AMERICAN REBEL HOLDINGS INC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2024

NOTE 1 –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 “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”). We established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold our licenses with respect to the beer business. American Rebel Beer launched in 2024.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries, American Rebel, Inc., American Rebel Beverages, LLC and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.

As discussed further in Note 10, the Company effected a series of reverse stock splits. Common shares and related earnings per share in the accompanying consolidated financial statements have been adjusted to reflect the effect of the reverse stock splits.

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.

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

Finished goods inventory primarily consists of backpacks, jackets, and related accessories, safes, and packaged beer available for sale. Raw materials primarily consists of component parts used in the assembly of safes and packaging materials. Apart from safes, the Company’s finished goods are manufactured or otherwise produced by outside parties to the Company’s specifications. Inventory is carried at the lower of cost (First-in, First-out Method) or net realizable 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. From time-to-time, the Company makes deposit payments on certain inventory purchases that are presented separately in the accompanying consolidated financial statements as inventory deposits until the goods are received into inventory.

Property and Equipment

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 fifteen years.

Revenue Recognition and Accounts Receivable

In accordance with the Financial Accounting Standards Board (“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. Additionally, the Company offers extended warranties for the locking mechanism of its safes, which are separately purchased by customers. Warranty income is recognized over time based on the estimated useful life of the locks, which approximates 10 years. Unrecognized warranty income is presented as deferred revenue in the accompanying consolidated financial statements. Warranty income recognized was not significant for the years ended December 31, 2024 and 2023.

The carrying amount of accounts receivable is reduced by an allowance for bad debts and expected credit losses, as necessary, that reflects management’s best estimate of the amount that will not be collected. This estimation takes into consideration historical experience, current conditions and, as applicable, reasonable supportable forecasts. Actual results could vary from the estimate. Accounts are charged against the allowance when management deems them to be uncollectible. The allowance for doubtful accounts was approximately $315,000 and $150,000 at December 31, 2024 and 2023, respectively. Net accounts receivable was $1,170,944, $2,674,540 and $1,372,234 at December 31, 2024, 2023 and January 1, 2023, respectively.

The following table sets forth the approximate percentage of revenue by primary category:

Advertising costs

Advertising costs are expensed as incurred and totaled $2,354,809 and $1,318,890 for the years ended December 31, 2024 and 2023, respectively.

Fair Value

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2024 and 2023, respectively. The respective carrying value of certain financial instruments approximated their fair values as of year-end. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash, accounts receivable and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

The three levels of inputs used to measure fair value are as follows:

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 718, which requires the Company to recognize expense related to the grant date fair value of its employee stock awards. The Company recognizes the cost of employee share-based awards over the requisite service period, which represents the vesting period of the award. Stock-based compensation primarily relates to the Company’s Series A Preferred Stock awards.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from non-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 and the effect of pre-funded warrants issued. 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. Because the Company incurred net losses for each of the years presented, the effect of dilutive securi ties, excluding pre-funded warrants, have been excluded as the effect on EPS is antidilutive. For the years ended December 31, 2024 and 2023, net loss per share was $(306.91) and $(857.02), 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.

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 antidilutive.

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. For the years ended December 31, 2024 and 2023, respectively, no income tax expense has been recorded given significant losses incurred and resulting valuation allowance on such losses.

Deferred income tax may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of December 31, 2024 and 2023, 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 and maintains sufficient net operating loss carryforwards in the event uncertain tax positions are identified. As necessary, the Company classifies tax-related penalties and net interest as income tax expense.

Leases

ASC 842 requires lessees to recognize substantially 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 Company 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. The Company hadno financing leases as of and for the years ended December 31, 2024 and 2023.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-06,Debt—Debt with Conversion and Other Options (Subtopic 470-20) andDerivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity to reduce the complexity of accounting for convertible debt and other equity-linked instruments. The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2023. The Company classified its convertible debt issued in 2024 in accordance with ASC 2020-06.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact this update will have on our consolidated The adoption had no material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is applied retrospectively to all periods presented in the financial statements, unless it is impracticable. The adoption had no material impact on our consolidated financial statements.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This update modifies the disclosure or presentation requirements of a variety of topics in the Accounting Standards Codification to conform with certain SEC amendments in Release No. 33-10532, Disclosure Update and Simplification. The amendments in this update should be applied prospectively, and the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or S-K becomes effective. However, if the SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. We are currently evaluating the potential impact of this guidance on our consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

Concentration Risk

The Company did not have any vendor or customer concentrations as of December 31, 2024 or 2023.

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. The Company is in the growth and acquisition stage and, accordingly, has not yet reached profitability or positive cash flow from its operations. Since inception, the Company has been engaged in financing activities and executing its plan of operations and incurring costs and expenses related to product development, branding, inventory buildup and product launch. As a result, the Company has continued to incur significant net losses for the years ended December 31, 2024 and 2023 amounting to ($17,604,364) and ($9,731,701), respectively. The Company’s accumulated deficit was ($65,086,200) as of December 31, 2024 and ($47,481,836) as of December 31, 2023. The Company’s working capital deficit was $8,940,228 as of December 31, 2024 and a surplus of $2,545,744 as of December 31, 2023. Additionally, the Company has missed contractual payments on certain financing arrangements subsequent to December 31, 2024. Lastly, the Company is not in compliance with the Nasdaq listing requirements and is in the process of remediating.

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

Inventory includes the following:

The Company accounts for excess and obsolete inventory with a reserve that is established based on management’s estimates of the net realizable value of the related products. These reserves are product specific and are based upon analyses of product lines that are slow moving or expected to become obsolete due to significant product enhancements.

Included in finished goods is approximately $162,000 in finished products related to our American Rebel branded beer lager as of December 31, 2024. This inventory is immediately available to the consumer and for distribution. As the beer product line commended during 2024, no such inventory existed as of December 31, 2023. For the year ended December 31, 2024, the Company wrote off approximately $180,000 of beer lager inventory, which corresponded to the initial brew of the product.

