AREB American Rebel Holdings Inc

 

Preliminary Offering Circular, Dated [*], 2024

 

AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF ANY SUCH STATE. WE MAY ELECT TO SATISFY OUR OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF OUR SALE TO YOU THAT CONTAINS THE URL WHERE THE OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.

 

 

American Rebel Holdings, Inc.

909 18^th Avenue South, Suite A

Nashville, Tennessee 37212

833-267-3235

www.americanrebel.com

 

BEST EFFORTS OFFERING OF UP TO 2,666,666 SHARES OF

SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK

 

American Rebel Holdings, Inc., which we refer to as “our company,” “we,” “our” and “us,” is offering up to 2,666,666 shares of series C redeemable convertible preferred stock, par value $0.001 per share, which we refer to as the Series C Preferred Stock, at an offering price of $7.50 per share, for a maximum offering amount of $19,999,995. There is a minimum initial investment amount per investor of $300.00 for the Series C Preferred Stock and any additional purchases must be made in increments of at least $7.50.

 

The Series C Preferred Stock being offered will rank, as to dividend rights and rights upon our liquidation, dissolution, or winding up, senior to our Common Stock. Holders of our Series C Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.16 per share each quarter; provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.225 per quarter. The liquidation preference for each share of our Series C Preferred Stock is $7.50. Upon a liquidation, dissolution or winding up of our company, holders of shares of our Series C Preferred Stock will be entitled to receive the liquidation preference with respect to their shares plus an amount equal to any accrued but unpaid dividends (whether or not declared) to, but not including, the date of payment with respect to such shares. Commencing on the fifth anniversary of the initial closing of this offering and continuing indefinitely thereafter, we shall have a right to call for redemption the outstanding shares of our Series C Preferred Stock at a call price equal to 150% of the original issue price of our Series C Preferred Stock, and correspondingly, each holder of shares of our Series C Preferred Stock shall have a right to put the shares of Series C Preferred Stock held by such holder back to us at a put price equal to 150% of the original issue purchase price of such shares. The Series C Preferred Stock will have no voting rights (except for certain matters) and each share of the Series C Preferred Stock is convertible into five (5) shares of our Common Stock at the option of the holder. Up to 13,333,330 shares of Common Stock underlying the Series C Preferred Stock are being registered in this offering. See “Description of Securities” beginning on page 74 for additional details.

 

 

There is no existing public trading market for the Series C Preferred Stock. Our common stock, $0.001 par value per share (the “Common Stock”) and certain existing warrants are traded on the Nasdaq Capital Market (which we sometimes refer to as “Nasdaq”) under the symbols “AREB” and “AREBW,” respectively. On [*], 2024, the closing price of our Common Stock as reported on the Nasdaq Capital Market was $[*] per share. Unless otherwise noted and other than in our financial statements and the notes thereto, the share and per share information in this offering circular reflects a reverse stock split of the outstanding Common Stock of the Company at a 1-for-25 ratio, which was effectuated on June 27, 2023.

 

The offering price of the Series C Preferred Stock may not reflect the market price of our Series C Preferred Stock after this offering.

 

We intend to apply to have our Series C Preferred Stock listed on the Nasdaq Capital Market under the symbol “AREBP” after the final closing of this offering. We intend to list our Series C Preferred Stock on the Nasdaq Capital Market following Nasdaq’s certification of the Form 8-A of the Company to be filed after, and to begin trading within 120 days after, the final closing of this offering. The listing of the Company’s Series C Preferred Stock on the Nasdaq Capital Market is not a condition of the Company’s proceeding with this offering, and no assurance can be given that our application to list on Nasdaq Capital Market will be approved or that an active trading market for our Series C Preferred will develop. Our Series C Preferred Stock is not currently listed or quoted on any exchange.

 

This offering is being conducted on a “best efforts” basis pursuant to Regulation A of Section 3(6) of the Securities Act of 1933, as amended, or the Securities Act, for Tier 2 offerings. This offering will terminate at the earliest of: (1) the date at which the maximum amount of offered shares has been sold, (2) the date which is one year after this offering is qualified by the U.S. Securities and Exchange Commission, or the Commission, and (3) the date on which this offering is earlier terminated by us in our sole discretion.

 

Digital Offering, LLC is a broker-dealer registered with the Commission and members of the Financial Industry Regulatory Authority, or FINRA, and the Securities Investor Protection Corporation, or SIPC, which we refer to as the lead selling agent or managing broker-dealer, is the lead selling agent for this offering. The lead selling agent is selling our shares in this offering on a best-efforts basis and is not required to sell any specific number or dollar amount of shares offered by this offering circular but will use their best efforts to sell such shares.

 

We may undertake one or more closings on a rolling basis. Until we complete a closing, the proceeds for this offering will be kept in an escrow account maintained at Wilmington Trust, National Association (“Wilmington Trust”). At each closing, the proceeds will be distributed to us and the associated Series C Preferred Stock will be issued to the investors. If there are no closings or if funds remain in the escrow account upon termination of this offering without any corresponding closing, the funds so deposited for this offering will be promptly returned to investors, without deduction and without interest. See “Plan of Distribution.”

 

		Price to Public(1)				Selling Agent Commissions(2)				Proceeds to issuer(1)
Per Share		$	7.50			$	0.579			$	6.921
Total Maximum		$	19,999,995			$	1,543,999.61			$	18,455,995.40

 

	1.	Per Share price represents the offering price for one share of Series C Preferred Stock.
	2.	The Company has engaged Digital Offering, LLC (“Digital Offering”) to act as lead selling agent to offer the shares of our Series C Redeemable Convertible Preferred Stock, par value $0.001 (the “Series C Preferred Stock”) to prospective investors in this offering on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be received by the Company in this offering. In addition, the lead selling agent may engage one or more sub-agents or selected dealers to assist in its marketing efforts. Digital Offering is not purchasing the shares of Series C Preferred Stock offered by us and is not required to sell any specific number or dollar amount of shares in this offering before a closing occurs. The Company will pay a cash commission of 7.72% to Digital Offering on sales of the shares of Series C Preferred Stock. See “Plan of Distribution” on page 81 for details of compensation payable to the lead selling agent in connection with the offering.
	3.	Before deducting expenses of the offering, which are estimated to be approximately $560,000. See the section captioned “Plan of Distribution” for details regarding the compensation payable in connection with this offering. This amount represents the proceeds of the offering to us, which will be used as set out in the section captioned “Use of Proceeds.”

 

 

Our business and an investment in our Series C Preferred Stock involve significant risks. See “Risk Factors” beginning on page 13 of this offering circular to read about factors that you should consider before making an investment decision. You should also consider the risk factors described or referred to in any documents incorporated by reference in this offering circular, before investing in these securities.

 

Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or your net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)I(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

This offering will terminate at the earliest of: (1) the date at which the maximum offering amount has been received by the Company, (2) one year from the date upon which the Commission qualifies the offering statement of which this offering circular forms a part, and (3) the date at which the offering is earlier terminated by the Company in its sole discretion. This offering is being conducted on a best-efforts basis. The Company intends to undertake one or more closings in this offering on a rolling basis. After the closing, funds tendered by investors will be made available to the Company.

 

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.

 

GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO www.investor.gov.

 

This offering circular follows the disclosure format of Part I of Form S-1 pursuant to the general instructions of Part II(a)(1)(ii) of Form 1-A.

 

 

The approximate date of commencement of proposed sale to the public is [*], 2024.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This offering circular and the documents incorporated by reference herein contain, in addition to historical information, certain “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. 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 certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include the following:

 

	●	our ability to efficiently manage and repay our debt obligations;
	●	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 inability to raise additional financing for working capital, especially related to purchasing critical inventory;
	●	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;
	●	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 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;
	●	our future operating results;
	●	our ability to diversify our operations;
	●	our inability to effectively meet our short- and long-term obligations;
	●	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;
	●	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;
	●	adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;
	●	changes in generally accepted accounting policies in the United States (“U.S. GAAP”) or in the legal, regulatory and legislative environments in 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 and hire key employees;
	●	the global impact of COVID-19 on the United States economy and our operations;
	●	the inability of management to effectively implement our strategies and business plans;
	●	our business prospects;

 

 

	●	any contractual arrangements and relationships with third parties;
	●	the dependence of our future success on the general economy;
	●	any possible financings; and
	●	the adequacy of our cash resources and working capital.

 

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.

 

The specific discussions herein about our company include financial projections and future estimates and expectations about our company’s business. The projections, estimates and expectations are presented in this offering circular only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our company management’s own assessment of its business, the industry in which it works and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.

 

Market and Industry Data

 

The market and industry data used in this report are based on independent industry publications, customers, trade or business organizations, reports by market research firms and other published statistical information from third parties (collectively, the “Third Party Information”), as well as information based on management’s good faith estimates, which we derive from our review of internal information and independent sources. Such Third Party Information generally states that the information contained therein or provided by such sources has been obtained from sources believed to be reliable.

 

 

TABLE OF CONTENTS

 

Summary	1
Risk Factors	13
Use of Proceeds	29
Determination of Offering Price	30
Dividend Policy	30
Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Our Business	43
Our Properties	59
Legal Proceedings	60
Management	61
Executive Compensation	67
Security Ownership of Certain Beneficial Owners and Management	71
Transactions With Related Persons	72
Description of Securities	74
Plan of Distribution	81
Legal Matters	90
Experts	90
Where You Can Find More Information	90
Financial Statements	F-1

 

Please read this offering circular carefully. It describes our business, our financial condition and results of operations. We have prepared this offering circular so that you will have the information necessary to make an informed investment decision.

 

You should rely only on the information contained in this offering circular. We have not, and the lead selling agent has not, authorized anyone to provide you with any information other than that contained in this offering circular. We are offering to sell, and seeking offers to buy, the securities covered hereby only in jurisdictions where offers and sales are permitted. The information in this offering circular is accurate only as of the date of this offering circular, regardless of the time of delivery of this offering circular or any sale of the securities covered hereby. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the lead selling agent is not, making an offer of these securities in any jurisdiction where the offer is not permitted.

 

For investors outside the United States: We have not, and the lead selling agent has not, taken any action that would permit this offering or possession or distribution of this offering circular in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this offering circular must inform themselves about, and observe any restrictions relating to, the offering of the securities covered hereby or the distribution of this offering circular outside the United States.

 

This offering circular includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe that the data obtained from these industry publications and third-party research, surveys and studies are reliable. We are ultimately responsible for all disclosure included in this offering circular.

 

We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the offering statement of which this offering circular is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

Except as otherwise indicated by the context, references in this offering circular to “Company,” “American Rebel Holdings,” “American Rebel,” “we,” “us” and “our” are references to American Rebel Holdings, Inc. and its operating subsidiaries, American Rebel Beverages, LLC, 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.

 

WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS OFFERING CIRCULAR. YOU SHOULD NOT RELY ON ANY UNAUTHORIZED INFORMATION. THIS OFFEIRNG CIRCULAR IS NOT AN OFFER TO SELL OR BUY ANY SECURITIES IN ANY STATE OR OTHER JURISDICTION IN WHICH IT IS UNLAWFUL. THE INFORMATION IN THIS OFFERING CIRCULAR IS CURRENT AS OF THE DATE ON THE COVER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RISK FACTORS

 

An investment in our shares of Series C Preferred Stock involves a high degree of risk. You should carefully read and consider all of the risks described below, together with all of the other information contained or referred to in this offering circular, before making an investment decision with respect to our securities. If any of the following events occur, our financial condition, business and results of operations (including cash flows) may be materially adversely affected. In that event, the value of your shares of Series C Preferred Stock could decline, and you could lose all or part of your investment.

 

OUR SECURITIES INVOLVE A HIGH DEGREE OF RISK AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF THE ENTIRE INVESTMENT.

 

RISKS RELATED TO THE BEER INDUSTRY

 

The Company faces substantial competition within the beer industry.

 

The beer categories within the United States are highly competitive due to the participation of large domestic and international brewers in the categories and the increasing number of craft brewers and craft distilleries, who distribute similar beers we plan on selling and that have similar pricing and target drinkers.

 

The two largest brewers in the United States, AB InBev and Molson Coors, participate actively in mass appeal beer offerings as well as the High End and Beyond Beer categories, through numerous launches of new hard seltzers, flavored malt beverages and spirit RTDs from existing brands or new brands, importing and distributing import brands, and with their own domestic specialty beers, either by developing new brands or by acquiring, in whole or part, existing brands. Imported beers, such as Corona®, Heineken®, Modelo Especial® and Stella Artois®, continue to compete aggressively in the United States and have gained market share over the last ten years. All of these brands and companies have substantially greater financial resources, marketing strength and distribution networks than the Company. The Company anticipates competition to be strong as some existing beverage companies are building more capacity, expanding geographically and adding more SKUs and styles. The potential for growth in the sales of hard seltzers, flavored malt beverages, craft-brewed domestic beers, imported beers and spirits RTDs is expected to increase the competition in the market for beer occasions within the United States and, as a result, the Company anticipates it will face competitive pricing pressures and the demand for and market share of the Company’s products, when introduced, may fluctuate and possibly decline.

 

The Company’s products, when introduced, will compete generally with other alcoholic beverages. The Company anticipates competing with other beer and beverage companies not only for drinker acceptance and loyalty, but also for traditional retail shelf, cold box and tap space, as well as e-commerce placement and for marketing focus by the Company’s Distributors and their customers, when established, all of which are anticipated to distribute and sell other alcoholic beverage products. All of the Company’s potential competitors at this point in time have substantially greater financial resources, marketing strength and distribution networks than the Company. Moreover, the introduction of new products by competitors that compete directly with the Company’s intended products or that diminish the importance of the Company’s anticipated products to retailers or Distributors may have a material adverse effect on the Company’s business and financial results.

 

Further, the alcoholic beverage industry has also seen continued consolidation among brewers in order to take advantage of cost savings opportunities for supplies, distribution and operations. Also, in the last several years, both AB InBev and Molson Coors have introduced numerous new hard seltzers and purchased multiple regional craft breweries and craft distilleries with the intention to expand the capacity and distribution of these brands.

 

 

More recently in 2021 and into 2022, large non-alcoholic beverage companies including Coca-Cola Company (“Coke”), Pepsi and Monster Beverage Corporation (“Monster”) have begun to enter these markets through licensing agreements with alcoholic beverage companies to develop alcohol versions of existing traditional non-alcohol brands. Coke has entered into agreements with Molson Coors to develop, market and sell Topo Chico brand Hard Seltzer and Simply Spiked Lemonade. Coke also announced agreements with Constellation to develop, market and sell FRESCA™ Mixed, a line of spirits RTDs and with Brown Forman to develop, market and sell Jack Daniel’s® Tennessee Whiskey and Coca-Cola®™ Ready-to-Drink Cocktail. The Boston Brewing Company has entered into an agreement with Pepsi to develop, market and sell alcohol beverages which include Hard Mountain Dew, to take advantage of this trend. Pepsi also entered an agreement in late 2022 with FIFCO USA, a New York based brewery, to develop, market and sell Lipton Hard Iced Tea which launched in 2023. Lastly, Monster, acquired CANarchy Craft Brewery Collective in early 2022 and launched the Beast Unleashed, a new brand of flavored malt beverages in early 2023.

 

Due to the increased leverage that these combined operations will have in distribution and sales and marketing expenses, the costs to the Company of competing is anticipated to be great. The potential also exists for these large competitors to increase their influence with their Distributors, making it difficult for smaller beverage companies to maintain their market presence or enter new markets. The continuing consolidation could also reduce the contract brewing capacity that is available to the Company. These potential increases in the number and availability of competing brands, the costs to compete, reductions in contract brewing capacity and decreases in distribution support and opportunities may have a material adverse effect on the Company’s business and financial results.

 

Changes in public attitudes and drinker tastes could harm the Company’s business. Regulatory changes in response to public attitudes could adversely affect the Company’s business.

 

The alcoholic beverage industry has been the subject of considerable societal and political attention for several years, due to public concern over alcohol-related social problems, including driving under the influence, underage drinking and health consequences from the misuse of alcohol, including alcoholism. As an outgrowth of these concerns, the possibility exists that advertising by beer producers could be restricted, that additional cautionary labeling or packaging requirements might be imposed, that further restrictions on the sale of alcohol might be imposed or that there may be renewed efforts to impose increased excise or other taxes on beer sold in the United States.

 

The domestic beer industry, other than the market for High End beer occasions and Beyond Beer occasions, has experienced a decline in shipments over the last ten years. The Company believes that this decline is due to declining alcohol consumption per person in the population, drinkers trading up to drink high quality, more flavorful hard seltzers. beers and spirts RTDs, health and wellness trends and increased competition from wine and spirits companies. If consumption of the Company’s products, when introduced, in general were to come into disfavor among domestic drinkers, or if the domestic alcohol beverage industry were subjected to significant additional societal pressure or governmental regulations, the Company’s business could be materially adversely affected.

 

Additionally, certain states are considering or have passed laws and regulations that allow the sale and distribution of marijuana. Currently it is not possible to predict the impact of this on sales of alcohol, but it is possible that legal marijuana usage could adversely impact the demand for the Company’s products.

 

The Company anticipates being dependent on distributors.

 

In the United States, where the Company intends for its beer to be sold, the Company anticipates selling most of its beer to independent beer Distributors for distribution to retailers and, ultimately, to drinkers. Although the Company intends to engage multiple Distributors, sustained growth will require it to maintain such relationships and possibly enter into agreements with additional Distributors. Changes in control or ownership within the distribution network could lead to less support of the Company’s products.

 

Contributing to distribution risk is the fact that the Company’s distribution agreements, when entered into, are anticipated to be generally terminable by the Distributor on relatively short notice. While these distribution agreements are anticipated to contain provisions giving the Company enforcement and termination rights, some state laws prohibit the Company from exercising these contractual rights. The Company’s ability to maintain distribution arrangements may be adversely affected by the fact that many Distributors are reliant on one of the major beer producers for a large percentage of their revenue and, therefore, they may be influenced by such producers. If the Company’s distribution agreements are terminated, it may not be able to enter into new distribution agreements on substantially similar terms, which may result in an increase in the costs of distribution.

 

No assurance can be given that the Company will be able to establish or maintain a distribution network or secure additional Distributors on terms favorable to the Company.

 

 

RISKS RELATED TO OUR BUSINESS AND SAFE INDUSTRY

 

Our success depends upon our ability to introduce new products that track customer preferences.

 

Our success depends upon our ability to introduce new products that track consumer preferences. Our efforts to introduce new products into the market may not be successful, and new products that we introduce may not result in customer or market acceptance. We develop new products that we believe will match consumer preferences. The development of a new product is a lengthy and costly process and may not result in the development of a marketable or profitable product. Failure to develop new products that are attractive to consumers could decrease our sales, operating margins, and market share and could adversely affect our business, operating results, and financial condition.

 

Our advertising and promotional investments may affect the Company’s financial results but not be effective.

 

The Company has made and expects to continue to make, significant advertising and promotional expenditures to enhance its brand. These expenditures may adversely affect the Company’s results of operations in a particular quarter or even for the full year, and may not result in increased sales. Variations in the levels of advertising and promotional expenditures have in the past caused, and are expected in the future to continue to cause, variability in the Company’s quarterly results of operations. While the Company attempts to invest only in effective advertising and promotional activities, it is difficult to correlate such investments with sales results, and there is no guarantee that the Company’s expenditures will be effective in building brand equity or growing long term sales.

 

Our business depends on maintaining and strengthening our brand, as well as our reputation as a producer of high-quality goods, to maintain and generate ongoing demand for our products, and any harm to our brand could result in a significant reduction in such demand which could materially adversely affect our results of operations.

 

The “American Rebel” name and brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, which, in turn, depends on factors such as the quality, design, performance, functionality and durability of our products, e-commerce sales and retail partner floor spaces, our communication activities, including advertising, social media and public relations, and our management of the customer experience, including direct interfaces through customer service. Maintaining, promoting, and positioning our brand are important to expanding our customer base and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high-quality consumer experiences. To sustain long-term growth, we must continue to successfully promote our products to consumers, as well as other individuals, who value and identify with our brand.

 

Ineffective marketing, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, and those and other factors could rapidly and severely diminish customer confidence in us. Maintaining and enhancing our brand image are important to expanding our customer base. If we are unable to maintain or enhance our brand in current or new markets, or if we fail to continue to successfully market and sell our products to our existing customers or expand our customer base, our growth strategy and results of operations could be harmed.

 

Additionally, independent third parties and consumers often review our products as well as those of our competitors. Perceptions of our offerings in the marketplace may be significantly influenced by these reviews, which are disseminated via various media, including the Internet. If reviews of our products are negative, or less positive as compared to those of our competitors, our brand may be adversely affected and our results of operations materially harmed.

 

As a significant portion of our revenues is derived by demand for our safes and personal security products for firearms storage purposes, we depend on the availability and regulation of firearm/ammunition storage, as well as various economic, social and political factors.

 

Our performance is influenced by a variety of economic, social, and political factors. General economic conditions and consumer spending patterns can negatively impact our operating results. Economic uncertainty, unfavorable employment levels, declines in consumer confidence, increases in consumer debt levels, increased commodity prices, and other economic factors may affect consumer spending on discretionary items and adversely affect the demand for our products. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which affects demand for our products. Any substantial deterioration in general economic conditions that diminish consumer confidence or discretionary income could reduce our sales and adversely affect our operating results. Economic conditions also affect governmental political and budgetary policies. As a result, economic conditions also can have an effect on the sale of our products to law enforcement, government, and military customers.

 

 

Political and other factors also can affect our performance. Concerns about presidential, congressional, and state elections and legislature and policy shifts resulting from those elections can affect the demand for our products. As most of our revenue is generated from sales of safes, which are purchased in large numbers for firearms storage, speculation surrounding control of firearms, firearm products, and ammunition at the federal, state, and local level and heightened fears of terrorism and crime can affect consumer demand for our products. Often, such concerns result in an increase in near-term consumer demand and subsequent softening of demand when such concerns subside. Inventory levels in excess of customer demand may negatively impact operating results and cash flow.

 

Federal and state legislatures frequently consider legislation relating to the regulation of firearms, including amendment or repeal of existing legislation. Existing laws may also be affected by future judicial rulings and interpretations firearm products, ammunition, and safe gun storage. If such restrictive changes to legislation develop, we could find it difficult, expensive, or even impossible to comply with them, impeding new product development and distribution of existing products.

 

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.

 

The inability to obtain sufficient quantities of raw materials and components, including those necessary for the production of our products could result in reduced or delayed sales or lost orders. Any delay in or loss of sales or orders could adversely impact our operating results. Many of the materials used in the production of our products are available only from a limited number of suppliers. We do not have long-term supply contracts with any suppliers. As a result, we could be subject to increased costs, supply interruptions, and difficulties in obtaining raw materials and components.

 

Our reliance on third-party suppliers for various raw materials and components for our products exposes us to volatility in the availability, quality, and price of these raw materials and components. Our orders with certain of our suppliers may represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation of our orders. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions, price increases, or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs. Quality issues experienced by third party suppliers can also adversely affect the quality and effectiveness of our products and result in liability and reputational harm.

 

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 customers do not provide us with firm, long-term volume purchase commitments, but instead issue purchase orders for our products as needed. As a result, customers can cancel purchase orders or reduce or delay orders at any time. The cancellation, delay, or reduction of customer purchase orders could result in reduced sales, excess inventory, unabsorbed overhead, and reduced income from operations.

 

We often schedule internal production levels and place orders for products with third party manufacturers before receiving firm orders from our customers. Therefore, if we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of products to deliver to our customers. Factors that could affect our ability to accurately forecast demand for our products include the following:

 

	●	an increase or decrease in consumer demand for our products or for the products of our competitors;
	●	our failure to accurately forecast consumer acceptance of new products;

 

 

	●	new product introductions by us or our competitors;
	●	changes in our relationships within our distribution channels;
	●	changes in general market conditions or other factors, which may result in cancellations of orders or a reduction or increase in the rate of reorders placed by retailers;
	●	changes in laws and regulations governing the activities for which we sell products, such as hunting and shooting sports; and
	●	changes in laws and regulations regarding the possession and sale of medical or recreational controlled- substances.

 

Inventory levels in excess of consumer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could have an adverse effect on our business, operating results, and financial condition. If we underestimate demand for our products, our suppliers may not be able to react quickly enough to meet consumer demand, resulting in delays in the shipment of products and lost revenue, and damage to our reputation and customer and consumer relationships. We may not be able to manage inventory levels successfully to meet future order and reorder requirements.

 

We face intense competition that could result in our losing or failing to gain market share and suffering reduced sales.

 

We operate in intensely competitive markets that are characterized by price erosion and competition from major domestic and international companies. Competition in the markets in which we operate is based on a number of factors, including price, quality, performance, reliability, styling, product features, and warranties, and sales and marketing programs. This intense competition could result in pricing pressures, lower sales, reduced margins, and lower market share.

 

Our competitors include nationwide safe manufacturers and various smaller manufacturers and importers. Most of our competitors have greater market recognition, larger customer bases, and substantially greater financial, technical, marketing, distribution, and other resources than we possess and that afford them competitive advantages. As a result, they may be able to devote greater resources to the promotion and sale of products, to invest more funds in intellectual property and product development, to negotiate lower prices for raw materials and components, to deliver competitive products at lower prices, and to introduce new products and respond to consumer requirements more quickly than we can.

 

Our competitors could introduce products with superior features at lower prices than our products and could also bundle existing or new products with other more established products to compete with us. Certain of our competitors may be willing to reduce prices and accept lower profit margins to compete with us. Our competitors could also gain market share by acquiring or forming strategic alliances with other competitors.

 

Finally, we may face additional sources of competition in the future because new distribution methods offered by the Internet and electronic commerce have removed many of the barriers to entry historically faced by start-up companies. Retailers also demand that suppliers reduce their prices on products, which could lead to lower margins. Any of the foregoing effects could cause our sales to decline, which would harm our financial position and results of operations.

 

Our ability to compete successfully depends on a number of factors, both within and outside our control. These factors include the following:

 

	●	our success in developing, producing, marketing, and successfully selling new products;
	●	our ability to efficiently manage our operations;
	●	our ability to implement our strategies and business plans;
	●	our ability to achieve future operating results;

 

 

	●	our ability to address the needs of our consumer customers;
	●	the pricing, quality, performance, and reliability of our products;
	●	the quality of our customer service;
	●	the efficiency of our production; and
	●	product or technology introductions by our competitors.

 

Because we believe technological and functional distinctions among competing products in our markets are perceived by many end-user consumers to be relatively modest, effectiveness in marketing and manufacturing are particularly important competitive factors in our business.

 

We have a limited operating history on which you can evaluate our company.

 

We have a limited operating history on which you can evaluate our company. The corporate entity has existed since 2014 and started engaging in its current primary business operations in April 2019. As a result, our business has been subject to many of the problems, expenses, delays, and risks inherent in the establishment of a relatively new business enterprise.

 

We have a limited operating history upon which an evaluation of our business plan or performance and prospects can be made. Our business and prospects must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business and creating a new line of products. The risks include, in part, the possibility that we will not be able to develop functional and scalable products, or that although functional and scalable, our products and will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our competitors market a superior or equivalent product; that our competitors have such a significant advantage in brand recognition that our products will not be considered by potential customers; that we are not able to upgrade and enhance our technologies and products to accommodate new features as the market evolves; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages for our products. There are no assurances that we can successfully address these challenges. If it is unsuccessful, we and our business, financial condition and operating results could be materially and adversely affected.

 

The current and future expense levels are based largely on estimates of planned operations and future revenues. It is difficult to accurately forecast future revenues because our business is relatively new, and our market is rapidly developing. If our forecasts prove incorrect, the business, operating results and our financial condition will be materially and adversely affected. Moreover, we may be unable to adjust our spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction in revenues would immediately and adversely affect our business, financial condition and operating results.

 

We are highly dependent on Charles A. Ross, our Chief Executive Officer. The loss of our Chief Executive Officer, whose knowledge, leadership and industry reputation upon which we rely, could harm our ability to execute our business plan.

 

We are highly dependent on Charles A. Ross, our Chief Executive Officer and Chairman of our board of directors (the “Board”). Our success depends heavily upon the continued contributions of Mr. Ross, whose leadership, industry reputation entrepreneurial background and creative marketing skills may be difficult to replace at this stage in our business development, and on our ability to attract and retain similarly positioned prominent leaders. If we were to lose the services of our Chief Executive Officer, our ability to execute our business plan may be harmed and we may be forced to limit operations until such time as we could hire suitable replacements.

 

 

We cannot predict when we will achieve profitability.

 

We have not been profitable and cannot predict when or if we will achieve profitability. We have experienced net losses since our inception in December 2014.

 

We cannot predict when we will achieve profitability, if ever. Our inability to become profitable may force us to curtail or temporarily discontinue our research and development programs and our day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained on an ongoing basis. As of December 31, 2022, we had an accumulated deficit of $34,112,810.

 

We have limited financial resources. Our independent registered auditors’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.

 

We have recorded net losses since inception and have significant accumulated deficits. We have relied upon loans and equity financings for operating capital. Total revenues will be insufficient to pay off existing debt and fund operations. We may be required to rely on further debt financing, further loans from related parties, and private placements of our common and preferred stock for our additional cash needs. Such funding sources may not be available, or the terms of such funding sources may not be acceptable to the Company.

 

American Rebel has limited financial resources. There is substantial doubt about our ability to continue as a going concern if we are unable to raise additional funds.

 

We expect to require additional funds to further develop our business plan, including the anticipated launch of new products, in addition to continuing to market 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 may be dilutive to existing stockholders.

 

The sales of our safes are dependent in large part on the sales of firearms.

 

We market safes and other personal security products for sale to a wide variety of consumers. Although our customer base is large and diverse, and our products serve our customers’ different needs, our products have been particularly popular among collectors, hunters, sportsmen, competitive shooters, and gun enthusiasts. The sale of safe firearms storage and security components is influenced by the sale and usage of firearms. Sales of firearms are influenced by a variety of economic, social, and political factors, which may result in volatile sales.

 

Our financial results may be affected by tariffs or border adjustment taxes or other import restrictions.

 

Our current backpack and apparel suppliers have facilities both in China and Mexico and the imposition of tariffs or border adjustment taxes may affect our financial results. The current political climate is hostile to companies manufacturing goods outside of the US. At the current manufacturing levels, it is impractical to seek manufacturing facilities in the United States as US manufacturers are unable to meet or even approach the cost of manufacturing small quantities of custom-made goods. We are in the process of locating an alternative supplier which will have the capacity to produce commercial volumes of our backpacks and apparel to meet our expected demands. However, we have not yet located a suitable supplier and, even if we are able to do so, there is no guarantee that our manufacturing process will scale to produce our products in quantities sufficient to meet demand.

 

An inability to expand our e-commerce business and sales organization to effectively address existing and new markets that we intend to target could reduce our future growth and impact on our business and operating results.

 

Consumers are increasingly purchasing products online. We operate a direct-to-consumer e-commerce store to maintain an online presence with our end users. The future success of our online operations depends on our ability to use our marketing resources to communicate with existing and potential customers. We face competitive pressure to offer promotional discounts, which could impact our gross margin and increase our marketing expenses. We are limited, however, in our ability to fully respond to competitor price discounting because we cannot market our products at prices that may produce adverse relationships with our customers that operate brick and mortar locations as they may perceive themselves to be at a disadvantage based on lower e-commerce pricing to end consumers. There is no assurance that we will be able to successfully expand our e-commerce business to respond to shifting consumer traffic patterns and direct-to-consumer buying trends.

 

 

In addition, e-commerce and direct-to-consumer operations are subject to numerous risks, including implementing and maintaining appropriate technology to support business strategies; reliance on third-party computer hardware/software and service providers; data breaches; violations of state, federal or international laws, including those relating to firearms and ammunition sales; online privacy; credit card fraud; telecommunication failures; electronic break-ins and similar disruptions; and disruption of Internet service. Our inability to adequately respond to these risks and uncertainties or to successfully maintain and expand our direct-to-consumer business may have an adverse impact on our business and operating results.

 

We sell products that create exposure to potential product liability, warranty liability, or personal injury claims and litigation.

 

Our products are used to store, in part, items that involve risk of personal injury and death. Our products expose us to potential product liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products, including allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the product, negligence, and strict liability. If successful, any such claims could have a material adverse effect on our business, operating results, and financial condition. Defects in our products may result in a loss of sales, recall expenses, delay in market acceptance, and damage to our reputation and increased warranty costs, which could have a material adverse effect on our business, operating results, and financial condition. Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance coverage. In addition, our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products.

 

Despite the Company’s indebtedness levels, we are able to incur substantially more debt. This could further increase the risks associated with its leverage.

 

We may incur substantial additional indebtedness in the future, although certain terms of current debt agreements prohibit us from doing so. To the extent that we incur additional indebtedness, the risks associated with its substantial indebtedness describe above, including its possible inability to service its debt, will increase.

 

At this stage of our business operations, even with our good faith efforts, investors in our company may lose some or all of their investment.

 

Because the nature of our business is expected to change as a result of shifts in the industries in which we operate, competition, and the development of new and improved technology, management forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance. Further, we have raised substantial debt and equity to fund our business operations, which to date have generated insufficient revenue to support our working capital needs.

 

While management believes its estimates of projected occurrences and events are within the timetable of its business plan, our actual results may differ substantially from those that are currently anticipated. If our revenues do not increase to a level to support our working capital needs, we will be forced to seek equity capital to fund our operations and repay our substantial debt balances, which may not be available to us on acceptable terms or at all.

 

Product defects could adversely affect the results of our operations.

 

The design, manufacture and marketing of our products involve certain inherent risks. Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure of risks relating to the use of our products can lead to injury or other adverse events. The Company may not properly anticipate customer applications of our products and our products may fail to survive such unanticipated customer use. If the Company’s products fail to adequately perform to meet the customer’s expectations, the customer may demand refunds or replacements which will negatively affect the Company’s profitability.

 

 

We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential product liability claims.

 

Our products support the use and access to firearms and if our products are ineffective, we could require protection against potential product liability claims.

 

We will not be profitable unless we can demonstrate that our products can be manufactured at low prices.

 

To date, we have manufactured our products in limited volume. As the Company creates demand for its products, our projections require the benefit of volume discounts as we increase the size of our order. We can offer no assurance that either we or our manufacturing partners will develop efficient, automated, low-cost manufacturing capabilities and processes to meet the quality, price, engineering, design and production standards or production volumes required to successfully mass market our products. Even if we or our manufacturing partners are successful in developing such manufacturing capability and processes, we do not know whether we or they will be timely in meeting our product commercialization schedule or the production and delivery requirements of potential customers. A failure to develop such manufacturing processes and capabilities could have a material adverse effect on our business and financial results.

 

Our profitability in part is dependent on material and other manufacturing costs. We are unable to offer any assurance that either we or a manufacturing partner will be able to reduce costs to a level that will allow production of a competitive product or that any product produced using lower cost materials and manufacturing processes will not suffer from a reduction in performance, reliability and longevity.

 

War, terrorism, other acts of violence or natural or manmade disasters such as a pandemic, epidemic, outbreak of an infectious disease or other public health crisis may affect the markets in which the Company operates, the Company’s customers, the Company’s delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial condition.

 

Our business and supply chain may be adversely affected by instability, disruption or destruction in a geographic region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, food, fire, earthquake, storm or pandemic events and spread of disease (including the outbreak of COVID-19).

 

Such events may cause customers to suspend their decisions on using the Company’s products and services, make it impossible to access some of our inventory, and give rise to sudden significant changes in regional and global economic conditions and cycles that could interfere with purchases of goods or services and commitments to develop new products and services. These events also pose significant risks to the Company’s personnel and to physical facilities, transportation and operations, which could materially adversely affect the Company’s financial results.

 

Any significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures against COVID-19 or other public health crisis by governmental agencies, could make it difficult for the Company to deliver goods services to its customers. War, riots, or other disasters may increase the need for our products and demand by government and military may make it difficult for use to provide products to 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. 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.

 

We believe COVID-19 has not yet had a materially adverse effect on our operational results, but could at any time and without notice in the foreseeable future. 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. COVID-19 has resulted in restrictions, postponements and cancelations of meetings, conferences, trade shows and the impact, extent and duration of the government-imposed restrictions on travel and public gatherings as well as the overall effect of the COVID-19 virus is currently unknown.

 

 

The costs of being a public company could result in us being unable to continue as a going concern.

 

As a public company, we are required to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of maintaining public company reporting requirements could be significant and may preclude us from seeking financing or equity investment on terms acceptable to us and our stockholders. We estimate these costs to be in excess of $100,000 per year and may be higher if our business volume or business activity increases significantly. Our current estimate of costs does not include the necessary expenses associated with compliance, documentation and specific reporting requirements of Section 404 as we will not be subject to the full reporting requirements of Section 404 until we exceed $700 million in public float market capitalization.

 

If our revenues are insufficient or non-existent, or we cannot satisfy many of these costs through the issuance of shares or debt, we may be unable to satisfy these costs in the normal course of business. This would certainly result in our being unable to continue as a going concern.

 

Any acquisitions that we potentially undertake will involve significant risks, and any acquisitions that we undertake in the future could disrupt our business, dilute stockholder value, and harm our operating results.

 

Part of our growth strategy is to expand our operations through strategic acquisitions to enhance existing products and offer new products, enter new markets and businesses, strengthen and avoid interruption from our supply chain, and enhance our position in current markets and businesses. Acquisitions involve significant risks and uncertainties. We cannot accurately predict the timing, size, and success of any future acquisitions. We may be unable to identify suitable acquisition candidates or to complete the acquisitions of candidates that we identify. Increased competition for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels beyond our financial capability or to levels that would not result in the returns required by our acquisition criteria. Unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively impact our operating results.

 

Our ability to complete acquisitions that we desire to make will depend upon various factors, including the following:

 

	●	the availability of suitable acquisition candidates at attractive purchase prices;
	●	the ability to compete effectively for available acquisition opportunities;
	●	the availability of cash resources, borrowing capacity, or stock at favorable price levels to provide required purchase prices in acquisitions;
	●	the ability of management to devote sufficient attention to acquisition efforts; and
	●	the ability to obtain any requisite governmental or other approvals.

 

We may have little or no experience with certain acquired businesses, which could involve significantly different supply chains, production techniques, customers, and competitive factors than our current business. This lack of experience would require us to rely to a great extent on the management teams of these acquired businesses. These acquisitions also could require us to make significant investments in systems, equipment, facilities, and personnel in anticipation of growth. These costs could be essential to implement our growth strategy in supporting our expanded activities and resulting corporate structure changes. We may be unable to achieve some or all of the benefits that we expect to achieve as we expand into these new markets within the time frames we expect, if at all. If we fail to achieve some or all of the benefits that we expect to achieve as we expand into these new markets, or do not achieve them within the time frames we expect, our business, financial condition, and results of operations could be adversely affected.

 

Unforeseen expenses, difficulties, and delays frequently encountered in connection with future acquisitions could inhibit our growth and negatively impact our profitability. Any future acquisitions may not meet our strategic objectives or perform as anticipated. In addition, the size, timing, and success of any future acquisitions may cause substantial fluctuations in our operating results from quarter to quarter. These interim fluctuations could adversely affect the market price of our Common Stock.

 

 

If we finance any future acquisitions in whole or in part through the issuance of Common Stock or securities convertible into or exercisable for Common Stock, existing stockholders will experience dilution in the voting power of their Common Stock and earnings per share could be negatively impacted. The extent to which we will be able or willing to use our Common Stock for acquisitions will depend on the market price of our Common Stock from time-to-time and the willingness of potential acquisition candidates to accept our Common Stock as full or partial consideration for the sale of their businesses. Our inability to use our Common Stock as consideration, to generate cash from operations, or to obtain additional funding through debt or equity financings to pursue an acquisition could limit our growth.

 

We may not be able to successfully fund future acquisitions of new businesses due to the lack of availability of debt or equity financing on acceptable terms, which could impede the implementation of our acquisition strategy and materially adversely impact our financial condition, business and results of operations.

 

In order to make future acquisitions, we intend to raise capital primarily through debt financing, additional equity offerings, the sale of stock or assets of our businesses, and by offering equity in the businesses to the sellers of target businesses or by undertaking a combination of any of the above. Since the timing and size of acquisitions cannot be readily predicted, we may need to be able to obtain funding on short notice to benefit fully from attractive acquisition opportunities. Such funding may not be available on acceptable terms. In addition, the level of our indebtedness may impact our ability to borrow funds on acceptable terms. Another source of capital for us may be the sale of additional shares of Common Stock, subject to market conditions and investor demand for the shares at prices that we consider to be in the interests of our stockholders. These risks may materially adversely affect our ability to pursue our acquisition strategy successfully and materially adversely affect our financial condition, business and results of operations.

 

The industry in which we operate is competitive, price sensitive and subject to risks of governmental regulations or laws. If our competitors are better able to develop and market products that are more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.

 

The safe and personal security industry is characterized by intense competition. We will face competition on the basis of product features, reliability, price, apparent value, and other factors. Competitors may include large safe makers and other companies, some of which have significantly greater financial and marketing resources than we do, and firms that are more specialized than we are with respect to particular markets. Our competition may respond more quickly to new or emerging styles, undertake more extensive marketing campaigns, have greater financial, marketing and other resources than ours or may be more successful in attracting potential customers, employees and strategic partners.

 

Our industry could experience greater scrutiny and regulation by governmental authorities, which may lead to greater governmental regulation in the future.

 

The rapidly growing interest in new concealed carry products that this rapidly growing market may attract the attention of government regulators and legislators. The current trend in legislation is to roll back or minimize access to firearms restrictions, but there can be no assurance that this trend will continue.

 

RISKS RELATED TO OUR LEGAL AND REGULATORY ENVIRONMENT

 

Failure to comply with applicable laws and changing legal and regulatory requirements could harm our business and financial results.

 

Our policies and procedures are reasonably designed to comply with applicable laws, accounting and reporting requirements, tax rules and other regulations and requirements, including those imposed by the Commission, and foreign countries, as well as applicable trade, labor, safety, environmental, labeling and gun safety related laws, such as the Protection of Lawful Commerce in Arms Act as well as state laws. The complexity of the regulatory environment in which we operate and the related cost of compliance are both increasing due to additional or changing legal and regulatory requirements, our ongoing expansion into new markets and new channels, and the fact that foreign laws occasionally conflict with domestic laws. In addition to potential damage to our reputation and brand, failure by us or our business partners to comply with the various applicable laws and regulations, as well as changes in laws and regulations or the manner in which they are interpreted or applied, may result in litigation, civil and criminal liability, damages, fines and penalties, increased cost of regulatory compliance and restatements of our financial statements and have an adverse impact on our business and financial results.

 

 

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

 

As of December 31, 2022, and December 31, 2021, we had net operating loss carryforwards, or NOLs, for federal and state income tax purposes of $34,112,810 and $26,969,657, respectively, which begins to expire in 2034. Net operating loss carryforwards are available to reduce future taxable income. The federal net operating losses generated before 2018 will begin to expire in 2032. The federal net operating losses generated in and after 2018 may be carried forward indefinitely. The expiration of state NOL carryforwards vary by state and begin to expire in 2024. It is possible that we will not generate taxable income in time to use NOLs before their expiration, or at all. Under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOLs and other tax attributes to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5 percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use NOLs and other tax attributes to reduce future taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future (which may be outside our control).

 

Under the Tax Cuts and Jobs Act of 2017, or the Tax Act, as amended by the CARES Act, NOLs arising in tax years beginning after December 31, 2017, are subject to an 80% of taxable income limitation (as calculated before taking the NOLs into account) for tax years beginning after December 31, 2020. In addition, NOLs arising in tax years 2018, 2019, and 2020 are subject to a five-year carryback and indefinite carryforward, while NOLs arising in tax years beginning after December 31, 2020, also are subject to indefinite carryforward but cannot be carried back. Our NOLs may also be subject to limitations in other jurisdictions. For example, California recently enacted legislation suspending the use of NOLs for taxable years 2020, 2021, and 2022 for many taxpayers. In future years, if and when a net deferred tax asset is recognized related to our NOLs, the changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated after December 31, 2017.

 

If we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights.

 

Our future success depends upon our proprietary technology. Our protective measures, including patent, trademark and trade secret protection, may prove inadequate to protect our proprietary rights. The right to stop others from misusing our trademarks, service marks, and patents in commerce depends to some extent on our ability to show evidence of enforcement of our rights against such misuse in commerce. Our efforts to stop improper use, if insufficient, may lead to loss of trademark and service mark rights, brand loyalty, and notoriety among our customers and prospective customers. The scope of any patent that we have or may obtain may not prevent others from developing and selling competing products. The validity and breadth of claims covered in technology patents involve complex legal and factual questions, and the resolution of such claims may be highly uncertain, and expensive. In addition, our patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents. Company owned trademarks are listed under the heading Intellectual Property on page 20.

 

We are subject to the periodic reporting requirements of Section 15(d) and 12(g) of the Exchange Act that require us to incur audit fees and legal fees in connection with the preparation of such reports. These additional costs could reduce or eliminate our ability to earn a profit.

 

We are required to file periodic reports with the Commission pursuant to the Exchange Act and the rules and regulations promulgated thereunder. In order to comply with these requirements, our independent registered public accounting firm will have to review our financial statements on a quarterly basis and audit our financial statements on an annual basis. Moreover, our legal counsel will have to review and assist in the preparation of such reports. The costs charged by these professionals for such services cannot be accurately predicted at this time because factors such as the number and type of transactions that we engage in, and the complexity of our reports cannot be determined at this time and will affect the amount of time to be spent by our auditors and attorneys. However, the incurrence of such costs will obviously be an expense to our operations and thus have a negative effect on our ability to meet our overhead requirements and earn a profit.

 

 

However, for as long as we remain a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, reduced financial statement disclosure in registration statements, which must include two years of audited financial statements, reduced financial statement disclosure in annual reports on Form 10-K, and exemptions from the auditor attestation of management’s assessment of internal control over financial reporting. We may take advantage of these reporting exemptions until we are no longer a smaller reporting company.

 

If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our Common Stock, if a market ever develops, could drop significantly.

 

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

 

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

	●	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
	●	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and
	●	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Our internal controls may be inadequate or ineffective, which could cause financial reporting to be unreliable and lead to misinformation being disseminated to the public. Furthermore, our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require our management to make estimates about matters that are inherently uncertain. Investors relying upon this misinformation may make an uninformed investment decision.

 

Failure to achieve and maintain an effective internal control environment could cause us to face regulatory action and also cause investors to lose confidence in our reported financial information, either of which could have a material adverse effect on the Company’s business, financial condition, results of operations and future prospects.

 

However, our auditors will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until we are no longer a smaller reporting company.

 

 

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF THE SERIES C PREFERRED STOCK

 

Although we plan to list the Series C Preferred Stock being offered on Nasdaq following the Offering, there is no assurance that we will be successful with the listing or there will ever be a public market for the Series C Preferred Stock at any time.

 

Although our Common Stock and certain warrants currently trade on the Nasdaq Capital Market, there is no public trading market for our Series C Preferred Stock at this time. Although we plan to list the Series C Preferred Stock on Nasdaq upon completion of this offering, we may not be successful with such listing, and we cannot assure you that any market for our Series C Preferred Stock will ever develop. Further, we are currently not in compliance with the continued listing standards of Nasdaq, because our Common Stock is trading below $1.00 per share. This non-compliance may impact our ability to list the shares of Series C Preferred Stock on Nasdaq. The shares of Series C Preferred Stock are not readily marketable, and their value may be subject to adverse conditions that are impossible to predict. There can be no assurance that if it becomes necessary to sell or transfer our Series C Preferred Stock, a buyer could be found, or a suitable purchase price could be obtained. With no public trading market, it may be extremely difficult or impossible for you to resell your Series C Preferred Stock if you should desire to do so. In addition, there can be no assurance that, in the event you are able to find a purchaser for your Series C Preferred Stock, that you will be able to resell such securities at the price you paid in this offering. Therefore, prospective investors who require liquidity in their investment should not rely upon the Series C Preferred Stock being offered under this offering as a short-term component of their return on investment.

 

This is a fixed price offering and the fixed offering price may not accurately represent the current value of us or our assets at any particular time. Therefore, the purchase price you pay for our shares may not be supported by the value of our assets at the time of your purchase.

 

This is a fixed price offering, which means that the offering price for our shares is fixed and will not vary based on the underlying value of our assets at any time. Our Board has determined the offering price in its sole discretion. The fixed offering price for our shares has not been based on appraisals of any assets we own or may own, or of our company as a whole, nor do we intend to obtain such appraisals. Therefore, the fixed offering price established for our shares may not be supported by the current value of our company or our assets at any particular time.

 

Management has broad discretion in using the proceeds from this Offering.

 

We plan to use the proceeds from this offering to fund acquisitions, for general working capital and for debt repayment. We have broad discretion in the application of proceeds and the timing of the expenditure of the proceeds of this Offering. If we fail to apply the proceeds effectively, we may not be successful in implementing our business plan. You will not have the opportunity to evaluate all of the economic, financial or other information upon which we base our decisions.

 

You will not have a vote or influence on the management of our company.

 

All decisions with respect to the management of our company will be made exclusively by the officers, directors or employees of our company. You, as an investor in our Series C Preferred Stock, have very limited voting rights and will have no ability to vote on issues of company management and will not have the right or power to take part in the management of our company and will not be represented on the Board of our company. Accordingly, no person should purchase our Series C Preferred Stock unless he or she is willing to entrust all aspects of management to our company.

 

We may amend our business policies without stockholder approval.

 

Our Board determines our growth, investment, financing, capitalization, borrowing, operations and distributions policies. Although our Board has no intention at present to change or reverse any of these policies, they may be amended or revised without notice to holders of our Series C Preferred Stock. Accordingly, holders of our series C Preferred stock will not have any control over changes in our policies. We cannot assure you that changes in our policies will serve fully the interests of all holders of our Series C Preferred Stock.

 

 

Our Board has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to the Series C Preferred Stock and with the ability to affect adversely stockholder voting power and perpetuate their control over us.

 

Our Second Amended and Restated Articles of Incorporation allow us to issue shares of preferred stock without any vote or further action by our stockholders. Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our Board could authorize the issuance of additional series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of other securities and the right to the redemption of the shares, together with a premium, prior to the redemption of our other securities, including the Series C Preferred Stock.

 

We cannot assure you that we will be able to pay cash dividends.

 

Our ability to pay cash dividends on our Series C Preferred Stock is dependent on our ability to operate profitably and to generate cash from our operations and the operations of our operating businesses. We cannot guarantee that we will be able to pay cash dividends on our Series C Preferred Stock and may only be able to issue dividends in shares of our Common Stock.

 

We cannot assure you that we will be able to redeem our Series C Preferred Stock.

 

Our ability to redeem on our Series C Preferred Stock is dependent on our ability to operate profitably and to generate cash from our operations and the operations of our operating businesses or from raising additional capital. We cannot guarantee that we will be able to redeem our Series C Preferred Stock and may only be able to offer investors the ability to convert shares of Series C Preferred Stock into shares of our Common Stock.

 

We may issue additional debt and equity securities, which are senior to our Series C Preferred Stock as to distributions and in liquidation, which could materially adversely affect the value of the Series C Preferred Stock.

 

In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our stockholders. Any preferred securities, if issued by our company, may have a preference with respect to distributions and upon liquidation that is senior to the preference of the Series C Preferred Stock, which could further limit our ability to make distributions to our stockholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing.

 

Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your Series C Preferred Stock. In addition, we can change our leverage strategy from time to time without approval of holders of our Preferred Stock or Common Stock, which could materially adversely affect the value of our Preferred Stock, including the Series C Preferred Stock.

 

Our executive officers and directors, and their affiliated entities, although they own an insignificant percentage of our Common Stock, however super voting preferred stock allows them to be able to exert significant control over matters subject to stockholder approval.

 

Our executive officers and directors own only approximately 1% of our Common Stock. However, we have issued 125,000 shares of Series A Preferred Stock to three members of our management, Messrs. Charles A. Ross, Jr., Corey Lambrecht and Doug E. Grau, which have superior voting rights of 1,000 to 1 over shares of our Common Stock, resulting in nearly 96% of the current available stockholder votes. In addition, these shares are able to be converted into shares of Common Stock at a rate of 1 share of Series A Preferred Stock into 500 shares of Common Stock over a three to five-year period under certain circumstances.

 

Accordingly, these stockholders who are members of management may, as a practical matter, continue to be able to control the election of a majority of our directors and the determination of all corporate actions after these offerings and any future offerings. This concentration of ownership could delay or prevent a change in control of the Company.

 

 

Certain provisions of our second amended and restated articles of incorporation may make it more difficult for a third party to effect a change-of-control.

 

Our second amended and restated articles of incorporation authorizes our Board to issue up to a certain number of shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our Board without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights, redemption rights and sinking fund provisions. The issuance of any preferred stock could diminish the rights of holders of existing shares, and therefore could reduce the value of such shares. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of our Board to issue preferred stock could make it more difficult, delay, discourage, prevent or make it costlier to acquire or effect a change-in-control, which in turn could prevent our stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the value of our securities.

 

The Subscription Agreement that investors will execute in connection with the offering includes an exclusive forum selection provision that may limit an investor’s ability to bring a claim against us.

 

The subscription agreement that investors will execute to purchase shares of Series C Preferred Stock requires any claims against us based on the subscription agreement to be brought in a state or federal court of competent jurisdiction in the State of Nevada. By purchasing shares of Series C Preferred Stock, investors consent to the jurisdiction of the state courts located within the State of Nevada. Investors located outside the State of Nevada may have difficulty bringing any legal claim against us due to geographic limitations and may find it difficult and costly to respond to claims. This choice of forum provision may limit a holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, a court could find this provision to be inapplicable or unenforceable in respect of one or more of the specified types of actions or proceedings, which may require us to incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.

 

THIS EXCLUSIVE FORUM PROVISION WOULD NOT APPLY TO SUITS BROUGHT TO ENFORCE A DUTY OR LIABILITY CREATED BY FEDERAL SECURITIES LAWS OR ANY OTHER CLAIM FOR WHICH THE U.S. FEDERAL COURTS HAVE EXCLUSIVE JURISDICTION.

 

Provisions of the Existing Warrants could discourage an acquisition of us by a third party.

 

In addition to the discussion of the provisions of our governing organizational documents, certain provisions of our Existing Warrants could make it more difficult or expensive for a third party to acquire us. The Existing Warrants prohibit us from engaging in certain transactions constituting “fundamental transactions” unless, among other things, the surviving entity assumes our obligations under the Existing Warrants. These and other provisions of the Existing Warrants could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to our stockholders.

 

We may not raise sufficient funds to implement our business plan.

 

In our Use of Proceeds discussion below, we present a table showing our expected uses of proceeds assuming the sale of 25%, 50%, 75% and 100% of the securities offered for sale in this offering by us. If we fail to sell at least 25% of the Series C Preferred Stock we are offering, we may not be able to implement a material portion of our planned use of proceeds. This could have a deleterious effect on your investment in us.

 

We are not required to raise any minimum amount in this offering before we may utilize the funds received in this offering. Investors should be aware that there is no assurance that any monies beside their own will be invested in this Offering.

 

Because there is no minimum amount of subscriptions which we must receive before accepting funds in the Offering, you will not be assured that we will have sufficient funds to execute our business plan or satisfy its working capital requirements and will bear the risk that we will be unable to secure the funds necessary to meet our current and anticipated financial obligations.

 

This offering is being conducted on a “best efforts” basis without a minimum and we may not be able to execute our growth strategy if the $19,999,995 maximum is not sold.

 

If you invest in our Series C Preferred Stock and less than all of the offered shares of our Series C Preferred Stock are sold, the risk of losing your entire investment will be increased. We are offering our Series C Preferred Stock on a “best efforts” basis without a minimum, and we can give no assurance that all of the offered Series C Preferred Stock will be sold. If less than $19,999,995 of Series C Preferred Stock shares offered are sold, we may be unable to fund all the intended uses described in this offering circular from the net proceeds anticipated from this offering without obtaining funds from alternative sources or using working capital that we generate. Alternative sources of funding may not be available to us at what we consider to be a reasonable cost, and the working capital generated by us may not be sufficient to fund any uses not financed by offering net proceeds. No assurance can be given to you that any funds will be invested in this offering other than your own.

 

We may terminate this Offering at any time during the Offering period.

 

We reserve the right to terminate this Offering at any time, regardless of the number of shares sold. In the event that we terminate this Offering at any time prior to the sale of all of the shares offered hereby, whatever amount of capital that we have raised at that time will have already been utilized by our company and no funds will be returned to subscribers.

 

 

USE OF PROCEEDS

 

We estimate that we will receive net proceeds of approximately $17,795,995 if the maximum number of shares of Series C Preferred Stock being offered are sold after deducting the estimated Selling Agent commissions and estimated offering expenses payable by us.

 

The following table below sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100% of the securities offered for sale in this offering by us. For further discussion, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

		25% of				50% of				75% of				100% of
		Offering				Offering				Offering				Offering
		Sold				Sold				Sold				Sold
Offering Proceeds
Shares Sold			666,667				1,333,333				1,999,999				2,666,666
Gross Proceeds		$	5,000,003			$	9,999,998			$	14,999,993			$	19,999,995
Underwriting Commissions (7.72%)			386,000				772,000				1,157,999				1,544,000
Processing Fees (0.5%)			25,000				50,000				75,000				100,000
Net Proceeds Before Expenses			4,589,002				9,177,998				13,766,993				18,355,995
Offering Expenses
Underwriter Expenses			75,000				75,000				75,000				75,000
Legal & Accounting			210,000				210,000				210,000				210,000
Publishing/EDGAR			10,000				10,000				10,000				10,000
Transfer Agent			15,000				15,000				15,000				15,000
Marketing			250,000				250,000				250,000				250,000
Total Offering Expenses			560,000				560,000				560,000				560,000
Amount of Offering Proceeds Available for Use			4,029,002				8,617,998				13,206,993				17,795,995
Uses
Payoff of Current Debt			628,650				1,317,000				1,317,000				1,317,000
Beverage and Other Inventory			1,250,000				3,000,000				5,000,000				6,000,000
Marketing and Advertising			1,250,000				2,000,000				3,000,000				4,250,000
New Product Development and Acquisitions			250,000				1,250,000				2,000,000				3,500,000
Employee Recruitment			50,000				175,000				250,000				350,000
Nashville Office Expansion			100,000				150,000				200,000				250,000
Beverage Legal and Compliance			150,000				250,000				300,000				350,000
Total Expenditures			3,678,650				8,142,000				12,067,000				16,017,000
Net Remaining Proceeds Reserved for General Corporate Purposes		$	350,352			$	475,998			$	1,139,993			$	1,778,995

 

We currently intend to use the net proceeds from this offering as set forth above.

 

As of the date of this offering circular and except as explicitly set forth herein, we cannot specify with certainty all of the particular uses of the net proceeds from this offering. Pending use of the net proceeds from this offering as described above, we may invest the net proceeds in short-term interest-bearing investment grade instruments.

 

 

The expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.

 

The above description of the anticipated use of proceeds is not binding on us and is merely a description of our current intentions. We reserve the right to change the above use of proceeds if management believes it is in the best interests of our company.

 

DETERMINATION OF OFFERING PRICE

 

There will be no trading market for our Series C Preferred Stock upon issuance and we do not expect any trading market to develop for the Series C Preferred Stock. The Series C Preferred Stock is being sold at par, which we have determined to be $7.50 per share, and it is expected that at some time after the initial closing of this offering we will exercise our right to call the Series C Preferred Stock for redemption at a call price equal to 150% of par (i.e., of the original issue price of the Series C Preferred Stock) or that, after the fifth anniversary of the initial closing of this offering, holders of the Series C Preferred Stock will exercise their right to put their shares of Series C Preferred Stock to us at 150% of par. Accordingly, the $7.50 price per share of Series C Preferred Stock is arbitrary and represents the amount of investment made by an investor for purposes of determining the redemption price upon a put or call (i.e., the redemption price will be 150% of the purchase price or $11.25 per share of Series C Preferred Stock).

 

DIVIDEND POLICY

 

Dividends on the Series C Preferred Stock being offered will be cumulative and payable quarterly in arrears to all holders of record on the applicable record date. Holders of our Series C Preferred Stock will be entitled to receive cumulative dividends in the amount of $0.16 per share each quarter, which is equivalent to the annual rate of 8.53% of the $7.50 original per share purchase price; provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.225 per quarter, which is equivalent to the annual rate of 12% of the $7.50 original per share purchase price. Dividends on shares of our Series C Preferred Stock will continue to accrue even if any of our agreements prohibit the current payment of dividends or we do not have earnings. Dividends may be paid in cash or in kind in the form of Common Stock of the Company equal to the closing price of Common Stock on the last day of the quarter at the Company’s discretion.

 

Our anticipated source of funds to pay the cumulative dividends for our Series C Preferred Stock in cash will be from net operating income and retained earnings. We believe that our net operating income will increase as we deploy the funds raised in this offering in a manner consistent with the use of proceeds described in this offering circular. We expect that our retained earnings will increase as we increase net operating income.

 

See also “Risk Factors—Risks Related to this Offering and Ownership of Our Series C Preferred Stock—We cannot assure you that we will be able to pay cash dividends.”

 

We have never declared dividends or paid cash dividends on our Common Stock. Our Board will make any future decisions regarding dividends. We currently intend to retain and use any future earnings for the development and expansion of our business and, other than as indicted above with respect to the Series C Preferred Stock, we do not anticipate paying any cash dividends in the near future. Our Board has complete discretion on whether to pay cash dividends or issue additional shares of Common Stock as dividends on the Series C Preferred Stock. Even if our Board decides to pay additional dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board may deem relevant.

 

 

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market for our Common Stock

 

Our Common Stock and certain existing warrants are traded on the Nasdaq Capital Market under the symbols “AREB” and “AREBW,” respectively. On [*], 2024, the closing price of our Common Stock as reported on the Nasdaq Capital Market was $[*] per share. On October 23, 2023, we were notified by Nasdaq that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the price of our Common Stock had traded at less than $1.00 per share for the last thirty consecutive trading days. Nasdaq’s notice has no immediate effect on the listing of the Common Stock on Nasdaq and, at this time. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an initial compliance period of 180 calendar days, or until April 22, 2024, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days prior to April 22, 2024. Management continues to believe that adherence to its current operating and business plan will enable us to regain compliance.

 

Stockholders of Record

 

As of December 31, 2023, an aggregate of 5,947,643 shares of our Common Stock were issued and outstanding and owned by 128 stockholders of record.

 

Dividends

 

We have not since December 15, 2014 (date of inception) declared or paid any cash dividends on our Common Stock and currently do not anticipate paying such cash dividends. We currently anticipate that we will retain all of our future earnings for use in the development and expansion of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board and will depend upon our results of operations, financial condition, tax laws and other factors as the board, in its discretion, deems relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

On January 1, 2021, our Board approved the establishment of the 2021 Long-Term Equity Incentive Plan (“LTIP”). The LTIP is intended to enable us to continue to attract able directors, employees, and consultants and to provide a means whereby those individuals upon whom the responsibilities rest for successful administration and management of the Company, and whose present and potential contributions are of importance, can acquire and maintain Common Stock ownership, thereby strengthening their concern for our welfare. The aggregate maximum number of shares of Common Stock (including shares underlying options) that may be issued under the LTIP pursuant to awards of Restricted Shares or Options will be limited to 10% of the outstanding shares of Common Stock, which calculation shall be made on the first trading day of each new fiscal year. For fiscal year 2022, up to 6,390 shares of Common Stock were available for participants under the LTIP. For fiscal year 2023, up to 67,723 shares of Common Stock were available for participants under the LTIP. For fiscal year 2024, up to 587,992 shares of Common Stock are available for participants under the LTIP. The number of shares of Common Stock that are the subject of awards under the LTIP which are forfeited or terminated, are settled in cash in lieu of shares of Common Stock or in a manner such that all or some of the shares covered by an award are not issued to a participant or are exchanged for awards that do not involve shares will again immediately become available to be issued pursuant to awards granted under the LTIP. If shares of Common Stock are withheld from payment of an award to satisfy tax obligations with respect to the award, those shares of Common Stock will be treated as shares that have been issued under the LTIP and will not again be available for issuance under the LTIP. In December of 2022, we authorized the grant and issuance of all 6,390 shares of Common Stock under the LTIP to our executive management team. Further, in December of 2023, we authorized the grant and issuance of all 67,723 shares of Common Stock under the LTIP to our executive management team.

 

Recent Sales of Unregistered Securities

 

None

 

Subsequent Issuances after Year-End

 

On June 27, 2023, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. for the purchase and sale of $2,993,850.63 of securities, consisting of (i) 71,499 shares of Common Stock at $4.37 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of Common Stock (the “2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of Common Stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance.

 

 

In connection with the Company’s June 27, 2023 1-for-25 reverse split and the round lot rounding associated therewith, approximately 2.1 million new shares of Common Stock were issued.

 

On July 1, 2023, we authorized the issuance of 24,129 shares of Common Stock to our independent board members.

 

On September 8, 2023, holders of certain existing warrants exercised such warrants by paying $3,287,555.70 for 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue two new common stock purchase warrants to purchase, in the aggregate, up to 5,977,374 shares of the Company’s common stock.

 

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 there from.

 

Repurchase of Equity Securities

 

We have no plans, programs or other arrangements in regards to repurchases of our Common Stock. Further, we did not repurchase any of our equity securities during the year ended December 31, 2022 or the nine months ended September 30, 2023.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following management’s discussion and analysis of financial condition and results of operations provides information that management believes is relevant to an assessment and understanding of our plans and financial condition. The following selected financial information is derived from our historical financial statements should be read in conjunction with such financial statements and notes thereto set forth elsewhere herein and the “Cautionary Note Regarding Forward-Looking Statements” explanation included herein.

 

Management’s Discussion and Analysis should be read in conjunction with the financial statements included in this offering circular. The financial statements have been prepared in accordance with U.S. GAAP. Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.

 

The following discussion of the Company’s financial condition and the results of operations should be read in conjunction with the financial statements and footnotes thereto appearing elsewhere in this offering circular.

 

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that in addition to the description of historical facts contained herein, this offering circular contains certain forward-looking statements that involve risks and uncertainties as detailed herein and from time to time in the Company’s other filings with the Commission and elsewhere. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those, described in the forward-looking statements. These factors include, among others: (a) the Company’s fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; and (f) pending litigation.

 

Operations

 

On June 9, 2016, a change in control occurred, a sixty percent (60%) ownership interest was obtained by American Rebel, Inc. from our former officer and director and founder. On June 17, 2017, the Company acquired 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. On July 29, 2022, the Company closed on its acquisition of the Champion Entities.

 

 

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 and safes as well as market American Rebel Beer. American Rebel accesses its market uniquely through its positioning as America’s Patriotic Brand and the appeal of its products as well as through the profile and public persona of its founder and Chief Executive Officer, Andy Ross. Andy hosted his own television show for 12 years, has made multiple appearances over the years at trade shows, and is well-known in the archery world as the founder of Ross Archery, which was the world’s fastest-growing bow company in 2007 and 2008. Andy has also released 3 CDs, done numerous radio and print interviews, and performed many concerts in front of thousands of people. Andy has the ability to present American Rebel to large numbers of potential customers through the appeal of his music and other supporting appearances. For example, his appearance on the History Channel hit show Counting Cars in February 2014 has been viewed by more than 2 million people. Bringing innovative products that satisfy an existing demand to the market through exciting means is the American Rebel blueprint for success.

 

Other

 

As a corporate policy, we will not incur any cash obligations that we cannot satisfy with known resources, of which there are currently none except as described in “Liquidity” below or elsewhere in this offering circular. We believe that the perception that many people have of a public company makes it more likely that they will accept restricted securities from a public company as consideration for indebtedness to them than they would from a private company. We have not performed any studies of this matter. Our conclusion is based on our own observations. Additionally, the issuance of restricted shares will dilute the percentage of ownership interest of our stockholders.

 

Recent Developments

 

American Rebel Beer

 

On August 9, 2023, the Company entered into a Master Brewing Agreement with Associated Brewing. Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. American Rebel Light Beer will launch regionally in early 2024. The Company has paid a setup fee and security deposit to Associated Brewing.

 

Acquisition of Champion Entities

 

On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with the Champion Entities and Seller pursuant to 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 offering circular in our 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 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.

 

 

Secured Loans

 

On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan”) with an accredited investor lending source (the “Lender”). Under the Secured Loan, the Company received $980,000 on April 20, 2023, which was net of fees to the Lender. The Secured Loan requires 64 weekly payments of $20,000, for a total repayment of $1,280,000 to the Lender. The principal balance bears interest at 22.8%. The Secured Loan is secured by all of the assets of the Company and its subsidiaries second only to a previously secured line of credit and contains other customary terms and conditions for agreements of its type. Further, the Company’s CEO, Charles A. Ross, Jr., provided a personal guaranty for the Secured Loan.

 

On December 28, 2023, the Company entered into a $500,000 Business Loan and Security Agreement (the “Second Secured Loan”) with Alt Banq Inc., an accredited investor lending source (“Alt Banq”). Under the Second Secured Loan, the Company received $490,000 on December 29, 2023, which was net of fees to Alt Banq. The Second Secured Loan requires 52 weekly payments of $11,731, for a total repayment of $610,000 to Alt Banq. The principal balance bears interest at 22% per annum. The Second Secured Loan, is secured by all of the assets of the Company and its subsidiaries second only to a previously secured line of credit and contains other customary terms and conditions for agreements of its type. Further, the Company’s CEO, Charles A. Ross, Jr., provided a personal guaranty for the Second Secured Loan.

 

Unsecured Loan

 

The Company refinanced a $600,000 note with an accredited investor that was due March 31, 2023 with a new note dated July 1, 2023. The total amount refinanced with an accredited investor is $450,000, with $150,000 due December 31, 2023, and $300,000 due June 30, 2024. Interest will be paid quarterly in the amount of 12% on the outstanding principal amounts.

 

Armistice PIPE and Warrant Exercise

 

On June 27, 2023, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. for the purchase and sale of $2,993,850.63 of securities, consisting of (i) 71,499 shares of Common Stock at $4.37 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of Common Stock (the “ 2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of Common Stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance.

 

On September 8, 2023, Armistice exercised certain existing warrants by paying $3,287,555.70 for 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue two new common stock purchase warrants to purchase, in the aggregate, up to 5,977,374 shares of the Company’s common stock.

 

Results of Operations for the fiscal years ended December 31, 2022 and December 31, 2021

 

Revenue and cost of goods sold

 

For the year ended December 31, 2022, we reported Sales of $8,449,800, compared to Sales of $986,826 for the year ended December 31, 2021. The increase is primarily attributable to the Company’s recent acquisition of the Champion Entities that closed on July 29, 2022. For the year ended December 31, 2022, we reported Cost of Sales of $6,509,382, compared to Cost of Sales of $812,130 for the year ended December 31, 2021. The increase in Cost of Sales was again primarily attributable to the acquisition of the Champion Entities. For the year ended December 31, 2022, we reported Gross Profit of $1,940,418, compared to Gross Profit of $174,696 for the year ended December 31, 2021. The increase in Gross Profit was primarily attributable to the acquisition of the Champion Entities. Please review our footnotes to the Consolidated Financial Statements for its presentation on the pro forma financial information as if the Company and the Champion Entities had been combined since January 1, 2021. This represents a significant difference if we were able to include a full year of revenue and costs of sales for the Champion Entities for 2022.

 

Expenses

 

Total operating expenses for the year ended December 31, 2022 were $7,003,704 compared to $3,486,135 for the year ended December 31, 2021 as further described below.

 

For the year ended December 31, 2022, we incurred consulting and business development expenses of $2,000,624, compared to consulting and business development expenses of $2,012,803 for the year ended December 31, 2021. The slight decrease in consulting and business development expenses is due to the decrease in outside corporate consultants offset by additional payroll expenses for the Company as a result of the acquisition of the Champion Entities.

 

 

For the year ended December 31, 2022, we incurred rental expense, warehousing and outlet expense of $508,527, compared to rental expense, warehousing and outlet expense of $0 for the year ended December 31, 2021. Since the acquisition of the Champion Entities that closed on July 29, 2022, the Company now has a much larger physical footprint. Our rental expense, warehousing, etc. was negligible in years prior to 2022 and was included in our general and administrative expense line item.

 

For the year ended December 31, 2022, we incurred product development expenses of $746,871, compared to product development expenses of $330,353 for the year ended December 31, 2021. The increase in the amount of product development expenses was due to the increase in product development activity.

 

For the year ended December 31, 2022, we incurred marketing and brand development expenses of $507,503, compared to marketing and brand development expenses of $171,030 for the year ended December 31, 2021. The increase in marketing and brand development expenses relates primarily to the expanded size of the Company and the return of trade shows post the COVID-19 pandemic.

 

For the year ended December 31, 2022, we incurred general and administrative expenses of $3,190,092, compared to general and administrative expenses of $968,306 for the year ended December 31, 2021. The increase relates primarily to an increase in professional, consulting and operating fees due to the expanded size of the Company.

 

For the year ended December 31, 2022, we incurred depreciation expense of $50,087, compared to depreciation expense of $3,643 for the year ended December 31, 2021. The increase in depreciation expense is due to the increased size of the Company and the assets acquired in the Champion Entities purchase.

 

Other income and expenses

 

For the year ended December 31, 2022, we incurred interest expense of $358,689, compared to interest expense of $2,061,782 for the year ended December 31, 2021. The decrease in interest expense is due to the Company retiring or converting to Common Stock most of its outstanding debt in late 2021. Retirement or converting to Common Stock of debt in 2022 was smaller in comparison. Additionally, the Company incurred interest expense of $350,000 for the release of pre-emptive rights from a certain lender to the Company.

 

Net Loss

 

Net loss for the year ended December 31, 2022, amounted to $7,143,153, resulting in a loss per share of $24, compared to a net loss of $6,098,944 for the year ended December 31, 2021, resulting in a loss per share of $121.25. The increase in the net loss from the year ended December 31, 2021 to the year ended December 31, 2022 is primarily due to acquisition costs of the Champion Entities and our increased expenditures on financing and other activities for growth.

 

Results of Operations for the Three and Nine Months ended September 30, 2023 compared to the Three and Nine Months ended September 30, 2022

 

From inception through September 30, 2023, we have generated an operating deficit of $37,723,739. We expect to incur additional losses during fiscal year ending December 31, 2023, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.

 

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

 

Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)

 

		Nine months ended September 30, 2023				Nine months ended September 30, 2022
Revenue		$	11,418,222			$	4,595,547
Cost of goods sold			8,869,432				3,462,454
Gross margin			2,548,790				1,133,093
Expenses:
Consulting/payroll and other costs			2,915,377				1,937,349
Rental expense, warehousing, outlet expense			732,360				314,314
Product development costs			36,821				146,463
Marketing and brand development costs			942,687				349,341
Administrative and other			2,542,181				2,687,728
Depreciation and amortization expense			79,260				11,311
			7,248,686				5,446,506
Operating income (loss)			(4,699,896	)			(959,076	)
Other Income (Expense)
Interest expense, net			(250,877	)			(341,990	)
Interest expense – pre-emptive rights release			-				(350,000	)
Interest Income			3,203				4,428
Employee retention credit funds, net of costs to collect			1,107,672				-
Gain/(loss) on sale of equipment			1,400				-
Gain/(loss) on extinguishment of debt			227,569				(1,376,756	)
			1,088,967				(2,064,318	)
Net income (loss) before income tax provision			(3,610,929	)			(6,377,731	)
Provision for income tax			-				-
Net income (loss)		$	(3,610,929	)		$	(6,377,731	)

 

 

For the nine months ended September 30, 2023, we reported Revenues of $11,418,222 compared to Revenues of $4,595,547 for the nine months ended September 30, 2022. The increase in Revenues of $6,822,675 (or 148% period over period (PoP)) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, is primarily attributable to the closing of the Champion acquisition on July 29, 2022 and a general increase from Champion’s average quarterly sales of product. For the nine months ended September 30, 2023, we reported Cost of Goods Sold of $8,869,432, compared to Cost of Goods Sold of $3,462,454 for the nine months ended September 30, 2022. The increase in Cost of Goods Sold of $5,406,978 (or 156% period over period (PoP)) for the current period is due to a significantly greater number of sales of product during the period compared to the nine months ending September 30, 2022 and again attributable to the closing of the Champion acquisition on July 29, 2022. For the nine months ended September 30, 2023, we reported Gross Margin of $2,548,790, compared to Gross Margin of $1,133,093 for the nine months ended September 30, 2022. The increase in Gross Margin of $1,415,697 (or 125% period over period (PoP)) for the nine months ending September 30, 2023, compared to the nine months ending September 30, 2022 is again due to the closing of the Champion acquisition on July 29, 2022. Gross Margin percentages for the nine months ended September 30, 2023 was 22.3% compared to 24.6% for the nine months ended September 30, 2022. We expect our Gross Margin percentages to remain consistent in the mid-20% range until we achieve sufficient sales volume to increase our margins from better pricing power, to better buying power on our costs of goods, inventory and inventory management.

 

Operating Expenses

 

Total operating expenses for the nine months ended September 30, 2023 were $7,248,686 compared to $5,446,506 for the nine months ended September 30, 2022 as further described below. Overall, we saw a $1,802,180 increase in operating expenses or a 33% period over period (PoP) increase in operating expenses from the prior year comparable period. With the acquisition and integration of the Champion acquisition we expect this to be about the same going forward dropping as a percentage of Revenues as we increase our overall sales volume.

 

For the nine months ended September 30, 2023, we incurred consulting/payroll and other costs of $2,915,377 compared to consulting/payroll and other costs of $1,937,349 for the nine months ended September 30, 2022. The increase in consulting/payroll and other costs of $978,028 (or 50% period over period (PoP)) was due to the increase in the number of employees and the size of the Company post-acquisition of the Champion Entities as well as increased payroll costs from a competitive jobs market. The Company expects to maintain its current consulting/payroll and other costs as we further expand our sales volume.

 

For the nine months ended September 30, 2023, we incurred rental expense, warehousing, outlet expense of $732,360, compared to rental expense, warehousing, outlet expense of $314,314 for the nine months ended September 30, 2022. The increase in rental expense, warehousing, outlet expense of $418,046 is due to the significant number of leases and properties that the Company rents to conduct the Champion business. Prior to the Champion business acquisition, the Company included lease expense in the Administrative and other account. The significant number of leases and properties that the Company rents to conduct its Champion business provides a better presentation of expenses through a separate line item in its Statement of Operations. The Company expects to maintain this level of expense on a go-forward basis with its leases and rented properties. The Company may look to consolidate some of its space as it fine tunes the Champion business.

 

For the nine months ended September 30, 2023, we incurred product development expenses of $36,821, compared to product development expenses of $146,463 for the nine months ended September 30, 2022. The decrease in product development expenses of $109,642 (or -75% period over period (PoP)) is due to some of the Company’s current product development expenses being included in consulting/payroll and other costs account which provides for a better presentation of those expenses than pure product development expense, offset by new efforts over these past few months where we’ve incurred some significant expenses that are attributable to our private label brewery efforts and should be separated and identified. The Company expects to maintain some level of expense on a go-forward basis with new products and efforts being expended for future sales growth and product needs.

 

For the nine months ended September 30, 2023, we incurred marketing and brand development expenses of $942,687, compared to marketing and brand development expenses of $349,341 for the nine months ended September 30, 2022. The increase in marketing and brand development expenses of $593,346 (or 170% period over period (PoP)) relates primarily to an increase of activities including major trade shows and the availability of working capital for these types of expenses as well as increased costs attributable to our acquisition and integration of the Champion business.

 

 

For the nine months ended September 30, 2023, we incurred administrative and other expense of $2,542,181, compared to administrative and other expense of $2,687,728 for the nine months ended September 30, 2022. The decrease in administrative and other expense of $145,547 (or -5% period over period (PoP)) relates primarily to the significant legal and other professional fees that we incurred during 2022 in anticipation of our registered public offerings, offset by additional expenses picked up from our acquisition of Champion and other recent financing efforts. The Company believes as it grows its sales base it will need to increase its administrative and other expenses commensurate with an overall increased profit for the future.

