NOTE 8 – RELATED PARTY NOTES PAYABLE AND RELATED PARTY TRANSACTIONS

Employment Agreements

Charles A. Ross, Jr. serves as the Company’s Chief Executive Officer. Compensation for Mr. Ross was $87,832 and $86,154 plus stock awards, respectively for the three months ended June 30, 2025 and 2024 and $175,665 and $162,500 plus stock awards, respectively for the six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, approximately $232,000 and $338,000 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets, respectively.

Doug E. Grau served as the Company’s President and Interim Principal Accounting Officer through June 30, 2025 (see Note 16). Compensation for Mr. Grau was $50,670 and $70,000 plus stock awards, respectively for the three months ended June 30, 2025 and 2024 and $101,340 and $132,500 plus stock awards, respectively for the six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, approximately $164,000 and $203,000 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets, respectively.

Corey Lambrecht serves as the Company’s Chief Operating Officer. Compensation for Mr. Lambrecht was $71,364 and $70,000 plus stock awards, respectively for the three months ended June 30, 2025 and 2024 and $142,728 and $130,000 plus stock awards, respectively for the six months ended June 30, 2025 and 2024. As of June 30, 2025 and December 31, 2024, approximately $309,000 and $316,000 in accrued and unpaid compensation was outstanding and included in accrued expenses and other in the accompanying consolidated balance sheets, respectively.

There were no new stock awards granted and issued to Messrs. Ross, Grau and Lambrecht during 2025 and 2024. Additionally, the aforementioned officers advanced the Company approximately $8,000 and $214,000 for the three and six months ended June 30, 2025 and 2024, respectively, of which approximately $455,000 and $447,000 was outstanding as of June 30, 2025 and December 31, 2024, respectively. The advances are unsecured non-interest-bearing demand notes. These officers provided these loans as short-term funding.

Series A Convertible Preferred Stock

The Company, in connection with its employment agreements, as amended, reserved for the issuance of 277,778 shares (on a post-split basis) of its common stock that are convertible under the Series A preferred stock conversion terms. The Series A preferred stock is convertible into 2 shares (on a post-split basis) of common stock for every one share of Series A preferred stock.

Per Mr. Lambrecht’s employment agreement entered into on November 20, 2023, the share-award grant is to vest 1/4th upon the signing of Mr. Lambrecht’s employment, another 1/4th on January 1, 2024, another 1/4th on January 1, 2025 and the remaining 1/4th on January 1, 2026. Mr. Lambrecht’s employment agreement has a term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. For the three months ended June 30, 2025 and 2024, the Company recognized $39,063 and $225,667 in compensation expense attributable to the share award grant and respective earn-out. For the six months ended June 30, 2025 and 2024, the Company recognized $78,126 and $451,334 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 another 6,250 shares of Series A preferred stock vested for Mr. Lambrecht, providing for a total of 41,667 shares of common stock that Mr. Lambrecht may convert his Series A preferred shares into.

Mr. Ross’s amended employment agreement had an effective date of November 20, 2023. The share-award grant will vest 1/5th on January 1, 2024, another 1/5th on January 1, 2025, 1/5th on January 1, 2026, 1/5th on January 1, 2027 and the remaining 1/5th on January 1, 2028. Mr. Ross’s amended employment agreement has an effective term running from November 20, 2023 through December 31, 2026, a term of 37 and ½ months. For the three months ended June 30, 2025 and 2024, the Company recognized $62,500 and $454,167 in compensation expense attributable to the share award grant and respective earn-out. For the six months ended June 30, 2025 and 2024, the Company recognized $125,000 and $908,334 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional 10,000 shares of Series A preferred stock vested for Mr. Ross, providing for a total of 44,444 shares of common stock that Mr. Ross may convert his Series A preferred shares into at any time.

Mr. Grau’s amended employment agreement had an effective date of November 20, 2023, with a termination date of July 1, 2025 (see Note 16). The share-award grant will vest 1/5th on January 1, 2024, another 1/5th on January 1, 2025, 1/5th on January 1, 2026, 1/5th on January 1, 2027 and the remaining 1/5th on January 1, 2028. Mr. Grau’s amended employment agreement has an effective term running from November 20, 2023 through June 30, 2025 (see Note 16) For the three months ended June 30, 2025 and 2024, the Company recognized $62,500 and $454,167 in compensation expense attributable to the share award grant and respective earn-out. For the six months ended June 30, 2025 and 2024, the Company recognized $125,000 and $908,334 in compensation expense attributable to the share award grant and respective earn-out. On January 1, 2025 an additional 10,000 shares of Series A preferred stock vested for Mr. Grau, providing for a total of 44,444 shares of common stock that Mr. Grau may convert his Series A preferred shares into at any time. The Company is currently in the process of finalizing compensation arrangements for Mr. Grau.

For the three and six months ended June 30, 2025, no shares of Series A preferred stock were converted to common stock.

Stock-Based Compensation

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

Stock-based compensation is presented in accordance with the guidance of ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”). Under the provisions of ASC 718, the Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statements of operations. Where the stock-based compensation is not an award, option, warrant or other common stock equivalent, the Company values the shares based on fair value with respect to its grant date and the price that investors may have been paying for the Company’s common stock on that date in its various exempt private placement offerings. Stock-based compensation expense totaled $164,063 and $1,344,125 for the three months ended June 30, 2025 and 2024, respectively, and primarily relates to the aforementioned Series A preferred stock awards. Stock-based compensation expense totaled $328,125 and $2,478,125 for the six months ended June 30, 2025 and 2024, respectively, and primarily relates to the aforementioned Series A preferred stock awards.

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

Director’s Note

On June 28, 2024, the Company entered into a short-term loan with a director, Lawrence Sinks (“Mr. Sinks”), evidenced by a promissory note in the principal amount of $400,000 (the “Director’s Note”). Proceeds from the Director’s Note are to be utilized solely by the Company’s wholly-owned subsidiary, American Rebel Beverages, LLC. The Director’s Note was due on September 30, 2024, with a repayment amount of $520,000. As of June 30, 2025, the note had not been repaid and remained outstanding, of which $400,000 is presented in the accompanying consolidated balance sheet within Loan – Director – related party, and the remaining $120,000 within accrued interest in the accompanying consolidated balance sheet.