When inventory is physically disposed of, the Company accounts for the write-offs by making a debit to the reserve and a credit to inventory for the standard cost of the inventory item. The valuation reserve is applied as an estimate to specific product lines. Since the inventory item retains its standard cost until it is either sold or written off, the reserve estimates will differ from the actual write-off. There wereno other material write-offs or inventory reserves during the years ended December 31, 2024 and 2023 other than what is described above with respect to our branded beer lager.

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment include the following:

For the years ended December 31, 2024 and 2023 we recognized $95,547 and $104,229 in depreciation expense, respectively.

NOTE 5 –RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS

Employment Agreements

Charles A. Ross, Jr. serves as the Company’s Chief Executive Officer. Compensation for Mr. Ross was $341,760 and $318,667 plus stock awards for the year ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, approximately $338,000 and $0 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets.

Doug E. Grau serves as the Company’s President and Interim Principal Accounting Officer. Compensation for Mr. Grau was $277,680 and $186,456 plus stock awards for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, approximately $203,000 and $18,000 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets.

Both Messrs. Ross and Grau serve as the Company’s Chief Executive Officer and President, respectively. Compensation for both, Messrs. Ross and Grau, includes a base salary and a bonus based upon certain performance measures approved by the board of directors.

Corey Lambrecht serves as the Company’s Chief Operating Officer. Mr. Lambrecht and the Company entered into an employment agreement on November 20, 2023. Mr. Lambrecht’s employment agreement provides for an initial annual base salary of $260,000, which may be adjusted by the board of directors of the Company. Mr. Lambrecht at this time ceased being an independent director of the Company. Mr. Lambrecht earned approximately $277,680 and $10,025 for his services as an officer of the Company for the years ended December 31, 2024 and 2023, respectively, and $0 and $185,000 as an independent consultant for the Company for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, approximately $316,000 and $21,000 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets.

There were no new stock awards granted and issued to Messrs. Ross, Grau and Lambrecht during 2024 and 2023 apart from Series A Preferred Stock discussed below. Additionally, the aforementioned officers advanced the Company approximately $737,775 and$214,000 for the years ended December 31, 2024 and 2023, respectively, of which $447,716 and $74,664 were outstanding, respectively. The advances are unsecured non-interest-bearing demand notes. These officers provided these loans as short-term funding.

Series A Convertible Preferred Stock

The Company, in connection with its employment agreements, as amended, reserved for the issuance of 62,500,000 shares of its common stock that are convertible under the Series A preferred stock conversion terms.

Per Mr. Lambrecht’s employment agreement entered into on November 20, 2023, the share-award grant is to vest 1/4 th upon the signing of Mr. Lambrecht’s employment, another 1/4 th on January 1, 2024, another 1/4 th on January 1, 2025 and the remaining 1/4 th on January 1, 2026. Mr. Lambrecht’s employment agreement has a term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. The Company on November 20, 2023 for Mr. Lambrecht recognized $625,000 as a total value for the share-award grant and $312,500 in compensation expense for the 4 th quarter of 2023 for the share award grant and the common stock equivalents underlying that share award. For the year ended December 31, 2024 the Company recognized an additional $156,250 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 another 6,250 shares of Series A preferred stock vested for Mr. Lambrecht, providing for a total of 41,667 shares of common stock that Mr. Lambrecht may convert his Series A preferred shares into.

Mr. Ross’s amended employment agreement had an effective date of November 20, 2023.The share-award grant will vest 1/5 th on January 1, 2024, another 1/5 th on January 1, 2025, 1/5 th on January 1, 2026, 1/5 th on January 1, 2027 and the remaining 1/5 th on January 1, 2028. Mr. Ross’s amended employment agreement has an effective term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. On October 31, 2023, the Company recognized $1,250,000 as a total value for the share-award grant and recognized $250,000 in compensation expense for the 4 th quarter of 2023 for the share award grant and the common stock equivalents underlying that share award. For the year ended December 31, 2024 the Company recognized an additional $250,000 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional 10,000 shares of Series A preferred stock vested for Mr. Ross, providing for a total of 44,444 of shares of common stock that Mr. Ross may convert his Series A preferred shares into at any time.

Mr. Grau’s amended employment agreement had an effective date of November 20, 2023. The share-award grant will vest 1/5 th on January 1, 2024, another 1/5 th on January 1, 2025, 1/5 th on January 1, 2026, 1/5 th on January 1, 2027 and the remaining 1/5 th on January 1, 2028. Mr. Grau’s amended employment agreement has an effective term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. On October 31, 2023, the Company recognized $1,250,000 as a total value for the share-award grant and recognized $250,000 in compensation expense for the 4 th quarter of 2023 for the share award grant and the common stock equivalents underlying that share award. For the year ended December 31, 2024 the Company recognized an additional $250,000 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional 10,000 shares of Series A preferred stock vested for Mr. Grau, providing for a total of 44,444 of shares of common stock that Mr. Grau may convert his Series A preferred shares into at any time.

For the year ended December 31, 2024,188 shares of Series A preferred stock were converted to common stock, totaling 3,760 shares of common stock in the accompanying consolidated statements of stockholders’ equity (deficit).

Stock-Based Compensation

The Company, in connection with various employment and independent directors’ agreements, is required to issue shares of its common stock as payment for services performed or to be performed. The value of the shares issued is determined by the fair value of the Company’s common stock that trades on the Nasdaq Capital Market. This value on the date of grant is afforded to the Company for the recording of stock compensation to employees and other related parties or control persons and the recognition of this expense over the period in which the services were incurred or performed. Most of the Company’s agreement for stock compensation provide for services performed to have been satisfied by the initial grant, thereby incurring the cost immediately from the grant.

Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Under the provisions of ASC 718, the Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statements of operations. Where the stock-based compensation is not an award, option, warrant or other common stock equivalent, the Company values the shares based on fair value with respect to its grant date and the price that investors may have been paying for the Company’s common stock on that date in its various exempt private placement offerings. Stock-based compensation expense totaled $656,250 and $812,500 for the years ended December 31, 2024 and 2023, respectively, and primarily relates to the aforementioned Series A preferred stock awards.

