UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X]
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the quarterly period endedSeptember 30, 20172022
OR
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___ to ___
Commission file number333-201607001-41267
AMERICAN REBEL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 47-3892903 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Nashville, Tennessee |
| |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: |
|
|
Copies of communications to: | ||
Joseph Lucosky, Esq. | Anthony N. DeMint, Esq. | |
Adele Hogan, Esq. | DeMint Law, PLLC | |
Lucosky Brookman LLP | 3753 Howard Hughes Parkway | |
101 Wood Avenue South | Second Floor, Suite 314 | |
5th Floor | Las Vegas, Nevada 89169 | |
Iselin, NJ 08830 | (702) 714-0889 | |
(732) 395-4402 | anthony@demintlaw.com | |
jlucosky@lucbro.com |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock | AREB | The Nasdaq Stock Market LLC | ||
Common Stock Purchase Warrants | AREBW | The Nasdaq Stock Market LLC |
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. Yes [ ] ☒ No [X]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ ] ☒ No [X]☐
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 |
| |
Non-accelerated filer |
| Smaller reporting company |
| |
Emerging growth company |
|
1
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 [X] ☒
The number of shares of the registrant’s common stock outstanding as of November 20, 201714, 2022, was 23,771,000 shares.
2
AMERICAN REBEL HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
Page No. | |||
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Item 1. | Interim Condensed Consolidated Financial Statements (unaudited) |
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Item 2. |
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Item 3. |
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Item 4. |
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36 | |||
Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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3
2 |
Part I. Financial Information
Item 1.- Interim Condensed Consolidated Financial Statements (unaudited)
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
|
| September 30, 2017 (unaudited) |
| December 31, 2016 (audited) | September 30, 2022 | December 31, 2021 (audited) | ||||||
ASSETS |
|
|
|
| ||||||||
|
|
|
|
| ||||||||
CURRENT ASSETS: |
|
|
|
| ||||||||
Cash and cash equivalents | $ | 19,322 | $ | - | $ | 1,185,578 | $ | 17,607 | ||||
Prepaid expense |
| 85,341 |
| 13,500 | ||||||||
Accounts receivable | 2,446,290 | 100,746 | ||||||||||
Prepaid expense and other deposits | 147,832 | 163,492 | ||||||||||
Inventory |
| 515,371 |
| 137,905 | 6,306,341 | 685,854 | ||||||
Inventory deposits |
| - |
| 84,969 | 230,223 | - | ||||||
Total Current Assets |
| 620,034 |
| 236,374 | 10,316,264 | 967,699 | ||||||
|
|
|
|
| ||||||||
Property and Equipment, net |
| 206,553 |
| 234,188 | 486,070 | 900 | ||||||
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|
|
|
| ||||||||
OTHER ASSETS: |
|
|
|
| ||||||||
Investment |
| - |
| 35,000 | ||||||||
Goodwill and other intangible assets | 4,200,000 | - | ||||||||||
Lease deposit | 19,633 | - | ||||||||||
Total Other Assets |
| - |
| 35,000 | 4,219,633 | - | ||||||
|
|
|
|
| ||||||||
TOTAL ASSETS | $ | 826,587 | $ | 505,562 | $ | 15,021,967 | $ | 968,599 | ||||
|
|
|
|
| ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
| ||||||||
|
|
|
|
| ||||||||
CURRENT LIABILITIES: |
|
|
|
| ||||||||
Overdraft | $ | - | $ | 373 | ||||||||
Accounts payable and accrued expense |
| 365,358 |
| 163,799 | 2,312,081 | 1,032,264 | ||||||
Accrued Interest – Convertible Debenture – Related Party |
| 168,537 |
| - | ||||||||
Loan – Officer - Related party |
| 104,150 |
| 221,155 | ||||||||
Loan – Related party |
| - |
| 584,187 | ||||||||
Loan – Working Capital |
| 183,355 |
| - | ||||||||
Loans - Nonrelated parties |
| 153,718 |
| 182,315 | ||||||||
Accrued interest | 67,919 | 203,972 | ||||||||||
Loan – officer - related party | - | 10,373 | ||||||||||
Loans – working capital | 603,840 | 3,879,428 | ||||||||||
Loans - nonrelated parties | 4,152 | 12,939 | ||||||||||
Total Current Liabilities |
| 975,118 |
| 1,151,829 | 2,987,992 | 5,138,976 | ||||||
|
|
|
|
| ||||||||
Convertible Debenture –Related party |
| 1,675,000 |
| - | ||||||||
Other long-term liabilities | - | - | ||||||||||
TOTAL LIABILITIES |
| 2,650,118 |
| 1,151,829 | 2,987,992 | 5,138,976 | ||||||
|
|
|
|
| ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT): |
|
|
|
| ||||||||
Preferred stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding |
| - |
| - | ||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 23,771,000 and 14,621,000 issued and outstanding, respectively at September 30, 2017 and December 31, 2016 |
| 23,771 |
| 14,621 | ||||||||
Preferred stock, $ | par value; shares authorized; issued and outstanding, at September 30, 2022 and December 31, 2021 Series A100 | 100 | ||||||||||
Preferred stock, $ | par value; shares authorized; and issued and outstanding, respectively at September 30, 2022 and December 31, 2021 Series B75 | 277 | ||||||||||
Preferred stock,value | 75 | 277 | ||||||||||
Common stock, $ | par value; shares authorized; and issued and outstanding, respectively at September 30, 2022 and December 31, 20218,474 | 1,597 | ||||||||||
Additional paid in capital |
| 3,022,947 |
| 1,682,129 | 45,372,714 | 22,797,306 | ||||||
Accumulated deficit |
| (4,870,249) |
| (2,343,017) | (33,347,388 | ) | (26,969,657 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
| (1,823,530) |
| (646,267) | 12,033,975 | (4,170,377 | ) | |||||
|
|
|
|
| ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 826,587 | $ | 505,562 | $ | 15,021,967 | $ | 968,599 |
See Notes to Financial Statements.
4
3 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the three months ended September 30, 2017 (unaudited) |
| For the three months ended September 30, 2016 (unaudited) | ||||||||
|
|
| ||||||||||
|
|
| For the three months ended September 30, 2022 | For the three months ended September 30, 2021 | ||||||||
Revenue | $ | 10,164 | $ | - | $ | 4,102,761 | $ | 295,490 | ||||
Cost of goods sold |
| 3,314 |
| - | 3,124,657 | 280,212 | ||||||
Gross margin |
| 6,850 |
| - | 978,104 | 15,278 | ||||||
|
|
|
|
| ||||||||
Expenses: |
|
|
|
| ||||||||
Consulting – business development |
| 172,171 |
| 130,999 | ||||||||
Consulting/payroll and other payroll costs | 1,227,953 | 656,784 | ||||||||||
Rental expense, warehousing, outlet expense | 314,314 | - | ||||||||||
Product development costs |
| 12,860 |
| 23,486 | - | 42,720 | ||||||
Marketing and brand development costs |
| 96,789 |
| 122,981 | 119,122 | 34,669 | ||||||
Administrative and other |
| 53,380 |
| 66,485 | 1,077,005 | 236,763 | ||||||
Depreciation expense |
| 15,507 |
| 14,561 | 9,956 | 946 | ||||||
|
| 350,707 |
| 358,512 | ||||||||
Total operating expense | 2,748,350 | 971,882 | ||||||||||
Operating income (loss) |
| (343,857) |
| (358,512) | (1,770,246 | ) | (956,604 | ) | ||||
|
|
|
|
| ||||||||
Other Income (Expense) |
|
|
|
| ||||||||
Licensing income |
| - |
| 30,000 | ||||||||
Gain on sale of assets |
| - |
| - | ||||||||
Interest expense |
| (121,893) |
| (10,064) | (31,584 | ) | (382,601 | ) | ||||
Interest expense – pre-emptive rights release | (350,000 | ) | - | |||||||||
Interest income | 4,428 | - | ||||||||||
Gain (loss) on extinguishment of debt | - | (87,575 | ) | |||||||||
Total other income (expense), net | (377,156 | ) | (470,176 | ) | ||||||||
Net income (loss) before income tax provision |
| (465,751) |
| (338,576) | (2,147,402 | ) | (1,426,780 | ) | ||||
Provision for income tax |
| - |
| - | - | - | ||||||
Net income (loss) | $ | (465,751) | $ | (338,576) | $ | (2,147,402 | ) | $ | (1,426,780 | ) | ||
Basic and diluted income (loss) per share | $ | (0.02) | $ | (0.02) | $ | (0.36 | ) | $ | (1.05 | ) | ||
Weighted average common shares outstanding - basic and diluted |
| 23,714,000 |
| 14,621,000 | 6,031,715 | 1,354,700 |
See Notes to Financial Statements.
5
4 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
| For the nine months ended September 30, 2017 (unaudited) |
| For the nine months ended September 30, 2016 (unaudited) | For the nine months ended September 30, 2022 | For the nine months ended September 30, 2021 | ||||||
Revenue | $ | 28,361 | $ | - | $ | 4,595,547 | $ | 848,357 | ||||
Cost of goods sold |
| 8,818 |
| - | 3,462,454 | 716,943 | ||||||
Gross margin |
| 19,543 |
| - | 1,133,093 | 131,414 | ||||||
|
|
|
|
| ||||||||
Expenses: |
|
|
|
| ||||||||
Consulting – business development |
| 1,881,781 |
| 391,862 | ||||||||
Consulting/payroll and other payroll costs | 1,937,349 | 1,774,003 | ||||||||||
Rental expense, warehousing, outlet expense | 314,314 | - | ||||||||||
Product development costs |
| 35,376 |
| 105,806 | 146,463 | 275,780 | ||||||
Marketing and brand development costs |
| 282,382 |
| 294,428 | 349,341 | 138,783 | ||||||
Administrative and other |
| 178,031 |
| 139,903 | 2,687,728 | 603,727 | ||||||
Depreciation expense |
| 45,622 |
| 43,055 | 11,311 | 2,744 | ||||||
|
| 2,423,193 |
| 975,054 | ||||||||
Total operating expense | 5,446,506 | 2,795,037 | ||||||||||
Operating income (loss) |
| (2,403,649) |
| (975,054) | (4,313,413 | ) | (2,663,623 | ) | ||||
|
|
|
|
| ||||||||
Other Income (Expense) |
|
|
|
| ||||||||
Licensing income |
| - |
| 30,000 | ||||||||
Interest expense |
| (143,583) |
| (31,932) | (341,990 | ) | (1,500,744 | ) | ||||
| 20,000 |
| - | |||||||||
Interest expense – pre-emptive rights release | (350,000 | ) | - | |||||||||
Interest income | 4,428 | - | ||||||||||
Gain (loss) on extinguishment of debt | (1,376,756 | ) | (725,723 | ) | ||||||||
Total other income (expense), net | (2,064,318 | ) | (2,226,467 | ) | ||||||||
Net income (loss) before income tax provision |
| (2,527,232) |
| (976,986) | (6,377,731 | ) | (4,890,090 | ) | ||||
Provision for income tax |
| - |
| - | - | - | ||||||
Net income (loss) | $ | (2,527,232) | $ | (976,986) | $ | (6,377,731 | ) | $ | (4,890,090 | ) | ||
Basic and diluted income (loss) per share | $ | (0.14) | $ | (0.07) | $ | (1.34 | ) | $ | (4.23 | ) | ||
Weighted average common shares outstanding - basic and diluted |
| 18,081,000 |
| 14,241,000 | ||||||||
Weighted average common shares outstanding – basic and diluted | 4,743,244 | 1,155,513 |
See Notes to Financial Statements.
