Form 10-Q/A Amended Quarterly Report

Note 1 - Summary of Significant Accounting Policies

Notes

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The “Company” was incorporated on December 15, 2014 (date of inception) 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. 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 acquisition of American Rebel, Inc. was accounted for as a reverse merger. The Company issued 17,421,000 shares of its common stock and issued warrants to purchase 500,000 shares of common stock to shareholders of American Rebel, Inc. and cancelled 9,000,000 shares of common stock owned by American Rebel, Inc.

The Company filed a registration statement on Form S-1 which was declared effective by the U.S. Securities and Exchange Commission on October 14, 2015. Twenty six (26) investors invested at a price of $0.01 per share for a total of $60,000. The direct public offering closed on December 11, 2015.

Nature of Operations

The Company is developing branded products in the self-defense and patriotic product areas that are promoted and sold using personal appearance, music, Internet and television avenues. The Company’s products will be under the American Rebel brand and imprinted.

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 United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by 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, 2017 and notes thereto contained.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiary. 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 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 is 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.

Investment

During June 2016, American Rebel, Inc. purchased a 60% controlling interest in the Company with the intent to merge. The merger was completed on June 19, 2017 and has been accounted for as a reverse merger with comparative financial history being that of American Rebel, Inc., its wholly owned subsidiary.

Revenue Recognition

We recognize revenue when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has been provided to the consumer; (3) the amount of fees to be paid by the consumer is fixed or determinable; and (4) the collection of our fees or product revenue is probable.

The Company will record revenue when it is realizable and earned and product has been shipped to the consumers or that our service has been rendered to the consumer. License income will be reported as income when the Company has completed any responsibility to earn the income and when any earned royalties are received.

Advertising Costs

Advertising costs are expensed as incurred; Marketing costs incurred were $172,021 and $136,595 for the three month periods ended June 30, 2018 and 2017, respectively, and $395,175 and $185,594, respectively, for the six 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 June 30, 2018 and December 31, 2017, 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.

During June, 2017, and prior to the merger, the Company recorded $1,400,000 in compensation expense for the issuance of 2,800,000 shares of common stock. During July, 2017 the Company recorded $59,000 in interest expense and $66,000 in loan discount for the issuance of 250,000 shares of common stock in connection with a working capital loan. During August 2017, the Company recorded $50,000 in prepaid expense for the issuance of 100,000 shares of common stock in connection with purchase of an exclusive trade show booth space. In January, 2018 and May 2018, the Company issued a total of 333,333 shares of common stock as compensation for professional services to be performed during 2018. The common stock was valued at a price of $0.50 per share consistent with earlier sales of common stock by American Rebel, Inc. as well as the present conversion price of the Company’s convertible debentures. In January, 2018, the Company issued 300,000 shares of common stock as compensation in settlement of professional services billed at $180,000.

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 June 30, 2018 and December 31, 2017, 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 and six month periods ended June 30, 2018 and 2017, 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.

Recent Pronouncements

The Company evaluated recent accounting pronouncements through June 30, 2018 and believes that none have a material effect on the Company’s financial statements except for the following.

In August, 2014, FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entities Ability to continue as a Going Concern. The standard is intended to define management's responsibility to decide whether there is substantial doubt about an organization's ability to continue as a going concern and to provide related footnote disclosures. The standard requires management to decide whether there are conditions or events that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued. The standard provides guidance to an organization's management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations in the footnotes. The standard becomes effective for the annual period ending after December 15, 2017, with early application permitted. The adoption of this pronouncement is not expected to have a material impact on our financial statements. Management's evaluations regarding the events and conditions that raise substantial doubt regarding the Company's ability to continue as a going concern are disclosed in Note 2 below.

In August 2015, FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date. In 2014 FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provided a framework for addressing revenue recognition issues and replaces almost all existing revenue recognition guidance in current U.S. GAAP. The core principle of ASU 2014-09 is for companies to recognize revenue for the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 also resulted in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The amendments in ASU 2015-14 defer the effective date of the new revenue recognition guidance to annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted to the original effective date (December 15, 2017), including interim periods within that reporting period. Management is evaluating the future impact of this guidance on the Company’s financial statements and notes thereto.