 

For the nine months ended September 30, 2023, we incurred depreciation and amortization expense of $79,260, compared to depreciation and amortization expense of $11,311 for the nine months ended September 30, 2022. The increase in depreciation and amortization expense relates primarily to the acquisition of Champion and its significant and additional depreciable asset base that it provided to the Company’s financial position.

 

Other income and expenses

 

For the nine months ended September 30, 2023, we incurred interest expense of $250,877, compared to interest expense of $341,990 for the nine months ended September 30, 2022. The decrease in interest expense of $91,113 is due to a significant number of notes being paid during 2022 that were able to be paid in full from the various financings, offset by the increased borrowing costs that we have on our working capital notes payable and line of credit. We are currently paying an interest rate of approximately 7% on our line of credit, 12% on our existing working capital notes payable, and our new working capital notes payable we are paying approximately 40% per annum on this debt instrument. During the nine months ended September 30, 2023, we incurred a gain on extinguishment of debt of $227,569, compared to $1,376,756 during the nine months ended September 30, 2022. The decrease in loss on extinguishment of debt is due to the charges necessary through the amortization of the debt discount recorded for the issuance of shares of common stock in connection with working capital loans retired during 2022. The Company expects to manage and maintain its interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a minimum as we grow the business and its sales volume. The gain on extinguishment of debt for the nine months ended September 30, 2023 is directly attributable to equity issuances that were static or an agreed upon number of shares for the services at the time (which was much higher) and the settlement of the shares as payment for the services at a time when the shares were significantly less valuable. For the nine months ended September 30, 2023 we received approximately $1,286,000 in tax credits under the CARES Act from the US Department of Treasury and in turn paid approximately $178,500 to the service provider, netting the Company approximately $1,107,500 in credits for retaining its employees during COVID. As part of the collection process the Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This is a one-time other income item and we do not expect to receive this type of special income in the future. During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller of the Champion Entities with respect to the CARES Act tax credits income. The Company prior to September 30, 2023 settled with the Seller and agreed to pay an additional $325,000 to the seller. This amount was not offset against the CARES Act tax credit income but increased the purchase price of the Champion Entities and increased our determined Goodwill value by $325,000.

 

 

Net Loss

 

Net loss for the nine months ended September 30, 2023, amounted to $3,610,929, resulting in a loss per share of $2.50, compared to $6,377,731 for the nine months ended September 30, 2022, resulting in a loss per share of $33.62. The decrease in the net loss from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 is primarily due to one-time transactional costs related to 2022 financings and as well our preparation costs for the Champion acquisition and integration, offset by increasing costs due to a tightening jobs market and inflation. The Company’s management believes with increasing sales volume and strict adherence on cost cutting measures and best practices that net positive income can be achieved for the business into the future.

 

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

 

Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)

 

		Three months ended September 30, 2023				Three months ended September 30, 2022
Revenue		$	3,345,552			$	4,102,761
Cost of goods sold			3,095,418				3,124,657
Gross margin			250,134				978,104
Expenses:
Consulting/payroll and other costs			1,039,273				1,227,953
Rental expense, warehousing, outlet expense			230,226				314,314
Product development costs			20,326				-
Marketing and brand development costs			517,345				119,122
Administrative and other			1,347,181				1,077,005
Depreciation and amortization expense			24,895				9,956
			3,179,246				2,748,350
Operating income (loss)			(2,929,112	)			(1,770,246	)
Other Income (Expense)
Interest expense, net			(95,330	)			(31,584	)
Interest expense – pre-emptive rights release			-				(350,000	)
Interest income			3,203				4,428
Employee retention credit funds, net of costs to collect			-				-
Gain/(loss) on sale of equipment			-				-
Gain/(loss) on extinguishment of debt			227,569				-
			135,442				(377,156	)
Net income (loss) before income tax provision			(2,793,670	)			(2,147,402	)
Provision for income tax			-				-
Net income (loss)		$	(2,793,670	)		$	(2,147,402	)

 

 

For the three months ended September 30, 2023, we reported Revenues of $3,345,552 compared to Revenues of $4,102,761 for the three months ended September 30, 2022. The decrease in Revenues of $757,209 (or -18% period over period (PoP)) for the current period compared to the three months ended September 30, 2022, is attributable to slower sales for 2023 and current market conditions. For the three months ended September 30, 2023, we reported Cost of Goods Sold of $3,095,418, compared to Cost of Goods Sold of $3,124,657 for the three months ended September 30, 2022. The decrease in Cost of Goods Sold of $29,239 (or -1% period over period (PoP)) for the current period is primarily attributable to a marginal decrease in sales for the period. For the three months ended September 30, 2023, we reported Gross Margin of $250,134, compared to Gross Margin of $978,104 for the three months ended September 30, 2022. The decrease in Gross Margin of $727,970 (or -74% period over period (PoP)) for the three months ending September 30, 2023, compared to the three months ending September 30, 2022 is again due a decrease in sales and increased costs of sales. Gross Margin percentages for the three months ended September 30, 2023 was 8% compared to 24% for the three months ended September 30, 2022. We expect our Gross Margin percentages for this time of year to be consistently in the 20% range. If not within this range we will try to increase our sales volume to in order to increase our margins, with better pricing power, better buying power on costs of goods, inventory and of course inventory management. In general, second amendment businesses have experienced a slowdown in sales volume during the past twelve months and this is in line with what we have experienced in our business.

 

Operating Expenses

 

Total operating expenses for the three months ended September 30, 2023 were $3,179,246 compared to $2,748,350 for the three months ended September 30, 2022 as further described below. Overall, we experienced a $430,896 increase in operating expenses or a 16% period over period (PoP) increase in operating expenses from the prior year comparable period. With the successful integration of the Champion acquisition, we believe this will begin to drop or decrease as a percentage of Revenues as we increase our sales volume.

 

For the three months ended September 30, 2023, we incurred consulting/payroll and other costs of $1,039,273 compared to consulting/payroll and other costs of $1,227,953 for the three months ended September 30, 2022. The decrease in consulting/payroll and other costs of $188,680 (or -15% period over period (PoP)) was due to cost controls put in place on the post-acquisition of the Champion Entities. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.

 

For the three months ended September 30, 2023, we incurred rental expense, warehousing, outlet expense of $230,226, compared to rental expense, warehousing, outlet expense of $314,314 for the three months ended September 30, 2022. The decrease in rental expense, warehousing, outlet expense of $84,088 is due to cost cutting on leases and properties that the Company rents to conduct the Champion business acquisition as well as other cost cutting measures or efficiencies put in place. Prior to the Champion business acquisition, the Company included lease expense in the Administrative and other account. With the significant number of leases and properties that the Company rents to conduct the Champion business we believe provides a better presentation of expenses with a separate account line item. The Company expects to maintain this level of expense on a go-forward basis with its leases and rented properties for the near term. The Company may look to consolidate some of its space as needed as it fine tunes the Champion business.

 

For the three months ended September 30, 2023, we incurred product development expenses of $20,326, compared to product development expenses of $- for the three months ended September 30, 2022. The increase in product development expenses of $20,326 (or ~% period over period (PoP)) is due to some of the Company’s current product development expenses being included in consulting/payroll and other costs account which we believe provides for a better presentation of our historical business expenses than pure product development expense. For these three months ended September 30, 2023 we’ve incurred expenses that are attributable to our private label brewery efforts and should be separated and identified. The Company expects to maintain some level of expense on a go-forward basis with new products and efforts being expended for future sales growth and product needs.

 

For the three months ended September 30, 2023, we incurred marketing and brand development expenses of $517,345, compared to marketing and brand development expenses of $119,122 for the three months ended September 30, 2022. The increase in marketing and brand development expenses of $398,223 (or 334% period over period (PoP)) relates primarily to an increase of activities including major trade shows and the availability of working capital for these types of expenses as well as increased costs attributable to our acquisition and integration of the Champion business, as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.

 

 

For the three months ended September 30, 2023, we incurred administrative and other expense of $1,347,181, compared to administrative and other expense of $1,077,005 for the three months ended September 30, 2022. The increase in administrative and other expense of $270,176 (or 25% period over period (PoP)) relates directly to increased legal and other professional fees that we incurred in our registered public offerings and capital raising efforts, along with additional expenses picked up from our acquisition of Champion. The Company believes as it grows its sales base it will also increase its administrative and other expense commensurate with the increased profits for the future.

 

For the three months ended September 30, 2023, we incurred depreciation and amortization expense of $24,895, compared to depreciation and amortization expense of $9,956 for the three months ended September 30, 2022. The increase in depreciation and amortization expense relates primarily to the acquisition of Champion and its significant and additional depreciable asset base that it provided to the Company’s financial position.

 

Other income and expenses

 

For the three months ended September 30, 2023, we incurred interest expense of $95,330, compared to interest expense of $31,584 for the three months ended September 30, 2022. The increase in interest expense of $63,746 is due to a significant number of notes being paid during 2022 that were able to be paid in full from the various financings, offset by the increased borrowing costs that we have on our working capital notes payable and line of credit. We are currently paying an interest rate of approximately 7% on our line of credit, 12% on our existing working capital notes payable, and on our new working capital notes payable we are paying approximately 40% per annum on this debt instrument. The Company expects to manage and maintain its interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a minimum as we grow the business and its sales volume.

 

Net Loss

 

Net loss for the three months ended September 30, 2023, amounted to $2,793,670, resulting in a loss per share of $0.95, compared to $2,147,402 for the three months ended September 30, 2022, resulting in a loss per share of $8.90. The increase in the net loss from the three months ended September 30, 2022 to the three months ended September 30, 2023 is from a myriad of expenses that the Company incurred in the quarter, such as professional and legal fees, increased costs in marketing and the softening of gross margin on sales. The Company’s management believes with increasing sales volume and strict adherence to cost cutting measures and best practices that net positive income can be achieved for the business.

 

Liquidity and Capital Resources

 

We are a company still in the growth and acquisition stage and our revenue from operations does not cover our operating expenses. Working capital increased by $725,021 period over period where we had a working capital balance of $6,678,562 at December 31, 2022 compared to a working capital balance of $7,403,583 at September 30, 2023. This working capital increase was due to the successful closings of three financing transactions (one in February 2022, the second in July 2022 and a third one recently in June 2023) despite incurring a deficit of over $37.7 million from inception to September 30, 2023. We have funded our operations primarily through the issuance of capital stock, convertible debt, and other securities and will continue so into the near future and beyond.

 

During the nine months ended September 30, 2023, we raised net cash of approximately $5,304,000 through the issuance of equity (which included the inducement to accelerate the conversion of certain warrants into equity), as compared to approximately $19,985,000 for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, we raised net cash of approximately $2,386,000 through the issuance of notes payable and entering into a line of credit with a national financial institution secured by inventory and other assets, as compared to approximately $60,000 for the nine months ended September 30, 2022. During the nine months ended September 30, 2022 we paid down approximately $2,607,000 in loan principal which we did not replenish.

 

 

As we continue with the launch of the American Rebel branded safes and concealed carry product line as well our Champion line of products, we expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures. We may from time to time incur significant capital needs for these expenditures and our business; we cannot fully predict what those needs will be and the impact to our business.

 

We expect to require additional funds to further develop our business and acquisition plan, including the launch of additional products in addition to aggressively 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 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.

 

Debt Restructuring

 

The Company during early 2022 engaged in and completed a financial restructuring (the “Debt Restructuring”), that included extending, renewing, and restructuring the terms of loans with several investors and third-party creditors. The completion of the registered public offering in February 2022 provided the necessary funds to pay off multiple loans with several investors and third-party creditors, leaving a small but manageable amount of debt on the books.

 

Promissory Notes – Working Capital

 

As part of the Debt Restructuring (as defined above), the Company entered into several replacement notes to extend the maturities on certain notes with working capital lending partners.

 

On July 1, 2022, the Company entered into a $600,000 unsecured promissory note with an accredited investor, our working capital lending partner. The unsecured promissory note bears interest at 12% 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.

 

On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan”) with an accredited investor lending source (the “Lender”). Under the Secured Loan, the Company received the loan net of fees of $20,000. The Secured Loan requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan bears interest at 41.4%. The Secured Loan is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan. The Secured Loan provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. We paid approximately $300,000 in principal payments to the lender under the Secured Loan. We intend to make the payments in a timely manner, with no early repayment of the principal.

 

 

Line of Credit

 

During February 2023, the Company, through its wholly-owned subsidiary Champion entered into a $2 million line of credit facility (the “Line of Credit”). The Line of Credit accrues interest at a rate determined by BSBY Daily Floating Rate plus 2.05 percentage points (which at September 30, 2023 was 7.48%), and is secured by all of the assets of the Champion Entities. The Line of Credit expires February 28, 2024. The outstanding liability of the Line of Credit at September 30, 2023 was $1.69 million. The Company has the ability to draw upon the line to the full $2 million if necessary.

 

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) 20,373 shares of Common Stock at $27.75 per share, (ii) prefunded warrants that are exercisable into 448,097 shares of Common Stock at $27.50 per prefunded warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of Common Stock at an initial exercise price of $21.50 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 the Champion Entities and the Seller under 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.

 

During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller. The Company settled with the Seller and agreed to pay an additional $325,000 to the Seller in the following manner. $275,000 upon signing of the agreement and another $50,000 to be paid over the next twelve months. The Company increased its purchase price of the Champion Entities by the $325,000 during the nine months ended September 30, 2023. The funds for this pricing adjustment came from general working capital.

 

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 1 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.

 

 

Our BUSINESS

 

Recent Events

 

American Rebel Beer

 

On August 9, 2023, the Company entered into a Master Brewing Agreement with Associated Brewing. Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. American Rebel Light Beer will launch regionally in early 2024.

 

Acquisition of Champion Entities

 

On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with the Champion Entities and the Seller under 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 offering circular in our consolidated financial statements which consist of the consolidated balance sheets, consolidated statement of operations, consolidated statement of stockholders’ equity (deficit) and consolidated statement of cash flows (the “Consolidated Financial Statements”). 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 paid the Seller (i) cash consideration in the amount of $9,150,000, along with (ii) cash deposits previously of $350,000, and (iii) reimbursement to the Seller for $397,420 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021.

 

Corporate Summary

 

American Rebel Holdings, Inc. was incorporated on December 15, 2014, in the State of Nevada and is authorized to issue 600,000,000 shares of $0.001 par value Common Stock and 10,000,000 shares of $0.001 par value preferred stock (“Preferred Stock”).

 

The Company operates primarily as a designer, manufacturer and marketer of branded safes and personal security and self-defense products. Additionally, the Company designs and produces branded apparel and accessories and plans to introduce American Rebel Beer in early 2024.

 

We believe that when it comes to their homes, consumers place a premium on their security and privacy. Our products are designed to offer our customers convenient, efficient and secure home and personal safes from a provider that they can trust. We are committed to offering products of enduring quality that allow customers to keep their valuable belongings protected and to express their patriotism and style, which is synonymous with the American Rebel brand.

 

Our safes and personal security products are constructed primarily of U.S.-made steel. We believe our products are designed to safely store firearms, as well as store our customers’ priceless keepsakes, family heirlooms and treasured memories and other valuables, and we aim to make our products accessible at various price points for home and office use. We believe our products are designed for safety, quality, reliability, features and performance.

 

To enhance the strength of our brand and drive product demand, we work with our manufacturing facilities and various suppliers to emphasize product quality and mechanical development in order to improve the performance and affordability of our products while providing support to our distribution channel and consumers. We seek to sell products that offer features and benefits of higher-end safes at mid-line price ranges.

 

We believe that safes are becoming a ‘must-have appliance’ in a significant portion of households. We believe our current safes provide safety, security, style and peace of mind at competitive prices.

 

 

In addition to branded safes, we offer an assortment of personal security products as well as apparel and accessories for men and women under the Company’s American Rebel brand. Our backpacks utilize what we believe is a distinctive sandwich-method concealment pocket, which we refer to as Personal Protection Pocket, to hold firearms in place securely and safely. The 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 a brand community presence around the core ideals and beliefs of America, in part through our Chief Executive Officer, 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 “American Rebel” brand.

 

Through our growing network of dealers, we promote and sell our products in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including our website and e-commerce platforms such as Amazon.com.

 

American Rebel is boldly positioning itself as “America’s Patriotic Brand” in a time when national spirit and American values are being rekindled and redefined. The typical American Rebel customer loves their family, their country and their community. Our positioning statement to our customers is: are you the type of person who will still hold open a door, come to the aid of a neighbor, or help an elderly person across the street? Are you the type of person that is prepared to defend yourself, your family, or even a room full of strangers? We have the beer that is as bold and brave as you. We believe the time is right for American Rebel Beer, we believe we have the right expertise, and we believe we have the right brand. The beer market in the United States is a more than 110 billion dollar industry. We believe recent trends have revealed that beer consumers want to express their values through their choice of beer. We believe that American Rebel Beer will have a receptive target audience for our product. We plan to introduce American Rebel Light Beer as our first product on a regional basis in early 2024. Consumers are already registering their email addresses at www.AmericanRebelBeer.com to be notified when American Rebel Beer is available in their local market. We are also offering our American Rebel Beer can cooler as a free incentive to visit our website.

 

American Rebel is an advocate for the 2nd Amendment and conveys a sense of responsibility to teach and preach good common practices of gun ownership. American Rebel products keep you concealed and safe inside and outside the home. American Rebel Safes protect your firearms and valuables from children, theft, fire and natural disasters inside the home; and American Rebel Concealed Carry Products provide quick and easy access to your firearm utilizing American Rebel’s Proprietary Protection Pocket in its backpacks and apparel outside the home. The initial company product releases embrace the “concealed carry lifestyle” with a focus on concealed carry products, apparel, personal security and defense. “There’s a growing need to know how to protect yourself, your family, your neighbors or even a room full of total strangers,” says American Rebel’s Chief Executive Officer, Andy Ross. “That need is in the forethought of every product we design.”

 

The “concealed carry lifestyle” refers to a set of products and a set of ideas around the emotional decision to carry a gun everywhere you go. The American Rebel brand strategy is similar to the successful Harley-Davidson Motorcycle philosophy, referenced in this quote from Richard F. Teerlink, Harley’s chairman and former chief executive, “It’s not hardware; it is a lifestyle, an emotional attachment. That’s what we have to keep marketing to.” As an American icon, Harley has come to symbolize freedom, rugged individualism, excitement and a sense of “bad boy rebellion.” American Rebel    has significant potential for branded products as a lifestyle brand. We believe our Concealed Carry Product line and Safe line serve a large and growing market segment; but it is important to note we have product opportunities beyond Concealed Carry Products and Safes.

 

American Rebel Safes

 

Keeping your guns in a location only appropriate trusted members of the household can access should be one of the top priorities for every responsible gun owner. Whenever a new firearm is purchased, the owner should also look for a way to store and secure it. Storing the firearm in a gun safe will prevent it from being misused by young household members, and it will also prevent it from being stolen in a burglary or damaged in a fire or natural disaster. Gun safes may seem pricy at first glance, but once the consumer is educated on their role to protect expensive firearms and other valuables such as jewelry and important documents, the price is justified.

 

 

American Rebel produces large floor safes in a variety of sizes as well as small portable keyed safes. Additional opportunities exist for the Company to develop Wall Safes and Handgun Boxes.

 

Reasons gun owners should own a gun safe:

 

	●	If you are a gun owner and you have children, many states have a law in place that you have to have your gun locked in a safe, away from children. This will prevent your children from getting the gun and hurting themselves or someone else.
	●	Some states have a law in place that you have to keep your gun locked away when it is not in use even if you don’t have children in your home. California has a law that you have to have your gun locked in a firearms safety device that is considered safe by the California Department of Justice (DOJ). When you buy a safe, you should see if it has approval from the California DOJ.
	●	Many gun owners own more guns than insurance will cover. Many insurance companies only cover $3,000 worth of guns. Are your weapons worth more? If so, you should invest in a gun safe to make sure your guns are protected from fire, water, and thieves.
	●	Many insurance companies may give you a discount if you own a gun safe. If you own a gun safe or you purchase one, you should see if your insurance company is one that offers a discount for this. A safe can protect your guns and possibly save you money.
	●	Do people know you own guns? You might not know that many burglaries are carried out by people they know.
	●	If a person you know breaks into your home, steals your gun, and murders someone you could be charged with a crime you didn’t commit, or the victim’s family could sue you.
	●	Gun safes can protect your guns in the event your home goes up in flames. When buying a safe, you should see if it will protect your firearm or any other valuables from fire damage.
	●	You might be the type of person that has a gun in your home for protection. A gun locked in a safe can still offer you protection. There are quick access gun safes on the market. With a quick access gun safe, you can still retrieve your gun in a few seconds, but when it isn’t needed it will be protected.

 

We believe a gun safe is the best investment a gun owner can make because the safe can protect guns from thieves, fire, water, or accidents. Bills or ballot measures to require safe storage have been discussed in Delaware, Washington, Oregon, Missouri and Virginia; and various laws are on the books in California and Massachusetts. Even a figure as staunchly pro-gun as Texas’s Republican lieutenant governor, Dan Patrick, called on gun-owning parents to lock up their weapons after the Santa Fe shooting. The gun safe industry is experiencing rapid growth and innovation. American Rebel Chief Executive Officer Andy Ross and the rest of the American Rebel team are committed to fulfilling the opportunity in the gun safe market and filling the identified void with American Rebel Gun Safes.

 

Below is a summary of the different safes we offer:

 

i.

Large Safes – our current large model safe collection 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 a double plate steel door, 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.

 

 

	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.
	iii.	Vault Doors – our U.S.-made vault doors combine style with theft and fire protection for a 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 boltworks, which is the locking mechanism that bolts the safe door closed so that it cannot be pried open 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 community, provides cannabis and horticultural plant home growers a reliable and safe solution to protect their inventory. Designed with medical marijuana or recreational cannabis dispensaries in mind and increasing governmental and insurance industry regulation to lock inventory after hours, we believe our HG-INV Inventory Safe delivers a high-level user experience.

 

Upcoming Product Offerings

 

To further complement our diverse product offerings, we plan to introduce additional products in 2023 and 2024. Below is a summary of potential upcoming product offerings:

 

i. Biometrics Safes – we intend to introduce a line of handgun boxes with biometrics, WiFi and Bluetooth technologies. These Biometric Safes have been designed, engineered and are ready for production.

 

ii. 2A Lockers – we have developed a unique steel lockbox with a 5-point locking mechanism to provide a secure place to lock up ammunition and other items that may not require the safety and security of a safe, but prevents unauthorized access. We believe there is a strong market for this product that is priced between $349 - $449 depending on the model.

 

iii. Wall Safes – wall safes can be easily hidden and provide “free” storage space since they are able to be tucked into the space between your wall and studs.

 

iv. Economy Safe Line – we are exploring enhancing our safe line through the introduction of entry level safes built in North America to compete with other safes imported from overseas.

 

In addition to introducing additional products to add to our existing lines, we are actively seeking acquisition opportunities to diversify our product offerings and enhance stockholder value.

 

Our Competitive Strengths

 

We believe we are progressing toward long-term, sustainable growth, and our business has, and our future success will be driven by, the following competitive strengths:

 

● Powerful Brand Identity – We believe we have developed a distinctive brand that sets us apart from our competitors. We believe this has contributed significantly to the success of our business. Our brand is predicated on patriotism and quintessential American character: protecting our loved ones and expressing one’s values and beliefs. We strive to equip our safes with technologically advanced features, improved designs and accessory benefits that offer customers advanced security to provide the peace of mind they need. We believe our beer offerings are formulated for the mass appeal beer market and our can will boldly proclaim the drinker’s values as we believe the beer consumer has an almost unlimited number of options, but actually very few beer choices that clearly convey the drinker’s values. Maintaining, protecting and enhancing the “American Rebel” brand is critical to expanding our enthusiasts base, network of dealers distributors and other partners. Through our beer, our safes and branded apparel and accessories, we seek to further enhance our connection with the American Rebel community and share the values of patriotism and safety for which our Company stands for. We strive to continue to meet their need for our safes and our success is anticipated to depend largely on our ability to maintain customer trust, become a gun safe storage leader and continue to provide high-quality safes. Introducing American Rebel Beer is anticipated to further expand our brand identity due to the size and potential customer base available to us in the beer market.

 

 

● Beverage Operations – We believe that our agreement with Associated Brewing provides an operational advantage for American Rebel Beer. Associated Brewing is a premier beverage partner that provides turn-key operational support for American Rebel Beer. Associated Brewing’s resources and expertise jump-start American Rebel’s entry into the beer market providing a base of initial scale for the Company to utilize to enter this new market.

 

● Safe Product Design and Development – our current safe model relies on time-tested features, such as Four-Way Active Boltworks, pinning the door shut on all four sides (compared to Three-Way Bolt works, which is prevalent in many of our competitors’ safes), and benefits that would not often be available in our price point, including 12-gauge and heavier US-made steel. The sleek exterior of our American Rebel safes has garnered attention and earned the moniker from our dealers as the “safe with an attitude.” When we set out to enter the safe market, we wanted to offer a safe that we would want to buy, one that would get our attention and provide excellent value for the cost. Our Champion and Superior safes draw on decades of exemplary craftsmanship and dependability.

 

● Focus on Safe Product Performance - since the introduction of our first safes, we have maintained a singular focus on creating a full range of safe, quality, reliable safes that were designed to help our customers store valuables. We incorporate advanced features into our safes that are designed to improve strength and durability. Key elements of our current model safes’ performance include:

 

Double Plate Steel Door – 4 ½” Thick*

Reinforced Door Edge – 7/16” Thick

Double-Steel Door Casement*

Steel Walls – 11-Gauge

Diameter Door Bolts – 1 ¼” Thick

Four-Way Active Boltworks – AR-50(14), AR-40(12), AR-30(10), AR-20(10), AR-15(8), AR-12(8)

Diamond-Embedded Armor Plate*

 

* Double Plate Steel Door is formed from two U.S.-made steel plates with fire insulation sandwiched inside. Thicker steel is placed on the outside of the door while the inner steel provides additional door rigidity and attachment for the locking mechanism and bolt works. The door edge is reinforced with up to four layers of laminated steel. Pursuant to industry-standard strength tests performed, this exclusive design offers up to 16 times greater door strength and rigidity than the “thin metal bent to look thick” doors.

 

* Double-Steel Door Casement is formed from two or more layers of steel and is welded around the perimeter of the door opening. Pursuant to industry-standard strength tests performed, it more than quadruples the strength of the door opening and provides a more secure and pry-resistant door mounting. Our manufacturer installs a Double-Steel Door Casement™ on our safes. We believe the reinforced door casement feature provides important security as the safe door is often a target for break-in attempts.

 

* Diamond-Embedded Armor Plate Industrial diamond is bonded to a tungsten steel alloy hard plate. Diamond is harder than either a cobalt or carbide drill. If drilling is attempted the diamond removes the cutting edge from the drill, thus dulling the drill bit to where it will not cut.

 

● Trusted Brand - we believe that we have trusted brands with both retailers and consumers for delivering reliable, secure safe solutions.

 

● Customer Satisfaction - we believe we have established a reputation for delivering high-quality safes and personal security products in a timely manner, in accordance with regulatory requirements and our retailers’ delivery requirements and supporting our products with a consistent merchandising and marketing message. We also believe that our high level of service, combined with strong consumer demand for our products and our focused distribution strategy, produces substantial customer satisfaction and loyalty. We also believe we have cultivated an emotional connection with the brand which symbolizes a lifestyle of freedom, rugged individualism, excitement and a sense of bad boy rebellion.

 

 

● Proven Management Team - our founder and Chief Executive Officer, Charles A. Ross, Jr., has led the expansion and focus on the select product line we offer today. We believe that Mr. Ross had an immediate and positive impact on our brand, products, team members, and customers. Under Mr. Ross’s leadership, we believe that we have built a strong brand and strengthened the management team. We are refocusing on the profitability of our products, reinforcing the quality of safes to engage customers and drive sales. We believe our management team possesses an appropriate mix of skills, broad range of professional experience, and leadership designed to drive board performance and properly oversee the interests of the Company, including our long-term corporate strategy. Our management team also reflects a balanced approach to tenure that will allow the Board to benefit from a mix of newer members who bring fresh perspectives and seasoned directors who bring continuity and a deep understanding of our complex business. Our team at Associated Brewing provides expertise in the beverage industry to increase our efficiency in our American Rebel Beer launch and they are very excited about the American Rebel brand, marketing prowess and market opportunity. Associated Brewing and their affiliate copackers have significant capacity to supply American Rebel Beer.

 

Our Growth Strategy

 

Our goal is to enhance our position as a designer, producer and marketer of premium safes and personal security products. In addition, we recently announced we are entering the beverage business, through the introduction of American Rebel Beer. We have established plans to grow our business by focusing on three key areas: (1) organic growth and expansion in existing markets; (2) targeted strategic acquisitions that increase our on-premise and online product offerings, distributor and retail footprint and/or have the ability to increase and improve our manufacturing capabilities and output, and (3) expanding the scope of our operation activities to new applications and new business categories.

 

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 2022 in the 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 our safe product offerings. We are focused on continuing to develop our home, office and personal safe product lines. We are investing in adding what we believe are distinctive and advanced technological solutions for our safes and protective product lines.

 

We are 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 pledge to our customers to fight to protect their privacy just as we would fight to protect our own privacy. Customers purchase our safes with an expectation of security and privacy and we have to live up to their trust placed in us and fight for them.

 

 

Additionally, our Concealed Carry Product line and Safe line serve a large market segment. We believe that interest in safes increases, as well as in our complimentary concealed carry backpacks and apparel as a byproduct, when interest of the general population in firearms increases. 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 background 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 2023 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 Connecticut) are starting to legislate new storage requirements in respect of firearms, which is expected to have a positive impact on the sale of safes. We have also recognized a growth in first-time gun buyers and their propensity to purchase a gun safe simultaneously with their first-time gun purchase. The previous trend was that gun buyers would wait to purchase a gun safe until multiple firearms were owned.

 

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 offering 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. We also intend to capitalize on the dissatisfaction throughout the customer and dealer base with the Liberty Safe access code policy. Champion Safe and its legacy of nearly 25 years of craftsmanship and quality position its products as viable alternatives to Liberty Safe product. Firearm industry sources estimate that 70 million to 80 million people in the United States own an aggregate of more than 400 million firearms, creating a large potential market for our safes and personal security products. We are focusing on the premium segment of the market through the 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 acquisition 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 the Champion Entities and the Seller under 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 closed 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 PCAOB registered accounting firm to conduct their two years of audit and subsequent interim review reports.

 

 

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 of the combined company.

 

Champion Safe employs more than 60 employees in their Utah factory and more than 150 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, the founder and former CEO of Champion, 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 were continued under the first half of 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 was eager to expand his manufacturing operation and seize upon the growth opportunities in the safe business. Working closing with the American Rebel team, Mr. Crosby 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 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.

 

Expand into New Business Categories

 

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 showroom in Lenexa, Kansas.

 

We recently entered into an agreement to introduce American Rebel Beer as a new product offering, which is anticipated to launch regionally in early 2024. The Company has strived to be innovative, building products around its brand, and is committed to becoming a leading innovator in the industries in which it competes. To that end, the Company plans to continually test new alcohol beverages and may sell them under various brand labels for evaluation of drinker interest. The Company will also continue to consider new markets for its safe products and new product applications. The Company has already identified opportunities in the cannabis industry to lock inventory after hours as well as locking cabinets for tools and automotive parts in garages. Also, Champion Safe has focused on the middle and premium segments of the safe market. We believe introducing a value line series will grow customer and dealer loyalty to our brands as nearly 60% of current safe industry sales are going to value line products. We believe our value line product will have features and benefits other value line safes won’t offer and that our value line safe will be a better product.

 

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 although we have not entered into any agreements relating to this market niche as of the date hereof. Cannabis dispensaries have various insurance requirements and local ordinances requiring them to secure their inventory when the dispensary is closed.   We have been told that a number of 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 new 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 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 currently generate material revenues from licensing fees, our management team 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.

 

Description of Business

 

Our Company

 

We are intending to establish American Rebel as a lifestyle brand that presents our customers the opportunity to express their values with the products they buy. We currently operate primarily as a designer, manufacturer and marketer of branded safes and personal security and self-defense products. American Rebel acquired Champion Safe Company and its associated entities on July 29, 2022. This acquisition dramatically grew the Company’s revenues and built a solid base to position the Company for future growth. Additionally, the Company designs and produces branded accessories and apparel, including with concealment pockets. Recently, the Company has entered into an agreement with Associated Brewing  to produce American Rebel Beer. The beer industry in the United States is a more than $110 Billion dollar market.    We believe there is a substantial opportunity to enter the beer market at this time to present our customers with a beer they can support that aligns with their values.

 

American Rebel  is boldly positioning itself as “America’s Patriotic Brand” in a time when national spirit and American values are being rekindled and redefined. The typical American Rebel customer loves their family, their country and their community. We believe the time is right for American Rebel Beer, we believe we have the right expertise, and we believe we have the right brand. Recent trends have revealed that beer consumers want to express their values through their choice of beer. We believe that American Rebel Beer will have a receptive target audience for our product. American Rebel Light Beer will be the first product introduced on a regional basis in early 2024. Consumers are already registering their email addresses at www.AmericanRebelBeer.com to be notified when American Rebel Beer is available in their local market. We are also offering our American Rebel Beer can cooler as a free incentive to visit our website.

 

Our safes have an established legacy of quality and craftsmanship since Champion Safe was founded in 1999  . We believe that when it comes to their homes, consumers place a premium on their security and privacy. Our products are designed to offer our customers convenient, efficient and secure home and personal safes from a provider that they can trust. We are committed to offering products of enduring quality that allow customers to keep their valuable belongings protected and to express their patriotism and style, which is synonymous with the American Rebel brand.

 

Our safes and personal security products are constructed primarily of U.S.-made steel. We believe our products are designed to safely store firearms, as well as store our customers’ priceless keepsakes, family heirlooms and treasured memories and other valuables, and we aim to make our products accessible at various sizes and price points for home use. We believe our products are designed for safety, quality, reliability, features and performance.

 

 

To enhance the strength of our brand and drive product demand, we work with our manufacturing team and our suppliers to emphasize product quality and mechanical development in order to improve the performance and affordability of our products while providing support to our distribution channel and consumers. We seek to sell products that offer features and benefits of higher-end safes at mid-line price ranges.

 

We believe that safes are becoming a ‘must-have appliance’ in a significant portion of households. We believe our current safes provide safety, security, style and peace of mind at competitive prices. We are in the process of developing an additional value-line model safe. Seventy percent of current industry-wide safe safes are from value-priced safes.

 

In addition to branded safes, we offer an assortment of personal security products as well as apparel and accessories for men and women under the Company’s American Rebel brand. Our backpacks utilize what we believe is a distinctive sandwich-method concealment pocket, which we refer to as Personal Protection Pocket, to hold firearms in place securely and safely. The 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 a brand community presence around the core ideals and beliefs of America, in part through our Chief Executive Officer, 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 “American Rebel” brand.

 

Through our growing network of dealers, we promote and sell our products in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including our website and e-commerce platforms such as Amazon.com.

 

Our Products

 

We design, manufacture, market and sell branded safes and personal security products, including concealed carry/self-defense products, and design and market an apparel line and complimentary accessories. We promote and sell our products primarily through retailers using a dealer network, as well as online, through our website, and on Amazon.com, where customers can place an order for our branded backpacks and apparel items.

 

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. Our safes exhibit the strength and rugged independence that America was built upon. American Rebel’s design makes keeping your firearms more secure in style. Products are marketed under the American Rebel brand. Although demand for our safes is strong across all segments of our customers, including individuals and families who wish to protect their valuables, to collectors and the dispensary servicing community, the demand for safe storage responsible solutions has been particularly strong among gun owners, sportsmen, competitive shooters and hunters alike. We expect to benefit from increasing awareness of and need for safe storage of firearms in future periods.

 

Large Safes

 

Our large safe collection consists of six safes in a range of sizes. All of our large safes share the same high-quality workmanship, are constructed out of 11-gauge U.S.-made steel and feature a double plate steel door, double-steel door casements and reinforced door edges. We believe that our large safes are ideal for storing valuables of significant size, and that they offer greater capacity for storage and protection. 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. The large safes are designed to be resistant to break-ins, natural disasters and fire damage, and to prevent unauthorized access and to protect your family and their valuables. A large, highly visible safe also is believed to act as a deterrent to any prospective thief. Safe storage is also top priority of our customer base who seeks to responsibly secure their firearms. Whenever a new firearm is purchased, gun owners look for our premium solution to responsibly secure them and protect their loved ones.

 

 

Our large safes selection includes the following:

 

AR-50

 

The AR-50 is our biggest safe. The AR-50 safe is designed to be strong, rugged, constructed of 11-gauge American-made steel and maintains capacity to comfortably store more than 40 firearms comfortably. This premium gun safe with a double plate steel door, double-steel door casement and reinforced door edge is designed to give our customers added security and peace of mind, with 75 minutes of fire protection at 1200 degrees Fahrenheit as well as a customized shelf solution and optional additional accessories to increase the capacity to hold firearms. 72” tall, 40” wide with a depth of 28.5”.

 

AR-40

 

The AR-40 has the same footprint as the AR-50; however, it is 12” shorter with a capacity of more than 30 firearms. This gun safe contains a double plate steel door, double-steel door casement and reinforced door edge, designed to give our customers secure storage. It provides 75 minutes of fire protection at 1200 degrees Fahrenheit as well as a flexible shelving system to accommodate firearm storage. The dimensions include 60” tall, 40” wide with a depth of 28.5”.

 

AR-30

 

The AR-30 offers nearly 50,000 cubic inches of storage. Built with the same strength and ruggedness as the AR-50 and AR-40 models, this safe holds more than 20 firearms. This gun safe contains a double plate steel door, double-steel door casement and reinforced door edge. It is designed to give our customers the ability to store their firearms and valuables securely, with 75 minutes of fire protection at 1200 degrees Fahrenheit as well as offering optional add-on accessories to increase storage capacity. The dimensions include 60” tall, 34” wide with a depth of 24.5”.

 

AR-20

 

The AR-20 shares the quality workmanship as the other sizes with a capacity for more than 15 firearms. This gun safe contains a double plate steel door, double-steel door casement and reinforced door edge is designed to prevent theft and provide protection from fire, flood and accidental access, with 75 minutes of fire protection at 1200 degrees Fahrenheit as well as a customized shelving solution. The dimensions include 60” tall, 28” wide with a depth of 22.5”.

 

AR-15

 

The AR-15 fits the bill for narrow spaces with room for more than 10 firearms. Same quality construction as our other large safes including a double plate steel door, double-steel door casement and reinforced door edge is designed to give our customers added security and peace of mind, with 75 minutes of fire protection at 1200 degrees Fahrenheit as well as a customized shelving solution. The dimensions include 60” tall, 22” wide with a depth of 22.5”.

 

AR-12

 

The AR-12 is our shortest safe. It is the perfect size to store AR rifles, handguns and personal valuables. It has a capacity of more than 8 AR rifles. Same quality construction as our other large safes including a double plate steel door, double-steel door casement and reinforced door edge is designed to give our customers safe storage and peace of mind, with 75 minutes of fire protection at 1200 degrees Fahrenheit as well as offering optional add-on accessories to increase storage capacity. The dimensions include 40” tall, 26” wide with a depth of 23”.

 

Personal safes

 

Our compact safes, which come in two sizes, are a responsible solution to safely secure smaller valuables or handguns. The AR-110 weighs 5 pounds and is 9.5” x 6.5” x 1.75”. The AR-120 weighs 6 pounds and is 10.5” x 7.5” x 2.1875”. These small, personal safes are easy to operate and carry as they fit into a briefcase, desk or under a vehicle seat. These personal safes meet (“TSA”) airline firearm guidelines and fit comfortably in luggage where travel regulations require it.

 

 

Vault doors

 

Our U.S.-made Vault Doors combine style with theft and fire protection for a look that fits any decor. Designed to offer superior protection, vault rooms provide an ideal solution for the protection of the family and any valuables. 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 is a safe room, a shelter, or a place to consolidate valuables, our American Rebel In-Swinging and Out-Swinging Vault Doors provide maximum functionality to a secure vault room. American Rebel vault doors are constructed of two thick, A36 carbon steel panels with sandwiched fire insulation, a design that provides greater rigidity, security and fire protection. The active boltworks and three external hinges are some of the features of the vault door. For safety and to use the door for a panic or safe room door, a quick release lever is installed inside the door.

 

Dispensaries

 

Our inventory control safe, the HG-INV Inventory Safe, provides cannabis dispensaries a reliable and safe solution. With wide-spread legalization, medical marijuana or recreational cannabis dispensaries face increasing government regulation and insurance requirements to lock their inventory after hours. Our HG-INV Inventory Safe delivers a higher level user experience with customized shelving and our inventory notation system. The HG-INV has been introduced to the dispensary industry through trade show appearances and many of our dealers are actively cultivating dispensary business. Expanding our marketing of the HG-INV can open new markets to American Rebel.

 

Personal Security

 

Concealed Carry Backpacks – consist of an assortment of sizes, features and styles. Our XL, Large, and Medium concealed carry backpacks feature our proprietary “Personal Protection Pocket” which utilizes a sandwich method to keep handguns secure and in the desired and easily accessible position. The sandwich method is comprised of two foam pads that surround or sandwich the firearm in place. The user can access the isolated Protection Pocket from either side of the backpack. We believe these distinctive concealed carry products are designed for everyday use while keeping your firearm concealed, safe and easily accessible.

 

The Extra-Large Freedom and Cartwright CCW Backpack

 

Our largest concealed carry backpack offers ample storage, including a dedicated top loading laptop pouch and additional tablet sleeve. Both compartments are padded to protect your devices. Two large open compartments make this backpack practical for carrying documents and folders or whatever you need to tote from one place to another. Our proprietary “Protection Pocket” allows quick and easy access to your handgun from either side. Multiple interior compartments are strategically placed to secure extra magazines and accessories. Available in the Freedom and Cartwright style as well as a variety of trim color options.

 

Large Freedom and Cartwright CCW Backpack

 

Our most popular concealed carry backpack. This backpack offers ample storage, including a dedicated top loading laptop pouch and an additional tablet sleeve. Both compartments are padded to protect your devices. The size of the main compartment opening makes this backpack practical for carrying documents, folders or whatever you need to tote from one place to another. Includes our proprietary “Protection Pocket” and is available in the Freedom and Cartwright style as well as a variety of trim color options.

 

Medium Freedom CCW Backpack

 

This medium-sized backpack is designed for those who look to be more streamlined. This backpack offers ample storage, including a dedicated top loading laptop/tablet compartment and two liquid container pouches. The laptop/tablet compartment is padded to protect your devices. The main compartment is practical for carrying documents and folders or whatever you need for everyday use. Includes our proprietary “Protection Pocket”. Available in a variety of trim color options.

 

 

Small Plus CCW Backpack

 

Our small one-strap concealed carry backpack is designed for use while running, jogging, biking or riding a motorcycle. Our concealment pocket contains a holster and attaches to the interior with hook and loop material. Soft fleece lined pockets for your tablet, glasses case and accessories are also included. Available in dark blue or in our signature patriotic “We The People” design.

 

Small Freedom CCW Backpack

 

This one strap pack also contains a holster and attaches to the interior with hook and loop material. There is also plenty of room for a small tablet, cell phone, chargers and other necessities. Available in a variety of trim color options.

 

Apparel

 

We offer a wide range of concealed carry jackets, vests and coats for men and women, including our Freedom Jacket 2.0 which incorporates a significant advance in the operation of the concealment pocket. We also proudly offer patriotic apparel for the whole family, with the imprint of the American Rebel brand. Our apparel line serves as “point man” for the brand, often the first exposure that people have to all things American Rebel. Our branded apparel line is forever relevant, current and bold. We place emphasis on styling that complements our enthusiast customers’ lifestyle, representing the values of our community and quintessential American character. The American Rebel clothing line style is not only a fashion statement; it is the sense of pride of belonging to our patriotic family, on your adventures and in life. Our apparel collection consists of the following:

 

Cartwright Coats and Vests

 

Engineered for comfort, warmth, and versatility and mobility. Our Cartwright Concealed Carry Coats and Vests are designed with purpose and informed by the rugged demands of the everyday hard worker. Its quality construction and workmanship are designed to keep you warm and shielded from the elements. Left-hand and right-hand concealment pocket access provides for secure and safe concealment of your firearm with easy access on either side.

 

Freedom 2.0 Jackets and Vests for men and women

 

Our lightweight jackets collection is designed with magnetic pocket closures for silent, secure and safe concealment. Our lightweight jackets are crafted to facilitate easy firearm access for both right-handed and left-handed carriers.

 

American Rebel T-Shirts Collection

 

American Rebel’s T-shirts collection is created to liberate the spirit of an endless summer inside everyone and to embrace their patriotism.

 

Competition

 

Safes - The North American safe industry is dominated by a small number of companies. We compete primarily on the quality, safety, reliability, features, performance, brand awareness, and price of our products. Our primary competitors include companies such as Liberty Safe, Fort Knox Security Products, American Security, Sturdy Safe Company, Homeland Security Safes, SentrySafe and as well as certain other domestic manufacturers, as well as certain China-based manufactured safes. Safes manufactured in China, including Steelwater and Alpha-Guardian, have struggled under the import tariffs initiated under the administration of former U.S President Donald Trump and continued during the first half of the current administration. We believe that given the current substantial uncertainty related to the supply chain and delivery of international goods, we have a competitive advantage because our safes are not manufactured overseas. Our higher end safes and vault doors are made in the USA in our Provo, UT manufacturing facility, which resonates with our customer base. Our middle and value line safes are made with USA made steel in our manufacturing facility in Nogales, Mexico. The combination of having all our safes made with USA made steel along with our higher end safes and vault doors being made in America put the Company in a strong position.

 

 

Beer - The Beer industry in the United States is highly competitive due to large domestic and international brewers and the increasing number of craft brewers and craft distilleries in this category who distribute similar products that have similar pricing and target beer drinkers. The two largest brewers in the United States, AB InBev and Molson Coors, participate actively in mass appeal beer offerings as well as the High End and Beyond Beer categories, through numerous hard seltzers, flavored malt beverages, and spirit RTDs from existing beer brands or new brands, importing and distributing import brands, and with their own domestic specialty beers, either by developing new brands or by acquiring, in whole or part, existing brands. Imported beers, such as Corona®, Heineken®, Modelo Especial® and Stella Artois®, continue to compete aggressively in the United States and have gained market share over the last ten years. All of these companies have substantially greater financial resources, marketing strength and distribution networks than the Company. We believe our brand positioning will present opportunities for us to compete in this crowded marketplace. American Rebel won’t be all things to all people; but we do believe we can be important to a large potential market.

 

Intellectual Property

 

Our commercial success depends in part on our ability to obtain and maintain intellectual property protection for our brand and technology, defend and enforce our intellectual property rights, preserve the confidentiality of our trade secrets, operate our business without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties and prevent third parties from infringing, misappropriating or otherwise violating our intellectual property rights. We rely on a combination of patent, copyright and trade secret laws in the United States to protect our proprietary technology. We also rely on a number of United States registered, pending and common law trademarks to protect our brand “American Rebel”.

 

On May 29, 2018, US Patent No. 9,984,552, Firearm Detecting Luggage, was issued to us. The term of the patent is 20 years from the issuance date. In addition to our patent, we rely upon unpatented trade secrets and know-how and continuing technological development and maintain our competitive position. Trade secrets and know-how, however, can be difficult to protect. We seek to protect our proprietary information, in part, by entering into confidentiality and proprietary rights agreements with our employees and independent contractors.

 

Regulation

 

The storage of firearms and ammunition is subject to increasing federal, state and local governmental laws. While the current legislative climate does not appear to seek to limit possession of firearms, there is apparent momentum to require safe storage of firearms and ammunition. Although our safes, which are the primary driver of our sales and revenues, are designed to protect any valuables, a significant number of our safes’ end users have traditionally been gun enthusiasts, collectors, hunters, sportsmen and competitive shooters. Therefore, we expect the increasing federal, state and local governmental regulation of gun storage to have a materially positive effect on our business.

 

Our Customers

 

We primarily market and sell our products to safe-only specialty stores and independent gun stores nationwide. We also sell our products online to individuals desiring home, personal and office protection, as well as to recreational shooters and hunters. Our customers choose us for a number of reasons, including the breadth and availability of the products we offer, our extensive expertise, and the quality of our customer service.

 

We believe the nature of our solutions and our high-touch customer service model strengthens relationships, builds loyalty and drives repeat business as our customers’ businesses expand. In addition, we feel as if our premium product lines and comprehensive product portfolio position us well to meet our customers’ needs. Furthermore, we fully anticipate that we will be able to leverage all of the data that we are collecting from our existing customer base to make continuous improvements to our offerings and better serve our current and new customers in the future.

 

We intend to expand our distribution to sporting goods stores, farm and home stores, other independent retailers as well as our online customer base upon securing additional funding and expanding our manufacturing facilities.

 

 

Suppliers

 

We are dependent on the continued supply of materials for the manufacturing of our safes, as well as the continued supply and manufacturing of backpacks and apparel at third-party facilities locations, which are critical to our success. Any event that causes a disruption of the operation of these facilities for even a relatively short period of time would adversely affect our ability to ship and deliver our safes and other products and to provide service to our customers. We have previously experienced, including during the first months after the spread of the COVID-19 pandemic, and may in the future experience, launch and production ramp up delays for our products as a result of disruption at our suppliers and our suppliers’ manufacturing partners. Additionally, we have to date fully qualified only a very limited number of such suppliers and have limited flexibility in changing suppliers. Any disruption in the supply of materials for our branded safes from our suppliers could limit our sales.

 

Furthermore, the cost of safes depends in part upon the prices and availability of raw manufacturing materials such as steel, locks, fireboard, hinges, pins and other metals. The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products. Any reduced availability of these materials may impact our access to these parts and any increases in their prices may reduce our profitability if we cannot recoup the increased costs through increased safe prices. Moreover, any such attempts to increase product prices may harm our brand, prospects and operating results.

 

We currently rely on third-party suppliers to ship our products to our customers. We have found that dedicated truckloads from our warehouse to our dealers reduce freight damage and provide the overall best shipping solution. Several companies offer dedicated truckload shipping. Increased sales will offer the opportunity to establish regional distribution centers.

 

Sales and Marketing

 

We market our products to consumers through independent safe specialty stores, select national and regional retailers, local specialty firearms stores, as well as via e-commerce. We maintain consumer-focused product marketing and promotional campaigns, which include print and digital advertising campaigns; social and electronic media; product demonstrations; point-of-sales materials; in-store training; and in-store retail merchandising. Our use of social media includes Facebook, and YouTube.

 

Marketing Team Aligned with Sales Force to Maximize Our Industry Visibility to Drive Revenue

 

Our Chief Executive Officer, Charles A. Ross, is familiar to many in the industry due to his twelve years on television as the host of Maximum Archery World Tour and later American Rebel, that was broadcast on The Outdoor Channel, Sportsman Channel and the Pursuit Channel. Our Marketing and Sales teams have established American Rebel as a brand that our customers want and a brand that they are proud to embrace and bring into their homes.

 

Direct Marketing

 

In light of the expertise required to deliver and install safes that weigh 500-1000 pounds, direct marketing is utilized to create awareness and provide information. Our website, AmericanRebel.com, has proven to be a very valuable tool in introducing potential customers to our products. Infomercials and direct-to-consumer campaigns are vehicles to expand our reach at the appropriate time. Currently the demand from our current customers and future customer pool of independent safe specialty stores is high. As the Company grows and seeks out new customers to expand its customer base, direct marketing will be an asset for American Rebel. Chief Executive Officer, Charles A. Ross, was basically making infomercials to promote his Ross Archery products when he was filming Maximum Archery World Tour during the mid-2000s.

 

 

Social Media and Thought Leadership

 

A portion of marketing dollars will be directed to social media. American Rebel and Chief Executive Officer Charles A. Ross have large followings on social media and a dedicated social media campaign will efficiently reach large numbers of potential customers and brand adopters. We will leverage our social media assets to cross-promote locally with independent safe specialty store customers to pull out product through the sales channel. Driving demand and awareness of our products to our customers will expand their loyalty to American Rebel and increase each stores’ commitment to our brand.

 

Trade Shows

 

Trade shows have been an important medium to introducing our brand and our products. The NRA Annual Meeting, a consumer trade show, is a valuable opportunity to meet and greet our final customers. When we launched our Concealed Carry line of products at the NRA Annual Meeting in Atlanta, GA, in the Spring of 2017, the response from the meeting attendees was overwhelming. We immediately knew the product line resonated with consumers. Similarly, when we introduced our line of safes at the 2019 NRA Annual Meeting in the Spring of 2019, we knew we were on to something significant. The USCCA (United States Concealed Carry Association) has an annual Concealed Carry and Home Defense Expo. This is also an excellent opportunity to meet, greet and sell product to our final customers, the buying public. The Iowa Deer Classic and Illinois Deer Classic are carryovers from our Chief Executive Officer Charles A. Ross’ hosting duties on Maximum Archery World Tour, but we have found that many potential safe buyers attend these shows.

 

Three industry-only trade shows we attend are the SHOT Show, Nation’s Best Sports (NBS) Spring and Fall Buying Markets, and the Sports, Inc trade show. The SHOT Show is very high-profile show that most movers and shakers in the firearms industry attend. Operated by the National Shooting Sports Foundation, the SHOT Show is the first trade show of the calendar year and is a great opportunity to introduce the year’s new products. NBS operates buying group shows where retailers who are members of NBS attend the Spring and Fall Market Buying shows to place orders. NBS provides an excellent base of customers for us to introduce our products to. Sports, Inc. is also a buying group show where retailers who are members of Sports, Inc. attend to make purchases from attending vendors.

 

Paid Advertising

 

We will occasionally purchase paid print advertising to support editorial and events. The American Shooting Journal has been very supportive of our business has featured an interview with our Chief Executive Officer in one of past issues of the magazine.

 

Legal Proceedings

 

There are no proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No current director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No current director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No current director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.

 

From time to time, however, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

Corporate History

 

The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective 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 owned subsidiary of the Company. On July 29, 2022, the Company closed on its acquisition of the Champion Entities.

 

 

OUR PROPERTIES

 

American Rebel Facilities

 

American Rebel entities lease the following properties:

 

Location		Square Feet		Use		Lessee		Lease Expiration
909 18th Avenue South, Suite A Nashville, TN 37212		1,750		Corporate Executive Offices		American Rebel Holdings, Inc.		March 31, 2024
3800 S Ross Lane Chanute, Kansas 66720		50,000		Warehouse and Shipping		American Rebel Holdings, Inc.		February 1, 2024
8500 Marshall Road Lenexa, Kansas 66214		15,800		Retail Sales		American Rebel, Inc.		July 31, 2028

 

Champion Safe Facilities

 

Headquarters for the Champion Entities (Champion, Superior and Safe Guard) are located in Provo, Utah. These entities lease the following locations:

 

Location		Square Feet		Use		Lessee		Lease Expiration
2055 S. Tracy Hall Parkway Provo, Utah 84606**		8,000		Manufacturing				December 31, 2024
2813 S Sierra Vista Way, Provo, Utah 84606*		8,000		Executive Offices and Factory Sales Outlet				January 1, 2025
2813 S Sierra Vista Way, Suite 2 Provo, Utah 84606*		24,000		Warehouse				December 31, 2024
200 Rock Industrial Park Bridgeton, Missouri 63044**		5,000		Warehouse and Shipping		Champion Safe Company, Inc.		January 15, 2024
500 Industrial Drive Lewisberry, Pennsylvania 17339**		2,100		Warehouse and Retail Sales				December 15, 2023***
5411 Trebor Lane Knoxville, Tennessee 37914**		2,500		Warehouse and Retail Sales				January 31, 2024
792 N. Gilbert Road, Suite 102 Gilbert, Arizona 85233		2,600		Retail Sales				June 30, 2026
4027 North Oracle Road Tucson, Arizona 85705		1,400		Retail Sales				March 7, 2027
17455 N. Black Canyon Highway Phoenix, Arizona 85023		2,400		Retail Sales				February 28, 2025
9802 N. 91st Avenue, Suite 108 Peoria, Arizona 85345		3,907		Warehouse and Retail Sales				April 30, 2025
28344 Waterview Drive Boerne, Texas 78006		2,400		Retail Sales		Sublease		Month-to-month
1020 FM 1960 West, Suite 7 Houston, Texas 77090		2,500		Retail Sales		Sublease		Month-to-month
Av. Alvaro Obregon 6745, California, 84065 Nogales, Sonora, Mexico		73,659		Manufacturing		Champion Safe De Mexico, S.A. DE C.V.		September 1, 2024

 

*** Subleased effective December 15, 2023. Original lease expiration date is August 1, 2024.

** Leased from Utah–Tennessee Holding Company, LLC, a company owned by the former Champion CEO, Ray Crosby.

* Leased from Champion Holdings, LLC, a company owned by the former Champion CEO, Ray Crosby.

 

 

As part of our transaction in acquiring the Champion Entities, several of the long-term leases are held with the Seller, Mr. Ray Crosby through a limited liability company. These long-term leases are considered market value as Mr. Crosby through this LLC provides rental space at market value, neither charging the Company and its subsidiaries too much or too little. Please review the footnotes to our Consolidated Financial Statements for further disclosure on the leases that the Company is obligated to the Seller of the Champion Entities.

 

The Company believes these facilities are adequate for its needs, including providing the space and infrastructure to accommodate its development work based on current operating plans. In the future, the Company may lease or license additional facilities for manufacturing, corporate offices and other functions. The Company believes that suitable additional facilities will be available on commercially reasonable terms to accommodate the foreseeable expansion of its operations.

 

LEGAL PROCEEDINGS

 

We are not currently a party in any legal proceeding or governmental regulatory proceeding nor are we currently aware of any pending or potential legal proceeding or governmental regulatory proceeding proposed to be initiated against us that would have a material adverse effect on us or our business.

 

 

MANAGEMENT

 

Directors and Executive Officers

 

The following table sets forth certain information regarding the executive officers and directors of American Rebel Holdings, Inc. as of the date of this offering circular.

 

All directors of the Company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. Officers of the Company are appointed by our Board and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

 

Name		Positions Held with the Company		Age		Date First Elected or Appointed
Executive Officers
Charles A. Ross, Jr.		Chief Executive Officer and Director (Principal Executive Officer)		57		June 9, 2016
Doug E. Grau		President, (Interim Principal Accounting Officer)		61		February 12, 2020
Corey Lambrecht		Chief Operating Officer and Director		54		February 12, 2020
Non-Employee Directors
Michael Dean Smith		Director		53		February 8, 2022
C. Stephen Cochennet		Director		66		May 9, 2023
Larry Sinks		Director		60		November 20, 2023

 

Executive Officers

 

Charles A. Ross, Jr., Chief Executive Officer and Director

 

Mr. Ross is currently the Company’s CEO and a Director. He has held these positions since June 20, 2016. He is responsible for all duties required of a corporate officer and the development of the business. From December 15, 2014 through April 9, 2021, Mr. Ross served as the sole officer and director of American Rebel, Inc. He now serves as Secretary/Treasurer and a director. American Rebel, Inc. has developed a product line of concealed carry products that officially launch at the 2017 NRA Convention April 27 – 30 in Atlanta, GA. Prior to founding American Rebel, Inc. Mr. Ross founded many companies including Digital Ally, Inc. (NASDAQ: DGLY), which he established in 2004. In addition to his entrepreneurial accomplishments, Mr. Ross served as host for ten years of his own television show, Maximum Archery World Tour, where he bowhunted all over the world including traditional hunts and some of the world’s most dangerous game. Maximum Archery World Tour evolved into his new show, American Rebel, which featured Mr. Ross’s music, patriotism, his support of the 2^nd Amendment and celebrated the “American Rebel Spirit” in all of us. Mr. Ross has released three CDs and his song “American Rebel” has become the theme song for American Rebel.

 

Doug E. Grau, President and Interim Principal Accounting Officer

 

Mr. Grau is currently our president and interim principal accounting officer. Mr. Grau served as a director from February of 2020 through November of 2023. From 2014 through present he has also served as a director of American Rebel, Inc., our wholly-owned operating subsidiary. Mr. Grau has produced Chief Executive Officer Andy Ross’s three CDs and has worked with Andy in various capacities for thirteen years. Mr. Grau worked as an executive at Warner Bros. Records in Nashville for fifteen years, developing the talents of Travis Tritt, Little Texas, David Ball, Jeff Foxworthy, Bill Engvall, Larry the Cable Guy, Ron White, and others. Mr. Grau graduated from Belmont University in Nashville, TN in 1985 with a Bachelor’s degree in Business Administration.

 

Corey Lambrecht, Chief Operating Officer and Director

 

Mr. Lambrecht has served as a director since February of 2020 and was appointed as our Chief Operating Officer in November of 2023. Mr. Lambrecht is a 20+ year public company executive with broad experience in strategic acquisitions, corporate turnarounds, new business development, pioneering consumer products, corporate licensing, interactive technology services in addition to holding public company executive roles with responsibilities including day-to-day business operations, management, raising capital, board communication and investor relations. He is a Certified Director from the UCLA Anderson Graduate School of Management accredited Directors program. From 2007 through 2023 he was an independent director of Orbital Infrastructure Group, Inc., a former Nasdaq listed company. Mr. Lambrecht served on the Board of HippoFi, Inc. (OTC: ORHB) from July 2016 through December 2019. On January 17, 2020, Mr. Lambrecht was appointed to serve as the Chief Financial Officer for Singlepoint Inc. (CBOE: SING) and he previously served as a Board Member for Lifestyle Wireless, Inc. which, in 2012 merged into Singlepoint. In December 2011 he joined the Board of Guardian 8 Holdings, a leading non-lethal security product company, serving until early 2016. He most recently served as the President and Chief Operating Officer at Earth911 Inc., a subsidiary of Infinity Resources Holdings Company (OTC: IRHC) from January 2010 to July 2013.

 

 

Non-Employee Directors

 

Michael Dean Smith, Director

 

Mr. Smith has been an independent director since February 2022 and has, since 2017, been Vice President of Industrial Maintenance, Inc. From 1997-2017, Mr. Smith served in various positions with Payless Shoe Source. Mr. Smith holds B.S. in Business Administration and Accounting from the University of Kansas, and MBA from Washburn University.

 

C. Stephen Cochennet, Director

 

Mr. Cochennet has served as CEO/President, of Kansas Resource Development Company, a private oil and gas exploration company since 2011. In addition, from 2018 through 2023, Mr. Cochennet served as an independent board and committee member of Orbital Infrastructure Group, Inc., a former Nasdaq listed company. From 2011 through 2015 he was also the CEO and president of Guardian 8 Corporation. From 2005 to 2010, Mr. Cochennet was the Chairman, President, and Chief Executive Officer of EnerJex Resources, Inc., a publicly traded Commission registered Oil and Gas Company. Prior to joining EnerJex, Mr. Cochennet was President of CSC Group, LLC in which he supported several Fortune 500 corporations, international companies, and natural gas/electric utilities as well as various startup organizations. The services provided included strategic planning, capital formation, corporate development, executive networking and transaction structuring. From 1985 to 2002, he held several executive positions with UtiliCorp United Inc. (Aquila) in Kansas City, Missouri. His responsibilities included finance, administration, operations, human resources, corporate development, natural gas/energy marketing, and managing several new startup operations. Prior to his experience at Aquila Mr. Cochennet served 6 years with the Federal Reserve System managing problem and failed banking institutions primarily within the oil and gas markets.

 

Mr. Cochennet graduated from the University of Nebraska with a B.A. in Finance and Economics.

 

Larry Sinks, Director

 

Mr. Sinks was appointed as a director in November of 2023. Since 2005, Mr. Sinks has been in the screen printing and embroidering business on a freelance basis. In addition, since 2016, Mr. Sinks has been a consultant for Team Image Marketing, a company specializing in high-end corrugated grocery store displays. Further, from 2021 through present, Mr. Sinks has been consulting for Champion Building Solutions, a private company in Kansas City, Missouri specializing in general remodels of homes. Mr. Sinks real passion is in motorsports and making introductions to people in the auto racing business. Along these lines, Mr. Sinks was instrumental in introducing us to Tony Stewart Racing.

 

CORPORATE GOVERNANCE

 

Concurrent with our February 2022 public offering, we made significant corporate governance changes, which are set forth below.

 

Director Independence

 

The Board has reviewed the independence of our directors based on the listing standards of the Nasdaq Capital Market. Based on this review, the Board has determined that each of Larry Sinks, Michael Dean Smith and C. Stephen Cochennet are independent within the meaning of the Nasdaq Capital Market rules. In making this determination, our Board considered the relationships that each of these non-employee directors has with us and all other facts and circumstances our Board deemed relevant in determining their independence. As required under applicable Nasdaq Capital Market rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.

 

 

Board Committees

 

Our Board has established the following four standing committees: an audit committee; a compensation committee; a nominating and governance committee; and mergers and acquisitions committee. Our Board has adopted written charters for each of these committees. Copies of their charters are available on our website . Our Board may establish other committees as it deems necessary or appropriate from time to time.

 

The following table identifies the independent and non-independent current Board and committee members through the date of this filing:

 

Name		Audit		Compensation		Nominating and Corporate Governance		Mergers and Acquisitions		Independent
Charles A. Ross, Jr.								X
Corey Lambrecht
Larry Sinks		X		X		X		X		X
Michael Dean Smith		X		X		X				X
C. Stephen Cochennet		X		X		X		X		X

 

Audit Committee

 

Our Board established the audit committee for the purpose of overseeing the accounting and financial reporting process and audits of our financial statements. The audit committee is responsible for, among other matters:

 

	●	appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm;
	●	discussing with our independent registered public accounting firm the independence of its members from its management;
	●	reviewing with our independent registered public accounting firm the scope and results of their audit;
	●	approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm;
	●	overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the Commission;
	●	reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements;
	●	coordinating the oversight by our Board of our code of business conduct and our disclosure controls and procedures;
	●	establishing procedures for the confidential and/or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and
	●	reviewing and approving related-person transactions.

 

Our audit committee consists of Larry Sinks, Michael Dean Smith and C. Stephen Cochennet. Mr. Cochennet serves as the chairman. Our Board has affirmatively determined that each of the members; Larry Sinks, Michael Dean Smith and C. Stephen Cochennet qualify as an “audit committee financial expert,” as defined by Item 407(d)(5) of Regulation S-K.

 

Our Board has affirmatively determined that each of the members; Larry Sinks, Michael Dean Smith and C. Stephen Cochennet meet the definition of an “independent director” for purposes of serving on the audit committee under Rule 10A-3 of the Exchange Act and the Nasdaq Capital Market rules and requirements.

 

 

Compensation Committee

 

Our Board has established the compensation committee for the purpose of reviewing, recommending and approving our compensation policies and benefits, including the compensation of all of our executive officers and directors. The compensation committee is responsible for, among other matters:

 

	●	reviewing key employee compensation goals, policies, plans and programs;
	●	reviewing and approving the compensation of our directors and executive officers;
	●	reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and
	●	appointing and overseeing any compensation consultants or advisors.

 

Our compensation committee consists of Larry Sinks, Michael Dean Smith and C. Stephen Cochennet. Larry Sinks serves as the chairman. In determining that each of the members; Larry Sinks, Michael Dean Smith and C. Stephen Cochennet qualify as an “independent director” pursuant to Rule 10A-3 of the Exchange Act, the Board also considered all factors required by Rule 5605(d)(2)(A) and any and all other applicable regulations or rules promulgated by the Commission and the Nasdaq Capital Market rules relating to the compensation committee composition.

 

Nominating and Corporate Governance Committee

 

Our Board has established the nominating and corporate governance committee for the purpose of assisting the board in identifying qualified individuals to become board members, in determining the composition of the board and in monitoring the process to assess board effectiveness. Our nominating committee consists of Michael Dean Smith, C. Stephen Cochennet, and Larry Sinks. Michael Dean Smith serves as the chairman.

 

Mergers and Acquisitions Committee

 

Our Board has established the mergers and acquisitions committee for the purpose of assisting the board in identifying and analyzing potential mergers or acquisitions for the Company. Our mergers and acquisitions committee consists of Charles A. Ross, Jr., C. Stephen Cochennet, and Larry Sinks. Mr. Sinks serves as the chairman.

 

Board Leadership Structure

 

Our Board has not adopted a formal policy regarding the separation of the offices of Chief Executive Officer and Chairman of the Board. Rather, the Board believes that different leadership structures may be appropriate for the Company at a different time and under different circumstances, and it prefers the flexibility in making this decision based on its evaluation of the relevant facts at any given time.

 

In December 2014, Mr. Ross was appointed as Chief Executive Officer and became Executive Chairman of the Board. Under our current Board leadership structure, the Chief Executive Officer is responsible for the day-to-day leadership and performance of the Company. Mr. Grau, our President and Interim Principal Accounting Officer, focuses on the allocation of resources and the financial reporting and operational and internal controls necessary to provide accurate and timely financials.

 

 

Risk Oversight

 

Our Board oversee a company-wide approach to risk management. Our Board determines the appropriate risk level for us generally, assesses the specific risks faced by us and review the steps taken by management to manage those risks. While our Board have ultimate oversight responsibility for the risk management process, its committees oversee risk in certain specified areas.

 

Specifically, our compensation committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee oversees management of enterprise risks and financial risks, as well as potential conflicts of interests. Our Board is responsible for overseeing the management of risks associated with the independence of our Board.

 

Code of Business Conduct and Ethics

 

Our Board adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees. A copy of this code is available on our website. We will disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

 

Family Relationships

 

There are no family relationships among our directors and/or executive officers.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers has, during the past 10 years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.

 

 

Board Diversity

 

While we do not have a formal policy on diversity, our Board considers diversity to include the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Our Board believes that diversity promotes a variety of ideas, judgments and considerations to the benefit of our Company and stockholders. Although there are many other factors, the Board primarily focuses on public company board experience, knowledge of the safes and concealed self-defense products industry, or background in finance or technology, and experience operating growing businesses.

 

Board Diversity Matrix (As of November 30, 2023)
Total Number of Directors		5
		Female				Male				Non-Binary				Did Not Disclose Gender
Part I: Gender Identity
Directors			-				5				-				-
Part II: Demographic Background
African American or Black			-				-				-				-
Alaskan Native or Native American			-				-				-				-
Asian			-				-				-				-
Hispanic or Latinx			-				-				-				-
Native Hawaiian or Pacific Islander			-				1				-				-
White			-				5				-				-
Two or More Ethnicities			-				1				-				-
LGBTQ+			-
Did Not Disclose Demographic Background			-

 

Communication with our Board

 

Although the Company does not have a formal policy regarding communications with the Board, stockholders may communicate with the Board by writing to us at American Rebel Holdings, Inc., at 909 18th Avenue South, Suite A, Nashville, TN, 37212, Attention: Corporate Secretary. Stockholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

 

Nominations to the Board

 

Our directors take a critical role in guiding our strategic direction and oversee the management of the Company. Board candidates are considered based upon various criteria, such as their broad-based business and professional skills and experiences, a global business and social perspective, concern for the long-term interests of the stockholders, diversity, and personal integrity and judgment.

 

In addition, directors must have the time available to devote to Board activities and to enhance their knowledge in the growing of our business. Accordingly, we have sought to attract and retain highly qualified independent directors who have the sufficient time to attend to their substantial duties and responsibilities to the Company.

 

Director Nominations

 

As of December 31, 2022, we did not make any material changes to the procedures by which our stockholders may recommend nominees to our Board. In January of 2023, the Company and its stockholders approved the election and continuation of the then current board members until the next annual stockholders meeting. In April of 2023, Ken Yonika resigned as a member of the Board and its committees. In May of 2023, this vacancy on the Board was filled by the appointment of C. Stephen Cochennet as a member of the Board and its committees. In November of 2023, Doug Grau resigned as a member of the Board and this vacancy was filled by the appointment of Larry Sinks as a member of the Board and its committees.

 

 

Compensation Committee Interlocks and Insider Participation

 

No interlocking relationship exists between our Board and the Board or the compensation committee of any other company, nor has any interlocking relationship existed in the past.

 

General Philosophy

 

During fiscal 2021, our board was solely responsible for establishing and administering our executive and director compensation plans. During 2022, the compensation committee of the Board was solely responsible for establishing and administering our executive and director compensation plans.

 

Executive Compensation

 

The following table sets forth the compensation we paid to our current executive officer(s) during the fiscal years ended December 31, 2022 and 2021, respectively:

 

SUMMARY COMPENSATION TABLE
Name and						Salary				Bonus				Stock Awards				All Other Compensation				Total
principal position		Year				($)				($)				($)				($)				($)
(a)		(b)				(c)				(d)				(i)				(e)				(j)
Charles A. Ross, Jr. (1)			2022				200,000				481,400				20,766	(2)			-				702,166
Chief Executive Officer			2021				200,000				-				393,490	(3)			-				593,490
Doug E. Grau(4)			2022				120,000				293,381				11,182	(5)			-				424,563
President			2021				120,000				-				393,490	(3)			-				513,490
Ronald A. Smith(6)			2022				-				-				-				-				-
Chief Operating Officer			2021				-				-				247,000	(6)			-				247,000

 

	(1)	On January 1, 2021, the Company entered into a five-year employment agreement with Mr. Ross, with a base annual salary of $180,000.
	(2)	Deemed value of 103,829 shares of Common Stock authorized for issuance on December 27, 2022 pursuant to the LTIP.
	(3)	Deemed value of 26,813 shares of Common Stock issued on March 24, 2021 pursuant to the LTIP, 50,000 shares of preferred stock issued on April 9, 2021 pursuant to an employment agreement, and 9,416 shares of Common Stock issued on August 3, 2021 pursuant to the LTIP.
		Represents cash compensation paid to the named executive officer.
	(4)	On January 1, 2021, the Company entered into a five-year employment agreement with Mr. Grau, with a base annual salary of $120,000.
	(5)	Deemed value of 55,908 shares of Common Stock authorized for issuance on December 27, 2022 pursuant to the LTIP.
	(6)	Mr. Smith was appointed as Chief Operating Officer and the Company entered into a two-year employment agreement with Mr. Smith on April 9, 2021, with no cash salary; however, Mr. Smith was issued 59,375 shares of Common Stock, with a deemed value of $247,000, pursuant to the employment agreement.

 

 

Employment Agreements

 

Effective January 1, 2021, the Company entered into employment agreements with Charles A. Ross, Jr., its Chief Executive Officer, and Doug E. Grau, its President. These agreements were amended in April of 2021.

 

Charles A. Ross, Jr. Employment Agreement and Amendments

 

In general, Mr. Ross’ employment agreement contains provisions concerning terms of employment, voluntary and involuntary termination, indemnification, severance payments, and other termination benefits, in addition to a non-compete clause and certain other perquisites.

 

The term of Mr. Ross’ employment agreement, as amended, runs from January 1, 2021 until December 31, 2026.

 

Mr. Ross’ employment agreement provides for an initial annual base salary of $180,000, which may be adjusted by the Board of the Company. As of the date of this offering circular Mr. Ross’ annual base salary is $325,000.

 

In addition, Mr. Ross is eligible to receive annual short term incentive bonuses as determined by a review at the discretion of the Company’s Board.

 

Further, the Company granted and issued Mr. Ross 50,000 shares of Series A - Super Voting Convertible preferred stock. Pursuant to the amendment to his employment agreement, the Company issued 50,000 shares of Common Stock to Mr. Ross.

 

In the event of a termination of employment with the Company by the Company without “cause” or by Mr. Ross for “Good Reason” (as defined in the employment agreement), Mr. Ross would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to 12-months base salary; and (iii) immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

In the event of a termination of employment with the Company by the Company for “cause” (as defined in the employment agreement), by reason of incapacity, disability or death, Mr. Ross, or his estate, would receive a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment, disability or death.

 

In the event of a termination of Mr. Ross’ employment with the Company by reason of change in control (as defined in the employment agreement), Mr. Ross, would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to twelve (12) months Salary plus 100% of his prior year’s Bonus; and (iii) and immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

The above description of Mr. Ross’ employment agreement is qualified in its entirety by reference to the full text of that agreement, a copy of which was attached as Exhibit 10.2 to the Form 8-K filed on March 2, 2021. A copy of the first amendment to Mr. Ross’ employment agreement was attached as Exhibit 10.42 to the Form 10-K filed on May 17, 2021. A copy of the second amendment to Mr. Ross’ employment agreement was attached as Exhibit 10.3 to the Form 8-K filed on November 24, 2023.

 

Doug E. Grau Employment Agreement and Amendments

 

In general, Mr. Grau’s employment agreement contains provisions concerning terms of employment, voluntary and involuntary termination, indemnification, severance payments, and other termination benefits, in addition to a non-compete clause and certain other perquisites.

 

The term of Mr. Grau’s employment agreement, as amended, runs from January 1, 2021 until December 31, 2026.

 

Mr. Grau’s employment agreement provides for an initial annual base salary of $120,000, which may be adjusted by the Board of the Company. As of the date of this offering circular Mr. Grau’s annual base salary is $265,000.

 

 

In addition, Mr. Grau is eligible to receive annual short term incentive bonuses as determined by a review at the discretion of the Company’s Board.

 

Further, the Company granted and issued Mr. Grau 50,000 shares of Series A - Super Voting Convertible preferred stock. Pursuant to the amendment to his employment agreement, the Company issued 50,000 shares of Common Stock to Mr. Grau.

 

In the event of a termination of employment with the Company by the Company without “cause” or by Mr. Grau for “Good Reason” (as defined in the employment agreement), Mr. Grau would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to 12-months base salary; and (iii) immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

In the event of a termination of employment with the Company by the Company for “cause” (as defined in the employment agreement), by reason of incapacity, disability or death, Mr. Grau, or his estate, would receive a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment, disability or death.

 

In the event of a termination of Mr. Grau’s employment with the Company by reason of change in control (as defined in the employment agreement), Mr. Grau, would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to twelve (12) months Salary plus 100% of his prior year’s Bonus; and (iii) and immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

The above description of Mr. Grau’s employment agreement is qualified in its entirety by reference to the full text of that agreement, a copy of which was attached as Exhibit 10.2 to the Form 8-K filed on March 2, 2021. A copy of the first amendment to Mr. Grau’s employment agreement was attached as Exhibit 10.43 to the Form 10-K filed on May 17, 2021. A copy of the second amendment to Mr. Grau’s employment agreement was attached as Exhibit 10.4 to the Form 8-K filed on November 24, 2023.

 

Corey Lambrecht Employment Agreement -

 

In general, Mr. Lambrecht’s employment agreement contains provisions concerning terms of employment, voluntary and involuntary termination, indemnification, severance payments, and other termination benefits, in addition to a non-compete clause and certain other perquisites.

 

The original term of Mr. Lambrecht’s employment agreement runs from November 20, 2023 until December 31, 2026.

 

Mr. Lambrecht’s employment agreement provides for an initial annual base salary of $260,000, which may be adjusted by the board of directors of the Registrant.

 

In addition, Mr. Lambrecht is eligible to receive annual short term incentive bonuses as determined by a review at the discretion of our board of directors.

 

Further, we granted and issued Mr. Lambrecht 25,000 shares of Series A - Super Voting Convertible Preferred Stock. Conversion of the Series A – Super Voting Convertible Preferred Stock shall vest as follows: Twenty-five percent (25%) shall vest and be convertible into shares of common stock immediately, the remainder shall vest and be convertible into shares of common stock equally on January 1, 2024, January 1, 2025 and January 1, 2026.

 

In the event of a termination of employment with the Registrant by the Registrant without “cause” or by Mr. Lambrecht for “Good Reason” (as defined in the employment agreement), Mr. Lambrecht would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to 12-months base salary; and (iii) immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

In the event of a termination of employment with the Registrant by the Registrant for “cause” (as defined in the employment agreement), by reason of incapacity, disability or death, Mr. Lambrecht, or his estate, would receive a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment, disability or death.

 

In the event of a termination of Mr. Lambrecht’ employment with the Registrant by reason of change in control (as defined in the employment agreement), Mr. Lambrecht, would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment; (ii) a lump sum payment equal to twelve (12) months Salary plus 100% of his prior year’s Bonus; and (iii) and immediate vesting of all equity awards (including but not limited to stock options and restricted shares).

 

The above description of Mr. Lambrecht’s employment agreement is qualified in its entirety by reference to the full text of that agreement, a copy of which was attached as Exhibit 10.2 to the Form 8-K filed on November 24, 2023.

