by the same entity as the limited liability company that previously held the $ | ||||||||
Working capital loan agreement with a limited liability company domiciled in the state of Virginia. The working capital
loan requires payments of $ | ||||||||
| Working capital loan agreement structured as a Revenue Interest Purchase Agreement (“revenue
participation interest”) with a corporate entity domiciled in the state of California. The working capital loan provided for a
purchase of an ownership interest in the revenues of our Champion subsidiary. The revenue participation interest requires payments
of $ | ||||||||
| Working capital loan agreement structured as a Revenue Interest Purchase Agreement (“revenue participation
interest”) with an individual or purported limited liability company domiciled in the state of California. The working capital loan
provided for a purchase of an ownership interest in the revenues of our Champion subsidiary. The revenue participation interest requires
payments of $ | ||||||||
| Working capital loan agreement with a limited liability company domiciled in the state of New York. The working capital
loan is secured by all the assets of the Company that is not secured by the first priority interest of the major financial institution
line of credit facility as well as a personal guaranty by our Chief Executive Officer, Mr. Charles A Ross. The working capital loan requires
payments of $ | ||||||||
| Working capital loan agreement with a limited liability company domiciled in the state of New York. The working capital loan is secured by all the assets of the Company that is not secured by the first priority interest of the major financial institution line of credit facility as well as a personal guaranty by our Chief Executive Officer, Mr. Charles A Ross. The working capital loan requires payments of $ | ||||||||
| Working capital loan agreement with a limited liability company domiciled in the state of New York. The working capital loan is secured by all the assets of the Company that is not secured by the first priority interest of the major financial institution line of credit facility as well as a personal guaranty by our Chief Executive Officer, Mr. Charles A Ross. The working capital loan requires payments of $ | ||||||||
| $ | $ | |||||||
| Total recorded as a current liability | $ | $ | ||||||
| 14 |
On
April 14, 2023, the Company entered into a $
On
July 1, 2023, the Company entered into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited
lender. Under the Assumption Agreement the Company agreed to pay $
On
July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023, and
the accredited lender of the new working capital loans paid the holder of the old working capital loans $
On
December 19, 2023, the Company entered into a $
On
December 29, 2023, the Company entered into a $
| 15 |
On
March 21, 2024, the Company entered into a securities purchase agreement with an accredited investor, pursuant
to which the lender made a loan to the Company, evidenced by a promissory note in the principal amount of $
On
March 22, 2024, the Company entered into another Revenue Interest Purchase Agreement (the “Revenue Interest Loan #2”) with
an individual accredited investor, in the amount of $
On
March 27, 2024, the Company entered into a $
At
March 31, 2024, and December 31, 2023, the outstanding balance due on all of the working capital notes payable was $
NOTE 8 – GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES
Goodwill
Goodwill is initially recorded as of the acquisition date, and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.
| 16 |
As
of March 31, 2024 and December 31, 2023, we had goodwill of $
The
Company will review its goodwill for impairment periodically (based on economic conditions) and determine whether impairment is to be
recognized within its consolidated statement of operations.
NOTE 9 – INCOME TAXES
At
March 31, 2024 and December 31, 2023, the Company had a net operating loss carry forward of $
Components of net deferred tax asset, including a valuation allowance, are as follows:
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Deferred tax asset: | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Total deferred tax asset | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Valuation
allowance for deferred tax assets as of March 31, 2024, and December 31, 2023, was $
Reconciliation between the statutory rate and the effective tax rate for both periods and as of March 31, 2024 and December 31, 2023:
| Federal statutory rate | ( | )% | ||
| State taxes, net of federal benefit | ( | )% | ||
| Change in valuation allowance | % | |||
| Effective tax rate | % |
On August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous provisions, including a 15% corporate alternative minimum income tax on “adjusted financial statement income”, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases. The provisions of the 2022 act become effective for tax years beginning after December 31, 2023. On December 27, 2022, the IRS and Department of Treasury issued initial guidance for taxpayers subject to the corporate alternative minimum tax. The guidance addresses several, but not all, issues that needed clarification. The IRS and Department of Treasury intend to release additional guidance in the future. We will continue to evaluate the impact of the 2022 act as more guidance becomes available. We currently do not expect an impact on our consolidated financial statements.
| 17 |
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.
On
June 27, 2023, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of
Common stock and preferred stock
For
the month of June 2023, the following transactions occurred: On June 27, 2023, we entered into a PIPE transaction with Armistice Capital
for the purchase and sale of $
Pursuant to the PIPE transaction shares of common stock were issued to Armistice Capital. The 2023 Prefunded Warrants held by Armistice Capital were not exercised for the month of July.
For the month of September 2023, the following transactions occurred: On September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $ and $, respectively per share.
Pursuant
to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an
aggregate of
| 18 |
On
September 8, 2023,
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. Per Mr. Lambrecht’s employment agreement entered into on November 20, 2023, The Company for Mr. Lambrecht recognized $ as a charge for the share-award grant and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of grant for Mr. Lambrecht’s shares was $.
Per Mr. Ross’s amended employment agreement with an effective date of November 20, 2023, The Company for Mr. Ross recognized $ as a charge for the share-award grant on October 31, 2023 (the modification date) and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of modification of the terms of the Series A preferred stock for Mr. Ross’s shares was $.
Per Mr. Grau’s amended employment agreement with an effective date of November 20, 2023, The Company for Mr. Grau recognized $ as a charge for the share-award grant on October 31, 2023 (the modification date) and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of modification of the terms of the Series A preferred stock for Mr. Grau’s shares was $.
| 19 |
Shares Issued as Compensation
The Company in connection with various consulting and advisory agreements is required to issue shares of its common stock. 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 non-employees 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 to have been satisfied upon 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.
Modified Terms of Series A Preferred Stock
On October 31, 2023, the Company board of directors approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and to allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. Based on the vesting schedule afforded to the holders of the Series A Preferred Stock, shares of common stock could be issued upon the conversion of shares of Series A Preferred Stock as of December 31, 2023, and immediately subsequent to December 31, 2023, another shares of common stock could be issued upon the conversion of shares of Series A Preferred Stock on January 1, 2024. The conversion of the Series A Preferred Stock is at the discretion of the holder unless there are special circumstances. The Company will recognize the fair value of the modified share awards over the employment agreement period and will record any changes to that fair value in accordance with ASC 718 on a period-by-period basis as part of that compensation expense, attributable to the employee.
New Preferred Stock Series Designation and Reg. A+ Offering
On November 3, 2023, the Company’s board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”).
The
Company filed a registration statement on Form 1-A offering up to shares of Series C Preferred Stock, at an offering price
of $ per share, for a maximum offering amount of $
At March 31, 2024 and December 31, 2023, there were shares of common stock issued (which includes reserved for) and outstanding, respectively; and and shares of Series B preferred stock issued and outstanding, respectively, and and shares of its Series A preferred stock issued and outstanding, respectively. Series C preferred stock was issued or outstanding at March 31, 2024 or December 31, 2023.
| 20 |
As
of March 31, 2024, no Prefunded Warrants remained issued and outstanding with respect to the July PIPE transaction. The Prefunded Warrants
were purchased in their entirety by the holders of the warrants for $
Calvary
Fund exercised all of its Calvary Warrants by November 30, 2022 requiring the payment of an additional $
Along
with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to
On
June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $ of securities, consisting
of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are
exercisable into
On
September 8, 2023, the Company, entered into an inducement offer letter agreement with Armistice Capital the holders of existing common
stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on
July 8, 2022 and June 28, 2023 and had an exercise price of $
Pursuant
to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an
aggregate of
| 21 |
Along
with the Prefunded Warrants the previous year’s PIPE investors were issued immediately exercisable warrants to purchase up to
As
of March 31, 2024 and December 31, 2023, there were
The Company evaluates outstanding warrants as derivative liabilities and will recognize any changes in the fair value through earnings. The Company determined that the warrants have an immaterial fair value at December 31, 2023 and March 31, 2024. The warrants do not trade in a highly active securities market, and as such, the Company estimated the fair value of these common stock equivalents using Black-Scholes and the following assumptions:
Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term which due to their maturity period as expiry, it was three years. The Company had no reason to believe future volatility over the expected remaining life of these common stock equivalents was likely to differ materially from historical volatility. Expected life was based on three years due to the expiry of maturity. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the common stock equivalents.
| March 31, 2024 | December 31, 2023 | |||||||
| (unaudited) | (audited) | |||||||
| Stock Price | $ | $ | ||||||
| Exercise Price | $ | $ | ||||||
| Term (expected in years) | ||||||||
| Volatility | % | % | ||||||
| Annual Rate of Dividends | % | % | ||||||
| Risk Free Rate | % | % | ||||||
| 22 |
Stock Purchase Warrants
| Shares | Weighted- Average Exercise Price Per Share | Remaining term | Intrinsic value | |||||||||||||
| Outstanding and Exercisable at December 31, 2022 (audited) | $ | years | ||||||||||||||
| Granted | $ | years | ||||||||||||||
| Granted in Debt Conversion | $ | years | - | |||||||||||||
| Granted Prefunded Warrants | $ | years | - | |||||||||||||
| Granted in PIPE transaction | $ | * | years | - | ||||||||||||
| Exercised | ( | ) | $ | years | - | |||||||||||
| Expired | - | - | ||||||||||||||
| Outstanding and Exercisable at December 31, 2023 (audited) | $ | years | ||||||||||||||
| Granted | $ | - | ||||||||||||||
| Exercised | $ | - | ||||||||||||||
| Expired | $ | - | ||||||||||||||
| Outstanding and Exercisable at March 31, 2024 (unaudited) | $ | years | ||||||||||||||
| - |
NOTE 12 – 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 (more than month-to-month) 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’ expiry 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.
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. The Company added approximately $
| 23 |
Balance sheet information related to our leases is presented below:
| Balance Sheet location | March 31, 2024 | December 31, 2023 | ||||||||
| (unaudited) | (unaudited) | |||||||||
| Operating leases: | ||||||||||
| Right-of-use lease assets | Right-of-use operating lease assets | $ | $ | |||||||
| Right-of-use lease liability, current | Other current liabilities | |||||||||
| Right-of-use lease liability, long-term | Right-of-use operating lease liability | |||||||||
The following provides details of the Company’s lease expense:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (unaudited) | (unaudited) | |||||||
| Operating lease expense, net | $ | $ | ||||||
| Operating lease expense, net | $ | $ | ||||||
Other information related to leases is presented below:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
(unaudited) | (unaudited) | |||||||
| Cash Paid for Amounts Included in Measurement of Liabilities: | ||||||||
| Operating cash flows from operating leases | $ | $ | ||||||
| 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 | ||||
| 2024 (nine months remaining) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total future minimum lease payments, undiscounted | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
Rental
expense totaled approximately $
| 24 |
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company from time-to-time. In the opinion of management, and after consultation with legal counsel, resolution of any of these matters (of which there are none) is not expected to have a material effect on the condensed consolidated financial statements.
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, 2024 and December 31, 2023 there were
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 14 – OTHER INCOME – EMPLOYEE RETENTION CREDIT
The
Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included
identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the preparation
of tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During
the year ended December 31, 2023, the Company received approximately $
NOTE 15 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of March 31, 2024, through the date the financial statements were issued and determined that there were the following subsequent events:
On
April 1, 2024, the Company entered into a Revenue Interest Purchase Agreement with an accredited investor, pursuant to which
the investor purchased a revenue interest from the Company for $
On April 9, 2024, the Company entered into a Revenue Interest Purchase
Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $
On April 9, 2024, the Company entered into a Revenue Interest Purchase
Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $
On April 9, 2024, the Company entered into a Revenue Interest Purchase
Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $
| 25 |
On April 19, 2024, the Registrant entered into a Revenue Interest Purchase
Agreement (the “Revenue Interest Purchase Agreement”) with an individual accredited investor, pursuant to which the investor
purchased a revenue interest from the Registrant for $
On April 23, 2024, the Registrant received notice from Nasdaq indicating that, while the Registrant has not regained compliance with the Bid Price Requirement, Nasdaq has determined that the Registrant is eligible for an additional 180-day period, or until October 21, 2024, to regain compliance. According to the notification from Nasdaq, the staff’s determination was based on (i) the Registrant meeting the continued listing requirement for market value of its publicly held shares and all other applicable Nasdaq initial listing standards, with the exception of the minimum bid price requirement, and (ii) the Registrant’s written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If at any time during this second 180-day compliance period, the closing bid price of the common stock is at least $ per share for a minimum of 10 consecutive business days, Nasdaq will provide the Registrant with written confirmation of compliance. If compliance cannot be demonstrated by October 21, 2024, Nasdaq will provide written notification that the common stock will be delisted. At that time, the Registrant may appeal Nasdaq’s determination to a Hearings Panel.
On April 24, 2024, the Registrant received notice from Nasdaq indicating that Staff determined to grant the Registrant an extension until June 15, 2024 to regain compliance with the rule by holding an annual meeting of shareholders. At the annual meeting, shareholders must be afforded the opportunity to discuss company affairs with management and, if required by the company’s governing documents, to elect directors. The Registrant expects to hold an annual meeting within such timeframe. While the compliance plan is pending, the Registrant’s securities will continue to trade on NASDAQ.
The maturity date on the Champion line of credit was extended by Bank of
America to April 30, 2024. The balance at the maturity date was approximately $
On May 3, 2024, the Securities and Exchange Commission (the “Commission”) 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 Commission as an accountant (the “Order”). As a result of the Order, BF Borgers may no longer serve as the Registrant’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.
On May 3, 2024, the Registrant dismissed BF Borgers CPA PC (“BF Borgers”) as its independent registered public accounting firm. The Registrant’s audit committee unanimously approved the decision to dismiss BF Borgers.
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 Registrant on May 6, 2024, unanimously approved to dismiss, and dismissed BF Borgers as the Registrant’s independent registered public accounting firm.
On May 10, 2024, the Registrant’s board of directors approved the designation of a new Series D Convertible Preferred Stock (the “Series D Designation”). The rights, preferences, restrictions and other matters relating to the Series D Convertible Preferred Stock (the “Series D Preferred Stock”) are described in greater detail in Exhibit 4.15.
On May 13, 2024, the Committee approved the engagement of GBQ as the Registrant’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.
On May 28, 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
June 14, 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 $
| 26 |
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:
| ● | we recently 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; | |
| ● | 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.
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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”). 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
American Rebel is boldly positioning itself as America’s Patriotic Brand. The Company has identified the market opportunity to design, manufacture, and market innovative concealed carry products and safes. American Rebel accesses its market uniquely through its positioning as America’s Patriotic Brand and the appeal of its products as well as through the profile and public persona of its 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 Annual 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 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.
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 our Chief Executive Officer, Charles A. “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.
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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 American Rebel’s Chief Executive Officer, 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.
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 the Company 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 you have to have 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 you have 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 you have 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 isn’t needed it will be protected. |
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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. American Rebel Chief Executive Officer 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. | |
| 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 in 2024 and 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.
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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, such as the effects of the COVID-19 pandemic. The consequences of the pandemic and impact on the U.S. and global economies continue to evolve and the full extent of the impact is uncertain as of the date of this filing. The pandemic has had a significant effect on the safe and personal security industry and on the apparel industry. If the recovery from the COVID-19 pandemic is not robust, the impact could be prolonged and severe. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. While our manufacturing capabilities have been suffering, and could continue to suffer from mandatory, forced production disruptions and supply chain shortages, which negatively impact our ability to satisfy the demand for our products, as the result of the pandemic, we expect that the impact of such attrition would be mitigated by the addition of new customers resulting from the increasing demand for home, office and personal safety and security. The extent to which the COVID-19 pandemic will impact our operations, ability to obtain financing or future financial results is uncertain at this time. Due to the effects of COVID-19, management worked to reduce unnecessary marketing expenditures and worked to improve staff and human capital expenditures, while maintaining overall workforce levels. The Company expects but cannot guarantee that demand for its safes and personal security products will continue to keep growing in 2023 and beyond, as customers continue to spend more time working remotely, and increasing regulation in many states mandating safe ammunition storage, accelerating the demand for our responsible solution safes and making them a necessary appliance for any household, providing protection for expensive firearms and other valuables. Overall, management is focused on effectively positioning the Company for meeting the increasing demand for our safes and faster production turnaround.
Recent Developments
Establishment of American Rebel Beer
On August 9, 2023, the Company 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 will launch regionally in early 2024. The Company 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.
Acquisition of Champion Entities
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc. (“Champion Safe”), Superior Safe, LLC (“Superior Safe”), Safe Guard Security Products, LLC (“Safe Guard”), Champion Safe De Mexico, S.A. de C.V. (“Champion Safe Mexico”) and, together with Champion Safe, Superior Safe, Safe Guard and Champion Safe Mexico, collectively, the (“Champion Entities”) and Mr. Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller. This transaction was completed on July 29, 2022. As of the date of this Report, the Champion Entities have been integrated with our existing operations and are under the control of our management team.
