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: |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
| ||||
| The
|
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 14, 2023, was shares, which does not include an additional 860,000 shares that are authorized but not yet outstanding.
AMERICAN REBEL HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
| 2 |
Part I. Financial Information
Item 1.- Interim Condensed Consolidated Financial Statements (unaudited)
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (audited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expense | ||||||||
| Inventory | ||||||||
| Inventory deposits | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net | ||||||||
| OTHER ASSETS: | ||||||||
| Lease deposits and other | ||||||||
| Right-of-use lease assets | ||||||||
| Goodwill | ||||||||
| Total Other Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and other accrued expense | $ | $ | ||||||
| Accrued interest | ||||||||
| Loan – Officer – related party | ||||||||
| Loans – Working capital | ||||||||
| Line of credit | ||||||||
| Right-of-use lease liabilities, current | ||||||||
| Total Current Liabilities | ||||||||
| Right-of-use lease liabilities, long-term | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY (DEFICIT): | ||||||||
| Preferred stock, $ par value; shares authorized; , and issued and outstanding, respectively at September 30, 2023 and December 31, 2022 | ||||||||
| Series A Preferred Shares | ||||||||
| Series B Preferred Shares | ||||||||
| Common Stock, $ par value; shares authorized; and issued and outstanding, respectively at September 30, 2023 and December 31, 2022 | ||||||||
| 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 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the three months ended September 30, 2023 | For the three months ended September 30, 2022 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | ||||||||
| Rental expense, warehousing, outlet expense | ||||||||
| Product development costs | ||||||||
| Marketing and brand development costs | ||||||||
| Administrative and other | ||||||||
| Depreciation and amortization expense | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Interest expense – pre-emptive rights release | ( | ) | ||||||
| Interest Income | ||||||||
| Employee retention credit funds, net of costs to collect | ||||||||
| Gain/(loss) on sale of equipment | ||||||||
| 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 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the nine months ended September 30, 2023 | For the nine months ended September 30, 2022 | |||||||
| Revenue | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross margin | ||||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | ||||||||
| Rental expense, warehousing, outlet expense | ||||||||
| Product development costs | ||||||||
| Marketing and brand development costs | ||||||||
| Administrative and other | ||||||||
| Depreciation and amortization expense | ||||||||
| Operating income (loss) | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Interest expense – pre-emptive rights release | ( | ) | ||||||
| Interest income | ||||||||
| Employee retention credit funds, net of costs to collect | ||||||||
| Gain/(loss) on sale of equipment | ||||||||
| 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.
| 5 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)
| Common Stock | Common Stock Amount | Preferred Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | |||||||||||||||||||
| Balance – December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
| Sale of common stock, net | ||||||||||||||||||||||||
| Common stock issued as compensation | ||||||||||||||||||||||||
| Preferred stock converted into common stock | ( | ) | ||||||||||||||||||||||
| Conversion of debt into warrants | - | |||||||||||||||||||||||
| Sale of common stock | ||||||||||||||||||||||||
| Sale of pe-funded common stock warrants $
per share, exercise price of $ |
- | |||||||||||||||||||||||
| Offering costs and fees associated with offering | - | ( |
) | ( |
) | |||||||||||||||||||
| Issuance of shares as compensation | ||||||||||||||||||||||||
| Exercise of pre-funded warrants | ||||||||||||||||||||||||
| Net loss for the nine months ending September 30, 2022 | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance – September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance – December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Sale of common stock, net | ||||||||||||||||||||||||
| Sale of pre-funded common stock warrants $ per share, exercise price of $ | - | |||||||||||||||||||||||
| Prefunded common stock warrant offering costs and fees | - | ( | ) | ( | ) | |||||||||||||||||||
| Effect of reverse stock split round lot shares | ( | ) | ||||||||||||||||||||||
| Warrant inducement and exercise
of repriced common stock warrants at $ | ||||||||||||||||||||||||
| Warrant inducement offering costs and fees | - | ( | ) | ( | ) | |||||||||||||||||||
| Exercise of prefunded common
stock warrants at $ | ||||||||||||||||||||||||
| Common stock issued as compensation | ||||||||||||||||||||||||
| Net loss for the nine months ending September 30, 2023 | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance – September 30, 2023 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
See Notes to Financial Statements.
| 6 |
AMERICAN REBEL HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
| For the nine months ended September 30, 2023 | For the nine months ended September 30, 2022 | |||||||
| CASH FLOW FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Depreciation and amortization | ||||||||
| Gain on sale of equipment | ( | ) | ||||||
| Expense paid through issuance of common stock | ||||||||
| Amortization of loan discount | ||||||||
| Adjustments to reconcile net loss to cash (used in) operating activities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses | ||||||||
| Inventory | ( | ) | ( | ) | ||||
| Inventory deposits and other | ( | ) | ( | ) | ||||
| Accounts payable and accrued expense | ( | ) | ( | ) | ||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of Champion Entities | ( | ) | ||||||
| Disposition/(purchase) of fixed assets | ( | ) | ||||||
| Partial payment made on settlement of outstanding liability – Champion Entities purchase | ( | ) | ||||||
| Net Cash Provided by/(Used in) Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOW FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock, prefunded warrants and warrant inducement,
net of offering costs paid of $ | ||||||||
| Proceeds from warrant exercise | ||||||||
| Proceeds from line of credit | ||||||||
| Principal payments on line of credit, net | ( | ) | ||||||
| Proceeds (repayments) of loans – officer - related party, net | ( | ) | ||||||
| Proceeds from working capital loans | ||||||||
| Principal payments on working capital loans | ( | ) | ||||||
| Principal payment on loans – nonrelated parties | ( | ) | ||||||
| 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: | ||||||||
| Conversion of debt into equity | $ | $ | ||||||
See Notes to Financial Statements.
| 7 |
AMERICAN REBEL HOLDINGS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(unaudited)
NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The
Company was incorporated on
Nature of operations
The Company develops and sells branded products in the self-defense, safe storage and other patriotic product areas using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. The Company’s products are marketed under the American Rebel Brand and are proudly imprinted with such branding. Through its acquisition of the “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.) the Company promotes and sells its safe and storage products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms retail outlets, as well as through online avenues, including website and e-commerce platforms. The Company sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands as well as the American Rebel Brand. On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch regionally in early 2024.
To varying degrees, the consequences of the COVID-19 pandemic continue to affect our operating business. Significant government and private sector actions have taken place to control the spread and mitigate the economic effects of the virus and its variants. The development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our business. The economic effects from these events over long term cannot be reasonably estimated at this time. Accordingly, estimates used in the preparation of our financial statements, including those associated with the evaluation of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us (through accounts receivable) and the estimations of certain losses assumed under warranty and other liability contracts, may be subject to significant adjustments in future periods.
Interim Financial Statements and Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K of the Company for the period ended December 31, 2022, and notes thereto contained, filed on April 14, 2023.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.
Year-end
The Company’s year-end is December 31.
| 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, other storage products and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines an estimate for the reserve of slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
Fixed assets and depreciation
Property and equipment are stated at cost, net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded using the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.
Revenue recognition
In accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.
These steps are met when an order is received, a price is agreed to, and the product is shipped or delivered to that customer.
Advertising costs
Advertising
costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023, and December 31, 2022, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
| 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, 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 ASC 718-10 and the conclusions reached ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively, and for the nine months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively
Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled none and none as of September 30, 2023 and December 31, 2022, respectively. All other dilutive securities are listed below.
The following table illustrates the total number of common shares that would be converted from common stock equivalents issued and outstanding at the end of each period presented; as of September 30, 2023 and as of September 30, 2022, respectively.
| September 30, 2023 | September 30, 2022 | |||||||
| Shares used in computation of basic earnings per share for the periods ended | ||||||||
| Total dilutive effect of outstanding stock awards or common stock equivalents | ||||||||
| Shares used in computation of fully diluted earnings per share for the periods ended September 30, 2023 and September 30, 2022, respectively | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Fully diluted income (loss) per share | $ | ( | ) | $ | ( | ) | ||
In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
Income taxes
The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change.
Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
| 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, 2023, and December 31, 2022, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax
positions with
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month and nine-month periods ended September 30, 2023, and 2022, respectively, income tax expense has been recorded.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Warranties
The
Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with
respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its
recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense
accounts in the accompanying condensed consolidated balance sheets We estimate that warranty liability is nominal or negligible based on the superior quality of products and our excellent
customer relationships. Warranty liability recorded as of December 31, 2022 and September 30, 2023 was approximately $
Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations, and as further defined by ASU 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of future results, particularly by growth-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value (see Note 8 - Goodwill and Acquisition of Champion Entities for further information in accordance with ASC 805-10-55-37 through ASC 805-10-55-50).
Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included in operating lease Right-of-Use assets and operating lease liabilities, current and non-current, on the Company’s condensed consolidated balance sheets.
Recent pronouncements
The Company evaluated recent accounting pronouncements through September 30, 2023, and believes that none have a material effect on the Company’s financial statements.
| 11 |
Concentration risks
Prior
to the closing of the Champion Entities, the Company purchased a substantial portion (over
NOTE 2 – GOING CONCERN
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the
recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the
growth and acquisition stage and, accordingly, has not yet reached profitability from its operations. Since inception, the Company has
been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to product
development, branding, inventory buildup and product launch. As a result, the Company has continued to incur net losses for the nine
months ended September 30, 2023, and 2022 of ($
The ability of the Company to continue as a going concern is dependent upon its ability to raise capital from the sale of its equity and, ultimately, the achievement of significant operating revenues and profitability.
Management believes that sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock. However, no assurance can be given that the Company will obtain this additional working capital, or if obtained, that such funding will not cause substantial dilution to its existing stockholders. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay some of its business objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – INVENTORY AND DEPOSITS
Inventory and deposits include the following:
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Inventory – finished goods | $ | $ | ||||||
| Inventory deposits | ||||||||
| Total Inventory and deposits | $ | $ | ||||||
With
the integration of Champion, we eliminated the need to hold inventory with our American Rebel, Inc. subsidiary at its facility. We do
not believe we have a risk of concentration in our purchasing of inventory materials, sourcing needs or manufacturing. As reported in
our Annual Report filed on Form 10-K Champion added approximately $
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Plant, property and equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Property and equipment gross | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Net property and equipment | $ | $ | ||||||
| 12 |
For
the nine months ended September 30, 2023, and 2022 we recognized $
NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
Charles A. Ross, Jr. serves as the Company’s CEO. Compensation for Mr. Ross includes a base salary and a bonus based upon certain performance measures approved by the Board of Directors.
Doug
Grau serves as the Company’s President. Compensation for Mr. Grau includes a base salary and a bonus based upon certain performance
measures approved by the Board of Directors. Mr. Grau lent the Company approximately $
NOTE 6 – LINE OF CREDIT – FINANCIAL INSTITUTION
During
February 2023, the Company entered into a $
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Line of credit from a financial institution. | $ | $ | ||||||
| Total recorded as a current liability | $ | $ | ||||||
Current
and long-term portion. As of September 30, 2023 the total balance due of $
The
Company drew down on the Line of Credit initially in the amount of $
NOTE 7 – NOTES PAYABLE – WORKING CAPITAL
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Working capital loan with a limited liability company domiciled in the state of Georgia. The working capital loan is demand loan and accrues interest at | ||||||||
| Working capital loans with an irrevocable trust established in the state
of Georgia, managed and owned by the same entity as the limited liability company that previously held the $ | ||||||||
| Working capital loans with a major financial institution converted from a revolving line of credit to a strict payoff loan agreement with the major financial institution. Annual interest rate approximates | ||||||||
| Working capital loan agreement with a limited liability company domiciled in the state of New York. The working capital loan is secured by all the assets of the Company that is not secured by the first priority interest of the major financial institution line of credit facility as well as a personal guaranty by our CEO, Mr. Charles A Ross. The working capital loan requires payments of $ | ||||||||
| $ | $ | |||||||
| Total recorded as a current liability | $ | $ | ||||||
On
April 14, 2023, the Company entered into a $
On July 1, 2023, the Company entered
into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited lender. Under the Assumption
Agreement the Company agreed to pay $
On
July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023,
and the accredited lender of the new working capital loans paid the holder of the old working capital loans $
During
the nine months ending September 30, 2022, the Company repaid several short-term notes under similar terms as its other short-term notes totaling
$
| 13 |
During
the nine months ending September 30, 2022, the Company repaid $
At
September 30, 2023, and December 31, 2022, the outstanding balance due on all of the working capital notes payable was
$
NOTE 8 – GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES
Goodwill
Goodwill is initially recorded as of the acquisition date and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.
As
of September 30, 2023 and December 31, 2022, we had goodwill of $
The Company policy is to review its goodwill for impairment periodically (based on economic conditions) and more specifically in the 4th quarter of its financial reporting year and determine whether impairment is to be recognized within its condensed consolidated statement of operations. See Note 1, Summary of Significant Accounting Policies to our Annual Report filed on Form 10-K, for more information on impairment testing.
Business Combination Consideration
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (the “Champion Entities” or “Champion”) and Mr. Ray Crosby (the “Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The
acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration
of approximately $
During the nine months ended September 30, 2023 the
Company received a claim for refund or right of repayment from the Seller of the Champion Entities with respect to the CARES Act tax credits
income the Company received. The Company prior to September 30, 2023 settled the matter with the Seller and agreed to pay an additional
$
| 14 |
Accounting for the Business Combination
Under the acquisition method of accounting, the acquired tangible and intangible assets and assumed liabilities are recognized based on their estimated fair values as of the business combination closing date. Pro forma adjustments were preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of December 31, 2022 which have been prepared to illustrate the estimated effect of the business combination (see Note 15 – Pro Forma Condensed Combined Financial Information (Unaudited) to our Annual Report filed on Form 10-K).
The Company may recognize a negligible deferred tax benefit as a result of the acquisition. Due to the acquisition, a temporary difference between book and tax basis for the intangible assets acquired may result in a deferred tax liability and additional goodwill, which we believe to be negligible.
The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of July 29, 2022. The purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed, nor may never be completed. Accordingly, the pro forma purchase price allocation may be subject to further adjustments. There can be no assurances that additional analyses and final determination of valuations will result in a change to the estimates of fair value set forth below.
The following is the estimate of the fair value of the assets acquired, liabilities assumed, and ensuing goodwill identified, reconciled to the purchase price transferred:
| Cash | $ | |||
| Accounts receivable | ||||
| Inventory | ||||
| Fixed assets | ||||
| Deposits and other assets | ||||
| Customer list and other intangibles** | ||||
| Accounts payable | ( | ) | ||
| Accrued expenses and other | ( | ) | ||
| Goodwill | ||||
| Consideration | $ | |||
| Consideration: | ||||
| Payments of cash direct to Seller | $ | |||
| Additional payments of cash to Seller in 2023 | ||||
| Amounts due on accounts payable to Seller (over the next 12 months) | ||||
| Debt payments on behalf of Seller - guarantor | ||||
| Payments to various service providers | ||||
| $ |
The
Company’s estimates of fair values of the net assets acquired are based on the information that was available at the date of the
acquisition, and the Company may continue to evaluate the underlying inputs and assumptions used in its valuations and would be subject
to change. Preliminary estimates are subject to change during the measurement period, which we have determined to be one year from the
date of the acquisition, which is July 29, 2023. (**- Customer lists and other intangibles are combined with goodwill at the end of each
period and evaluated as to fair value. At September 30, 2023 and December 31, 2022, it was determined that total
intangible assets (which includes goodwill) had a fair value of $
NOTE 9 – INCOME TAXES
At
September 30, 2023 and December 31, 2022, the Company had a net operating loss carryforward of $
Components of net deferred tax asset, including a valuation allowance, are as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Deferred tax asset: | ||||||||
| Net operating loss carryforward | $ | $ | ||||||
| Total deferred tax asset | ||||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
Valuation
allowance for deferred tax assets as of September 30, 2023, and December 31, 2022, was $
| 15 |
Reconciliation between the statutory rate and the effective tax rate for both periods and as of September 30, 2023 and December 31, 2022:
| Federal statutory rate | ( | )% | ||
| State taxes, net of federal benefit | ( | )% | ||
| Change in valuation allowance | % | |||
| Effective tax rate | % |
On
August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous
provisions, including a
NOTE 10 – SHARE CAPITAL
The Company is authorized to issue shares of its $ par value common stock and shares of its $ par value preferred stock.
On
June 27, 2023, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of
Common stock and preferred stock
For
the month of February 2022, the following transactions occurred: On February 3, 2022, multiple Series B Convertible Preferred stockholders
converted shares of their Series B Convertible preferred stock to shares of common stock of the Company. On February 3,
2022, the Company converted two outstanding notes into shares of common stock of the Company. On February 10, 2022, the Company
received an equity investment of $
For
the month of July 2022 the following transactions occurred: On July 12, 2022, we entered into a PIPE transaction with Armistice
Capital Master Fund Ltd. (“Armistice Capital”) for the purchase and sale of $
For
the month of June 2023 the following transactions occurred: On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $
| 16 |
Pursuant to the PIPE transaction shares of common stock were issued to Armistice Capital. The 2023 Prefunded Warrants held by Armistice Capital were not exercised for the month of July.
For the month of September 2023, the following transactions occurred: On September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $ and $, respectively per share.
Pursuant
to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants
to purchase an aggregate of
On
September 8, 2023
At September 30, 2023 and December 31, 2022, there were and shares of common stock issued and outstanding, respectively; and and shares of Series B preferred stock issued and outstanding, respectively, and and shares of its Series A preferred stock issued and outstanding, respectively.