 

 

Options Exercised and Stock Vested Table

 

None of the named executive officers exercised any stock options, nor were there any restricted stock units held by our named executive officers vested, during the fiscal years ended December 31, 2022 and December 31, 2021.

 

Outstanding Equity Awards at Fiscal Year-end Table

 

None of the named executive officers held any unexercised options and unvested stock awards previously awarded as of December 31, 2022.

 

Potential Payments upon Termination or Change-in-Control

 

Commission regulations state that we must disclose information regarding agreements, plans or arrangements that provide for payments or benefits to our executive officers in connection with any termination of employment or change in control of the company. On January 1, 2021 we entered into employment agreements with Charles A. Ross, Jr. and Doug E. Grau. These agreements provide for certain payments to be made in the event of a termination of their employment agreements by reason of change in control (as defined in the employment agreements). Each of them would receive: (i) a lump sum payment equal to all earned but unpaid base salary through the date of termination of employment (not applicable to Smith as he receives no salary); (ii) a lump sum payment equal to twelve (12) months Salary plus 100% of his prior year’s bonus; and (iii) and immediate vesting of all equity awards (including but not limited to stock options and restricted shares). No changes were made to these agreements for the year ended December 31, 2022.

 

Retirement Plans

 

We do not offer any annuity, pension, or retirement benefits to be paid to any of our officers, directors, or employees in the event of retirement.

 

Compensation of Directors

 

During the year ended December 31, 2021, we did not have a standard arrangement for compensation of our directors for services provided as a director, including services for committee participation or for special assignments. In March of 2022, our Board adopted compensation specific to and for non-employee directors. Non-employee directors are entitled to receive compensation of $60,000 per year for their service, payable in restricted shares of the Company’s Common Stock at a price determined by the average monthly closing price for each month in service, and are to be paid nominal cash fees and reimbursement of costs for director and committee meetings.

 

The following table sets forth summary compensation information for the year ended December 31, 2022 for each of our non-employee directors.

 

Name		Fees Earned or Paid in Cash $				Stock Awards $				Option Awards $				All Other Compensation $				Total $
Corey Lambrecht		$	63,000			$	54,194	(1)		$	-			$	122,000			$	239,194
Michael Dean Smith		$	-			$	54,194	(1)		$	-			$	-			$	54,194
Ken Yonika(2)		$	30,500			$	54,194	(1)		$	-			$	-			$	84,694

 

(1)	Effective February 7, 2022, our non-employee directors were eligible for the payment of $60,000 per year as a non-employee director fee for their services, which is payable in shares of our Common Stock. The value is pro-rated for the partial year ended December 31, 2022. Each non-employee director was issued 3,920 shares of Common Stock for their services for fiscal 2022.
(2)	Effective April 4, 2023, Mr. Yonika resigned from the board and its committees.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information concerning the number of shares of our Common Stock owned beneficially as of the date of this offering circular or exercisable within the next 60 days thereafter, by: (i) our directors; (ii) our named executive officers; and (iii) each person or group known by us to beneficially own more than 5% of our outstanding shares of Common Stock. Beneficial ownership is determined in accordance with the rules of the Commission and generally includes voting or investment power with respect to securities. Except as indicated by footnote, the persons named in the table below have sole voting power and investment power with respect to all shares of Common Stock shown as beneficially owned by them.

 

Name and Address of Beneficial Owner(1)		Amount of Beneficial Ownership				Percentage of Common Stock Outstanding(2)
Officers and Directors
Charles A. Ross, Jr., Chief Executive Officer, Chairman, principal executive officer, secretary, treasurer(3)			5,051,716				46.14	%
Doug E. Grau, President, Interim Chief Financial Officer, principal financial officer and principal accounting officer(3)			5,035,276				45.99	%
Corey Lambrecht, Chief Operating Officer and Director(4)			6,258,632				51.31	%
Michael Dean Smith, Director			8,132				0.14	%
C. Stephen Cochennet, Director			2,203				0.04	%
Larry Sinks, Director			0				0	%
Directors and executive officers as a group (6 Persons)			16,355,959				73.69	%

 

* Less than 0.01%

 

	(1)	Unless otherwise noted above, the address of the persons and entities listed in the table is c/o American Rebel Holdings, Inc., 909 18th Avenue South, Suite A, Nashville, Tennessee 37212.
	(2)	Percentage is based upon 5,947,643 shares of Common Stock authorized and outstanding as of the date of this offering circular and figures are rounded to the nearest hundredth of a percent.
	(3)	Includes 10,000 shares of Series A Preferred Stock, which is currently convertible into 5,000,000 shares of Common Stock at the option of the holder. Does not include an additional 40,000 shares of Series A Preferred stock, which are convertible, equally every year starting on January 1, 2025 and for three additional years, into shares of Common Stock at a rate of 500 to 1. Further, each share of Series A Preferred Stock is entitled to cast one thousand (1,000) votes for each share held of the Series A Preferred stock on all matters presented to the stockholders of the Company for a vote.
	(4)	Includes 12,500 shares of Series A Preferred Stock, which is currently convertible into 6,250,000 shares of Common Stock at the option of the holder. Does not include an additional 12,500 shares of Series A Preferred stock, which are convertible, equally every year starting on January 1, 2025 and for two additional years, into shares of Common Stock at a rate of 500 to 1. Further, each share of Series A Preferred Stock is entitled to cast one thousand (1,000) votes for each share held of the Series A Preferred stock on all matters presented to the stockholders of the Company for a vote.

 

Non-Cumulative Voting

 

The holders of our shares of Common Stock do not have cumulative voting rights, which means that the holders of more than 50% of such outstanding shares, voting for the election of directors, can elect all of the directors to be elected, if they so choose. In such event, the holders of the remaining shares will not be able to elect any of our directors.

 

 

Super Majority Voting Powers Attributable to Preferred Stock

 

As of the date of this offering circular, the Company had 5,947,643 shares of Common Stock issued and outstanding and entitled to vote, which for voting purposes are entitled to one vote per share. If a vote was taken today, the following stockholders (which consist of Messrs. Ross, Lambrecht and Grau) owning a total of 95,624 shares of Common Stock and 125,000 shares of Series A Preferred, whereby each share of Series A Preferred is entitled to cast one thousand (1,000) votes for each share held on all matters presented to the stockholders of the Company for a stockholder vote, thereby allowing such Common Stock and Series A Preferred to cast votes totaling 125,095,624 shares of Common Stock, delivering an executed written consent authorizing the actions being set forth to the vote. The consenting stockholders’ names, affiliation with the Company and holdings are as follows:

 

Name		Affiliation		Number of Voting Shares				% of Total Voting Shares(4)
Charles A. Ross, Jr.		Director, Chief Executive Officer, Treasurer			50,051,716	(1)			38.22	%
Doug Grau		President			50,035,276	(2)			38.21	%
Corey Lambrecht		Director, Chief Operating Officer			25,008,632	(3)			19.10	%
Total					125,095,624				95.53	%

 

(1)	Includes 50,000 shares of Series A Preferred with equivalent of 50,000,000 shares of Common Stock voting power and 51,716 shares of Common Stock beneficially owned by Mr. Ross.
(2)	Includes 50,000 shares of Series A Preferred with equivalent of 50,000,000 shares of Common Stock voting power and 35,276 shares of Common Stock beneficially owned by Mr. Grau.
(3)	Includes 25,000 shares of Series A Preferred with equivalent of 25,000,000 shares of Common Stock voting power and 8,632 shares of Common Stock beneficially owned by Mr. Lambrecht.
(4)	Percentage is based upon 5,947,643 shares of Common Stock authorized and outstanding and adjusted by the 125,000,000 votes attributable to the Series A Preferred, for a total of 130,947,643 total voting shares. Figures are rounded to the nearest hundredth of a percent.

 

TRANSACTIONS WITH RELATED PERSONS

 

The following information summarizes transactions we have either engaged in for the past two fiscal years or propose to engage in, involving our executive officers, directors, more than 5% stockholders, or immediate family members of these persons. These transactions were negotiated between related parties without “arm’s length” bargaining and, as a result, the terms of these transactions may be different than transactions negotiated between unrelated persons.

 

Other than as set forth below, we were not a party to any transactions or series of similar transactions that have occurred during fiscal years 2022 and 2021 in which:

 

	●	The amounts involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed fiscal years ($77,760 and $14,980, respectively); and
	●	A director, executive officer, holder of more than 5% of our Common Stock or any member of their immediate family had or will have a direct or indirect material interest.

 

Transactions with Related Parties

 

The following includes a summary of transactions during fiscal 2022 and 2021 to which we have been a party in which the amount involved exceeded or will exceed $77,760 or $14,980, respectively, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under “Executive and Director Compensation.” We also describe below certain other transactions with our directors, executive officers and stockholders.

 

Charles A. Ross, Jr. serves as the Company’s Chief Executive Officer and a director. On March 24, 2021, pursuant to the Company’s Long-Term Incentive Plan, Mr. Ross received 1,073 shares of Common Stock. On April 9, 2021, the Company entered into an amendment to the employment agreement with Charles A. Ross, Jr. and authorized the issuance of 50,000 shares of Preferred Stock to Mr. Ross. On August 3, 2021, pursuant to the Company’s Long-Term Incentive Plan, Mr. Ross received 9,416 shares of Common Stock. On December 27, 2022, pursuant to the Company’s Long-Term Incentive Plan, Mr. Ross was awarded 4,154   shares of Common Stock.

 

 

Ronald Smith served as the Company’s Chief Operating Officer and on April 9, 2021, the Company entered into a two-year employment agreement with Mr. Smith and authorized the issuance of 2,375 shares of Common Stock. On April 9, 2021, the Company entered into a Bridge Loan agreement with Mr. Smith and issued 1,000 warrants to purchase shares of the Company’s Common Stock at an exercise price of $200.00 per share with a five-year term. The Company did not extend the term of Mr. Smith’s employment agreement and he no longer serves as an officer of the Company as of the date of this offering circular.

 

Doug Grau is the Company’s President. On March 24, 2021, pursuant to the Company’s Long-Term Incentive Plan, Mr. Grau received 1,073 shares of Common Stock. On April 9, 2021, the Company entered into an amendment to the employment agreement with Doug Grau and authorized the issuance of 50,000 shares of preferred stock to Mr. Grau. On August 3, 2021, pursuant to the Company’s Long-Term Incentive Plan, Mr. Grau received 9,416 shares of Common Stock. On December 27, 2022, pursuant to the Company’s Long-Term Incentive Plan, Mr. Grau was awarded 2,236 shares of Common Stock.

 

Corey Lambrecht is an independent director of the Company’s Board. On March 24, 2021, the Company authorized 250 shares of Common Stock to Mr. Lambrecht for services.

 

The Company has agreements with related parties for services, notes payable and stock grants. See Notes to Financial Statements numbers 5, 7, 9 and 10.

 

Other than the foregoing, none of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its Common Stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past fiscal year, or in any proposed transaction, which has materially affected or will affect the Company.

 

Review, Approval or Ratification of Transactions with Related Persons

 

Although we adopted a Code of Ethics, we still rely on our Board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our Board reviews a transaction in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our Board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our Board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our Board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company.

 

 

DESCRIPTION OF SECURITIES

 

General

 

The following description summarizes important terms of the classes of our capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of our second amended and restated articles of incorporation and our bylaws which have been filed as exhibits to the offering statement of which this offering circular is a part.

 

Our authorized capital stock consists of 600,000,000 shares of Common Stock, par value $0.001 per share, and 10,000,000 shares of Preferred Stock, par value $0.001 per share, among which 150,000 shares are designated as Series A Preferred Stock and 250,000 shares are designated as Series B Convertible Preferred Stock.

 

As of the date of this offering circular, there were 5,947,643 shares of Common Stock, 125,000 shares of Series A Preferred Stock and 75,143 shares of Series B Preferred Stock issued and outstanding. No other shares of our capital stock were issued and outstanding as of such date.

 

As of the date of this offering circular, we had two classes of security registered under Section 12 of the Securities Exchange Act of 1934, as amended, our Common Stock and a registered class of warrants, each to purchase one share of Common Stock. The shares of Common Stock and warrants are listed on the Nasdaq Capital Market under the symbols “AREB” and “AREBW,” respectively, and began trading on February 7, 2022. On October 23, 2023, we were notified by Nasdaq that we were not in compliance with Nasdaq Listing Rule 5550(a)(2) because the price of our Common Stock had traded at less than $1.00 per share for the last thirty consecutive trading days. Nasdaq’s notice has no immediate effect on the listing of the Common Stock on Nasdaq and, at this time. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an initial compliance period of 180 calendar days, or until April 22, 2024, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of the Common Stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days prior to April 22, 2024. Management continues to believe that adherence to its current operating and business plan will enable us to regain compliance.

 

Our Board is authorized, without stockholder approval, except as otherwise may be required by the applicable listing standards of a national securities exchange or any applicable laws, to issue additional shares of our authorized capital stock.

 

Common Stock

 

Dividend Rights

 

Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of our Common Stock are entitled to receive dividends out of funds legally available if our Board, in its discretion, determines to declare and pay dividends and then only at the times and in the amounts that our Board may determine.

 

Voting Rights

 

Holders of our Common Stock are entitled to one vote for each share held on all matters properly submitted to a vote of stockholders on which holders of Common Stock are entitled to vote. We have not provided for cumulative voting for the election of directors in our Certificate of Incorporation. The directors are elected by a plurality of the outstanding shares entitled to vote on the election of directors.

 

No Preemptive or Similar Rights

 

Our Common Stock is not entitled to preemptive rights, and is not subject to conversion, redemption or sinking fund provisions.

 

Right to Receive Liquidation Distributions

 

If we become subject to a liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Common Stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.

 

 

Preferred Stock

 

Our Board is authorized, subject to limitations prescribed by Nevada law, to issue preferred stock in one or more series, to establish from time-to-time the number of shares to be included in each series, and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our Board can also increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding) the number of shares of any series of preferred stock, without any further vote or action by our stockholders. Our Board may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our Common Stock or other series of preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible financings, acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control of our company and might adversely affect the market price of our Common Stock and the voting and other rights of the holders of our Common Stock.

 

Series A Preferred Stock

 

No Maturity, Sinking Fund or Mandatory Redemption

 

The Series A Preferred Stock (the “Existing Series A Preferred Stock”) has no stated maturity and will not be subject to any sinking fund or mandatory redemption. Shares of the Existing Series A Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase them.

 

Dividend Rights

 

Holders of shares of the Existing Series A Preferred Stock are not entitled to receive any dividends.

 

Voting Rights

 

Holders of the Existing Series A Preferred Stock are entitled to vote together with the holders of our Common Stock on an as-converted basis. Each Existing Series A Preferred Stock is entitled to cast one thousand (1,000) votes for each share held of the Existing Series A Preferred stock.

 

Conversion Rights

 

Each holder of the Series A Preferred Stock is entitled to convert any portion of the outstanding shares of Series A Preferred Stock held by such holder into validly issued, fully paid and non-assessable shares of our Common Stock. Each share of the Series A Preferred Stock is convertible into our Common Stock at the conversion rate of 1 share of Series A Preferred Stock to 500 shares of Common Stock, subject to vesting requirements and adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock. Should the Company issue a redemption notice the conversion shall occur on or prior to the fifth (5^th) day prior to the redemption date, as may have been fixed in any redemption notice with respect to the Existing Series B Preferred Stock shares, at the office of the Company or any transfer agent for such stock.

 

Series B Preferred Stock

 

No Maturity, Sinking Fund or Pre-Determined Mandatory Redemption

 

The Series B (the “Existing Series B Preferred Stock”) has no stated maturity and will not be subject to any sinking fund or pre-determined mandatory redemption. Shares of the Existing Series B Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase them, or the holders decide to convert them.

 

Dividend Rights

 

Holders of shares of the Existing Series B Preferred Stock are not entitled to receive any dividends.

 

 

Voting Rights

 

Holders of the Existing Series B Preferred Stock shall not have any voting rights, except in the case of voting on a change in the preferences of the Existing Series B Preferred Stock shares.

 

Conversion Rights

 

Each holder of the Existing Series B Preferred Stock is entitled to convert any portion of the outstanding shares of Existing Series B Preferred Stock held by such holder into validly issued, fully paid and non-assessable shares of our Common Stock Each share of the Existing Series B Preferred Stock is convertible into our Common Stock at the conversion rate of 1 share of Existing Series B Preferred Stock to 31.25 shares of Common Stock, subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock. Should the Company issue a redemption notice the conversion shall occur on or prior to the fifth (5^th) day prior to the redemption date, as may have been fixed in any redemption notice with respect to the Existing Series B Preferred Stock shares, at the office of the Company or any transfer agent for such stock.

 

Fractional Shares

 

No fractional shares of our Common Stock will be issued upon any conversion of the Existing Series B Preferred Stock. If the conversion would result in the issuance of a fraction of a share of Common Stock, the number of shares of Common Stock issuable upon such conversion will be rounded up to the nearest whole share.

 

Series C Preferred Stock

 

On November 3, 2023, we filed a certificate of designation with the Nevada Secretary of State to establish our Series C Preferred Stock. We designated a total of 3,100,000 shares of Preferred Stock as “Series C Cumulative Redeemable Preferred Stock.” Our Series C Preferred Stock has following voting powers, designations, preferences and relative rights, qualifications, limitations or restrictions:

 

Ranking. The Series C Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up, junior to our Series A Preferred Stock and senior to our Common Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit our ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of our Series C Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up.

 

Stated Value. Each share of Series C Preferred Stock has an initial stated value of $7.50, which is equal to the offering price per share, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting our Series C Preferred Stock.

 

Dividend Rate and Payment Dates. Dividends  on the Series C Preferred Stock are cumulative and payable quarterly in arrears to all holders of record on the applicable record date. Holders of our Series C Preferred Stock are entitled to receive cumulative quarterly dividends at a per annum rate of 8.53% of the stated value (or $0.16 per share per quarter based on the liquidation preference per share); provided that upon an event of default (generally defined as our failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.225 per quarter, which is equivalent to the annual rate of 12% of the $7.50 liquidation preference per share. In our sole discretion, dividends may be paid in cash or in kind in the form of Common Stock equal to the closing price of Common Stock on the last day of the quarter. Dividends on each share begin accruing on, and are cumulative from, the date of issuance and regardless of whether our Board declares and pays such dividends. Dividends on shares of our Series C Preferred Stock will continue to accrue even if any of our agreements prohibit the current payment of dividends or we do not have earnings.

 

Liquidation Preference. Upon a liquidation, dissolution or winding up of our company, holders of shares of our Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of our Common Stock or Series B Preferred Stock and on a junior basis with holders of our Series A Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon (whether or not declared).

 

 

Company Call Option. We may redeem the shares of Series C Preferred Stock, in whole or in part at any time after the fifth anniversary of the initial closing of this Offering and continuing indefinitely thereafter, at our option, for cash, at $11.25 per share of Series C Preferred Stock, plus any accrued and unpaid dividends.

 

Stockholder Put Option. Once per calendar quarter beginning any time after the fifth-year anniversary of date of issuance, a Holder of record of shares of Series C Preferred Stock may elect to cause us to redeem all or any portion of their shares of Series C Preferred Stock for an amount equal to $11.25 per share plus any accrued and unpaid dividends, which amount may be settled by delivery of cash or shares of Common Stock, at the option of the holder. If the holder elects settlement in shares of Common Stock, we will deliver such number of shares of Common Stock equal to $11.25 per share of Series C Preferred Stock to be redeemed plus any accrued and unpaid dividends corresponding to the redeemed shares, divided by $2.25 per share (subject to pro rata adjustment in connection with any stock splits, stock dividends, or similar changes to the Company’s capitalization occurring after the date of this Certificate), with any fraction rounded up to the next whole share of Common Stock. A holder making such election shall provide written notice thereof to us specifying the name and address of the holder, the number of shares to be redeemed and whether settlement shall be in cash or shares of Common Stock. We shall redeem the specified shares of Series C Preferred Stock for shares of Common Stock no later than ten (10) days, or for cash no later than 365 days, following receipt of such notice.

 

Please see the certificate of designation, which has been filed as an exhibit to the offering statement of which this offering circular forms a part, for the procedures to request a redemption.

 

Restrictions on Redemption and Repurchase. We are not be obligated to redeem or repurchase shares of Series C Preferred Stock if we are restricted by applicable law or our articles of incorporation from making such redemption or repurchase or to the extent any such redemption or repurchase would cause or constitute a default under any borrowing agreements to which we or any of our subsidiaries are a party or otherwise bound. In addition, we have no obligation to redeem shares in connection with a redemption request made by a holder if we determine, as of the redemption date, that we do not have sufficient funds available to fund that redemption. In this regard, we will have complete discretion under the certificate of designation for the Series C Preferred Stock to determine whether we are in possession of “sufficient funds” to fund a redemption request. Redemptions will be limited to five percent (5%) of the total outstanding Shares per quarter. To the extent we are unable to complete redemptions we may have earlier agreed to make, we will complete those redemptions promptly after we become able to do so, with all such deferred redemptions being satisfied on a first come, first served, basis.

 

Voting Rights. The Series C Preferred Stock has no voting rights relative to matters submitted to a vote of our stockholders (other than as required by law). We may not authorize or issue any class or series of equity securities ranking senior to the Series C Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend our articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series C Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of our outstanding shares of Series C Preferred Stock, voting together as a class.

 

Further Issuances. We will not be required to redeem shares of our Series C Preferred Stock at any time except as otherwise described above under the captions “Company Call Option” and “Stockholder Put Option.” Accordingly, the shares of our Series C Preferred Stock will remain outstanding indefinitely, unless we decide, at our option, to exercise our call right, the holder of the Series C Preferred Stock exercises their put right. The shares of Series C Preferred Stock will not be subject to any sinking fund.

 

Conversion at Option of Holder. Each share of Series C Preferred Stock shall be convertible into shares of Common Stock at a price per share of $1.50 (1 share of Series C Preferred Stock converts into 5 shares of Common Stock), at the option of the holder thereof, at any time following the issuance date of such share of Series C Preferred Stock and on or prior to the fifth (5^th) day prior to a redemption date, if any, as may have been fixed in any redemption notice with respect to the shares of Series C Preferred Stock, at our office or any transfer agent for such stock. The conversion price ($1.50) shall not be adjusted for stock splits, stock dividends, recapitalizations or similar events.

 

Forced Conversion – If the closing price of the Company’s Common Stock during any ten consecutive trading day period has been at or above $2.25 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events), then the Company shall have the right to require the holder of the Series C Preferred Stock to convert all, or any portion of, the shares of Series C Preferred Stock held by such holder for shares of Common Stock. If the Company elects to cause a forced conversion of the shares of Series C Preferred Stock then it must simultaneously take the same action with respect to all of the other shares of Series C Preferred Stock then outstanding on a pro rata basis.

 

Registration of Underlying Shares of Common Stock . In this offering we are registering with the Commission up to 13,333,330 shares of Common Stock underlying the Series C Preferred Stock.

 

 

Anti-Takeover Effects of Various Provisions of Nevada Law

 

Provisions of the Nevada Revised Statutes, and our articles of incorporation and bylaws, as amended, could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, would be expected to discourage certain types of takeover practices and takeover bids our Board may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us will outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.

 

Public Offering Warrants

 

Overview. The following summary of certain terms and provisions of the Existing Warrants is not complete and is subject to, and qualified in its entirety by, the provisions of the applicable warrant agency agreement between us and Action Stock Transfer, as the Warrant Agent, and the form of warrant, both of which are filed as exhibits to the registration statement of which this prospectus is a part. Prospective investors should carefully review the terms and provisions set forth in the applicable warrant agency agreement, including the annexes thereto, and form of warrant.

 

The Existing Warrants entitle the registered holder to purchase shares of Common Stock at a price equal to $50.25 per share, subject to adjustment as discussed below, immediately following the issuance of such warrant and terminating at 5:00 p.m., New York City time, five years after their original issuance.

 

The exercise price and number of shares of Common Stock issuable upon exercise of the Existing Warrants may be adjusted in certain circumstances, including in the event of a stock dividend or recapitalization, reorganization, merger or consolidation. However, the Existing Warrants will not be adjusted for issuances of Common Stock at prices below its exercise price.

 

Exercisability. The Existing Warrants are exercisable at any time after their original issuance and at any time up to the date that is five (5) years after their original issuance. The Existing Warrants may be exercised upon surrender of the Warrant certificate on or prior to the expiration date at the offices of the Warrant Agent, with the exercise form on the reverse side of the Warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of Existing Warrants being exercised. Under the terms of the applicable warrant agreement, we must use our best efforts to maintain the effectiveness of the registration statement and current prospectus relating to Common Stock issuable upon exercise of the Existing Warrants until the expiration of the Existing Warrants. If we fail to maintain the effectiveness of the registration statement and current prospectus relating to the shares of Common Stock issuable upon exercise of the Existing Warrants, the holders of the Existing Warrants shall have the right to exercise the Existing Warrants solely via a cashless exercise feature provided for in the Existing Warrants, until such time as there is an effective registration statement and current prospectus.

 

Exercise Limitation. A holder may not exercise any portion of an Existing Warrant to the extent that the holder, together with its affiliates and any other person or entity acting as a group, would own more than 4.99% of the outstanding shares of Common Stock after exercise, as such percentage ownership is determined in accordance with the terms of the Warrant, except that upon prior notice from the holder to us, the holder may waive such limitation up to a percentage not in excess of 9.99%.

 

Exercise Price. The exercise price per whole share of shares of Common Stock purchasable upon exercise of the Existing Warrants is $50.25. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our shares of Common Stock and also upon any distributions of assets, including cash, stock or other property to our stockholders.

 

Fractional Shares. No fractional shares of Common Stock will be issued upon exercise of the Existing Warrants. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, the Company will round up or down, as applicable, to the nearest whole share.

 

Transferability. Subject to applicable laws, the Existing Warrants may be offered for sale, sold, transferred or assigned without our consent.

 

 

Warrant Agent; Global Certificate. The Existing Warrants were issued in registered form under a warrant agency agreement between the Warrant Agent and us. The Existing Warrants shall initially be represented only by one or more global warrants deposited with the Warrant Agent, as custodian on behalf of The Depository Trust Company (DTC) and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.

 

Fundamental Transactions. In the event of a fundamental transaction, as described in the Existing Warrants and generally including any reorganization, recapitalization or reclassification of our shares of Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Stock, the holders of the Existing Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the Existing Warrants immediately prior to such fundamental transaction.

 

Rights as a Stockholder. The Warrant holders do not have the rights or privileges of holders of shares of Common Stock or any voting rights until they exercise their Existing Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Existing Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

 

Governing Law. The Existing Warrants and the applicable warrant agency agreement are governed by New York law.

 

Armistice Warrants

 

On September 8, 2023, we entered into an inducement letter (the “Inducement Letter”) with Armistice Capital Master Fund Ltd. (“Armistice”), the holder of existing warrants, made up of common stock purchase warrants, to purchase shares of Common Stock. The existing warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.

 

Pursuant to the Inducement Letter, Armistice agreed to exercise for cash their existing warrants to purchase an aggregate of 2,988,687 shares of Common Stock at a reduced exercise price of $1.10 per share in consideration for our agreement to issue two new common stock purchase warrants (the “New Warrant A” and the “New Warrant B” and, together, the “New Warrants”), as described below, to purchase, in the aggregate, up to 5,977,374 shares of Common Stock (the “New Warrant Shares”). We received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing warrants. Prior to the foregoing transaction, we had 3,151,883 shares of Common Stock outstanding.

 

Each New Warrant will have an exercise price equal to $1.10 per share. The New Warrants will be immediately exercisable from the date of issuance until the five-year anniversary of the issuance date. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, subsequent rights offerings, pro rata distributions, reorganizations, or similar events affecting our Common Stock and the exercise price.

 

The New Warrants will be exercisable, at the option of Armistice, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full, within one trading day of such exercise of the New Warrant, for the number of shares of Common Stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). Armistice (together with its affiliates) may not exercise any portion of its New Warrants to the extent that they would own more than 4.99% (or, at the election of Armistice, 9.99%) of the outstanding Common Stock immediately after exercise, except that upon prior notice from Armistice to us, they may increase or decrease the amount of ownership of outstanding stock after exercising their New Warrants up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the New Warrants, provided that any increase will not be effective until 61 days following notice to us.

 

New Warrant A is subject to anti-dilution adjustment to its exercise price in the event of certain issuances of shares of our Common Stock.

 

 

There is no established trading market for the New Warrants, and we do not expect an active trading market to develop. We do not intend to apply to list the New Warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the New Warrants will be extremely limited.

 

Except as otherwise provided in the New Warrants or by virtue of Armistice’s ownership of shares of our Common Stock, Armistice does not have the rights or privileges of a holder of our Common Stock, including any voting rights, until they exercise the New Warrants. The New Warrants will provide that the holders of the New Warrants have the right to participate in distributions or dividends paid on our shares of Common Stock.

 

If at any time the New Warrants are outstanding, we, either directly or indirectly, in one or more related transactions effects a fundamental transaction (as defined in the New Warrant), Armistice will be entitled to receive, upon exercise of the New Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the New Warrants immediately prior to the fundamental transaction. As an alternative, and at Armistice’s option in the event of a fundamental transaction, exercisable at the earliest to occur of (i) the public disclosure of any change of control, (ii) the consummation of any change of control, and (iii) Armistice first becoming aware of any change of control through the date that is 90 days after the public disclosure of the consummation of such change of control by us pursuant to a current report on Form 8-K filed with the Commission , we shall purchase the unexercised portion of the New Warrant from Armistice by paying to them an amount of cash equal to the Black Scholes Value (as defined in the Warrant) of the remaining unexercised portion of the New Warrant on the date of the consummation of such fundamental transaction.

 

The New Warrants may be modified or amended or the provisions of the New Warrants waived with us and Armistice’s written consent.

 

The above disclosure contains only a brief description of the material terms of the Inducement Letter and does not purport to be a complete description of the rights and obligations of the parties thereunder, and such description is qualified in its entirety by reference to the full text of the Inducement Letter, the form of which is attached to this offering circular and is incorporated herein by reference.

 

Transfer Agent, Warrant Agent and Registrar

 

The Transfer Agent for our Common Stock is Securities Transfer Corporation, 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75039. Its telephone number is (469) 633-0101.

 

 

PLAN OF DISTRIBUTION

 

The Company is offering up to 2,666,666 shares of Series C Preferred Stock on a “best efforts” basis at a price of $7.50 per share. The minimum subscription is $300.00, or 40 shares of Series C Preferred Stock.

 

The Company intends to market the shares in this offering through both online and offline means. Online marketing may take the form of contacting potential investors through electronic media and posting our offering circular or “testing the waters” materials on an online investment platform. This offering circular will be furnished to prospective investors via download 24 hours per day, 7 days per week on the Company’s website (www.AmericanRebel.com) on a landing page that relates to the offering.

 

The offering will terminate at the earliest of the date at which the maximum offering amount has been sold, one year from the date upon which the Commission qualifies the offering statement of which this offering circular forms a part and the date at which the offering is earlier terminated by the Company, in its sole discretion.

 

The Company intends to complete multiple closings in this offering. After each closing, funds tendered by investors will be available to the Company.

 

Engagement Agreement with Digital Offering

 

We are currently party to an engagement agreement dated June 28, 2023 with Digital Offering, LLC (“Digital Offering” or the “lead selling agent”). Digital Offering has agreed to act as our lead selling agent for the offering. Digital Offering has made no commitment to purchase all or any part of the shares of Series C Preferred Stock being offered but has agreed to use its best efforts to sell such shares in the offering. As such, Digital Offering is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act. Digital Offering is under no obligation to purchase any of the shares of Series C Preferred Stock or arrange for the sale of any specific number or dollar amount of shares of Series C Preferred Stock. The term of the engagement agreement began on June 28, 2023 and will continue until the earliest to occur of: (a) the date that either party gives the other at least ten (10) days written notice of the termination of the engagement agreement, which termination may occur with or without cause, (b) the date which is one year from this offering being qualified by the Commission, and (c) the date that the offering is consummated (such applicable date, the “Termination Date”). The engagement agreement provides that Digital Offering may engage other Financial Industry Regulatory Authority (“FINRA”) member broker-dealers that are registered with the Commission to participate as soliciting dealers for this offering. We refer to these other broker-dealers as soliciting dealers or members of the selling group. Upon engagement of any such soliciting dealer, Digital Offering will be permitted to re-allow all or part of its fees and expense allowance as described below. Such soliciting dealer will also be entitled to receive the benefits of our engagement agreement with Digital Offering, including the indemnification rights arising under the engagement agreement upon their execution of a soliciting dealer agreement with Digital Offering that confirms that such soliciting dealer is so entitled. As of the date hereof, we have been advised that Digital Offering has retained Cambria Capital LLC, and DealMaker Securities LLC to participate in this offering as soliciting dealers. We will not be responsible for paying any placement agency fees, commissions or expense reimbursements to any soliciting dealers retained by Digital Offering. None of the soliciting dealers is purchasing any of the shares of Series C Preferred Stock in this offering or is required to sell any specific number or dollar amount of shares of Series C Preferred Stock, but will instead arrange for the sale of shares of Series C Preferred Stock to investors on a “best efforts” basis, meaning that they need only use their best efforts to sell the shares of Series C Preferred Stock. In addition to the engagement agreement, we plan to enter into a definitive selling agency agreement with Digital Offering prior to the commencement of the offering.

 

Offering Expenses

 

We are responsible for all offering fees and expenses, including the following: (i) fees and disbursements of our legal counsel, accountants, and other professionals we engage; (ii) fees and expenses incurred in the production of offering documents, including design, printing, photograph, and written material procurement costs; (iii) all filing fees, including those charged by FINRA; (iv) all of the legal fees related to FINRA clearance; and (v) $50,000 in accountable expenses of Digital Offering, including for travel expenses associated with site visits, tech fees and other related fees. This $50,000 has already been paid to Digital Offering by us. We have agreed to reimburse Digital Offering for its reasonable and documented legal costs up to a maximum of $85,000, $25,000 of which has been paid to date. Notwithstanding the foregoing, the two advances received by Digital Offering and discussed above will be reimbursed to us to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(a).

 

 

Reimbursable Expenses in the Event of Termination

 

In the event the offering does not close or the selling agency agreement is terminated for any reason, we have agreed to reimburse Digital Offering for all unreimbursed, reasonable, documented, out-of-pocket fees, expenses, and disbursements, including its legal fees.

 

Other Expenses of the Offering

 

The Lead Selling Agent has engaged DealMaker Securities LLC as a soliciting dealer to assist in the placement of our shares of Series C Preferred Stock in those states where it is registered to undertake such activities, including soliciting potential investors on a best efforts basis.

 

In addition, the Company has retained DealMaker Reach LLC (“Reach”) for marketing and advisory services. Reach, an affiliate of DealMaker Securities, LLC, will consult and advise on the design and messaging on creative assets, website design and implementation, paid media and email campaigns, advise on optimizing the Company’s campaign page to track investor progress, and advise on strategic planning, implementation, and execution of Company’s capital raise marketing budget. The Company will pay Reach a monthly fee of $12,000 in cash up to a maximum of $48,000. We have also paid Reach a $30,000 launch fee. This launch fee received by Reach will be reimbursed to us to the extent not actually incurred, in compliance with FINRA Rule 5110(g)(4)(a). To the extent services under this agreement are commenced in advance of a FINRA no objection letter being received by us, such amounts shall be considered an advance against accountable expenses anticipated to be incurred, and fully refunded to extent not actually incurred, in compliance with FINRA Rule 5110(g)(4)(a). A maximum of $36,000 or three months of account management fees are payable prior to a no objection letter being received.

 

The Company has also engaged, through its agreement with Reach, Novation Solutions Inc. operating as DealMaker (“DealMaker”), an affiliate of DealMaker Securities, LLC, to create and maintain the online subscription processing platform for the offering. After the Company’s offering statement is qualified by the SEC, the offering will be conducted, in part, using DealMaker’s online subscription processing platform through the Company’s website, whereby investors will receive, review, execute and deliver subscription agreements electronically as well as make purchase price payments through a third-party processor by ACH debit transfer, wire transfer or credit card. Novation Solutions, Inc. has not received, is not receiving and will not receive any compensation for its services.

 

Selling Agents’ Commission

 

We have agreed that the definitive selling agency agreement will provide for us to pay a commission of 7.72% of the gross proceeds received by us in the offering, which shall be allocated by Digital Offering to members of the selling group and soliciting dealers in its sole discretion (we sometimes refer to Digital Offering and such members and dealers collectively as the “Selling Agents”).

 

The following table shows the total commissions payable to Digital Offering on a per-share basis in connection with this offering, assuming a fully subscribed offering.

 

		Per Share
Public offering price		$	7.50
Digital Offering commission (7.72%)*		$	0.579
Proceeds, before expenses, to us, per share		$	6.921

 

*Assuming a fully subscribed offering, Digital Offering would receive total commissions of $1,545,499.61

 

Digital Offering has entered into an agreement with EF Hutton pursuant to which in exchange for EF Hutton’s waiving its right of first refusal to participate in the offering. Digital Offering will pay EF Hutton, out of its 7.72% commission, 1.02% of the gross proceeds received by them in the offering.

 

Lock-Up Agreements

 

Provided that our Series C Preferred Stock is listed on Nasdaq, we have agreed with Digital Offering, subject to certain exceptions, that, without the prior written consent of Digital Offering, we will not, directly or indirectly, during the period ending 180 days following the closing of this offering, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of, or otherwise dispose of or transfer any shares of our capital stock or any securities convertible into or exchangeable or exercisable for our capital stock.

 

The lock-up agreement does not apply to securities issued hereunder, or to securities issued pursuant to existing employee benefit plans or securities issued upon exercise of options.

 

 

Exchange Listing

 

We intend to apply to the Nasdaq Capital Market to list shares of our Series C Preferred Stock under the symbol “AREBP” on the Nasdaq Capital Market after the final closing of the Offering. In order to meet one of the requirements for listing our Series C Preferred Stock on Nasdaq, Digital Offering and other soliciting dealers intend to sell lots of 100 or more shares to a minimum of 400 beneficial holders. Our Series C Preferred Stock will not commence trading on Nasdaq until each of the following conditions is met: (i) this offering is terminated; (ii) we have filed a post-qualification amendment to the offering statement, which post-qualification amendment is qualified by the Commission; and (iii) we have filed a registration statement on Form 8-A, which Form 8-A has been declared effective by the Commission. Pursuant to applicable rules under Regulation A, the Form 8-A will not become effective until the Commission qualifies the post-qualification amendment. We intend to file the post-qualification amendment and request its qualification immediately prior to the termination of this offering in order that the Form 8-A may become effective as soon as practicable thereafter. Even if we meet the minimum requirements for listing on Nasdaq, we may wait before terminating this offering and commencing the trading of our Series C Preferred Stock on Nasdaq in order to raise additional proceeds. As a result, you may experience a delay between the closing of your purchase of shares of our Series C Preferred Stock and the commencement of exchange trading of our Series C Preferred Stock on Nasdaq. No assurance can be given, however, that our application to list on Nasdaq will be approved or that an active trading market for our Series C Preferred Stock will develop.

 

Pricing of the Offering

 

Prior to the offering, there has been no public market for the shares of Series C Preferred Stock. The initial public offering price has been determined by negotiation between us and Digital Offering. The principal factors considered in determining the initial public offering price include:

 

●

the information set forth in this offering circular and otherwise available to Digital Offering;

 

●

our history and prospects and the history of and prospects for the industry in which we compete;

 

●

our past and present financial performance;

 

●

our prospects for future earnings and the present state of our development;

 

●

an assessment of our management;

 

●

the general condition of the securities markets at the time of this offering;

 

●

the recent market prices of, and demand for, publicly traded Common Stock of generally comparable companies; and

 

●

other factors deemed relevant by Digital Offering and us.

 

Indemnification and Control

 

We have agreed to indemnify the Lead Selling Agent, its affiliates and controlling persons and members of the selling group against certain liabilities, including liabilities under the Securities Act. If we are unable to provide this indemnification, we will contribute to the payments the Lead Selling Agent, its affiliates and controlling persons as may be required to make in respect of these liabilities.

 

The Lead Selling Agent and its affiliates are engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The Lead Selling Agent and its affiliates may in the future perform various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

 

 

Our Relationship with the Lead Selling Agent

 

In the ordinary course of their various business activities, Digital Offering and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the Company. Digital Offering and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

Investment Limitations if We Do Not Obtain a Listing on a National Securities Exchange

 

As set forth in Title IV of the JOBS Act, there would be no limit on how many shares an investor may purchase if this offering results in a listing of our Series C Preferred Stock on Nasdaq or other national securities exchange. However, our Series C Preferred Stock will not be listed on Nasdaq upon the initial qualification of this offering by the Commission. Additionally, we cannot provide any assurance that our application to list on Nasdaq will be approved.

 

For individuals who are not accredited investors, if we are not listed on Nasdaq, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see under “— Procedures for Subscribing — How to Calculate Net Worth”). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.

 

Because this is a Tier 2, Regulation A offering, most investors in the case of trading on the over-the-counter markets must comply with the 10% limitation on investment in this offering. The only investors in this offering exempt from this limitation, if our Series C Preferred Stock is not listed on Nasdaq, are “accredited investors” as defined under Rule 501 of Regulation D under the Securities Act (each, an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited Investor:

 

(i)

You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year;

 

(ii)

You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $1,000,000 at the time you purchase Shares (please see below under “— How to Calculate Net Worth”);

 

(iii)

You are an executive officer or general partner of the issuer or a director, executive officer or general partner of the general partner of the issuer;

 

(iv)

You are a holder in good standing of the General Securities Representative license (Series 7), the Private Securities Offerings Representative license (Series 82), and the Licensed Investment Adviser Representative (Series 65), each as issued by FINRA;

 

(v)

You are a corporation, limited liability company, partnership or are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, a corporation or similar business trust or a partnership, not formed for the specific purpose of acquiring the shares of Series C Preferred Stock, with total assets in excess of $5,000,000;

 

(vi)

You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940 (the “Investment Company Act”), or a business development company as defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development company as defined in the Investment Advisers Act of 1940;

 

 

(vii)

You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor;

 

(viii)

You are a trust with total assets in excess of $5,000,000, your purchase of Shares is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the shares of Series C Preferred Stock;

 

(ix)

You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000;

 

(x)

You are a Commission or state-registered investment adviser or a federally exempt reporting adviser;

 

(xi)

You are a Rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;

 

(xii)

You are an entity not listed above that that owns “investments,” in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered; or

 

(xiii)

You are an Investor certifies that (A) it is a “family office” as defined in Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 (i) with at least $5 million in assets under management, (ii) not formed for the specific purpose of acquiring the securities offered and (iii) whose investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment or (B) that it is a “family client” as defined in Rule 202(a)(11)(G)-1, of a family office meeting the criteria specified above.

 

This offering will start on or after the date that the offering is qualified by the Commission and will terminate on the earliest of the date at which the maximum offering amount has been sold, one year from the date upon which the Commission qualifies the offering statement of which this offering circular forms a part and the date at which the offering is earlier terminated by the Company, in its sole discretion.

 

Procedures for Subscribing

 

Procedures for Subscribing through Cambria Capital’s My IPO Platform

 

Cambria Capital is a registered broker-dealer and member of FINRA and SIPC. Cambria Capital has been appointed by us and Digital Offering, as a soliciting dealer for this offering. Cambria Capital operates the My IPO platform as a separate unincorporated business division.

 

 

In order to subscribe to purchase the shares of Series C Preferred Stock through My IPO, a prospective investor must electronically complete and execute a subscription agreement and provide payment to the Wilmington Trust, N.A. escrow account (“Wilmington Trust Escrow Account”) or an account owned by the investor and held at the clearing firm of Cambria Capital. When submitting the subscription request through My IPO, a prospective investor is required to agree to various terms and conditions by checking boxes and to review and electronically sign any necessary documents. We will not accept any subscription agreements prior to the Commission’s qualification of this offering.

 

Escrow Account

 

Except with respect to investors who are clients of DealMaker Securities LLC, or Other Broker-Dealers (as defined below) with clearing agreements in place, investors will be required to deposit their funds to the Wilmington Trust Escrow Account. We may undertake one or more closings on a rolling basis. Any such funds that Wilmington Trust receives shall be held in escrow until a closing of the offering takes place or such other time as mutually agreed between the Company and Digital Offering, and then used to complete securities purchases, or returned if this offering fails to close. All subscribers will be instructed by the Company or its agents to transfer funds by wire or ACH transfer directly to the escrow account established for this offering.

 

Other Procedures for Subscribing

 

Cambria Capital clears through various clearing firms as do other broker-dealers who may participate in this offering. We refer to such other broker-dealers that clear through their respective clearing firms and who may participate in this offering as Other Broker-Dealers. Other Broker-Dealers with clearing agreements shall provide the Selling Agents with executed subscription agreements and delivery sheets from their customers and shall settle the transaction with the Selling Agents through DTC on closing.

 

Prospective investors investing through Cambria Capital or Other Broker-Dealers will acquire shares of our Series C Preferred Stock through book-entry order by opening an account with Cambria Capital or an Other Broker-Dealer, or by utilizing an existing Cambria Capital account or account with an Other Broker-Dealer. In each such case, the account will be an account owned by the investor and held at the clearing firm of such Other Broker-Dealer, as the clearing firm for the exclusive benefit of such investor. The investor will also be required to complete and submit a subscription agreement. Subscriptions for shares Series C Preferred Stock acquired through an account at Cambria Capital, or an Other Broker-Dealer can be processed online at https://form.jotform.com/232956832752162 or provided directly by the Broker-Dealers. Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part.

 

Our transfer agent is Securities Transfer Corporation . Our transfer agent will record and maintain records of the shares of Series C Preferred Stock issued of record by us, including shares issued of record to the Depositary Trust Corporation, which we refer to as the DTC, or its nominee, Cede & Co., for the benefit of broker-dealers, including the clearing firms. The clearing firm, as the clearing firm, will maintain the individual stockholder beneficial records for accounts at Cambria Capital or Other Broker-Dealers. All other investors that participate through the Wilmington Trust Escrow Account, shall have their shares held at Securities Transfer Corporation in digital book entry. Such shares may be transferred to the investor’s outside brokerage account by requesting their outside broker dealer to effect such transfer. Request for transfer may only be made by the outside broker dealer of the investor.

 

You may not subscribe to this offering prior to the date this offering is qualified by the Commission, which we will refer to as the qualification date. Before the qualification date, you may only make non-binding indications of your interest to purchase securities in the offering. For any subscription agreements received after the qualification date, we have the right to review and accept or reject the subscription in whole or in part, for any reason or for no reason. If a closing doesn’t occur or a subscription is rejected and the investor has an account with My IPO or another clearing broker, funds for such subscription will not be debited from My IPO or other clearing broker and the subscription will be cancelled. If accepted, the funds will remain in the escrow account or clearing firm account until we determine to have the closing of the offering and the funds in escrow or in the clearing firm account will then be transferred into our general account.

 

 

Non-U.S. investors may participate in this offering by depositing their funds in the escrow account held at Wilmington Trust, N.A.; any such funds that Wilmington Trust receives shall be held in escrow until the closing of this offering or such other time as mutually agreed between the Company and the Selling Agents, and then used to complete securities purchases, or returned if this offering fails to close.

 

DealMaker Securities LLC

 

Investors who invest through DealMaker Securities LLC may subscribe through invest.americanrebel.com by tendering funds by wire, credit, or debit card or ACH transfer to the escrow account to be set up at Enterprise Bank. Tendered funds will remain in escrow until a closing has occurred. Upon each closing, funds tendered by investors will be made available to the Company for its use. The Company will not cover credit card fees on behalf of investors.

 

Procedures for subscribing directly through the Company’s website

 

The subscription procedure is summarized as follows:

 

	1.	Go to the www.american rebel.com website and click on the “Invest Now” button;
	2.	Complete the online investment form;
	3.	Deliver funds directly by wire, debit card, credit card or electronic funds transfer via ACH to the specified escrow account;
	4.	Once funds or documentation are received an automated AML check will be performed to verify the identity and status of the investor;
	5.	Once AML is verified, investor will electronically receive, review, execute and deliver to us a Subscription Agreement. Investors will be required to complete a subscription agreement in order to invest. For so long as we are not listed on Nasdaq, the subscription agreement will include a representation by the investor to the effect that, if the investor is not an “accredited investor” as defined under securities law, the investor is investing an amount that does not exceed the greater of 10% of his or her annual income or 10% of your net worth (excluding the investor’s principal residence).

 

Right to Reject Subscriptions

 

After we receive your complete, executed subscription agreement (forms of which are attached to the offering statement, of which this offering circular forms a part, as Exhibits 4.1 and 4.2) and the funds required under the subscription agreement have been transferred to the Wilmington Trust Escrow Account or such other selected dealer designated escrow account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.

 

Acceptance of Subscriptions

 

Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares of subscribed for Series C Preferred Stock at closing. Once you submit the subscription agreement and it is accepted, you may not revoke or change your subscription or request your subscription funds. All accepted subscription agreements are irrevocable.

 

Under Rule 251 of Regulation A, unless a company’s offered securities are listed on a national securities exchange, non-accredited, non-natural person investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). As a result, for so long as our Series C Preferred Stock is not listed on Nasdaq, non-accredited, natural person may only invest funds in our Series C Preferred Stock which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).

 

 

How to Calculate Net Worth

 

For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the shares of Series C Preferred Stock.

 

In order to purchase the shares of Series C Preferred Stock and prior to the acceptance of any funds from an investor, for so long as our Series C Preferred Stock is not listed on Nasdaq, an investor in our Series C Preferred Stock will be required to represent, to the Company’s satisfaction, that he or she is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this offering.

 

No Minimum Offering Amount

 

There is no minimum offering amount in this offering and we may close on any funds that we receive. Potential investors should be aware that there can be no assurance that any other funds will be invested in this offering other than their own funds.

 

No Selling Security holders

 

No securities are being sold for the account of security holders; all net proceeds of this offering will go to the Company.

 

Transfer Agent and Registrar

 

The Company has engaged Securities Transfer Corporation, a registered transfer agent with the Commission, who will serve as transfer agent to maintain stockholder information on a book-entry basis.

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES

 

Our Second Amended and Restated Certificate of Incorporation, as amended, and our Amended and Restated Bylaws, subject to the provisions of Nevada law, contain provisions that allow the Company to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the Company. We have also entered into indemnification agreements with each of our executive officers and directors that provide our executive officers and directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the laws of the State of Nevada in effect from time to time, subject to certain exceptions contained in those agreements. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our director and officers, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

 

Provisions of Note in our Subscription Agreement

 

Forum Selection Provision

 

The subscription agreement that investors will execute in connection with the offering includes a forum selection provision that requires any claims against the Company based on the subscription agreement to be brought in a state or federal court of competent jurisdiction in the State of Nevada, for the purpose of any suit, action or other proceeding arising out of or based upon the agreement. Although we believe the provision benefits us by providing increased consistency in the application of Nevada law in the types of lawsuits to which it applies and in limiting our litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The Company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time traveling to any particular forum so they may continue to focus on the operations of the Company. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. We believe that the exclusive forum provision applies to claims arising under the Securities Act, but there is uncertainty as to whether a court would enforce such a provision in this context. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Investors will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder.

 

Jury Trial Waiver

 

The subscription agreement that investors will execute in connection with the offering provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the agreement, other than claims arising under federal securities laws. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, subscribers will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

 

Offer Restrictions Outside the United States

 

Other than in the United States, no action has been taken by us or the lead selling agent that would permit a public offering of the securities offered by this offering circular in any jurisdiction where action for that purpose is required. The securities offered by this offering circular may not be offered or sold, directly or indirectly, nor may this offering circular or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this offering circular comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this offering circular. This offering circular does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this offering circular in any jurisdiction in which such an offer or a solicitation is unlawful.

 

 

LEGAL MATTERS

 

The validity of the shares of Series C Preferred Stock covered by this offering circular will be passed upon by DeMint Law, PLLC.

 

EXPERTS

 

The consolidated financial statements of our company for the years ended December 31, 2022 and 2021 included in this offering circular have been audited by BF Borgers CPA, a professional corporation, as stated in this report appearing herein. Such financial statements have been so included in reliance upon the report of such firm given upon its authority as an expert in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We have filed with the Commission an offering statement on Form 1-A under the Securities Act with respect to the shares of Series C Preferred Stock that we are offering. This offering circular, which constitutes a part of the offering statement, does not contain all the information set forth in the offering statement or the exhibits and schedules filed with the offering statement. For further information about us and the Series C Preferred Stock, we refer you to the offering statement and the exhibits and schedules filed with the offering statement. Statements contained in this offering circular regarding the contents of any contract or other document that is filed as an exhibit to the offering statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the offering statement. You can read our Commission filings, including the offering statement, at the Commission’s website which contains reports, proxy and information statements and other information about issuers, like us, that file electronically with the Commission. The address of the website is www.sec.gov.

 

Following the consummation of this offering, assuming that we have filed a Form 8-A, we will be required to file periodic reports, proxy statements, and other information with the Commission pursuant to the Exchange Act. These periodic reports, proxy and other information will be available for inspection at the website of the Commission referred to above. You may access these materials free of charge as soon as reasonably practicable after they are filed electronically with, or furnished to, the Commission. We also maintain a website at www.americanrebel.com. The inclusion of our website address in this offering circular is an inactive textual reference only. The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this offering circular or the offering statement of which this offering circular forms a part. Investors should not rely on any such information in deciding whether to purchase our Series A Preferred Stock.

 

 

AMERICAN REBEL HOLDINGS, INC.

AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED

DECEMBER 31, 2022 AND DECEMBER 31, 2021

 

	Page
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 5041)	F-2
Audited Financial Statements for the years ended December 31, 2022 and December 31, 2021
Balance Sheets	F-3
Statements of Operations	F-4
Statement of Stockholders’ Equity (Deficit)	F-5
Statements of Cash Flows	F-6
Notes to the Audited Financial Statements	F-7
Unaudited Financial Statements for the nine-months ended September 30, 2023 and September 30, 2022
Balance Sheets	F-30
Statements of Operations	F-31
Statement of Stockholders’ Equity (Deficit)	F-33
Statements of Cash Flows	F-34
Notes to the Unaudited Financial Statements	F-35

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Shareholders of American Rebel Holdings, Inc.:

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of American Rebel Holdings, Inc. (the “Company”) as of December 31, 2022 and 2021 and the related consolidated statements of operations, shareholders’ equity, and cash flows for the two years in the period ended December 31, 2022, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the two years in the period ended December 31, 2022 and 2021, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern Matter

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

 

Critical Audit Matter

 

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

/s/ BF Borgers CPA PC

BF Borgers CPA PC

 

We have served as the Company’s auditor since 2020

 

Lakewood, CO

April 14, 2023

 

 

AMERICAN REBEL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

		December 31, 2022				December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	356,754			$	17,607
Accounts receivable			1,613,489				100,746
Prepaid expense			207,052				163,492
Inventory			7,421,696				685,854
Inventory deposits			309,684				-
Total Current Assets			9,908,675				967,699
Property and Equipment, net			456,525				900
OTHER ASSETS:
Lease deposits			18,032				-
Right-of-use lease assets			1,977,329				-
Goodwill			4,200,000				-
Total Other Assets			6,195,361				-
TOTAL ASSETS		$	16,560,561			$	968,599
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expense		$	2,523,551			$	1,032,264
Accrued interest			103,919				203,972
Loan – Officers – related party			-				10,373
Loans – Working capital			602,643				3,879,428
Loans - Nonrelated parties			-				12,939
Right-of-use lease liability, current			992,496				-
Total Current Liabilities			4,222,609				5,138,976
Right-of-use lease liability, long-term			984,833				-
TOTAL LIABILITIES			5,207,442				5,138,976
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 175,000, and 376,501 issued and outstanding, respectively at December 31, 2022 and December 31, 2021
Preferred Shares A			100				100
Preferred Shares B			75				277
Common Stock, $0.001 par value; 600,000,000 shares authorized; 16,930,517 and 1,597,370 issued and outstanding, respectively at December 31, 2022 and December 31, 2021			16,930				1,597
Additional paid in capital			45,448,824				22,797,306
Accumulated deficit			(34,112,810	)			(26,969,657	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)			11,353,119				(4,170,377	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	16,560,561			$	968,599

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 

		For the year ended December 31, 2022				For the year ended December 31, 2021
Revenue		$	8,449,800			$	986,826
Cost of goods sold			6,509,382				812,130
Gross margin			1,940,418				174,696
Expenses:
Consulting/payroll and other costs			2,000,624				2,012,803
Rental expense, warehousing, outlet expense			508,527				-
Product development costs			746,871				330,353
Marketing and brand development costs			507,503				171,030
Administrative and other			3,190,092				968,306
Depreciation and amortization expense			50,087				3,643
			7,003,704				3,486,135
Operating income (loss)			(5,063,286	)			(3,311,439	)
Other Income (Expense)
Interest expense			(358,689	)			(2,061,782	)
Interest expense – pre-emptive rights release			(350,000	)			-
Interest income			5,578				-
Gain/(loss) on extinguishment of debt			(1,376,756	)			(725,723	)
Net income (loss) before income tax provision			(7,143,153	)			(6,098,944	)
Provision for income tax			-				-
Net income (loss)		$	(7,143,153	)		$	(6,098,944	)
Basic and diluted income (loss) per share		$	(0.96	)		$	(4.85	)
Weighted average common shares outstanding - basic and diluted			7,469,000				1,258,000

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

 

		Common Stock				Common Stock Amount				Preferred Stock Amount				Additional Paid-in Capital				Accumulated Deficit				Total
Balance – December 31, 2020			910,100			$	910			$	-			$	15,857,366			$	(20,870,713	)		$	(5,012,437	)
Issuance of common stock as compensation			546,292				546				-				2,501,899				-				2,502,445
Issuance of preferred stock Series C			-				-				100				(100	)			-				-
Issuance of preferred stock Series B			-				-				50				547,455				-				547,505
Conversion of debt			96,336				96				227				2,691,618				-				2,691,941
Warrants issued as compensation			-				-				-				974,113				-				974,113
Sale of common stock, net			44,643				45				-				224,955				-				225,000
Net loss			-				-				-				-				(6,098,944	)			(6,098,944	)
Balance – December 31, 2021			1,597,370				1,597				377				22,797,306				(26,969,657	)			(4,170,377	)
Sale of common stock through registered offering, net of offering costs, includes reverse stock split round lot shares of 128,509			2,658,630				2,659				-				9,035,797				-				9,038,456
Issuance of common stock to pay for expenses			233,623				234				-				969,301				-				969,535
Preferred stock converted to common stock			251,698				252				(202	)			(50	)			-				-
Debt converted into 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 $1.10 per share, exercise price of $0.01			-				-				-				12,322,542				-				12,322,542
Prefunded common stock warrant offering costs and fees			-				-				-				(1,972,578	)			-				(1,972,578	)
Issuance of common stock as compensation			100,000				100				-				60,900				-				61,000
Exercise of $1.10 prefunded warrants			11,202,401				11,202				-				100,823				-				112,025
Exercise of $4.15 prefunded warrants			377,484				377				-				3,398				-				3,775
Net loss			-				-				-				-				(7,143,153	)			(7,143,153	)
Balance – December 31, 2022			16,930,517			$	16,930			$	175			$	45,448,824			$	(34,112,810	)		$	11,353,119

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		For the year ended December 31, 2022				For the year ended December 31, 2021
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)		$	(7,143,153	)		$	(6,098,944	)
Depreciation			50,087				3,643
Gain on disposition of property			(1,994	)			-
Compensation paid through issuance of common stock			1,030,535				3,476,559
Amortization of loan discount			1,000,457				1,262,109
Adjustments to reconcile net loss to cash (used in) operating activities (net of acquired amounts from Champion):
Accounts receivable			613,104				75,334
Prepaid expenses			(34,286	)			(8,010	)
Inventory			(2,289,695	)			(4,145	)
Inventory deposits and other			(3,149	)			141,164
Accounts payable and accrued expense			(50,042	)			304,445
Net Cash (Used in) Operating Activities			(6,828,136	)			(847,845	)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Champion			(10,247,420	)			-
Purchase of property and equipment			(20,888	)			-
Net Cash (Used in) Investing Activities			(10,268,308	)			-
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from sale of common and preferred stock, net of offering costs			9,603,791				772,505
Proceeds from sale of prefunded warrants, net of offering costs			10,349,964				-
Proceeds from exercise of prefunded warrants			115,798				-
Proceeds (repayments) of loans – officer - related party			(81,506	)			35,548
Proceeds of working capital loan			60,000				2,244,100
Repayment of loans – nonrelated party			(2,612,456	)			(2,247,600	)
Net Cash Provided by Financing Activities			17,435,591				804,553
CHANGE IN CASH			339,147				(43,292	)
CASH AT BEGINNING OF PERIOD			17,607				60,899
CASH AT END OF PERIOD		$	356,754			$	17,607
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest		$	270,146			$	214,798
Income taxes		$	-			$	-
Non-cash investing and financing activities:
Conversion of debt to equity		$	2,011,224			$	2,691,940

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2022

 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

The “Company” was incorporated on December 15, 2014 (date of inception) under the laws of the State of Nevada, as CubeScape, Inc. Effective 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 owned subsidiary of the Company.

 

The acquisition of American Rebel, Inc. was accounted for as a reverse merger. The Company issued 217,763 shares of its common stock and issued warrants to purchase 6,250 shares of common stock to stockholders of American Rebel, Inc. and cancelled 112,500 shares of common stock owned by American Rebel, Inc.

 

The Company filed a registration statement on Form S-1 which was declared effective by the Securities and Exchange Commission on October 14, 2015. Twenty six (26) investors invested at a price of $0.80 per share for a total of $60,000 and closed on December 11, 2015. On July 29, 2022, the Company closed on the acquisition of the Champion Entities.

 

Nature of operations

 

The Company develops and sells branded products in the self-defense, safe storage and patriotic product areas that are promoted and sold using a wholesale distribution network, personal appearance, music, Internet and television avenues. The Company’s products are marketed under the American Rebel Brand and imprinted with such branding. Through its recent acquisition of the “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.) the Company promotes and sells its products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as through a multitude of online avenues, including its website and various e-commerce platforms such as Amazon.com.

 

Principles of Consolidation

 

The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.

 

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 approximate fair value.

 

Inventory and Inventory Deposits

 

Inventory consists of safes, backpacks, jackets and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or net realizable value. The Company determines the estimate for the adjustment 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.

 

 

Fixed assets and depreciation

 

Property and equipment are 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 Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, 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 steps: 1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.

 

These steps are met when an order is received, a price agreed, and the product shipped or delivered to that customer.

 

Advertising costs

 

Advertising costs are expensed as incurred; Marketing costs incurred were $507,503 and $171,030 for the years ended December 31, 2022 and 2021, respectively.

 

Fair value of financial instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2022 and December 31, 2021, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair value. 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.

 

Level 2: The 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, 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.

 

Stock-based compensation

 

The Company records stock-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.

 

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached by 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

 

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - 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. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the years ended December 31, 2022 and 2021, net loss per share was $(0.96) and $(4.85), respectively.

 

Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled none and none as of December 31, 2022 and December 31, 2021, respectively. All other dilutive securities are listed below.

 

The following table illustrates the total number of common shares that would be converted from common stock equivalents issued and outstanding at the end of each period presented; as of December 31, 2022 and as of December 31, 2021, respectively.

 

		December 31, 2022				December 31, 2021
Shares used in computation of basic earnings per share for the year ended			7,469,000				1,258,000
Total dilutive effect of outstanding stock awards or common stock equivalents			16,864,000				682,000
Shares used in computation of fully diluted earnings per share for the year ended			24,333,000				1,940,000
Net income (loss)		$	(7,143,153	)		$	(6,098,944	)
Fully diluted income (loss) per share		$	(0.29	)		$	(3.14	)

 

In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

 

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.

 

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 December 31, 2022 and December 31, 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 years ended December 31, 2022 and 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.

 

Warranties

 

The Company’s safe manufacturing business estimates their exposure to warranty claims based on both current and historical (Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability quarterly and adjusts the amount as necessary. Warranty liability is included in accrued expenses in the accompanying consolidated balance sheets. We estimate that warranty liability is nominal or negligible based on the quality of products and our excellent customer relationships. Warranty liability is $93,458 as of December 31, 2022. We had no warranty liability as of December 31, 2021.

 

Business Combinations

 

The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations, and as further defined by ASU 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of drug development, particularly by development-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value (see Note 8 - Goodwill and Acquisition Of Champion Entities and Note 15 - Pro Forma Condensed Combined Financial Information (Unaudited) for further information in accordance with ASC 805-10-55-37 through ASC 805-10-55-50).

 

 

Right of Use Assets and Lease Liabilities

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company 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 amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company 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 purpose, 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 evaluated recent accounting pronouncements through December 31, 2022, and believes that none have a material effect on the Company’s financial statements.

 

Concentration Risk

 

In 2022 prior to the closing of the Champion Entities, the Company purchased a substantial portion (over 20%) of inventory from two third-party vendors. With the closing of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from these specific third-party vendors. As of December 31, 2022, the net amount due to these specific third-party vendors (accounts payable and accrued expense) was $0. Similarly, as of December 31, 2021, the net amount due to these specific third-party vendors (accounts payable and accrued expenses) was also $0. The loss of manufacturing vendor relationships could have a material effect on the Company, however the Company believes numerous other suppliers that could be substituted should these specific third-party vendors/suppliers become unavailable or non-competitive.

 

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 growth and acquisition stage and, accordingly, has not yet reached profitability from its operations (which now includes the Champion Entities business). Since inception, the Company has been engaged in financing activities and executing its plan of operations and incurring costs and expenses related to product development, branding, inventory buildup and product launch. As a result, the Company has continued to incur significant net losses for the years ended December 31, 2022 and 2021 amounting to ($7,143,153) and ($6,098,944), respectively. The Company’s accumulated deficit was ($34,112,810) as of December 31, 2022 and ($26,969,657) as of December 31, 2021. The Company’s working capital surplus was $6,678,562 as of December 31, 2022 compared to a working capital deficit of ($4,171,277) as of December 31, 2021. The increase in working capital from December 31, 2021, to December 31, 2022, is due primarily to the Company closing on its registered public offering in February 2022 its July 2022 private investment in public equity (“PIPE”) transaction and its acquisition and integration of the Champion Entities. Until most recently the Company’s activities have been primarily sustained through equity/debt financing and the continued usage of deferral of payments on accounts payable and other expenses.

 

 

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 believes funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common 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 existing 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 objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

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 be necessary should the Company be unable to continue as a going concern.

 

NOTE 3- INVENTORY AND DEPOSITS

 

Inventory and deposits include the following:

 

		December 31, 2022				December 31, 2021
Inventory - Finished goods		$	7,421,696			$	685,854
Inventory – Deposits and other			309,684				-
Total Inventory		$	7,731,380			$	685,854

 

With the Champion acquisition we will soon eliminate the need to hold inventory with our American Rebel, Inc subsidiary at its facility. We do not believe we have a risk of concentration in our purchasing of inventory materials, sourcing needs or manufacturing. The Champion acquisition added approximately $5,400,000 in inventory on the date of purchase less intercompany deposits of approximately $600,000. We have added approximately $1,600,000 in new inventory purchases over the past 5 months and 3 days, enabling us to take advantage of pricing discounts.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment include the following:
		December 31, 2022				December 31, 2021
Plant, property and equipment		$	367,317			$	32,261
Vehicles			448,542				277,886
Property and equipment gross			815,859				310,147
Less: Accumulated depreciation			(359,334	)			(309,247	)
Net property and equipment		$	456,525			$	900

 

For the years ended December 31, 2022 and 2021 we recognized $50,087 and $3,643 in depreciation expense, respectively. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life. We recognized 5 months and 3 days of depreciation expense from the assets that we acquired with the Champion acquisition. The Champion acquisition added approximately $400,000 in assets on the date of the purchase.

 

 

NOTE 5 –RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS

 

For the year ended December 31, 2016, the Company received loans from its sole officer and director at the time totaling $221,155. Balances outstanding during the year ended December 31, 2021 were paid in full during 2021.

 

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 is the total debt assumed under each related loan, or a total of $277,886. All of the loans associated with these transactions were paid in full as of December 31, 2022.

 

Charles A. Ross, Jr. serves as the Company’s Chief Executive Officer and director. Compensation for Mr. Ross was $681,400 and $200,000 plus stock awards of $20,766 and $393,490, respectively for the years ended December 31, 2022 and 2021. Doug E. Grau serves as the Company’s President, Interim Principal Accounting Officer and a director. Compensation for Mr. Grau was $413,381 and $200,000 plus stock awards of $11,182 and $393,490, respectively for the years ended December 31, 2022 and 2021.

 

NOTE 6 – NOTES PAYABLE – NONRELATED PARTIES

 

Effective January 1, 2016, the Company acquired three vehicles from various related parties in exchange for the assumption of the liabilities related to those vehicles. The liabilities assumed are as follows at December 31, 2022 and December 31, 2021.

 

SCHEDULE OF NOTES PAYABLE TO NON-RELATED PARTIES

 

		December 31, 2022				December 31, 2021
Loan secured by a tour bus, payable in monthly payments of $1,426 including interest at 12% per annum through January 2023 when the remaining balance is payable.		$	-			$	12,939
Total recorded as current liability		$	-			$	12,939

 

Current and long-term portion. Total loan balance was paid in full prior to December 31, 2022.

 

NOTE 7 – NOTES PAYABLE – WORKING CAPITAL

 

During the year ending December 31, 2021, the Company and the Company’s wholly-owned operating subsidiary completed the sale of several additional short term notes and extensions of short term notes under similar terms with additional principal amount totaling $2,244,100. The notes were secured by a pledge of certain of the Company’s current inventory and the chief executive officer’s personal guaranty. These short-term working capital notes mature in 30-180 days. In connection with these notes, the Company issued 546,292 shares of its common stock, warrants to purchase 662,713 shares of its common stock. The fair value of these share incentives was calculated to be $1,437,432. The fair value of the share incentive was recorded as a discount to the note payable and the discount was amortized over the term of those agreements to interest expense using the straight-line method that approximates the effective interest method. Interest expense recorded as a result of amortization of discount for the year ended December 31, 2021 was $1,261,695.

 

During the year ended December 31, 2021, the Company and the Company’s wholly-owned operating subsidiary completed the conversion of short term notes with a face value of $1,713,904 and accrued interest into 96,336 shares of common stock with a fair value of $2,691,940, resulting in a loss on extinguishment of debt of $725,723 recorded in our consolidated statement of operations.

 

During the year ended December 31, 2022, the Company through one of its wholly-owned operating subsidiaries completed the sale of several short-term notes under similar terms totaling $60,000. The notes are secured by a pledge of certain items of the Company’s current inventory and the chief executive officer’s personal guaranty.

 

 

During the year ended December 31, 2022, the Company and one of its wholly-owned operating subsidiaries repaid $2,541,634 of these short-term notes and completed the conversion of short-term notes with a face value of $1,950,224 and accrued interest into shares of common stock with a fair value of $2,803,632, resulting in a loss on extinguishment of debt of $1,376,756 recorded in our consolidated statement of operations. The conversion of a substantial portion of the outstanding short-term notes payable and accrued interest was accomplished and in conjunction with the Company’s public offering completed in February of 2022.

 

As of December 31, 2022, and 2021, the outstanding balance due on the working capital notes was $602,643 and $3,879,428, respectively.

 

NOTE 8 – GOODWILL AND ACQUISITION OF CHAMPION ENTITIES

 

Goodwill

 

Goodwill is initially recorded as of the acquisition date, and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.

 

As of December 31, 2022 and December 31, 2021, we had goodwill of $4,200,000 and none, respectively, presented within other long-term assets in our consolidated balance sheets, primarily related to our 2022 acquisition of Champion Entities. In the 4^th quarter of 2022, we performed a qualitative assessment of potential goodwill impairment and determined it was more likely than not that the fair value of our reporting units exceeded its carrying value. Accordingly, no further impairment testing of goodwill was performed, and we did not recognize any goodwill impairment for the 4^th quarter or for the year ending December 31, 2022.

 

The Company will review its goodwill for impairment periodically (based on economic conditions) and more specifically in the 4^th quarter of its financial reporting year and determine whether impairment is to be recognized within its consolidated statement of operations. See Note 1, Summary of Significant Accounting Policies, for more information on the impairment testing.

 

Business Combination Consideration

 

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 PCAOB registered accounting firm to conduct their two years of audit and subsequent interim review reports.

 

 

Accounting for the Business Combination

 

Under the acquisition method of accounting, the acquired tangible and intangible assets and assumed liabilities are recognized based on their estimated fair values as of the business combination closing date. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of December 31, 2022 and have been prepared to illustrate the estimated effect of the business combination (see Note 15 – Pro Forma Condensed Combined Financial Information (Unaudited).

 

The Company may recognize a deferred tax benefit as a result of the acquisition. Due to the acquisition, a temporary difference between the book and the tax basis for the intangible assets acquired may be created resulting in a deferred tax liability and additional goodwill. No deferred tax benefit was recorded in the combined pro forma financial statements.

 

The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of July 29, 2022. The purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed. Accordingly, the pro forma purchase price allocation is subject to further adjustments as additional information becomes available and as additional analyses and final valuations are conducted following the completion of the business combination. There can be no assurances that these additional analyses and final valuations will not result in significant changes to the estimates of fair value set forth below.

 

The following is the preliminary estimate of the fair value of the assets acquired, liabilities assumed, and ensuing goodwill identified, reconciled to the purchase price transferred:

 

Cash		$	-
Accounts receivable			1,337,130
Inventory			5,229,426
Fixed assets			473,326
Deposits and other assets			53,977
Customer list and other intangibles**			637,515
Accounts payable			(1,609,657	)
Accrued expenses and other			(84,297	)
Goodwill			4,200,000
Consideration		$	10,237,420
Consideration:
Payments of cash direct to Seller		$	8,455,177
Debt payments on behalf of Seller - guarantor			1,442,243
Payments to various service providers			340,000
		$	10,237,420

 

The Company’s preliminary estimates of fair values of the net assets acquired are based solely on the information that was available at the date of the acquisition, and the Company is continuing to evaluate the underlying inputs and assumptions used in its valuations. Accordingly, these preliminary estimates are subject to change during the measurement period, which is up to one year from the date of the acquisition. (**- Customer list and other intangibles are combined with goodwill at the end of each period and evaluated as to fair value. At December 31, 2022 it was determined that total intangible assets (which includes goodwill) has a fair value of $4.2 million).

 

NOTE 9 – INCOME TAXES

 

At December 31, 2022 and December 31, 2021, the Company had a net operating loss carryforward of $34,112,810 and $26,969,657, respectively, which begins to expire in 2034.

 

 

Components of net deferred tax asset, including a valuation allowance, are as follows:

 

		December 31, 2022				December 31, 2021
Deferred tax asset:
Net operating loss carryforward		$	7,163,690			$	5,663,628
Total deferred tax asset			7,163,690				5,663,628
Less: Valuation allowance			(7,163,690	)			(5,663,628	)
Net deferred tax asset		$	-			$	-

 

Valuation allowance for deferred tax assets as of December 31, 2022 and December 31, 2021 was $7,163,690 and $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 December 31, 2022 and December 31, 2021 and recognized 100% valuation allowance for each period.

 

Reconciliation between statutory rate and the effective tax rate for and as of December 31, 2022 and 2021:

 

Federal statutory rate			(21.0	)%
State taxes, net of federal benefit			(0.00	)%
Change in valuation allowance			21.0	%
Effective tax rate			0.0	%

 

NOTE 10 – SHARE CAPITAL

 

The Company is authorized to issue 600,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock.

 

Common and Preferred stock

 

For the month of January 2021 the following transactions occurred: On January 5, 2021, the Company issued 3,875 shares of common stock of the Company valued at $4.80 per share as an interest payment on an outstanding note payable. On January 12, 2021, the Company received an equity investment of $50,000 to purchase 10,417 shares of the Company’s common stock by subscription agreement at $4.80 per share.

 

For the month of March 2021 the following transactions occurred: The Company entered into a one-year promissory note dated March 4, 2021 in the amount of $50,000. The Company will pay monthly interest payments at 12% per annum to the holder of the note. As a component of the note we issued 7,500 shares of common stock to the note holder. On March 5, 2021 the Company received an equity investment of $100,000, to purchase 20,833 shares of the Company’s common stock by subscription agreement at $4.80 per share. On March 10, 2021, the Company issued 3,500 shares of common stock to pay interest on an outstanding note. On March 10, 2021, the Company issued 3,875 shares of common stock to pay interest on an outstanding note. On March 10, 2021, the Company issued 3,991 shares of common stock of the Company valued at $4.80 per share as payment for services rendered.

 

For the month of April 2021 the following transactions occurred: On April 9, 2021, in connection with a $1,000,000 bridge loan, the Company issued Ronald A. Smith, our Chief Operating Officer, a warrant to purchase 25,000 shares of the Company’s common stock at an exercise price of $8.00 per share with a five-year term. On April 9, 2021, the Company entered into two employment agreements with recently appointed officers, whereby it agreed to issue 109,375 shares of common stock to such officers. In addition, the Company entered into amendments to the current employment agreements with its Chief Executive Officer and President, whereby it agreed to issue 100,000 shares of its common stock. On April 20, 2021, the Company issued 1,875 shares of common stock in return for services rendered. On April 22, 2021, the Company entered into a settlement agreement with a current debt holder, whereby the Company agreed to repay the $151,688 balance owing on the note owed with a cash payment of $50,000 and the issuance of 25,000 shares of common stock, with a stated value of $100,688.

 

 

For the month of June 2021 the following transactions occurred: On June 11, 2021, the Company sold 10,000 units at $7 per unit consisting of 10,000 shares of Series B preferred stock and 12,500 three-year warrants to purchase 1 share of common stock per warrant at 8.00 to an accredited investor. On June 14, 2021, the Company sold 5,000 units at $7 per unit consisting of 5,000 shares of Series B preferred stock and 6,250 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor. On June 14, 2021, a holder of various outstanding notes converted outstanding principal and interest to 42,658 units at $7 per unit consisting of 42,658 shares of Series B Preferred Stock and 53,322 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 15, 2021, a holder of various outstanding notes converted outstanding principal and interest to 57,143 units at $7 per unit consisting of 57,143 shares of Series B preferred stock and 71,429 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 15, 2021, a holder of an outstanding note converted outstanding principal and interest to 75,143 units at $7 per unit consisting of 75,143 shares of Series B preferred stock and 93,929 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 18, 2021, the Company sold 28,572 units at $7 per unit consisting of 28,572 shares of Series B preferred stock and 35,715 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor. On June 21, 2021, a holder of an outstanding note converted a portion of outstanding principal to 50,000 units at $7 per unit consisting of 50,000 shares of Series B preferred stock and 62,500 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 28, 2021, the Company sold 5,000 units at $7 per unit consisting of 5,000 shares of Series B preferred stock and 6,250 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor. On June 29, 2021, a holder of an outstanding note converted outstanding principal and interest to 16,000 units at $7 per unit consisting of 16,000 shares of Series B preferred stock and 20,000 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 29, 2021, a holder of an outstanding note converted outstanding principal and interest to 8,000 units at $7 per unit consisting of 8,000 shares of Series B preferred stock and 10,000 three-year warrants to purchase 1 share of common stock per warrant at $8.00. On June 30, 2021, the Company sold 15,000 units at $7 per unit consisting of 15,000 shares of Series B preferred stock and 18,750 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor. On June 30, 2021, the Company sold 7,143 units at $7 per unit consisting of 7,143 shares of Series B preferred stock and 8,929 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor.

 

For the month of July 2021 the following transactions occurred: On July 21, 2021, the Company issued 15,250 shares of common stock as interest payments on an outstanding note. On July 22, 2021, the Company issued 16,250 shares of common stock as a component of a note payable. On July 26, 2021, the Company filed a Certificate of Designation and Amendment with the Nevada Secretary of State to increase the number of shares constituting the Series B Convertible preferred stock from 250,000 to 350,000. On July 26, 2021, the Company sold 7,500 units at $7 per unit consisting of 7,500 shares of Series B preferred stock and 9,375 three-year warrants to purchase 1 share of common stock per warrant at $8.00 to an accredited investor by subscription agreement. On July 29, 2021, the Company issued 10,000 shares of common stock as a conversion of Series B preferred stock. On July 30, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 9,416 shares of common stock to Rocco LaVista, our VP of Business Development, for services.