In August 2015, FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The Company previously reported that in April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which simplifies the presentation of debt issuance costs by requiring that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in ASU 2015-15 address the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements such that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-15 and ASU 2015-03 are effective for financial statements of public business entities issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The adoption of this guidance is not expected to have a material impact on the Company's financial position, results of operations or cash flows.

In September 2015, the FASB issued ASU 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this ASU require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; calculated as if the accounting had been completed at the acquisition date. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in this ASU should be applied prospectively with earlier application permitted for financial statements that have not been issued. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.

Amendments clarifying guidance in Topic 205, Risks and Uncertainties, are applicable to entities that have not commenced planned principal operations, which we have commenced recently.

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Note 2 - Going Concern

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Notes

Note 2 - Going Concern

NOTE 2 – GOING CONCERN

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated significant revenues from operations. Since inception, the Company has been engaged in financing activities and executing its business plan of operations and incurring costs and expenses related to developing products and market identity, obtaining inventory and preparing for public product launch. As a result, the Company incurred net income (losses) for the six months ended June 30, 2018 and 2017 of ($1,110,334) and ($2,061,482) , respectively. The Company’s accumulated deficit was ($6,396,189) as of June 30, 2018 and ($5,285,855) as of December 31, 2017. The Company’s working capital deficit was ($339,477) as of June 30, 2018 and a deficit of ($302,024) as of December 31, 2017. In addition, the Company’s development 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 operating revenues. Management believes sufficient funding can be secured through the obtaining of loans, as well as future offerings of its preferred and common stock to institutional and other financial sources. 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 its stockholders. If the Company is unable to secure such additional funds from these sources, it may be forced to change or delay its business plan rollout.

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.

Note3 - Inventory and Deposits

Note3 - Inventory and Deposits

Notes

NOTE 3- INVENTORY AND DEPOSITS

Inventory and deposits includes the following:

		June 30, 2018 (unaudited)		December 31, 2017 (audited)
Inventory - Finished goods	$	444,402	$	479,233
Inventory deposits		171,440		71,440
		615,842		550,673
Less: Reserve for excess and obsolete		-		-
Net inventory and deposits	$	615,842	$	550,673

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Note 4 - Investment

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Notes

Note 4 - Investment

NOTE 4 – INVESTMENT

During June 2016, American Rebel, Inc. purchased a 60% controlling interest the Company with the intent to merge. The merger was completed on June 19, 2017 and American Rebel, Inc. has become a wholly owned subsidiary. The transaction has been recorded as a reverse merger with the consolidated ongoing history of the Company being that of American Rebel, Inc. The $35,000 investment in CubeScape, Inc has been eliminated in consolidation and netted into additional paid-in capital.

Note 5 - Property and Equipment

Note 5 - Property and Equipment

Notes

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment includes the following:
		June 30, 2018 (unaudited)		December 31, 2017 (audited)

Marketing equipment	$	32,261	$	32,261
Vehicles		277,886		277,886
		310,147		310,147
Less: Accumulated depreciation		(150,115)		(119,101)
Net property and equipment	$	160,032	$	191,046

For the three months ended June 30, 2018 and 2017 we recognized $15,507 and $15,507 in depreciation expense, respectively, and $31,014 and $30,115 for the six month periods then ended. We depreciate these assets over a period of sixty (60) months which has been deemed their useful life. In January, 2016 we acquired three vehicles from related parties and assumed the debt secured by the vehicles as described at Note 7 – Notes Payable. Accordingly, the recorded cost of each vehicle is the amount of debt assumed under each related loan, or a total of $277,886.

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Notes

NOTE 6 –RELATED PARTY NOTE PAYABLE AND RELATED PARTY TRANSACTIONS

For the year ended December 31, 2016, the Company received loans from its sole officer and director totaling $221,155. The balance at December 31, 2017 was $81,881. During the six months ended June 30, 2018, the company repaid $8,930 of these loans resulting in a balance at June 30, 2018 of $72,951. These loans are due on demand and carry no interest.

During the six months ended June 30, 2018, the Company entered into several convertible debt instruments with stockholders in the amount of $120,000, for a total of $245,000. The Company accrued interest expense on this convertible debt of $96,398, for a total accrued of $17,675 at June 30, 2018. Since public trading of the Company’s common stock began in 2018, the Company determined a Beneficial Conversion Discount of $120,000 applied to the 2018 sales the Convertible Debentures. The discount reduced the liability balance of the debentures to $0 when the debentures were issued and recorded the proceeds of the sale as Additional paid in Capital. The discount will be amortized over the three year term of the debentures. The discounted balance of the convertible debentures at June 30, 2018 was $135,671.