6
5 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICITSTOCKHOLDERS’ EQUITY/(DEFICIT)
| Common Stock |
| Common Stock Amount |
| Additional Paid-in Capital |
| Accumulated Deficit |
| Total |
|
|
|
|
|
|
|
|
| |
Balance – December 31, 2015 | 13,455,000 | $ | 13,455 | $ | 1,100,295 | $ | (979,511) | $ | 134,239 |
|
|
|
|
|
|
|
|
|
|
1,166,000 |
| 1,166 |
| 581,834 |
| - |
| 583,000 | |
|
|
|
|
|
|
|
|
|
|
Net loss | - |
| - |
| - |
| (1,363,506) |
| (1,363,506) |
|
|
|
|
|
|
|
|
|
|
Balance – December 31, 2016 | 14,621,000 | $ | 14,621 | $ | 1,682,129 | $ | (2,343,017) | $ | (646,267) |
|
|
|
|
|
|
|
|
|
|
Common Stock issued as compensation. | 3,150,000 |
| 3,150 |
| 1,571,850 |
| - |
| 1,575,000 |
|
|
|
|
|
|
|
|
|
|
Reverse Acquisition of American Rebel, Inc. | 6,000,000 |
| 6,000 |
| (231,032) |
| - |
| (225,032) |
|
|
|
|
|
|
|
|
|
|
Net loss | - |
| - |
| - |
| (2,527,232) |
| (2,527,232) |
|
|
|
|
|
|
|
|
|
|
Balance – September 30, 2017 | 23,771,000 | $ | 23,771 | $ | 3,022,947 | $ | (4,870,249) | $ | (1,823,530) |
Common Stock | Preferred Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
Balance – December 31, 2020 | 910,099 | - | $ | 910 | $ | - | $ | 15,857,366 | $ | (20,870,713 | ) | $ | (5,012,437 | ) | ||||||||||||||
Sale of common stock | 31,250 | - | 31 | - | 149,969 | - | 150,000 | |||||||||||||||||||||
Common stock issued to pay expense | 22,741 | - | 23 | - | 105,443 | - | 105,466 | |||||||||||||||||||||
Net Loss | - | - | - | - | - | (4,890,090 | ) | (4,890,090 | ) | |||||||||||||||||||
Balance – September 30, 2021 | 964,090 | - | $ | 964 | $ | - | $ | 16,112,778 | $ | (25,760,803 | ) | $ | (5,684,586 | ) |
Common Stock | Preferred Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
Balance – December 31, 2021 | 1,597,370 | 376,501 | $ | 1,597 | $ | 377 | $ | 22,797,306 | $ | (26,969,657 | ) | $ | (4,170,377 | ) | ||||||||||||||
Beginning balance | 1,597,370 | 376,501 | $ | 1,597 | $ | 377 | $ | 22,797,306 | $ | (26,969,657 | ) | $ | (4,170,377 | ) | ||||||||||||||
Sale of common stock, net | 2,658,630 | - | 2,659 | - | 9,035,797 | - | 9,038,456 | |||||||||||||||||||||
Common stock issued to pay expense | 233,623 | - | 234 | - | 969,301 | - | 969,535 | |||||||||||||||||||||
Preferred stock converted to common stock | 251,698 | (201,358 | ) | 252 | (202 | ) | (50 | ) | - | - | ||||||||||||||||||
Debt converted to warrants | - | - | - | - | 1,566,559 | - | 1,566,559 | |||||||||||||||||||||
Sale of common stock | 509,311 | - | 509 | - | 564,826 | - | 565,335 | |||||||||||||||||||||
Sale of pre-funded common stock warrants $0.01 | per share, exercise price of $- | - | - | - | 12,322,542 | - | 12,322,542 | |||||||||||||||||||||
Offering costs and fees associated with offering | - | - | - | (1,972,578 | ) | - | (1,972,578 | ) | ||||||||||||||||||||
Issuance of shares as compensation | 100,000 | - | 100 | 60,900 | - | 61,000 | ||||||||||||||||||||||
Exercise of pre-funded warrants | 3,123,401 | - | 3,123 | - | 28,111 | - | 31,234 | |||||||||||||||||||||
Net Loss | - | - | - | - | - | (6,377,731 | ) | (6,377,731 | ) | |||||||||||||||||||
Balance – September 30, 2022 | 8,474,033 | 175,143 | $ | 8,474 | $ | 175 | $ | 45,372,714 | $ | (33,347,388 | ) | $ | 12,033,975 | |||||||||||||||
Ending balance | 8,474,033 | 175,143 | $ | 8,474 | $ | 175 | $ | 45,372,714 | $ | (33,347,388 | ) | $ | 12,033,975 |
See Notes to Financial Statements.
7
6 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
| For the nine months ended September 30, 2017 (unaudited) |
| For the nine months ended September 30, 2016 (unaudited) | For the nine months ended September 30, 2022 | For the nine months ended September 30, 2021 | ||||||
|
|
|
|
| ||||||||
CASH FLOW FROM OPERATING ACTIVITIES: |
|
|
|
| ||||||||
Net income (loss) | $ | (2,527,232) | $ | (976,986) | $ | (6,377,731 | ) | $ | (4,890,090 | ) | ||
Depreciation |
| 45,622 |
| 43,055 | 11,311 | 3,158 | ||||||
Gain on sale of assets |
| (20,000) |
| - | ||||||||
Compensation paid through issuance of common stock |
| 1,400,000 |
| - | ||||||||
Expense paid through issuance of common stock | 1,030,535 | 2,806,826 | ||||||||||
Amortization of loan discount |
| 59,000 |
| - | 1,000,457 | 839,434 | ||||||
Adjustments to reconcile net loss to cash (used in) operating activities: |
|
|
|
| ||||||||
Change in accounts receivable | (219,697 | ) | (6,830 | ) | ||||||||
Change in prepaid expenses |
| (16,008) |
| 12,815 | 20,184 | (8,010 | ) | |||||
Change in inventory |
| (377,467) |
| - | (869,985 | ) | (6,120 | ) | ||||
Change in inventory deposits |
| 84,970 |
| (142,740) | ||||||||
Change in inventory deposits and other | (224,894 | ) | 64,479 | |||||||||
Change in accounts payable and accrued expense |
| 220,411 |
| 51,346 | (297,513 | ) | 201,915 | |||||
Net Cash (Used in) Operating Activities |
| (1,130,704) |
| (1,012,510) | (5,927,333 | ) | (995,238 | ) | ||||
|
|
|
|
| ||||||||
CASH FLOW FROM INVESTING ACTIVITIES: |
|
|
|
| ||||||||
Property and equipment purchased |
| (17,987) |
| (8,101) | ||||||||
Investment in Cubescape, Inc. |
| - |
| (35,000) | ||||||||
Net Cash (Used in) Operating Activities |
| (17,987) |
| (43,101) | ||||||||
Purchase of Champion Entities | (10,247,420 | ) | - | |||||||||
Purchase of equipment | (13,651 | ) | - | |||||||||
Net Cash (Used in) Investing Activities | (10,261,071 | ) | - | |||||||||
|
|
|
|
| ||||||||
CASH FLOW FROM FINANCING ACTIVITIES: |
|
|
|
| ||||||||
Overdraft |
| (373) |
| - | ||||||||
Cash received through merger with American Rebel, Inc. |
| 469 |
| - | ||||||||
Proceeds (repayments) of loans – officer - related party | (81,506 | ) | 14,658 | |||||||||
Proceeds from sale of common stock |
| - |
| 583,000 | 9,603,791 | 697,505 | ||||||
Proceeds (repayments) of loans – officer - related party |
| (117,005) |
| 117,680 | ||||||||
Proceeds of convertible debentures |
| 1,064,164 |
| 395,562 | ||||||||
Proceeds of working capital loan |
| 250,000 |
| - | ||||||||
Proceeds from sale of prefunded warrants, net of offering costs | 10,349,964 | - | ||||||||||
Proceeds from exercise of prefunded warrants | 31,234 | - | ||||||||||
Proceeds from working capital loan | 60,000 | 2,169,100 | ||||||||||
Repayment of loans – nonrelated party |
| (29,242) |
| (85,125) | (2,607,108 | ) | (1,736,000 | ) | ||||
Net Cash Provided by Financing Activities |
| 1,168,013 |
| 1,011,117 | 17,356,375 | 1,145,263 | ||||||
|
|
|
|
| ||||||||
CHANGE IN CASH |
| 19,322 |
| (44,494) | 1,167,971 | 150,025 | ||||||
|
|
|
|
| ||||||||
CASH AT BEGINNING OF PERIOD |
| - |
| 90,591 | 17,607 | 68,307 | ||||||
|
|
|
|
| ||||||||
CASH AT END OF PERIOD | $ | 19,322 | $ | 46,097 | $ | 1,185,578 | $ | 218,332 | ||||
|
|
|
|
| ||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
| ||||||||
Cash paid for: |
|
|
|
| ||||||||
Interest | $ | 9,502 | $ | 31,932 | $ | 234,146 | $ | 176,910 | ||||
Income taxes | $ | - | $ | - | $ | - | $ | - | ||||
|
|
|
|
| ||||||||
Non-cash investing and financing activities: |
|
|
|
| ||||||||
Investment eliminated through merger and consolidation | $ | 35,000 | $ | - | ||||||||
Vehicles acquired through assumption of loans | $ | - | $ | 277,886 | ||||||||
Debt assumed to acquire vehicles | $ | - | $ | 277,886 | ||||||||
|
|
|
|
| ||||||||
Debt repayment through the issuance of common stock | $ | 2,011,224 | $ | 1,713,924 |
See Notes to Financial Statements.
8
7 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 20172022
(unaudited)
NOTE 1 –ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OrganizationGeneral
American Rebel Holdings, Inc. (the “Company”) operates primarily as a designer, manufacturer, and marketer of branded safes and personal security, self-defense products. Additionally, the Company designs and produces branded apparel and other accessories.
The “Company”Company promotes and sells its products primarily through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including its website and e-commerce platforms such as Amazon.com.
The information on our website does not constitute a part of this report.
Listing, Reorganization and Acquisition of Champion Entities
The Company was incorporated on December 15, 2014 (date of inception), under the laws of the State of Nevada, as CubeScape, Inc. EffectiveThe Company filed a registration statement on Form S-1, which was declared effective by the United States Securities and Exchange Commission (the “SEC”) on October 14, 2015. Twenty-six (26) investors invested at a price of $ per share for a total of $60,000. The direct public offering closed on December 11, 2015.
On January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. The Company completed a business combination with its majority stockholder, American Rebel, Inc. on June 19, 2017. As a result, American Rebel, Inc. became a wholly ownedwholly-owned subsidiary of the Company.
The aforementioned acquisition of American Rebel, Inc. was accounted for as a reverse merger. Themerger, which involved issuance by the Company issued 17,421,000of shares of its common stock and issued6,250 warrants to purchase 500,000 shares of common stock to shareholders of American Rebel, Inc., and cancelled 9,000,000 shares of common stock previously owned by American Rebel, Inc.
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. This transaction was completed on July 29, 2022. We have included the Champion Entities assets and liabilities as of that date and the subsequent financial activity through the date of this Report in our Condensed Consolidated Financial Statements. For all intent and purposes, the Champion Entities have been integrated with our existing operations and are under the control of our management team.
The closing of the acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company filed a registration statementpaid 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.
For purposes of this Quarterly Report on Form S-1 which was declared effective by the U.S. Securities and Exchange Commission on October 14, 2015. Twenty six (26) investors invested at a price of $0.01 per share for a total of $60,000. The direct public offering closed on December 11, 2015.
Nature of operations
The Company is developing branded products in the self-defense and patriotic product areas that are promoted and sold using personal appearance, music, internet and television avenues. The Company’s products will be under the10-Q, “American Rebel” “we,” “our,” “us,” or similar references refers to American Rebel BrandHoldings, Inc. and imprinted.its consolidated subsidiaries, unless the context requires otherwise.
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 United States Securities and Exchange Commission (the “SEC”)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, 20162021, and notes thereto contained. And the Current Report filed on Form 8-K of the Company dated June 19, 2017.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiary.subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.
Year end
The Company’s year-end is December 31.
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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 and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company also makes deposit payments on inventory to be manufactured that are carried separately until the goods are received into inventory.
9
Fixed assets and depreciation
Property and equipment isare 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 by the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.
Revenue recognition
In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), 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 to seven years.
Investment
During June 2016, American Rebel, Inc. purchasedsteps: (1) Identify the contract with a 60% controlling interestclient; (2) Identify the performance obligations in the Company withcontract; (3) Determine the intenttransaction price; (4) Allocate the transaction price to merge. The merger was completed on June 19, 2017performance obligations in the contract; and has been accounted for(5) Recognize revenues when or as the company satisfies a reverse merger with comparative financial history being that of American Rebel, Inc., its wholly owned subsidiary.performance obligation.
Revenue recognition
We recognize revenueThese steps are met when all of the following conditions are satisfied: (1) therean order is persuasive evidence of an arrangement; (2)received, a price is agreed, and the product is shipped or service has been provideddelivered to the consumer; (3) the amount of fees to be paid by the consumer is fixed or determinable; and (4) the collection of our fees or product revenue is probable.that customer.
The Company will record revenue when it is realizable and earned and product has been shipped to the consumers or that our service has been rendered to the consumer. License income will be reported as income when the Company has completed any responsibility to earn the income and when any earned royalties are received.
Advertising costs
Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $96,789$119,122 and $122,981$34,669 for the three monththree-month periods ended September 30, 20172022, and 2016,2021, respectively and $282,382$349,341 and $294,428, respectively,$138,783 for the nine monthnine-month periods then ended.
Fair valueValue of financial instrumentsFinancial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 20172022, and December 31, 2016,2021, 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.
Level 1:The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
9 |
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, the Financial Accounting Standards Board (the “FASB”) acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
The Company records stock basedstock-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.