 

For the month of August 2021 the following transactions occurred: On August 3, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 9,416 shares of common stock to Charles A. Ross, Jr., our CEO, for services. On August 4, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 9,416 shares of common stock to Doug E. Grau, our President, for services. On August 12, 2021, the Company issued 3,875 shares of common stock as an interest payment on an outstanding note. On August 18, 2021, the Company issued 53,322 shares of common stock upon conversion of 42,658 shares of Series B preferred stock.

 

For the month of September 2021 the following transactions occurred: On September 3, 2021, the Company issued 431 shares of common stock as a component of a note. On September 8, 2021, the Company issued 3,875 shares of common stock as an interest payment on an outstanding note. On September 21, 2021, the Company issued 1,250 shares of common stock as a component of a note. On September 21, 2021, the Company issued 6,250 shares of common stock as a component of a note. On September 30, 2021, the Company issued 1,563 shares of common stock as a component of a note extension. On September 30, 2021, the Company issued 3,750 shares of common stock as an interest payment on an outstanding note. On September 30, 2021, the Company issued 34,492 shares of common stock as an interest payment on outstanding notes.

 

 

For the month of October 2021 the following transactions occurred: On October 25, 2021, the Company issued 13,393 shares of common stock and 13,393 three-year warrants to purchase common stock for $8.00 for an investment of $75,000 by an accredited investor. On October 29, 2021, the Company issued 14,750 shares of common stock as an interest payment on an outstanding note. On October 29, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 6,250 shares of common stock to a legal consultant of the Company for services. On October 29, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 6,250 shares of common stock to a financial consultant of the Company for services.

 

For the month of December 2021 the following transactions occurred: On December 2, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 6,250 shares of common stock to a consultant of the Company for services. On December 2, 2021, the Company issued 44,125 shares of common stock as interest payments on outstanding notes. On December 2, 2021, the Company issued 18,878 shares of common stock to convert three outstanding notes to equity. On December 2, 2021, the Company issued 23,705 shares of common stock as a conversion of Series B Preferred stock. On December 2, 2021, the Company issued 1,250 shares of common stock in return for services.

 

For the month of February 2022 the following transactions occurred: On February 3, 2022, multiple Series B Convertible Preferred stockholders converted 201,358 shares of their Series B Convertible preferred stock to 251,698 shares of common stock of the Company. On February 3, 2022, the Company converted two outstanding notes into 186,067 shares of common stock of the Company. On February 10, 2022, the Company received an equity investment of $10,500,000 to purchase 2,530,121 shares of the Company’s common stock through a registered public offering at $4.15 per share.

 

For the month of July 2022 the following transactions occurred: On July 12, 2022, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. for the purchase and sale of $12,887,976.31 of securities, consisting of (i) 509,311 shares of common stock at $1.11 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.

 

For the month of August 2022 the following transactions occurred: On August 22, 2022, 100,000 shares of common stock were issued in return for services as a component of a February 2022 services agreement. During the month of August 2022, Armistice Capital Master Fund Ltd. exercised 440,441 Prefunded Warrants. Along with the exercise notice and payment of $4,404.41, 440,441 shares of common stock were issued.

 

For the month of September 2022 the following transactions occurred: During 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.

 

For the month of October 2022 the following transactions occurred: During the month of October 2022, Armistice Capital Master Fund Ltd. exercised 8,079,000 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790.00, 8,079,000 shares of common stock were issued.

 

For the month of November 2022 the following transactions occurred: During the month of November 2022, Calvary Fund exercised 377,484 prefunded warrants. Along with an exercise notice and payment totaling $3,774.84, 377,484 shares of common stock were issued.

 

At December 31, 2022 and December 31, 2021, there were 16,930,517 and 1,597,370 shares of common stock issued and outstanding, respectively; and 75,143 and 276,501 shares of Series B preferred stock issued and outstanding, respectively, and 100,000 and 100,000 shares of its Series C preferred stock issued and outstanding, respectively.

 

 

NOTE 11 – WARRANTS AND OPTIONS

 

In April 2021, the Company issued five-year warrants to purchase 25,000 shares of the Company’s common stock at $8.00 per share in connection with short term financing. In July 2021, the Company issued three-year warrants to purchase 23,705 shares of the Company’s common stock at $8.00 per share in connection with conversion of short-term debt to Preferred and common stock. In August 2021, the Company issued three-year warrants to purchase 9,375 shares of the Company’s common stock at $8.00 per share in connection with conversion of short-term debt to Preferred and common stock. In September 2021, the Company issued five-year warrants to purchase 191,667 shares of the Company’s common stock at $8.00 per share in connection with short term financing. In October 2021, the Company issued three-year warrants to purchase 13,393 shares of the Company’s common stock at $8.00 per share in connection with sale of common stock.

 

On July 12, 2022, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. for the purchase and sale of $12,887,976.31 of securities, consisting of (i) 509,311 shares of common stock at $1.11 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 with an exercise price of $0.86 per warrant and will expire five years from the date of issuance.

 

As of December 31, 2022, there were no Prefunded Warrants issued and outstanding with respect to the July PIPE transaction. The Prefunded Warrants were purchased in their entirety 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 from July 12, 2022 through December 31, 2022, the Company received notice on 11,202,401 Prefunded Warrants converting into 11,202,401 shares of common stock.

 

Calvary Fund exercised all of their prefunded warrants by November 30, 2022.

 

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. None of these warrants have been exercised by the holders

 

As of December 31, 2022, there were 27,411,385 warrants issued and outstanding to acquire additional shares of common stock. As of December 31, 2021, there were 701,776 warrants issued and 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 Warrants have an immaterial fair value at December 31, 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 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.

 

		December 31, 2022				December 31, 2021
Stock Price		$	0.19			$	5.68
Exercise Price		$	0.86			$	8.00
Term (expected in years)			4.5				3.2
Volatility			38.14	%			203.44	%
Annual Rate of Dividends			0.0	%			0.0	%
Risk-Free Rate			4.69	%			1.52	%

 

 

Stock Purchase Warrants

 

The following table summarizes all warrant activity for the years ended December 31, 2022 and 2021.

 

		Shares				Weighted- Average Exercise Price Per Share				Remaining term				Intrinsic value
Outstanding and Exercisable at December 31, 2020			43,688			$	20.80				3.48 years				-
Granted			662,713			$	8.00				2.95 years				-
Exercised			-				-				-				-
Expired			(4,625	)			-				-				-
Outstanding and Exercisable at December 31, 2021			701,776			$	8.80				2.95 years				-
Granted			2,909,639			$	5.1875				5.00 years				-
Granted in Debt Conversion			377,484			$	5.1875				5.00 years
Granted Prefunded Warrants			11,579,885			$	0.01				5.00 years
Granted in PIPE transaction			23,423,424			$	0.86				5.00 years
Exercised			(11,579,885	)		$	0.01				-				-
Expired			(938	)			-				-				-
Outstanding and Exercisable at December 31, 2022			27,411,385			$	1.22				4.50 years				-

 

NOTE 12 – LEASES AND LEASED PREMISES

 

Rental Payments under Non-cancellable Operating Leases and Equipment Leases

 

The Company through its purchase of Champion acquired several 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 for which it leases facilities. Lease terms on the various spaces expiry from a month-to-month lease (30 days) to a long-term lease expiring in March of 2027.

 

Rent expense for operating leases totaled approximately $502,421 and $179,589 for the years ended December 31, 2022, and 2021, respectively.

 

The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.

 

Rental equipment expense for finance leases totaled approximately none and none for the years ended December 31, 2022, and 2021, respectively.

 

 

Right of Use Assets and Lease Liabilities

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company 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 amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company 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 purpose, 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.

 

On January 1, 2019, the Company adopted ASC 842 which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. ASC 842 requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019.

 

The adoption of ASC 842 resulted in the recognition of ROU assets of $none and lease liabilities for operating leases of $none on the Company’s consolidated balance sheet as of January 1, 2019, with no material impact to its consolidated statements of operations. The difference between the ROU assets and the operating lease liability represents the reclassification of (i) deferred rent balances, resulting from the historical operating leases, and (ii) certain accrued restructuring liabilities. The Company’s accounting for finance leases remained substantially unchanged from its accounting for capital leases in prior periods.

 

The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.

 

For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.

 

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.

 

 

Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

 

The Company’s operating leases are comprised primarily of a facility lease and we have no finance leases for our vehicles or equipment.

 

Balance sheet information related to our leases is presented below:

 

SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES

 

				December 31,
		Balance Sheet location		2022				2021
Operating leases:
Right-of-use lease assets		Right-of-use operating lease assets		$	1,977,329			$	-
Right-of-use lease liability, current		Other current liabilities			992,496				-
Right-of-use lease liability, long-term		Right-of-use operating lease liability			984,833				-
Finance leases:
Right-of-use lease assets		Property, plant and equipment			-				-
Right-of-use lease liability, current		Current portion of long-term debt			-				-
Right-of-use lease liability, long-term		Long-term debt			-				-

 

The following provides details of the Company’s lease expense:

 

		Years Ended December 31,
		2022				2021
Operating lease expense, net		$	502,421			$	-
Finance lease expense:
Amortization of assets			-				-
Interest on lease liabilities			-				-
Total finance lease expense			-				-
Operating lease expense, net		$	502,421			$	-

 

Other information related to leases is presented below:

 

SCHEDULE OF OTHER INFORMATION RELATED TO LEASES

 

		2022				2021
Right-of-use assets acquired in exchange for operating lease obligations		$	1,977,329			$	-
Cash Paid For Amounts Included In Measurement of Liabilities:
Operating cash flows from finance leases			-				-
Operating cash flows from operating leases			1,038,647				-
Weighted Average Remaining Lease Term:
Operating leases			3.0 years				0.0 years
Finance leases			0.0 years				0.0 years
Weighted Average Discount Rate:
Operating leases			5.00	%			5.00	%
Finance leases			n/a	%			n/a	%

 

 

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

 

		Finance leases				Operating leases
2023		$	-			$	1,106,358
2024			-				688,526
2025			-				163,794
2026			-				62,792
2027			-				3,733
Thereafter			-				-
Total future minimum lease payments, undiscounted			-				2,025,203
Less: Imputed interest			(-)				(104,664	)
Present value of future minimum lease payments		$	-			$	1,920,539

 

Rent costs totaled approximately $502,421 and $179,589 for years ended December 31, 2022 and 2021, respectively.

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

During the years ended December 31, 2022 and December 31, 2021, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company. In the opinion of management, after consultation with legal counsel, resolution of any of these matters is not expected to have a material effect on the Company’s consolidated financial statements.

 

Contractual Obligations

 

The Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the Company. As of December 31, 2022 and December 31, 2021 there was approximately none and none, respectively, in outstanding letters of credit issued in the normal course of business. These letters of credit would reduce our available borrowings, if we had any. The Company subsequent to year end entered into a line of credit with a major financial institution (see Note – 14 - Subsequent Events).

 

Executive Employment Agreements and Independent Contractor Agreements

 

The Company has written employment agreements with its Chief Executive Officer and various other executive officers. All payments made to its executive officers and other service providers are analyzed and determined by the board of directors compensation committee; some payments made to independent contractors (or officer payments as non-employee compensation) may be subject to backup withholding or the general withholding of payroll taxes which may make the Company responsible for the withholding of those taxes. Certain service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis.

 

NOTE 14 – SUBSEQUENT EVENTS

 

The Company evaluated all events that occurred after the balance sheet date of December 31, 2022 through the date the financial statements were issued and determined that there were the following subsequent events.

 

On February 10, 2023, our wholly-owned subsidiary Champion Safe Company secured a line of credit with Bank of America which provides up to $2,000,000 in additional funding secured by Champion Safe Company’s inventory and account receivables.

 

 

NOTE 15 – PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (UNAUDITED)

 

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 Entities”), 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 Entities, 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 Entities for accounting purposes and will allocate the purchase price to the fair value of Champion Entities’ 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 December 31, 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 Entities on July 29, 2022. The unaudited pro forma condensed combined statement of operations for the years ended December 31, 2021 and 2022, gives effect to the transaction as if it had occurred on January 1, 2021, more than 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 Entities’ unaudited historical condensed consolidated financial statements as of December 31, 2022, (which includes the Champion Entities activities as of the acquisition date and financial activity through the end of the 2022 calendar year) and the audited historical consolidated financial statements as of and for the year ended December 31, 2021.

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED COMBINED CONSOLIDATED BALANCE SHEETS

 

		American Rebel Holdings, Inc				Champion Acquisition				Purchase Transaction Accounting				Financing Transaction Accounting				Pro Forma
		Historical				Historical				Adjustments				Adjustments				Combined
		31-Dec-22				31-Dec-22				31-Dec-22				31-Dec-22				31-Dec-22
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	85,339			$	271,415			$	-			$	-			$	356,754
Accounts receivable			496,898				1,116,591				(2,529	)			-				1,619,960
Prepaid expense			178,559				28,493				-				-				207,052
Inventory			943,854				6,477,842				-				-				7,421,696
Inventory deposits and other			943,977				-				(943,977	)			-				-
Total Current Assets			2,648,627				7,894,341				(946,506	)			-				9,596,462
Property and Equipment, net			13,196				443,329				-				-				456,525
OTHER ASSETS:
Goodwill and Purchase Consideration			10,247,420				243,899				(5,674,420	)			327,000				4,900,000
											(243,899	)
Right of use - Assets			-				-				-				-				-
Lease deposits			4,750				13,282				-				-				18,032
			10,252,170				257,181				(5,918,319	)			327,000				4,705,703
TOTAL ASSETS		$	12,913,993			$	8,594,851			$	(6,864,825	)		$	327,000			$	14,971,019
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expense			793,525				1,730,026				-				-				2,523,551
Accrued interest			103,919				-				-				-				103,919
Loan – officer - related party			-				-				-				-				-
Loan – working capital			602,643				600,000				(600,000	)			-				602,643
Loans - nonrelated parties			-				-				-				-				-
Total Current Liabilities			1,500,087				2,330,026				(600,000	)			-				3,230,113
Right of use - Liabilities			-				-				-				-				-
TOTAL LIABILITIES			1,500,087				2,330,026				(600,000	)			-				3,230,113
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, Class A			100				-				-				-				100
Preferred stock, Class B			75				-				-				-				75
Common stock,			16,929				-				-				-				16,929
Additional paid in capital			45,448,824				6,264,825				(6,264,825	)			-				45,448,824
Accumulated deficit			(34,052,022	)			-				-				327,000				(33,725,022	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)			11,413,906				6,264,825				(6,264,825	)			327,000				11,740,906
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	12,913,993			$	8,594,851			$	(6,864,825	)		$	327,000			$	14,863,359

 

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS

 

		American Rebel 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

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS

 

		American Rebel Holdings, Inc				Champion Acquisition				Purchase Transaction Accounting				Financing Transaction Accounting				Pro Forma
		Historical				Historical				Adjustments				Adjustments				Combined
		31-Dec-22				31-Dec-22				31-Dec-22				31-Dec-22				31-Dec-22
		(unaudited)				(unaudited)				(unaudited)				(unaudited)				(unaudited)
Revenue		$	1,018,363			$	17,909,282			$	-			$	(301,762	)		$	18,625,883
Cost of goods sold			776,063				13,569,736				-				(549,629	)			13,796,170
Gross margin			242,300				4,339,546				-				247,867				4,829,713
Expenses:
Consulting/payroll and other payroll			1,016,212				2,083,574				-				-				3,099,786
Product development costs			746,871				44,408				-				-				791,279
Marketing and brand development costs			487,624				30,442				-				-				518,066
Administrative and other			3,002,418				1,685,052				-				(79,133	)			4,608,337
Depreciation expense			1,355				54,014				-				-				55,369
Operating expenses			5,254,480				3,897,490				-				(79,133	)			9,072,837
Operating income (loss)			(5,012,180	)			442,056				-				327,000				(4,243,124	)
Other Income (Expense)
Interest expense			(699,149	)			(59,950	)			-				-				(759,099	)
Interest income			4,892				6,926				-				-				11,818
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			(7,083,193	)			391,027				-				327,000				(6,365,166	)
Provision for income tax			-				-				-				-				-
Net income (loss)		$	(7,083,193	)		$	391,027			$	-			$	327,000			$	(6,365,166	)
Basic and diluted income (loss) per share		$	(0.95	)		$	-			$	-			$	-			$	(0.85	)
Weighted average common shares outstanding - basic and diluted			7,469,000				-				-				-				7,469,000

 

Basis of Presentation

 

The historical financial information has been adjusted in the unaudited 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 based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the transaction and certain other adjustments. The final determination of the purchase price allocation was based on the fair values of assets acquired and liabilities assumed as of the date the transaction closed, which was July 29, 2022.

 

The Company’s and Champion Entities’ historical results reflect the audited condensed statements of operations for the twelve months ended December 31, 2022, and December 31, 2021, and the audited condensed balance sheet as of December 31, 2022.

 

 

Description of Transaction

 

On June 29, 2022, the Company entered into and executed 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”) and Mr. Ray Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company acquired all of the issued and outstanding capital stock and membership interests of Champion Entities from the Seller.

 

Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration of approximately $9,150,000, along with (ii) previously provided cash deposits in the amount of $350,000, and (iii) reimbursed Seller for approximately $397,000 of agreed upon acquisitions and equipment purchases which were completed by the Seller through Champion Entities since June 30, 2021. Of total cash consideration paid to the Seller, the Seller commensurate with the closing retired a line of credit held by Champion Entities of approximately $1,442,000 and approximately $291,000 in related party loans due to the Seller by Champion Entities. All were recorded on Champion Entities books and recorded prior to July 29, 2022, the closing date.

 

Reclassification Adjustments

 

The accounting policies used in the preparation of this unaudited pro forma condensed combined financial information are those as set out in the Company’s audited consolidated financial statements as of and for the fiscal year ended December 31, 2022, and for the fiscal year ended December 31, 2021. With the information currently available, the Company determined that no significant adjustments are necessary to conform Champion Entities’ consolidated financial statements to the accounting policies used by the Company. The Company determined that the Right-to-Use assets and liabilities of the Champion Acquisition provided a net, net effect of zero to its financial presentation and condition, therefore leaving out of the unaudited pro forma condensed combined financial information as of December 31, 2022.

 

The reclassification adjustments are based on currently available information and assumptions management believes are, under the circumstances and given the information available, reasonable, and reflective of any adjustments necessary to report the Company’s financial condition and results of operations as if the acquisition were completed in the presentation.

 

The combined company finalized the review of all accounting policies and reclassifications, which were not deemed to be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein. The reclassification adjustments for proforma presentation currently identified are as follows:

 

Transaction Consideration

 

Total transaction consideration was approximately $9,900,000 as determined through 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

 

Total additional costs directly attributed to the purchase of the Champion Entities was and additional $340,000 as determined through various expenditures or costs that the Company incurred in completing the transaction with the Champion Entities. Those costs were approximately $200,000 paid to the Company’s investment banker for its services on the acquisition as well as approximately $150,000 in fees paid to the auditors of Champion Entities which so happen to be the Company’s auditor.

 

 

Allocation of Consideration

 

Under the acquisition method of accounting, the identifiable assets acquired, and liabilities assumed of Champion Entities are 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 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 used 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 December 31, 2022. Final allocation of consideration, upon completion of the acquisition, was based on Champion’s assets acquired and liabilities assumed as of the acquisition date, July 29, 2022.

 

The following table sets forth an allocation of the approximate consideration plus additional costs to acquire the identifiable tangible and intangible assets acquired and liabilities assumed of Champion Entities based on Champion Entities’ unaudited consolidated balance sheet as of December 31, 2022, with the estimated excess recorded to goodwill:

 

Total assets (approximate)		$	7,070,000
Total liabilities (approximate)			1,730,000
Net acquired tangible assets			5,340,000
Goodwill and other intangible assets			4,900,000
Allocation of the Estimated Transaction Consideration		$	10,240,000

 

Pro Forma Adjustments

 

Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

 

a.

To record estimated working capital financing (of which there was none required) in addition to Transaction Consideration, as of December 31, 2022.

 

American Rebel Holdings, Inc.

Champion Entities

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:

 

		Year Ended December 31, 2022				Year Ended December 31, 2021
Revenue		$	(300,000	)		$	(600,000	)
Cost of Goods Sold			(550,000	)			(600,000	)
General and Administrative Costs			80,000				-
Pro forma net adjustment		$	(330,000	)		$	-

 

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:

 

		Year Ended December 31, 2022				Year Ended December 31, 2021
Interest expense		$	-			$	(1,800,000	)
Loss on extinguishment of debt			-				(725,000	)
Pro forma net adjustment		$	-			$	(2,525,000	)

 

 

Interim Condensed Consolidated Financial Statements (unaudited)

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2023				December 31, 2022
						(audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	1,633,238			$	356,754
Accounts receivable			2,631,439				1,613,489
Prepaid expense			166,137				207,052
Inventory			8,509,992				7,421,696
Inventory deposits			310,587				309,684
Total Current Assets			13,251,393				9,908,675
Property and Equipment, net			377,264				456,525
OTHER ASSETS:
Lease deposits and other			59,106				18,032
Right-of-use lease assets			1,237,618				1,977,329
Goodwill			4,525,000				4,200,000
Total Other Assets			5,821,724				6,195,361
TOTAL ASSETS		$	19,450,381			$	16,560,561
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other accrued expense		$	2,173,725			$	2,523,551
Accrued interest			28,919				103,919
Loan – Officer – related party			95,332				-
Loans – Working capital			1,152,972				602,643
Line of credit			1,689,163				-
Right-of-use lease liabilities, current			798,136				992,496
Total Current Liabilities			5,938,247				4,222,609
Right-of-use lease liabilities, long-term			439,482				984,833
TOTAL LIABILITIES			6,377,729				5,207,442
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 175,000, and 175,000 issued and outstanding, respectively at September 30, 2023 and December 31, 2022
Series A Preferred Shares			100				100
Series B Preferred Shares			75				75
Preferred stock, value			-				-
Common Stock, $0.001 par value; 600,000,000 shares authorized; 5,875,263 and 677,221 issued and outstanding, respectively at September 30, 2023 and December 31, 2022			5,875				677
Additional paid in capital			50,790,341				45,465,077
Accumulated deficit			(37,723,739	)			(34,112,810	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)			13,072,652				11,353,119
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	19,450,381			$	16,560,561

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		For the three months ended September 30, 2023				For the three months ended September 30, 2022
Revenue		$	3,345,552			$	4,102,761
Cost of goods sold			3,095,418				3,124,657
Gross margin			250,134				978,104
Expenses:
Consulting/payroll and other costs			1,039,273				1,227,953
Rental expense, warehousing, outlet expense			230,226				314,314
Product development costs			20,326				-
Marketing and brand development costs			517,345				119,122
Administrative and other			1,347,181				1,077,005
Depreciation and amortization expense			24,895				9,956
			3,179,246				2,748,350
Operating income (loss)			(2,929,112	)			(1,770,246	)
Other Income (Expense)
Interest expense, net			(95,330	)			(31,584	)
Interest expense – pre-emptive rights release			-				(350,000	)
Interest Income			3,203				4,428
Employee retention credit funds, net of costs to collect			-				-
Gain/(loss) on sale of equipment			-				-
Gain/(loss) on extinguishment of debt			227,569				-
			135,442				(377,156	)
Net income (loss) before income tax provision			(2,793,670	)			(2,147,402	)
Provision for income tax			-				-
Net income (loss)		$	(2,793,670	)		$	(2,147,402	)
Basic and diluted income (loss) per share		$	(0.95	)		$	(8.90	)
Weighted average common shares outstanding - basic and diluted			2,930,700				241,300

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		For the nine months ended September 30, 2023				For the nine months ended September 30, 2022
Revenue		$	11,418,222			$	4,595,547
Cost of goods sold			8,869,432				3,462,454
Gross margin			2,548,790				1,133,093
Expenses:
Consulting/payroll and other costs			2,915,377				1,937,349
Rental expense, warehousing, outlet expense			732,360				314,314
Product development costs			36,821				146,463
Marketing and brand development costs			942,687				349,341
Administrative and other			2,542,181				2,687,728
Depreciation and amortization expense			79,260				11,311
			7,248,686				5,446,506
Operating income (loss)			(4,699,896	)			(4,313,413	)
Other Income (Expense)
Interest expense			(250,877	)			(341,990	)
Interest expense – pre-emptive rights release			-				(350,000	)
Interest income			3,203				4,428
Employee retention credit funds, net of costs to collect			1,107,672				-
Gain/(loss) on sale of equipment			1,400				-
Gain/(loss) on extinguishment of debt			227,569				(1,376,756	)
			1,088,967				(2,064,318	)
Net income (loss) before income tax provision			(3,610,929	)			(6,377,731	)
Provision for income tax			-				-
Net income (loss)		$	(3,610,929	)		$	(6,377,731	)
Basic and diluted income (loss) per share		$	(2.50	)		$	(33.62	)
Weighted average common shares outstanding - basic and diluted			1,442,600				189,700

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)

 

		Common Stock				Common Stock Amount				Preferred Stock Amount				Additional Paid-in Capital				Accumulated Deficit				Total
Balance – December 31, 2021			63,895			$	64			$	377			$	22,798,839			$	(26,969,657	)		$	(4,170,337	)
Sale of common stock, net			106,345				106				-				9,038,350				-				9,038,456
Common stock issued as compensation			9,345				9				-				969,526				-				969,535
Preferred stock converted into common stock			10,068				10				(202	)			192				-				-
Conversion of debt into warrants			-				-				-				1,566,559				-				1,566,559
Sale of common stock			20,372				20				-				565,315				-				565,335
Sale of 492,902 pe-funded common stock warrants $27.50 per share, exercise price of $0.25			-				-				-				12,322,542				-				12,322,542
Offering costs and fees associated with offering			-				-				-				(1,972,578	)			-				(1,972,578	)
Issuance of shares as compensation			4,000				4				-				60,996				-				61,000
Exercise of pre-funded warrants			124,936				125				-				31,109				-				31,234
Net loss for the nine months ending September 30, 2022			-				-				-				-				(6,377,731	)			(6,377,731	)
Balance – September 30, 2022			338,961			$	338			$	175			$	45,380,850			$	(33,347,388	)		$	12,033,975
Balance – December 31, 2022			677,221			$	677			$	175			$	45,465,077			$	(34,112,810	)		$	11,353,119
Balance			677,221			$	677			$	175			$	45,465,077			$	(34,112,810	)		$	11,353,119
Sale of common stock, net			71,499				72				-				312,380				-				312,452
Sale of 615,000 pre-funded common stock warrants $4.36 per share, exercise price of $0.01			-				-				-				2,681,400				-				2,681,400
Prefunded common stock warrant offering costs and fees			-				-				-				(529,324	)			-				(529,324	)
Effect of reverse stock split round lot shares			1,488,615				1,489				-				(1,489	)			-				-
Warrant inducement and exercise of 2,988,687 repriced common stock warrants at $1.10 per share			2,988,687				2,989				-				3,284,567				-				3,287,556
Warrant inducement offering costs and fees			-				-				-				(453,756	)			-				(453,756	)
Exercise of prefunded common stock warrants at $0.01 per share			615,000				615				-				5,535				-				6,150
Common stock issued as compensation			34,241				34				-				25,950				-				25,984
Net loss for the nine months ending September 30, 2023			-				-				-				-				(3,610,929	)			(3,610,929	)
Balance – September 30, 2023			5,875,263			$	5,875			$	175			$	50,790,341			$	(37,723,739	)		$	13,072,652
Balance			5,875,263			$	5,875			$	175			$	50,790,341			$	(37,723,739	)		$	13,072,652

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 

		For the nine months ended September 30, 2023				For the nine months ended September 30, 2022
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)		$	(3,610,929	)		$	(6,377,731	)
Depreciation and amortization			79,260				11,311
Gain on sale of equipment			(1,400	)			-
Expense paid through issuance of common stock			25,984				1,030,535
Amortization of loan discount			-				1,000,457
Adjustments to reconcile net loss to cash (used in) operating activities:
Accounts receivable			(1,017,950	)			(219,697	)
Prepaid expenses			40,915				20,184
Inventory			(1,089,198	)			(869,985	)
Inventory deposits and other			(41,074	)			(224,894	)
Accounts payable and accrued expense			(474,827	)			(297,513	)
Net Cash (Used in) Operating Activities			(6,089,219	)			(5,927,333	)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Champion Entities			-				(10,247,420	)
Disposition/(purchase) of fixed assets			1,402				(13,651	)
Partial payment made on settlement of outstanding liability – Champion Entities purchase			(275,000	)			-
Net Cash Provided by/(Used in) Investing Activities			(273,598	)			(10,261,071	)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, prefunded warrants and warrant inducement, net of offering costs paid of $983,080 and $3,434,122, respectively			5,298,330				19,953,755
Proceeds from warrant exercise			6,150				31,234
Proceeds from line of credit			1,700,000				-
Principal payments on line of credit, net			(10,837	)			-
Proceeds (repayments) of loans – officer - related party, net			95,332				(81,506	)
Proceeds from working capital loans			1,000,000				60,000
Principal payments on working capital loans			(449,675	)			-
Principal payment on loans – nonrelated parties			-				(2,607,108	)
Net Cash Provided by Financing Activities			7,639,300				17,356,375
CHANGE IN CASH			1,276,483				1,167,971
CASH AT BEGINNING OF PERIOD			356,754				17,607
CASH AT END OF PERIOD		$	1,633,238			$	1,185,578
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest		$	245,874			$	234,146
Income taxes		$	-			$	-
Non-cash investing and financing activities:
Conversion of debt into equity		$	-			$	2,011,224

 

See Notes to Financial Statements.

 

 

AMERICAN REBEL HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

(unaudited)

 

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization

 

The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. On June 19, 2017, the Company completed a business combination with its majority stockholder, American Rebel, Inc. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.

 

Nature of operations

 

The Company develops and sells branded products in the self-defense, safe storage and other patriotic product areas using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. The Company’s products are marketed under the American Rebel Brand and are proudly imprinted with such branding. Through its acquisition of the “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.) the Company promotes and sells its safe and storage products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms retail outlets, as well as through online avenues, including website and e-commerce platforms. The Company sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands as well as the American Rebel Brand. On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch regionally in early 2024.

 

To varying degrees, the consequences of the COVID-19 pandemic continue to affect our operating business. Significant government and private sector actions have taken place to control the spread and mitigate the economic effects of the virus and its variants. The development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our business. The economic effects from these events over long term cannot be reasonably estimated at this time. Accordingly, estimates used in the preparation of our financial statements, including those associated with the evaluation of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us (through accounts receivable) and the estimations of certain losses assumed under warranty and other liability contracts, may be subject to significant adjustments in future periods.

 

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 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, 2022, and notes thereto contained, filed on April 14, 2023.

 

Principles of Consolidation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned 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.

 

 

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, other storage products 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 an estimate for the reserve of slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.

 

Fixed assets and depreciation

 

Property and equipment are 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 using the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.

 

Revenue recognition

 

In accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, 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 steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.

 

These steps are met when an order is received, a price is agreed to, and the product is shipped or delivered to that customer.

 

Advertising costs

 

Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $172,617 and $119,122 for the three-month periods ended September 30, 2023, and 2022, respectively, and $942,687 and $349,341 for the nine-month period then ended, respectively.

 

Fair Value of Financial Instruments

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023, and December 31, 2022, 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.

 

 

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, 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.

 

Stock-based compensation

 

The Company records stock-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.

 

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached 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 ASC 505-50.

 

Earnings per share

 

Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - 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. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended September 30, 2023 and September 30, 2022, net loss per share was $(0.95) and $(8.90), respectively, and for the nine months ended September 30, 2023 and September 30, 2022, net loss per share was $(2.50) and $(33.62), respectively

 

Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled none and none as of September 30, 2023 and December 31, 2022, respectively. All other dilutive securities are listed below.

 

The following table illustrates the total number of common shares that would be converted from common stock equivalents issued and outstanding at the end of each period presented; as of September 30, 2023 and as of September 30, 2022, respectively.

 

		September 30, 2023				September 30, 2022
Shares used in computation of basic earnings per share for the periods ended			1,442,600				189,700
Total dilutive effect of outstanding stock awards or common stock equivalents			1,714,700				344,000
Shares used in computation of fully diluted earnings per share for the periods ended September 30, 2023 and September 30, 2022, respectively			3,157,300				533,700
Net income (loss)		$	(3,610,929	)		$	(6,377,731	)
Fully diluted income (loss) per share		$	(1.14	)		$	(11.95	)

 

In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

 

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.

 

 

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, 2023, and December 31, 2022, 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 three-month and nine-month periods ended September 30, 2023, and 2022, 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.

 

Warranties

 

The Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense accounts in the accompanying condensed consolidated balance sheets We estimate that warranty liability is nominal or negligible based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of December 31, 2022 and September 30, 2023 was approximately $100,000.

 

Business Combinations

 

The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations, and as further defined by ASU 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of future results, particularly by growth-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value (see Note 8 - Goodwill and Acquisition of Champion Entities for further information in accordance with ASC 805-10-55-37 through ASC 805-10-55-50).

 

Right of Use Assets and Lease Liabilities

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company 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 amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company 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 purpose, 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’s 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 condensed consolidated balance sheets.

 

Recent pronouncements

 

The Company evaluated recent accounting pronouncements through September 30, 2023, and believes that none have a material effect on the Company’s financial statements.

 

 

Concentration risks

 

Prior to the closing of the Champion Entities, the Company purchased a substantial portion (over 20%) of its inventory from 2 third-party vendors. With the closing and integration of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from the 2 third-party vendors. As of September 30, 2023, the net amount due to these 2 third-party vendors (accounts payable and accrued expense) was $0. The loss of vendor relationships could have a material effect on the Company; however, the Company believes sufficient suppliers could be substituted should these third-party vendors/suppliers become unavailable or non-competitive for us.

 

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 growth and acquisition stage and, accordingly, has not yet reached profitability from its operations. Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to product development, branding, inventory buildup and product launch. As a result, the Company has continued to incur net losses for the nine months ended September 30, 2023, and 2022 of ($3,610,929) and ($6,377,731), respectively. The Company’s accumulated deficit was ($37,723,739) as of September 30, 2023, and ($34,112,810) as of December 31, 2022. The Company’s working capital was $8,111,282 as of September 30, 2023, compared to $6,678,562 as of December 31, 2022. The increase in working capital from December 31, 2022, to September 30, 2023, is due to the Company increasing its overall inventory and accounts receivable balances offset by smaller increases in liabilities as well as incurring a sizeable net loss during the nine months ending September 30, 2023.

 

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 and profitability.

 

Management believes that sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common 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 existing 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 objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

 

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 be necessary should the Company be unable to continue as a going concern.

 

NOTE 3 – INVENTORY AND DEPOSITS

 

Inventory and deposits include the following:

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Inventory – finished goods		$	8,509,992			$	7,421,696
Inventory deposits			310,587				309,684
Total Inventory and deposits		$	8,820,579			$	7,731,380

 

With the integration of Champion, we eliminated the need to hold inventory with our American Rebel, Inc. subsidiary at its facility. We do not believe we have a risk of concentration in our purchasing of inventory materials, sourcing needs or manufacturing. As reported in our Annual Report filed on Form 10-K Champion added approximately $5,400,000 in inventory on the date of purchase less intercompany deposits of approximately $600,000 which is included in our balances as of December 31, 2022.

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

Property and equipment include the following:

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Plant, property and equipment		$	367,317			$	367,317
Vehicles			423,515				448,542
Property and equipment gross			790,832				815,859
Less: Accumulated depreciation			(413,568	)			(359,334	)
Net property and equipment		$	377,264			$	456,525

 

 

For the nine months ended September 30, 2023, and 2022 we recognized $79,260 and $11,311 in depreciation expense, respectively. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life.

 

NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS

 

Charles A. Ross, Jr. serves as the Company’s CEO. Compensation for Mr. Ross includes a base salary and a bonus based upon certain performance measures approved by the Board of Directors.

 

Doug Grau serves as the Company’s President. Compensation for Mr. Grau includes a base salary and a bonus based upon certain performance measures approved by the Board of Directors. Mr. Grau lent the Company approximately $95,332, net of repayments during the nine months ended September 30, 2023, the loan is an unsecured non-interest-bearing demand note.

 

NOTE 6 – LINE OF CREDIT – FINANCIAL INSTITUTION

 

During February 2023, the Company entered into a $2 million master credit agreement (credit facility) with a major financial institution (“Line of Credit”). The Line of Credit accrues interest at a rate determined by the Bloomberg Short-Term Bank Yield Index (“BSBY”) Daily Floating Rate plus 2.05 percentage points (which at September 30, 2023 for the Company was 7.48%), and is secured by all the assets of the Champion Entities. The Line of Credit expires February 28, 2024. The outstanding amount due on the Line of Credit at September 30, 2023 and December 31, 2022 was, respectively.

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Line of credit from a financial institution.		$	1,689,163			$	-
Total recorded as a current liability		$	1,689,163			$	-

 

Current and long-term portion. As of September 30, 2023 the total balance due of $1,689,163 reported as current as the Line of Credit is to be repaid within one year, with subsequent drawdowns as needed by the Company. The Company paid a one-time loan fee equal to 0.1% of the Line of Credit amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate.

 

The Company drew down on the Line of Credit initially in the amount of $1.7 million, with subsequent net payments and draws on the Line of Credit in the amount of approximately $10,000. The Company as of September 30, 2023 has not increased the Line of Credit amount beyond its initial drawdown and has paid interest expense of approximately $65,000 to the financial institution for the nine months ended September 30, 2023. The Company intends to keep the Line of Credit open and in existence to enhance the profitability and working capital needs of the Champion entities and may in the future seek to expand the Line of Credit as the Company grows in size.

 

NOTE 7 – NOTES PAYABLE – WORKING CAPITAL

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Working capital loan with a limited liability company domiciled in the state of Georgia. The working capital loan is demand loan and accrues interest at 12% per annum and interest only payments that are due by the 15th of month following the close of the quarter.			-				600,000
Working capital loans with an irrevocable trust established in the state of Georgia, managed and owned by the same entity as the limited liability company that previously held the $600,000 in loans made June 30, 2022. The working capital loans are demand loans and accrue interest at 12% per annum and interest only payments that are due by the last day of the quarter. The 1st loan in the amount of $150,000 is due and payable on December 31, 2023, the 2nd loan in the amount of $300,000 is due and payable on June 30, 2024.			450,000				-
Working capital loans with a major financial institution converted from a revolving line of credit to a strict payoff loan agreement with the major financial institution. Annual interest rate approximates 22.5% per annum and consists of two revolving line of credit accounts.			-				2,643
Working capital loan agreement with a limited liability company domiciled in the state of New York. The working capital loan is secured by all the assets of the Company that is not secured by the first priority interest of the major financial institution line of credit facility as well as a personal guaranty by our CEO, Mr. Charles A Ross. The working capital loan requires payments of $20,000 each for 64 weeks on the Friday following funding. The working capital loan is due and payable on July 5, 2024 with a final payment of $20,000.			702,972				-
		$	1,152,972			$	602,643
Total recorded as a current liability		$	1,152,972			$	602,643

 

On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan”) with an accredited investor lending source (the “Lender”). Under the Secured Loan, the Company received the loan net of fees of $20,000. The Secured Loan requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan bears interest at 41.4%. The Secured Loan is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan. The Secured Loan provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company was also required to pay a fee associated with the Lender and its introduction to the Company of $80,000 to be made in equity of the Company at the time the loan was entered into. The Company issued 3,721 post-reverse stock split shares, which on the date of issuance had a value of approximately $2,900. Since the number of shares had been established upon consummation of the loan but not valued or recorded on the books at the time, because of the leeway on grant date; total cost to the Company for the issuance of the 3,721 shares of common stock on the grant date was $2,900 which was recorded to interest expense and attributable to the loan.

 

On July 1, 2023, the Company entered into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited lender. Under the Assumption Agreement the Company agreed to pay $150,000 immediately to the holder of the $600,000 working capital loans that the Company had in place. The Assumption Agreement provided for the accredited lender, who effectively had the same management and ownership as the old working capital holders and assumed the debt instruments under the same terms and conditions and is due one year from the date of the Assumption Agreement, June 30, 2024 for one of the loans and the other loan (in the amount of $150,000) is due and payable on December 31, 2023. The Company made a one-time payment of $150,000 to the holder and was released from the prior obligations and the default status that it had been in with that holder since March 31, 2023.

 

On July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023, and the accredited lender of the new working capital loans paid the holder of the old working capital loans $450,000 which required no additional working capital outlay from the Company. The terms of the new loan are 12% per annum and interest only payments that are due by last day of the quarter based on a calendar year. This reduces the Company’s interest payments on the working capital loans (old) of $600,000 from $18,000 per quarter to just $13,500 per quarter (for quarter ending December 31, 2023) and $9,000 per quarter thereafter (for quarters ending March 31, 2024 and June 30, 2024).

 

During the nine months ending September 30, 2022, the Company repaid several short-term notes under similar terms as its other short-term notes totaling $60,000. The notes were secured by a pledge of certain inventory items and the Company’s Chief Executive Officer’s personal guaranty.

 

 

During the nine months ending September 30, 2022, the Company repaid $2,541,634 of these short-term notes and completed the conversion of short-term notes with a face value of $1,950,224 along with accrued interest into shares of common stock with a fair value of $2,803,632, resulting in a loss on extinguishment of $1,376,756. The conversion into common stock was done in connection with our registered public offering in February 2022 for which we recognized a loss on extinguishment.

 

At September 30, 2023, and December 31, 2022, the outstanding balance due on all of the working capital notes payable was $1,152,972 and $602,643, respectively. These amounts do not include any interest payable on the various notes where interest was not paid in full per the terms of the notes.

 

NOTE 8 – GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES

 

Goodwill

 

Goodwill is initially recorded as of the acquisition date and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.

 

As of September 30, 2023 and December 31, 2022, we had goodwill of $4,525,000 and $4,200,000, respectively, presented within other long-term assets in our condensed consolidated balance sheets, primarily related to our 2022 acquisition of Champion Entities. During the 3rd quarter of 2023, we performed a qualitative assessment of potential goodwill impairment and determined it was more likely than not that the fair value of our reporting units exceeded its carrying value. Accordingly, no further impairment testing of goodwill was performed, and we did not recognize any goodwill impairment for the nine months ending September 30, 2023.

 

The Company policy is to review its goodwill for impairment periodically (based on economic conditions) and more specifically in the 4^th quarter of its financial reporting year and determine whether impairment is to be recognized within its condensed consolidated statement of operations. See Note 1, Summary of Significant Accounting Policies to our Annual Report filed on Form 10-K, for more information on impairment testing.

 

Business Combination Consideration

 

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 specifically associated with the acquisition of Champion and its integration of $350,000; $200,000 was paid to our investment banker in analyzing the acquisition and purchase of Champion as well as we paid $150,000 to Champion’s independent PCAOB registered accounting firm to conduct a two year of audit and subsequent interim review report of their financial condition and reports.

 

During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller of the Champion Entities with respect to the CARES Act tax credits income the Company received. The Company prior to September 30, 2023 settled the matter with the Seller and agreed to pay an additional $325,000 to the Seller. This amount was not offset against the CARES Act tax credit income but increased the purchase price of the Champion Entities and increased our determined Goodwill value by $325,000.

 

 

Accounting for the Business Combination

 

Under the acquisition method of accounting, the acquired tangible and intangible assets and assumed liabilities are recognized based on their estimated fair values as of the business combination closing date. Pro forma adjustments were preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of December 31, 2022 which have been prepared to illustrate the estimated effect of the business combination (see Note 15 – Pro Forma Condensed Combined Financial Information (Unaudited) to our Annual Report filed on Form 10-K).

 

The Company may recognize a negligible deferred tax benefit as a result of the acquisition. Due to the acquisition, a temporary difference between book and tax basis for the intangible assets acquired may result in a deferred tax liability and additional goodwill, which we believe to be negligible.

 

The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of July 29, 2022. The purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed, nor may never be completed. Accordingly, the pro forma purchase price allocation may be subject to further adjustments. There can be no assurances that additional analyses and final determination of valuations will result in a change to the estimates of fair value set forth below.

 

The following is the estimate of the fair value of the assets acquired, liabilities assumed, and ensuing goodwill identified, reconciled to the purchase price transferred:

 

Cash		$	-
Accounts receivable			1,337,130
Inventory			5,229,426
Fixed assets			473,326
Deposits and other assets			53,977
Customer list and other intangibles**			637,515
Accounts payable			(1,609,657	)
Accrued expenses and other			(84,297	)
Goodwill			4,525,000
Consideration		$	10,562,420
Consideration:
Payments of cash direct to Seller		$	8,455,177
Additional payments of cash to Seller in 2023			275,000
Amounts due on accounts payable to Seller (over the next 12 months)			50,000
Debt payments on behalf of Seller - guarantor			1,442,243
Payments to various service providers			340,000
		$	10,562,420

 

The Company’s estimates of fair values of the net assets acquired are based on the information that was available at the date of the acquisition, and the Company may continue to evaluate the underlying inputs and assumptions used in its valuations and would be subject to change. Preliminary estimates are subject to change during the measurement period, which we have determined to be one year from the date of the acquisition, which is July 29, 2023. (**- Customer lists and other intangibles are combined with goodwill at the end of each period and evaluated as to fair value. At September 30, 2023 and December 31, 2022, it was determined that total intangible assets (which includes goodwill) had a fair value of $4.5 million and $4.2 million, respectively).

 

NOTE 9 – INCOME TAXES

 

At September 30, 2023 and December 31, 2022, the Company had a net operating loss carryforward of $37,723,739 and $34,112,810, respectively, which begins to expire in 2034.

 

Components of net deferred tax asset, including a valuation allowance, are as follows:

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Deferred tax asset:
Net operating loss carryforward		$	7,922,000			$	7,163,690
Total deferred tax asset			7,922,000				7,163,690
Less: Valuation allowance			(7,922,000	)			(7,163,690	)
Net deferred tax asset		$	-			$	-

 

Valuation allowance for deferred tax assets as of September 30, 2023, and December 31, 2022, was $7,922,000 and $7,163,690, 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, 2023, and December 31, 2022, and recognized 100% valuation allowance for each period.

 

 

Reconciliation between the statutory rate and the effective tax rate for both periods and as of September 30, 2023 and December 31, 2022:

 

Federal statutory rate			(21.0	)%
State taxes, net of federal benefit			(0.0	)%
Change in valuation allowance			21.0	%
Effective tax rate			0.0	%

 

On August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous provisions, including a 15% corporate alternative minimum income tax on “adjusted financial statement income”, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases. The provisions of the 2022 act become effective for tax years beginning after December 31, 2022. On December 27, 2022, the IRS and Department of Treasury issued initial guidance for taxpayers subject to the corporate alternative minimum tax. The guidance addresses several, but not all, issues that needed clarification. The IRS and Department of Treasury intend to release additional guidance in the future. We will continue to evaluate the impact of the 2022 act as more guidance becomes available. We currently do not expect an impact on our consolidated financial statements.

 

NOTE 10 – SHARE CAPITAL

 

The Company is authorized to issue 600,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock.

 

On June 27, 2023, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of 1-for-25. The share numbers and pricing information in this report are adjusted to reflect the reverse stock split as of September 30, 2023.

 

Common stock and preferred stock

 

For the month of February 2022, the following transactions occurred: On February 3, 2022, multiple Series B Convertible Preferred stockholders converted 201,358 shares of their Series B Convertible preferred stock to 10,068 shares of common stock of the Company. On February 3, 2022, the Company converted two outstanding notes into 7,443 shares of common stock of the Company. On February 10, 2022, the Company received an equity investment of $10,500,000 to purchase 101,205 shares of the Company’s common stock through a registered public offering at $103.75 per share.

 

For the month of July 2022 the following transactions occurred: On July 12, 2022, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. (“Armistice Capital”) for the purchase and sale of $12,887,976.31 of securities, consisting of (i) 20,372 shares of common stock at $27.75 per share, (ii) prefunded warrants (the “Prefunded Warrants”) that are exercisable into 448,096 shares of common stock (the “Prefunded Warrant Shares”) at $27.50 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock at an initial exercise price of $21.50 per share and will expire five years from the date of issuance.

 

For the month of August 2022, the following transactions occurred: On August 22, 2022, 4,000 shares of common stock were issued in return for services as a component of a February 2022 services agreement. During the month of August 2022, Armistice Capital exercised 17,618 Prefunded Warrants. Along with the exercise notice and payment of $4,404.41, 17,618 shares of common stock were issued.

 

For the month of September 2022, the following transactions occurred: During the month of September 2022, Armistice Capital exercised 107,318 Prefunded Warrants. Along with several exercise notices and payments totaling $26,829.60, 107,318 shares of common stock were issued.

 

For the month of October 2022, the following transactions occurred: During the month of October 2022, Armistice Capital exercised 323,160 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790.00, 323,160 shares of common stock were issued.

 

For the month of November 2022, the following transactions occurred: During the month of November 2022, Calvary Fund exercised 15,099 Calvary Warrants (see Note 11 – Warrants and Options). Along with an exercise notice and payment totaling $3,774.84, 15,099 shares of common stock were issued.

 

For the month of June 2023 the following transactions occurred: On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,850.63 of securities, consisting of (i) 71,499 shares of common stock at $4.37 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “ 2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance.

 

 

For the month of July 2023, the following transactions occurred: Approximately 1,488,615 shares of the Company’s common stock were issued pursuant to the 100-share lot roundup caused by the reverse stock split on June 27, 2023. The Depository Trust and Clearing Corporation (the “DTCC”) which handles the clearing and settlement of virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets submitted numerous requests for share allocations. In connection with the Company’s June 27, 2023 1-for-25 reverse split DTCC made these requests. An additional 1.488 million shares of the Company’s common stock were newly issued and added to its post-reverse stock split numbers. As described in the Company’s Information Statement filed on Schedule 14C dated December 14, 2022, shareholders holding at least a “round lot” (100 shares or more) prior to the reverse stock split shall have no less than one round lot (100 shares) after the reverse stock split.

 

Pursuant to the PIPE transaction 71,499 shares of common stock were issued to Armistice Capital. The 2023 Prefunded Warrants held by Armistice Capital were not exercised for the month of July.

 

For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued.

 

For the month of September 2023, the following transactions occurred: On September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.

 

Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued 2,988,687 shares of the Company’s common stock, of which 2,242,000 shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of 356,687 shares of common stock (September 21^st) and 390,000 shares of common stock (September 12^th), representing less than 9.99% ownership interest by Armistice Capital on such dates.

 

On September 8, 2023 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, 370,000 shares of common stock were issued. On September 19, 2023 the Company issued 6,391 shares of common stock pursuant to the Company’s 2019 LTIP equity plan. The shares were valued at $4,984.98 with a per share value of $0.78 which was the Company’s common stock closing market price on the grant date and date of issuance. Approximately 3.954 shares of common stock were issued to Mr. Ross our CEO and 2,237 shares of common stock were issued to Mr. Grau our COO and interim CFO pursuant to the LTIP plan. Additionally, September 19, 2023 3,721 shares of common stock were granted and issued to a vendor associated with our current working capital loan. The shares were valued at $2,902.38 with a per share value of $0.78 on that date. On September 20, 2023 the Company issued 24,129 shares of common stock pursuant to the Company’s board compensation plan. The shares were valued at $18,096.75 with a per share value of $0.75 which was the Company’s common stock closing market price on the grant date and date of issuance. The Company recognized approximately $228,000 in gain on settlement of debt through the issuance of common stock on this date.

 

At September 30, 2023 and December 31, 2022, there were 5,875,263 and 677,221 shares of common stock issued and outstanding, respectively; and 75,143 and 75,143 shares of Series B preferred stock issued and outstanding, respectively, and 100,000 and 100,000 shares of its Series A preferred stock issued and outstanding, respectively.

 

See Note 15 – Subsequent Events, the Company on October 31, 2023, approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from 100,000 to 150,000 and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. On November 3, 2023, the Company approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are further described in Note 15 – Subsequent Events.

 

 

NOTE 11 – WARRANTS AND OPTIONS

 

On February 10, 2022, the Company received an equity investment of $10,500,000 to purchase 101,205 shares of the Company’s common stock through a registered public offering at $103.75 per share. Along with the issuance of the shares of common stock, the Company issued immediately exercisable warrants (the “Uplist Warrants”) to purchase up to 101,205 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. Commensurate with the February 10, 2022 offering the Company issued to its underwriters immediately exercisable warrants to purchase up to 15,181 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. On July 8, 2022, the Company issued a dilutive issuance notice that in accordance with Section 3(b) of the Uplist Warrants, upon closing of the July 12, 2022 PIPE transaction, the exercise price of the Uplist Warrants shall be reduced from the current exercise price of $129.6875 to $50.25.

 

On February 11, 2022, we entered into a transaction with Calvary Fund, the provider of our 2021 bridge financing for the retirement of its debt instrument, principal and interest with a combined value of $1,566,659.00 through the issuance of securities, consisting of (i) prefunded warrants (the “Calvary Warrants”) that are exercisable into 15,099 shares of common stock (the “Calvary Warrant Shares”) at $103.75 per Calvary Warrant, and (iii) immediately exercisable Uplist Warrants to purchase up to 15,099 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. On July 8, 2022, the Company issued a dilutive issuance notice that in accordance with Section 3(b) of the Uplist Warrants, upon closing of the July 12, 2022 PIPE transaction, the exercise price of the Uplist Warrants shall be reduced from the current exercise price of $129.6875 to $50.25.

 

On July 12, 2022, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $12,887,976.31 of securities, consisting of (i) 20,372 shares of common stock at $27.75 per share, (ii) prefunded warrants (the “Prefunded Warrants”) that are exercisable into 448,096 shares of common stock (the “Prefunded Warrant Shares”) at $27.50 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock with an exercise price of $21.50 per warrant and will expire five years from the date of issuance. As part of the June 27, 2023 transaction with Armistice the Company was required along with its transaction an additional 1,365,251 immediately exercisable warrants to purchase up to 1,365,251 shares of common stock with an exercise price of $21.50 per warrant and will expire five years from the original date.

 

On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,850.63 of securities, consisting of (i) 71,499 shares of common stock at $4.37 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “ 2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance. The 686,499 warrants were repriced to $1.10 per share as part of the Inducement Letter and exercise terms with Armistice Capital.

 

On September 8, 2023, the Company entered into an inducement offer letter agreement with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.

 

Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued 2,988,687 shares of the Company’s common stock, of which 2,242,000 shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of 356,687 shares of common stock (September 21^st) and 390,000 shares of common stock (September 12^th), representing less than 9.99% ownership interest by Armistice Capital on such dates. The common stock purchase warrants that were induced into being exercised were all held by Armistice Capital and consisted of the July 12, 2022 immediately exercisable warrants with an exercise price of $21.50, the additional issuance of warrants to Armistice Capital that contractually were part of the July 12, 2022 issuance but were triggered by the June 27, 2023 offering that occurred with Armistice Capital and resulting in an additional 1,365,251 immediately exercisable warrants with an exercise price of $21.50, along with 686,499 immediately exercisable warrants with an exercise price of $4.24 that were issued on June 27, 2023.

 

 

On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued. On September 8, 2023 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, 370,000 shares of common stock were issued. A total of 615,000 2023 Prefunded Warrants were exercised along with 746,687 warrants per the Inducement Letter.

 

As of December 31, 2022, no Prefunded Warrants remained issued and outstanding with respect to the July PIPE transaction. The Prefunded Warrants were purchased in their entirety by the holders of the warrants for $27.50 per warrant. The Prefunded Warrants required the payment of an additional $0.25 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 from July 12, 2022 through December 31, 2022, the Company received notice on 448,096 Prefunded Warrants converting into 448,096 shares of common stock.

 

Calvary Fund exercised all of its Calvary Warrants by November 30, 2022 requiring the payment of an additional $0.25 per warrant and the written notice of exercise to the Company to convert the Calvary Warrant into one share of common stock of the Company. Calvary Fund continues to hold the 15,099 warrants exercisable at a price of $50.25 per warrant.

 

Along with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to 936,937 shares of the Company’s common stock with an exercise price of $21.50 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 $21.50 per share with a five-year expiry. None of these warrants have been exercised by the holders. These warrants were repriced to $1.10 per share as part of the Inducement Letter and exercise agreement by Armistice Capital.

 

As of December 31, 2022, there were 1,096,455 warrants issued and outstanding to acquire additional shares of common stock. As of September 30, 2023, there were 6,136,892 warrants issued and 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 warrants have an immaterial fair value at December 31, 2022 and September 30, 2023. 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 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.

 

		September 30, 2023				December 31, 2022
		(unaudited)				(audited)
Stock Price		$	0.70			$	4.75
Exercise Price		$	1.10			$	21.50
Term (expected in years)			3.2				4.5
Volatility			40.12	%			38.14	%
Annual Rate of Dividends			0.0	%			0.0	%
Risk Free Rate			5.46	%			4.69	%
Measurement input

 

 

Stock Purchase Warrants

 

The following table summarizes all warrant activity for the year ended December 31, 2022, and for the nine months ended September 30, 2023.

 

		Shares				Weighted- Average Exercise Price Per Share				Remaining term				Intrinsic value
Outstanding and Exercisable at December 31, 2021			28,072			$	220.00				2.95 years				-
Granted			116,386			$	50.25				5.00 years				-
Granted in Debt Conversion			15,099			$	50.25				5.00 years				-
Granted Prefunded Warrants			463,195			$	0.25				5.00 years				-
Granted in PIPE transaction			936,937			$	21.50	*			5.00 years				-
Exercised			(463,195	)		$	0.25				-				-
Expired			(39	)			-				-				-
Outstanding and Exercisable at December 31, 2022 (audited)			1,096,455				30.05				4.95 years
Granted Prefunded Warrants			615,000			$	4.37				5.00 years				-
Granted in PIPE transaction			686,499			$	4.24	*			5.00 years				-
Granted pursuant to repricing transaction			1,365,251			$	1.10	*			4.00 years				-
Granted pursuant to Inducement Agreement – New Warrants			5,977,374			$	1.10				5.00 years				-
Exercised			(3,603,687	)		$	0.88				5.00 years				-
Expired			-				-				-				-
Outstanding and Exercisable at September 30, 2023 (unaudited)			6,136,892			$	3.15				4.70 years				-

 

-

*Pursuant to the Inducement Agreement the following warrants were repriced with an exercise price of $1.10 per warrant.

 

NOTE 12 – LEASES AND LEASED PREMISES

 

Rental Payments under Non-cancellable Operating Leases and Equipment Leases

 

The Company through its purchase of Champion acquired several 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 for which it leases facilities. Lease terms on the various spaces’ expiry from a month-to-month lease (30 days) to a long-term lease expiring in March of 2027.

 

Rent expense for operating leases totaled approximately $630,000 and $300,000 for the nine months ended September 30, 2023, and 2022, respectively.

 

The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.

 

Rental equipment expense for finance leases totaled approximately $0 and $0 for the nine months ended September 30, 2023, and 2022, respectively.

 

Right of Use Assets and Lease Liabilities

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company 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 amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company 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 purpose, 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’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

 

 

On January 1, 2019, the Company adopted ASC 842 which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. ASC 842 requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019.

 

The adoption of ASC 842 resulted in the recognition of ROU assets of $0 and lease liabilities for operating leases of $0 on the Company’s condensed consolidated balance sheet as of January 1, 2019, with no material impact to its condensed consolidated statements of operations. The difference between the ROU assets and the operating lease liability represents the reclassification of (i) deferred rent balances, resulting from the historical operating leases, and (ii) certain accrued restructuring liabilities. The Company’s accounting for finance leases remained substantially unchanged from its accounting for capital leases in prior periods.

 

The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.

 

For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.

 

For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.

 

Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.

 

The Company’s operating leases are comprised primarily of facility leases and as such we have no finance leases for our vehicles or equipment currently at this time.

 

 

Balance sheet information related to our leases is presented below:

 

		Balance Sheet location		2023				2022
				September 30,
		Balance Sheet location		2023				2022
Operating leases:
Right-of-use lease assets		Right-of-use operating lease assets		$	1,237,618			$	-
Right-of-use lease liability, current		Other current liabilities			798,136				-
Right-of-use lease liability, long-term		Right-of-use operating lease liability			439,482				-
Finance leases:
Right-of-use lease assets		Property, plant and equipment			-				-
Right-of-use lease liability, current		Current portion of long-term debt			-				-
Right-of-use lease liability, long-term		Long-term debt			-				-

 

The following provides details of the Company’s lease expense:

 

		2023				2022
		Nine Months Ended September 30,
		2023				2022
Operating lease expense, net		$	632,420			$	-
Finance lease expense:
Amortization of assets			-				-
Interest on lease liabilities			-				-
Total finance lease expense			-				-
Operating lease expense, net		$	632,420			$	-

 

Other information related to leases is presented below:

 

		2023				2022
Right-of-use assets acquired in exchange for operating lease obligations		$	1,237,618			$	-
Cash Paid for Amounts Included in Measurement of Liabilities:
Operating cash flows from finance leases			-				-
Operating cash flows from operating leases			739,710				-
Weighted Average Remaining Lease Term:
Operating leases			2.7 years				0.0 years
Finance leases			0.0 years				0.0 years
Weighted Average Discount Rate:
Operating leases			5.00	%			5.00	%
Finance leases			n/a	%			n/a	%

 

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

 

		Finance leases				Operating leases
2023 (three months remaining)		$	-			$	265,965
2024			-				688,526
2025			-				163,794
2026			-				62,792
2027			-				3,733
Thereafter			-				-
Total future minimum lease payments, undiscounted			-				1,184,810
Less: Imputed interest			(-	)			(46,410	)
Present value of future minimum lease payments		$	-			$	1,138,330

 

Rental expense totaled approximately $630,000 and $300,000 for the nine months ended September 30, 2023 and 2022, respectively.

 

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Legal Proceedings

 

During the nine-month periods ended September 30, 2023 and 2022, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company from time-to-time. In the opinion of management, and after consultation with legal counsel, resolution of any of these matters (of which there are none) is not expected to have a material effect on the condensed consolidated financial statements.

 

Contractual Obligations

 

The Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022 there was approximately $0 and $0, respectively, in outstanding letters of credit issued during the normal course of business. These letters of credit could reduce our available borrowings, if we had any. During the nine months ended September 30, 2023 the Company entered into a line of credit with a major financial institution. The amount due on the line of credit as of September 30, 2023 was $1,689,163. The Company is in compliance with the terms and covenants.

 

Executive Employment Agreements and Independent Contractor Agreements

 

The Company has written employment agreements with various other executive officers. All payments made to its executive officers and significant outside service providers are analyzed and determined by the board of directors’ compensation committee; some payments made to independent contractors (or officer payments characterized as non-employee compensation) may be subject to backup withholding or general withholding of payroll taxes, may make the Company responsible for the withholding and remittance of those taxes. Generally outside service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis and Company policy.

 

NOTE 14 – OTHER INCOME – EMPLOYEE RETENTION CREDIT

 

The Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Company received approximately $1,286,000 in tax credits under the CARES Act from the US Department of Treasury and paid approximately $178,500 to the service provider, netting the Company approximately $1,107,500 in credits for retaining its employees during COVID.

 

NOTE 15 – SUBSEQUENT EVENTS

 

The Company evaluated all events that occurred after the balance sheet date of September 30, 2023, through the date the financial statements were issued and determined that there were the following subsequent events:

 

On October 31, 2023, the Company approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from 100,000 to 150,000 and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. 

 

On November 3, 2023, the Company’s board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are as follows:

 

●

The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, junior to the Company’s Series A Preferred Stock and senior to its Common Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of its Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up.

 

●

Each share of Series C Preferred Stock has an initial stated value of $7.50, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series C Preferred Stock.

 

●

Dividends on the Series C Preferred Stock are cumulative and payable quarterly in arrears to all holders of record on the applicable record date. Holders of Series C Preferred Stock are entitled to receive cumulative quarterly dividends at a per annum rate of 8.53% of the stated value (or $0.16 per share per quarter based on the liquidation preference per share); provided that upon an event of default (generally defined as the Company’s failure to pay dividends when due or to redeem shares when requested by a holder), such amount shall be increased to $0.225 per quarter, which is equivalent to the annual rate of 12% of the $7.50 liquidation preference per share. In the Company’s sole discretion, dividends may be paid in cash or in kind in the form of Common Stock equal to the closing price of Common Stock on the last day of the quarter. Dividends on each share begin accruing on, and are cumulative from, the date of issuance and regardless of whether the Board declares and pays such dividends. Dividends on shares of Series C Preferred Stock will continue to accrue even if any of the Company’s agreements prohibit the current payment of dividends or it does not have earnings.

 

 

●

Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock or Series B Preferred Stock and on a junior basis with holders of Series A Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon (whether or not declared).

 

●

The Company may redeem the shares of Series C Preferred Stock, in whole or in part at any time after the fifth anniversary of the initial closing of offering selling such shares and continuing indefinitely thereafter, at the Company’s option, for cash, at $11.25 per share of Series C Preferred Stock, plus any accrued and unpaid dividends.

 

●

Once per calendar quarter beginning any time after the fifth-year anniversary of date of issuance, a Holder of record of shares of Series C Preferred Stock may elect to cause the Company to redeem all or any portion of their shares of Series C Preferred Stock for an amount equal to $11.25 per share plus any accrued and unpaid dividends, which amount may be settled by delivery of cash or shares of Common Stock, at the option of the holder. If the holder elects settlement in shares of Common Stock, the Company will deliver such number of shares of Common Stock equal to $11.25 per share of Series C Preferred Stock to be redeemed plus any accrued and unpaid dividends corresponding to the redeemed shares, divided by $2.25 per share (subject to pro rata adjustment in connection with any stock splits, stock dividends, or similar changes to the Company’s capitalization occurring after the date of this Certificate), with any fraction rounded up to the next whole share of Common Stock. A holder making such election shall provide written notice thereof to the Company specifying the name and address of the holder, the number of shares to be redeemed and whether settlement shall be in cash or shares of Common Stock. The Company shall redeem the specified shares of Series C Preferred Stock for shares of Common Stock no later than ten (10) days, or for cash no later than 365 days, following receipt of such notice.

 

●

The Company is not obligated to redeem or repurchase shares of Series C Preferred Stock if it is restricted by applicable law or its articles of incorporation from making such redemption or repurchase or to the extent any such redemption or repurchase would cause or constitute a default under any borrowing agreements to which it or any of its subsidiaries are a party or otherwise bound. In addition, the Company has no obligation to redeem shares in connection with a redemption request made by a holder if it determines, as of the redemption date, that it does not have sufficient funds available to fund that redemption. In this regard, the Company will have complete discretion under the certificate of designation for the Series C Preferred Stock to determine whether it is in possession of “sufficient funds” to fund a redemption request. Redemptions will be limited to five percent (5%) of the total outstanding shares of Series C Preferred Stock per quarter. To the extent the Company is unable to complete redemptions it may have earlier agreed to make, the Company will complete those redemptions promptly after it becomes able to do so, with all such deferred redemptions being satisfied on a first come, first served, basis.

 

●

The Series C Preferred Stock has no voting rights relative to matters submitted to a vote of the Company’s stockholders (other than as required by law). The Company may not authorize or issue any class or series of equity securities ranking senior to the Series C Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend its articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series C Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the Company’s outstanding shares of Series C Preferred Stock, voting together as a class.

 

●

The Company will not be required to redeem shares of Series C Preferred Stock at any time except as otherwise described above. Accordingly, the shares of Series C Preferred Stock will remain outstanding indefinitely, unless the Company decides, at its option, to exercise its call right, or the holder of the Series C Preferred Stock exercises their put right. The shares of Series C Preferred Stock will not be subject to any sinking fund.

 

●

Each share of Series C Preferred Stock shall be convertible into shares of Common Stock at a price per share of $1.50 (1 share of Series C Preferred Stock converts into 5 shares of Common Stock), at the option of the holder thereof, at any time following the issuance date of such share of Series C Preferred Stock and on or prior to the fifth (5th) day prior to a redemption date, if any, as may have been fixed in any redemption notice with respect to the shares of Series C Preferred Stock, at the Company’s office or any transfer agent for such stock.

 

 

PART III – EXHIBITS

 

Exhibit Index

 

Exhibit No.		Description
1.1**		Selling Agency Agreement, dated [*], 2023, between American Rebel Holdings, Inc. and Digital Offering, LLC
1.2*		Side Letter, dated June 28, 2023, between Digital Offering LLC and EF Hutton, division of Benchmark Investment, LLC
1.3*		Side Letter Amendment, dated January 24, 2024 between Digital Offering, LLC and EF Hutton, LLC, division of Benchmark Investment, LLC
2.1*		Second Amended and Restated Articles of Incorporation effective January 22, 2022
2.2*		Amended and Restated Bylaws of American Rebel Holdings, Inc. effective as of February 9, 2022
2.3*		Certificate of Amendment to the Second Amended and Restated Articles effectuating 25:1 Reverse Stock Split
3.1*		Certificate of Designation of Series A Preferred Stock
3.2*		Certificate of Designation of Series B Preferred Stock
3.3*		Amended Certificate of Designation of Series B Preferred Stock
3.4*		First Amended and Restated Certificate of Designation of Series C Preferred Stock
3.5		Amended and Restated Certificate of Designation of Series A Preferred Stock ((Incorporated by reference to Exhibit 4.1 to Form 8-K filed on November 6, 2023)
3.6*		Warrant Agency Agreement with Action Stock Transfer dated February 9, 2022
3.7*		Form of Pre-funded Warrant
3.8*		Line of Credit Agreement dated February 10, 2023
3.9		Financing Agreement dated April 14, 2023 (Incorporated by reference to Exhibit 4.1 to Form 8-K, filed May 1, 2023)
3.10		Armistice Form of New Warrant A (Incorporated by reference to Exhibit 4.1 to Form 8-K/A, filed on September 8, 2023)
3.11		Armistice Form of New Warrant B (Incorporated by reference to Exhibit 4.2 to Form 8-K/A, filed on September 8, 2023)
3.12*		Alt Banq Financing Agreement dated December 28, 2023
3.13		New $75,000 Loan Agreement dated January 1, 2024 (Incorporated by reference to Exhibit 10.1 to Form 8-K, filed on January 5, 2024)
4.1*		Form of Subscription Agreement
6.1		Ross Employment Agreement dated January 1, 2021 (Incorporated by reference to Exhibit 10.1 to Form 8-K, filed March 5, 2021)
6.2		Grau Employment Agreement dated January 1, 2021 (Incorporated by reference to Exhibit 10. 2 to Form 8-K, filed March 5, 2021)

 

 

6.3		2021 Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 to Form 8-K, filed March 5, 2021)
6.4*		Ross Amendment to Employment Agreement dated April 9, 2021
6.5*		Grau Amendment to Employment Agreement dated April 9, 2021
6.6		Lambrecht Employment Agreement dated November 20, 2023 (Incorporated by reference to Exhibit 10.2 to Form 8-K, filed on November 24, 2023)
6.7		Ross Amendment No. 2 to Employment Agreement dated November 20, 2023 (Incorporated by reference to Exhibit 10.3 to Form 8-K, filed on November 24, 2023)
6.8		Grau Amendment No. 2 to Employment Agreement dated November 20, 2023 (Incorporated by reference to Exhibit 10.4 to Form 8-K, filed on November 24, 2023)
6.9		Securities Purchase Agreement, dated June 27, 2023, between American Rebel Holdings, Inc. and the Armistice Capital Master Fund Ltd. (Incorporated by reference to Exhibit 10.1 to Form 8-K filed on June 28, 2023)
6.10		Armistice Form of Warrant (Incorporated by reference to Exhibit 10.2 to Form 8-K filed on June 28, 2023)
6.11		Armistice Form of Prefunded Warrant (Incorporated by reference to Exhibit 10.3 to Form 8-K filed on June 28, 2023)
6.12		Armistice Form of Registration Rights Agreement (Incorporated by reference to Exhibit 10.4 to Form 8-K filed on June 28, 2023)
6.13*		Tony Stewart Racing Nitro Sponsorship Agreement dated July 1, 2023
6.14*		Master Brewing Agreement dated August 9, 2023
6.15		Armistice Form of Inducement Letter dated September 8, 2023 (Incorporated by reference to Exhibit 10.1 to Form 8-K/A, filed on September 8, 2023)
7.1		Securities Purchase Agreement, dated June 9, 2016, by and among CubeScape, Inc., American Rebel, Inc., and certain individual named therein (Incorporated by reference to Exhibit 2.1 to Form 8-K, filed June 15, 2016)
7.2		Champion Safe Co., Inc. Stock Membership Interest Purchase Agreement dated June 29, 2022 (Incorporated by reference to Exhibit 2.1 to Form 8-K, filed July 6, 2022)
8.1**		Escrow Agreement, dated [*], 2023, by and among American Rebel Holdings, Inc., Digital Offering LLC and Wilmington Trust, National Association
10.1*		Power of attorney (included on the signature page of this offering statement)
11.1**		Consent of BF Borgers CPA, P.C.
11.2**		Consent of DeMint Law, PLLC (included in Exhibit 12.1)
12.1**		Opinion of DeMint law, PLLC

 

*	Filed herewith.
**	To be filed by amendment.

 

 

SIGNATURES

 

Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Nashville, Tennessee, on February 22, 2024.

 

	American Rebel Holdings, Inc.
	By:	/s/ Charles A. Ross, Jr.
		Charles A. Ross, Jr.
		Chief Executive Officer

 

Each person whose signature appears below constitutes and appoints Charles A. Ross, Jr. as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and his name, place and stead, in any and all capacities, to sign any or all amendments (including post-qualification amendments) to this Offering Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.

 

This offering statement has been signed by the following persons, in the capacities, and on the dates indicated.

 

SIGNATURE		TITLE		DATE
/s/ Charles A. Ross, Jr.		Chief Executive Officer (Principal Executive Officer), Secretary, Treasurer and Director		February 22, 2024
Charles A. Ross, Jr.
/s/ Doug E. Grau		President (Interim Principal Financial Officer)		February 22, 2024
Doug E. Grau
/s/ Corey Lambrecht		Chief Executive Officer and Director		February 22, 2024
Corey Lambrecht
/s/ Michael Dean Smith		Director		February 22, 2024
Michael Dean Smith
/s/ C. Stephen Cochennet		Director		February 22, 2024
C. Stephen Cochennet
/s/ Larry Sinks		Director		February 22, 2024
Larry Sinks

 

 

Exhibit 1.2

 

 

Member FINRA/SIPC

1461 Glenneyre Street, Suite D

Laguna Beach, CA 92651

 

Phone (866) 209-1955

 

June 28, 2023

 

EF Hutton, division of Benchmark Investment, LLC

590 Madison Avenue, Floor 39,

New York, NY 10022

 

Attention: Sam Fleischman, Supervisory Principal

 

Dear Mr. Fleischman:

 

Reference is made to the engagement letter, dated June 28, 2023 (the “Engagement Letter”), among American Rebel Holdings Inc. (the “Company”), Digital Offering, LLC (“DO”), as Selling Agent (the “Selling Agent”) for the Reg A+ offering of preferred stock of the Company (the “Offering”). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Engagement Letter.

 

Reference is also made to Section 3 of the Engagement Letter, in which the Company has agreed to pay to DO a placement fee of eight and one half percent (8.5%) of the funds raised (the “Cash Fee”).

 

Reference is also made to the Placement Agent Agreement between and EF Hutton, division of Benchmark Investment, LLC (“EF Hutton”) and the Company dated June 27, 2023 (the “PAA”), including, the Right of First Refusal set forth in Section 9.B. of the PAA (the “ROFR”).

 

Accordingly, it is also understood and acknowledged between the parties hereto that EF Hutton agrees to a one time waiver of its ROFR in the PAA in connection with the Offering (as defined above), and consideration of this waiver, the Company and DO agree to pay to EF Hutton at the time of the closing of each tranche of the Offering a Cash Fee of one and three quarters percent (1.75%) of the gross proceeds raised in the Offering. The Company and DO agree that prior to executing the contemplated Selling Agency Agreement (the “SAA”) between the Company and DO, that the final unexecuted copy of the SAA will be provided to EF Hutton for their review and approval, which shall not be unreasonably withheld.

 

The Company and DO further agree that EF Hutton shall have no role, responsibilities or obligations in connection with the Offering, and that EF Hutton will not be named in any of the Offering materials or press releases in connection with the Offering.

 

 

If the foregoing is in accordance with your understanding, please indicate your confirmation and acceptance by signing in the space provided below.

 

Very truly yours,

 

EF Hutton, division of Benchmark Investment, LLC
By:	/s/Sam Fleischman
	Sam Fleischman Supervisory Principal

 

Confirmed and accepted as of the date of this letter:

 

Digital Offering, LLC
By:	/s/Gordon McBean
Name:	Gordon McBean
Title:	CEO

 

AMERICAN REBEL HOLDINGS INC.
By:	/s/Charles A. Ross Jr
Name:	Charles A. Ross, Jr.,
Title:	Chief Executive Officer

 

 

 

Exhibit 1.3

 

 

Member FINRA/SIPC

1461 Glenneyre Street, Suite D

Laguna Beach, CA 92651

 

Phone (866) 209-1955

 

 

January 24, 2024

 

EF Hutton LLC

590 Madison Avenue, Floor 39, New York, NY 10022

 

Attention: Sam Fleischman, Supervisory Principal

 

Dear Mr. Fleischman:

 

This letter is to amend the side letter dated June 28, 2023, among EF Hutton LLC fka EF Hutton, division of Benchmark Investment, LLC (“EF Hutton”), American Rebel Holdings Inc. (the “Company”), Digital Offering, LLC (“DO”), as Selling Agent (the “Selling Agent”) for the Reg A+ offering of preferred stock of the Company (the “Offering”).

 

Whereas, it was understood and acknowledged between the parties hereto that EF Hutton agrees to a one time waiver of its ROFR in the PAA in connection with the Offering, and consideration of this waiver, the Company and DO agree to pay to EF Hutton at the time of the closing of each tranche of the Offering a Cash Fee of one and three quarters percent (1.75%) of the gross proceeds raised in the Offering.

 

Whereas, FINRA determined the overall compensation under 5110 was unreasonable and such fees were required to be reduced from 8.5% to 7.72% a reduction of .78%. All parties understood that DO required a min fee of 6.70% to facilitate the offering including syndicate payments to be made to selling group members.

 

Therefore it is it is understood and acknowledged between the parties hereto that the Company and DO agree to pay to EF Hutton at the time of the closing of each tranche of the Offering a Cash Fee of one point zero two percent (1.02%) of the gross proceeds raised in the Offering.

 

The Company and Selling Agent agree (i) that EF Hutton shall not be identified in any prospectus filed with the SEC (other than exhibits required) or any FINRA filing in connection with the Offering (other than 5110 filing) and (ii) that the Company and the Selling Agent will jointly and severally indemnify EF Hutton and its affiliates, officers, directors, employees, and controlling persons (within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable fees and expenses of counsel), relating to or arising out of the Offering.

 

 

If the foregoing is in accordance with your understanding, please indicate your confirmation and acceptance by signing in the space provided below.

 

Very truly yours,

 

EF Hutton LLC
By:	/s/ Sam Fleishman
	Sam Fleischman
	Supervisory Principal

 

Confirmed and accepted as of the date of this letter:

 

Digital Offering, LLC
By:	/s/ Gordon McBean
Name:	Gordon McBean
Title:	CEO

 

AMERICAN REBEL HOLDINGS INC.
By:	/s/ Charles A Ross, Jr
Name:	Charles A. Ross, Jr.
Title:	Chief Executive Officer

 

 

Exhibit 2.1

 

SECOND AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

AMERICAN REBEL HOLDINGS, INC.

 

KNOW ALL MEN BY THESE PRESENTS:

 

That the undersigned, being at least eighteen (18) years of age and acting as the incorporator of the Corporation hereby being formed under and pursuant to the laws of the State of Nevada, does hereby certify that:

 

Article I - NAME

 

The exact name of this Corporation is:

 

AMERICAN REBEL HOLDINGS, INC.

 

Article II - REGISTERED OFFICE AND RESIDENT AGENT

 

The registered office and place of business in the State of Tennessee of this Corporation shall be as designated by the Corporation’s Board of Directors from time to time. The registered agent of the Corporation is The Corporate Place, Inc., whose address is 601 E. Charleston Blvd, Ste 100, Las Vegas, Nevada 89104.