On April 30, 2018, holders of convertible debentures exercised their rights to convert the debt of $2,010,000 and accrued interest of $274,529 to 4,569,058 shares of common stock. Of this amount borrowed under the convertible debt, $2,481,787 was loaned to American Rebel, Inc., the Company’s former majority stockholder and now the Company’s wholly owned subsidiary, as a working capital loan to pay its operating expenses including legal, accounting, product development, brand expansion, and marketing costs. The majority stockholder also used the proceeds of these loans to purchase inventory of its initial product launched during 2017. This loan is eliminated in consolidation.

During the year ended December 31, 2016, the Company acquired three vehicles from various related parties and assumed the debt secured by each one of the vehicles. Accordingly, the recorded value for each vehicle is the total debt assumed under each related loan, or a total of $277,886. (See Note 7 – Notes Payable.)

Charles A. Ross, Jr. serves as the Company’s sole officer and director. Compensation for Mr. Ross was $100,000 and $100,000, respectively for the six months ended June 30, 2018 and 2017, and $187,500 for the year ended December 31, 2017. Mr. Ross received a grant of 1,000,000 shares of American Rebel, Inc. common stock, valued at $0.50 per share in June 2017, prior to the acquisition. These shares were part of the 6,500,000 shares exchanged for Company common stock in the acquisition of American Rebel, Inc. completed on June 19, 2017.

Note 7 - Notes Payable - Non-related Parties

Note 7 - Notes Payable - Non-related Parties

Notes

NOTE 7 – NOTES PAYABLE – NONRELATED PARTIES

Effective January 1, 2016, the Company acquired three vehicles from various related parties in exchange for the assumption of the liabilities related to those vehicles. The liabilities assumed are as follows at June 30, 2018 and December 31, 2017.

		June 30, 2018		December 31, 2017
		(unaudited)		(audited)
Loan secured by a tour bus, payable in monthly payments of $2,710 including interest at 12% per annum through June 2020 when the remaining balance is payable.	$	62,804	$	70,649

Loan secured by a Ford truck, payable in monthly payments of $1,742 including interest at 1% per annum through October 2018.		8,661		15,542

Loan secured by a promotional vehicle. Loan is past due, payments are made at irregular intervals and interest expense accrues at 3% per month until paid in full.		68,044		68,044

Total recorded as current liability	$	139,509	$	154,235

Current and long-term portion. Total loan balance is reported as current because loans are past due, become due within one year or are expected to be repaid within one year.

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Note 8 - Notes Payable - Working Capital

Note 8 - Notes Payable - Working Capital

Notes

NOTE 8 – NOTES PAYABLE – WORKING CAPITAL

On July 6, 2017, the Company’s wholly-owned operating subsidiary completed the sale of a secured promissory note in the principal amount of $250,000 with an interest rate of 12% per annum to a private investor, and current stockholder. In April, 2018 the Company’s wholly-owned operating subsidiary completed the sale of additional notes under similar terms in the additional principal amount totaling $250,000. The notes are secured by a pledge of certain of the Company’s current inventory and the chief executive officer’s personal guaranty. These working capital notes require payments equal to 75-100% of current sales of that specific secured inventory and mature in 180 days. In connection with the original note, the Company issued 250,000 shares of its common stock to the noteholder valued at $0.50 per share for a total of $125,000. The fair value of the common stock issued was recorded as a discount to the note payable. The discount was amortized over the term of the agreement to interest expense using the straight-line method that approximates the effective interest method. As of June 30, 2018, the discounted outstanding balance due on the working capital notes was $496,005.

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Note 9 - Convertible Debenture, Related Party

Note 9 - Convertible Debenture, Related Party

Notes

NOTE 9- CONVERTIBLE DEBENTURE – RELATED PARTY

Since September 16, 2016, the Company sold convertible debentures in the amount of $2,255,000 in the form of 12% three year convertible term notes. Interest is accrued at an annual rate of 12% and is payable in common stock at maturity. Both principal and interest may be converted into common stock at a price of $0.50 per share after the passage of 181 days. The Company may redeem the debenture at its option or force conversion after common stock trades at a price in excess of $1.00 per share for five days. The Holder may force redemption after the Company raises $3 million dollars in equity. The holders of the convertible debentures were issued three year warrants to purchase 2,255,000 shares of the Company’s common stock at $1.00 per share. At April 30, 2018, debentures with face value of $2,010,000 plus accrued interest of $274,529 were converted into 4,569,058 shares of common stock. As of June 30, 2018, the Company had a face value of $245,000 due under this convertible debenture.