10
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB 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 FASB ASC 505-50.
Earnings per share
The Company follows ASC Topic 260 to account for 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. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
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.
10 |
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 September 30, 20172022, and December 31, 2016,2021, 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 does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. For the threethree-month and nine monthnine-month periods ended September 30, 20172022, and 2016,2021, respectively, no income tax expense has been recorded.
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.
Recent pronouncementsRight of Use Assets and Lease Liabilities
The Company evaluated recent accounting pronouncements through September 30, 2017 and believes that none have a material effect onIn February 2016, the Company’s financial statements except for the following.
11
In August, 2014, FASB issued ASU No. 2014-15,Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entities Ability to continue as a Going Concern2016-02, Leases (Topic 842). The standard is intendedrequires lessees to define management's responsibility to decide whether there is substantial doubt about an organization's ability to continuerecognize almost all leases on the balance sheet as a going concernRight-of-Use (“ROU”) asset and a lease liability and requires leases to provide related footnote disclosures.be classified as either an operating or a finance type lease. The standard requires management to decide whether there are conditionsexcludes leases of intangible assets or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued.inventory. The standard provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The standard becomesbecame effective for the annualCompany beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period ending after December 15, 2016,amounts have not been adjusted and continue to be reported in accordance with early application permitted.our historical accounting under ASC 840. The adoptionCompany elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also 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 pronouncementpurpose, 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’ 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 consolidated balance sheets.
Recent pronouncements
The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements. The Company does not expected tobelieve that there are any new accounting pronouncements that have been issued that might have a material impact on our financial statements. Management's evaluations regarding the events and conditions that raise substantial doubt regarding the Company's ability to continue as a going concern are disclosed in Note 2 below.
In August 2015, FASB issued ASU 2015-14,Revenue from Contracts with Customers: Deferral of Effective Date. In 2014 FASB issued ASU 2014-09,Revenue from Contracts with Customers,which provided a framework for addressing revenue recognition issues and replaces almost all existing revenue recognition guidance in current U.S. GAAP. The core principle of ASU 2014-09 is for companies to recognize revenue for the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also resulted in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The amendments in ASU 2015-14 defer the effective date of the new revenue recognition guidance to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted to the original effective date (December 15, 2016), including interim periods within that reporting period. Management is evaluating the future impact of this guidance on the Company’s financial statements and notes thereto.
In August 2015, FASB issued ASU 2015-15,Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The Company previously reported that in April 2015, the FASB issued ASU 2015-03,Simplifying the Presentation of Debt Issuance Costs, which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in ASU 2015-15 address the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements such that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 and ASU 2015-03 are effective for financial statements of public business entities issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The adoption of this guidance is not expected to have a material impact on the Company'sits financial position or results of operations or cash flows.operations.
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In September 2015, the FASB issued ASU 2015-16,Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; calculated as if the accounting had been completed at the acquisition date. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this ASU should be applied prospectively with earlier application permitted for financial statements that have not been issued. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.
Amendments clarifying guidance in Topic 205, Risks and Uncertainties, are applicable to entities that have not commenced planned principal operations, which we have commenced recently.
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 development stage and, accordingly, hasits revenue from its planned operations does not yet generated significant revenues from operations.cover its operating expenses. Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to developing products and market identity, obtaining inventory, and preparing for public product launch.launch and ultimately selling products. As a result, the Company incurred net income (losses) for the nine months ended September 30, 20172022, and 20162021 of ($2,527,232)6,377,731) and ($976,986) 4,890,090), respectively. The Company’s accumulated deficit was ($4,870,249)33,347,388) as of September 30, 20172022, and ($2,343,017)26,969,657) as of December 31, 2016.2021. The Company’s working capital deficit was ($355,083)$7,328,272 as of September 30, 2017 and2022, compared to a deficit of ($915,455)4,171,277) as of December 31, 2016. In addition,2021. The increase in working capital from December 31, 2021, to September 30, 2022, is due to the Company closing on its registered public offering in February 2022 and subsequent private investment in public equity (“PIPE”) transaction completed in July 2022 and the acquisition of Champion. Until recently the Company’s development activities since inception have been sustained through equity and debt financing and the deferral of payments on accounts payable and other expenses.
12
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. Management is in discussion with its investment bank, EF Hutton a division of Benchmark Investments, LLC, and other broker dealers regarding additional funding initiatives or financings through the market.
Management believes sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock to institutional and other financial sources.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 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 plan rollout.objectives.
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 result from this uncertainty.
NOTE 3- 3 – INVENTORY AND DEPOSITS
Inventory and deposits includesinclude the following:
|
| September 30, 2017 (unaudited) |
| December 31, 2016 (audited) | ||
|
|
|
|
|
|
|
Inventory - Finished goods |
| $ | 515,371 |
| $ | 137,905 |
Inventory deposits |
|
| - |
|
| 84,969 |
|
|
| 515,371 |
|
| 222,874 |
Less: Reserve for excess and obsolete |
|
| - |
|
| - |
Net inventory and deposits |
| $ | 515,371 |
| $ | 222,874 |
SCHEDULE OF INVENTORY AND DEPOSITS
September 30, 2022 (unaudited) | December 31, 2021 (audited) | |||||||
Inventory – finished goods | $ | 6,306,341 | $ | 685,854 | ||||
Inventory deposits | 230,223 | - | ||||||
Total Inventory and deposits | $ | 6,536,564 | $ | 685,854 |
NOTE 4 – INVESTMENT
During June 2016, American Rebel, Inc. purchased a 60% controlling interest the Company with the intent to merge. The merger was completed on June 19, 2017 and American Rebel, Inc. has become a wholly owned subsidiary. The transaction has been recorded as a reverse merger with the consolidated ongoing history of the Company being that of American Rebel, Inc. The $35,000 investment in CubeScape, Inc has been eliminated in consolidation and netted into additional paid-in capital.
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment includesinclude the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | (audited) | |||||||
Plant, property and equipment | $ | 1,964,483 | $ | 32,261 | ||||
Vehicles | 663,332 | 277,886 | ||||||
Property and equipment gross | 2,627,815 | 310,147 | ||||||
Less: Accumulated depreciation | (2,141,745 | ) | (309,247 | ) | ||||
Net property and equipment | $ | 486,070 | $ | 900 |
12 |
|
| September 30, 2017 (unaudited) |
| December 31, 2016 (audited) | ||
|
|
|
|
|
|
|
Marketing equipment |
| $ | 32,261 |
| $ | 14,274 |
Vehicles |
|
| 277,886 |
|
| 277,886 |
|
|
| 310,147 |
|
| 292,160 |
Less: Accumulated depreciation |
|
| (103,594) |
|
| (57,972) |
Net property and equipment |
| $ | 206,553 |
| $ | 234,188 |
For the threenine months ended September 30, 20172022, and 20162021 we recognized $15,507$11,311 and $14,561$2,744 in depreciation expense, respectively, and $45,622 and $43,055 for the nine month periods then ended.respectively. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life. In January, 2016We recognized only two months and three days of depreciation expense from the assets that we acquired three vehicles from related parties and assumedwith the debt secured by the vehicles as described at Note 7Champion purchase.
NOTE 5 – Notes Payable. Accordingly, the recorded cost of each vehicle is the amount of debt assumed under each related loan, or a total of $277,886.
NOTE 6 –RELATEDRELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
For the year ended December 31, 2016, the Company received loans from its sole officer and director totaling $221,155. The balance at December 31, 2016 was $221,155. During the nine months ended September 30, 2017, the company repaid $117,005 of these loans resulting in a balance at September 30, 2017 of $104,150. These loans are due on demand and carry no interest.
13
During the nine months ended September 30, 2017, the Company entered into several convertible debt instruments with stockholders in the amount of $1,075,000, for a total of $1,675,000. The Company accrued interest expense on this convertible debt of $116,915, for a total of $135,427 at September 30, 2017. Of this amount borrowed under the convertible debt, $1,633,787 was loaned to American Rebel, Inc., the Company’s former majority stockholder and now the Company’s wholly owned subsidiary, as a working capital loan to pay its operating expenses including legal, accounting, product development, brand expansion, and marketing costs. The majority stockholder also used the proceeds of these loans to purchase inventory of its initial product scheduled to launch during 2017. This loan is eliminated in consolidation.
During the year ended December 31, 2016, the Company acquired three vehicles from various related parties and assumed the debt secured by each one of the vehicles. Accordingly, the recorded value for each vehicle iswas the total debt assumed underfrom each related loan, orfor a total of $277,886. (See Note 7 – Notes Payable.)$277,886.
Charles A. Ross, Jr. serves as the Company’s sole officer and director.CEO. Compensation for Mr. Ross was $150,000$552,000 and $142,500,$90,000, respectively for the nine months ended September 30, 20172022, and 2016, and $187,5002021. Compensation for the yearnine months ended December 31, 2016.September 30, 2022 includes several bonuses approved by the Board of Directors.
Doug Grau serves as the Company’s President. Compensation for Mr. Ross received a grantGrau was $278,000 and $60,000, respectively for the nine months ended September 30, 2022, and 2021. Compensation for the nine months ended September 30, 2022 includes several bonuses approved by the Board of 1,000,000 shares of American Rebel, Inc. common stock, valued at $0.50 per share in June 2017, prior to the acquisition. These shares were part of the 6,500,000 shares exchanged for Company common stock in the acquisition of American Rebel, Inc. completed on June 19, 2017.Directors.
NOTE 76 – NOTES PAYABLE – NONRELATED PARTIESNON-RELATED PARTY
Effective January 1, 2016, the Company acquired three vehiclesa vehicle from variousa related partiesparty in exchange for the assumption of the liabilitiesliability related to those vehicles.this vehicle. The liabilitiesliability assumed areis as follows at September 30, 20172022 and December 31, 2016.2021.
|
| September 30, 2017 |
| December 31, 2016 |
|
| (unaudited) |
| (audited) |
Loan secured by a tour bus, payable in monthly payments of $2,710 including interest at 12% per annum through June 2017 when the remaining balance of $65,000 is payable. | $ | 65,000 | $ | 78,345 |
|
|
|
|
|
Loan secured by a Ford truck, payable in monthly payments of $1,742 including interest at1% per annum through October 2018. |
| 20,674 |
| 35,926 |
|
|
|
|
|
Loan secured by a promotional vehicle. Loan is past due, payments are made at irregular intervals and interest expense accrues at 3% per month until paid in full. |
| 68,044 |
| 68,044 |
|
|
|
|
|
Total recorded as current liability | $ | 153,718 | $ | 182,315 |
SCHEDULE OF NOTES PAYABLE TO NON-RELATED PARTIES
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
(unaudited) | (audited) | |||||||
Loan secured by a tour bus, monthly payments of $1,426 including interest at 12% per annum through January 2023 when the remaining balance is payable. | $ | 4,152 | $ | 12,939 | ||||
Total recorded as current liability | $ | 4,152 | $ | 12,939 |
Current and long-term portion. Total loan balance is reported as current because loans are past due, become due within one year or are expected toas the loan will be repaid within one year.years time.
NOTE 87 – NOTES PAYABLE – WORKING CAPITAL
On July 6, 2017,During the Company’snine months ending September 30, 2022, the Company through one of its wholly-owned operating subsidiarysubsidiaries completed the sale of a secured promissory note in the principal amount of $250,000 with an interest rate of 12% per annum to a private investor, and current stockholder.several short-term notes under similar terms as its other short-term notes totaling $60,000. The note isnotes are secured by a pledge of allcertain items of the Company’s current inventory and the chief executive officer’s personal guaranty. This working capital note requires payments equal to 75% of current sales and matures in 180 days. In connection with this note,
13 |
During the nine months ending September 30, 2022, the Company issued 250,000and one of the Company’s wholly-owned operating subsidiaries repaid $2,541,634 of these short-term notes and successfully completed the conversion of short-term notes with a face value of $1,950,224 and accrued interest into shares of its common stock to the noteholder valued at $0.50 per share forwith a total of $125,000. The fair value of the common stock issued was$2,803,632, resulting in a Loss on extinguishment of debt of $1,376,756 recorded asin our Condensed Consolidated Statement of Operations. The conversion of a discount to the note payable. The discount will be amortized over the termmajor portion of the agreement tooutstanding short-term notes payable and accrued interest expense usingwas done in connection with the straight-line method that approximates the effective interest method. As ofregistered public offering completed in February 2022.
At September 30, 2017,2022, and December 31, 2021, the discounted outstanding balance due on the working capital notenotes payable was $183,355, including discount of $66,000.$603,840 and $3,879,428, respectively. These amounts do not include accrued interest payable for each respective time period.
