American Rebel Holdings Inc 10-Q for FY2021 Q3
American Rebel Holdings Inc (AREB)
About this 10-Q
American Rebel Holdings Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $295.49K
- up 5.8% from $279.31K a year earlier
- Net loss
- $1.43M
- compared with a net loss of $1.32M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
for
the quarterly period ended
OR
for the transition period from ___ to ___
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s
telephone number, including area code: |
| Copies of communications to: | ||
| Joseph Lucosky, Esq | Anthony N. DeMint, Esq. | |
| Adele Hogan, Esq. | DeMint Law, PLLC | |
| Lucosky Brookman LLP | 3753 Howard Hughes Parkway | |
| 101 Wood Avenue South | Second Floor, Suite 314 | |
| 5th Floor | Las Vegas, Nevada 89169 | |
| Iselin, NJ 08830 | (702) 714-0889 | |
| (732) 395-4402 | anthony@demintlaw.com | |
| jlucosky@lucbro.com | ||
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐
The number of shares of the registrant’s common stock outstanding as of November 15, 2021, was shares.
AMERICAN REBEL HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
| 2 |
Part I. Financial Information
Item 1.- Interim Consolidated Financial Statements (unaudited)
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
| September 30, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Prepaid expense | ||||||||
| Inventory | ||||||||
| Inventory deposits | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Lease Deposit | - | |||||||
| Total Other Assets | - | |||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expense | ||||||||
| Accrued Interest – Convertible Debenture – Related Party | ||||||||
| Loan – Officer - Related party | ||||||||
| Loan – Working Capital, net of discounts of $ | ||||||||
| Loans - Nonrelated parties | ||||||||
| Total Current Liabilities | ||||||||
| Convertible Debenture –Related party, net of discounts of $ | - | |||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $ par value; shares authorized; , and issued and outstanding, respectively at September 30, 2021 and December 31, 2020 Preferred shares Class A | - | |||||||
| Preferred stock, $ par value; shares authorized; , and issued and outstanding, respectively at September 30, 2021 and December 31, 2020 Preferred shares Class B | - | |||||||
| Common stock, $par value; shares authorized; and issued and outstanding, respectively at September 30, 2021 and December 31, 2020 | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ||||||
| TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | $ | ||||||
See Notes to Financial Statements.
| 3 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended | For the three months ended September 30, 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Expenses: | ||||||||
| Consulting – business development | ||||||||
| Product development costs | ||||||||
| Marketing and brand development costs | ||||||||
| Administrative and other | ||||||||
| Depreciation expense | ||||||||
| Total | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (Loss) on extinguishment of debt | ( | ) | ( | ) | ||||
| Net income (loss) before income tax provision | ( | ) | ( | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
See Notes to Financial Statements.
| 4 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Expenses: | ||||||||
| Consulting – business development | ||||||||
| Product development costs | ||||||||
| Marketing and brand development costs | ||||||||
| Administrative and other | ||||||||
| Depreciation expense | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ||||
| Net income (loss) before income tax provision | ( | ) | ( | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and diluted | ||||||||
See Notes to Financial Statements.
| 5 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
| Common Stock | Preferred Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance – December 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common Stock issued as compensation. | ||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2020 (Unaudited)- | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Sale of common stock. | - | |||||||||||||||||||||||||||
| Sale of Preferred Stock. | ||||||||||||||||||||||||||||
| Sale of Preferred Stock., shares | ||||||||||||||||||||||||||||
| Common Stock issued to pay expense | ||||||||||||||||||||||||||||
| Common Stock issued to pay expense, shares | ||||||||||||||||||||||||||||
| Preferred Stock converted to Common Stock | ||||||||||||||||||||||||||||
| Preferred Stock converted to Common Stock, shares | ||||||||||||||||||||||||||||
| Preferred Stock issued to pay expense | ||||||||||||||||||||||||||||
| Preferred Stock issued to pay expense, shares | ||||||||||||||||||||||||||||
| Common Stock issued to reduce Debt | ||||||||||||||||||||||||||||
| Common Stock issued to reduce Debt, shares | ||||||||||||||||||||||||||||
| Preferred A shares issued | ||||||||||||||||||||||||||||
| Common Stock Warrants Issued | ||||||||||||||||||||||||||||
common stock issued as compensation. | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2020 (Unaudited)- | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common stock issued as compensation. | - | |||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2020 (Unaudited)- | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Common Stock | Preferred Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | ||||||||||||||||||||||
| Balance – December 31, 2020- | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Sale of common stock. | - | |||||||||||||||||||||||||||
| Common Stock issued to pay expense | - | |||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – March 31, 2021- | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Sale of Preferred Stock. | - | |||||||||||||||||||||||||||
common stock issued to pay expense | - | |||||||||||||||||||||||||||
| Preferred Stock issued to pay expense | - | |||||||||||||||||||||||||||
| Common stock Warrants Issued | - | - | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2021- | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Beginning balance, value | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Sale of Preferred Stock. | - | |||||||||||||||||||||||||||
| Common stock issued to pay expense | - | |||||||||||||||||||||||||||
| Preferred Stock converted to Common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Common stock issued to reduce Debt | - | |||||||||||||||||||||||||||
| Preferred A shares issued | ( | ) | ||||||||||||||||||||||||||
Common stock Warrants Issued | - | - | ||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – September 30, 2021- | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Ending balance, value | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
See Notes to Financial Statements.
| 6 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
| 2021 | 2020 | |||||||
| For the nine months ended September 30, 2021 | For the nine months ended September 30, 2020 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Depreciation | ||||||||
| Expense paid through issuance of stock | ||||||||
| Amortization of loan discount | ||||||||
| Adjustments to reconcile net loss to cash (used in) operating activities: | ||||||||
| Change in accounts receivable | ( | ) | ( | ) | ||||
| Change in prepaid expenses | ( | ) | ||||||
| Change in inventory | ( | ) | ( | ) | ||||
| Change in inventory deposits | ||||||||
| Change in accounts payable and accrued expense | ||||||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| - | - | |||||||
| Net Cash (Used in) Investing Activities | ||||||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds (repayments) of loans – officer - related party | ||||||||
| Proceeds of Sale of Stock | ||||||||
| Proceeds of exercise of Warrants | ||||||||
| Proceeds of working capital loan | ||||||||
| Repayment of loans – nonrelated party | ( | ) | ( | ) | ||||
| Net Cash Provided by Financing Activities | ||||||||
| CHANGE IN CASH | ||||||||
| CASH AT BEGINNING OF PERIOD | ||||||||
| CASH AT END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Debt eliminated through issue of Stock | $ | $ | ||||||
See Notes to Financial Statements.
| 7 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(unaudited)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
American Rebel Holdings, Inc. (the “Company”) operates primarily as a designer and marketer of branded safes and personal security, self-defense products. Additionally, the Company designs and produces branded apparel and other accessories.