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Champion Safe Combined Group
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (the “Champion Entities”, “Champion Safe Combined Group” or “Champion”) and Mr. Ray Crosby (the “Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller. The closing occurred on July 29, 2022 (see Recent Events described above).
“Champion Safe Combined Group” consists of Champion Safe Co., Inc. (“Champion Safe”) a Utah corporation, Superior Safe, LLC (“Superior Safe”) a Utah limited liability company, Safe Guard Security Products, LLC (“Safe Guard”) a Utah limited liability company, Champion Safe De Mexico, S.A. de C.V. (“Champion Safe Mexico”) a corporation duly organized and existing under the laws of Mexico. Each of these entities is under common control and ownership by American Rebel Holdings, Inc.
Champion Safe Combined Group develops and sells branded products in the safe storage product using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. Champion Safe Combined Group’s products are marketed under the Champion, Superior and Safe Guard brands. Champion Safe Combined Group 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. Champion Safe Combined Group sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands.
Based in Provo, Utah and founded in 1999, Champion Safe is what we believe to be one of the premier designers, manufacturers and marketers of home and gun safes in North America. Champion Safe Co. has three safe lines, which we believe feature some of the most secure and highest quality gun safes.
We operate Champion Safe in the same manner as it was operated pre-acquisition. Champion Safe, Superior Safe and Safe Guard Security Products are valuable and prominent identifiable brands in the safe industry. We have begun to expand our manufacturing throughput to fill the significant backlog of orders and aggressively open new dealer accounts. Champion Safe Company and its management will shift its emphasis to growing revenue and increasing profitability of the combined businesses.
We believe that the combined company will benefit greatly from access to former Champion founder Mr. Crosby. Mr. Crosby’s vast experience and expertise in the industry will be instrumental in opening doors and insight into the industry’s growth. Mr. Crosby is a foundational figure in the safe business with over 40 years of experience in the industry. Mr. Crosby and his brother Jay Crosby founded Fort Knox Safe in 1982, and Liberty Safe in 1988. Liberty Safe which was recently resold to a middle market private investment firm for approximately $147.5 million a significant increase in overall enterprise value. In 1999, Mr. Crosby founded Champion Safe, later expanding to include Superior Safe and Safe Guard Security Products. Champion Safe employs over 60 employees in their Utah factory and over 150 employees in their Nogales, Mexico facility just south of the U.S. border. The majority of the midline and value priced safes industry-wide are manufactured in China, but Mr. Crosby had the foresight to build his own facility in Mexico and utilize American-made steel exclusively. Steep tariffs were imposed on China manufactured safes by the Trump administration and were continued under the first half of the Biden administration. The prices of components for the made-in-China safes have dramatically increased as well as the transportation costs to import these Chinese-made safes. Mr. Crosby’s decision to build his own facility in Mexico as opposed to importing Chinese-made safes has proven to be insightful and beneficial for Champion Safe.
Mr. Crosby was eager to expand his manufacturing operation and seize upon the growth opportunities in the safe business. Working closing with the American Rebel team, Mr. Crosby expanded his paint-line capacity and hinge assembly workstations. Mr. Crosby has experience in many prior economic cycles and has found the safe business to be sound in good and bad economic times. Furthermore, the current emphasis on safe storage and the capital infusion from American Rebel positions the Champion operation to grow its footprint.
In addition to the access to capital for Champion to grow its business, American Rebel will benefit from Champion’s 350 dealers, nationwide distribution network and seniority with buying groups and trade shows. American Rebel will benefit from the increased Champion manufacturing throughput as capacity restrictions have limited American Rebel’s inventory and potential growth. The collaboration between management teams will focus on increased manufacturing efficiencies and volume expansion.
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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. With the legal cannabis hyper-growth market expected to exceed $43 billion by 2025, and an increasing number of states where the growth and cultivation of cannabis is legal (California, Colorado, Hawaii, Maine, Maryland, Michigan, Montana, New Mexico, Oregon, Rhode Island, Vermont and Washington), we believe we are well positioned to address the need of dispensaries. 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, 2024, we have generated an operating deficit of $47,914,872. We expect to incur additional losses during fiscal year ending December 31, 2024, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.
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Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
| Three months ended March 31, 2024 | Three months ended March 31, 2023 | |||||||
| Revenue | $ | 4,043,837 | $ | 4,402,099 | ||||
| Cost of goods sold | 3,202,514 | 2,791,326 | ||||||
| Gross margin | 841,323 | 1,610,773 | ||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | 551,913 | 854,599 | ||||||
| Compensation expense – officers – related party | 212,500 | 90,000 | ||||||
Compensation expense – officers – deferred comp – related party | 1,134,000 | - | ||||||
| Rental expense, warehousing, outlet expense | 151,666 | 226,660 | ||||||
| Product development costs | 98,629 | 16,495 | ||||||
| Marketing and brand development costs | 265,055 | 252,725 | ||||||
| Administrative and other | 680,514 | 361,149 | ||||||
| Depreciation and amortization expense | 24,315 | 29,090 | ||||||
| 3,118,592 | 1,830,718 | |||||||
| Operating income (loss) | (2,277,269 | ) | (219,945 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | (423,859 | ) | (7,110 | ) | ||||
| Interest income | - | - | ||||||
| Employee retention credit funds, net of costs to collect | - | - | ||||||
| Gain/(loss) on sale of equipment | - | - | ||||||
| Gain/(loss) on extinguishment of debt | 227,569 | - | ||||||
| 424,009 | (7,110 | ) | ||||||
| Net income (loss) before income tax provision | (2,701,278 | ) | (227,055 | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | $ | (2,701,278 | ) | $ | (227,055 | ) | ||
For the three months ended March 31, 2024, we reported Revenues of $4,043,837 compared to Revenues of $4,402,099 for the three months ended March 31, 2023. The decrease in Revenues of $358,262 (or -8% period over period (PoP)) for the current period compared to the three months ended March 31, 2023, is attributable to slower sales for 2024 and current market conditions. For the three months ended March 31, 2024, we reported Cost of Goods Sold of $3,202,514, compared to Cost of Goods Sold of $2,791,326 for the three months ended March 31, 2023. The increase in Cost of Goods Sold of $411,188 (or 15% period over period (PoP)) for the current period is primarily attributable to a marginal decrease in sales along with higher costs of goods sold for the period. For the three months ended March 31, 2024, we reported Gross Margin of $841,323, compared to Gross Margin of $1,610,773 for the three months ended March 31, 2023. The decrease in Gross Margin of $769,450 (or -48% period over period (PoP)) for the three months ending March 31, 2024, compared to the three months ending March 31, 2023 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentages for the three months ended March 31, 2024 was 21% compared to 37% for the three months ended March 31, 2023. We expect our Gross Margin percentages for this time of year to be consistently in the 20% range. If not within this range we will try to increase our sales volume to in order to increase our margins, with better pricing power, better buying power on costs of goods, inventory and of course inventory management. 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.
Operating Expenses
Total operating expenses for the three months ended March 31, 2024 were $3,118,592 compared to $1,830,718 for the three months ended March 31, 2023 as further described below. Overall, we experienced a $1,287,874 increase in operating expenses or a 70% period over period (PoP) increase in operating expenses from the prior year comparable period. With the successful integration of the Champion acquisition, we believe this will begin to drop or decrease as a percentage of Revenues as we increase our sales volume.
For the three months ended March 31, 2024, we incurred consulting/payroll and other costs (along with officer compensation) of $1,898,413 compared to consulting/payroll and other costs (along with officer compensation) of $944,599 for the three months ended March 31, 2023. The increase in consulting/payroll and other costs of $953,814 (or 101% period over period (PoP)) was due to cost controls put in place on the post-acquisition of the Champion Entities offset by increased compensation costs due to common stock equivalents on our Series A preferred stock. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.
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For the three months ended March 31, 2024, we incurred rental expense, warehousing, outlet expense of $151,666, compared to rental expense, warehousing, outlet expense of $226,660 for the three months ended March 31, 2023. The decrease in rental expense, warehousing, outlet expense of $74,994 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. Prior to the Champion business acquisition, the Company included lease expense in the Administrative and other account. With the significant number of leases and properties that the Company rents to conduct the Champion business we believe provides a better presentation of expenses with a separate account line item. The Company expects to maintain this level of expense on a go-forward basis with its leases and rented properties for the near term. The Company may look to consolidate some of its space as needed as it fine tunes the Champion business.
For the three months ended March 31, 2024, we incurred product development expenses of $98,629, compared to product development expenses of $16,495 for the three months ended March 31, 2023. The increase in product development expenses of $82,134 (or 498% period over period (PoP)) is due to some of the Company’s current product development expenses being included in consulting/payroll and other costs account which we believe provides for a better presentation of our historical business expenses than pure product development expense. For these three months ended March 31, 2024 we’ve incurred expenses that are attributable to our private label brewery efforts and should be separated and identified. The Company expects 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, 2024, we incurred marketing and brand development expenses of $265,055, compared to marketing and brand development expenses of $252,725 for the three months ended March 31, 2023. The increase in marketing and brand development expenses of $12,280 (or 5% period over period (PoP)) relates primarily to an increase of activities including major trade shows and the availability of working capital for these types of expenses as well as increased costs attributable to our acquisition and integration of the Champion business, as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.
For the three months ended March 31, 2024, we incurred administrative and other expense of $680,514, compared to administrative and other expense of $361,149 for the three months ended March 31, 2023. The increase in administrative and other expense of $319,365 (or 88% period over period (PoP)) relates directly to increased legal and other professional fees that we incurred in our registered public offerings and capital raising efforts, along with additional expenses picked up from our acquisition of Champion. The Company believes as it grows its sales base it will also increase its administrative and other expense commensurate with the increased profits for the future.
For the three months ended March 31, 2024, we incurred depreciation and amortization expense of $24,315, compared to depreciation and amortization expense of $29,090 for the three months ended March 31, 2023. The increase in depreciation and amortization expense relates primarily to the acquisition of Champion and its significant and additional depreciable asset base that it provided to the Company’s financial position.
Other income and expenses
For the three months ended March 31, 2024, we incurred interest expense of $423,859, compared to interest expense of $7,110 for the three months ended March 31, 2023. The increase in interest expense of $416,749 is due to a significant number of notes being paid during 2023 that were able to be paid in full from the various financings, offset by the increased borrowing costs that we have on our working capital notes payable and line of credit. We are currently paying an interest rate of approximately 7% on our line of credit, in excess of 18% on our existing working capital notes payable, and on our new working capital notes payable we are paying more than 40% per annum on these debt instruments. The Company believes that it will manage and maintain its interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a reasonable amount as we grow the business and its sales volume.
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Net Loss
Net loss for the three months ended March 31, 2024, amounted to $2,701,278, resulting in a loss per share of $0.12, compared to $227,055 for the three months ended March 31, 2023, resulting in a loss per share of $0.34. The increase in the net loss from the three months ended March 31, 2023 to the three months ended March 31, 2024 is from a myriad of expenses that the Company incurred in the quarter, such as professional and legal fees, increased costs in marketing and the softening of gross margin on sales. The Company’s management believes with increasing sales volume and strict adherence to cost cutting measures and best practices that net positive income can be achieved for the business.
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 $1,541,323 period over period where we had a working capital balance of $4,551,927 at December 31, 2023 compared to a working capital balance of $3,010,604 at March 31, 2024. This working capital decrease was due to entering into several new debt instruments as well as other new borrowings through March 31, 2024. 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, 2024, we raised net cash of approximately $0 through the issuance of equity (which included the inducement to accelerate the conversion of certain warrants into equity), as compared to approximately $0 for the three months ended March 31, 2023. During the three months ended March 31, 2024, we raised net cash of approximately $2,000,000 through the issuance of notes payable and maintaining a line of credit with a national financial institution secured by inventory and other assets, as compared to approximately $1,700,000 for the three months ended March 31, 2023.
As we continue with the launch of 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 and marketing, sales, and operational expenditures. We may from time to time incur significant capital needs for these expenditures and 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 the following:
On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan #1”) with an accredited investor lending source. Under the Secured Loan #1, the Company received the loan net of fees of $20,000. The Secured Loan #1 requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan #1 bears interest at 41.4%. The Secured Loan #1 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #1. The Secured Loan #1 provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company was required to pay a fee associated with the Lender and its introduction to the Company of $80,000 to be made in equity of the Company at the time the loan was entered into. The Company issued 3,721 post-reverse stock split shares, which on the date of issuance had a value of approximately $2,900. Since the number of shares had been established upon consummation of the loan but not valued or recorded on the books at the time, because of the leeway on grant date; total cost to the Company for the issuance of the 3,721 shares of common stock on the grant date was $2,900 which was recorded to interest expense and attributable to the loan.
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On July 1, 2023, the Company entered into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited lender. Under the Assumption Agreement the Company agreed to pay $150,000 immediately to the holder of the $600,000 working capital loans that the Company had in place. The Assumption Agreement provided for the accredited lender, who effectively had the same management and ownership as the old working capital holders and assumed the debt instruments under the same terms and conditions and is due one year from the date of the Assumption Agreement, June 30, 2024 for one of the loans and the other loan (in the amount of $150,000) is due and payable on December 31, 2023. The Company made a one-time payment of $150,000 to the holder and was released from the prior obligations and the default status that it had been in with that holder since March 31, 2023.
On July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023, and the accredited lender of the new working capital loans paid the holder of the old working capital loans $450,000 which required no additional working capital outlay from the Company. The terms of the new loan are 12% per annum and interest only payments that are due by last day of the quarter based on a calendar year. This reduces the Company’s interest payments on the working capital loans (old) of $600,000 from $18,000 per quarter to just $13,500 per quarter (for quarter ending December 31, 2023) and $9,000 per quarter thereafter (for quarters ending March 31, 2024 and June 30, 2024).
On December 19, 2023, the Company entered into a $500,000 Revenue Interest Purchase Agreement (the “Revenue Interest Loan”) with an accredited lender. Under the Revenue Interest Loan, the Company received the revenue interest purchase price/loan net of fees of $5,000. The Revenue Interest Loan requires monthly payments of $75,000 each, until the Revenue Interest Loan is repurchased by the Company. Upon entering into the agreement, the Revenue Interest Loan bore an effective interest of more than 100%. The Revenue Interest Loan is secured by all of the product revenues of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s is obligated to provide for 50% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan as payment towards the amounts due. The Revenue Interest Loan may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan prior to April 1, 2024 is 125% or $625,000, the repurchase price for the Revenue Interest Loan after April 1, 2024 and prior to May 5, 2024 is 137.5% or $687,500, thereafter the repurchase price of the Revenue Interest Loan is $687,500 plus monthly payments of $75,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety. The Revenue Interest Loan bears an effective interest of 81.3% as of March 31, 2024, an effective interest rate of 87.3% through May 4, 2024, and an effective interest rate of 111.3% thereafter until the Company repurchases the Revenue Interest Loan from the holder.
On December 29, 2023, the Company entered into a $500,000 Business Loan and Security Agreement (the “Secured Loan #2”) with an accredited investor lending source. Under the Secured Loan #2, the Company received the loan net of fees of $10,000. The Secured Loan #2 requires 52 weekly payments of $11,731 each, for a total repayment of $610,000. The Secured Loan #2 bears interest at 40.5%. The Secured Loan #2 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #2. The Secured Loan #2 provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company is required to pay a fee associated with the Lender and its introduction to the Company of $40,000 to be made in equity of the Company at the time the loan was entered into.
On March 21, 2024, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the lender made a loan to the Company, evidenced by a promissory note in the principal amount of $235,750. A one-time interest charge or points amounting to 15% (or $35,362) and fees of $5,000 were applied at the issuance date, resulting in net proceeds to the Company of $200,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in seven payments; the first payment shall be in the amount of $162,667.20 and is due on June 30, 2024 with six (6) subsequent payments each in the amount of $18,074.14 due on the 30th of each month thereafter (total repayment of $271,112 on or by December 31, 2023). the Company has the right to prepay the note within one hundred eighty days at a discount of 5%. Effective interest rate on this loan is 81.1% with 15 points paid up front as a fee as of March 31, 2024.
On March 22, 2024, the Company entered into another Revenue Interest Purchase Agreement (the “Revenue Interest Loan #2”) with an individual accredited investor, in the amount of $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Loan #2, the investor has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Furthermore, the Company’s is obligated to provide for 5.15% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan as payment towards the amounts due. The Revenue Interest Loan may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan prior to May 31, 2024 is 140% or $140,000, the repurchase price for the Revenue Interest Loan after May 31, 2024 and prior to July 5, 2024 is 154 % or $154,000, thereafter the repurchase price of the Revenue Interest Loan is $154,000 plus monthly payments of $10,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety. The Revenue Interest Loan bears an effective interest of more than 200% as of March 31, 2024, an effective interest rate of 188.8% through May 31, 2024, and an effective interest rate of 183.4% thereafter until the Company repurchases the Revenue Interest Loan from the holder.