See Note 15 – Subsequent Events, the Company on October 31, 2023, approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. On November 3, 2023, the Company approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are further described in Note 15 – Subsequent Events.
| 17 |
On
February 10, 2022, the Company received an equity investment of $
On
February 11, 2022, we entered into a transaction with Calvary Fund, the provider of our 2021 bridge financing for the retirement of its
debt instrument, principal and interest with a combined value of $
On
July 12, 2022, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $
On
June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $
of securities, consisting of (i)
shares of common stock at $ per
share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into
On September 8, 2023, the
Company, entered into an inducement offer letter agreement with Armistice Capital the holders of existing common stock purchase warrants
to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28,
2023 and had an exercise price of $
Pursuant to the Inducement
Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of
| 18 |
As
of December 31, 2022, no Prefunded Warrants remained issued and outstanding with respect to the July PIPE transaction. The Prefunded
Warrants were purchased in their entirety by the holders of the warrants for $
Calvary
Fund exercised all of its Calvary Warrants by November 30, 2022 requiring the payment of an additional $
Along
with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to
As
of December 31, 2022, 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 December 31, 2022 and September 30, 2023. The warrants do not trade in a highly active securities market, and as such, the Company estimated the fair value of these common stock equivalents using Black-Scholes and the following assumptions:
Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term which due to their maturity period as expiry, it was three years. The Company had no reason to believe future volatility over the expected remaining life of these common stock equivalents was likely to differ materially from historical volatility. Expected life was based on three years due to the expiry of maturity. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the common stock equivalents.
| September 30, 2023 | December 31, 2022 | |||||||
| (unaudited) | (audited) | |||||||
| Stock Price | $ | $ | ||||||
| Exercise Price | $ | $ | ||||||
| Term (expected in years) | ||||||||
| Volatility | % | % | ||||||
| Annual Rate of Dividends | % | % | ||||||
| Risk Free Rate | % | % | ||||||
| 19 |
Stock Purchase Warrants
| Shares | Weighted- Average Exercise Price Per Share | Remaining term | Intrinsic value | |||||||||||||
| Outstanding and Exercisable at December 31, 2021 | $ | years | ||||||||||||||
| Granted | $ | years | ||||||||||||||
| Granted in Debt Conversion | $ | years | - | |||||||||||||
| Granted Prefunded Warrants | $ | years | - | |||||||||||||
| Granted in PIPE transaction | $ | * | years | - | ||||||||||||
| Exercised | ( | ) | $ | - | ||||||||||||
| Expired | ( | ) | - | |||||||||||||
| Outstanding and Exercisable at December 31, 2022 (audited) | years | |||||||||||||||
| Granted Prefunded Warrants | $ | years | - | |||||||||||||
| Granted in PIPE transaction | $ | * | years | |||||||||||||
| Granted pursuant to repricing transaction | $ | * | years | - | ||||||||||||
| Granted pursuant to Inducement Agreement – New Warrants | $ | years | - | |||||||||||||
| Exercised | ( | ) | $ | years | ||||||||||||
| Expired | - | |||||||||||||||
| Outstanding and Exercisable at September 30, 2023 (unaudited) | $ | years | ||||||||||||||
| - |
NOTE 12 – LEASES AND LEASED PREMISES
Rental Payments under Non-cancellable Operating Leases and Equipment Leases
The Company through its purchase of Champion acquired several long term (more than month-to-month) leases for two manufacturing facilities, three office spaces, five distribution centers and five retail spaces. Four of its distribution centers also have retail operations for which it leases facilities. Lease terms on the various spaces’ expiry from a month-to-month lease (30 days) to a long-term lease expiring in March of 2027.
Rent
expense for operating leases totaled approximately $
The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.
Rental
equipment expense for finance leases totaled approximately $
Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
| 20 |
On January 1, 2019, the Company adopted ASC 842 which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. ASC 842 requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019.
The
adoption of ASC 842 resulted in the recognition of ROU assets of $
The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.
For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.
For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
The Company’s operating leases are comprised primarily of facility leases and as such we have no finance leases for our vehicles or equipment currently at this time.
| 21 |
Balance sheet information related to our leases is presented below:
| September 30, | ||||||||||
| Balance Sheet location | 2023 | 2022 | ||||||||
| Operating leases: | ||||||||||
| Right-of-use lease assets | Right-of-use operating lease assets | $ | $ | |||||||
| Right-of-use lease liability, current | Other current liabilities | |||||||||
| Right-of-use lease liability, long-term | Right-of-use operating lease liability | |||||||||
| Finance leases: | ||||||||||
| Right-of-use lease assets | Property, plant and equipment | |||||||||
| Right-of-use lease liability, current | Current portion of long-term debt | |||||||||
| Right-of-use lease liability, long-term | Long-term debt | |||||||||
The following provides details of the Company’s lease expense:
| Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Operating lease expense, net | $ | $ | ||||||
| Finance lease expense: | ||||||||
| Amortization of assets | ||||||||
| Interest on lease liabilities | ||||||||
| Total finance lease expense | ||||||||
| Operating lease expense, net | $ | $ | ||||||
Other information related to leases is presented below:
| 2023 | 2022 | |||||||
| Right-of-use assets acquired in exchange for operating lease obligations | $ | $ | ||||||
| Cash Paid for Amounts Included in Measurement of Liabilities: | ||||||||
| Operating cash flows from finance leases | ||||||||
| Operating cash flows from operating leases | ||||||||
| Weighted Average Remaining Lease Term: | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted Average Discount Rate: | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | n/a | % | n/a | % | ||||
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
| Finance leases | Operating leases | |||||||
| 2023 (three months remaining) | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total future minimum lease payments, undiscounted | ||||||||
| Less: Imputed interest | (- | ) | ( | ) | ||||
| Present value of future minimum lease payments | $ | $ | ||||||
Rental
expense totaled approximately $
| 22 |
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
During the nine-month periods ended September 30, 2023 and 2022, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company from time-to-time. In the opinion of management, and after consultation with legal counsel, resolution of any of these matters (of which there are none) is not expected to have a material effect on the condensed consolidated financial statements.
Contractual Obligations
The
Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect
on the condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022 there was approximately $
Executive Employment Agreements and Independent Contractor Agreements
The Company has written employment agreements with various other executive officers. All payments made to its executive officers and significant outside service providers are analyzed and determined by the board of directors’ compensation committee; some payments made to independent contractors (or officer payments characterized as non-employee compensation) may be subject to backup withholding or general withholding of payroll taxes, may make the Company responsible for the withholding and remittance of those taxes. Generally outside service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis and Company policy.
NOTE 14 – OTHER INCOME – EMPLOYEE RETENTION CREDIT
The
Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included
identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the tax filings
for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Company received
approximately $
NOTE 15 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of September 30, 2023, through the date the financial statements were issued and determined that there were the following subsequent events:
On October 31, 2023, the Company approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements.
On November 3, 2023, the Company’s board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are as follows:
| ● | The Series C Preferred Stock ranks, as to dividend rights and rights upon liquidation, dissolution, or winding up, junior to the Company’s Series A Preferred Stock and senior to its Common Stock and Series B Preferred Stock. The terms of the Series C Preferred Stock do not limit the Company’s ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of its Series C Preferred Stock as to distribution rights and rights upon liquidation, dissolution or winding up. |
| ● | Each share of Series C Preferred Stock has an initial stated value of $, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting the Series C Preferred Stock. |
| ● | Dividends
on the Series C Preferred Stock are cumulative and payable quarterly in arrears to all holders
of record on the applicable record date. Holders of Series C Preferred Stock are entitled
to receive cumulative quarterly dividends at a per annum rate of |
| 23 |
| ● | Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series C Preferred Stock are entitled to receive, before any payment or distribution is made to the holders of Common Stock or Series B Preferred Stock and on a junior basis with holders of Series A Preferred Stock, a liquidation preference equal to the stated value per share, plus accrued but unpaid dividends thereon (whether or not declared). |
| ● | The
Company may redeem the shares of Series C Preferred Stock, in whole or in part at any time
after the fifth anniversary of the initial closing of offering selling such shares and continuing
indefinitely thereafter, at the Company’s option, for cash, at $ |
| ● | Once
per calendar quarter beginning any time after the fifth-year anniversary of date of issuance,
a Holder of record of shares of Series C Preferred Stock may elect to cause the Company to
redeem all or any portion of their shares of Series C Preferred Stock for an amount equal
to $ |
| ● | The Company is not be obligated to redeem or repurchase shares of Series C Preferred Stock if it is restricted by applicable law or its articles of incorporation from making such redemption or repurchase or to the extent any such redemption or repurchase would cause or constitute a default under any borrowing agreements to which it or any of its subsidiaries are a party or otherwise bound. In addition, the Company has no obligation to redeem shares in connection with a redemption request made by a holder if it determines, as of the redemption date, that it does not have sufficient funds available to fund that redemption. In this regard, the Company will have complete discretion under the certificate of designation for the Series C Preferred Stock to determine whether it is in possession of “sufficient funds” to fund a redemption request. Redemptions will be limited to five percent (5%) of the total outstanding shares of Series C Preferred Stock per quarter. To the extent the Company is unable to complete redemptions it may have earlier agreed to make, the Company will complete those redemptions promptly after it becomes able to do so, with all such deferred redemptions being satisfied on a first come, first served, basis. |
| ● | The Series C Preferred Stock has no voting rights relative to matters submitted to a vote of the Company’s stockholders (other than as required by law). The Company may not authorize or issue any class or series of equity securities ranking senior to the Series C Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior securities) or amend its articles of incorporation (whether by merger, consolidation, or otherwise) to materially and adversely change the terms of the Series C Preferred Stock without the affirmative vote of at least two-thirds of the votes entitled to be cast on such matter by holders of the Company’s outstanding shares of Series C Preferred Stock, voting together as a class. |
| ● | The Company will not be required to redeem shares of Series C Preferred Stock at any time except as otherwise described above. Accordingly, the shares of Series C Preferred Stock will remain outstanding indefinitely, unless the Company decides, at its option, to exercise its call right, or the holder of the Series C Preferred Stock exercises their put right. The shares of Series C Preferred Stock will not be subject to any sinking fund. |
| ● | Each
share of Series C Preferred Stock shall be convertible into shares of Common Stock at a price
per share of $ ( |
| 24 |
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “may,” “could,” “should,” “anticipate,” “expect,” “project,” “position,” “intend,” “target,” “plan,” “seek,” “believe,” “foresee,” “outlook,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. These risks and uncertainties include, but are not limited to, the following:
| ● | we recently consummated the purchase of our safe manufacturer and sales organizations, and future acquisitions and operations of new manufacturing facilities and/or sales organizations might prove unsuccessful and could fail; | |
| ● | our success depends on our ability to introduce new products that track customer preferences; | |
| ● | if we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights; | |
| ● | as a significant portion of our revenues are derived by demand for our safes and the personal security products for firearms storage, we depend on the availability and regulation of ammunition and firearm storage; | |
| ● | as we continue to integrate the purchase of our safe manufacturer and sales organization, any compromised operational capacity may affect our ability to meet the demand for our safes, which in turn may affect our generation of revenue; | |
| ● | shortages of components and materials, as well as supply chain disruptions, may delay or reduce our sales and increase our costs, thereby harming our results of operations; | |
| ● | we do not have long-term purchase commitments from our customers, and their ability to cancel, reduce, or delay orders could reduce our revenue and increase our costs; | |
| ● | our inability to effectively meet our short- and long-term obligations; | |
| ● | given our limited corporate history it is difficult to evaluate our business and future prospects and increases the risks associated with an investment in our securities; | |
| ● | our inability to raise additional financing for working capital; | |
| ● | our ability to generate sufficient revenue in our targeted markets to support operations; | |
| ● | significant dilution resulting from our financing activities; | |
| ● | the actions and initiatives taken by both current and potential competitors; | |
| ● | our ability to diversify our operations; | |
| ● | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; | |
| ● | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; | |
| ● | the deterioration in general of global economic, market and political conditions; | |
| ● | the inability to efficiently manage our operations; | |
| ● | the inability to achieve future operating results; | |
| ● | the unavailability of funds for capital expenditures; | |
| ● | the inability of management to effectively implement our strategies and business plans; and | |
| ● | the other risks and uncertainties detailed in this report. |
Because the factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us, you should not place undue reliance on any such forward-looking statements. New factors emerge from time to time, and their emergence is impossible for us to predict. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
This Quarterly Report should be read completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Quarterly Report are made as of the date of this Quarterly Report and should be evaluated with consideration of any changes occurring after the date of this Quarterly Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Except as otherwise indicated by the context, references in this report to “Company,” “American Rebel Holdings,” “American Rebel,” “we,” “us” and “our” are references to American Rebel Holdings, Inc. and its operating subsidiaries, American Rebel, Inc., Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC and Champion Safe De Mexico, S.A. de C.V. All references to “USD” or United States Dollar refer to the legal currency of the United States of America.
| 25 |
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 established America’s Patriotic Brand and operates as a designer, manufacturer, and marketer of safes and other storage products, as well as other personal security products, particularly branded accessories and apparel with advantageous concealment pockets for 2nd Amendment enthusiasts.
We are focused on 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 safely store our customers’ priceless keepsakes, family heirlooms and other treasured memories, with an aim to make our products accessible at various price points for home and personal use. We believe our products are designed for safety, quality, reliability, abundance of features and performance. Our safes are designed, manufactured and sold under the American Rebel, Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands that are well known and well respected in the safe industry.
In addition to our branded safes, we offer an assortment of personal security products that include apparel and accessories for both men and women, and children under the American Rebel name, America’s Patriotic Brand. Our backpacks utilize what we believe to be a distinctive sandwich-method concealment pocket, which we refer to as our Personal Protection Pocket, to hold customers firearms in place, securely and safely. Concealment pockets on our Freedom 3.0 and Freedom 2.0 Concealed Carry Jackets incorporate a silent operation method allowing for opening and closing of the pockets with the use of a magnetic closure for stealth and safety.
On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch regionally in early 2024. The beer industry in the United States is a more than $110 billion dollar market. We believe there is a substantial opportunity to enter the beer market at this time to present our customers with a beer they can support that aligns with their core values.
We believe we can continue to create a strong American brand community presence, in part through the personal efforts our Chief Executive Officer, Mr. Charles A. “Andy” Ross, who has written, recorded and performed a number of hit songs about the true American spirit of independence. We believe our customers identify with these core values expressed by our Chief Executive Officer through the “American Rebel” brand, America’s Patriotic Brand. American Rebel, its executives and employees live and breathe the America First philosophy and further those efforts utilizing social media wherever they can and are not censored for their words which we are all afforded under the First Amendment.
Through our growing network of dealers, we promote and sell our products in select regional retailers, as well as local specialty safe, sports, hunting and firearms stores, along with available e-commerce marketplaces. The Company shares a commitment to offering products of what we believe are enduring quality and comfort that allow our customers to keep their valuable belongings safe on the go and express their patriotism and style, which is synonymous with the American Rebel, America’s Patriotic Brand.
We generate revenue from the following activities:
| a. | Safes – we offer a wide range of home, office and personal safe models, in a broad assortment of sizes, features and styles, which are constructed with U.S.-made steel. Demand for our safes is relatively strong across all segments of our customers, including individuals and families seeking to protect their valuables, businesses seeking to protect valuables and irreplaceable items such as artifacts and jewelry, and dispensaries servicing the community that seek to protect their inventory and cash flow. In addition, the demand for our safes has also been relatively strong among responsible gun owners, sportsmen, competitive shooters and hunters seeking a premium and responsible solution to secure valuables and firearms, to prevent theft and to protect loved ones. We expect to benefit from increasing awareness of and need for safe storage of firearms in future periods. Below is a summary of the different safes we currently make: |
| i. | Large Safes – All of our large safes share the same high-quality workmanship, are constructed out of 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 90 minutes of fire protection at 1200 degrees Fahrenheit. Many of 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. |
| 26 |
| 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, Champion and Superior in- and out-swinging vault doors provide maximum functionality to facilitate a secure vault room. Our 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. |
Costs of 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 and supply chain shortages, 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 continue to keep growing in 2023 and beyond, as customers continue to spend 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 a necessary appliance for any household, providing protection for expensive firearms and other valuables. Overall, management is focused on effectively positioning the Company for meeting the increasing demand for our safes and faster production turnaround.
Recent Developments and Trends
Our Growth Strategy
Our goal is to enhance our position as a designer, manufacturer and marketer of premium safes and personal security products. In addition, we recently announced we are entering the beverage business, through the introduction of American Rebel Beer. We have established plans to grow our business by focusing on three key areas: (1) organic growth and expansion in existing markets; (2) targeted strategic acquisitions that increase our on-premise and online product offerings, distributor and retail footprint and/or have the ability to increase and improve our manufacturing capabilities and output, and (3) expanding the scope of our operation activities to the dispensaries U.S. community.
| 27 |
We have developed what we believe is a multi-pronged growth strategy, as described below, to help us capitalize on a sizable opportunity. Through methodical sales and marketing efforts, we believe we have implemented several key initiatives we can use to grow our business more effectively. We believe we made significant progress in 2022 in the largest growing segment of the safe industry, sales to first-time buyers. We also intend to opportunistically pursue the strategies described below to continue our upward trajectory and enhance stockholder value. Key elements of our strategy to achieve this goal are as follows:
Organic Growth and Expansion in Existing Markets - Build our Core Business
The cornerstone of our business has historically been safe product offerings. We are focused on continuing to develop our home, office and personal safes product lines. We are investing in adding what we believe are distinctive and advanced technological solutions for our safes and protective product lines.
We are also working to increase floor space dedicated to our safes and strengthen our online presence in order to expand our reach to new enthusiasts and build our devoted American Rebel community. We intend to continue to endeavor to create and provide retailers and customers with what we believe are responsible, safe, reliable and stylish products, and we expect to concentrate on tailoring our supply and distribution logistics in response to the specific demands of our customers.