The Company promotes and sells its products primarily through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including its website and e-commerce platforms such as Amazon.com.
The information on our website does not constitute a part of this report.
Listing and reorganization
The
Company was incorporated on
On January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. The Company completed a business combination with its majority stockholder, American Rebel, Inc. on June 19, 2017. As a result, American Rebel, Inc. became a wholly owned subsidiary of the Company.
The aforementioned acquisition of American Rebel, Inc. was accounted for as a reverse merger, which involved issuance by the Company of shares of its common stock and warrants to purchase shares of common stock to shareholders of American Rebel, Inc., and cancelled shares of common stock previously owned by American Rebel, Inc.
For purposes of this Quarterly Report on Form 10-Q, “American Rebel” “we,” “our,” “us,” or similar references refers to American Rebel Holdings. and its consolidated wholly-owned subsidiary, unless the context requires otherwise.
Interim Financial Statements and Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) 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, 2020 and notes thereto contained.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.
Year end
The Company’s year-end is December 31.
| 8 |
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Inventory and Inventory Deposits
Inventory consists of backpacks, jackets, safes and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company also makes deposit payments on inventory to be manufactured that are carried separately until the goods are received into inventory.
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 ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five 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.
We adopted this ASC on January 1, 2018. Although the new revenue standard is expected to have an immaterial impact, if any, on our ongoing net income, we did implement changes to our processes related to revenue recognition and the control activities within them.
Advertising costs
Advertising
costs are expensed as incurred; Marketing costs incurred were $
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, 2021, and December 31, 2020, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
| 9 |
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, the Financial Accounting Standards Board (the “FASB”) acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
The Company records stock-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 FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.
During
the three months ended September 30, 2021, the Company issued shares of its common stock to pay
professional and consulting fees. Total fair value of $
The Company follows ASC Topic 260 to account for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Income taxes
The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change.
Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
| 10 |
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of September 30, 2021 and December 31, 2020, 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 nine-month period ended September 30, 2021, and 2020, 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.
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.
Operating leases are included in operating lease Right-of-Use assets and operating lease liabilities, current and non-current, on the Company’s consolidated balance sheets.
Recent pronouncements
The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements. The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
| 11 |
NOTE 2 – GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the
recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the
development stage and, accordingly, its revenue from its planned operations does not cover its operating expenses.
Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs
and expenses related to developing products and market identity, obtaining inventory, preparing for public product launch and ultimately
selling products. As a result, the Company incurred net income (losses) for the nine months ended September 30, 2021, and 2020 of ($
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 operating revenues. Management believes holders of its warrants will execute their outstanding warrants
generating investment capital for the Company. As of September 30, 2021, there are
Management believes sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock to institutional and other investors. However, no assurance can be given that the Company will obtain this additional working capital, or if obtained, that such funding will not cause substantial dilution to its stockholders. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay its business plan rollout.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 3 - INVENTORY AND DEPOSITS
Inventory and deposits include the following:
SCHEDULE OF INVENTORY AND DEPOSITS
September 30, 2021 (unaudited) | December 31, 2020 (audited) | |||||||
| Inventory - Finished goods | $ | $ | ||||||
| Inventory deposits | ||||||||
| Total Inventories | ||||||||
| Less: Reserve for excess and obsolete | - | - | ||||||
| Net inventory and deposits | $ | $ | ||||||
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
September 30, 2021 (unaudited) | December 31, 2020 (audited) | |||||||
| Marketing equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
| 12 |
For
the nine months ended September 30, 2021, and 2020 we recognized $
NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
For
the year ended December 31, 2016, the
During
the year ended December 31, 2018, the
During
the current year through September 30, 2021, the Company entered into a Bridge Loan Agreement dated April 9, 2021, with Ronald Smith,
our Chief Operating Officer. The Bridge Loan Agreement bears 8% interest per annum and matures in 180 days. If the Company fails to raise
at least $
During
the current year through September 30, 2021, our Mr. Smith advanced $
During the current year through September 30, 2021, a greater than 5% shareholder of the Company has received shares of common stock of the Company as interest due on an outstanding note.
Charles
A. Ross, Jr. serves as the Company’s CEO. Compensation for Mr. Ross was $
Doug
Grau serves as the Company’s President. Compensation for Mr. Grau was $
NOTE 6 – NOTES PAYABLE – NON-RELATED 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 September 30, 2021 and December 31, 2020.
SCHEDULE OF NOTES PAYABLE TO NON-RELATED PARTIES
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (unaudited) | (audited) | |||||||
| Loan secured by | ||||||||
| interest at | $ | $ | ||||||
| Total recorded as current liability | $ | $ | ||||||
Current and long-term portion. Total loan balance is reported as current because loans are expected to be repaid within one year.
NOTE 7 – NOTES PAYABLE – WORKING CAPITAL
During
the nine months ending September 30, 2021, the
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During
the nine months ending September 30, 2021, the Company and the Company’s wholly owned operating subsidiary completed the conversion
of short-term notes with a face value of $
As
of September 30, 2021, and December 31, 2020, the outstanding balance due on the working capital notes was $
NOTE 8 - CONVERTIBLE DEBENTURE – RELATED PARTY
Since
September 16, 2016, the Company sold an aggregate amount of $
Pursuant to the governing agreement,
the Convertible Debentures featured maturities beginning September 16, 2019, and the Convertible Debenture holder, had
the option to convert their principal and interest into
During
the year ended December 31, 2018, the
The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and fair value measurement under ASC 820 and determined that the beneficial conversion feature under the Convertible Debenture should be recorded as a discount to debt if the current price of the stock was higher than the conversion price.