On March 27, 2024, the Company entered into a $1,300,000 Business Loan and Security Agreement (the “Secured Loan #3”) with an accredited investor lending source. Under the Secured Loan #3, the Company received the loan net of fees of $26,000. The Company repaid two outstanding secured notes payable (Secured Loan #1 and Secured Loan #2) to affiliates of the lender totaling $769,228, resulting in net proceeds to the Company of $504,772. The Secured Loan #3 requires 64 weekly payments of $26,000 each, for a total repayment of $1,664,000. The Secured Loan #3 bears an effective interest 40.9%. The Secured Loan #3 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #3. The Secured Loan #3 provides for a default fee of $15,000 for any late payments on the weekly payments. As long as the Secured Loan #3 is not in default, the Company may prepay the Secured Loan #3 pursuant to certain prepayment amounts set forth in the Secured Loan #3. Further, any default by the Company allows the lender to take necessary actions to secure its collateral and recovery of funds.
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Line of Credit
During February 2023, the Company, through its wholly-owned subsidiary Champion entered into a $2 million line of credit facility (the “Line of Credit”). The Line of Credit accrues interest at a rate determined by BSBY Daily Floating Rate plus 2.05 percentage points (which at March 31, 2024 was 7.48%), and is secured by all of the assets of the Champion Entities. The Line of Credit expires February 28, 2024. The outstanding liability of the Line of Credit at March 31, 2024 was $1.81 million.
Acquisition, Integration of Champion Entities and PIPE Transaction Used to Fund Acquisition
On July 12, 2022, we sold $12,887,976 of securities to Armistice Capital, an institutional purchaser. Such securities consisted of (i) 20,372 shares of common stock at $27.75 per share, (ii) prefunded warrants that are exercisable into 448,096 shares of common stock at $27.50 per prefunded warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock at an initial exercise price of $21.50 per share, subject to adjustments as set forth therein, and will expire five years from the date of issuance. EF Hutton, a division of Benchmark Investments, LLC, acted as exclusive placement agent for the offering and was paid: (i) a commission of 10% of the gross proceeds ($1,288,798); (ii) non-accountable expenses of 1% of the gross proceeds ($128,880); and (iii) placement agent expenses of $125,000.
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc. (“Champion Safe”), Superior Safe, LLC (“Superior Safe”), Safe Guard Security Products, LLC (“Safe Guard”), Champion Safe De Mexico, S.A. de C.V. (“Champion Safe Mexico” and, together with Champion Safe, Superior Safe, and Safe Guard, collectively, the “Champion Entities”) and Mr. Ray Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The closing of the acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration in the amount of $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed Seller for $397,420 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021.
During 2023 the Company received a claim for refund or right of repayment from the Seller. The Company settled with the Seller and agreed to pay an additional $325,000 to the Seller in the following manner. $275,000 upon signing of the agreement and another $50,000 to be paid over the next twelve months. The Company increased its purchase price of the Champion Entities by the $325,000 during 2023. The funds for this pricing adjustment came from general working capital.
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Critical Accounting Policies
The preparation of financial statements and related footnotes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 1 to the financial statements, included elsewhere in this report, includes a summary of the significant accounting policies and methods used in the preparation of our financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer, Mr. Charles A. Ross, Jr., and our Interim Principal Accounting Officer, Mr. Doug E. Grau, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on their evaluation, Messrs. Ross and Grau concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings. The Company hired a financial expert with experience in creating and managing internal control systems as well to continue to improve the effectiveness of our internal controls and financial disclosure controls.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Part II: Other Information
Item 1 - Legal Proceedings
We are currently not involved in any material litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
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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 for the year ended December 31, 2023. 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
Subsequent Issuances after Quarter End
During the period covered by this Report until the date of filing of this Report, May 6, 2024, the Company has not issued or authorized the sale of any equity securities.
All of the above-described issuances (if any) were exempt from registration pursuant to Section 4(a)(2) 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, 2024.
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Item 3 – Defaults upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
None.
Item 6 – Exhibits
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# 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.
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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: June 14, 2024
| 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) | |||
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Exhibit 10.29
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
THE ISSUE PRICE OF THIS NOTE IS $111,550.00
THE ORIGINAL ISSUE DISCOUNT IS $14,550.00
| Principal Amount: $111,550.00 | Issue Date: |
| Purchase Price: $97,000.00 |
PROMISSORY NOTE
FOR VALUE RECEIVED, AMERICAN REBEL HOLDINGS, INC., a Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of Coventry Enterprises, LLC, a Delaware company, or registered assigns (the “Holder”) the sum of $111,550.00 together with any interest as set forth herein, on February 28, 2025 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof from the date hereof (the “Issue Date”) as set forth herein. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).
This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of stockholders of the Borrower and will not impose personal liability upon the holder thereof.
The following terms shall apply to this Note:
ARTICLE I. GENERAL TERMS
1.1 Interest. A one-time interest charge of twelve percent (12%) (the “Interest Rate”) shall be applied on the Issuance Date to the principal amount ($111,550.00 * twelve percent (12%) = $13,386.00). Interest hereunder shall be paid as set forth herein to the Holder or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes in cash or, in the Event of Default, at the Option of the Holder, converted into share of Common Stock as set forth herein.
1.2 Mandatory Monthly Payments. Accrued, unpaid Interest and outstanding principal, subject to adjustment, shall be paid in nine (9) payments each in the amount of $13,881.78 (a total payback to the Holder of $124,936.00). The first payment shall be due June 30, 2024 with eight (8) subsequent payments on the last day of each month thereafter. The Company shall have a five (5) day grace period with respect to each payment. The Company has right to accelerate payments or prepay in full at any time with no prepayment penalty. All payments shall be made by bank wire transfer to the Holder’s wire instructions, attached hereto as Exhibit A. For the avoidance of doubt, a missed payment shall be considered an Event of Default.
ARTICLE II. CERTAIN COVENANTS
2.1 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business in one or a series of transactions which would render the Borrower a “shell company” as such term is defined in Rule 144 (as defined herein).
ARTICLE III. EVENTS OF DEFAULT
If any of the following events of default (each, an “Event of Default”) shall occur:
3.1 Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise and such breach continues for a period of five (5) business days after written notice from the Holder.
3.2 Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach continues for a period of twenty (20) days after written notice thereof to the Borrower from the Holder.
3.3 Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
3.4 Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.5 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower on or after the Issue Date.
3.6 Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on the Nasdaq National Market, the Nasdaq SmallCap Market, the New York Stock Exchange, or the NYSE American Stock Exchange (collectively, the “Exchanges”).
3.7 Failure to Comply with the Exchange Act. The Borrower shall fail to materially comply with the reporting requirements of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.8 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.9 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.10 [intentionally deleted].
3.11 Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
Upon the occurrence and during the continuation of any Event of Default, the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Article IV hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
ARTICLE IV. CONVERSION RIGHTS
4.1 Conversion Right. After the occurrence of an Event of Default, at any time, the Holder shall have the right, to convert all or any part of the outstanding and unpaid amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit B(the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 4.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00pm, New York, New York time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 4.4 hereof. Notwithstanding anything in this Agreement to the contrary, and in addition to the limitations set forth herein, if the Borrower has not obtained Stockholder Approval, the Borrower shall not issue a number of shares of Common Stock under this Agreement, which when aggregated with all other securities that are required to be aggregated for purposes of Rule 5635(d), would exceed 19.99% of the shares of Common Stock outstanding as of the date of definitive agreement with respect to the first of such aggregated transactions (the “Conversion Limitation”). For purposes of this section, “Stockholder Approval” means such approval as may be required by the applicable rules and regulations of the Nasdaq Stock Market LLC (or any successor entity) from the stockholders of the Company with respect to the issuance of the shares under this Agreement that, when taken together with any other securities that are required to be aggregated with the issuance of the shares issued under this Agreement for purposes of Rule 5635(d) of the Nasdaq Stock Market LLC (“Rule 5635(d)”), would exceed 19.99% of the issued and outstanding common stock as of the date of definitive agreement with respect to the first of such aggregated transactions. “Principal Market” means the Exchanges, the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange, and all rules and regulations relating to such exchange. Upon the occurrence of an Event of Default pursuant to Section 3.6 hereof, the Conversion Limitation shall no longer apply to limit the issuance of shares in conversion of this Note.
4.2 Conversion Price. The Conversion Price shall mean 75% multiplied by the Market Price (as defined herein) (representing a discount rate of 25%) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). “Market Price” means the lowest Trading Price (as defined below) for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the closing bid price on the or applicable exchange or trading market (the “Trading Market”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg) or, if the Trading Market is not the principal trading market for such security, the closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded or, if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of any market makers for such security that are listed in the “pink sheets”. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the Trading Market, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
The Holder shall be entitled to deduct $1,500.00 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion. Any additional expenses incurred by Holder with respect to the Borrower’s transfer agent, for the issuance of the Common Stock into which this Note is convertible into, shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder.
4.3 Authorized Shares. The Borrower covenants that during the period that the Note is outstanding, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued pursuant to the Purchase Agreement. The Borrower is required at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Note in effect from time to time initially 1,675,868 shares) (the “Reserved Amount”). The Reserved Amount shall be increased (or decreased) from time to time (and in the case of each payment received by the Holder hereunder) in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under this Note.
4.4 Method of Conversion.
(a) Mechanics of Conversion. As set forth in Section 4.1 hereof, at any time following an Event of Default, and during the continuation thereof, the balance due pursuant to this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 4.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion.
(c) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 4.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt subject to the terms hereof and applicable rules of the Principal Market (as defined hereinbelow) (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
(d) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.
(e) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to willful and purposeful action and/or inaction of the Borrower, the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 4.4(e) are justified.
4.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 4.5 and who is an Accredited Investor (as defined in the Purchase Agreement).
Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel that properly conforms to applicable securities laws provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), it will be considered an Event of Default pursuant to this Note.
4.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 4.6(b) unless (a) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of stockholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s stockholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining stockholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of stockholders entitled to such Distribution.
ARTICLE V. MISCELLANEOUS
5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
5.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Borrower, to:
AMERICAN REBEL HOLDINGS, INC.
5115 Maryland Way, Suite 303
Brentwood, Tennessee 37027
Attn: Charles A. Ross, Jr., Chief Executive Officer
Email: andy@andyross.com
If to the Holder:
Coventry Enterprises, LLC
80 SW 8th Street, Suite 2000
Miami, FL 33130
Attn: Jack Bodenstein
5.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
5.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.
5.5 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
5.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the Circuit Court of Fairfax County, Virginia or in the Alexandria Division of the United States District Court for the Eastern District of Virginia. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any objection or defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The Holder shall be entitled to recover from the Borrower its reasonable attorney’s fees and costs incurred in connection with or related to any Event of Default by the Company, as defined in Article III hereof. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof or any agreement delivered in connection herewith. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
5.7 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement.
5.8 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this on June 14, 2024.
| AMERICAN REBEL HOLDINGS, INC. | ||
| By: | ||
| Charles A. Ross, Jr. | ||
| Chief Executive Officer | ||
Exhibit 10.30
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of June 14, 2024, by and between AMERICAN REBEL HOLDINGS, INC., a Nevada corporation, with its address at 5115 Maryland Way, Suite 303, Brentwood, Tennessee 37027 (the “Company”), and Coventry Enterprises, LLC, a Delaware limited liability company, with its address at 80 SW 8th Street, Suite 2000 Miami, FL 33130 (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”); and
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement, a promissory note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $111,550.00 (including $14,550.00 of Original Issue Discount) (the “Note”) with additional tranches of financing of up to $1,000,000.00 during the next twelve (12) months following the date hereof subject to further agreement by and between the Company and the Buyer; and
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of the Securities.
a. Purchase of the Securities. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company the Securities as is set forth immediately below the Buyer’s name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Securities be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Securities, and (ii) the Company shall deliver such duly executed Note on behalf of the Company against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Securities pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about June 14, 2024, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information. The Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.
e. Legends. The Buyer understands that the Securities have not been registered under the 1933 Act; and may bear a restrictive legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE BUYER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”
The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the Buyer of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to an exemption from registration without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such Buyer provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not reasonably accept the opinion of counsel that properly conforms to applicable securities laws provided by the Buyer with respect to the transfer of any Securities pursuant to an exemption from registration, such as Rule 144, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
f. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note has been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized common stock of the Company consists of 600,000,000 authorized shares of Common Stock, $0.001 par value per share, of which 5,947,643 shares are issued and outstanding. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable.
d. Issuance of Shares. The Securities are duly authorized and reserved for issuance in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the Buyer thereof.
e. No Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.
f. SEC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). As a result of the May 3, 2024 BF Borgers SEC action and the inability of BF Borgers to appear or practice before the SEC, all of the Company’s financial statements, references and disclosures are specifically excluded from the definition of SEC Documents, the Company cannot rep or warrant to any such financial statements. Upon written request the Company will deliver to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates or if amended, as of the dates of the amendments, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for the re-audit of the Company’s financial statements for the years ended December 31, 2022 and 2023 and except for such statements as have been amended or updated in subsequent filings prior the date hereof). The Company is subject to the reporting requirements of the 1934 Act.
g. Absence of Certain Changes. Since December 31, 2023, except as set forth in the SEC Documents and for the BF Borgers SEC action, there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.
h. Absence of Litigation. Except as set forth in the SEC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
i. No Integrated Offering. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.
j. No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
k. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.
l. Breach of Representations and Warranties by the Company. If the Company breaches any of the material representations or warranties set forth in this Section 3 which is continuing after the applicable cure period as set forth in the Note, if any, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under Article III of the Note.
4. COVENANTS.
a. Reasonable Commercial Efforts. The Company shall use its reasonable commercial efforts to satisfy timely each of the conditions described in Section 7 of this Agreement.
b. Use of Proceeds. The Company shall use the proceeds for general working capital purposes.
c. Expenses. At the Closing, the Company’s obligation with respect to the transactions contemplated by this Agreement is to reimburse Buyer’ expenses shall be $7,000.00 for Buyer’s legal fees and due diligence fee.
d. Corporate Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except with the prior written consent of the Buyer.
e. Breach of Covenants. If the Company breaches any of the material covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement which is continuing after the applicable cure period as set forth in the Note, it will be considered an event of default under Article III of the Note.
f. Failure to Comply with the 1934 Act. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.
g. The Buyer is Not a “Dealer”. The Buyer and the Company hereby acknowledge and agree that the Buyer has not: (i) acted as an underwriter; (ii) acted as a market maker or specialist; (iii) acted as “de facto” market maker; or (iv) conducted any other professional market activities such as providing investment advice, extending credit and lending securities in connection; and thus that the Buyer is not a “Dealer” as such term is defined in the 1934 Act.
h. Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.
5. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the shares underlying any conversion of the Note upon default of the Note (the “Conversion Shares”) in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount as such term is defined in the Note) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to an exemption from registration, all such certificates shall bear the restrictive legend specified in Section 2(e) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 5, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and/or this Agreement. If the Buyer provides the Company and the Company’s transfer, at the cost of the Buyer, with an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
6. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Securities to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and delivered the same to the Company.
b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.
c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
7. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Securities at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Company shall have executed this Agreement and delivered the same to the Buyer.
b. The Company shall have delivered to the Buyer the duly executed Note, in accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
d. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Board of Directors’ resolutions relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
f. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.
8. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the Circuit Court of Fairfax County, Virginia or in the Alexandria Division of the United States District Court for the Eastern District of Virginia. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any objection or defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyer waive trial by jury. The Buyer shall be entitled to recover from the Company its reasonable attorney’s fees and costs incurred in connection with or related to any Event of Default by the Company, as defined in Article III of the Note. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note or any related document or agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by each of the parties hereto.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be as set forth in the heading of this Agreement. Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
i. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
j. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.
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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
| AMERICAN REBEL HOLDINGS, INC. | ||
| By: | ||
| Charles A. Ross, Jr. | ||
| Chief Executive Officer | ||
| COVENTRY ENTERPRISES, LLC | ||
| By: | ||
| Aggregate Principal Amount of Note: | $ | 111,550.00 | ||
| Original Issue Discount | $ | 14,550.00 | ||
| Aggregate Purchase Price: | $ | 97,000.00 |
EXHIBIT 31.1
CERTIFICATION
I, Charles A. Ross, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Rebel Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: June 14, 2024
| /s/ Charles A. Ross, Jr. | |
| Charles A. Ross, Jr. | |
| Chief Executive Officer and Principal Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Doug E. Grau, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Rebel Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: June 14, 2024
| /s/ Doug E. Grau | |
| Doug E. Grau | |
| President and Interim Principal Accounting Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Rebel Holdings, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Charles A. Ross, Jr. | |
Charles A. Ross, Jr. Chief Executive Officer and Principal Executive Officer |
|
| /s/ Doug E. Grau | |
| Doug E. Grau | |
| President and Interim Principal Accounting Officer |
June 14, 2024
The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), and are not to be incorporated by reference into any filing of American Rebel Holdings, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 99.2
American Rebel to Exhibit at the 153rd NRA Annual Meeting in Dallas, Texas
Nashville, TN, May 17, 2024 (GLOBE NEWSWIRE) — American Rebel Holdings, Inc. (NASDAQ: AREB) (“American Rebel” or the “Company”), a designer, manufacturer, and marketer of American Rebel Beer ( www.americanrebelbeer.com ) and branded safes, personal security and self-defense products and apparel, will exhibit in booth #4417 at the 2024 NRA Annual Meeting at the Kay Bailey Hutchison Convention Center in Dallas, Texas May 17 - 19. The Exhibit Hall is open all three days and will showcase over 14 acres of the latest guns and gear (and now beer) from the most popular companies in the industry.
