AMERICAN REBEL HOLDINGS INC

Previous wording

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.

Current wording

Apart from the matter above, 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.

Previous wording

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

Current wording

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

Previous wording

We believe that we have the potential to continue to create a brand community presence around the core ideals and beliefs of America, in part through our Chief Executive Officer, Charles A. “Andy” Ross, who has written, recorded and performs a number of songs about the American spirit of independence. We believe our customers identify with the values expressed by our Chief Executive Officer through the “American Rebel” brand.

Current wording

We believe that we have the potential to continue to create a brand community presence around the core ideals and beliefs of America, in part through Andy Ross, who has written, recorded and performs a number of songs about the American spirit of independence. We believe our customers identify with the values expressed by our Chief Executive Officer through the “American Rebel” brand.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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.

Current wording

Our results of operations and financial condition may be impacted positively and negatively by certain general macroeconomic and industry wide conditions

Previous wording

On August 9, 2023, the Company entered into a Master Brewing Agreement with Associated Brewing. Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. American Rebel Light Beer will launch regionally in 2024. The Company paid a setup fee and security deposit to Associated Brewing. We established American Rebel Beverages, LLC as a wholly-owned subsidiary specifically to hold our alcohol licenses and conduct operations for our beer business.

Current wording

On August 9, 2023, we entered into a Master Brewing Agreement with Associated Brewing. Under the terms of the Brewing Agreement, Associated Brewing has been appointed as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. American Rebel Light Beer will launch regionally in 2024. We paid a setup fee and security deposit to Associated Brewing. We established American Rebel Beverages, LLC as a wholly-owned subsidiary specifically to hold our alcohol licenses and conduct operations for our beer business.

Previous wording

From inception through June 30, 2024, we have generated an operating deficit of $55,856,751. We expect to incur additional losses during fiscal year ending December 31, 2024, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.

Current wording

From inception through September 30, 2024, we have generated an accumulated deficit of $53,991,446. We expect to incur additional losses during fiscal year ending December 31, 2024, and beyond, principally as a result of our increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.

Previous wording

For the three months ended June 30, 2024, we reported Revenues of $3,255,393 compared to Revenues of $3,670,571 for the three months ended June 30, 2023. The decrease in Revenues of $415,178 (or -11% period over period (PoP)) for the current period compared to the three months ended June 30, 2023, is attributable to slower sales for 2024 and current market conditions. For the three months ended June 30, 2024, we reported Cost of Goods Sold of $3,224,738, compared to Cost of Goods Sold of $2,982,688 for the three months ended June 30, 2023. The increase in Cost of Goods Sold of $242,050 (or 8% period over period (PoP)) for the current period is primarily attributable to a marginal decrease in sales along with higher costs of goods sold for the period. For the three months ended June 30, 2024, we reported Gross Margin of $30,655, compared to Gross Margin of $687,883 for the three months ended June 30, 2023. The decrease in Gross Margin of $657,228 (or -96% period over period (PoP)) for the three months ending June 30, 2024, compared to the three months ending June 30, 2023 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentages for the three months ended June 30, 2024 was 1% compared to 19% for the three months ended June 30, 2023. 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.

Current wording

For the three months ended September 30, 2024, we reported Revenues of $2,337,786 compared to Revenues of $3,345,552 for the three months ended September 30, 2023. The decrease in Revenues of $1,007,766 (or -30% period over period) for the current period compared to the three months ended September 30, 2023, is attributable to slower sales for 2024 and current market conditions. For the three months ended September 30, 2024, we reported Cost of Goods Sold of $2,835,763, compared to Cost of Goods Sold of $3,095,418 for the three months ended September 30, 2023. The decrease in Cost of Goods Sold of $259,655 (or -8% period over period) for the current period is primarily attributable to of the decrease in revenue. For the three months ended September 30, 2024, we reported Gross Margin of $(497,977), compared to Gross Margin of $250,134 for the three months ended September 30, 2023. The decrease in Gross Margin of $748,111 (or -299% period over period) for the three months ended September 30, 2024, compared to the three months ended September 30, 2023 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentages for the three months ended September 30, 2024 was -18% compared to 8% for the three months ended September 30, 2023. 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.