Taxable value of the stock-based compensation is recorded in accordance with the Internal Revenue Service’s regulations as it pertains to employees, control persons and others whereby they receive share-based payments. This may not always align with what the Company records these issuances in accordance with GAAP. There are no provisional tax agreements or gross-up provisions with respect to any of our share-based payments to these entities. The payment or withholding of taxes is strictly left to the recipient of the share-based payments, or the modification of share-based payments.

Director’s Note

On June 28, 2024, the Company entered into a short-term loan with a director, Lawrence Sinks (“Mr. Sinks”), evidenced by a promissory note in the principal amount of $400,000 (the “Director’s Note”). Proceeds from the Director’s Note are to be utilized solely by the Company’s wholly-owned subsidiary, American Rebel Beverages, LLC. The Director’s Note was due on September 30, 2024, with a repayment amount of $520,000. As of December 31, 2024, the note had not been repaid and remained outstanding, of which $400,000 is presented in the accompanying consolidated balance sheet within Loan – Director – related party, and the remaining $120,000 within accrued interest in the accompanying consolidated balance sheet.

NOTE 6 –LINE OF CREDIT – FINANCIAL INSTITUTION

During February 2023, the Company entered into a $2 million master credit agreement (credit facility) with Bank of America (“LOC”). The LOC 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 December 31, 2024 and December 31, 2023 for the Company was 7.25% and 7.48%, respectively), and is secured by all the assets of the Champion Entities. The LOC originally expired February 28, 2024, and was extended to April 30, 2024. The following table shows outstanding amounts due under the LOC:

As of December 31, 2024 and 2023, the total balance due of $1,992,129 and $1,456,929, respectively, is reported as current as the LOC was to be repaid within one year, with subsequent drawdowns as needed by the Company. Upon inception the Company paid a one-time loan fee equal to 0.1% of the LOC amount available. In the likelihood of default, the default interest automatically increases to 6% over the BSBY plus an additional 2.05% rate.

The balance at the maturity date was approximately $1.9 million, and access to the line of credit with Bank of America was terminated. The Company, through its wholly-owned subsidiary Champion, and Bank of America have continued meaningful dialogue and the Company is working with Bank of America regarding term loan repayment options for the original LOC.

On July 25, 2024, the Company received a notice of default and demand for payment from Bank of America regarding the Company’s Line of Credit. The Company is currently negotiating a forbearance or other cure to the default and a plan for repayment of the credit facility within 60 to 90 days with its assigned relationship manager at the bank. As discussed further in Note 15, Bank of America has filed a complaint in the Fourth Judicial District Court in and for Utah County, State of Utah (Case No. 250401345) against the Company and its subsidiaries.

NOTE 7 –NOTES PAYABLE – WORKING CAPITAL

The Company has several working capital loan agreements in place, which are described in detail below.

As of December 31, 2024 and 2023, the outstanding balance due on all of the working capital notes payable was $4,938,465 and $1,944,410, respectively.

Accrued interest was approximately $1.3 million and $0.1 million as of December 31, 2024 and 2023.

The Company evaluates its convertible notes for potential bifurcation of conversion options or otherwise separate accounting and measurement of notes at fair value. As of December 31, 2024, the Company recognized approximately $165,000 in incremental expense in remeasuring a portion of its convertible notes to fair value. This adjustment increased accrued interest and interest expense in the accompanying consolidated financial statements.

For the year ended December 31, 2024, the Company recognized a net loss on debt extinguishment totaling $1,422,307 for various working capital loan arrangements. Such loans were settled or otherwise exchanged through various mechanisms, including issuances of Series D Preferred Stock, common stock, pre-funded warrants and convertible notes. Loss on debt extinguishment totaled approximately $289,000, $923,000 and $210,000 through the issuance of Series D Preferred Stock, common stock and equivalents (pre-funded warrants) and convertible notes, respectively. Additionally, approximately $166,000 of incremental interest expense was recognized in 2024 through the issuance of Series D Preferred Stock for two RIP agreements. Because the loss on debt extinguishment represents a non-recurring measurement based on the fair value of financial instruments exchanged by the Company in settling such obligations, the following summarizes the approximate fair value of instruments issued by the Company as of the settlement dates:

Level 2 fair value measurements in the table above were primarily measured through the Company’s publicly traded common stock price, which is an observable input in determining fair value. Convertible notes were valued on an as-converted basis at the time of settlement as conversion into common stock occurred shortly after.

As discussed further in Note 10, the gain on settlement of liability for the year ended December 31, 2023 primarily relates to common stock issued under the Company’s board compensation plan for its independent directors, the fair value measurement of which is a Level 1 input within the fair value hierarchy.

NOTE 8 –INTANGIBLE ASSETS

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. The Company first performs 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. The Company uses the income approach, whereby the fair value is calculated based on the present value of estimated future cash flows using a discount rate that approximates the 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 part of its prior amended and restated filing for fiscal 2023, management performed a qualitative assessment of potential goodwill impairment and determined it was more likely than not that the fair value of its reporting unit (comprised by the Champion Entities) did not exceed its carrying value. In conjunction with this assessment, the Company also evaluated its separately identifiable intangible asset associated with the acquisition of the Champion Entities, concluding a trade name asset in the amount of $500,000 was required as of December 31, 2023. Accordingly, an aggregate goodwill and intangible asset impairment of $1,912,559 was recognized for the year ending December 31, 2023. This impairment charge includes additional consideration paid to Seller in 2023 in the amount of $325,000.

As of December 31, 2024 and 2023, the Company had intangible assets, representing a trade name subject to amortization over a 10-year life, of $450,000 and $500,000, respectively, directly related to the 2022 acquisition of the Champion Entities. Annual amortization expense related to trade name approximates $50,000.

The Company will review its trade name intangible asset for impairment periodically (based on indicators of impairment) and determine whether impairment is to be recognized within its consolidated statement of operations. No impairment charge was recognized during the year ended December 31, 2024.

NOTE 9 –INCOME TAXES

The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The deferred tax assets on December 31, 2024 and 2023 consist of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.

As of December 31, 2024 and 2023, the Company had approximately $64,393,753 and $46,789,389, respectively, in net operating loss carry forwards for federal income tax purposes, which may be carried forward indefinitely subject to annual usage limitations of 80% of taxable income. Generally, these can be carried forward and applied against future taxable income at the tax rate applicable at that time.