14
NOTE 9- CONVERTIBLE DEBENTURE8 – RELATED PARTY
Since September 16, 2016, the Company sold convertible debentures in the amount of $1,675,000 in the form of 12% three year convertible term notes. Interest is accrued at an annual rate of 12% and is payable in common stock at maturity. Both principal and interest may be converted into common stock at a price of $0.50 per share after the passage of 181 days. The Company may redeem the debenture at its option or force conversion after common stock trades at a price in excess of $1.00 per share for five days. The Holder may force redemption after the Company raises $3 million dollars in equity. The holders of the convertible debentures were issued three year warrants to purchase 1,675,000 shares of the Company’s common stock at $1.00 per share. As of September 30, 2017, the Company received $1,675,000 under this convertible debenture. The Company received an additional $410,000 in October and November 2017 (see Note 12 – Subsequent Events).
The convertible debenture holder, based on its agreement, with maturities beginning September 16, 2019 has the option to convert their principal and interest into 3,350,000 (plus 270,855 for accrued interest) shares of common stock. The fair value of the embedded beneficial conversion feature resulted in no discount to the convertible debenture – related party at September 30, 2017.
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and fair value measurement under ASC 820 and determined that the beneficial conversion feature under the convertible debenture should be recorded as a discount to debt if market was more than the conversion feature.
The convertible debenture - related party is measured at fair value at the end of each reporting period or termination of the debenture agreement with the change in fair value recorded to earnings. The fair value of the embedded beneficial conversion feature did not result in a discount to the convertible debenture - related party. The discount if and when we have one will be amortized over the term of agreement or modification to the agreement to interest expense using the straight-line method that approximates the effective interest method.
The Company used the eight steps to determine fair value under ASC 820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make the measurement. (8) Determine amounts to be recognized and information to be disclosed.
Fair value was determined by the market price of the Company’s publicly traded stock with no discount allowed. This was determined as of the effective date of the agreement entered convertible debenture - related party. The conversion price was then compared to fair value, determined by market price and the difference between the two multiplied by the number of shares that would be issued upon conversion. The Company has not had any market activity within its public market. Private transactions between willing buyers and willing sellers have ranged from $0.02 to $0.50 per share. These transactions were not conducted through a broker dealer network.
As of September 30, 2017, the outstanding balance due the convertible debentures holders was $1,675,000, including $0 in original issue discount or interest.
NOTE 10 – EMBEDDED DERIVATIVES – FINANCIAL INSTRUMENTS
Since September 2016 the Company entered into a financial instrument, which consists of a convertible debenture, containing a conversion feature. Generally financial instruments are convertible into shares of the Company’s common stock; at prices that are either marked to the volume weighted average price of the Company’s publicly traded stock or a static price determinative from each financial instrument agreement. These prices may be at a significant discount to market as determined overall by the volume weighted average price of the Company’s publicly traded common stock. The Company for all intent and purposes considers these discounts to be fair market value as would be determined in an arm’s length transaction with a willing buyer and the restrictive nature of the common stock issued, unless issued pursuant to a registration or some other registered shares with the SEC.
The Company accounts for the fair value of the conversion feature in accordance with ASC 815-15,Derivatives and Hedging; Embedded Derivatives, which requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt and original issue discount notes payable. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations. The Company valued the embedded derivatives using eight steps to determine fair value under ASC 820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make the measurement. (8) Determine amounts to be recognized and information to be disclosed.
15
The fair value of the conversion feature of the financial instrument as of September 30, 2017 was $0. The Company did not record any expense associated with the embedded derivatives at September 30, 2017. No embedded derivative expense was realized as there was no change in the conversion price. The conversion price for this financial instrument was $0.50 per share which is higher than market as there have been no sales of the Company’s common stock.
NOTE 11 – INCOME TAXES
At September 30, 20172022 and December 31, 2016,2021, the Company had a net operating loss carryforward of $4,870,249 $33,347,388 and $2,343,017,$26,969,657, respectively, which begins to expire in 2034.
Components of net deferred tax asset, including a valuation allowance, are as follows:
|
| September 30, 2017 (unaudited) |
| December 31, 2016 (audited) |
Deferred tax asset: |
|
|
|
|
Net operating loss carryforward | $ | 1,704,587 | $ | 820,056 |
Total deferred tax asset |
| 1,704,587 |
| 820,056 |
Less: Valuation allowance |
| (1,704,587) |
| (820,056) |
Net deferred tax asset | $ | - | $ | - |
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
September 30, 2022 (unaudited) | December 31, 2021 (audited) | |||||||
Deferred tax asset: | ||||||||
Net operating loss carryforward | $ | 7,002,951 | $ | 5,663,628 | ||||
Total deferred tax asset | 7,002,951 | 5,663,628 | ||||||
Less: Valuation allowance | (7,002,951 | ) | (5,663,628 | ) | ||||
Net deferred tax asset | $ | - | $ | - |
Valuation allowance for deferred tax assets as of September 30, 20172022, and December 31, 20162021, was $1,704,587$7,002,951 and $820,056,$5,663,628, 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 September 30, 20172022, and December 31, 20162021, and recognized 100% valuation allowance for each period.period.
14 |
Reconciliation between the statutory rate and the effective tax rate for both periods and as of December 31, 2016:2021:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
St | (0.0 | )% | ||
Federal statutory rate |
| (21.0 | )% | |
State taxes, net of federal benefit |
| (0.0 | )% | |
Change in valuation allowance |
| 21.0 | % | |
Effective tax rate |
| 0.0 | % |
NOTE 129 – SHARE CAPITAL
The Company is authorized to issue 100,000,000 shares of its $0.001$ par value common stock and 1,000,000 shares of its $0.001$ par value preferred stock.
Common stock
On December 15, 2014,February 7, 2022, the Company effectuated a reverse split of its issued to its founder, then an officer and director of the Company, 6,000,000outstanding shares of its $0.001 par value common stock at a priceratio of $0.001 per1-for-80. The share for services provided upon organization. The services were valued at $6,000.numbers and pricing information in this report are adjusted to reflect the reverse stock split.
Common stock and preferred stock
On January 15, 2015, the Company issued to its founder 3,000,000February 3, 2022, multiple Series B Convertible Preferred stockholders converted shares of its $0.001 par value common stock at a price of $0.008 per share for certain intangible assets and tangible assets (see Note 3 - Intangible Assets). Mr. David Estus, then our sole officer and director, incurred more than $50,000 in developing or acquiring the intangible and tangible assets for which the Company valued at $24,000.
The Company filed a registration statement on Form S-1 which was declared effective by the U.S. Securities and Exchange Commission on October 14, 2015. The Form S-1 allowed the Companytheir Series B Convertible Preferred Stock to solicit investors for investment in a direct public offering of $60,000. Twenty six (26) investors invested at a price of $0.01 per share for the entire offering which closed on December 11, 2015.
The Company issued 17,421,000 shares of its common stock and issued warrants to purchase 500,000 shares of common stock to shareholders of American Rebel, Inc. and cancelled 9,000,000the Company.
On February 3, 2022, the Company converted two outstanding notes into owned by American Rebel, Inc.of the Company. shares of common stock
On February 10, 2022, the Company received an equity investment of $10,500,000 to completepurchase shares of the acquisitionCompany’s common stock through a registered public offering at $ per share.
On July 12, 2022, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. for the purchase and sale of American Rebel, Inc. which was accounted$12,887,976.31 of securities, consisting of (i) shares of Common Stock at $ per share, (ii) prefunded warrants (the “Prefunded Warrants”) that are exercisable into 11,202,401 shares of Common Stock (the “Prefunded Warrant Shares”) at $1.10 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 23,423,424 shares of Common Stock at an initial exercise price of $0.86 per share and will expire five years from the date of issuance.
On August 22, 2022, reverse merger.component of a February 2022 services agreement. shares of Common Stock were issued in return for services as a
16
During June 2017, prior to the merger, American Rebel, Inc issued 2,800,000month of August 2022, Armistice Capital Master Fund Ltd. exercised 440,441 Prefunded Warrants. Along with the exercise notice and payment of $4,404.41, shares of common stock as compensationwere issued.
During the month of September 2022, Armistice Capital Master Fund Ltd. exercised 2,682,960 Prefunded Warrants. Along with several exercise notices and recorded an expense based on fair market value of $0.50 per share for a total expense of $1,400,000. On June 19, 2017, in connection with the merger and acquisition of the subsidiary, the Company exchanged 17,421,000payments totaling $26,829.60, shares of common stock with stockholders of American Rebel, Inc. and cancelled 9,000,000 shares of common stock held by American Rebel, Inc. American Rebel, Inc. became a wholly owned subsidiary of the Company upon completion of the exchange.were issued.
On July 6, 2017, the Company’s wholly-owned operating subsidiary completed the sale of a secured promissory note in the principal amount of $250,000 with an interest rate of 12% per annum to a private investor, and current stockholder. The note is secured by a pledge of all of the Company’s current inventory and the chief executive officer’s personal guaranty. This working capital note requires payments equal to 75% of current sales and matures in 180 days. In connection with this note, the Company issued 250,000 shares of its common stock to the noteholder.
On August 6, 2017, the Company’s wholly-owned subsidiary completed an agreement to acquire a right to a trade show booth location early in 2018. In connection with this acquisition, the Company issued 100,000 shares of its common stock to the seller.
At September 30, 20172022 and December 31, 2016,2021, there were 23,771,000 and 14,621,000 shares of common stock issued 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.
15 |
Since September 16, 2016,Prefunded Warrants and Warrants issued in connection with the convertible debenture –related party (see Note 8 – Convertible Debenture – Related Party) the Company issued three year warrants to purchase 1,675,000 shares of the Company’s common stock at $1.00 per share. In conjunction with sale of convertible debt subsequent to September 30, 2017, the Company issued warrants to purchase an additional 410,000shares on identical terms.PIPE
On June 19, 2017, the Company issued five year warrants to purchase 500,000 shares of the Company’s common stock at $0.50 per share as compensation.
As of September 30, 2017,2022, there were 2,175,000 warrants8,456,843 Prefunded Warrants issued and outstanding. As of December 31, 2016,2021, there were 600,000no Prefunded Warrants issued and outstanding. The Prefunded Warrants were purchased by the holders of the warrants for $1.10 per warrant. The Prefunded Warrants require the payment of an additional $0.01 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 ended September 30, 2022, the Company received notice on Prefunded Warrants converting into shares of common stock.
Along with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to 23,423,424 shares of the Company’s common stock with an exercise price of $0.86 per share expiring five years 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 $0.86 per share with a five-year expiry.
As of September 30, 2022, there were 35,867,869 warrants issued and outstanding, which includes the remaining balance of 8,456,843 Prefunded Warrants. As of December 31, 2021, there were 701,776 warrants 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 Warrantswarrants have an immaterial fair value at September 30, 2017.2022. 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’s common stock has not traded so the volatility computation was based on other similarly situated companies. 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.
SCHEDULE OF FAIR VALUE MEASUREMENT
September 30, 2022 (unaudited) | December 31, 2021 (audited) | |||||||
Stock Price | $ | 1.80 | $ | 5.68 | ||||
Exercise Price | $ | 8.00 | $ | 8.00 | ||||
Term (expected in years) | 5.0 | 3.2 | ||||||
Volatility | 148.26 | % | 203.44 | % | ||||
Annual Rate of Dividends | 0.0 | % | 0.0 | % | ||||
Risk Free Rate | 2.32 | % | 1.52 | % |
16 |
|
| September 30, 2017 (unaudited) |
| December 31, 2016 (audited) |
|
|
|
|
|
Stock Price | $ | .01 | $ | .01 |
Exercise Price | $ | 1 | $ | 1 |
Term (expected in years) |
| 3 |
| 3 |
Volatility |
| 86.0% |
| 118% |
Annual Rate of Dividends |
| 0% |
| 0% |
Risk Free Rate |
| 1.62% |
| 0.88% |
17
Stock Purchase WarrantWarrants
The following table summarizes all warrant activity for the nine monthsyear ended September 30, 2017. We had no warrant activity duringDecember 31, 2021, and the nine months ended September 30, 2016.2022.
|
| Shares |
| Weighted-Average Exercise Price Per Share |
|
Remaining term |
|
Intrinsic value |
Outstanding, December 31, 2016 |
| 600,000 | $ | 1.00 |
| 1.99 years |
| - |
Granted |
| 1,575,000 | $ | 0.82 |
| 3.21 years |
| - |
Exercised |
| - |
| - |
| - |
| - |
Expired |
| - |
| - |
| - |
| - |
Outstanding and Exercisable at September 30, 2017 |
| 2,175,000 | $ | 0.89 |
| 2.87 years |
| - |
|
|
|
|
|
|
|
|
|
SCHEDULE OF WARRANT ACTIVITY
Shares | Weighted- Average Exercise Price Per Share | Remaining term | Intrinsic value | |||||||||||||
Outstanding and Exercisable at December 31, 2020 | 43,688 | $ | 20.80 | years | - | |||||||||||
Granted | 662,713 | $ | 8.00 | years | - | |||||||||||
Exercised | - | - | ||||||||||||||
Expired | (4,625 | ) | - | - | - | |||||||||||
Outstanding and Exercisable at December 31, 2021 | 701,776 | $ | 8.80 | years | - | |||||||||||
Granted | 2,909,639 | $ | 5.1875 | years | - | |||||||||||
Granted in Debt Conversion | 377,484 | $ | 5.1875 | years | ||||||||||||
Granted Prefunded Warrants | 11,579,885 | $ | 0.01 | years | ||||||||||||
Granted in PIPE transaction | $ | 0.86 | years | |||||||||||||
Exercised | ) | $ | - | - | ||||||||||||
Expired | (938 | ) | - | - | - | |||||||||||
Outstanding and Exercisable at September 30, 2022 | 35,867,869 | $ | 1.22 | years | - |
NOTE 1411 – COMMITMENTS AND CONTINGENCIES
Rental Payments under Non-cancellable Operating Leases
The Company has 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. Lease terms on the various spaces vary in expiration from as minimal as month-to-month to a lease expiring in March 2027.