Previous wording

Total operating expenses for the three months ended June 30, 2024 were $3,978,576 compared to $2,238,722 for the three months ended June 30, 2023 as further described below. Overall, we experienced a $1,739,854 increase in operating expenses or a 77% period over period (PoP) increase in operating expenses from the prior year comparable period. This increase is due to the recognition of the deferred compensation expense. 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.

Current wording

Total operating expenses for the three months ended September 30, 2024 were $542,695 compared to $3,179,246 for the three months ended September 30, 2023 as further described below. Overall, we experienced a $2,636,551 decrease in operating expenses or a -83% period over period decrease in operating expenses from the prior year comparable period. This decrease is primarily due to an adjustment in the deferred compensation expense.

Previous wording

For the three months ended June 30, 2024, we incurred consulting/payroll and other costs (along with officer compensation) of $2,001,691 compared to consulting/payroll and other costs (along with officer compensation) of $931,505 for the three months ended June 30, 2023. The increase in consulting/payroll and other costs of $1,070,186 (or 115% period over period (PoP)) was due to the recognition of the deferred compensation expense due to common stock equivalents on our Series A preferred stock. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.

Current wording

For the three months ended September 30, 2024, we incurred consulting/payroll and other costs (along with officer compensation) of $(1,932,565) compared to consulting/payroll and other costs (along with officer compensation) of $1,039,273 for the three months ended September 30, 2023. The decrease in consulting/payroll and other costs of $(2,971,838) was due to the adjustment in the deferred compensation expense due to common stock equivalents on our Series A preferred stock. The Company expects to try and maintain its consulting/payroll and other costs as we endeavour to further expand our sales volume.

Previous wording

For the three months ended June 30, 2024, we incurred rental expense, warehousing, outlet expense of $80,515, compared to rental expense, warehousing, outlet expense of $275,474 for the three months ended June 30, 2023. The decrease in rental expense, warehousing, outlet expense of $194,959 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. 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.

Current wording

For the three months ended September 30, 2024, we incurred rental expense, warehousing, outlet expense of $103,562, compared to rental expense, warehousing, outlet expense of $230,226 for the three months ended September 30, 2023. The decrease in rental expense, warehousing, outlet expense of $126,664 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. 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.

Previous wording

For the three months ended June 30, 2024, we incurred product development expenses of $337,771, compared to product development expenses of $0 for the three months ended June 30, 2023. The increase in product development expenses of $337,771 (or incalculable period over period (PoP)) is due to some of the Company’s current product development expenses in the three months ended June 30, 2023 period being included in consulting/payroll and other costs accounts which we believe provides for a better presentation of our historical business expenses than pure product development expense. For these three months ended June 30, 2024 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.

Current wording

For the three months ended September 30, 2024, we incurred product development expenses of $277,483, compared to product development expenses of $20,326 for the three months ended September 30, 2023. The increase in product development expenses of $257,157 is due to some of the Company’s current product development expenses in the three months ended September 30, 2023 period being included in consulting/payroll and other costs accounts which we believe provides for a better presentation of our historical business expenses than pure product development expense. For the three months ended September 30, 2024, we have 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.

Previous wording

For the three months ended June 30, 2024, we incurred marketing and brand development expenses of $299,655, compared to marketing and brand development expenses of $172,617 for the three months ended June 30, 2023. The increase in marketing and brand development expenses of $127,038 (or 74% period over period (PoP)) relates primarily to initial market awareness efforts for American Rebel Beer as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.

Current wording

For the three months ended September 30, 2024, we incurred marketing and brand development expenses of $624,509, compared to marketing and brand development expenses of $517,345 for the three months ended September 30, 2023. The increase in marketing and brand development expenses of $107,164 (or 21% period over period) relates primarily to initial market awareness efforts for American Rebel Beer as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.

Previous wording

For the three months ended June 30, 2024, we incurred administrative and other expense of $1,228,163, compared to administrative and other expense of $833,851 for the three months ended June 30, 2023. The increase in administrative and other expense of $394,312 (or 47% 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.

Current wording

For the three months ended September 30, 2024, we incurred administrative and other expense of $1,414,889, compared to administrative and other expense of $1,347,181 for the three months ended September 30, 2023. The decrease in administrative and other expense of $67,708 (or 5% period over period) relates directly to decreased 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.

