AREB.OTC.PinkAmerican Rebel Holdings INC
10-K/A: American Rebel Holdings Restates Financials Following Auditor Barring, Identifies Material Weakness
Sentiment:
Annual Report Amendment (Form 10-K/A)
American Rebel Holdings files an amended 10-K to restate its 2023 and 2022 financial statements due to errors identified after its previous auditor was barred by the SEC.
Capital raiseThe company may attempt to raise additional capital by returning to the market to sell shares of common or preferred stock, possibly at a deep discount to the market price of its common stock.The company is currently in a capital raise utilizing its Series C Preferred Stock.The company will need additional capital and continued access to operating lines of credit in the future to finance its planned growth.The company may be required to rely on further debt financing, further loans from related parties, and private placements of its common and preferred stock for its additional cash needs.
Worse than expectedThe company restated its financial statements due to errors in accounting for inventory, cost of goods sold, accounts receivable, certain expenses and accruals, Series A preferred stock, the Champion business combination, and adjustments to right of use assets and liabilities.The company identified a material weakness in its internal control over financial reporting related to the financial reporting cycle.
Summary
- American Rebel Holdings, Inc. is filing an amendment to its annual report on Form 10-K to restate its financial statements for the years ended December 31, 2023, and 2022.
- The restatement is due to errors identified in the original filing, primarily related to accounting for inventory, cost of goods sold, accounts receivable, certain expenses and accruals, Series A preferred stock, the Champion business combination, and adjustments to right of use assets and liabilities.
- The company's previous auditor, BF Borgers CPA PC, was permanently barred by the SEC, leading to the engagement of GBQ Partners LLC as the new independent registered public accounting firm.
- The aggregate market value of voting and non-voting common equity held by non-affiliates was approximately $15,705,174 on June 30, 2023.
- As of January 27, 2025, there were 2,345,406 shares of the registrant's common stock issued and outstanding.
- The company identified a material weakness in its internal control over financial reporting related to the financial reporting cycle.
- The company's goal is to enhance its position as a designer, producer and marketer of premium safes and personal security products.
- The company is focused on continuing to develop its home, office and personal safe product lines.
- The company is working to increase floor space dedicated to its safes and strengthen its online presence in order to expand its reach to new enthusiasts and build its devoted American Rebel community.
- The company is actively seeking acquisition opportunities to diversify its product offerings and enhance stockholder value.
- The company is dependent on the continued supply of materials for the manufacturing of its safes, as well as the continued supply and manufacturing of backpacks and apparel at third-party facilities locations, which are critical to its success.
- The company markets its products to consumers through independent safe specialty stores, select national and regional retailers, local specialty firearms stores, as well as via e-commerce.
- The company is subject to the periodic reporting requirements of Section 15(d) and 12(g) of the Exchange Act that require it to incur audit fees and legal fees in connection with the preparation of such reports.
Sentiment
Score: 4
Explanation: The document highlights both positive strategic initiatives and significant financial challenges, including a restatement, material weakness, and dependence on external financing. The sentiment is cautiously negative due to the financial uncertainties.
Positives
- Engagement of a new independent registered public accounting firm, GBQ Partners LLC.
- Focus on organic growth and expansion in existing markets.
- Actively seeking strategic acquisitions for long-term growth.
- Expanding scope of operations activities by offering servicing dispensaries and brand licensing.
- The company believes that safes are becoming a must-have appliance in a significant portion of households.
- The company believes that it has the potential to continue to create a brand community presence around the core ideals and beliefs of America.
Negatives
- Restatement of financial statements for 2023 and 2022.
- Identification of a material weakness in internal control over financial reporting.
- Dependence on the availability and regulation of ammunition and firearm storage.
- Limited financial resources and reliance on loans and equity financings for operating capital.
- The company has not been profitable and cannot predict when or if it will achieve profitability.
- The company is highly dependent on Charles A. Ross, its Chief Executive Officer.
- The company may not be able to maintain a listing of its common stock on the Nasdaq Capital Market.
Risks
- The company's ability to efficiently manage and repay its debt obligations.
- The company's inability to raise additional financing for working capital, especially related to purchasing critical inventory.
- The company's ability to generate sufficient revenue in its targeted markets to support operations.
- Significant dilution resulting from the company's financing activities.
- Shortages of components and materials, as well as supply chain disruptions, may delay or reduce the company's sales and increase its costs.
- The company does not have long-term purchase commitments from its customers, and their ability to cancel, reduce, or delay orders could reduce the company's revenue and increase its costs.
- The company's success depends on its ability to introduce new products that track customer preferences.
- If the company is unable to protect its intellectual property, it may lose a competitive advantage or incur substantial litigation costs to protect its rights.
- Adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations.
- Deterioration in general or global economic, market and political conditions.
- Inability to efficiently manage the company's operations.
- The unavailability of funds for capital expenditures.
- The company's ability to recruit and hire key employees.
- The inability of management to effectively implement the company's strategies and business plans.
- The dependence of the company's future success on the general economy.
- The adequacy of the company's cash resources and working capital.