“We always look forward to showcasing our safes and concealed carry apparel at the NRA Annual Meeting,” said American Rebel CEO Andy Ross. “But this year we can’t wait to introduce America’s Patriotic, God-fearing, Constitution-loving, National Anthem-singing, stand your ground beer to 75,000 or so like-minded patriots attending this year’s Annual Meeting. We sell quite a few safes and concealed carry backpacks and apparel out of the booth every year, and this year we’ll tell everyone about American Rebel Light Beer and hand out some promotional items to support our beer launch.”
“There are only five cities really that can hold us due to our size: Houston, Dallas, Indianapolis, Louisville and Atlanta,” said Nick Perrine, NRA spokesperson. The NRA Annual Meeting was last in Dallas in 2018, and this year the event is expected to bring in 70,000 to 75,000 attendees from across the country, and possibly internationally, generating millions of dollars for the local Dallas economy. Former President Donald Trump will be Saturday’s keynote speaker and Texas Governor Greg Abbott will also speak.
“Launching America’s Patriotic, God-fearing, Constitution-loving, National Anthem-singing, stand your ground beer into the marketplace is a primary goal of our company and introducing American Rebel Light Beer to up to 75,000 patriots helps deliver on that goal,” said Andy Ross. “Interested investors 18 years or older can log onto our public offering website at http://invest.americanrebel.com and register to receive updates when our investment opportunities are open to the public.”
About American Rebel Holdings, Inc.
American Rebel Holdings, Inc. (NASDAQ: AREB) has operated primarily as a designer, manufacturer and marketer of branded safes and personal security and self-defense products and has recently transitioned into the beverage industry through the introduction of American Rebel Beer. The Company also designs and produces branded apparel and accessories. To learn more, visit www.americanrebel.com and www.americanrebelbeer.com. For investor information, visit www.americanrebel.com/investor-relations.
The Reg A Offering will be made by means of the Offering Circular. The securities offered by American Rebel are highly speculative. Investing in shares of American Rebel involves significant risks. The investment is suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the offering, it may not continue. American Rebel intends to list the Series C Preferred Stock offered under Offering Circular on Nasdaq Capital Market and doing so entails significant ongoing corporate obligations including but not limited to disclosure, filing and notification requirements, as well compliance with applicable continued quantitative and qualitative listing standards. The listing of the Company’s Series C Preferred Stock on Nasdaq Capital Market is not a condition of the Company’s proceeding with the Public Offering, and no assurance can be given that our application to list on Nasdaq Capital Market will be approved or that an active trading market for our Series C Preferred will develop.
For additional information on American Rebel, the Offering and any other related topics, please review the Offering Statement that can be found at: https://www.sec.gov/Archives/edgar/data/1648087/000149315224009903/form253g2.htm.
Additional information concerning risk factors related to the Offering, including those related to the business, government regulations, intellectual property and the offering in general, can be found in the section titled “Risk Factors” of the Offering Statement.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. American Rebel Holdings, Inc., (NASDAQ: AREB; AREBW) (the “Company,” “American Rebel,” “we,” “our” or “us”) desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “forecasts” “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements primarily on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include continued increase in revenues, actual receipt of funds under the Reg A Offering, effects of the offering on the trading price of our securities, implied or perceived benefits resulting from the receipt of funds from the offering, actual launch timing and availability of American Rebel Beer, our ability to effectively execute our business plan, and the Risk Factors contained within our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.
Company Contact:
info@americanrebel.com
Investor Relations:
Brian Prenoveau
MZ North America
+1 (561) 489-5315
AREB@mzgroup.us
Exhibit 99.3
American Rebel Light Beer Set to Debut at Tony Stewart’s Eldora Speedway for Dirt Track Late Model Dream Week June 5 - 8
Nashville, TN, June 04, 2024 (GLOBE NEWSWIRE) — American Rebel Holdings, Inc. (NASDAQ: AREB) (“American Rebel” or the “Company”), a designer, manufacturer, and marketer of American Rebel Beer ( www.americanrebelbeer.com ) and branded safes, personal security and self-defense products and apparel, is proud to announce that American Rebel Light Beer will be commercially available for the first time at Tony Stewart’s Eldora Speedway for Dirt Track Late Model Dream Week June 5 – 8.
“I couldn’t think of a better place to launch Rebel Light than the ‘World’s Greatest Dirt Track’ – Eldora Speedway,” said American Rebel Chief Executive Officer Andy Ross. “My band and I will perform Friday night at the speedway to mark the occasion and it’s going to be great. We’re very proud of our relationship with Eldora and our distributor for the speedway and the surrounding area, Bonbright Distributors.”
“We are excited to partner with American Rebel. We look forward working with their team and grow the American Rebel brand in the state of Ohio,” said Brock Anderson, Chairman and Chief Executive Officer of Bonbright Distributors.
“Bonbright Distributors and American Rebel Beer are going to do great things together in the state of Ohio,” said Andy Ross. “Signing a distribution agreement with a distributor like Bonbright is a great achievement for American Rebel and is a great expansion of our growing distribution network across this great country. Tony Stewart’s Eldora Speedway has committed to sell American Rebel Beer at their track and having a customer like Eldora Speedway will put American Rebel Light Lager on the map in west central Ohio. Launching America’s Patriotic, God-Fearing, Constitution-Loving, National Anthem Singing, Stand Your Ground Beer into the marketplace is a primary goal of our company and having American Rebel Light Beer available in the state of Ohio helps deliver on that goal,” said Andy Ross. “Interested investors 18 years or older can log onto our public offering website at http://invest.americanrebel.com and register to receive updates when our investment opportunities are open to the public.”
Bonbright’s 92 vehicles drive the open roads of nine Ohio counties to get their beers to their destinations. The counties they serve include Butler, Clinton, Darke, Greene, Mercer, Miami, Montgomery, Preble and Warren.
“I want to recognize the recent sudden passing of Eldora Speedway General Manager and 2023 Promoter of the Year Jerry Gappens,” said Andy Ross. “Jerry was very enthusiastic about launching American Rebel Beer at Eldora and we’re heartbroken he won’t be there with us in person, but he’ll certainly be with us in spirit.”
“Jerry came to Eldora with a wealth of experience and an equal amount of humility,” said NASCAR, IndyCar and USAC champion Tony Stewart, owner of Eldora Speedway. “No job was too big or too small. His attention to detail was impressive, and he made sure the fan experience at Eldora was exceptional, always finding ways to make improvements with each and every event he oversaw.”
About Eldora Speedway
Since carved from a cornfield in the natural amphitheater that existed between the Eldora Ballroom and the Wabash River by bandleader Earl Baltes in 1954, Eldora Speedway has grown to be a frontrunner in motorsports growth and stability. Baltes chose to sell the legendary high-banked clay oval to motorsports entrepreneur and NASCAR, IndyCar and USAC champion Tony Stewart in 2004. Eldora hosts the biggest events in short-track racing including the Dirt Track Late Model Dream, Kings Royal and World 100. For more information go to www.eldoraspeedway.com.
About Bonbright Distributors
Starting with just one truck, Carl Bonbright created Bonbright Distributors in 1934 when he received the license to sell Schoenling Brewing products in Miami, Montgomery, Greene, Preble and Clark counties. In 1951, he received the distribution rights for Miller Brewing Company brands, and over seventy years later, Bonbright’s annual sales approach 8 million cases annually.
In April 1983, H. Brockman Anderson acquired Bonbright Distributors from the Bonbright family. And that year, the company’s total case sales reached 2,000,000. Under Bonbright’s current ownership and management team, the business has grown by almost 300 percent, added nineteen additional counties, bought eight beer distributorships and acquired the rights to sell products from eight of the nation’s top ten breweries. For more information go to www.bonbright.com.
About American Rebel Holdings, Inc.
American Rebel Holdings, Inc. (NASDAQ: AREB) has operated primarily as a designer, manufacturer and marketer of branded safes and personal security and self-defense products and has recently transitioned into the beverage industry through the introduction of American Rebel Beer. The Company also designs and produces branded apparel and accessories. To learn more, visit www.americanrebel.com and www.americanrebelbeer.com. For investor information, visit www.americanrebel.com/investor-relations.
The Reg A Offering will be made by means of the Offering Circular. The securities offered by American Rebel are highly speculative. Investing in shares of American Rebel involves significant risks. The investment is suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the offering, it may not continue. American Rebel intends to list the Series C Preferred Stock offered under Offering Circular on Nasdaq Capital Market and doing so entails significant ongoing corporate obligations including but not limited to disclosure, filing and notification requirements, as well compliance with applicable continued quantitative and qualitative listing standards. The listing of the Company’s Series C Preferred Stock on Nasdaq Capital Market is not a condition of the Company’s proceeding with the Public Offering, and no assurance can be given that our application to list on Nasdaq Capital Market will be approved or that an active trading market for our Series C Preferred will develop.
For additional information on American Rebel, the Offering and any other related topics, please review the Offering Statement that can be found at: https://www.sec.gov/Archives/edgar/data/1648087/000149315224009903/form253g2.htm.
Additional information concerning risk factors related to the Offering, including those related to the business, government regulations, intellectual property and the offering in general, can be found in the section titled “Risk Factors” of the Offering Statement.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. American Rebel Holdings, Inc., (NASDAQ: AREB; AREBW) (the “Company,” “American Rebel,” “we,” “our” or “us”) desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “forecasts” “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements primarily on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include continued increase in revenues, actual receipt of funds under the Reg A Offering, effects of the offering on the trading price of our securities, implied or perceived benefits resulting from the receipt of funds from the offering, actual launch timing and availability of American Rebel Beer, our ability to effectively execute our business plan, and the Risk Factors contained within our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.
Company Contact:
info@americanrebel.com
Investor Relations:
Brian Prenoveau
MZ North America
+1 (561) 489-5315
AREB@mzgroup.us
Exhibit 99.4
American Rebel Light to be Featured at Country Stampede in Bonner Springs, Kansas June 27 - 29
Nashville, TN, June 10, 2024 (GLOBE NEWSWIRE) — American Rebel Holdings, Inc. (NASDAQ: AREB) (“American Rebel” or the “Company”), a designer, manufacturer, and marketer of American Rebel Beer ( www.americanrebelbeer.com ) and branded safes, personal security and self-defense products and apparel, is proud to announce that American Rebel Light Lager (“Rebel Light”) will be featured at the Country Stampede Music Festival ( www.countrystampede.com ) in Bonner Springs, Kansas June 27 – 29. This will be the first time Rebel Light will be available for purchase in the state of Kansas, exclusively distributed in Kansas by Standard Beverage Corporation ( www.standardbeverage.com ).
“Being featured at Country Stampede is a great way to launch American Rebel Light in Kansas, “ said Andy Ross, Chief Executive Officer of American Rebel. “Launching America’s Patriotic, God-Fearing, Constitution-Loving, National Anthem-Singing, Stand Your Ground Beer into the marketplace is a primary goal of our current Reg A+ offering and having American Rebel Light Beer for sale at Country Stampede helps deliver on that goal. Interested investors 18 years or older can log onto our public offering website at http://invest.americanrebel.com and subscribe to the offering.”
Brian Skurdal, Director of National Sponsorships for Forward Sports Marketing, says, ““We are thrilled to play a small part in the launching of American Rebel Beer in the state of Kansas. The Country Stampede is one of the biggest and most historic country music festivals in the country; and American Rebel Beer will be a welcome addition for years to come.”
American Rebel Beer is a sponsor of the “Party Pit,” the standing-room area in front of the stage. Country Stampede attendees at the Azura Amphitheater, with a capacity of 18,000 music fans, will see ads for American Rebel Light Beer and the American Rebel Light logo will be emblazoned on 2,500 “Party Pit” wrist bands.
Chris Janson will be Thursday’s featured artist, Riley Green will be Friday’s featured artist and Jon Pardi will be Saturday’s featured artist. Other artists scheduled to appear include Billy Currington, LOCASH, Randy Houser, Drew Green, Dillon Carmichael, Jackson Dean, Jerrod Niemann, Redferrin, Neon Union, Casi Joy, Tanner Adell and DJ Hish.
American Rebel and Standard Beverage Corporation both have deep roots in the Kansas City suburb of Lenexa, Kansas, where Standard Beverage has a new 83,000-square-foot facility and American Rebel has its flagship retail store. Standard Beverage was started by Sam Rudd in the Wichita area in 1949, just a year after Kansas ended its prohibition laws, and received one of the first alcohol wholesaler licenses in the state. Standard Beverage is still run by the Rudd family, and today is “the largest single alcohol distributor” in Kansas. American Rebel CEO Andy Ross’s father, Bud Ross, founded two legendary Kansas publicly-traded companies, Kustom Electronics and Birdview Satellite.
About Country Stampede
The Country Stampede, owned by Kustom Entertainment, a subsidiary of Digital Ally, Inc. (NASDAQ: DGLY), is an annual 3-day outdoor music and camping festival that takes place in Bonner Springs, Kansas at Azura Amphitheater. The well-respected Country Stampede is nationally known as one of the largest music festivals in the Midwest. The biggest names in country music have performed at Country Stampede such as Kenny Chesney, Miranda Lambert, Reba McEntire, Taylor Swift, Chris Stapleton, Jason Aldean, Florida Georgia Line, Luke Bryan and so many more. For more information go to www.countrystampede.com.
About Standard Beverage Corporation
Standard Beverage Corporation is a leading distributor of fine wines, spirits and beer, and is the only large distributor that is Kansas owned. With offices in Lawrence, Lenexa and Wichita, Standard Beverage employs approximately 450+ dedicated people and provides the most diverse portfolio of the industry’s best and most well-known brands. For more information on Standard Beverage go to www.standardbeverage.com.
About American Rebel Holdings, Inc.
American Rebel Holdings, Inc. (NASDAQ: AREB) has operated primarily as a designer, manufacturer and marketer of branded safes and personal security and self-defense products and has recently transitioned into the beverage industry through the introduction of American Rebel Beer. The Company also designs and produces branded apparel and accessories. To learn more, visit www.americanrebel.com and www.americanrebelbeer.com. For investor information, visit www.americanrebel.com/investor-relations.
The Reg A Offering will be made by means of the Offering Circular. The securities offered by American Rebel are highly speculative. Investing in shares of American Rebel involves significant risks. The investment is suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following the offering, it may not continue. American Rebel intends to list the Series C Preferred Stock offered under Offering Circular on Nasdaq Capital Market and doing so entails significant ongoing corporate obligations including but not limited to disclosure, filing and notification requirements, as well compliance with applicable continued quantitative and qualitative listing standards. The listing of the Company’s Series C Preferred Stock on Nasdaq Capital Market is not a condition of the Company’s proceeding with the Public Offering, and no assurance can be given that our application to list on Nasdaq Capital Market will be approved or that an active trading market for our Series C Preferred will develop.
For additional information on American Rebel, the Offering and any other related topics, please review the Offering Statement that can be found at: https://www.sec.gov/Archives/edgar/data/1648087/000149315224009903/form253g2.htm.
Additional information concerning risk factors related to the Offering, including those related to the business, government regulations, intellectual property and the offering in general, can be found in the section titled “Risk Factors” of the Offering Statement.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. American Rebel Holdings, Inc., (NASDAQ: AREB; AREBW) (the “Company,” “American Rebel,” “we,” “our” or “us”) desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “forecasts” “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements primarily on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. Important factors that could cause actual results to differ from those in the forward-looking statements include continued increase in revenues, actual receipt of funds under the Reg A Offering, effects of the offering on the trading price of our securities, implied or perceived benefits resulting from the receipt of funds from the offering, actual launch timing and availability of American Rebel Beer, our ability to effectively execute our business plan, and the Risk Factors contained within our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023. Any forward-looking statement made by us herein speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law.