Additionally, our Concealed Carry Product line and Safe line serve a large and growing market segment. We believe that interest in safes increase, as well as in our complimentary concealed carry backpacks and apparel as a by-product, when interest of the general population in firearms increase. To this extent, the FBI’s National Instant Criminal Background Check System (NICS), which we believe serves as a proxy for gun sales since a background check is generally needed to purchase a firearm, reported a record number of background checks in 2020, 39,695,315. The prior annual record for background checks was 2019’s 28,369,750. In 2021, there were 38,876,673 background checks conducted, similar to that of 2020’s annual record which was 40% higher than the previous annual record in 2019. Background checks in 2023 are continuing on a pace to exceed the 2019 totals as well. While we do not expect this increase in background checks to necessarily translate to an equivalent number of additional safes purchased, we do believe it might be an indicator of the increased demand in the safe market. In addition, certain states (such as Massachusetts, California, New York and Connecticut) are starting to legislate new storage requirements in respect of firearms, which is expected to have a positive impact on the sale of safes. We have also recognized a growth in first-time gun buyers and their propensity to purchase a gun safe simultaneously with their first-time gun purchase. The previous trend was that gun buyers would wait to purchase a gun safe until multiple firearms were owned.
We continue to strive to strengthen our relationships and our brand awareness with our current distributors, dealers, manufacturers, specialty retailers and consumers and to attract other distributors, dealers, and retailers. We believe that the success of our efforts depends on the distinctive features, quality, and performance of our products; continued manufacturing capabilities and meeting demand for our safes; the effectiveness of our marketing and merchandising programs; and the dedicated customer support.
In addition, we seek to improve customer satisfaction and loyalty by offering distinctive, high-quality products on a timely and cost-attractive basis and by offering efficient customer service. We regard the features, quality, and performance of our products as the most important components of our customer satisfaction and loyalty efforts, but we also rely on customer service and support for growing our business.
Furthermore, we intend to continue improving our business operations, including research and development, component sourcing, production processes, marketing programs, and customer support. Thus, we are continuing our efforts to enhance our production by increasing daily production quantities through equipment acquisitions, expanded shifts and process improvements, increased operational availability of our equipment, reduced equipment down times, and increased overall efficiency.
We believe that by enhancing our brand recognition, our market share might grow correspondingly. Champion Safe and its legacy of nearly 25 years of craftsmanship and quality position its products as viable alternatives to Liberty Safe product. Firearm industry sources estimate that 70 million to 80 million people in the United States own an aggregate of more than 400 million firearms, creating a large potential market for our safes and personal security products. We are focusing on the premium segment of the market through the quality, distinctiveness, and performance of our products; the effectiveness of our marketing and merchandising efforts; and the attractiveness of our competitive pricing strategies.
Targeted Strategic Acquisitions for Long-term Growth
We are consistently evaluating and considering acquisition opportunities that fit our overall growth strategy as part of our corporate mission to accelerate long-term value for our stockholders and create integrated value chains.
| 28 |
Champion Safe
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (the “Champion Entities” or “Champion”) and Mr. Ray Crosby (the “Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration of approximately $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed the Seller for approximately $400,000 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021. In addition to the payments to the Seller, the Company paid costs on behalf of and specifically associated with the acquisition of Champion and its integration into the Company’s operations of $350,000; $200,000 was paid to our investment banker in analyzing the acquisition and purchase of Champion prior to the purchase and subsequent financing in July as well as $150,000 paid to Champion’s independent PCOAB registered accounting firm to conduct their two years of audit and subsequent interim review reports.
Based in Provo, Utah and founded in 1999, Champion Safe is what we believe to be one of the premier designers, manufacturers and marketers of home and gun safes in North America. Champion Safe Co. has three safe lines, which we believe feature some of the most secure and highest quality gun safes.
Following the acquisition, we operate Champion Safe in the same manner as it operated pre-acquisition. Champion Safe, Superior Safe and Safe Guard Security Products are valuable and prominent identifiable brands in the safe industry. We plan to expand our manufacturing throughput to fill our significant backlog of orders and aggressively open new dealer accounts. As a division of the combined company, Champion Safe Company will shift its emphasis to growing revenue and increasing profitability for the combined company.
Champion Safe employs over 100 employees in their Utah factory and over 300 employees in their Nogales, Mexico facility just south of the U.S. border. The majority of the midline and value priced safes industry-wide are manufactured in China, but Champion had the foresight to build his own facility in Mexico and utilize American-made steel exclusively. Steep tariffs were imposed on China manufactured safes by the Trump administration and were continued for a time under the Biden administration. The prices of components for the made-in-China safes have dramatically increased as well as the transportation costs to import these Chinese-made safes. Champion’s decision to build his own facility in Mexico as opposed to importing Chinese-made safes has proven to be insightful and beneficial for Champion Safe.
Champion has expanded his paint-line capacity and hinge assembly workstations to seize upon the growth opportunities in the safe business. Champion has experience in many prior economic cycles and has found the safe business to be sound in good and bad economic times. Furthermore, the current emphasis on safe storage and the capital infusion from American Rebel positions the Champion operation to grow its footprint.
In addition to the access to capital for Champion to grow its business, American Rebel will benefit from Champion’s 350 dealers, nationwide distribution network and seniority with buying groups and trade shows. American Rebel will also benefit from the increased Champion manufacturing throughput as capacity restrictions have limited American Rebel’s inventory and potential growth. The collaboration between Champion and American Rebel management teams will focus on increased manufacturing efficiencies and volume expansion.
| 29 |
Expand into New Business Categories
We recently entered into an agreement to introduce American Rebel Beer as a new product offering, which is anticipated to launch regionally in early 2024. The Company has strived to be innovative, building products around its brand, and is committed to becoming a leading innovator in the industries in which it competes. To that end, the Company plans to continually test new alcohol beverages and may sell them under various brand labels for evaluation of drinker interest. The Company will also continue to consider new markets for its safe products and new product applications. The Company has already identified opportunities in the cannabis industry to lock inventory after hours as well as locking cabinets for tools and automotive parts in garages. Also, Champion Safe has focused on the middle and premium segments of the safe market. We believe introducing a value line series will grow customer and dealer loyalty to our brands as nearly 60% of current safe industry sales are going to value line products. We believe our value line product will have features and benefits other value line safes won’t offer and that our value line safe will be a better product.
Further, we believe that we are being effective in establishing American Rebel as America’s Patriotic Brand. An almost limitless list of potential product launches is available to management. Currently, American Rebel has significant potential for its branded products as a lifestyle brand. As the American Rebel Brand continues to grow in popularity, we anticipate generating additional revenues from licensing fees earned from third parties who wish to engage the American Rebel community. While the Company does not generate material revenues from licensing fees, management believes the American Rebel brand name may in the future have significant licensing value to third parties that seek the American Rebel name to brand their products to market to the American Rebel target demographic. For example, a tool manufacturer that wants to pursue an alternative marketing plan for a different look and feel could license the American Rebel brand name for their line of tools and market their tools under our distinct brand. This licensee would benefit from the strong American Rebel brand with their second line of American Rebel branded tools as they would continue to sell both of the lines of tools. Conversely, American Rebel could potentially also benefit as a licensee of products. If American Rebel determines a third party has designed, engineered, and manufactured a product that would be a strong addition to the American Rebel catalog of products, American Rebel could license that product from the third-party and sell the licensed product under the American Rebel brand.
| 30 |
Results of Operations
From inception through September 30, 2023, we have generated an operating deficit of $37,723,739. We expect to incur additional losses during fiscal year ending December 31, 2023, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
| Nine
months ended September 30, 2023 | Nine
months ended September 30, 2022 | |||||||
| Revenue | $ | 11,418,222 | $ | 4,595,547 | ||||
| Cost of goods sold | 8,869,432 | 3,462,454 | ||||||
| Gross margin | 2,548,790 | 1,133,093 | ||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | 2,915,377 | 1,937,349 | ||||||
| Rental expense, warehousing, outlet expense | 732,360 | 314,314 | ||||||
| Product development costs | 36,821 | 146,463 | ||||||
| Marketing and brand development costs | 942,687 | 349,341 | ||||||
| Administrative and other | 2,542,181 | 2,687,728 | ||||||
| Depreciation and amortization expense | 79,260 | 11,311 | ||||||
| 7,248,686 | 5,446,506 | |||||||
| Operating income (loss) | (4,699,896 | ) | (959,076 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense, net | (250,877 | ) | (341,990 | ) | ||||
| Interest expense – pre-emptive rights release | - | (350,000 | ) | |||||
| Interest Income | 3,203 | 4,428 | ||||||
| Employee retention credit funds, net of costs to collect | 1,107,672 | - | ||||||
| Gain/(loss) on sale of equipment | 1,400 | - | ||||||
| Gain/(loss) on extinguishment of debt | 227,569 | (1,376,756 | ) | |||||
| 1,088,967 | (2,064,318 | ) | ||||||
| Net income (loss) before income tax provision | (3,610,929 | ) | (6,377,731 | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | $ | (3,610,929 | ) | $ | (6,377,731 | ) | ||
For the nine months ended September 30, 2023, we reported Revenues of $11,418,222 compared to Revenues of $4,595,547 for the nine months ended September 30, 2022. The increase in Revenues of $6,822,675 (or 148% period over period (PoP)) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, is primarily attributable to the closing of the Champion acquisition on July 29, 2022 and a general increase from Champion’s average quarterly sales of product. For the nine months ended September 30, 2023, we reported Cost of Goods Sold of $8,869,432, compared to Cost of Goods Sold of $3,462,454 for the nine months ended September 30, 2022. The increase in Cost of Goods Sold of $5,406,978 (or 156% period over period (PoP)) for the current period is due to a significantly greater number of sales of product during the period compared to the nine months ending September 30, 2022 and again attributable to the closing of the Champion acquisition on July 29, 2022. For the nine months ended September 30, 2023, we reported Gross Margin of $2,548,790, compared to Gross Margin of $1,133,093 for the nine months ended September 30, 2022. The increase in Gross Margin of $1,415,697 (or 125% period over period (PoP)) for the nine months ending September 30, 2023, compared to the nine months ending September 30, 2022 is again due to the closing of the Champion acquisition on July 29, 2022. Gross Margin percentages for the nine months ended September 30, 2023 was 22.3% compared to 24.6% for the nine months ended September 30, 2022. We expect our Gross Margin percentages to remain consistent in the mid-20% range until we achieve sufficient sales volume to increase our margins from better pricing power, to better buying power on our costs of goods, inventory and inventory management.
Operating Expenses
Total operating expenses for the nine months ended September 30, 2023 were $7,248,686 compared to $5,446,506 for the nine months ended September 30, 2022 as further described below. Overall, we saw a $1,802,180 increase in operating expenses or a 33% period over period (PoP) increase in operating expenses from the prior year comparable period. With the acquisition and integration of the Champion acquisition we expect this to be about the same going forward dropping as a percentage of Revenues as we increase our overall sales volume.
For the nine months ended September 30, 2023, we incurred consulting/payroll and other costs of $2,915,377 compared to consulting/payroll and other costs of $1,937,349 for the nine months ended September 30, 2022. The increase in consulting/payroll and other costs of $978,028 (or 50% period over period (PoP)) was due to the increase in the number of employees and the size of the Company post-acquisition of the Champion Entities as well as increased payroll costs from a competitive jobs market. The Company expects to maintain its current consulting/payroll and other costs as we further expand our sales volume.
For the nine months ended September 30, 2023, we incurred rental expense, warehousing, outlet expense of $732,360, compared to rental expense, warehousing, outlet expense of $314,314 for the nine months ended September 30, 2022. The increase in rental expense, warehousing, outlet expense of $418,046 is due to the significant number of leases and properties that the Company rents to conduct the Champion business. Prior to the Champion business acquisition, the Company included lease expense in the Administrative and other account. The significant number of leases and properties that the Company rents to conduct its Champion business provides a better presentation of expenses through a separate line item in its Statement of Operations. The Company expects to maintain this level of expense on a go-forward basis with its leases and rented properties. The Company may look to consolidate some of its space as it fine tunes the Champion business.
For the nine months ended September 30, 2023, we incurred product development expenses of $36,821, compared to product development expenses of $146,463 for the nine months ended September 30, 2022. The decrease in product development expenses of $109,642 (or -75% period over period (PoP)) is due to some of the Company’s current product development expenses being included in consulting/payroll and other costs account which provides for a better presentation of those expenses than pure product development expense, offset by new efforts over these past few months where we’ve incurred some significant expenses that are attributable to our private label brewery efforts and should be separated and identified. The Company expects to maintain some level of expense on a go-forward basis with new products and efforts being expended for future sales growth and product needs.
For the nine months ended September 30, 2023, we incurred marketing and brand development expenses of $942,687, compared to marketing and brand development expenses of $349,341 for the nine months ended September 30, 2022. The increase in marketing and brand development expenses of $593,346 (or 170% period over period (PoP)) relates primarily to an increase of activities including major trade shows and the availability of working capital for these types of expenses as well as increased costs attributable to our acquisition and integration of the Champion business.
| 31 |
For the nine months ended September 30, 2023, we incurred administrative and other expense of $2,542,181, compared to administrative and other expense of $2,687,728 for the nine months ended September 30, 2022. The decrease in administrative and other expense of $145,547 (or -5% period over period (PoP)) relates primarily to the significant legal and other professional fees that we incurred during 2022 in anticipation of our registered public offerings, offset by additional expenses picked up from our acquisition of Champion and other recent financing efforts. The Company believes as it grows its sales base it will need to increase its administrative and other expenses commensurate with an overall increased profit for the future.
For the nine months ended September 30, 2023, we incurred depreciation and amortization expense of $79,260, compared to depreciation and amortization expense of $11,311 for the nine months ended September 30, 2022. The increase in depreciation and amortization expense relates primarily to the acquisition of Champion and its significant and additional depreciable asset base that it provided to the Company’s financial position.
Other income and expenses
For the nine months ended September 30, 2023, we incurred interest expense of $250,877, compared to interest expense of $341,990 for the nine months ended September 30, 2022. The decrease in interest expense of $91,113 is due to a significant number of notes being paid during 2022 that were able to be paid in full from the various financings, offset by the increased borrowing costs that we have on our working capital notes payable and line of credit. We are currently paying an interest rate of approximately 7% on our line of credit, 12% on our existing working capital notes payable, and our new working capital notes payable we are paying approximately 40% per annum on this debt instrument. During the nine months ended September 30, 2023, we incurred a gain on extinguishment of debt of $227,569, compared to $1,376,756 during the nine months ended September 30, 2022. The decrease in loss on extinguishment of debt is due to the charges necessary through the amortization of the debt discount recorded for the issuance of shares of common stock in connection with working capital loans retired during 2022. The Company expects to manage and maintain its interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a minimum as we grow the business and its sales volume. The gain on extinguishment of debt for the nine months ended September 30, 2023 is directly attributable to equity issuances that were static or an agreed upon number of shares for the services at the time (which was much higher) and the settlement of the shares as payment for the services at a time when the shares were significantly less valuable. For the nine months ended September 30, 2023 we received approximately $1,286,000 in tax credits under the CARES Act from the US Department of Treasury and in turn paid approximately $178,500 to the service provider, netting the Company approximately $1,107,500 in credits for retaining its employees during COVID. As part of the collection process the Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). This is a one-time other income item and we do not expect to receive this type of special income in the future. During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller of the Champion Entities with respect to the CARES Act tax credits income. The Company prior to September 30, 2023 settled with the Seller and agreed to pay an additional $325,000 to the seller. This amount was not offset against the CARES Act tax credit income but increased the purchase price of the Champion Entities and increased our determined Goodwill value by $325,000.
Net Loss
Net loss for the nine months ended September 30, 2023, amounted to $3,610,929, resulting in a loss per share of $2.50, compared to $6,377,731 for the nine months ended September 30, 2022, resulting in a loss per share of $33.62. The decrease in the net loss from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 is primarily due to one-time transactional costs related to 2022 financings and as well our preparation costs for the Champion acquisition and integration, offset by increasing costs due to a tightening jobs market and inflation. The Company’s management believes with increasing sales volume and strict adherence on cost cutting measures and best practices that net positive income can be achieved for the business into the future.
Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022
Revenue (‘Sales’) and cost of goods sold (‘Cost of Sales’)
| Three
months ended September 30, 2023 | Three
months ended September 30, 2022 | |||||||
| Revenue | $ | 3,345,552 | $ | 4,102,761 | ||||
| Cost of goods sold | 3,095,418 | 3,124,657 | ||||||
| Gross margin | 250,134 | 978,104 | ||||||
| Expenses: | ||||||||
| Consulting/payroll and other costs | 1,039,273 | 1,227,953 | ||||||
| Rental expense, warehousing, outlet expense | 230,226 | 314,314 | ||||||
| Product development costs | 20,326 | - | ||||||
| Marketing and brand development costs | 517,345 | 119,122 | ||||||
| Administrative and other | 1,347,181 | 1,077,005 | ||||||
| Depreciation and amortization expense | 24,895 | 9,956 | ||||||
| 3,179,246 | 2,748,350 | |||||||
| Operating income (loss) | (2,929,112 | ) | (1,770,246 | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense, net | (95,330 | ) | (31,584 | ) | ||||
| Interest expense – pre-emptive rights release | - | (350,000 | ) | |||||
| Interest income | 3,203 | 4,428 | ||||||
| Employee retention credit funds, net of costs to collect | - | - | ||||||
| Gain/(loss) on sale of equipment | - | - | ||||||
| Gain/(loss) on extinguishment of debt | 227,569 | - | ||||||
| 135,442 | (377,156 | ) | ||||||
| Net income (loss) before income tax provision | (2,793,670 | ) | (2,147,402 | ) | ||||
| Provision for income tax | - | - | ||||||
| Net income (loss) | $ | (2,793,670 | ) | $ | (2,147,402 | ) | ||
| 32 |
For the three months ended September 30, 2023, we reported Revenues of $3,345,552 compared to Revenues of $4,102,761 for the three months ended September 30, 2022. The decrease in Revenues of $757,209 (or -18% period over period (PoP)) for the current period compared to the three months ended September 30, 2022, is attributable to slower sales for 2023 and current market conditions. For the three months ended September 30, 2023, we reported Cost of Goods Sold of $3,095,418, compared to Cost of Goods Sold of $3,124,657 for the three months ended September 30, 2022. The decrease in Cost of Goods Sold of $29,239 (or -1% period over period (PoP)) for the current period is primarily attributable to a marginal decrease in sales for the period. For the three months ended September 30, 2023, we reported Gross Margin of $250,134, compared to Gross Margin of $978,104 for the three months ended September 30, 2022. The decrease in Gross Margin of $727,970 (or -74% period over period (PoP)) for the three months ending September 30, 2023, compared to the three months ending September 30, 2022 is again due a decrease in sales and increased costs of sales. Gross Margin percentages for the three months ended September 30, 2023 was 8% compared to 24% for the three months ended September 30, 2022. We expect our Gross Margin percentages for this time of year to be consistently in the 20% range. If not within this range we will try to increase our sales volume to in order to increase our margins, with better pricing power, better buying power on costs of goods, inventory and of course inventory management. In general, second amendment businesses have experienced a slowdown in sales volume during the past twelve months and this is in line with what we have experienced in our business.
