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
18th 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
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.
SUMMARY
This
summary highlights selected information contained elsewhere in this offering circular. This summary is not complete and does not contain
all the information that you should consider before deciding whether to invest in our securities. You should carefully read the entire
offering circular, including the risks associated with an investment in our company discussed in the “Risk Factors” section
of this offering circular, before making an investment decision.
Our
Company
Corporate
Summary
The
Company is setting out to establish itself as “America’s Patriotic Brand.” American Rebel is a lifestyle
brand that we believe 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, Inc., a Utah corporation (“Champion Safe”), 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 apparel and accessories. 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 American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch
regionally in early 2024. 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.
We
believe 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.
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. American Rebel Light Beer will be the first product introduced
on a regional basis, with plans to launch 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 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 in the United States. 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, Jr., 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 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 our customers concealed and safe both inside and outside the home. American Rebel Safes protect our customers’
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 our customers’ firearms utilizing American Rebel’s Proprietary Protection Pocket in its
backpacks and apparel outside the home. Our concealed carry product releases embrace the “concealed carry lifestyle” with
a focus on personal security and defense.
The
Company’s “concealed carry lifestyle” motto refers to a set of products and a set of ideas around the emotional decision
to carry a gun everywhere a customer goes. 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,
we believe Harley-Davidson Motorcycle has come to symbolize freedom, rugged individualism, excitement and a sense of “bad boy rebellion.”
We believe 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. One of these opportunities is American Rebel Beer, offering beer consumers a chance to celebrate
life and celebrate freedom.
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 Champion Safe, Superior Safe, LLC (“Superior
Safe”), Safe Guard Security Products, LLC (“Safe Guard”), Champion Safe De Mexico, S.A. de C.V. (“Champion Safe
Mexico” and, together with Champion Safe, Superior Safe, Safe Guard, and Champion Safe Mexico, collectively, the “Champion
Entities”) and Mr. Ray Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company
agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
This transaction was completed on July 29, 2022. We have included the Champion Entities assets and liabilities as of that date and the
subsequent financial activity through the date of this 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 contemplated by the Champion Purchase Agreement 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 paid 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.
Our
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, as well as certain other domestic
manufacturers, as well as certain China-based manufactured safes. Safes manufactured in China, including Steelwater and Alpha-Guardian,
were subject to 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 we believe resonates with our customer base. Our middle and
value line safes are made with USA made steel in our manufacturing facility in Nogales, Mexico. We believe 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 against our competitors because we do not rely on importing safes from China and US-made steel is the strongest steel available.
Chinese imports are less appealing due to rising raw material and labor costs in China as well as the ever-present risk that tariffs
could be reinstated at any time.
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 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 ready to drink packaged beverages,
or 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.
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. 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. 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 loyal 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 will 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 will 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 models rely 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. Champion
Safe – Built Up to a Standard, Not Down to a Price.
●
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 keep their family and valuables safe at all times.
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. “Andy” Ross, Jr., has led the expansion and
focus on the select product line we offer today. We believe that Mr. Ross had, and continues to have, 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. We believe 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.
Associated Brewing provides expertise in the beverage industry which is anticipated to increase our efficiency in our American Rebel
Beer launch, and they are very excited about the American Rebel brand, marketing abilities 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 2023 in the largest growing segment of the safe industry, sales to first-time
buyers. We also intend to opportunistically pursue the strategies described below to continue our upward trajectory and enhance stockholder
value. Key elements of our strategy to achieve this goal are as follows:
Organic
Growth and Expansion in Existing Markets - Build our Core Business
The
cornerstone of our business has historically been 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 Federal Bureau of Investigation’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. 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.
Expand
into New Business Categories
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.
Our
Risks and Challenges
Our
prospects should be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by similar companies.
Our ability to realize our business objectives and execute our strategies is subject to risks and uncertainties, including, among others,
the following:
|
● |
we recently consummated
the purchase of our safe manufacturer and sales organizations, and future acquisitions and operations of new manufacturing facilities
and/or sales organizations might prove unsuccessful and could fail; |
|
● |
our success depends on
our ability to introduce new products that track customer preferences; |
|
|
|
|
● |
We face substantial risks
relating to our planned entry into the beer and alcoholic beverage market; |
|
|
|
|
● |
we may be unsuccessful
introducing new products, thereby increasing our expenditures without corresponding increases in our revenues; |
|
|
|
|
● |
if we are unable to protect
our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights; |
|
|
|
|
● |
as a significant portion
of our revenues are derived by demand for our safes and the personal security products for firearms storage, we depend on the availability
and regulation of ammunition and firearm storage; |
|
|
|
|
● |
as we continue to integrate
the recent purchase of our safe manufacturer and sales organization, any compromised operational capacity may affect our ability
to meet the demand for our safes, which in turn may affect our generation of revenue; |
|
|
|
|
● |
shortages of components
and materials, as well as supply chain disruptions, may delay or reduce our sales and increase our costs, thereby harming our results
of operations; |
|
|
|
|
● |
we do not have long-term
purchase commitments from our customers, and their ability to cancel, reduce, or delay orders could reduce our revenue and increase
our costs; |
|
|
|
|
● |
our inability to effectively
meet our short- and long-term obligations; |
|
|
|
|
● |
given our limited corporate
history it is difficult to evaluate our business and future prospects and increases the risks associated with an investment in our
securities; |
|
|
|
|
● |
our inability to raise
additional financing for working capital; |
|
|
|
|
● |
our ability to generate
sufficient revenue in our targeted markets to support operations; |
|
|
|
|
● |
significant dilution resulting
from our financing activities; |
|
|
|
|
● |
the actions and initiatives
taken by both current and potential competitors; |
|
|
|
|
● |
our ability to diversify
our operations; |
|
|
|
|
● |
the fact that our accounting
policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management
to make estimates about matters that are inherently uncertain; |
|
|
|
|
● |
changes in U.S. GAAP or
in the legal, regulatory and legislative environments in the markets in which we operate; |
|
|
|
|
● |
the deterioration in general
of global economic, market and political conditions; |
|
|
|
|
● |
the inability to efficiently
manage our operations; |
|
|
|
|
● |
the inability to achieve
future operating results; |
|
|
|
|
● |
the unavailability of funds
for capital expenditures; |
|
|
|
|
● |
the inability of management
to effectively implement our strategies and business plans; and |
In
addition, we face other risks and uncertainties that may materially affect our business prospects, financial condition, and results of
operations. You should consider the risks discussed in “Risk Factors” and elsewhere in this offering circular before investing
in our Series C Preferred Stock.
Corporate
Information
Our
principal executive offices are located at 909 18th Avenue South, Suite A, Nashville, Tennessee. Our telephone number is (833)
267-3235. Our website addresses are www.americanrebel.com, www.championsafe.com, www.superiorsafe.com and www.americanrebelbeer.com.
Information available on our websites is not incorporated by reference in and is not deemed a part of this offering circular. Investors
should not rely on any such information in deciding whether to purchase our Series C Preferred Stock.
The
Offering
Securities
being
offered: |
|
Up
to 2,666,666 shares of Series C Convertible Cumulative Preferred Stock (“Series C Preferred Stock”) at an offering price
of $7.50 per share, for a maximum offering amount of $19,999,995. We are also registering up to 13,333,330 shares of Common Stock
underlying the conversion of the Series C Preferred Stock, based upon a conversion ratio of 5-for-1. |
Terms
of Series C Preferred Stock:
|
|
● |
Ranking
- The Series C Preferred Stock ranks, as to dividend rights and rights upon our liquidation, dissolution, or winding up,
senior to our Common Stock and our Series B Preferred Stock (as defined below) and junior to our Series A Preferred Stock (as
defined below). The terms of the Series C Preferred Stock will 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. |
|
|
|
|
|
|
● |
Dividend
Rate and Payment Dates - 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
liquidation preference per share described below; 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 described below. 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. |
|
|
|
|
|
|
● |
Liquidation
Preference - 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. |
|
|
|
|
|
|
● |
Conversion
at Option of Holder – At any time our Series C Preferred Stock is convertible into 5 (five) 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. |
|
|
|
|
|
|
● |
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. |
|
|
|
|
|
|
● |
Company
Call and Stockholder Put Options - 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. Such price will be $11.25 per share. |
|
|
|
|
|
|
● |
Further
Issuances - The shares of our Series C Preferred Stock have no maturity date, and we will not be required to redeem shares
of our Series C Preferred Stock at any time except as otherwise described above under the caption “Company Call and Stockholder
Put Options.” 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 his put right. |
|
|
|
|
|
|
● |
Voting
Rights - 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. Otherwise, holders of the
shares of our Series C Preferred Stock will not have any voting rights. |
Investor
Perks: |
|
Investment
Level |
|
Perks(1) |
|
|
$300-524 |
|
1
American Rebel Hat |
|
|
|
|
2
American Rebel Koozies |
|
|
|
|
1
American Rebel T-shirt |
|
|
|
|
|
|
|
$525-1,004 |
|
1
American Rebel Hat |
|
|
|
|
2
American Rebel Koozies |
|
|
|
|
1
American Rebel T-shirt |
|
|
|
|
1
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
|
|
|
$1,005-2,504 |
|
1
American Rebel Hat |
|
|
|
|
4
American Rebel Koozies |
|
|
|
|
2
American Rebel T-shirt |
|
|
|
|
2
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
1
American Rebel Hoodie |
|
|
|
|
|
|
|
$2,505-5,024 |
|
1
American Rebel Hat |
|
|
|
|
4
American Rebel Koozies |
|
|
|
|
2
American Rebel T-shirt |
|
|
|
|
2
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
2
American Rebel Hoodies |
|
|
|
|
1
Commemorative Plaque |
|
|
|
|
|
|
|
$5,025-10,004 |
|
1
American Rebel Hat |
|
|
|
|
4
American Rebel Koozies |
|
|
|
|
2
American Rebel T-shirt |
|
|
|
|
2
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
2
American Rebel Hoodies |
|
|
|
|
1
Commemorative Plaque |
|
|
|
|
|
|
|
|
|
|
|
|
$10,005-25,004 |
|
1
American Rebel Hat |
|
|
|
|
4
American Rebel Koozies |
|
|
|
|
2
American Rebel T-shirt |
|
|
|
|
2
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
2
American Rebel Hoodies |
|
|
|
|
1
Commemorative Platinum Plaque |
|
|
|
|
|
|
|
|
|
2
VIP Invitations to our Kick-Off Party in Nashville, TN |
|
|
|
|
|
|
|
$25,005+ |
|
1
American Rebel Hat |
|
|
|
|
4
American Rebel Koozies |
|
|
|
|
2
American Rebel T-shirt |
|
|
|
|
2
American Rebel Tank Top |
|
|
|
|
1
Andy Ross Album |
|
|
|
|
2
American Rebel Hoodies |
|
|
|
|
1
Commemorative Platinum Plaque |
|
|
|
|
2
VIP Invitations to our Kick-Off Party in Nashville, TN
|
|
|
|
|
1
American Rebel Beer Cigar Box Guitar |
(1) Subject to change at the Company’s sole option.
Conversion
to
Common: |
|
Each
holder of the Series C Preferred Stock is entitled to convert any portion of the outstanding shares of Series C Preferred Stock held
by such holder into validly issued, fully paid and non-assessable shares of our Common Stock. Each share of the Series C Preferred
Stock is convertible into our Common Stock at the conversion rate of 1 share of Series C Preferred Stock to 5 shares of Common Stock
at $1.50 per share, 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 any conversion of Series C Preferred Stock initiated after the redemption notice date shall occur on or prior to the fifth
(5th) day prior to the redemption date, as may have been fixed in any redemption notice with respect to the Existing Series
C Preferred Stock shares, at the office of the Company or any transfer agent for such stock. |
|
|
|
Selling
Agent; Best Efforts Offering: |
|
We
have engaged Digital Offering to serve as our lead selling agent to assist in the placement of our Series C Preferred Stock in this
offering on a “best efforts” basis. In addition, Digital Offering may engage one or more sub-agents or selected dealers
to assist in its marketing efforts. The Selling Agents are not required to sell any specific number or dollar amount of Series C
Preferred Stock offered by this offering circular but will use their best efforts to sell such shares. See “Plan of Distribution”
for further details. |
|
|
|
Securities
issued and outstanding before this offering: |
|
5,947,643
shares of Common Stock, including 67,723 shares authorized but unissued; 125,000 shares of Series A convertible preferred stock (“Series
A Preferred Stock”); 75,143 shares of Series B convertible preferred stock (“Series B Preferred Stock”); warrants
to purchase 6,136,892 shares of Common Stock; and no shares of Series C Preferred Stock. |
|
|
|
Securities
issued and outstanding after this offering:(1) |
|
5,947,643
shares of Common Stock, including 67,723 shares authorized but unissued; 125,000 shares of Series A Preferred Stock; 75,143 shares
of Series B Preferred Stock; warrants to purchase 6,136,892 shares of Common Stock; and 2,666,666 shares of Series C Preferred
Stock if the maximum number of shares being offered are sold. |
1 | The
total number of shares of our capital stock outstanding after this offering is based on 5,947,643
shares of common stock outstanding as of January 1, 2024 and excludes: |
|
● |
587,992
shares of our common stock reserved for future
grants pursuant to our 2021 Long-Term Incentive Plan; and |
Minimum
subscription price: |
|
The
minimum initial investment is per investor is $300.00 and any additional purchases must be made in increments of at least $7.50. |
|
|
|
Use
of proceeds: |
|
We
intend to use the net proceeds from this offering to fund acquisitions pursuant to the exercise of existing option agreements with
certain operating businesses, general working capital and for debt repayment. For a discussion, see “Use of Proceeds.” |
|
|
|
Proposed
listing of
Series C Preferred
Stock |
|
We
intend to apply to list the Series C Preferred Stock on Nasdaq under the symbol “AREBP” after the closing of this offering.