The Company does not have any uncertain tax positions or events leading to uncertainty in a tax position. The Company’s 2024, 2023 and 2022 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

NOTE 10 –SHARE CAPITAL

The Company is authorized to issue 600,000,000 shares of its $0.001 par value common stock and 10,000,000 shares of its $0.001 par value preferred stock. The 10,000,000 shares of $0.001 par value preferred stock were comprised of 150,000 shares authorized and 124,812 shares issued and outstanding of its Series A convertible preferred stock at December 31, 2024 and 2023,350,000 shares authorized and 75,000 shares issued and outstanding of its Series B convertible preferred stock at December 31, 2024 and 2023,3,100,000 shares authorized and 0 shares issued and outstanding of its Series C convertible preferred stock at December 31, 2024 and 2023, and 500,000 shares authorized and 198,444 shares issued and outstanding of its Series D convertible preferred stock at December 31, 2024 (no shares were issued and outstanding at December 31, 2023). At December 31, 2024 and 2023, there were 76,516 and 26,133 shares of common stock issued and outstanding, respectively.

The share numbers and pricing information in this report have been adjusted to reflect the effects of the following reverse stock splits, which occurred during 2023, 2024 and subsequent to December 31, 2024 prior to the issuance of the consolidated financial statements:

During July 2023, approximately 1,493,272 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 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.

On June 27, 2023, the Company entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,850.63 of securities, consisting of (i)318 shares of common stock at $983.25 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 2,733 shares of common stock (the “2023 Prefunded Warrant Shares”) at $983.25 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 3,051 shares of common stock at an initial exercise price of $954 per share and will expire five years from the date of issuance.

On August 21, 2023,1,089 of the 2023 Prefunded Warrants were exercised.1,089 shares of common stock were issued for a total payment of $2,450,000.

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 $983.25 and $954, 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 13,283 shares of the Company’s common stock at a reduced exercise price of $247.50 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”) to purchase up to 26,566 shares of the Company’s common stock (the “New Warrant Shares”). The Company received aggregate gross proceeds of $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 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 13,283 shares of the Company’s common stock, of which 9,964 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 1,585 shares of common stock (September 21 st) and 1,733 shares of common stock (September 12 th), representing less than 9.99% ownership interest by Armistice Capital on such dates.

On September 8, 2023,1,644 of the 2023 Prefunded Warrants were exercised.1,644 shares of common stock were issued for a total payment of $3,700,000.

On September 19, 2023, the Company issued 28 shares of common stock pursuant to the Company’s 2021 LTIP equity plan. Under the 2021 LTIP equity plan 18 shares of common stock were issued to Mr. Ross and 10 shares of common stock were issued to Mr. Grau.

Additionally, on September 19, 2023,17 shares of common stock were granted and issued to a vendor associated with one of the Company’s current working capital loans.

On September 20, 2023, the Company issued 107 shares of common stock pursuant to the Company’s board compensation plan for its independent directors. The Company recognized approximately $228,000 in gain on settlement of debt through the issuance of 107 shares of common stock to its independent directors on this date.

Shares Reserved for Issuance Pursuant to Certain Executive Employment Agreements

The Company in connection with its employment agreement with Messrs. Ross, Grau and Lambrecht reserved for issuance 124,812,000 shares of its common stock that are convertible under the Series A preferred stock.

New Preferred Stock Series and Designations and Reg. A+ Offering

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 Company filed a registration statement on Form 1-A offering up to 2,666,666 shares of Series C Preferred Stock, at an offering price of $7.50 per share, for a maximum offering amount of $19,999,995. There is a minimum initial investment amount per investor of $300.00 for the Series C Preferred Stock and any additional purchases must be made in increments of at least $7.50. No Series C Preferred Stock was issued and outstanding at September 30, 2024 and December 31, 2023.

On May 10, 2024, the Company’s board of directors approved the designation of a new Series D Convertible Preferred Stock (the “Series D Designation”). The Series D Designation was filed by the Company with the Secretary of State of Nevada on May 10, 2024, and designated 2,500,000 shares of Series D Preferred Stock, $0.001 par value per share. The Series D Preferred Stock has the following rights:

Stated Value. Each share of Series D Preferred Stock has an initial stated value of $7.50.

Conversion at Option of Holder. Each share of Series D Preferred Stock shall be convertible into shares of Common Stock at a fixed ratio of 1:5 (1 share of Series D Preferred Stock converts into 5 shares of Common Stock), at the option of the holder thereof, at any time following the issuance date of such share of Series D Preferred Stock at the Company’s office or any transfer agent for such stock. The conversion ratio shallnot be adjusted for stock splits, stock dividends, recapitalizations or similar events.

Forced Conversion – If the closing price of the Company’s Common Stock during any ten consecutive trading day period has been at or above $2.25 per share (as adjusted for stock splits, stock dividends recapitalizations and similar events), then the Company shall have the right to require the holder of the Series D Preferred Stock to convert all, or any portion of, the shares of Series D Preferred Stock held by such holder for shares of Common Stock. If the Company elects to cause a forced conversion of the shares of Series D Preferred Stock, then it must simultaneously take the same action with respect to all of the other shares of Series D Preferred Stock then outstanding on a pro rata basis.

Voting Rights. The Series D 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 amend its articles of incorporation or the Series D Designation (whether by merger, consolidation, or otherwise) to materially and adversely change the rights, preferences or voting power of the Series D 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 D Preferred Stock, voting together as a class.

Conversion of Revenue Interest Loan for Preferred Stock Series D and Potential Issuance of Common Stock Equivalents from the Conversion of Series D

On May 13, 2024 the Company and the holder of one of the Revenue Interest Loans entered into a settlement and conversion agreement (“Securities Exchange Agreement”), whereby the Company issued 133,334 shares of Series D convertible preferred stock as full satisfaction for the revenue participation interest agreement or loan. The Series D convertible preferred stock was purchased at $7.50 per share. Total loan balance and premium payment for inducement for this Revenue Interest Loan on the date of settlement and conversion was $1,000,005. The Series D convertible preferred stock is convertible at the option of the holder into common stock of the Company at a fixed price per share of $1.50 per share.