Operating Expenses
Total operating expenses for the three months ended September 30, 2023 were $3,179,246 compared to $2,748,350 for the three months ended September 30, 2022 as further described below. Overall, we experienced a $430,896 increase in operating expenses or a 16% period over period (PoP) increase in operating expenses from the prior year comparable period. With the successful integration of the Champion acquisition, we believe this will begin to drop or decrease as a percentage of Revenues as we increase our sales volume.
For the three months ended September 30, 2023, we incurred consulting/payroll and other costs of $1,039,273 compared to consulting/payroll and other costs of $1,227,953 for the three months ended September 30, 2022. The decrease in consulting/payroll and other costs of $188,680 (or -15% period over period (PoP)) was due to cost controls put in place on the post-acquisition of the Champion Entities. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.
For the three months ended September 30, 2023, we incurred rental expense, warehousing, outlet expense of $230,226, compared to rental expense, warehousing, outlet expense of $314,314 for the three months ended September 30, 2022. The decrease in rental expense, warehousing, outlet expense of $84,088 is due to cost cutting on leases and properties that the Company rents to conduct the Champion business acquisition as well as other cost cutting measures or efficiencies put in place. Prior to the Champion business acquisition, the Company included lease expense in the Administrative and other account. With the significant number of leases and properties that the Company rents to conduct the Champion business we believe provides a better presentation of expenses with a separate account line item. The Company expects to maintain this level of expense on a go-forward basis with its leases and rented properties for the near term. The Company may look to consolidate some of its space as needed as it fine tunes the Champion business.
For the three months ended September 30, 2023, we incurred product development expenses of $20,326, compared to product development expenses of $- for the three months ended September 30, 2022. The increase in product development expenses of $20,326 (or ~% period over period (PoP)) is due to some of the Company’s current product development expenses being included in consulting/payroll and other costs account which we believe provides for a better presentation of our historical business expenses than pure product development expense. For these three months ended September 30, 2023 we’ve incurred expenses that are attributable to our private label brewery efforts and should be separated and identified. The Company expects to maintain some level of expense on a go-forward basis with new products and efforts being expended for future sales growth and product needs.
For the three months ended September 30, 2023, we incurred marketing and brand development expenses of $517,345, compared to marketing and brand development expenses of $119,122 for the three months ended September 30, 2022. The increase in marketing and brand development expenses of $398,223 (or 334% period over period (PoP)) relates primarily to an increase of activities including major trade shows and the availability of working capital for these types of expenses as well as increased costs attributable to our acquisition and integration of the Champion business, as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.
| 33 |
For the three months ended September 30, 2023, we incurred administrative and other expense of $1,347,181, compared to administrative and other expense of $1,077,005 for the three months ended September 30, 2022. The increase in administrative and other expense of $270,176 (or 25% period over period (PoP)) relates directly to increased legal and other professional fees that we incurred in our registered public offerings and capital raising efforts, along with additional expenses picked up from our acquisition of Champion. The Company believes as it grows its sales base it will also increase its administrative and other expense commensurate with the increased profits for the future.
For the three months ended September 30, 2023, we incurred depreciation and amortization expense of $24,895, compared to depreciation and amortization expense of $9,956 for the three months ended September 30, 2022. The increase in depreciation and amortization expense relates primarily to the acquisition of Champion and its significant and additional depreciable asset base that it provided to the Company’s financial position.
Other income and expenses
For the three months ended September 30, 2023, we incurred interest expense of $95,330, compared to interest expense of $31,584 for the three months ended September 30, 2022. The increase in interest expense of $63,746 is due to a significant number of notes being paid during 2022 that were able to be paid in full from the various financings, offset by the increased borrowing costs that we have on our working capital notes payable and line of credit. We are currently paying an interest rate of approximately 7% on our line of credit, 12% on our existing working capital notes payable, and on our new working capital notes payable we are paying approximately 40% per annum on this debt instrument. The Company expects to manage and maintain its interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a minimum as we grow the business and its sales volume.
Net Loss
Net loss for the three months ended September 30, 2023, amounted to $2,793,670, resulting in a loss per share of $0.95, compared to $2,147,402 for the three months ended September 30, 2022, resulting in a loss per share of $8.90. The increase in the net loss from the three months ended September 30, 2022 to the three months ended September 30, 2023 is from a myriad of expenses that the Company incurred in the quarter, such as professional and legal fees, increased costs in marketing and the softening of gross margin on sales. The Company’s management believes with increasing sales volume and strict adherence to cost cutting measures and best practices that net positive income can be achieved for the business.
Liquidity and Capital Resources
We are a company still in the growth and acquisition stage and our revenue from operations does not cover our operating expenses. Working capital increased by $725,021 period over period where we had a working capital balance of $6,678,562 at December 31, 2022 compared to a working capital balance of $7,403,583 at September 30, 2023. This working capital increase was due to the successful closings of three financing transactions (one in February 2022, the second in July 2022 and a third one recently in June 2023) despite incurring a deficit of over $37.7 million from inception to September 30, 2023. We have funded our operations primarily through the issuance of capital stock, convertible debt, and other securities and will continue so into the near future and beyond.
During the nine months ended September 30, 2023, we raised net cash of approximately $5,304,000 through the issuance of equity (which included the inducement to accelerate the conversion of certain warrants into equity), as compared to approximately $19,985,000 for the nine months ended September 30, 2022. During the nine months ended September 30, 2023, we raised net cash of approximately $2,386,000 through the issuance of notes payable and entering into a line of credit with a national financial institution secured by inventory and other assets, as compared to approximately $60,000 for the nine months ended September 30, 2022. During the nine months ended September 30, 2022 we paid down approximately $2,607,000 in loan principal which we did not replenish.
As we continue with the launch of the American Rebel branded safes and concealed carry product line as well our Champion line of products, we expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures. We may from time to time incur significant capital needs for these expenditures and our business; we cannot fully predict what those needs will be and the impact to our business.
We expect to require additional funds to further develop our business and acquisition plan, including the launch of additional products in addition to aggressively marketing our safes and concealed carry product line. Since it is impossible to predict with certainty the timing and amount of funds required to establish profitability, we anticipate that we will raise additional funds through equity or debt offerings or otherwise in order to meet our expected future liquidity requirements. Any such financing that we undertake will likely be dilutive to existing stockholders.
| 34 |
In addition, we expect to need additional funds to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines.
Debt Restructuring
The Company during early 2022 engaged in and completed a financial restructuring (the “Debt Restructuring”), that included extending, renewing, and restructuring the terms of loans with several investors and third-party creditors. The completion of the registered public offering in February 2022 provided the necessary funds to pay off multiple loans with several investors and third-party creditors, leaving a small but manageable amount of debt on the books.
Promissory Notes – Working Capital
As part of the Debt Restructuring (as defined above), the Company entered into several replacement notes to extend the maturities on certain notes with working capital lending partners.
On July 1, 2022, the Company entered into a $600,000 unsecured promissory note with an accredited investor, our working capital lending partner. The unsecured promissory note bears interest at 12% per annum. The principal of the unsecured promissory note was due on March 31, 2023. The unsecured promissory note contains customary warranties, covenants and representations of the Company. This note was refinanced with a new note with an accredited investor dated July 1, 2023 in the amount of $450,000. $150,000 will be due on December 31, 2023 and $300,000 will be due on June 30, 2024. Interest on outstanding principal amounts will be payable quarterly at an annual rate of 12%. The unsecured promissory note contains customary warranties, covenants and representations of the Company.
On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan”) with an accredited investor lending source (the “Lender”). Under the Secured Loan, the Company received the loan net of fees of $20,000. The Secured Loan requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan bears interest at 41.4%. The Secured Loan is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan. The Secured Loan provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. We paid approximately $300,000 in principal payments to the lender under the Secured Loan. We intend to make the payments in a timely manner, with no early repayment of the principal.
Line of Credit
During February 2023, the Company, through its wholly-owned subsidiary Champion entered into a $2 million line of credit facility (the “Line of Credit”). The Line of Credit accrues interest at a rate determined by BSBY Daily Floating Rate plus 2.05 percentage points (which at September 30, 2023 was 7.48%), and is secured by all of the assets of the Champion Entities. The Line of Credit expires February 28, 2024. The outstanding liability of the Line of Credit at September 30, 2023 was $1.69 million. The Company has the ability to draw upon the line to the full $2 million if necessary.
Acquisition, Integration of Champion Entities and PIPE Transaction Used to Fund Acquisition
On July 12, 2022, we sold $12,887,976 of securities to Armistice Capital, an institutional purchaser. Such securities consisted of (i) 20,372 shares of common stock at $27.75 per share, (ii) prefunded warrants that are exercisable into 448,096 shares of common stock at $27.50 per prefunded warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock at an initial exercise price of $21.50 per share, subject to adjustments as set forth therein, and will expire five years from the date of issuance. EF Hutton, a division of Benchmark Investments, LLC, acted as exclusive placement agent for the offering and was paid: (i) a commission of 10% of the gross proceeds ($1,288,798); (ii) non-accountable expenses of 1% of the gross proceeds ($128,880); and (iii) placement agent expenses of $125,000.
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc. (“Champion Safe”), Superior Safe, LLC (“Superior Safe”), Safe Guard Security Products, LLC (“Safe Guard”), Champion Safe De Mexico, S.A. de C.V. (“Champion Safe Mexico” and, together with Champion Safe, Superior Safe, and Safe Guard, collectively, the “Champion Entities”) and Mr. Ray Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The closing of the acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration in the amount of $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed Seller for $397,420 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021.
During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller. The Company settled with the Seller and agreed to pay an additional $325,000 to the Seller in the following manner. $275,000 upon signing of the agreement and another $50,000 to be paid over the next twelve months. The Company increased its purchase price of the Champion Entities by the $325,000 during the nine months ended September 30, 2023. The funds for this pricing adjustment came from general working capital.
Critical Accounting Policies
The preparation of financial statements and related footnotes requires us to make judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities.
| 35 |
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.
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, Mr. Charles A. Ross, Jr., and our Interim Principal Accounting Officer, Mr. Doug E. Grau, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on their evaluation, Messrs. Ross and Grau concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us required to be included in our periodic SEC filings. The Company hired a financial expert with 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 have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
| 36 |
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.
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, 2022. 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 September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.
Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrants for each existing common stock purchase warrant that they exercised. EF Hutton, a division of Benchmark Investments LLC acted as the underwriters on the transaction and charged the Company the usual 9% and 1% fees along with a placement agent fee of $125,000.
Subsequent Issuances after Quarter End
During the period covered by this Report until the date of filing of this Report, November 14, 2023, the Company has not issued or authorized the sale of any equity securities.
All of the above-described issuances (if any) were exempt from registration pursuant to Section 4(a)(2) and/or Regulation D of the Securities Act as transactions not involving a public offering. With respect to each transaction listed above, no general solicitation was made by either the Company or any person acting on its behalf. All such securities issued pursuant to such exemptions are restricted securities as defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate legends have been placed on the documents evidencing the securities, and may not be offered or sold absent registration or pursuant to an exemption therefrom.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter ended September 30, 2023.
| 37 |
Item 3 – Defaults upon Senior Securities
None.
Item 4 – Mine Safety Disclosures
Not applicable.
Item 5 – Other Information
None.
Item 6 – Exhibits
| 38 |
# Filed herewith.
‡ Furnished herewith.
† Indicates management contract or compensatory plan or arrangement.
** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
| 39 |
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 14, 2023
| AMERICAN REBEL HOLDINGS, INC. | ||||
| (Registrant) | ||||
| By: | /s/ Charles A. Ross, Jr. | By: | /s/ Doug E. Grau | |
| Charles A. Ross, Jr., CEO | Doug E. Grau | |||
| (Principal Executive Officer) | President (Interim Principal Accounting Officer) | |||
| 40 |
EXHIBIT 31.1
CERTIFICATION
I, Charles A. Ross, Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Rebel Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 14, 2023
| /s/ Charles A. Ross, Jr. | |
| Charles A. Ross, Jr. | |
| Chief Executive Officer and Principal Executive Officer |
EXHIBIT 31.2
CERTIFICATION
I, Doug E. Grau, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of American Rebel Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 14, 2023
| /s/ Doug E. Grau | |
| Doug E. Grau | |
| President and Interim Principal Accounting Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Rebel Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Charles A. Ross, Jr. | |
Charles A. Ross, Jr. Chief Executive Officer and Principal Executive Officer |
|
| /s/ Doug E. Grau | |
| Doug E. Grau | |
| President and Interim Principal Accounting Officer |
November 14, 2023
The foregoing certifications are not deemed filed with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), and are not to be incorporated by reference into any filing of American Rebel Holdings, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value | $ 0.001 | $ 0.001 |
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
| Preferred stock, shares issued | 175,000 | 175,000 |
| Preferred stock, shares outstanding | 175,000 | 175,000 |
| Common stock, par value | $ 0.001 | $ 0.001 |
| Common stock, shares authorized | 600,000,000 | 600,000,000 |
| Common stock, shares issued | 5,875,263 | 677,221 |
| Common stock, shares outstanding | 5,875,263 | 677,221 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Revenue | $ 3,345,552 | $ 4,102,761 | $ 11,418,222 | $ 4,595,547 |
| Cost of goods sold | 3,095,418 | 3,124,657 | 8,869,432 | 3,462,454 |
| Gross margin | 250,134 | 978,104 | 2,548,790 | 1,133,093 |
| Expenses: | ||||
| Consulting/payroll and other costs | 1,039,273 | 1,227,953 | 2,915,377 | 1,937,349 |
| Rental expense, warehousing, outlet expense | 230,226 | 314,314 | 732,360 | 314,314 |
| Product development costs | 20,326 | 36,821 | 146,463 | |
| Marketing and brand development costs | 517,345 | 119,122 | 942,687 | 349,341 |
| Administrative and other | 1,347,181 | 1,077,005 | 2,542,181 | 2,687,728 |
| Depreciation and amortization expense | 24,895 | 9,956 | 79,260 | 11,311 |
| Total operating expense | 3,179,246 | 2,748,350 | 7,248,686 | 5,446,506 |
| Operating income (loss) | (2,929,112) | (1,770,246) | (4,699,896) | (4,313,413) |
| Other Income (Expense) | ||||
| Interest expense | (95,330) | (31,584) | (250,877) | (341,990) |
| Interest expense – pre-emptive rights release | (350,000) | (350,000) | ||
| Interest income | 3,203 | 4,428 | 3,203 | 4,428 |
| Employee retention credit funds, net of costs to collect | 1,107,672 | |||
| Gain/(loss) on sale of equipment | 1,400 | |||
| Gain/(loss) on extinguishment of debt | 227,569 | 227,569 | (1,376,756) | |
| Total Other Income (Expense) | 135,442 | (377,156) | 1,088,967 | (2,064,318) |
| Net income (loss) before income tax provision | (2,793,670) | (2,147,402) | (3,610,929) | (6,377,731) |
| Provision for income tax | ||||
| Net income (loss) | $ (2,793,670) | $ (2,147,402) | $ (3,610,929) | $ (6,377,731) |
| Basic income (loss) per share | $ (0.95) | $ (8.90) | $ (2.50) | $ (33.62) |
| Diluted income (loss) per share | $ (0.95) | $ (8.90) | $ (2.50) | $ (33.62) |
| Weighted average common shares outstanding - basic | 2,930,700 | 241,300 | 1,442,600 | 189,700 |
| Weighted average common shares outstanding - diluted | 2,930,700 | 241,300 | 1,442,600 | 189,700 |
Condensed Consolidated Statement of Stockholders' Equity/(Deficit) (Unaudited) (Parenthetical) - $ / shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Warrant inducement shares exercised | 2,988,687 | |
| Pre Funded Common Stock Warrants [Member] | ||
| Number of shares issued | 615,000 | 492,902 |
| Pre-funded stock price per share | $ 4.36 | $ 27.50 |
| Warrants exercise price per share | 0.01 | $ 0.25 |
| Warrants inducement exercise price per share | 1.10 | |
| Pre Funded Warrant [Member] | ||
| Warrants exercise price per share | $ 0.01 | |
Condensed Consolidated Statement of Cash Flows (Parenthetical) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Statement of Cash Flows [Abstract] | ||
| Net of offering costs paid | $ 983,080 | $ 3,434,122 |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. On June 19, 2017, the Company completed a business combination with its majority stockholder, American Rebel, Inc. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.
Nature of operations
The Company develops and sells branded products in the self-defense, safe storage and other patriotic product areas using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. The Company’s products are marketed under the American Rebel Brand and are proudly imprinted with such branding. Through its acquisition of the “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.) the Company promotes and sells its safe and storage products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms retail outlets, as well as through online avenues, including website and e-commerce platforms. The Company sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands as well as the American Rebel Brand. On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch regionally in early 2024.