Company Contact:
info@americanrebel.com
Investor Relations:
Brian Prenoveau
MZ North America
+1 (561) 489-5315
AREB@mzgroup.us
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 200,000 | 200,000 |
| Preferred stock, shares outstanding | 200,000 | 200,000 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 600,000,000 | 600,000,000 |
| Common stock, shares issued | 22,129,920 | 9,004,920 |
| Common stock, shares outstanding | 22,129,920 | 9,004,920 |
Condensed Consolidated Statement of Stockholders' Equity/(Deficit) (Unaudited) - USD ($) |
Common Stock [Member] |
Common Stock [Member]
Related Party One [Member]
|
Common Stock [Member]
Related Party Two [Member]
|
Preferred Stock [Member] |
Preferred Stock [Member]
Related Party One [Member]
|
Preferred Stock [Member]
Related Party Two [Member]
|
Additional Paid-in Capital [Member] |
Additional Paid-in Capital [Member]
Related Party One [Member]
|
Additional Paid-in Capital [Member]
Related Party Two [Member]
|
Retained Earnings [Member] |
Retained Earnings [Member]
Related Party One [Member]
|
Retained Earnings [Member]
Related Party Two [Member]
|
Total |
Related Party One [Member] |
Related Party Two [Member] |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2022 | $ 677 | $ 175 | $ 45,465,077 | $ (34,112,810) | $ (11,353,119) | ||||||||||
| Balance, shares at Dec. 31, 2022 | 677,221 | ||||||||||||||
| Net loss | (227,055) | (227,055) | |||||||||||||
| Balance at Mar. 31, 2023 | $ 677 | 175 | 45,465,077 | (34,339,865) | 11,126,064 | ||||||||||
| Balance, shares at Mar. 31, 2023 | 677,221 | ||||||||||||||
| Balance at Dec. 31, 2023 | $ 9,005 | 200 | 52,200,211 | (45,213,594) | 6,995,822 | ||||||||||
| Balance, shares at Dec. 31, 2023 | 9,004,920 | ||||||||||||||
| Net loss | (2,701,278) | (2,701,278) | |||||||||||||
| Vested shares reserved for through deferred compensation plan | $ 3,125 | $ 10,000 | $ (3,125) | $ (10,000) | |||||||||||
| Vested shares reserved for through deferred compensation plan, Shares | 3,125,000 | 10,000,000 | |||||||||||||
| Compensation component of vested and non-vested common stock equivalents attributable to Series A preferred stock – three (3) related parties | 1,134,000 | 1,134,000 | |||||||||||||
| Balance at Mar. 31, 2024 | $ 22,130 | $ 200 | $ 53,321,086 | $ (47,914,872) | $ 5,428,544 | ||||||||||
| Balance, shares at Mar. 31, 2024 | 22,129,920 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. On June 19, 2017, the Company completed a business combination with its majority stockholder, American Rebel, Inc. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.
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”). We established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold our licenses with respect to the beer business. American Rebel Beer plans to launch regionally in 2024.
To varying degrees, the development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our 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 our 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 us (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, 2023, and notes thereto contained, filed on April 12, 2024.
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
Inventory consists of backpacks, jackets, safes, other storage products and accessories manufactured to our design and held for resale and are 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. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
Fixed Assets and Depreciation
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 to seven years.
Revenue Recognition
In accordance with Financial Accounting Standards Board’s (“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. Accounts receivable totaled $2,967,435, $2,816,541 and $1,613,489 as of March 31, 2024, December 31, 2023, and December 31, 2022, respectively.
The carrying amount of accounts receivables is reduced by a valuation allowance for 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 not material as of March 31, 2024, and December 31, 2023.
Advertising Costs
Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $265,055 and $252,725 for the three-month periods ended March 31, 2024, and 2023, respectively.
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, 2024, and December 31, 2023, respectively. The respective carrying value of certain on-balance-sheet 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.
Fair value is defined as the exchange value that would be received on the measurement date to sell an asset or to value the amount paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants. The three levels of the fair value hierarchy are as follows:
Level 1: Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Level 1 inputs provide the most reliable measure of fair value as of the measurement date.
Level 2: Inputs are based on significant observable inputs, including unadjusted quoted market prices for similar assets and liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs are significant unobservable inputs for the asset or liability.
The level of the fair value hierarchy within which the fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than 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. 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. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended March 31, 2024, and March 31, 2023, net loss per share was $ and $, respectively.
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. Out-of-the-money stock options totaled none as of March 31, 2024 and December 31, 2023, respectively. All other dilutive securities are listed below.
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 anti-dilutive.
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.
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, 2024, and December 31, 2023, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month periods ended March 31, 2024, and 2023, respectively, income tax benefit has been recorded due to the recognition of a full valuation allowance.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Warranties
The Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense accounts in the accompanying condensed consolidated balance sheets. We estimate that the warranty liability is nominal or negligible based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of March 31, 2024 and December 31, 2023 was less than $100,000.
Right of Use Assets and Lease Liabilities
ASC 842, Leases requires lessees to recognize almost 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.
Recent Pronouncements
The Company evaluated recent accounting pronouncements through March 31, 2024, and believes that none have a material effect on the Company’s financial statements.
Concentration Risks
Prior to the closing of the Champion Entities in 2022, the Company purchased a substantial portion (over 20%) of its inventory from two third-party vendors. With the closing of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from these third-party vendors. As of March 31, 2024 and December 31, 2023, the net amount due to these third-party vendors (accounts payable and accrued expense) was $0.
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GOING CONCERN |
3 Months Ended |
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Mar. 31, 2024 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 2 – 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, 2024, and 2023 of ($2,701,278) and ($227,055), respectively. The Company’s accumulated deficit was ($47,914,872) as of March 31, 2024, and ($45,213,594) as of December 31, 2023. The Company’s working capital was $3,010,604 as of March 31, 2024, compared to $4,551,927 as of December 31, 2023.
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 is currently conducting a Reg. A+ offering on Form 1-A that became effective on March 13, 2024. Total amount to be sought under this Reg. A+ offering is approximately $20.0 million.
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. 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.
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.
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INVENTORY AND DEPOSITS |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY AND DEPOSITS | NOTE 3 – INVENTORY AND DEPOSITS
Inventory and deposits include the following:
The Company accounts for excess or 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.
Included in inventory – finished goods are approximately $240,000 in finished products related to our American Rebel branded beer lager. This inventory is immediately available to the consumer and for distribution.
When inventory is physically disposed of, we account for the write-offs by making a debit to the reserve and a credit to inventory for the standard cost of the inventory item. Our 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 no material write-offs or inventory reserves during the three months ended March 31, 2024 and 2023.
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PROPERTY AND EQUIPMENT |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
For the three-month periods ended March 31, 2024 and 2023 we recognized $24,315 and $29,090 in depreciation expense, respectively. We depreciate these assets over a period of – 7 years, which has been deemed their useful life.
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RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS |
3 Months Ended |
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Mar. 31, 2024 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS | NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
Charles A. Ross, Jr. serves as the Company’s Chief Executive Officer. Compensation for Mr. Ross was $81,250 and $60,000 plus stock awards (granted and issued) of $0 and $0, respectively for the three months ended March 31, 2024 and 2023. Doug E. Grau serves as the Company’s President and Interim Principal Accounting Officer. Compensation for Mr. Grau was $66,250 and $30,000 plus stock awards (granted and issued) of $0 and $0, respectively for the three months ended March 31, 2024 and 2023.
Both Messrs. Ross and Grau serve as the Company’s Chief Executive Officer and President, respectively. Compensation for both, Messrs. Ross and Grau, includes a base salary and a bonus based upon certain performance measures approved by the board of directors. Three of our officers lent the Company approximately $396,507, net of repayments during the three months ended March 31, 2024, the loans are unsecured non-interest-bearing demand notes. These officers provided these loans as short-term funding and usually receives repayment a few months later, pending working capital needs.
Corey Lambrecht serves as the Company’s Chief Operating Officer. Mr. Lambrecht and the Company entered into an employment agreement on November 20, 2023. Mr. Lambrecht’s employment agreement provides for an initial annual base salary of $260,000, which may be adjusted by the board of directors of the Company. Mr. Lambrecht at this time ceased being an independent director of the Company. Mr. Lambrecht received approximately $65,000 for his services as an officer of the Company for the three months ended March 31, 20243, and $25,000 as an independent consultant for the Company for the three months ended March 31, 2023, respectively.
The Company in connection with its employment agreements (both recently entered (for Mr. Lambrecht) into as well as amended (for Mr. Ross and Mr. Grau)) with Messrs. Ross, Grau and Lambrecht reserved for issuance shares of its common stock that are convertible under the Series A preferred stock conversion terms.
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. The Company on November 20, 2023 for Mr. Lambrecht recognized $4,612,500 as a charge for the share-award grant and $ in compensation expense for the 4th quarter of 2023 for the share award grant and respective earn-outs of the common stock equivalents underlying that share award. For the three months ended March 31, 2024 the Company recognized an additional $ in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2024 another shares of Series A preferred stock vested for Mr. Lambrecht, providing for a total of of shares of common stock that Mr. Lambrecht may convert his Series A preferred shares into.
Per Mr. Ross’s amended employment agreement with an effective date of November 20, 2023, the already issued or existing share-award grant is to 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. The Company on October 31, 2023 for Mr. Ross recognized $8,752,500 as a charge for the share-award grant and recognized $ in compensation expense for the 4th quarter of 2023 for the share award grant and respective earn-outs of the common stock equivalents underlying that share award. For the three months ended March 31, 2024 the Company recognized an additional $ in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2024 shares of Series A preferred stock vested for Mr. Ross, providing for a total of of shares of common stock that Mr. Ross may convert his Series A preferred shares into at any time.
Per Mr. Grau’s amended employment agreement with an effective date of November 20, 2023, the already issued or existing share-award grant is to 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. The Company on October 31, 2023 for Mr. Grau recognized $8,752,500 as a charge for the share-award grant and recognized $ in compensation expense for the 4th quarter of 2023 for the share award grant and respective earn-outs of the common stock equivalents underlying that share award. For the three months ended March 31, 2024 the Company recognized an additional $ in compensation expense attributable to the share award grant and respective earn-out.
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.
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.
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LINE OF CREDIT – FINANCIAL INSTITUTION |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Line Of Credit Financial Institution | ||||||||||||||||||||||||||||||||||||||||||||||
| LINE OF CREDIT – FINANCIAL INSTITUTION | NOTE 6 – LINE OF CREDIT – FINANCIAL INSTITUTION
During February 2023, the Company entered into a $2 million master credit agreement (credit facility) with a major financial institution (“Line of Credit”). The Line of Credit accrues interest at a rate determined by the Bloomberg Short-Term Bank Yield Index (“BSBY”) Daily Floating Rate plus 2.05 percentage points (which at March 31, 2024 and December 31, 2023 for the Company was 7.45% and 7.48%, respectively), and is secured by all the assets of the Champion Entities. The Line of Credit expired February 28, 2024. The outstanding amount due on the Line of Credit at March 31, 2024 and December 31, 2023 was, respectively.
Current and long-term portion. As of March 31, 2024 and December 31, 2023 the total balance due of $1,818,441 and $1,456,929 is reported as current as the Line of Credit is to be repaid within one year, with subsequent drawdowns as needed by the Company. Upon inception the Company paid a one-time loan fee equal to 0.1% of the Line of Credit amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate.
Initially the Company drew down on the Line of Credit in the amount of $1.7 million, with subsequent net payments and draws on the Line of Credit in the amount of approximately $250,000. The Company recently increased the Line of Credit amount beyond its initial drawdown. The Company intends to keep the Line of Credit open and in existence to enhance the profitability and working capital needs of the Champion entities and may in the future seek to expand the Line of Credit, The Company received an extension on the Line of Credit and as of the date of this Report has not entered into an amended agreement for the Line of Credit.
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NOTES PAYABLE – WORKING CAPITAL |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE – WORKING CAPITAL | NOTE 7 – NOTES PAYABLE – WORKING CAPITAL
On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan #1”) with an accredited investor lending source. Under the Secured Loan #1, the Company received the loan net of fees of $20,000. The Secured Loan #1 requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan #1 bears interest at 41.4%. The Secured Loan #1 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #1. The Secured Loan #1 provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company was required to pay a fee associated with the Lender and its introduction to the Company of $80,000 to be made in equity of the Company at the time the loan was entered into. The Company issued post-reverse stock split shares, which on the date of issuance had a value of approximately $2,900. Since the number of shares had been established upon consummation of the loan but not valued or recorded on the books at the time, because of the leeway on grant date; total cost to the Company for the issuance of the shares of common stock on the grant date was $2,900 which was recorded to interest expense and attributable to the loan.
On July 1, 2023, the Company entered into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited lender. Under the Assumption Agreement the Company agreed to pay $150,000 immediately to the holder of the $600,000 working capital loans that the Company had in place. The Assumption Agreement provided for the accredited lender, who effectively had the same management and ownership as the old working capital holders and assumed the debt instruments under the same terms and conditions and is due one year from the date of the Assumption Agreement, June 30, 2024 for one of the loans and the other loan (in the amount of $150,000) is due and payable on December 31, 2023. The Company made a one-time payment of $150,000 to the holder and was released from the prior obligations and the default status that it had been in with that holder since March 31, 2023.
On July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023, and the accredited lender of the new working capital loans paid the holder of the old working capital loans $450,000 which required no additional working capital outlay from the Company. The terms of the new loan are 12% per annum and interest only payments that are due by last day of the quarter based on a calendar year. This reduces the Company’s interest payments on the working capital loans (old) of $600,000 from $18,000 per quarter to just $13,500 per quarter (for quarter ending December 31, 2023) and $9,000 per quarter thereafter (for quarters ending March 31, 2024 and June 30, 2024).
On December 19, 2023, the Company entered into a $500,000 Revenue Interest Purchase Agreement (the “Revenue Interest Loan”) with an accredited lender. Under the Revenue Interest Loan, the Company received the revenue interest purchase price/loan net of fees of $5,000. The Revenue Interest Loan requires monthly payments of $75,000 each, until the Revenue Interest Loan is repurchased by the Company. Upon entering into the agreement, the Revenue Interest Loan bore an effective interest of more than 100%. The Revenue Interest Loan is secured by all of the product revenues of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s is obligated to provide for 50% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan as payment towards the amounts due. The Revenue Interest Loan may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan prior to April 1, 2024 is 125% or $625,000, the repurchase price for the Revenue Interest Loan after April 1, 2024 and prior to May 5, 2024 is 137.5% or $687,500, thereafter the repurchase price of the Revenue Interest Loan is $687,500 plus monthly payments of $75,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety. The Revenue Interest Loan bears an effective interest of 81.3% as of March 31, 2024, an effective interest rate of 87.3% through May 4, 2024, and an effective interest rate of 111.3% thereafter until the Company repurchases the Revenue Interest Loan from the holder.
On December 29, 2023, the Company entered into a $500,000 Business Loan and Security Agreement (the “Secured Loan #2”) with an accredited investor lending source. Under the Secured Loan #2, the Company received the loan net of fees of $10,000. The Secured Loan #2 requires 52 weekly payments of $11,731 each, for a total repayment of $610,000. The Secured Loan #2 bears interest at 40.5%. The Secured Loan #2 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #2. The Secured Loan #2 provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company is required to pay a fee associated with the Lender and its introduction to the Company of $40,000 to be made in equity of the Company at the time the loan was entered into.
On March 21, 2024, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the lender made a loan to the Company, evidenced by a promissory note in the principal amount of $235,750. A one-time interest charge or points amounting to 15% (or $35,362) and fees of $5,000 were applied at the issuance date, resulting in net proceeds to the Company of $200,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in seven payments; the first payment shall be in the amount of $162,667.20 and is due on June 30, 2024 with six (6) subsequent payments each in the amount of $18,074.14 due on the 30th of each month thereafter (total repayment of $271,112 on or by December 31, 2023). the Company has the right to prepay the note within one hundred eighty days at a discount of 5%. Effective interest rate on this loan is 81.1% with 15 points paid up front as a fee as of March 31, 2024.
On March 22, 2024, the Company entered into another Revenue Interest Purchase Agreement (the “Revenue Interest Loan #2”) with an individual accredited investor, in the amount of $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Loan #2, the investor has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Furthermore, the Company’s is obligated to provide for 5.15% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan as payment towards the amounts due. The Revenue Interest Loan may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan prior to May 31, 2024 is 140% or $140,000, the repurchase price for the Revenue Interest Loan after May 31, 2024 and prior to July 5, 2024 is 154 % or $154,000, thereafter the repurchase price of the Revenue Interest Loan is $154,000 plus monthly payments of $10,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety. The Revenue Interest Loan bears an effective interest of more than 200% as of March 31, 2024, an effective interest rate of 188.8% through May 31, 2024, and an effective interest rate of 183.4% thereafter until the Company repurchases the Revenue Interest Loan from the holder.
On March 27, 2024, the Company entered into a $1,300,000 Business Loan and Security Agreement (the “Secured Loan #3”) with an accredited investor lending source. Under the Secured Loan #3, the Company received the loan net of fees of $26,000. The Company repaid two outstanding secured notes payable (Secured Loan #1 and Secured Loan #2) to affiliates of the lender totaling $769,228, resulting in net proceeds to the Company of $504,772. The Secured Loan #3 requires 64 weekly payments of $26,000 each, for a total repayment of $1,664,000. The Secured Loan #3 bears an effective interest 40.9%. The Secured Loan #3 is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan #3. The Secured Loan #3 provides for a default fee of $15,000 for any late payments on the weekly payments. As long as the Secured Loan #3 is not in default, the Company may prepay the Secured Loan #3 pursuant to certain prepayment amounts set forth in the Secured Loan #3. Further, any default by the Company allows the lender to take necessary actions to secure its collateral and recovery of funds.
