8-K: American Rebel Secures High-Cost Loan, Executes Reverse Split

American Rebel Holdings, Inc. secured a $158,000 net loan with significant fees and discount, while also completing a 1-for-20 reverse stock split and preferred stock conversions.

Summary

• Secured a promissory note for $183,280 from 1800 Diagonal Lending, LLC.
• Received net proceeds of $158,000 after an original issue discount of $25,280 and fees of $8,000.
• The note requires a total payback of $217,645 over 15 monthly payments, ending January 15, 2027.
• A 1-for-20 reverse stock split was effectuated on October 3, 2025.
• Issued 4,053,452 common shares to CEDE & Co. for rounding associated with the reverse stock split.
• Converted 11,000 shares of Series D Convertible Preferred Stock into 55,000 shares of common stock in early October 2025.
• Currently has 5,421,049 shares of common stock issued and outstanding.

Sentiment

Score: 3

Explanation: The high cost of debt, significant default penalties, potential for dilutive conversion, and the red flag regarding past financial statement reliability (due to auditor issues) collectively indicate a negative outlook, despite securing working capital.

Positives

• Secured $158,000 in net proceeds, providing immediate working capital.
• The company has the right to prepay the note in full at a 95% discount of the outstanding principal and accrued interest within 180 days of the issue date, without penalty.
• The Securities Purchase Agreement allows for additional financing tranches of up to $1,000,000 in the aggregate over the next twelve months, subject to further agreement.
• The lender's conversion right is limited to less than 4.99% of total outstanding common stock upon conversion, mitigating immediate significant dilution from conversion.

Negatives

• The loan carries a high effective cost, with an original issue discount of $25,280 and fees of $8,000 on a $183,280 principal, resulting in only $158,000 net proceeds.
• The total payback amount of $217,645 on $158,000 net proceeds represents a substantial cost of capital.
• Upon an Event of Default, the company is obligated to pay 150% of the outstanding principal plus accrued interest, default interest (22% per annum), and any conversion amounts.
• The note can be converted into common stock at a 25% discount to market price upon an Event of Default, leading to potential significant dilution for existing shareholders.
• The company's financial statements for the years ended December 31, 2022, and 2023 are explicitly excluded from representations and warranties due to the BF Borgers SEC action, raising concerns about past financial reporting reliability.
• The 1-for-20 reverse stock split often indicates a low share price and potential struggles to meet listing requirements, which can be perceived negatively by the market.

Risks

• Risk of significant financial penalties and accelerated repayment (150% of outstanding principal plus interest) if an Event of Default occurs.
• Potential for substantial shareholder dilution if the note converts to common stock at a 25% discount to market price upon an Event of Default.
• The company's obligation to reserve shares equal to four times the number of shares issuable upon full conversion of the note could strain its authorized share count and facilitate future dilution.
• Failure to maintain Nasdaq listing (delisting of common stock) is an Event of Default.
• Failure to materially comply with 1934 Act reporting requirements or ceasing to be subject to them is an Event of Default.
• Any dissolution, liquidation, winding up, or cessation of operations by the company is an Event of Default.
• The exclusion of financial statements for 2022 and 2023 from representations due to the BF Borgers SEC action poses a risk regarding the reliability of historical financial data.

Future Outlook

The company anticipates using the net proceeds from the loan for general working capital purposes and has the potential for additional financing tranches of up to $1,000,000 over the next twelve months, subject to further agreement.

Management Comments

• Charles A. Ross, Jr., Chief Executive Officer, signed the filing on behalf of American Rebel Holdings, Inc., indicating management's approval of the reported transactions.

Industry Context

This filing reflects a common strategy for micro-cap companies to raise capital through debt financing, often at higher costs, and to execute reverse stock splits to maintain stock exchange listing compliance. The exclusion of financial statements due to auditor issues is a significant red flag that could impact investor confidence and regulatory scrutiny, distinguishing it from typical industry practices.

Comparison to Industry Standards

• The effective cost of capital for this loan, considering the original issue discount and fees, appears significantly higher than typical commercial bank lending rates for established companies, aligning more with distressed or high-risk financing common for micro-cap or early-stage ventures.
• The 1-for-20 reverse stock split is a common tactic used by companies, particularly those listed on Nasdaq, to increase their per-share price to meet minimum bid price requirements, similar to actions taken by other companies facing potential delisting.
• The explicit exclusion of financial statements for 2022 and 2023 from representations due to auditor issues (BF Borgers SEC action) is a severe deviation from industry standards for financial transparency and reliability, unlike well-governed public companies such as Apple or Microsoft which maintain robust audit assurances.
• The default penalty of 150% of outstanding principal plus interest is a stringent term, indicative of the high perceived risk by the lender, and is more aggressive than standard corporate debt covenants.

Corporate Governance

Legal Proceedings

• The company's financial statements for the years ended December 31, 2022, and 2023 are excluded from representations due to the May 3, 2024 BF Borgers SEC action, indicating past issues with audit compliance.

Stakeholder Impact

• Shareholders: Face potential dilution from the conversion feature of the promissory note at a discount if an Event of Default occurs. The reverse stock split may temporarily boost share price but doesn't fundamentally change company value, and can be a negative signal. The exclusion of past financial statements from representations could erode investor confidence.
• Creditors (Lender): Benefits from high interest rates, significant default penalties (150% of principal), and the ability to convert debt to equity at a discount upon default, providing strong downside protection and potential upside.
• Management: Has secured working capital to support operations but is under pressure to manage the high-cost debt and avoid default, while also addressing past financial reporting issues.

Next Steps

• Make scheduled monthly payments on the promissory note, with the first payment due November 15, 2025, and the final payment due January 15, 2027.
• Manage the terms of the promissory note to avoid any Events of Default, which would trigger severe penalties and potential equity conversion.
• Potentially pursue additional financing tranches up to $1,000,000 as outlined in the Securities Purchase Agreement, subject to further negotiation.
• Address the implications of the BF Borgers SEC action on its financial reporting and ensure future compliance and reliability.

Key Dates

Recommendation

The company's recent actions, including a 1-for-20 reverse stock split and securing high-cost debt with punitive default terms, signal significant financial distress. The exclusion of 2022 and 2023 financial statements from representations due to auditor issues (BF Borgers SEC action) is a major red flag, indicating a lack of reliable historical financial data and potential governance concerns. While the company secured $158,000 in net proceeds for working capital, the total payback of $217,645 on this amount, coupled with a 150% default penalty and dilutive conversion rights at a 25% discount, represents an extremely expensive and risky financing structure. These factors collectively point to severe underlying operational or financial challenges, making the stock a 'strong sell' for seasoned investors.

Keywords

American Rebel Holdings, AREB, Promissory Note, Securities Purchase Agreement, Reverse Stock Split, Debt Financing, Convertible Note, SEC Filing, Corporate Finance, Dilution Risk, Working Capital