The Securities Exchange Agreement is intended to be effected as an exchange of securities issued by the Company pursuant to Section 3(a)(9) of the Securities Act. For the purposes of Rule 144, the Company acknowledges that the holding period of the Securities Exchange Agreement (and upon conversion thereof, if any, into shares of the Company’s common stock) may be tacked onto the holding period of the Series D Preferred Stock received by the holder. The Company agrees not to take a position contrary to this unless required by regulatory authorities and their determination to the contrary.

On July 10, 2024, the Company entered into a separately negotiated Conversion Agreement (the “Conversion Agreement”) with the 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).

Refer to Note 7 – Notes Payable – Working Capital, for additional information regarding the settlement of debt liabilities through the issuances of Series D Preferred Stock, common stock, pre-funded warrants and convertible notes during the year ended December 31, 2024.

For the year ended December 31, 2024, the Company settled certain operational liabilities, consisting of accounts payable originating during the year, through the issuance of Series D Preferred Stock and common stock. A total of 77,000 shares of Series D Preferred Stock were issued during 2024, resulting in expense of $594,650. Expenses recognized primarily correspond to marketing, promotional, general and administrative costs. Additionally,20,000 shares of Series D Preferred Stock was issued during 2024 for marketing and promotional services to be rendered in fiscal 2025. In connection with the issuance, the Company recognized a prepaid asset totaling $178,000 as of December 31, 2024. For the year ended December 31, 2024, a total of 4,593 shares of common stock were issued totaling $503,135, of which $87,480 and $130,656 are included in prepaid assets and loss on debt extinguishment, respectively. The remainder was recognized as general and administrative expense.

NOTE 11 –WARRANTS AND OPTIONS

On June 27, 2023, the Company entered into a PIPE transaction with Armistice Capital for the purchase and sale of $2,993,851 of securities, consisting of (i)318 shares of common stock at $983.25 per share, (ii) prefunded warrants (the “2023 Prefunded Warrants”) that are exercisable into 2,733 shares of common stock (the “2023 Prefunded Warrant Shares”) at $983.25 per Prefunded Warrant, and (iii) immediately exercisable warrants to purchase up to 3,051 shares of common stock at an initial exercise price of $954 per share and will expire five years from the date of issuance. The 3,051 warrants were repriced to $247.50 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 $983.25 and $954, 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 13,283 shares of the Company’s common stock at a reduced exercise price of $247.50 per share in consideration for the Company’s agreement to issue new common stock purchase warrants (the “New Warrants”), to purchase up to 26,566 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 13,283 shares of the Company’s common stock, of which 9,964 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 1,585 shares of common stock (September 21 st) and 1,733 shares of common stock (September 12 th), 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 $4,837.50, the additional issuance of warrants to Armistice Capital that contractually were part of the July 12, 2022 issuance but were triggered by the June 27, 2023 offering that occurred with Armistice Capital and resulting in an additional 6,068 immediately exercisable warrants with an exercise price of $4,837.50, along with 3,051 immediately exercisable warrants with an exercise price of $954 that were issued on June 27, 2023.

On August 21, 20231,089 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $2,450.00,1,089 shares of common stock were issued. On September 8, 2023, 1,644 of the 2023 Prefunded Warrants were exercised. Along with an exercise notice and payment totaling $3,700.00,1,644 shares of common stock were issued. A total of 2,733 2023 Prefunded Warrants were exercised along with 3,319 warrants per the Inducement Letter.

Along with the Prefunded Warrants the previous year’s PIPE investors were issued immediately exercisable warrants to purchase up to 4,164 shares of the Company’s common stock with an exercise price of $21.50 per share expiring five years from the date of issuance, or July 11, 2027. Each Prefunded Warrant and share of common stock issued in the PIPE transaction received two warrants that were exercisable at $4,837.50 per share with a five-year expiry. None of these warrants have been exercised by the holders. These warrants were repriced to $247.50 per share as part of the Inducement Letter and exercise agreement by and between Armistice Capital and the Company.

On October 23, 2024, the Company issued 2,280 shares of common stock and 19,440 pre-funded warrants as settlement of a RIP originating during 2024. In connection with the settlement, the Company recognized a loss on debt extinguishment totaling approximately $722,000. Refer to Note 7 – Notes Payable – Working Capital, for additional information regarding the settlement of debt liabilities through the issuances of Series D Preferred Stock, common stock, pre-funded warrants and convertible notes during the year ended December 31, 2024. Subsequent to the settlement, the holder exercised 8,033 pre-funded warrants into common stock during the year ended December 31, 2024.

As of December 31, 2024, there were 46,716 warrants issued and outstanding to acquire additional shares of common stock. As of December 31, 2023, there were 27,275 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, 2024 and 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

The following table summarizes all warrant activity for the years ended December 31, 2024 and 2023.

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 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 its facilities. Lease terms on the various spaces’ range from a month-to-month lease (30 days) to a long-term lease expiring in September of 2028.

Rent expense for operating leases totaled approximately $469,000 and $871,000 for the years ended December 31, 2024 and 2023, respectively. These amounts are included in our consolidated statement of operations in Rental expense, warehousing, outlet expense and Administrative and other. Rental expense, warehousing, outlet expense is specific to warehousing and final manufacturing of our products.

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.

Right of Use Assets and Lease Liabilities

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.

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:

As of December 31, 2024, weighted-average remaining lease term and discount rate were as follows:

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

NOTE 13 –COMMITMENTS AND CONTINGENCIES

During the years ended December 31, 2024 and 2023, various claims and lawsuits, incidental to the ordinary course of our business, may be brought against the Company. In the opinion of management, after consultation with legal counsel, resolution of any of these matters is not expected to have a material effect on the Company’s consolidated financial statements.