If this application is approved, we expect trading in the Series C Preferred Stock to begin on Nasdaq within 120 days of closing
of the offering, but cannot provide any assurance that a liquid or established trading market for the Series C Preferred Stock will
develop. |
|
|
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Termination
of the offering: |
|
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 365 days after this offering is qualified by the Commission, or (3) the date on which this offering is earlier terminated
by us in our sole discretion. |
|
|
|
Closings
of the
offering: |
|
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 (or Enterprise
Bank for investments through DealMaker Securities, LLC). At each closing, the proceeds will
be distributed to us and the associated shares will be issued to the investors.
You
may not subscribe to this offering prior to the date offering statement of which this offering circular forms a part is qualified
by the Commission. Before such date, you may only make non-binding indications of your interest to purchase securities in the offering.
For any subscription agreement received after such date, we have the right review the subscription for completeness, complete anti-money
laundering, know your client and similar background checks and accept the subscription if it is complete and passes such checks or
reject the subscription if it fails any of such checks. If rejected and your funds are held in bank escrow, we will return all funds
to the rejected investor within ten business days. If a closing doesn’t occur or your subscription is rejected and you have
an account with My IPO or another clearing broker, your funds for such subscription will not be debited from My IPO or other clearing
broker and your subscription will be cancelled. The funds will remain in the escrow account pending the completion of anti-money
laundering, know your client and similar background checks. We intend to conduct the initial closing on a date mutually determined
by us and the lead selling agent. In determining when to conduct the initial closing we and the lead selling agent will take into
account the number of investors with funds in escrow that have cleared the requisite background checks and the total amount of funds
held in escrow pending an initial closing (although no minimum amount of funds is required to conduct an initial closing). Upon the
initial closing all funds in escrow will be transferred into our general account.
Following
the initial closing of this offering, we expect to have several subsequent closings of this offering until the maximum offering amount
is raised or the offering is terminated. We expect to have closings on a monthly basis and expect that we will accept all funds subscribed
for each month subject to our working capital and other needs consistent with the use of proceeds described in this offering circular.
Investors should expect to wait approximately one month and no longer than forty-five days before we accept their subscriptions and
they receive the securities subscribed for. An investor’s subscription is binding and irrevocable and investors will not have
the right to withdraw their subscription or receive a return of funds prior to the next closing unless we reject the investor’s
subscription. You will receive a confirmation of your purchase promptly following the closing in which you participate. |
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|
|
Restrictions
on investment amount: |
|
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. |
|
|
|
No
market for Series C Preferred Stock; transferability: |
|
There
is no existing public trading market for the Series C Preferred Stock and we do not anticipate that a secondary market for the stock
will develop until such time as the Series C Preferred Stock is listed or quoted for trading. We do not intend to apply for
listing of the Series C Preferred Stock on any securities exchange or for quotation in any automated dealer quotation system or other
over-the-counter market until after the final closing. Nevertheless, you will be able to freely transfer or pledge your shares subject
to the availability of applicable exemptions from the registration requirements of the Securities Act of 1933, as amended. |
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|
|
Current
symbols: |
|
Our
Common Stock and certain existing warrants are traded on the Nasdaq Capital Market under the symbols “AREB” and “AREBW,”
respectively. |
|
|
|
Risk
factors: |
|
Investing
in our securities is highly speculative and involves a high degree of risk. You should carefully consider the information set forth
in the “Risk Factors” section beginning on page 13 before deciding to invest in our securities. |
Summary
Financial Data
The
following tables summarize selected financial data regarding our business and should be read in conjunction with our financial statements
and related notes contained elsewhere in this offering circular and the information under “Management’s Discussion and Analysis
of Financial Condition and Results of Operations.”
The
summary consolidated financial data as of December 31, 2022 and 2021 and for the years then ended for our company are derived from our
audited consolidated financial statements included elsewhere in this offering circular. We derived the summary consolidated financial
data as of September 30, 2023 and for the nine months ended September 30, 2023 and 2022 from our unaudited consolidated
financial statements included elsewhere in this offering circular, which include all adjustments, consisting of normal recurring adjustments,
that our management considers necessary for a fair presentation of our financial position and results of operations as of the dates and
for the periods presented. Our consolidated financial statements include the accounts of American Rebel Holdings, Inc. and all subsidiaries.
The
summary financial data information is only a summary and should be read in conjunction with the historical financial statements and related
notes contained elsewhere herein. The financial statements contained elsewhere in this offering circular fully represent our financial
condition and operations; however, they are not necessarily indicative of our future performance.
| |
Nine Months
Ended September 30, | | |
Years Ended
December 31, | |
| |
2023 | | |
2022 | | |
2022 | | |
2021 | |
| |
(unaudited) | | |
(unaudited) | | |
| | |
| |
Statements of Operations Data | |
| | |
| | |
| | |
| |
Total revenues | |
$ | 11,418,222 | | |
$ | 4,595,547 | | |
$ | 8,449,800 | | |
$ | 986,826 | |
Cost of goods sold | |
| 8,869,432 | | |
| 3,462,454 | | |
| 6,509,382 | | |
| 812,130 | |
Consulting/payroll and other costs | |
| 2,915,377 | | |
| 1,937,349 | | |
| 2,000,624 | | |
| 2,012,803 | |
Administrative and other | |
| 2,542,181 | | |
| 2,687,728 | | |
| 3,190,092 | | |
| 986,306 | |
Other operating expenses | |
| 1,711,868 | | |
| 810,118 | | |
| 1,762,901 | | |
| 501,383 | |
Depreciation and amortization expense | |
| 79,260 | | |
| 11,311 | | |
| 50,087 | | |
| 3,643 | |
Operating income (loss) | |
| (4,699,896 | ) | |
| (4,313,413 | ) | |
| (5,063,286 | ) | |
| (3,311,439 | ) |
| |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (250,877 | ) | |
| (341,990 | ) | |
| (703,111 | ) | |
| (2,061,782 | ) |
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 | ) | |
| (1,376,756 | ) | |
| (725,723 | ) |
Net (loss) | |
$ | (3,610,929 | ) | |
$ | (6,377,731 | ) | |
$ | (7,143,153 | ) | |
$ | (6,098,944 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding – basic and diluted | |
| 1,442,600 | | |
| 189,700 | | |
| 298,760 | | |
| 50,320 | |
Basic and diluted income (loss) per share | |
$ | (2.50 | ) | |
$ | (33.62 | ) | |
$ | (24.00 | ) | |
$ | (121.25 | ) |
| |
As
of September
30,
2023 | | |
As
of December
31, 2022 | | |
As
of December
31, 2021 | |
| |
(unaudited) | | |
| | |
| |
Balance
Sheet Data | |
| | | |
| | | |
| | |
Current Assets | |
$ | 13,251,393 | | |
$ | 9,908,675 | | |
$ | 967,699 | |
Other Assets | |
| 6,198,988 | | |
| 6,195,361 | | |
| - | |
Total assets | |
| 19,450,381 | | |
| 16,560,561 | | |
| 968,599 | |
Total liabilities | |
| 6,377,729 | | |
| 5,207,442 | | |
| 5,138,976 | |
Stockholders’ equity
(deficit) | |
| 13,072,652 | | |
| 11,353,119 | | |
| (4,170,377 | ) |
Total liabilities and stockholders’
equity (deficit) | |
$ | 19,450,381 | | |
$ | 16,560,561 | | |
$ | 968,599 | |
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; |
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|
|
● |
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; |
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|
|
|
● |
our
ability to efficiently manage our operations; |
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|
|
|
● |
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:
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availability of suitable acquisition candidates at attractive purchase prices; |
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ability to compete effectively for available acquisition opportunities; |
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availability of cash resources, borrowing capacity, or stock at favorable price levels to provide required purchase prices in acquisitions; |
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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:
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pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets
of the Company; |
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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 |
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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. |
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● |
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. |
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● |
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. |
|
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|
● |
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. |
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● |
Do
people know you own guns? You might not know that many burglaries are carried out by people they know. |
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● |
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. |
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● |
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. |
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● |
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. |
|
|
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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. |
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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 2nd 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, 2023
and 2022, 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) | |
| 2023(2) | | |
| 228,667 | | |
| 90,000 | | |
| 12,588 | (3) | |
| - | | |
| 331,255 | |
Chief Executive Officer | |
| 2022 | | |
| 200,000 | | |
| 481,400 | | |
| 20,766
| (4) | |
| - | | |
| 702,166 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Doug E.
Grau(5) | |
| 2023(2) | | |
| 126,456 | | |
| 60,000 | | |
| 8,392 | (6) | |
| - | | |
| 194,848 | |
President | |
| 2022 | | |
| 120,000 | | |
| 293,381 | | |
| 11,182
| (7) | |
| - | | |
| 424,563 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Corey Lambrecht(8) | |
| 2023(2) | | |
| 10,000 | | |
| - | | |
| 25 | (9) | |
| - | | |
| 10,025 | |
Chief Operating Officer | |
| 2022 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
|
(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. In 2023 the employment agreement was amended to extend the termination
date to December 31, 2026 and increase Mr. Ross’ salary to $325,000 per year. |
|
(2) |
2023 compensation is preliminary and subject to change based upon
the finalization of the Company’s annual audit for the year ended December 31, 2023. |
|
(3) |
Deemed value of 40,634 shares of Common Stock authorized for issuance
on December 30, 2023 pursuant to the LTIP. |
|
(4) |
Deemed value of 103,829 shares of Common Stock authorized for issuance
on December 27, 2022 pursuant to the LTIP. |
|
(5) |
On January 1, 2021, the Company entered into a five-year employment
agreement with Mr. Grau, with a base annual salary of $120,000. In 2023 the employment agreement was amended to extend the termination
date to December 31, 2026 and increase Mr. Grau’s salary to $265,000 per year. |
|
(6) |
Deemed value of 27,089 shares of Common Stock authorized for issuance
on December 30, 2023 pursuant to the LTIP. |
|
(7) |
Deemed value of 55,908 shares of Common Stock authorized for issuance
on December 27, 2022 pursuant to the LTIP. |
|
(8) |
On November 20, 2023, the Company entered into a three-year employment
agreement with Mr. Lambrecht, with an annual base salary of $260,000. Prior to becoming an executive officer, Mr. Lambrecht served
as the Company’s lead independent director and was compensated as set forth below under Director Compensation. |
|
(9) |
Mr. Lambrecht was issued 25,000 shares of Series A Preferred Stock,
with a deemed value of $25, pursuant to his 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 provided 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, 2023.
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, 2023.
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, 2023.
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. In 2022 such compensation was paid in restricted shares of the Company’s Common Stock at a price determined by
the average monthly closing price for each month in service. In 2023 the Company Compensation Committee agreed to review how the board
would be compensated for their service and has yet to make a final determination. Board members are also paid nominal cash fees and
reimbursement of costs for director and committee meetings.
The
following table sets forth summary compensation information for the years ended December 31, 2022 and 2023 for each of
our non-employee directors.
Name | |
Year | | |
Fees
Earned or Paid in Cash $ | | |
Stock
Awards $ | | |
Option
Awards
$ | | |
All
Other Compensation $ | | |
Total
$ | |
Corey
Lambrecht(1) | |
| 2023 | | |
$ | 114,000 | | |
$ | - | | |
$ | - | | |
$ | 53,096 | (2) | |
$ | 167,096 | |
| |
| 2022 | | |
$ | 63,000 | | |
$ | 54,194 | (3) | |
$ | - | | |
$ | 122,000 | | |
$ | 239,194 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael
Dean Smith | |
| 2023 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 60,000 | (2) | |
$ | 60,000 | |
| |
| 2022 | | |
$ | - | | |
$ | 54,194 | (3) | |
$ | - | | |
$ | - | | |
$ | 54,194 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ken
Yonika(4) | |
| 2023 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 15,288 | (2) | |
$ | 15,288 | |
| |
| 2022 | | |
$ | 30,500 | | |
$ | 54,194 | (3) | |
$ | - | | |
$ | - | | |
$ | 84,694 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
C.