Future Outlook
The company expects to require additional funds to further develop its business plan and may need to raise additional funds through equity or debt offerings.
Management Comments
- American Rebel is boldly positioning itself as Americas Patriotic Brand.
- The company has identified the market opportunity to design, manufacture, and market innovative concealed carry products and safes.
- The company accesses its market uniquely through its positioning as Americas 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.
Industry Context
The North American safe industry is dominated by a small number of companies, and the company competes primarily on the quality, safety, reliability, features, performance, brand awareness, and price of its products.
Comparison to Industry Standards
- The company's primary competitors include companies such as Liberty Safe, Fort Knox Security Products, American Security, Sturdy Safe Company, Homeland Security Safes, SentrySafe and as well as certain other domestic manufacturers, as well as certain China-based manufactured safes.
- 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.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Chief Operating Officer | NA | Corey Lambrecht | 2023-11-20 | New appointment |
| Director | Ken Yonika | C. Stephen Cochennet | 2023-05-09 | Resignation of previous director |
| Director | Doug E. Grau | Larry Sinks | 2023-11-20 | Resignation of previous director |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Amendment to Certificate of Designation | 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 100,000 to 150,000 and to allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. | 2023-10-31 | The amendment to the certificate of designation of the Company’s Series A Convertible Preferred Stock will allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. |
| Designation of new Series C Convertible Cumulative Preferred Stock | The Company board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the Series C Designation). | 2023-11-03 | The designation of a new Series C Convertible Cumulative Preferred Stock will allow the Company to raise additional capital. |
Legal Proceedings
- On July 23, 2024, the Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (Liberty), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products.
Related Party Transactions
- The Company has agreements with related parties for services, notes payable and stock grants.
Stakeholder Impact
- Shareholders may experience dilution due to potential equity offerings.
- Employees may be affected by changes in compensation and benefits.
- Customers may be affected by changes in product offerings and pricing.
- Suppliers may be affected by changes in the company's supply chain.
- Creditors may be affected by the company's ability to repay its debt obligations.
Next Steps
- The company intends to continue strengthening its internal resources while utilizing an external consulting firm to support public reporting requirements.
- The company intends to submit a compliance plan to Nasdaq within the specified period, which it expects will consist of holding an annual meeting of stockholders within sixty (60) days of filing of this Form 10-K.
- The company is currently negotiating a forbearance or other cure to the default and a plan for repayment of the credit facility within sixty (60) to ninety (90) days with its assigned relationship manager at the bank.
Key Dates
| Date | Description |
|---|---|
| 2014-12-15 | American Rebel Holdings, Inc. was incorporated. |
| 2017-01-05 | CubeScape, Inc. amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. |
| 2017-06-19 | The Company completed a business combination with its majority shareholder, American Rebel, Inc. |
| 2022-06-29 | The Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc. |
| 2022-07-29 | The Company closed on the acquisition of Champion Entities. |
| 2023-04-14 | The Company entered into a $1,000,000 Business Loan and Security Agreement. |
| 2023-06-27 | The Company entered into a PIPE transaction with Armistice Capital Master Fund Ltd. |
| 2023-07-01 | The Company authorized the issuance of 24,129 shares of common stock to its independent board members for past services. |
| 2023-08-09 | The Company entered into a Master Brewing Agreement with Associated Brewing. |
| 2023-09-08 | Holders of certain existing warrants exercised such warrants for 2,988,687 shares of the Company's common stock. |
| 2023-10-23 | The Company was notified by Nasdaq that it was not in compliance with Nasdaq Listing Rule 5550(a)(2). |
| 2023-11-03 | The Company's board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock. |
| 2023-11-20 | The Company entered into an employment agreement with Corey Lambrecht, its Chief Operating Officer. |
| 2023-12-19 | The Company entered into a Revenue Interest Purchase Agreement with Kingdom Building Inc. |
| 2023-12-28 | The Company entered into a $500,000 Business Loan and Security Agreement with Alt Banq Inc. |
| 2024-02-28 | The Company received a written notice from Nasdaq stating that it no longer complies with Nasdaq Listing Rule 5620(a). |
| 2024-03-21 | The Company entered into a Securities Purchase Agreement with an accredited investor. |
| 2024-03-22 | The Company entered into another Revenue Interest Purchase Agreement with an individual accredited investor. |
| 2024-03-27 | The Company entered into a $1,300,000 Business Loan and Security Agreement with an accredited investor lending source. |
| 2024-04-01 | The Company entered into an additional Revenue Interest Purchase Agreement with an individual accredited investor. |
| 2024-04-09 | The Company entered into additional Revenue Interest Purchase Agreements with individual accredited investors. |
| 2024-04-23 | The Company received notice from Nasdaq indicating that it is eligible for an additional 180-day period to regain compliance with the minimum bid price requirement. |