The convertible debenture - related party is measured at fair value at the end of each reporting period or termination of the applicable debenture agreement with the change in fair value recorded to earnings. The fair value of the embedded beneficial conversion feature did not result in a discount to the convertible debenture - related party. The discount if and when we have one will be amortized over the term of agreement or modification to the agreement to interest expense using the straight-line method that approximates the effective interest method.
The Company used the eight steps to determine fair value under ASC 820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make the measurement. (8) Determine amounts to be recognized and information to be disclosed.
Fair value was determined by the market price of the Company’s publicly traded stock with no discount allowed. This was determined as of the effective date of the agreement entered convertible debenture - related party. The conversion price was then compared to fair value, determined by market price and the difference between the two multiplied by the number of shares that would be issued upon conversion. Since public trading of the common stock began in 2018, market price of the Company’s traded stock has ranged from $ to $ per share.
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As
of September 30, 2021, the outstanding balance due the Convertible Debentures holders was $
NOTE 9 – EMBEDDED DERIVATIVES – FINANCIAL INSTRUMENTS
Since September 2016 the Company entered into several financial instruments, which consisted of Convertible Debentures, containing a fixed conversion feature. It is possible the fixed conversion price of the Convertible Debenture may be at a significant discount to the market price of the shares of the Company’s common stock. The Company for all intent and purposes considers these discounts to be fair market value as would be determined in an arm’s length transaction with a willing buyer and the restrictive nature of the common stock issued, unless issued pursuant to a registration or some other registered shares with the SEC.
The Company accounts for the fair value of the conversion feature in accordance with ASC 815-15, Derivatives and Hedging; Embedded Derivatives, which requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt and original issue discount notes payable. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations. The Company valued the embedded derivatives using eight steps to determine fair value under ASC 820: (1) Identify the item to be valued and the unit of account; (2) Determine the principal or most advantageous market and the relevant market participants; (3) Select the valuation premise to be used for asset measurements; (4) Consider the risk assumptions applicable to liability measurements; (5) Identify available inputs; (6) Select the appropriate valuation technique(s); (7) Make the measurement, and (8) Determine amounts to be recognized and information to be disclosed.
The
fair value of the conversion feature of the financial instrument as of September 30, 2021, was $
NOTE 10 – INCOME TAXES
At
September 30, 2021 and December 31, 2020, the Company had a net operating loss carryforward of $
Components of net deferred tax asset, including a valuation allowance, are as follows:
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES
September 30, 2021 | December 31, 2020 | |||||||
| Deferred tax asset: | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Total deferred tax asset | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Valuation
allowance for deferred tax assets as of September 30, 2021, and December 31, 2020 was $
| 15 |
Reconciliation between the statutory rate and the effective tax rate for both periods and as of December 31, 2020:
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION
| Federal statutory rate | ( | )% | ||
| State taxes, net of federal benefit | ( | )% | ||
| Change in valuation allowance | % | |||
| Effective tax rate | % |
NOTE 11 – SHARE CAPITAL
The Company is authorized to issue shares of its $ par value common stock and shares of its $ par value preferred stock.
Common stock
On July 21, 2021, the Company issued shares of common stock as interest payments on an outstanding note.
On July 22, 2021, the Company issued 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 to .
On
July 26, 2021, the Company sold
On July 29, 2021, the Company issued 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 shares of common stock to Rocco LaVista, our VP of Business Development, for services.
On August 3, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 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 shares of common stock to Doug E. Grau, our President, for services.
On August 12, 2021, the Company issued shares of common stock as an interest payment on an outstanding note.
On August 18, 2021, the Company issued shares of common stock as a conversion of Series B Preferred Stock.
On September 3, 2021, the Company issued shares of Common Stock as a component of a note.
On September 8, 2021, the Company issued shares of common stock as an interest payment on an outstanding note.
On September 21, 2021, the Company issued shares of common stock as a component of a note.
On September 21, 2021, the Company issued shares of common stock as a component of a note.
On September 30, 2021, the Company issued shares of common stock as a component of a note extension.
On September 30, 2021, the Company issued shares of common stock as an interest payment on an outstanding note.
On September 30, 2021, the Company issued shares of common stock as an interest payment on outstanding notes.
At September 30, 2021 and December 31, 2020, there were and shares of common stock issued and outstanding, respectively; and and shares of Series B preferred stock issued and outstanding, respectively.
NOTE 12 – WARRANTS AND OPTIONS
As
of September 30, 2021, there were
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 September 30, 2021. 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.
SCHEDULE OF FAIR VALUE MEASUREMENT
| September 30, 2021 (unaudited) | December 31, 2020 (audited) | |||||||
| Stock Price | $ | $ | ||||||
| Exercise Price | $ | $ | ||||||
| Term (expected in years) | ||||||||
| Volatility | % | % | ||||||
| Annual Rate of Dividends | % | % | ||||||
| Risk Free Rate | % | % | ||||||
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Stock Purchase Warrant
SCHEDULE OF WARRANT ACTIVITY
| Shares | Weighted-Average Exercise Price Per Share | Remaining term | Intrinsic value | |||||||||||||
| Outstanding and Exercisable at December 31, 2019 | $ |
years | ||||||||||||||
| Granted | $ | years | ||||||||||||||
| Exercised | - | |||||||||||||||
| Expired | ( | ) | - | |||||||||||||
| Outstanding and Exercisable at December 31, 2020 | $ |
years | ||||||||||||||
| Granted | $ | years | ||||||||||||||
| Exercised | - | |||||||||||||||
| Expired | ( | ) | - | |||||||||||||
| Outstanding and Exercisable at September 30, 2021 |
|
years | ||||||||||||||
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Rental Payments under Non-cancelable Operating Leases
The Company has a lease for a sales office and showroom in Lenexa, Kansas which expires in January 2026, and an annually renewable lease for manufacturing and warehouse space in Chanute, Kansas. The following is a schedule, by year, of the future minimum rental payments under the lease:
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE
| Year ended December 31, | ||||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Subsequent | ||||
| Total | $ | |||
Rent
costs totaled approximately $
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NOTE 14 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of September 30, 2021, through the date the financial statements were issued and determined that there were the following subsequent events:
On October 25, 2021, the Company issued
shares of Common stock and three-year warrants to purchase Common stock for $ for an investment of $
On October 29, 2021, the Company issued 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 shares of common stock to a financial consultant of the Company for services.