To varying degrees, the consequences of the COVID-19 pandemic continue to affect our operating business. Significant government and private sector actions have taken place to control the spread and mitigate the economic effects of the virus and its variants. The development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our business. The economic effects from these events over long term cannot be reasonably estimated at this time. Accordingly, estimates used in the preparation of our financial statements, including those associated with the evaluation of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us (through accounts receivable) and the estimations of certain losses assumed under warranty and other liability contracts, may be subject to significant adjustments in future periods.
Interim Financial Statements and Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K of the Company for the period ended December 31, 2022, and notes thereto contained, filed on April 14, 2023.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.
Year-end
The Company’s year-end is December 31.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Inventory and Inventory Deposits
Inventory consists of backpacks, jackets, safes, other storage products and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines an estimate for the reserve of slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
Fixed assets and depreciation
Property and equipment are stated at cost, net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded using the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.
Revenue recognition
In accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.
These steps are met when an order is received, a price is agreed to, and the product is shipped or delivered to that customer.
Advertising costs
Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $172,617 and $119,122 for the three-month periods ended September 30, 2023, and 2022, respectively, and $942,687 and $349,341 for the nine-month period then ended, respectively.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023, and December 31, 2022, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively, and for the nine months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively
Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled none and none as of September 30, 2023 and December 31, 2022, respectively. All other dilutive securities are listed below.
The following table illustrates the total number of common shares that would be converted from common stock equivalents issued and outstanding at the end of each period presented; as of September 30, 2023 and as of September 30, 2022, respectively.
In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
Income taxes
The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change.
Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of September 30, 2023, and December 31, 2022, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month and nine-month periods ended September 30, 2023, and 2022, respectively, income tax expense has been recorded.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Warranties
The Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense accounts in the accompanying condensed consolidated balance sheets We estimate that warranty liability is nominal or negligible based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of December 31, 2022 and September 30, 2023 was approximately $100,000.
Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations, and as further defined by ASU 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of future results, particularly by growth-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value (see Note 8 - Goodwill and Acquisition of Champion Entities for further information in accordance with ASC 805-10-55-37 through ASC 805-10-55-50).
Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included in operating lease Right-of-Use assets and operating lease liabilities, current and non-current, on the Company’s condensed consolidated balance sheets.
Recent pronouncements
The Company evaluated recent accounting pronouncements through September 30, 2023, and believes that none have a material effect on the Company’s financial statements.
Concentration risks
Prior to the closing of the Champion Entities, the Company purchased a substantial portion (over 20%) of its inventory from 2 third-party vendors. With the closing and integration of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from the 2 third-party vendors. As of September 30, 2023, the net amount due to these 2 third-party vendors (accounts payable and accrued expense) was $0. The loss of vendor relationships could have a material effect on the Company; however, the Company believes sufficient suppliers could be substituted should these third-party vendors/suppliers become unavailable or non-competitive for us.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOING CONCERN |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the growth and acquisition stage and, accordingly, has not yet reached profitability from its operations. Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to product development, branding, inventory buildup and product launch. As a result, the Company has continued to incur net losses for the nine months ended September 30, 2023, and 2022 of ($3,610,929) and ($6,377,731), respectively. The Company’s accumulated deficit was ($37,723,739) as of September 30, 2023, and ($34,112,810) as of December 31, 2022. The Company’s working capital was $8,111,282 as of September 30, 2023, compared to $6,678,562 as of December 31, 2022. The increase in working capital from December 31, 2022, to September 30, 2023, is due to the Company increasing its overall inventory and accounts receivable balances offset by smaller increases in liabilities as well as incurring a sizeable net loss during the nine months ending September 30, 2023.
The ability of the Company to continue as a going concern is dependent upon its ability to raise capital from the sale of its equity and, ultimately, the achievement of significant operating revenues and profitability.
Management believes that sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock. However, no assurance can be given that the Company will obtain this additional working capital, or if obtained, that such funding will not cause substantial dilution to its existing stockholders. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay some of its business objectives and efforts. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
|
INVENTORY AND DEPOSITS |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY AND DEPOSITS | NOTE 3 – INVENTORY AND DEPOSITS
Inventory and deposits include the following:
With the integration of Champion, we eliminated the need to hold inventory with our American Rebel, Inc. subsidiary at its facility. We do not believe we have a risk of concentration in our purchasing of inventory materials, sourcing needs or manufacturing. As reported in our Annual Report filed on Form 10-K Champion added approximately $5,400,000 in inventory on the date of purchase less intercompany deposits of approximately $600,000 which is included in our balances as of December 31, 2022.
|
|||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment include the following:
For the nine months ended September 30, 2023, and 2022 we recognized $79,260 and $11,311 in depreciation expense, respectively. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS | NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS
Charles A. Ross, Jr. serves as the Company’s CEO. Compensation for Mr. Ross includes a base salary and a bonus based upon certain performance measures approved by the Board of Directors.
Doug Grau serves as the Company’s President. Compensation for Mr. Grau includes a base salary and a bonus based upon certain performance measures approved by the Board of Directors. Mr. Grau lent the Company approximately $95,332, net of repayments during the nine months ended September 30, 2023, the loan is an unsecured non-interest-bearing demand note.
|
LINE OF CREDIT – FINANCIAL INSTITUTION |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Line Of Credit Financial Institution | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LINE OF CREDIT – FINANCIAL INSTITUTION | NOTE 6 – LINE OF CREDIT – FINANCIAL INSTITUTION
During February 2023, the Company entered into a $2 million master credit agreement (credit facility) with a major financial institution (“Line of Credit”). The Line of Credit accrues interest at a rate determined by the Bloomberg Short-Term Bank Yield Index (“BSBY”) Daily Floating Rate plus 2.05 percentage points (which at September 30, 2023 for the Company was 7.48%), and is secured by all the assets of the Champion Entities. The Line of Credit expires February 28, 2024. The outstanding amount due on the Line of Credit at September 30, 2023 and December 31, 2022 was, respectively.
Current and long-term portion. As of September 30, 2023 the total balance due of $1,689,163 reported as current as the Line of Credit is to be repaid within one year, with subsequent drawdowns as needed by the Company. The Company paid a one-time loan fee equal to 0.1% of the Line of Credit amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate.
The Company drew down on the Line of Credit initially in the amount of $1.7 million, with subsequent net payments and draws on the Line of Credit in the amount of approximately $10,000. The Company as of September 30, 2023 has not increased the Line of Credit amount beyond its initial drawdown and has paid interest expense of approximately $65,000 to the financial institution for the nine months ended September 30, 2023. The Company intends to keep the Line of Credit open and in existence to enhance the profitability and working capital needs of the Champion entities and may in the future seek to expand the Line of Credit as the Company grows in size.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE – WORKING CAPITAL |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTES PAYABLE – WORKING CAPITAL | NOTE 7 – NOTES PAYABLE – WORKING CAPITAL
On April 14, 2023, the Company entered into a $1,000,000 Business Loan and Security Agreement (the “Secured Loan”) with an accredited investor lending source (the “Lender”). Under the Secured Loan, the Company received the loan net of fees of $20,000. The Secured Loan requires 64 weekly payments of $20,000 each, for a total repayment of $1,280,000. The Secured Loan bears interest at 41.4%. The Secured Loan is secured by all of the assets of the Company and its subsidiaries second to a first priority lien secured the holder of the Line of Credit. Furthermore, the Company’s Chief Executive Officer, provided a personal guaranty for the Secured Loan. The Secured Loan provides for a default fee of $15,000 for any late payments on the weekly payments. No prepayment of the loan is allowed as well as any default by the Company allows the Lender to take necessary actions to secure its collateral and recovery of funds. The Company was also required to pay a fee associated with the Lender and its introduction to the Company of $80,000 to be made in equity of the Company at the time the loan was entered into. The Company issued post-reverse stock split shares, which on the date of issuance had a value of approximately $2,900. Since the number of shares had been established upon consummation of the loan but not valued or recorded on the books at the time, because of the leeway on grant date; total cost to the Company for the issuance of the 3,721 shares of common stock on the grant date was $2,900 which was recorded to interest expense and attributable to the loan.
On July 1, 2023, the Company entered into an assignment and assumption loan agreement (the “Assumption Loan”) with an accredited lender. Under the Assumption Agreement the Company agreed to pay $150,000 immediately to the holder of the $600,000 working capital loans that the Company had in place. The Assumption Agreement provided for the accredited lender, who effectively had the same management and ownership as the old working capital holders and assumed the debt instruments under the same terms and conditions and is due one year from the date of the Assumption Agreement, June 30, 2024 for one of the loans and the other loan (in the amount of $150,000) is due and payable on December 31, 2023. The Company made a one-time payment of $150,000 to the holder and was released from the prior obligations and the default status that it had been in with that holder since March 31, 2023.
On July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since March 31, 2023, and the accredited lender of the new working capital loans paid the holder of the old working capital loans $450,000 which required no additional working capital outlay from the Company. The terms of the new loan are 12% per annum and interest only payments that are due by last day of the quarter based on a calendar year. This reduces the Company’s interest payments on the working capital loans (old) of $600,000 from $18,000 per quarter to just $13,500 per quarter (for quarter ending December 31, 2023) and $9,000 per quarter thereafter (for quarters ending March 31, 2024 and June 30, 2024).
During the nine months ending September 30, 2022, the Company repaid several short-term notes under similar terms as its other short-term notes totaling $60,000. The notes were secured by a pledge of certain inventory items and the Company’s Chief Executive Officer’s personal guaranty.
During the nine months ending September 30, 2022, the Company repaid $2,541,634 of these short-term notes and completed the conversion of short-term notes with a face value of $1,950,224 along with accrued interest into shares of common stock with a fair value of $2,803,632, resulting in a loss on extinguishment of $1,376,756. The conversion into common stock was done in connection with our registered public offering in February 2022 for which we recognized a loss on extinguishment.
At September 30, 2023, and December 31, 2022, the outstanding balance due on all of the working capital notes payable was $1,152,972 and $602,643, respectively. These amounts do not include any interest payable on the various notes where interest was not paid in full per the terms of the notes.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill And Acquisition Of Champion Entities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES | NOTE 8 – GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES
Goodwill
Goodwill is initially recorded as of the acquisition date and is measured as any excess of the purchase price over the estimated fair value of the identifiable net assets acquired. Goodwill is not amortized, but rather is subject to impairment testing annually (on the first day of the fourth quarter), or between annual tests whenever events or changes in circumstances indicate that the fair value of a reporting unit may be below its carrying amount. We first perform a qualitative assessment to evaluate goodwill for potential impairment. If based on that assessment it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative impairment test is necessary. The quantitative impairment test requires determining the fair value of the reporting unit. We use the income approach, whereby we calculate the fair value based on the present value of estimated future cash flows using a discount rate that approximates our weighted average cost of capital. The process of evaluating the potential impairment of goodwill is subjective and requires significant estimates and assumptions about the future such as sales growth, gross margins, employment costs, capital expenditures, inflation and future economic and market conditions. Actual future results may differ from those estimates. If the carrying value of the reporting unit’s assets and liabilities, including goodwill, exceeds its fair value, impairment is recorded for the excess, not to exceed the total amount of goodwill allocated to the reporting unit.
As of September 30, 2023 and December 31, 2022, we had goodwill of $4,525,000 and $4,200,000, respectively, presented within other long-term assets in our condensed consolidated balance sheets, primarily related to our 2022 acquisition of Champion Entities. During the 3rd quarter of 2023, we performed a qualitative assessment of potential goodwill impairment and determined it was more likely than not that the fair value of our reporting units exceeded its carrying value. Accordingly, no further impairment testing of goodwill was performed, and we did not recognize any goodwill impairment for the nine months ending September 30, 2023.
The Company policy is to review its goodwill for impairment periodically (based on economic conditions) and more specifically in the 4th quarter of its financial reporting year and determine whether impairment is to be recognized within its condensed consolidated statement of operations. See Note 1, Summary of Significant Accounting Policies to our Annual Report filed on Form 10-K, for more information on impairment testing.
Business Combination Consideration
On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, Champion Safe De Mexico, S.A. de C.V. (the “Champion Entities” or “Champion”) and Mr. Ray Crosby (the “Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller.
The acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration of approximately $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed the Seller for approximately $400,000 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021. In addition to the payments to the Seller, the Company paid costs specifically associated with the acquisition of Champion and its integration of $350,000; $200,000 was paid to our investment banker in analyzing the acquisition and purchase of Champion as well as we paid $150,000 to Champion’s independent PCAOB registered accounting firm to conduct a two year of audit and subsequent interim review report of their financial condition and reports.
During the nine months ended September 30, 2023 the Company received a claim for refund or right of repayment from the Seller of the Champion Entities with respect to the CARES Act tax credits income the Company received. The Company prior to September 30, 2023 settled the matter with the Seller and agreed to pay an additional $325,000 to the Seller. This amount was not offset against the CARES Act tax credit income but increased the purchase price of the Champion Entities and increased our determined Goodwill value by $325,000.
Accounting for the Business Combination
Under the acquisition method of accounting, the acquired tangible and intangible assets and assumed liabilities are recognized based on their estimated fair values as of the business combination closing date. Pro forma adjustments were preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed as of December 31, 2022 which have been prepared to illustrate the estimated effect of the business combination (see Note 15 – Pro Forma Condensed Combined Financial Information (Unaudited) to our Annual Report filed on Form 10-K).
The Company may recognize a negligible deferred tax benefit as a result of the acquisition. Due to the acquisition, a temporary difference between book and tax basis for the intangible assets acquired may result in a deferred tax liability and additional goodwill, which we believe to be negligible.
The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the total purchase consideration was allocated to the assets acquired and liabilities assumed based on their fair values as of July 29, 2022. The purchase price allocation is dependent upon certain valuation and other studies that have not yet been completed, nor may never be completed. Accordingly, the pro forma purchase price allocation may be subject to further adjustments. There can be no assurances that additional analyses and final determination of valuations will result in a change to the estimates of fair value set forth below.
The following is the estimate of the fair value of the assets acquired, liabilities assumed, and ensuing goodwill identified, reconciled to the purchase price transferred:
The Company’s estimates of fair values of the net assets acquired are based on the information that was available at the date of the acquisition, and the Company may continue to evaluate the underlying inputs and assumptions used in its valuations and would be subject to change. Preliminary estimates are subject to change during the measurement period, which we have determined to be one year from the date of the acquisition, which is July 29, 2023. (**- Customer lists and other intangibles are combined with goodwill at the end of each period and evaluated as to fair value. At September 30, 2023 and December 31, 2022, it was determined that total intangible assets (which includes goodwill) had a fair value of $4.5 million and $4.2 million, respectively).
|
INCOME TAXES |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | NOTE 9 – INCOME TAXES
At September 30, 2023 and December 31, 2022, the Company had a net operating loss carryforward of $37,723,739 and $34,112,810, respectively, which begins to expire in 2034.
Components of net deferred tax asset, including a valuation allowance, are as follows:
Valuation allowance for deferred tax assets as of September 30, 2023, and December 31, 2022, was $7,922,000 and $7,163,690, respectively. In assessing the recovery of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not deferred tax assets will not be realized as of September 30, 2023, and December 31, 2022, and recognized 100% valuation allowance for each period.
Reconciliation between the statutory rate and the effective tax rate for both periods and as of September 30, 2023 and December 31, 2022:
On August 16, 2022, the Inflation Reduction Act of 2022 (“the 2022 act”) was signed into law. The 2022 act contains numerous provisions, including a 15% corporate alternative minimum income tax on “adjusted financial statement income”, expanded tax credits for clean energy incentives and a 1% excise tax on corporate stock repurchases. The provisions of the 2022 act become effective for tax years beginning after December 31, 2022. On December 27, 2022, the IRS and Department of Treasury issued initial guidance for taxpayers subject to the corporate alternative minimum tax. The guidance addresses several, but not all, issues that needed clarification. The IRS and Department of Treasury intend to release additional guidance in the future. We will continue to evaluate the impact of the 2022 act as more guidance becomes available. We currently do not expect an impact on our consolidated financial statements.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHARE CAPITAL |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Equity [Abstract] | |
| SHARE CAPITAL | NOTE 10 – SHARE CAPITAL
The Company is authorized to issue shares of its $ par value common stock and shares of its $ par value preferred stock.
On June 27, 2023, the Company effectuated a reverse split of its issued and outstanding shares of common stock at a ratio of 1-for-25. The share numbers and pricing information in this report are adjusted to reflect the reverse stock split as of September 30, 2023.
Common stock and preferred stock
For the month of February 2022, the following transactions occurred: On February 3, 2022, multiple Series B Convertible Preferred stockholders converted shares of their Series B Convertible preferred stock to shares of common stock of the Company. On February 3, 2022, the Company converted two outstanding notes into shares of common stock of the Company. On February 10, 2022, the Company received an equity investment of $10,500,000 to purchase shares of the Company’s common stock through a registered public offering at $ per share.
For the month of July 2022 the following transactions occurred: On July 12, 2022, we entered into a PIPE transaction with Armistice Capital Master Fund Ltd. (“Armistice Capital”) for the purchase and sale of $12,887,976.31 of securities, consisting of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “Prefunded Warrants”) that are exercisable into 448,096 shares of common stock (the “Prefunded Warrant Shares”) at $ per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock at an initial exercise price of $ per share and will expire five years from the date of issuance.
For the month of August 2022, the following transactions occurred: On August 22, 2022, 4,000 shares of common stock were issued in return for services as a component of a February 2022 services agreement. During the month of August 2022, Armistice Capital exercised 17,618 Prefunded Warrants. Along with the exercise notice and payment of $4,404.41, 17,618 shares of common stock were issued.
For the month of September 2022, the following transactions occurred: During the month of September 2022, Armistice Capital exercised 107,318 Prefunded Warrants. Along with several exercise notices and payments totaling $26,829.60, 107,318 shares of common stock were issued.
For the month of October 2022, the following transactions occurred: During the month of October 2022, Armistice Capital exercised 323,160 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790.00, 323,160 shares of common stock were issued.