The following is a schedule, by calendar year, of the future minimum rental payments required under the lease:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE
Year ended December 31, | ||||
2022 | 294,794 | |||
2023 | 985,956 | |||
2024 | 610,623 | |||
2025 | 85,891 | |||
2026 | 43,316 | |||
2027 | 3,733 | |||
Total | $ | 2,024,313 |
Rent expense totaled approximately $300,000 and $100,000 for the nine-month periods ended September 30, 2022, and 2021, respectively.
NOTE 12 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of September 30, 20172022, through the date the financial statements were issued and determined that there were the following subsequent events.events:
During the month of October 2022, Armistice Capital Master Fund Ltd. exercised 8,079,00 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790, shares of common stock were issued.
17 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2022
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction
The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations based upon the combined historical financial statements of American Rebel Holdings, Inc. (the “Company”) and Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (collectively “Champion”), after giving effect to the consummation of the transaction completed on July 29, 2022 (as disclosed on Current Report Form 8-K, dated August 4, 2022), by and among the Company and Champion, and the related adjustments described in the accompanying notes. The transaction is accounted for under the acquisition method of accounting, which requires determination of the accounting acquirer.
The Company is considered to be the acquirer of Champion for accounting purposes and will allocate the purchase price to the fair value of Champion’s assets and liabilities as of the acquisition date, with any excess purchase price recorded as goodwill.
The unaudited pro forma condensed combined balance sheet data as of September 30, 2022, gives effect to the transaction as if it occurred on that date for which it is reported on, which incidentally the Company acquired Champion on July 29, 2022. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021, gives effect to the transaction as if it had occurred on January 1, 2021, one full calendar year prior to the actual acquisition date of July 29, 2022.
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with business combination accounting guidance as provided in FASB ASC Topic 805 and reflect the preliminary allocation of the estimated merger consideration to the acquired assets and liabilities assumed based upon their estimated fair values, using the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information. The Company’s historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results.
The unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. In connection with the pro forma condensed combined financial information, the Company allocated the estimated purchase price using its best estimates of fair value. The allocation is dependent upon certain valuation and other analyses that are not yet final. Accordingly, the pro forma acquisition price adjustments are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed. There can be no assurances that the final valuations will not result in material changes to the preliminary estimated purchase price allocation. The unaudited pro forma condensed combined financial information also does not give effect to the dilution or costs of financing associated with the transaction, potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transaction or any integration costs. Furthermore, the unaudited pro forma condensed combined statements of operations do not include certain nonrecurring charges and the related tax effects that result directly from the transaction as described in the notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information should be read in conjunction with both the Company’s and Champion’s unaudited historical condensed consolidated financial statements as of September 30, 2022, (which includes the Champion activities as of the acquisition date and financial activity through the end of the reporting period) and the audited historical consolidated financial statements as of and for the year ended December 31, 2021.
18 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
American Rebel Holdings, Inc | Champion Safe Et Al Company | Purchase Transaction Accounting | Financing Transaction Accounting | Pro Forma | ||||||||||||||||
Historical | Historical | Adjustments | Adjustments | Combined | ||||||||||||||||
30-Sept-22 | 30-Sept-22 | 30-Sept-22 | 30-Sept-22 | 30-Sept-22 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
ASSETS | ||||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||
Cash and cash equivalents | $ | 963,402 | $ | 222,176 | $ | - | $ | - | $ | 1,185,578 | ||||||||||
Accounts receivable | 320,442 | 2,125,847 | 224,894 | - | 2,671,183 | |||||||||||||||
Prepaid expense | 138,559 | 9,274 | - | - | 147,833 | |||||||||||||||
Inventory | 873,369 | 5,432,973 | (153,280 | ) | - | 6,153,062 | ||||||||||||||
Inventory deposits | 224,894 | - | (224,894 | ) | - | - | ||||||||||||||
Total Current Assets | 2,520,666 | 7,790,270 | (153,280 | ) | - | 10,157,656 | ||||||||||||||
Property and Equipment, net | 13,196 | 472,874 | - | - | 486,070 | |||||||||||||||
OTHER ASSETS: | ||||||||||||||||||||
Goodwill and Purchase Consideration | 10,247,420 | 315,027 | (6,047,420 | ) | - | 4,200,000 | ||||||||||||||
(315,027 | ) | |||||||||||||||||||
Lease deposits | 504,750 | 14,883 | (500,000 | ) | - | 19,633 | ||||||||||||||
10,765,366 | 802,784 | (6,862,447 | ) | - | 4,705,703 | |||||||||||||||
TOTAL ASSETS | $ | 13,286,032 | $ | 8,593,055 | $ | (7,015,727 | ) | $ | - | $ | 14,863,359 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||
Accounts payable and accrued expense | 734,404 | 1,577,328 | - | - | 2,311,731 | |||||||||||||||
Accrued interest | 67,919 | - | - | - | 67,919 | |||||||||||||||
Loan – officer - related party | - | 291,945 | (291,945 | ) | - | - | ||||||||||||||
Loan – working capital | 603,840 | 500,000 | (500,000 | ) | - | 603,840 | ||||||||||||||
Loans - nonrelated parties | 4,152 | - | - | - | 4,152 | |||||||||||||||
Total Current Liabilities | 1,410,315 | 2,369,273 | (791,945 | ) | - | 2,987,642 | ||||||||||||||
Other long-term liabilities | - | - | - | - | - | |||||||||||||||
TOTAL LIABILITIES | 1,410,315 | 2,369,273 | (791,945 | ) | - | 2,987,642 | ||||||||||||||
STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||||||
Preferred stock, Class A | 100 | - | - | - | 100 | |||||||||||||||
Preferred stock, Class B | 75 | - | - | - | 75 | |||||||||||||||
Common stock, | 8,474 | - | - | - | 8,474 | |||||||||||||||
Additional paid in capital | 45,372,715 | 6,223,782 | (6,223,782 | ) | - | 45,372,715 | ||||||||||||||
Accumulated deficit | (33,505,647 | ) | - | - | - | (33,505,647 | ) | |||||||||||||
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | 11,875,717 | 6,223,782 | (6,223,782 | ) | - | 11,875,717 | ||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 13,286,032 | $ | 8,593,055 | $ | (7,015,727 | ) | $ | - | $ | 14,863,359 |
See Notes to Financial Statements.
19 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
American Holdings, Inc | Champion Safe Et Al Company | Purchase Transaction Accounting | Financing Transaction Accounting | Pro Forma | ||||||||||||||||
Historical | Historical | Adjustments | Adjustments | Combined | ||||||||||||||||
31-Dec-21 | 31-Dec-21 | 31-Dec-21 | 31-Dec-21 | 31-Dec-21 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
Revenue | $ | 986,826 | $ | 18,304,859 | $ | - | $ | (600,000 | ) | $ | 18,691,685 | |||||||||
Cost of goods sold | 812,130 | 14,354,863 | - | (600,000 | ) | 14,566,993 | ||||||||||||||
Gross margin | 174,696 | 3,949,996 | - | - | 4,124,692 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Consulting – business development | 2,012,803 | 1,838,947 | - | - | 3,851,750 | |||||||||||||||
Product development costs | 330,353 | 24,558 | - | - | 354,911 | |||||||||||||||
Marketing and brand development costs | 171,030 | 828,890 | - | - | 999,920 | |||||||||||||||
Administrative and other | 968,306 | 518,705 | - | - | 1,487,011 | |||||||||||||||
Depreciation expense | 3,643 | 24,919 | - | - | 28,562 | |||||||||||||||
Operating expenses | 3,486,135 | 3,236,019 | - | - | 6,722,154 | |||||||||||||||
Operating income (loss) | (3,311,439 | ) | 713,977 | - | - | (2,597,462 | ) | |||||||||||||
Other Income (Expense) | ||||||||||||||||||||
Interest expense | (2,061,782 | ) | (77,752 | ) | - | 1,800,000 | (339,534 | ) | ||||||||||||
Interest Income | - | 305 | 305 | |||||||||||||||||
Payroll Protection Loan Forgiven | - | 625,064 | - | 625,064 | ||||||||||||||||
Gain (Loss) on extinguishment of debt | (725,723 | ) | - | - | 725,723 | - | ||||||||||||||
Net income (loss) before income tax provision | (6,098,944 | ) | 1,261,594 | - | 2,525,723 | (2,311,627 | ) | |||||||||||||
Provision for income tax | - | - | - | - | - | |||||||||||||||
Net income (loss) | $ | (6,098,944 | ) | $ | 1,261,594 | $ | - | $ | 2,525,723 | $ | (2,311,627 | ) | ||||||||
Basic and diluted income (loss) per share | $ | (1.92 | ) | $ | - | $ | - | $ | - | $ | (0.73 | ) | ||||||||
Weighted average common shares outstanding - basic and diluted | 3,169,000 | - | - | - | 3,169,000 |
See Notes to Financial Statements.
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AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Subsequent to September 30, 2017, the Company received an additional $410,000 under the convertible debenture – related party (see Note 8 – Convertible Debenture – Related Party) for a total of $2,085,000 and issued an additional 410,000 warrants (see Note 12 – Warrants and Options.)
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FORWARD LOOKING STATEMENTS
American Rebel | Champion Safe Et Al Company | Purchase Transaction Accounting | Financing Transaction Accounting | Pro Forma | ||||||||||||||||
Historical | Historical | Adjustments | Adjustments | Combined | ||||||||||||||||
30-Sept-22 | 30-Sept-22 | 30-Sept-22 | 30-Sept-22 | 30-Sept-22 | ||||||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||||||
Revenue | $ | 699,948 | $ | 14,373,444 | $ | - | $ | (300,000 | ) | $ | 14,773,392 | |||||||||
Cost of goods sold | 512,700 | 10,786,172 | - | (300,000 | ) | 10,998,872 | ||||||||||||||
Gross margin | 187,248 | 3,587,272 | - | - | 3,774,520 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Consulting, payroll and related costs | 1,514,337 | 1,522,174 | - | - | 3,036,511 | |||||||||||||||
Product development costs | 146,463 | 8,302 | - | - | 154,765 | |||||||||||||||
Marketing and brand development costs | 342,022 | 17,881 | - | - | 359,903 | |||||||||||||||
Administrative and other | 2,664,634 | 1,336,728 | - | - | 4,001,362 | |||||||||||||||
Depreciation expense | 1,355 | 40,048 | - | - | 41,4034 | |||||||||||||||
Operating expenses | 4,668,811 | 2,925,133 | - | - | 7,593,944 | |||||||||||||||
Operating income (loss) | (4,481,563 | ) | 662,139 | - | - | (3,819,424 | ) | |||||||||||||
Other Income (Expense) | ||||||||||||||||||||
Interest expense | (682,450 | ) | (59,950 | ) | - | - | (742,400 | ) | ||||||||||||
Interest income | 4,431 | 6,238 | 10,669 | |||||||||||||||||
Gain/loss on sale of assets | - | 1,995 | - | 1,995 | ||||||||||||||||
Gain (Loss) on extinguishment of debt | (1,376,756 | ) | - | - | - | (1,376,756 | ) | |||||||||||||
Net income (loss) before income tax provision | (6,536,338 | ) | 610,422 | - | - | (5,925,916 | ) | |||||||||||||
Provision for income tax | - | - | - | - | - | |||||||||||||||
Net income (loss) | $ | (6,536,338 | ) | $ | 610,422 | $ | - | $ | - | $ | (1,885,207 | ) | ||||||||
Basic and diluted income (loss) per share | $ | (1.38 | ) | $ | - | $ | - | $ | - | $ | (1.24 | ) | ||||||||
Weighted average common shares outstanding - basic and diluted | 4,743,244 | - | - | - | 4,743,000 |
This document contains “forward-looking statements” withinSee Notes to Financial Statements.