| 2024-04-24 | The Company received notice from Nasdaq indicating that it has been granted an extension until June 15, 2024 to regain compliance with the rule by holding an annual meeting of shareholders. |
| 2024-05-03 | The Securities and Exchange Commission entered an order permanently barring BF Borgers CPA PC from appearing or practicing before the Commission as an accountant. |
| 2024-05-03 | The Company dismissed BF Borgers CPA PC as its independent registered public accounting firm. |
| 2024-05-10 | The Company's board of directors approved the designation of a new Series D Convertible Preferred Stock. |
| 2024-05-13 | 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. |
| 2024-05-28 | The Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor. |
| 2024-06-14 | The Company entered into a Securities Purchase Agreement with Coventry Enterprises, LLC, an accredited investor. |
| 2024-07-02 | The Company, entered into a Standard Merchant Cash Advance Agreement (the Factoring Agreement), with an accredited investor lending source (Financier). |
| 2024-07-08 | The Company, and two of its subsidiaries (American Rebel, Inc. and Champion Safe Company, Inc.) entered into a subordinated business loan and security agreement (Loan) with an accredited investor lending source and a subsidiary to that accredited investor lending source as collateral agent. |
| 2024-07-10 | The Company entered into a Conversion Agreement (the Conversion Agreement) with Series D convertible preferred stock holder, pursuant to which the holder agreed to convert the 133,334 shares of Series D convertible preferred stock it held into 2,232,143 shares of common stock, par value $ 0.001 per share, of the Company. |
| 2024-07-22 | The Company and an accredited investor lending source entered into an agreement whereby $ 300,000 of the Assumption Loan was acquired by the accredited investor lending source from the original holder. |
| 2024-07-23 | The Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (Liberty), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products. |
| 2024-07-25 | Champion Safe Company received a notice of default and demand for payment from Bank of America regarding the Company’s Line of Credit. |
| 2024-08-05 | Effective August 5, 2024, the Company entered into two securities exchange and amendment agreements with two accredited investors, whereby the Company agreed to issue the investor 10,010 shares of Series D Convertible Preferred Stock in exchange for a portion of a $ 75,000 revenue interest owned by one such investor, and whereby the Company agreed to issue the investor 12,134 shares of Series D Convertible Preferred Stock in exchange for a portion of a $ 100,000 revenue interest owned by a second such investor. |
| 2024-08-05 | Effective August 5, 2024, the Company entered into three Amended Revenue Interest Purchase Agreements with two individual accredited investors and one corporate accredited investor. |
| 2024-08-09 | On August 9, 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 $ 179,400. |
| 2024-09-04 | On September 4, 2024, the Company entered into a Securities Purchase Agreement with Coventry Enterprises, LLC, an accredited investor (the Lender), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ 300,000 (the Note). |
| 2024-09-19 | On September 19, 2024, the Company authorized the issuance of 669,643 shares of common stock, valued at $ 0.448 per share, to a vendor pursuant to the terms of a settlement agreement. |
| 2024-09-27 | On September 27, 2024, the Company authorized the issuance of 360,000 shares of common stock, valued at $ 0.448 per share, to a consultant pursuant to the terms of a consulting agreement. |
| 2024-10-04 | On October 4, 2024, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the Lender), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ 122,960 (the Note). |
| 2024-10-16 | On October 16, 2024, the Registrant received a written notification from the Staff indicating that, as of October 15, 2024, the Registrant had regained compliance with the Minimum Bid Price Requirement. |
| 2024-10-23 | On October 23, 2024, (the Closing Date), the Company entered into an Exchange and Settlement Agreement (the Securities Exchange Agreement) with an individual accredited investor (the Investor). |
| 2024-10-30 | On October 30, 2024, the Company entered into a Securities Purchase Agreement with Alumni Capital LP, a Delaware limited partnership (the Lender), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ 420,000 (the Note). |
| 2024-11-06 | On November 6, 2024, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the Lender), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $ 122,960 (the Note). |
| 2024-11-11 | On November 11, 2024, the Company entered into a Purchase and Exchange Agreement among an investor (the Purchaser) and Altbanq Lending LLC (the Seller), pursuant to which the Purchaser agreed to purchase from the Seller a portion ($ 150,469.11 ) of a promissory note dated March 27, 2024 in the original principal amount of $ 1,330,000 (the Note), with a current balance payable of $ 1,229,350 (the Note Balance). |
| 2024-12-13 | On December 13, 2024, the Company entered into a three-month promissory note with an accredited investor (the Lender) in the principal amount of $ 213,715 (the Note). |
| 2024-12-26 | On December 26, 2024, the Company entered into a Settlement Agreement and Stipulation (the Settlement Agreement) with Silverback Capital Corporation (SCC) to settle outstanding claims owed to SCC. |
| 2025-01-03 | The Court entered an Order confirming the fairness of the terms and conditions of the Settlement Agreement and the issuance of the Settlement Shares. |
| 2025-01-10 | On January 10, 2025, the Company entered into two six-month promissory notes with accredited investors (the Lenders) in the principal amounts of $ 617,100 (Note 1) and $ 123,420 (Note 2). |
Keywords
American Rebel Holdings, restatement, financial statements, auditor, internal control, safes, firearms, security products, acquisition, revenue, debt, equity, financing, compliance
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