For the month of November 2022, the following transactions occurred: During the month of November 2022, Calvary Fund exercised 15,099 Calvary Warrants (see Note 11 – Warrants and Options). Along with an exercise notice and payment totaling $3,774.84, 15,099 shares of common stock were issued.
For the month of June 2023 the following transactions occurred: On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,850.63 of securities, consisting of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “ 2023 Prefunded Warrant Shares”) at $ per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $ per share and will expire five years from the date of issuance.
For the month of July 2023, the following transactions occurred: Approximately shares of the Company’s common stock were issued pursuant to the 100-share lot roundup caused by the reverse stock split on June 27, 2023. The Depository Trust and Clearing Corporation (the “DTCC”) which handles the clearing and settlement of virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets submitted numerous requests for share allocations. In connection with the Company’s June 27, 2023 1-for-25 reverse split DTCC made these requests. An additional 1.488 million shares of the Company’s common stock were newly issued and added to its post-reverse stock split numbers. As described in the Company’s Information Statement filed on Schedule 14C dated December 14, 2022, shareholders holding at least a “round lot” (100 shares or more) prior to the reverse stock split shall have no less than one round lot (100 shares) after the reverse stock split.
Pursuant to the PIPE transaction shares of common stock were issued to Armistice Capital. The 2023 Prefunded Warrants held by Armistice Capital were not exercised for the month of July.
For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued.
For the month of September 2023, the following transactions occurred: On September 8, 2023, the Company, entered into an inducement offer letter agreement (the “Inducement Letter”) with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $ and $, respectively per share.
Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued shares of the Company’s common stock, of which shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of shares of common stock (September 21st) and shares of common stock (September 12th), representing less than 9.99% ownership interest by Armistice Capital on such dates.
On September 8, 2023 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, shares of common stock were issued. On September 19, 2023 the Company issued shares of common stock pursuant to the Company’s 2019 LTIP equity plan. The shares were valued at $4,984.98 with a per share value of $ which was the Company’s common stock closing market price on the grant date and date of issuance. Approximately shares of common stock were issued to Mr. Ross our CEO and shares of common stock were issued to Mr. Grau our COO and interim CFO pursuant to the LTIP plan. Additionally, September 19, 2023 shares of common stock were granted and issued to a vendor associated with our current working capital loan. The shares were valued at $2,902.38 with a per share value of $ on that date. On September 20, 2023 the Company issued shares of common stock pursuant to the Company’s board compensation plan. The shares were valued at $18,096.75 with a per share value of $ which was the Company’s common stock closing market price on the grant date and date of issuance. The Company recognized approximately $228,000 in gain on settlement of debt through the issuance of common stock on this date.
At September 30, 2023 and December 31, 2022, there were and shares of common stock issued and outstanding, respectively; and and shares of Series B preferred stock issued and outstanding, respectively, and and shares of its Series A preferred stock issued and outstanding, respectively.
See Note 15 – Subsequent Events, the Company on October 31, 2023, approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements. On November 3, 2023, the Company approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are further described in Note 15 – Subsequent Events.
|
WARRANTS AND OPTIONS |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARRANTS AND OPTIONS |
On February 10, 2022, the Company received an equity investment of $10,500,000 to purchase shares of the Company’s common stock through a registered public offering at $ per share. Along with the issuance of the shares of common stock, the Company issued immediately exercisable warrants (the “Uplist Warrants”) to purchase up to 101,205 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. Commensurate with the February 10, 2022 offering the Company issued to its underwriters immediately exercisable warrants to purchase up to 15,181 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. On July 8, 2022, the Company issued a dilutive issuance notice that in accordance with Section 3(b) of the Uplist Warrants, upon closing of the July 12, 2022 PIPE transaction, the exercise price of the Uplist Warrants shall be reduced from the current exercise price of $129.6875 to $50.25.
On February 11, 2022, we entered into a transaction with Calvary Fund, the provider of our 2021 bridge financing for the retirement of its debt instrument, principal and interest with a combined value of $1,566,659.00 through the issuance of securities, consisting of (i) prefunded warrants (the “Calvary Warrants”) that are exercisable into 15,099 shares of common stock (the “Calvary Warrant Shares”) at $103.75 per Calvary Warrant, and (iii) immediately exercisable Uplist Warrants to purchase up to 15,099 shares of common stock with an exercise price of $129.6875 per warrant and will expire five years from the date of issuance. On July 8, 2022, the Company issued a dilutive issuance notice that in accordance with Section 3(b) of the Uplist Warrants, upon closing of the July 12, 2022 PIPE transaction, the exercise price of the Uplist Warrants shall be reduced from the current exercise price of $129.6875 to $50.25.
On July 12, 2022, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $12,887,976.31 of securities, consisting of (i) shares of common stock at $27.75 per share, (ii) prefunded warrants (the “Prefunded Warrants”) that are exercisable into 448,096 shares of common stock (the “Prefunded Warrant Shares”) at $27.50 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 936,937 shares of common stock with an exercise price of $21.50 per warrant and will expire five years from the date of issuance. As part of the June 27, 2023 transaction with Armistice the Company was required along with its transaction an additional 1,365,251 immediately exercisable warrants to purchase up to 1,365,251 shares of common stock with an exercise price of $21.50 per warrant and will expire five years from the original date.
On June 27, 2023, we entered into a PIPE transaction with Armistice Capital for the purchase and sale of $ of securities, consisting of (i) shares of common stock at $ per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 615,000 shares of common stock (the “ 2023 Prefunded Warrant Shares”) at $4.37 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 686,499 shares of common stock at an initial exercise price of $4.24 per share and will expire five years from the date of issuance. The 686,499 warrants were repriced to $1.10 per share as part of the Inducement Letter and exercise terms with Armistice Capital.
On September 8, 2023, the Company, entered into an inducement offer letter agreement with Armistice Capital the holders of existing common stock purchase warrants to purchase shares of common stock of the Company. The existing common stock purchase warrants were issued on July 8, 2022 and June 28, 2023 and had an exercise price of $4.37 and $4.24, respectively per share.
Pursuant to the Inducement Letter, Armistice Capital agreed to exercise for cash their existing common stock purchase warrants to purchase an aggregate of 2,988,687 shares of the Company’s common stock at a reduced exercise price of $1.10 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 5,977,374 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of approximately $3,287,555.70 from the exercise of the existing common stock purchase warrants by Armistice Capital. Armistice Capital received 2 New Warrant for each existing common stock purchase warrant that they exercised. No compensation or expense was recognized as the repricing of the existing common stock purchase warrants was in excess of the current market price of the Company’s common stock, and the New Warrants were not compensatory as well due to the market conditions. The Company issued shares of the Company’s common stock, of which shares of common stock are held in reserve by the Company’s transfer agent. Armistice Capital Fund Ltd. is limited to total ownership at one time to be no more than 9.99% of the Company’s issued and outstanding common stock. Armistice Capital took ownership and possession of shares of common stock (September 21st) and shares of common stock (September 12th), representing less than 9.99% ownership interest by Armistice Capital on such dates. The common stock purchase warrants that were induced into being exercised were all held by Armistice Capital and consisted of the July 12, 2022 immediately exercisable warrants with an exercise price of $, the additional issuance of warrants to Armistice Capital that contractually were part of the July 12, 2022 issuance but were triggered by the June 27, 2023 offering that occurred with Armistice Capital and resulting in an additional 1,365,251 immediately exercisable warrants with an exercise price of $, along with 686,499 immediately exercisable warrants with an exercise price of $ that were issued on June 27, 2023.
On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued. On September 8, 2023 370,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00, shares of common stock were issued. A total of 2023 Prefunded Warrants were exercised along with warrants per the Inducement Letter.
As of December 31, 2022, no Prefunded Warrants remained issued and outstanding with respect to the July PIPE transaction. The Prefunded Warrants were purchased in their entirety by the holders of the warrants for $27.50 per warrant. The Prefunded Warrants required the payment of an additional $0.25 per warrant and the written notice of exercise to the Company to convert the Prefunded Warrant into one share of common stock of the Company. During the period from July 12, 2022 through December 31, 2022, the Company received notice on 448,096 Prefunded Warrants converting into 448,096 shares of common stock.
Calvary Fund exercised all of its Calvary Warrants by November 30, 2022 requiring the payment of an additional $0.25 per warrant and the written notice of exercise to the Company to convert the Calvary Warrant into one share of common stock of the Company. Calvary Fund continues to hold the warrants exercisable at a price of $50.25 per warrant.
Along with the Prefunded Warrants the PIPE investors were issued immediately exercisable warrants to purchase up to 936,937 shares of the Company’s common stock with an exercise price of $ per share expiring from the date of issuance, or July 11, 2027. Each Prefunded Warrant and share of common stock issued in the PIPE transaction received two warrants that were exercisable at $ per share with a five-year expiry. None of these warrants have been exercised by the holders. These warrants were repriced to $1.10 per share as part of the Inducement Letter and exercise agreement by Armistice Capital.
As of December 31, 2022, there were 1,096,455 warrants issued and outstanding to acquire additional shares of common stock. As of September 30, 2023, there were warrants issued and outstanding to acquire additional shares of common stock.
The Company evaluates outstanding warrants as derivative liabilities and will recognize any changes in the fair value through earnings. The Company determined that the warrants have an immaterial fair value at December 31, 2022 and September 30, 2023. The warrants do not trade in a highly active securities market, and as such, the Company estimated the fair value of these common stock equivalents using Black-Scholes and the following assumptions:
Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term which due to their maturity period as expiry, it was three years. The Company had no reason to believe future volatility over the expected remaining life of these common stock equivalents was likely to differ materially from historical volatility. Expected life was based on three years due to the expiry of maturity. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the common stock equivalents.
Stock Purchase Warrants
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES AND LEASED PREMISES |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases And Leased Premises | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES AND LEASED PREMISES | NOTE 12 – LEASES AND LEASED PREMISES
Rental Payments under Non-cancellable Operating Leases and Equipment Leases
The Company through its purchase of Champion acquired several long term (more than month-to-month) leases for two manufacturing facilities, three office spaces, five distribution centers and five retail spaces. Four of its distribution centers also have retail operations for which it leases facilities. Lease terms on the various spaces’ expiry from a month-to-month lease (30 days) to a long-term lease expiring in March of 2027.
Rent expense for operating leases totaled approximately $630,000 and $300,000 for the nine months ended September 30, 2023, and 2022, respectively.
The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.
Rental equipment expense for finance leases totaled approximately $0 and $0 for the nine months ended September 30, 2023, and 2022, respectively.
Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
On January 1, 2019, the Company adopted ASC 842 which increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as lease assets and lease liabilities. ASC 842 requires the recognition of the right-of-use (“ROU”) assets and related operating and finance lease liabilities on the balance sheet. The Company adopted the new guidance using the modified retrospective approach with a cumulative-effect adjustment recorded on January 1, 2019.
The adoption of ASC 842 resulted in the recognition of ROU assets of $0 and lease liabilities for operating leases of $0 on the Company’s condensed consolidated balance sheet as of January 1, 2019, with no material impact to its condensed consolidated statements of operations. The difference between the ROU assets and the operating lease liability represents the reclassification of (i) deferred rent balances, resulting from the historical operating leases, and (ii) certain accrued restructuring liabilities. The Company’s accounting for finance leases remained substantially unchanged from its accounting for capital leases in prior periods.
The Company elected the package of practical expedients permitted within the standard, which allow an entity to forgo reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs. Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient related to land easements which allows the Company not to retrospectively treat land easements as leases; however, the Company must apply lease accounting prospectively to land easements if they meet the definition of a lease.
For contracts entered into on or after the effective date, at the inception of a contract the Company will assess whether the contract is, or contains, a lease. The Company’s assessment is based on: (i) whether the contract involves the use of a distinct identified asset, (ii) whether the Company obtained the right to substantially all the economic benefit from the use of the asset throughout the period, and (iii) whether the Company has the right to direct the use of the asset. Leases entered into prior to January 1, 2019, are accounted for under ASC 840 and were not reassessed for classification.
For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments. For finance leases, the lease liability is initially measured in the same manner and date as for operating leases, and is subsequently measured at amortized cost using the effective interest method. The Company generally uses its incremental borrowing rate as the discount rate for leases, unless an interest rate is implicitly stated in the lease. The lease term for all of the Company’s leases includes the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor. All ROU assets are reviewed for impairment.
Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term. Lease expense for finance leases consists of the amortization of the asset on a straight-line basis over the earlier of the lease term or its useful life and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
The Company’s operating leases are comprised primarily of facility leases and as such we have no finance leases for our vehicles or equipment currently at this time.
Balance sheet information related to our leases is presented below:
The following provides details of the Company’s lease expense:
Other information related to leases is presented below:
The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:
Rental expense totaled approximately $630,000 and $300,000 for the nine months ended September 30, 2023 and 2022, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 13 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
During the nine-month periods ended September 30, 2023 and 2022, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company from time-to-time. In the opinion of management, and after consultation with legal counsel, resolution of any of these matters (of which there are none) is not expected to have a material effect on the condensed consolidated financial statements.
Contractual Obligations
The Company does not believe there are any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the condensed consolidated financial statements. As of September 30, 2023 and December 31, 2022 there was approximately $0 and $0, respectively, in outstanding letters of credit issued during the normal course of business. These letters of credit could reduce our available borrowings, if we had any. During the nine months ended September 30, 2023 the Company entered into a line of credit with a major financial institution. The amount due on the line of credit as of September 30, 2023 was $1,689,163. The Company is in compliance with the terms and covenants.
Executive Employment Agreements and Independent Contractor Agreements
The Company has written employment agreements with various other executive officers. All payments made to its executive officers and significant outside service providers are analyzed and determined by the board of directors’ compensation committee; some payments made to independent contractors (or officer payments characterized as non-employee compensation) may be subject to backup withholding or general withholding of payroll taxes, may make the Company responsible for the withholding and remittance of those taxes. Generally outside service providers are responsible for their own withholding and payment of taxes. Certain state taxing authorities may otherwise disagree with that analysis and Company policy.
|
OTHER INCOME – EMPLOYEE RETENTION CREDIT |
9 Months Ended |
|---|---|
Sep. 30, 2023 | |
| Other Income and Expenses [Abstract] | |
| OTHER INCOME – EMPLOYEE RETENTION CREDIT | NOTE 14 – OTHER INCOME – EMPLOYEE RETENTION CREDIT
The Company retained the services of a tax service professional to provide the Company with the specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Company received approximately $1,286,000 in tax credits under the CARES Act from the US Department of Treasury and paid approximately $178,500 to the service provider, netting the Company approximately $1,107,500 in credits for retaining its employees during COVID.
|
SUBSEQUENT EVENTS |
9 Months Ended | ||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||
| Subsequent Events [Abstract] | |||||||||||||||||||||||||||||||
| SUBSEQUENT EVENTS | NOTE 15 – SUBSEQUENT EVENTS
The Company evaluated all events that occurred after the balance sheet date of September 30, 2023, through the date the financial statements were issued and determined that there were the following subsequent events:
On October 31, 2023, the Company approved amending and restating the certificate of designation of the Company’s Series A Convertible Preferred Stock to increase the number of shares from to and allow for the conversion of the Series A Preferred Stock under certain circumstances and vesting requirements.
On November 3, 2023, the Company’s board of directors approved the designation of a new Series C Convertible Cumulative Preferred Stock (the “Series C Designation”). The rights, preferences, restrictions and other matters relating to the Series C Convertible Cumulative Preferred Stock (the “Series C Preferred Stock”) are as follows:
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization | Organization
The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. Effective January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. On June 19, 2017, the Company completed a business combination with its majority stockholder, American Rebel, Inc. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Nature of operations | Nature of operations
The Company develops and sells branded products in the self-defense, safe storage and other patriotic product areas using a wholesale distribution network, utilizing personal appearances, musical venue performances, as well e-commerce and television. The Company’s products are marketed under the American Rebel Brand and are proudly imprinted with such branding. Through its acquisition of the “Champion Entities” (which consists of Champion Safe Co., Inc., Superior Safe, LLC, Safe Guard Security Products, LLC, and Champion Safe De Mexico, S.A. de C.V.) the Company promotes and sells its safe and storage products through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms retail outlets, as well as through online avenues, including website and e-commerce platforms. The Company sells its products under the Champion Safe Co., Superior Safe Company and Safe Guard Safe Co. brands as well as the American Rebel Brand. On August 9, 2023, the Company entered into a Master Brewing Agreement (the “Brewing Agreement”) with Associated Brewing Company, a Minnesota limited liability company (“Associated Brewing”). Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer (“American Rebel Beer”). American Rebel Beer plans to launch regionally in early 2024.
To varying degrees, the consequences of the COVID-19 pandemic continue to affect our operating business. Significant government and private sector actions have taken place to control the spread and mitigate the economic effects of the virus and its variants. The development of geopolitical conflicts, supply chain disruptions and government actions to slow rapid inflation in recent years have produced varying effects on our business. The economic effects from these events over long term cannot be reasonably estimated at this time. Accordingly, estimates used in the preparation of our financial statements, including those associated with the evaluation of certain long-lived assets, goodwill and other intangible assets for impairment, expected credit losses on amounts owed to us (through accounts receivable) and the estimations of certain losses assumed under warranty and other liability contracts, may be subject to significant adjustments in future periods.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interim Financial Statements and Basis of Presentation | Interim Financial Statements and Basis of Presentation
The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K of the Company for the period ended December 31, 2022, and notes thereto contained, filed on April 14, 2023.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Principles of Consolidation | Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year-end | Year-end
The Company’s year-end is December 31.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | 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 and Inventory Deposits
Inventory consists of backpacks, jackets, safes, other storage products and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines an estimate for the reserve of slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company makes deposit payments on certain inventory to be manufactured that are carried separately until the manufactured goods are received into inventory.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed assets and depreciation | Fixed assets and depreciation
Property and equipment are stated at cost, net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded using the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue recognition | Revenue recognition
In accordance with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.
