UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the quarterly period ended September 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from ___ to ___

Commission file number 001-41267

AMERICAN REBEL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada

47-3892903

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

909 18th Avenue South, Suite A

Nashville, Tennessee

37212

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (833) 267-3235

Copies of communications to:

Joseph Lucosky, Esq.		Anthony N. DeMint, Esq.
Adele Hogan, Esq.		DeMint Law, PLLC
Lucosky Brookman LLP		3753 Howard Hughes Parkway
101 Wood Avenue South		Second Floor, Suite 314
5th Floor		Las Vegas, Nevada 89169
Iselin, NJ 08830		(702) 714-0889
(732) 395-4402		anthony@demintlaw.com
jlucosky@lucbro.com

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AREB	The Nasdaq Stock Market LLC
Common Stock Purchase Warrants	AREBW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of November 14, 2022, was 16,553,033 shares.

AMERICAN REBEL HOLDINGS, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

		Page No.
PART I. FINANCIAL INFORMATION		3

Item 1.	Interim Condensed Consolidated Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets of American Rebel Holdings, Inc. at September 30, 2022 (unaudited) and December 31, 2021 (audited)	3

	Condensed Consolidated Statements of Operations of American Rebel Holdings, Inc. for the three months ended September 30, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Operations of American Rebel Holdings, Inc. for the nine months ended September 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statements of Stockholders Equity (Deficit) of American Rebel Holdings, Inc. for the nine months ended September 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows of American Rebel Holdings, Inc. for the nine months ended September 30, 2022 and 2021 (unaudited)	7

	Notes to the Condensed Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis	25

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	35

Item 4.	Controls and Procedures	35

PART II. OTHER INFORMATION		36

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults upon Senior Securities	37

Item 4.	Mine Safety Disclosure	37

Item 5.	Other Information	37

Item 6.	Exhibits	37

Signatures		39

Part I. Financial Information

Item 1.- Interim Condensed Consolidated Financial Statements (unaudited)

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2022			December 31, 2021 (audited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,185,578		$	17,607
Accounts receivable		2,446,290			100,746
Prepaid expense and other deposits		147,832			163,492
Inventory		6,306,341			685,854
Inventory deposits		230,223			-
Total Current Assets		10,316,264			967,699

Property and Equipment, net		486,070			900

OTHER ASSETS:
Goodwill and other intangible assets		4,200,000			-
Lease deposit		19,633			-
Total Other Assets		4,219,633			-

TOTAL ASSETS	$	15,021,967		$	968,599

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable and accrued expense		2,312,081			1,032,264
Accrued interest		67,919			203,972
Loan – officer - related party		-			10,373
Loans – working capital		603,840			3,879,428
Loans - nonrelated parties		4,152			12,939
Total Current Liabilities		2,987,992			5,138,976

Other long-term liabilities		-			-
TOTAL LIABILITIES		2,987,992			5,138,976

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 100,000 issued and outstanding, at September 30, 2022 and December 31, 2021 Series A		100			100
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 75,143 and 276,501 issued and outstanding, respectively at September 30, 2022 and December 31, 2021 Series B		75			277
Preferred stock,value		75			277
Common stock, $0.001 par value; 600,000,000 shares authorized; 8,474,033 and 1,597,370 issued and outstanding, respectively at September 30, 2022 and December 31, 2021		8,474			1,597
Additional paid in capital		45,372,714			22,797,306
Accumulated deficit		(33,347,388	)		(26,969,657	)
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)		12,033,975			(4,170,377	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	15,021,967		$	968,599

See Notes to Financial Statements.

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three months ended September 30, 2022			For the three months ended September 30, 2021
Revenue	$	4,102,761		$	295,490
Cost of goods sold		3,124,657			280,212
Gross margin		978,104			15,278

Expenses:
Consulting/payroll and other payroll costs		1,227,953			656,784
Rental expense, warehousing, outlet expense		314,314			-
Product development costs		-			42,720
Marketing and brand development costs		119,122			34,669
Administrative and other		1,077,005			236,763
Depreciation expense		9,956			946
Total operating expense		2,748,350			971,882
Operating income (loss)		(1,770,246	)		(956,604	)

Other Income (Expense)
Interest expense		(31,584	)		(382,601	)
Interest expense – pre-emptive rights release		(350,000	)		-
Interest income		4,428			-
Gain (loss) on extinguishment of debt		-			(87,575	)
Total other income (expense), net		(377,156	)		(470,176	)

Net income (loss) before income tax provision		(2,147,402	)		(1,426,780	)
Provision for income tax		-			-
Net income (loss)	$	(2,147,402	)	$	(1,426,780	)
Basic and diluted income (loss) per share	$	(0.36	)	$	(1.05	)
Weighted average common shares outstanding - basic and diluted		6,031,715			1,354,700

See Notes to Financial Statements.

