8-K: American Rebel Secures $200K in High-Cost Debt

American Rebel Holdings, Inc. secured two new promissory notes totaling $239,200 in principal from 1800 Diagonal Lending and Boot Capital LLC for working capital, alongside issuing preferred stock to a strategic advisor.

Summary

• American Rebel Holdings, Inc. (AREB) entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC on December 15, 2025, for a promissory note with a principal amount of $152,950.00.
• The 1800 Diagonal Note included an Original Issue Discount (OID) of $19,950.00 and additional fees of $8,000.00, resulting in net loan proceeds of $125,000.00 to the company.
• The total payback to 1800 Diagonal Lending, LLC is $181,628.00, with a maturity date of March 15, 2027, and a one-time interest charge of $28,678.00 (18.75% over 15 months).
• The company also entered into a Securities Purchase Agreement with Boot Capital LLC on December 15, 2025, for a promissory note with a principal amount of $86,250.00.
• The Boot Capital Note included an OID of $11,250.00, resulting in net loan proceeds of $75,000.00 to the company.
• The total payback to Boot Capital LLC is $102,421.00, with a maturity date of March 15, 2027, and a one-time interest charge of $16,171.00 (18.75% over 15 months).
• Both notes stipulate a default interest rate of 22% per annum and a penalty of 150% of the outstanding principal plus accrued interest upon an Event of Default, with conversion rights into common stock at a 25% discount to market price.
• The company agreed to reserve shares of common stock equal to four times the number of shares issuable upon conversion for both notes, with conversion limited to less than 4.99% beneficial ownership.
• Proceeds from the 1800 Diagonal Note are for general working capital, focusing on consumer products operations, while proceeds from the Boot Capital Note are for general working capital, including American Rebel Beverages.
• The company believes these notes comply with existing debt restrictions under its June 26, 2025, Note Purchase Agreement with Streeterville Capital, LLC, specifically within the $800,000 cap for 1800 Diagonal notes and the $1,500,000 cap for American Rebel Beverages working capital.
• On December 9, 2025, the company issued 25,000 shares of Series D Convertible Preferred Stock to a strategic advisor for services to be rendered through September 30, 2027, under an exemption from registration.

Sentiment

Score: 3

Explanation: The filing indicates a company in need of capital, securing it through high-cost, dilutive debt instruments with punitive default terms. The inability to warrant financial statements due to a past SEC action further dampens sentiment, suggesting underlying operational or financial instability.

Positives

• Secured additional working capital totaling $200,000 ($125,000 from 1800 Diagonal and $75,000 from Boot Capital) to support general operations and specific product lines.
• The capital is earmarked for strategic areas, including consumer products operations and American Rebel Beverages, which could aid growth in these segments.
• The company believes the new debt instruments are in compliance with existing restrictive covenants from the Streeterville Note Purchase Agreement, avoiding potential breaches of prior agreements.

Negatives

• The debt carries a significant Original Issue Discount (OID) and fees, reducing the net proceeds received compared to the principal amount (e.g., $152,950 principal for $125,000 net from 1800 Diagonal, $86,250 principal for $75,000 net from Boot Capital).
• The one-time interest charge of 18.75% over 15 months, combined with OID, indicates a very high effective cost of capital.
• Punitive default terms include a 22% per annum default interest rate and a mandatory payment of 150% of the outstanding principal plus accrued interest upon an Event of Default.
• Upon default, lenders have the right to convert outstanding principal into common stock at a 25% discount to market price, posing a significant dilution risk to existing shareholders.
• The company's financial statements for the years ended December 31, 2022, and 2023 require re-audit due to the May 3, 2024, BF Borgers SEC action, and the company cannot represent or warrant to any such financial statements, indicating significant financial reporting issues.

Risks

• Failure to make timely payments on the promissory notes could trigger an Event of Default, leading to accelerated repayment at a 150% penalty and potential dilutive conversion of debt to equity.
• The ongoing impact of the BF Borgers SEC action means the company cannot represent or warrant its financial statements for 2022 and 2023, creating uncertainty and potential regulatory scrutiny.
• Failure to maintain the listing of common stock on Nasdaq or other exchanges would constitute an Event of Default.
• Failure to comply with 1934 Act reporting requirements could lead to an Event of Default.
• Not maintaining the required reserve of common stock (four times the number of shares issuable upon full conversion) would be an Event of Default.
• Any material adverse change in the company's business, operations, assets, financial condition, or prospects could trigger an Event of Default under the notes.

Future Outlook

The company intends to use the newly secured capital for general working capital purposes, with a specific focus on funding its consumer products operations and American Rebel Beverages. This indicates a strategic allocation of resources towards these business segments for future growth and operational stability.