These steps are met when an order is received, a price is agreed to, and the product is shipped or delivered to that customer.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising costs | Advertising costs
Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $172,617 and $119,122 for the three-month periods ended September 30, 2023, and 2022, respectively, and $942,687 and $349,341 for the nine-month period then ended, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Instruments | Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2023, and December 31, 2022, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.
Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 718-10 and the conclusions reached ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings per share |
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC 260 - Earnings per Share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. Dilutive common share equivalents are negligible or immaterial as dilutive shares to be issued during net loss years were non-existent. For the three months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively, and for the nine months ended September 30, 2023 and September 30, 2022, net loss per share was $ and $, respectively
Fully diluted shares outstanding is the total number of shares that the Company would theoretically have if all dilutive securities were exercised and converted into shares. Dilutive securities include options, warrants, convertible debt, preferred stock and anything else that can be converted into shares. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of dilutive securities, calculated using the treasury stock method. The calculation of dilutive shares outstanding excludes out-of-the-money options (i.e., such options’ exercise prices were greater than the average market price of our common shares for the period) because their inclusion would have been antidilutive. Out-of-the-money stock options totaled none and none as of September 30, 2023 and December 31, 2022, respectively. All other dilutive securities are listed below.
The following table illustrates the total number of common shares that would be converted from common stock equivalents issued and outstanding at the end of each period presented; as of September 30, 2023 and as of September 30, 2022, respectively.
In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income taxes | Income taxes
The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change.
Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of September 30, 2023, and December 31, 2022, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.
The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.
The Company classifies tax-related penalties and net interest as income tax expense. For the three-month and nine-month periods ended September 30, 2023, and 2022, respectively, income tax expense has been recorded.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of estimates | Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warranties | Warranties
The Company’s safe manufacturing business estimates its exposure to warranty claims based on both current and historical (with respect to the Champion Entities) product sales data and warranty costs (actual) incurred. The Company assesses the adequacy of its recorded warranty liability each quarter and adjusts the amount as necessary. Warranty liability is included in our accrued expense accounts in the accompanying condensed consolidated balance sheets We estimate that warranty liability is nominal or negligible based on the superior quality of products and our excellent customer relationships. Warranty liability recorded as of December 31, 2022 and September 30, 2023 was approximately $100,000.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combinations | Business Combinations
The Company accounts for business combinations in accordance with ASC Topic 805, Business Combinations, and as further defined by ASU 2017-01, Business Combinations (Topic 805), which requires the purchase price to be measured at fair value. When the purchase consideration consists entirely of shares of our common stock, the Company calculates the purchase price by determining the fair value, as of the acquisition date, of shares issued in connection with the closing of the acquisition and, if the transaction involves contingent consideration based on achievement of milestones or earn-out events, the probability-weighted fair value, as of the acquisition date, of shares issuable upon the occurrence of future events or conditions pursuant to the terms of the agreement governing the business combination. If the transaction involves such contingent consideration, our calculation of the purchase price involves probability inputs that are highly judgmental due to the inherent unpredictability of future results, particularly by growth-stage companies. The Company recognizes estimated fair values of the tangible assets and intangible assets acquired, including in process research and development (“IPR&D”), and liabilities assumed as of the acquisition date, and we record as goodwill any amount of the purchase price of the tangible and intangible assets acquired and liabilities assumed in excess of the fair value (see Note 8 - Goodwill and Acquisition of Champion Entities for further information in accordance with ASC 805-10-55-37 through ASC 805-10-55-50).
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Right of Use Assets and Lease Liabilities | Right of Use Assets and Lease Liabilities
In February 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.
Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
Operating leases are included in operating lease Right-of-Use assets and operating lease liabilities, current and non-current, on the Company’s condensed consolidated balance sheets.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Recent pronouncements | Recent pronouncements
The Company evaluated recent accounting pronouncements through September 30, 2023, and believes that none have a material effect on the Company’s financial statements.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Concentration risks | Concentration risks
Prior to the closing of the Champion Entities, the Company purchased a substantial portion (over 20%) of its inventory from 2 third-party vendors. With the closing and integration of the Champion Entities, the Company no longer purchases a substantial portion (over 20%) of its inventory from the 2 third-party vendors. As of September 30, 2023, the net amount due to these 2 third-party vendors (accounts payable and accrued expense) was $0. The loss of vendor relationships could have a material effect on the Company; however, the Company believes sufficient suppliers could be substituted should these third-party vendors/suppliers become unavailable or non-competitive for us. |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF EARNINGS PER SHARE |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVENTORY AND DEPOSITS (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INVENTORY AND DEPOSITS | Inventory and deposits include the following:
|
|||||||||||||||||||||||||||||||||||||||||||||
PROPERTY AND EQUIPMENT (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF PROPERTY AND EQUIPMENT | Property and equipment include the following:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LINE OF CREDIT – FINANCIAL INSTITUTION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Line Of Credit Financial Institution | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LINE OF CREDIT |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
NOTES PAYABLE – WORKING CAPITAL (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF WORKING CAPITAL |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND ACQUISITION OF THE CHAMPION ENTITIES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Champion Safe Co Inc [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring Cost and Reserve [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ASSETS ACQUIRED AND LIABILITY ASSUMED |
|
INCOME TAXES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES | Components of net deferred tax asset, including a valuation allowance, are as follows:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION | Reconciliation between the statutory rate and the effective tax rate for both periods and as of September 30, 2023 and December 31, 2022:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
WARRANTS AND OPTIONS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FAIR VALUE MEASUREMENT |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF WARRANT ACTIVITY |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LEASES AND LEASED PREMISES (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases And Leased Premises | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES | Balance sheet information related to our leases is presented below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF LEASE EXPENSE | The following provides details of the Company’s lease expense:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF OTHER INFORMATION RELATED TO LEASES | Other information related to leases is presented below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SCHEDULE OF EARNINGS PER SHARE (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Shares used in computation of basic earnings per share for the periods ended | 1,442,600 | 189,700 | ||
| Total dilutive effect of outstanding stock awards or common stock equivalents | 1,714,700 | 344,000 | ||
| Shares used in computation of fully diluted earnings per share for the periods ended September 30, 2023 and September 30, 2022, respectively | 3,157,300 | 533,700 | ||
| Net income (loss) | $ (2,793,670) | $ (2,147,402) | $ (3,610,929) | $ (6,377,731) |
| Fully diluted income (loss) per share | $ (1.14) | $ (11.95) | ||
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Product Information [Line Items] | |||||
| Date of incorporation | Dec. 15, 2014 | ||||
| Advertising costs | $ 172,617 | $ 119,122 | $ 942,687 | $ 349,341 | |
| Earnings per share basic | $ (0.95) | $ (8.90) | $ (2.50) | $ (33.62) | |
| Earnings per share diluted | $ (0.95) | $ (8.90) | $ (2.50) | $ (33.62) | |
| Income tax examination description | less than a 50% likelihood | less than a 50% likelihood | |||
| Income tax expense | |||||
| Warranty liability | 100,000 | 100,000 | $ 100,000 | ||
| 2 Third-party Vendors [Member] | |||||
| Product Information [Line Items] | |||||
| Accounts payable and accrued expense | $ 0 | $ 0 | |||
| Supplier Concentration Risk [Member] | Inventory [Member] | 2 Third-party Vendors [Member] | |||||
| Product Information [Line Items] | |||||
| Risk percentage | 20.00% | 20.00% | |||
GOING CONCERN (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||
|---|---|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||
| Net losses | $ 2,793,670 | $ 2,147,402 | $ 3,610,929 | $ 6,377,731 | |
| Accumulated deficit | 37,723,739 | 37,723,739 | $ 34,112,810 | ||
| Working capital deficit | $ 8,111,282 | $ 8,111,282 | $ 6,678,562 | ||
SCHEDULE OF INVENTORY AND DEPOSITS (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory – finished goods | $ 8,509,992 | $ 7,421,696 |
| Inventory deposits | 310,587 | 309,684 |
| Total Inventory and deposits | $ 8,820,579 | $ 7,731,380 |
INVENTORY AND DEPOSITS (Details Narrative) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory | $ 8,820,579 | $ 7,731,380 |
| Deposits | 600,000 | |
| American Rebel Inc [Member] | Champion Acquisition [Member] | ||
| Inventory | $ 5,400,000 |
SCHEDULE OF PROPERTY AND EQUIPMENT (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | $ 790,832 | $ 815,859 |
| Less: Accumulated depreciation | (413,568) | (359,334) |
| Net property and equipment | 377,264 | 456,525 |
| Property, Plant and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | 367,317 | 367,317 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment gross | $ 423,515 | $ 448,542 |
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 79,260 | $ 11,311 |
| Depreciation expense | 60 months | |
RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS (Details Narrative) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Mr. Doug Grau [Member] | |
| Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items] | |
| Loan | $ 95,332 |
SCHEDULE OF LINE OF CREDIT (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Line of Credit Facility [Line Items] | ||
| Total recorded as a current liability | $ 1,689,163 | |
| Line of Credit [Member] | ||
| Line of Credit Facility [Line Items] | ||
| Total recorded as a current liability | $ 1,689,163 |
LINE OF CREDIT – FINANCIAL INSTITUTION (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
Feb. 28, 2023 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Line of Credit Facility [Line Items] | |||
| Line of credit, current | $ 1,689,163 | ||
| Master Credit Agreement [Member] | |||
| Line of Credit Facility [Line Items] | |||
| Long-Term Line of Credit | $ 2,000,000 | ||
| Percentage of interest rate period end | 2.05% | ||
| Total percentage of interest rate during period | 7.48% | ||
| Line of credit description | The Company paid a one-time loan fee equal to 0.1% of the Line of Credit amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate. | ||
| Interest rate, increase (decrease) | 6.00% | ||
| Line of credit, maximum borrowing capacity | $ 1,700,000 | ||
| Line of credit, draws | 10,000 | ||
| Line of credit, interest expenses | $ 65,000 |
SCHEDULE OF WORKING CAPITAL (Details) - USD ($) |
Dec. 31, 2023 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|---|
| Short-Term Debt [Line Items] | |||
| Total recorded as a current liability | $ 1,152,972 | $ 602,643 | |
| Debt current | 600,000 | 600,000 | |
| Forecast [Member] | First Loan [Member] | |||
| Short-Term Debt [Line Items] | |||
| Loans | $ 150,000 | ||
| Forecast [Member] | Second Loan [Member] | |||
| Short-Term Debt [Line Items] | |||
| Loans | $ 300,000 | ||
| Working Capital Loan One [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total recorded as a current liability | 600,000 | ||
| Working Capital Loan Two [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total recorded as a current liability | 450,000 | ||
| Working Capital Loan Three [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total recorded as a current liability | 2,643 | ||
| Working Capital Loan Four [Member] | |||
| Short-Term Debt [Line Items] | |||
| Total recorded as a current liability | $ 702,972 |
SCHEDULE OF NOTES PAYABLE TO NON-RELATED PARTIES (Details) (Parenthetical) - USD ($) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Working Capital Loan One [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt interest rate | 12.00% | 12.00% |
| Working Capital Loan Two [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt interest rate | 12.00% | 12.00% |
| Debt instrument maturity date | Jun. 30, 2024 | Jun. 30, 2024 |
| Working Capital Loan Three [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt interest rate | 22.50% | 22.50% |
| Working Capital Loan Four [Member] | ||
| Short-Term Debt [Line Items] | ||
| Debt instrument maturity date | Jul. 05, 2024 | Jul. 05, 2024 |
| Debt Instrument, Periodic Payment | $ 20,000 | $ 20,000 |
SCHEDULE OF ASSETS ACQUIRED AND LIABILITY ASSUMED (Details) - USD ($) |
Jul. 29, 2022 |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 29, 2022 |
|---|---|---|---|---|
| Restructuring Cost and Reserve [Line Items] | ||||
| Goodwill | $ 4,525,000 | $ 4,200,000 | ||
| Champion Safe Co Inc [Member] | ||||
| Restructuring Cost and Reserve [Line Items] | ||||
| Cash | ||||
| Accounts receivable | 1,337,130 | |||
| Inventory | 5,229,426 | |||
| Fixed assets | 473,326 | |||
| Deposits and other assets | 53,977 | |||
| Customer list and other intangibles** | 637,515 | |||
| Account payable | (1,609,657) | |||
| Accrued expenses | (84,297) | |||
| Goodwill | 4,525,000 | $ 325,000 | ||
| Consideration | 10,562,420 | |||
| Payments in cash to seller | 8,455,177 | |||
| Additional payments of cash to Seller in 2023 | 275,000 | |||
| Amounts due on accounts payable to Seller (over the next 12 months) | 50,000 | |||
| Debt paid on behalf of seller | 1,442,243 | |||
| Payments to service providers | 340,000 | |||
| Total purchase price | $ 10,562,420 |
SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Income Tax Disclosure [Abstract] | ||
| Net operating loss carryforward | $ 7,922,000 | $ 7,163,690 |
| Total deferred tax asset | 7,922,000 | 7,163,690 |
| Less: Valuation allowance | (7,922,000) | (7,163,690) |
| Net deferred tax asset |
SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION (Details) |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | ||
| Federal statutory rate | 21.00% | 21.00% |
| State taxes, net of federal benefit | 0.00% | 0.00% |
| Change in valuation allowance | 21.00% | 21.00% |
| Effective tax rate | 0.00% | 0.00% |
INCOME TAXES (Details Narrative) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Aug. 16, 2022 |
Sep. 30, 2023 |
Dec. 31, 2022 |
|
| Income Tax Disclosure [Abstract] | |||
| Net operating loss carryforward | $ 37,723,739 | $ 34,112,810 | |
| Valuation allowance for deferred tax assets | $ 7,922,000 | $ 7,163,690 | |
| Valuation allowance description | As a result, management determined it was more likely than not deferred tax assets will not be realized as of September 30, 2023, and December 31, 2022, and recognized 100% valuation allowance for each period | ||
| Corporate alternative minimum income tax rate | 15.00% | ||
| Percentage of excise tax on corporate stock repurchases | 1.00% |
SHARE CAPITAL (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | ||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 31, 2023 |
Oct. 31, 2023 |
Sep. 20, 2023 |
Sep. 19, 2023 |
Sep. 08, 2023 |
Aug. 21, 2023 |
Jun. 28, 2023 |
Jun. 27, 2023 |
Jun. 27, 2023 |
Nov. 30, 2022 |
Aug. 22, 2022 |
Jul. 12, 2022 |
Jul. 12, 2022 |
Jul. 12, 2022 |
Jul. 08, 2022 |
Feb. 10, 2022 |
Feb. 03, 2022 |
Aug. 30, 2023 |
Jul. 31, 2023 |
Nov. 30, 2022 |
Oct. 31, 2022 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
Feb. 11, 2022 |
|
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Common stock, shares authorized | 600,000,000 | 600,000,000 | ||||||||||||||||||||||||
| Common stock, par value | $ 0.001 | $ 0.001 | ||||||||||||||||||||||||
| Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||||||||||||||||||
| Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||||||||||||||||||
| Reserse split | 1-for-25 | |||||||||||||||||||||||||
| Debt conversion, converted instrument, shares issued | 15,099 | |||||||||||||||||||||||||
| Shares new issues | 2,993,850.63 | |||||||||||||||||||||||||
| Exercisable of warrants | 615,000 | 615,000 | 448,096 | 448,096 | 448,096 | 448,096 | 15,099 | |||||||||||||||||||
| Balance, shares | 71,499 | 20,372 | ||||||||||||||||||||||||
| Common stock purchase warrants | 2,988,687 | |||||||||||||||||||||||||
| Value new issues | $ 2,902.38 | $ 312,452 | $ 9,038,456 | |||||||||||||||||||||||
| Gain on settlement of debt | $ 228,000 | |||||||||||||||||||||||||
| Common Stock, Shares, Issued | 5,875,263 | 677,221 | ||||||||||||||||||||||||
| Common Stock, Shares, Outstanding | 5,875,263 | 677,221 | ||||||||||||||||||||||||
| Preferred Stock, Shares Issued | 175,000 | 175,000 | ||||||||||||||||||||||||
| Preferred Stock, Shares Outstanding | 175,000 | 175,000 | ||||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | September Twelve [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||||||||||||||
| Prefunded Warrants [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Exercisable of warrants | 370,000 | |||||||||||||||||||||||||
| Share issued price per share | $ 0.75 | $ 0.78 | ||||||||||||||||||||||||
| Sale of stock description of transaction | On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued. | For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | ||||||||||||||||||||||||
| Balance, shares | 24,129 | 6,391 | 370,000 | |||||||||||||||||||||||