On July 23, 2024, the Company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc. (“Liberty”), in connection with the marketing and sale of the Company’s and its subsidiaries, Champion Safe Company, Inc., line of safe products. As of the date of this Report, the complaint has not been served on the Company or Champion Safe. In the complaint, Liberty alleges trademark infringement as a result of the purported use of the term “Freedom” in the sale of safes, federal false designation of origin and unfair competition, violation of Utah deceptive trade practices, Utah unfair competition, and damages to Liberty. Management believes that this lawsuit is without merit; however has initiated settlement discussions with Liberty and anticipates an amicable settlement to be forthcoming. At this time, Management does not believe a settlement with Liberty will have a material effect on its business or financial condition.

As reported by the Company in the Form 8-K dated August 7, 2024, during February 2023, the Company entered into a $2 million master credit agreement (credit facility) with Bank of America. The credit facility is secured by all the assets of the Company’s Champion subsidiaries and guaranteed by the Company, the Champion subsidiaries and the Company’s CEO. The Line of Credit expired on February 28, 2024, but the Company and Champion Safe Company have been actively working with the bank to extend or modify the credit facility. Despite being current on all payments under the credit facility and actively working with the bank for a long-term solution to repay the credit facility, on July 25, 2024, Champion Safe Company received a notice of default and demand for payment from the bank. On March 21, 2025, Bank of America filed a complaint in the Fourth Judicial District Court in and for Utah County, State of Utah (Case No. 250401345) against the Company and its subsidiaries (Champion Safe Company, Inc., American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC) alleging four causes of action related to the credit facility: (i) Breach of the Loan Documents – Champion Safe; (ii) Breach of the Loan Documents – Guarantors (the Company, American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC); (iii) Breach of the Implied Covenant of Good Faith and Fair Dealing – all parties; and (iv) Unjust Enrichment – Champion Safe. The Company plans to defend the complaint, while continuing to work with Bank of American on a settlement.

Contractual Obligations

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on the condensed consolidated financial statements. As of December 31, 2024 and 2023, there wereno outstanding letters of credit issued during the normal course of business. These letters of credit could reduce the Company’s available borrowings. During the year ended December 31, 2024 the Company continues to hold a line of credit with a major financial institution. The amount due on the line of credit as of December 31, 2024 was $1,992,129. The Company is currently not in compliance with its terms and covenants.

Nasdaq Compliance

On April 23, 2024, the Company received notice from Nasdaq indicating that, while the Company has not regained compliance with the Bid Price Requirement, Nasdaq has determined that the Company is eligible for an additional 180-day period, or until October 21, 2024, to regain compliance. On October 16, 2024, the Company received a written notification from Nasdaq indicating that, as of October 15, 2024, the Company had regained compliance with the Bid Price Requirement.

On February 28, 2024 the Registrant received a written notice from the Listing Qualifications department of The Nasdaq Stock Market stating that because the Company has not yet held an annual meeting of shareholders within 12 months of the end of the Company’s 2022 fiscal year end, it no longer complies with Nasdaq Listing Rule 5620(a) for continued listing on The Nasdaq Capital Market. The Company had until April 15, 2024, which was 45 days from the date of the notice, to submit a plan to regain compliance and, if Nasdaq accepted the plan, it may grant an exception of up to 180 calendar days from the fiscal year end, or until June 28, 2024, to regain compliance. The Company held its annual meeting of stockholders on June 27, 2024, thereby regaining compliance with the Nasdaq annual meeting requirement.

On November 22, 2024, the Company received a notice from Nasdaq indicating that, as a result of not having timely filed the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, the Company is not in compliance with Nasdaq Listing Rules which require timely filing of periodic reports with the SEC. Pursuant to the Nasdaq Listing Rules, the Company has until January 21, 2025 to submit a plan to regain compliance. If the plan is accepted, an extension may be granted of up to 180 calendar days from the due date of the Initial Delinquent Filing, or May 19, 2025, to regain compliance. The Company submitted a compliance plan on January 20, 2025 and filed its Form 10-Q for the quarter ended September 30, 2204 on February 7, 2025. On February 10, 2025, the Company received a written notification from the Staff indicating that the Company had regained compliance with the periodic filing requirement under Nasdaq Listing Rules.

On February 19, 2025, the Company received a notification letter Nasdaq stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) because the stockholders’ equity of the Company as of September 30, 2024, as reported in the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 7, 2025, was below the minimum requirement of $2,500,000 (the “Stockholders’ Equity Requirement”). The Notification Letter has no immediate effect on the Company’s continued listing on the Nasdaq Capital Market, subject to the Company’s compliance with the other continued listing requirements. Pursuant to Nasdaq’s Listing Rules, the Company has 45 calendar days (until April 7, 2025), to submit a plan to evidence compliance with the Rule (a “Compliance Plan”). The Company intends to submit a Compliance Plan within the required time, although there can be no assurance that the Compliance Plan will be accepted by Nasdaq. If the Compliance Plan is accepted by Nasdaq, the Company will be granted an extension of up to 180 calendar days from February 19, 2025 to evidence compliance with the Rule. In the event the Compliance Plan is not accepted by Nasdaq, or in the event the Compliance Plan is accepted but the Company fails to evidence compliance within the extension period, the Company will have the right to a hearing before Nasdaq’s Hearing Panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing. The Company submitted the Compliance Plan on April 7, 2025, will continue to monitor its stockholders’ equity and, if appropriate, consider further available options to evidence compliance with the Stockholders’ Equity Requirement.

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 –SEGMENT REPORTING

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance.

The Company views its operations and manages its business as one operating segment engaged in patriotic goods comprised of safes, soft goods, and beer. The Company’s Chief Executive Officer, as the CODM, regularly reviews the entity-wide financial and operational performance as a single unit. No financial information is disaggregated into separate lines of business. The CODM makes resource allocation and business process decisions regarding the overall level of resources available and how to best deploy the resources.

The single segment’s principal measure of segment profit and loss is consolidated revenue, gross margin, and total operating expenses. The CODM considers actual and forecasted numbers when evaluating performance.

NOTE 15 –OTHER INCOME – EMPLOYEE RETENTION CREDIT

The Company retained the services of a tax service professional to provide the Company with certain specialized tax services. The services included identifying various tax initiatives as well as specifically tasking the tax service professional in applying for and the preparation of tax filings for (tax) credits available under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During the year ended December 31, 2023, the Company received approximately $1,291,000 in tax credits under the CARES Act from the US Department of Treasury and paid approximately $178,000 in fees to the service provider, netting the Company approximately $1,113,000 in credits for the retaining of its employees during COVID.