Previous wording

For the six months ended June 30, 2024, we incurred depreciation and amortization expense of $54,996, compared to depreciation and amortization expense of $54,365 for the six months ended June 30, 2023. 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.

Current wording

For the three months ended September 30, 2024, we incurred depreciation and amortization expense of $54,817, compared to depreciation and amortization expense of $24,895 for the three months ended September 30, 2023. The increase primarily relates to amortization related to goodwill.

Previous wording

For the three months ended June 30, 2024, we incurred interest expense of $1,055,282, compared to interest expense of $148,437 for the three months ended June 30, 2023. The increase in interest expense of $906,845 is due to a significant number of notes being paid during 2023 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, in excess of 18% on our existing working capital notes payable, and on our new working capital notes payable we are paying more than 40% per annum on these debt instruments. The Company believes that it will 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 reasonable amount as we grow the business and its sales volume. For the three months ended June 30, 2024, we incurred a loss on settlement of debt of $250,000. This loss on the settlement of debt was in association with the Company negotiating with a revenue interest purchase note payable holder to convert their debt into equity of the Company. This payment was to induce the holder to settle and convert this debt instrument prior to June 30, 2024. This was a one-time event.

Current wording

For the three months ended September 30, 2024, we incurred interest expense of $649,216, compared to interest expense of $95,330 for the three months ended September 30, 2023. The increase in interest expense of $553,886 is due to a significant number of notes being paid during 2023 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, in excess of 18% on our existing working capital notes payable, and more than 40% per annum on our new working capital notes payable. We believe we will manage and maintain our interest expense exposure despite the increase in interest rates for this year over last year, as well keeping our debt obligations to a reasonable amount as we grow the business and its sales volume.

Previous wording

Net loss for the three months ended June 30, 2024, amounted to $5,253,004, resulting in a loss per share of $0.89, compared to $590,204 for the three months ended June 30, 2023, resulting in a loss per share of $0.87. The increase in the net loss from the three months ended June 30, 2023 to the three months ended June 30, 2024 is from a myriad of expenses that the Company incurred in the quarter, such as professional and legal fees, increased costs in marketing, the softening of gross margin on sales, and the recognition of deferred compensation expense. The Company’s management believes with increasing sales volume, launching new products and strict adherence to cost cutting measures in its legacy business and best practices that net positive income can be achieved for the business.

Current wording

Net loss for the three months ended September 30, 2024 amounted to $1,747,957, resulting in a loss per share of $(0.67), compared to a net loss of $2,793,670 for the three months ended September 30, 2023, resulting in a loss per share of $(0.95). The decrease in the net loss from the three months ended September 30, 2023 to the three months ended September 30, 2024 is primarily due to adjustments made to deferred compensation expense in connection with the Series A Preferred shares partially offset by 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.

Previous wording

For the six months ended June 30, 2024, we reported Revenues of $7,299,230 compared to Revenues of $8,072,670 for the six months ended June 30, 2023. The decrease in Revenues of $773,440 (or -10% period over period (PoP)) for the current period compared to the six months ended June 30, 2023, is attributable to slower sales for 2024 and current market conditions. For the six months ended June 30, 2024, we reported Cost of Goods Sold of $6,427,252, compared to Cost of Goods Sold of $5,774,014 for the six months ended June 30, 2023. The increase in Cost of Goods Sold of $653,238 (or 10% period over period (PoP)) for the current period is primarily attributable to a marginal decrease in sales along with higher costs of goods sold for the period. For the six months ended June 30, 2024, we reported Gross Margin of $871,978, compared to Gross Margin of $2,298,656 for the six months ended June 30, 2023. The decrease in Gross Margin of $1,426,678 (or -62% period over period (PoP)) for the six months ending June 30, 2024, compared to the six months ending June 30, 2023 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentages for the six months ended June 30, 2024 was 12% compared to 28% for the six months ended June 30, 2023. 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.

