Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis should be read in along with the financial statements included in this Quarterly Report on Form 10-Q (the “Financial Statements”). The Financial Statements have been prepared in accordance with generally accepted accounting policies in the United States (“GAAP”). Except as otherwise disclosed, all dollar figures included therein and in the following management discussion and analysis are quoted in United States dollars.

Operations

On June 9, 2016 a change in control occurred, a sixty percent (60%) ownership interest was obtained by American Rebel, Inc. from our former officer and director and founder. On June 17, 2017, the Company acquired the business of its control stockholder accounted for and presented financially as a reverse merger transaction. Our majority stockholder, American Rebel, Inc. became a wholly owned subsidiary of the Company and we distributed shares to the stockholders of American Rebel, Inc. As a result of this reverse merger, the reported operating history of the Company is now the operating history of American Rebel, Inc. Financial statements of both companies are now consolidated and all material intercompany transactions and balances are eliminated.

We are a development stage company and have limited financial resources. We have not established a firm source of equity or debt financing. Our independent registered public accounting firm has included an explanatory paragraph in their report filed on March 13, 2017 and included with our Form 10-K and Current Report on Form 8-K filed on June 22, 2017 emphasizing the uncertainty of our ability to remain as a going concern. An investor or financial statement reader should read our Risk Factors in full.

Description of Business

Company Overview

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

Market Overview

The Concealed Carry product market is estimated at over $500 million in annual sales; but American Rebel’s market not only includes current consumers of concealed carry products but also includes anyone that has ever considered the option of concealing and carrying a weapon in the public arena. Many the Company’s products solve the problem of how to safely and responsibly carry a weapon. If they had our backpack, they would then have the perfect option and article to conceal and carry their gun.

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The US firearms and gun ownership market continues to grow with no sign of abatement. Since 2010, the market for new gun purchases has increased by 60%, and by the end of 2016, there will be over 400 million guns in the US. Seventeen days after the election, November 25, 2016 set the single day record for the number of electronic background checks conducted by the NICS. The NICS processed 2,771,159 background checks in December, bringing 2016’s total to 27,538,673, according to FBI data. That dwarfs the firearms check record of 23,141,970 set in 2015

Interest in gun ownership and tactical/concealed carry clothing, backpacks and accessories is exploding. A current market leader in the tactical products category has grown its revenue from $80 million in 2007 to $200 million in 2011 to $400 million in 2015. This all sends a strong signal for gun rights, gun ownership, tactical/concealed carry products, and our American Rebel brand.

The obvious customer base for American Rebel Concealed Carry products would be any customer that conceals a hand gun and any concealed carry permit holders; but we believe the market is much larger than that. Interviews of potential customers have revealed that our customer base would include any person who has thought they might one day want to conceal and carry a firearm and the availability of the American Rebel product will initiate their taking action on their desire to conceal and carry a firearm. These potential customers aren’t comfortable carrying a firearm holstered on their hip and they haven’t been introduced to a product that conceals the firearm properly, allows easy access to the firearm, and also provides everyday value for their daily routine.

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2016 Increases in Firearm Sales & Conceal Carry Permits

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A new study commissioned by the National Shooting Sports Foundation reports women owning guns the fastest growing segment. The most commonly owned firearm by women in the study is a semiautomatic pistol, with 56 percent of women reporting they owned at least one. Women say their purchases are mainly influenced by Fit, Quality and Practicality.

Women purchasing a gun in the last 12 months spent on average $870 on firearms and more than $400 on accessories. More than 42 percent of women have a concealed carry permit for their state of residence. Placing a premium on safety, women say the single most important reason why they decided to purchase or own a firearm is protection—both personal and home protection.

Concealed Carry Permit Trends

Current estimates show the number of individuals in possession of concealed carry permits to be around 15 million. According to Dr. John R. Lott, president of the Crime Prevention Research Center, this shows a 215% increase since 2007.

Dr. Lott has found that the states of Texas, Florida, and Pennsylvania each have over one million residents that legally carry. Overall, totals show over six percent of the U.S. adult population are concealed carry permit holders. In ten other states, over 10% of adults have concealed carry permits.

Analyzing this increase in carry permits, Dr. Lott points out that 15 million is a low estimate, as this figure does not fully encompass the numbers of those that legally carry firearms. This is because 12 states have now adopted laws that allow residents to legally carry concealed weapons without permits. These “permit less” carry states, including Missouri, West Virginia, Idaho, and Mississippi, tend to have lower numbers of carry permits issued annually, despite the fact that many more residents legally carry thanks to their “Constitutional Carry” laws.