The convertible debenture holders, based on its agreement, with maturities beginning September 16, 2019 has the option to convert their principal and interest into 490,000 (plus 35,350 for accrued interest) shares of common stock. The fair value of the embedded beneficial conversion feature resulted in no discount to the convertible debenture – related party at December 31, 2018.

During the six months ended June 30, 2018, the Company sold convertible debt instruments in the amount of $120,000. Since public trading of the Company’s common stock began in 2018, the Company determined a beneficial conversion discount of $120,000 applied to the 2018 sales the convertible debt instruments. The discount reduced the liability balance of the debentures to $0 when the debentures were issued and recorded the proceeds of the sale as Additional paid in Capital. The discount will be amortized over the three year term of the debentures. The discounted balance of the convertible debentures at June 30, 2018 was $135,671.

The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and fair value measurement under ASC 820 and determined that the beneficial conversion feature under the convertible debenture should be recorded as a discount to debt if market was more than the conversion feature.

The convertible debenture - related party is measured at fair value at the end of each reporting period or termination of the debenture agreement with the change in fair value recorded to earnings. The fair value of the embedded beneficial conversion feature did not result in a discount to the convertible debenture - related party. The discount if and when we have one will be amortized over the term of agreement or modification to the agreement to interest expense using the straight-line method that approximates the effective interest method.

The Company used the eight steps to determine fair value under ASC 820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make the measurement. (8) Determine amounts to be recognized and information to be disclosed.

Fair value was determined by the market price of the Company’s publicly traded stock with no discount allowed. This was determined as of the effective date of the agreement entered convertible debenture - related party. The conversion price was then compared to fair value, determined by market price and the difference between the two multiplied by the number of shares that would be issued upon conversion. The Company had not had any market activity within its public market until January 2018. Private transactions between willing buyers and willing sellers have ranged from $0.02 to $0.50 per share. These private transactions were not conducted through a broker dealer network. Since public trading of the common stock began in 2018 market price of the Company’s traded stock has ranged from $1.00 to $2.50 per share.

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Note 10 - Embedded Derivatives - Financial Instruments

Note 10 - Embedded Derivatives - Financial Instruments

Notes

NOTE 10 – EMBEDDED DERIVATIVES – FINANCIAL INSTRUMENTS

Since September 2017 the Company entered into a financial instrument, which consists of a convertible debenture, containing a conversion feature. Generally financial instruments are convertible into shares of the Company’s common stock; at prices that are either marked to the volume weighted average price of the Company’s publicly traded stock or a static price determinative from each financial instrument agreement. These prices may be at a significant discount to market as determined overall by the volume weighted average price of the Company’s publicly traded common stock. The Company for all intent and purposes considers these discounts to be fair market value as would be determined in an arm’s length transaction with a willing buyer and the restrictive nature of the common stock issued, unless issued pursuant to a registration or some other registered shares with the SEC.

The Company accounts for the fair value of the conversion feature in accordance with ASC 815-15, Derivatives and Hedging; Embedded Derivatives, which requires the Company to bifurcate and separately account for the conversion features as an embedded derivative contained in the Company’s convertible debt and original issue discount notes payable. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations. The Company valued the embedded derivatives using eight steps to determine fair value under ASC 820. (1) Identify the item to be valued and the unit of account. (2) Determine the principal or most advantageous market and the relevant market participants. (3) Select the valuation premise to be used for asset measurements. (4) Consider the risk assumptions applicable to liability measurements. (5) Identify available inputs. (6) Select the appropriate valuation technique(s). (7) Make the measurement. (8) Determine amounts to be recognized and information to be disclosed.

The fair value of the conversion feature of the financial instrument as of June 30, 2018 was $0. The Company did not record any expense associated with the embedded derivatives at June 30, 2018. No embedded derivative expense was realized as there was no change in the conversion price. The conversion price for this financial instrument was $0.50 per share which is higher than market as there have been no sales of the Company’s common stock.