Current wording

For the nine months ended September 30, 2024, we reported Revenues of $9,637,016 compared to Revenues of $11,418,222 for the nine months ended September 30, 2023. The decrease in Revenues of $1,781,206 (or -16% period over period) for the current period compared to the nine months ended September 30, 2023 is attributable to slower sales for 2024 and current market conditions. For the nine months ended September 30, 2024, we reported Cost of Goods Sold of $9,263,015, compared to Cost of Goods Sold of $8,869,432 for the nine months ended September 30, 2023. The increase in Cost of Goods Sold of $393,583 (or 4% period over period) for the current period is primarily attributable to a marginal decrease in sales along with higher costs of goods sold for the period. For the nine months ended September 30, 2024, we reported Gross Margin of $374,001 compared to Gross Margin of $2,548,790 for the nine months ended September 30, 2023. The decrease in Gross Margin of $2,174,789 (or -85% period over period) for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is again due a decrease in sales and increased costs of goods sold. Gross Margin percentages for the nine months ended September 30, 2024 was 4% compared to 29% for the nine months ended September 30, 2023. 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.

Previous wording

Total operating expenses for the six months ended June 30, 2024 were $7,097,168 compared to $4,069,440 for the six months ended June 30, 2023 as further described below. Overall, we experienced a $3,027,728 increase in operating expenses or a 74% period over period (PoP) increase in operating expenses from the prior year comparable period. This increase is directly attributable to the recognition of deferred compensation expense. 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.

Current wording

Total operating expenses for the nine months ended September 30, 2024 were $7,639,863 compared to $7,248,686 for the nine months ended September 30, 2023 as further described below. Overall, we experienced a $391,177 increase in operating expenses or a 5% period over period increase in operating expenses from the prior year comparable period due to a myriad of professional service expenses incurred

Previous wording

For the six months ended June 30, 2024, we incurred consulting/payroll and other costs (along with officer compensation) of $3,900,204 compared to consulting/payroll and other costs (along with officer compensation) of $1,876,104 for the six months ended June 30, 2023. The increase in consulting/payroll and other costs of $2,024,100 (or 108% period over period (PoP)) was due to cost controls put in place on the post-acquisition of the Champion Entities offset by increased compensation costs due to common stock equivalents on our Series A preferred stock. The Company expects to try and maintain its consulting/payroll and other costs as we endeavor to further expand our sales volume.

Current wording

For the nine months ended September 30, 2024, we incurred consulting/payroll and other costs (along with officer compensation) of $1,967,639 compared to consulting/payroll and other costs (along with officer compensation) of $2,915,377 for the nine months ended September 30, 2023. The decrease in consulting/payroll and other costs of $947,738 was due to cost controls put in place on the post-acquisition of the Champion Entities and an adjustment to compensation costs due to common stock equivalents on our Series A preferred stock. We expect to try and maintain our consulting/payroll and other costs as we endeavour to further expand our sales volume.

Previous wording

For the six months ended June 30, 2024, we incurred rental expense, warehousing, outlet expense of $232,181, compared to rental expense, warehousing, outlet expense of $502,134 for the six months ended June 30, 2023. The decrease in rental expense, warehousing, outlet expense of $269,953 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.

Current wording

For the nine months ended September 30, 2024, we incurred rental expense, warehousing, outlet expense of $335,743 compared to rental expense, warehousing, outlet expense of $732,360 for the nine months ended September 30, 2023. The decrease in rental expense, warehousing, outlet expense of $396,617 is due to cost cutting on leases and properties that we rent to conduct the Champion business acquisition as well as other cost cutting measures or efficiencies put in place. Prior to the Champion business acquisition, we included lease expense in the Administrative and other account. With the significant number of leases and properties that we rent to conduct the Champion business, we believe this is a better presentation of the expenses. We expect to maintain this level of expense on a go-forward basis with our leases and rented properties for the near term. We may look to consolidate some of our space as needed as we fine tune the Champion business.

Previous wording

For the six months ended June 30, 2024, we incurred product development expenses of $436,400, compared to product development expenses of $16,495 for the six months ended June 30, 2023. The increase in product development expenses of $419,905 (or 2,546% 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 six months ended June 30, 2024 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.

Current wording

For the nine months ended September 30, 2024, we incurred product development expenses of $713,883, compared to product development expenses of $36,821 for the nine months ended September 30, 2023. The increase in product development expenses of $677,062 (or 1,839% period over period) is due to some of the Company’s current product development expenses being reclassed from 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 the nine months ended September 30, 2024, we have 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.