As the numbers of permit holders and gun owners have rapidly increased in recent years, the majority of these increases were seen among women and minorities. The number of women obtaining carry permits since 2007 has grown at double the rate of men seeking carry permits. Further, according to the Crime Prevention Research Center, evidence suggests that the increases in permit holding have been more rapid among minority groups.

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The Rise Of The 'Concealed-Carry Lifestyle'

The "concealed-carry lifestyle" refers to a set of products and a set of ideas around the decision to carry a gun everywhere you go.

The concealed-carry movement is central to the gun-rights platform of organizations like the National Rifle Association. "The idea that you should be allowed, legally and constitutionally, to carry a gun almost anywhere ... is actually sort of the heart of what the gun rights movement believes is the future."

Over the last 30 years a deep change has happened in American law and in American habit where state by state, places that once prohibited or strictly controlled the ability to carry a gun in everyday life have systematically relaxed those rules to the point that concealed carry is now legal in all 50 states.

General Backpack Industry Trends

The backpack is back. Sales of backpacks grew 9% in the past 12 months to $1.6 billion, according to data collected for Yahoo Finance by the consumer tracking service NPD Group. Sales of backpacks for use by adults (ages 18 and up) grew even more – 16% – and it was adult purchases that accounted for 69% of the overall market. In other words: the adult backpack is very hot right now.

The category is so popular that in 2014, backpack sales growth (up 18% that year among adult men and adult women) kept the $12 billion US bag market steady in a year when women’s handbags, the largest category, declined. In the face of the purse drop, backpacks gained popularity among women that year, and are still gaining.

This kind of market upswing creates new room for small, scrappy entrants. And indeed, smaller backpack players are carving out strong corners of an industry in which one giant, VF Corporation (VFC), enjoys more than 50% market share thanks to owning Timberland, The North Face, and Eastpak.

Fashion and function must come together to appeal to today’s always on-the-go consumer,” said Marshal Cohen, chief industry analyst, The NPD Group, Inc. “Male or female, consumers are carrying a lot of things around with them, and want a bag that looks good while also meeting their multifunctional needs.”

Bags worn by men accounted for $2.3 billion in sales in 2014, nearly one quarter of total industry results. Last year’s double-digit unit and dollar sales increases clearly make the men’s segment the one to watch in 2015. Men are purchasing more bags than ever before, and wearing bags of all types.

“The bag industry has an opportunity to continue to capture and keep the attention of male and female consumers alike by emphasizing designs that accommodate their lifestyles in both form and function,” added Cohen.

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Consumer Needs Based Segments

One size does not fit all. Gun owners are not the same

This consumer segmentation analysis identifies the uniquely distinct parts, or segments, of the market. In a needs-based segmentation, each segment shares a common set of motivations for wanting to buy a product and their preferred styles or features. It is not based on what the customer looks like or how they use their firearms. By understanding why consumers decide to buy a firearm, and the reasons why they selected specific firearm, we can improve our accessory products and customer interactions. For example, some consumers want premium quality and unquestionable precision – price is no object. Other consumers desire everyday functionality and acceptable workmanship all at a good value.

Based on a survey by National Shooting Sports Foundation of more than 6,000 U.S. households combined with extensive statistical analysis from Southwick Associates, this consumer segmentation data of the U.S. firearms market provides important insights which move beyond demographics and get into what really motivates people.

The largest segment, the Protector is typically a family-oriented professional with slightly above average income. They do not describe themselves as outdoorsy, but strongly define themselves as protective of their families and home and know what they want in a firearm when they visit the retailer.

Guardian Gary is another distinctly different protection-oriented segment. This all-male segment is a slightly older buyer who is more likely to define himself as tech savvy, analytical and old-fashioned. He is not a hunter but enjoys the outdoors. Personal protection away-from-home is a lesser concern than keeping the home front safe. Not interested in recreational shooting.

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An all-female segment, Debbie Defense is interested in personal protection, at- and away from- home. Young and more ethnically diverse, she enjoys the outdoors. Debbie Defense wants conceal-ability and light weight in a firearm, but is not set on specific product features or brands when she starts shopping for firearms. Recreational shooting is of little interest.