At March 31, 2024, and December 31, 2023, the outstanding balance due on all of the working capital notes payable was $2,675,750 and $1,954,214, respectively. These amounts do not include any interest payable on the various notes where interest was not paid in full per the terms of the notes.
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GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES |
3 Months Ended |
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Mar. 31, 2024 | |
| Goodwill And Acquisition Of Champion Entities | |
| GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES | NOTE 8 – GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES
Goodwill
Goodwill is initially recorded as of the acquisition date, and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.
As of March 31, 2024 and December 31, 2023, we had goodwill of $2,000,000 presented within other long-term assets in our consolidated balance sheets, directly related to our 2022 acquisition of the Champion Entities.
The Company will review its goodwill for impairment periodically (based on economic conditions) and determine whether impairment is to be recognized within its consolidated statement of operations. No impairment charges were recognized during the three months ended March 31, 2024 and 2023.
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INCOME TAXES |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 9 – INCOME TAXES
At March 31, 2024 and December 31, 2023, the Company had a net operating loss carry forward of $47,914,872 and $45,213,594, respectively, which begins to expire in 2034.
Components of net deferred tax asset, including a valuation allowance, are as follows:
Valuation allowance for deferred tax assets as of March 31, 2024, and December 31, 2023, was $10,061,910 and $9,494,850, respectively. In assessing the recovery of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not deferred tax assets will not be realized as of March 31, 2024, and December 31, 2023, and recognized 100% valuation allowance for each period.
Reconciliation between the statutory rate and the effective tax rate for both periods and as of March 31, 2024 and December 31, 2023:
On August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous provisions, including a 15% corporate alternative minimum income tax on “adjusted financial statement income”, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases. The provisions of the 2022 act become effective for tax years beginning after December 31, 2023. On December 27, 2022, the IRS and Department of Treasury issued initial guidance for taxpayers subject to the corporate alternative minimum tax. The guidance addresses several, but not all, issues that needed clarification. The IRS and Department of Treasury intend to release additional guidance in the future. We will continue to evaluate the impact of the 2022 act as more guidance becomes available. We currently do not expect an impact on our consolidated financial statements.
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SHARE CAPITAL |
3 Months Ended |
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Mar. 31, 2024 | |
| Equity [Abstract] | |
| SHARE CAPITAL | 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.
On June 27, 2023, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of 1-for-25. The share numbers and pricing information in this report are adjusted to reflect the reverse stock split as of March 31, 2024 and March 31, 2023, and as of December 31, 2023, respectively.
Common stock and preferred stock
For the month of June 2023, the following transactions occurred: On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,850.63 of securities, consisting of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “ 2023 Prefunded Warrant Shares”) at $ per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $ per share and will expire five years from the date of issuance.
For the month of July 2023, the following transactions occurred: Approximately shares of the Company’s common stock were issued pursuant to the 100-share lot roundup caused by the reverse stock split on June 27, 2023. The Depository Trust and Clearing Corporation (the “DTCC”) which handles the clearing and settlement of virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets submitted numerous requests for share allocations. In connection with the Company’s June 27, 2023 1-for-25 reverse split DTCC made these requests. An additional 1.488 million shares of the Company’s common stock were newly issued and added to its post-reverse stock split numbers. As described in the Company’s Information Statement filed on Schedule 14C dated December 14, 2022, shareholders holding at least a “round lot” (100 shares or more) prior to the reverse stock split shall have no less than one round lot (100 shares) after the reverse stock split.
Pursuant to the PIPE transaction shares of common stock were issued to Armistice Capital. The 2023 Prefunded Warrants held by Armistice Capital were not exercised for the month of July.
For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued.
For the month of September 2023, the following transactions occurred: On September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $ and $, respectively per share.
Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued shares of the Company’s common stock, of which shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of shares of common stock (September 21st) and shares of common stock (September 12th), representing less than 9.99% ownership interest by Armistice Capital on such dates.
On September 8, 2023, 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, shares of common stock were issued. On September 19, 2023, the Company issued shares of common stock pursuant to the Company’s 2021 LTIP equity plan. The shares were valued at $4,984.98 with a per share value of $ which was the Company’s common stock closing market price on the grant date and date of issuance. Under the 2021 LTIP equity plan shares of common stock were issued to Mr. Ross our Chief Executive Officer and shares of common stock were issued to Mr. Grau our President and Interim Principal Accounting Officer. Additionally, on September 19, 2023, shares of common stock were granted and issued to a vendor associated with our current working capital loan. The shares were valued at $2,902.38 with a per share value of $. On September 20, 2023, the Company issued shares of common stock pursuant to the Company’s board compensation plan for its independent directors. The shares were valued at $18,096.75 with a per share value of $ which was the Company’s common stock closing market price on the grant date as well as issuance date. The Company recognized approximately $228,000 in gain on settlement of debt through the issuance of shares of common stock to its independent directors on this date.
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. Per Mr. Lambrecht’s employment agreement entered into on November 20, 2023, The Company for Mr. Lambrecht recognized $ as a charge for the share-award grant and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of grant for Mr. Lambrecht’s shares was $.
Per Mr. Ross’s amended employment agreement with an effective date of November 20, 2023, The Company for Mr. Ross recognized $ as a charge for the share-award grant on October 31, 2023 (the modification date) and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of modification of the terms of the Series A preferred stock for Mr. Ross’s shares was $.
Per Mr. Grau’s amended employment agreement with an effective date of November 20, 2023, The Company for Mr. Grau recognized $ as a charge for the share-award grant on October 31, 2023 (the modification date) and recognized $ in compensation expense for the year ending December 31, 2023 for the grants and respective earn-outs of the common stock equivalents under the employment agreement through December 31, 2023. The Company values the shares granted and earned out, as well as the additional shares granted but not earned out in accordance with ASC 718 and employee share-awards. Market value for the Company’s publicly traded stock at the time of modification of the terms of the Series A preferred stock for Mr. Grau’s shares was $.
Shares Issued as Compensation
The Company in connection with various consulting and advisory agreements is required to issue shares of its common stock. 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 non-employees 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 to have been satisfied upon 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.
Modified Terms of Series A Preferred Stock
On October 31, 2023, the Company board of directors approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and to allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. Based on the vesting schedule afforded to the holders of the Series A Preferred Stock, shares of common stock could be issued upon the conversion of shares of Series A Preferred Stock as of December 31, 2023, and immediately subsequent to December 31, 2023, another shares of common stock could be issued upon the conversion of shares of Series A Preferred Stock on January 1, 2024. The conversion of the Series A Preferred Stock is at the discretion of the holder unless there are special circumstances. The Company will recognize the fair value of the modified share awards over the employment agreement period and will record any changes to that fair value in accordance with ASC 718 on a period-by-period basis as part of that compensation expense, attributable to the employee.
New Preferred Stock Series Designation and Reg. A+ Offering
On November 3, 2023, the Company’s board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”).
The Company filed a registration statement on Form 1-A offering up to shares of Series C Preferred Stock, at an offering price of $ per share, for a maximum offering amount of $19,999,995. There is a minimum initial investment amount per investor of $300.00 for the Series C Preferred Stock and any additional purchases must be made in increments of at least $7.50.
At March 31, 2024 and December 31, 2023, there were shares of common stock issued (which includes reserved for) and outstanding, respectively; and and shares of Series B preferred stock issued and outstanding, respectively, and and shares of its Series A preferred stock issued and outstanding, respectively. Series C preferred stock was issued or outstanding at March 31, 2024 or December 31, 2023.
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WARRANTS AND OPTIONS |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARRANTS AND OPTIONS |
As of March 31, 2024, no Prefunded Warrants remained issued and outstanding with respect to the July PIPE transaction. The Prefunded Warrants were purchased in their entirety by the holders of the warrants for $27.50 per warrant. The Prefunded Warrants required the payment of an additional $0.25 per warrant and the written notice of exercise to the Company to convert the Prefunded Warrant into one share of common stock of the Company. During the period from July 12, 2022 through December 31, 2023, the Company received notice on Prefunded Warrants converting into shares of common stock.
Calvary Fund exercised all of its Calvary Warrants by November 30, 2022 requiring the payment of an additional $0.25 per warrant and the written notice of exercise to the Company to convert the Calvary Warrant into one share of common stock of the Company. Calvary Fund continues to hold the warrants exercisable at a price of $129.6875 per warrant.
Along with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to 936,937 shares of the Company’s common stock with an exercise price of $ per share expiring from the date of issuance, or July 11, 2027. Each Prefunded Warrant and share of common stock issued in the PIPE transaction received two warrants that were exercisable at $ per share with a five-year expiry. None of these warrants have been exercised by the holders.
On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $ of securities, consisting of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance. The 686,499 warrants were repriced to $1.10 per share as part of the Inducement Letter and exercise terms with Armistice Capital.
On September 8, 2023, the Company, entered into an inducement offer letter agreement with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.
Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued shares of the Company’s common stock, of which shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of shares of common stock (September 21st) and shares of common stock (September 12th), representing less than 9.99% ownership interest by Armistice Capital on such dates. The common stock purchase warrants that were induced into being exercised were all held by Armistice Capital and consisted of the July 12, 2022 immediately exercisable warrants with an exercise price of $, the additional issuance of warrants to Armistice Capital that contractually were part of the July 12, 2022 issuance but were triggered by the June 27, 2023 offering that occurred with Armistice Capital and resulting in an additional 1,365,251 immediately exercisable warrants with an exercise price of $, along with 686,499 immediately exercisable warrants with an exercise price of $ that were issued on June 27, 2023.
On August 21, 2023, 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued. On September 8, 2023 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, shares of common stock were issued. A total of 2023 Prefunded Warrants were exercised along with warrants per the Inducement Letter.
Along with the Prefunded Warrants the previous year’s PIPE investors were issued immediately exercisable warrants to purchase up to 936,937 shares of the Company’s common stock with an exercise price of $ per share expiring from the date of issuance, or July 11, 2027. Each Prefunded Warrant and share of common stock issued in the PIPE transaction received two warrants that were exercisable at $ per share with a five-year expiry. None of these warrants have been exercised by the holders. These warrants were repriced to $ per share as part of the Inducement Letter and exercise agreement by and between Armistice Capital and the Company.
As of March 31, 2024 and December 31, 2023, there were 6,136,892 warrants issued and outstanding to acquire additional shares of common stock.
The Company evaluates outstanding warrants as derivative liabilities and will recognize any changes in the fair value through earnings. The Company determined that the warrants have an immaterial fair value at December 31, 2023 and March 31, 2024. The warrants do not trade in a highly active securities market, and as such, the Company estimated the fair value of these common stock equivalents using Black-Scholes and the following assumptions:
Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term which due to their maturity period as expiry, it was three years. The Company had no reason to believe future volatility over the expected remaining life of these common stock equivalents was likely to differ materially from historical volatility. Expected life was based on three years due to the expiry of maturity. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the common stock equivalents.
Stock Purchase Warrants
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LEASES AND LEASED PREMISES |
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| Leases And Leased Premises | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES AND LEASED PREMISES | NOTE 12 – 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 (more than month-to-month) 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’ expiry 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 $630,000 and $226,000 for the three months ended March 31, 2024, and 2023, respectively. These amounts are included in our condensed consolidated statement of operations in Rental expense, warehousing, outlet expense and Administrative and other. Rental expense, warehousing, outlet expense is specific to warehousing and final manufacturing of our products.
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.
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. The Company added approximately $1,000,000 in right-of-use lease assets offset by right-of-use lease liabilities during the 4th quarter for the year ended December 31, 2023, this included multiple leases that were increased in size and as well as several leases that were extended or options to extend were added in the lease terms.
Balance sheet information related to our leases is presented below:
The following provides details of the Company’s lease expense:
Other information related to leases is presented below:
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
Rental expense totaled approximately $374,017 and $226,660 for the three months ended March 31, 2024 and 2023, respectively. The Company extended several leases and increased the payments on several more in connection with its expansion, while closing several facility leases in streamlining operations and inventory storage and warehousing.
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
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Mar. 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
Various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company from time-to-time. In the opinion of management, and after consultation with legal counsel, resolution of any of these matters (of which there are none) is not expected to have a material effect on the condensed consolidated financial statements.
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, 2024 and December 31, 2023 there were no outstanding letters of credit issued during the normal course of business. These letters of credit could reduce our available borrowings. During the three months ended March 31, 2024 the Company entered into a line of credit with a major financial institution. The amount due on the line of credit as of March 31, 2024 was $1,818,441. The Company is in compliance with its terms and covenants.
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.
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OTHER INCOME – EMPLOYEE RETENTION CREDIT |
3 Months Ended |
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Mar. 31, 2024 | |
| Other Income and Expenses [Abstract] | |
| OTHER INCOME – EMPLOYEE RETENTION CREDIT | NOTE 14 – OTHER INCOME – EMPLOYEE RETENTION CREDIT
The Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the preparation of tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During the year ended December 31, 2023, the Company received approximately $1,291,000 in tax credits under the CARES Act from the US Department of Treasury and paid approximately $178,000 to the service provider, netting the Company approximately $1,113,000 in credits for the retaining of its employees during COVID.
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SUBSEQUENT EVENTS |
3 Months Ended |
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Mar. 31, 2024 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of March 31, 2024, through the date the financial statements were issued and determined that there were the following subsequent events:
On April 1, 2024, the Company entered into a Revenue Interest Purchase Agreement with an accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Purchase Agreement, the investor has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Under the Revenue Interest Purchase Agreement, the Company has an option to repurchase the Revenue Interest at any time upon two days advance written notice. Additionally, the investor has an option to terminate the Revenue Interest Purchase Agreement and to require the Company to repurchase future Revenue Interest upon the Company consummating a public offering pursuant to Regulation A. The repurchase price to be paid by the Company will be, if the Call Option or the Put Option is exercised (i) $ if repurchased on or before May 31, 2024; and (ii) $ after June 1, 2024; in each case of (i) or (ii), minus all Revenue Interest or other payments made by the Company to the investor prior to such date. In addition, the Revenue Interest Purchase Agreement contains various representations and warranties, covenants and other obligations and other provisions that are customary for a transaction of this nature.
On April 9, 2024, the Company entered into a Revenue Interest Purchase Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Purchase Agreement, the investor has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Under the Revenue Interest Purchase Agreement, the Company has an option to repurchase the Revenue Interest at any time upon two days advance written notice. Additionally, the investor has an option to terminate the Revenue Interest Purchase Agreement and to require the Company to repurchase future Revenue Interest upon the Company consummating a public offering pursuant to Regulation A. The repurchase price to be paid by the Company will be, if the Call Option or the Put Option is exercised (i) $ if repurchased on or before May 31, 2024; and (ii) $ after June 1, 2024; in each case of (i) or (ii), minus all Revenue Interest or other payments made by the Company to the investor prior to such date. The foregoing description of the material terms of the Revenue Interest Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Revenue Interest Purchase Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 10.21.
On April 9, 2024, the Company entered into a Revenue Interest Purchase Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $300,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Purchase Agreement, the investor has a right to receive $30,000 per month from the Company generated from its operating subsidiaries. Under the Revenue Interest Purchase Agreement, the Company has an option to repurchase the Revenue Interest at any time upon two days advance written notice. Additionally, the investor has an option to terminate the Revenue Interest Purchase Agreement and to require the Company to repurchase future Revenue Interest upon the Company consummating a public offering pursuant to Regulation A. The repurchase price to be paid by the Company will be, if the Call Option or the Put Option is exercised (i) $ if repurchased on or before May 31, 2024; and (ii) $ after June 1, 2024; in each case of (i) or (ii), minus all Revenue Interest or other payments made by the Company to the investor prior to such date. The foregoing description of the material terms of the Revenue Interest Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Revenue Interest Purchase Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 10.22.
On April 9, 2024, the Company entered into a Revenue Interest Purchase Agreement with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Company for $75,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Purchase Agreement, the investor has a right to receive $7,500 per month from the Company generated from its operating subsidiaries. Under the Revenue Interest Purchase Agreement, the Company has an option to repurchase the Revenue Interest at any time upon two days advance written notice. Additionally, the investor has an option to terminate the Revenue Interest Purchase Agreement and to require the Company to repurchase future Revenue Interest upon the Company consummating a public offering pursuant to Regulation A. The repurchase price to be paid by the Company will be, if the Call Option or the Put Option is exercised (i) $ if repurchased on or before May 31, 2024; and (ii) $ after June 1, 2024; in each case of (i) or (ii), minus all Revenue Interest or other payments made by the Company to the investor prior to such date. The foregoing description of the material terms of the Revenue Interest Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the Revenue Interest Purchase Agreement, a copy of which is attached to this Annual Report on Form 10-K as Exhibit 10.23.