 

Article III - DURATION

 

The Corporation shall have perpetual existence.

 

Article IV - PURPOSES

 

The purpose, object and nature of the business for which this Corporation is organized are:

 

(a) To engage in any lawful activity, (b) To carry on such business as may be necessary, convenient, or desirable to accomplish the above purposes, and to do all other things incidental thereto which are not forbidden by law or by these Articles of Incorporation.

 

Article V - POWERS

 

This corporation is formed pursuant to Chapter 78 of the Nevada Revised Statutes. The powers of the Corporation shall be those powers granted by 78.060 and 78.070 of the Nevada Revised Statutes under which this Corporation is formed. In addition, the Corporation shall have the following specific powers:

 

(a) To elect or appoint officers and agents of the Corporation and to fix their compensation; (b) To act as an agent for any individual, association, partnership, corporation or other legal entity; (c) To receive, acquire, hold, exercise rights arising out of the ownership or possession thereof, sell, or otherwise dispose of, shares or other interests in, or obligations of, individuals, association, partnerships, corporations, or governments; (d) To receive, acquire, hold, pledge, transfer, or otherwise dispose of shares of the Corporation, but such shares may only be purchased, directly or indirectly, out of earned surplus; (e) To make gifts or contributions for the public welfare or for charitable, scientific or educational purposes.

 

Article VI - CAPITAL STOCK

 

Section 1. Authorized Shares. The total number of shares which this Corporation is authorized to issue is (i) 600,000,000 shares of Common Stock of $0.001 par value, and (ii) 10,000,000 shares of Preferred Stock of $0.001 par value, of which; 100,000 are designated as Series A Convertible Preferred Stock, and 250,000 are designated as Series B Convertible Preferred Stock. The authority of the Corporation to issue non-voting convertible and/or non-voting non-convertible preferred shares together with additional classes of shares may be limited by resolution of the Board of Directors of the Corporation. Preferred shares and additional classes of shares may be issued from time to time as the Board of Directors may determine in their sole judgment and without the necessity of action by the holders of Shares.

 

 

Series A Preferred Designation

 

The rights, preferences, restrictions and other matters relating to the Series A Convertible Preferred Stock are as follows:

 

Section I. Designation and Amount. There is hereby authorized to be issued out of the authorized and unissued shares of preferred stock of the Corporation a class of preferred stock designated as the “Series A – Super Voting Convertible Preferred Stock” (“Series A Preferred Stock”) and the number of shares constituting such class shall be 100,000.

 

Section II. Voting Rights. Holders of the Series A Preferred Stock shall be entitled to cast one thousand (1,000) votes for each share held of the Series A Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.

 

Section III. Redemption Rights. The Series A Preferred Stock is not redeemable by the Corporation.

 

Section IV. Protective Provisions. So long as any shares of Series A Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series A Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series A Preferred Stock:

 

(a) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of;

 

(b) alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares;

 

(c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

 

(d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series A Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Series A Preferred Stock; or

 

(e) amend the Corporation’s Articles of Incorporation or bylaws

 

Section V. Other Rights. Except as otherwise stated herein, there are no other rights, privileges, or preferences attendant or relating to in any way the Series A Preferred Stock, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.

 

 

Section VI. Definitions. As used in herein, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:

 

“Common Stock” means any and all shares of the Corporation’s $0.001 par value common stock.

 

“Corporation” means American Rebel Holdings, Inc., a Nevada corporation, and its successors.

 

“Series A Preferred Stock” has the meaning ascribed to it in Section I hereof.

 

“Holder” means a holder of a share or shares of Series A Preferred Stock as reflected in the stock books of the Corporation.

 

Series B Preferred Designation

 

The rights, preferences, restrictions and other matters relating to the Series B Convertible Preferred Stock are as follows:

 

The number of shares constituting the Series B Convertible Preferred Stock shall be 350,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series B Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series B Convertible Preferred Stock.

 

1. Designation. The Shares are designated as the Company’s Series B Convertible Preferred Stock (the “Series B Preferred”).

 

2. Conversion. The holders of the Series B Preferred shall have conversion rights as follows (the “Conversion Rights”):

 

(a) Right to Convert. Each Series B Preferred share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.07 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, and on or prior to the fifth (5^th) day prior to a redemption Date, if any, as may have been fixed in any redemption notice with respect to the Series B Preferred shares, at the office of this Company or any transfer agent for such stock.

 

(b) Mechanics of Conversion. Before any holder of Series B Preferred shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of this Company or of any transfer agent for the Series B Preferred, and shall give written notice to this Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Series B Preferred shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series B Preferred to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

 

(c) No Impairment. This Company will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this Company, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Preferred shares against impairment.

 

(d) Reservation of Stock Issuable Upon Conversion. Following the date hereof, the Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series B Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred shares; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred shares, in addition to such other remedies as shall be available to the holder of such Series B Preferred shares, this Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Articles of Incorporation.

 

(e) Notice. Any notice required by the provisions of this section to be given to the holders of Series B Preferred shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this Company.

 

3. Other Rights. Except as otherwise stated herein, there are no other rights, privileges, or preferences attendant or relating to in any way the Series B Preferred, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.

 

4. Voting Rights. The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Series B Preferred.

 

5. Protective Provisions. So long as any Series B Preferred are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Series B Preferred which is entitled, other than solely by law, to vote with respect to the matter, and which Series B Preferred represents at least a majority of the voting power of the then outstanding Series B Preferred:

 

(a) alter or change the rights, preferences or privileges of the Series B Preferred so as to affect adversely the Series B Preferred; or

 

(b) increase the total number of authorized Series B Preferred.

 

Section 2. Voting Rights of Stockholders. Each holder of the Common Stock shall be entitled to one vote for each share of stock standing in his name on the books of the Corporation.

 

Section 3. Consideration for Shares. The Common Stock shall be issued for such consideration, as shall be fixed from time to time by the Board of Directors. In the absence of fraud, the judgment of the Directors as to the value of any property or services received in full or partial payment for shares shall be conclusive. When shares are issued upon payment of the consideration fixed by the Board of Directors, such shares shall be taken to be fully paid stock and shall be non-assessable.

 

 

Section 4. Stock Rights and Options. The Corporation shall have the power to create and issue rights, warrants, or options entitling the holders thereof to purchase from the Corporation any shares of its capital stock of any class or classes, upon such terms and conditions and at such times and prices as the Board of Directors may provide, which terms and conditions shall be incorporated in an instrument or instruments evidencing such rights. In the absence of fraud, the judgment of the Directors as to the adequacy of consideration for the issuance of such rights or options and the sufficiency thereof shall be conclusive.

 

Section 5. Reverse Stock Split. Effective on January 20, 2022 (the “Effective Time”), the shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Effective Time (the “Old Common Stock”), will be automatically reclassified as and combined into shares of Common Stock (the “New Common Stock”) such that each forty (40) shares of Old Common Stock shall be reclassified as and combined into one share of New Common Stock. Notwithstanding the previous sentence, no fractional shares of New Common Stock shall be issued to the holders of record of Old Common Stock in connection with the foregoing reclassification of shares of Old Common Stock. Stockholders who, immediately prior to the Effective Time, own a number of shares of Old Common Stock, which is not evenly divisible by 100 shall, with respect to such fractional interest, be entitled to receive one (1) whole share of Common Stock in lieu of a fraction of a share of New Common Stock. Each stock certificate that, immediately prior to the Effective Time represented shares of Old Common Stock shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of New Common Stock into which the shares of Old Common Stock represented by such certificate shall have been reclassified; provided, however, that each holder of record of a certificate that represented shares of Old Common Stock shall receive, upon surrender of such certificate, a new certificate representing the number of whole shares of New Common Stock into which the shares of Old Common Stock represented by such certificate shall have been reclassified as set forth above. In conjunction with the Reverse Stock Split, no stockholder holding at least a round lot (100 shares) prior to the Reverse Stock Split shall have less than one round lot (100 shares) after the Reverse Stock Split.

 

Article VII - MANAGEMENT

 

For the management of the business, and for the conduct of the affairs of the Corporation, and for the future definition, limitation, and regulation of the powers of the Corporation and its directors and stockholders, it is further provided:

 

Section 1. Size of Board. The initial number of the Board of Directors shall be up to five (5). Thereafter, the number of directors shall be as specified in the Bylaws of the Corporation, and such number may from time to time be increased or decreased in such manner as prescribed by the Bylaws. Directors need not be stockholders.

 

Section 2. Powers of Board. In furtherance and not in limitation of the powers conferred by the laws of the State of Nevada, the Board of Directors is expressly authorized and empowered:

 

(a) To make, alter, amend, and repeal the Bylaws subject to the power of the stockholders to alter or repeal the Bylaws made by the Board of Directors;

 

(b) Subject to the applicable provisions of the Bylaws then in effect, to determine, from time to time, whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to stockholder inspection. No stockholder shall have any right to inspect any of the accounts, books or documents of the Corporation, except as permitted by law, unless and until authorized to do so by resolution of the Board of Directors or of the stockholders of the Corporation;

 

(c) To authorize and issue, without stockholder consent, obligations of the Corporation, secured and unsecured, under such terms and conditions as the Board, in its sole discretion, may determine, and to pledge or mortgage, as security therefore, any real or personal property of the Corporation, including after-acquired property;

 

 

(d) To determine whether any and, if so, what part of the earned surplus of the Corporation shall be paid in dividends to the stockholders, and to direct and determine other use and disposition of any such earned surplus;

 

(e) To fix, from time to time, the amount of the profits of the Corporation to be reserved as working capital or for any other lawful purpose;

 

(f) To establish bonus, profit-sharing, stock option, or other types of incentive compensation plans for the employees, including officers and directors, of the Corporation, and to fix the amount of profits to be shared or distributed, and to determine the persons to participate in any such plans and the amount of their respective participations.

 

(g) To designate, by resolution or resolutions passed by a majority of the whole Board, one or more committees, each consisting of two or more directors, which, to the extent permitted by law and authorized by the resolution or the Bylaws, shall have and may exercise the powers of the Board;

 

(h) To provide for the reasonable compensation of its own members by Bylaw, and to fix the terms and conditions upon which such compensation will be paid;

 

(i) In addition to the powers and authority hereinbefore, or by statute, expressly conferred upon it, the Board of Directors may exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the laws of the State of Nevada, of these Articles of Incorporation, and of the Bylaws of the Corporation.

 

Section 3. Interested Directors. No contract or transaction between this Corporation and any of its directors, or between this Corporation and any other corporation, firm, association, or other legal entity shall be invalidated by reason of the fact that the director of the Corporation has a direct or indirect interest, pecuniary or otherwise, in such corporation, firm, association, or legal entity, or because the interested director was present at the meeting of the Board of Directors which acted upon or in reference to such contract or transaction, or because he participated in such action, provided that: (1) the interest of each such director shall have been disclosed to or known by the Board and a disinterested majority of the Board shall have, nonetheless, ratified and approved such contract or transaction (such interested director or directors may be counted in determining whether a quorum is present for the meeting at which such ratification or approval is given); or (2) the conditions of N.R.S. 78.140 are met.

 

Section 4. Name and Address. The name and post office address of the Board of Directors which shall consist of three (3) persons who shall hold office until their successors are duly elected and qualified, are as follows:

 

NAME		ADDRESS
Charles “Andy” Ross, Jr.		718 Thompson Lane, Suite 108-199
		Nashville, TN 37204
Doug Grau		718 Thompson Lane, Suite 108-199
		Nashville, TN 37204
Corey Lambrecht		718 Thompson Lane, Suite 108-199
		Nashville, TN 37204

 

 

Article VIII - PLACE OF MEETING; CORPORATE BOOKS

 

Subject to the laws of the State of Nevada, the stockholders and the directors shall have power to hold their meetings, and the directors shall have power to have an office or offices and to maintain the books of the Corporation outside the State of Nevada, at such place or places as may from time to time be designated in the Bylaws or by appropriate resolution.

 

Article IX - AMENDMENT OF ARTICLES

 

The provisions of these Articles of Incorporation may be amended, altered or repealed from time to time to the extent and in the manner prescribed by the laws of the State of Nevada, and additional provisions authorized by such laws as are then in force may be added. All rights herein conferred on the directors, officers and stockholders are granted subject to this reservation.

 

Article X – The name and address of the incorporator who signed the original Articles of Incorporation was:

 

NAME		POST OFFICE ADDRESS
David Estus		601 E. Charleston Blvd, Suite 100
		Las Vegas, Nevada 89104

 

Article XI - LIMITED LIABILITY OF OFFICERS AND DIRECTORS

 

Except as hereinafter provided, the officers and directors of the Corporation shall not be personally liable to the Corporation or its stockholders for damages for breach of fiduciary duty as a director or officer. This limitation on personal liability shall not apply to acts or omissions which involve intentional misconduct, fraud, knowing violation of law, or unlawful distributions prohibited by Nevada Revised Statutes Section 78.300.

 

Article XII – TRANSACTIONS WITH STOCKHOLDERS

 

Section 1. CONTROL SHARE ACQUISITION EXEMPTION. The Corporation elects not to be governed by the provisions of NRS.§78.378 to NRS.§78.3793 generally known as the “Control Share Acquisition Statute” under the Nevada Business Corporation Law, which contains a provision governing “Acquisition of Controlling Interest.”

 

Section 2. COMBINATIONS WITH INTERESTED STOCKHOLDERS. The Corporation elects not to be governed by the provisions of NRS §78.411 through NRS §78.444, inclusive, of the Nevada Business Corporation Law.

 

Article XIII - FORUM SELECTION

 

Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, and to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any present or former director, officer or employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Nevada Revised Statutes, (iv) any action asserting a claim arising pursuant to any provision of the Certificate of Incorporation or these Bylaws (as either may be amended from time to time), or (v) any action asserting a claim governed by the internal affairs doctrine (“Covered Action”) shall be the courts in Clark County in the State of Nevada (or, if the courts in Clark County in the State of Nevada does not have jurisdiction, the federal district court for the District of Nevada). Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section. This exclusive forum selection provision will not apply to claims arising under the federal securities laws or any other claim for which the federal courts have exclusive jurisdiction.

 

 

Article XIV - SEVERABILITY PROVISIONS

 

If any voting powers, preferences and relative, participating, optional and other special rights of any class or series of capital stock and qualifications, limitations, and restrictions thereof is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of all classes and series of capital stock and qualifications, limitations and restrictions thereof set forth in these Articles of Incorporation which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative participating, optional and other special rights of any series or class of capital stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences or relative, participating, optional or other special rights of any class or series of capital stock and qualifications, limitations and restrictions thereof set forth shall be deemed dependent upon any other such voting powers, preferences or relative, participating, optional or other special rights of any class or series of capital stock and qualifications, limitations and restrictions thereof unless so expressed herein.

 

IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated Articles of Incorporation this 18^th day of January, 2022.

 

	/s/ Charles A. Ross, Jr.
	Charles A. Ross, Jr., CEO

 

 

 

Exhibit 2.2

 

AMENDED AND RESTATED BYLAWS

 

OF

 

AMERICAN REBEL HOLDINGS, INC.

a Nevada corporation

 

 

TABLE OF CONTENTS
		Page
ARTICLE I OFFICES		1
Section 1.	Principal Office	1
Section 2.	Other Offices	1
ARTICLE II DIRECTORS - MANAGEMENT		1
Section 1.	Powers, Standard of Care	1
Section 2.	Number and Qualification of Directors	1
Section 3.	Election and Term of Office of Directors	2
Section 4.	Vacancies	2
Section 5.	Removal of Directors	2
Section 6.	Place of Meetings	3
Section 7.	Annual Meetings	3
Section 8.	Other Regular Meetings	3
Section 9.	Special Meetings/Notices	3
Section 10.	Waiver of Notice	3
Section 11.	Quorums	4
Section 12.	Adjournment	4
Section 13.	Notice of Adjournment	4
Section 14.	Sole Director Provided by Articles or Bylaws	4
Section 15.	Directors Action by Unanimous Written Consent	4
Section 16.	Compensation of Directors	4
Section 17.	Committees	4
Section 18.	Meetings and Action of Committees	4
Section 19.	Advisors	4
ARTICLE III OFFICERS		5
Section 1.	Officers	5
Section 2.	Election of Officers	5
Section 3.	Subordinate Officers, Etc	5
Section 4.	Removal and Resignation of Officers	5
Section 5.	Vacancies	5
Section 6.	Chairman of the Board	5
Section 7.	President	5
Section 8.	Vice President	5
Section 9.	Secretary	6
Section 10.	Treasurer	6
ARTICLE IV SHAREHOLDERS		6
Section 1.	Place of Meetings	6
Section 2.	Annual Meeting	6
Section 3.	Special Meetings	7
Section 4.	Notice of Meetings - Reports	7
Section 5.	Quorum	7
Section 6.	Adjourned Meeting and Notice Thereof	7
Section 7.	Waiver or Consent by Absent Shareholders	8
Section 8.	List of Shareholders Entitled to Vote	8
Section 9.	Maintenance and Inspection of Bylaws	8
Section 10.	Annual Report to Shareholders	8
Section 11.	Financial Statements	9
Section 12.	Annual List of Officers, Directors, and State Business License Application	9

 

 

ARTICLE V AMENDMENTS TO BYLAWS		9
Section 1.	Amendment by Directors	9
Section 2.	Record of Amendments	9
ARTICLE VI SHARES OF STOCK		10
Section 1.	Certificate of Stock	10
Section 2.	Lost or Destroyed Certificates	10
Section 3.	Transfer of Shares	10
Section 4.	Record Date	10
ARTICLE VII DIVIDENDS		11
ARTICLE VIII FISCAL YEAR		11
ARTICLE IX CORPORATE SEAL		11
ARTICLE X INDEMNITY		11
ARTICLE XI MISCELLANEOUS		11
Section 1.	Shareholders’ Agreements	11
Section 2.	Effect of Shareholders’ Agreements	12
Section 3.	Books and Records	12
Section 4.	Invalid Provisions	12
Section 5.	Relation to Certificate of Incorproation	12
Section 6.	Forum Selection of Certain Litigation	12
Section 7.	Headings	12

 

 

AMENDED AND RESTATED BYLAWS

 

OF

AMERICAN REBEL HOLDINGS, INC.

a Nevada corporation

 

ARTICLE I

OFFICES

 

Section 1. Principal Office. The principal office for the transaction of business of American Rebel Holdings, Inc., a Nevada corporation (the “Corporation”), shall be designated by the Corporation’s Board of Directors from time to time. The location may be changed by approval of a majority of the authorized directors, and additional offices may be established and maintained at such other place or places, either within or outside of Nevada, as the Board of Directors may from time to time designate.

 

Section 2. Other Offices. Branch or subordinate offices may at any time be established by the Board of Directors at any place or places where the Corporation is qualified to do business.

 

ARTICLE II

DIRECTORS - MANAGEMENT

 

Section 1. Powers, Standard of Care.

 

1.1 Powers. Subject to the provisions of the Nevada Revised Statutes (hereinafter the “Code”), and subject to any limitations in the Articles of Incorporation of the Corporation relating to action required to be approved by the Shareholders, as that term is defined in the Code, or by the outstanding shares, as that term is defined in the Code, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board of Directors may delegate the management of the day-to-day operation of the business of the Corporation to a management company or other persons, provided that the business and affairs of the Corporation shall be managed, and all corporate powers shall be exercised, under the ultimate direction of the Board.

 

1.2 Standard of Care; Liability.

 

1.2.1 Each Director shall exercise such powers and otherwise perform such duties, in good faith, in the matters such Director believes to be in the best interests of the Corporation, and with such care, including reasonable inquiry, using ordinary prudence, as a person in a like position would use under similar circumstances.

 

1.2.2 In performing the duties of a Director, a Director shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in which case prepared or presented by:

(1) One or more officers or employees of the Corporation whom the Director believes to be reliable and competent in the matters presented,

 

(2) Counsel, independent accountants, or other persons as to which the Director believes to be within such person’s professional or expert competence, or

 

(3) A Committee of the Board upon which the Director does not serve, as to matters within its designated authority, which committee the Director believes to merit confidence, so long as in any such case the Director acts in good faith, after reasonable inquiry when the need therefore is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.

 

Section 2. Number and Qualification of Directors. The authorized number of Directors of the Corporation shall be not less than one nor more than five until changed by a duly adopted amendment to the Articles of Incorporation or by an amendment to the Bylaws. The exact number of directors may be fixed within the limits specified by resolution adopted by the vote of the majority of directors in office; but no reduction of the number of directors shall have the effect of removing any director prior to the expiration of his or her term.

 

 

Section 3. Election and Term of Office of Directors.

 

3.1 Directors shall be elected at each annual meeting of the Shareholders to hold office until the next annual meeting. If any such annual meeting of Shareholders is not held or the Directors are not elected thereat, the Directors may be elected at any special meeting of Shareholders held for that purpose. Each Director, including a Director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

 

3.2 Except as may otherwise be provided herein, or in the Articles of Incorporation by way of cumulative voting rights, the members of the Board of Directors of this Corporation, who need not be shareholders, shall be elected by a majority (plurality) of the votes cast at a meeting of shareholders, by the holders of shares of stock present in person or by proxy, entitled to vote in the election.

 

Section 4. Vacancies.

 

4.1 A vacancy or vacancies on the Board of Directors shall be deemed to exist in the event of the death, resignation, or removal of any Director, or if the Board of Directors by resolution declares vacant the office of a Director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors be increased, or if the shareholders fail, at any annual or special meeting of shareholders at which any director or directors are elected, to elect the full authorized number of directors to be voted for at the meeting.

 

4.2 Vacancies on the Board of Directors, except for a vacancy created by the removal of a Director, may be filled by a majority of the remaining Directors, though less than a quorum, or by a sole remaining Director. Each Director so elected shall hold office until the next annual meeting of the Shareholders or until a successor has been otherwise elected and qualified.

 

4.3 The Shareholders may elect a Director or Directors to fill a vacancy or vacancies only if there are no Directors in office.

 

4.4 Any Director may resign, effective upon giving written notice to the Chairman of the Board, the President, the Secretary, or the Board of Directors, unless the notice specifies a later time for that resignation to become effective. When one or more directors give notice of his or her or their resignation from the Board of Directors, effective at a future date, the Board may fill the vacancy or vacancies to take effect when the resignation or resignations become effective, each Director so appointed to hold office during the remainder of the term of office of the resigning Director(s).

 

4.5 No reduction of the authorized number of Directors shall have the effect of removing any Director before that Director’s term of office expires.

 

Section 5. Removal of Directors.

 

5.1 The entire Board of Directors, or any individual Director, may be removed from office as provided by Section 78.335 of the Code at any special meeting of Shareholders called for such purpose by vote of the holders of two-thirds of the voting power entitling them to elect directors in place of those to be removed, subject to the provisions of Section 5.2 of Article II.

 

5.2 No Director may be removed (unless the entire Board is removed) when the votes cast against removal or not consenting in writing to such removal would be sufficient to elect such Director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote, were voted) and the entire number of Directors authorized at the time of the Director’s most recent election were then being elected; and when by the provisions of the Articles of Incorporation the holders of the shares of any class or series voting as a class or series are entitled to elect one or more Directors, any Director so elected may be removed only by the applicable vote of the holders of the shares of that class or series.

 

 

Section 6. Place of Meetings. Regular meetings of the Board of Directors shall be held at any place within or outside the state that has been designated from time to time by resolution of the Board. In the absence of such resolution, regular meetings shall be held at the principal executive office of the Corporation. Special meetings of the Board shall be held at any place within or outside the state that has been designated in the notice of the meeting, or, if not stated in the notice or there is no notice, at the principal executive office of the Corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all Directors participating in such meeting can hear one another, and all such Directors shall be deemed to have been present in person at such meeting.

 

Section 7. Annual Meetings. Immediately following each annual meeting of Shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, the election of officers, and the transaction of other business. Notice of this meeting shall not be required. Minutes of any meeting of the Board, or any committee thereof, shall be maintained as required by the Code, by the Secretary, or other officer designated for that purpose.

 

Section 8. Other Regular Meetings.

 

8.1 Other regular meetings of the Board of Directors shall be held without call at such time as shall from time to time be fixed by the Board of Directors. Such regular meetings may be held without notice, provided the time and place of such meetings has been fixed by the Board of Directors, and further provided the notice of any change in the time of such meeting shall be given to all the Directors. Notice of a change in the determination of the time shall be given to each Director in the same manner as notice for such special meetings of the Board of Directors.

 

8.2 If said day falls upon a holiday, such meetings shall be held on the next succeeding business day thereafter.

 

Section 9. Special Meetings, Notices.

 

9.1 Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the Chairman of the Board or the President or any one-third or more of the Directors in office.

 

9.2 Notice of the time and place for special meetings shall be delivered personally, by electronic mail, by telephone, or sent by first class mail, charges prepaid, addressed to each Director at his or her address as it is shown in the records of the Corporation. In case such notice is mailed, it shall be deposited in the United States mail at least four days prior to the time of holding the meeting. In case such notice is delivered personally, or by telephone or other recognized delivery service, it shall be delivered personally or by telephone or to the other recognized delivery service at least 48 hours prior to the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated to either the Director or to a person at the office of the Director who the person giving the notice has reason to believe will promptly communicate same to the Director. The notice need not specify the purpose of the meeting, nor the place, if the meeting is to be held at the principal executive office of the Corporation.

 

Section 10. Waiver of Notice.

 

10.1 The transactions of any meeting of the Board of Directors, however called, noticed, or wherever held, shall be as valid as though had at a meeting duly held after the regular call and notice if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. Waivers of notice or consent need not specify the purposes of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made part of the minutes of the meeting.

 

10.2 Notice of a meeting shall also be deemed given to any Director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.

 

 

Section 11. Quorums. Presence of a majority of the authorized number of Directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 12 of this Article II. Members of the Board may participate in a meeting through use of conference telephone, video conference, or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting as permitted by the preceding sentence constitutes presence in person at such meeting. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum was present shall be regarded as the act of the Board of Directors, unless a greater number is required by law or the Articles of Incorporation. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of Directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

 

Section 12. Adjournment. A majority of the Directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

 

Section 13. Notice of Adjournment. Notice of the time and place of the holding of an adjourned meeting need not be given, unless the meeting is adjourned for more than 24 hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting to the Directors who were not present at the time of the adjournment.

 

Section 14. Sole Director Provided by Articles or Bylaws. In the event only one Director is required by the Bylaws or the Articles of Incorporation, then any reference herein to notices, waivers, consents, meetings or other actions by a majority or quorum of the Board of Directors shall be deemed or referred as such notice, waiver, etc., by the sole Director, who shall have all rights and duties and shall be entitled to exercise all of the powers and shall assume all the responsibilities otherwise herein described, as given to the Board of Directors.

 

Section 15. Directors Action by Unanimous Written Consent. Any action required or permitted to be taken by the Board of Directors may be taken without a meeting and with the same force and effect as if taken by a unanimous vote of Directors, if authorized by a writing signed individually or collectively by all members of the Board of Directors. Such consent shall be filed with the regular minutes of the Board of Directors.

 

Section 16. Compensation of Directors. By a resolution of the Board of Directors, Directors and Committee members may be paid either expenses, if any, for their attendance at each regular and special meeting of the Board of Directors or Committee meeting, or a fixed sum for attendance at each meeting, or a stated salary as a Director or Committee member, or a combination of the foregoing; provided, however, that nothing contained herein shall be construed to preclude any Director from serving the Corporation in any other capacity as an officer, employee or otherwise receiving compensation for such services.

 

Section 17. Committees. Committees of the Board of Directors may be appointed by resolution passed by a majority of the whole Board. Committees shall be composed of two or more members of the Board of Directors. The Board may designate one or more Directors as alternate members of any Committee, who may replace any absent member at any meeting of the Committee. Committees shall have such powers as those held by the Board of Directors as may be expressly delegated to it by resolution of the Board of Directors, except those powers expressly made non-delegable by the Code.

 

Section 18. Meetings and Action of Committees. Meetings and action of Committees shall be governed by, and held and taken in accordance with, the provisions of Article II, Sections 6, 8, 9, 10, 11, 12, 13 and 15, with such changes in the context of those Sections as are necessary to substitute the Committee and its members for the Board of Directors and its members, except that the time of the regular meetings of the committees may be determined by resolution of the Board of Directors as well as the Committee, and special meetings of Committees may also be given to all alternate members, who shall have the right to attend all meetings of the Committee. The Board of Directors may adopt rules for the government of any Committee not inconsistent with the provisions of these Bylaws.

 

Section 19. Advisors. The Board of Directors from time to time may request and hire for a fee one or more persons to be Advisors to the Board of Directors, but such persons shall not by such appointment be members of the Board of Directors. Advisors shall be available from time to time to perform special assignments specified by the President, to attend meetings of the Board of Directors upon invitation, and to furnish consultation to the Board of Directors. The period during which the title shall be held may be prescribed by the Board of Directors. If no period is prescribed, the title shall be held at the pleasure of the Board of Directors.

 

 

ARTICLE III

OFFICERS

 

Section 1. Officers. The principal officers of the Corporation shall be a President, a Secretary, and a Treasurer who may also be called Chief Financial Officer. The Corporation shall also have, at the discretion of the Board of Directors, a Chief Executive Officer, a Chairman of the Board, a Chief Operations Officer, Chief Legal Officer, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article III. Any number of offices may be held by the same person.

 

Section 2. Election of Officers. The principal officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article III, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the Board of Directors, subject to the rights if any, of an officer under any contract of employment. Each officer shall hold office until his or her successor shall be duly elected and qualified, or until his or her death, resignation, or removal in the manner hereinafter provided.

 

Section 3. Subordinate Officers, etc. The Board of Directors may appoint such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws, or as the Board of Directors may from time to time determine.

 

Section 4. Removal and Resignation of Officers.

 

4.1 Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by a majority of the Directors at that time in office, at any regular or special meeting of the Board of Directors, or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

 

4.2 Any officer may resign at any time by giving written notice to the Board of Directors. Any resignation shall take effect on the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

 

Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause shall be filled in the manner prescribed in the Bylaws for regular appointments to that office.

 

Section 6. Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, preside at the meetings of the Board of Directors and exercise and perform such other powers and duties as may, from time to time, be assigned by the Board of Directors or prescribed by the Bylaws. If there is no President, the Chairman of the Board shall, in addition, be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article III.

 

Section 7. President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there is such an officer, the President shall be assisting the Chief Executive Officer of the Corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the Corporation. In the absence or disability of the Chief Executive Officer, the President shall preside at all meetings of the Shareholders and, in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. The President shall have the general powers and duties of management usually vested in the office of President of a corporation, shall be ex officio a member of all the standing Committees, including the Executive Committee, if any, and shall have such other powers and duties as may be prescribed by the Board of Directors or the Bylaws.

 

Section 8. Vice President. In the absence or disability of the Chief Executive Officer, if any, and the President, the Vice Presidents, if any, in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the Chief Executive Officer and President, and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer and President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors or the Bylaws, the Chief Executive Officer, President, or the Chairman of the Board.

 

 

Section 9. Secretary.

 

9.1 The Secretary shall keep, or cause to be kept, a book of minutes of all meetings of the Board of Directors and Shareholders at the principal office of the Corporation or such other place as the Board of Directors may order. The minutes shall include the time and place of holding the meeting, whether regular or special, and if a special meeting, how authorized, the notice thereof given, and the names of those present at Directors’ and Committee meetings, the number of shares present or represented at Shareholders’ meetings and the proceedings thereof.

 

9.2 The Secretary shall keep, or cause to be kept, at the principal office of the Corporation or at the office of the Corporation’s transfer agent, a share register, or duplicate share register, showing the names of the Shareholders and their addresses; the number and classes or shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation.

 

9.3 The Secretary shall give, or cause to be given, notice of all the meetings of the Shareholders and of the Board of Directors required by the Bylaws or by law to be given. The Secretary shall keep the seal, if any, of the Corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.

 

Section 10. Treasurer.

 

10.1 The Treasurer, who may also be called Chief Financial Officer, shall keep and maintain, or cause to be kept and maintained, in accordance with generally accepted accounting principles, adequate and correct accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, earnings (or surplus) and shares issued. The books of account shall, at all reasonable times, be open to inspection by any Director.

 

10.2 The Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board of Directors. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of the transactions of the Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.

 

ARTICLE IV

SHAREHOLDERS

 

Section 1. Place of Meetings. Meetings of the Shareholders shall be held at any place within or outside the state of Nevada designated by the Board of Directors. In the absence of any such designation, Shareholders’ meetings shall be held at the principal executive office of the Corporation.

 

Section 2. Annual Meeting.

 

2.1 The annual meetings of shareholders shall be held at a date and time designated by the board of directors. (At such meetings, directors shall be elected and any other proper business may be transacted by a plurality vote of shareholders.)

 

2.2 If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same time. At the annual meeting, the Shareholders shall elect a Board of Directors, consider reports of the affairs of the Corporation and transact such other business as may be properly brought before the meeting.

 

2.3 If the above date is inconvenient, the annual meeting of Shareholders shall be held each year on a date and at a time designated by the Board of Directors.

 

 

Section 3. Special Meetings. Special meetings of the Shareholders for any purpose or purposes whatsoever, may be called at any time by the Board of Directors, the Chairman of the Board, or the President.

 

Section 4. Notice of Meetings – Reports.

 

4.1 Notice of any Shareholders meetings, annual or special, shall be given in writing not less than ten calendar days nor more than 60 calendar days before the date of the meeting to Shareholders entitled to vote thereat by the Secretary or the Assistant Secretary, or if there be no such officer, or in the case of said Secretary or Assistant Secretary’s neglect or refusal, by any Director or Shareholder.

 

4.2 Such notices or any reports shall be given personally, by mail, or other means of written communication as provided in the Code and shall be sent to the Shareholder’s address appearing on the books of the Corporation, or supplied by the Shareholder to the Corporation for the purpose of notice, and in the absence thereof, as provided in the Code by posting notice at a place where the principal executive office of the Corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located.

 

4.3 Notice of any meeting of Shareholders shall specify the place, the day and the hour of meeting, and (i) in case of a special meeting, the general nature of the business to be transacted and that no other business may be transacted, or (ii) in the case of an annual meeting, those matters which the Board of Directors, at the date of transmission of the notice, intends to present for action by the Shareholders. At any meetings where Directors are elected, notice shall include the names of the nominees, if any, intended at the date of notice to be presented for election.

 

4.4 Notice shall be deemed given at the time it is delivered personally or five business days after deposit in the mail or upon receipt of refusal if sent by other means of written communication. The officer giving such notice or report shall prepare and file in the minute book of the Corporation an affidavit or declaration thereof.

 

Section 5. Quorum.

 

5.1 The holders of one-third of the shares entitled to vote at a Shareholders’ meeting, present in person, or represented by proxy, shall constitute a quorum at all meetings of the Shareholders for the transaction of business except as otherwise provided by the Code or by these Bylaws.

 

5.2 The Shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by a majority of the shares required to constitute a quorum.

 

Section 6. Adjourned Meeting and Notice Thereof.

 

6.1 Any Shareholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at such meeting.

 

6.2 When any meeting of Shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than 45 calendar days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any adjourned meeting shall be given to each Shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 4 of this Article IV. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.

 

 

Section 7. Waiver or Consent by Absent Shareholders.

 

7.1 The transactions of any meeting of Shareholders, either annual or special, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the Shareholders entitled to vote, not present in person or by proxy, sign a written waiver of notice, or a consent to the holding of such meeting or an approval of the minutes thereof.

 

7.2 The waiver of notice or consent need not specify either the business to be transacted or the purpose of any regular or special meeting of Shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in Section 4.3 of this Article IV, the waiver of notice or consent shall state the general nature of such proposal. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

 

7.3 Attendance of a person at a meeting shall also constitute a waiver of notice of such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice. A Shareholder or Shareholders of the Corporation holding at least 5% in the aggregate of the outstanding voting shares of the Corporation may (i) inspect, and copy the records of Shareholders’ names and addresses and shareholdings during usual business hours upon five business days prior written demand upon the Corporation, and/or (ii) obtain from the transfer agent by paying such transfer agent’s usual charges for such a list, a list of the Shareholders’ names and addresses who are entitled to vote for the election of Directors, and their shareholdings, as of the most recent record date for which such list has been compiled or as of a date specified by the Shareholders subsequent to the day of demand. Such list shall be made available by the transfer agent on or before the later of five business days after the demand is received or the date specified therein as the date as of which the list is to be compiled. The record of Shareholders shall also be open to inspection upon the written demand of any Shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to such holder’s interest as a Shareholder or as a holder of a voting trust certificate. Any inspection and copying under this Section may be made in person or by an agent or attorney of such Shareholder or holder of a voting trust certificate making such demand.

 

Section 8. List of Shareholders Entitled to a Vote. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of Shareholders, a complete list of the Shareholders entitled to vote at the meeting; provided, however, if the record date for determining the Shareholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the Shareholders entitled to vote as of the tenth day before the meeting date, arranged in alphabetical order, and showing the address of each Shareholder and the number of shares registered in the name of each Shareholder. The corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any Shareholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the corporation’s principal place of business. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to Shareholders of the corporation. If the meeting is to be held at a place, then a list of Shareholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be examined by any Shareholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any Shareholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.

 

Section 9. Maintenance and Inspection of Bylaws. The Corporation shall keep at its principal executive office, or if not in this state, at its principal business office in this state, the original or a copy of the Bylaws amended to date, which shall be open to inspection by the Shareholders at all reasonable times during office hours.

 

Section 10. Annual Report to Shareholders.

 

10.1 A copy of any annual financial statement and any Income Statement of the Corporation for each quarterly period of each fiscal year, and any accompanying Balance Sheet of the Corporation as of the end of each such period, that has been prepared by the Corporation shall be kept on file at the principal executive office of the Corporation for 12 months from the date of its execution.

 

 

10.2 Only if the Corporation has not filed its annual financial statements during the 12 months prior to such request as required under Section 13 or 15 of the Securities Exchange Act of 1934, then if a Shareholder or Shareholders holding at least 15 percent of the outstanding shares of any class of stock of the Corporation makes a written request to the Corporation for an Income Statement of the Corporation for the three month, six month, or nine month period of the then current fiscal year ended more than 45 calendar days prior to the date of the request, and a Balance Sheet of the Corporation at the end of such period, the Chief Financial Officer shall cause such statement to be prepared, if not already prepared, and shall deliver personally or mail such statement or statements to the person making the request within 30 calendar days after the receipt of such request; provided however, that the Shareholder must first provide the Corporation an affidavit that such inspection, is not desired for any purpose not related to his or her interest in the corporation as a Shareholder.

 

Section 11. Financial Statements.

 

11.1 A copy of any annual financial statement and any Income Statement of the Corporation for each quarterly period of each fiscal year, and any accompanying Balance Sheet of the Corporation as of the end of each such period, that has been prepared by the Corporation shall be kept on file at the principal executive office of the Corporation for 12 months from the date of its execution.

 

11.2 Any person who has been a shareholder of record of the Corporation for no less than six months and owns not less than 15 percent of all of the issued and outstanding shares of the stock of the Corporation or has been authorized in writing by the holders of at least 15 percent of all its issued and outstanding shares, upon at least 5 calendar days’ written demand, is entitled to inspect in person or by agent or attorney, during normal business hours, the books of account and all financial records of the corporation, to make copies of records, and to conduct an audit of such records; provided however, that the shareholder must provide the Corporation an affidavit that such inspection, copies or audit is not desired for any purpose not related to his or her interest in the Corporation as a shareholder.

 

Section 12. Annual List of Officers, Directors, and State Business License Application. The Corporation shall, in a timely manner, as required by law, file with the Secretary of State of Nevada, on the prescribed form, the statement setting forth the authorized number of Directors, the names and complete business or residence addresses of all incumbent Directors, the names and complete business or residence addresses of the Chief Executive Officer, Secretary and Chief Financial Officer, the street address of its principal executive office or principal business office in this state and the general type of business constituting the principal business activity of the Corporation, together with a designation of the agent of the Corporation for the purpose of the service of process, all in compliance with the Code.

 

ARTICLE V

AMENDMENTS TO BYLAWS

 

Section 1. Amendment by Directors. The Board of Directors shall have power to make, adopt, alter, amend, and repeal, from time to time, Bylaws of the Corporation, except that the Board of Directors shall have no power to change the quorum for meetings of Shareholders or of the Board of Directors or to change any provisions of the Bylaws with respect to the removal of Directors. If any bylaw regulating an impending election of Directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of Shareholders for the election of Directors, the Bylaws so adopted, amended or repealed, together with a concise statement of the changes made.

 

Section 2. Record of Amendments. Whenever an amendment or new Bylaw is adopted, it shall be copied in the corporate book with the original Bylaws, in the appropriate place. If any Bylaw is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in the corporate book of Bylaws.

 

 

ARTICLE VI

SHARES OF STOCK

 

Section 1. Certificate of Stock.

 

1.1 The certificates representing shares of the Corporation’s stock shall be in such form as shall be adopted by the Board of Directors and shall be numbered and registered in the order issued. The certificates shall bear the following: the Corporate Seal, if any, the holder’s name, the number of shares of stock and the signatures of: (1) the Chairman of the Board, the Chief Executive Officer, President and (2) the Secretary or Chief Financial Officer.

 

1.2 To the extent permitted by law, the Board of Directors may authorize the issuance of certificates for fractions of a share of stock which shall entitle the holder to exercise voting rights, receive dividends and participate in liquidating distributions, in proportion to the fractional holdings; or it may authorize the payment in cash of the fair value of fractions of a share of stock as of the time when those entitled to receive such fractions are determined; or it may authorize the issuance, subject to such conditions as may be permitted by law, of scrip in registered or bearer form over the signature of an officer or agent of the Corporation, exchangeable as therein provided for full shares of stock, but such scrip shall not entitle the holder to any rights of a Shareholder, except as therein provided.

 

Section 2. Lost or Destroyed Certificates.

 

The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of any loss or destruction of the certificate representing the same. The Corporation may issue a new certificate in the place of any certificate theretofore issued by it, alleged to have been lost or destroyed. On production of such evidence of loss or destruction as the Board of Directors in its discretion may require, the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or his or her legal representatives, to give the Corporation a bond in such sum as the Board may direct, and with such surety or sureties as may be satisfactory to the Board, to indemnify the Corporation against any claims, loss, liability, or damage it may suffer on account of the issuance of the new certificate. A new certificate may be issued without requiring any such evidence or bond when, in the judgment of the Board of Directors, it is proper to do so.

 

Section 3. Transfer of Shares.

 

3.1 Transfer of shares of stock of the Corporation shall be made on the stock ledger of the Corporation only by the holder of record thereof, in person or by his or her duly authorized attorney, upon surrender for cancellation of the certificate or certificates representing such shares of stock with an assignment or power of transfer endorsed thereon or delivered therewith, duly executed, with such proof of the authenticity of the signature and of authority to transfer and of payment of taxes as the Corporation or its agents may require.

 

3.2 The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the absolute owner thereof for all purposes and, accordingly, shall not be bound to recognize any legal, equitable or other claim to, or interest in, such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by law.

 

Section 4. Record Date. In lieu of closing the stock ledger of the Corporation, the Board of Directors may fix, in advance, a date not exceeding 60 calendar days, nor less than ten calendar days, as the record date for the determination of Shareholders entitled to receive notice of, or to vote at, any meeting of Shareholders, or to consent to any proposal without a meeting, or for the purpose of determining Shareholders entitled to receive payment of any dividends or allotment of any rights, or for the purpose of any other action. If no record date is fixed, the record date for the determination of Shareholders entitled to notice of, or to vote at, a meeting of Shareholders shall be at the close of business on the day next preceding the day on which the notice is given, or, if no notice is given, the day preceding the day on which the meeting is held. The record date for determining Shareholders for any other purpose shall be at the close of business on the day on which the resolution of the Directors relating thereto is adopted. When a determination of Shareholders of record entitled to notice of, or to vote at, any meeting of Shareholders has been made, as provided for herein, such determination shall apply to any adjournment thereof, unless the Directors fix a new record date for the adjourned meeting.

 

 

ARTICLE VII

DIVIDENDS

 

Subject to applicable law, dividends may be declared and paid out of any funds available therefor, as often, in such amount, and at such time or times as the Board of Directors may determine.

 

ARTICLE VIII

FISCAL YEAR

 

The fiscal year of the corporation shall be fixed by resolution of the board of directors.

 

ARTICLE IX

CORPORATE SEAL

 

The corporate seal shall have inscribed the name of the Corporation, the date of its incorporation, and the word “Nevada” to indicate the Corporation was incorporated pursuant to the laws of the State of Nevada.

 

ARTICLE X

INDEMNITY

 

Section 1. Every person who was or is a party or is threatened to be made a party to or is involved in any action, suit, appeal, or proceeding, whether civil, criminal, administrative, or investigative, whether formal or informal, and whether brought by or in the right of the Corporation, its security holders or otherwise by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a Director or officer of the Corporation or is or was serving at the request of the corporation or for its benefit as a Director, officer, employee, or agent of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under the general corporation law of the State of Nevada from time to time against all expenses, liability and loss (including, without limitation attorneys’ fees and disbursements, judgments, fine penalties, damage, punitive damages, excise tax assessed with respect to an employee benefit plan, amounts paid or to be paid in settlement and cost or expense of any nature) reasonably incurred or suffered by him or her in connection therewith. The Board of Directors may, in its discretion, cause the expense of officers and Directors incurred in defending a civil or criminal action, suit, or proceeding to be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit, or proceeding upon receipt of an undertaking by or on behalf of the Director or officer to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. No such person shall be indemnified against, or be reimbursed for, any expense or payments incurred in connection with any claim or liability established to have arisen out of his or her own willful misconduct or gross negligence. Any right of indemnification shall not be exclusive of any other right which such Directors, officers or representatives may have or hereafter acquire and, which such directors, officers, or representatives may have or hereafter acquire and, without limiting the generality of such statement, they shall be entitled to their respective rights of indemnification under any bylaw, agreement, vote of shareholders, provision of law or otherwise, as well as their rights under this Article. This provision will not apply to actions arising under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended.

 

Section 2. The Board of Directors may cause the corporation to purchase and maintain insurance on behalf of any person who is or was a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a Director or officer of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise against any liability asserted against such person and incurred in any such capacity or arising out of such status, whether or not the Corporation would have the power to indemnify such person.

 

Section 3. The Board of Directors may from time to time adopt further Bylaws with respect to indemnification and may amend these and such Bylaws to the full extent permitted by the Code.

 

ARTICLE XI

MISCELLANEOUS

 

Section 1. Shareholders’ Agreements. Notwithstanding anything contained in this Article X to the contrary, in the event the Corporation elects to become a close corporation, an agreement between two or more Shareholders thereof, if in writing and signed by the parties thereto, may provide that in exercising any voting rights, the shares held by them shall be voted as provided therein, and may otherwise modify the provisions contained in Article IV, herein as to Shareholders’ meetings and actions.

 

 

Section 2. Effect of Shareholders’ Agreements. Any Shareholders’ Agreement authorized by the Code, shall only be effective to modify the terms of these Bylaws if the Corporation elects to become a close corporation with the appropriate filing of an amendment to its Articles of Incorporation as required by the Code and shall terminate when the Corporation ceases to be a close corporation. Such an agreement cannot waive or alter the Sections of the Code. Any other provisions of the Code or these Bylaws may be altered or waived thereby, but to the extent they are not so altered or waived, these Bylaws shall be applicable.

 

Section 3. Books and Records. The Corporation will keep, or cause to be kept or administered on its behalf, correct and complete books and records of account and minutes of the proceedings of its Shareholders and Board of Directors and a stock ledger, all in accordance with Section 78.0297 of Chapter 78 of the Nevada Revised Statutes.

 

Section 4. Invalid Provisions. If any part of these Bylaws is held invalid or inoperative for any reason, the remaining parts, so far as possible and reasonable, will be valid and operative.

 

Section 5. Relation to the Certificate of Incorporation. These Bylaws are subject to, and governed by, the Certificate of Incorporation of the Corporation as amended from time to time.

 

Section 6. Forum Selection for Certain Litigation. Unless the Corporation consents in writing to the selection of an alternative forum, and to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any present or former director, officer or employee of the Corporation to the Corporation or the Corporation’s Shareholders, (iii) any action asserting a claim arising pursuant to any provision of the Nevada Revised Statutes, (iv) any action asserting a claim arising pursuant to any provision of the Certificate of Incorporation or these Bylaws (as either may be amended from time to time), or (v) any action asserting a claim governed by the internal affairs doctrine (“Covered Action”) shall be the courts in Clark County in the State of Nevada (or, if the courts in Clark County in the State of Nevada does not have jurisdiction, the federal district court for the District of Nevada). Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section. This exclusive forum selection provision will not apply to claims arising under the federal securities laws or any other claim for which the federal courts have exclusive jurisdiction.

 

Section 7. Headings. The headings contained herein are for convenience only, do not constitute a part of this Bylaws and shall not be deemed to limit or affect and of the provisions hereof.

 

 

CERTIFICATE OF SECRETARY

 

I, the undersigned, certify that:

 

1.	I am the duly elected and acting Secretary of American Rebel Holdings, Inc., a Nevada corporation; and
2.	The foregoing Bylaws, consisting of 12 pages, are the Bylaws of this Corporation as adopted by the Board of Directors.

 

IN WITNESS WHEREOF, I have subscribed my name and affixed the seal of this Corporation on the 20^th day of January, 2022.

 

	/s/ Charles A. Ross, Jr.
	Charles A. Ross, Jr., Secretary

 

 

 

Exhibit 2.3

 

 

 

 

 

Article VI – Capital Stock shall be amended to add the following section:

 

Section 6. Second Reverse Stock Split. Effective upon the filing of this Certificate of Amendment of Articles of Incorporation with the Secretary of State of the State of Nevada (the “Second Effective Time”), the shares of the Corporation’s Common Stock issued and outstanding immediately prior to the Second Effective Time (the “Second Old Common Stock”), will be automatically reclassified as and combined into shares of Common Stock (the “Second New Common Stock”) such that each twenty-five (25) shares of Second Old Common Stock shall be reclassified as and combined into one share of Second New Common Stock. Notwithstanding the previous sentence, no fractional shares of Second New Common Stock shall be issued to the holders of record of Second Old Common Stock in connection with the foregoing reclassification of shares of Second Old Common Stock. Stockholders who, immediately prior to the Second Effective Time, own a number of shares of Second Old Common Stock, which is not evenly divisible by 25 shall, with respect to such fractional interest, be entitled to receive one (1) whole share of Common Stock in lieu of a fraction of a share of Second New Common Stock. Each stock certificate that, immediately prior to the Second Effective Time represented shares of Second Old Common Stock shall, from and after the Second Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of Second New Common Stock into which the shares of Second Old Common Stock represented by such certificate shall have been reclassified; provided, however, that each holder of record of a certificate that represented shares of Second Old Common Stock shall receive, upon surrender of such certificate, a new certificate representing the number of whole shares of Second New Common Stock into which the shares of Second Old Common Stock represented by such certificate shall have been reclassified as set forth above. In conjunction with the Second Reverse Stock Split, no stockholder holding at least a round lot (100 shares) prior to the Second Reverse Stock Split shall have less than one round lot (100 shares) after the Second Reverse Stock Split.

 

 

 

Exhibit 3.1

 

CERTIFICATE OF DESIGNATION

of

SERIES A CONVERTIBLE PREFERRED STOCK

of

AMERICAN REBEL HOLDINGS, INC.

 

Establishing the

Voting Powers, Designations, Preferences, Limitations,

Restrictions, and Relative Rights of

 

Pursuant to NRS 78.195 of the

Laws of the State of Nevada

 

The rights, preferences, restrictions and other matters relating to the Series A Convertible Preferred Stock are as follows:

 

Section 1. Designation and Amount. There is hereby authorized to be issued out of the authorized and unissued shares of preferred stock of the Corporation a class of preferred stock designated as the “Series A – Super Voting Convertible Preferred Stock” (“Series A Preferred Stock”) and the number of shares constituting such class shall be 100,000.

 

Section II. Voting Rights. Holders of the Series A Preferred Stock shall be entitled to cast one thousand (1,000) votes for each share held of the Series A Preferred Stock on all matters presented to the stockholders of the Corporation for stockholder vote which shall vote along with holders of the Corporation’s Common Stock on such matters.

 

Section III. Redemption Rights. The Series A Preferred Stock is not redeemable by the Corporation.

 

Section IV. Protective Provisions. So long as any shares of Series A Preferred Stock are outstanding, this Corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the Holders of the Series A Preferred Stock which is entitled, other than solely by law, to vote with respect to the matter, and which Preferred Stock represents at least a majority of the voting power of the then outstanding shares of such Series A Preferred Stock:

 

(a) sell, convey, or otherwise dispose of or encumber all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Corporation is disposed of;

 

(b) alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the shares;

 

(c) increase or decrease (other than by redemption or conversion) the total number of authorized shares of preferred stock;

 

 

(d) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security (i) having a preference over, or being on a parity with, the Series A Preferred Stock with respect to dividends or upon liquidation, or (ii) having rights similar to any of the rights of the Series A Preferred Stock; or

 

(e) amend the Corporation’s Articles of Incorporation or bylaws

 

Section V. Other Rights. Except as otherwise stated herein, there are no other rights, privileges, or preferences attendant or relating to in any way the Series A Preferred Stock, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.

 

Section VI. Definitions. As used in herein, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires:

 

“Common Stock” means any and all shares of the Corporation’s $0.001 par value common stock.

 

“Corporation” means American Rebel Holdings, Inc., a Nevada corporation, and its successors.

 

“Series A Preferred Stock” has the meaning ascribed to it in Section I hereof.

 

“Holder” means a holder of a share or shares of Series A Preferred Stock as reflected in the stock books of the Corporation.

 

In WITNESS WHEREOF, the undersigned hereby declares and certifies that this Certificate of Designation is executed on behalf of the Company as of this 12^th day of February, 2020.

 

	Company:
	AMERICAN REBEL HOLDINGS, INC.
	By:	/s/ Charles A. Ross, Jr.
		Charles A. Ross, Jr., CEO

 

 

 

Exhibit 3.2

 

CERTIFICATE OF DESIGNATION

of

SERIES B CONVERTIBLE PREFERRED STOCK

of

AMERICAN REBEL HOLDINGS, INC.

 

Establishing the

Voting Powers, Designations, Preferences, Limitations,

Restrictions, and Relative Rights of

 

Pursuant to NRS 78.195 of the

Laws of the State of Nevada

 

The rights, preferences, restrictions and other matters relating to the Series B Convertible Preferred Stock are as follows:

 

The number of shares constituting the Series B Convertible Preferred Stock shall be 250,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series B Convertible Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series B Convertible Preferred Stock.

 

	1.	DESIGNATION. The Shares are designated as the Company’s Series B Convertible Preferred Stock (the “Shares”).
	2.	CONVERSION. The holders of the Shares shall have conversion rights as follows (the “Conversion Rights”):

 

	(a)	Right to Convert. Each Share shall be convertible into shares of the Company’s Common Stock at a price per share of $0.07 (1 Share converts into 100 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the date the Company amends its articles of incorporation to increase its authorized shares of common stock from 100,000,000 shares to 600,000,000 shares and on or prior to the fifth (5th) day prior to a redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock.
	(b)	Mechanics of Conversion. Before any holder of Shares shall be entitled to convert the same into shares of Common Stock, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of this Company or of any transfer agent for the Shares, and shall give written notice to this Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Shares to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.

 

 

	(c)	No Impairment. This Company will not, by amendment of its Articles of incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this Company, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Shares against impairment.
	(d)	Reservation of Stock Issuable Upon Conversion. Following the date the Company amends its articles of incorporation to increase its authorized shares of common stock from 100,000,000 shares to 600,000,000 shares, the Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Shares, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Shares; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Shares, in addition to such other remedies as shall be available to the holder of such Shares, this Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Articles of incorporation.
	(e)	Notice. Any notice required by the provisions of this section to be given to the holders of Shares shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this Company.

 

	3.	OTHER RIGHTS. Except as otherwise stated herein, there are no other rights, privileges, or preferences attendant or relating to in any way the Shares, including by way of illustration but not limitation, those concerning dividend, ranking, other conversion, other redemption, participation, or anti-dilution rights or preferences.
	4.	Voting Rights. The holder of each Share shall not have any voting rights, except in the case of voting on a change in the preferences of Shares.
	5.	Protective Provisions. So long as any Shares are outstanding, this Company shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of Shares which is entitled, other than solely by law, to vote with respect to the matter, and which Shares represents at least a majority of the voting power of the then outstanding Shares:

 

	(a)	alter or change the rights, preferences or privileges of the Shares so as to affect adversely the Shares; or
	(b)	increase the total number of authorized Shares.

 

 

In WITNESS WHEREOF, the undersigned hereby declares and certifies that this Certificate of Designation is executed on behalf of the Company as of this 20^th day of May, 2021.

 

	Company:
	AMERICAN REBEL HOLDINGS, INC.
	By:	/s/ Charles A. Ross, Jr.
		Charles A. Ross, Jr., CEO

 

 

 

Exhibit 3.3

 

 

 

Exhibit 3.4

 

		STATE OF NEVADA
FRANCISCO V. AGUILAR				Commercial Recordings & Notary Division
Secretary of State				401 N. Carson Street
				Carson City, NV 89701
				Telephone (775) 684-5708
				Fax (775) 684-7138
				North Las Vegas City Hall
DEPUTY BAKKEDAHL				2250 Las Vegas Blvd North, Suite 400
Deputy Secretary for				North Las Vegas, NV 89030
Commercial Recordings				Telephone (702) 486-2880
		OFFICE OF THE SECRETARY OF STATE		Fax (702) 486-2888

 

Anthony DeMint		Work Order #: W2024022001062
3753 Howard Hughes Pkwy Second Floor, Suite 314		February 20, 2024
Las Vegas, NV 89169, USA		Receipt Version: 1

 

Special Handling Instructions:

Submitter ID: 21815

 

Charges

 

Description

Fee Description

Filing Number

Filing Date/Time

Filing Status

Qty

Price

Amount

Amended Certification of Stock Designation Before Issuance of Class/Series

Fees

20243830804

2/20/2024 11:54:48 AM

Internal Review

1

$

175.00

$

175.00

Total

$

175.00

 

Payments

 

Type		Description		Payment Status		Amount
Credit Card		7084588763766262003057		Success		$	175.00
Credit Card		Service Fee		Success		$	4.38
Total						$	179.38
				Credit Balance:		$	0.00

 

Anthony DeMint

3753 Howard Hughes Pkwy Second Floor, Suite 314

Las Vegas, NV 89169, USA

 

 

		STATE OF NEVADA
FRANCISCO V. AGUILAR				Commercial Recordings & Notary Division
Secretary of State				401 N. Carson Street
				Carson City, NV 89701
				Telephone (775) 684-5708
				Fax (775) 684-7138
				North Las Vegas City Hall
DEPUTY BAKKEDAHL				2250 Las Vegas Blvd North, Suite 400
Deputy Secretary for				North Las Vegas, NV 89030
Commercial Recordings				Telephone (702) 486-2880
		OFFICE OF THE SECRETARY OF STATE		Fax (702) 486-2888

 

Business Entity - Filing Acknowledgement

 

02/20/2024

 

Work Order Item Number:			W2024022001062 - 3474358
Filing Number:			20243830804
Filing Type:			Amended Certification of Stock Designation Before Issuance of Class/Series
Filing Date/Time:			02/20/2024 11:54:48 AM
Filing Page(s):			13
Indexed Entity Information:
Entity ID:	E0625902014-3		Entity Name:	AMERICAN REBEL HOLDINGS, INC
Entity Status:	Active		Expiration Date:	None

 

Commercial Registered Agent

THE CORPORATE PLACE, LLC

601 E CHARLESTON BLVD STE 100, LAS VEGAS, NV 89104, USA

 

The attached document(s) were filed with the Nevada Secretary of State, Commercial Recording Division. The filing date and time have been affixed to each document, indicating the date and time of filing. A filing number is also affixed and can be used to reference this document in the future.

 

	Respectfully,
	FRANCISCO V. AGUILAR
	Secretary of State

 

Commercial Recording Division

401 N. Carson Street

 

Page 1 of 1

 

 

				Filed in the Office of	Business Number
	FRANCISCO V. AGUILAR				E0625902014-3 Filing Number
	Secretary of State				20243830804
	401 North Carson Street			Secretary of State	Filed On
	Carson City, Nevada 89701-4201				02/20/2024 11:54:48 AM
	(775) 684-5708			State Of Nevada	Number of Pages
	Website:	www.nvsos.gov			13
		www.nvsilverflume.gov

 

 

Certificate, Amendment or Withdrawal of Designation

NRS 78.1955, 78.1955(6)

☐ Certificate of Designation

☒ Certificate of Amendment to Designation - Before Issuance of Class or Series

☐ Certificate of Amendment to Designation - After Issuance of Class or Series

☐ Certificate of Withdrawal of Certificate of Designation

 

 

TYPE OR PRINT - USE DARK INK ONLY - DO NOT HIGHLIGHT

 

1. Entity information:		Name of entity:   AMERICAN REBEL HOLDINGS, INC
		Entity or Nevada Business Identification Number (NVID):				NV20141763365
2. Effective date and time:		For Certificate of Designation or			Date:	Time:
		Amendment to Designation Only (Optional):			(must not be later than 90 days after the certificate is filed)
3. Class or series of stock: (Certificate of Designation only)		The class or series of stock being designated within this filing:
4. Information for amendment of class or series of stock:		The original class or series of stock being amended within this filing: Series C Convertible Cumulative Preferred Stock
5. Amendment of class or series of stock:		☒ Certificate of Amendment to Designation- Before Issuance of Class or Series As of the date of this certificate no shares of the class or series of stock have been issued.
		☐ Certificate of Amendment to Designation- After Issuance of Class or Series The amendment has been approved by the vote of stockholders holding shares in the corporation entitling them to exercise a majority of the voting power, or such greater proportion of the voting power as may be required by the articles of incorporation or the certificate of designation.
6.Resolution: (Certificate of Designation and Amendment to Designation only)		By resolution of the board of directors pursuant to a provision in the articles of incorporation this certificate establishes OR amends the following regarding the voting powers, designations, preferences, limitations, restrictions and relative rights of the following class or series of stock.*
7. Withdrawal:		Designation being Withdrawn:			Date of Designation:
		No shares of the class or series of stock being withdrawn are outstanding.   The resolution of the board of directors authorizing the withdrawal of the certificate of designation establishing the class or series of stock: *
8. Signature: (Required)		X	Doug Grau		Date:	02/20/2024
			Signature of Officer

 

This form must be accompanied by appropriate fees.

 

Page 1 of 1

 

 

	Filed in the Office of	Business Number E0625902014-3
		Filing Number
		20243830804
	Secretary of State	Filed On 02/20/2024 11:54:48 AM
	State Of Nevada	Number of Pages 13

 

FIRST AMENDED AND RESTATED

CERTIFICATE OF DESIGNATION

of

SERIES C CONVERTIBLE CUMULATIVE PREFERRED STOCK

of

AMERICAN REBEL HOLDINGS, INC.

 

Establishing the

Voting Powers, Designations, Preferences, Limitations,

Restrictions, and Relative Rights of

 

Pursuant to NRS 78.195 of the

Laws of the State of Nevada

 

The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock are as follows:

 

The number of shares constituting the Series C Convertible Cumulative Preferred Stock shall be 3,100,000. Such number of shares may be increased or decreased by resolution of the Board; provided, that no decrease shall reduce the number of shares of Series C Convertible Cumulative Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company convertible into Series C Convertible Cumulative Preferred Stock.

 

1. DESIGNATION. The Shares are designated as the Company’s Series C Convertible Cumulative Preferred Stock (the “Shares”).

 

2. DEFINITIONS. For purposes of the Shares and as used in this Certificate, the following terms shall have the meanings indicated:

 

“Board” shall mean the board of directors of the Company or any committee of members of the board of directors authorized by such board to perform any of its responsibilities with respect to the Shares.

 

“Borrowing Agreements” shall have the meaning set forth in paragraph (b)(ii) of Section 5 hereof.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a day on which state or federally chartered banking institutions in New York, New York are not required to be open.

 

“Call Date” shall mean the date fixed for redemption of the Shares and specified in the notice to holders required under paragraph (a)(i) of Section 5 hereof as the Call Date.

 

“Certificate” shall mean this Certificate of Designation of Rights and Preferences of the Shares.

 

“Closing Sale Price” means the last closing trade price for the Common Shares on the principal securities exchange or trading market where such Common Shares are listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing trade price of such Common Shares in the over-the-counter market on the electronic bulletin board for such Common Shares as reported by Bloomberg, or, if no closing trade price, respectively, is reported for such security by Bloomberg, the average closing price of any market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

“Common Shares” shall mean the shares of common stock, $0.001 par value, of the Company.

 

“Company” shall mean American Rebel Holdings, Inc., a Nevada corporation.

 

“Conversion Price” shall have the meaning set forth in subparagraph (a) of Section 6 hereof.

 

“Company Redemption Notice” shall have the meaning set forth in paragraph (a)(i) of Section 5 hereof.

 

 

“Company Redemption Response” shall have the meaning set forth in paragraph (b)(ii) of Section 5 hereof.

 

“Conversion Rights” shall have the meaning set forth in Section 6 hereof.

 

“Dividend Default” shall have the meaning set forth in subparagraph (b) of Section 3 hereof.

 

“Dividend Payment Date” shall have the meaning set forth in subparagraph (a) of Section 3 hereof.

 

“Dividend Periods” shall mean quarterly dividend periods commencing on the first day of each of January, April, July and October and ending on and including the day preceding the first day of the next succeeding Dividend Period; provided, however, that any Dividend Period during which any Shares shall be redeemed pursuant to Section 5 hereof shall end on but shall not include the Call Date only with respect to the Shares being redeemed.

 

“Dividend Rate” is $0.16 per share each quarter, which is equivalent to the annual rate of 8.53% of the $7.50 liquidation preference per Share set forth in Section 4.

 

“Dividend Record Date” shall have the meaning set forth in subparagraph (a) of Section 3 hereof.

 

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended.

 

“Forced Conversion” shall have the meaning set forth in subparagraph (b) of Section 6 hereof.

 

“Forced Conversion Date” shall have the meaning set forth in subparagraph (b) of Section 6 hereof.

 

“Forced Conversion Notice” shall have the meaning set forth in subparagraph (b) of Section 6 hereof.

 

“Forced Conversion Notice Date” shall have the meaning set forth in subparagraph (b) of Section 6 hereof.

 

“Holder Redemption Notice” shall have the meaning set forth in paragraph (b)(ii) of Section 5 hereof

 

“Issue Date” shall mean the original date of issuance of Shares.

 

“Junior Shares” shall have the meaning set forth in paragraph (a)(iii) of Section 8 hereof.

 

“Parity Shares” shall have the meaning set forth in paragraph (a)(ii) of Section 8 hereof.

 

“Penalty Rate” is $0.225 per quarter, which is equivalent to the annual rate of 12% of the $7.50 liquidation preference per Share set forth in Section 4.

 

“Person” shall mean any individual, firm, partnership, limited liability company, corporation or other entity, and shall include any successor (by merger or otherwise) of such entity.

 

“Principal Market” means the Nasdaq Stock Market LLC.

 

A “Quarterly Dividend Default” shall occur if the Company fails to pay dividends on the Shares provided for in Section 3(a) in full for any Dividend Period.

 

“Redemption Date” shall have the meaning set forth in paragraph (b)(ii) of Section 5 hereof.

 

“Redemption Price” shall have the meaning set forth in paragraph (a)(i) of Section 5 hereof.

 

“Senior Shares” shall have the meaning set forth in paragraph (a)(i) of Section 8 hereof.

 

“Shares” shall have the meaning set forth in Section 1 hereof.

 

 

“set apart for payment” shall be deemed to include, without any further action, the following: the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry that indicates, pursuant to an authorization by the Board and a declaration of dividends or other distribution by the Company, the initial and continued allocation of funds to be so paid on any series or class of shares of stock of the Company; provided, however, that if any funds for any class or series of Junior Shares or any class or series of Parity Shares are placed in a separate account of the Company or delivered to a disbursing, paying or other similar agent, then “set apart for payment” with respect to the Shares shall mean irrevocably placing such funds in a separate account or irrevocably delivering such funds to a disbursing, paying or other similar agent.

 

“Trading Day” means any day on which the Common Shares are traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Shares, then on the principal securities exchange or securities market on which the Common Shares are then traded.

 

“Transfer Agent” means Securities Transfer Company, or such other agent or agents of the Company as may be designated by the Board or its duly authorized designee as the transfer agent, registrar and dividend disbursing agent for the Shares.

 

“Voting Stock” shall mean stock of any class or kind having the power to vote generally for the election of directors.

 

3. DIVIDENDS.

 

(a) Holders of Shares shall be entitled to receive cumulative preferential dividends, when, as and if declared by the Board or a duly authorized committee thereof, in its sole discretion, at a rate per annum equal to the Dividend Rate (subject to adjustment as set forth in paragraphs (b) and (c) of this Section 3). At the Company’s sole discretion, dividends may be paid in cash or in kind in the form of Common Shares of the Company equal to the closing price of Common Shares on the last day of the quarter. Such dividends shall accrue without interest and accumulate, whether or not earned or declared, on each issued and outstanding share of the Shares from (and including) the original date of issuance of such share, and shall be payable quarterly in arrears on a date selected by the Company each quarter that is no later than twenty (20) days following the end of each Dividend Period (each such day being hereinafter called a “Dividend Payment Date”); provided, that (i) Shares issued during any Dividend Period after the Dividend Record Date for such Dividend Period shall only begin to accrue dividends on the first day of the next Dividend Period; and provided, further, that (ii) if any Dividend Payment Date is not a Business Day, then the dividend that would otherwise have been payable on such Dividend Payment Date (if declared) may be paid on the next succeeding Business Day with the same force and effect as if paid on such Dividend Payment Date, and no interest or additional dividends or other sums shall accrue on the amount so payable from such Dividend Payment Date to such next succeeding Business Day. Any dividend payable on the Shares for any partial Dividend Period shall be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends shall be payable to holders of record as they appear in the stock records of the Company at the close of business on the applicable record date, which shall be the fifteenth day of the month in which the applicable Dividend Payment Date occurs, or such other date designated by the Board or an officer of the Company duly authorized by the Board for the payment of dividends that is not more than thirty (30) nor less than ten (10) days prior to such Dividend Payment Date (each such date, a “Dividend Record Date”).

 

(b) Upon the occurrence of four accumulated, accrued and unpaid Quarterly Dividend Defaults, whether consecutive or non-consecutive (a “Dividend Default”), then:

 

(i) the Dividend Rate shall increase to the Penalty Rate, commencing on the first day after the Dividend Payment Date on which a Dividend Default occurs and for each subsequent Dividend Payment Date thereafter until such time as the Company has paid all accumulated accrued and unpaid dividends on the Shares in full and has paid accrued dividends for all Dividend Periods during the most recently completed Quarterly Dividend Period in full, at which time the Dividend Rate shall be reinstated; and

 

 

(ii) when the Dividend Default is cured and the Dividend Rate is reinstated, a second Dividend Default shall not occur until the Company has an additional four accumulated, accrued and unpaid Quarterly Dividend Defaults, whether consecutive or non-consecutive after the initial default is cured.

 

(c) No dividend on the Shares will be declared by the Company or paid or set apart for payment by the Company at such time as the terms and provisions of Senior Shares or any agreement of the Company, including any agreement relating to its indebtedness, prohibit such declaration, payment or setting apart for payment or provide that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration, payment or setting aside of funds is restricted or prohibited under Nevada law or other applicable law; provided, however, notwithstanding anything to the contrary contained herein, dividends on the Shares shall continue to accrue without interest and accumulate regardless of whether: (i) any or all of the foregoing restrictions exist; (ii) the Company has earnings or profits; (iii) there are funds legally available for the payment of such dividends; or (iv) such dividends are authorized by the Board. Accrued and unpaid dividends on the Shares will accumulate as of the Dividend Payment Date on which they first become payable or on the date of redemption of the Shares, as the case may be.

 

(d) Except as provided in the next sentence, if any Shares is outstanding, no dividends will be declared or paid or set apart for payment on any Parity Shares or Junior Shares, unless all accumulated accrued and unpaid dividends are contemporaneously declared and paid in cash or declared and a sum of cash sufficient for the payment thereof set apart for such payment on the Shares for all past Dividend Periods with respect to which full dividends were not paid on the Shares in cash. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart for payment) upon the Shares and upon all Parity Shares, all dividends declared, paid or set apart for payment upon the Shares and all such Parity Shares shall be declared and paid pro rata or declared and set apart for payment pro rata so that the amount of dividends declared per share of Shares and per share of such Parity Shares shall in all cases bear to each other the same ratio that accumulated dividends per share of Shares and such other Parity Shares (which shall not include any accumulation in respect of unpaid dividends for prior dividend periods if such other Parity Shares do not bear cumulative dividends) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on Shares which may be in arrears, whether at the Dividend Rate or at the Penalty Rate.

 

(e) Except as provided in paragraph (d) of this Section 3, unless all accumulated accrued and unpaid dividends on the Shares are contemporaneously declared and paid in cash or declared and a sum of cash sufficient for the payment thereof is set apart for payment for all past Dividend Periods with respect to which full dividends were not paid on the Shares, no dividends (other than payable in shares of Common Stock or Junior Shares ranking junior to the Shares as to dividends and upon liquidation) may be declared or paid or set apart for payment upon the Common Stock or any Junior Shares or Parity Shares, nor shall any Common Stock or any Junior Shares or Parity Shares be redeemed, purchased or otherwise acquired directly or indirectly for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any such stock) by the Company (except by conversion into or exchange for Junior Shares or by redemption, purchase or acquisition of stock under any employee benefit plan of the Company).

 

(f) Holders of Shares shall not be entitled to any dividend in excess of all accumulated accrued and unpaid dividends on the Shares as described in this Section 3. Any dividend payment made on the Shares shall first be credited against the earliest accumulated accrued and unpaid dividend due with respect to such shares which remains payable at the time of such payment.

 

 

4. LIQUIDATION PREFERENCE.

 

(a) Subject to the rights of the holders of Senior Shares and Parity Shares, in the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of Junior Shares as to the distribution of assets on any liquidation, dissolution or winding up of the Company, each holder of the Shares shall be entitled to receive an amount of cash equal to $7.50 per Share plus an amount in cash, or shares of Common Stock, equal to all accumulated accrued and unpaid dividends thereon (whether or not earned or declared) to the date of final distribution to such holders. If, upon any liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other shares of any class or series of Parity Shares as to the distribution of assets on any liquidation, dissolution or winding up of the Company, then such assets, or the proceeds thereof, shall be distributed among the holders of Shares and any such other Parity Shares ratably in accordance with the respective amounts that would be payable on such Shares and any such other Parity Shares if all amounts payable thereon were paid in full.

 

(b) Written notice of any such liquidation, dissolution or winding up of the Company, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given by first class mail, postage pre-paid, not less than twenty (20) nor more than sixty (60) days prior to the payment date stated therein, to each record holder of Shares at the respective address of such holders as the same shall appear on the stock transfer records of the Company.

 

(c) Subject to the rights of the holders of Senior Shares and Parity Shares upon liquidation, dissolution or winding up, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Shares, as provided in this Section 4, any other series or class or classes of Junior Shares shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Shares shall not be entitled to share therein.

 

5. COMPANY CALL AND HOLDER PUT OPTIONS.

 

(a) Optional Redemption at Election of Company.

 

(i) The Company shall have the right (but not the obligation) to redeem the Shares, in whole or in part at any time after the fifth anniversary of the initial closing of the offering selling the Shares and continuing indefinitely thereafter, at the option of the Company, for cash, at $11.25 per Share, plus the amounts indicated in paragraph (d) of this Section 5 (the “Redemption Price”). To exercise this redemption right, the Company shall deliver written notice to each Holder that all or part of the Shares will be redeemed (the “Company Redemption Notice”) on a date that is no earlier than twenty (20) and no later than sixty (60) days after the date of the Company Redemption Notice (such date, the “Call Date”). If fewer than all of the outstanding Shares are to be redeemed pursuant to the Company’s exercise of its redemption right under this Section 5(a), the Shares to be redeemed shall be selected pro rata (as nearly as practicable without creating fractional shares) or by lot or in such other equitable method prescribed by the Company.

 

 

(ii) On a Call Date and in accordance with this Section 5(a), the Company will, at its option (to the extent it may then lawfully do so under Nevada law, and for so long as (A) a redemption is permitted under the Company’s articles of incorporation (including all related certificates of designation), and (B) such redemption does not constitute a default under any Borrowing Agreements)), redeem the Shares specified in the Company Redemption Notice by paying in cash, via wire transfer of immediately available funds to the respective accounts designated in writing by the applicable Holders, an amount per share equal to the Redemption Price.

 

(iii) On or before the Company Redemption Date, each Holder whose Shares are being redeemed under this Section 5(a) shall deliver to the Company a stock power, duly executed (in the form provided by the Company together with the Company Redemption Notice).

 

(b) Optional Redemption at Election of Holder.

 

(i) Once per calendar quarter beginning any time after the fifth-year anniversary of the Issue Date, a Holder of record of Shares may elect to cause the Company to redeem all or any portion of their Shares for an amount equal to the Redemption Price, which amount may be settled by delivery of cash or Common Shares, at the option of the Holder. If the Holder elects settlement in Common Shares, the Company will deliver such number of Common Shares equal to the Redemption Price divided by $2.25 per share (subject to pro rata adjustment in connection with any stock splits, stock dividends, or similar changes to the Company’s capitalization occurring after the date of this Certificate), with any fraction rounded up to the next whole Common Share. A holder making such election shall provide written notice thereof to the Company specifying the name and address of the holder, the number of Shares to be redeemed and whether settlement shall be in cash or Common Shares. The Board may, however, suspend cash redemptions at any time in its discretion if it determines that it would not be in the best interests of the Company to effectuate cash redemptions at a given time because the Company does not have sufficient cash, including because the Board believes that cash on hand should be utilized for other business purposes. Redemptions will be limited to five percent (5%) of the total outstanding Shares per quarter and any redemptions in excess of such limit or to the extent suspended, shall be redeemed in subsequent quarters on a first come, first served, basis. The Company shall redeem the specified Shares for Common Shares no later than ten (10) days, or for cash no later than 365 days, following receipt of such notice. The Company may require the surrender and endorsement of the physical share certificates representing the redeemed Shares upon payment of the redemption price.

 

(ii) Upon receipt of a written notice from a Holder requesting that the Company redeem such Holder’s Share(s) (the “Holder Redemption Notice”), the Company may choose to (but shall not be obligated to) redeem the applicable Shares. Within thirty (30) days after the Company’s receipt of the Holder Redemption Notice, the Company shall provide written notice to such requesting Holder specifying whether all or a portion of the Shares sought to be redeemed pursuant to the Holder Redemption Notice will be purchased by the Company(which the Company shall determine in its discretion)(the “Company Redemption Response”). If all or any portion of such Series C Preferred Stock is to be repurchased by the Company, then the Company Redemption Response shall specify the date on which such repurchase and redemption shall occur (the “Redemption Date”), which date shall be no more than 365 days after the giving of the Holder Redemption Notice, and the Company Redemption Response shall include the stock power, if required.

 

 

(iii) On any Redemption Date and in accordance with this Section 5(b), the Company will to the extent that it has sufficient funds to consummate a redemption, as determined by the Company in its discretion, and to the extent that it may then lawfully do so under Nevada law and such payment is further permitted under the Company’s articles of incorporation (including all related certificates of designation), and any borrowing agreements to which it or its subsidiaries are bound (the “Borrowing Agreements”), in connection with the delivery by such Holder of the applicable items required herein, redeem the Shares specified in the Company Redemption Response by paying in cash., via wire transfer of immediately available funds to an account designated in writing by the Holder, an amount per share equal to the Redemption Price.