Suburban with modest incomes, the Skills Builder is not outdoorsy and is the youngest of all segments. With higher rates of female and minority participation, this segment does not own many firearms but wants to be proficient with the firearms they own. Conceal-ability and low weight reflect their interest in personal protection.

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As the name implies, the Hunter owns firearms for the purpose of hunting. One of the older and most rural segments, the Hunter is not concerned about conceal-ability, but seeks quality while remaining price sensitive.

Diverse in its rural versus suburban spread, the Social Shooter is interested in firearms as a way to spend time with friends. Price is a concern, and versatility is desired in a firearm. After the Hunter segment, this group is more likely to purchase a long gun than other segments.

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Not necessarily looking for rare or antique firearms, this mostly-male Collector segment wants to possess different types of firearms. Slightly older and wealthier than the other segments, they hunt and shoot, but are not avid participants. Price and versatility are not a concern.

Urban Recruits have lower income, are price conscious and seek versatility in their firearm purchases. Largely urban and suburban, these relatively new owners have the highest proportion of minorities (25%), low rates of target shooting participation, and the highest rates of law enforcement and military background.

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Playing Field for the U.S. Firearms Market

Needs- based consumer segmentation reveals the ‘playing field’, mapping each distinct consumer segment based on their critical needs. The playing field below (graphically presenting U.S. firearms consumers since 2000) shows how big each segment is relative to each other, and which ones are more value sensitive (Hunter, Social Shooter and Guardian Gary), and which ones enter the market knowing the specific features they want in their next purchase (Collector, Protector and Urban Recruits). Consumer segmentation is based on peoples’ most recent purchases.

Their needs and motivations can vary from purchase to purchase. For example, not everyone who hunts belongs to the Hunter segment. But, if their most recent purchase was to satisfy a home protection need, that hunter could fall into the Guardian Gary segment. Consumer segmentation is best interpreted as reflecting the overall mix of consumers’ motivations and needs as they exist today, and not as a permanent classification for each individual consumer.

Consumer segmentation brings clarity to a complex market, and provides validated insight to our new business opportunity, develops a tighter bond with our consumers, increases our brand loyalty and develops longer lifetime value.

Competition

Current Alternatives

American Rebel competes with other concealed carry products as well as products that don’t offer concealed carry capabilities. For example any backpack manufacturer competes with American Rebel Concealed Carry Backpacks and American Rebel needs to differentiate its products and clearly present the features and benefits of its backpacks.

The market is dominated by 5.11 Tactical with the remaining companies competing for the rest of a growing market.

5.11 Tactical is very successful and the other smaller companies share varying degrees of success. The Company believes that it will be ultimately successful developing its direct to consumer model to stay in closer contact with its customers to develop America’s Patriotic Brand.

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5.11 Tactical was purchased for $400 million in 2016 by Compass Diversified Holdings (NYSE: CODI). 5.11 will continue to operate independently post-merger and maintain their headquarters in Irvine and Modesto, CA and operate international sales offices in Sweden, Mexico, Australia, China, and UAE. 5.11 Tactical is estimated to have an over 40% share of the concealed carry market. Interestingly, 5.11 describes themselves as “a leading designer and marketer of purpose-built tactical apparel and gear serving a wide range of global customers including law enforcement, military special operations and firefighters, as well as outdoor enthusiasts.” 5.11’s initial product was rock climbing pants which they discovered were popular with members of law enforcement which led 5.11 to design products specifically for law enforcement and grow their business.

5.11 Tactical Rush 12 Back Pack $129.99

Maxpedition® is the brainchild of founder and CEO Tim Tang, who in 2003 dropped out of medical school to start his own company in his parent's garage. Ten years (and several progressively larger warehouses) later, Maxpedition is now thriving in its own Los Angeles-based corporate and distribution compound

Innovative from the start, Maxpedition gained a competitive edge in its early years by creating bags and packs with superior durability and ergonomics, such as the Versipack® and Gearslinger® series. The first customers were military operators and law enforcement officers, but the civilian and concealed carry markets quickly caught on, selecting Maxpedition® as their preferred EDC (Every Day Carry).

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Our Advantages

The American Rebel Concealed Carry patent-pending Protection Pocket is an innovative advantage over the competition. The patent-pending Protection Pocket utilizes a sandwich concept to hold the firearm in place and positioned properly for quick and effective access. American Rebel Concealed Carry products are designed for everyday use while keeping you concealed and safe. American Rebel Concealed Carry products enable easy access to your firearm while remaining discreet.