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Note 11 - Income Taxes

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Notes

Note 11 - Income Taxes

NOTE 11 – INCOME TAXES

At June 30, 2018 and December 31, 2017, the Company had a net operating loss carryforward of $6,396,189 and $5,285,855, respectively, which begins to expire in 2034.

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

		June 30, 2018		December 31, 2017
		(unaudited)		(audited)
Deferred tax asset:
Net operating loss carryforward	$	1,599,047	$	1,321,464
Total deferred tax asset		1,599,047		1,321,464
Less: Valuation allowance		(1,599,047)		(1,321,464)
Net deferred tax asset	$	-	$	-

Valuation allowance for deferred tax assets as of June 30, 2018 and December 31, 2017 was $1,599,047 and $1,321,464, respectively. In assessing the recovery of the deferred tax asset, management considers whether it is more likely than not that some portion or the entire deferred tax asset will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not deferred tax assets will not be realized as of June 30, 2018 and December 31, 2017 and recognized 100% valuation allowance for each period.

Reconciliation between statutory rate and the effective tax rate for both periods and as of December 31, 2017:

Federal statutory rate		(21.00)%
State taxes, net of federal benefit		(4.00)%
Change in valuation allowance		25.00%
Effective tax rate		0.00%

Note 12 - Share Capital

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Notes

Note 12 - Share Capital

NOTE 12 – SHARE CAPITAL

The Company is authorized to issue 100,000,000 shares of its $0.001 par value common stock and 1,000,000 shares of its $0.001 par value preferred stock.

Common stock

On December 15, 2014, the Company issued to its founder, then an officer and director of the Company, 6,000,000 shares of its $0.001 par value common stock at a price of $0.001 per share for services provided upon organization. The services were valued at $6,000.

On January 15, 2015, the Company issued to its founder 3,000,000 shares of its $0.001 par value common stock at a price of $0.008 per share for certain intangible assets and tangible assets (see Note 3 - Intangible Assets). Mr. David Estus, then our sole officer and director, incurred more than $50,000 in developing or acquiring the intangible and tangible assets for which the Company valued at $24,000.

The Company filed a registration statement on Form S-1 which was declared effective by the U.S. Securities and Exchange Commission on October 14, 2015. The Form S-1 allowed the Company to solicit investors for investment in a direct public offering of $60,000. Twenty six (26) investors invested at a price of $0.01 per share for the entire offering which closed on December 11, 2015.

The Company issued 17,421,000 shares of its common stock and issued warrants to purchase 500,000 shares of common stock to shareholders of American Rebel, Inc. and cancelled 9,000,000 shares of common stock owned by American Rebel, Inc. to complete the acquisition of American Rebel, Inc. which was accounted for as a reverse merger.

During June 2017, prior to the merger, American Rebel, Inc issued 2,800,000 shares of common stock as compensation and recorded an expense based on fair market value of $0.50 per share for a total expense of $1,400,000. On June 19, 2017, in connection with the merger and acquisition of the subsidiary, the Company exchanged 17,421,000 shares of common stock with stockholders of American Rebel, Inc. and cancelled 9,000,000 shares of common stock held by American Rebel, Inc. American Rebel, Inc. became a wholly owned subsidiary of the Company upon completion of the exchange.

On August 6, 2017, the Company’s wholly-owned subsidiary completed an agreement to acquire a right to a trade show booth location early in 2018. In connection with this acquisition, the Company issued 100,000 shares of its common stock to the seller.

In January 2018, the Company’s wholly owned subsidiary completed an agreement to acquire professional services during 2018 in exchange for 500,000 shares of the company’s common stock. The common stock is to be issued in three stages, 166,667 shares in January 2018, 166,667 shares in May 2018 and the remainder in September 2018. The shares were valued at $.50 per share consistent with valuation of other share issues.

In January 2018, the Company issued 300,000 shares of common stock to settle a liability for professional services billed in the amount of $180,000.

At June 30, 2018 and December 31, 2017, there were 29,553,392 and 23,771,000 shares of common stock issued and outstanding, respectively.

Note 13 - Warrants and Options

Note 13 - Warrants and Options

Notes

NOTE 13 – WARRANTS AND OPTIONS

Since September 16, 2016, in connection with the convertible debenture –related party (see Note 8 – Convertible Debenture – Related Party) the Company issued three year warrants to purchase 2,255,000 shares of the Company’s common stock at $1.00 per share. In conjunction with the conversion of convertible debt at April 30, 2018, the company agreed to reduce the exercise price of the Warrants to $.50 per share. Warrants to purchase 580,000 shares of common stock were exercised generating proceeds of $290,000 during 2018.