 

(iv) From and after the Redemption Date, (A) the shares identified in the Company Redemption Response shall be cancelled on the books and records of the Company, (B) the right to receive dividends thereon shall cease to accrue, and (C) all rights of the Holder of the shares to be redeemed shall cease and terminate, excepting only the right to receive the Redemption Price (which right shall be contingent upon the Holder delivering the stock power required herein); provided, however, that if as of the close of business on the Redemption Date the Company has not paid the Redemption Price with respect to such Holder (other than any case in which the Redemption Price has not been paid due to a failure by the Holder to deliver the stock power required herein), then the Shares to be redeemed shall remain issued and outstanding, and all rights of such Holder with respect to such Shares shall continue.

 

(v) If, on any Redemption Date, the Company (A) is unable, by virtue of applicable law or provisions in its articles of incorporation (including all related certificates of designation), to redeem Shares, or (B) cannot redeem Shares without constituting a default under any Borrowing Agreements, then such redemption obligation shall be discharged promptly after the Company becomes able to discharge such redemption obligation under applicable law and without causing or constituting a default under Borrowing Agreements, with all such deferred redemption obligations being satisfied based on the order in which any Holder Redemption Notices shall have been received by the Company (i.e., first come, first served).

 

(vi) Until the Company obtains approval to waive this Section 5(b)(ii) by the requisite number of its stockholders at a duly called special or annual meeting of stockholders, the Company shall not deliver Common Shares in settlement of a holder’s redemption right under Section 5(b)(i) hereof, and a holder of Shares shall not have the right to elect delivery of Common Shares under Section 5(b)(i), to the extent that (A) the aggregate Common Shares issued by the Company to all holders pursuant to Section 5(b)(i) plus (B) the aggregate Common Shares issued or issuable by the Company pursuant to the exercise of warrants issued by the Company under that certain Inducement Letter, dated September 8, 2023, would exceed 19.99% of the Common Shares issued and outstanding on the date of this Certificate, subject to pro rata adjustment in connection with any stock splits, stock dividends, or similar changes to the Company’s capitalization occurring after the date of this Certificate.

 

(c) Unpaid Dividends. Upon any redemption of Shares pursuant to this Section 5, the Company shall, subject to the next sentence, pay any accumulated accrued and unpaid dividends in arrears for any Dividend Period ending on or prior to the Call Date. If the Call Date falls after a Dividend Record Date and prior to the corresponding Dividend Payment Date, then each holder of Shares at the close of business on such Dividend Record Date shall be entitled to the dividend payable on such shares on the corresponding Dividend Payment Date notwithstanding the redemption of such Shares before such Dividend Payment Date. Except as provided above, the Company shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Shares called for redemption.

 

 

(d) Additional Limitation on Redemption. If all accumulated accrued and unpaid dividends on the Shares and any other class or series of Parity Shares of the Company have not been paid in cash (or, with respect to any Parity Shares, in Parity Shares), declared and set apart for payment in cash (or, with respect to any Parity Shares, in Parity Shares), then the Company shall not redeem, purchase or acquire any Shares or Parity Shares, otherwise than (i) pursuant to a purchase or exchange offer made on the same terms to all holders of Shares and Parity Shares, (ii) in exchange for Junior Shares, or (iii) pursuant to paragraph (b) of this Section 5; provided that the holders of not less than 75% of the outstanding Shares have elected to redeem such Shares.

 

(e) Company Redemption Procedures. The Company Redemption Notice shall be mailed by first class mail to each holder of record of Shares to be redeemed at the address of each such Holder as shown on the Company’s records. Neither the failure to mail any notice required by this paragraph (e), nor any defect therein or in the mailing thereof, to any particular holder, shall affect the sufficiency of the notice or the validity of the proceedings for redemption with respect to the other holders. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given on the date mailed whether or not the holder receives the notice. Each such mailed notice shall state, as appropriate: (1) the Call Date; (2) the number of Shares to be redeemed and, if fewer than all the Shares held by such holder are to be redeemed, the number of such Shares to be redeemed from such holder; (3) the redemption price per Share (determined as set forth in paragraph (a) of this Section 5) plus accumulated accrued and unpaid dividends through the Call Date (determined as set forth in paragraph (c) of this Section 5); (4) if any Shares are represented by certificates, the place or places at which certificates for such Shares are to be surrendered; (5) that dividends on the Shares to be redeemed shall cease to accrue on such Call Date except as otherwise provided herein; and (6) any other information required by law or by the applicable rules of any exchange or national securities market upon which the Shares may be listed or admitted for trading. Notice having been mailed as aforesaid, from and after the Call Date (unless the Company shall fail to make available an amount of cash necessary to effect such redemption), (i) except as otherwise provided herein, dividends on the Shares so called for redemption shall cease to accrue, (ii) said Shares shall no longer be deemed to be outstanding, and (iii) all rights of the holders thereof as holders of Shares shall cease (except the right to receive cash payable upon such redemption, without interest thereon, upon surrender and endorsement of their certificates if so required and to receive any dividends payable thereon).

 

(f) Set Asides. The Company’s obligation to provide cash in accordance with the preceding subsection shall be deemed fulfilled if, on or before the Call Date, the Company shall irrevocably deposit funds necessary for such redemption, in trust, with a bank or trust company that has, or is an affiliate of a bank or trust company that has, capital and surplus of at least $50 million, with irrevocable instructions that such cash be applied to the redemption of the Shares so called for redemption, in which case the notice to holders of the Shares will (i) state the date of such deposit, (ii) specify the office of such bank or trust company as the place of payment of the redemption price and (iii) require such holders to surrender the certificates, if any, representing such Shares at such place on or about the date fixed in such redemption notice (which may not be later than the Call Date) against payment of the redemption price (including all accumulated accrued and unpaid dividends to the Call Date, determined as set forth in paragraph (c) of this Section 5). No interest shall accrue for the benefit of the holders of Shares to be redeemed on any cash so set aside by the Company. Subject to applicable escheat laws, any such cash unclaimed at the end of six months from the Call Date shall revert to the general funds of the Company after which reversion the holders of such Shares so called for redemption shall look only to the general funds of the Company for the payment of such cash.

 

 

6. CONVERSION. The holders of the Shares shall have conversion rights as follows (the “Conversion Rights”):

 

(a) Right to Convert. Each Share shall be convertible into Common Shares at a price per share of $1.50 (1 Share converts into 5 shares of Common Stock) (the “Conversion Price”), at the option of the holder thereof, at any time following the issuance date of such Share and on or prior to the fifth (5^th) day prior to a redemption Date, if any, as may have been fixed in any redemption notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. The Conversion Price shall not be adjusted for stock splits, stock dividends, recapitalizations or similar events.

 

(b) Forced Conversion. If the Closing Sale Price of Common Shares during the ten consecutive Trading Day period ending and including the applicable Forced Conversion Notice Date (as defined below) has been at or above $2.25 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events), then the Company shall have the right to require the Holder to convert all, or any portion of, the Shares held by such Holder for Common Shares in accordance with this Section 6(b) (the “Forced Conversion”) on the Forced Conversion Date (as defined below). The Company may exercise its right to require a Forced Conversion by delivering a written notice thereof by email, facsimile or overnight courier to the holders of Shares (the “Forced Conversion Notice” and the date all of the holders of Shares received such notice is referred to as the “Forced Conversion Notice Date”).  The Forced Conversion Notice shall (x) state the date on which the Forced Conversion shall occur (the “Forced Conversion Date”) which date shall not be less than five (5) calendar days nor more than twenty (20) calendar days following the Forced Conversion Notice Date, and (y) state the aggregate number of Shares which are being converted in such Forced Conversion from the Holder and all of the other holders of the Shares pursuant to this Section 6(b) on the Forced Conversion Date. If the Company has elected a Forced Conversion, the mechanics of conversion set forth in Section 6(c) shall apply. If the Company elects to cause a Forced Conversion of the Shares pursuant to Section 6(b) then it must simultaneously take the same action with respect to all of the other Shares then outstanding on a pro rata basis.

 

(c) Mechanics of Conversion. Before any holder of Shares shall be entitled to convert the same into Common Shares, they shall surrender the certificate or certificates therefor, duly endorsed, at the office of this Company or of any transfer agent for the Shares, and shall give written notice to this Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for Common Shares are to be issued. This Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Shares, or to the nominee or nominees of such holder, a certificate or certificates for the number of Common Shares to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the Shares to be converted, and the person or persons entitled to receive the Common Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Shares as of such date.

 

(d) No Impairment. This Company will not, by amendment of its Articles of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this Company, but will at all times in good faith assist in the carrying out of all the provisions of this section and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Shares against impairment.

 

(e) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its authorized but unissued Common Shares, solely for the purpose of effecting the conversion of the Shares, such number of its Common Shares as shall from time to time be sufficient to effect the conversion of all outstanding Shares; and if at any time the number of authorized but unissued Common Shares shall not be sufficient to effect the conversion of all then outstanding Shares, in addition to such other remedies as shall be available to the holder of such Shares, this Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Company’s Articles of Incorporation.

 

(f) Notice. Any notice required by the provisions of this section to be given to the holders of Shares shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address appearing on the books of this Company.

 

 

7. STATUS OF ACQUIRED SHARES. All Shares issued, redeemed by the Company or converted by the holder in accordance with Sections 5 or 6 hereof, or otherwise acquired by the Company, shall be restored to the status of authorized but unissued shares of undesignated Preferred Stock of the Company.

 

8. RANKING.

 

(a) Any class or series of shares of stock of the Company shall be deemed to rank:

 

(i) prior to the Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable upon liquidation, dissolution or winding up, as the case may be, in preference or priority to the holders of Shares (“Senior Shares”);

 

(ii) on a parity with the Shares, as to the payment of dividends and as to distribution of assets upon liquidation, dissolution or winding up, whether or not the dividend rates, dividend payment dates or redemption or liquidation prices per share thereof be different from those of the Shares, if the holders of such class or series and the Shares shall be entitled to the receipt of dividends and of amounts distributable upon liquidation, dissolution or winding up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority one over the other (“Parity Shares”); and

 

(iii) junior to the Shares, as to the payment of dividends and as to the distribution of assets upon liquidation, dissolution or winding up, if such class or series shall be the Common Shares or any other class or series of shares of stock of the Company now or hereafter issued and outstanding over which the Shares have preference or priority in the payment of dividends and in the distribution of assets upon any liquidation, dissolution or winding up of the Company (“Junior Shares”).

 

(b) The Company’s Series A Convertible Preferred Stock shall be considered Senior Shares relative to the Shares. The Company’s Series B Convertible Preferred Stock and Common Shares each shall be considered Junior Shares relative to the Shares.

 

9. VOTING RIGHTS.

 

(a) So long as any Shares are outstanding, the affirmative vote of the holders of more than two-thirds (66.7%) of the Shares then outstanding, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating:

 

(i) Any amendment, alteration or repeal of any provisions of the Articles of Incorporation or this Certificate that materially and adversely affects the rights, preferences or voting power of the Shares; provided, however, that (a) the amendment of the Articles of Incorporation to authorize or create Parity Shares or Junior Shares, or (b) to increase or decrease the authorized amount of, Shares, Senior Shares, Parity Shares or Junior Shares, shall not be deemed to materially or adversely affect the rights, preferences or voting power of the Shares;

 

 

(ii) A statutory share exchange, consolidation with or merger of the Company with or into another entity or consolidation of the Company with or merger of another entity into the Company, that in each case materially and adversely affects the rights, preferences or voting power of the Shares, unless in such case each Share shall be converted into or exchanged for an amount of cash equal to or greater than the applicable redemption price called for under Section 5 hereof at the time of such conversion or exchange or preferred shares of the surviving entity having preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications and terms or conditions of redemption thereof that are materially the same as those of a Share; or

 

(iii) Approving any waiver or amendment of the restrictions set forth in paragraphs (d) or (e) of Section 3 hereof;

 

provided, however, that no such vote of the holders of Shares shall be required if, at or prior to the time when any of the above actions is to take effect, a deposit is made for the redemption in cash of all Shares at the time outstanding, as provided in paragraph (f) of Section 5 hereof, for a redemption price called for under Section 5 at the time of such redemption.

 

(b) For purposes of paragraph (a) of this Section 9, each Share shall have one vote per share. Except as required by applicable provisions of Nevada law, the Shares shall not have any relative, participating, optional or other special voting rights and powers other than as set forth herein, and the consent of the holders thereof shall not be required for the taking of any corporate action. No amendment to these terms of the Shares shall require the vote of the holders of Common Shares (except as required by law).

 

10. RECORD HOLDERS. The Company and the Transfer Agent shall deem and treat the record holder of any Shares as the true and lawful owner thereof for all purposes, and neither the Company nor the Transfer Agent shall be affected by any notice to the contrary.

 

11. SINKING FUND. The Shares shall not be entitled to the benefits of any retirement or sinking fund.

 

12. UNCERTIFICATED BOOK-ENTRY SECURITIES. At the option of the Company, the Shares may be issued as book-entry securities directly registered in the stockholder’s name on the Company’s or Transfer Agent’s books and records. If entered as book-entry, the Shares need not be represented by certificates, but instead would be uncertificated securities of the Company.

 

13. OTHER RIGHTS. Except as otherwise stated herein, there are no other rights, privileges, or preferences attendant or relating to in any way to the Shares, including by way of illustration but not limitation, those concerning participation, or anti-dilution rights or preferences.

 

In WITNESS WHEREOF, the undersigned hereby declares and certifies that this First Amended and Restated Certificate of Designation is executed on behalf of the Company as of this 20^th day of February, 2024.

 

	Company:
	AMERICAN REBEL HOLDINGS, INC.
	By:	/s/ Charles A. Ross, Jr.
		Charles A. Ross, Jr., CEO

 

 

 

Exhibit 3.6

 

NEITHER THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

AMERICAN REBEL HOLDINGS, INC.

 

Warrant Shares: 377,843

Initial Exercise Date: February 11, 2022

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Cavalry Fund I, L.P., a Delaware Limited Partnership or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the “Initial Exercise Date”) and on or prior to 5:00 p.m. (New York City time) on February 7, 2025 (the “Termination Date”) but not thereafter, to subscribe for and purchase from American Rebel Holdings, Inc., a Nevada corporation (the “Company”), up to 377,843 shares of common stock (“Common Stock”) of the Company, par value $0.001 (the “Warrant Shares”). The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 1(b).

 

Section 1. Exercise.

 

a) Exercise of Warrant. Subject to the terms and conditions hereof, this Warrant may be exercised by the Holder on any day on or after the Initial Exercise Date, in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice (the “Notice of Exercise”) of the Holder’s election to exercise this Warrant. Within one (1) Trading Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the Exercise Price (as defined below) in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds. The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise hereunder. Execution and delivery of a Notice of Exercise with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares. Execution and delivery of a Notice of Exercise for all of the then-remaining Warrant Shares shall have the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms hereof.

 

b) Exercise Price. The exercise price per share of Common Stock under this Warrant shall be $0.01, subject to adjustment hereunder (the “Exercise Price”).

 

 

c) Mechanics of Exercise.

 

i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by the Company’s transfer agent (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of- sale limitations pursuant to Rule 144 , and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, (ii) one (1) Trading Day after delivery of the Aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate (but not Rule 144) purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date of delivery of the Warrant Shares, provided that payment of the aggregate Exercise Price is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary trading market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. As used herein, “Trading Day” means a day on which the principal trading market of the Common Stock is open for trading.

 

ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii. Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant to Section 1(c)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

 

v. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same- day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.

 

vi. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

d) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 1 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other persons acting as a group together with the Holder or any of the Holder’s Affiliates (such persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1(d), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 1(d) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61^st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1(d) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

 

Section 2. Certain Adjustments.

 

a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 2(a) above, if at any time the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

 

c) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, that, to the extent that the Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another person, (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another person or group of persons whereby such other person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other person or other persons making or party to, or associated or affiliated with the other persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 1(d) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 1(d) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section 2(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

 

e) Calculations. All calculations under this Section 2 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 2, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f) Notice to Holder.

 

i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 2, the Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

 

ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

Section 3. Transfer of Warrant.

 

a) Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 3(d) hereof, this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date on which the Holder delivers an assignment form to the Company assigning this Warrant in full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

 

b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 3(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d) Reserved.

 

e) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 4. Miscellaneous.

 

a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 1(d)(i), except as expressly set forth in Section 1.

 

b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding Business Day.

 

d) Authorized Shares.

 

The Company covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the trading market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e) Governing Law; Jurisdiction. This Warrant shall be governed by and construed in accordance with the laws of the State of Nevada without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the federal courts of Southern District of New York. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Warrant by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

 

f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

 

g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h) Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile, or electronic mail addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

If to the Company:

 

American Rebel Holdings, Inc.

718 Thompson Lane, Suite 108-99

Nashville, Tennessee 37204

Attention: Chief Executive Officer

Email: info@americanrebel.com

Telephone: (833) 267-3235

 

If to the Holder:

 

Cavalry Fund I, L.P.

82 EAST ALLENDALE ROAD, SUITE 5B

SADDLE RIVER NJ 07458

e-mail: thomas@cavalryfund.com

 

i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

 

j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l) Amendment; Waivers. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

(Signature Page Follows)

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	AMERICAN REBEL HOLDINGS, INC.
	By:	/s/Charles A Ross
	Name:	Charles A. Ross
	Title:	Chief Executive Officer

 

 

NOTICE OF EXERCISE

 

TO:

[

 

(1) The undersigned hereby elects to purchase                          Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2) Payment shall take the form of [  ] in lawful money of the United States; or

 

(3) Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

                                           _______________________________________ 

 

The Warrant Shares shall be delivered to the following DWAC Account Number:

 

                                           _______________________________________ 

 

                                           _______________________________________ 

 

                                           _______________________________________ 

 

(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:

Signature of Authorized Signatory of Investing Entity:

Name of Authorized Signatory:

Authorized Signatory:

Date:

 

 

EXHIBIT B

 

ASSIGNMENT FORM

 

(To assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to Name:

 

	(Please Print)
Address:
	(Please Print)
Phone Number:
Email Address:
Dated:                     ,

 

Holder’s Signature:
Holder’s Address:

 

 

 

Exhibit 3.7

 

	THIS IS A COPY
	This is a copy view of the Authoritative Copy held
	by the designated custodian

 

 

MASTER CREDIT AGREEMENT

 

This Master Credit Agreement, dated and effective as of February 10, 2023, is entered into between Champion Safe Company, Inc. (collectively and individually, the “Borrower”) and Bank of America, N.A. (the “Bank”). This Master Credit Agreement, together with the Covenant Agreement (as defined below), each Note (as defined below), each Guaranty and Collateral Agreement (as defined below), and each other Related Collateral Document (as defined below), as applicable, sets forth the general terms and conditions for each Credit Facility (as defined below). For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as follows:

 

1.	DEFINITIONS.

 

1.1 General. Capitalized terms used in each Credit Document shall have the respective meanings ascribed thereto in Section 1 of this Master Credit Agreement, as supplemented or modified by Section 1 of each other Credit Document, and as otherwise may be provided in other provisions of the Credit Documents.

 

1.2 In the Credit Documents:

 

“Beneficial Ownership Certification” means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“Civil Asset Forfeiture Reform Act” means the Civil Asset Forfeiture Reform Act of 2000 (18 U.S.C. Sections 983 et seq.), as amended from time to time, and any successor statute.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means, collectively, “Collateral” as defined in each Guaranty and Collateral Agreement and all property, rights, interests and privileges from time to time subject to liens granted to the Bank pursuant to any other Collateral Document.

 

“Controlled Substances Act” means the Controlled Substances Act (21 U.S.C. Sections 801 et seq.), as amended from time to time, and any successor statute.

 

“Covenant Agreement” means the Financial Covenant Agreement, between the Borrower and the Bank relating to the Master Credit Agreement as such Financial Covenant Agreement is amended or amended and restated from time to time.

 

“Credit Documents” means this Master Credit Agreement and the Covenant Agreement, together with any and all Notes, Guaranty and Collateral Agreements and each other Related Collateral Document.

 

“Credit Facility” means, collectively, each “Credit Facility” as defined in each Note.

 

“Default” means an Event of Default or any event or condition that, with the lapse of time or giving of notice or both, would constitute an Event of Default.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code.

 

“Guarantor” means each Guarantor identified in any Guaranty and Collateral Agreement.

 

“Guaranty and Collateral Agreement” means each Guaranty and Collateral Agreement among each Borrower party thereto, each Guarantor party thereto and the Bank, as amended from time to time.

 

 

“Master Credit Agreement” means this Master Credit Agreement between the Borrower and the Bank, as amended from time to time.

 

“Note” means each Note between each Borrower party thereto and the Bank, as amended from time to time.

 

“Obligor” shall mean the Borrower, each Guarantor, and, if the Borrower or any Guarantor is comprised of the trustees of a trust, any trustor.

 

“Obligations” means, collectively, “Obligations” as defined in each Note.

 

“Plan” means a plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate, including any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA.

 

“Proceeds” means, collectively, “Proceeds” as defined in each Guaranty and Collateral Agreement and as otherwise defined in any other Related Collateral Agreement.

 

“Related Collateral Document” means each Related Guaranty and Collateral Agreement, if Collateral is pledged thereunder, and each mortgage, deed of trust, pledge agreement, assignment, financing statement, control agreement and other document as shall from time to time secure or relate to the Obligations, as amended from time to time.

 

“Transaction Summary” means the “Transaction Summary” box on page 1 of each Note.

 

“Uniform Commercial Code” means the Uniform Commercial Code as in effect in the State of New York or, when the laws of any other jurisdiction govern the perfection or enforcement of any lien, the Uniform Commercial Code of such jurisdiction.

 

1.3 Uniform Commercial Code. As used in the Credit Documents, the following terms are defined in accordance with the Uniform Commercial Code in effect in the State of New York from time to time: Accessions, Accounts, Chattel Paper, Deposit Account, Documents, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letters of Credit, Letter-of-Credit Rights, Money, and Supporting Obligations.

 

2.	DISBURSEMENTS, PAYMENTS AND COSTS

 

2.1 Borrower’s Authorized Representatives. The individuals who sign this Master Credit Agreement or any other Credit Document on behalf of the Borrower (the “Authorized Representatives”) will represent the Borrower in the administration of each Credit Facility. The Authorized Representatives are authorized to act on behalf of the Borrower and bind the Borrower in connection with any matter involving any Credit Facility. The Bank may act on oral requests from an Authorized Representative, but may require that an oral request be confirmed in writing. The Bank may rely on the instructions from an Authorized Representative, or someone the Bank reasonably believes to be an Authorized Representative, until the Bank receives written notice from the Borrower to the contrary and has a reasonable period of time to act on that notice. The Bank may also rely on the email addresses of the Authorized Representatives provided by the Borrower in order to deliver communications to and, in its sole discretion, receive communications from, each of the Authorized Representatives until the Bank receives written notice that any such email address has been cancelled or changed and the Bank has a reasonable period of time to act on that notice. If the Bank receives conflicting instructions from the Authorized Representatives, the Bank will take no action and may terminate borrowing privileges on the Credit Facility until the Bank receives written instructions from the Borrower resolving the conflict.

 

2.2 Disbursements and Payments.

 

(a) Each payment by an Obligor will be made in U.S. Dollars and immediately available funds, without setoff or counterclaim. Payments will be made by debit to a deposit account, if direct debit is provided for in the applicable Note or is otherwise authorized by the Borrower. For payments not made by direct debit, payments will be made by mail to the address shown on the Borrower’s statement, or by such other method as may be permitted by the Bank.

 

(b) For any payment under the Credit Documents made by debit to a deposit account, the Borrower will maintain sufficient immediately available funds in the deposit account to cover each debit. If there are insufficient immediately available funds in the deposit account on the date the Bank enters any such debit authorized by the Credit Documents, the Bank may reverse the debit.

 

 

(c) Each disbursement by the Bank and each payment by an Obliger will be evidenced by records kept by the Bank.

 

(d) Prior to the date each payment of principal and interest and any fees from the Borrower under any Note or other Credit Document becomes due (each, a “Due Date”), the Bank may send to the Borrower statement(s) of the amounts that will be due on that Due Date under each Note (each, a “Billed Amount”).

 

2.3 Borrower’s Instructions.

 

(a) The Bank may honor instructions for advances or repayments given by the Borrower (if an individual), or by any one of the Authorized Representatives, or any other individual designated by any one of the Authorized Representatives (a “Delegated Individual”). The Bank may honor any such instructions made by any one of the Authorized Representatives or Delegated Individuals, whether such instructions are given in writing or by telephone, telefax or Internet and intranet websites designated by the Bank with respect to separate products or services offered by the Bank. The Bank’s obligation to act on such instructions is subject to the terms, conditions and procedures stated elsewhere in the Credit Documents.

 

(b) In following instructions from an Authorized Representative or Delegated Individual for advances or repayments, the Bank shall have the right, but not the obligation, to require that any advances be deposited in and repayments be withdrawn from a deposit account owned by the Borrower and held at the Bank. The Bank may require additional written authorization from the Borrower before processing advances or repayments except as provided in this subparagraph.

 

(c) The Borrower will indemnify and hold the Bank harmless from all liability, loss, and costs in connection with any act resulting from (A) the Bank complying with instructions the Bank reasonably believes are made by any individual authorized by the Borrower to give such instructions, whether such instructions are given in writing or by telephone, telefax or electronic communications (including e-mail, Internet and intranet websites) and (B) the Bank’s reliance on any Communication executed using an Electronic Signature, or in the form of an Electronic Record, that the Bank reasonably believes is made by any such authorized individual. This paragraph will survive termination of the Credit Documents, and will benefit the Bank and its officers, employees, and agents.

 

2.4 Direct Debit.

 

(a) If, in the Transaction Summary for any Note, the question “Direct Debit” is marked “Yes,” then the Borrower (and the owner of the deposit account, if different) agree that on the applicable Due Date the Bank will debit the Billed Amount for such Note from such deposit account as indicated in such Transaction Summary, or as otherwise designated by the Borrower to the Bank from time to time. If the deposit account is not with the Bank, then a voided copy of a check on the deposit account has been, or will be, provided to the Bank. Any debits made by ACH shall be subject to the operating rules of the National Automated Clearing House Association, as in effect from time to time.

 

(b) The Borrower or the owner of the deposit account may terminate this direct debit arrangement with respect to any Note at any time by sending written notice to the Bank. If this direct debit arrangement is terminated, then the principal amount outstanding under the applicable Note will at the option of the Bank bear interest at a rate per annum which is one (1.0) percentage point higher than the rate of interest otherwise provided under such Note and the amount of each payment will be increased accordingly.

 

2.5 Taxes. All payments of Obligations by Obligors shall be made without deduction or withholding for any taxes, except as required by applicable law. For the avoidance of doubt, if any payments to the Bank under any Credit Document are made from outside the United States, no Obliger will deduct any foreign taxes from any payments it makes to the Bank. If any such taxes are imposed on any payments made by an Obliger (including payments under this paragraph), such Obliger will pay the taxes and will also pay to the Bank, at the time interest is paid, any additional amount which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed. Each Obliger will confirm that it has paid the taxes by giving the Bank official tax receipts (or notarized copies) within thirty (30) days after the due date.

 

 

3.	REPRESENTATIONS AND WARRANTIES

 

The Borrower, with respect to itself and each other Obligor, makes the following representations and warranties as of the date of this Master Credit Agreement, on the date of each request for an extension of credit and on the date of each extension of credit:

 

3.1 Formation. If such Obligor is anything other than a natural person, it is duly formed and existing under the laws of the state or other jurisdiction where organized.

 

3.2 Authorization. Each Credit Document, and any instrument or agreement required under the Credit Documents to which such Obligor is a party, are within such Obligor’s powers, have been duly authorized, and do not conflict with any of its organizational papers. The individual signing each Credit Document to which such Obligor is a party on behalf of such Obligor is authorized to sign such documents on behalf of such Obligor.

 

3.3 Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification most recently provided to the Bank, if applicable, is true and correct in all respects.

 

3.4 Good Standing. In each state in which such Obligor does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name (e.g. trade name or d/b/a) statutes.

 

3.5 Financial Information. All financial and other information that has been or will be supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of such Obligor’s financial condition, including all material contingent liabilities. Since the date of the most recent financial statement provided to the Bank, there has been no material adverse change in the business condition (financial or otherwise), operations, properties or prospects of such Obligor. If any Obligor is comprised of the trustees of a trust, the foregoing representations shall also pertain to the trustor(s) of the trust.

 

3.6 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened against any Obligor which, if lost, would impair such Obligor’s financial condition or ability to pay the Obligations, except as has been disclosed in writing to the Bank prior to the date of this Master Credit Agreement or otherwise disclosed in writing to, and approved in writing by, the Bank.

 

3.7 Other Obligations. No Obligor is in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation, except as has been disclosed in writing to the Bank prior to the date of this Master Credit Agreement or otherwise disclosed in writing to, and approved in writing by, the Bank.

 

3.8 Tax Matters. No Obligor has any knowledge of any pending assessments or adjustments of its income tax for any year and all taxes due have been paid, except as have been disclosed in writing to the Bank prior to the date of this Master Credit Agreement or otherwise disclosed in writing to, and approved in writing by, the Bank.

 

3.9 PACE Financing. With respect to any Note that is secured by real property, the Borrower has not entered into any Property Assessed Clean Energy (“PACE”) or similar energy efficiency or renewable energy financing and has no knowledge of any pending assessments or adjustments in connection therewith.

 

3.10 No Event of Default. There is no Default or Event of Default.

 

3.11 Collateral. All Collateral securing the Obligations is owned by the grantor of the security interest in such Collateral free of any title defects or any liens or interests of others, except those which have been disclosed in writing to, and approved in writing by, the Bank or are permitted by the section of the Covenant Agreement entitled Other Liens.

 

3.12 Location of Obligor. If such Obligor is an individual (sole proprietorship), such Obligor’s principal residence is located, as applicable, at the address specified in the Location of Borrower section in each applicable Transaction Summary, the Location of Guarantor section on the signature page to each applicable Guaranty and Collateral Agreement, which is the same address set forth on such Obligor’s driver’s license or special identification card issued by the state of such Obligor’s principal residence, or the location of such Obligor as otherwise indicated in any other Related Collateral Document. If such Obligor is not an individual, then the place of business of such Obligor (or, if such Obligor has more than one place of business, its chief executive office) is located, as applicable, at the address specified in the location of Borrower section in each applicable Transaction Summary, the Location of Guarantor section on the signature page to each applicable Guaranty and Collateral Agreement or as otherwise indicated in any other Related Collateral Document.

 

 

3.13 ERISA Plans.

 

(a) Each Plan (other than a multiemployer plan) is in compliance in all material respects with ERISA, the Code and other federal or state law, including all applicable minimum funding standards and there have been no prohibited transactions with respect to any Plan (other than a multiemployer plan), which has resulted or could reasonably be expected to result in a material adverse effect.

 

(b) With respect to any Plan subject to Title IV of ERISA:

 

(i) No reportable event has occurred under Section 4043(c) of ERISA which requires notice.

 

(ii) No action by the Borrower or any ERISA Affiliate to terminate or withdraw from any Plan has been taken and no notice of intent to terminate a Plan has been filed under Section 4041 or 4042 of ERISA.

 

3.14 No Plan Assets. As of the date hereof and throughout the term of this Agreement, no Borrower or Guarantor, if any, is (1) an employee benefit plan subject to Title I of ERISA, (2) a plan or account subject to Section 4975 of the Code, (3) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code, or (4) a “governmental plan” within the meaning of ERISA.

 

3.15 Environmental. No Obligor is in violation of any health, safety, or environmental law or regulation regarding hazardous substances or the subject of any claim, proceeding, notice, or other communication regarding hazardous substances. “Hazardous substances” means any substance, material or waste that is or becomes designated or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar designation or regulation under any current or future federal, state or local law (whether under common law, statute, regulation or otherwise) or judicial or administrative interpretation of such, including without limitation petroleum or natural gas.

 

3.16 Sanctions. No Obligor, nor any of their respective affiliated entities, including in the case of any Obligor that is not a natural person, subsidiaries nor, to the knowledge of any Obligor, any owner, trustee, director, officer, employee, agent, affiliate or representative of any Obligor is an individual or entity currently the subject of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions”), nor is any Obligor located, organized or resident in a country or territory that is the subject of Sanctions.

 

4.	AGREEMENTS OF THE BORROWER

 

The Borrower agrees that each Borrower and each Guarantor, to the extent applicable, so long as any credit is available under the Credit Documents and until all Obligations are repaid in full:

 

4.1 Use of Proceeds. The Borrower will use the proceeds of any Credit Facility only for business purposes. For the avoidance of doubt, the proceeds must not be used to: repay commercial paper debt, backstop a commercial paper program, support a variable rate demand obligation, or backstop an industrial revenue bond. The Borrower may not use proceeds of any Credit Facility to make payments due under the Credit Documents or to repay any other obligation of the Borrower to the Bank or any affiliate of the Bank except for the payment of any fees owing under the Credit Documents or the refinancing of any loans with the Bank. The Borrower may not use proceeds of any Credit Facility to engage in any transaction that is illegal (including any transaction that violates the Controlled Substance Act). The Borrower will not, directly or indirectly, use the proceeds of any Credit Facility, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person, to fund any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any person (including the Bank) of Sanctions. The Obligors shall indemnify the Bank for any liability if any Obligor engages in an illegal transaction or violates Sanctions in any way.

 

4.2 Maintenance of Assets and Collateral.

 

(a) Not to sell, assign, lease, transfer or otherwise dispose of (i) any part of the Borrower’s business or the Borrower’s assets except inventory in the ordinary course of the Borrower’s business or (ii) any Collateral owned by any Guarantor, except as agreed in writing by the Bank.

 

 

(b) Not to sell, assign, lease, transfer or otherwise dispose of any of the Borrower’s assets for less than fair market value, or enter into any agreement to do so.

 

(c) Not to enter into any sale and leaseback agreement covering any of the Borrower’s assets.

 

(d) To maintain and preserve all rights, privileges, and franchises the Borrower now has.

 

(e) To make any repairs, renewals, or replacements to keep the Borrower’s properties in good working condition.

 

(f) To execute and deliver such documents as the Bank deems necessary to create, perfect and continue the security interests contemplated by the Credit Documents, if any.

 

(g) To permit the Bank to inspect any Collateral at any time.

 

(h) If requested by the Bank, to receive and use reasonable diligence to collect Collateral (if any) consisting of Accounts and other rights to payment and Proceeds, in trust and as the property of the Bank, and to immediately endorse as appropriate and deliver such Collateral to the Bank daily in the exact form in which they are received together with a collection report in form satisfactory to the Bank.

 

(i) To give only normal allowances and credits and to advise the Bank immediately in writing if they affect any rights to payment or Proceeds in any material respect.

 

(j) If requested by the Bank, to assign in writing and deliver to the Bank all Accounts, contracts, leases and other Chattel Paper, Instruments, and Documents constituting Collateral and if requested by the Bank, to prepare and deliver a schedule of all Collateral subject to the Credit Documents.

 

(k) To keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral (if any).

 

(I) Not to attach any personal property Collateral to any real property or fixture in a manner which might cause such Collateral to become a part thereof without first obtaining the written consent in form and substance acceptable to the Bank of any owner, holder of any lien on the real property or fixture, or other person having an interest in such property to the removal by the Bank of the Collateral from such real property or fixture.

 

(m) Not to commingle any Collateral, or collections with respect to any Collateral, with any other property.

 

4.3 Compliance with Laws. To comply with the laws (including any fictitious or trade name statute and the Controlled Substances Act), regulations, and orders of any government body with authority over the Borrower’s or any Guarantor’s business. The Bank shall have no obligation to make any advance to the Borrower except in compliance with all applicable laws and regulations and the Borrower shall fully cooperate with the Bank in complying with all such applicable laws and regulations.

 

4.4 Books and Records. To maintain adequate books and records such that the Borrower and each Guarantor is able to produce, among other things, interim financial statements in form acceptable to the Bank within 30 days of request.

 

4.5 Audits. To allow the Bank and its agents to inspect the Borrower’s properties and examine, audit, and make copies of books and records at any reasonable time. If any of the Borrower’s properties, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank’s requests for information concerning such properties, books and records.

 

4.6 Perfection of Liens. To the extent any Collateral is pledged under the Credit Documents, to help the Bank perfect and protect its security interests and liens, to obtain such agreements from third parties as the Bank deems necessary in connection with the preservation, perfection or enforcement of any of its rights under the Credit Documents and to reimburse the Bank for related costs it incurs to protect its security interests and liens. Each Obligor agrees that the Bank is authorized to file financing statements in the name of such Obligor identifying the Collateral to perfect the Bank’s security interest in the Collateral and that the Bank is authorized to notify any account debtors, any buyers of the Collateral, or any other persons of the Bank’s interest in the Collateral.

 

 

4.7 Additional Agreements. Not to, without the Bank’s written consent:

 

(a) Enter into any consolidation, merger, or other combination, or, with respect to the Borrower, become a partner in a partnership, a member of a joint venture, or a member of a limited liability company.

 

(b) With respect to the Borrower, acquire or purchase a business or its assets.

 

(c) With respect to the Borrower, engage in any business activities substantially different from the Borrower’s present business.

 

(d) Liquidate or dissolve the Borrower’s or any Guarantor’s business.

 

(e) With respect to any Borrower or Guarantor which is a business entity, adopt a plan of division or divide itself into two or more business entities (pursuant to a “plan of division” under Section 18-217 of the Delaware Limited Liability Company Act or a similar arrangement under any other applicable state statute).

 

(f) Change its name (including, for an individual (sole proprietorship), its name on any driver’s license or special identification card issued by any state), and as applicable, its chief executive office, its principal residence or the jurisdiction in which it is organized and/or registered or its business structure.

 

(g) Change the places where such Obligor keeps any Collateral or such Obligor’s records concerning any Collateral.

 

(h) Remove any Collateral from such Obligor’s premises except in the ordinary course of such Obligor’s business.

 

(i) With respect to any Note that is secured by real property, apply for or accept any PACE or similar energy efficiency or renewable energy financing.

 

4.8 Notices to Bank. To promptly notify the Bank in writing of:

 

(a) Any Default or Event of Default under any Credit Document.

 

(b) Any change in the Borrower’s or any Guarantor’s name, legal structure, principal residence (for an individual (sole proprietorship)), or name on any driver’s license or special identification card issued by any state, state of registration (for a registered entity), place of business, or chief executive office if the Borrower or any Guarantor has more than one place of business.

 

(c) Any notice, order, or other communication received by the Borrower or any Guarantor regarding (i) any enforcement action by any governmental authority relating to health, safety, the environment, any hazardous substances or any illegal activity, including violations of the Controlled Substances Act, with regard to the Borrower’s or any Guarantor’s property, activities, or operations, or (ii) any claim against the Borrower or any Guarantor regarding hazardous substances or violations of the Controlled Substances Act.

 

4.9 Insurance.

 

(a) General Business Insurance. With respect to the Borrower, to maintain insurance as is usual for the business it is in.

 

(b) Insurance Covering Collateral. To maintain all risk property damage insurance policies (including without limitation flood coverage, windstorm coverage, and hurricane coverage as applicable) covering the tangible property comprising any Collateral and to cause each such policy to be endorsed to name the Bank as lender loss payee and additional insured in a form acceptable to the Bank. Such insurance shall be in form, amounts, coverages and basis reasonably acceptable to the Bank, shall require losses to be paid on a replacement cost basis, and shall be issued by insurance companies acceptable to the Bank.

 

(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy, or, if permitted by the Bank, other evidence of insurance listing all insurance in force.

 

 

4.10 Bank as Principal Depository. With respect to the Borrower, to maintain the Bank or one of its affiliates as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts, unless otherwise agreed in writing by the Bank.

 

4.11 Loans. With respect to the Borrower, not to make any loans, advances or other extensions of credit to any individual or entity except for extensions of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business to non-affiliated entities and other loans, advances or other extensions of credit disclosed in writing to, and approved in writing by, the Bank.

 

4.12 Change of Management. Not to make any substantial change in the present management of any Obligor unless otherwise agreed in writing by the Bank.

 

4.13 Change of Ownership. If the Borrower or any Guarantor is anything other than a natural person, not to, without the Bank’s written consent, cause, permit, or suffer any change in capital ownership such that there is a material change, as determined by the Bank in its sole discretion, in the direct or indirect capital ownership of the Borrower or such Guarantor.

 

4.14 Cooperation. To take any action reasonably requested by the Bank to carry out the intent of the Credit Documents.

 

4.15 Patriot Act; Beneficial Ownership Regulation. Promptly following any request therefor, to provide information and documentation reasonably requested by the Bank for purposes of compliance with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act and the Beneficial Ownership Regulation.

 

5.	DEFAULT AND REMEDIES

 

5.1 Events of Default. Each of the following shall be an “Event of Default” if it occurs for any reason whatsoever, whether voluntary or involuntary, by operation of law or otherwise:

 

(a) Failure to Pay. Any Obligor fails to make a payment of principal under any Note when due or any Obligor fails to make a payment of any interest, fees or other Obligations when due and such failure continues for three (3) days.

 

(b) Other Bank Agreements. Any default occurs under any other agreement any Obligor has with the Bank or any affiliate of the Bank

 

(c) Cross-default. Any default occurs under any agreement in connection with any credit any Obligor has obtained from anyone else or which any Obligor or any of an Obligor’s related entities or affiliates has guaranteed.

 

(d) False Information. The Borrower or any Obligor has given the Bank false or misleading information or representations.

 

(e) Inaccuracy of Representations or Warranties. Any representation or warranty of any Obligor contained in any Credit Document or in any other instrument, document, certificate or statement executed and delivered to Bank in connection with the Credit Documents proves to have been incorrect or inaccurate in any material respect.

 

(f) Failure to Furnish Information. Any Obligor fails to deliver financial statements or tax returns as required under the Credit Documents, or any Obligor fails to deliver any other information that the Bank requests from time to time as permitted under the Credit Documents within 30 days of the request.

 

(g) Bankruptcy. Any Obligor, or any general partner of any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the foregoing parties, or any Obligor, or any general partner of any Obligor makes a general assignment for the benefit of creditors.

 

(h) Receivers. A receiver or similar official is appointed for any portion of any Obligor’s business, or the business is terminated, or, if any Obligor is anything other than a natural person, such Obligor is liquidated or dissolved.

 

 

(i) Revocation or Termination. If any Obligor is comprised of the trustee(s) of a trust, the trust is revoked or otherwise terminated or all or a substantial part of the Obligor’s assets are distributed or otherwise disposed of.

 

(j) Lien Priority. If a lien is granted to the Bank pursuant to any Guaranty and Collateral Agreement or any other Related Collateral Document, the Bank fails to have an enforceable first priority lien (except for any prior liens to which the Bank has consented in writing) on or security interest in the Collateral or in any other property given as security for the Obligations (as defined in such Guaranty and Collateral Agreement or Related Collateral Document).

 

(k) Judgments. Any material judgments or arbitration awards are entered against any Obligor. Materiality will be determined in the Bank’s sole discretion.

 

(I) Forfeiture. (1) An Obligor or any of its officers is criminally indicted or convicted for (x) a felony committed in the conduct of the Obligors’ business, or (x) violating any state or federal law (including the Controlled Substances Act, Money Laundering Control Act of 1986 and Illegal Exportation of War Materials Act) that could lead to forfeiture of any property of any Obligor or any part thereof, or (2) a judicial or nonjudicial forfeiture or seizure proceeding is commenced by a government authority and remains pending with respect to any property of any Obligor or any part thereof, on the grounds that the property or any part thereof had been used to commit or facilitate the commission of a criminal offense by any person, including any tenant, pursuant to any law, including under the Controlled Substances Act or the Civil Asset Forfeiture Reform Act, regardless of whether or not the property shall become subject to forfeiture or seizure in connection therewith.

 

(m) Uninsured Loss. The occurrence of any material, uninsured casualty loss with respect to any assets of the Borrower.

 

(n) Death. If any Obligor is a natural person, such Obligor dies or becomes legally incompetent; if any Obligor is a trust, a trustor dies or becomes legally incompetent; if any Obligor is a partnership, any general partner dies or becomes legally incompetent.

 

(o) Material Adverse Change. A material adverse change occurs, or is reasonably likely to occur, in any Obligor’s business condition (financial or otherwise), operations, properties or prospects, or ability to repay the Obligations.

 

(p) Government Action. Any government authority takes action that the Bank believes materially adversely affects any Obligor’s financial condition or ability to repay.

 

(q) ERISA. A reportable event occurs under Section 4043(c) of ERISA, or any Plan termination (or commencement of proceedings to terminate a Plan) or the full or partial withdrawal from a Plan under Section 4041 or 4042 of ERISA occurs; provided such event or events could reasonably be expected, in the judgment of the Bank, to have a material adverse effect.

 

(r) Default Under Related Documents. Any default occurs under any guaranty, subordination agreement, security agreement, deed of trust, mortgage, or other document required by or delivered in connection with the Credit Documents or any such document is no longer in effect, or any Guarantor purports to revoke or disavow the guaranty.

 

(s) Other Breach Under Agreement. (i) A default occurs under any term or condition of the Covenant Agreement (including any failure or anticipated failure by any Obligor to comply with any financial covenants set forth in the Covenant Agreement, whether such failure is evidenced by financial statements delivered to the Bank or is otherwise known to an Obligor or the Bank) or Sections 4.1, 4.2, 4.5, 4.7, 4.8, 4.11, 4.12 and/or 4.13 of this Master Credit Agreement or (ii) a default occurs under any other term or condition of any Credit Document not specifically referred to in this Article and such default continues for thirty (30) days.

 

 

5.2 Remedies. Without limiting any of the Bank’s rights and remedies in the Credit Documents, if any of the foregoing Events of Default occurs, the Bank may do one or more of the following without prior notice: declare the Borrower in default, stop making any additional credit available to the Borrower, or require the Borrower to repay its entire debt immediately. If a Default has occurred and is continuing, the Bank has no obligation to make advances or extend additional credit under any Note. In addition, if any Event of Default occurs, the Bank shall have all rights, powers and remedies available under any instruments and agreements required by or executed in connection with the Credit Documents, as well as all rights and remedies available at law or in equity. Without limiting any other rights the Bank may have, upon the occurrence of an Event of Default, the Bank may enforce the security interest in any Collateral pursuant to the Uniform Commercial Code and any other applicable law, notify and direct all account debtors to forward all payments and Proceeds of the Collateral to a post office box under the Bank’s exclusive control, give notice to others of the Bank’s rights in the Collateral, enter upon the property where any Collateral, including any books and records are located and take possession of such Collateral, use or transfer any of the Obligors’ rights and interests in any General Intangibles constituting Collateral now owned or hereafter acquired by an Obligor, have a receiver appointed by any court of competent jurisdiction to take possession of the Collateral, require the Obligors to obtain the Bank’s prior written consent to any sale, lease, agreement to sell or lease, or other disposition of any Collateral consisting of inventory, require any Obligor to segregate all collections and proceeds of the Collateral so that they are capable of identification and deliver daily such collections and proceeds to the Bank in kind, grant extensions and compromise or settle claims with respect to the Collateral for less than face value, all without notice to the Obligors, receive, open and read mail addressed to the Obligors, resort to the Collateral under the Credit Documents, and any other collateral related to the Obligations, in any order, release persons liable on the Collateral, give receipts and acquittances and compromise disputes, and release or substitute security. The Bank may take such measures as the Bank may deem necessary or advisable to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, and each Obligor irrevocably constitutes and appoints the Bank as such Obligor’s attorney-in-fact to perform all acts and execute all documents.

 

If an Event of Default occurs under Section 5.1(g) or (h) above with respect to any Obligor, then the entire debt outstanding under the Credit Documents will automatically be due immediately.

 

Notwithstanding anything herein to the contrary, (i) the Proceeds of any Collateral shall only be applied to the Obligations secured by such Collateral pursuant to the applicable Guaranty and Collateral Agreement(s) or other Related Collateral Document, as applicable, and (ii) nothing in this Master Credit Agreement shall cause the Collateral under any Guaranty and Collateral Agreement (if any) to secure any Obligations not constituting “Obligations” as defined in such Guaranty and Collateral Agreement or shall cause any Collateral under any other Related Collateral Document (if any) to secure Obligations not constituting obligations secured pursuant to such Related Collateral Document.

 

6.	ENFORCING THIS AGREEMENT; MISCELLANEOUS

 

6.1 GAAP. Except as otherwise stated in the Credit Documents, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied or another basis acceptable to the Bank; provided, however, leases shall continue to be classified and accounted for on a basis consistent with that reflected in the financial statements of the Borrower for the most recently ended fiscal year prior to the date of this Agreement for all purposes of this Agreement, notwithstanding any change in GMP relating thereto, unless the parties hereto shall enter into a mutually acceptable amendment addressing such changes.

 

If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth herein, and either the Borrower or the Bank shall so request, the Borrower and the Bank shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GMP; provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GMP prior to such change therein and (ii) the Borrower shall provide to the Bank financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

6.2 Bank Rights. Each Obligor appoints the Bank its attorney in fact to perform any of the following rights, which are coupled with an interest, are irrevocable until termination of the Credit Documents and may be exercised from time to time by the Bank’s officers and employees, or any of them:

 

(a) to perform any obligation of such Obligor under each Credit Document in such Obligor’s name or otherwise;

 

(b) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, financing statements, continuation statements, termination statements, statements of assignment, applications for registration or like documents to perfect, preserve or release the Bank’s interest in any Collateral;

 

 

(c) to take cash, instruments for the payment of money and other property to which the Bank is entitled;

 

(d) to verify facts concerning any Collateral by inquiry of obligors thereon, or otherwise, in its own name or a fictitious name;

 

(e) to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to any Collateral;

 

(f) to prepare, adjust, execute, deliver and receive payment under insurance claims, and to collect and receive payment of and endorse any instrument in payment of loss or returned premiums or any other insurance refund or return, and to apply such amounts received by the Bank, at the Bank’s sole option, toward repayment of the Obligations or, where appropriate, replacement of any Collateral;

 

(g) to enter onto such Obligor’s premises to inspect any Collateral;

 

(h) to make withdrawals from and to close deposit accounts or other accounts with any financial institution, wherever located, into which proceeds of any Credit Facility may have been deposited, and to apply funds so withdrawn to payment of the Obligations (as defined in the Note governing such Credit Facility);

 

(i) to preserve or release the interest evidenced by chattel paper to which the Bank is entitled and to endorse and deliver any evidence of title; and

 

(j) to do all acts and things and execute all documents in the name of the Borrower or otherwise, deemed by the Bank as necessary, proper and convenient in connection with the preservation, perfection or enforcement of the Bank’s rights;

 

provided that the Bank will not exercise any rights under clauses (a), (c), (d), (e), (f) or (h) unless an Event of Default has occurred and is continuing.

 

6.3 Change of Terms. The Credit Documents may only be amended by a writing signed by the parties thereto; which, to the extent expressly agreed to by the Bank in its discretion, may include being amended by an Electronic Record signed by the parties thereto using Electronic Signatures pursuant to the terms of the Credit Documents.

 

6.4 Successors and Assigns. Each Credit Document is binding on each Obligor’s and the Bank’s successors and assignees. Each Obligor agrees that it may not assign any Credit Document without the Bank’s prior written consent. The Bank may sell participations in or assign any Credit Facility and the related Credit Documents, and may exchange information about the Obligors (including, without limitation, any information regarding any hazardous substances) with actual or potential participants or assignees.

 

6.5 Severability; Waivers. If any part of any Credit Document is not enforceable, the rest of the Credit Documents may be enforced. The Bank retains all rights, even if it makes a loan after Default. If the Bank waives a Default, it may enforce a later Default. Any consent or waiver under any Credit Document must be in writing.

 

6.6 Fees and Expenses. The Borrower shall reimburse the Bank for any reasonable costs and expenses, including attorneys’ fees incurred by the Bank in connection with the Credit Documents, including (i) the negotiation and preparation of the Credit Documents and any related agreements, the Bank’s continued administration of the Credit Documents and such related agreements, and the preparation of any amendments and waivers related to the Credit Documents or such related agreements, (ii) the enforcement or preservation of any rights or remedies under the Credit Documents and any other documents executed in connection with the Credit Documents, and in connection with any amendment, waiver, “workout” or restructuring under the Credit Documents, (iii) filing, recording and search fees, appraisal fees, field examination fees, title report fees, and documentation fees with respect to any Collateral and books and records of the Borrower or any Obligor, and (iv) taxes, costs or expenses incurred in connection with providing any Credit Facility or otherwise required to be paid by the Borrower or any Obligor that are paid, incurred or advanced by the Bank.

 

6.7 Individual Liability. If the Borrower or any Guarantor is a natural person, the Bank may proceed against the Borrower’s or such Guarantor’s business and non-business property in enforcing the Credit Documents and other agreements relating to the Credit Facility. If the Borrower or any Guarantor is a partnership, the Bank may proceed against the business and non-business property of each general partner of the Borrower or such Guarantor in enforcing the Credit Documents and other agreements relating to the Credit Facility

 

 

6.8 Set-Off.

 

(a) In addition to any rights and remedies of the Bank provided by law, upon the occurrence and during the continuance of any Event of Default, the Bank is authorized, at any time, to set off and apply any and all Deposits of the Borrower or any Obligor held by the Bank or its affiliates against any and all Obligations owing to the Bank. The set-off may be made irrespective of whether or not the Bank shall have made demand under any Credit Document or any guaranty, and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable Deposits and without regard for the availability or adequacy of any Collateral. Any Deposits may be converted, sold or otherwise liquidated at prevailing market prices in order to effect such set-off.

 

(b) The set-off may be made without prior notice to the Borrower or any other person, any such notice being waived by the Borrower (on its own behalf and on behalf of each Obligor) to the fullest extent permitted by law. The Bank agrees promptly to notify the Borrower after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application.

 

(c) For the purposes of this Section 6.8, “Deposits” means any deposits (general or special, time or demand, provisional or final, individual or joint) as well as any money, instruments, securities, credits, claims, demands, income or other property, rights or interests owned by the Borrower or any Obligor which come into the possession or custody or under the control of the Bank or its affiliates. TO THE EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS TO REQUIRE THE BANK TO EXERCISE ITS REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL THAT SECURES THE OBLIGATIONS PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS, OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVED.

 

6.9 One Agreement. The Credit Documents and any related security or other agreements required by the Credit Documents, collectively:

 

(a) Represent the sum of the understandings and agreements between the Bank, the Borrower and each Guarantor concerning each Credit Facility;

 

(b) Replace any prior oral or written agreements between the Bank, the Borrower and each Guarantor concerning each Credit Facility; and

 

(c) Are intended by the Bank, the Borrower and each Guarantor as the final, complete and exclusive statement of the terms agreed to by them.

 

In the event of any conflict between this Master Credit Agreement on one hand, and any other Credit Document, on the other hand, such other Credit Document will prevail. In the event of any conflict between any Credit Document and any other agreements or documents signed in connection with the Credit Documents, the applicable Credit Document will prevail.

 

6.10 Indemnification. The Borrower will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) the Credit Documents or any document required under the Credit Documents or signed in connection with the Credit Documents, (b) any Credit Facility extended or committed by the Bank to the Borrower under the Credit Documents, (c) any litigation or proceeding related to or arising out of the Credit Documents, any such document, or any such Credit Facility, and (d) any loss or liability the Bank incurs in connection with or as a result of the Credit Documents, which directly or indirectly arises out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity includes but is not limited to attorneys’ fees. This indemnity extends to the Bank, its parent, subsidiaries, affiliates and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Obligations to the Bank. All sums due to the Bank hereunder shall be Obligations of the Obligors, due and payable immediately without demand.

 

 

6.11 Notices. Unless otherwise provided in this Agreement or in another agreement between the Bank and any Obligor, all notices required under the Credit Documents and other information concerning the Credit Documents shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses specified herein, or to such other addresses as the Bank and such Obligor may specify from time to time in writing (any such notice a “Written Notice”). Any such Written Notices sent by (a) the Bank to any Obligor shall be sent to such Obligor’s address as recorded in the Bank’s records and (b) any Obligor to the Bank shall be sent to:

 

Bank of America, N.A.

Gateway Village - 900 Building

NC1-026-06-06

900 W. Trade Street

Charlotte, NC 28255

 

Written Notices shall be effective (i) if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, or (ii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram), when delivered. Each Obligor shall promptly notify the Bank of any change in such Obligor’s name, address, employment, or ownership. Any notices and/or disclosures sent by the Bank under the Credit Documents to any Obligor shall constitute notice to all Obligors. In lieu of a Written Notice, notices and/or communications from the Bank to any Obligor may, to the extent permitted by law, be delivered electronically (i) by transmitting the communication to the electronic address provided by such Obligor or to such other electronic address as such Obligor may specify from time to time in writing, or (ii) by posting the communication on a website and sending such Obligor a notice to such Obligor’s postal address or electronic address telling such Obligor that the communication has been posted, its location, and providing instructions on how to view it (any such notice, an “Electronic Notice”). Electronic Notices shall be effective when the communication, or a notice advising of its posting to a website, is sent to such Obligor’s electronic address.

 

6.12 Headings. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of any Credit Document.

 

6.13 Borrower/Obligor Information; Reporting to Credit Bureaus. Each of the Borrower and each Obligor executing any Credit Document authorizes the Bank at any time to verify or check any information given by the Borrower and/or any Obligor to the Bank, check the Borrower’s or Obligor’s credit references, verify employment, and obtain credit reports. Each of the Borrower and each Obligor agrees that the Bank shall have the right at all times to disclose and report to credit reporting agencies and credit rating agencies such information pertaining to the Borrower and/or all Obligors as is consistent with the Bank’s policies and practices from time to time in effect.

 

6.14 Collection. Each Obligor agrees that if any payment is not made when due, such Obligor will accept calls from the Bank or the Bank’s agent regarding collection of the outstanding balance. The calls could be automatically dialed and a recorded message may be played. Each Obligor agrees that such calls will not be “unsolicited” calls for purposes of local, state or federal law.

 

6.15 Telephone Monitoring. The Bank may monitor and record all telephone calls between an Obligor and the Bank.

 

6.16 Electronic Records and Signatures. The Credit Documents and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to the transaction(s) described in the Credit Documents (each a “Communication”), including Communications required to be in writing, may, if agreed by the Bank, be in the form of an Electronic Record and may be executed using Electronic Signatures, including, without limitation, facsimile and/or .pdf. The Borrower agrees that any Electronic Signature (including, without limitation, facsimile or .pdf) on or associated with any Communication shall be valid and binding on the Borrower to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered to the Bank. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Bank of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. The Bank may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of the Bank’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Bank is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Bank pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Bank has agreed to accept such Electronic Signature, the Bank shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Obligor without further verification and (b) upon the request of the Bank any Electronic Signature shall be promptly followed by a manually executed, original counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.

 

 

6.17 Conversion to Paper Original.

 

(a) At the Bank’s discretion the authoritative electronic copy of each Credit Document (“Authoritative Copy”) may be converted to paper and marked as the original by the Bank (the “Paper Original”).

 

(b) Unless and until the Bank creates a Paper Original, the Authoritative Copy of each Credit Document:

 

(i) shall at all times reside in a document management system designated by the Bank for the storage of authoritative copies of electronic records, and

 

(ii) is held in the ordinary course of business.

 

(c) In the event the Authoritative Copy is converted to a Paper Original, the parties hereto acknowledge and agree that:

 

(i) the electronic signing of each Credit Document also constitutes issuance and delivery of the Paper Original,

 

(ii) the electronic signature(s) associated with each Credit Document, when affixed to the Paper Original, constitutes legally valid and binding signatures on the Paper Original, and

 

(iii) the respective obligations of each Obligor will be evidenced by the Paper Original after such conversion.

 

6.18 Limitation of Interest and Other Charges. If, at any time, the rate of interest, together with all amounts that constitute interest and are reserved, charged or taken by the Bank as compensation for fees, services or expenses incidental to the making, negotiating or collection of the Credit Facility, shall be deemed by any competent court of law, governmental agency or tribunal to exceed the maximum rate of interest permitted to be charged by the Bank to the applicable Obligor under applicable law, then, during such time as such rate of interest would be deemed excessive, that portion of each sum paid attributable to that portion of such interest rate that exceeds the maximum rate of interest so permitted shall be deemed a voluntary prepayment of principal. As used in the Credit Documents, the term “applicable law” shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then each Credit Document shall be governed by such new law as of its effective date.

 

6.19 Customary Advertising Material. The Borrower consents to the publication by the Bank of customary advertising material relating to the transactions contemplated by this Master Credit Agreement and the other Credit Documents using the name, product photographs, logo or trademark of the Borrower.

 

6.20 Governing Law. Except to the extent that any law of the United States may apply, each Credit Document shall be governed and interpreted according to the laws of New York (the “Governing Law State”), without regard to any choice of law, rules or principles to the contrary. Nothing in this paragraph shall be construed to limit or otherwise affect any rights or remedies of the Bank under federal law. Notwithstanding the foregoing, if the laws of the Governing Law State are found not to apply, the charging and calculating of interest on the obligations under the Credit Documents shall be governed by, construed and enforced in accordance with the laws of the State of North Carolina and applicable federal law.

 

 

6.21 Venue and Jurisdiction. Each Obligor agrees that any action or suit against the Bank arising out of or relating to any Credit Document shall be filed in federal court or state court located in either (i) the city of New York, borough of Manhattan or (ii) the state in which the Borrower is located (the “Selected Venues”). Each Obligor agrees that the Bank shall not be deemed to have waived its rights to enforce this section by filing an action or suit against the Borrower or any Guarantor in a venue outside of the Selected Venues. If the Bank does commence an action or suit arising out of or relating to any Credit Document, each Obligor agrees that the case may be filed in the Selected Venues. The Bank reserves the right to commence an action or suit in any other jurisdiction where any Obligor, or any Collateral has any presence or is located. Each Obligor consents to personal jurisdiction and venue in such forum selected by the Bank and waives any right to contest jurisdiction and venue and the convenience of any such forum. The provisions of this section are material inducements to the Bank’s acceptance of the Credit Documents.

 

6.22 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS MASTER CREDIT AGREEMENT OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (a) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (b) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS MASTER CREDIT AGREEMENT AND THE OTHER DOCUMENTS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION AND (c) CERTIFIES THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE.

 

6.23 Waiver of Class Actions. The terms “Claim” or “Claims” refer to any disputes, controversies, claims, counterclaims, allegations of liability, theories of damage, or defenses between Bank of America, N.A., its subsidiaries and affiliates, on the one hand, and the other parties to the Credit Documents, on the other hand (all of the foregoing each being referred to as a “Party” and collectively as the “Parties”). Whether in state court, federal court, or any other venue, jurisdiction, or before any tribunal, the Parties agree that all aspects of litigation and trial of any Claim will take place without resort to any form of class or representative action. Thus the Parties may only bring Claims against each other in an individual capacity and waive any right they may have to do so as a class representative or a class member in a class or representative action. THIS CLASS ACTION WAIVER PRECLUDES ANY PARTY FROM PARTICIPATING IN OR BEING REPRESENTED IN ANY CLASS OR REPRESENTATIVE ACTION REGARDING A CLAIM.

 

This Master Credit Agreement is executed as of the date first written above.

 

Bank:
Bank of America, N.A.
By:
	Authorized Representative
Borrower:

 

Champion Safe Company, Inc.
By:
	Charles A. Ross Jr., Chief Executive Officer

 

 

Federal law requires Bank of America, N.A. (the “Bank”) to provide the following notice. The notice is not part of the foregoing agreement or instrument and may not be altered. Please read the notice carefully.

 

(1) USA PATRIOT ACT NOTICE

 

Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. The Bank will ask for the Borrower’s legal name, address, tax ID number or social security number and other identifying information. The Bank may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of the Borrower, guarantors or other related persons.

 

 

 

GUARANTY AND COLLATERAL AGREEMENT

 

TRANSACTION SUMMARY
Date of Related Note:	February 10, 2023
Credit Limit of Related Note:	$2,000,000.00
Loan Account Number:	361508
Name(s) of Borrower:	Champion Safe Company, Inc.
Name(s) of Guarantor:	American Rebel, Inc., Superior Safe Co, L.L.C., Safe Guard Security Products LC, and American Rebel Holdings, Inc

 

This Guaranty and Collateral Agreement, dated and effective as of February 10, 2023, is entered into among the Borrower, each Guarantor and Bank of America, N.A. (the “Bank”) to govern the Continuing and Unconditional Guaranty and the Security Agreement set forth herein, in connection with the Note, dated as of February 10, 2023 (as amended from time to time, and as set forth in more detail in the Transaction Summary above, the “Related Note”), between the Borrower and the Bank, the Master Credit Agreement, dated as of February 10, 2023 (as amended from time to time, the “Master Credit Agreement”), between the Borrower and the Bank, and the Covenant Agreement executed in connection therewith.

 

1. DEFINITIONS.

 

1.1 General. Unless otherwise defined herein, capitalized terms used in this Guaranty and Collateral Agreement shall have the respective meanings ascribed thereto in Section 1 of the Master Credit Agreement and as otherwise may be provided in other provisions of the Credit Documents. Except as otherwise expressly set forth herein, each reference herein to “herein,” “hereunder” or “hereof’ shall be deemed a reference to this Guaranty and Collateral Agreement.

 

1.2 In this Guaranty and Collateral Agreement:

 

“Borrower” means, collectively and individually, each person set forth in the Transaction Summary as the “Borrower”.

 

“Credit Facility” means “Credit Facility” as defined in the Related Note.

 

“Guarantor” means each person or entity (if any) set forth in the Transaction Summary as the “Guarantor”, and “Guarantors” means all such persons and entities collectively.

 

“Guaranty and Collateral Agreement” means this Guaranty and Collateral Agreement among the Borrower, each Guarantor and the Bank, as amended from time to time.

 

“Obligations” means “Obligations” as defined in the Related Note.

 

“Transaction Summary” means the summary of terms set forth on page one of this Guaranty and Collateral Agreement.

 

2. CONTINUING AND UNCONDITIONAL GUARANTY.

 

BY SIGNING BELOW, EACH GUARANTOR: (i) CONSENTS TO, JOINS IN AND AGREES TO BE BOUND BY THIS GUARANTY AND COLLATERAL AGREEMENT, (ii) CONSENTS TO, JOINS IN AND AGREES TO BE BOUND BY THE RELATED NOTE, THE MASTER CREDIT AGREEMENT AND THE COVENANT AGREEMENT, INCLUDING ANY AND ALL AMENDMENTS THERETO (ALL WITHOUT NOTICE TO OR CONSENT BY SUCH GUARANTOR); (iii) AGREES TO BE BOUND BY THE TERMS OF THE CONTINUING AND UNCONDITIONAL GUARANTY SET FORTH BELOW (THE “GUARANTY”); (iv) HEREBY MAKES EACH OF THE REPRESENTATIONS AND WARRANTIES AND AGREES TO EACH OF THE COVENANTS IN THIS GUARANTY AND COLLATERAL AGREEMENT, THE RELATED NOTE, THE MASTER CREDIT AGREEMENT AND THE COVENANT AGREEMENT THAT ARE APPLICABLE TO SUCH GUARANTOR OR ALL OBLIGORS, (v) WARRANTS AND COVENANTS TO THE BANK THAT, EXCEPT TO THE EXTENT PREVIOUSLY DISCLOSED TO THE BANK IN WRITING, ALL REPRESENTATIONS AND WARRANTIES PREVIOUSLY MADE BY IT TO THE BANK ARE TRUE, COMPLETE AND ACCURATE AS OF THE DATE OF THIS GUARANTY AND COLLATERAL AGREEMENT; AND (vi) ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED AND HAD THE OPPORTUNITY TO REVIEW COPIES OF EACH OF THE RELATED NOTE, THE MASTER CREDIT AGREEMENT AND THE COVENANT AGREEMENT.

 

 

2.1 Continuing and Unconditional Guaranty. In consideration of the Bank extending the Credit Facility to the Borrower each person and entity signing below as a Guarantor unconditionally guarantees to the Bank and its successors and assigns, the prompt payment and performance of (a) all Obligations and (b) all obligations under any deposit, treasury management or similar transaction or arrangement of any Borrower with the Bank (collectively, the “Guaranteed Obligations”). EACH GUARANTOR’S LIABILITY HEREUNDER SHALL COMMENCE UPON SUCH GUARANTOR’S EXECUTION OF THIS GUARANTY AND COLLATERAL AGREEMENT AND SHALL BE UNLIMITED IN AMOUNT. This Guaranty shall operate as a continuing, unconditional and absolute guaranty. Each Guarantor waives all requirements of notice, demand, presentment or protest, any right such Guarantor may have to require the Bank first to proceed against the Borrower or any other person or entity, to marshal! assets or first to realize on any collateral (including the Collateral) before proceeding against such Guarantor hereunder, or to give notice of the terms, time and place of any public or private sale or other disposition of any Collateral. Further, each Guarantor waives all other defenses that may be available to a surety, including but not limited to those based upon or arising by reason of (i) any disability or other defense of the Borrower or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Guaranteed Obligations; (iii) any lack of authority of any person acting or purporting to act on behalf of the Borrower which is an entity, or any defect in the formation of the Borrower; (iv) the application by the Borrower of the proceeds of any Guaranteed Obligations for purposes other than the purposes represented by the Borrower to, or intended or understood by, the Bank or such Guarantor; (v) any act or omission by the Bank which directly or indirectly results in or aids the discharge of the Borrower or any portion of the Guaranteed Obligations by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of the Bank against the Borrower; (vi) any impairment of the value of any interest in any Collateral, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any Collateral, the release of any Collateral without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any Collateral; (vii) any modification of the Guaranteed Obligations, in any form whatsoever, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Guaranteed Obligations, including increase or decrease of the rate of interest and any amendment or modification to any Credit Document; (viii) any requirement that the Bank give any notice of acceptance of this Guaranty; (ix) any defense based on any claim that such Guarantor’s obligations exceed or are more burdensome than those of the Borrower; (x) the benefit of any statute of limitations affecting such Guarantor’s liability under this Guaranty; or (xi) any election of remedies by the Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Guaranteed Obligations, destroys such Guarantor’s rights of subrogation or such Guarantor’s rights to proceed against the Borrower for reimbursement. Each Guarantor waives all rights of setoff and exoneration, or subrogation until the Guaranteed Obligations shall have been paid and/or performed in full. Each Guarantor agrees that the Bank may renew, compromise, extend, accelerate, or otherwise change the time for payment, or otherwise change the terms, of the Obligations or any part thereof, including increase or decrease of the rate of interest, modify or extend the terms of the Related Note, the Master Credit Agreement, the Covenant Agreement or of any other Guaranteed Obligations, or compromise, settle or release any other obligor under the Guaranteed Obligations, all without notice to or consent by such Guarantor and without affecting such Guarantor’s liability hereunder. Additionally, the Bank may receive and hold security for the payment of this Guaranty or any Guaranteed Obligations under this Guaranty and Collateral Agreement and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security. Any obligations of the Borrower to each Guarantor, now or hereafter existing, including but not limited to any obligations to any Guarantor as subrogee of Bank or resulting from such Guarantor’s performance under this Guaranty, are hereby subordinated to the Guaranteed Obligations. Each Guarantor shall not demand, take, or receive from the Borrower, by setoff or in any other manner, payment of any other obligations of the Borrower to such Guarantor until the Guaranteed Obligations have been paid in full and any commitments of the Bank or facilities provided by the Bank with respect to the Guaranteed Obligations have been terminated. If any payments are received by any Guarantor in violation of such waiver or agreement, such payments shall be received by such Guarantor as trustee for the Bank and shall be paid over to the Bank on account of the Guaranteed Obligations, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. Any security interest, lien, or other encumbrance that each Guarantor may now or hereafter have on any property of the Borrower is hereby subordinated to any security interest, lien, or other encumbrance that the Bank may have on any such property. Each Guarantor grants the Bank the right of setoff for all matured and unmatured Guaranteed Obligations against all deposits and property of such Guarantor now or hereafter in the possession or control of the Bank or its affiliates without regard to the adequacy of Collateral. Each Guarantor grants the Bank a security interest in all such property to secure such Guarantor’s obligations. Until the Guaranteed Obligations have been paid in full and any commitments of the Bank to provide further extensions of credit have been terminated, each Guarantor waives any right of subrogation, reimbursement, indemnification and contribution. This Guaranty shall be binding upon each Guarantor’s successors and assigns. This Guaranty may be modified only by a written agreement signed by the Bank and each Guarantor. THIS GUARANTY IS SUBJECT TO THE VENUE, JURISDICTION AND DISPUTE RESOLUTION PROVISION CLAUSES SET FORTH IN THE MASTER CREDIT AGREEMENT. EACH GUARANTOR ACKNOWLEDGES THAT ANY CONTROVERSIES OR CLAIMS RELATING TO THIS GUARANTY ARE SUBJECT TO ARBITRATION, JUDICIAL REFERENCE, AND/OR JURY TRIAL WAIVER AS PROVIDED FOR IN THE MASTER CREDIT AGREEMENT. EACH GUARANTOR ACKNOWLEDGES THIS IS A COMMERCIAL TRANSACTION AND NOT A CONSUMER TRANSACTION. Each Guarantor agrees that the Bank may rely on a facsimile of this Guaranty. Each Guarantor acknowledges that it has had the opportunity to consult with counsel of its own choosing with respect to this Guaranty. This Guaranty is intended to take effect as an instrument under seal. If any Guarantor is an entity other than an individual, the individuals signing on behalf of such Guarantor represent and warrant that they are duly authorized to execute this Guaranty on behalf of such Guarantor. Each Guarantor agrees to pay all reasonable attorneys’ fees and all other costs and expenses that may be incurred by the Bank in the enforcement of this Guaranty or in connection with the preservation or protection of the Bank’s rights under this Guaranty. In the event of the death of a Guarantor, the liability of the estate of the deceased Guarantor shall continue in full force and effect as to (i) the Obligations existing at the date of death, and any renewals or extensions, and (ii) loans or advances made to or for the account of the Borrower after the date of death of the deceased Guarantor pursuant to a commitment made by Bank to the Borrower prior to the date of such death. As to any surviving Guarantor, this Guaranty shall continue in full force and effect after the death of a Guarantor, not only as to Obligations existing at that time but also as to the Obligations later incurred by Borrower to Bank. This guaranty is cumulative and does not supersede any other outstanding guaranties, and the liability of each Guarantor under this Guaranty and Collateral Agreement is exclusive of such Guarantor’s liability under any other guaranties signed by such Guarantor.

 

 

2.2 Indemnity. Each Guarantor, jointly and severally, will indemnify and hold the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Guaranty and Collateral Agreement, the Related Note or any document required hereunder or signed in connection herewith, (b) the Credit Facility extended or committed by the Bank to the Borrower under the Related Note, (c) any litigation or proceeding related to or arising out of this Guaranty and Collateral Agreement, the Related Note, or the Credit Facility, and (d) any loss or liability the Bank incurs in connection with or as a result of entering into the Related Note or this Guaranty and Collateral Agreement, which directly or indirectly arises out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity includes but is not limited to attorneys’ fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries, affiliates and all of their directors, officers, employees, agents, successors, attorneys, and assigns. This indemnity will survive repayment of the Obligations to the Bank. All sums due to the Bank hereunder shall be Obligations of each Guarantor, due and payable immediately without demand.

 

2.3 Information Relating to Borrower. Each Guarantor acknowledges and agrees that it has made such independent examination, review, and investigation of the Credit Documents as such Guarantor deems necessary and appropriate, and shall have sole responsibility to obtain from the Borrower any information required by such Guarantor about any modifications to the Credit Documents. Each Guarantor further acknowledges that the Bank has no duty, and no Guarantor is relying on the Bank, at any time to disclose to such Guarantor any information relating to the business operations or financial condition of the Borrower. For purposes of this Section 2.3 “Credit Documents” shall mean all agreements, documents, and instruments evidencing any of the Obligations, including but not limited to the Master Credit Agreement, the Covenant Agreement, the Related Note, and all deeds of trust, mortgages, security agreements, and other agreements, documents, and instruments executed by Borrower in connection with the Obligations, all as now in effect and as hereafter amended, restated, renewed, or superseded.

 

 

3. SECURITY AGREEMENT.

 

Champion Safe Company, Inc. hereby assigns and grants to the Bank, and to the Bank’s subsidiaries and affiliates, a continuing security interest in the following described property now owned or hereafter acquired by such Obligor (collectively, “Collateral”), which does and shall secure all Obligations:

 

All (a) Accounts; (b) Chattel Paper; (c) Deposit Accounts; (d) Documents; (e) General Intangibles; (f) Goods, including Equipment; (g) Instruments; (h) Inventory; (i) Investment Property; U) Letters of Credit and Letter-of-Credit Rights; (k) Money and other assets of such Obligor that now or later come into the possession, custody, or control of the Bank; (I) all negotiable and nonnegotiable documents of title covering any of the foregoing; (m) all Accessions, attachments and other additions to, or substitutions and replacements for, the foregoing, and all tools, parts and equipment used in connection with the foregoing; (n) all books and records relating to the foregoing whether in the form of a writing, photograph, microfilm or electronic media, including but not limited to any computer-readable memory and any computer software necessary to process such memory; and (o) all proceeds (as such term is defined in the Uniform Commercial Code), all cash or non-cash proceeds (including insurance proceeds), products, rents and profits of the foregoing, and all income, benefits and property receivable on account of the foregoing, and all Supporting Obligations covering any of the foregoing (all such proceeds, collectively, “Proceeds”).

 

Except as otherwise agreed in writing by the Bank and the Obligors, if the Obligations include, now or hereafter, any Special Flood Zone Loan, then the following shall apply: The Special Flood Zone Loan shall not be secured under this Guaranty and Collateral Agreement by any Collateral which would constitute “contents” located within the Flood Zone Improvements. For the purposes of this subparagraph, (a) “Flood Zone Improvements” means any “improved” real property that is located within a Special Flood Hazard Area; (b) a “Special Flood Zone Loan” means a loan or line of credit which is secured by Flood Zone Improvements; and (c) the terms “improved” real property, “Special Flood Hazard Area,” and “contents” shall have the meaning ascribed to them by the Flood Disaster Protection Act of 1973, 42 U.S.C. § 4001 et seq., and implementing regulations, 44 C.F.R. Parts 59 et seq., and/or the Federal Emergency Management Agency (“FEMA”).

 

Each Obligor agrees that the Collateral may be sold as provided for in any Credit Document and to the extent permitted by applicable law, expressly waives any rights of notice of sale, advertisement procedures, or related provisions granted under applicable law, including the UCC. This Guaranty and Collateral Agreement does not supersede any outstanding security agreement that covers liabilities of any Obligor not included in the Related Note.

 

4. GOVERNING LAW. Except to the extent that any law of the United States may apply, this Guaranty and Collateral Agreement shall be governed and interpreted according to the laws of New York, without regard to any choice of law, rules or principles to the contrary. Nothing in this paragraph shall be construed to limit or otherwise affect any rights or remedies of the Bank under federal law.

 

5. ELECTRONIC RECORDS AND SIGNATURES.

 

5.1 Electronic Records and Signatures. Any Credit Document and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to the transaction(s) described in the Credit Documents (each a “Communication”), including Communications required to be in writing, may, if agreed by the Bank, be in the form of an Electronic Record and may be executed using Electronic Signatures, including, without limitation, facsimile and/or .pdf. The Borrower and each Guarantor agrees that any Electronic Signature (including, without limitation, facsimile or .pdf) on or associated with any Communication shall be valid and binding on the Borrower and each Guarantor to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of the Borrower and Guarantors enforceable against the Borrower and Guarantors in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered to the Bank. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Bank of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. The Bank may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of the Bank’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Bank is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Bank pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Bank has agreed to accept such Electronic Signature, the Bank shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Obligor without further verification and (b) upon the request of the Bank any Electronic Signature shall be promptly followed by a manually executed, original counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.

 

 

5.2 Conversion to Paper Original.

 

(a) At the Bank’s discretion the authoritative electronic copy of each Credit Document (“Authoritative QQ.Qy”) may be converted to paper and marked as the original by the Bank (the “Paper Original”).

 

(b) Unless and until the Bank creates a Paper Original, the Authoritative Copy of each Credit Document:

 

(i) shall at all times reside in a document management system designated by the Bank for the storage of authoritative copies of electronic records, and

 

(ii) is held in the ordinary course of business.