The key selling feature is innovation, style, and brand. Currently, innovation is the key selling feature as American Rebel enjoys a first-to-market status with its current assortment of Concealed Carry Backpacks.

Product innovations and first-to-market status currently insulate the Company from competitor’s influence. Changes in competition may influence pricing policies in the future.

American Rebel has applied for patent protection on several items of its products, including the patent-pending Protection Pocket. The Company believes it is an early adopter of providing SmartPack Bluetooth connectivity capabilities to its product lines. The SmartPack technology links the backpack with a SmartPhone app to provided added benefits. SmartPack technology will be offered as an optional feature within the next year.

Sales aren’t concentrated in a few customers as the company sells its products direct to the end consumer as opposed to selling wholesale to large distributors and retailers. Selling direct to consumer alleviates the potential problem of the Company being exposed to a high concentration of sales in a few customers. Large distributors or retailers do not have leverage over American Rebel since American Rebel sells direct to its customers.

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Market Opportunity

The Company believes it has identified an unmet need – Customers aren’t comfortable carrying a firearm holstered on their hip and they haven’t been introduced to a product that conceals the firearm properly, allows easy access to the firearm, and provides everyday value and utility for their daily routine. In addition, many potential customers would be interested in carrying a concealed firearm if they knew about a product that conceals the firearm properly, allows easy access to the firearm, and was their primary backpack for everyday use. These potential customers need to know the availability of our product and the steps they need to take to protect themselves, their family, their neighbors, or even a room full of total strangers.

The American Rebel Concealed Carry product line’s key selling feature is innovation, style, and brand. Its patent-pending Protection Pocket is an innovative advantage over the competition. American Rebel enjoys a first-to-market status with its current assortment of Concealed Carry Backpacks designed for everyday use. Product innovations and first-to-market status currently insulate the Company from competitors’ influence. The Company believes contact with its customers through its direct sales initiatives, its social media, and its profile at consumer trade shows will increase the relevancy of American Rebel products in the lives of its customers. Contact with its customers will also provide an excellent source of information for product performance and improvement and innovation.

Market Strategy

The American Rebel brand strategy includes multiple pathways to success, all of which focus back to the Company’s core mission of providing innovative products and promoting responsible gun ownership while celebrating “The American Rebel Spirit” in all of us.

Superior designs, proprietary technology, and a unique marketing approach put American Rebel in a position to dominate the rapidly growing tactical/concealed carry market. American Rebel strongly supports the 2nd Amendment, and conveys a sense of responsibility to teach and preach good common practices of gun ownership. American Rebel products are designed to keep people safe, keep them aware, and give them the tools to defend and protect. “There’s a growing need to know how to protect yourself, your family, your neighbors or even a room full of total strangers,” says American Rebel’s CEO Andy Ross. “That need is in the forethought of every product we design.”

American Rebel directly benefits from the awareness and persona that founder Andy Ross has cultivated his entire life. His outdoors man and adventurer status will serve the brand well as it addresses the customer through television, radio, and data-driven digital marketing initiatives. In addition, Andy has assembled a brand development team to guide the Company in its infancy. The team members are all tenured in their respective fields, and in total bring hundreds of years of experience to the brand and the Company.

American Rebel Concealed Carry products were designed due to the popularity of Andy Ross’s song “Cold Dead Hand” and Andy’s music continues to be an important part of American Rebel’s marketing and its connection with its customers. American Rebel utilizes social media to put its products in front of its customers and Andy’s music and television persona provide organic content to keep our social media “fans” and “followers” engaged.

American Rebel has applied for patent protection on several items of its products, including the patent-pending Protection Pocket. Product innovations and first-to-market status currently insulate the Company from competitor’s influence. Potential customers aren’t comfortable carrying a firearm holstered on their hip and they haven’t been introduced to a product that conceals the firearm properly, allows easy access to the firearm, and also provides everyday value for their daily routine.

Product and Technology

The American Rebel patent-pending Protection Pocket utilizes a sandwich concept to hold the firearm in place and positioned properly for quick and effective access. American Rebel Concealed Carry products are designed for everyday use while keeping you concealed and safe. In addition to the patent-pending Protection Pocket, American Rebel Concealed Carry Backpacks employ the finest materials available – Ripstop water-resistance fabric, YKK zippers and branded pull tabs, UTX branded clips. Practical design provides properly sized pockets for laptops and tablets, felt-lined pocket for sunglasses, compartments for cell phones, chargers, water bottles, and other daily needed accessories. American Rebel Concealed Carry Backpacks also contain a protected area for extra magazines and ammunition.

