American Rebel(US:AREB)2025-08-13 00:56PART I. FINANCIAL INFORMATION This section presents the unaudited interim consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the company Interim Consolidated Financial Statements (Unaudited) The unaudited interim financial statements for the six months ended June 30, 2025, show a deteriorating financial position with a $23.2 million net loss, negative gross margins, and substantial non-cash charges, raising going concern doubts Consolidated Balance Sheets As of June 30, 2025, total assets increased to $15.0 million while liabilities grew to $18.2 million, resulting in a $3.1 million stockholders' deficit and a $4.6 million working capital deficit Consolidated Balance Sheet Summary (Unaudited) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $11,643,452 | $6,325,679 | | Total Assets | $15,031,082 | $10,006,215 | | Total Current Liabilities | $16,281,393 | $15,265,907 | | Total Liabilities | $18,158,973 | $17,638,097 | | Total Stockholders' Deficit | ($3,127,891) | ($7,631,882) | - The company's working capital deficit was $(4,637,940) as of June 30, 2025, compared to $(8,940,228) as of December 31, 202455 Consolidated Statements of Operations Revenues declined by 27% for the six months ended June 30, 2025, with a negative gross margin in Q2, leading to a $23.2 million net loss driven by significant non-cash charges Statement of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $2,842,596 | $3,255,393 | $5,353,920 | $7,299,230 | | Gross Margin | ($31,373) | $30,655 | $257,680 | $871,978 | | Operating Loss | ($4,198,280) | ($3,947,921) | ($7,164,698) | ($6,225,190) | | Net Loss | ($18,137,743) | ($5,253,004) | ($23,196,999) | ($7,954,282) | | Basic and Diluted EPS | ($5.34) | ($201.01) | ($7.15) | ($304.38) | - A significant loss on debt extinguishment of $12.3 million and a loss on settlement of liability of $2.6 million were major contributors to the net loss in the first six months of 202511 Consolidated Statements of Cash Flows Operating activities used $3.4 million in cash for the six months ended June 30, 2025, with financing activities providing $8.2 million, increasing total cash to $5.1 million Cash Flow Summary for the Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($3,359,662) | ($3,697,209) | | Net Cash Used in Investing Activities | ($42,272) | ($5,939) | | Net Cash Provided by Financing Activities | $8,196,600 | $3,008,237 | | Change in Cash, Cash Equivalents, and Restricted Cash | $4,794,666 | ($694,911) | | Total Cash, Cash Equivalents, and Restricted Cash at End of Period | $5,082,212 | $452,785 | Notes to the Condensed Financial Statements Key notes include a change in auditors, non-reliance on prior financials, substantial going concern doubt, heavy reliance on dilutive high-interest debt, and ongoing legal proceedings including a Bank of America default - The company dismissed its previous auditor, BF Borgers CPA PC, following an SEC order, and as a result, comparative financial figures for the three and six months ended June 30, 2024, have not been restated and should not be relied upon171820 - Substantial doubt exists about the Company's ability to continue as a going concern due to significant net losses of $23.2 million for the six months ended June 30, 2025, an accumulated deficit of $88.3 million, and a working capital deficit, with continued operations dependent on raising additional capital555657 - The company is heavily reliant on working capital loans, many structured as Revenue Interest Purchase Agreements or containing high interest rates and conversion features leading to significant shareholder dilution8182 - Numerous debt-to-equity conversions and share issuances occurred, including over 1 million shares issued to settle $4.1 million in payables, resulting in a $2.6 million loss on conversion and indicating significant dilutive financing activities100101102 - The company defaulted on its line of credit with Bank of America, leading to a lawsuit seeking over $1.9 million, and failed to make the final payment by the July 31, 2025 deadline despite a forbearance agreement164165 Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 27% revenue decline to market slowdowns, with increased net loss due to non-cash debt extinguishment losses and higher marketing and professional fees, highlighting ongoing liquidity and going concern risks - The company positions itself as "America's Patriotic Brand," focusing on safes, concealed carry products, and American Rebel Light Beer, leveraging CEO Andy Ross's public persona for marketing188198 Revenue by Product Category (Six Months Ended June 30) | Percentage of revenue | 2025 | 2024 | | :--- | :--- | :--- | | Safes | 95.7% | 99.2% | | Soft goods | 1.6% | 0.5% | | Beverages | 2.7% | 0.3% | | Total | 100% | 100% | - Revenue for the six months ended June 30, 2025, decreased by 27% to $5.4 million from $7.3 million in the prior year, attributed by management to slower sales and market conditions in the second amendment industry225 - Operating expenses for the first six months of 2025 increased by 5% year-over-year, driven by a 195% increase in marketing and brand development costs and a 46% increase in administrative expenses225230231 - The company's working capital deficit was $4.6 million as of June 30, 2025, with operations primarily funded through dilutive issuances of capital stock and convertible debt236 Quantitative and Qualitative Disclosures about Market Risk This section is not applicable to the company as a smaller reporting company - The company has indicated that this item is not applicable243 Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, due to a material weakness in internal control over financial reporting, specifically inadequate management reviews and technical accounting competencies - The CEO and Interim Principal Accounting Officer concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2025245 - A material weakness in internal control over financial reporting was identified due to deficiencies in management reviews and a lack of sufficient technical accounting competencies246 PART II. OTHER INFORMATION This section details legal proceedings, risk factors, unregistered equity sales, defaults on senior securities, and other pertinent information Legal Proceedings The company faces legal actions including a trademark infringement claim from Liberty Safe and a $1.9 million lawsuit from Bank of America for a defaulted line of credit - The company received a complaint from Liberty Safe and Security Products, Inc. for alleged trademark infringement, which management believes is without merit but has initiated settlement discussions249 - Bank of America filed a complaint against the company on March 21, 2025, seeking no less than $1,906,743 due to a default on a line of credit, with a forbearance agreement executed on May 30, 2025250 Risk Factors This section refers to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, with no new factors detailed in this quarterly report - The report directs investors to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2024252 Unregistered Sales of Equity Securities and Use of Proceeds The company engaged in extensive unregistered sales of equity securities, including common and Series D Preferred Stock, to settle payables and convert debt, highlighting reliance on dilutive financing - In April 2025, the company entered into a settlement agreement with Silverback Capital Corporation (SCC) to exchange payables totaling $4.7 million for shares of common stock255 - On April 4, 2025, the company entered into agreements for a private placement to sell an aggregate of 724,640 shares of common stock (or pre-funded warrants) and accompanying series A and B warrants260 - Numerous conversions of debt into common stock and Series D Preferred Stock occurred throughout April and May 2025 with various lenders, indicating a pattern of settling obligations with equity258262278 Defaults Upon Senior Securities The company defaulted on its Bank of America line of credit, failing to make the $1.8 million final payment by July 31, 2025, and acknowledges cash flow restraints and missed payments on other financing agreements - The company's subsidiary, Champion Safe, defaulted on its Credit Agreement with Bank of America286 - Champion did not make the final payment of all amounts owed under the Credit Agreement by the extended forbearance deadline of July 31, 2025, with the total amount due being $1,831,014.51291 - The company has experienced cash flow restraints and has missed payments due under several other financing agreements, though it is working with lenders for solutions293 Mine Safety Disclosure This section is not applicable to the company - The company has indicated that this item is not applicable296 Other Information Post-quarter, on July 31, 2025, the company secured a $500,000 promissory note with $350,000 net proceeds to support refinancing and extend the Bank of America forbearance agreement, with a debt-to-equity conversion option - On July 31, 2025, the Company entered into a two-year promissory note for a gross principal of $500,000, with net proceeds of $350,000297 - The proceeds are intended to support refinancing efforts with Bank of America, specifically to extend the existing forbearance agreement298 Exhibits This section lists all exhibits filed with the Form 10-Q, including numerous financing and securities agreements, highlighting the complexity of capital-raising and debt-restructuring activities