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the nine months ended September 30, 2022			For the nine months ended September 30, 2021
Revenue	$	4,595,547		$	848,357
Cost of goods sold		3,462,454			716,943
Gross margin		1,133,093			131,414

Expenses:
Consulting/payroll and other payroll costs		1,937,349			1,774,003
Rental expense, warehousing, outlet expense		314,314			-
Product development costs		146,463			275,780
Marketing and brand development costs		349,341			138,783
Administrative and other		2,687,728			603,727
Depreciation expense		11,311			2,744
Total operating expense		5,446,506			2,795,037
Operating income (loss)		(4,313,413	)		(2,663,623	)

Other Income (Expense)
Interest expense		(341,990	)		(1,500,744	)
Interest expense – pre-emptive rights release		(350,000	)		-
Interest income		4,428			-
Gain (loss) on extinguishment of debt		(1,376,756	)		(725,723	)
Total other income (expense), net		(2,064,318	)		(2,226,467	)

Net income (loss) before income tax provision		(6,377,731	)		(4,890,090	)
Provision for income tax		-			-
Net income (loss)	$	(6,377,731	)	$	(4,890,090	)
Basic and diluted income (loss) per share	$	(1.34	)	$	(4.23	)
Weighted average common shares outstanding – basic and diluted		4,743,244			1,155,513

See Notes to Financial Statements.

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)

	Common Stock		Preferred Stock		Common Stock Amount		Preferred Stock Amount		Additional Paid-in Capital		Accumulated Deficit			Total

Balance – December 31, 2020		910,099		-	$	910	$	-	$	15,857,366	$	(20,870,713	)	$	(5,012,437	)

Sale of common stock		31,250		-		31		-		149,969		-			150,000

Common stock issued to pay expense		22,741		-		23		-		105,443		-			105,466

Net Loss		-		-		-		-		-		(4,890,090	)		(4,890,090	)

Balance – September 30, 2021		964,090		-	$	964	$	-	$	16,112,778	$	(25,760,803	)	$	(5,684,586	)

	Common Stock		Preferred Stock			Common Stock Amount		Preferred Stock Amount			Additional Paid-in Capital			Accumulated Deficit			Total
Balance – December 31, 2021		1,597,370		376,501		$	1,597	$	377		$	22,797,306		$	(26,969,657	)	$	(4,170,377	)
Beginning balance		1,597,370		376,501		$	1,597	$	377		$	22,797,306		$	(26,969,657	)	$	(4,170,377	)

Sale of common stock, net		2,658,630		-			2,659		-			9,035,797			-			9,038,456

Common stock issued to pay expense		233,623		-			234		-			969,301			-			969,535

Preferred stock converted to common stock		251,698		(201,358	)		252		(202	)		(50	)		-			-

Debt converted to warrants		-		-			-		-			1,566,559			-			1,566,559

Sale of common stock		509,311		-			509		-			564,826			-			565,335

Sale of pre-funded common stock warrants $1.10 per share, exercise price of $0.01		-		-			-		-			12,322,542			-			12,322,542

Offering costs and fees associated with offering		-		-			-					(1,972,578	)		-			(1,972,578	)

Issuance of shares as compensation		100,000		-			100					60,900			-			61,000

Exercise of pre-funded warrants		3,123,401		-			3,123		-			28,111			-			31,234

Net Loss		-		-			-		-			-			(6,377,731	)		(6,377,731	)
Balance – September 30, 2022		8,474,033		175,143		$	8,474	$	175		$	45,372,714		$	(33,347,388	)	$	12,033,975
Ending balance		8,474,033		175,143		$	8,474	$	175		$	45,372,714		$	(33,347,388	)	$	12,033,975

See Notes to Financial Statements.

AMERICAN REBEL HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	For the nine months ended September 30, 2022			For the nine months ended September 30, 2021

CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)	$	(6,377,731	)	$	(4,890,090	)
Depreciation		11,311			3,158
Expense paid through issuance of common stock		1,030,535			2,806,826
Amortization of loan discount		1,000,457			839,434
Adjustments to reconcile net loss to cash (used in) operating activities:
Change in accounts receivable		(219,697	)		(6,830	)
Change in prepaid expenses		20,184			(8,010	)
Change in inventory		(869,985	)		(6,120	)
Change in inventory deposits and other		(224,894	)		64,479
Change in accounts payable and accrued expense		(297,513	)		201,915
Net Cash (Used in) Operating Activities		(5,927,333	)		(995,238	)

CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of Champion Entities		(10,247,420	)		-
Purchase of equipment		(13,651	)		-
Net Cash (Used in) Investing Activities		(10,261,071	)		-

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds (repayments) of loans – officer - related party		(81,506	)		14,658
Proceeds from sale of common stock		9,603,791			697,505
Proceeds from sale of prefunded warrants, net of offering costs		10,349,964			-
Proceeds from exercise of prefunded warrants		31,234			-
Proceeds from working capital loan		60,000			2,169,100
Repayment of loans – nonrelated party		(2,607,108	)		(1,736,000	)
Net Cash Provided by Financing Activities		17,356,375			1,145,263

CHANGE IN CASH		1,167,971			150,025

CASH AT BEGINNING OF PERIOD		17,607			68,307

CASH AT END OF PERIOD	$	1,185,578		$	218,332

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	234,146		$	176,910
Income taxes	$	-		$	-

Non-cash investing and financing activities:
Debt repayment through the issuance of common stock	$	2,011,224		$	1,713,924

See Notes to Financial Statements.

AMERICAN REBEL HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(unaudited)

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

American Rebel Holdings, Inc. (the “Company”) operates primarily as a designer, manufacturer, and marketer of branded safes and personal security, self-defense products. Additionally, the Company designs and produces branded apparel and other accessories.

The Company promotes and sells its products primarily through a growing network of dealers, in select regional retailers and local specialty safe, sporting goods, hunting and firearms stores, as well as online, including its website and e-commerce platforms such as Amazon.com.

The information on our website does not constitute a part of this report.

Listing, Reorganization and Acquisition of Champion Entities

The Company was incorporated on December 15, 2014, under the laws of the State of Nevada, as CubeScape, Inc. The Company filed a registration statement on Form S-1, which was declared effective by the United States Securities and Exchange Commission (the “SEC”) on October 14, 2015. Twenty-six (26) investors invested at a price of $0.80 per share for a total of $60,000. The direct public offering closed on December 11, 2015.

On January 5, 2017, the Company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. The Company completed a business combination with its majority stockholder, American Rebel, Inc. on June 19, 2017. As a result, American Rebel, Inc. became a wholly-owned subsidiary of the Company.

The aforementioned acquisition of American Rebel, Inc. was accounted for as a reverse merger, which involved issuance by the Company of 217,763 shares of its common stock and 6,250 warrants to purchase shares of common stock to shareholders of American Rebel, Inc., and cancelled 112,500 shares of common stock previously owned by American Rebel, Inc.

On June 29, 2022, the Company entered into a stock and membership interest purchase agreement with Champion Safe Co., Inc. (“Champion Safe”), Superior Safe, LLC (“Superior Safe”), Safe Guard Security Products, LLC (“Safe Guard”), Champion Safe De Mexico, S.A. de C.V. (“Champion Safe Mexico”) and, together with Champion Safe, Superior Safe, and Safe Guard, collectively, the (“Champion Entities”) and Mr. Ray Crosby (“Seller”) (the “Champion Purchase Agreement”), pursuant to which the Company agreed to acquire all of the issued and outstanding capital stock and membership interests of the Champion Entities from the Seller. This transaction was completed on July 29, 2022. We have included the Champion Entities assets and liabilities as of that date and the subsequent financial activity through the date of this Report in our Condensed Consolidated Financial Statements. For all intent and purposes, the Champion Entities have been integrated with our existing operations and are under the control of our management team.

The closing of the acquisition occurred on July 29, 2022. Under the terms of the Champion Purchase Agreement, the Company paid the Seller (i) cash consideration in the amount of $9,150,000, along with (ii) cash deposits in the amount of $350,000, and (iii) reimbursed Seller for $397,420 of agreed upon acquisitions and equipment purchases completed by the Seller and the Champion Entities since June 30, 2021.

For purposes of this Quarterly Report on Form 10-Q, “American Rebel” “we,” “our,” “us,” or similar references refers to American Rebel Holdings, Inc. and its consolidated subsidiaries, unless the context requires otherwise.

Interim Financial Statements and Basis of Presentation

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the SEC set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by the U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed on Form 10-K of the Company for the period ended December 31, 2021, and notes thereto contained.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries, American Rebel, Inc., and the Champion Entities. All significant intercompany accounts and transactions have been eliminated.

Year end

The Company’s year-end is December 31.

Cash and cash equivalents

For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.

Inventory and Inventory Deposits

Inventory consists of backpacks, jackets, safes and accessories manufactured to our design and held for resale and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected sales and current economic conditions. The Company also makes deposit payments on inventory to be manufactured that are carried separately until the goods are received into inventory.