On October 29, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 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 shares of common stock to a consultant of the Company for services.
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FORWARD LOOKING STATEMENTS
This document contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures we make in this Quarterly Report on Form 10-Q, Current Reports on Form 8-K and other reports made under the Exchange Act.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
| ● | We currently do not own a manufacturing facility, and future acquisition and operation of new manufacturing facilities might prove unsuccessful and could fail; | |
| ● | our success depends on our ability to introduce new products that track customer preferences; |
| ● | if we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights; |
| ● | as 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 ammunition storage; | |
| ● | as we rely on third-party manufacturers for our safes production, our 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; |
| ● | we face a high degree of market competition that could result in our losing or failing to gain market share; | |
| ● | our ability to expand our sales organization to address effectively existing and new markets that we intend to target; |
| ● | applicable laws and changing legal and regulatory requirements could harm our business and financial results; |
| ● | our Management has control over key decision-making as a result of their control of a majority of our voting stock; |
| ● | the loss of our founder and Chief Executive Officer, Charles A, Ross, could harm our business; |
| ● | our inability to generate significant cash flow from sales of our products, which could lead to a substantial increase in indebtedness and negatively impact our ability to comply with the financial covenants, as applicable, in our debt agreements; |
| ● | our inability to access lending, capital markets and other sources of liquidity, if needed, on reasonable terms, or at all, or obtain amendments, extensions and waivers of financial maintenance covenants, among other material terms; | |
| ● | our inability to effectively meet our short- and long-term obligations; |
| ● | our inability to service our existing and future indebtedness or other liabilities, the failure of which could result in insolvency proceedings and result in a total loss of your equity investment; |
| ● | 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 ability to identify suitable acquisition candidates to consummate acquisitions on acceptable terms, or to successfully integrate acquisitions in connection with the execution of our growth strategy, the failure of which could disrupt our operations and adversely impact our business and operating results; |
| ● | 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 or global economic, market and political conditions; | |
| ● | the inability to efficiently manage our operations; | |
| ● | the inability to achieve future operating results; | |
| ● | the unavailability of funds for capital expenditures; | |
| ● | the inability of management to effectively implement our strategies and business plans; and | |
| ● | the other risks and uncertainties detailed in this report. |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis should be read along with the financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.
Description of Business
Overview
The Company operates as a marketer of branded safes and personal security products. Additionally, the Company designs and produces branded accessories and apparel including with concealment pockets.
We focus on primarily using U.S.-made steel as the primary component of our safes and personal security products. We believe our products are designed to safely store firearms, as well as store our customers’ priceless keepsakes, family heirlooms and treasured memories, and aim to make our products accessible at various price points for home use. We believe our products are designed for safety, quality, reliability, features and performance.
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 our Personal Protection Pocket, to hold firearms in place securely and safely. Concealment pockets on our Freedom 2.0 Concealed Carry Jackets incorporate a silent operation opening and closing with the use of a magnetic closure.
We believe that we have the potential to continue to create an American brand community presence, in part through our Chief Executive Officer, 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, sports, hunting and firearms stores, as well as via e-commerce marketplace. The brand shares a commitment to offering products of what we believe are enduring quality and comfort that allow customers to keep their valuable belongings safe on the go and express their patriotism and style, which is synonymous with the American Rebel brand.
We generate revenue from the following activities:
| a. | Safes - we offer a wide range of home, office and personal safe models, in a broad assortment of sizes, features and styles, which are constructed with U.S.-made steel. Demand for our safes is relatively strong across all segments of our customers, including individuals and families seeking to protect their valuables, businesses seeking to protect valuables and irreplaceable items such as artifacts and jewelry, and dispensaries servicing the community that seek to protect their inventory and cashflow. In addition, the demand for our safes has also been relatively strong among responsible gun owners, sportsmen, competitive shooters and hunters seeking a premium and responsible solution to secure valuables and firearms, to prevent theft and to protect loved ones. We expect to benefit from increasing awareness of and need for safe storage of firearms in future periods. Below is a summary of the different safes we make: |
| 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 double plate steel doors, double-steel door casements and reinforced door edges. Each of these safes provide up to 75 minutes of fire protection at 1200 degrees Fahrenheit. Our safes offer a fully adjustable interior to fit our customers’ needs. Depending on the model, one side of the interior may have shelves and the other side set up to accommodate long guns. There are optional additions such as Rifle Rod Kits and Handgun Hangers to increase the storage capacity of the safe. These large safes offer greater capacity for secure storage and protection, and our safes are designed to prevent unauthorized access, including in the event of an attempted theft, natural disaster or fire. We believe that a large, highly visible safe also acts as a deterrent to any prospective thief. |
| 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. |
| 20 |
| iii. | Vault Doors – Our U.S.-made vault doors combine style with what we believe are superior theft and fire protection for an elegant look that fits any decor. Newly-built, higher-end homes often add vault rooms and we believe our vault doors, which we designed to facilitate secure access to such vault rooms, provide ideal solutions for the protection of valuables and shelter from either storms or intruders. Whether it’s in the context of a safe room, a shelter, or a place to consolidate valuables, our American Rebel in- and out-swinging vault doors provide maximum functionality to facilitate a secure vault room. American Rebel vault doors are constructed of 4 ½” double steel plate thickness, A36 carbon steel panels with sandwiched fire insulation, a design that provides greater rigidity, security and fire protection. Active bolt works, which is the locking mechanism that bolts the safe door closed so that it cannot be pried open, and which is considered to be by some locksmiths among the smoothest and strongest in the industry, and three external hinges that support the weight of the door, are some of the features of the vault door. For safety and when the door is used for a panic or safe room, a quick release lever is installed inside the door. |
| iv. | Dispensary Safes - Our HG-INV Inventory Safe, a safe tailor-made for the cannabis industry, provides cannabis and horticultural plant home growers a reliable and safe solution. Designed with medical marijuana or recreational cannabis dispensaries in mind, including with respect to increasing governmental and insurance industry regulation to lock inventory after hours, our HG-INV Inventory Safe delivers a high level of user experience. |
| b. | Personal Security - our concealed carry backpack selection consists of an assortment of sizes, features and styles. | |
| c. | Apparel and Accessories - we offer a wide range of concealed carry jackets, vests and coats for men and women. We also offer patriotic apparel for the whole family, with the American Rebel imprint. Our apparel line serves as “point man” for the brand, often acting as the first point of exposure that people have to all things American Rebel. Our apparel line is designed and branded to be stylish, patriotic and bold. We emphasize styling that complements our enthusiasts’ and customers’ lifestyle, representing the values of our community and quintessential American character. We believe the American Rebel clothing line style is not only a fashion statement; we seek to cultivate a sense of pride of belonging to our patriotic family, in our customers’ adventures and in life. |
The costs of our revenue primarily consist of productions costs, product development, consulting, and marketing and brand development fees.
