8-K: American Rebel Holdings Secures Debt Financing and Settles Outstanding Claims to Bolster Financial Position

American Rebel Holdings finalized a settlement agreement with Silverback Capital and entered into two promissory notes to address outstanding payables and secure additional funding.

Summary

• American Rebel Holdings, Inc. entered into a settlement agreement with Silverback Capital Corporation (SCC) to settle outstanding claims.
• SCC will purchase approximately $1.84 million in outstanding payables to designated vendors of the Company.
• In exchange, SCC will receive settlement shares of common stock, priced at 75% of the average of the three lowest traded prices during the five trading day period prior to a share request, subject to a floor price.
• The agreement includes a provision that neither party can declare a default unless the Company's market price decreases to or below $1.00 per share.
• SCC has agreed not to become the beneficial owner of more than 4.99% of the Company's common stock.
• The issuance of settlement shares is capped at 19.9% of the outstanding common stock as of the date of the Settlement Agreement, pending stockholder approval.
• The Circuit Court of the Twelfth Judicial Circuit Court for Manatee County, Florida approved the Settlement Agreement and the issuance of the Settlement Shares on January 3, 2025.
• The Company also entered into two six-month promissory notes with accredited investors for $617,100 (Note 1) and $123,420 (Note 2) on January 10, 2025.
• An original issue discount (OID) of $117,100 was applied to Note 1 and $23,420 to Note 2, paid through the issuance of 15,613 and 3,123 shares of Series D Convertible Preferred Stock, respectively.
• The net loan proceeds to the Company were $500,000 (Note 1) and $100,000 (Note 2).
• Accrued, unpaid interest and outstanding principal are due on or before July 10, 2025, totaling $537,500 (Note 1) and $107,500 (Note 2).
• Upon an Event of Default, the amount due would be 130% of the outstanding principal plus accrued interest and any amounts owed pursuant to conversion rights.
• Lenders can convert the outstanding principal into Series D Convertible Preferred Stock at $7.50 per share, or into common stock at the lowest price sold prior to registration if the common stock price falls below $1.50 per share.
• Each lender agreed to limit stock received to less than 4.99% of the total outstanding common stock.
• The lenders were granted piggy-back registration rights on the shares of common stock issuable upon conversion of the Series D Convertible Preferred Stock.
• The company authorized the issuance of 50,000 shares of common stock to Corey Lambrecht, the Company's COO and a director, upon the conversion of 100 shares of Series A Convertible Preferred Stock.
• As of January 8, 2025, the Company had 1,912,906 shares of common stock issued and outstanding.

Sentiment

Score: 4

Explanation: The announcement is mixed. While securing financing and settling debts are positive steps, the high cost of debt and potential dilution of shares raise concerns.

Positives

• The settlement with Silverback Capital Corporation eliminates $1,843,595.18 in outstanding payables.
• The new promissory notes provide $600,000 in immediate funding to the company.
• The conversion options in the promissory notes could potentially reduce the company's debt burden.
• The company has secured a distribution partner, Clark Distributing Company, for American Rebel Light Beer in Kentucky, covering 81% of the state's counties and serving 67% of the state's population.

Negatives

• The settlement with Silverback Capital Corporation involves issuing shares of common stock, which could dilute existing shareholders.
• The promissory notes carry a 15% interest rate, which is a relatively high cost of capital.
• The promissory notes include an original issue discount, reducing the net proceeds received by the company.
• The company may need to obtain stockholder approval for the issuance of settlement shares to Silverback Capital Corporation.

Risks

• The company's market price could decrease to or below $1.00 per share, potentially triggering a default under the settlement agreement.
• The lenders could convert the promissory notes into common stock, further diluting existing shareholders.
• The company may not be able to register the shares of common stock underlying the conversion of the Preferred Stock within ninety (90) days of the Issue Date of the Notes, as set forth in Section 16 hereof, subject to a thirty (30) day cure period, which could trigger an event of default.
• The company's ability to execute its business plan and the actual launch timing and availability of American Rebel Beer could impact future results.

Future Outlook

The press releases contain forward-looking statements within the meaning of the federal securities laws, based on management's expectations as of the date of the releases and subject to significant risks and uncertainties.

Management Comments

• Todd Porter, President of American Rebel Beverages, stated, 'We couldnt have imagined a better way to launch American Rebel Beer in Nashville.'
• Andy Ross, CEO of American Rebel Holdings, Inc., said, 'Each night I go back, Ive witnessed and joined in with several customers as they proudly raise their American Rebel Light Cans to toast the values of America and Americas Patriotic God-Fearing, Constitution-Loving, National Anthem-Singing, Stand Your Ground Beer.'
• Andy Ross, CEO of American Rebel Holdings, stated, 'Kentucky is an important state for us as we expand American Rebel Light Beer across this great, patriotic, God-fearing nation.'

Industry Context

The company's expansion into the beverage industry with American Rebel Light Beer reflects a diversification strategy, leveraging its brand recognition in the patriotic market segment.

Comparison to Industry Standards

• The terms of the promissory notes, including the interest rate and original issue discount, are comparable to those offered by other small-cap companies seeking short-term financing.
• The distribution agreement with Clark Distributing Company is similar to agreements other beverage companies have with distributors to expand their market reach.
• The company's focus on a specific niche market (patriotic consumers) is a common strategy among smaller beverage companies seeking to differentiate themselves from larger competitors like Anheuser-Busch InBev and Molson Coors.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• The company's employees and vendors may benefit from the settlement of outstanding payables.
• Customers in Kentucky will have access to American Rebel Light Beer through the distribution agreement with Clark Distributing Company.
• Lenders will receive interest payments and have the option to convert their notes into equity.

Next Steps

• The company needs to execute its business plan and effectively launch American Rebel Beer.
• The company needs to manage its debt obligations and avoid events of default.
• The company may need to seek stockholder approval for the issuance of settlement shares to Silverback Capital Corporation.
• The company needs to register the shares of Common Stock underlying the conversion of the Preferred Stock within ninety (90) days of the Issue Date of the Notes, as set forth in Section 16 hereof, subject to a thirty (30) day cure period.

Key Dates