Fixed assets and depreciation

Property and equipment are stated at cost net of accumulated depreciation. Additions and improvements are capitalized while ordinary maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded by the straight-line method over the estimated useful life of the asset, which ranges from five to seven years.

Revenue recognition

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenues are recognized when control of the promised goods or services is transferred to our clients, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: (1) Identify the contract with a client; (2) Identify the performance obligations in the contract; (3) Determine the transaction price; (4) Allocate the transaction price to performance obligations in the contract; and (5) Recognize revenues when or as the company satisfies a performance obligation.

These steps are met when an order is received, a price is agreed, and the product is shipped or delivered to that customer.

Advertising costs

Advertising costs are expensed as incurred; Marketing costs which we consider to be advertising costs incurred were $119,122 and $34,669 for the three-month periods ended September 30, 2022, and 2021, respectively and $349,341 and $138,783 for the nine-month periods then ended.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2022, and December 31, 2021, respectively. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand.

Level 1: The preferred inputs to valuation efforts are “quoted prices in active markets for identical assets or liabilities,” with the caveat that the reporting entity must have access to that market. Information at this level is based on direct observations of transactions involving the same assets and liabilities, not assumptions, and thus offers superior reliability. However, relatively few items, especially physical assets, actually trade in active markets.

Level 2: FASB acknowledged that active markets for identical assets and liabilities are relatively uncommon and, even when they do exist, they may be too thin to provide reliable information. To deal with this shortage of direct data, the board provided a second level of inputs that can be applied in three situations.

Level 3: If inputs from levels 1 and 2 are not available, the Financial Accounting Standards Board (the “FASB”) acknowledges that fair value measures of many assets and liabilities are less precise. The board describes Level 3 inputs as “unobservable,” and limits their use by saying they “shall be used to measure fair value to the extent that observable inputs are not available.” This category allows “for situations in which there is little, if any, market activity for the asset or liability at the measurement date”. Earlier in the standard, FASB explains that “observable inputs” are gathered from sources other than the reporting company and that they are expected to reflect assumptions made by market participants.

Stock-based compensation

The Company records stock-based compensation in accordance with the guidance in ASC Topic 505 and 718 which requires the Company to recognize expense related to the fair value of its employee stock option awards. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method. The Company recognizes the cost of all share-based awards on a graded vesting basis over the vesting period of the award.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 718-10 and the conclusions reached by the FASB ASC 505-50. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by FASB ASC 505-50.

Earnings per share

The Company follows ASC Topic 260 to account for earnings per share. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

Income taxes

The Company follows ASC Topic 740 for recording provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expense or benefit is based on the changes in the asset or liability for each period. If available evidence suggests that it is more likely than not that some portion or the entire deferred tax asset will not be realized, a valuation allowance is required to reduce the deferred tax asset to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income tax in the period of change.

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

The Company applies a more-likely-than-not recognition threshold for all tax uncertainties. ASC Topic 740 only allows the recognition of tax benefits that have a greater than fifty percent likelihood of being sustained upon examination by taxing authorities. As of September 30, 2022, and December 31, 2021, the Company reviewed its tax positions and determined there were no outstanding, or retroactive tax positions with less than a 50% likelihood of being sustained upon examination by the taxing authorities, therefore this standard has not had a material effect on the Company.

The Company does not anticipate any significant changes to its total unrecognized tax benefits within the next 12 months.

The Company classifies tax-related penalties and net interest as income tax expense. For the three-month and nine-month periods ended September 30, 2022, and 2021, respectively, no income tax expense has been recorded.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.

Right of Use Assets and Lease Liabilities

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The standard requires lessees to recognize almost all leases on the balance sheet as a Right-of-Use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019, are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities.

Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company’s leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company’ lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Operating leases are included in operating lease Right-of-Use assets and operating lease liabilities, current and non-current, on the Company’s consolidated balance sheets.

Recent pronouncements

The Company has implemented all new accounting pronouncements that are in effect and is evaluating any that may impact its financial statements. The Company does not believe that there are any new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, its revenue from its planned operations does not cover its operating expenses. Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to developing products and market identity, obtaining inventory, preparing for public product launch and ultimately selling products. As a result, the Company incurred net income (losses) for the nine months ended September 30, 2022, and 2021 of ($6,377,731) and ($4,890,090), respectively. The Company’s accumulated deficit was ($33,347,388) as of September 30, 2022, and ($26,969,657) as of December 31, 2021. The Company’s working capital was $7,328,272 as of September 30, 2022, compared to a deficit of ($4,171,277) as of December 31, 2021. The increase in working capital from December 31, 2021, to September 30, 2022, is due to the Company closing on its registered public offering in February 2022 and subsequent private investment in public equity (“PIPE”) transaction completed in July 2022 and the acquisition of Champion. Until recently the Company’s activities since inception have been sustained through equity and debt financing and the deferral of payments on accounts payable and other expenses.