On April 19, 2024, the Registrant entered into a Revenue Interest Purchase Agreement (the “Revenue Interest Purchase Agreement”) with an individual accredited investor, pursuant to which the investor purchased a revenue interest from the Registrant for $500,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Registrant pursuant to the terms of the Revenue Interest Purchase Agreement, the investor has a right to receive $50,000 per month from the Registrant generated from its operating subsidiaries (the “Revenue Interest”). Under the Revenue Interest Purchase Agreement, the Company has an option (the “Call Option”) to repurchase the Revenue Interest at any time upon two days advance written notice. Additionally, the Purchasers have an option (the “Put Option”) to terminate the Revenue Interest Purchase Agreement and to require the Registrant to repurchase future Revenue Interest upon the Registrant consummating a public offering pursuant to Regulation A. The repurchase price to be paid by the Registrant will be, if the Call Option or the Put Option is exercised (i) $ if repurchased on or before May 31, 2024; and (ii) $ after June 1, 2024; in each case of (i) or (ii), minus all Revenue Interest or other payments made by the Registrant to the investor prior to such date.
On April 23, 2024, the Registrant received notice from Nasdaq indicating that, while the Registrant has not regained compliance with the Bid Price Requirement, Nasdaq has determined that the Registrant is eligible for an additional 180-day period, or until October 21, 2024, to regain compliance. According to the notification from Nasdaq, the staff’s determination was based on (i) the Registrant meeting the continued listing requirement for market value of its publicly held shares and all other applicable Nasdaq initial listing standards, with the exception of the minimum bid price requirement, and (ii) the Registrant’s written notice to Nasdaq of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If at any time during this second 180-day compliance period, the closing bid price of the common stock is at least $ per share for a minimum of 10 consecutive business days, Nasdaq will provide the Registrant with written confirmation of compliance. If compliance cannot be demonstrated by October 21, 2024, Nasdaq will provide written notification that the common stock will be delisted. At that time, the Registrant may appeal Nasdaq’s determination to a Hearings Panel.
On April 24, 2024, the Registrant received notice from Nasdaq indicating that Staff determined to grant the Registrant an extension until June 15, 2024 to regain compliance with the rule by holding an annual meeting of shareholders. At the annual meeting, shareholders must be afforded the opportunity to discuss company affairs with management and, if required by the company’s governing documents, to elect directors. The Registrant expects to hold an annual meeting within such timeframe. While the compliance plan is pending, the Registrant’s securities will continue to trade on NASDAQ.
The maturity date on the Champion line of credit was extended by Bank of America to April 30, 2024. The balance at the maturity date was approximately $1.81M and access to the line of credit was terminated. Champion and Bank of America have continued dialogue and the company is working with our assigned representatives regarding term loan repayment options.
On May 3, 2024, the Securities and Exchange Commission (the “Commission”) 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 Commission as an accountant (the “Order”). As a result of the Order, BF Borgers may no longer serve as the Registrant’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.
On May 3, 2024, the Registrant dismissed BF Borgers CPA PC (“BF Borgers”) as its independent registered public accounting firm. The Registrant’s audit committee unanimously approved the decision to dismiss BF Borgers.
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 Registrant on May 6, 2024, unanimously approved to dismiss, and dismissed BF Borgers as the Registrant’s independent registered public accounting firm.
On May 10, 2024, the Registrant’s board of directors approved the designation of a new Series D Convertible Preferred Stock (the “Series D Designation”). The rights, preferences, restrictions and other matters relating to the Series D Convertible Preferred Stock (the “Series D Preferred Stock”) are described in greater detail in Exhibit 4.15.
On May 13, 2024, the Committee approved the engagement of GBQ as the Registrant’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.
On May 28, 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 $111,550 (the “Note”). An original issue discount of $14,550 and fees of $7,000 were applied on the issuance date, resulting in net loan proceeds to the Company of $90,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in nine payments in the amount of $13,881.78, with the first payment due on June 30, 2024, and remaining eight payments due on the last day of each month thereafter (a total payback to the Lender of $124,936.00).
On June 14, 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 $111,550 (the “Note”). An original issue discount of $14,550 and fees of $7,000 were applied on the issuance date, resulting in net loan proceeds to the Company of $90,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in nine payments in the amount of $13,881.78, with the first payment due on June 30, 2024, and remaining eight payments due on the last day of each month thereafter (a total payback to the Lender of $124,936.00).
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization | Organization
The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. On June 19, 2017, the Company completed a business combination with its majority stockholder, American Rebel, Inc. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.
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| Nature of Operations | 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”). We established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold our licenses with respect to the beer business. American Rebel Beer plans to launch regionally in 2024.
To varying degrees, the development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our 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 our 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 us (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.
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| Interim Financial Statements and Basis of Presentation | 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, 2023, and notes thereto contained, filed on April 12, 2024.
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| Principles of Consolidation | 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.
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| Year-end | Year-end
The Company’s year-end is December 31.
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| Cash and Cash Equivalents | 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.
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| Inventory and Inventory Deposits | Inventory and Inventory Deposits
Inventory consists of backpacks, jackets, safes, other storage products and accessories manufactured to our design and held for resale and are 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. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
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| Fixed Assets and Depreciation | Fixed Assets and Depreciation
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 to seven years.
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| Revenue Recognition | Revenue Recognition
In accordance with Financial Accounting Standards Board’s (“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. Accounts receivable totaled $2,967,435, $2,816,541 and $1,613,489 as of March 31, 2024, December 31, 2023, and December 31, 2022, respectively.
The carrying amount of accounts receivables is reduced by a valuation allowance for 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 not material as of March 31, 2024, and December 31, 2023.
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| Advertising Costs | Advertising Costs
Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $265,055 and $252,725 for the three-month periods ended March 31, 2024, and 2023, respectively.
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| Fair Value of Financial Instruments | 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, 2024, and December 31, 2023, respectively. The respective carrying value of certain on-balance-sheet 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.
Fair value is defined as the exchange value that would be received on the measurement date to sell an asset or to value the amount paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants. The three levels of the fair value hierarchy are as follows:
Level 1: Inputs are unadjusted quoted market prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Level 1 inputs provide the most reliable measure of fair value as of the measurement date.
Level 2: Inputs are based on significant observable inputs, including unadjusted quoted market prices for similar assets and liabilities in active markets, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs are significant unobservable inputs for the asset or liability.
The level of the fair value hierarchy within which the fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.
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| Stock-Based Compensation |
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than 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.
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| Earnings per Share |
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. 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. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended March 31, 2024, and March 31, 2023, net loss per share was $ and $, respectively.
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. Out-of-the-money stock options totaled none as of March 31, 2024 and December 31, 2023, respectively. All other dilutive securities are listed below.
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 anti-dilutive.
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| Income Taxes | 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.
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, 2024, and December 31, 2023, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month periods ended March 31, 2024, and 2023, respectively, income tax benefit has been recorded due to the recognition of a full valuation allowance.
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
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| Warranties | Warranties
The Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense accounts in the accompanying condensed consolidated balance sheets. We estimate that the warranty liability is nominal or negligible based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of March 31, 2024 and December 31, 2023 was less than $100,000.
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| Right of Use Assets and Lease Liabilities | Right of Use Assets and Lease Liabilities
ASC 842, Leases requires lessees to recognize almost 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.
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| Recent Pronouncements | Recent Pronouncements
The Company evaluated recent accounting pronouncements through March 31, 2024, and believes that none have a material effect on the Company’s financial statements.
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| Concentration Risks | Concentration Risks
Prior to the closing of the Champion Entities in 2022, the Company purchased a substantial portion (over 20%) of its inventory from two third-party vendors. With the closing of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from these third-party vendors. As of March 31, 2024 and December 31, 2023, the net amount due to these third-party vendors (accounts payable and accrued expense) was $0. |
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ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF EARNINGS PER SHARE |
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INVENTORY AND DEPOSITS (Tables) |
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| SCHEDULE OF INVENTORY AND DEPOSITS | Inventory and deposits include the following:
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PROPERTY AND EQUIPMENT (Tables) |
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| SCHEDULE OF PROPERTY AND EQUIPMENT | Property and equipment include the following:
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LINE OF CREDIT – FINANCIAL INSTITUTION (Tables) |
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Line Of Credit Financial Institution | ||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LINE OF CREDIT |
|
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NOTES PAYABLE – WORKING CAPITAL (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF WORKING CAPITAL |
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INCOME TAXES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES | Components of net deferred tax asset, including a valuation allowance, are as follows:
|
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| SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION | Reconciliation between the statutory rate and the effective tax rate for both periods and as of March 31, 2024 and December 31, 2023:
|
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WARRANTS AND OPTIONS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE MEASUREMENT |
|
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| SCHEDULE OF WARRANT ACTIVITY |
|
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LEASES AND LEASED PREMISES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases And Leased Premises | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES | Balance sheet information related to our leases is presented below:
|
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| SCHEDULE OF LEASE EXPENSE | The following provides details of the Company’s lease expense:
|
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| SCHEDULE OF OTHER INFORMATION RELATED TO LEASES | Other information related to leases is presented below:
|
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| SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE | The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
|
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SCHEDULE OF EARNINGS PER SHARE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Accounting Policies [Abstract] | ||
| Shares used in computation of basic earnings per share for the periods ended | 22,129,200 | 677,200 |
| Total dilutive effect of outstanding stock awards or common stock equivalents | 51,679,600 | 1,062,760 |
| Shares used in computation of fully diluted earnings per share for the periods ended March 31, 2024 and March 31, 2023, respectively | 73,808,800 | 1,739,960 |
| Net income (loss) | $ (2,701,278) | $ (227,055) |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
Dec. 31, 2022 |
|
| Product Information [Line Items] | ||||
| Date of incorporation | Dec. 15, 2014 | |||
| Accounts receivable | $ 2,967,435 | $ 2,816,541 | $ 1,613,489 | |
| Marketing expense | $ 265,055 | $ 252,725 | ||
| Earnings per share diluted | $ (0.12) | $ (0.34) | ||
| Income tax examination description | less than a 50% likelihood | less than a 50% likelihood | ||
| Income tax expense | ||||
| Warranty liability | 100,000 | $ 100,000 | ||
| 2 Third-party Vendors [Member] | ||||
| Product Information [Line Items] | ||||
| Accounts payable and accrued expense | $ 0 | $ 0 | ||
| Supplier Concentration Risk [Member] | Inventory [Member] | 2 Third-party Vendors [Member] | ||||
| Product Information [Line Items] | ||||
| Risk percentage | 20.00% | 20.00% | ||
| Minimum [Member] | ||||
| Product Information [Line Items] | ||||
| Estimated useful life | 5 years | |||
| Maximum [Member] | ||||
| Product Information [Line Items] | ||||
| Estimated useful life | 7 years | |||
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
| Net Income (Loss) Attributable to Parent | $ 2,701,278 | $ 227,055 | |
| Retained Earnings (Accumulated Deficit) | 47,914,872 | $ 45,213,594 | |
| Working capital | 3,010,604 | $ 4,551,927 | |
| Sought value | $ 20,000,000.0 | ||
SCHEDULE OF INVENTORY AND DEPOSITS (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory – Finished Goods and Work in Progress | $ 4,521,193 | $ 4,017,381 |
| Inventory – Raw Materials | 1,989,538 | 1,770,612 |
| Total Inventory | $ 6,510,731 | $ 5,787,993 |
INVENTORY AND DEPOSITS (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Inventory Disclosure [Abstract] | ||
| Finished goods | $ 240,000 | |
| Inventory write-offs | $ 0 | $ 0 |
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | $ 773,438 | $ 789,038 |
| Less: Accumulated depreciation | (438,330) | (428,543) |
| Net property and equipment | 335,108 | 360,495 |
| Property, Plant and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | 354,885 | 353,885 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | $ 418,553 | $ 435,153 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Property, Plant and Equipment [Line Items] | ||
| Depreciation | $ 24,315 | $ 29,090 |
| Minimum [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment useful life | 5 years | |
| Maximum [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment useful life | 7 years | |
SCHEDULE OF LINE OF CREDIT (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Line of Credit Facility [Line Items] | ||
| Total recorded as a current liability | $ 1,818,441 | $ 1,456,929 |
| Line of Credit [Member] | ||
| Line of Credit Facility [Line Items] | ||
| Total recorded as a current liability | $ 1,818,441 | $ 1,456,929 |
LINE OF CREDIT – FINANCIAL INSTITUTION (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |
|---|---|---|---|---|
Feb. 28, 2023 |
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Line of Credit Facility [Line Items] | ||||
| Line of credit, current | $ 1,818,441 | $ 1,456,929 | ||
| Proceeds from Lines of Credit | $ 1,700,000 | |||
| Master Credit Agreement [Member] | ||||
| Line of Credit Facility [Line Items] | ||||
| Line of credit | $ 2,000,000 | |||
| Percentage of interest rate period end | 2.05% | |||
| Total percentage of interest rate during period | 7.45% | 7.48% | ||
| Line of credit description | Upon inception the Company paid a one-time loan fee equal to 0.1% of the Line of Credit amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate | |||
| Interest rate, increase (decrease) | 6.00% | |||
| Proceeds from Lines of Credit | $ 1,700,000 | |||
| Repayments of Lines of Credit | $ 250,000 | |||
SCHEDULE OF WORKING CAPITAL (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | $ 2,675,750 | $ 1,954,214 |
| Working Capital Loan [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 375,000 | 450,000 |
| Working Capital Loan One [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 235,750 | |
| Working Capital Loan Two [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 625,000 | 500,000 |
| Working Capital Loan Three [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 140,000 | |
| Working Capital Loan Four [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 1,300,000 | |
| Working Capital Loan Five [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | 500,000 | |
| Working Capital Loan Six [Member] | ||
| Short-Term Debt [Line Items] | ||
| Total recorded as a current liability | $ 504,214 |
GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Goodwill And Acquisition Of Champion Entities | |||