On June 19, 2017, the Company issued five year warrants to purchase 500,000 shares of the Company’s common stock at $0.50 per share as compensation.

As of June 30, 2018, there were 1,675,000 warrants issued and outstanding. As of December 31, 2017, there were 2,010,000 warrants 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 June 30, 2018. 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’s common stock has not traded in material volume, so the volatility computation was based on other similarly situated companies. 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.

		June 30, 2018 (unaudited)		December 31, 2017 (audited)

Stock Price	$	0.01	$	0.01
Exercise Price	$	1	$	1
Term (expected in years)		3		3
Volatility		77.70%		111.70%
Annual Rate of Dividends		0.00%		0.00%
Risk Free Rate		2.63%		1.98%

Stock Purchase Warrants

The following table summarizes all warrant activity for the six months ended June 30, 2018 and the year ended December 31, 2017.

	Shares		Weighted-Average Exercise Price Per Share	Remaining term	Intrinsic value
Outstanding, December 31, 2016	600,000	$	0.50	1.34 years	-
Granted	2,035,000	$	0.52	2.41 years	-
Exercised	-		-	-	-
Expired	-		-	-	-
Outstanding, December 31, 2017	2,635,000	$	0.52	2.40 years	-
Granted	120,000	$	1.00	2.73 years	-
Exercised	580,000	$	0.50	-	-
Expired	-		-	-	-
Outstanding and Exercisable at June 30, 2018	2,175,000	$	0.54	2.42 years	-

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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Note 14 - Subsequent Events

Note 14 - Subsequent Events

Notes

NOTE 14 – SUBSEQUENT EVENTS

The Company evaluated all events that occurred after the balance sheet date of June 30, 2018 through the date the financial statements were issued and determined that there were the following subsequent events.

Subsequent to June 30, 2018, the Company received an additional $300,000 under the notes payable secured by inventory and received $40,000 from exercise of warrants to issue 80,000 shares of common stock.

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Note 1 - Summary of Significant Accounting Policies: Nature of operations (Policies)

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Policies

Nature of operations

Nature of Operations

Note 1 - Summary of Significant Accounting Policies: Interim Financial Statements and Basis of Presentation (Policies)

Interim Financial Statements and Basis of Presentation

Policies

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Note 1 - Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

Principles of Consolidation

Policies

The Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

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Note 1 - Summary of Significant Accounting Policies: Year end (Policies)

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Policies

Year end

Year End

The Company’s year-end is December 31.

Note 1 - Summary of Significant Accounting Policies: Cash and cash equivalents (Policies)

Cash and cash equivalents

Policies

Cash and Cash Equivalents

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Note 1 - Summary of Significant Accounting Policies: Inventory and Inventory Deposits (Policies)

Inventory and Inventory Deposits

Policies

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Note 1 - Summary of Significant Accounting Policies: Fixed assets and depreciation (Policies)

Fixed assets and depreciation

Policies

Fixed Assets and Depreciation

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Note 1 - Summary of Significant Accounting Policies: Investment (Policies)

Policies

Disclosure of accounting policy for investments in financial assets, including marketable securities (debt and equity securities with readily determinable fair values), investments accounted for under the equity method and cost method, securities borrowed and loaned, and repurchase and resale agreements. For marketable securities, the disclosure may include the entity's accounting treatment for transfers between investment categories and how the fair values for such securities are determined. Also, for all investments, an entity may describe its policy for assessing, recognizing and measuring impairment of the investment.

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Note 1 - Summary of Significant Accounting Policies: Revenue recognition (Policies)

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Policies

Revenue recognition

Revenue Recognition

Note 1 - Summary of Significant Accounting Policies: Advertising costs (Policies)

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Policies

Advertising costs

Advertising Costs

Note 1 - Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

Fair Value of Financial Instruments

Policies

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Note 1 - Summary of Significant Accounting Policies: Stock-based compensation (Policies)

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Policies

Stock-based compensation

Stock-Based Compensation

Note 1 - Summary of Significant Accounting Policies: Earnings per share (Policies)

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Policies

Earnings per share

Earnings Per Share

Note 1 - Summary of Significant Accounting Policies: Income taxes (Policies)

Policies

Income taxes

Income Taxes

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

Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.