NOTE 16 –SUBSEQUENT EVENTS

The Company evaluated all events that occurred after the balance sheet date of December 31, 2024 through the date the financial statements were issued and determined that there were the following subsequent events.

On January 10, 2025, the Company authorized the issuance of 55,000 shares of common stock to a consultant pursuant to the terms of an amendment to a current consulting agreement.

On January 10, 2025, the Company entered into two six-month promissory notes with accredited investors (the “Lenders”) in the principal amounts of $617,100 (“Note 1”) and $123,420 (“Note 2”). An original issue discount of $117,100 was applied to Note 1 and $23,420 was applied to Note 2 on the issuance date and was paid through the issuance of 15,613 (Note 1) and 3,123 (Note 2) shares of the Company’s Series D Convertible Preferred Stock to the Lenders, resulting in net loan proceeds to the Company of $500,000 (Note 1) and $100,000 (Note 2). Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid on or before July 10, 2025 (a total payback to the Lender of $537,500 (Note 1) and $107,500 (Note 2)). Upon the occurrence and during the continuation of any Event of Default, the Note shall become immediately due and payable and the Company will be obligated to pay to the Lenders, in full satisfaction of its obligations, an amount equal to 130% times the sum of (w) the then outstanding principal amount of the Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note to the date of payment plus (y) any amounts owed to the Lender pursuant to the conversion rights referenced below. At any time after the issuance date of the Notes, the Lenders may convert the outstanding unpaid principal amount of the Notes into restricted shares of Series D Convertible Preferred Stock of the Company at $7.50 per share, or upon the sale of common stock below $1.50 per share, the Lenders have the ability to convert the outstanding amounts of the Notes into shares of common stock at the lowest price sold prior to the registration of the common stock. Each Lender agreed to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or other derivatives attached to these Notes. The Company granted the Lenders piggy-back registration rights on the shares of common stock issuable upon conversion of the Series D Convertible Preferred Stock. The Company agreed to reserve a number of shares of Series D Convertible Preferred Stock, and common stock issuable upon conversion thereof, equal to three times the number of shares of Series D Convertible Preferred Stock, and common stock issuable upon conversion thereof, which may be issuable upon conversion of the Notes at all times.

On January 14, 2025, the Company authorized the issuance of 43,335 shares of Series D Convertible Preferred Stock to seven service providers to the Company and its subsidiaries.

As previously disclosed in a Current Report on Form 8-K dated November 27, 2024, on November 22, 2024, the Company received a Notice from Nasdaq indicating that, as a result of not having timely filed the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, the Company was not in compliance with Nasdaq Listing Rules, which require timely filing of periodic reports with the SEC. Pursuant to the Nasdaq Listing Rules, the Company had until January 21, 2025 to submit a plan to regain compliance. The Company submitted a plan before such date and subsequently filed its Form 10-Q for the quarter ended September 30, 2024 on February 7, 2025. On February 10, 2025, the Company received a written notification from the Staff indicating that the Company had regained compliance with the periodic filing requirement under Nasdaq Listing Rules.

On February 10, 2025, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the “Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $155,250 (the “Note”). An original issue discount of $20,250 and fees of $6,000 were applied on the issuance date, resulting in net loan proceeds to the Company of $129,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in five payments, with the first payment of $89,268.50 due on August 15, 2025, and remaining four payments of $22,317.13 due on the fifteenth day of each month thereafter (a total payback to the Lender of $178,537.00). Upon the occurrence and during the continuation of any Event of Default, the Note shall become immediately due and payable and the Company will be obligated to pay to the Lender, in full satisfaction of its obligations, an amount equal to 150% times the sum of (w) the then outstanding principal amount of the Note plus (x) accrued and unpaid interest on the unpaid principal amount of the Note to the date of payment plus (y) default interest, if any, at the rate of 22% per annum on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Lender pursuant to the conversion rights referenced below. Only upon an occurrence of an event of default under the Note, the Lender may convert the outstanding unpaid principal amount of the Note into restricted shares of common stock of the Company at a discount of 25% of the market price. The Lender agreed to limit the amount of stock received to less than 4.99% of the total outstanding common stock. There are no warrants or other derivatives attached to this Note. The Company agreed to reserve a number of shares of common stock equal to four times the number of shares of common stock which may be issuable upon conversion of the Note at all times.

As previously disclosed in the Form 8-K dated November 13, 2024, on November 11, 2024, the Company entered into a Purchase and Exchange Agreement among an investor (the “Purchaser”) and Altbanq Lending LLC (the “Seller”), pursuant to which the Purchaser agreed to purchase from the Seller a portion ($150,469.11) of a promissory note dated March 27, 2024 in the original principal amount of $1,330,000 (the “Note”), with a current balance payable of $1,229,350 (the “Note Balance”). Contemporaneously with assignment of the assigned note portion to the Purchaser, the Company exchanged the $150,469.11 of assigned note portion for 78,615 shares of the Company’s common stock as a 3(a)(9) exchange. In December of 2024, the Purchaser cancelled the exchange and the Seller returned the $150,469.11 to the Purchaser. The 78,615 shares of common stock were issued and subsequently cancelled. These shares were issued, but were never delivered to Purchaser. On February 19, 2025, the Purchaser, the Seller and the Company entered into an amendment to the Purchase and Exchange Agreement (the “Amendment”), which extends the time for the Purchaser to purchase additional portions of the Note from the Seller. On February 20, 2025, the Purchaser sent the Company a closing notice for the exchange of $55,423.57 of assigned note portion for 78,615 shares of the Company’s common stock as a 3(a)(9) exchange.

On March 3, 2025, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending, LLC, an accredited investor (the “Lender”), pursuant to which the Lender made a loan to the Company, evidenced by a promissory note in the principal amount of $94,300 (the “Note”). An original issue discount of $12,300 and fees of $7,000 were applied on the issuance date, resulting in net loan proceeds to the Company of $75,000. Accrued, unpaid interest and outstanding principal, subject to adjustment, is required to be paid in five payments, with the first payment of $54,222.50 due on August 30, 2025, and remaining four payments of $13,555.63 due on the thirtieth day of each month thereafter (a total payback to the Lender of $108,445.00).