Previous wording

For the six months ended June 30, 2024, we incurred marketing and brand development expenses of $564,710, compared to marketing and brand development expenses of $425,342 for the six months ended June 30, 2023. The increase in marketing and brand development expenses of $139,368 (or 33% period over period (PoP)) relates primarily to an increase of activities related to the launch of American Rebel Beer as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.

Current wording

For the nine months ended September 30, 2024, we incurred marketing and brand development expenses of $1,189,219 compared to marketing and brand development expenses of $942,687 for the nine months ended September 30, 2023. The increase in marketing and brand development expenses of $246,532 (or 26% period over period) relates primarily to an increase of activities related to the launch of American Rebel Beer as well as expenses associated with our Tony Stewart activities and general push forward on sales efforts.

Previous wording

For the six months ended June 30, 2024, we incurred administrative and other expense of $1,908,6677, compared to administrative and other expense of $1,195,000 for the six months ended June 30, 2023. The increase in administrative and other expense of $713,677 (or 60% 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.

Current wording

For the nine months ended September 30, 2024, we incurred administrative and other expense of $3,323,566 compared to administrative and other expense of $2,542,181 for the nine months ended September 30, 2023. The increase in administrative and other expense of $781,385 (or 31% period over period) 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. We believe as we grow our sales base, we will also increase our administrative and other expense commensurate with the increased profits for the future.

Previous wording

For the three months ended June 30, 2024, we incurred depreciation and amortization expense of $30,681, compared to depreciation and amortization expense of $25,275 for the three months ended June 30, 2023. 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.

Current wording

For the nine months ended September 30, 2024, we incurred depreciation and amortization expense of $109,813 compared to depreciation and amortization expense of $79,260 for the nine months ended September 30, 2023. The increase in depreciation and amortization expense primarily relates to the amortization expense of goodwill.

Previous wording

For the six months ended June 30, 2024, we incurred interest expense of $1,479,141, compared to interest expense of $155,547 for the six months ended June 30, 2023. The increase in interest expense of $1,323,594 is due to a significant number of notes being paid during 2023 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, in excess of 18% on our existing working capital notes payable, and on our new working capital notes payable we are paying more than 40% per annum on these debt instruments. The Company believes that it will 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 reasonable amount as we grow the business and its sales volume. For the six months ended June 30, 2024, we incurred a loss on settlement of debt instrument of $250,000. This loss on the settlement of debt was in association with the Company negotiating with revenue interest purchase note payable holder to convert their debt into equity of the Company. This payment was to induce the holder to settle and convert this debt instrument prior to June 30, 2024. This was a one-time event.

Current wording

For the nine months ended September 30, 2024, we incurred interest expense of $2,128,357 compared to interest expense of $250,877 for the nine months ended September 30, 2023. The increase in interest expense of $1,877,480 is due to a significant number of notes being paid during 2023 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, in excess of 18% on our existing working capital notes payable, and more than 40% per annum on our new working capital notes. We believe that we will manage and maintain our interest expense exposure despite the increase in interest rates for this year over last year, as well as keeping our debt obligations to a reasonable amount as we grow the business and its sales volume.

Previous wording

Net loss for the six months ended June 30, 2024, amounted to $7,954,282, resulting in a loss per share of $1.35, compared to $817,259 for the six months ended June 30, 2023, resulting in a loss per share of $1.21. The increase in the net loss from the six months ended June 30, 2023 to the six months ended June 30, 2024 is from a myriad of expenses that the Company incurred in the quarter, such as professional and legal fees, increased costs in marketing, the softening of gross margin on sales, and the recognition of deferred compensation expense. The Company’s management believes with increasing sales volume from the launch of new products, strict adherence to cost cutting measures in its legacy business, and best practices that net positive income can be achieved for the business.

Current wording

Net loss for the nine months ended September 30, 2024 amounted to $9,702,239, resulting in a loss per share of $(1.48), compared to a net loss of $3,610,929 for the nine months ended September 30, 2023, resulting in a loss per share of $(2.50). The increase in the net loss from the nine months ended September 30, 2023 to the nine months ended September 30, 2024 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 from the launch of new products, strict adherence to cost cutting measures in its legacy business, and best practices that net positive income can be achieved for the business.