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AMERICAN REBEL HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 – Basis of Presentation
The historical financial information has been adjusted in the meaningunaudited pro forma condensed combined financial information to give effect to events that are (1) directly attributable to the transaction, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on estimates of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for purposes of federalfair value and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statementsuseful lives of the plans, strategiesassets acquired and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief;liabilities assumed and any statements of assumptions underlying anyhave been prepared to illustrate the estimated effect of the foregoing.
Forward-looking statements may includetransaction and certain other adjustments. The final determination of the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimatespurchase price allocation will be based on the fair values of assets acquired and assumptions onlyliabilities assumed as of the date the transaction closes, which was July 29, 2022.
The Company’s and Champion’s historical results reflect the unaudited condensed statements of operations for the full nine months ended September 30, 2022, the audited statements of operations for the year ended December 31, 2021, and the unaudited condensed balance sheet as of September 30, 2022.
Note 2 – Description of Transaction
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” or “Champion”) 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 occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration of approximately $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed Seller for approximately $397,000 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021 and the direct expenditures of approximately $350,000 that were required in completing the acquisition of Champion. Of the cash consideration paid to the Seller, the Seller retired a line of credit of approximately $1,442,000 with a financial institution and approximately $291,000 in related party loans that Champion had on its balance sheets prior to July 29, 20222.
Note 3 - Reclassification Adjustments
The accounting policies used in the preparation of this report. Accordingly, readersunaudited pro forma condensed combined financial information are cautioned not to place undue reliance on forward-lookingthose set out in the Company’s audited consolidated financial statements which speak only as of and for the dates on which theyfiscal year ended December 31, 2021, and unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2022. With the information currently available, the Company has determined that no significant adjustments are made. We do not undertakenecessary to update forward-lookingconform Champion’s consolidated financial statements to reflect the impactaccounting policies used by the Company in the preparation of circumstances or events that arise after the dates theyunaudited pro forma condensed combined financial information.
The reclassification adjustments are made. You should, however, consult further disclosures we make in this Quarterly Reportbased on Form 10-Q, Current Reports on Form 8-Kcurrently available information and other reports madeassumptions management believes are, under the Exchange Act.
Although we believe thatcircumstances and given the expectations reflected in anyinformation available at this time, reasonable, and reflective of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our futureadjustments necessary to report the Company’s financial condition and results of operations as wellif the acquisition were completed.
The combined company will finalize the review of accounting policies and reclassifications, which could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein. The reclassification adjustments currently identified are as follows:
Note 4 –Transaction Consideration
The transaction consideration is approximately $9,900,000 as determined by the actual purchase price of $9,897,420 as described above in Note 2 to this unaudited pro forma condensed combined financial information.
The following table summarizes the consideration transferred as a result of the combination.
Deposits paid with contract | $ | 350,000 | ||
Cash payment due at closing | 9,150,000 | |||
Reimbursement for equipment purchased since June 30, 2021 | 400,000 | |||
Transaction Consideration | $ | 9,900,000 |
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Note 5 – Allocation of Consideration
Under the acquisition method of accounting, the identifiable assets acquired, and liabilities assumed of Champion will be recognized and measured at fair value as of the closing date of the combination and added to those of the Company. The determination of fair value used in the transaction-related adjustments presented herein are preliminary and based on management estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the effect of the acquisition. The Company may use the assistance of outside professionals and valuation experts to determine if there should be any impairment charges or other to these estimated numbers as of September 30, 2022. The final allocation of consideration, upon the completion of the acquisition, will be based on Champion’s assets acquired and liabilities assumed as of the acquisition date, July 29, 2022, and will depend on a number of factors. Therefore, allocations may differ slightly from the transaction accounting adjustments presented herein. The allocation may be dependent upon certain valuations and other studies from outside professionals and valuation expert that have not yet been completed and may not be completed until the Company’s annual report is filed. Accordingly, the pro forma allocation of the consideration may be subject to further adjustments as additional information becomes available and as analyses and valuations are completed. There can be no assurances that these additional analyses and final valuations will not result in material changes to the estimates of fair value set forth below.
The following table sets forth a preliminary allocation of the estimated consideration to the identifiable tangible and intangible assets acquired and liabilities assumed of Champion based on Champion’s unaudited consolidated balance sheet as of September 30, 2022, with the estimated excess recorded to goodwill:
Total assets | $ | 8,278,027 | ||
Total liabilities | 2,577,328 | |||
Net acquired tangible assets | 5,700,699 | |||
Goodwill | 4,199,301 | |||
Allocation of the Estimated Transaction Consideration | $ | 9,900,000 |
Note 6 – Pro Forma Adjustments
Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments
a. | To record estimated working capital financing (of which there is none required) in addition to Transaction Consideration, as of September 30, 2022. |
American Rebel Holdings, Inc. | Champion | Total | ||||||||||||||
Additional working capital | $ | - | $ | - | $ | - | ||||||||||
Additional paid in capital | - | - | - | |||||||||||||
- | - | |||||||||||||||
Pro forma net adjustment | $ | - | $ | $ | - |
Unaudited Pro Forma Condensed Combined Statements of Operations Adjustments
b. | To adjust Revenue and Cost of Goods Sold for estimated transactions between companies: |
Nine months Ended September 30, 2022 | Year Ended December 31, 2021 | |||||||
Revenue | $ | (300,000 | ) | $ | (600,000 | ) | ||
Cost of Goods Sold | (300,000 | ) | (600,000 | ) | ||||
Pro forma net adjustment | $ | - | $ | - |
c. | To adjust interest expense and loss on extinguishment of debt based upon debt obligations eliminated by working capital financing (of which there is none required) in connection with the acquisition: |
Nine months Ended September 30, 2022 | Year Ended December 31, 2021 | |||||||
Interest expense | $ | - | $ | - | ||||
Loss on extinguishment of debt | - | - | ||||||
Pro forma net adjustment | $ | - | $ | - |
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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 changecertain risks, uncertainties and inherent risksother factors, some of which are beyond our control, are difficult to predict and uncertainties. The factors impacting thesecould cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include, but are not limited to:to, the following:
our ability to efficiently manage and repay our debt obligations;
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;
actions and initiatives taken by both current and potential competitors;
supply chain disruptions for components used in our products;
manufacturers inability to deliver components or products on time;
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;
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
● | 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 recent 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 legal, regulatoryfuture and legislative environments inwe 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 markets in which we operate;
deterioration in general or global economic, market and political conditions;
inability to efficiently manage our operations;
inability to achieve future operating results;
the unavailability of funds for capital expenditures;
our ability to recruit, hire and retain key employees;
the inability of management to effectively implement our strategies and business plans; and
the other risks and uncertainties detailedcontext, references in this report.
In this form 10-Q referencesreport to “Company,” “American Rebel”, “ARI”, “the Company”,Rebel Holdings,” “American Rebel,” “we,” “us,”“us” and “our” and similar terms referare references to American Rebel Holdings, Inc. and its wholly owned operating subsidiary,subsidiaries, American Rebel, Inc., 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'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis should be read in 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.
OperationsDescription of Business
On June 9, 2016Overview
The Company operates as a change in control occurred, a sixty percent (60%) ownership interest was obtained by American Rebel, Inc. from our former officerdesigner, manufacturer, and directormarketer of safes and founder. On June 17, 2017,designer and marketer of personal security products. Additionally, the Company acquireddesigns and produces branded accessories and apparel with concealment pockets.
We focus on primarily using U.S.-made steel as the business of its control stockholder accounted for and presented financially as a reverse merger transaction. Our majority stockholder, American Rebel, Inc. became a wholly owned subsidiary of the Company and we distributed shares to the stockholders of American Rebel, Inc. As a result of this reverse merger, the reported operating history of the Company is now the operating history of American Rebel, Inc. Financial statements of both companies are now consolidated and all material intercompany transactions and balances are eliminated.
We are a development stage company and have limited financial resources. We have not established a firm source of equity or debt financing. Our independent registered public accounting firm has included an explanatory paragraph in their report filed on March 13, 2017 and included with our Form 10-K and Current Report on Form 8-K filed on June 22, 2017 emphasizing the uncertaintyprimary component of our abilitysafes and personal security products. We believe our products are designed to remainsafely store firearms, as a going concern. An investor or financial statement reader should readwell as store our Risk Factors in full.customers’ priceless keepsakes, family heirlooms and treasured memories, and aim to make our products accessible at various price points for home use. We believe our products are designed for safety, quality, reliability, features and performance.
DescriptionIn addition to branded safes, we offer an assortment of Business
Company 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. American Rebel accesses its market uniquely through its positioning as America’s Patriotic Brand and the appeal of itspersonal security products as well as apparel and accessories for men and women under the American Rebel brand. Our backpacks utilize what we believe is a distinctive sandwich-method concealment pocket, which we refer to as our Personal Protection Pocket, to hold firearms in place securely and safely. 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 an American brand community presence, in part through our Chief Executive Officer, Mr. 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 profile“American Rebel” brand.
Through our growing network of dealers, we promote and public personasell our products in select regional retailers and local specialty safe, sports, hunting and firearms stores, as well as via e-commerce marketplace. The brand shares a commitment to offering products of what we believe are enduring quality and comfort that allow customers to keep their valuable belongings safe on the go and express their patriotism and style, which is synonymous with the American Rebel brand.
We generate revenue from the following activities:
a. | Safes – we offer a wide range of home, office and personal safe models, in a broad assortment of sizes, features and styles, which are constructed with U.S.-made steel. Demand for our safes is relatively strong across all segments of our customers, including individuals and families seeking to protect their valuables, businesses seeking to protect valuables and irreplaceable items such as artifacts and jewelry, and dispensaries servicing the community that seek to protect their inventory and cash flow. In addition, the demand for our safes has also been relatively strong among responsible gun owners, sportsmen, competitive shooters and hunters seeking a premium and responsible solution to secure valuables and firearms, to prevent theft and to protect loved ones. We expect to benefit from increasing awareness of and need for safe storage of firearms in future periods. Below is a summary of the different safes we currently make: |
i. | Large Safes – our current large model safe collection, the Defender, 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 double plate steel doors, 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 also acts as a deterrent to any prospective thief. We have recently debuted our value-priced safe line, the Freedom. The Freedom line is constructed out of 12-gauge U.S.-made steel and featured a rugged textured finish. | |
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. |
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iii. | Vault Doors – Our U.S.-made vault doors combine style with what we believe are superior theft and fire protection for an elegant 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 bolt works, which is the locking mechanism that bolts the safe door closed so that it cannot be pried open, and which is considered to be by some locksmiths among the smoothest and strongest in the industry, 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 industry, provides cannabis and horticultural plant home growers a reliable and safe solution. Designed with medical marijuana or recreational cannabis dispensaries in mind, including with respect to increasing governmental and insurance industry regulation to lock inventory after hours, our HG-INV Inventory Safe delivers a high level of user experience. |
b. | Personal Security - our concealed carry backpack selection consists of an assortment of sizes, features and styles. | |
c. | Apparel and Accessories - we offer a wide range of concealed carry jackets, vests and coats for men and women. We also offer patriotic apparel for the whole family, with the American Rebel imprint. Our apparel line serves as “point man” for the brand, often acting as the first point of exposure that people have to all things American Rebel. Our apparel line is designed and branded to be stylish, patriotic and bold. We emphasize styling that complements our enthusiasts’ and customers’ lifestyle, representing the values of our community and quintessential American character. We believe the American Rebel clothing line style is not only a fashion statement; we seek to cultivate a sense of pride of belonging to our patriotic family, in our customers’ adventures and in life. |
The costs of our revenue primarily consist of productions costs, product development, consulting, and marketing and brand development fees.
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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 founderoffice space, virtual meetings and CEO, Andy Ross. Andy hosted his own television showthe like. While our manufacturing capabilities have been suffering, and could continue to suffer from mandatory, forced production disruptions, which negatively impact our ability to satisfy the demand for 12 years, has made multiple appearances over the years at trade shows, and is well-known in the archery worldour products, as the founderresult of Ross Archery,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 was the world’s fastestCOVID-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 bow company in 20072022 and 2008. Andy has also released 3 CDs, done numerous radiobeyond, as customers continue to spend more time working remotely, and print interviews,increasing regulation in many states mandating safe ammunition storage, accelerating the demand for our responsible solution safes and performed many concertsmaking 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 and Trends
Our Growth Strategy
Our goal is to enhance our position as a designer, manufacturer and marketer of premium safes and personal security products. We have established plans to grow our business by focusing on three key areas: (1) organic growth and expansion in front of tens of thousands of people. Andy hasexisting markets; (2) targeted strategic acquisitions that increase our on-premise and online product offerings, distributor and retail footprint and/or have the ability to presentincrease and improve our manufacturing capabilities and output, and (3) expanding the scope of our operation activities to the dispensaries U.S. community.