American Rebel will introduce its SmartPack technology within the next year which links the backpack with a SmartPhone app to provided added benefits. The added benefits of the SmartPhone app include notification when approaching airports and federal buildings. It would be easy to assume someone forgetting their handgun in their carry-on luggage and then going through security would be a rare occurrence, but 2012 TSA data show over 1,500 guns were revealed by TSA screener which was an increase from 1,300 the year before. 65 guns, of which 54 were loaded were found during one week in May 2013. Some of the patterns leading to a handgun being forgotten in a carry-on include:

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 A person who regularly carries a handgun in the glove box of their car taking their car in for repairs and removing the handgun and placing it in their backpack, then forgetting to return the handgun to the glove box after picking up the car and then flying in the next few days. 

 A person who regularly keeps their handgun on their nightstand at home, but they move the handgun to their briefcase when visited by relatives and they forget to return the handgun to its regular position when the relatives leave and then the person travels without going through their briefcase or backpack. 

 Someone packs the bags for the person flying and the person packing the bags assumes the person flying will stow the handgun when they get to the airport, but the person flying assumes the bag has been packed without the handgun. 

 A backpack has a discreet, almost hidden compartment for a handgun and the person carrying the bag doesn’t remember to check the compartment. American Rebel’s patent-pending Protection Pocket is a discreet, almost hidden compartment and the Protection Pocket is so effective at carrying the handgun the person carrying the backpack needs to be reminded to remove or stow the firearm before passing through security at an airport. 

The American Rebel Concealed Carry Phone App will also notify the user if they forget their backpack or accidently leave it behind. An American Rebel Concealed Carry Backpack customer using the optional American Rebel Concealed Carry Phone App will be notified on their phone if they leave their backpack behind under the table at the restaurant where they were dining and in an office building where they were attending a meeting or if someone picks up their backpack by accident. The American Rebel Concealed Carry Phone App will also be able to determine if a firearm is stowed in the backpack or if the firearm is being removed from the backpack.

Tracking technology, such as the Tile Mate and other chip options, are fairly common today; but the American Rebel added benefits combined with the patent-pending Protection Pocket and everyday use utility provide a competitive advantage over the competition. Of course, there are many backpacks on the market, but they don’t have the patent-pending Protection Pocket. There are many tactical and range bags on the market, but they don’t provide the functionality for everyday use. Many of the tactical bags on the market have a military look and feel and a need exists for a backpack that appears to be a typical backpack with additional concealed carry features that are discreet.

Future Markets

American Rebel Concealed Carry Backpacks are designed for everyday use and the popularity of backpacks today make the American Rebel Concealed Carry Backpack an easy choice for most prospective customers interested in a backpack for everyday use that offers added features and benefits to keep them concealed and safe. For prospective customers interested in a traditional briefcase or computer bag, American Rebel will soon have a solution. The American Rebel Constitution line of products will include jackets, backpacks, brief cases and carry bags that provide concealed carry capabilities targeting business professionals and entrepreneurs in both a business and business casual setting. The Constitution line will feature traditional business stylings in appearance while providing the innovative American Rebel features and benefits that keep the user concealed and safe. The Constitution line will also offer Smart capabilities that have an added benefit to strictly assuring your handgun stays under your control. The SmartPhone App can be an application to assure the user that their possessions, such as laptops and files, stay under their control. Identity and personal data breaches are multi-million dollar problems in the business world and the SmartPack provides a solution to secure personal data and valuables stay with its responsible owner. The American Rebel SmartPack incorporates our proprietary SmartPhone app, our American Rebel cloud application and a Bluetooth device.

American Rebel is currently developing a tactical line of products to offer to customers in search of a range bag or a duffel bag as well as a backpack with a more combat appearance. Our product consultant, endorser, and trainer Rod Ryan is utilizing his 30+ years of experience in the military and law enforcement as well as his years as CEO of Storm Mountain, one of the top tactical training centers in the world. Rod is applying his years of experience to create a line of products that will combine many features of our Concealed Carry line with specific needs and features required by a customer looking for a great tactical product.