Previous wording

We are a company still in the growth and acquisition stage and our revenue from operations does not cover our operating expenses. Working capital decreased by $4,421,987 period over period where we had a working capital balance of $4,551,927 at December 31, 2023 compared to a working capital balance of $129,940 at June 30, 2024. This working capital decrease was due to increased expenses launching new products and slowing sales in its legacy business. 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.

Current wording

We are a company still in the growth and acquisition stage and our revenue from operations does not cover our operating expenses. Working capital decreased by $7,322,713 period over period where we had a working capital balance of $2,545,744 at December 31, 2023 compared to a working capital deficit balance of $(4,776,970) at September 30, 2024. This working capital decrease was due to increased expenses launching new products and slowing sales in its legacy business. 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.

Previous wording

During the six months ended June 30, 2024, we raised net cash of approximately $0 through the issuance of equity, as compared to approximately $2,464,528 for the six months ended June 30, 2023. During the six months ended June 30, 2024, we raised net cash of approximately $3,000,000 through the issuance of notes payable and maintaining a line of credit with a national financial institution secured by inventory and other assets, as compared to approximately $1,700,000 for the six months ended June 30, 2023.

Current wording

During the nine months ended September 30, 2024, we raised net cash of approximately $0 through the issuance of equity, as compared to approximately $5,304,000 for the nine months ended September 30, 2023 (which included the inducement to accelerate the conversion of certain warrants into equity). During the nine months ended September 30, 2024, we raised net cash of approximately $3,500,000 through the issuance of notes payable and maintaining a line of credit with a national financial institution secured by inventory and other assets, as compared to approximately $2,386,000 for the nine months ended September 30, 2023.

Previous wording

As we continue with the launch of American Rebel Beer and continue to maintain 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.

Current wording

As we continue with the launch of American Rebel Beer and continue to maintain 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, marketing, sales, and operational expenditures. We may from time to time incur significant capital needs for these expenditures and for our business. We cannot fully predict what those needs will be and the impact to our business.

Previous wording

On July 1, 2023 the Company received a release from the lender of the working capital loans that were in default since June 30, 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 June 30, 2024 and June 30, 2024).

Current wording

On July 1, 2023, the Company received a release from the lender of the working capital loans that were in default since June 30, 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 $13,500 per quarter (for quarter ended December 31, 2023) and $9,000 per quarter thereafter (for three and nine months ended September 30, 2024).

Previous wording

On March 22, 2024, the Company entered into another Revenue Interest Purchase Agreement (the “Revenue Interest Loan #2”) with an individual accredited investor lending source, in the amount of $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company pursuant to the terms of the Revenue Interest Loan #2, the holder has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Furthermore, the Company’s is obligated to provide for 5.15% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan #2 as payment towards the amounts due. The Revenue Interest Loan #2 may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan #2 prior to May 31, 2024 is 140% or $140,000, the repurchase price for the Revenue Interest Loan #2 after May 31, 2024 and prior to July 5, 2024 is 154 % or $154,000, thereafter the repurchase price of the Revenue Interest Loan #2 is $154,000 plus monthly payments of $10,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety.

Current wording

On March 22, 2024, the Company entered into another Revenue Interest Purchase Agreement (the “Revenue Interest Loan #2”) with an individual accredited investor lending source, in the amount of $100,000. As consideration for such payment, commencing on June 1, 2024 and continuing thereafter until all amounts are repurchased by the Company, pursuant to the terms of the Revenue Interest Loan #2, the holder has a right to receive $10,000 per month from the Company generated from its operating subsidiaries. Furthermore, the Company is obligated to provide for 5.15% of the Reg. 1-A offering proceeds to the holder of the Revenue Interest Loan #2 as payment towards the amounts due. The Revenue Interest Loan #2 may be repurchased by the Company at any time. The repurchase price for the Revenue Interest Loan #2 prior to May 31, 2024 is 140% or $140,000, the repurchase price for the Revenue Interest Loan #2 after May 31, 2024 and prior to July 5, 2024 is 154 % or $154,000, thereafter the repurchase price of the Revenue Interest Loan #2 is $154,000 plus monthly payments of $10,000 due and payable on the fifth calendar day until repurchased by the Company in its entirety.