Stephen Cochennet(5) | |
| 2023 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 38,795 | (2) | |
$ | 38,795 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Larry
Sinks(6) | |
| 2023 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 6,740 | (2) | |
$ | 6,740 | |
(1) |
Mr.
Lambrecht served as our lead independent director through November 20, 2023, at which time he was appointed as our chief operating
officer. Mr. Lambrecht remains a non-independent director. |
|
|
(2) |
Preliminary
accrual for 2023 directors fees. The board is determining how and when director fees will be paid for fiscal 2023. |
|
|
(3) |
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 was 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. |
|
|
(4) |
Effective
April 4, 2023, Mr. Yonika resigned from the board and its committees. |
|
|
(5) |
Mr.
Cochennet was appointed to the board on May 9, 2023. |
|
|
(6) |
Mr.
Sinks was appointed to the board on November 20, 2023. |
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 (5th) 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 (5th) 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 (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 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
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 4th 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 4th 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 4th
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 4th
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 21st) and 390,000 shares of common
stock (September 12th), 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 21st) and 390,000 shares of common stock (September
12th), 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 June 28 , 2023, between American Rebel Holdings, Inc. and Digital Offering, LLC , and Selling Agency
Agreement Amendment, dated January 8, 2024, 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 November 10, 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 |
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 March 8, 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 |
|
March
8, 2024 |
Charles
A. Ross, Jr. |
|
|
|
|
|
|
|
|
|
/s/
Doug E. Grau |
|
President
(Interim Principal Financial Officer) |
|
March
8, 2024 |
Doug
E. Grau |
|
|
|
|
|
|
|
|
|
/s/
Corey Lambrecht |
|
Chief
Executive Officer and Director |
|
March
8, 2024 |
Corey
Lambrecht |
|
|
|
|
|
|
|
|
|
/s/
Michael Dean Smith |
|
Director |
|
March
8, 2024 |
Michael
Dean Smith |
|
|
|
|
|
|
|
|
|
/s/
C. Stephen Cochennet |
|
Director |
|
March
8, 2024 |
C.
Stephen Cochennet |
|
|
|
|
|
|
|
|
|
/s/
Larry Sinks |
|
Director |
|
March
8 , 2024 |
Larry
Sinks |
|
|
|
|
Exhibit
1.1
|
|
|
Member
FINRA/SIPC |
|
|
1461
Glenneyre Street, Suite D |
|
|
Laguna
Beach, CA 92651 |
|
|
Phone
(866) 209-1955 |
SELLING
AGENCY AGREEMENT
June
28, 2023
American
Rebel Holdings Inc.
909
18th Avenue South, Suite A
Nashville,
Tennessee 37212
|
Re: |
Engagement
as Selling Agent |
The
purpose of this engagement letter is to outline our agreement in principle pursuant to which Digital Offering, LLC along with (“DO
/” or “Selling Agent”), will act as the lead managing selling agent on a commercially reasonable efforts
basis, in connection with a qualified primary offering and possible listing on NASDAQ by American Rebel Holdings Inc. (the “Company”)
anticipated to be up to $40,000,000 of the preferred stock, par value, $0.001 per share and such other securities as may be necessary
for a successful offering (collectively referred herein as the “Securities”) under Regulation A (“Regulation
A”) of the Securities Act of 1933, as amended (the “Act”), on terms and conditions to be mutually agreed between
the Company and the Selling Agent (the “Offering”).
This
engagement letter states certain conditions and assumptions upon which the Offering is premised. Except as expressly provided for herein,
with regard to those specific sections that are agreed to be binding, this engagement letter is not intended to be a binding legal document.
The
terms of our agreement in principle are as follows:
1.
The Company hereby engages DO, for the period beginning on the date hereof and ending on the earlier of (a) the date that either party
gives the other at least ten (10) days written notice of the termination of this Agreement, which termination may occur with or without
cause, (b) June 30, 2024, or (c) the date that the Offering is consummated (the “Engagement Period”), to act as the
Company’s exclusive financial advisor and investment banker in connection with the proposed Offering or any other financing (excluding
the private placement being conducted as of the date of this engagement letter and excluding any financings completed with current shareholders
of the Company or their affiliates) during the Engagement Period.
2.
DO will act as the exclusive, lead managing Selling Agent and book runner of the Offering of a selling group, subject to, among other
things, completion of DO’s due diligence examination of the Company and its affiliates and the execution of a definitive selling
agency agreement between the Company and DO in connection with the Offering (the “Selling Agency Agreement”) and other
documentation that is customary with regard to an offering of the type contemplated herein.
|
|
|
Member
FINRA/SIPC |
|
|
1461
Glenneyre Street, Suite D |
|
|
Laguna
Beach, CA 92651 |
|
|
Phone
(866) 209-1955 |
The
actual size of the Offering, the precise number and type of Securities to be offered by the Company, the minimum offering amount and
the offering price of the Securities shall be the subject of continuing negotiations between the Company and DO which will include, but
not be limited to, the capitalization of the Company (at the time of the Offering) being acceptable to DO, general market and economic
conditions, a review and finalization of audited financial statements and formal financial projections of the Company, as well as other
factors which DO deems relevant in its discretion. DO will, with the Company’s approval (not to be unreasonably withheld, conditioned
or delayed), (i) create a selling group for the Offering comprised of broker-dealers who are registered with the SEC and members of the
Financial Industry Regulatory Authority (“FINRA”) and/or (ii) rely on soliciting dealers who are FINRA members to
participate in placing a portion of the Offering.
| 3. | DO
shall be entitled to aggregate placement fees as described below in this Section 3, which
aggregate placement fees shall be apportioned between DO and allocated by DO to members of
the selling group and soliciting dealers in their sole discretion: |
DO
shall be entitled to a placement fee of eight and one half percent (8.50%) of the gross proceeds received by the Company in the Offerings
that are derived from investors first introduced to the Company.
4.
The Company shall, as soon as practicable following the date hereof, prepare and file with the Securities and Exchange Commission (the
“Commission”) and the appropriate state securities authorities, an Offering Statement on Form 1-A (the “Offering
Statement”) under the Act, and an Offering Circular included therein (the “Offering Circular”) covering
the Securities to be sold in the Offering and the Securities underlying the Selling Agent’s Warrants (as defined above). The Offering
Statement (including the Offering Circular therein), and all amendments and supplements thereto, will be in form satisfactory to DO and
counsel to DO and will contain such interim and other financial statements and schedules as may be required by the Act and rules and
regulations of the Commission thereunder. DO and its counsel shall be given the opportunity to make such review and investigation in
connection with the Offering Statement and the Company as they deem desirable. DO and the Company shall mutually agree on the use of
proceeds of the Offering, which shall be described in detail within the Offering Circular, it being further understood and agreed that,
except as may expressly approved by DO, none of the proceeds from the Offering will be used to pay outstanding loans owed by the Company
to any Company officers, directors or stockholders.
5.
The Offering Statement filing will include as an exhibit a proposed form of Selling Agency Agreement. The final Selling Agency Agreement
will be in form satisfactory to the Company and DO and will include indemnification provisions and other terms and conditions customarily
found in Selling Agency Agreements for primary public offerings. Without limiting the generality of the foregoing, the Selling Agency
Agreement shall contain customary representations and warranties of the Company and shall further provide that: (i) the Company, the
Company’s directors and officers and any other holder(s) of 10.0% or more of the outstanding Securities as of the effective date
of the Offering Statement (and all holders of securities exercisable for or convertible into Securities) shall enter into customary “lock-up”
agreements in favor of DO pursuant to which such persons and entities shall agree, for a period of 6 months after the Offering is completed,
that they shall neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any
securities of the Company without DO’s prior written consent, which consent shall not be unreasonably withheld.
|
|
|
Member
FINRA/SIPC |
|
|
1461
Glenneyre Street, Suite D |
|
|
Laguna
Beach, CA 92651 |
|
|
Phone
(866) 209-1955 |
6.
Concurrently with or as soon as practicable after the filing of the Offering Statement with the Commission, the Company shall make all
necessary state “blue sky” securities law filings with respect to the Securities to be sold in the Offering. The Company
and DO will cooperate in obtaining the necessary approvals and qualifications in such states as DO deems necessary and/or desirable.
7.
The Company agrees to pay a non-accountable due diligence fee of $50,000 which shall be paid on the signing of this Agreement. This payment
shall be reimbursed to the Company to the extent not actually incurred, in compliance with FINRA Rule 5110(g)(4)(a). The Company shall
be responsible for and pay all expenses relating to the Offering, including, without limitation, all filing fees and communication expenses
relating to the qualification of the Securities to be sold in the Offering with the Commission and the filing of the offering materials
with FINRA; if applicable, all fees and expenses relating to the listing of such Securities on the OTCQB, OTCQX, Nasdaq market system,
NYSE or NYSE MKT as the Company and DO together determine, all fees, expenses and disbursements relating to the registration or qualification
of such Securities; the costs of all mailing and printing of the Offering documents (including the Offering Agreement, any Blue Sky Surveys
and, if appropriate, any Agreement Among Selected Dealers’ Agreement and Selling Agent’s Questionnaire), Offering Statements,
Offering Circulars and all amendments, supplements and exhibits thereto and as many preliminary and final Offering Circulars as DO may
reasonably deem necessary; the costs and expenses of the public relations firm referred to in Paragraph 11(g) hereof; the costs of preparing,
printing and delivering certificates representing such Securities; fees and expenses of the transfer agent for such Securities; stock
transfer taxes, if any, payable upon the transfer of securities from the Company to DO; the fees and expenses of the Company’s
accountants and the fees and expenses of the Company’s legal counsel and other agents and representatives. Upon the execution of
the engagement letter, the Company at its own expense will conduct background checks, by a background search firm acceptable to DO, for
the Company’s senior management. Upon DO’s and the Company’s mutual agreement, the Company shall provide funds to pay
all such fees, expenses and disbursements in advance. For the sake of clarity, it is understood and agreed that the Company shall be
responsible for DO’s legal costs up to a maximum of $85,000, whether the Offering is consummated or the Company terminates this
Agreement or DO terminates this Agreement as the result of the Company’s material breach of this Agreement, which breach is not
cured within ten
(10)
days following written notice to the Company from DO of such breach. The Company shall be solely responsible for work, fees, costs and
expenses in connection with any required Blue Sky filings.
|
|
|
Member
FINRA/SIPC |
|
|
1461
Glenneyre Street, Suite D |
|
|
Laguna
Beach, CA 92651 |
|
|
Phone
(866) 209-1955 |
8.
While the Commission is reviewing the Offering Statement, DO may plan and arrange one or more “road show” marketing trips
for the Company’s management to meet with prospective investors. Such trips will include visits to a number of prospective institutional
and retail investors. The Company shall pre-approve all such road shows and all DO expenses in excess of $1,000, alone or in the aggregate
and pay for such pre-approved expenses, including, without limitation, travel and lodging expenses, associated with such trips.
9.
At such time as the Company and DO are mutually satisfied that it is appropriate to commence the Offering, the final terms of the Selling
Agency Agreement will be negotiated and the Company will request the Commission to qualify the Offering Statement.
10.
RESERVED
11.
The Offering shall be conditioned upon, among other things, the following:
(a)
Satisfactory completion by DO of its due diligence investigation and analysis of: (i) the Company’s arrangements with its officers,
directors, employees, affiliates, customers and suppliers and (ii) the Company’s audited historical financial statements as may
be required by the Securities Act and rules and regulations of the Commission thereunder for inclusion in the Offering Statement, and
approval by the DO commitment committee;
(b)
The execution by the Company and the DO of the Selling Agency Agreement containing all applicable terms and conditions provided for in
this engagement letter and for transactions of this type;
(c)
The Company meeting the criteria necessary for inclusion of the Common Stock on the Nasdaq Capital Market, Nasdaq Global Market, Nasdaq
Global Select Market or the NYSE American and seeking and using its commercially reasonable efforts to maintain such listing for a period
of at least three years after the Closing;
(d)
The Company’s qualification of the Offering Statement under Regulation A (“Regulation A”) of the Securities Act of
1933, as amended (the “Act”),
(e)
The Company retaining an independent certified public accounting firm, which will have responsibility for the preparation of the financial
statements and the financial exhibits, if any, to be included in the Offering Circular and to provide a standard “cold comfort
letter” in favor of DO;
(f)
The Company retaining a transfer agent for the Company’s Common Stock;
(g)
The Company engaging a financial public relations firm experienced in assisting issuers in public offerings of securities and in their
relations with their security holders; and
(h)
The Company obtaining, if necessary, and maintaining a level of directors’ and officers’ liability insurance acceptable to
DO).