We have developed what we believe is a multi-pronged growth strategy, as described below, to help us capitalize on a sizable opportunity. Through methodical sales and marketing efforts, we believe we have implemented several key initiatives we can use to grow our business more effectively. We believe we made significant progress in 2021 in the largest growing segment of the safe industry, sales to first-time buyers. We also intend to opportunistically pursue the strategies described below to continue our upward trajectory and enhance stockholder value. Key elements of our strategy to achieve this goal are as follows:
Organic Growth and Expansion in Existing Markets - Build our Core Business
The cornerstone of our business has historically been safe product offerings. We are focused on continuing to develop our home, office and personal safes product lines. We are investing in adding what we believe are distinctive technology solutions to our safes.
We are also working to increase floor space dedicated to our safes and strengthen our online presence in order to expand our reach to new enthusiasts and build our devoted American Rebel community. We intend to continue to endeavor to create and provide retailers and customers with what we believe are responsible, safe, reliable and stylish products, and we expect to concentrate on tailoring our supply and distribution logistics in response to the specific demands of our customers.
We launched our Freedom line of safes during the second quarter of 2022. The Freedom line of safes are made from 12-gauge American-made steel and carry a 60 minute at 1200 degrees fire rating. The Freedom safe is available in three sizes: the Freedom 20, the Freedom 30, and the Freedom 50. The exterior is a rugged dark grey textured finish with a plush velour interior containing high-capacity gun racks and a custom door organizer.
An additional new product we expect to launch during the fourth quarter of this year is our 2A Locker. The 2A Locker is a response to demand from our customers for a lightweight, steel cabinet with a secure lock. Our 2A Locker is expected to be available in three models: 2A Ammo, 2A Locker-10, and the 2A Locker-14. Each 2A product will utilize our proprietary 5-point locking mechanism.
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In September of 2022, we signed a letter of intent with Sierra E-Life, a full-service USA manufacturer of E-Bikes, with the intention of exploring the opportunity to diversify our product offerings. We, in collaboration with Sierra E-Life, have designed three distinct E-Bike models: the Patriot 500, the Freedom 750 and the Rebel 1000. The Patriot 500, the Freedom 750 and the Rebel 1000 are projected to be Made in the USA with global components. We continue to explore this opportunity as well as others in the E-Bike and E-Sports industry.
While we currently rely on third-party manufacturers for the production of our line of apparel and accessories, the Champion acquisition adds safe manufacturing as a significant and important component to the Company’s activities and focus.
Additionally, our Concealed Carry Product line and Safe line serve a large numbersand growing market segment. We believe that interest in safes increase, as well as in our complimentary concealed carry backpacks and apparel as a by-product, when interest of potential customers through the appealgeneral population in firearms increase. To this extent, the FBI’s National Instant Criminal Background Check System (NICS), which we believe serves as a proxy for gun sales since a background check is generally needed to purchase a firearm, reported a record number of his musicbackground checks in 2020, 39,695,315. The prior annual record for background checks was 2019’s 28,369,750. In 2021, there were 38,876,673 background checks conducted, similar to that of 2020’s annual record which was 40% higher than the previous annual record in 2019. Background checks in 2022 are continuing on a pace to exceed the 2019 totals as well. While we do not expect this increase in background checks to necessarily translate to an equivalent number of additional safes purchased, we do believe it might be an indicator of the increased demand in the safe market. In addition, certain states (such as Massachusetts, California, New York and other supporting appearances. For example, his appearanceConnecticut) are starting to legislate new storage requirements in respect of firearms, which is expected to have a positive impact on the History Channel hit show Counting Cars in February 2014 has been viewedsale of safes.
We continue to strive to strengthen our relationships and our brand awareness with our current distributors, dealers, manufacturers, specialty retailers and consumers and to attract other distributors, dealers, and retailers. We believe that the success of our efforts depends on the distinctive features, quality, and performance of our products; continued manufacturing capabilities and meeting demand for our safes; the effectiveness of our marketing and merchandising programs; and the dedicated customer support.
In addition, we seek to improve customer satisfaction and loyalty by 2offering distinctive, high-quality products on a timely and cost-attractive basis and by offering efficient customer service. We regard the features, quality, and performance of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer service and support for growing our business.
Furthermore, we intend to continue improving our business operations, including research and development, component sourcing, production processes, marketing programs, and customer support. Thus, we are continuing our efforts to enhance our production by increasing daily production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability of our equipment, reduced equipment down times, and increased overall efficiency.
We believe that by enhancing our brand recognition, our market share might grow correspondingly. Industry sources estimate that 70 million to 80 million people or more. Bringing innovative products that satisfyin the United States own an existing demand toaggregate of more than 400 million firearms, creating a large potential market for our safes and personal security products. With the Champion acquisition we are focused on the premium segment of the market through exciting meansthe quality, distinctiveness, and performance of our products; the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
Targeted Strategic Acquisitions for Long-term Growth
We are consistently evaluating and considering acquisitions opportunities that fit our overall growth strategy as part of our corporate mission to accelerate long-term value for our stockholders and create integrated value chains.
Champion Safe
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” 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 acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration of approximately $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed the Seller for approximately $400,000 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021. In addition to the payments to the Seller, the Company paid costs on behalf of and specifically associated with the acquisition of Champion and its integration into the Company’s operations of $350,000; $200,000 was paid to our investment banker in analyzing the acquisition and purchase of Champion prior to the purchase and subsequent financing in July as well as $150,000 paid to Champion’s independent PCOAB registered accounting firm to conduct their two years of audit and subsequent interim review reports.
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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.
Following the acquisition, we operate Champion Safe in the same manner as it operated pre-acquisition. Champion Safe, Superior Safe and Safe Guard Security Products are valuable and prominent identifiable brands in the safe industry. We plan to expand our manufacturing throughput to fill our significant backlog of orders and aggressively open new dealer accounts. As a division of the combined company, Champion Safe Company will shift its emphasis to growing revenue and increasing profitability for the combined company.
The combined company will continue to benefit from Champion founder Mr. Ray Crosby’s vast experience and expertise. 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 founded Fort Knox Safe in 1982 and Liberty Safe, in 1988, which recently sold to a middle market private investment firm for approximately $147.5 million. In 1999, Mr. Crosby founded Champion Safe, later expanding to include Superior Safe and Safe Guard Security Products. Champion Safe employs over 100 employees in their Utah factory and over 300 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 have continued under 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 is eager to expand his manufacturing operation and seize upon the growth opportunities in the safe business. Working closing with the American Rebel blueprintteam, Mr. Crosby has 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 success.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 also benefit from the increased Champion manufacturing throughput as capacity restrictions have limited American Rebel’s inventory and potential growth. The collaboration between Champion and American Rebel management teams will focus on increased manufacturing efficiencies and volume expansion.
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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 retail showrooms across the country.
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 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 its 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 generate material revenues from licensing fees, management 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 also 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.
Coronavirus (“COVID-19”) and Related Market Impact.
The COVID-19 outbreak has presented evolving risks and developments domestically and internationally, as well as new opportunities for our business. Although the pandemic has not materially impacted our results and operations adversely, our ability to satisfy demand for our products could be negatively impacted by mandatory forced production disruptions of our safes’ sole third-party manufacturer and strategic partners. Any significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures against COVID-19 by governmental agencies, could make it difficult for us to deliver goods and services to our customers. Further, travel restrictions and protective measures against COVID-19 could cause the Company to incur additional unexpected labor costs and expenses or could restrain the Company’s ability to retain the highly skilled personnel the Company needs for its operations. The extent to which COVID-19 impacts the Company’s business, sales and results of operations will depend on future developments, which are uncertain and cannot be currently predicted.
Additionally, as a result of COVID-19, at any time we may be subject to increased operating costs, supply interruptions, and difficulties in obtaining raw materials and components. To address these challenges, we continue to monitor our supply chain.
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We expect that the demand for home, office and personal safety and security products would remain stable, in part due to customers spending more time working remotely, increasing regulation mandating safe storage, and substantial uncertainty related to the supply chain and delivery of international goods, which in turn translate into, we believe, growth in demand for our home and personal safes as a U.S. company. We, however, cannot guarantee, that demand for our safes and personal security products will keep growing through the end of the 2022 calendar year and beyond.
Due to the substantial uncertainty related to the effects of the pandemic, its duration and the related market impacts, including the economic stimulus activity, we are unable to predict the specific impact the pandemic and related restrictions (including the lifting or re-imposing of restrictions due to the Omicron variant or otherwise) will have on our results of operations, liquidity or long-term financial results.
Results of Operations
From inception through September 30, 2017,2022, we have generated an operating deficit of $4,870,249.$33,347,388. We expect to incur additional losses during the fiscal year ending December 31, 20172022, and beyond, principally as a result of our increased investment in inventory, marketing expenses, due to product launch, and the initial limited sales of our new products as we seek to establish them in the marketplace.growth initiatives.
Nine Months Ended September 30, 20172022 Compared To Nine Months Ended September 30, 20162021
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
For the nine months ended September 30, 2017,2022, we reported Sales of $28,361,$4,595,547, compared to Sales of $0$848,357 for the nine months ended September 30, 2016.2021. The increase in Sales for the period compared to the nine months ended September 30, 2021 is attributable to the closing of the Champion acquisition on July 29, 2022. For the nine months ended September 30, 2017,2022, we reported Cost of Sales of $8,818,$3,462,454, compared to Cost of Sales of $0$716,943 for the nine months ended September 30, 2016.2021. The increase in Cost of Sales for the current quarter is again due to the closing of the Champion acquisition during the period compared to the nine months ending September 30, 2021. For the nine months ended September 30, 2017,2022, we reported gross margin (“Gross ProfitProfit”) of $19,543,$1,133,093, compared to Gross Profit of $0$131,414 for the nine months ended September 30, 2016. Sales2021. The increase in Gross Profit for the nine months ending September 30, 2022 compared to the nine months ending September 30, 2021 is due to the closing of our products began during the fourth quarter of 2016.Champion acquisition.
Operating Expenses
Total operating expenses for the nine months ended September 30, 20172022 were $2,423,193$5,446,506 compared to $975,054$2,795,037 for the nine months ended September 30, 20162021 as further described below.
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For the nine months ended September 30, 2017,2022, we incurred consultingconsulting/payroll and business development expensesother payroll costs of $1,881,781,$1,937,349, compared to consultingconsulting/payroll and business development expensesother payroll costs of $391,862$1,774,003 for the nine months ended September 30, 2016.2021. The increase in consultingconsulting/payroll and business development expenses relates primarilyother payroll costs was due to expansionthe integration of activities in preparation of 2017 product launch and included a compensation payment of $1,400,000 that was paid through issuance of 2,800,000 shares of common stock and warrants to purchase 500,000 shares of common stock.the Champion operation into the Company’s operations.
For the nine months ended September 30, 2017,2022, we incurred product development expenses of $35,376,$146,463, compared to product development expenses of $105,806$275,780 for the nine months ended September 30, 2016.2021. The changedecrease in product development expenses relates primarily to change of activitiesa decrease in preparation of several 2017 product launches.development activities.
For the nine months ended September 30, 2017,2022, we incurred marketing and brand development expenses of $282,382,$349,341, compared to marketing and brand development expenses of $294,428$138,783 for the nine months ended September 30, 2016.2021. The changeincrease in marketing and brand development expenses relates primarily to expansionan increase of activities in preparationincluding major trade shows and the availability of several 2017 product launches.working capital provided by our recently completed registered public offering.
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For the nine months ended September 30, 2017,2022, we incurred general and administrative expenses of $178,031,$2,687,728, compared to general and administrative expenses of $139,903$603,727 for the nine months ended September 30, 2016.2021. The majority of the increase in general and administrative expenses relates primarily to an increase in professional, consulting and operating fees due to the mergerCompany’s registered offering completed in June 2017February 2022 along with significant legal and other professional fees that we incurred in the acceleration inacquisition of Champion and our activities in connection with our planned 2017 product launches.registered public offerings.
For the nine months ended September 30, 2017,2022, we incurred depreciation expense of $45,622,$11,311, compared to depreciation expense of $43,055$2,744 for the nine months ended September 30, 2016.2021. The increase in depreciation expense relates primarily to acquisitionthe increase in the number of marketing equipment primarily for trade shows for use in connection with our planned 2017 product launches.newly acquired depreciable assets.