Previous wording

On March 27, 2024, the Company entered into a $1,300,000 Business Loan and Security Agreement (the “Secured Loan #3”) with an accredited investor lending source. Under the Secured Loan #3, the Company received the loan net of fees of $26,000. The Company repaid two outstanding secured notes payable (Secured Loan #1 and Secured Loan #2) to affiliates of the lender totaling $769,228, resulting in net proceeds to the Company of $504,772. The Secured Loan #3 requires 64 weekly payments of $26,000 each, for a total repayment of $1,664,000. The Secured Loan #3 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 #3. The Secured Loan #3 provides for a default fee of $15,000 for any late payments on the weekly payments. As long as the Secured Loan #3 is not in default, the Company may prepay the Secured Loan #3 pursuant to certain prepayment amounts set forth in the Secured Loan #3. Further, any default by the Company allows the lender to take necessary actions to secure its collateral and recovery of funds.

Current wording

On March 27, 2024, the Company entered into a $1,300,000 Business Loan and Security Agreement (the “Secured Loan #3”) with an accredited investor lending source. Under the Secured Loan #3, the Company received the loan net of fees of $26,000. The Company repaid two outstanding secured notes payable (Secured Loan #1 and Secured Loan #2) to affiliates of the lender totalling $769,228, resulting in net proceeds to the Company of $504,772. The Secured Loan #3 requires 64 weekly payments of $26,000 each, for a total repayment of $1,664,000. The Secured Loan #3 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 #3. The Secured Loan #3 provides for a default fee of $15,000 for any late payments on the weekly payments. As long as the Secured Loan #3 is not in default, the Company may prepay the Secured Loan #3 pursuant to certain prepayment amounts set forth in the Secured Loan #3. Further, any default by the Company allows the lender to take necessary actions to secure its collateral and recovery of funds.

Previous wording

On July 2, 2024, American Rebel, Inc., a wholly-owned subsidiary of the Company, entered into a Standard Merchant Cash Advance Agreement (the “Factoring Agreement”), with an accredited investor lending source (“Financier”). Under the Factoring Agreement, our wholly-owned subsidiary sold to Financier a specified percentage of its future receipts (as defined by the Factoring Agreement, which include any and future revenues of Champion Safe Company, Inc. (“Champion”), another wholly-owned subsidiary of the Company, and the Company) equal to $357,500 for $250,000, less origination and other fees of $12,500. Our wholly-owned subsidiary agrees to repay this purchased receivable amount in equal weekly installments of $17,875. Financier has specified customary collection procedures for the collection and remittance of the weekly payable amount including direct payments from specified authorized bank accounts. The Factoring Agreement expressly provides that the sale of the future receipts shall be construed and treated for all purposes as a true and complete sale and includes customary provisions granting a security interest under the Uniform Commercial Code in accounts and the proceeds, subject to existing liens. The Factoring Agreement also provides customary provisions including representations, warranties and covenants, indemnification, arbitration and the exercise of remedies upon a breach or default. The obligations of our wholly-owned subsidiary, Champion and the Company under the Factoring Agreement are irrevocably, absolutely, and unconditionally guaranteed by Charles A. Ross, Jr., the Company’s Chairman and Chief Executive Officer. The Personal Guaranty of Performance by Mr. Ross to Financier provides customary provisions, including representations, warranties and covenants.

Current wording

On July 2, 2024, the Company, entered into a Standard Merchant Cash Advance Agreement (the “Factoring Agreement”), with an accredited investor lending source (“Financier”). Under the Factoring Agreement, the Company sold to Financier a specified percentage of its future receipts (as defined by the Factoring Agreement, which include any and future revenues equal to $357,500 for $250,000, less origination and other fees of $12,500. The Company agreed to repay this purchased receivable amount in equal weekly installments of $17,875. Financier has specified customary collection procedures for the collection and remittance of the weekly payable amount including direct payments from specified authorized bank accounts. The Factoring Agreement expressly provides that the sale of the future receipts shall be construed and treated for all purposes as a true and complete sale and includes customary provisions granting a security interest under the Uniform Commercial Code in accounts and the proceeds, subject to existing liens. The Factoring Agreement also provides customary provisions including representations, warranties and covenants, indemnification, arbitration and the exercise of remedies upon a breach or default. The obligations the Company under the Factoring Agreement are irrevocably, absolutely, and unconditionally guaranteed by the Company’s Chief Executive Officer. The Personal Guaranty of Performance by Mr. Ross to Financier provides customary provisions, including representations, warranties and covenants.