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Note 1 - Summary of Significant Accounting Policies: Use of estimates (Policies)

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Policies

Use of estimates

Use of Estimates

Note 1 - Summary of Significant Accounting Policies: Recent pronouncements (Policies)

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Policies

Recent pronouncements

Recent Pronouncements

The Company evaluated recent accounting pronouncements through June 30, 2018 and believes that none have a material effect on the Company’s financial statements except for the following.

Amendments clarifying guidance in Topic 205, Risks and Uncertainties, are applicable to entities that have not commenced planned principal operations, which we have commenced recently.

Note3 - Inventory and Deposits: Schedule of Inventory (Tables)

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Schedule of Inventory

		June 30, 2018 (unaudited)		December 31, 2017 (audited)
Inventory - Finished goods	$	444,402	$	479,233
Inventory deposits		171,440		71,440
		615,842		550,673
Less: Reserve for excess and obsolete		-		-
Net inventory and deposits	$	615,842	$	550,673

Note 7 - Notes Payable - Non-related Parties: Schedule of Notes Payable to Related Parties (Tables)

Schedule of Notes Payable to Related Parties

		June 30, 2018		December 31, 2017
		(unaudited)		(audited)
Loan secured by a tour bus, payable in monthly payments of $2,710 including interest at 12% per annum through June 2020 when the remaining balance is payable.	$	62,804	$	70,649

Loan secured by a Ford truck, payable in monthly payments of $1,742 including interest at 1% per annum through October 2018.		8,661		15,542

Loan secured by a promotional vehicle. Loan is past due, payments are made at irregular intervals and interest expense accrues at 3% per month until paid in full.		68,044		68,044

Total recorded as current liability	$	139,509	$	154,235

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Note 11 - Income Taxes: Schedule of Deferred Tax Assets and Liabilities (Tables)

Schedule of Deferred Tax Assets and Liabilities

		June 30, 2018		December 31, 2017
		(unaudited)		(audited)
Deferred tax asset:
Net operating loss carryforward	$	1,599,047	$	1,321,464
Total deferred tax asset		1,599,047		1,321,464
Less: Valuation allowance		(1,599,047)		(1,321,464)
Net deferred tax asset	$	-	$	-

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Note 11 - Income Taxes: Schedule of Effective Income Tax Rate Reconciliation (Tables)

Schedule of Effective Income Tax Rate Reconciliation

Federal statutory rate		(21.00)%
State taxes, net of federal benefit		(4.00)%
Change in valuation allowance		25.00%
Effective tax rate		0.00%

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Note 13 - Warrants and Options: Schedule of Fair Value Measurement (Tables)

Schedule of Fair Value Measurement

		June 30, 2018 (unaudited)		December 31, 2017 (audited)

Stock Price	$	0.01	$	0.01
Exercise Price	$	1	$	1
Term (expected in years)		3		3
Volatility		77.70%		111.70%
Annual Rate of Dividends		0.00%		0.00%
Risk Free Rate		2.63%		1.98%

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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Note 13 - Warrants and Options: Schedule of Warrant Activity (Tables)

Schedule of Warrant Activity

	Shares		Weighted-Average Exercise Price Per Share	Remaining term	Intrinsic value
Outstanding, December 31, 2016	600,000	$	0.50	1.34 years	-
Granted	2,035,000	$	0.52	2.41 years	-
Exercised	-		-	-	-
Expired	-		-	-	-
Outstanding, December 31, 2017	2,635,000	$	0.52	2.40 years	-
Granted	120,000	$	1.00	2.73 years	-
Exercised	580,000	$	0.50	-	-
Expired	-		-	-	-
Outstanding and Exercisable at June 30, 2018	2,175,000	$	0.54	2.42 years	-

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Note 1 - Summary of Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2018
Details
Entity Incorporation, Date of Incorporation	Dec. 15, 2014
Entity Incorporation, State Country Name	Nevada

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Note 2 - Going Concern (Details) - USD ($)	6 Months Ended
Note 2 - Going Concern (Details) - USD ($)	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Details
Net income (loss)	$ (1,110,334)	$ (2,061,482)
Accumulated deficit	(6,396,189)		$ (5,285,855)
Working Capital Deficit	$ 339,477		$ 302,024