Our results of operations and financial condition may be impacted positively and negatively by certain general macroeconomic and industry wide conditions, such as the effects of the COVID-19 pandemic. The consequences of the pandemic and impact on the U.S. and global economies continue to evolve and the full extent of the impact is uncertain as of the date of this filing. The pandemic has had a significant effect on the safe and personal security industry and on the apparel industry. If the recovery from the COVID-19 pandemic is not robust, the impact could be prolonged and severe. While to date the Company has not been required to stop operating, management is evaluating its use of its office space, virtual meetings and the like. While our manufacturing capabilities have been suffering, and could continue to suffer from mandatory, forced production disruptions, which negatively impact our ability to satisfy the demand for our products, as the result of the pandemic, we expect that the impact of such attrition would be mitigated by the addition of new customers resulting from the increasing demand for home, office and personal safety and security. The extent to which the COVID-19 pandemic will impact our operations, ability to obtain financing or future financial results is uncertain at this time. Due to the effects of COVID-19, management worked to reduce unnecessary marketing expenditures and worked to improve staff and human capital expenditures, while maintaining overall workforce levels. The Company expects but cannot guarantee that demand for its safes and personal security products will keep growing later in 2021, as more customers spending more time working remotely, and increasing regulation in many states mandating safe ammunition storage, accelerating the demand for our responsible solution safes and making them necessary appliance for any household, providing protection for expensive firearms and other valuables. Overall, management is focused on effectively positioning the Company for meeting the increasing demand for our safes and faster turnaround production.
Recent Developments and Trends
Strategic Corporate Reorganization for Long-term Growth. We are consistently evaluating and considering appropriate strategic and acquisitions opportunities as part of its overall strategy to accelerate growth, long-term value for its stockholders and create integrated value chains’
Coronavirus (“COVID-19”) and Related Market Impact. The COVID-19 outbreak has presented evolving risks and developments domestically and internationally, as well as new opportunities for our business. Although the pandemic has not materially impacted our results and operations adversely, our ability to satisfy demand for our products could be negatively impacted by mandatory forced production disruptions of our safes’ sole third-party manufacturer and strategic partners. Any significant disruption to communications and travel, including travel restrictions and other potential protective quarantine measures against COVID-19 by governmental agencies, could make it difficult for us to deliver goods and services to our customers. Further, travel restrictions and protective measures against COVID-19 could cause the Company to incur additional unexpected labor costs and expenses or could restrain the Company’s ability to retain the highly skilled personnel the Company needs for its operations. The extent to which COVID-19 impacts the Company’s business, sales and results of operations will depend on future developments, which are uncertain and cannot be currently predicted.
Additionally, as a result of COVID-19, at any time we may be subject to increased operating costs, supply interruptions, and difficulties in obtaining raw materials and components. To address these challenges, we continue to monitor our supply chain. We have recently entered into a contract with a third-party manufacturer to exclusively assemble our upcoming new line of safes. We believe that this vertical integration would allow us, among other benefits, to ramp up our production levels to meet expected demand for our products, provide us greater autonomy over the manufacturing process, and add what we believe are distinctive features to our safes.
We expect that the demand for home, office and personal safety and security products would remain stable, in part due to customers spending more time working remotely, increasing regulation mandating safe storage, and substantial uncertainty related to the supply chain and delivery of international goods, which in turn translate into, we believe, growth in demand for our home and personal safes as a U.S. company. We, however, cannot guarantee, that demand for our safes and personal security products will keep growing through the end of the 2021 calendar year and beyond.
Further, due to the effects of COVID-19, our management have reduced unnecessary marketing expenditures as part of continued efforts to adjust the Company’s operations to address changes in the safes and vault industry, and particularly to improve staff and human capital expenditures, while maintaining overall workforce levels.
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 Delta variant or otherwise) will have on our results of operations, liquidity or long-term financial results.
Results of Operations
From inception through September 30, 2021, we have generated an operating deficit of $25,760,803. We expect to incur additional losses during the fiscal year ending December 31, 2021, and beyond, principally as a result of our increased investment in inventory, marketing expenses, and the limited sales of our new products as we seek to establish them in the marketplace.
Nine Months Ended September 30, 2021 Compared To Nine Months Ended September 30, 2020
Revenue and cost of goods sold
For the nine months ended September 30, 2021, we reported Sales of $848,357, compared to Sales of $899,238 for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, we reported Cost of Sales of $716,943, compared to Cost of Sales of $659,006 for the nine months ended September 30, 2020. For the nine months ended September 30, 2021, we reported Gross Profit of $131,414, compared to Gross Profit of $240,232 for the nine months ended September 30, 2020. Sales of our products began during the fourth quarter of 2016.
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Operating Expenses
Total operating expenses for the nine months ended September 30, 2021, were $2,795,037 compared to $2,414,991 for the nine months ended September 30, 2020, as further described below.