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
12.
Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given and effective upon receipt if (a) delivered personally, (b) sent by email transmission, or (c) sent
by nationally recognized overnight courier, to the parties hereto as follows:
If
to the Dealer-Manager:
Digital
Offering, LLC
1461
Glenneyre Street, Suite D
Laguna
Beach, CA 92651
Attention:
Gordon McBean, CEO
Email:
gmcbean@digitaloffering.com
If
to the Company:
American
Rebel Holdings Inc.
909
18th Avenue South, Suite A
Nashville,
Tennessee 37212
Attention:
Charles A. Ross, Jr., Chief Executive Officer
Email:
andy@andyross.com
13.
a Paragraphs 8, 9, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 and Exhibit A attached hereto are intended be legally binding and enforceable
on and against the Company and DO and will be embodied in the Selling Agency Agreement. Until the Selling Agency Agreement has been finally
negotiated and signed, but subject to the sub paragraph (b) of this Section, the Company or DO may at any time terminate its further
participation in the proposed transactions and the party so terminating shall have no liability to the other on account of any matters
provided for herein, except that:
b.
If the Company terminates this Agreement or if DO terminates this Agreement as the result of the Company’s material breach of this
Agreement, which breach is not cured within thirty (30) days following written notice to the Company from DO of such breach, the Company
agrees to reimburse DO for, or otherwise pay and bear, the expenses and fees to be paid and borne by the Company as provided for in Paragraphs
7 and 8 above and to reimburse DO for the full amount of its accountable expenses incurred to such date not to exceed the amounts set
forth in Paragraphs 7 and 8 above (which shall include, but shall not be limited to, all fees and disbursements of DO’s counsel,
travel, lodging and other “road show” expenses, mailing, printing and reproduction expenses, and any expenses incurred by
DO in conducting its due diligence) and;
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1461
Glenneyre Street, Suite D |
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Laguna
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14.
The Company represents and warrants to DO that the entry into this engagement letter or the any other action of the Company in connection
with the proposed Offering will not violate any existing agreement between the Company and any other Selling Agent and/or placement agent.
15.
The Company and DO agree that while the Company Offering Circular is being reviewed by the SEC, neither party will issue press releases
or engage in any other publicity, without the other party’s prior written consent. For clarity, prior to qualification, the Company
may make ordinary course dissemination of business operations press releases without pre-approval of DO.
16.
During the Engagement Period or until the Closing, the Company agrees to cooperate with DO and to furnish, or cause to be furnished,
to DO, any and all information and data concerning the Company, its subsidiaries and the Offering that DO deems appropriate, including,
without limitation, the Company’s acquisition plans and plans for raising capital or additional financing (the “Information”).
The Company shall provide DO reasonable access during normal business hours from and after the date of execution of this Agreement until
the date of the Closing to all of the Company’s and its subsidiaries assets, properties, books, contracts, commitments and records
and to the Company’s and its subsidiaries officers, directors, employees, appraisers, independent accountants, legal counsel and
other consultants and advisors. The Company represents and warrants to DO that all Information: (i) made available by the Company to
DO or its agents, representatives and any potential group or selling group member, (ii) contained in any preliminary or final Offering
Circular prepared by the Company in connection with the Offering, and (3) contained in any filing by the Company with any court or governmental
regulatory agency, commission or instrumentality, will be complete and correct in all material respects and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading in the light of
the circumstances under which such statements are made. The Company further represents and warrants to DO that all such Information will
have been prepared by the Company in good faith and will be based upon assumptions which, in light of the circumstances under which they
were made, are reasonable. The Company acknowledges and agrees that in rendering its services hereunder, DO will be using and relying
on such information (and information available from public sources and other sources deemed reliable by DO) without independent verification
thereof by DO or independent appraisal by DO of any of the Company’s assets. The Company acknowledges and agrees that this engagement
letter and the terms hereof are confidential and will not be disclosed to anyone other than the officers and directors of the Company
and the Company’s accountants and legal counsel. Except as contemplated by the terms hereof or as required by applicable law, the
Company and DO shall keep strictly confidential all non-public Information concerning the Company provided to DO. No obligation of confidentiality
shall apply to Information that: (a) is in the public domain as of the date hereof or hereafter enters the public domain without a breach
by DO, (b) was known or became known by DO prior to the Company’s disclosure thereof to DO, (c) becomes known to DO from a source
other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company, (d) is disclosed by the
Company to a third party without restrictions on its disclosure or (e) is independently developed by DO.
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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17.
This engagement letter shall be deemed to have been made and delivered in Laguna Beach, California and both this engagement letter and
the transactions contemplated hereby shall be governed as to validity, interpretation, construction, effect and in all other respects
by the internal laws of the State of California, without regard to the conflict of laws principles thereof.
18.
The Company agrees that any and all decisions, acts, actions, or omissions with respect to the Offering shall be the sole responsibility
of the Company, and that the performance by DO of services hereunder will in no way expose DO to any liability for any such decisions,
acts, actions or omissions of the Company.
19.
DO reserves the right to reduce any item of its compensation or adjust the terms thereof as specified herein in the event that a determination
and/or suggestion shall be made by FINRA to the effect that the Selling Agent’s aggregate compensation is in excess of FINRA rules
or that the terms thereof require adjustment; provided, however, the aggregate compensation otherwise to be paid to the Selling
Agent by the Company may not be increased above the amounts stated herein without the approval of the Company in writing.
20.
This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts executed
and to be wholly performed therein without giving effect to its conflicts of laws principles or rules. The Company and Digital Offering
agree that any dispute concerning this Agreement shall be resolved exclusively through binding arbitration before FINRA pursuant to its
arbitration rules. Arbitration will be venued in Santa Clara County, California USA (the “Agreed Forum”). Each of
the Company and Digital Offering agree that the Agreed Forum is not an “inconvenient forum” for proceedings hereunder, and
each hereby agree to the personal jurisdiction of the Agreed Forum and that service of process by mail to the address for such party
as set forth in this letter (or such other address as a party hereto shall notify the other in writing) constitute full and valid service
for such proceedings.
(Signature
Page and Indemnification Provisions Follow)
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
If
the foregoing correctly sets forth your understanding, please so indicate in the space provided below for that purpose, whereupon this
letter shall constitute a binding agreement among us.
Accepted
and agreed as of the date first written above:
DIGITAL
OFFERING, LLC |
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By: |
/s/
Gordon McBean |
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Gordon
McBean |
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CEO |
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AMERICAN
REBEL HOLDINGS INC. |
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By: |
/s/
Charles A. Ross, Jr., |
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Name: |
Charles
A. Ross, Jr., |
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Title: |
Chief
Executive Officer |
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Member
FINRA/SIPC |
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
EXHIBIT
A
INDEMNIFICATION
AND CONTRIBUTION
Capitalized
terms used in this Appendix shall have the meanings ascribed to such terms in the Agreement to which this Appendix is attached.
The
Company agrees to indemnify and hold harmless Digital Offering and its respective affiliates (as defined in Rule 405 under the Securities
Act of 1933, as amended) and their respective directors, officers, employees, agents, including any and all Soliciting Dealers, and controlling
persons (Digital Offering and each such person being an “Indemnified Party”) from and against all losses, claims,
damages and liabilities (or actions, including shareholder actions, in respect thereof), joint or several, to which such Indemnified
Party may become subject under any applicable federal or state law, or otherwise, which are related to or result from the performance
by Digital Offering of the services contemplated by or the engagement of Digital Offering pursuant to, this Agreement and will promptly
reimburse any Indemnified Party on demand for all reasonable expenses (including reasonable counsel fees and expenses) as they are incurred
in connection with the investigation of, preparation for or defense arising from any threatened or pending claim, whether or not such
Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by the Company. The Company
will not be liable to any Indemnified Party under the foregoing indemnification and reimbursement provisions, (i) for any settlement
by an Indemnified Party effected without the Company’s prior written consent (not to be unreasonably withheld); or (ii) to the
extent that any loss, claim, damage or liability is found in a final, non-appealable judgment by a court of competent jurisdiction to
have resulted primarily from Digital Offering’s willful misconduct or gross negligence. The Company also agrees that no Indemnified
Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company or its security holders
or creditors related to or arising out of the engagement of Digital Offering pursuant to, or the performance by Digital Offering of the
services contemplated by, this Agreement except to the extent that any loss, claim, damage or liability is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted primarily from Digital Offering’s willful misconduct or gross negligence.
Promptly
after receipt by an Indemnified Party of notice of any intention or threat to commence an action, suit or proceeding or notice of the
commencement of any action, suit or proceeding, such Indemnified Party will, if a claim in respect thereof is to be made against the
Indemnified Party pursuant hereto, promptly notify the Company in writing of the same. In case any such action is brought against any
Indemnified Party and such Indemnified Party notifies the Company of the commencement thereof, the Company may elect to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party, and an Indemnified Party may employ counsel to participate in
the defense of any such action provided, that the employment of such counsel shall be at the Indemnified Party’s own expense, unless
(i) the employment of such counsel has been authorized in writing by the Company, (ii) the Indemnified Party has reasonably concluded
(based upon advice of counsel to the Indemnified Party) that there may be legal defenses available to it or other Indemnified Parties
that are different from or in addition to those available to the Company, or that a conflict or potential conflict exists (based upon
advice of counsel to the Indemnified Party) between the Indemnified Party and the Company that makes it impossible or inadvisable for
counsel to the Indemnifying Party to conduct the defense of both the Company and the Indemnified Party (in which case the Company will
not have the right to direct the defense of such action on behalf of the Indemnified Party), or (iii) the Company has not in fact employed
counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action within a reasonable time after receiving
notice of the action, suit or proceeding, in each of which cases the reasonable fees, disbursements and other charges of such counsel
will be at the expense of the Company; provided, further, that in no event shall the Company be required to pay fees and expenses for
more than one firm of attorneys representing Indemnified Parties unless the defense of one Indemnified Party is materially different
from that of another Indemnified Party subject to the same claim or action. Any failure or delay by an Indemnified Party to give the
notice referred to in this paragraph shall not affect such Indemnified Party’s right to be indemnified hereunder, except to the
extent that such failure or delay causes actual harm to the Company, or prejudices its ability to defend such action, suit or proceeding
on behalf of such Indemnified Party.
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
If
the indemnification provided for in this Agreement is for any reason held unenforceable by an Indemnified Party, the Company agrees to
contribute to the losses, claims, damages and liabilities for which such indemnification is held unenforceable (i) in such proportion
as is appropriate to reflect the relative benefits to the Company, on the one hand, and Digital Offering on the other hand, of the Offering
as contemplated whether or not the Offering is consummated or, (ii) if (but only if) the allocation provided for in clause (i) is for
any reason unenforceable, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but
also the relative fault of the Company, on the one hand and Digital Offering, on the other hand, as well as any other relevant equitable
considerations. The Company agrees that for the purposes of this paragraph the relative benefits to the Company and Digital Offering
of the Offering as contemplated shall be deemed to be in the same proportion that the total value received or contemplated to be received
by the Company or its shareholders, as the case may be, as a result of or in connection with the Offering bear to the fees paid or to
be paid to Digital Offering under this Agreement. Notwithstanding the foregoing, the Company expressly agrees that Digital Offering shall
not be required to contribute any amount in excess of the amount by which fees paid to Digital Offering hereunder (excluding reimbursable
expenses), exceeds the amount of any damages which Digital Offering has otherwise been required to pay.
The
Company agrees that without the prior written consent of Digital Offering, which shall not be unreasonably withheld, conditioned or delayed,
it will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect
of which indemnification could be sought under the indemnification provisions of this Agreement (in which Digital Offering or any other
Indemnified Party is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Party from all liability arising out of such claim, action or proceeding.
In
the event that an Indemnified Party is requested or required to appear as a witness in any action brought by or on behalf of or against
the Company in which such Indemnified Party is not named as a defendant, the Company agrees to promptly reimburse Digital Offering on
a monthly basis for all reasonable expenses incurred by it in connection with such Indemnified Party’s appearing and preparing
to appear as such a witness, including, without limitation, the reasonable fees and disbursements of its legal counsel.