 

(c) In the event the Authoritative Copy is converted to a Paper Original, the parties hereto acknowledge and agree that:

 

(i) the electronic signing of each Credit Document also constitutes issuance and delivery of the Paper Original,

 

(ii) the electronic signature(s) associated with each Credit Document, when affixed to the Paper Original, constitutes legally valid and binding signatures on the Paper Original, and the respective obligations of each Obligor will be evidenced by the Paper Original after such conversion.

 

This Guaranty and Collateral Agreement is executed as of the date first written above. Bank:

 

Bank of America, N.A.
By:
	Authorized Representative
Borrower:

 

Champion Safe Company, Inc.
By:
	Charles A. Ross Jr., Chief Executive Officer

 

 

Guarantor:
American Rebel, Inc.
By:
	Charles A. Ross Jr., Chief Executive Officer
Location of Guarantor:
American Rebel, Inc.
8460 Nieman Rd
Lenexa, KS 662141512

 

Superior Safe Co, L.L.C.
By:
	Charles A. Ross Jr., Chief Executive Officer
Location of Guarantor:
Superior Safe Co, L.L.C.
2055 S Tracy Hall Pkwy
Provo, UT 846066224

 

Safe Guard Security Products LC
By:
	Charles A. Ross Jr., Chief Executive Officer
Location of Guarantor:
Safe Guard Security Products LC
2055 S Tracy Hall Pkwy
Provo, UT 846066224

 

American Rebel Holdings, Inc
By:
	Charles A. Ross Jr., Chief Executive Officer
Location of Guarantor:
American Rebel Holdings, Inc
8460 Nieman Rd
Lenexa, KS 662141512

 

 

Exhibit 3.8

 

 

Business Loan and Security Agreement

April 14, 2023

 

This Business Loan and Security Agreement Supplement is part of (and incorporated by reference into) the Business Loan and Security Agreement. Borrower should keep this important legal document for Borrower’s records.

 

Borrower:		AMERICAN REBEL INC. AND AMERICAN REBEL ,INC AND AMERICAN REBEL, INC. AND AMERICAN REBEL HOLDING, INC AND AMERICAN REBEL HOLDINGS, INC. AND AMERICAN REBEL HOLDINGS INC AND CHAMPION SAFE COMPANY, INC. AND CHAMPION SAFE COMPANY INC AND CHAMPION SAFE CO., INC. AND SUPERIOR SAFE, LLC AND SUPERIOR SAFE CO, L.L.C. AND SUPERIOR SAFE CO LLC AND SAFE GUARD SECURITY PRODUCTS, LLC AND SAFE GUARD SECURITY PRODUCTS LC AND CUBESCAPE INC AND AMERICAN REBEL HOLDINGS AND AMERICAN REBEL HOLDING AND AMERICAN REBEL AND CHAMPION SAFE COMPANY AND CHAMPION SAFE CO AND SUPERIOR SAFE CO AND SUPERIOR SAFE AND SUPERIOR SAFE COMPANY AND SAFE GUARD SECURITY PRODUCTS AND SAFE GUARD AND SAFE CO   Business Addresses:   909 18th Ave South Ste A, Nashville, TN 37212   2813 S Sierra Vista Way, Provo, UT 84606   718 Thompson Lane Suite 108-199, Nashville, TN 37204   2055 South Tracy Hall Pkwy, Provo, UT 84606   8460 Nieman Rd, Lenexa, KS 66214   EIN: 47-3892903, 87-0676377, 47-1937934, 26-0333651
Lender:
Disbursement Amount: Amount of Loan less fees and costs   Note that the Disbursement Amount will be net of (a) any principal amount owed to Lender from an existing loan or (b) any amount used to pay off an existing obligation owed to a third party lender.		$980,000.00 (may be made in multiple disbursements)
Amount of Loan:		$1,000,000.00
Total Repayment Amount:   Sum of Amount of Loan and Interest Charge when all payments are made on time		$1,280,000.00
Payment Schedule:		64 payments of $20,000 due each week beginning on the first Friday after the Disbursement Amount is disbursed, (the “Weekly Repayment Amount”). Should any payment date fall on a holiday that days payment will be due the business day prior.   “Business day” means any Monday through Friday, except for Federal Reserve holidays.
Interest Charge:   Dollar amount of interest that the Loan will cost (does not include any Fees)		$280,000.00
Interest Rate:   (Interest rate paid on Amount of Loan if all payments made as scheduled.)		22.8% per annum
Fees:		Closing Fee: $15,000.00 (to be deducted from the Loan Amount) Legal Fee: $5,000.00 (to be deducted from the Loan Amount) Returned Payment Fee: $50.00   Default Fee: $15,000.

 

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Interest Rate

 

The interest rate disclosed on this Business Loan and Security Agreement Supplement (the “Interest Rate”) is the rate of interest calculated by dividing the Amount of Loan by the Interest Charge. This calculation assumes that all payments are made as scheduled. THIS INTEREST RATE DOES NOT INCLUDE ANY FEES AND IS NOT ANNUALIZED AND, THEREFORE, IS NOT AN ANNUAL PERCENTAGE RATE (“APR”).

 

The APR equals a single percentage number that represents the actual yearly cost of funds over the term of a loan and includes any fees or additional costs associated with the loan. The APR on this loan can be compared to the APR of other loan programs to give you a consistent means of comparing rates and programs to the extent programs have different loan terms and fee structures.

 

Disbursement Amount

 

The Disbursement Amount is the Amount of Loan minus the Origination Fee and the payoffs of prior loans/lines to the extent applicable.

 

Fees

 

The Origination Fee is deducted at the time of disbursement.

 

Total Repayment Amount

 

The Total Repayment Amount includes the Amount of Loan plus the Interest Charged.

 

Loan Pricing Disclosure

 

Lender uses a system of risk-based pricing to determine interest charges and fees. Risk-based pricing is a system that evaluates the risk factors of your application and adjusts the interest rate and discount points up or down based on this risk evaluation.

 

Although Lender believes that its loan process provides expedited turnaround time and its underwriting process provides greater likelihood of approval of your loan, this loan may be a higher cost loan than loans that may be available through other lenders. You should fully consider all costs and fees associated with this loan and compare your available alternatives to this loan. You are encouraged to engage appropriate advisors to the extent you believe necessary to evaluate the terms of this loan.

 

LOAN FOR SPECIFIC PURPOSES ONLY

 

The proceeds of the requested Loan may solely be used for the specific purposes as set forth in the Use of Proceeds Certification of the Business Loan and Security Agreement. IN ADDITION, THE LOAN WILL NOT BE USED FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for consumer/personal purposes, and certain important rights conferred upon consumers, pursuant to federal or state law will not apply to this transaction.

 

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1. INTRODUCTION. This Business Loan and Security Agreement (together with the accompanying Business Loan and Security Agreement Supplement and the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits), this “Agreement”) governs your business loan (“Loan”) made by        and serviced by        (“Servicer”). Please read it and keep it for your reference. In this Agreement, the words “you,” “your” and “Borrower” means each individual or entity that signs this Agreement or on whose behalf this Agreement is signed. The words “Lender”, “we”, “us”, and “our” mean. or its successor(s) and assign(s).

 

2. EFFECTIVE DATE. This Agreement begins on the date we accept this Agreement in New York. Borrower understands and agrees that Lender may postpone, without penalty, the disbursement of amounts to Borrower until all required security interests have been perfected and Lender has received all required personal guarantees or other documentation.

 

3. AUTHORIZATION. Borrower agrees that the Loan made by Lender to Borrower shall be conclusively deemed to have been authorized by Borrower and to have been made pursuant to a duly authorized request on its behalf.

 

4. LOAN FOR SPECIFIC PURPOSES ONLY. The proceeds of the requested Loan may solely be used for the specific purposes as set forth in the Use of Proceeds Certification contained in Section 49 below, and not for any other purposes. In addition, the Loan will not be used for personal, family or household purposes. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for consumer/personal purposes, and certain important rights conferred upon consumers, pursuant to federal or state law will not apply to the Loan or the Agreement. Borrower also understands that Lender will be unable to confirm whether the use of the Loan conforms to this section. Borrower agrees that a breach by Borrower of the provisions of this section will not affect Lender’s right to (i) enforce Borrower’s promise to pay for all amounts owed under this Agreement, regardless of the purpose for which the Loan is in fact obtained or (ii) use any remedy legally available to Lender, even if that remedy would not have been available had the Loan been made for consumer purposes.

 

5. DISBURSEMENT OF LOAN PROCEEDS AND MAINTENANCE OF BORROWER’S BANK ACCOUNT. If Borrower applied and was approved for a Loan, Borrowers Loan will be disbursed upon approval as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits). Borrower agrees to maintain Direct Payments (ACH Debits) in its operating account which is the account that was reviewed in conjunction with underwriting and approval of this Loan (including keeping such account open until the Total Repayment Amount had been completely repaid).

 

6. PROMISE TO PAY. Borrower agrees to pay Lender the Total Repayment Amount shown in the accompanying Business Loan and Security Agreement Supplement in accordance with the Payment Schedule shown in the accompanying Business Loan and Security Agreement Supplement. Borrower agrees to enroll in Lender’s Automatic Payment Plan and authorizes Lender to collect required payments as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits). If required by Lender, Borrower further agrees and authorizes Lender or its Servicer to collect required payments from a transfer account established pursuant to certain Transfer Account Loan Documentation that will be provided by Lender in connection with this Business Loan and Security Agreement if applicable.

 

7. ALTERNATIVE PAYMENT METHODS. If Borrower knows that for any reason Lender will be unable to process a payment under Lender’s Automatic Payment Plan, then Borrower must either restore sufficient funds such that the missed payment can be collected as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits), or promptly mail or deliver a check to Lender in the amount of the missed payment or, if offered, make the missed payment by any pay-by-phone or on-line service that Lender may make available from time to time. All alternative payments must be made in good funds by check, money order, wire transfer, automatic transfer from an account at an institution offering such service, or other instrument in U.S. Dollars. Borrower understands and agrees that payments made at any other address than as specified by Lender may result in a delay in processing and/or crediting. If Borrower makes an alternative payment on Borrowers Loan by mail or by any pay-by-phone or on-line service that Lender makes available while Borrower is enrolled in the Automatic Payment Plan, Lender may treat such payment as an additional payment and continue to process Borrowers scheduled Automatic Payment Plan payments or may reduce any scheduled Automatic Payment Plan payment by the amount of any such additional payment received.

 

8. APPLICATION OF PAYMENTS. Subject to applicable law, Lender reserves the right to allocate and apply payments received on Borrowers Loan between principal, interest and fees in any manner Lender chooses in Lender’s sole discretion it being understood and agreed that any fees and interest will generally be paid during the earlier portion of the term.

 

9. POSTDATED CHECKS, RESTRICTED ENDORSEMENT CHECKS AND OTHER DISPUTED OR QUALIFIED PAYMENTS. Lender can accept late, postdated or partial payments without losing any of Lenders rights under this Agreement (a postdated check is a check dated later than the day it was actually presented for payment). Lender is under no obligation to hold a postdated check and Lender reserves the right to process every item presented as if dated the same date received by Lender or Lenders check processor unless Borrower gives Lender adequate notice and a reasonable opportunity to act on it. Except where such notice and opportunity is given, Borrower may not hold Lender liable for depositing any postdated check. Borrower agrees not to send Lender partial payments marked “paid in full,” “without recourse,” or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Agreement. All notices and written communications concerning postdated checks, restricted endorsement checks (including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount) or any other disputed, nonconforming or qualified payments, must be emailed to our Servicer,                at                Attn: Director of Operations.

 

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10. PREPAYMENT. For so long as no event of default has occurred, Borrower may prepay only in accordance with the attached Prepayment Addendum. Borrower confirms that it has read and understands the terms of this Section 10 and acknowledges and agrees that the foregoing provisions of this Section 10 are a material inducement for Lender’s agreement to make the loan in accordance with the terms hereof.

 

11. SECURITY INTEREST. Borrower hereby grants to Lender, subject to Bank of America’s priority lien, the secured party hereunder, a continuing security interest in and to any and all “Collateral” as described below to secure payment and performance of all debts, liabilities and obligations of Borrower to Lender hereunder and also any and all other debts, liabilities and obligations of Borrower to Lender of every kind and description, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, related to the Loan described in this Agreement, whether or not contemplated by the parties at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral includes the following property that Borrower (or Guarantor, if applicable, pursuant to Section 12) now owns or shall acquire or create immediately upon the acquisition or creation thereof: (i) any and all amounts owing to Borrower now or in the future from any merchant processor(s) processing charges made by customers of Borrower via credit card or debit card transactions; and (ii) all other tangible and intangible personal property, including, but not limited to (a) cash and cash equivalents, (b) inventory, (c) equipment, (d) investment property, including certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts and commodity accounts, (e) instruments, including promissory notes chattel paper, including tangible chattel paper and electronic chattel paper, documents, (h) letter of credit rights, (i) accounts, including health-care insurance receivables, (j) deposit accounts, (k) commercial tort claims, (I) general intangibles, including payment intangibles and software and (m) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower (or Guarantor, if applicable, pursuant to Section 12) grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto. Lender disclaims any security interest in household goods in which Lender is forbidden by law from taking a security interest.

 

12. PROTECTING THE SECURITY INTEREST. Borrower agrees that Lender and/or Lender’s Representative may file any financing statement, lien entry form or other document Lender and/or Lender’s Representative requires in order to perfect, amend or continue Lender’s security interest in the Collateral and Borrower agrees to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender or Lender’s Representative deems necessary to protect Lenders security interest in the Collateral. Borrower and Guarantor (defined below) each agree that, if any Guarantor is a corporate entity, then Lender or Lenders Representative may file any financing statement, lien entry form or other document against such Guarantor or its property that Lender and/or Lenders Representative requires in order to perfect, amend or continue Lenders security interest in the Collateral. Any such Guarantor agrees to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender and Lender’s Representative deems necessary to protect Lender’s security interest in the Collateral. In this Agreement, “Lenders Representative” means any entity or individual that is designated by Lender to serve in such capacity.

 

13. LOCATION OF COLLATERAL; TRANSACTIONS INVOLVING COLLATERAL. Unless Lender has agreed otherwise in writing, Borrower agrees and warrants that (i) all Collateral (or records of the Collateral in the case of accounts, chattel paper and general intangibles) shall be located at Borrower’s address as shown in the application, (ii) except for inventory sold or accounts collected in the ordinary course of Borrower’s business, Borrower shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral, (iii) no one else has any interest in or claim against the Collateral that Borrower has not already told Lender about, (iv) Borrower shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance or charge, other than the security interest provided for in this Agreement and (v) Borrower shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral for less than the fair market value thereof. Borrower shall defend Lender’s rights in the Collateral against the claims and demands of all other persons. All proceeds from any unauthorized disposition of the Collateral shall be held in trust for Lender, shall not be co-mingled with any other funds and shall immediately be delivered to Lender. This requirement, however, does not constitute consent by Lender to any such disposition.

 

14. TAXES, ASSESSMENTS AND LIENS. Borrower will complete and file all necessary federal, state and local tax returns and will pay when due all taxes, assessments, levies and liens upon the Collateral and provide evidence of such payments to Lender upon request.

 

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15. INSURANCE. Borrower shall procure and maintain such insurance as Lender may require with respect to the Collateral, in form, amounts and coverage reasonably acceptable to Lender and issued by a company reasonably acceptable to Lender naming Lender as loss payee. If Borrower at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may obtain such insurance as Lender deems appropriate at Borrowers sole cost and expense. Borrower shall promptly notify Lender of any loss of or damage to the Collateral.

 

16. REPAIRS AND MAINTENANCE. Borrower agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all times while this Agreement remains in effect. Borrower further agrees to pay when due all claims for work done on, or services rendered or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral.

 

17. INSPECTION OF COLLATERAL AND PLACE OF BUSINESS; USE OF PHOTOGRAPHS AND TESTIMONIALS. Lender and Lenders designated representatives and agents shall have the right during Borrower’s normal business hours and at any other reasonable time to examine the Collateral wherever located and the interior and exterior of any Borrower place of business. During an examination of any Borrower place of business, Lender may examine, among other things, whether Borrower (i) has a place of business that is separate from any personal residence, (ii) is open for business, (iii) has sufficient inventory to conduct Borrowers business and (iv) has one or more credit card terminals if Borrower processes credit card transactions. When performing an examination, Lender may photograph the interior and exterior of any Borrower place of business, including any signage, and may photograph any individual who has signed the Agreement (“Signatory”) unless the Signatory previously has notified Lender that he or she does not authorize Lender to photograph the Signatory. Lender may obtain testimonials from any Signatory, including testimonials on why Borrower needed the Loan and how the Loan has helped Borrower. Any photograph and testimonial will become and remain the sole property of Lender. Borrower and each Signatory grant Lender the irrevocable and permanent right to display and share any photograph and testimonial in all forms and media, including composite and modified representations, for all purposes, including but not limited to any trade or commercial purpose, with any Lender employees and agents and with the general public. Lender may, but is not required to, use the name of any Borrower and Signatory as a credit in connection with any photograph and testimonial. Borrower and each Signatory waive the right to inspect or approve versions of any photograph or testimonial or the written copy or other media that may be used in connection with same. Borrower and each Signatory release Lender from any claims that may arise regarding the use of any photograph or testimonial, including any claims of defamation, invasion of privacy or infringement of moral rights, rights of publicity or copyright.

 

18. LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any related documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any related documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lender’s option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon an Event of Default.

 

19. BORROWER’S REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that: (i) Borrower will comply with all laws, statutes, regulations and ordinances pertaining to the conduct of Borrower’s business and promises to hold Lender harmless from any damages, liabilities, costs, expenses (including attorneys’ fees) or other harm arising out of any violation thereof; (ii) Borrower’s principal executive office and the office where Borrower keeps its records concerning its accounts, contract rights and other property, is that shown in the application; (iii) Borrower is duly organized, licensed, validly existing and in good standing under the laws of its state of formation and shall hereafter remain in good standing in that state, and is duly qualified, licensed and in good standing in every other state in which it is doing business, and shall hereafter remain duly qualified, licensed and in good standing in every other state in which it is doing business, and shall hereafter remain duly qualified, licensed and in good standing in every other state in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of Borrower; (iv) the true and correct legal name of the Borrower is set forth in the application; (v) the aggregate ownership percentage of the Signatories is greater than or equal to fifty percent (50%) of the Borrowers business; (vi) the execution, delivery and performance of this Agreement, and any other document executed in connection herewith, are within Borrowers powers, have been duly authorized, are not in contravention of law or the terms of Borrower’s charter, by-laws or other constating documents, or of any indenture, agreement or undertaking to which Borrower is a party; (vii) all organization papers and all amendments thereto of Borrower have been duly filed and are in proper order and any capital stock issued by Borrower and outstanding was and is properly issued and all books and records of Borrower are accurate and up to date and will be so maintained; (viii) Borrower (a) is subject to no charter, corporate or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction that could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with its charter, by-laws and other constating documents, all contractual requirements by which it may be bound and all applicable laws, rules and regulations other than laws, rules or regulations the validity or applicability of which it is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect its financial condition, business or prospects or the value of the Collateral; and (ix) there is no action, suit, proceeding or investigation pending or, to Borrowers knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on its financial condition, business or prospects or the value of the Collateral.

 

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20. INTEREST AND FEES. Borrower agrees to pay in full the interest as set forth in the accompanying Business Loan and Security Agreement Supplement. In addition to any other fees described in the Agreement, Borrower agrees to pay the following fees:

 

A. Origination Fee: A one-time Origination Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement. Borrower agrees that this fee will be immediately deducted from the proceeds of Borrowers Loan.

 

B. Returned Payment Fee: A Returned Payment Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement if any electronic payment processed on Borrowers Loan is returned unpaid or dishonored for any reason.

 

C. Late Fee: A Late Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement if a scheduled payment is not received by Lender as provided in the payment schedule set forth in the accompanying Business Loan and Security Agreement Supplement.

 

Payments made by Borrower hereunder will be applied and allocated between Loan principal, interest and fees in the manner set forth in Section 8.

 

21. INTEREST AND FEES EXCEEDING PERMITTED LIMIT. If the Loan is subject to a law that sets maximum charges, and that law is finally interpreted so that the interest or other fees collected or to be collected in connection with this Agreement exceed the permitted limits, then (i) any such charge will be reduced by the amount necessary to reduce the charge to the permitted limit and (ii) if required by applicable law, any sums already collected from Borrower that exceed the permitted limits will be refunded or credited to Borrower.

 

22. FINANCIAL INFORMATION AND REEVALUATION OF CREDIT. Borrower and each guarantor (if any) authorize Lender to obtain business and personal credit bureau reports in Borrowers and any guarantor’s name, respectively, at any time and from time to time for purposes of deciding whether to approve the requested Loan or for any update, renewal, extension of credit or other lawful purpose. Upon Borrower’s or any guarantors request, Lender will advise Borrower or guarantor if Lender obtained a credit report and Lender will give Borrower or guarantor the credit bureau’s name and address. Borrower and each guarantor (if any) agree to submit current financial information, a new credit application, or both, in Borrower’s name and in the name of each guarantor, respectively, at any time promptly upon Lenders request. Borrower authorizes Lender to act as Borrower’s agent for purposes of accessing and retrieving transaction history information regarding Borrower from Borrowers designated merchant processor(s). Lender may report Lender’s credit experiences with Borrower and any guarantor of Borrower’s Loan to third parties as permitted by law. Borrower also agrees that Lender may release information to comply with governmental reporting or legal process that Lender believes may be required, whether or not such is in fact required, or when necessary or helpful in completing a transaction, or when investigating a loss or potential loss. Borrower and each Guarantor is hereby notified that a negative credit report reflecting on Borrowers and/or any Guarantors credit record may be submitted to a credit reporting agency if Borrower or such Guarantor fails to fulfill the terms of their respective credit obligations hereunder.

 

23. ATTORNEYS’ FEES AND COLLECTION COSTS. To the extent not prohibited by applicable law, Borrower shall pay to Lender on demand any and all expenses, including, but not limited to, collection costs, all attorneys’ fees calculated at 25% of remaining balance due on the Total Repayment Amount at the time of Default, and expenses, and all other expenses of like or unlike nature which may be expended by Lender to obtain or enforce payment of Obligations either as against Borrower or any guarantor or surety of Borrower or in the prosecution or defense of any action or concerning any matter arising out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Lender’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any counsel fees or expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses (including search fees) incurred or paid by Lender in connection with the administration, supervision, protection or realization on any security held by Lender for the debt secured hereby, whether such security was granted by Borrower or by any other person primarily or secondarily liable (with or without recourse) with respect to such debt, and all costs and expenses incurred by Lender in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Lender in connection therewith, which amounts shall be considered advances to protect Lender’s security, and shall be secured hereby. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lenders option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon an Event of Default.

 

24. BORROWER’S REPORTS. Promptly upon Lenders written request, Borrower and each guarantor agrees to provide Lender with such information about the financial condition and operations of Borrower or any guarantor, as Lender may, from time to time, reasonably request. Borrower also agrees promptly upon becoming aware of any Event of Default, or the occurrence or existence of an event which, with the passage of time or the giving of notice or both, would constitute an Event of Default hereunder, to promptly provide notice thereof to Lender in writing.

 

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25. TELEPHONE COMMUNICATIONS. Borrower hereby expressly consents to receiving calls and messages, including auto-dialed and pre-recorded message calls and SMS messages (including text messages) from Lender, its affiliates, marketing partners, agents and others calling at Lenders request or on its behalf, at any telephone numbers that Borrower has provided or may provide in the future or otherwise in Lenders possession (including any cellular or mobile telephone numbers).

 

26. INDEMNIFICATION. Except for Lenders gross negligence or willful misconduct, Borrower will indemnify and save Lender harmless from all losses, costs, damages, liabilities or expenses (including, without limitation, court costs and reasonable attorneys’ fees) that Lender may sustain or incur by reason of defending or protecting Lenders security interest or the priority thereof or enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter arising out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations and/or the Collateral. This indemnity shall survive the repayment of the Obligations and the termination of this Agreement.

 

27. MERGERS, CONSOLIDATIONS OR SALES. Borrower represents and agrees that Borrower will not (i) merge or consolidate with or into any other business entity or (ii) enter into any joint venture or partnership with any person, firm or corporation.

 

28. CHANGE IN LEGAL STATUS. Without Lenders consent, Borrower represents and agrees that Borrower will not (i) change its name, its place of business or, if more than one, chief executive office, its mailing address, or organizational identification number if it has one, or (ii) change its type of organization, jurisdiction of organization or other legal structure. If Borrower does not have an organizational identification number and later obtains one, Borrower shall promptly notify Lender of such taxpayer identification number.

 

29. EVENTS OF DEFAULT. The occurrence of any one or more of the following events (herein, “Events of Default”) shall constitute, without notice or demand, a default under this Agreement and all other agreements between Lender and Borrower and instruments and papers given Lender by Borrower, whether such agreements, instruments, or papers now exist or hereafter arise: (i) Lender is unable to collect any Automatic Payment Plan payment and/or, Borrower fails to pay any Obligations when due; (ii) Borrower fails to comply with, promptly, punctually and faithfully perform or observe any term, condition or promise within this Agreement; (iii) the determination by Lender that any representation or warranty heretofore, now or hereafter made by Borrower to Lender, in any documents, instrument, agreement, or paper was not true or accurate when given; (iv) the occurrence of any event such that any indebtedness of Borrower from any lender or financing source other than Lender could be accelerated, notwithstanding that such acceleration has not taken place; (v) the occurrence of any event that would cause a lien creditor, as that term is defined in Section 9- 102 of the Uniform Commercial Code, (other than Lender) to take priority over the Loan made by Lender; (vi) a filing against or relating to Borrower (unless consented to in writing by Lender) of (a) a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or (b) a state tax lien in favor of any state of the United States of America or any political subdivision of any such state; (c) the filling of any lien against Borrower (vii) the occurrence of any event of default under any other agreement between Lender and Borrower or instrument or paper given Lender by Borrower, whether such agreement, instrument, or paper now exists or hereafter arises (notwithstanding that Lender may not have exercised its rights upon default under any such other agreement, instrument or paper); (viii) any act by, against, or relating to Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other person, pursuant to court action or otherwise, over all, or any part of Borrowers property; (ix) the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for Borrower; (x) the failure by Borrower to generally pay the debts of Borrower as they mature; (xi) adjudication of bankruptcy or insolvency relative to Borrower; (xii) the entry of an order for relief or similar order with respect to Borrower in any proceeding pursuant to Title 11 of the United States Code entitled “Bankruptcy” (the “Bankruptcy Code”) or any other federal bankruptcy law; (xiii) the filing of any complaint, application or petition by or against Borrower initiating any matter in which Borrower is or may be granted any relief from the debts of Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure; (xiv) the calling or sufferance of a meeting of creditors of Borrower; (xv) the meeting by Borrower with a formal or informal creditors committee; (xvi) the offering by or entering into by Borrower of any composition, extension or any other arrangement seeking relief or extension for the debts of Borrower, or the initiation of any other judicial or non-judicial proceeding or agreement by, against or including Borrower that seeks or intends to accomplish a reorganization or arrangement with creditors; the entry of any judgment against Borrower, which judgment is not satisfied or appealed from (with execution or similar process stayed) within 5 calendar days of its entry; the occurrence of any event or circumstance with respect to Borrower such that Lender shall believe in good faith that the prospect of payment of all or any part of the Obligations or the performance by Borrower under this Agreement or any other agreement between Lender and Borrower is impaired or there shall occur any material adverse change in the business or financial condition of Borrower (such event specifically includes, but is not limited to, taking additional financing from a credit card advance, cash advance company or an additional working capital loan without the prior written consent of Lender); (xix) the entry of any court order that enjoins, restrains or in any way prevents Borrower from conducting all or any part of its business affairs in the ordinary course of business; (xx) the occurrence of any uninsured loss, theft, damage or destruction to any material asset(s) of Borrower; (xxi) Borrower shall enter into any financing agreements with any other party including but not limited to: Loans, Merchant Cash Advances, Receivables financing, or any other agreement that will increase the total debt owed by Borrower to any other party.; (xxii) the termination of existence, dissolution or liquidation of Borrower or the ceasing to carry on actively any substantial part of Borrowers current business; (xxiii) this Agreement shall, at any time after its execution and delivery and for any reason, cease to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by Borrower or any guarantor of Borrower denies it has any further liability or obligation hereunder; (xxiv) any guarantor or person signing a support agreement in favor of Lender shall repudiate, purport to revoke or fail to perform his or her obligations under his guaranty or support agreement in favor of Lender or any corporate guarantor shall cease to exist; (xxv) any material change occurs in Borrowers ownership or organizational structure (acknowledging that any change in ownership will be deemed material when ownership is closely held); (xxvi) if Borrower is a sole proprietorship, the owner dies; if Borrower is a trust, a trustor dies; if Borrower is a partnership, any general or managing partner dies; if Borrower is a corporation, any principal officer or 10% or greater shareholder dies; if Borrower is a limited liability company, any managing member dies; if Borrower is any other form of business entity, any person(s) directly or indirectly controlling 10% or more of the ownership interests of such entity dies.

 

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30. RIGHTS AND REMEDIES UPON DEFAULT. Subject to applicable law, if an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise any one or more of the following rights and remedies:

 

A. Refrain from Disbursing Loan Proceeds: Lender may refrain from disbursing Borrower’s Loan proceeds to Borrowers Designated Checking Account.

 

B. Debit Amounts Due From Borrower’s Accounts: Lender may debit from Borrower’s Designated Checking Account all Automatic Payment Plan payments that Lender was unable to collect and/or the amount of any other Obligations that Borrower failed to pay.

 

C. Accelerate Indebtedness: Lender may declare the entire Obligations immediately due and payable, without notice of any kind to Borrower.

 

D. Assemble Collateral: Lender may require Borrower and/or Guarantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Borrower and/or Guarantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter, provided Lender does so without a breach of the peace or a trespass, upon the property of Borrower and/or Guarantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Borrower and Guarantor agree that Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Borrower and Guarantor after repossession.

 

E. Sell the Collateral: Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name or that of Borrower and/or Guarantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Borrower, Guarantor and other persons as required by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition of the Collateral is to be made. However, no notice need be provided to any person who, after an Event of Default occurs, enters into and authenticates an agreement waiving that person’s right to notification of sale. The requirements of reasonable notice shall be met if such notice is given at least 10 days before the time of the sale or disposition. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Obligations secured by this Agreement. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lenders option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during either (a) the term of an y applicable insurance policy or (b) the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity.

 

F. Appoint Receiver: Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral and apply the proceeds, over and above the cost of the receivership, against the Obligations. The receiver may serve without bond if permitted by law. Lender’s right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Obligations by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.

 

G. Collect Revenues. Apply Accounts: Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lenders nominee and receive the payments, rents, income and revenues therefrom and hold the same as security for the Obligations or apply it to payment of the Obligations in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Lender may determine, whether or not any amount included within the Obligations is then due. For these purposes, Lender may, on behalf of and in the name of Borrower and/or Guarantor, receive, open and dispose of mail addressed to Borrower; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment or storage of any Collateral. To facilitate collections, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender.

 

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H. Obtain Deficiency: If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Borrower and/or Guarantor for any deficiency remaining on the Obligations due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Borrower and/or Guarantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.

 

I. Other Rights and Remedies: Upon the occurrence of any Event of Default or breach of any term of this Agreement, lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity or otherwise.

 

J. Election of Remedies: Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, any related documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower under the Agreement, after Borrowers failure to perform, shall not affect Lenders right to declare a default and exercise its remedies.

 

K. Upon the occurrence of an Event of Default or if the Borrower fails to make any payment when due, the Outstanding Balance shall accrue interest at 24% (twenty four percent) per annum (“Default Interest Rate”) until the entire Outstanding Balance, all accrued unpaid Default Interest), Fees and other charges are paid to the Lender.

 

31. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. Borrower and Lender agree that this Agreement and Borrowers Loan will be governed by law of the State of New York. These laws will apply based on the residence of the Lender. Borrower and Lender agree that any action or proceeding to enforce or arising out of this Agreement shall be brought in any court of the State of New York, and Borrower waives personal service of process. Borrower and Lender agree that venue is proper in such courts. Borrower and Guarantor agrees that Venue is proper and convenient in the State of New York and waives the right to challenge venue based on forum or convenience. Borrower and Guarantor agree to accept service of process via certified mail the address on the first page of this Agreement. Borrower and Guarantor submit to the Personal Jurisdiction of the Courts in the state of New York for all claims, actions or suits that arise out of or in connection to this Agreement, and waive any challenge to the personal jurisdiction of the courts of New York.

 

32. NO WAIVER BY LENDER. No delay or omission on the part of Lender in exercising any rights under this Agreement, any related guaranty or applicable law shall operate as a waiver of such right or any other right. Waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All Lenders rights and remedies, whether evidenced hereb y or by any other agreement, instrument or paper, shall be cumulative and may be exercised singularly or concurrently.

 

33. ASSIGNMENT. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Lender’s prior written consent and any prohibited assignment shall be absolutely null and void. No consent to an assignment by Lender shall release Borrower from its Obligations. Lender may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower is required in connection with any such assignment. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Lenders rights and benefits hereunder. In connection with any assignment or participation, Lender may disclose all documents and information that Lender now or hereafter may have relating to Borrower or Borrowers business. To the extent that Lender assigns its rights and obligations hereunder to another party, Lender thereafter shall be released from such assigned obligations to Borrower and such assignment shall affect a novation between Borrower and such other party.

 

34. INTERPRETATION. Paragraph and section headings used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Lender or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

 

35. SEVERABILITY. If one or more provisions of this Agreement (or the application thereof) is determined invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not invalidate or render illegal or unenforceable such provision (or its application) in any other jurisdiction or any other provision of this Agreement (or its application).

 

36. NOTICES. Except as otherwise provided in this Agreement, notice under this Agreement must be in writing. Notices will be deemed given when deposited in the U.S. mail, postage prepaid, first class mail; when delivered in person; or when sent by registered mail; by certified mail; by nationally recognized overnight courier; or when sent by electronic mail. Notice to Borrower will be sent to Borrower’s last known address or electronic mail address in Lenders records for this Loan. Notice to Lender may be sent to our Servicer: by         e-mail at          Attn: Director of Operations.

 

Please initial this document here

 

 

37. RECORDKEEPING AND AUDIT REQUIREMENTS. Lender shall have no obligation to maintain any electronic records or any documents, schedules, invoices or any other paper delivered to Lender by Borrower in connection with this Agreement or any other agreement other than as required by law. Borrower will at all times keep accurate and complete records of Borrower’s accounts and Collateral. At Lender’s request, Borrower shall deliver to Lender: (i) schedules of accounts and general intangibles; and (ii) such other information regarding the Collateral as Lender shall request. Lender, or any of its agents, shall have the right to call any telephone numbers that Borrower has provided or may provide in the future or otherwise in the Lender’s possession (including any cellular or mobile telephone numbers) at intervals to be determined by Lender, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence that relate to Borrower’s accounts and Collateral or other transactions between the parties thereto and the general financial condition of Borrower and Lender may remove any of such records temporarily for the purpose of having copies made thereof. If Borrower was referred to Lender for this Loan by a third party (the “Referring Party”), then Borrower consents to Lender sharing certain reasonable information about Borrower with the Referring Party for purposes of the Referring Party verifying and/or auditing loans made through such Referring Party’s referrals.

 

38. GOVERNING LAW. Subject to Section 31 above, our relationship including this Agreement and any claim, dispute or controversy (whether in contract, tort, or otherwise) at any time arising from or relating to this Agreement is governed by, and this Agreement will be construed in accordance with the laws of the state of New York without regard to internal principles of conflict of laws. The legality, enforceability and interpretation of this Agreement and the amounts contracted for, charged and reserved under this Agreement will be governed by such laws. However, the Parties agree that any dispute arising out of this Agreement shall be situated in the Supreme Court in the State of New York. Borrower understands and agrees that (i) Lender is located in New York, (ii) Lender makes all credit decisions from Lender’s office in New York, (iii) the Loan is made in New York (that is, no binding contract will be formed until Lender receives and accepts Borrower’s signed Agreement in New York) and (iv) Borrower’s payments are not accepted until received by Lender in New York.

 

39. WAIVER OF NOTICES AND OTHER TERMS. Except for any notices provided for in this Agreement, Borrower and any person who has obligations pursuant to this Agreement (e.g., a guarantor), to the extent not prohibited by applicable law hereby, waives demand, notice of nonpayment, notice of intention to accelerate, notice of acceleration, presentment, protest, notice of dishonor and notice of protest. To the extent permitted by applicable law, Borrower and any person who has obligations pursuant to this Agreement also agrees: Lender is not required to file suit, show diligence in collection against Borrower or any person who has obligations pursuant to this Agreement, or proceed against any Collateral; Lender may, but will not be obligated to, substitute, exchange or release any Collateral; Lender may release any Collateral, or fail to realize upon or perfect Lender’s security interest in any Collateral; Lender may, but will not be obligated to, sue one or more persons without joining or suing others; and Lender may modify, renew, or extend this Agreement (repeatedly and for any length of time) without notice to or approval by any person who has obligations pursuant to this Agreement (other than the party with whom the modification, renewal or extension is made).

 

40. MONITORING, RECORDING AND ELECTRONIC COMMUNICATIONS. In order to ensure a high quality of service for Lender’s customers, Lender may monitor and/or record telephone calls between Borrower and Lender’s employees or agents. Borrower acknowledges that Lender may do so and agrees in advance to any such monitoring or recording of telephone calls. Borrower also agrees that Lender may communicate with Borrower electronically by e-mail.

 

41. JURY TRIAL WAIVER. To the extent not prohibited by applicable law, Borrower and Lender waive their right to a trial by jury of any claim or cause of action based upon, arising out of or related to the Agreement and all other documentation evidencing the Obligations, in any legal action or proceeding. Subject to Section 32 above, any such claim or cause of action shall be tried by court sitting without a jury. THE PARTIES HERETO ACKNOWLEDGE THAT EACH MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.

 

42. CONFIDENTIALITY. Borrower shall not make, publish or otherwise disseminate in any manner a copy of this Agreement or any public statement or description of the terms of this Agreement, except to its employees, advisors and similar persons who have a legitimate need to know its contents.

 

43. ENTIRE AGREEMENT. Any application Borrower signed or otherwise submitted in connection with the Loan, the accompanying Business Loan and Security Agreement Supplement and the Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits) and any other documents required by Lender now or in the future in connection with this Agreement and Borrower’s Loan are hereby incorporated into and made a part of this Agreement. This Agreement is the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto.

 

44. COUNTERPARTS; ELECTRONIC SIGNATURES. This Agreement may be executed in one or more counterparts, each of which counterparts shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. For purposes of the execution of this Agreement, signatures delivered by electronic or fax submission shall be treated in all respects as original signatures.

 

45. CUSTOMER SERVICE CONTACT INFORMATION. If you have questions or comments about your Loan, you may contact our Servicer,          by (i) e-mail at.              , (ii) telephone at

 

Please initial this document here

 

 

46. PERSONAL GUARANTY. The undersigned (each a “Guarantor”), jointly and severally (if more than one), absolutely and unconditionally guarantee the prompt payment to Lender, including its successors and assignees, of any and all Obligations incurred by the Borrower pursuant to the Agreement (this “Personal Guaranty”). Each Guarantor further agrees to repay the Obligations on demand, without requiring Lender first to enforce payment against Borrower. This is a guarantee of payment and not of collection. This is an absolute, unconditional, primary, and continuing obligation and will remain in full force and effect until the first to occur of the following: (a) all of the Obligations have been indefeasibly paid in full, and Lender has terminated this Personal Guaranty, or (b) 30 days after the date on which written notice of revocation is actually received and accepted by Lender. No revocation will affect: (i) the then existing liabilities of the revoking Guarantor under this Personal Guaranty; (ii) Obligations created, contracted, assumed, acquired or incurred prior to the effective date of such revocation; (iii) Obligations created, contracted, assumed, acquired or incurred after the effective date of such revocation pursuant to any agreement entered into or commitment obtained prior to the effective date of such revocation; or (iv) any Obligations then or thereafter arising under the agreements or instruments then in effect and then evidencing the Obligations. Each Guarantor represents and warrants that it is a legal resident of the United States of America. Each Guarantor waives all notices to which the Guarantor might otherwise be entitled by law, and also waives all defenses, legal equitable, otherwise available to the Guarantor. This Personal Guaranty shall be construed in accordance with the laws of the State of New York, and shall inure to the benefit of Lender, its successors and assigns. To the extent not prohibited by applicable law, each of the undersigned Guarantors waives its right to a trial by jury of any claim or cause of action based upon, arising out of or related to this guaranty, the Agreement and all other documentation evidencing the Obligations, in any legal action or proceeding. Subject to Section 32 above, any such claim or cause of action shall be tried by court sitting without a jury.

 

47. CLASS ACTION WAIVER. THE PARTIES HERETO WAIVE ANY RIGHT TO ASSERT ANY CLAIMS AGAINST THE OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY LAW AS AGAINST PUBLIC POLICY. TO THE EXTENT EITHER PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST THE OTHER, THE PARTIES HEREBY AGREE THAT: (1) THE PREVAILING PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT); AND ( 2) THE PARTY WHO INITIATES OR PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR REPRESENTATIVE ACTION.

 

48. CERTIFICATION AND SIGNATURES. By initialing below or authorizing the person signing below to sign on its behalf, Borrower certifies that Borrower has received a copy of this Agreement and that Borrower has read, understood and agreed to be bound by its terms. Each person signing below certifies that each person is signing on behalf of the Borrower and/or in the capacity indicated below the signers name and that such signer is authorized to execute this Agreement on behalf of or the in stated relation to Borrower.

 

49. Use of Proceeds Certification. As referred to in Section 4, by initialing below, the Borrower certifies, acknowledges and understands that the proceeds from the requested Loan will be used solely for business purposes.

 

FOR THE BORROWER (#1)		By:	CHARLES ANDREW ROSS JR		/s/ Charles Andrew Ross Jr
			(Print Name and Title)		(Signature)
FOR THE BORROWER (#2)		By:
			(Print Name and Title)		(Signature)
BY GUARANTOR (#1)		By:	CHARLES ANDREW ROSS JR		/s/ Charles Andrew Ross Jr
			(Print Name and Title)		(Signature)
BY GUARANTOR (#2)		By:
			(Print Name and Title)		(Signature)

 

For Lenders Use Only: This Agreement has been received and accepted by Lender in New York after being signed by Borrower and any Guarantor(s).   By:   (Signature)   (Print Name)   Position: Date:

 

Please initial this document here

 

 

 

Exhibit 3.12

 

Business Loan and Security Agreement

December 28, 2023

 

This Business Loan and Security Agreement Supplement is an important legal document. Borrower should keep this document for Borrower’s records.

 

Borrower:		AMERICAN REBEL INC. AND AMERICAN REBEL ,INC AND AMERICAN REBEL, INC. AND AMERICAN REBEL HOLDING, INC AND AMERICAN REBEL HOLDINGS, INC. AND AMERICAN REBEL HOLDINGS, INC AND AMERICAN REBEL HOLDINGS INC AND CHAMPION SAFE COMPANY, INC. AND CHAMPION SAFE COMPANY INC AND CHAMPION SAFE CO., INC. AND SUPERIOR SAFE, LLC AND SUPERIOR SAFE CO, L.L.C. AND SUPERIOR SAFE CO LLC AND SAFE GUARD SECURITY PRODUCTS, LLC AND SAFE GUARD SECURITY PRODUCTS LC AND CUBESCAPE INC AND AMERICAN REBEL HOLDINGS AND AMERICAN REBEL HOLDING AND AMERICAN REBEL AND CHAMPION SAFE COMPANY AND CHAMPION SAFE CO AND SUPERIOR SAFE CO AND SUPERIOR SAFE AND SUPERIOR SAFE COMPANY AND SAFE GUARD SECURITY PRODUCTS AND SAFE GUARD AND SAFE CO AND SAFE GUARD SAFE COMPANY AND SAFE GUARD SAFE CO.   Business Addresses:   909 18th Ave South Ste A, Nashville, TN 37212 2813 S Sierra Vista Way, Provo, UT 84606   718 Thompson Lane Suite 108-199, Nashville, TN 37204 2055 South Tracy Hall Pkwy, Provo, UT 84606   8500 Marshall Dr, Lenexa, KS 66214   EIN: 47-3892903, 87-0676377, 47-1937934, 26-0333651
Lender:		ALT BANQ INC.
Disbursement Amount: Amount of Loan less fees and costs Note that the Disbursement Amount will be net of (a) any principal amount owed to Lender from an existing loan or (b) any amount used to pay off an existing obligation owed to a third party lender.		$490,000.00 (may be made in multiple disbursements)
Amount of Loan:		$500,000.00
Total Repayment Amount:
Sum of Amount of Loan and Interest Charge when all payments are made on time		$610,000.00
Payment Schedule:		52 payments of $11,731.00 due each week beginning on the first Friday after the Disbursement Amount is disbursed, (the “Weekly Repayment Amount”). Should any payment date fall on a holiday that day’s payment will be due the business day prior.   “Business day” means any Monday through Friday, except for Federal Reserve holidays.
Interest Charge: Dollar amount of interest that the Loan will cost (does not include any Fees)		$110,000.00
Interest Rate:		22%
(Interest rate paid on Amount of Loan if all payments made as scheduled. This Interest Rate is not an annualized interest rate)
Fees:		Origination Fee: $5,000.00 (to be deducted from the Loan Amount) Legal Fee: $5,000.00 (to be deducted from the Loan Amount) Returned Payment Fee: $50.00 Late Payment Fee: $50.00 Default Fee: $15,000.00

 

 

Interest Rate

 

The interest rate disclosed on this Business Loan and Security Agreement Supplement (the “Interest Rate”) is the rate of interest calculated by dividing the Interest Charge by the Amount of Loan. Interest Rate (Calculate as if all payments made as scheduled).

 

Disbursement Amount

 

The Disbursement Amount is the Amount of Loan minus the Origination Fee and the payoffs of prior loans/lines to the extent applicable.

 

Fees

 

The Origination Fee is deducted at the time of disbursement.

 

Total Repayment Amount

 

The Total Repayment Amount includes the Amount of Loan plus the Interest Charged.

 

Loan Pricing Disclosure

 

Lender uses a system of risk-based pricing to determine interest charges and fees. Risk-based pricing is a system that evaluates the risk factors of your application and adjusts the interest rate and discount points up or down based on this risk evaluation.

 

Although Lender believes that its loan process provides expedited turnaround time and its underwriting process provides greater likelihood of approval of your loan, this loan may be a higher cost loan than loans that may be available through other lenders. You should fully consider all costs and fees associated with this loan and compare your available alternatives to this loan. You are encouraged to engage appropriate advisors to the extent you believe necessary to evaluate the terms of this loan.

 

LOAN FOR SPECIFIC PURPOSES ONLY

 

The proceeds of the requested Loan may solely be used for the specific purposes as set forth in the Use of Proceeds Certification of the Business Loan and Security Agreement. IN ADDITION, THE LOAN WILL NOT BE USED FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for consumer/personal purposes, and certain important rights conferred upon consumers, pursuant to federal or state law will not apply to this transaction.

 

 

1. INTRODUCTION. This Business Loan and Security Agreement (together with the accompanying Business Loan and Security Agreement Supplement and the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits), this “Agreement”) governs your business loan (“Loan”) made by ALT BANQ INC.. and serviced by ALT BANQ INC.. (“Servicer”). Please read it and keep it for your reference. In this Agreement, the words “you,” “your” and “Borrower” means each individual or entity that signs this Agreement or on whose behalf this Agreement is signed. The words “Lender”, “we”, “us”, and “our” mean ALT BANQ INC.. or its successor(s) and assign(s).

 

2. EFFECTIVE DATE. This Agreement begins on the date we accept this Agreement in New York. Borrower understands and agrees that Lender may postpone, without penalty, the disbursement of amounts to Borrower until all required security interests have been perfected and Lender has received all required personal guarantees or other documentation.

 

3. AUTHORIZATION. Borrower agrees that the Loan made by Lender to Borrower shall be conclusively deemed to have been authorized by Borrower and to have been made pursuant to a duly authorized request on its behalf.

 

4. LOAN FOR SPECIFIC PURPOSES ONLY. The proceeds of the requested Loan may solely be used for the specific purposes as set forth in the Use of Proceeds Certification contained in Section 49 below, and not for any other purposes. In addition, the Loan will not be used for personal, family or household purposes. Borrower understands that Borrower’s agreement not to use the Loan proceeds for personal, family or household purposes means that certain important duties imposed upon entities making loans for consumer/personal purposes, and certain important rights conferred upon consumers, pursuant to federal or state law will not apply to the Loan or the Agreement. Borrower also understands that Lender will be unable to confirm whether the use of the Loan conforms to this section. Borrower agrees that a breach by Borrower of the provisions of this section will not affect Lender’s right to (i) enforce Borrower’s promise to pay for all amounts owed under this Agreement, regardless of the purpose for which the Loan is in fact obtained or (ii) use any remedy legally available to Lender, even if that remedy would not have been available had the Loan been made for consumer purposes.

 

5. DISBURSEMENT OF LOAN PROCEEDS AND MAINTENANCE OF BORROWER’S BANK ACCOUNT. If Borrower applied and was approved for a Loan, Borrowers Loan will be disbursed upon approval as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits). Borrower agrees to maintain Direct Payments (ACH Debits) in its operating account which is the account that was reviewed in conjunction with underwriting and approval of this Loan (including keeping such account open until the Total Repayment Amount had been completely repaid).

 

6. PROMISE TO PAY. Borrower agrees to pay Lender the Total Repayment Amount shown in the accompanying Business Loan and Security Agreement Supplement in accordance with the Payment Schedule shown in the accompanying Business Loan and Security Agreement Supplement. Borrower agrees to enroll in Lender’s Automatic Payment Plan and authorizes Lender to collect required payments as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits). If required by Lender, Borrower further agrees and authorizes Lender or its Servicer to collect required payments from a transfer account established pursuant to certain Transfer Account Loan Documentation that will be provided by Lender in connection with this Business Loan and Security Agreement if applicable.

 

7. ALTERNATIVE PAYMENT METHODS. If Borrower knows that for any reason Lender will be unable to process a payment under Lender’s Automatic Payment Plan, then Borrower must either restore sufficient funds such that the missed payment can be collected as provided in the accompanying Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits), or promptly mail or deliver a check to Lender in the amount of the missed payment or, if offered, make the missed payment by any pay-by-phone or on-line service that Lender may make available from time to time. All alternative payments must be made in good funds by check, money order, wire transfer, automatic transfer from an account at an institution offering such service, or other instrument in U.S. Dollars. Borrower understands and agrees that payments made at any other address than as specified by Lender may result in a delay in processing and/or crediting. If Borrower makes an alternative payment on Borrowers Loan by mail or by any pay-by-phone or on-line service that Lender makes available while Borrower is enrolled in the Automatic Payment Plan, Lender may treat such payment as an additional payment and continue to process Borrowers scheduled Automatic Payment Plan payments or may reduce any scheduled Automatic Payment Plan payment by the amount of any such additional payment received.

 

8. APPLICATION OF PAYMENTS. Subject to applicable law, Lender reserves the right to allocate and apply payments received on Borrowers Loan between principal, interest and fees in any manner Lender chooses in Lender’s sole discretion it being understood and agreed that any fees and interest will generally be paid during the earlier portion of the term.

 

9. POSTDATED CHECKS, RESTRICTED ENDORSEMENT CHECKS AND OTHER DISPUTED OR QUALIFIED PAYMENTS. Lender can accept late, postdated or partial payments without losing any of Lenders rights under this Agreement (a postdated check is a check dated later than the day it was actually presented for payment). Lender is under no obligation to hold a postdated check and Lender reserves the right to process every item presented as if dated the same date received by Lender or Lenders check processor unless Borrower gives Lender adequate notice and a reasonable opportunity to act on it. Except where such notice and opportunity is given, Borrower may not hold Lender liable for depositing any postdated check. Borrower agrees not to send Lender partial payments marked “paid in full,” “without recourse,” or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Agreement. All notices and written communications concerning postdated checks, restricted endorsement checks (including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount) or any other disputed, nonconforming or qualified payments, must be emailed to our Servicer, ALT BANQ INC. at UW@altbanq.com, Attn: Director of Operations.

 

 

10. PREPAYMENT. For so long as no event of default has occurred, Borrower may prepay only in accordance with the attached Prepayment Addendum. Borrower confirms that it has read and understands the terms of this Section 10 and acknowledges and agrees that the foregoing provisions of this Section 10 are a material inducement for Lender’s agreement to make the loan in accordance with the terms hereof.

 

11. SECURITY INTEREST. Borrower hereby grants to Lender, subject to Bank of America’s priority lien, the secured party hereunder, a continuing security interest in and to any and all “Collateral” as described below to secure payment and performance of all debts, liabilities and obligations of Borrower to Lender hereunder and also any and all other debts, liabilities and obligations of Borrower to Lender of every kind and description, direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising, related to the Loan described in this Agreement, whether or not contemplated by the parties at the time of the granting of this security interest, regardless of how they arise or by what agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument, and includes obligations to perform acts and refrain from taking action as well as obligations to pay money including, without limitation, all interest, other fees and expenses (all hereinafter called “Obligations”). The Collateral includes the following property that Borrower (or Guarantor, if applicable, pursuant to Section 12) now owns or shall acquire or create immediately upon the acquisition or creation thereof: (i) any and all amounts owing to Borrower now or in the future from any merchant processor(s) processing charges made by customers of Borrower via credit card or debit card transactions; and (ii) all other tangible and intangible personal property, including, but not limited to (a) cash and cash equivalents, (b) inventory, (c) equipment, (d) investment property, including certificated and uncertificated securities, securities accounts, security entitlements, commodity contracts and commodity accounts, (e) instruments, including promissory notes chattel paper, including tangible chattel paper and electronic chattel paper, documents, (h) letter of credit rights, (i) accounts, including health-care insurance receivables, (j) deposit accounts, (k) commercial tort claims, (I) general intangibles, including payment intangibles and software and (m) as-extracted collateral as such terms may from time to time be defined in the Uniform Commercial Code. The security interest Borrower (or Guarantor, if applicable, pursuant to Section 12) grants includes all accessions, attachments, accessories, parts, supplies and replacements for the Collateral, all products, proceeds and collections thereof and all records and data relating thereto. Lender disclaims any security interest in household goods in which Lender is forbidden by law from taking a security interest.

 

12. PROTECTING THE SECURITY INTEREST. Borrower agrees that Lender and/or Lender’s Representative may file any financing statement, lien entry form or other document Lender and/or Lender’s Representative requires in order to perfect, amend or continue Lender’s security interest in the Collateral and Borrower agrees to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender or Lender’s Representative deems necessary to protect Lenders security interest in the Collateral. Borrower and Guarantor (defined below) each agree that, if any Guarantor is a corporate entity, then Lender or Lenders Representative may file any financing statement, lien entry form or other document against such Guarantor or its property that Lender and/or Lenders Representative requires in order to perfect, amend or continue Lenders security interest in the Collateral. Any such Guarantor agrees to cooperate with Lender and Lender’s Representative as may be necessary to accomplish said filing and to do whatever Lender and Lender’s Representative deems necessary to protect Lender’s security interest in the Collateral. In this Agreement, “Lenders Representative” means any entity or individual that is designated by Lender to serve in such capacity.

 

13. LOCATION OF COLLATERAL; TRANSACTIONS INVOLVING COLLATERAL. Unless Lender has agreed otherwise in writing, Borrower agrees and warrants that (i) all Collateral (or records of the Collateral in the case of accounts, chattel paper and general intangibles) shall be located at Borrower’s address as shown in the application, (ii) except for inventory sold or accounts collected in the ordinary course of Borrower’s business, Borrower shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral, (iii) no one else has any interest in or claim against the Collateral that Borrower has not already told Lender about, (iv) Borrower shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance or charge, other than the security interest provided for in this Agreement and (v) Borrower shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral for less than the fair market value thereof. Borrower shall defend Lender’s rights in the Collateral against the claims and demands of all other persons. All proceeds from any unauthorized disposition of the Collateral shall be held in trust for Lender, shall not be co-mingled with any other funds and shall immediately be delivered to Lender. This requirement, however, does not constitute consent by Lender to any such disposition.

 

14. TAXES, ASSESSMENTS AND LIENS. Borrower will complete and file all necessary federal, state and local tax returns and will pay when due all taxes, assessments, levies and liens upon the Collateral and provide evidence of such payments to Lender upon request.

 

15. INSURANCE. Borrower shall procure and maintain such insurance as Lender may require with respect to the Collateral, in form, amounts and coverage reasonably acceptable to Lender and issued by a company reasonably acceptable to Lender naming Lender as loss payee. If Borrower at any time fails to obtain or maintain any insurance as required under this Agreement, Lender may obtain such insurance as Lender deems appropriate at Borrowers sole cost and expense. Borrower shall promptly notify Lender of any loss of or damage to the Collateral.

 

 

16. REPAIRS AND MAINTENANCE. Borrower agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all times while this Agreement remains in effect. Borrower further agrees to pay when due all claims for work done on, or services rendered or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral.

 

17. INSPECTION OF COLLATERAL AND PLACE OF BUSINESS; USE OF PHOTOGRAPHS AND TESTIMONIALS. Lender and Lenders designated representatives and agents shall have the right during Borrower’s normal business hours and at any other reasonable time to examine the Collateral wherever located and the interior and exterior of any Borrower place of business. During an examination of any Borrower place of business, Lender may examine, among other things, whether Borrower (i) has a place of business that is separate from any personal residence, (ii) is open for business, (iii) has sufficient inventory to conduct Borrowers business and (iv) has one or more credit card terminals if Borrower processes credit card transactions. When performing an examination, Lender may photograph the interior and exterior of any Borrower place of business, including any signage, and may photograph any individual who has signed the Agreement (“Signatory”) unless the Signatory previously has notified Lender that he or she does not authorize Lender to photograph the Signatory. Lender may obtain testimonials from any Signatory, including testimonials on why Borrower needed the Loan and how the Loan has helped Borrower. Any photograph and testimonial will become and remain the sole property of Lender. Borrower and each Signatory grant Lender the irrevocable and permanent right to display and share any photograph and testimonial in all forms and media, including composite and modified representations, for all purposes, including but not limited to any trade or commercial purpose, with any Lender employees and agents and with the general public. Lender may, but is not required to, use the name of any Borrower and Signatory as a credit in connection with any photograph and testimonial. Borrower and each Signatory waive the right to inspect or approve versions of any photograph or testimonial or the written copy or other media that may be used in connection with same. Borrower and each Signatory release Lender from any claims that may arise regarding the use of any photograph or testimonial, including any claims of defamation, invasion of privacy or infringement of moral rights, rights of publicity or copyright.

 

18. LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower fails to comply with any provision of this Agreement or any related documents, including but not limited to Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any related documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lender’s option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon an Event of Default.

 

19. BORROWER’S REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants that: (i) Borrower will comply with all laws, statutes, regulations and ordinances pertaining to the conduct of Borrower’s business and promises to hold Lender harmless from any damages, liabilities, costs, expenses (including attorneys’ fees) or other harm arising out of any violation thereof; (ii) Borrower’s principal executive office and the office where Borrower keeps its records concerning its accounts, contract rights and other property, is that shown in the application; (iii) Borrower is duly organized, licensed, validly existing and in good standing under the laws of its state of formation and shall hereafter remain in good standing in that state, and is duly qualified, licensed and in good standing in every other state in which it is doing business, and shall hereafter remain duly qualified, licensed and in good standing in every other state in which it is doing business, and shall hereafter remain duly qualified, licensed and in good standing in every other state in which the failure to qualify or become licensed could have a material adverse effect on the financial condition, business or operations of Borrower; (iv) the true and correct legal name of the Borrower is set forth in the application; (v) the aggregate ownership percentage of the Signatories is greater than or equal to fifty percent (50%) of the Borrowers business; (vi) the execution, delivery and performance of this Agreement, and any other document executed in connection herewith, are within Borrowers powers, have been duly authorized, are not in contravention of law or the terms of Borrower’s charter, by-laws or other constating documents, or of any indenture, agreement or undertaking to which Borrower is a party; (vii) all organization papers and all amendments thereto of Borrower have been duly filed and are in proper order and any capital stock issued by Borrower and outstanding was and is properly issued and all books and records of Borrower are accurate and up to date and will be so maintained; (viii) Borrower (a) is subject to no charter, corporate or other legal restriction, or any judgment, award, decree, order, governmental rule or regulation or contractual restriction that could have a material adverse effect on its financial condition, business or prospects, and (b) is in compliance with its charter, by-laws and other constating documents, all contractual requirements by which it may be bound and all applicable laws, rules and regulations other than laws, rules or regulations the validity or applicability of which it is contesting in good faith or provisions of any of the foregoing the failure to comply with which cannot reasonably be expected to materially adversely affect its financial condition, business or prospects or the value of the Collateral; and (ix) there is no action, suit, proceeding or investigation pending or, to Borrowers knowledge, threatened against or affecting it or any of its assets before or by any court or other governmental authority which, if determined adversely to it, would have a material adverse effect on its financial condition, business or prospects or the value of the Collateral.

 

 

20. INTEREST AND FEES. Borrower agrees to pay in full the interest as set forth in the accompanying Business Loan and Security Agreement Supplement. In addition to any other fees described in the Agreement, Borrower agrees to pay the following fees:

 

A. Origination Fee: A one-time Origination Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement. Borrower agrees that this fee will be immediately deducted from the proceeds of Borrowers Loan.

 

B. Returned Payment Fee: A Returned Payment Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement if any electronic payment processed on Borrowers Loan is returned unpaid or dishonored for any reason.

 

C. Late Fee: A Late Fee in the amount set forth in the accompanying Business Loan and Security Agreement Supplement if a scheduled payment is not received by Lender as provided in the payment schedule set forth in the accompanying Business Loan and Security Agreement Supplement.

 

Payments made by Borrower hereunder will be applied and allocated between Loan principal, interest and fees in the manner set forth in Section 8.

 

21. INTEREST AND FEES EXCEEDING PERMITTED LIMIT. If the Loan is subject to a law that sets maximum charges, and that law is finally interpreted so that the interest or other fees collected or to be collected in connection with this Agreement exceed the permitted limits, then (i) any such charge will be reduced by the amount necessary to reduce the charge to the permitted limit and (ii) if required by applicable law, any sums already collected from Borrower that exceed the permitted limits will be refunded or credited to Borrower.

 

22. FINANCIAL INFORMATION AND REEVALUATION OF CREDIT. Borrower and each guarantor (if any) authorize Lender to obtain business and personal credit bureau reports in Borrowers and any guarantor’s name, respectively, at any time and from time to time for purposes of deciding whether to approve the requested Loan or for any update, renewal, extension of credit or other lawful purpose. Upon Borrower’s or any guarantors request, Lender will advise Borrower or guarantor if Lender obtained a credit report and Lender will give Borrower or guarantor the credit bureau’s name and address. Borrower and each guarantor (if any) agree to submit current financial information, a new credit application, or both, in Borrower’s name and in the name of each guarantor, respectively, at any time promptly upon Lenders request. Borrower authorizes Lender to act as Borrower’s agent for purposes of accessing and retrieving transaction history information regarding Borrower from Borrowers designated merchant processor(s). Lender may report Lender’s credit experiences with Borrower and any guarantor of Borrower’s Loan to third parties as permitted by law. Borrower also agrees that Lender may release information to comply with governmental reporting or legal process that Lender believes may be required, whether or not such is in fact required, or when necessary or helpful in completing a transaction, or when investigating a loss or potential loss. Borrower and each Guarantor is hereby notified that a negative credit report reflecting on Borrowers and/or any Guarantors credit record may be submitted to a credit reporting agency if Borrower or such Guarantor fails to fulfill the terms of their respective credit obligations hereunder.

 

23. ATTORNEYS’ FEES AND COLLECTION COSTS. To the extent not prohibited by applicable law, Borrower shall pay to Lender on demand any and all expenses, including, but not limited to, collection costs, all attorneys’ fees calculated at 25% of remaining balance due on the Total Repayment Amount at the time of Default, and expenses, and all other expenses of like or unlike nature which may be expended by Lender to obtain or enforce payment of Obligations either as against Borrower or any guarantor or surety of Borrower or in the prosecution or defense of any action or concerning any matter arising out of or connected with the subject matter of this Agreement, the Obligations or the Collateral or any of Lender’s rights or interests therein or thereto, including, without limiting the generality of the foregoing, any counsel fees or expenses incurred in any bankruptcy or insolvency proceedings and all costs and expenses (including search fees) incurred or paid by Lender in connection with the administration, supervision, protection or realization on any security held by Lender for the debt secured hereby, whether such security was granted by Borrower or by any other person primarily or secondarily liable (with or without recourse) with respect to such debt, and all costs and expenses incurred by Lender in connection with the defense, settlement or satisfaction of any action, claim or demand asserted against Lender in connection therewith, which amounts shall be considered advances to protect Lender’s security, and shall be secured hereby. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lenders option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon an Event of Default.

 

24. BORROWER’S REPORTS. Promptly upon Lenders written request, Borrower and each guarantor agrees to provide Lender with such information about the financial condition and operations of Borrower or any guarantor, as Lender may, from time to time, reasonably request. Borrower also agrees promptly upon becoming aware of any Event of Default, or the occurrence or existence of an event which, with the passage of time or the giving of notice or both, would constitute an Event of Default hereunder, to promptly provide notice thereof to Lender in writing.

 

 

25. TELEPHONE COMMUNICATIONS. Borrower hereby expressly consents to receiving calls and messages, including auto-dialed and pre-recorded message calls and SMS messages (including text messages) from Lender, its affiliates, marketing partners, agents and others calling at Lenders request or on its behalf, at any telephone numbers that Borrower has provided or may provide in the future or otherwise in Lenders possession (including any cellular or mobile telephone numbers).

 

26. INDEMNIFICATION. Except for Lenders gross negligence or willful misconduct, Borrower will indemnify and save Lender harmless from all losses, costs, damages, liabilities or expenses (including, without limitation, court costs and reasonable attorneys’ fees) that Lender may sustain or incur by reason of defending or protecting Lenders security interest or the priority thereof or enforcing the Obligations, or in the prosecution or defense of any action or proceeding concerning any matter arising out of or in connection with this Agreement and/or any other documents now or hereafter executed in connection with this Agreement and/or the Obligations and/or the Collateral. This indemnity shall survive the repayment of the Obligations and the termination of this Agreement.

 

27. MERGERS, CONSOLIDATIONS OR SALES. Borrower represents and agrees that Borrower will not (i) merge or consolidate with or into any other business entity or (ii) enter into any joint venture or partnership with any person, firm or corporation.

 

28. CHANGE IN LEGAL STATUS. Without Lenders consent, Borrower represents and agrees that Borrower will not (i) change its name, its place of business or, if more than one, chief executive office, its mailing address, or organizational identification number if it has one, or (ii) change its type of organization, jurisdiction of organization or other legal structure. If Borrower does not have an organizational identification number and later obtains one, Borrower shall promptly notify Lender of such taxpayer identification number.

 

29. EVENTS OF DEFAULT. The occurrence of any one or more of the following events (herein, “Events of Default”) shall constitute, without notice or demand, a default under this Agreement and all other agreements between Lender and Borrower and instruments and papers given Lender by Borrower, whether such agreements, instruments, or papers now exist or hereafter arise: (i) Lender is unable to collect any Automatic Payment Plan payment and/or, Borrower fails to pay any Obligations when due; (ii) Borrower fails to comply with, promptly, punctually and faithfully perform or observe any term, condition or promise within this Agreement; (iii) the determination by Lender that any representation or warranty heretofore, now or hereafter made by Borrower to Lender, in any documents, instrument, agreement, or paper was not true or accurate when given; (iv) the occurrence of any event such that any indebtedness of Borrower from any lender or financing source other than Lender could be accelerated, notwithstanding that such acceleration has not taken place; (v) the occurrence of any event that would cause a lien creditor, as that term is defined in Section 9- 102 of the Uniform Commercial Code, (other than Lender) to take priority over the Loan made by Lender; (vi) a filing against or relating to Borrower (unless consented to in writing by Lender) of (a) a federal tax lien in favor of the United States of America or any political subdivision of the United States of America, or (b) a state tax lien in favor of any state of the United States of America or any political subdivision of any such state; (c) the filling of any lien against Borrower (vii) the occurrence of any event of default under any other agreement between Lender and Borrower or instrument or paper given Lender by Borrower, whether such agreement, instrument, or paper now exists or hereafter arises (notwithstanding that Lender may not have exercised its rights upon default under any such other agreement, instrument or paper); (viii) any act by, against, or relating to Borrower, or its property or assets, which act constitutes the application for, consent to, or sufferance of the appointment of a receiver, trustee or other person, pursuant to court action or otherwise, over all, or any part of Borrowers property; (ix) the granting of any trust mortgage or execution of an assignment for the benefit of the creditors of Borrower, or the occurrence of any other voluntary or involuntary liquidation or extension of debt agreement for Borrower; (x) the failure by Borrower to generally pay the debts of Borrower as they mature; (xi) adjudication of bankruptcy or insolvency relative to Borrower; (xii) the entry of an order for relief or similar order with respect to Borrower in any proceeding pursuant to Title 11 of the United States Code entitled “Bankruptcy” (the “Bankruptcy Code”) or any other federal bankruptcy law; (xiii) the filing of any complaint, application or petition by or against Borrower initiating any matter in which Borrower is or may be granted any relief from the debts of Borrower pursuant to the Bankruptcy Code or any other insolvency statute or procedure; (xiv) the calling or sufferance of a meeting of creditors of Borrower; (xv) the meeting by Borrower with a formal or informal creditors committee; (xvi) the offering by or entering into by Borrower of any composition, extension or any other arrangement seeking relief or extension for the debts of Borrower, or the initiation of any other judicial or non-judicial proceeding or agreement by, against or including Borrower that seeks or intends to accomplish a reorganization or arrangement with creditors; the entry of any judgment against Borrower, which judgment is not satisfied or appealed from (with execution or similar process stayed) within 5 calendar days of its entry; the occurrence of any event or circumstance with respect to Borrower such that Lender shall believe in good faith that the prospect of payment of all or any part of the Obligations or the performance by Borrower under this Agreement or any other agreement between Lender and Borrower is impaired or there shall occur any material adverse change in the business or financial condition of Borrower (such event specifically includes, but is not limited to, taking additional financing from a credit card advance, cash advance company or an additional working capital loan without the prior written consent of Lender); (xix) the entry of any court order that enjoins, restrains or in any way prevents Borrower from conducting all or any part of its business affairs in the ordinary course of business; (xx) the occurrence of any uninsured loss, theft, damage or destruction to any material asset(s) of Borrower; (xxi) Borrower shall enter into any financing agreements with any other party including but not limited to: Loans, Merchant Cash Advances, Receivables financing, or any other agreement that will increase the total debt owed by Borrower to any other party.; (xxii) the termination of existence, dissolution or liquidation of Borrower or the ceasing to carry on actively any substantial part of Borrowers current business; (xxiii) this Agreement shall, at any time after its execution and delivery and for any reason, cease to be in full force and effect or shall be declared null and void, or the validity or enforceability hereof shall be contested by Borrower or any guarantor of Borrower denies it has any further liability or obligation hereunder; (xxiv) any guarantor or person signing a support agreement in favor of Lender shall repudiate, purport to revoke or fail to perform his or her obligations under his guaranty or support agreement in favor of Lender or any corporate guarantor shall cease to exist; (xxv) any material change occurs in Borrowers ownership or organizational structure (acknowledging that any change in ownership will be deemed material when ownership is closely held); (xxvi) if Borrower is a sole proprietorship, the owner dies; if Borrower is a trust, a trustor dies; if Borrower is a partnership, any general or managing partner dies; if Borrower is a corporation, any principal officer or 10% or greater shareholder dies; if Borrower is a limited liability company, any managing member dies; if Borrower is any other form of business entity, any person(s) directly or indirectly controlling 10% or more of the ownership interests of such entity dies.

 

 

30. RIGHTS AND REMEDIES UPON DEFAULT. Subject to applicable law, if an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise any one or more of the following rights and remedies:

 

A. Refrain from Disbursing Loan Proceeds: Lender may refrain from disbursing Borrower’s Loan proceeds to Borrowers Designated Checking Account.

 

B. Debit Amounts Due From Borrower’s Accounts: Lender may debit from Borrower’s Designated Checking Account all Automatic Payment Plan payments that Lender was unable to collect and/or the amount of any other Obligations that Borrower failed to pay.

 

C. Accelerate Indebtedness: Lender may declare the entire Obligations immediately due and payable, without notice of any kind to Borrower.

 

D. Assemble Collateral: Lender may require Borrower and/or Guarantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Borrower and/or Guarantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter, provided Lender does so without a breach of the peace or a trespass, upon the property of Borrower and/or Guarantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Borrower and Guarantor agree that Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Borrower and Guarantor after repossession.

 

E. Sell the Collateral: Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name or that of Borrower and/or Guarantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give Borrower, Guarantor and other persons as required by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition of the Collateral is to be made. However, no notice need be provided to any person who, after an Event of Default occurs, enters into and authenticates an agreement waiving that person’s right to notification of sale. The requirements of reasonable notice shall be met if such notice is given at least 10 days before the time of the sale or disposition. All expenses relating to the disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shall become a part of the Obligations secured by this Agreement. To the extent permitted by applicable law, all such expenses will become a part of the Obligations and, at Lenders option, will: (i) be payable on demand; (ii) be added to the balance of the Loan and be apportioned among and be payable with any installment payments to become due during either (a) the term of any applicable insurance policy or (b) the remaining term of the Loan; or (iii) be treated as a balloon payment that will be due and payable at the Loan’s maturity.

 

F. Appoint Receiver: Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral and apply the proceeds, over and above the cost of the receivership, against the Obligations. The receiver may serve without bond if permitted by law. Lender’s right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Obligations by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.

 

G. Collect Revenues. Apply Accounts: Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lenders nominee and receive the payments, rents, income and revenues therefrom and hold the same as security for the Obligations or apply it to payment of the Obligations in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose or realize on the Collateral as Lender may determine, whether or not any amount included within the Obligations is then due. For these purposes, Lender may, on behalf of and in the name of Borrower and/or Guarantor, receive, open and dispose of mail addressed to Borrower; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment or storage of any Collateral. To facilitate collections, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender.

 

 

H. Obtain Deficiency: If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Borrower and/or Guarantor for any deficiency remaining on the Obligations due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Borrower and/or Guarantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.

 

I. Other Rights and Remedies: Upon the occurrence of any Event of Default or breach of any term of this Agreement, lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law, in equity or otherwise.

 

J. Election of Remedies: Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, any related documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Borrower under the Agreement, after Borrowers failure to perform, shall not affect Lenders right to declare a default and exercise its remedies.

 

K. Upon the occurrence of an Event of Default or if the Borrower fails to make any payment when due, the Outstanding Balance shall accrue interest at 24% (twenty four percent) per annum (“Default Interest Rate”) until the entire Outstanding Balance, all accrued unpaid Default Interest), Fees and other charges are paid to the Lender.

 

31. GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. Borrower and Lender agree that this Agreement and Borrowers Loan will be governed by law of the State of New York. These laws will apply based on the residence of the Lender. Borrower and Lender agree that any action or proceeding to enforce or arising out of this Agreement shall be brought in any court of the State of New York, and Borrower waives personal service of process. Borrower and Lender agree that venue is proper in such courts. Borrower and Guarantor agrees that Venue is proper and convenient in the State of New York and waives the right to challenge venue based on forum or convenience. Borrower and Guarantor agree to accept service of process via certified mail the address on the first page of this Agreement. Borrower and Guarantor submit to the Personal Jurisdiction of the Courts in the state of New York for all claims, actions or suits that arise out of or in connection to this Agreement, and waive any challenge to the personal jurisdiction of the courts of New York.

 

32. NO WAIVER BY LENDER. No delay or omission on the part of Lender in exercising any rights under this Agreement, any related guaranty or applicable law shall operate as a waiver of such right or any other right. Waiver on any one occasion shall not be construed as a bar to or waiver of any right or remedy on any future occasion. All Lenders rights and remedies, whether evidenced hereby or by any other agreement, instrument or paper, shall be cumulative and may be exercised singularly or concurrently.

 

33. ASSIGNMENT. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties hereto; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Lender’s prior written consent and any prohibited assignment shall be absolutely null and void. No consent to an assignment by Lender shall release Borrower from its Obligations. Lender may assign this Agreement and its rights and duties hereunder and no consent or approval by Borrower is required in connection with any such assignment. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in Lenders rights and benefits hereunder. In connection with any assignment or participation, Lender may disclose all documents and information that Lender now or hereafter may have relating to Borrower or Borrowers business. To the extent that Lender assigns its rights and obligations hereunder to another party, Lender thereafter shall be released from such assigned obligations to Borrower and such assignment shall affect a novation between Borrower and such other party.

 

34. INTERPRETATION. Paragraph and section headings used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Lender or Borrower, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by all parties and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of all parties hereto.

 

35. SEVERABILITY. If one or more provisions of this Agreement (or the application thereof) is determined invalid, illegal or unenforceable in any respect in any jurisdiction, the same shall not invalidate or render illegal or unenforceable such provision (or its application) in any other jurisdiction or any other provision of this Agreement (or its application).

 

36. NOTICES. Except as otherwise provided in this Agreement, notice under this Agreement must be in writing. Notices will be deemed given when deposited in the U.S. mail, postage prepaid, first class mail; when delivered in person; or when sent by registered mail; by certified mail; by nationally recognized overnight courier; or when sent by electronic mail. Notice to Borrower will be sent to Borrower’s last known address or electronic mail address in Lenders records for this Loan. Notice to Lender may be sent to our Servicer: ALT BANQ INC.., by e-mail at UW@altbanq.com, Attn: Director of Operations.

 

37. RECORDKEEPING AND AUDIT REQUIREMENTS. Lender shall have no obligation to maintain any electronic records or any documents, schedules, invoices or any other paper delivered to Lender by Borrower in connection with this Agreement or any other agreement other than as required by law. Borrower will at all times keep accurate and complete records of Borrower’s accounts and Collateral. At Lender’s request, Borrower shall deliver to Lender: (i) schedules of accounts and general intangibles; and (ii) such other information regarding the Collateral as Lender shall request. Lender, or any of its agents, shall have the right to call any telephone numbers that Borrower has provided or may provide in the future or otherwise in the Lender’s possession (including any cellular or mobile telephone numbers) at intervals to be determined by Lender, and without hindrance or delay, to inspect, audit, check, and make extracts from any copies of the books, records, journals, orders, receipts, correspondence that relate to Borrower’s accounts and Collateral or other transactions between the parties thereto and the general financial condition of Borrower and Lender may remove any of such records temporarily for the purpose of having copies made thereof. If Borrower was referred to Lender for this Loan by a third party (the “Referring Party”), then Borrower consents to Lender sharing certain reasonable information about Borrower with the Referring Party for purposes of the Referring Party verifying and/or auditing loans made through such Referring Party’s referrals.

 

 

38. GOVERNING LAW. Subject to Section 31 above, our relationship including this Agreement and any claim, dispute or controversy (whether in contract, tort, or otherwise) at any time arising from or relating to this Agreement is governed by, and this Agreement will be construed in accordance with the laws of the state of New York without regard to internal principles of conflict of laws. The legality, enforceability and interpretation of this Agreement and the amounts contracted for, charged and reserved under this Agreement will be governed by such laws. However, the Parties agree that any dispute arising out of this Agreement shall be situated in the Supreme Court in the State of New York. Borrower understands and agrees that (i) Lender is located in New York, (ii) Lender makes all credit decisions from Lender’s office in New York, (iii) the Loan is made in New York (that is, no binding contract will be formed until Lender receives and accepts Borrower’s signed Agreement in New York) and (iv) Borrower’s payments are not accepted until received by Lender in New York.