Intellectual Property

American Rebel has applied for patent protection for many of its proprietary features, including its patent-pending Protection Pocket and SmartPhone app. Company CEO Andy Ross has experience with intellectual property and values the protection and value IP can provide a company. We have and generally plan to continue to enter into non-disclosure, confidentially and intellectual property assignment agreements with all new employees as a condition of employment. In addition, we intend to also generally enter into confidentiality and non-disclosure agreements with consultants, manufacturers’ representatives, distributors, suppliers and others to attempt to limit access to, use and disclosure of our proprietary information. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.

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We also may from time to time rely on other intellectual property developed or acquired, including patents, technical innovations, laws of unfair competition and various other licensing agreements to provide our future growth and to build our competitive position. However, we can give no assurance that competitors will not infringe on our patent or other rights or otherwise create similar or non-infringing competing products that are technically patentable in their own right.

Research and Development

Our research and development programs are generally pursued by engineers and scientists employed by us or hired as consultants or through partnerships with industry leaders in manufacturing and design and researchers and academia. We are also working with subcontractors in developing specific components of our technologies. The primary objective of our research and development program is to advance the development of our existing and proposed products, to enhance the commercial value of such products.

Government Regulation

General

The right to bear arms is stated as the Second Amendment to the US Constitution and the trend of current laws and regulations is to reduce the burden on citizens desiring to bear arms. In spite of years of journalistic and public attention and debate, the United States has instituted few substantive changes in firearms policy over the past century. Opponents to increased gun control diluted a brief push by the Roosevelt administration in the 1930s and resulted in two minimalist federal statutes. A second effort to limit citizen’s access to firearms in the wake of the assassinations of John and Robert Kennedy and Martin Luther King produced the Gun Control Act of 1968, which largely remains the primary federal law. This modest control effort was subsequently diluted by the Firearms Owners Protection Act of 1986. The Clinton administration passed the Brady Act, requiring background checks on purchases from licensed firearms dealers, and a law directed at “assault weapons,” which sunset after ten years. For the past two decades, policy activity has shifted to the state legislatures and the courts, where concealed carry laws have granted more access to firearms and the Second Amendment has been recognized as an individual and fundamental right. Entrenched opposition to gun control in Congress and state legislatures, well-organized institutional opposition, and constitutional constraints have limited the risk of increased gun restrictions for the foreseeable future. It is important to note, though, that public sentiment is subject to change and voters could demand greater restrictions on access to firearms and influence Congress and state legislatures to enact tougher gun access legislation; but that is not the current mood or trend.

In addition to the above, the only regulations we encounter are the regulations that are common to all businesses, such as employment legislation, implied warranty laws, and environmental, health and safety standards, to the extent applicable. We could also encounter in the future industry-specific government regulations that would govern our products. It is highly unlikely but there is a remote chance that it may become the case that regulatory approvals will be required for the design and manufacture of our products and proposed products.

Foreign Regulation and Markets

The right to bear arms as stated in the Second Amendment to the US Constitution is uniquely American and American Rebel is uniquely “American,” especially considering the benefit of the concealed carry characteristics of our products. That being said, the Company has been approached by an exporter who believes because American Rebel products are uniquely “American” that they may have a receptive audience in Asia. The Company is not anticipating any revenue from foreign markets but will explore any proposals to partner with any companies specializing in foreign markets. If any substantive opportunities develop, American Rebel will address any foreign regulations that require the Company’s adherence.

Quality Management System

As the Company grows, we may also need to establish a suitable and effective quality management system, which establishes controlled processes for our product design, manufacturing, and distribution. We have a consultant with access to our current manufacturing facilities and the Company currently enjoys an excellent relationship with our manufacturing source. Manufacture of our products is not unique to a single source and the Company has access to a vast network of potential manufacturers.

Employees

The Company currently utilizes consultants and individual contractors to advance its business objectives and intends to hire full-time employees to oversee day-to-day operations of the Company and with the consultants, support management, engineering, manufacturing, and administration. The Company has no unionized employees.

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Based on funding ability, the Company currently plans to hire 5 to 10 additional full-time employees within the next 12 months, whose principal responsibilities will be the support of our sales, marketing, research and development, and operational activities.

We consider relations with our consultants and contractors to be satisfactory.

Legal Matters

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.

We are not currently a party in any legal proceeding or governmental regulatory proceeding nor are we currently aware of any pending or potential legal proceeding or governmental regulatory proceeding proposed to be initiated against us that would have a material adverse effect on us or our business.