| Goodwill | $ 2,000,000 | $ 2,000,000 | |
| Impairment charges | $ 0 | $ 0 | |
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Net operating loss carryforward | $ 10,061,910 | $ 9,494,850 |
| Total deferred tax asset | 10,061,910 | 9,494,850 |
| Less: Valuation allowance | (10,061,910) | (9,494,850) |
| Net deferred tax asset |
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION (Details) |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Federal statutory rate | (21.00%) |
| State taxes, net of federal benefit | (0.00%) |
| Change in valuation allowance | 21.00% |
| Effective tax rate | 0.00% |
INCOME TAXES (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Income Tax Disclosure [Abstract] | ||
| Net operating loss carryforward | $ 47,914,872 | $ 45,213,594 |
| Deferred Tax Assets, Valuation Allowance | $ 10,061,910 | $ 9,494,850 |
| Valuation Allowance, Deferred Tax Asset, Explanation of Change | As a result, management determined it was more likely than not deferred tax assets will not be realized as of March 31, 2024, and December 31, 2023, and recognized 100% valuation allowance for each period |
SHARE CAPITAL (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | 18 Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jan. 01, 2024 |
Nov. 20, 2023 |
Nov. 03, 2023 |
Oct. 31, 2023 |
Oct. 30, 2023 |
Sep. 20, 2023 |
Sep. 19, 2023 |
Sep. 08, 2023 |
Aug. 21, 2023 |
Jun. 28, 2023 |
Jun. 27, 2023 |
Jun. 27, 2023 |
Jul. 12, 2022 |
Jul. 08, 2022 |
Aug. 30, 2023 |
Jul. 31, 2023 |
Mar. 31, 2024 |
Dec. 31, 2023 |
Dec. 31, 2023 |
|
| Common stock, shares authorized | 600,000,000 | 600,000,000 | 600,000,000 | ||||||||||||||||
| Common stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | ||||||||||||||||
| Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||||||||
| Reserse split | 1-for-25 | ||||||||||||||||||
| Shares new issues | 2,993,850.63 | ||||||||||||||||||
| Exercisable of warrants | 615,000 | 615,000 | |||||||||||||||||
| Offering shares | 24,129 | 71,499 | |||||||||||||||||
| Issuance of common stock, shares held | 2,988,687 | ||||||||||||||||||
| Sale of common stock, net | $ 2,902.38 | ||||||||||||||||||
| Gain on settlement of debt | $ 228,000 | ||||||||||||||||||
| Stock price | $ 4.37 | $ 4.37 | |||||||||||||||||
| Common Stock, Shares, Outstanding | 22,129,920 | 9,004,920 | 9,004,920 | ||||||||||||||||
| Preferred Stock, Shares Outstanding | 200,000 | 200,000 | 200,000 | ||||||||||||||||
| Series A Preferred Stock [Member] | |||||||||||||||||||
| Share issued in conversion | 13,125,000 | 3,125,000 | |||||||||||||||||
| Conversion of shares | 26,250 | 6,250 | |||||||||||||||||
| Series A Convertible Preferred Stock [Member] | |||||||||||||||||||
| Offering shares | 150,000 | 100,000 | |||||||||||||||||
| Series C Preferred Stock [Member] | IPO [Member] | |||||||||||||||||||
| Offering price | $ 7.50 | ||||||||||||||||||
| Proceeds from offering | $ 19,999,995 | ||||||||||||||||||
| Series C Preferred Stock [Member] | IPO [Member] | Maximum [Member] | |||||||||||||||||||
| Offering shares | 2,666,666 | ||||||||||||||||||
| Series C Preferred Stock [Member] | IPO [Member] | Minimum [Member] | |||||||||||||||||||
| Purchase price | $ 7.50 | ||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | |||||||||||||||||||
| Ownership percentage | 9.99% | ||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | September 12 [Member] | |||||||||||||||||||
| Ownership percentage | 9.99% | ||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | |||||||||||||||||||
| Exercisable of warrants | 5,977,374 | ||||||||||||||||||
| Prefunded Warrants [Member] | |||||||||||||||||||
| Offering price | $ 0.75 | $ 0.78 | |||||||||||||||||
| Exercisable of warrants | 370,000 | ||||||||||||||||||
| Sale of stock description of transaction | On August 21, 2023, 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | |||||||||||||||||
| Offering shares | 24,129 | 6,391 | 370,000 | ||||||||||||||||
| Sale of common stock, net | $ 18,096.75 | $ 4,984.98 | $ 3,700.00 | ||||||||||||||||
| Stock granted to vendor | 3,721 | ||||||||||||||||||
| Common Stock [Member] | |||||||||||||||||||
| Exercisable of warrants | 686,499 | 686,499 | |||||||||||||||||
| Offering shares | 1,493,272 | ||||||||||||||||||
| Conversion of shares | 448,096 | ||||||||||||||||||
| Common Stock, Shares, Outstanding | 9,004,920 | 9,004,920 | 9,004,920 | ||||||||||||||||
| Common Stock [Member] | September 21 [Member] | |||||||||||||||||||
| Offering shares | 356,687 | ||||||||||||||||||
| Common Stock [Member] | September 12 [Member] | |||||||||||||||||||
| Offering shares | 390,000 | ||||||||||||||||||
| Prefunded Warrants [Member] | |||||||||||||||||||
| Conversion of shares | 448,096 | ||||||||||||||||||
| Reverse Stock Split [Member] | |||||||||||||||||||
| Sale of stock description of transaction | For the month of July 2023, the following transactions occurred: Approximately 1,493,272 shares of the Company’s common stock were issued pursuant to the 100-share lot roundup caused by the reverse stock split on June 27, 2023. The Depository Trust and Clearing Corporation (the “DTCC”) which handles the clearing and settlement of virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets submitted numerous requests for share allocations. In connection with the Company’s June 27, 2023 1-for-25 reverse split DTCC made these requests. An additional 1.488 million shares of the Company’s common stock were newly issued and added to its post-reverse stock split numbers. As described in the Company’s Information Statement filed on Schedule 14C dated December 14, 2022, shareholders holding at least a “round lot” (100 shares or more) prior to the reverse stock split shall have no less than one round lot (100 shares) after the reverse stock split | ||||||||||||||||||
| Prefunded Common Stock Warrants [Member] | |||||||||||||||||||
| Offering shares | 615,000 | ||||||||||||||||||
| Warrants inducement exercise price per share | $ 1.10 | ||||||||||||||||||
| Preferred Stock [Member] | Series A Preferred Stock [Member] | |||||||||||||||||||
| Preferred Stock, Shares Outstanding | 125,000 | 125,000 | 125,000 | ||||||||||||||||
| Preferred Stock [Member] | Series B Preferred Stock [Member] | |||||||||||||||||||
| Preferred Stock, Shares Outstanding | 75,143 | 75,143 | 75,143 | ||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | |||||||||||||||||||
| Sale of stock consideration received per transaction | $ 2,993,850.63 | ||||||||||||||||||
| Shares new issues | 71,499 | ||||||||||||||||||
| Excerice price share | $ 4.24 | $ 4.24 | $ 21.50 | $ 4.37 | |||||||||||||||
| Exercisable of warrants | 615,000 | 615,000 | |||||||||||||||||
| Exercisable of warrants | 686,499 | 686,499 | 2,988,687 | ||||||||||||||||
| Offering shares | 71,499 | ||||||||||||||||||
| Proceeds from sale of warrant inducement, net of offering costs | $ 3,287,555.70 | ||||||||||||||||||
| Issuance of common stock, shares held | 2,242,000 | ||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Common Stock [Member] | |||||||||||||||||||
| Excerice price share | $ 4.37 | ||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Prefunded Warrants [Member] | |||||||||||||||||||
| Excerice price share | 4.24 | ||||||||||||||||||
| Offering price | $ 4.37 | $ 4.37 | |||||||||||||||||
| Chief Executive Officer [Member] | Employment Agreement [Member] | |||||||||||||||||||
| Vesting description | the already issued or existing share-award grant is to 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. | ||||||||||||||||||
| Recognised share award grant | 8,752,500 | ||||||||||||||||||
| Compensation expenses | $ 466,800 | ||||||||||||||||||
| Chief Executive Officer [Member] | Employment Agreement [Member] | Series A Preferred Stock [Member] | |||||||||||||||||||
| Stock price | $ 0.3501 | ||||||||||||||||||
| Chief Executive Officer [Member] | Prefunded Warrants [Member] | |||||||||||||||||||
| Offering shares | 3,954 | ||||||||||||||||||
| Chief Operating Officer [Member] | Employment Agreement [Member] | |||||||||||||||||||
| Vesting description | 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. | ||||||||||||||||||
| Recognised share award grant | 4,612,500 | 4,612,500 | |||||||||||||||||
| Compensation expenses | $ 184,500 | ||||||||||||||||||
| Stock price | $ 0.369 | ||||||||||||||||||
| Chief Operating Officer [Member] | Employment [Member] | Series A Preferred Stock [Member] | |||||||||||||||||||
| Stock option award, description | On November 20, 2023 the Company issued 25,000 shares of its Series A Preferred Stock to Mr. Lambrecht, pursuant to his employment agreement as Chief Operating Officer. Mr. Lambrecht’s shares of Series A Preferred Stock will vest in the following manner, 25% upon signing of the employment agreement, 25% on the 1st of January 2024, and 25% for the following two anniversaries. Messrs. Ross and Grau who are holders of the Series A Preferred Stock will also enjoy the vesting of their shares of Series A Preferred Stock in the following manner; 20% on the 1st of January 2024 and 20% thereafter for the following 4 anniversaries. The Company has determined, and appropriately recorded in its statement of operations a compensation expense associated with the conversion or convertibility of the Series A Preferred Stock into common stock of the Company on a 500:1 basis. | ||||||||||||||||||
| Chief Operating Officer [Member] | Prefunded Warrants [Member] | |||||||||||||||||||
| Offering shares | 2,237 | ||||||||||||||||||
| CEO, President and COO [Member] | Employment Agreement [Member] | |||||||||||||||||||
| Common stock shares reserved for issuance | 62,500,000 | ||||||||||||||||||
| President [Member] | Employment Agreement [Member] | |||||||||||||||||||
| Vesting description | the already issued or existing share-award grant is to 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. | ||||||||||||||||||
| Recognised share award grant | 8,752,500 | ||||||||||||||||||
| Compensation expenses | $ 466,800 | ||||||||||||||||||
| President [Member] | Employment Agreement [Member] | Series A Preferred Stock [Member] | |||||||||||||||||||
| Stock price | $ 0.3501 | ||||||||||||||||||
| Investor [Member] | Series C Preferred Stock [Member] | |||||||||||||||||||
| Investment | $ 300.00 | ||||||||||||||||||
SCHEDULE OF WARRANT ACTIVITY (Details) (Parenthetical) |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
$ / shares
| |
| Share-Based Payment Arrangement [Abstract] | |
| Repriced exercise price | $ 1.10 |
WARRANTS AND OPTIONS (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 18 Months Ended | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 20, 2023 |
Sep. 19, 2023 |
Sep. 08, 2023 |
Aug. 21, 2023 |
Jun. 28, 2023 |
Jun. 27, 2023 |
Jun. 27, 2023 |
Nov. 30, 2022 |
Jul. 12, 2022 |
Jul. 08, 2022 |
Aug. 30, 2023 |
Jul. 31, 2023 |
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Exercise prie of warrants | $ 4.37 | $ 4.37 | $ 0.25 | $ 0.25 | ||||||||||
| Purchase of warrants | 615,000 | 615,000 | ||||||||||||
| Sale of stock | 2,993,850.63 | |||||||||||||
| Number of shares issued | 24,129 | 71,499 | ||||||||||||
| Share price | $ 4.37 | $ 4.37 | ||||||||||||
| Issuance of common stock, shares held | 2,988,687 | |||||||||||||
| Value new issues | $ 2,902.38 | |||||||||||||
| Weighted average exercise price per share | $ 1.10 | |||||||||||||
| Prefunded Warrants [Member] | ||||||||||||||
| Purchase of warrants | 370,000 | |||||||||||||
| Number of shares issued | 24,129 | 6,391 | 370,000 | |||||||||||
| Sale of stock description of transaction | On August 21, 2023, 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | ||||||||||||
| Value new issues | $ 18,096.75 | $ 4,984.98 | $ 3,700.00 | |||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||
| Armistice Capital Master Fund Ltd [Member] | September 12 [Member] | ||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||
| Purchase of warrants | 5,977,374 | |||||||||||||
| Prefunded Warrants To Calvary [Member] | ||||||||||||||
| Purchase of warrants | 936,937 | |||||||||||||
| Warrant exercise price | $ 21.50 | |||||||||||||
| Warrant exercise price | 5 years | |||||||||||||
| Weighted average exercise price per share | $ 1.10 | |||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||
| Purchase of warrants | 686,499 | 686,499 | 2,988,687 | |||||||||||
| Warrant exercise price | $ 4.24 | $ 4.24 | $ 21.50 | $ 4.37 | ||||||||||
| Sale of stock | 71,499 | |||||||||||||
| Number of shares issued | 71,499 | |||||||||||||
| Aggregate gross proceeds of warrants | $ 3,287,555.70 | |||||||||||||
| Issuance of common stock, shares held | 2,242,000 | |||||||||||||
| Calvary Fund [Member] | ||||||||||||||
| Exercise prie of warrants | $ 129.6875 | |||||||||||||
| Conversion of warrants | 15,099 | |||||||||||||
| Warrants [Member] | ||||||||||||||
| Exercise prie of warrants | $ 27.50 | |||||||||||||
| Prefunded Warrants [Member] | ||||||||||||||
| Warants converting into shares | 448,096 | |||||||||||||
| Prefunded Warrants [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||
| Warrant exercise price | $ 4.24 | |||||||||||||
| Common Stock [Member] | ||||||||||||||
| Exercise prie of warrants | $ 4.24 | $ 4.24 | ||||||||||||
| Warants converting into shares | 448,096 | |||||||||||||
| Purchase of warrants | 686,499 | 686,499 | ||||||||||||
| Number of shares issued | 1,493,272 | |||||||||||||
| Warrants issued and outstanding | 1,365,251 | 1,365,251 | 686,499 | |||||||||||
| Common Stock [Member] | September 21 [Member] | ||||||||||||||
| Number of shares issued | 356,687 | |||||||||||||
| Common Stock [Member] | September 12 [Member] | ||||||||||||||
| Number of shares issued | 390,000 | |||||||||||||
| Common Stock [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||
| Warrant exercise price | $ 4.37 | |||||||||||||
| Warrant [Member] | ||||||||||||||
| Exercise prie of warrants | $ 1.10 | $ 1.10 | ||||||||||||
| Purchase of warrants | 686,499 | 686,499 | ||||||||||||
| Number of shares issued | 746,687 | |||||||||||||
| Warrants issued and outstanding | 6,136,892 | 6,136,892 | ||||||||||||
| Warrant [Member] | Offer Letter Agreement [Member] | ||||||||||||||
| Exercise prie of warrants | $ 4.24 | $ 4.37 | ||||||||||||
| Prefunded Common Stock Warrants [Member] | ||||||||||||||
| Number of shares issued | 615,000 | |||||||||||||
| Common stock exercise price | $ 1.10 | |||||||||||||
SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES (Details) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Right-of-use lease liability, long-term | $ 1,618,449 | $ 1,946,567 |
| Right of Use Operating Lease Assets [Member] | ||
| Right-of-use lease liability, long-term | 1,618,449 | 1,946,567 |
| Other Current Liabilities [Member] | ||
| Right-of-use lease liability, long-term | 785,672 | 1,039,081 |
| Right of Use Operating Lease Liability [Member] | ||
| Right-of-use lease liability, long-term | $ 832,777 | $ 907,486 |
SCHEDULE OF LEASE EXPENSE (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Leases And Leased Premises | ||
| Operating lease expense, net | $ 374,017 | $ 226,660 |
| Operating lease expense, net | $ 374,017 | $ 226,660 |
SCHEDULE OF OTHER INFORMATION RELATED TO LEASES (Details) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Leases And Leased Premises | ||
| Operating cash flows from operating leases | $ 328,118 | $ 243,501 |
| Operating leases, remaining lease term | 2 years 9 months 18 days | 3 years |
| Operating leases, weighted average discount rate | 10.00% | 5.00% |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE (Details) |
Mar. 31, 2024
USD ($)
|
|---|---|
| Leases And Leased Premises | |
| Operating lease, 2024 (three months remaining) | $ 865,855 |
| Operating lease, 2024 (three months remaining) | 407,861 |
| Operating lease, 2024 (three months remaining) | 291,375 |
| Operating lease, 2024 (three months remaining) | 258,282 |
| Operating lease, 2024 (three months remaining) | 194,262 |
| Operating lease, 2024 (three months remaining) | |
| Operating lease, 2024 (three months remaining) | 2,017,634 |
| Operating lease, 2024 (three months remaining) | (241,669) |
| Operating lease, 2024 (three months remaining) | $ 1,775,965 |
LEASES AND LEASED PREMISES (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Leases And Leased Premises | |||
| Rent expense, operating leases | $ 630,000 | $ 226,000 | |
| Operating lease right of use asset and liability | $ 1,000,000 | ||
| Rent expenses | $ 374,017 | $ 226,660 | |
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Outstanding letters of credit | $ 0 | $ 0 |
| Line of credit | $ 1,818,441 | $ 1,456,929 |
OTHER INCOME – EMPLOYEE RETENTION CREDIT (Details Narrative) - US Treasury and Government [Member] |
12 Months Ended |
|---|---|
|
Dec. 31, 2023
USD ($)
| |
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |
| Received tax credit | $ 1,291,000 |
| Refunds and credits for retaining | 178,000 |
| Employee [Member] | |
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |
| Refunds and credits for retaining | $ 1,113,000 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Jun. 30, 2024 |
Jun. 14, 2024 |
May 28, 2024 |
Apr. 19, 2024 |
Apr. 09, 2024 |
Apr. 01, 2024 |
Mar. 22, 2024 |
Apr. 30, 2024 |
Apr. 23, 2024 |
Jun. 27, 2023 |
|---|---|---|---|---|---|---|---|---|---|---|
| Subsequent Event [Line Items] | ||||||||||
| common stock per share | $ 4.37 | |||||||||
| Subsequent Event [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| common stock per share | $ 1 | |||||||||
| Line of credit | $ 1,810,000 | |||||||||
| Revenue Interest Purchase Agreement [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Revenue interest | $ 100,000 | |||||||||
| Other expense, operating | $ 10,000 | |||||||||
| Revenue Interest Purchase Agreement [Member] | Subsequent Event [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Revenue interest | $ 500,000 | $ 100,000 | $ 100,000 | |||||||
| Other expense, operating | 50,000 | 10,000 | 10,000 | |||||||
| Revenue Interest Purchase Agreement [Member] | Subsequent Event [Member] | May 31, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | 770,000 | 140,000 | 140,000 | |||||||
| Revenue Interest Purchase Agreement [Member] | Subsequent Event [Member] | June 1, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | $ 700,000 | 154,000 | $ 154,000 | |||||||
| Revenue Interest Purchase Agreement One [Member] | Subsequent Event [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Revenue interest | 300,000 | |||||||||
| Other expense, operating | 30,000 | |||||||||
| Revenue Interest Purchase Agreement One [Member] | Subsequent Event [Member] | May 31, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | 420,000 | |||||||||
| Revenue Interest Purchase Agreement One [Member] | Subsequent Event [Member] | June 1, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | 462,000 | |||||||||
| Revenue Interest Purchase Agreement Two [Member] | Subsequent Event [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Revenue interest | 75,000 | |||||||||
| Other expense, operating | 7,500 | |||||||||
| Revenue Interest Purchase Agreement Two [Member] | Subsequent Event [Member] | May 31, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | 105,000 | |||||||||
| Revenue Interest Purchase Agreement Two [Member] | Subsequent Event [Member] | June 1, 2024 [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Payments for repurchase of equity | $ 115,500 | |||||||||
| Securities Purchase Agreement [Member] | Subsequent Event [Member] | ||||||||||
| Subsequent Event [Line Items] | ||||||||||
| Principal amount | $ 111,550 | $ 111,550 | ||||||||
| Original issue discount | 14,550 | 14,550 | ||||||||
| Original issue fees | 7,000 | 7,000 | ||||||||
| Loan proceeds | $ 90,000 | $ 90,000 | ||||||||
| Accrued, unpaid interest | $ 13,881.78 | |||||||||
| Remaining payments | $ 124,936.00 |
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