 

39. WAIVER OF NOTICES AND OTHER TERMS. Except for any notices provided for in this Agreement, Borrower and any person who has obligations pursuant to this Agreement (e.g., a guarantor), to the extent not prohibited by applicable law hereby, waives demand, notice of nonpayment, notice of intention to accelerate, notice of acceleration, presentment, protest, notice of dishonor and notice of protest. To the extent permitted by applicable law, Borrower and any person who has obligations pursuant to this Agreement also agrees: Lender is not required to file suit, show diligence in collection against Borrower or any person who has obligations pursuant to this Agreement, or proceed against any Collateral; Lender may, but will not be obligated to, substitute, exchange or release any Collateral; Lender may release any Collateral, or fail to realize upon or perfect Lender’s security interest in any Collateral; Lender may, but will not be obligated to, sue one or more persons without joining or suing others; and Lender may modify, renew, or extend this Agreement (repeatedly and for any length of time) without notice to or approval by any person who has obligations pursuant to this Agreement (other than the party with whom the modification, renewal or extension is made).

 

40. MONITORING, RECORDING AND ELECTRONIC COMMUNICATIONS. In order to ensure a high quality of service for Lender’s customers, Lender may monitor and/or record telephone calls between Borrower and Lender’s employees or agents. Borrower acknowledges that Lender may do so and agrees in advance to any such monitoring or recording of telephone calls. Borrower also agrees that Lender may communicate with Borrower electronically by e-mail.

 

41. JURY TRIAL WAIVER. To the extent not prohibited by applicable law, Borrower and Lender waive their right to a trial by jury of any claim or cause of action based upon, arising out of or related to the Agreement and all other documentation evidencing the Obligations, in any legal action or proceeding. Subject to Section 32 above, any such claim or cause of action shall be tried by court sitting without a jury. THE PARTIES HERETO ACKNOWLEDGE THAT EACH MAKES THIS WAIVER KNOWINGLY, WILLINGLY AND VOLUNTARILY AND WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH THEIR ATTORNEYS.

 

42. CONFIDENTIALITY. Borrower shall not make, publish or otherwise disseminate in any manner a copy of this Agreement or any public statement or description of the terms of this Agreement, except to its employees, advisors and similar persons who have a legitimate need to know its contents.

 

43. ENTIRE AGREEMENT. Any application Borrower signed or otherwise submitted in connection with the Loan, the accompanying Business Loan and Security Agreement Supplement and the Authorization Agreement for Direct Deposit (ACH Credit) and Direct Payments (ACH Debits) and any other documents required by Lender now or in the future in connection with this Agreement and Borrower’s Loan are hereby incorporated into and made a part of this Agreement. This Agreement is the entire agreement of the parties with respect to the subject matter hereof and supersedes any prior written or verbal communications or instruments relating thereto.

 

44. COUNTERPARTS; ELECTRONIC SIGNATURES. This Agreement may be executed in one or more counterparts, each of which counterparts shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument. For purposes of the execution of this Agreement, signatures delivered by electronic or fax submission shall be treated in all respects as original signatures.

 

45. CUSTOMER SERVICE CONTACT INFORMATION. If you have questions or comments about your Loan, you may contact our Servicer, ALT BANQ INC.. by (i) e-mail at UW@altbanq.com, (ii) telephone at 212-235-5455

 

 

46. PERSONAL GUARANTY. The undersigned (each a “Guarantor”), jointly and severally (if more than one), absolutely and unconditionally guarantee the prompt payment to Lender, including its successors and assignees, of any and all Obligations incurred by the Borrower pursuant to the Agreement (this “Personal Guaranty”). Each Guarantor further agrees to repay the Obligations on demand, without requiring Lender first to enforce payment against Borrower. This is a guarantee of payment and not of collection. This is an absolute, unconditional, primary, and continuing obligation and will remain in full force and effect until the first to occur of the following: (a) all of the Obligations have been indefeasibly paid in full, and Lender has terminated this Personal Guaranty, or (b) 30 days after the date on which written notice of revocation is actually received and accepted by Lender. No revocation will affect: (i) the then existing liabilities of the revoking Guarantor under this Personal Guaranty; (ii) Obligations created, contracted, assumed, acquired or incurred prior to the effective date of such revocation; (iii) Obligations created, contracted, assumed, acquired or incurred after the effective date of such revocation pursuant to any agreement entered into or commitment obtained prior to the effective date of such revocation; or (iv) any Obligations then or thereafter arising under the agreements or instruments then in effect and then evidencing the Obligations. Each Guarantor represents and warrants that it is a legal resident of the United States of America. Each Guarantor waives all notices to which the Guarantor might otherwise be entitled by law, and also waives all defenses, legal equitable, otherwise available to the Guarantor. This Personal Guaranty shall be construed in accordance with the laws of the State of New York, and shall inure to the benefit of Lender, its successors and assigns. To the extent not prohibited by applicable law, each of the undersigned Guarantors waives its right to a trial by jury of any claim or cause of action based upon, arising out of or related to this guaranty, the Agreement and all other documentation evidencing the Obligations, in any legal action or proceeding. Subject to Section 32 above, any such claim or cause of action shall be tried by court sitting without a jury.

 

47. CLASS ACTION WAIVER. THE PARTIES HERETO WAIVE ANY RIGHT TO ASSERT ANY CLAIMS AGAINST THE OTHER PARTY AS A REPRESENTATIVE OR MEMBER IN ANY CLASS OR REPRESENTATIVE ACTION, EXCEPT WHERE SUCH WAIVER IS PROHIBITED BY LAW AS AGAINST PUBLIC POLICY. TO THE EXTENT EITHER PARTY IS PERMITTED BY LAW OR COURT OF LAW TO PROCEED WITH A CLASS OR REPRESENTATIVE ACTION AGAINST THE OTHER, THE PARTIES HEREBY AGREE THAT: (1) THE PREVAILING PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS’ FEES OR COSTS ASSOCIATED WITH PURSUING THE CLASS OR REPRESENTATIVE ACTION (NOT WITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT); AND ( 2) THE PARTY WHO INITIATES OR PARTICIPATES AS A MEMBER OF THE CLASS WILL NOT SUBMIT A CLAIM OR OTHERWISE PARTICIPATE IN ANY RECOVERY SECURED THROUGH THE CLASS OR REPRESENTATIVE ACTION.

 

48. CERTIFICATION AND SIGNATURES. By initialing below or authorizing the person signing below to sign on its behalf, Borrower certifies that Borrower has received a copy of this Agreement and that Borrower has read, understood and agreed to be bound by its terms. Each person signing below certifies that each person is signing on behalf of the Borrower and/or in the capacity indicated below the signers name and that such signer is authorized to execute this Agreement on behalf of or the in stated relation to Borrower.

 

49. Use of Proceeds Certification. As referred to in Section 4, by initialing below, the Borrower certifies, acknowledges and understands that the proceeds from the requested Loan will be used solely for business purposes.

 

FOR THE BORROWER (#1)	By:	CHARLES ANDREW ROSS JR		/s/ Charles A Ross, Jr.
		(Print Name and Title)		(Signature)
FOR THE BORROWER (#2)	By:
		(Print Name and Title)		(Signature)
BY GUARANTOR (#1)	By:	CHARLES ANDREW ROSS JR		/s/ Charles A Ross, Jr.
		(Print Name and Title)		(Signature)
BY GUARANTOR (#2)	By:
		(Print Name and Title)		(Signature)

 

For Lenders Use Only: This Agreement has been received and accepted by Lender in New York after being signed by Borrower and any Guarantor(s).
By:
(Signature)
(Print Name)
Position:
Date:

 

 

 

Exhibit 4.1

 

PUBLIC OFFERING SUBSCRIPTION AGREEMENT

 

Shares of SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK

 

of

 

American Rebel Holdings, Inc.

 

This Subscription Agreement relates to my/our agreement to purchase ________ shares of preferred stock, $0.001 par value per share (the “Shares”), to be issued by American Rebel Holdings, Inc., a Nevada corporation (the “Company”), for a purchase price of $[              ] per Share, for a total purchase price of $___________ (“Subscription Price”), subject to the terms, conditions, acknowledgments, representations and warranties stated herein and in the final offering circular for the sale of the Shares, dated [*], 2023 contained in the offering statement on Form 1-A declared “qualified” by the Securities and Exchange Commission (the “SEC”) on [           ], 2023 (the “Offering Circular”). Capitalized terms used but not defined herein shall have the meanings given to them in the Offering Circular.

 

Simultaneously with or subsequent to the execution and delivery hereof, if I have an account with My IPO (“My IPO”), the online offering platform division of Cambria Capital, LLC, I am authorizing the Selling Agent to debit funds equal to the amount of the Subscription Price from my account at My IPO; in the amount of my Subscription Price, provided that if my broker-dealer or the Selling Agent has arranged to facilitate the funding of the Subscription Price to the escrow account (as described below) or through a clearing agent, then I agree to deliver the funds for the Subscription Price pursuant to the instructions provided by such clearing agent, such broker-dealer or the Selling Agent. I understand that if I wish to purchase Shares, I must complete this Subscription Agreement and, if I have an account with My IPO, have sufficient funds in my account at the time of the execution and delivery of this Subscription Agreement; or, if I do not maintain an account with My IPO, submit the applicable Subscription Price as set forth herein. Subscription funds submitted by Investors who do not have an account with My IPO will be held by and at an FDIC insured bank in compliance with SEC Rule 15c2-4, with funds released to the Company at closing, as described in the Circular. The escrow account will be maintained by Wilmington Trust as escrow agent. In the event that the offering is terminated, then the Offered Shares will not be sold to investors pursuant to this offering and all funds will be returned to investors from escrow together with interest, if any. If any portion of the Shares is not sold in the offering, any funds paid by me for such portion of the Shares will be returned to me promptly; or, if I have an account with My IPO, funds for such unsold Shares will not be debited from my account at closing.

 

In order to induce the Company to accept this Subscription Agreement for the Shares and as further consideration for such acceptance, I hereby make, adopt, confirm and agree to all of the following covenants, acknowledgments, representations and warranties with the full knowledge that the Company and its affiliates will expressly rely thereon in making a decision to accept or reject this Subscription Agreement:

 

1. Type of Ownership

 

☐ Individual ☐ Joint ☐ Institution

 

2. Investor Information (You must include a permanent street address even if your mailing address is a P.O. Box.)

 

Individual/Beneficial Owner:		Joint-Owner/Minor: (If applicable.)
Name:		Name:
Social Security/Tax ID Number:		Social Security/Tax ID Number:
Street Address:		Street Address:
City:		City:
State:		State:
Postal Code:		Postal Code:
Country:		Country:
Phone Number:		Phone Number:
Email Address:		Email Address:

 

 

3. Investor Eligibility Certifications

 

I understand that to purchase Shares, I must either be an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 (the “Act”), or, unless the securities issued in the offering initially trade on a national securities exchange, I must limit my investment in the Shares to a maximum of: (i) 10% of my net worth or annual income, whichever is greater, if I am a natural person; or (ii) 10% of my revenues or net assets, whichever is greater, for my most recently completed fiscal year, if I am a non-natural person. I understand that if I am a natural person I should determine my net worth for purposes of these representations by calculating the difference between my total assets and total liabilities. I understand this calculation must exclude the value of my primary residence and may exclude any indebtedness secured by my primary residence (up to an amount equal to the value of my primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the Shares.

 

I hereby represent and warrant that I meet the qualifications to purchase Shares because:

 

☐ The aggregate purchase price for the Common Stock I am purchasing in the offering does not exceed 10% of my net worth or annual income, whichever is greater.

 

☐ I am an accredited investor.

 

4. I understand that the Company reserves the right to, in its sole discretion, accept or reject this subscription, in whole or in part, for any reason whatsoever, and to the extent not accepted, unused funds maintained in my account at My IPO or transmitted herewith shall either not be debited from my account at My IPO or be returned to the undersigned in full, with any interest accrued thereon.

 

5. I have received the Circular.

 

6. I accept the terms of the Certificate of Incorporation of the Company.

 

7. I am purchasing the Shares for my own account.

 

8. I hereby represent and warrant that I am not on, and am not acting as an agent, representative, intermediary or nominee for any person identified on, the list of blocked persons maintained by the Office of Foreign Assets Control, U.S. Department of Treasury. In addition, I have complied with all applicable U.S. laws, regulations, directives, and executive orders relating to anti-money laundering, including but not limited to the following laws: (1) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (2) Executive Order 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23, 2001. By making the foregoing representations you have not waived any right of action you may have under federal or state securities law. Any such waiver would be unenforceable. The Company will assert your representations as a defense in any subsequent litigation where such assertion would be relevant. This subscription agreement and all rights hereunder shall be governed by, and interpreted in accordance with, the laws of the State of Nevada without giving effect to the principles of conflict of laws.

 

9. Digital (“electronic”) signatures, often referred to as an “e-signature”, enable paperless contracts and help speed up business transactions. The 2001 E-Sign Act was meant to ease the adoption of electronic signatures. The mechanics of this Subscription Agreement’s electronic signature include your signing this Agreement below by typing in your name, with the underlying software recording your IP address, your browser identification, the timestamp, and a securities hash within an SSL encrypted environment. This electronically signed Subscription Agreement will be available to both you and the Company, as well as any associated brokers, so they can store and access it at any time, and it will be stored and accessible on Banq.co®. You and the Company each hereby consent and agree that electronically signing this Agreement constitutes your signature, acceptance and agreement as if actually signed by you in writing. Further, all parties agree that no certification authority or other third party verification is necessary to validate any electronic signature; and that the lack of such certification or third party verification will not in any way affect the enforceability of your signature or resulting contract between you and the Company. You understand and agree that your e-signature executed in conjunction with the electronic submission of this Subscription Agreement shall be legally binding and such transaction shall be considered authorized by you. You agree your electronic signature is the legal equivalent of your manual signature on this Subscription Agreement and you consent to be legally bound by this Subscription Agreement’s terms and conditions. Furthermore, you and the Company each hereby agree that all current and future notices, confirmations and other communications regarding this Subscription Agreement specifically, and future communications in general between the parties, may be made by email, sent to the email address of record as set forth in this Subscription Agreement or as otherwise from time to time changed or updated and disclosed to the other party, without necessity of confirmation of receipt, delivery or reading, and such form of electronic communication is sufficient for all matters regarding the relationship between the parties. If any such electronically sent communication fails to be received for any reason, including but not limited to such communication being diverted to the recipient’s spam filters by the recipient’s email service provider, or due to a recipient’s change of address, or due to technology issues by the recipient’s service provider, the parties agree that the burden of such failure to receive is on the recipient and not the sender, and that the sender is under no obligation to resend communications via any other means, including but not limited to postal service or overnight courier, and that such communications shall for all purposes, including legal and regulatory, be deemed to have been delivered and received. No physical, paper documents will be sent to you, and if you desire physical documents then you agree to be satisfied by directly and personally printing, at your own expense, the electronically sent communication(s) and maintaining such physical records in any manner or form that you desire.

 

 

10. Delivery Instructions. All shares will be retained at the transfer agent in book entry. On closing you will receive a notice of your holdings delivered to the address of record above.

 

Cambria Capital, LLC is registered with the Securities and Exchange Commission (“SEC”) as a broker-dealer and is a State Registered Investment Adviser. Brokerage and investment advisory services and fees differ, and it is important for you to understand the differences. This Client Relationship Summary provides details about our brokerage and advisory services, fees, and other important information. Please review the information prior to submitting this indication at Cambria Reg BI Disclosure

 

11. Exclusive Jurisdiction. EACH OF THE PARTIES HERETO CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED WITHIN THE STATE OF NEVADA AND NO OTHER PLACE AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS RELATING TO THIS SUBSCRIPTION AGREEMENT MAY BE LITIGATED IN SUCH COURTS. EACH OF INVESTORS AND THE COMPANY ACCEPTS FOR ITSELF AND HIMSELF AND IN CONNECTION WITH ITS AND HIS RESPECTIVE PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS SUBSCRIPTION AGREEMENT. INVESTOR AND THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN THE MANNER AND IN THE ADDRESS SPECIFIED IN SECTION HEREIN AND THE SIGNATURE PAGE OF THIS SUBSCRIPTION AGREEMENT. HOWEVER, NOTHING IN THIS PARAGRAPH SHALL BE CONSTRUED TO BE APPLICABLE TO ANY ACTION ARISING UNDER THE FEDERAL SECURITIES LAWS.

 

12. Jury Trial Waiver. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT BUT NOT INCLUDING CLAIMS UNDER THE FEDERAL SECURITIES LAWS) ARISING OUT OF OR RELATING TO THIS SUBSCRIPTION AGREEMENT OR THE ACTIONS OF EITHER PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF. EACH OF THE PARTIES HERETO ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF SUCH PARTY. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS SUBSCRIPTION AGREEMENT. IN THE EVENT OF LITIGATION, THIS SUBSCRIPTION AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. BY AGREEING TO THIS WAIVER, THE SUBSCRIBER IS NOT DEEMED TO WAIVE THE COMPANY’S COMPLIANCE WITH THE FEDERAL SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.

 

I acknowledge that I have reviewed the client relationship summary link provided above.

 

Your Consent is Hereby Given: By signing this Subscription Agreement electronically, you are explicitly agreeing to receive documents electronically including your copy of this signed Subscription Agreement as well as ongoing disclosures, communications and notices.

 

SIGNATURES:

 

THE UNDERSIGNED HAS THE AUTHORITY TO ENTER INTO THIS SUBSCRIPTION AGREEMENT ON BEHALF OF THE PERSON(S) OR ENTITY REGISTERED ABOVE.

 

Subscriber:			Issuer:
Name:			Name:	Charles Andy Ross
Email:			Company:	American Rebel Holdings, Inc.
Date:			Title:	Chief Executive Officer

 

 

 

Exhibit 6.4

 

AMENDMENT TO

EMPLOYMENT AGREEMENT

 

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is made and entered into effective the 9^th day of April, 2021, by and between American Rebel Holdings, Inc., a Nevada corporation (“American Rebel”) and Charles A. Ross, Jr. (“Ross”).

 

RECITALS

 

A. American Rebel and Ross entered into an employment agreement on January 1, 2021 (the “Employment Agreement”) pursuant to which American Rebel agreed to employ Ross as its chief executive officer for a five year term;

 

B. Effective April 1, 2021, Ross agreed to reduce the salary payable to him under the Employment Agreement for six months; and

 

C. American Rebel and Ross desire to further amend the Employment Agreement pursuant to this Amendment.

 

NOW, THEREFORE, for and in consideration of the foregoing, and of the mutual covenants, agreements, undertakings, representations and warranties contained herein, the parties hereto agree as follows:

 

1. Ross’s Base Salary for the period from April 1, 2021 through September 30, 2021 shall be reduced to $72,000 per annum ($6,000 per month). After September 30, 2021, Ross’s Base Salary shall revert to that set forth in the Employment Agreement.

 

2. Concurrent with the signing of this Amendment, American Rebel shall grant and agree to issue to Ross four million (4,000,000) shares of restricted common stock. Such shares shall be issued only upon the amendment to American Rebel’s articles of incorporation to increase its authorized shares of common stock.

 

3. Other than as specifically provided in this Amendment, all other provisions of the Employment Agreement shall remain in full force and effect, the Employment Agreement as amended by this Amendment constituting the sole and entire agreement between the parties as to the matters contained herein, and superseding any and all conversations, letters and other communications which may have been disseminated by the parties relating to the subject matter hereof, all of which are void and of no effect.

 

[signature page to follow]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

 

American Rebel:

American Rebel Holdings, Inc.,

a Nevada corporation

 

By:	/s/ Doug Grau
	Doug Grau, President

 

Ross:

 

/s/ Charles A. Ross, Jr.
Charles A. Ross, Jr.

 

 

 

Exhibit 6.5

 

AMENDMENT TO

EMPLOYMENT AGREEMENT

 

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (“Amendment”) is made and entered into effective the 9^th day of April, 2021, by and between American Rebel Holdings, Inc., a Nevada corporation (“American Rebel”) and Doug Grau (“Grau”).

 

RECITALS

 

A. American Rebel and Grau entered into an employment agreement on January 1, 2021 (the “Employment Agreement”) pursuant to which American Rebel agreed to employ Grau as its president for a five year term;

 

B. Effective April 1, 2021, Grau agreed to reduce the salary payable to him under the Employment Agreement for six months; and

 

C. American Rebel and Grau desire to further amend the Employment Agreement pursuant to this Amendment.

 

NOW, THEREFORE, for and in consideration of the foregoing, and of the mutual covenants, agreements, undertakings, representations and warranties contained herein, the parties hereto agree as follows:

 

1. Grau’s Base Salary for the period from April 1, 2021 through September 30, 2021 shall be reduced to $72,000 per annum ($6,000 per month). After September 30, 2021, Grau’s Base Salary shall revert to that set forth in the Employment Agreement.

 

2. Concurrent with the signing of this Amendment, American Rebel shall grant and agree to issue to Grau four million (4,000,000) shares of restricted common stock. Such shares shall be issued only upon the amendment to American Rebel’s articles of incorporation to increase its authorized shares of common stock.

 

3. Other than as specifically provided in this Amendment, all other provisions of the Employment Agreement shall remain in full force and effect, the Employment Agreement as amended by this Amendment constituting the sole and entire agreement between the parties as to the matters contained herein, and superseding any and all conversations, letters and other communications which may have been disseminated by the parties relating to the subject matter hereof, all of which are void and of no effect.

 

[signature page to follow]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written.

 

American Rebel:

American Rebel Holdings, Inc.,

a Nevada corporation

 

By:	/s/ Charles A. Ross, Jr.
	Charles A. Ross, Jr., CEO

 

Grau:

 

/s/ Doug Grau
Doug Grau

 

 

 

Exhibit 6.13

 

SPONSORSHIP AGREEMENT

 

THIS SPONSORSHIP AGREEMENT (“Agreement”) is made and entered into this 1st day of July, 2023 (“Effective Date”) between Tony Stewart Racing Nitro, LLC, d/b/a TSR NITRO (“Team”), and American Rebel Holdings, Inc. (“Sponsor”).

 

WHEREAS, Team owns and operates a Funny Car Team competing full time with the NHRA (“Funny Car Team”)

 

WHEREAS, Sponsor desires to enter into a sponsorship agreement with Funny Car Team and driver (“Driver”), Matt Hagan.

 

WHEREAS, Sponsor, who manufactures and markets gun safes, desires to enter into an agreement under which Team will provide certain promotions rights to Sponsor in exchange for the Sponsorship Fee (hereinafter defined).

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and the mutual benefits to be derived there from, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.	Sponsorship. In consideration of the Sponsorship Fees contained herein, during the Term, Sponsor shall receive the benefits (“Sponsorship Benefits”) set forth on Exhibit A, attached hereto and incorporated herein.
2.	Term: Subject to earlier termination as provided herein, the term of this Agreement shall commence as of the Effective Date and shall continue through December 31, 2023 (“Term”). This agreement shall automatically renew thru July 31, 2025 (or after ten (10) 2025 season races, whichever comes first) unless Team elects in writing to terminate following the 2023 season. Election must be made on or before December 31, 2023.
3.	Sponsorship Fee. In consideration of the Sponsorship Benefits, Sponsor shall compensate Team four-hundred thousand United States dollars ($400,000 USD) for 2023 and four-hundred thousand United States dollars ($400,000 USD) for 2024 per the schedule below:

 

August 1, 2023:	$100,000
October 1, 2023:	$100,000
January 1, 2024:	$100,000
April 1, 2024:	$100,000
July 1, 2024:	$100,000
October 1, 2024:	$100,000
January 1, 2025	$100,000
April 1, 2025	$100,000

 

4.	Category Exclusivity. Sponsor shall be exclusive in relation to the gun safe category and designated the “Official Gun Safe Supplier of “Tony Stewart Racing Nitro”.

 

5.	Intellectual Property. The licenses granted in this Section 5 are solely for advertising and promotion; the procedure for Licensed Products sales and distribution of Premiums are detailed in Section 6 below.

 

a.

License to Use Team Marks. Team hereby grants Sponsor a non-exclusive and non-transferable license to use the Team Marks, on a royalty-free basis, for the purpose of promoting Sponsor’s sponsorship of the in advertising, promotional activities or materials. For purposes of this Agreement, the term “Team Marks” will mean the trademarks, service marks, tradenames, copyrights, logos, slogans and other identifying symbols and indicia of the Team. Notwithstanding anything to the contrary herein, the Team Marks will remain the property of the Team. All use of Team Marks by Sponsor must be pre-approved by Team.

 

 

b.

License to Use Sponsor Marks. Sponsor hereby grants Team a non-exclusive and non-transferable license to use the Sponsor Marks (as defined below), on a royalty-free basis, for the purpose of promoting Sponsor’s sponsorship of the Team in advertising. For purposes of this Agreement, the term “Sponsor’s Marks” will mean those Sponsor trademarks, service marks, tradenames, copyrights, logos, slogans and other identifying symbols and indicia, which are owned by the Sponsor. Notwithstanding anything to the contrary herein, the Sponsor’s Marks will remain the property of the Sponsor. All uses of Sponsor’s Marks in connection with the Team will be in the form and format specified by the Sponsor. Team will not use the Sponsor’s Marks without the prior, express, written consent of the Sponsor. Notwithstanding the foregoing, Team will not use Sponsor’s Marks in a manner that would impair the validity or enforceability of Sponsor’s Marks, harm the reputation of the Sponsor, or in any way disparage or dilute Sponsor’s Marks. Team recognizes the goodwill attached to the Sponsor’s Marks belonging to the Sponsor and agrees that it shall not use the Sponsor’s Marks in such a manner that confusion may arise in the public mind as to the products or services for which the license being set forth herein is being granted. All uses of Sponsor’s Marks by Team will inure to the sole benefit of Sponsor. Upon expiration or termination of this Agreement for any reason, Team will immediately cease any and all use of Sponsor’s Marks and will destroy or return to Sponsor all material in its possession which contain any of Sponsor’s Marks.

 

c.

Notwithstanding the preceding, with respect to Team Promotions, Sponsor’s review and approval will be limited to the use of the Sponsor Marks and Sponsor will not undertake to review and approve or endorse any Team Promotion. Sponsor expressly disclaims any approval or endorsement of Team Promotions.

 

6.

Licensed Products & Premiums. Only licensees party to a written license agreement with Team are authorized to create Licensed Products. For purposes of this Agreement, the term “Licensed Products” shall mean goods, services and other products (e.g., souvenir and novelty items, apparel, toys and replica die-casts) displaying Sponsor Marks with Team Marks.

 

a.

Sponsor Trademarks on Licensed Products. Sponsor hereby grants Team the exclusive right during the Term and for 180 days thereafter to license, sublicense, advertise, promote, manufacture, distribute and sell Licensed Products. Other than Sponsor Trademarks or any modifications, deviations therefrom, all artwork and designs created by the Team or its licensees and used in combination with the Team Trademarks are the property of Team.

 

b.

Territory & Royalties. The territory for the licenses granted in Sections 5 and 6 is all the countries of the world. Sponsor will not receive royalties or other consideration from the sale of Licensed Products, other goods or any other licenses granted herein.

 

7.

Confidentiality. Either party may disclose or make available (the “Disclosing Party”) to the other party (the “Receiving Party”), whether orally or in physical form, confidential or proprietary information concerning the Disclosing Party and/or its business, products, services, marketing, promotional or technical information in connection with this Agreement (collectively, the “Confidential Information”). During the Term, except as otherwise required by applicable law, each party and their respective agents, employees, and representatives agree that: (a) it will use the Confidential Information of the Disclosing Party solely for the purpose(s) of this Agreement; and (b) it will not disclose in any way any terms of this Agreement to any third party (other than the Receiving Party’s employees and/or professional advisors on a need-to-know basis who are bound by obligations of nondisclosure and whose limited use is at least as stringent as those contained herein) without first obtaining the Disclosing Party’s written consent. For purposes hereof, Confidential Information will not include information: (a) which was previously known to Receiving Party; (b) which was acquired by Receiving Party from a third party which was not, to the Receiving Party’s knowledge, under an obligation to Disclosing Party not to disclose such information; (c) which is or becomes publicly available through no breach by Receiving Party of this Agreement; or (d) which Disclosing Party gave written permission to Receiving Party for disclosure.

 

The Receiving Party will protect the Confidential Information in the same manner that it protects the confidentiality of its own proprietary and confidential information and materials of like kind, but in no event less than a reasonable standard of care. When applicable, the Receiving Party will take any steps required to avoid inadvertent disclosure of materials in its possession. The Receiving Party is responsible for any breach of the confidentiality provisions of this Agreement by its employees and/or professional advisors. In the event the Receiving Party receives a subpoena or other validly issued administrative or judicial process demanding the Confidential Information, the Receiving Party will give the Disclosing Party prompt written notice of any disclosure of the Agreement terms that, in the opinion of its counsel, appears to be required by law, so that the Disclosing Party may assert any defenses to disclosure that may be available. Upon request by the Disclosing Party, the Receiving Party will return all copies of any Confidential Information to the Disclosing Party. Confidential Information disclosed by the Disclosing Party to the Receiving Party will at all times remain the property of the Disclosing Party. No license under any trade secrets, copyrights, or other rights is granted under this Agreement or by any disclosure of Confidential Information under this Agreement. For Confidential Information that does not constitute “trade secrets” under applicable law, these confidentiality obligations will expire three (3) years after the termination of expiration of this Agreement.

 

 

8.	Termination.

 

a.

Either party may terminate this Agreement in the event of a material breach by other party within a period of thirty (30) calendar days after receipt of written notice specifying the breach, if the breach is not cured within such thirty (30) day time period. If Team has committed or permitted a material breach and Sponsor terminates this Agreement, then Team (i) shall refund to Sponsor the pro-rata portion of Sponsorship Fees paid by Sponsor prior to the date of termination in the respective year in which the Team has committed or permitted a material breach; pro-rata portion shall be dictated by the number of events on Team’s schedule in the respective year that have occurred and the number of events that have not occurred when the Team committed or permitted a material breach; refund of Sponsorship Fees are only applicable to those events that have not occurred when the Team committed or permitted a material breach.

 

b.

Either party may terminate this Agreement immediately upon notice to the other party in the event the other party makes an assignment for the benefit of creditors, files an involuntary petition in bankruptcy or is adjudicated bankrupt or insolvent, has a receiver appointed for any portion of its business or property, or has a trustee in bankruptcy or trustee in insolvency appointed for it under federal or state law.

 

9.

Non-Disparagement. “Negative Behavior” shall mean any action or statement by Team that brings Team into public disrespect, contempt, scandal or ridicule, or that shocks or offends the community or any group or class thereof, or that reflects unfavorably on Sponsor or that reduces the commercial value of the Sponsor’s association with the Team. Team represents that there is no past Negative Behavior that would damage or embarrass Sponsor if made public and during the Term, Team will not engage in any Negative Behavior that would damage or embarrass Sponsor. Team warrants that it shall render the Event required under this Agreement in a competent and professional manner to the best of its abilities and shall comply with all of the reasonable direction of Team in connection with the performance of the Event required under this Agreement. Team warrants that it shall report promptly for the Event and that it will generally comport at all times in accordance with the highest standards of conduct and behavior.

 

10.

No Partnership or Agency. Nothing in this Agreement shall be deemed to create any partnership, joint venture, joint enterprise or agency relationship among the parties, and no party shall have the right to enter into contracts on behalf of, to legally bind, to incur debt on behalf of, or to otherwise incur any liability or obligation on behalf of, the other party hereto, in the absence of a separate writing, executed by an authorized representative of the other party, specifically authorizing such action.

 

11.	Indemnification.

 

a.

Team will defend Sponsor against all third party claims, and indemnify Sponsor for all losses and expenses (including reasonable attorney’s fees) arising in any way from: (a) the acts or omissions of Team, its employees, or agents in their performance of this Agreement; (b) any claims arising from personal injury or death at the Event; or (c) any claims that the Team Marks infringe a third party’s intellectual property right, as long as the Team Marks have been used in the manner provided or approved by Team.

 

b.

Sponsor will defend Team against all third party claims, and indemnify Team for all losses and expenses (including reasonable attorney’s fees) arising in any way from: (a) the negligence or willful misconduct of Sponsor, its employees, or agents in their performance of this Agreement; or (b) any claims that Sponsor’s Marks infringe a third party’s intellectual property rights, as long as the Sponsor’s Marks have been used in the manner approved by Sponsor.

 

c.

Whenever any party entitled to indemnification under this Agreement (the “Indemnified Party”) receives notice of any potential claim that might be subject to indemnification, that party will promptly notify the party obligated to indemnify (the “Indemnifying Party”). The Indemnifying Party will assume the defense of the claim through counsel designated by it and reasonably acceptable to the Indemnified Party. The Indemnifying Party will not settle or compromise any claim, or consent to the entry of any judgment, without written consent of the Indemnified Party, which will not be reasonably withheld. The Indemnified Party and its affiliates, employees, and representatives will cooperate with the Indemnifying Party in the defense of a claim. If the Indemnifying Party fails to assume the defense of the claim as soon as reasonably possible, and in any event, before the earlier of twenty (20) days after receiving notice of the claim or five (5) days before the date that an answer to a complaint (or its equivalent) is due, then the Indemnified Party may settle the claim on behalf of and at the risk and expense of the Indemnified Party.

 

12.	Insurance. During the Term of this Agreement, Team shall maintain the insurance coverage in line with industry standards.

 

13.	Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Indiana, without regard to its conflict of law principles.

 

 

14.

Representations and Warranties. Each party represents, warrants, and covenants that: (a) it has full power and authority (including full corporate power and authority) to enter into this Agreement and to execute and deliver this Agreement and perform its obligations hereunder; (b) it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (c) it has not entered into, and during the Term will not enter into, any agreement that would prevent it from complying with this Agreement; (d) neither the execution nor performance of this Agreement will conflict with, result in a breach of, or constitute a default under any contract, license, sublicense, franchise, permit, or agreement to which any party hereto is a party or by which is bound; and (e) neither the execution nor performance of this Agreement will knowingly violate any statute, regulation, rule, judgment, order, decree, stipulation, injunction, charge or other restriction of any government, governmental agency or court to which such party is subject to or any provision of the charters or bylaws of such party.

 

15.

Release, Discharge or Waiver. A party’s release, discharge, or waiver of any of this Agreement’s terms or conditions is effective only if in writing and signed by that party. A party’s specific waiver does not constitute a waiver by that party of any earlier, concurrent or later breach or default. No waiver occurs if a party either fails to insist on strict performance of this Agreement’s terms or pays or accepts money under this Agreement with knowledge of a breach.

 

16.

Force Majeure. Any delay in or failure by either party in performance of this Agreement shall be excused if and to the extent such delay or failure is caused by occurrences beyond the control of the affected party including, but not limited to, decrees or restraints of Government, acts of God, strikes, work stoppage or other labor disturbances, war or sabotage (each being a “Force Majeure Event”). The affected party will promptly notify the other party upon becoming aware that any Force Majeure has occurred or is likely to occur and will use its best efforts to minimize any resulting delay in or interference with the performance of its obligations under this Agreement.

 

17.

Notices. Any notice or report required under this Agreement will be given in writing by personal delivery, by certified or registered mail, return receipt requested, or by overnight courier, directed to the address of the party given below or to such other address as may be substituted by notice to the other party. All notices will be effective upon receipt.

 

If to Team

Tony Stewart Racing Nitro, LLC

438 Southpoint Circle

Brownsburg, IN 46112

 

If to Sponsor:

 

American Rebel Holdings, Inc.

909 18th Avenue S, Suite A

Nashville, TN 37212

 

18.

No Assignment. This Agreement may not be assigned by any of the parties without the prior written consent of the other parties. Any assignment made in violation of this paragraph is void. Nonetheless, Sponsor may assign all or part of Sponsor’s rights and obligations under this Agreement to any of Sponsor’s subsidiaries.

 

19.	No Intended Beneficiaries. Nothing in this Agreement is intended to inure to the benefit of any third party.

 

20.	Severability. If any term or provision of this Agreement is held by a court of competent jurisdiction to be indefinite, invalid, void or otherwise unenforceable, the remaining provisions will nevertheless continue in full force and effect.

 

21.	Headings. All headings are for reference purposes only and will not affect the meaning or interpretation of this Agreement in any way.

 

22.	Counterparts. This Agreement may be executed in two or more counterparts.

 

23.

Survival. The paragraphs of this Agreement that by their nature are intended to survive its expiration or termination, including, but not limited to, payment, confidentiality, indemnification, insurance, governing law, representations and warranties, and survival shall survive the expiration or any termination of this Agreement.

 

24.

Entire Agreement. This Agreement and the attached exhibits and schedules constitute the entire agreement between Team and Sponsor and supersede all prior agreements, understandings and representations relating to the subject matter. This Agreement may only be amended, modified or supplemented by a written agreement signed by all parties.

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized representatives as of the date indicated below:

 

Team:		Sponsor:
TONY STEWART RACING NITRO, LLC		AMERICAN REBEL HOLDINGS, INC.

 

By:	/s/ Jared Frood		By:	/s/ Charles A Ross Jr
Print:	JARED FROOD		Print:	Charles A Ross Jr
Title:	COO		Title:	CEO
Date:	8/1/23		Date:	8/1/23

 

 

EXHIBIT A

 

Sponsorship Benefits
Driver	TSR Funny Car Driver - Matt Hagan
At-Track Meet & Greets	As reasonably needed with Matt Hagan and team owner, Tony Stewart
Primary Car Branding	2 Primary Paint Schemes on Matt’s Funny Car entry (2023 - Topeka & St. Louis) (2024 - TBD)
Primary Branding on Firesuit	Primary branding on Matt Hagan’s firesuit (center chest, arms, legs, neck, back)
Funny Car Associate Car Branding	Associate location on TSR Funny Car for remaining 2023 events; full season 2024
Associate Branding on Firesuit	Associate branding on Matt Hagan’s firesuit (sleeve) - remaining events 2023, full season 2024
Funny Car Crew Shirts	Primary branding on Funny Car team during primary races
Team Marketing Rights	Full Rights to the American Rebel Funny Car primary entry
Social Media	To be agreed upon social posts via Matt and TSR social platforms
Driver Rights	To be agreed upon rights to Matt Hagan (organic content)
Additional TSR assets	Branding on TSR Nitro website
General Admission & Hospitality Passes	20 one day passes (includes hospitality and general admission)
Additional Tickets/Hospitality	Available at $200/person/day
Category Exclusivity	Gun Safes

 

*Associate branding elements will continue for the first 10 races of 2025 season

 

 

 

Exhibit 6.14

 

 

MASTER BREWING AGREEMENT

 

This Master Brewing Agreement (the “Agreement”) is effective August 9, 2023 (the “Effective Date”) by and between Associated Brewing Company, a Minnesota limited liability company with its principal place of business at 219 Little Canada Road, Suite 170, St. Paul, Minnesota 55117 (“ABC”), and American Rebel, Inc , a Nevada corporation with its principal place of business at 909 18th Avenue South, Ste A, Nashville, TN 37212 (“Brand Owner”).

 

Recitals

 

	A.	ABC is a brewer of beer (as defined in 27 U.S.C. § 5052(a) or any successor statute) and ABC possesses the necessary federal and state permits and licenses to produce beer and licenses to sell beer to wholesale distributors in the United States.
	B.	ABC owns the trademarks, proprietary recipes (if any) and other intellectual property rights associated with the beer(s) listed on Schedule A to this Agreement (the “Product” or “Products”, as applicable)”) and wishes to license the Product to Brand Owner to be able to sell the Product under its brand name, American Rebel.
	C.	Brand Owner hereby appoints ABC to brew and sell the Products on its behalf to approved wholesale distributors in the United States.

 

The parties, for adequate and sufficient consideration, accordingly agree as follows:

 

Agreement

 

1.	Term: This Agreement shall commence on the date written above and continue for a term of three (3) years (the “Initial Term” and, collectively with all Renewal Terms as defined below, the “Term”) and shall automatically renew for successive three-year periods (each a “Renewal Term”) unless terminated pursuant to the terms of Section 16 below. ABC may reasonably alter the payment terms or increase the fees payable by the Brand Owner under this Agreement by giving Brand Owner no less than ninety (90) days’ notice of such alteration or increase.
2.	ABC Intellectual Property: ABC represents and warrants that it completely owns the trademarks, proprietary recipes and other intellectual property (collectively the “IP”) associated with the Products. ABC grants to Brand Owner a limited non-transferable and non-exclusive license to use the IP in connection with the production, marketing and sale of the Products pursuant to the terms and conditions of this Agreement and any Statement of Work made hereunder.
3.	Brand Owner Intellectual Property: Brand Owner represents and warrants that it completely owns the copyrights, trademarks and other intellectual property rights (collectively the “IP”) associated with all of the following, without limitation: product names, labels, logos, packaging, marketing, etc. that may be used for the Products during the Term of this Agreement. Further, Brand Owner guarantees it will not infringe on any third-party rights and shall indemnify ABC for all third-party infringement claims that may arise.
4.	Appointment: During the term, Brand Owner appoints ABC as its exclusive producer and seller of the Product, and any other Products that the parties may from time to time agree to add to the scope of this Agreement, in which case such Products shall be deemed to be added to Schedule A and shall be treated in all respects as “Products” for purpose of this Agreement. Brand Owner acknowledges and agrees that ABC may utilize ABC’s distribution network, including distributors selected by ABC, in any given territory in which ABC sells the Products.

 

 

5.	Production, Forecast and Supply Partnership:

 

	a.	Production. ABC shall exercise reasonable commercial efforts to produce the Products in accordance with any recipe(s) and reasonable instructions provided to it from time to time by Brand Licensee. ABC will only produce Products in such quantities as are confirmed by Brand Licensee on a sales order form or other form of electronic order reasonably acceptable to ABC, which sales order form or other form of electronic order must be signed or authenticated by Brand Licensee. Brand Licensee may be subject to a cancellation fee if a production order is placed and the order is cancelled prior to production. ABC may, upon notice to Brand Licensee, decline to follow Brand Licensee’s instructions if, in the sole judgment of ABC, such instructions: (i) violate any law, regulation, order or policy of any applicable governmental authority (collectively, “Laws”); (ii) pose a threat to the equipment and personnel of ABC or its business partners; or (iii) require an investment in new equipment or personnel by ABC or its business partners.
	b.	Forecast. Brand Owner will deliver a twelve (12) month annual forecast for each SKU identified in the Agreement (the “Annual Forecast”). The first Annual Forecast must be provided to ABC within thirty (30) days of execution of this Agreement, thirty (30) days from the final commercialization of the Products, or by no later than October 1 of each calendar year of the Term. A rolling four (4) month forecast will be updated on a rolling basis and provided to ABC every month by no later than the fifth (5) business day of each month (the “Rolling Forecast”).
	c.	Supply Partnership. During the Term of this Agreement, the parties agree that ABC shall procure raw materials for the manufacturing and production of the Products, sourced within ABC’s own accomplished supplier network. Brand Owner agrees and covenants to use ABC as its sole supplier of raw materials, which includes but is not limited to (unless otherwise mutually agreed) ingredients, flavors, aluminum cans and can ends, packaging and other raw materials, for production of the Products during the Term of this Agreement and for a period of twelve (12) months from the completion of the Agreement (the “Supply Period”). In addition, during any period that ABC fails or is unable to timely perform its obligations under this Agreement which is not a result of Brand Owner’s actions, Brand Owner may obtain goods from any third party and shall be deemed to not be in breach of Brand Owner’s obligations under this Section 5c, provided that Brand Owner shall resume the obligations under Section 5c as soon as its commercially practicable to do so provided further that ABC has resumed the full performance of ABC’s obligations under this Agreement. Brand Owner will prepay to ABC a nonrefundable deposit in full for all raw materials sourced under this Agreement to secure desired production dates of the Products. Such nonrefundable deposit will be regularly evaluated and adjusted by ABC based on the current production requirements. All procurement of raw materials under this Agreement by ABC or its affiliated wholly owned sister company BevSource, LLC shall be governed by ABC’s general terms and conditions which can be provided to Brand Owner upon request and are always available at bevsource.com/terms unless Brand Owner has entered into a committed supply agreement with ABC for certain raw materials in which case such supply agreement terms and conditions shall apply. During the Supply Period it is agreed that Brand Owner shall exclusively continue to procure raw materials through ABC and its vendor network for the Products. Further, during the Supply Period, Brand Owner agrees and guarantees that it shall not solicit, directly or indirectly, interfere with, circumvent or attempt to circumvent, avoid, by-pass, or obviate the relationship between ABC and any of its suppliers. Brand Owner agrees and understands that the provisions under this Section 5c are necessary and reasonable to protect ABC’s business and shall survive the termination of this Agreement. For the avoidance of doubt, the Supply Period shall survive the full Initial Term of the Agreement even if Brand Owner exercises its early termination rights as provided for in Section 16 of this Agreement.

 

 

6.	Management: ABC shall exercise reasonable commercial efforts to forecast, ship and/or otherwise manage the logistics involved in producing and selling the Products and to provide production management and compliance services to Brand Owner. Fees for specific services under this paragraph are set forth in the applicable Statement of Work or any subsequent Statement(s) of work attached hereto as Exhibit A. ABC may, at its sole discretion, contract with other persons to perform or assist it in performing these duties and may, at its sole discretion, elect to have such other persons invoice Brand Owner directly for such services. In the event ABC elects to have a third-party service provider invoice Brand Owner directly for any service(s), Brand Owner must promptly pay such invoice in accordance with payment terms applicable to such invoice.
7.	Product Aging and Storage:

 

	a.	Unless otherwise mutually agreed in writing, Brand Owner shall be responsible for any fees, charges and/or expenses as they relate to finished goods storage, and the return or destruction of outdated or expired raw materials and Product. The contract manufacturing facility will charge additional storage fees with respect to warehousing of any quantity of Product and raw materials, and ABC shall invoice Brand Owner for such fees. Any raw materials stored at the contract manufacturer facility, including packaging and ingredients, that remain unused for three (3) consecutive months may need to be stored elsewhere or destroyed at Brand Owner’s expense. In the event raw materials remain on site at the production facility for longer than ninety (90) days without activity for any reason storage fees will be invoiced to Brand Owner every thirty (30) days thereafter (day 91, 121,151, etc). Should Brand Owner utilize ABC storage facilities, Brand Owner may be requested to move, at Brand Owner’s sole cost and expense, any unshipped Product to an outside warehouse by December 31st of each calendar year, unless the Product was produced on or after December 1st of such calendar year. For the avoidance of doubt ABC shall have the right to destroy, or direct the contract manufacturer to destroy, any unshipped Product and packaging nine (9) months from the date of production with no amounts owing to Brand Owner. Brand Owner shall immediately reimburse ABC for all costs associated with destruction of unshipped Product.
	b.	Unless otherwise mutually agreed in writing, within twenty (20) days after the end of each month, ABC shall advise Brand Owner in writing of any excess or obsolete finished goods, raw materials or other inventories procured or produced solely for the manufacturing of Brand Owner’s Products. Within the context of this Agreement, obsolete shall mean any on-hand finished goods, raw materials or other inventories procured or produced solely for the manufacturing of Brand Owner’s Products, which there has not been a demand in the last six (6) months nor any pending future demand which would consume the inventory within the next six (6) months. Brand Owner agrees to guarantee full payment for these products within thirty (30) days from notice, should the customer still owe any payments against the excess or obsolete inventory. Brand Owner agrees to provide a detailed strategy by item for all obsolete inventory to ensure it is removed from the ABC managed storage location within sixty (60) days of the obsolete notice.

 

 

8.	Sales, Invoicing and Collections: ABC shall invoice those customers identified by Brand Owner and shall exercise reasonable commercial efforts to invoice customers for the Products within two (2) business days of its receipt of the bill of lading. Where ABC, in its sole discretion and as permitted by law, elects to sell to customers on credit, ABC shall exercise reasonable commercial efforts to collect from such customers by making up to two (2) collections calls to customers with overdue invoices. Thereafter, Brand Owner shall become solely responsible for seeking to collect from customers.
9.	Customer Identification, Promotion and Marketing: Brand Owner shall remain solely and completely responsible for identifying customers and promoting and marketing the Products, whether to distributors, retailers or the general public. Brand Owner shall not, without the prior written approval of ABC, undertake any promotion that could result in any billback, charge back, set off, or other charge to ABC from an ABC customer. Brand Owner shall provide ABC with all appointment, ordering, receiving, accounting and other information necessary for ABC to make sales to customers. Any billbacks outstanding to be processed by the Brand Owner will be reported to ABC on a quarterly basis. In the event ABC is required to process a billback, the additional fees set forth in Exhibit A shall apply.
10.	Reporting: ABC shall provide to Brand Owner for Brand Owner’s pre-approval each invoice for Product sold and shipped by ABC to a distributor prior to sending such invoice to the distributor; provided, that if Brand Owner does not approve or disapprove of an invoice within seventy-two (72) hours of ABC’s transmission of such invoice to Brand Owner via electronic mail, Brand Owner shall be deemed to have approved the invoice. ABC may provide Brand Owner with additional reports in such form as ABC and Brand Owner may mutually agree upon from time to time.
11.	Payment: ABC shall pay Brand Owner for its use of the IP in accordance with the timeline and formula set forth in Schedule B.
12.	Security: Brand Owner shall provide ABC with the security deposit set forth in the applicable Statement of Work. The security deposit is intended to secure ABC against the financial risks it assumes in performing its obligations under this Agreement. Those financial risks include, among other things: excess ingredient inventory, distributor billbacks, obsolete inventory, and other materials costs. In the event any new equipment must be installed to produce the Product, ABC may: (i) require Brand Owner to adhere to certain minimum production volumes, (ii) alter the pricing schedules to this Agreement to account for such equipment costs, and/or (iii) require Brand Owner to provide an additional security deposit. Unless otherwise stated in a Statement of Work the Security Deposit will be evaluated annually, or upon request, for changes in the business complexities impacting the Services. Any change in the security deposit will be paid or refunded prior to the next scheduled production. The total deposit held by ABC will be returned at the termination of the contract, less any outstanding charges.
13.	Expenses: Brand Owner shall reimburse ABC for all out-of-pocket expenses incurred on Brand Owner’s behalf upon receipt of invoice. See Exhibit A for reference.
14.	Taxes: ABC, the contract manufacturer or the co-packer of the Products, as applicable, shall pay all federal and state excise taxes (where applicable) and other fees necessitated by the sale of the Products, and file all returns associated with such payments.

 

 

15.	Compliance with Law:

 

	a.	ABC shall maintain the federal and state licenses necessary to sell the Products and shall conduct its business in compliance with all applicable laws. ABC shall exercise reasonable commercial efforts to obtain and maintain any licenses and other government approvals necessary to sell to customers identified by Brand Owner, provided that Brand Owner shall be financially responsible for all expenses associated with such licenses and approvals.
	b.	Brand Owner shall obtain and maintain any federal, state and local licenses necessary for it to identify customers and promote and market the Products and shall conduct such activities in compliance with all applicable laws. Brand Owner warrants that any recipes and manufacturing instructions provided to ABC comply with all applicable laws.
	c.	Brand Owner acknowledges and accepts that should Brand Owner undertake any fraudulent conduct towards ABC or makes deliberate or unintentional harmful acts without the prior written consent of ABC that results in harm against ABC’s state or federal licenses, market position, goodwill or reputation the Brand Owner will be in direct breach of this Agreement and ABC will file for injunction and will have the right to seek punitive damages in addition to any compensatory damages resulting from the Brand Owner’s actions.

 

16.	Scope of Duty: Pursuant to the terms of this Agreement, Brand Owner is retaining ABC to provide certain services, including but not limited to engaging a contract manufacturer to produce the Product(s) and appointing wholesale distributors to sell the Product(s). Brand Owner recognizes and agrees that ABC is not responsible for, and has no duty to indemnify Brand Owner against losses or damages caused by, the acts, errors or omissions of third parties engaged pursuant to this Agreement, including but not limited to co-packers, breweries, host brewers, wineries, host vintners, distilleries, host distillers, suppliers, and distributors (each a “Third Party”). In the event that a Third Party’s acts, errors or omissions result in damages or losses to Brand Owner, including but not limited to the destruction of raw materials or finished goods and the financial liability associated with such destruction, ABC must provide Brand Owner, at Brand Owner’s sole cost and expense, with such reasonable cooperation as Brand Owner may request in connection with Brand Owner’s assertion of a claim or claims against such Third Party. Any cooperation or assistance provided by ABC to Brand Owner pursuant to the immediately preceding sentence shall constitute a consulting service provided by ABC and shall be subject to the fees set forth in Exhibit A. In connection with Brand Owner’s assertion of a claim against a Third Party, Brand Owner may request that ABC assign its rights, if any, to assert such claim against such Third Party to Brand Owner, which request ABC shall not unreasonably reject.
17.	Termination:

 

a.

For Cause. Either party shall have the right to terminate this Agreement immediately if:

 

	i.	Either party undertakes fraudulent conduct towards the other party or takes deliberate action to harm the other party’s state or federal licenses, market position, goodwill or reputation.
	ii.	Either party becomes insolvent, institutes or is the subject of bankruptcy proceedings, assigns or attempts to assign assets for the benefit of creditors, or otherwise liquidates its business.
	iii.	Either party undertakes an assignment without the written approval required by paragraph 21.

 

 

	iv.	Either party is in breach of this Agreement, which breach remains uncured thirty (30) days after the non-breaching party gives the breaching party notice of such breach.
	v.	Brand Owner fails to pay monies due and owning in accordance to agreed payment terms following a written demand for payment from ABC.
	vi.	The host brewer ABC is using to produce Products declares bankruptcy or goes out of business for any reason.

 

18.	Disputes: This Agreement and the rights of the parties shall be governed exclusively by and construed and enforced in accordance with the laws of the State of Minnesota without regards to any choice of law principles. The exclusive venue for any action brought in connection with this Agreement shall be in the state of Minnesota, County of Ramsey, so long as ABC’s corporate offices are located there. The parties consent to the exclusive jurisdiction of the courts of the State of Minnesota, County of Ramsey, and the U.S. District Court, District of Minnesota, for any and all disputes arising from or related to this Agreement. In any action, suit or proceeding to enforce this Agreement, the prevailing party shall be entitled to recover from the other party its costs incurred in connection therewith, including, but not limited to, reasonable attorneys’ fees, court costs and expert witness fees.
19.	Claims:

 

	a.	ABC shall use commercially reasonable efforts to comply with all of its obligations under this Agreement. However, unless Brand Owner shall have a claim for gross negligence or an intentionally wrongful act, Brand Owner shall have no claims against ABC, its officers, shareholders, or affiliates, direct or for indemnity, all of which claims are hereby waived, and Brand Owner’s only remedy in the event of a breach by ABC shall be termination of this Agreement.
	b.	Brand Owner shall indemnify, defend, and hold harmless ABC and its officers, employees, members and managers (collectively “ABC Indemnitees”) from and against any and all claims arising from or relating to: (i) Brand Owner’s identification of customers, marketing or promotion of the Products; (ii) Brand Owner’s decisions, actions or inactions with respect to customers, including but not limited to any claim related to the termination, non-renewal or other halt in sales to any customer; (iii) the use of the IP by an ABC Indemnitee; (iv) the acts or omissions of any service provider or materials/ ingredient supplier to ABC and/or Brand Owner; and (v) Brand Owner’s breach of any obligation or warranty contained in this Agreement.
	c.	ABC shall indemnify, defend, and hold harmless Brand Owner and its officers, employees, members and managers (collectively “ABC Indemnitees”) from and against any and all claims arising from or relating to: (i) ABC’s own decisions, actions or inactions which are not directed by the Brand Owner; (ii) the acts or omissions of any service providers or materials/ ingredient supplier to ABC and/or Brand Owner which are selected by ABC; and (v) ABC’s breach of any obligation or warranty contained in this Agreement.
	d.	In no event shall ABC’s aggregate liability to Brand Owner arising out of or related to this Agreement, whether arising out of or related to breach of contract, tort (including negligence), or otherwise, exceed the total amount of fees paid by Brand Owner to ABC for the services actually performed by ABC pursuant to this Agreement in the twelve (12) months prior to the claim. Any payments made by Brand Owner to ABC for third party pass-through expenses is expressly excluded from the aggregate liability under this Section 19c.

 

 

20.	Insurance: Both parties shall procure and maintain for the duration of the contract the following policies of insurance. All such policies of insurance required hereunder shall be issued by financially responsible insurers (those with an A.M. Best Rating of “A-” or better):

 

	a.	Commercial General Liability Insurance providing coverage on an ‘occurrence’, rather than a ‘claims made’ basis, under a policy form that provides coverage at least as broad in all material respects as that provided under a standard Insurance Services Office (“ISO”) form CG 00 01. Such policy shall include, at a minimum, coverage for Bodily Injury, Property Damage, Personal and Advertising Injury, Contractual Liability (applying to this Agreement), and Products- Completed Operations liability. Brand Owner agrees to maintain at all times during the Term a combined general liability policy limit of at least $1,000,000 per occurrence and $2,000,000 in aggregate.
	b.	Umbrella Liability insurance providing coverage on an ‘occurrence’ basis. Such policy shall include minimum coverage limits of $1,000,000 per occurrence and $2,000,000 in the aggregate. The umbrella coverage must include as insureds all entities that are additional insureds on the Commercial General Liability Policy.
	c.	Additional Insured Status: Brand Owner’s Commercial General Liability Policy shall include ABC, its directors, officers, employees and agents as additional insureds under the policy. Each such policy shall also include a Severability of Interests (or “separation of insureds”) provision. A copy of the Additional Insured Endorsement shall be included with the Certificate of Insurance Brand Owner provides to ABC.
	d.	Certificate of Insurance: Brand Owner shall furnish ABC with a Certificate of Insurance along with a copy of the applicable Additional Insured Endorsement prior to the commencement of this Agreement.
	e.	Notice of Cancellation: Each policy noted above shall provide that coverage may not be cancelled, except with 30-days’ prior written notice to ABC.
	f.	Brand Owner insurance policies shall respond on a primary (not excess or contributory) basis with respect to any similar insurance maintained by ABC and its officers, officials, employees and volunteers.
	g.	Insurance terms not otherwise defined herein shall be interpreted consistent with customary U.S insurance industry usage.

 

21.	Incorporation of Exhibits. All Schedules, Exhibits and attachments referred to in this agreement are intended to be and shall be understood to be a part of this Agreement for all purposes as though included in the body of this Agreement.
22.	Assignment: Brand Owner may not assign this Agreement or any rights or duties under it to any person without ABC’s express written permission. For purposes of this paragraph, an assignment shall include any change in control of Brand Owner’s business, whether by one transaction or a series of transactions. Subject to the foregoing, this Agreement shall inure to the benefit of the parties’ respective successors and permitted assigns.

 

 

23.	Waiver: The failure of either party to enforce at any time any of the provisions of this Agreement will in no way be construed to be a waiver of any such provision, nor in any way affect the validity of this Agreement or any part of it or the right of either party after any such failure to enforce each and every such provision. No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement will be effective unless it is in writing and signed by the waiving party. No waiver of any breach of this Agreement will be held to be a waiver of any other or subsequent breach.
24.	Independent Contractor Relationship: ABC will perform its duties pursuant to this Agreement as an independent consultant and independent representative of Brand Owner and not as an employee of Brand Owner, and nothing in this Agreement creates an employer-employee relationship or joint venture between ABC and Brand Owner. ABC is an independent contractor of Brand Owner and will use its own professional judgment and assign employees as it sees fit in performing its duties pursuant to this Agreement. The parties agree that ABC has no ownership or proprietary rights in the trade names, trademarks, or brand names of Brand Owner products, and ABC will not represent itself as an owner of the trade names, trademarks, or brand names of Brand Owner. Decisions regarding the use of Brand Owner’s trade names, trademarks or brand names will remain with Brand Owner and will remain the sole responsibility of Brand Owner, except for the specific grant of permission to ABC to use such trade names, trademarks or brand names.
25.	Non-Solicitation: Both parties agrees that it will not, for a period of one (1) year after the date of termination of this Agreement, directly or indirectly: (i) solicit any of the other party’s employees or contractors for employment or with any business with which either party is then employed or affiliated, including any businesses that share any common ownership or management; (ii) interfere in any manner with the other party’s employment relationship with its employees; or (iii) employ, whether as an employee or independent contractor, indirectly or directly, any employee of that party, regardless of whether that employee may have solicited employment or other economic arrangements with the other party.
26.	Amendment: This Agreement may only be amended by a written instrument signed by both parties. Neither party may modify this Agreement orally. The failure of a party at any time or times to enforce any provision of this Agreement shall in no way be construed as a waiver of such provision and shall not affect the right of that party at a later time to enforce each and every such provision.
27.	Accounts Receivable: Brand Owner shall pay all funds payable to ABC in United States currency.
28.	Notices. All notices, requests, consents, and other communications required or permitted under this Agreement shall be given in writing and deemed to have been duly given or served if personally delivered, or via a trackable parcel or courier service at the address and email as provided below, or to such other address as such party may hereafter designate by written notice to the other party:

 

Notice to ABC:

 

Janet Johanson, CEO, Associated Brewing Company

219 Little Canada Road, Suite 100, St. Paul, Minnesota. 55117.

Email: janet@bevsource.com

 

 

With a copy to:

 

Samantha Baldwin, Contract Administrator

Email: sbaldwin@bevsource.com

 

Notice to Brand Owner:

 

Attn: Andy Ross

Address: 909 18th Avenue South, Ste A, Nashville, TN 37212

Email: andy@andyross.com

 

With a copy to:

 

Doug Grau

Email: info@americanrebel.com

 

29.	Confidentiality: Each party must protect Confidential Information provided to it during the course of fulfilling its obligations under this Agreement. “Confidential Information” includes all information provided by one party to the other party in the course of performance under this Agreement, including but not limited to intellectual property, customer lists, financing sources, manufacturing or distribution programs, proprietary investment opportunities, products, formulations, recipes, flavors, flavor names, ingredients, advertising, labels, designs, equipment, processes, packaging, techniques, strategies, capabilities, systems and computer programs, technology, specifications, business plans, financial data, consumer data, employee information, and other confidential information. A party may not reveal Confidential Information provided to it by the other party except: (i) as expressly required by law; (ii) as necessary to enforce the terms of this Agreement; (iii) as necessary to advise the parties’ respective legal, accounting and financial advisors; (iv) with the express written consent of the other party; and (v) where the Confidential Information in question is or has become generally known other than by disclosure by the party receiving the Confidential Information under this Agreement. If either Party or its Representatives are requested or required (by oral question, interrogatories, requests for information or documents, subpoena, civil investigative demand, or similar process) by any stock exchange, self regulatory body, court or governmental agency or authority to disclose any of the other Party’s Confidential Information, the Party receiving such request or demand will use its best efforts to provide the other Party with prompt notice of such request or demand so that such other Party shall have an opportunity to seek an appropriate protective order. The provisions of this Section 29 shall survive for two (2) years following the termination of this Agreement.
30.	Force Majeure: Except for the obligation to pay monies due and owing, in the event that either party hereto shall be prevented from or delayed beyond such party’s control, without such party’s fault or negligence and that by its nature could not have been foreseen by such party or, if it could have been foreseen, was unavoidable in the performance of any act required hereunder by, without limitation, failure or delays in transportation or communication, changes in applicable laws or regulations, labor disputes, accidents, shortages of labor, fuel, raw materials, ingredients, supply disruptions, third parties (including but not limited to actions, inactions, or timing of co-packers, manufacturers and distributors) equipment or technical failures, strikes, lockouts, riots, insurrection, terrorist acts, war, third party criminal acts, or other circumstances beyond such party’s reasonable control (“Force Majeure Event”), such party shall not be liable to the other party for any such delay or failure to perform. The obligations and rights of the affected party shall be extended for a period equal to the period during which such Force Majeure Event prevented such party’s performance, provided that the affected party uses its best efforts to resume performance promptly at the end of the Force Majeure Event.

 

 

31.	Further Assurances: Each party shall, from time to time at the request of the other party, furnish to the other with such further information or assurances; execute and deliver such additional documents, instruments and conveyances; and take such other actions and do such other things as may be reasonably appropriate to carry out the provisions of this Agreement.
32.	Miscellaneous: This document, including all Schedules and terms referenced in or contemplated by it, constitutes the entire Agreement between the parties. This Agreement shall be deemed to have been drafted equally by both parties and cancels and supersedes any previous agreements or understandings with respect to the subject matter herein between ABC and Brand Owner. In the event that any provision of this Agreement is deemed illegal or unenforceable, that conclusion shall not affect the enforceability of the remainder of this Agreement. This Agreement may be signed in counterparts each of which shall be deemed an original and taken together, shall constitute a single Agreement.

 

IN WITNESS WHEREOF, the parties have signed this Agreement as of the Effective Date above.

 

ASSOCIATED BREWING COMPANY, LLC		AMERICAN REBEL, INC.
By:	/s/ Rebecca L DuLac	By:	/s/ Charles A Ross, Jr.
Name:	Rebecca L DuLac	Name:	Charles A Ross, Jr.
Title:	CFO	Title:	CEO

 

 

Schedule A – Products/Recipes

 

	●	Product Type: ABC Beer Stream
	●	Brand Name: American Rebel
	●	SKU: 1
	●	Flavor Details: light lager
	●	Target ABV: 3.9%
	●	Carbonation: Yes
	●	Claims & Certifications: None
	●	Primary Packaging: Standard 12oz aluminum can
	●	Preferred Closure: 202 standard end
	●	Preferred Secondary Packaging:12pk wrap
	●	Preservation Method: Tunnel
	●	Desired Shelf Life:12 months
	●	Estimated Initial Run Size: MOQ of 25,000 24-count cases per production
	●	Estimated Run Frequency: TBD
	●	Preferred Contract Packer: City Brewing LaCrosse
	●	Distribution Location: National Retain
		a.	Launch in Tennessee

 

 

Schedule B – Payment of Royalties

 

1. 1. Timing: ABC shall remit via ACH (or otherwise agreed to form) to Brand Owner any Royalty Payments owed to Brand Owner within five (5) business days after ABC receives payment from the purchaser such Products.

 

2. Royalty Payments Formula: ABC shall remit to Brand Owner a royalty with respect to ABC’s sales of Products under this Agreement. With respect to a quantity of Products sold by ABC pursuant to this Agreement, the “Royalty Payment” shall be an amount equal to: the total amount ABC collects from the purchaser of such Products, less the sum of: (a) ABC’s cost of goods for the Products (less any raw materials nonrefundable deposits paid by Brand Owner for production); (b) all expenses paid by ABC for shipping or freight costs to sell the Products; (c) any offsets or other credits arising from billbacks, promotional allowances and the like; and (d) all fees owing to ABC under this Agreement, or any other written agreement with Brand Owner.

 

3. Prepayment: ABC will require a pre-payment, letter of credit, or other approved deposit that covers the exposure for all purchase orders placed to ABC (this may include excess liquid and packaging).

 

4. Late Fees: ABC shall assess a monthly service charge of 1.5% on all past due bills payable by Brand Owner.

 

5. Debts: If ABC pays a production facility any debts on the behalf of the Brand Owner, then Brand Owner shall immediately reimburse ABC for such sums, and ABC may, at its sole discretion, deduct such sums from any payments owed by ABC to Brand Owner.

 

 

Exhibit A

Statement of Work #1

 

This Statement of Work #1 (the “SOW”) is effective as of August 9, 2023 (the “SOW Effective Date”) and is made pursuant to the Alcohol Beverage Distribution and Representation Agreement dated August 2, 2023 (the “Agreement”) by and between Associated Brewing Company, LLC (“ABC”) and American Rebel, Inc. (“Brand Owner”). This SOW is made under and in accordance with the terms and conditions of the Agreement. All undefined capitalized terms shall have the meanings set forth in the Agreement. In the event of a conflict between the terms of this SOW and the terms of the Agreement the Agreement shall govern and prevail unless otherwise stated. The parties hereto have agreed to the following:

 

1. Project Overview

 

Brand Owner is engaging ABC to provide the following services: Warehouse Identification, Cost of Goods and Cash Schedule, Commercialization and First Production Planning & Management, Order Management, and Invoice and Collection Management (collectively the “Services”) for one (1) SKU(s) of ABC Beer Stream (the “Product”).

 

2. Project Scope

 

Warehouse Identification

 

	●	Research and provide findings via ABC Viability Tracker of warehouse facility sites that are a viable option to store the Product.
	●	Considerations include:
		◌	Location.
		◌	Certifications/Licenses.
		◌	Facility Capacity.
		◌	ABC Recommendation based on GMPs/Quality Standards/Customer Service
	●	ABC to make a recommendation based on findings for Brand Owner’s consideration.
		◌	If in the event there are project constraints resulting in limited or no viable options, ABC will provide a consultation to offer additional recommendations that may allow for additional viable options to be presented.
	●	Estimated Warehouse fees will be provided for up to two (2) facilities if applicable.
	●	Brand Owner to review ABC recommendations and provide final approval of one (1) selected warehouse facility for storage of their Product.

 

Cost of Goods (“COGS”) and Cash Schedule (“CS”)

 

	●	Preparation of COGS for production:
		◌	Once Brand Owner has provided final approval on one (1) selected Co-packer a final COGS will be provided for the SKU(s) under this SOW.
		◌	COGS will break out all estimated costs by line item for the number of cases the Brand Owner plans to produce.
		◌	COGS will define estimated finished case costs and include the following items:
			■	Co-packer Fees.
			■	FET (if applicable).
			■	Ingredients.
			■	Packaging.
			■	Freight for inbound raw materials.
			■	Liquid loss rates.

 

 

			■	Packaging loss rates.
			■	Contingency Variance.

 

	●	Preparation of CS for production:
		◌	Upon Brand Owner approval of the COGS, a CS will be provided. The CS will represent the total estimated dollar amount needed to move forward with the initial production of the Product at the predetermined production volume which includes but is not limited to the following:
			■	Co-packer Fees and other production facility costs.
			■	Raw Material Pricing at needed volumes or minimum order quantities where applicable, included ESTIMATED freight costs.
			■	ESTIMATED one-time charges.
			■	ESTIMATED label review charges if applicable.
			■	ESTIMATED travel costs for the first production attendance if requested by Brand Owner.
			■	Other Miscellaneous Fees.

 

Commercialization

 

	●	Upon final approval and selection by Brand Owner of one (1) Co-packer facility, ABC will participate in contract reviews as may be necessary solely to ensure visibility into the terms and requirements between Brand Owner and their Co-packer for ABC to be able to provide any production related services agreed to under this SOW in a timely manner.
	●	Set up each Brand Owner contracted SKU at their Co-packer. Set up of additional SKUs outside of the original contracted SKUs will incur an additional cost to Brand Owner.
	●	Prepare Finished Good Specification documents for Brand Owner’s final approval and once approval is received ABC will provide the approved Finished Good Specification documents to Brand Owner and Brand Owner’s Co-packer.
	●	Coordinate primary packaging, secondary & tertiary packaging art proofing & set up. Any adjustments or additional rounds to any packaging art proofing & setup is an additional fee.1
	●	If requested by Brand Owner, ABC will aid in identifying and engaging a third party partner to provide FDA Attorney Label Review during the commercialization process prior to any art proofing or packaging setup at Brand Owner’s cost.
	●	Provide raw material documentation required by the Brand Owner’s Co-packer for their production.
	●	Manage vendor set up including new customer set up forms, credit applications, and payment instructions.
	●	Identification of initial warehouse location(s) for finished goods shipments prior to the first production run.
		◌	Identification of up to three (3) warehouse options will be provided to Brand Owner and pricing will be obtained for each location.
	●	If requested by Brand Owner, ABC may identify warehouse location(s) for raw material storage for an additional fee.

 

First Production Planning & Management

 

Coordinate and manage Brand Owner’s first production run which must be complete by the Term end date. Should the first production be delayed for any reason, Brand Owner must provide no less than thirty (30) days’ written notice to ABC of their intent to request an extension of the First Production Planning & Management Services. Subject to approval, in ABC’s sole discretion, a written Change Order will be provided to the Brand Owner detailing the impacts to the Projects Scope, Project Timeline and associated Change Order fees for execution prior to additional work being performed.

 

1 Please see #3 under the Assumptions.

 

 

The Planning & Management Services include the following:

 

	●	Up to three (3) prototypes will be requested of the approved formula(s) for production reference purposes only.
	●	Review Brand Owner’s desired production output and give recommendations on raw material requirements, production quantities and timing for the first production.
	●	Review demand and generate and submit production, ingredient, and packaging Purchase Orders (“POs”).
	●	Track POs and communicate with the Co-packer on production schedule and material deliveries.
	●	ABC to provide Brand Owner with post-production results and evaluations including quality documentation, production yields, and inventory reconciliation.
	●	Brand Owner may request an ABC representative to be onsite for the first production run for an additional fee

 

Order Management

 

	●	Receive and process finished goods orders and transfers within ABC ERP system.
		◌	Brand Owner shall submit finished goods orders in an electronic format agreeable to the electronic order submission process required by ABC.
	●	Work with shipping locations to coordinate and set-up finished good transfers.
	●	Arrange freight for finished good transfers as required.
	●	Track, monitor, and communicate order and transfer status of finished goods.
	●	Obtain bills of lading in a timely fashion to support Brand Owner invoicing.
	●	Provide finished goods reporting in relation to open and completed orders.
		◌	Distribution cadence reports to be mutually agreed upon.

 

Invoice and Collection Management²

 

	●	Invoice and collect payment from Brand Owner identified customers.
		◌	ABC will make up to two (2) collection calls for overdue invoices from Brand Owner’s customers. Any further collection calls will be the sole responsibility of Brand Owner.
	●	Provide Brand Owner with reporting on orders and collections as needed in a format as mutually agreed upon.
	●	Brand Owner is responsible for any hard costs associated with state and local approvals.

 

3. Project Timeline

 

The Term of this SOW shall be from August 1, 2023, through February 1, 2024 (the “SOW Term”). A detailed project timeline (the “Project Timeline”) will be provided to Brand Owner upon completion of the project kick off call. The Project Timeline will be updated on an ongoing basis depending on the current state of the project and may be adjusted from time to time as mutually agreed upon between Brand Owner and ABC. ABC will use commercially reasonable best efforts to remain within the initial Project Timeline but cannot guarantee any specific results arising from any Brand Owner or third party delays that may occur affecting the overall Project Timeline. Any changes from the agreed upon Project Detail, Project Scope or the Project Timeline under this SOW may result in additional fees and charges. These fees will be presented in writing and approved by the Brand Owner prior to initiation of any services.

 

Should Brand Owner terminate this SOW in accordance with the terms of the Agreement Brand Owner shall pay to ABC all monies due and owing under this SOW for services completed as of the Effective Date of termination.

 

² Invoicing and Collection Management does not include hourly fees or costs of state compliance which will be charged per ABC’s annual consulting fees schedule.

 

 

4. Assumptions and Out of Scope

 

Assumptions

 

	1.	Any estimates provided in this Statement of Work are merely good faith estimates, and the actual cost may be subject to change based on factors which are unknown at the time of execution.
	2.	It is the Brand Owner’s responsibility to review, approve and provide final signoff on all packaging material content, inclusive of graphics, fonts, colors, and written content (claims & certification included). ABC will provide supplemental review services; however, we are not liable for any inaccuracies or oversights.
	3.	Upon commencement of the primary and secondary packaging art proofing & set up it is assumed that all packaging and art proofing provided by Brand Owner is finalized and valid for production and vetted and free of any trademark or infringement claims. Any changes required to the primary or secondary packaging will be an additional cost.
	4.	While onsite at any production run ABC will provide added value through its expertise and oversight during the production run, however, ABC is not the manufacturer and cannot guarantee any specific results while onsite.
	5.	ABC makes no guarantee that the COGS will result in sufficient margin to be profitable, or that the CS will fall within any pre-defined limit. ABC will consult on options to adjust COGS & CSs accordingly to meet the Brand Owner’s needs, if applicable. This consultation does not guarantee specific targets can be met and will be determined by making suggested edits to the scope or scale of the project. The relationship between COGS and a CS often contradicts each other. Should changes to the scope require additional time spent or rework of previously completed services, additional charges may apply. Brand Owner understands that ABC’s performance is dependent on Brand Owner’s effective satisfaction of Brand Owner’s responsibilities including timely decisions and approvals by Brand Owner. Any delays by Brand Owner or by any third party partners (including Co-packers, vendors and suppliers) may impact the overall cost and timeline.
	6.	Any deliverable extending beyond the estimated timelines is subject to additional fees.
	7.	Any work requested by Brand Owner that is outside of the scope of services herein may be documented and discussed with Brand Owner. A written change order to this SOW signed by both parties (a “Change Order”) will be required for any changes to the scope, including but not limited to the services, deliverables, and fees, prior to ABC beginning work.
	8.	Any subsequent projects will be outlined in a separate Statement of Work executed by both parties prior to ABC beginning work.

 

Out of Scope

 

	1.	Any Services not specifically defined in this SOW.
	2.	Hard costs associated with, but not limited to, laboratory testing for assessment, or Product claim validation and clinical studies, shelf-life testing, FDA or TTB Label Attorney, Process Authority, and sample shipping.
	3.	Hard costs associated with, but not limited to additional iterations throughout the commercial formulation process, additional samples of final formulas, raw materials for use in pilot run or additional rounds of samples. If additional samples above the amount defined in Project Scope are required, additional fees may apply.
	4.	Beverage nutritional testing.
	5.	Changes to the Product(s) base liquid, alcohol source, suggested preservation method, packaging material, key raw materials, flavor system, Alcohol by Volume (“ABV”), production volumes, and additional claims and certifications.
	6.	Management of certifications and claims related to the Brand Owner’s Product.

 

 

	7.	Management of shelf-life studies.
	8.	Research and set up of a new or additional production facility after the initial production facility has been selected by Brand Owner. This applies to pilot facilities as well.
	9.	Set up of additional SKUs as it relates to changes with primary and/ or secondary packaging
	10.	Identification and set up of additional warehouse(s) or changing warehouse locations after the initial warehouse(s) have been selected and approved by Brand Owner.
	11.	Artwork changes outside of the agreed upon Project Scope.
	12.	Project management using the Brand Owner’s Order & Inventory Management System.
	13.	ABC Regulatory Compliance Services for requested new Products (if applicable, these services are available at the current ABC published hourly rate)
		a.	Hard costs for any state/local licensing or registration fees for requested new Products which may be incurred and shall be the responsibility of Brand Owner to pay or reimburse ABC for such costs.

 

5.Fees and Payment Schedule

 

Fee Schedule

 

Project		Amount				Due
Security Deposit*		$	20,000			Upon execution of SOW
Fixed Services Fee		$	50,000			Upon execution of SOW
Total		$	70,000			Upon execution of SOW
Ongoing Fees: Order Management & Invoice and Collection Management		$	0.45 /case			Upon completion of a Production.

 

*Security Deposit: As set forth in paragraph 11 of the Agreement, a security deposit is required upon signing this SOW. This deposit is in addition to any prepayment and may be used by ABC to offset any incidental charges that may be due at the end of the relationship (e.g., past due bills, storage, destruction, unpaid distributor billbacks). The Security Deposit will be evaluated by ABC upon completion of the first production under this SOW. Thereafter the Security Deposit will be evaluated annually, or upon request, for changes in the business complexities impacting the Services. Any change in the security deposit will be paid or refunded prior to the next scheduled production. The total deposit held by ABC will be returned at the termination of the contract, less any outstanding charges.

 

➢	Setup of additional SKUs under this SOW may be requested by Brand Owner. Upon request, with no less than thirty (30) days’ advance notice, ABC will provide to Brand Owner the applicable setup fees that will be charged to Brand Owner. Such fees will be determined by ABC based on the complexity of the SKU and the applicable states required for the SKU setup.
➢	Additional services are available as requested in writing by the Brand Owner and per the annual consulting fees schedule published by ABC. Additional services include, but are not limited to, compliance and general consulting, procurement and development services.
➢	A service fee of $195 per hour will be charged for ABC’s processing of distributor billbacks should the Brand Owner not choose to manage them directly.

 

 

6. Acceptance of SOW

 

By executing this SOW, Brand Owner and ABC agree to the terms and conditions defined above and, in conjunction with the Agreement, this SOW constitutes the complete and exclusive agreement between Brand Owner and ABC, and supersedes all prior or contemporaneous agreements, representations, warranties and understandings with respect to the Services described herein.

 

IN WITNESS WHEREOF, the parties hereto with proper authority have executed this SOW as of the SOW Effective Date above.

 

ASSOCIATED BREWING COMPANY, LLC		AMERICAN REBEL, INC.
By:	/s/ Rebecca L DuLac	By:	/s/ Charles A Ross, Jr.
Name:	Rebecca L DuLac	Name:	Charles A Ross, Jr.
Title:	CFO	Title:	CEO

 

 

 

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