If
multiple claims are brought with respect to at least one of which indemnification is permitted under applicable law and provided for
under this Agreement, the Company agrees that any judgment or arbitration award shall be conclusively deemed to be based on claims as
to which indemnification is permitted and provided for, except to the extent the judgment or arbitrate award expressly states that it,
or any portion thereof, is based solely on a claim as to which indemnification is not available.
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Member
FINRA/SIPC |
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
SELLING
AGENCY AGREEMENT AMENDMENT
January
8, 2024
American
Rebel Holdings Inc. 909 18th Avenue South, Suite A Nashville, TN 37212
Re:
First Amendment to Selling Agency (Engagement) Agreement
Mr.
Ross,
Reference
is made to the letter agreement, dated June 28, 2023 (the “Engagement Letter”), by and between American Rebel Holdings. (the
“Company”) and Digital Offering, LLC (“DO” or the “Selling Agent”), relating to the planned primary
offering under Regulation A of the Securities Act of 1933, as amended (the “Offering”), by and for the Company consisting
of the Company’s Preferred Stock.
The
parties to the Engagement Letter desire to amend the Engagement Letter as follows:
1.
Amendment.
a.
Section 8 of the Engagement Letter is hereby deleted in its entirety.
2.
Effect of Amendment. Except as amended as set forth above, the Engagement Letter shall continue in full force and effect.
3.
Modification. This Amendment may not be modified or amended except in writing duly executed by the parties hereto.
4.
Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, and will become
effective and binding upon the partiesat such time as all of the signatories hereto have signed a counterpart of this Amendment. All
counterparts so executed shall constitute one Amendment binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the same counterpart. Each of the parties hereto shall sign a sufficient number of counterparts so that each partywill
receive a fully executed original of this Amendment.
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Member
FINRA/SIPC |
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1461
Glenneyre Street, Suite D |
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Laguna
Beach, CA 92651 |
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Phone
(866) 209-1955 |
Accepted
and agreed as of the date first written above:
DIGITAL
OFFERING, LLC |
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By: |
/s/
Gordon McBean |
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Gordon
McBean |
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CEO |
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AMERICAN
REBEL HOLDINGS INC. |
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By: |
/s/
Charles A. Ross, JR. |
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Name: |
Charles
A. Ross, JR. |
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Title: |
CEO |
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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 |
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By:
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/s/Sam
Fleischman |
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Sam
Fleischman
Supervisory
Principal |
|
Confirmed
and accepted as of the date of this letter:
Digital
Offering, LLC |
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By: |
/s/Gordon
McBean |
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Name: |
Gordon
McBean |
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Title: |
CEO |
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AMERICAN
REBEL HOLDINGS INC. |
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By: |
/s/Charles
A. Ross Jr |
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Name: |
Charles
A. Ross, Jr., |
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Title: |
Chief
Executive Officer |
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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 |
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By: |
/s/ Sam Fleishman |
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Sam Fleischman |
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|
Supervisory Principal |
|
Confirmed
and accepted as of the date of this letter:
Digital
Offering, LLC |
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| |
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By: | /s/
Gordon McBean |
|
Name: | Gordon
McBean |
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Title: | CEO |
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AMERICAN
REBEL HOLDINGS INC. |
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By: |
/s/
Charles A Ross, Jr |
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Name: |
Charles A. Ross, Jr. |
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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 (5th) 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 18th 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 20th 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 12th 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 20th 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
|
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 (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. 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 20th day of February, 2024.
|
Company: |
|
AMERICAN
REBEL HOLDINGS, INC. |
|
|
|
|
By: |
/s/
Charles A. Ross, Jr. |
|
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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 61st 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.
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AMERICAN
REBEL HOLDINGS, INC. |
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By:
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/s/Charles
A Ross |
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Name:
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Charles
A. Ross |
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Title:
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Chief
Executive Officer |
NOTICE
OF EXERCISE
(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:
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Address: |
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(Please
Print) |
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Phone
Number: |
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Email
Address: |
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Dated: ,
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Holder’s
Signature: |
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Holder’s
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Exhibit
3.7
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THIS
IS A COPY |
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This
is a copy view of the Authoritative Copy held |
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by
the designated custodian |
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:
1.1
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.
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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.
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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.
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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.
5.1
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. |
Please
initial this document here |
|
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.
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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
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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) |
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By: |
CHARLES
ANDREW ROSS JR |
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/s/ Charles
Andrew Ross Jr |
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(Print
Name and Title) |
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(Signature) |
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FOR
THE BORROWER (#2) |
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By: |
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(Print
Name and Title) |
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(Signature) |
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BY
GUARANTOR (#1) |
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By: |
CHARLES
ANDREW ROSS JR |
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/s/ Charles
Andrew Ross Jr |
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(Print
Name and Title) |
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(Signature) |
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BY
GUARANTOR (#2) |
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By: |
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(Print
Name and Title) |
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(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:
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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 |
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Lender: |
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ALT
BANQ INC. |
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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. |
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$490,000.00
(may be made in multiple disbursements) |
Amount
of Loan: |
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$500,000.00 |
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Total
Repayment Amount:
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Sum
of Amount of Loan and Interest Charge when all payments are made on time |
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$610,000.00 |
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Payment
Schedule: |
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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. |
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|
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Interest
Charge:
Dollar
amount of interest that the Loan will cost (does not include any Fees) |
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$110,000.00 |
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Interest
Rate: |
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22% |
(Interest
rate paid on Amount of Loan if all payments made as scheduled. This Interest Rate is not an annualized interest rate) |
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Fees: |
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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 |
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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.
Please initial this document here_____ |
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
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 A Ross, Jr. |
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(Print
Name and Title) |
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(Signature) |
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FOR
THE BORROWER (#2) |
By: |
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(Print
Name and Title) |
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(Signature) |
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BY
GUARANTOR (#1) |
By: |
CHARLES
ANDREW ROSS JR |
|
/s/
Charles A Ross, Jr. |
|
|
(Print
Name and Title) |
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(Signature) |
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BY
GUARANTOR (#2) |
By: |
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(Print
Name and Title) |
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(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). |
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By:
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(Signature) |
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(Print
Name) |
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Position: |
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Date: |
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Please initial this document here_____ |
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 9th 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 9th 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:
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.
| 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. |
| 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. |
|
|
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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”). |
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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. |
|
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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. |
|
|
|
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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. |
|
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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. |
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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. |
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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. |
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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. |
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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. |
|
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. |
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|
|
|
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. |
|
|
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|
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. |
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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. |
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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. |
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|
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. |
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v. |
Brand
Owner fails to pay monies due and owning in accordance to agreed payment terms following a written demand for payment from ABC. |
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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. |
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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. |
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|
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. |
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|
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. |
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|
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. |
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|
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. |
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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. |
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|
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. |
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|
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. |
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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. |
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|
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. |
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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. |
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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. |
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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. |
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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. |
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27. |
Accounts
Receivable: Brand Owner shall pay all funds payable to ABC in United States currency. |
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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. |
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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. |
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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. |
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|
|
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. |
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|
◌ |
Certifications/Licenses. |
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|
◌ |
Facility
Capacity. |
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|
◌ |
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 |
Exhibit
8.1
ESCROW
AGREEMENT
This
ESCROW AGREEMENT (this “Agreement”) dated as of this 10th day of November 2023 by and among American
Rebel Holdings, Inc., a Nevada corporation (the “Company”), having an address at 909 18th Avenue
South, Suite A, Nashville, TN 37212; Digital Offering, LLC, having an address at 1461 Glenneyre Street, Suite D, Laguna Beach,
CA 92651 (“Placement Agent”), and WILMINGTON TRUST, NATIONAL ASSOCIATION (the “Escrow Agent”).
The Company and the Placement Agent, each a “Party,” are collectively referred to as “Parties” and individually,
a “Party.”
All
capitalized terms not herein defined shall have the meaning ascribed to them in that certain Subscription Agreement, dated as of or about
November ___, 2023 as amended or supplemented from time-to-time, including all attachments, schedules and exhibits thereto (the “Subscription
Agreement”).
W
I T N E S S E T H:
WHEREAS,
the Company proposes to sell (the “Financing Transaction”) a maximum of 2,666,666 shares of our Series A Convertible
Cumulative Preferred Stock ,par value $.001 (“Series A Preferred”), at an offering price of $7.50 per share (the “Shares”)
for an offering amount of $19,999,995; in a public offering (the “Offering”) to investors (each, an “Investor”);
and
WHEREAS,
subject to all conditions to closing being satisfied or waived, the closing(s) of the Offering shall take place from time to time
until the earlier of (a) the date which is one year after this Offering being qualified by the U.S. Securities and Exchange Commission
(the “SEC” or the “Commission”), or (b) the date on which this Offering is earlier tenninated by the Company
in its sole discretion (the “Termination Date”) (the earlier of (a) or (b), the “Final Termination Date”);
and
WHEREAS,
there is no minimum offering amount and all funds shall only be returned to the potential Investors in the event the Offering is
not consummated or if the Company, in its sole discretion, rejects all or a part of a particular potential Investor’s subscription;
and
WHEREAS,
in connection with the Financing Transaction contemplated by the Subscription Agreement, the Company entered into a Placement Agent
Agreement between the Company and the Placement Agent, and certain other agreements, documents, instruments and certificates necessary
to carry out the purposes thereof, including without limitation the Subscription Agreement (collectively, the “Transaction Documents”);
and
WHEREAS,
the Company and Placement Agent desire to establish an escrow account with the Escrow Agent into which the Company and Placement
Agent shall instruct the Investors to deposit checks or make a wire transfer for the payment of money made payable to the order of “WILMINGTON
TRUST, N.A. as Escrow Agent for American Rebel Holdings, Inc.,” and the Escrow Agent is willing to accept said checks and other
instruments for the payment of money in accordance with the terms hereinafter set forth; and
WHEREAS,
the Company and Placement Agent represent and warrant to the Escrow Agent that they have not stated to any individual or entity that
the Escrow Agent’s duties will include anything other than those duties stated in this Agreement; and
WHEREAS,
THE ISSUER AND THE PLACEMENT AGENT UNDERSTAND THAT THE ESCROW AGENT, BY ACCEPTING THE APPOINMTMENT AND DESIGNATION AS ESCROW AGENT HEREUNDER,
IN NO WAY ENDORSES THE MERITS OF THE OFFERING OF THE SECURITIES. THE ISSUER AND THE PLACEMENT AGENT AGREE TO NOTIFY ANY PERSON ACTING
ON ITS BEHALF THAT THE ESCROW AGENT’S POSITION AS ESCROW AGENT DOES NOT CONSTITUTE SUCH AN ENDORSEMENT, AND TO PROHIBIT SAID PERSONS
FROM THE USE OF THE ESCROW AGENT’S NAME AS AN ENDORSER OF SUCH OFFERING. The Issuer and the Placement Agent further agree to
include with any sales literature, in which the Escrow Agent’s name appears and which is used in connection with such offering,
a statement to the effect that the Escrow Agent in no way endorses the merits of the offering; and
WHEREAS,
the Company and Placement Agent represent and warrant to the Escrow Agent that a copy of each document that has been delivered to
the Investor and third parties that include Escrow Agent’s name and duties, has been attached hereto as Schedule I.
NOW,
THEREFORE, IT IS AGREED as follows:
ARTICLE
1
ESCROW
DEPOSIT
Section
1.1 Delivery of Escrow Funds.
(a)
Placement Agent and the Company shall instruct the Investor to deliver to Escrow Agent checks made payable to the order of “WILMINGTON
TRUST, N.A. as Escrow Agent for American Rebel Holdings, Inc.”, or wire transfer to:
Wilmington
Trust Company
ABA #: 031100092
A/C
#: 166835-000
A/C
Name: American Rebel Escrow
Attn: Lance Schonert
International
Wires:
M&T
Buffalo,
New York
ABA:
022000046
SWIFT: MANTUS33
Beneficiary
Bank: Wilmington Trust
Beneficiary ABA: 031100092
A/C
#: 163835-000
A/C
Name: American Rebel Escrow
All
such checks and wire transfers remitted to the Escrow Agent shall be accompanied by information identifying each Investor, subscription,
the Investor’s social security or taxpayer identification number and address. In the event the Investor’s address and/or
social security number or taxpayer identification number are not provided to Escrow Agent by the Investor, then Placement Agent and/or
the Company agree to promptly upon request provide Escrow Agent with such information in writing. The checks or wire transfers shall
be deposited into a non interest-bearing account at WILMINGTON TRUST, NATIONAL ASSOCIATION entitled “WILMINGTON TRUST, N.A.
as Escrow Agent for American Rebel Holdings, Inc.” (the “Escrow Account”).