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. Management is in discussion with its investment bank, EF Hutton a division of Benchmark Investments, LLC, and other broker dealers regarding additional funding initiatives or financings through the market.

Management believes 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 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.

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

NOTE 3 – INVENTORY AND DEPOSITS

Inventory and deposits include the following:

SCHEDULE OF INVENTORY AND DEPOSITS

	September 30, 2022 (unaudited)		December 31, 2021 (audited)

Inventory – finished goods	$	6,306,341	$	685,854
Inventory deposits		230,223		-
Total Inventory and deposits	$	6,536,564	$	685,854

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment include the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	September 30,			December 31,
	2022			2021
	(unaudited)			(audited)

Plant, property and equipment	$	1,964,483		$	32,261
Vehicles		663,332			277,886
Property and equipment gross		2,627,815			310,147
Less: Accumulated depreciation		(2,141,745	)		(309,247	)
Net property and equipment	$	486,070		$	900

For the nine months ended September 30, 2022, and 2021 we recognized $11,311 and $2,744 in depreciation expense, respectively. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life. We recognized only two months and three days of depreciation expense from the assets that we acquired with the Champion purchase.

NOTE 5 – RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS

During the year ended December 31, 2016, the Company acquired three vehicles from related parties and assumed the debt secured by each one of the vehicles. Accordingly, the recorded value for each vehicle was the total debt assumed from each related loan, for a total of $277,886.

Charles A. Ross, Jr. serves as the Company’s CEO. Compensation for Mr. Ross was $552,000 and $90,000, respectively for the nine months ended September 30, 2022, and 2021. Compensation for the nine months ended September 30, 2022 includes several bonuses approved by the Board of Directors.

Doug Grau serves as the Company’s President. Compensation for Mr. Grau was $278,000 and $60,000, respectively for the nine months ended September 30, 2022, and 2021. Compensation for the nine months ended September 30, 2022 includes several bonuses approved by the Board of Directors.

NOTE 6 – NOTES PAYABLE – NON-RELATED PARTY

Effective January 1, 2016, the Company acquired a vehicle from a related party in exchange for the assumption of the liability related to this vehicle. The liability assumed is as follows at September 30, 2022 and December 31, 2021.

	September 30,		December 31,
	2022		2021
	(unaudited)		(audited)

Loan secured by a tour bus, monthly payments of $1,426 including interest at 12% per annum through January 2023 when the remaining balance is payable.	$	4,152	$	12,939

Total recorded as current liability	$	4,152	$	12,939

Current and long-term portion. Total loan balance is reported as current as the loan will be repaid within one years time.

NOTE 7 – NOTES PAYABLE – WORKING CAPITAL

During the nine months ending September 30, 2022, the Company through one of its wholly-owned operating subsidiaries completed the sale of several short-term notes under similar terms as its other short-term notes totaling $60,000. The notes are secured by a pledge of certain items of the Company’s current inventory and the chief executive officer’s personal guaranty.

During the nine months ending September 30, 2022, the Company and one of the Company’s wholly-owned operating subsidiaries repaid $2,541,634 of these short-term notes and successfully completed the conversion of short-term notes with a face value of $1,950,224 and accrued interest into shares of common stock with a fair value of $2,803,632, resulting in a Loss on extinguishment of debt of $1,376,756 recorded in our Condensed Consolidated Statement of Operations. The conversion of a major portion of the outstanding short-term notes payable and accrued interest was done in connection with the registered public offering completed in February 2022.

At September 30, 2022, and December 31, 2021, the outstanding balance due on the working capital notes payable was $603,840 and $3,879,428, respectively. These amounts do not include accrued interest payable for each respective time period.

NOTE 8 – INCOME TAXES

At September 30, 2022 and December 31, 2021, the Company had a net operating loss carryforward of $33,347,388 and $26,969,657, respectively, which begins to expire in 2034.

Components of net deferred tax asset, including a valuation allowance, are as follows:

	September 30, 2022 (unaudited)			December 31, 2021 (audited)
Deferred tax asset:
Net operating loss carryforward	$	7,002,951		$	5,663,628
Total deferred tax asset		7,002,951			5,663,628
Less: Valuation allowance		(7,002,951	)		(5,663,628	)

SEC Form 10-Q filed by American Rebel Holdings Inc.