Description of Property

American Rebel’s principal executive office is located at 718 Thompson Lane, Suite 108-199, Nashville, TN 37204, and its telephone number is (913) 940-9919. It also leases office space at 10571 Lackman Road, Lenexa, KS 66219. The Company plans to build a video production facility near Nashville to support the media creation necessary to promote its products to its potential customers. The Company believes these facilities are adequate for our needs, including providing the space and infrastructure to accommodate our development work based on our current operating plan.

Revenue and cost of goods sold

For the six months ended June 30, 2017, we reported Sales of $18,197, compared to Sales of $0 for the six months ended June 30, 2016. For the six months ended June 30, 2017, we reported Cost of Sales of $5,504, compared to Cost of Sales of $0 for the six months ended June 30, 2016.  For the six months ended June 30, 2017, we reported Gross Profit of $12,693, compared to Gross Profit of $0 for the six months ended June 30, 2016. Sales of our products began during the fourth quarter of 2016.

For the six months ended June 30, 2017, we incurred marketing and brand development expenses of $185,594, compared to marketing and brand development expenses of $171,447 for the six months ended June 30, 2016. The increase in marketing and brand development expenses relates primarily to expansion of activities in preparation of several 2017 product launches.

For the six months ended June 30, 2017, we incurred depreciation expense of $30,115, compared to depreciation expense of $28,494 for the six months ended June 30, 2016. The increase relates primarily to acquisition of marketing equipment primarily for trade shows for use in connection with our planned 2017 product launches.

Other income and expenses

For the six months ended June 30, 2017, we incurred interest expense of $21,689, compared to interest expense of $21,868 for the six months ended June 30, 2016. For the six months ended June 30, 2017, we reported a gain on sale of equipment of $20,000, compared to a gain on sale of equipment of $0 for the six months ended June 30, 2016

Other income and expenses

For the three months ended June 30, 2017, we incurred interest expense of $12,865, compared to interest expense of $11,632 for the six months ended June 30, 2016. For the six months ended June 30, 2017, we reported a gain on sale of equipment of $20,000, compared to a gain on sale of equipment of $0 for the six months ended June 30, 2016

Net Loss

Net loss for the three months ended June 30, 2017 amounted to $1,760,273, resulting in a loss per share of $0.11, compared to $345,480 for the three months ended June 30, 2016, resulting in a loss per share of $0.02. The increase in the net loss from the three months ended June 30, 2016 to the three months ended June 30, 2017 is primarily due to the investment in compensation, inventory and marketing in anticipation of our 2017 product launches.

Liquidity and Capital Resources

We are a development stage company and realized minimal revenue from our planned operations. We have a working capital deficit of $915,455 at December 31, 2016 and $249,840 at June 30, 2017, and have incurred a deficit of $4,404,499 from inception to June 30, 2017. We have funded operations primarily through the issuance of capital stock, convertible debt and other securities.

During the six months ended June 30, 2017, we raised net cash of $0 by issuance of common shares, as compared to $583,000 for the six months ended June 30, 2016. During the six months ended June 30, 2017, we raised net cash of $905,000 through the issuance of convertible promissory notes, as compared to $0 for the six months ended June 30, 2016. During the six months ended June 30, 2017, we repaid $49,631 on loans received from our CEO, as compared to $84,160 that we received in loans from our CEO during the six months ended June 30, 2016.

As we proceed with the launch of our American Rebel concealed carry product line we have devoted and expect to continue to devote significant resources in the areas of capital expenditures and marketing, sales, and operational expenditures.

We expect to require additional funds to further develop our business plan, including the anticipated launch of additional products in addition to the launch of our concealed carry product line. Since it is impossible to predict with certainty the timing and amount of funds required to establish profitability, we anticipate that we will need to raise additional funds through equity or debt offerings or otherwise in order to meet our expected future liquidity requirements. Any such financing that we undertake will likely be dilutive to existing stockholders.

In addition, we expect to also need additional funds to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines.

Critical Accounting Policies

Emerging Growth Company - We qualify as an “emerging growth company” under the recently enacted Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, among other things, we will not be required to:

• Have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; 

• Submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency” 

• Obtain shareholder approval of any golden parachute payments not previously approved; and 

• Disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executives compensation to median employee compensation. 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion; (ii) the fifth anniversary of our first sale of common equity pursuant to an effective registration statement; (iii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed third fiscal quarter; or (iv) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period.