Checks
should be mailed to the following address:
American
Rebel Escrow
c/o
Wilmington Trust
1100
North Market Street
Wilmington,
DE 19890
Attn:
Workflow Management
(b)
The collected funds deposited into the Escrow Account are refened to as the “Escrow Funds.”
(c)
The Escrow Agent shall have no duty or responsibility to enforce the collection or demand payment of any funds deposited into the Escrow
Account. If, for any reason, any check deposited into the Escrow Account shall be returned unpaid to the Escrow Agent, the sole duty
of the Escrow Agent shall be to return the check to the Investor and advise the Company and Placement Agent promptly thereof.
(d)
All funds received by the Escrow Agent shall be held only in non-interest bearing bank accounts at WILMINGTON TRUST, NATIONAL ASSOCIATION.
(e)
In the event that market conditions are such that negative interest applies to amounts deposited with the Escrow Agent, the Company and
Placement Agent uointly and severally] shall be responsible for the payment of such interest and the Escrow Agent shall be entitled to
deduct from amounts on deposit with it an amount necessary to pay such negative interest. For the avoidance of doubt, the indemnification
protections afforded to the Escrow Agent under Section 2.2 of this Agreement shall cover any interest-related expenses (including, but
not limited to, negative interest) incurred by the Escrow Agent in the performance of its duties hereunder.
Section
1.2 Release of Escrow Funds. The Escrow Funds shall be paid by the Escrow Agent in accordance with the following:
(a)
In the event that the Company advises the Escrow Agent in writing that the Offering has been terminated (the “Termination Notice”),
the Escrow Agent shall promptly return the funds paid by each Investor to such Investor without interest or offset.
(b)
At each Closing, the Company and the Placement Agent shall provide the Escrow Agent with written instructions regarding the disbursement
of the Escrow Funds in accordance with Exhibit A attached hereto and made a part hereof and signed by the Company and the
Placement Agent (the “Written Direction”).
(c)
Ifby 5:00 P.M. Eastern time on the Final Termination Date, the Escrow Agent has not received Written Direction from the Company and Placement
Agent regarding the disbursement of the Escrow Funds in the Escrow Account, if any, then the Escrow Agent shall promptly return such
Escrow Funds, if any, to the Investors without interest or offset. The Escrow Funds returned to the Investors shall be free and clear
of any and all claims of the Escrow Agent.
(d)
The Escrow Agent shall not be required to pay any uncollected funds or any funds that are not available for withdrawal.
(e)
The Placement Agent or the Company will provide the Escrow Agent with the payment instructions for each Investor, to whom the funds should
be returned in accordance with this section.
(f)
In the event that Escrow Agent makes any payment to any other party pursuant to this Escrow Agreement and for any reason such payment
(or any portion thereof) is required to be returned to the Escrow Account or another party or is subsequently invalidated, declared to
be fraudulent or preferential, set aside and/or required to be repaid to a receiver, trustee or other party under any bankruptcy or insolvency
law, other federal or state law, common law or equitable doctrine, then the recipient party shall repay to the Escrow Agent upon written
request the amount so paid to it.
(g)
The Escrow Agent shall, in its sole discretion, comply with judgments or orders issued or process entered by any court with respect to
the Escrow Amount, including without limitation any attachment, levy or garnishment, without any obligation to determine such court’s
jurisdiction in the matter and in accordance with its normal business practices. If the Escrow Agent complies with any such judgment,
order or process, then it shall not be liable to any of the Parties or any other person by reason of such compliance, regardless of the
final disposition of any such judgment, order or process.
(h)
Each Party understands and agrees that Escrow Agent shall have no obligation or duty to act upon a written direction delivered to Escrow
Agent for the disbursement of all or part of the Escrow Amount under this Agreement (a “Written Direction”) if such Written
Direction is not
(i)
in writing,
(ii)
signed by, in the case of Company, any individual designated by Company on Exhibit B hereto or, in the case of Placement Agent, any individual
designated by Placement Agent on Exhibit C hereto (in each case, each such individual an “Authorized Representative” of such
Party), and
(iii)
delivered to, and able to be authenticated by, Escrow Agent in accordance with Section 1.4 below.
(i)
Upon request by any Party, the Escrow Agent set up each Party with on-line access to the account(s) established pursuant to this Agreement,
which each Patty can use to view and verify transaction on such account(s).
(j)
A Party may specify in a Written Direction whether such Escrow Amount shall be disbursed by way of wire transfer or check. If the written
notice for the disbursement of funds does not so specify the disbursement means, Escrow Agent may disburse the Escrow Amount by wire
transfer.
Section
1.3 Written Direction and Other Instruction.
(a).
With respect to any Written Direction or any other notice, direction or other instruction required to be delivered by a Party to Escrow
Agent under this Agreement, Escrow Agent is authorized to follow and rely upon any and all such instructions given to it from time to
time if the Escrow Agent believes, in good faith, that such instruction is genuine and to have been signed by an Authorized Representative
of such Party. Escrow Agent shall have no duty or obligation to verify that the person who sent such instruction is, in fact, a person
duly authorized to give instructions on behalf of a Party, other than to verify that the signature of the Authorized Representative on
any such instruction appears to be the signature of such person. Each Party acknowledges and agrees that it is fully informed of the
protections and risks associated with the various methods of transmitting instructions to Escrow Agent, and that there may be more secure
methods of transmitting instructions other than the method selected by such Party. Escrow Agent shall have no responsibility or liability
for any loss which may result from (i) any action taken or not taken by Escrow Agent in good faith reliance on any such signatures or
instructions, (ii) as a result of a Party’s reliance upon or use of any particular method of delivering instructions to Escrow
Agent, including the risk of interception of such instruction and misuse by third parties, or
(iii)
any officer or Authorized Representative of a Party named in an incumbency certificate, Exhibit B or Exhibit C delivered hereunder prior
to actual receipt by the Escrow Agent of a more current incumbency certificate or an updated Exhibit B or Exhibit C and a reasonable
time for the Escrow Agent to act upon such updated or more current certificate or Exhibit.
(b)
Company may, at any time, update Exhibit B and Placement Agent may, at any time, update Exhibit C by signing and submitting to the Escrow
Agent an updated Exhibit. Any updated Exhibit shall not be effective unless the Escrow Agent countersigns a copy thereof. The Escrow
Agent shall be entitled to a reasonable time to act to implement any changes on an updated Exhibit.
Section
1.4 Delivery and Authentication of Written Direction.
(a)
A Written Direction must be delivered to Escrow Agent by one of the delivery methods set forth in Section 3.3.
(b)
Each Party and Escrow Agent hereby agree that the following security procedures will be used to verify the authenticity of a Written
Direction delivered by any Party to Escrow Agent under this Agreement:
| 1. | The
Written Direction must include the name and signature of the person delivering the disbursement
request to Escrow Agent. Escrow Agent will check that the name and signature of the person
identified on the Written Direction appears to be the same as the name and signature of an
Authorized Representative of such Party; |
| | |
| 2. | Escrow
Agent will make a telephone call to an Authorized Representative of the Party purporting
to deliver the Written Direction (which Authorized Representative may be the same as the
Authorized Representative who delivered the Written Direction) at any telephone number for
such Authorized Representative as set forth on Exhibit B or Exhibit C to obtain oral confirmation
of delivery of the Written Direction. If the Written Direction is a joint written notice
of the Parties, the Escrow Agent shall call back an Authorized Representative of both of
those Parties; and |
| | |
| 3. | If
the Written Direction is sent by email to Escrow Agent, Escrow Agent also shall review such
email address to verify that it appears to have been sent from an email address for an Authorized
Representative of one of the Parties as set forth on Exhibit B and Exhibit C, as applicable,
or from an email address for a person authorized under Exhibit B or Exhibit C, as applicable,
to email a Written Direction to Escrow Agent on behalf of the Authorized Representative). |
(c)
Each Party acknowledges and agrees that given its particular circumstances, including the nature of its business, the size, type and
frequency of its instructions, transactions and files, internal procedures and systems, the alternative security procedures offered by
Escrow Agent and the security procedures in general use by other customers and banks similarly situated, the security procedures set
forth in this Section 1.4 are a commercially reasonable method of verifying the authenticity of a payment order in a Written Direction.
(d)
Escrow Agent is authorized to execute, and each Party expressly agrees to be bound by any payment order in a Written Direction issued
in its name (and associated funds transfer) (i) that is accepted by Escrow Agent in accordance with the security procedures set forth
in this Section 1.4, whether or not authorized by such Party and/or (ii) that is authorized by or on behalf of such Party or for which
such Party is otherwise bound under the law of agency, whether or not the security procedures set forth in this Section 1.4 were followed,
and to debit the Escrow Account for the amount of the payment order. Notwithstanding anything else, Escrow Agent shall be deemed to have
acted in good faith and without negligence, gross negligence or misconduct if Escrow Agent is authorized to execute the payment order
under this Section 1.4. Any action taken by Escrow Agent pursuant to this paragraph prior to Escrow Agent’s actual receipt and
acknowledgement of a notice of revocation, cancellation or amendment of a Written Direction shall not be affected by such notice.
(e)
The security procedures set forth in this Section 1.4 are intended to verify the authenticity of payment orders provided to Escrow Agent
and are not designed to, and do not, detect errors in the transmission or content of any payment order. Escrow Agent is not responsible
for detecting an error in the payment order, regardless of whether any of the Parties believes the error was apparent, and Escrow Agent
is not liable for any damages arising from any failure to detect an error.
(f)
When instructed to credit or pay a party by both name and a unique numeric or alpha-numeric identifier (e.g. ABA number or account number),
Escrow Agent, and any other banks participating in the funds transfer, may rely solely on the unique identifier, even if it identifies
a party different than the party named. Each Party agrees to be bound by the rules of any funds transfer network used in connection with
any payment order accepted by Escrow Agent hereunder.
(g)
Escrow Agent shall not be obliged to make any payment requested under this Escrow Agreement if it is unable to validate the authenticity
of the request by the security procedures set forth in this Section 1.4. Escrow Agent’s inability to confirm a payment order may
result in a delay or failure to act on that payment order. Notwithstanding anything else in this Agreement, Escrow Agent shall not be
required to treat a payment order as having been received until Escrow Agent has authenticated it pursuant to the security procedures
in this Section 1.4 and shall not be liable or responsible for any losses arising in relation to such delay or failure to act.
ARTICLE
2
PROVISIONS
CONCERNING THE ESCROW AGENT
Section
2.1 Acceptance by Escrow Agent. The Escrow Agent hereby accepts and agrees to perform its obligations hereunder, provided
that:
(a)
The Escrow Agent shall be entitled to rely upon any order, judgment, opinion, or other writing delivered to it in compliance with the
provisions of this Agreement without being required to determine the authenticity or the correctness of any fact stated therein or the
propriety or validity of service thereof.
(b)
The Escrow Agent shall be entitled to rely on and shall not be liable for any action taken or omitted to be taken by the Escrow Agent
in accordance with the advice of counsel or other professionals retained or consulted by the Escrow Agent. The Escrow Agent shall be
reimbursed as set forth in Section 2.2 for any and all compensation (fees, expenses and other costs) paid and/or reimbursed to such counsel
and/or professionals. The Escrow Agent may perform any and all of its duties through its agents, representatives, attorneys, custodians,
and/or nominees and shall not be responsible for the acts or omissions of such agents, representatives, attorneys, custodians or nominees
appointed with due care.
(c)
In the event that the Escrow Agent shall be uncertain as to its duties or rights hereunder, the Escrow Agent shall be entitled to (i)
refrain from taking any action other than to keep safely the Escrow Funds until it shall be directed otherwise by a court of competent
jurisdiction, or (ii) deliver the Escrow Funds to a court of competent jurisdiction.
(d)
The Escrow Agent shall have no duty, responsibility or obligation to interpret or enforce the terms of any agreement other than Escrow
Agent’s obligations hereunder, and the Escrow Agent shall not be required to make a request that any monies be delivered to the
Escrow Account The Escrow Agent makes no representation as to the validity, value, genuineness or collectability of any security or other
document or instrument held by or delivered to it.
(e)
The Escrow Agent shall be obligated to perform only such duties as are expressly set forth in this Agreement. No implied covenants
or obligations shall be inferred from this Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the provisions
of any agreement by the Company beyond the specific terms hereof. Without limiting the foregoing, the Escrow Agent shall dispose of
the Escrow Funds in accordance with the express provisions of this Agreement, and has not reviewed and shall not make, be required
to make or be liable in any manner for its failure to make, any determination under any other document, or any other
agreement.
(f)
No term or provision of this Agreement is intended to create, nor shall any such term or provision be deemed to have created, any trust,
joint venture, partnership, between or among the Escrow Agent and any of the Parties.