On March 5, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fourth closing notice for the exchange of $55,000 of assigned note portion for 208,333 shares of the Company’s common stock. On March 6, 2025, Silverback Capital Corporation (“SCC”), pursuant to the Settlement Agreement and Stipulation with the Company dated December 26, 2024, requested the issuance of 80,000 shares of Common Stock to SCC, representing a payment of approximately $47,655. On March 7, 2025, SCC requested the issuance of 185,000 shares of Common Stock to SCC, representing a payment of approximately $48,978.75. On March 10, 2025, SCC requested the issuance of 190,000 shares of Common Stock to SCC, representing a payment of approximately $43,335.20. On March 12, 2025, SCC requested the issuance of 279,000 shares of Common Stock to SCC, representing a payment of approximately $63,006.57. On March 13, 2025, SCC requested the issuance of 290,000 shares of Common Stock to SCC, representing a payment of approximately $47,818.10. On March 14, 2025, SCC requested the issuance of 305,000 shares of Common Stock to SCC, representing a payment of approximately $46,558.25. On March 17, 2025, SCC requested the issuance of 320,000 shares of Common Stock to SCC, representing a payment of approximately $48,457.60. On March 18, 2025, SCC requested the issuance of 330,000 shares of Common Stock to SCC, representing a payment of approximately $49,971.90. On March 10, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fifth closing notice for the exchange of $50,000 of assigned note portion for 218,055 shares of the Company’s common stock. On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a sixth closing notice for the exchange of $50,000 of assigned note portion for 218,055 shares of the Company’s common stock. On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a seventh closing notice for the exchange of $50,000 of assigned note portion for 218,055 shares of the Company’s common stock. On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a eighth closing notice for the exchange of $50,000 of assigned note portion for 218,055 shares of the Company’s common stock. On March 12, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a ninth closing notice for the exchange of $65,000 of assigned note portion for 283,471 shares of the Company’s common stock. On March 13, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a tenth closing notice for the exchange of $50,000 of assigned note portion for 307,220 shares of the Company’s common stock. On March 17, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a sixth closing notice for the exchange of $50,000 of assigned note portion for 307,220 shares of the Company’s common stock. On March 18, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a sixth closing notice for the exchange of $50,000 of assigned note portion for 330,033 shares of the Company’s common stock.

As reported by the Company in the Form 8-K dated August 7, 2024, during February 2023, the Company entered into a $2 million master credit agreement (credit facility) with Bank of America. The credit facility is secured by all the assets of the Company’s Champion subsidiaries and guaranteed by the Company, the Champion subsidiaries and the Company’s CEO. The Line of Credit expired on February 28, 2024, but the Company and Champion Safe Company have been actively working with the bank to extend or modify the credit facility. Despite being current on all payments under the credit facility and actively working with the bank for a long-term solution to repay the credit facility, on July 25, 2024, Champion Safe Company received a notice of default and demand for payment from the bank. On March 21, 2025, Bank of America filed a complaint in the Fourth Judicial District Court in and for Utah County, State of Utah (Case No. 250401345) against the Company and its subsidiaries (Champion Safe Company, Inc., American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC) alleging four causes of action related to the credit facility: (i) Breach of the Loan Documents – Champion Safe; (ii) Breach of the Loan Documents – Guarantors (the Company, American Rebel, Inc., Superior Safe Co., L.L.C. and Safe Guard Security Products LC); (iii) Breach of the Implied Covenant of Good Faith and Fair Dealing – all parties; and (iv) Unjust Enrichment – Champion Safe. The Company plans to defend the complaint, while continuing to work with Bank of America on a settlement.

On March 19, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a thirteenth closing notice for the exchange of $50,000 of assigned note portion for 330,033 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a fourteenth closing notice for the exchange of $50,000 of assigned note portion for 388,199 shares of the Company’s common stock. On March 19, 2025, Silverback Capital Corporation (“SCC”), pursuant to the Settlement Agreement and Stipulation with the Company dated December 26, 2024, requested the issuance of 340,000 shares of Common Stock to SCC, representing a payment of approximately $51,486.20. On March 20, 2025, SCC requested the issuance of 350,000 shares of Common Stock to SCC, representing a payment of approximately $42,605.50. On March 21, 2025, SCC requested the issuance of 528,000 shares of Common Stock to SCC, representing a payment of approximately $59,400. On March 24, 2025, SCC requested the issuance of 542,000 shares of Common Stock to SCC, representing a payment of approximately $45,219.06. On March 24, 2025, the Purchaser, pursuant to the Purchase and Exchange Agreement dated November 11, 2024, as amended on February 19, 2025, sent the Company a fifteenth closing notice for the exchange of $35,000 of assigned note portion for 421,687 shares of the Company’s common stock. On the same day, the Purchaser sent the Company a sixteenth closing notice for the exchange of $35,000 of assigned note portion for 421,687 shares of the Company’s common stock. On March 25, 2025, SCC requested the issuance of 580,000 shares of Common Stock to SCC, representing a payment of approximately $45,240. On March 26, 2025, SCC requested the issuance of 610,000 shares of Common Stock to SCC, representing a payment of approximately $45,750.

On March 31, 2025, 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 for the 2024 and 2023 comparative periods presented.

On April 4, 2025, the Company entered into definitive agreements for the purchase and sale of an aggregate of 724,640 shares of common stock (or pre-funded warrant in lieu thereof), Series A warrants to purchase up to 724,640 shares of common stock and short-term Series B warrants to purchase up to 2,173,920 shares of common stock at a purchase price of $3.45 per share of common stock (or per pre-funded warrant in lieu thereof) and accompanying warrants in a private placement priced at-the-market under Nasdaq rules. The Series A warrants and the short-term Series B warrants will have an exercise price of $2.95 per share and will be exercisable immediately upon issuance. The Series A warrants will expire five years from the date of issuance and the short-term Series B warrants will expire eighteen months from the date issuance. The private placement has not closed as of the date of these financial statements.