For the nine months ended September 30, 2021, we incurred consulting and business development expenses of $1,774,003, compared to consulting and business development expenses of $404,700 for the nine months ended September 30, 2020. The change in consulting and business development expenses was due to the issuance of stock as compensation.
For the nine months ended September 30, 2021, we incurred product development expenses of $275,780, compared to product development expenses of $275,565 for the nine months ended September 30, 2020. There was no significant change in product development expenses.
For the nine months ended September 30, 2021, we incurred marketing and brand development expenses of $138,783, compared to marketing and brand development expenses of $331,775 for the nine months ended September 30, 2020. The change in marketing and brand development expenses relates primarily to a decrease of activities related to the ongoing COVID-19 pandemic, public health restrictions and cost-saving measures.
For the nine months ended September 30, 2021, we incurred general and administrative expenses of $603,727, compared to general and administrative expenses of $1,356,430 for the nine months ended September 30, 2020. The change relates primarily to a decrease in administrative expenses establishing company processes and procedures and cost-saving measures.
For the nine months ended September 30, 2021, we incurred depreciation expense of $2,744, compared to depreciation expense of $46,521 for the nine months ended September 30, 2020. The decrease in depreciation expense relates primarily to the maturity of depreciable assets.
Other income and expenses
For the nine months ended September 30, 2021, we incurred interest expense of $1,500,744, compared to interest expense of $1,507,662 for the nine months ended September 30, 2020. The similar amount of interest expense is due to ongoing debt refinancing and conversions of debt to equity. Included in this total interest expense, during the nine months ended September 30, 2021, we incurred interest expense by amortization of the discount recorded for the issuance of shares of common stock in connection with working capital loans of $885,920, compared to $462,072 during the nine months ended September 30, 2020, in interest expense by amortization of the discount recorded for the issuance of shares of common stock in connection with working capital loans.
Net Loss
Net loss for the nine months ended September 30, 2021, amounted to $4,890,090, resulting in a loss per share of $0.05, compared to $4,601,663 for the nine months ended September 30, 2020, resulting in a loss per share of $0.08. The slight increase in the net loss from the nine months ended September 30, 2020, to the nine months ended September 30, 2021, is primarily due to the use of stock as compensation. The Loss on Extinguishment of Debt of $725,723 incurred in the nine months ended September 30, 2021 and $919,242 incurred during the nine months ended September 30, 2020 created by the issuance of Common and Preferred Stock to eliminate short term debt and accrued interest expense continued the Company’s efforts to reduce debt.
Three Months Ended September 30, 2021 Compared To Three Months Ended September 30, 2020
Revenue and cost of goods sold
For the three months ended September 30, 2021, we reported Sales of $295,490, compared to Sales of $279,308 for the three months ended September 30, 2020. For the three months ended September 30, 2021, we reported Cost of Sales of $280,212, compared to Cost of Sales of $228,584 for the three months ended September 30, 2020. For the three months ended September 30, 2021, we reported Gross Profit of $15,278, compared to Gross Profit of $50,724 for the three months ended September 30, 2020. Sales of our products began during the fourth quarter of 2016.
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Operating Expenses
Total operating expenses for the three months ended September 30, 2021, were $971,882 compared to $618,808 for the three months ended September 30, 2020, as further described below.
For the three months ended September 30, 2021, we incurred consulting and business development expenses of $656,784, compared to consulting and business development expenses of $136,877 for the three months ended September 30, 2020. The change in consulting and business development expenses was due to the issuance of stock as compensation.
For the three months ended September 30, 2021, we incurred product development expenses of $42,720, compared to product development expenses of $89,578 for the three months ended September 30, 2020. The change in product development expenses relates primarily to a decrease of activities in preparation of new product launches.
For the three months ended September 30, 2021, we incurred marketing and brand development expenses of $34,669, compared to marketing and brand development expenses of $90,305 for the three months ended September 30, 2020. The change in marketing and brand development expenses relates primarily to a decrease of activities including major trade shows due to the COVID-19 pandemic and public health restrictions.
For the three months ended September 30, 2021, we incurred general and administrative expenses of $236,763, compared to general and administrative expenses of $286,541 for the three months ended September 30, 2020. The change relates primarily to a decrease in administrative expenses establishing company processes and procedures.
For the three months ended September 30, 2021, we incurred depreciation expense of $946, compared to depreciation expense of $15,507 for the three months ended September 30, 2020. The decrease in depreciation expense relates primarily to the maturity of depreciable assets.
Other income and expenses
For the three months ended September 30, 2021, we incurred interest expense of $382,601, compared to interest expense of $681,076 for the three months ended September 30, 2020. Included in this total interest expense, during the three months ended September 30, 2021 , we incurred interest expense by amortization of the discount recorded for the issuance of shares of common stock in connection with working capital loans of $216,636, compared to $198,990 during the three months ended September 30, 2020, in interest expense by amortization of the discount recorded for the issuance of shares of common stock in connection with working capital loans.
Net Loss
Net loss for the three months ended September 30, 2021, amounted to $1,426,780, resulting in a loss per share of $0.01, compared to $1,318,085 for the three months ended September 30, 2020, resulting in a loss per share of $0.02. The increase in the net loss from the three months ended September 30, 2020, to the three months ended September 30, 2021, is primarily due to the issuance of stock as compensation. The Loss on Extinguishment of Debt of $87,575 incurred during the three months ended September 30, 2021, was created by issuance of Common and Preferred Stock to eliminate short term debt and accrued interest expense.
Liquidity and Capital Resources
We are a development stage company and our revenue from our planned operations does not cover our operating expenses. We have a working capital deficit of $4,726,654 at December 31, 2020, and $3,338,820 at September 30, 2021, and have incurred a deficit of $25,760,803 from inception to September 30, 2021. We have funded operations primarily through the issuance of capital stock, convertible debt, and other securities.
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During the nine months ended September 30, 2021, we raised net cash of $697,505 by issuance of common and Preferred Shares, as compared to $7,000 for the nine months ended September 31, 2020. During the nine months ended September 30, 2021, we raised net cash of $0 through the issuance of debt instruments, as compared to $125,000 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we raised net cash of $2,169,100 through the issuance of notes payable secured by inventory, as compared to $2,208,671 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, we repaid $0 on loans received from our CEO, as compared to $0 that we repaid in loans from our CEO during the nine months ended September 30, 2020.