Previous wording

On July 8, 2024, the Company, and two of its subsidiaries (American Rebel, Inc. and Champion Safe Company, Inc.) entered into a subordinated business loan and security agreement (“Loan”) with an accredited investor lending source and a subsidiary to that accredited investor lending source as collateral agent, which provides for a term loan in the amount of $1,312,500 which principal and interest (of $577,500) is due on January 20, 2025. Commencing July 15, 2024, the Company is required to make weekly payments of $67,500 until the due date. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $62,500 was initially paid on the loan. A default interest rate of 5% becomes effective upon the occurrence of an event of default. In connection with the loan, the holder was issued a subordinated secured promissory note, dated July 8, 2024, in the principal amount of $1,312,500 which note is secured by all of the borrower’s assets, including receivables, subject to certain outstanding liens and agreements.

Current wording

On July 8, 2024, the Company entered into a subordinated business loan and security agreement (“Loan”) with an accredited investor lending source and a subsidiary to that accredited investor lending source as collateral agent, which provides for a term loan in the amount of $1,312,500 which principal and interest (of $577,500) is due on January 20, 2025. Commencing July 15, 2024, the Company is required to make weekly payments of $67,500 until the due date. The loan may be prepaid subject to a prepayment fee. An administrative agent fee of $62,500 was initially paid on the loan. A default interest rate of 5% becomes effective upon the occurrence of an event of default. In connection with the loan, the holder was issued a subordinated secured promissory note, dated July 8, 2024, in the principal amount of $1,312,500 which note is secured by all of the borrower’s assets, including receivables, subject to certain outstanding liens and agreements.

Previous wording

On July 10, 2024, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with Series D convertible preferred stock holder, pursuant to which the holder agreed to convert the 133,334 shares of Series D convertible preferred stock it held into 2,232,143 shares of common stock, par value $0.001 per share, of the Company. The shares of common stock underlying the Series D convertible preferred stock was reduced and repriced from $1.50 per share to $0.448 per share (which this price represents the closing price for the Company’s common stock on NASDAQ for the day immediately preceding the date of the Conversion Agreement).

Current wording

On July 10, 2024, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with Series D convertible preferred stock holder, pursuant to which the holder agreed to convert the 133,334 shares of Series D convertible preferred stock it held into 2,232,143 shares of common stock, par value $0.001 per share, of the Company. The shares of common stock underlying the Series D convertible preferred stock were reduced and repriced from $1.50 per share to $0.448 per share (which this price represents the closing price for the Company’s common stock on NASDAQ for the day immediately preceding the date of the Conversion Agreement).

Previous wording

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 June 30, 2024 was 7.44%), and is secured by all of the assets of the Champion Entities. The maturity date on the line of credit was initially extended by Bank of America to April 30, 2024. The balance at the maturity date was approximately $1.9 million and access to the line of credit with Bank of America was terminated. Subsequent to quarter end, Bank of America put the Company on notice that the Line of Credit is in default; however, Champion and Bank of America have continued dialogue and the Company is currently negotiating a forbearance or other cure to the default and a plan for repayment of the Line of Credit within sixty (60) to ninety (90) days with its assigned relationship manager at the bank.

Current wording

During February 2023, the Company 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 was 7.25% as of September 30, 2024), and is secured by all of the assets of the Champion Entities. The maturity date on the line of credit was initially extended by Bank of America to April 30, 2024. The balance at the maturity date was approximately $1.9 million and access to the line of credit with Bank of America was terminated. Subsequent to quarter end, Bank of America put the Company on notice that the Line of Credit is in default; however, Champion and Bank of America have continued dialogue and the Company is currently negotiating a forbearance or other cure to the default and a plan for repayment of the Line of Credit within sixty (60) to ninety (90) days with its assigned relationship manager at the bank.

Previous wording

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.

Current wording

The preparation of financial statements and related disclosures in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. Management has determined that the Company has no critical accounting estimates.