Section
2.2. Indemnification. Placement Agent and the Company agree,jointly and severally, to indemnify and hold the Escrow Agent
and its employees, officers, directors and agents (the “Indemnified Parties”) harmless from any and against all liabilities,
losses, actions, suits or proceedings at law or in equity, and any other expenses, fees or charges of any character or nature, (including,
without limitation, negative interest, attorney’s fees and expenses and the costs of enforcement of this Escrow Agreement or any
provision thereof), which an Indemnified Party may incur or with which it may be threatened by reason of acting as or on behalf of the
Escrow Agent under this Escrow Agreement or arising out of the existence of the Escrow Account, except to the extent the same shall be
have been finally adjudicated to have been directly caused by the Escrow Agent’s gross negligence or willful misconduct. Placement
Agent and the Company agree, jointly and severally, to pay or reimburse the Escrow Agent upon request for any transfer taxes or other
taxes relating to the Escrow Funds incurred in connection herewith and shall indemnify and hold harmless the Escrow Agent with respect
to any amounts that it is obligated to pay in the way of such taxes. The terms of this paragraph shall survive termination of this Agreement.
Section
2.3. Limitation of Liability. THE ESCROW AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY (I) DAMAGES, LOSSES OR EXPENSES
ARISING OUT OF THE SERVICES PROVIDED HEREUNDER, OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO HAVE DIRECTLY
RESULTED FROM THE ESCROW AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR (II) SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES
OR LOSSES OF ANY KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH LOSSES OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION, OR (III) AMOUNT IN EXCESS OF THE ESCROW FUNDS.
Section
2.4. Resignation and Termination of the Escrow Agent. The Escrow Agent may resign at any time by giving 30 days’ prior
written notice of such resignation to Placement Agent and the Company. Upon providing such notice, the Escrow Agent shall have no further
obligation hereunder except to hold as depositary the Escrow Funds that it receives until the end of such 30- day period. In such event,
the Escrow Agent shall not take any action, other than receiving and depositing the Investor’s checks and wire transfers in accordance
with this Agreement, until the Company has designated a banking corporation, trust company, attorney or other person as successor. Upon
receipt of such written designation signed by Placement Agent and the Company, the Escrow Agent shall promptly deliver the Escrow Funds
to such successor and shall thereafter have no further obligations hereunder. If the Company and Placement Agent have failed to appoint
a successor escrow agent prior to the expiration of thirty (30) days following the delivery of such notice of resignation or removal,
the Escrow Agent shall be entitled, at its sole discretion and at the expense of the Company and/or Placement Agent, to (a) return the
Escrow Funds to the Company, or (b) petition any court of competent jurisdiction for the appointment of a successor escrow agent or for
other appropriate relief, and any such resulting appointment shall be binding upon the parties. In either case provided for in this paragraph,
the Escrow Agent shall be relieved of all further obligations and released from all liability thereafter arising with respect to the
Escrow Funds.
Section
2.5 Termination. The Company and Placement Agent may tern1inate the appointment of the Escrow Agent hereunder upon written
notice specifying the date upon which such termination shall take effect, which date shall be at least 30 days from the date of such
notice. In the event of such termination, the Company and Placement Agent shall, within 30 days of such notice, appoint a successor escrow
agent and the Escrow Agent shall, upon receipt of written instructions signed by the Company and Placement Agent, turn over to such successor
escrow agent all of the Escrow Funds Upon receipt of the Escrow Funds, the successor escrow agent shall become the escrow agent hereunder
and shall be bound by all of the provisions hereof and the Escrow Agent shall be relieved of all further obligations and released from
all liability thereafter arising with respect to the Escrow Funds and under this Agreement. If the Company has failed to appoint a successor
escrow agent prior to the expiration of thirty (30) days following the delivery of the notice of termination, the Escrow Agent shall
be entitled, at its sole discretion and at the expense of the Company, to (a) return the Escrow Funds to the Company, or (b) petition
any court of competent jurisdiction for the appointment of a successor escrow agent or for other appropriate relief, and any such resulting
appointment shall be binding upon the parties.
Section
2.6 Compensation. Escrow Agent shall be entitled, for the duties to be performed by it hereunder, to compensation as stated
in the schedule attached hereto as Schedule III, which fee shall be paid by the Company within five (5) business days upon the signing
of this Agreement. In addition, the Company shall be obligated to reimburse Escrow Agent for all fees, costs and expenses incurred or
that become due in connection with this Agreement or the Escrow Account, including attorney’s fees. Neither the modification, cancellation,
tern1ination, resignation or rescission of this Agreement nor the resignation or termination of the Escrow Agent shall affect the right
of Escrow Agent to retain the amount of any fee which has been paid, or to be reimbursed or paid any amount which has been incurred or
becomes due, prior to the effective date of any such modification, cancellation, termination, resignation or rescission. To the extent
the Escrow Agent has incurred any such expenses, or any such fee becomes due, prior to any closing, the Escrow Agent shall advise the
Company and the Company shall direct all such amounts to be paid directly at any such closing. As security for the due and punctual performance
of any and all of the Company’s obligations to the Escrow Agent hereunder, now or hereafter arising, the Company, hereby pledges,
assigns and grants to the Escrow Agent a continuing security interest in, and a lien on and right of setoff against, the Escrow Funds
and all distributions thereon, investments thereof or additions thereto. If any fees, expenses or costs incurred by, or any obligations
owed to, the Escrow Agent hereunder are not promptly paid when due, then following five (5) Business Days written notice by the Escrow
Agent of its intent to set off against the Escrow Funds, the Escrow Agent may reimburse itself therefor from the Escrow Funds, and may
sell, convey or otherwise dispose of any Escrow Funds for such purpose. The security interest and setoff rights of the Escrow Agent shall
at all times be valid, perfected and enforceable by the Escrow Agent against the Parties and all third parties in accordance with the
terms of this Escrow Agreement. The terms of this paragraph shall survive termination of this Agreement. Notwithstanding anything contained
herein to the contrary and for the avoidance of doubt, the Company hereby agrees that any fee contemplated under this Section 2.6 is
still due and payable even in the event the Company delivers a Termination Notice pursuant to Section l.2(a) herein or funds are returned
to Investors on the Final Termination Date pursuant to Section 1.2(c) herein.
Section
2.7. Merger or Consolidation. Any corporation or association into which the Escrow Agent may be converted or merged, or with
which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets
as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation
or transfer to which the Escrow Agent is a party, shall be and become the successor escrow agent under this Agreement and shall have
and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument
or paper or the performance of any further act.
Section
2.8. Attachment of Escrow Funds; Compliance with Legal Orders. In the event that any Escrow Amount shall be attached, garnished
or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment
or decree shall be made or entered by any court order affecting the Escrow Funds , the Escrow Agent is hereby expressly authorized, in
its sole discretion, to respond as it deems appropriate or to comply with all writs, orders or decrees so entered or issued, or which
it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction. In the event that the Escrow
Agent obeys or complies with any such writ, order or decree it shall not be liable to any Party or to any other person, firm or corporation,
should, by reason of such compliance notwithstanding, such writ, order or decree be subsequently reversed, modified, annulled, set aside
or vacated.
Section
2.9 Force Majeure. The Escrow Agent shall not be responsible or liable for any failure or delay in the performance of its
obligation under this Escrow Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fire; flood; wars; acts of terrorism; civil or military disturbances; sabotage;
epidemic; pandemics; riots; interruptions; loss or malfunctions of utilities including but not limited to, computer (hardware or software),
payment systems, or communications services; accidents; labor disputes; acts of civil or military authority or governmental action; hacking,
cyber-attacks or other unauthorized infiltration of Escrow Agent’s information technology infrastructure; it being understood that
the Escrow Agent shall use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as reasonably practicable under the circumstances.
Section
2.10 No Financial Obligation. Escrow Agent shall not be required to use its own funds in the performance of any of its obligations
or duties or the exercise of any of its rights or powers, and shall not be required to take any action which, in Escrow Agent’s
sole and absolute judgment, could involve it in expense or liability unless furnished with security and indemnity which it deems, in
its sole and absolute discretion, to be satisfactory.
ARTICLE
3
MISCELLANEOUS
Section
3.1. Successors and Assigns. This Agreement shall be binding on and inure to the benefit of each Party and the Escrow Agent
and their respective successors and permitted assigns. No other persons shall have any rights under this Agreement. No assignment of
the interest of any of the Parties shall be binding unless and until written notice of such assignment shall be delivered to the other
Parties and Escrow Agent and shall require the prior written consent of the other Parties and Escrow Agent (such consent not to be unreasonably
withheld).
Section
3.2. Escheat. Each Party is aware that under applicable state law, property which is presumed abandoned may under certain
circumstances escheat to the applicable state. The Escrow Agent shall have no liability to any of the Parties, their respective heirs,
legal representatives, successors and assigns, or any other party, should any or all of the Escrow Funds escheat by operation of law.
Section
3.3. Notices. All notices, requests, demands, and other communications required under this Escrow Agreement shall be in writing,
in English, and shall be deemed to have been duly given if delivered (i) personally, (ii) by facsimile transmission with written confirmation
of receipt, (iii) by overnight delivery with a reputable national overnight delivery service, (iv) by mail or by certified mail, return
receipt requested, and postage prepaid, or (v) by electronic transmission; including by way of e-mail (as long as such email is accompanied
by a PDF or similar version of the relevant document bearing the signature of an Authorized Representative for the Party sending the
notice) with email confirmation of receipt. If any notice is mailed, it shall be deemed given five business days after the date such
notice is deposited in the United States mail. If notice is given to a party, it shall be given at the address for such party set forth
below. It shall be the responsibility of the Company to notify the Escrow Agent in writing of any name or address changes. In the case
of communications delivered to the Escrow Agent, such communications shall be deemed to have been given on the date received by the Escrow
Agent. :
If
to Placement Agent:
Digital
Offering, LLC
Gordon
McBean
CEO
1461
Glenneyre St., Suite D
Laguna
Beach, CA 92651
gmcbean@digitaloffering.com
If
to the Company:
American
Rebel Holdings, Inc.
Charles
A Ross, Jr.
CEO
909
18th Avenue South, Suite A,
Nashville,
Tennessee 37212
andy@andyross.com
Copy:
Name
Title
Company
Address
Telephone#
Email
Address
If
to Escrow Agent:
Wilmington
Trust, National Association
50
South Sixth Street, Suite 1290
Minneapolis,
MN 55402
Attn:
Lance Schonert
Telephone:
612-217-5681
Email
Address: lschonert@wilmingtontrust.com
Section
3.4. Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware. Each Party and Escrow Agent hereby consents to the exclusive personal jurisdiction of the courts located in the State
of Delaware in the event of a dispute arising out of or under this Agreement. Each Party and Escrow Agent hereby in-evocably waives any
objection to the laying of the venue of any suit, action or proceeding and in-evocably submits to the exclusive jurisdiction of such
court in such suit, action or proceeding.
Section
3.5. Entire Agreement. This Agreement and the Exhibits attached hereto (as updated from time to time in accordance herewith)
set forth the entire agreement and understanding of the parties related to the Escrow Amount. If a court of competent jurisdiction declares
a provision invalid, it will be ineffective only to the extent of the invalidity, so that the remainder of the provision and Escrow Agreement
will continue in full force and effect.
Section
3.6. Amendment. This Agreement may be amended, modified, superseded, rescinded, or canceled only by a written instrument executed
by each of the Parties and the Escrow Agent.
Section
3.7. Waivers. The failure of any party to this Agreement at any time or times to require performance of any provision under
this Agreement shall in no manner affect the right at a later time to enforce the same performance. A waiver by any party to this Agreement
of any such condition or breach of any term, covenant, representation, or wan-anty contained in this Agreement, in any one or more instances,
shall neither be construed as a further or continuing waiver of any such condition or breach nor a waiver of any other condition or breach
of any other term, covenant, representation, or wan-anty contained in this Agreement.
Section
3.8. Headings. Section headings of this Agreement have been inse1ied for convenience of reference only and shall in no way
restrict or otherwise modify any of the terms or provisions of this Escrow Agreement.
Section
3.9. Electronic Signatures; Facsimile Signatures; Counterparts. This Escrow Agreement may be executed in one or more counterparts.
Such execution of counterparts may occur by manual signature, electronic signature, facsimile signature, manual signature transmitted
by means of facsimile transmission or manual signature contained in an imaged document attached to an email transmission, and any such
execution that is not by manual signature shall have the same legal effect, validity and enforceability as a manual signature. Each such
counterpart executed in accordance with the foregoing shall be deemed an original, with all such counterparts together constituting one
and the same instrument. The exchange of executed copies of this Escrow Agreement or of executed signature pages to this Escrow Agreement
by electronic transmission, facsimile transmission or as an imaged document attached to an email transmission shall constitute effective
execution and delivery hereof. Any copy of this Escrow Agreement which is fully executed and transmitted in accordance with the terms
hereof may be used for all purposes in lieu of a manually executed copy of this Escrow Agreement and shall have the same legal effect,
validity and enforceability as if executed by manual signature.