As we continue with the launch of our safes and concealed carry product line we have devoted and expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures.
We expect to require additional funds to further develop our business plan, including the anticipated launch of additional 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 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 has recently engaged in a financial restructuring (the “Debt Restructuring”), that included extending, renewing, and structuring terms of loans with investors and third-party creditors.
Cavalry Bridge Loan
As part of the Debt Restructuring, on September 29, 2021, the Company entered into a financing transaction with accredited investor Cavalry Fund I, L.P., a Delaware limited partnership (“Cavalry”).
Pursuant to the financing transaction with Cavalry, the Company issued to Cavalry a senior secured convertible promissory note in the aggregate principal amount of $1,150,000 (the “Note”). The Note has a maturity date of one year from September 29, 2021 and bears interest at a rate of 6% per annum, which is also payable on maturity. The net proceeds received by the Company were $1,035,000. The Note provided, among other covenants, for (i) optional conversion of amount due under the underlying loan into shares of the Company’s Common Stock, (ii) a mandatory conversion pursuant to which the principal amount and any accrued or unpaid interest automatically convert into the Company’s Common Stock, or into the Company’s Common Stock and warrants, if warrants are included in certain subsequent financing events, and (iii) encumbrances on all of the assets of the Company, including a lien on and security interest in all of the issued and outstanding equity interests of the wholly-owned subsidiary of the Company. Further, in connection with the Debt Restructuring, the Company entered into a registration rights agreement whereby the Company agreed to file a registration statement covering Cavalry’s resale of all of the Common Stock underlying the loan and the warrants following 30 days of the entering into the Debt Restructuring.
Promissory Notes
As part of the Debt Restructuring (as defined above), the Company also entered into replacement notes to extend the maturity on certain prior notes.
On March 31, 2021, the Company entered into an unsecured Forbearance Agreement with an accredited investor to with respect to certain four previous notes between the accredited investor and the Company. The total outstanding amount owed to the accredited investor was $273,187.50 as of March 29, 2021. Pursuant to the Forbearance Agreement, the Company has agreed to pay an initial payment of $100,000, followed by seven monthly payments of $21,648.44 through December 2021, in exchange for delaying the exercise of rights and remedies under the previous notes by the accredited investor based on the existence of certain events of default. The Forbearance Agreement contains customary warranties, covenants and representations of the Company.
On April 18, 2021, the Company entered into a Secured Promissory Note with an accredited investor in the amount of $591,000. The Secured Promissory Note replaced and superseded a prior Secured Note with a remaining balance of $183,000 and a Consolidated Note with a remaining balance of $455,670. Payments under the Secured Promissory Note are due in accordance with a schedule, with the first payment of $100,000 due on or before April 23, 2021, and the final payment of $8,000 due on September 1, 2023. The Secured Promissory Note does not bear interest. The Secured Promissory Note contains customary warranties, covenants and representations of the Company, and a right of first refusal of the accredited investor exercisable in connection with any proposed transfer of all or any portion of the Secured Promissory Note.
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On June 21, 2021, the Company entered into a $329,609.50 unsecured Promissory Note with an accredited investor. The unsecured Promissory Note bears 12% interest per annum. Principal and interest payments are due in accordance with an amortization schedule with a maturity date of June 21, 2024. The unsecured Promissory Note contains customary warranties, covenants and representations of the Company.
On July 1, 2021, the Company entered into a $600,000 unsecured Promissory Note with an accredited investor. The unsecured Promissory Note bears 12% interest per annum. The principal of the unsecured Promissory Note is due on July 1, 2022. The unsecured Promissory Note contains customary warranties, covenants and representations of the Company.
On September 3, 2021, the Company entered into an extension to the Company’s promissory note with Tomahawk Road LLC (the “Tomahawk Note”). Under the Tomahawk Note, the Company owes the principal sum of $34,489, plus interests at the rate of 15% per annum. The Company has also issued 34,489 shares of common stock as a component of entering into the Tomahawk Note. The Tomahawk Note’s principal amount, and interest thereupon accrued, is due on December 2, 2021.
On September 13, 2021, the Company entered into a replacement promissory note with Erick Thompson (the “Thompson Note”) in order to extend its maturity date. Under the Thompson Note, the Company owes the principal sum of $106,000, plus interests of 12% per annum on the outstanding amount from September 13, 2021. The Company has also issued 100,000 shares of restricted common stock as a component of entering into the Thompson Note. The Thompson Note’s principal amount, and interest thereupon accrued, is due on December 13, 2021.
On September 13, 2021, the Company entered into a replacement promissory with Ronald Smith (the “Smith Note”) in order to extend its maturity date. Under the Smith Note, the Company owes the principal sum of $562,991.78, plus interests of 8.4% per annum on the outstanding amount from September 13, 2021. The Company has also issued 500,000 shares of restricted common stock as a component of entering into the Smith Note. The Smith Note’s principal amount, and interest thereupon accrued, is due on December 13, 2021.
On September 15, 2021, the Company entered into a replacement promissory with Christopher Zabel (the “Zabel Note”) in order to extend its maturity date. Under the Zabel Note, the Company owes the principal sum of $125,301.76, plus interests of 18% per annum on the outstanding amount from September 15, 2021. The Company has also issued 125,000 shares of restricted common stock as a component of entering into the Zabel Note. The Zabel Note’s principal amount, and interest thereupon accrued, is due on December 15, 2021.
Critical Accounting Policies
The preparation of financial statements and related footnotes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. There are no critical policies or decisions that rely on judgments that are based on assumptions about matters that are highly uncertain at the time the estimate is made. Note 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.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Principal Financial Officer, Charles A. Ross, Jr., evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on the evaluation, Mr. Ross concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to us required to be included in our periodic SEC filings. The Company hired a financial expert with the experience in creating and managing internal control systems as well to continue to improve the effectiveness of our internal controls and financial disclosure controls.