| Value new issues | $ 18,096.75 | $ 4,984.98 | $ 3,700.00 | |||||||||||||||||||||||
| Granted shares | 3,721 | |||||||||||||||||||||||||
| Private Investment In Public Equity [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Exercisable of warrants | 15,181 | |||||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Exercisable of warrants | 5,977,374 | |||||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Private Investment In Public Equity [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Exercisable of warrants | 101,205 | |||||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Private Investment In Public Equity [Member] | Prefunded Warrants [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Exercisable of warrants | 448,096 | 448,096 | 448,096 | |||||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Sale of stock consideration received per transaction | $ 2,993,850.63 | $ 12,887,976.31 | ||||||||||||||||||||||||
| Shares new issues | 71,499 | 20,372 | ||||||||||||||||||||||||
| Excerice price share | $ 4.24 | $ 4.24 | $ 21.50 | $ 4.37 | ||||||||||||||||||||||
| Exercisable of warrants | 686,499 | 686,499 | 936,937 | 936,937 | 936,937 | 2,988,687 | ||||||||||||||||||||
| Sale of stock description of transaction | For the month of October 2022, the following transactions occurred: During the month of October 2022, Armistice Capital exercised 323,160 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790.00, 323,160 shares of common stock were issued | For the month of September 2022, the following transactions occurred: During the month of September 2022, Armistice Capital exercised 107,318 Prefunded Warrants. Along with several exercise notices and payments totaling $26,829.60, 107,318 shares of common stock were issued. | ||||||||||||||||||||||||
| Exercisable of warrants | 615,000 | 615,000 | ||||||||||||||||||||||||
| Balance, shares | 71,499 | |||||||||||||||||||||||||
| Common stock purchase warrants | $ 3,287,555.70 | |||||||||||||||||||||||||
| Common stock purchase warrants | 2,242,000 | |||||||||||||||||||||||||
| Calvary Fund [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Sale of stock description of transaction | For the month of November 2022, the following transactions occurred: During the month of November 2022, Calvary Fund exercised 15,099 Calvary Warrants (see Note 11 – Warrants and Options). Along with an exercise notice and payment totaling $3,774.84, 15,099 shares of common stock were issued. | |||||||||||||||||||||||||
| Chief Executive Officer [Member] | Prefunded Warrants [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 3.954 | |||||||||||||||||||||||||
| Chief Operating Officer [Member] | Prefunded Warrants [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 2,237 | |||||||||||||||||||||||||
| Febrauary Twenty Twenty Two Service Agreement [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Sale of stock description of transaction | For the month of August 2022, the following transactions occurred: On August 22, 2022, 4,000 shares of common stock were issued in return for services as a component of a February 2022 services agreement. During the month of August 2022, Armistice Capital exercised 17,618 Prefunded Warrants. Along with the exercise notice and payment of $4,404.41, 17,618 shares of common stock were issued | |||||||||||||||||||||||||
| Common Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Cconversion of stock | 10,068 | |||||||||||||||||||||||||
| Debt conversion, converted instrument, shares issued | 7,443 | |||||||||||||||||||||||||
| Shares purchased | 101,205 | |||||||||||||||||||||||||
| Exercisable of warrants | 686,499 | 686,499 | 936,937 | 936,937 | 936,937 | |||||||||||||||||||||
| Balance, shares | 1,488,615 | 71,499 | 106,345 | |||||||||||||||||||||||
| Common stock purchase warrants | 2,988,687 | |||||||||||||||||||||||||
| Value new issues | $ 72 | $ 106 | ||||||||||||||||||||||||
| Common Stock, Shares, Issued | 5,875,263 | |||||||||||||||||||||||||
| Common Stock, Shares, Outstanding | 677,221 | |||||||||||||||||||||||||
| Common Stock [Member] | September Twenty One [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 356,687 | |||||||||||||||||||||||||
| Common Stock [Member] | September Twelve [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 390,000 | |||||||||||||||||||||||||
| Common Stock [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Excerice price share | $ 4.37 | $ 27.75 | ||||||||||||||||||||||||
| Common Stock [Member] | Subscription Arrangement [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Equity method investment received | $ 10,500,000 | |||||||||||||||||||||||||
| Shares purchased | 101,205 | |||||||||||||||||||||||||
| Stock price per share | $ 103.75 | |||||||||||||||||||||||||
| Prefunded Warrants [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Excerice price share | 4.24 | 21.50 | ||||||||||||||||||||||||
| Share issued price per share | $ 4.37 | $ 4.37 | $ 27.50 | $ 27.50 | $ 27.50 | |||||||||||||||||||||
| Reverse Stock Split [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Sale of stock description of transaction | For the month of July 2023, the following transactions occurred: Approximately 1,488,615 shares of the Company’s common stock were issued pursuant to the 100-share lot roundup caused by the reverse stock split on June 27, 2023. The Depository Trust and Clearing Corporation (the “DTCC”) which handles the clearing and settlement of virtually all broker-to-broker equity, listed corporate and municipal bond and unit investment trust (UIT) transactions in the U.S. equities markets submitted numerous requests for share allocations. In connection with the Company’s June 27, 2023 1-for-25 reverse split DTCC made these requests. An additional 1.488 million shares of the Company’s common stock were newly issued and added to its post-reverse stock split numbers. As described in the Company’s Information Statement filed on Schedule 14C dated December 14, 2022, shareholders holding at least a “round lot” (100 shares or more) prior to the reverse stock split shall have no less than one round lot (100 shares) after the reverse stock split | |||||||||||||||||||||||||
| Pre Funded Common Stock Warrants [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 615,000 | 492,902 | ||||||||||||||||||||||||
| Warrants inducement exercise price per share | $ 1.10 | |||||||||||||||||||||||||
| Preferred Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Value new issues | ||||||||||||||||||||||||||
| Series B Preferred Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Cconversion of stock | 201,358 | |||||||||||||||||||||||||
| Series B Preferred Stock [Member] | Preferred Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Preferred Stock, Shares Issued | 75,143 | |||||||||||||||||||||||||
| Preferred Stock, Shares Outstanding | 75,143 | |||||||||||||||||||||||||
| Series A Preferred Stock [Member] | Preferred Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Preferred Stock, Shares Issued | 100,000 | |||||||||||||||||||||||||
| Preferred Stock, Shares Outstanding | 100,000 | |||||||||||||||||||||||||
| Series A Convertible Preferred Stock [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 100,000 | 150,000 | ||||||||||||||||||||||||
| Series A Convertible Preferred Stock [Member] | Subsequent Event [Member] | ||||||||||||||||||||||||||
| Class of Stock [Line Items] | ||||||||||||||||||||||||||
| Balance, shares | 100,000 | 150,000 | ||||||||||||||||||||||||
SCHEDULE OF WARRANT ACTIVITY (Details) (Parenthetical) |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
$ / shares
| |
| Share-Based Payment Arrangement [Abstract] | |
| Weighted average exercise price per share | $ 1.10 |
WARRANTS AND OPTIONS (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 20, 2023 |
Sep. 19, 2023 |
Sep. 08, 2023 |
Aug. 21, 2023 |
Jun. 28, 2023 |
Jun. 27, 2023 |
Jun. 27, 2023 |
Nov. 30, 2022 |
Jul. 12, 2022 |
Jul. 12, 2022 |
Jul. 12, 2022 |
Jul. 08, 2022 |
Feb. 11, 2022 |
Feb. 10, 2022 |
Feb. 03, 2022 |
Aug. 30, 2023 |
Jul. 31, 2023 |
Oct. 31, 2022 |
Sep. 30, 2022 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 615,000 | 615,000 | 448,096 | 448,096 | 448,096 | 15,099 | 448,096 | |||||||||||||||
| Warrant exercise price | $ 4.37 | $ 4.37 | $ 0.25 | $ 27.50 | $ 27.50 | $ 27.50 | $ 129.6875 | $ 129.6875 | $ 0.25 | |||||||||||||
| Proceeds from notes payable | $ 1,566,659.00 | |||||||||||||||||||||
| Sale of stock | $ 12,887,976.31 | |||||||||||||||||||||
| Number of shares issued | 71,499 | 20,372 | ||||||||||||||||||||
| Sale of stock | 2,993,850.63 | |||||||||||||||||||||
| Share price | $ 4.37 | $ 4.37 | ||||||||||||||||||||
| Common stock purchase warrants | 2,988,687 | |||||||||||||||||||||
| Value new issues | $ 2,902.38 | $ 312,452 | $ 9,038,456 | |||||||||||||||||||
| Conversion of warrants | 15,099 | |||||||||||||||||||||
| Prefunded Warrants [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 370,000 | |||||||||||||||||||||
| Number of shares issued | 24,129 | 6,391 | 370,000 | |||||||||||||||||||
| Sale of stock description of transaction | On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued. | For the month of August 2023, the following transactions occurred: On August 21, 2023 245,000 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00, 245,000 shares of common stock were issued | ||||||||||||||||||||
| Value new issues | $ 18,096.75 | $ 4,984.98 | $ 3,700.00 | |||||||||||||||||||
| Additional Prefunded Warrants [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 50.25 | |||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||||||||||
| September Twelve [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Ownership percentage | 9.99% | |||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 686,499 | 686,499 | 936,937 | 936,937 | 936,937 | 2,988,687 | ||||||||||||||||
| Number of shares issued | 71,499 | |||||||||||||||||||||
| Sale of stock | 71,499 | 20,372 | ||||||||||||||||||||
| Common stock purchase warrants | $ 3,287,555.70 | |||||||||||||||||||||
| Common stock purchase warrants | 2,242,000 | |||||||||||||||||||||
| Warrant exercise price | $ 4.24 | $ 4.24 | $ 21.50 | $ 4.37 | ||||||||||||||||||
| Sale of stock description of transaction | For the month of October 2022, the following transactions occurred: During the month of October 2022, Armistice Capital exercised 323,160 Prefunded Warrants. Along with several exercise notices and payments totaling $80,790.00, 323,160 shares of common stock were issued | For the month of September 2022, the following transactions occurred: During the month of September 2022, Armistice Capital exercised 107,318 Prefunded Warrants. Along with several exercise notices and payments totaling $26,829.60, 107,318 shares of common stock were issued. | ||||||||||||||||||||
| Prefunded Warrants To Calvary [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 936,937 | |||||||||||||||||||||
| Warrant exercise price | $ 21.50 | 21.50 | ||||||||||||||||||||
| Warrant exercise price | 5 years | |||||||||||||||||||||
| Maximum [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | 129.6875 | $ 129.6875 | $ 129.6875 | |||||||||||||||||||
| Minimum [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 50.25 | $ 50.25 | $ 50.25 | |||||||||||||||||||
| Private Investment In Public Equity [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 15,181 | |||||||||||||||||||||
| Warrant exercise price | $ 103.75 | |||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 5,977,374 | |||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Private Investment In Public Equity [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 101,205 | |||||||||||||||||||||
| Warrant exercise price | $ 129.6875 | |||||||||||||||||||||
| Armistice Capital Master Fund Ltd [Member] | Private Investment In Public Equity [Member] | Prefunded Warrants [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 448,096 | 448,096 | 448,096 | |||||||||||||||||||
| Common Stock [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Stock repurchased shares | 101,205 | |||||||||||||||||||||
| Purchase of warrants | 686,499 | 686,499 | 936,937 | 936,937 | 936,937 | |||||||||||||||||
| Warrant exercise price | $ 4.24 | $ 4.24 | $ 21.50 | $ 21.50 | $ 21.50 | |||||||||||||||||
| Number of shares issued | 1,488,615 | 71,499 | 106,345 | |||||||||||||||||||
| Common stock purchase warrants | 2,988,687 | |||||||||||||||||||||
| Warrants issued and outstanding | 1,365,251 | 1,365,251 | 686,499 | |||||||||||||||||||
| Value new issues | $ 72 | $ 106 | ||||||||||||||||||||
| Conversion of warrants | 7,443 | |||||||||||||||||||||
| Common Stock [Member] | September Twenty One [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Number of shares issued | 356,687 | |||||||||||||||||||||
| Common Stock [Member] | September Twelve [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Number of shares issued | 390,000 | |||||||||||||||||||||
| Common Stock [Member] | Armistice Capital Master Fund Ltd [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 4.37 | 27.75 | ||||||||||||||||||||
| Common Stock [Member] | Subscription Arrangement [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Equity method investment received | $ 10,500,000 | |||||||||||||||||||||
| Stock repurchased shares | 101,205 | |||||||||||||||||||||
| Stock price per share | $ 103.75 | |||||||||||||||||||||
| Warrants [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 27.75 | $ 27.75 | $ 27.75 | $ 27.50 | ||||||||||||||||||
| Warrant [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Purchase of warrants | 686,499 | 686,499 | ||||||||||||||||||||
| Warrant exercise price | $ 1.10 | $ 1.10 | ||||||||||||||||||||
| Number of shares issued | 746,687 | |||||||||||||||||||||
| Warrants issued and outstanding | 1,096,455 | |||||||||||||||||||||
| Warrants issued and outstanding | 6,136,892 | |||||||||||||||||||||
| Warrant [Member] | Offer Letter Agreement [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 4.24 | $ 4.37 | ||||||||||||||||||||
| Pre Funded Common Stock Warrants [Member] | ||||||||||||||||||||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||||||||||||||||||||
| Warrant exercise price | $ 0.25 | $ 0.01 | $ 0.25 | |||||||||||||||||||
| Number of shares issued | 615,000 | 492,902 | ||||||||||||||||||||
| Warrants inducement exercise price per share | $ 1.10 | |||||||||||||||||||||
SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES (Details) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
Sep. 30, 2022 |
|---|---|---|---|
| Right-of-use lease liability, long-term | $ 1,237,618 | $ 1,977,329 | |
| Right of Use Operating Lease Assets [Member] | |||
| Right-of-use lease liability, long-term | 1,237,618 | ||
| Other Current Liabilities [Member] | |||
| Right-of-use lease liability, long-term | 798,136 | ||
| Right of Use Operating Lease Liability [Member] | |||
| Right-of-use lease liability, long-term | 439,482 | ||
| Property, Plant and Equipment [Member] | |||
| Right-of-use lease liability, long-term | |||
| Current Portion of Long-term Debt [Member] | |||
| Right-of-use lease liability, long-term | |||
| Long-Term Debt [Member] | |||
| Right-of-use lease liability, long-term |
SCHEDULE OF LEASE EXPENSE (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Leases And Leased Premises | ||
| Operating lease expense, net | $ 632,420 | |
| Amortization of assets | ||
| Interest on lease liabilities | ||
| Total finance lease expense | ||
SCHEDULE OF OTHER INFORMATION RELATED TO LEASES (Details) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
|
| Leases And Leased Premises | ||
| Right-of-use assets acquired in exchange for operating lease obligations | $ 1,237,618 | |
| Operating cash flows from finance leases | ||
| Operating cash flows from operating leases | $ 739,710 | |
| Operating leases, remaining lease term | 2 years 8 months 12 days | 0 years |
| Finance leases, remaining lease term | 0 years | 0 years |
| Operating leases, weighted average discount rate | 5.00% | 5.00% |
SCHEDULE OF FUTURE MINIMUM RENTAL PAYMENTS FOR OPERATING LEASE (Details) |
Sep. 30, 2023
USD ($)
|
|---|---|
| Leases And Leased Premises | |
| Finance leases, 2023 (three months remaining) | |
| Operating lease, 2023 (three months remaining) | 265,965 |
| Finance leases, 2024 | |
| Operating lease, 2024 | 688,526 |
| Finance leases, 2025 | |
| Operating lease, 2025 | 163,794 |
| Finance leases, 2026 | |
| Operating lease, 2026 | 62,792 |
| Finance leases, thereafter | |
| Operating lease, 2027 | 3,733 |
| Finance leases, thereafter | |
| Operating lease, thereafter | |
| Finance leases, total lease payments | |
| Operating lease, total lease payments | 1,184,810 |
| Operating lease, less imputed interest | (46,410) |
| Total finance lease liabilities | |
| Total operating lease liabilities | $ 1,138,330 |
LEASES AND LEASED PREMISES (Details Narrative) - USD ($) |
9 Months Ended | ||
|---|---|---|---|
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Rent expense | $ 630,000 | $ 300,000 | |
| Rental equipment expense for finance leases | 0 | 0 | |
| Operating lease right of use asset | 1,237,618 | $ 1,977,329 | |
| Operating lease liabilities | 1,138,330 | ||
| Rent expenses | 630,000 | $ 300,000 | |
| Accounting Standards Update 2016-02 [Member] | |||
| Operating lease right of use asset | 0 | ||
| Operating lease liabilities | $ 0 | ||
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) |
Sep. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Commitments and Contingencies Disclosure [Abstract] | ||
| Outstanding letters of credit | $ 0 | $ 0 |
| Line of credit | $ 1,689,163 |
OTHER INCOME – EMPLOYEE RETENTION CREDIT (Details Narrative) - US Treasury and Government [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2023
USD ($)
| |
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |
| Received tax credit | $ 1,286,000 |
| Refunds and credits for retaining | 178,500 |
| Employee [Member] | |
| Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | |
| Refunds and credits for retaining | $ 1,107,500 |
SUBSEQUENT EVENTS (Details Narrative) - $ / shares |
1 Months Ended | 9 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Nov. 03, 2023 |
Oct. 31, 2023 |
Oct. 31, 2023 |
Jun. 27, 2023 |
Jul. 12, 2022 |
Jul. 31, 2023 |
Sep. 30, 2023 |
Sep. 30, 2022 |
Dec. 31, 2022 |
|
| Subsequent Event [Line Items] | |||||||||
| Balance, shares | 71,499 | 20,372 | |||||||
| Series C preferred stock, par value | $ 0.001 | $ 0.001 | |||||||
| Share price | $ 4.37 | ||||||||
| Common Stock [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Balance, shares | 1,488,615 | 71,499 | 106,345 | ||||||
| Subsequent Event [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Preferred stock, liquidation preference per share | $ 0.225 | ||||||||
| Preferred stock, annual rate percentage | 1200.00% | ||||||||
| Subsequent Event [Member] | Common Stock [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Preferred stock, liquidation preference per share | $ 7.50 | ||||||||
| Series A Convertible Preferred Stock [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Balance, shares | 100,000 | 150,000 | |||||||
| Series A Convertible Preferred Stock [Member] | Subsequent Event [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Balance, shares | 100,000 | 150,000 | |||||||
| Series C Preferred Stock [Member] | Subsequent Event [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Series C preferred stock, par value | $ 7.50 | ||||||||
| Preferred stock, dividend rate, percentage | 853.00% | ||||||||
| Preferred stock, liquidation preference per share | $ 0.16 | ||||||||
| Share price | $ 1.50 | ||||||||
| Preferred stock, convertible, terms | 1 share of Series C Preferred Stock converts into 5 shares of Common Stock | ||||||||
| Series C Preferred Stock [Member] | Subsequent Event [Member] | Fifth Anniversary [Member] | |||||||||
| Subsequent Event [Line Items] | |||||||||
| Preferred stock, liquidation preference per share | $ 11.25 | ||||||||
| Redeemed shares, per share | $ 2.25 | ||||||||