For the nine months ended September 30, 2017,2022, we incurred interest expense of $143,583,$341,990, compared to interest expense of $31,932$1,500,744 for the nine months ended September 30, 2016.2021. The decrease in interest expense is due to several notes being paid in full during the nine months ending September 30, 2022, primarily due to the use of proceeds from our registered public offering. During the nine months ended September 30, 2017,2022, we recorded $59,000incurred a loss on extinguishment of debt (‘additional interest expense’) of $1,376,756, compared to $725,723 during the nine months ended September 30, 2021, in interest expense byloss on extinguishment of debt through the amortization of thedebt discount of $125,000 recorded for the various issuance of 250,000 shares of common stock in connection with a working capital loan. For the nine months ended September 30, 2017, we reporteda gain on sale of equipment of $20,000, compared to a gain on sale of equipment of $0 for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, we reported licensing income of $0, compared to licensing income of $30,000 for the nine months ended September 30, 2016.loans and their payoff.
Net Loss
Net loss for the nine months ended September 30, 20172022 amounted to $2,527,232,$6,377,731, resulting in a loss per share of $0.14,$1.34, compared to $976,986$4,890,090 for the nine months ended September 30, 2016,2021, resulting in a loss per share of $0.14.$4.23. The increase in the net loss from the nine months ended September 30, 20162021 to the nine months ended September 30, 20172022 is primarily due to the investmentincrease in compensation, increased inventorycorporate and marketing in conjunction with our 2017 product launches.financing costs including the loss on extinguishment of debt of $1,376,756 incurred during the nine months ended September 30, 2022 created by the issuance of common stock, eliminating short term debt and accrued interest expense on this short term debt.
Three Months Ended September 30, 20172022 Compared To Three Months Ended September 30, 20162021
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
For the three months ended September 30, 2017,2022, we reported Sales of $10,164,$4,102,761 compared to Sales of $0$295,490 for the three months ended September 30, 2016.2021. The increase in Sales for the current quarter compared to the three months ended September 30, 2021, is attributable to the closing of the Champion acquisition on July 29, 2022. For the three months ended September 30, 2017,2022, we reported Cost of Sales of $3,314,$3,124,657, compared to Cost of Sales of $0$280,212 for the three months ended September 30, 2016.2021. The increase in Cost of Sales for the current quarter is due to a greater number of Sales during the quarter compared to the three months ending September 30, 2021. For the three months ended September 30, 2017,2022, we reported Gross Profit of $6,850,$978,104, compared to Gross Profit of $0$15,278 for the three months ended September 30, 2016. Sales2021. The increase in Gross Profit for the three months ending September 30, 2022, compared to the three months ending September 30, 2021 is due to the closing of our products began during the fourth quarter of 2016.Champion acquisition.
Operating Expenses
Total operating expenses for the three months ended September 30, 20172022 were $350,707$2,748,350 compared to $358,512$971,882 for the three months ended September 30, 20162021 as further described below.
For the three months ended September 30, 2017,2022, we incurred consultingconsulting/payroll and business development expensesother payroll costs of $172,171,$1,227,953 compared to consultingconsulting/payroll and business development expensesother payroll costs of $130,999$656,784 for the three months ended September 30, 2016.2021. The increase in consultingconsulting/payroll and business development expenses relates primarilyother payroll costs was due to expansionthe increase in the number of activities in preparationemployees and the size of 2017 product launch.the Company post-acquisition.
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For the three months ended September 30, 2017,2022, we incurred product development expenses of $12,860,$0, compared to product development expenses of $23,486$42,720 for the three months ended September 30, 2016.2021. The changedecrease in product development expenses relates primarily to change of activitiesa decrease in preparation of several 2017 product launches.development activities.
For the three months ended September 30, 2017,2022, we incurred marketing and brand development expenses of $96,789,$119,122, compared to marketing and brand development expenses of $122,981$34,669 for the three months ended September 30, 2016.2021. The changeincrease in marketing and brand development expenses relates primarily to expansionan increase of activities in preparationincluding major trade shows and the availability of several 2017 product launches.working capital.
For the three months ended September 30, 2017,2022, we incurred general and administrative expenses of $53,380,$1,077,005, compared to general and administrative expenses of $66,485$236,763 for the three months ended September 30, 2016.2021. The changemajority of the increase in general and administrative expenses relates primarily to a reductionthe significant legal and other professional fees that we incurred in professional, consultingthe acquisition of Champion and operating fees due toour registered public offerings, especially as we approached the merger completed in June 2017 and the change in our activities in connection with our 2017 product launches.end of this quarter.
For the three months ended September 30, 2017,2022, we incurred depreciation expense of $15,507,$9,956, compared to depreciation expense of $14,561$946 for the three months ended September 30, 2016.2021. The increase in depreciation expense relates primarily to the acquisition of marketing equipment primarily for trade shows for use in connection with our 2017 product launches.additional depreciable assets.
Other income and expenses
For the three months ended September 30, 2017,2022, we incurred interest expense of $121,893,$31,584, compared to interest expense of $10,064$382,601 for the three months ended September 30, 2016.2021. The decrease in interest expense is due to several notes being paid in full during the previous quarter. During the three months ended September 30, 2017,2022, we recorded $59,000incurred a loss on extinguishment of debt of $0, compared to $87,575 during the three months ended September 30, 2021 in interest expense byloss on extinguishment of debt through the amortization of the debt discount of $125,000 recorded for the issuance of 250,000 shares of common stock in connection with a working capital loan. For the three months ended September 30, 2017, we reported licensing income of $0, compared to licensing income of $30,000 for the three months ended September 30, 2016.loans.
Net Loss
Net loss for the three months ended September 30, 20172022, amounted to $465,751,$2,147,402, resulting in a loss per share of $0.02,$0.36, compared to $338,576$1,426,780 for the three months ended September 30, 2016,2021, resulting in a loss per share of $0.02.$1.05. The increase in the net loss from the three months ended September 30, 20162021 to the three months ended September 30, 20172022 is primarily due to transactional costs related to the investment in compensation, inventory and marketing in anticipation of our 2017 product launches.Champion acquisition.
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Liquidity and Capital Resources
We are a development stage company and realized minimalour revenue from our planned operations.operations does not cover our operating expenses. We havehad a working capital deficit of $915,455$3,171,277 at December 31, 20162021 and $355,083working capital asset of $7,382,272 at September 30, 2017,2022 due to the successful closings of our two public financing transactions (one in February 2022 and the other in July 2022) and have incurred a deficit of $4,870,249$33,347,388 from inception to September 30, 2017.2022. We have funded our operations primarily through the issuance of capital stock, convertible debt, and other securities.
During the nine months ended September 30, 2017,2022, we raised net cash of $0 byapproximately $21,358,000 through the issuance of common and preferred shares, as compared to $583,000approximately $645,000 for the nine months ended September 30, 2016.2021. During the nine months ended September 30, 2017,2022, we raised net cash of $1,075,000approximately $60,000 through the issuance of convertible promissory notes payable secured by inventory, as compared to $0approximately $1,280,000 for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, we repaid $87,005 on loans received from our CEO, as compared to $117,680 that we received in loans from our CEO during the nine months ended September 30, 2016.2021.
As we proceedcontinue with the launch of our American Rebelsafes and concealed carry product line we have devoted and expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures.
We expect to require additional funds to further develop our business and acquisition plan, including the anticipated launch of additional products in addition to the launch ofaggressively 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 need to 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 also 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.
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Debt Restructuring
The Company recently engaged in and completed a financial restructuring (the “Debt Restructuring”), that included extending, renewing, and structuring terms of loans with investors and third-party creditors. The completion of the registered public offering provided the necessary funds to pay off multiple loans with investors and third-party creditors.
Promissory Notes
As part of the Debt Restructuring (as defined above), the Company also entered into replacement notes to extend the maturity on certain prior notes.
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On July 1, 2022, the Company entered into a $600,000 unsecured Promissory Note with an accredited investor. The unsecured Promissory Note bears 12% interest per annum. The principal of the unsecured Promissory Note is due on March 31, 2023. The unsecured Promissory Note contains customary warranties, covenants and representations of the Company.
Acquisition of Champion Entities and PIPE Transaction Used to Fund Acquisition
On July 12, 2022, we sold $12,887,976 of securities to Armistice Capital Master Fund Ltd., an institutional purchaser. Such securities consisted of (i) 509,311 shares of common stock at $1.11 per share, (ii) prefunded warrants that are exercisable into 11,202,401 shares of common stock at $1.10 per prefunded warrant, and (iii) immediately exercisable warrants to purchase up to 23,423,424 shares of common stock at an initial exercise price of $0.86 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.
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 1to1 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.
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Emerging Growth Company - We qualify as an “emerging growth company” under the recently enacted Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, among other things, we will not be required to:
Have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
Submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency”
Obtain shareholder approval of any golden parachute payments not previously approved; and
Disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executives compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion; (ii) the fifth anniversary of our first sale of common equity pursuant to an effective registration statement; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed third fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are an emerging growth company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer, and Principal Financial 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 thetheir evaluation, Mr.Messrs. Ross and Grau concluded that our disclosure controls and procedures are effective in timely alerting himthem to material information relating to us required to be included in our periodic SEC filings. The Company hired a financial expert with the experience in creating and managing internal control systems as well to continue to improve the effectiveness of our internal controls and financial disclosure controls.
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Changes in Internal Control over Financial Reporting
There hashave been no changechanges in the Company’sour internal controlscontrol over financial reporting during the quarter ended September 30, 2022, that occurred during our last fiscal quarter that hashave materially affected or isare reasonably likely to materially affect our internal controlscontrol over financial reporting.
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Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
Item 1 - Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are wecurrently not involved as a plaintiff 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 litigation. There are no proceedingsor, 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 our director, officer or any affiliates, or any registered or beneficial stockholder, is an adverse party or hasdecision could have a material interest adverse to our interest.effect.
Item 1a – Risk Factors
Our significant business risks are describedFactors 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 toof our Annual Report on Form 10-K for the year ended December 31, 2016 filed2021. 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 March 13, 2017 and in Current Report Form 8-K filed on June 22, 2017 to which reference is made herein.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 and Use of Proceeds
On July 6, 2017, in connection with the sale12, 2022, we sold $12,887,976 of a $250,000 secured promissory note, the Company issued 250,000securities to Armistice Capital Master Fund Ltd., an institutional purchaser. Such securities consisted of (i) 509,311 shares of restricted common stockCommon Stock at $1.11 per share, (ii) prefunded warrants that are exercisable into 11,202,401 shares of Common Stock at $1.10 per prefunded warrant, and (iii) immediately exercisable warrants to purchase up to 23,423,424 shares of Common Stock at an initial exercise price of $0.86 per share, subject to adjustments as set forth therein, and will expire five years from the noteholder.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 August 6, 2017, the Company issued22, 2022, 100,000 shares of common stock were issued in connectionreturn for services as a component of a February 2022 services agreement between the Company and its vendor.
During the month of August 2022, Armistice Capital Master Fund Ltd. exercised 440,441 Prefunded Warrants. Along with the acquisition by its wholly-owned operating subsidiaryexercise notice and payment of an exclusive right to a trade show booth location.$4,404.41, 440,441 shares of common stock were issued.
Subsequent Issuances After Quarter-EndDuring the month of September 2022, Armistice Capital Master Fund Ltd. exercised 2,682,960 Prefunded Warrants. Along with several exercise notices and payments totaling $26,829.60, 2,682,960 shares of common stock were issued.
Subsequent to September 30, 2017,Issuances after Quarter End
During the Company received an additional $410,000 under the convertible debenture – related party (see Note 9 – Convertible Debenture – Related Party) for a totalmonth of $2,085,000October 2022, Armistice Capital Master Fund Ltd. exercised 8,079,00 Prefunded Warrants. Along with several exercise notices and issued an additional 410,000 warrants (see Note 12 – Warrants and Options.)payments totaling $80,790, 8,079,000 shares of common stock were issued.
All of the above-described issuances 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 September 30, 2017.2022.
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Item 3 – Defaults upon Senior Securities
Item 4 –Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
Effective November 15, 2017, our name change from CubeScape, Inc. to American Rebel Holdings, Inc. was accepted by FINRA and our over-the-counter trading symbol was changed to “AREB”.None.
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Item 6 – Exhibits
American Rebel Holdings, Inc. includes by reference the following exhibits:
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* Filed with initial filing of the Company’s registration statement on Form S-1, August 4, 2015.
# 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
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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: November 20, 201714, 2022
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) |
AMERICAN REBEL HOLDINGS, INC.
(Registrant)
By:/s/ Charles A. Ross, Jr.
By: Charles A. Ross, Jr.,
President, CEO, Principal Executive Officer,
Treasurer, Chairman, CFO,
Principal Financial Officer
and Principal Accounting Officer
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