Section
3.10. Waiver of Jury Trial. EACH OF THE PARTIES HERETO AND THE ESCROW AGENT EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN RESOLVING
ANY CLAIM OR COUNTERCLAIM RELATING TO OR ARISING OUT OF THIS AGREEMENT.
Section
3.11 Termination. This Agreement will terminate upon the Final Termination Date.
Section
3.12 Anti-Terrorism/Anti-Money Laundering Laws.
IMPORTANT
INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT - To help the United States government fight the funding of terrorism or money
laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each
person who opens a new account. What this means for the parties to this Agreement: the Escrow Agent will ask for your name, address,
date of birth, and other information that will allow the Escrow Agent to identify you (e.g., your social security number or tax identification
number.) The Escrow Agent may also ask to see your driver’s license or other identifying documents (e.g., passport, evidence
of formation of corporation, limited liability company, limited partnership, etc., ce1tificate of good standing.)
[The
balance of this page intentionally left blank - signature page follows]
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first set forth above.
Company |
| Placement Agent |
|
| | |
By: |
/s/
Charles A Ross, Jr. |
| By: | /s/
Gordon McBean |
Name: |
Charles
A Ross, Jr. |
| Name: | Gordon
McBean |
Title: |
CEO |
| Title: | CEO |
WILMINGTON TRUST, NATIONAL ASSOCIATION |
|
as Escrow Agent |
|
|
|
By: |
/s/
Lance Schonert |
|
Name: |
Lance Schonert |
|
Title: |
Assistant Vice President |
|
Schedule
I
Form
1 a
Exhibit
A
Form
of Written Direction
Date:
Wilmington
Trust, National Association
Corporate
Client Services
50
South Sixth Street, Suite 1290
Minneapolis,
MN 55402
Attention:
Lance Schonert
Ladies
and Gentlemen:
In
accordance with the terms of paragraph l.2(b) of the Escrow Agreement dated as of September 15, 2023 (the “Escrow Agreement”),
by and between American Rebel Holdings, Inc. (the “Company”), Digital Offering, LLC (“Placement Agent”) and WILMINGTON
TRUST, NATIONAL ASSOCIATION (the “Escrow Agent”), the Company and Placement Agent hereby direct the Escrow Agent to release
the funds in the Escrow Account, account number 166835- 000, in the amounts, and to the account(s), as follows:
Amount:
Beneficiary
Bank Name:
Beneficiary
Bank Address Line 1:
Beneficiary
Bank Address Line 2:
Beneficiary
Bank Address Line 3:
ABA#:
SWIFT#:
Amount:
Beneficiary
Account Title:
Beneficiary
Account No./IBAN:
Beneficiary
Address Line 1:
Beneficiary
Address Line 2:
Beneficiary
Address Line 3:
Additional
Information:
Very truly yours, |
|
|
|
Company |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
|
|
Placement Agent |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
EXHIBITB
CERTIFICATE
AS TO AUTHORIZED SIGNATURES
OF
COMPANY
Company
hereby designates each of the following persons as its Authorized Representative for purposes of this Agreement, and confirms that the
title, contact information and specimen signature of each such person as set forth below is true and correct. Each such Authorized Representative
is authorized to initiate and approve transactions of all types for the Escrow Account[s] established under the Agreement to which this
Exhibit B is attached, on behalf of Company.
Name
(print): |
|
Charles
A Ross, Jr. |
Specimen
Signature: |
|
/s/ Charles A Ross, Jr. |
Title: |
|
CEO |
Telephone
Number
(required):
If
more than one, list all applicable
telephone
numbers. |
|
Office:
Cell:
913 602 4445 |
E-mail
(required): |
|
Email
1: andy@andyross.com |
If
more than one, list all |
|
Email
2: |
applicable
email |
|
|
addresses. |
|
|
|
|
|
Name
(print): |
|
Doug
Grau |
Specimen
Signature: |
|
/s/ Doug Grau |
Title: |
|
President |
Telephone
Number
(required):
If
more than one, list
all
applicable telephone numbers. |
|
Office:
833 267 3235
Cell:
615 497 3111 |
E-mail
(required): |
|
Email
1: info@americanrebel.com |
If
more than one, list all |
|
Email
2: |
applicable
email |
|
|
addresses. |
|
|
Name
(print): |
|
|
Specimen
Signature: |
|
|
Title: |
|
|
Telephone
Number
(required): |
|
Office:
Cell: |
If
more than one, list all |
|
|
applicable
telephone numbers. |
|
|
E-mail
(required): |
|
Email
1: |
If
more than one, list all |
|
Email
2: |
applicable
email |
|
|
addresses. |
|
|
Additional
Email Addresses:
The
following additional email addresses also may be used by Escrow Agent to verify the email address used to send any Payment Notice to
Escrow Agent:
Email 1: |
|
|
Email 2: |
|
|
Email 3: |
|
|
COMPLETE
BELOW TO UPDATE EXHIBIT B
If
Company wishes to update this Exhibit B, Company must complete, sign and send to Escrow Agent an updated copy of this Exhibit B with
such changes. Any updated Exhibit B shall be effective once signed by Company and Escrow Agent and shall entirely supersede and replace
any prior Exhibit B to this Agreement.
Company |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
Date: |
|
|
WILMINGTON TRUST,
NATIONAL ASSOCIATION (as Escrow Agent) |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
Date: |
|
|
EXHIBIT
C
CERTIFICATE
AS TO AUTHORIZED SIGNATURES OF PLACEMENT AGENT
Placement
Agent hereby designates each of the following persons as its Authorized Representative for purposes of this Agreement, and confirms that
the title, contact information and specimen signature of each such person as set forth below is true and correct. Each such Authorized
Representative is authorized to initiate and approve transactions of all types for the Escrow Account[s] established under the Agreement
to which this Exhibit C is attached, on behalf of Placement Agent.
Name
(print): |
|
Gordon
McBean |
Specimen
Signature: |
|
/s/ Gordon McBean |
Title: |
|
CEO |
Telephone
Number
(required):
If
more than one, list all applicable
telephone
numbers. |
|
Office:
Cell:
949 300 2240 |
E-mail
(required): |
|
Email
1: gmcbean@digitaloffering.com |
If
more than one, list all |
|
Email
2: |
applicable
email |
|
|
addresses. |
|
|
Name
(print): |
|
|
Specimen
Signature: |
|
|
Title: |
|
|
Telephone
Number
(required):
If
more than one, list
all
applicable telephone numbers. |
|
Office:
Cell: |
E-mail
(required): |
|
Email
1: |
If
more than one, list all |
|
Email
2: |
applicable
email |
|
|
addresses. |
|
|
Name
(print): |
|
|
Specimen
Signature: |
|
|
Title: |
|
|
Telephone
Number
(required):
If
more than one, list all applicable telephone numbers. |
|
Office:
Cell: |
E-mail
(required):
If
more than one, list all applicable email
addresses. |
|
Email
1:
Email
2: |
Additional
Email Addresses:
The
following additional email addresses also may be used by Escrow Agent to verify the email address used to send any Payment Notice to
Escrow Agent:
Email 1: |
|
|
Email 2: |
|
|
Email 3: |
|
|
COMPLETE
BELOW TO UPDATE EXHIBIT C
If
PLACEMENT AGENT wishes to update this Exhibit C, PLACEMENT AGENT must complete, sign and send to Escrow Agent an updated copy of this
Exhibit C with such changes. Any updated Exhibit C shall be effective once signed by PLACEMENT AGENT and Escrow Agent and shall entirely
supersede and replace any prior Exhibit C to this Agreement.
PLACEMENT AGENT |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
Date: |
|
|
WILMINGTON TRUST,
NATIONAL ASSOCIATION (as Escrow Agent) |
|
|
|
By: |
|
|
Name: |
|
|
Title: |
|
|
Date: |
|
|
Schedule
III
Fees
of Escrow Agent
Initial
Fees as they relate to Wilmington Trust acting in the capacity of Escrow Agent - includes review of the Escrow Agreement; acceptance
of the Escrow appointment; setting up of Escrow Account(s) and accounting records; and coordination ofreceipt of Escrow Information for
deposit to the Escrow Account(s). Acceptance Fee payable at time of Escrow Agreement execution.
Escrow Agent Administration Fee: |
$4,500 |
For
ordinary administrative services by Escrow Agent - includes daily routine account management; monitoring claim notices pursuant to the
agreement; and disbursement of Escrow Information in accordance with the agreement. This fee is due and payable 90 days after closing.
Wilmington
Trust’s bid is based on the following assumptions:
| 1. | Number
of Escrow Accounts to be established: 1 |
| 2. | Est.
Term: Under 12 months |
| 3. | Escrow
funds remain un-invested |
Out-of-Pocket Expenses: |
Billed At Cost |
Exhibit
11.1
CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We
hereby consent to the incorporation on Form 1-A/A of our report dated April 14, 2023, relating to the consolidated financial statements
American Rebel Holdings, Inc. for the years ended December 31, 2022 and 2021 and to all references to our firm included in this Registration
Statement.
Certified
Public Accountants
Lakewood,
CO
March
7, 2024
Exhibit
12.1
DeMint
Law, PLLC
Anthony
N. DeMint
Managing
Member
3753
Howard Hughes Parkway |
Direct
Dial: |
(702)
714-0889 |
Second
Floor, Suite 314 |
Cell: |
(702)
232-4842 |
Las
Vegas, Nevada 89169 |
email:
|
anthony@demintlaw.com |
March
7, 2024
American
Rebel Holdings, Inc.
909
18th Avenue South, Suite A
Nashville,
Tennessee 37212
Ladies
and Gentlemen:
We
have acted as counsel to you in connection with the preparation and filing by you of an Offering Statement on Form 1-A (File No. 024-12357)
(as amended, the “Offering Statement”) under the Securities Act of 1933, as amended (the “Act”) and Regulation
A promulgated thereunder, with respect to the qualification of up to 2,666,666 shares of Series C Redeemable Convertible Preferred Stock
(the “Series C Preferred”) of American Rebel Holdings, Inc., a Nevada corporation (the “Company”) at a price
of $7.50 per share.
This
opinion letter is being delivered in accordance with the requirements of Item 17 of Form 1-A under the Securities Act.
As
the Company’s counsel, we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Company’s
articles of incorporation and bylaws, each as amended to date, and minutes and records of the corporate proceedings of the Company relating
to the filing of the Offering Statement and the issuance of the Series C Preferred, as provided to us by the Company, certificates of
public officials and of representatives of the Company, and statutes and other instruments and documents, including the rights and preferences
of the Series C Preferred, as a basis for the opinions hereinafter expressed. In rendering this opinion, we have relied upon certificates
of public officials and representatives of the Company with respect to the accuracy of the factual matters contained in such certificates.
In
connection with such examination, we have assumed (a) the genuineness of all signatures and the legal capacity of all signatories; (b)
the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to
us as certified or photostatic copies; and (c) the proper issuance and accuracy of certificates of public officials and representatives
of the Company.
Based
on and subject to the foregoing, and having regard for such legal considerations as we deem relevant, it is our opinion that (1) the
Series C Preferred has been duly authorized by all necessary corporate action of the Company, and (2) when issued and sold by the Company
against payment therefor pursuant to the terms of the subscription agreement, attached to the Offering Statement, the Series C Preferred
will be validly issued, fully paid and non-assessable.
DeMint-American
Rebel
Form
1-A Opinion and Consent
Page
2
This
opinion is limited to the laws of the State of Nevada, and applicable provisions of the Nevada Constitution, in each case as currently
in effect, and reported judicial decisions as of the date of this opinion that interpret the Nevada Revised Statutes and such provisions
of the Nevada Constitution, and we are expressing no opinion as to the effect of the laws of any other jurisdiction.
This
opinion is rendered as of the date hereof, and we undertake no obligation to advise you of any changes in applicable law or any other
matters that may come to our attention after the date hereof.
This
opinion is furnished to you in connection with the filing of the Offering Statement and is not to be used, circulated, quoted or relied
upon for any other purpose except that purchasers of the Series C Preferred offered pursuant to the Offering Statement may rely on this
opinion to the same extent as if it were addressed to them.
We
hereby consent to the filing of this opinion as an exhibit to the Offering Statement and to any reference to the name of our firm in
the Offering Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the Commission thereunder.
Very
truly yours, |
|
|
|
/s/
DeMint Law, PLLC |
|
DeMint
Law, PLLC |
|
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