Changes in Internal Control over Financial Reporting
There has been no change in the Company’s internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
Part II: Other Information
Item 1 - Legal Proceedings
We are currently not involved in any material litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
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Item 1a – Risk Factors
Factors that could cause or contribute to differences in our future financial and operating results include those discussed in the risk factors set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. These risks are not the only risks that we face. Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on the Company. If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.
Item 2 - Unregistered Sales of Equity Securities
On July 21, 2021, the Company issued 1,220,000 shares of common stock valued at $0.06 per share as interest payments on an outstanding note.
On July 22, 2021, the Company issued 1,300,000 shares of common stock valued at $0.06 per share as a component of a note payable.
On July 26, 2021, the Company sold 7,500 units at $7 per unit for $52,500 to an accredited investor by subscription agreement. The units consisted of 7,500 shares of Series B Preferred Stock and 750,000 three-year warrants to purchase 1 share of common stock per warrant at $0.10.
On July 30, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 753,242 shares of common stock to Rocco LaVista, our VP of Business Development, for services.
On August 3, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 753,242 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 753,241 shares of common stock to Doug E. Grau, our President, for services.
On August 5, 2021, the Company issued 1,896,400 shares of common stock of the Company and 1,896,400 warrants to purchase shares of common stock of the Company at $0.10 per share with a three-year expiration to an investor who converted his outstanding debt to common stock of the Company.
On August 12, 2021, the Company issued 310,000 shares of common stock valued at $0.06 per share as an interest payment on an outstanding note.
On August 18, 2021, an investor who had previously converted outstanding debt to Series B Preferred Stock converted the Series B Preferred Stock to 4,265,800 shares of common stock of the Company.
On September 3, 2021, the Company issued 34,489 shares of Common Stock of the Company as a component of a note.
On September 8, 2021, the Company issued 310,000 shares of common stock valued at $0.06 per share as an interest payment on an outstanding note.
On September 21, 2021, the Company issued 100,000 shares of common stock as a component of a note.
On September 21, 2021, the Company issued 500,000 shares of common stock of the Company as a component of a note.
On September 30, 2021, the Company issued 502,623 shares of common stock and 502,623 warrants to purchase shares of common stock of the Company at $0.10 per share with a three-year expiration to an investor who converted his outstanding debt to common stock of the Company.
On September 30, 2021, the Company issued 503,797 shares of common stock and 503,797 warrants to purchase shares of common stock of the Company at $0.10 per share with a three-year expiration to an investor who converted his outstanding debt to common stock of the Company.
On September 30, 2021, the Company issued 503,797 shares of common stock and 503,797 warrants to purchase shares of common stock of the Company at $0.10 per share with a three-year expiration to an investor who converted his outstanding debt to common stock of the Company.
On September 30, 2021, the Company issued 125,000 shares of common stock as a component of a note extension.
On September 30, 2021, the Company issued 300,000 shares of common stock valued at $0.06 per share as an interest payment on an outstanding note.
On September 30, 2021, the Company issued 2,759,321 shares of common stock as an interest payment on outstanding notes.
Subsequent Issuances after Quarter-End
On October 25, 2021, the Company sold 1,071,429 units at $0.07 per unit to an accredited investor by subscription agreement. The units consisted of 1,071,429 shares of common stock and 1,071,429 three-year warrants to purchase 1 share of common stock per warrant at $0.10.
On October 29, 2021, the Company issued 1,180,000 shares of common stock valued at $0.06 per share as an interest payment on an outstanding note.
On October 29, 2021, pursuant to our 2021 Long-Term Incentive Plan, the Company authorized the issuance of 500,000 shares of Common Stock of the Company to a financial consultant of the Company for services.
On October 29, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 500,000 shares of Common Stock of the Company to a legal consultant of the Company for services.
On October 29, 2021, pursuant to its 2021 Long-Term Incentive Plan, the Company issued 500,000 shares of common stock of the Company to a consultant of the Company for services.
All of the above-described issuances were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities, and may not be offered or sold absent registration or pursuant to an exemption therefrom.
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Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended September 30, 2021.
Item 3 – Defaults upon Senior Securities
We have entered into a number of promissory notes, some of which are in default as of September 30, 2021, or went into default before the filing of this Quarterly Report (See Note 7 to the financial statements).
As of September 30, 2021, we only had cash and cash equivalents of $218,332 and had approximately $290,049 of short-term debt in default. The short-term debt agreements provide legal remedies for satisfaction of defaults, including increased interest rates, default fees and other financial penalties. As of the date of this Quarterly Report none of the lenders have pursued their legal remedies. Management’s plan is to raise additional funds in the form of debt or equity in order to continue to fund losses until such time as revenues are able to sustain the Company. To date, the main source of funding has been through the issuance of debt securities. There is no assurance that management will be successful in being able to continue to obtain additional funding or defend potential litigation by note holders.
Item 4 – Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
Amended and Restated Articles of Incorporation
Pursuant to the May 21, 2021, majority consent of stockholders in lieu of an annual meeting, the Company amended and restated its Articles of Incorporation effective as of July 14, 2021. A copy of the amended and restated articles of incorporation were attached to the Form 8-K filed on July 28, 2021, as Exhibit 3.1.
Articles – Amended Designation of Series B Preferred Stock
Effective July 26, 2021, the board of directors approved amending the certificate of designation of the Company’s Series B Preferred Stock to increase the authorized shares of Series B Preferred Stock from 250,000 shares to 350,000. The amended certificate of designation was attached to the Form 8-K filed on July 28, 2021 as Exhibit 4.1.
Item 6 – Exhibits
American Rebel Holdings, Inc. includes by reference the following exhibits:
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| 101.INS | Inline XBRL Instance Document** |
| 101.SCH | Inline XBRL Taxonomy Extension Schema** |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase** |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase** |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase** |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase** |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
# Filed herewith.
† Indicates management contract or compensatory plan or arrangement.
** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: November 15, 2021 | ||
| AMERICAN REBEL HOLDINGS, INC. | ||
| (Registrant) | ||
| By: | /s/ Charles A. Ross, Jr. | |
| By: | Charles A. Ross, Jr., President, CEO, Principal Executive Officer, | |
| Treasurer, CFO, Principal Financial Officer and Principal Accounting Officer | ||
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