Management Comments

• "The Company believes that both notes are permitted indebtedness under the Streeterville NPA and do not constitute Restricted Issuances thereunder."
• "The Company believes that, after giving effect to the issuance of the 1800 Note and the Boot Note and based on the current balances outstanding under its other applicable indebtedness, (a) the total principal amount of indebtedness owed to 1800 Diagonal will not exceed the 1800 Cap, and (b) the aggregate indebtedness incurred for American Rebel Beverages working capital purposes will not exceed the ARB Working Capital Cap, and therefore both transactions are in compliance with the Streeterville NPAs restrictions on additional debt and Restricted Issuances."

Industry Context

The company's reliance on high-cost, short-term debt with significant original issue discounts and punitive default terms suggests challenges in accessing more conventional, lower-cost financing. This is often characteristic of smaller companies, those with limited credit history, or those facing financial distress within the consumer products industry. The specific allocation of funds to consumer products and beverages indicates a focus on bolstering these operational areas, potentially in a competitive or capital-intensive market segment.

Comparison to Industry Standards

• The Original Issue Discount (OID) of approximately 13.04% for both the 1800 Diagonal Note ($19,950 OID on $152,950 principal) and the Boot Capital Note ($11,250 OID on $86,250 principal), coupled with an additional $8,000 fee for the 1800 Diagonal Note, results in effective borrowing costs significantly higher than typical commercial loans or corporate bonds for financially stable companies.
• The stated one-time interest charge of 18.75% over 15 months, when combined with the OID, implies an extremely high effective annual interest rate, far exceeding benchmark rates for companies with strong credit profiles.
• The 22% default interest rate and the 150% default penalty on outstanding amounts are aggressive terms, typically found in distressed financing scenarios or for borrowers perceived as high-risk, indicating a lack of leverage for the company in negotiating these terms.
• The provision allowing lenders to convert debt into common stock at a 25% discount to market price upon default is a common feature in highly dilutive financing, providing a significant upside for lenders at the expense of existing shareholders if the company faces financial difficulties.
• The requirement to re-audit financial statements for 2022 and 2023 due to the BF Borgers SEC action is a substantial red flag, indicating past financial reporting irregularities that would typically deter most institutional investors and lenders, placing the company outside standard industry financial health benchmarks.

Legal Proceedings

• The May 3, 2024, BF Borgers SEC action has resulted in the inability of BF Borgers to appear or practice before the SEC, leading to the company's financial statements, references, and disclosures being specifically excluded from the definition of SEC Documents, and the company's inability to represent or warrant to such financial statements.
• The company is required to re-audit its financial statements for the years ended December 31, 2022, and 2023, as a consequence of the BF Borgers SEC action.

Stakeholder Impact

• Shareholders face potential significant dilution if the company defaults on the notes, as lenders can convert debt to equity at a 25% discount. The high cost of debt will also negatively impact future earnings.
• Existing creditors may see increased risk due to the additional leverage, although the company asserts compliance with existing debt covenants.
• Employees and operations in the consumer products and American Rebel Beverages segments may benefit from the working capital infusion, which could support ongoing activities and growth initiatives.
• The inability to warrant financial statements due to the BF Borgers SEC action creates uncertainty and potential reputational damage for all stakeholders.

Next Steps

• Make mandatory monthly payments on the 1800 Diagonal Note and Boot Capital Note, with the first payment due on June 15, 2026.
• Continue to comply with the reporting requirements of the Securities Exchange Act of 1934.
• Complete the re-audit of financial statements for the years ended December 31, 2022, and 2023, as required due to the BF Borgers SEC action.
• Utilize the net proceeds from the notes for general working capital purposes, specifically supporting consumer products operations and American Rebel Beverages.
• The strategic advisor will render services from December 9, 2025, through September 30, 2027, in exchange for Series D Convertible Preferred Stock.

Key Dates

Recommendation

The terms of the new debt financing are highly unfavorable, characterized by significant original issue discounts, high effective interest rates, and extremely punitive default provisions including a 150% penalty and dilutive conversion rights. The company's inability to warrant its financial statements for 2022 and 2023 due to an SEC action against its former auditor, BF Borgers, signals severe financial reporting issues and a lack of transparency. This combination of expensive, high-risk financing and unresolved financial reporting problems points to significant operational and financial distress, making the stock a strong sell.

Keywords

American Rebel Holdings, AREB, debt financing, promissory note, working capital, convertible preferred stock, SEC filing, 8-K, corporate finance, capital raise, consumer products, American Rebel Beverages, original issue discount