American Rebel Holdings, Inc. (NASDAQ:AREB) is a leading designer, manufacturer, and marketer of branded safes, personal security and self-defense products, apparel, and the popular American Rebel Beer. The company has etched its name in the annals of American entrepreneurship, overcoming significant challenges to emerge as a beacon of patriotism and innovation.
Business Overview and History
American Rebel was incorporated on December 15, 2014, under the laws of the State of Nevada as CubeScape, Inc. On January 5, 2017, the company amended its articles of incorporation and changed its name to American Rebel Holdings, Inc. A significant milestone occurred on June 19, 2017, when the company completed a business combination with its majority stockholder, American Rebel, Inc., resulting in American Rebel, Inc. becoming a wholly-owned subsidiary.
Initially, the company developed and sold branded products in the beverage, self-defense, safe storage, and other patriotic product areas. These products were marketed under the American Rebel Brand and proudly imprinted with such branding. The company utilized a wholesale distribution network, personal appearances, musical venue performances, e-commerce, and television to promote and sell its products.
The acquisition of the Champion Entities in 2022 marked a transformative moment for American Rebel. This strategic move significantly expanded the company's manufacturing capabilities, product portfolio, and distribution network. The acquisition allowed American Rebel to promote and sell its safe and storage products through a growing network of dealers, select regional retailers, local specialty safe, sporting goods, hunting, and firearms retail outlets, as well as through online channels.
However, American Rebel has faced several challenges in recent years. In 2023, the company was required to restate its previously issued consolidated financial statements for the years ended December 31, 2023, and 2022. This restatement was due to the determination to dismiss its independent registered public accounting firm, resulting in unanticipated costs and potentially affecting investor confidence and raising reputational issues for the business. Additionally, the company has struggled to maintain compliance with Nasdaq listing standards, receiving notices related to its bid price and failure to timely file periodic reports with the SEC.
In addition to its core safe and security business, the company has diversified its offerings by introducing the American Rebel Beer brand in 2023. This strategic move has allowed American Rebel to tap into the lucrative $110 billion domestic beer industry, positioning the company as a multifaceted lifestyle brand catering to patriotic consumers.
Financial Performance and Liquidity
American Rebel's financial performance has been mixed in recent years, with the company reporting annual net losses of $9.73 million in 2023 and $10.09 million in 2022. The company's revenue has grown from $7.95 million in 2022 to $16.00 million in 2023, reflecting the impact of the Champion Entities acquisition and the launch of the American Rebel Beer brand.
For the most recent fiscal year ended December 31, 2023, American Rebel reported annual revenue of $16.00 million, annual net income of -$9.73 million, annual operating cash flow of -$7.03 million, and annual free cash flow of -$7.04 million.
The most recent quarter ended September 30, 2024, showed a decline in performance, with quarterly revenue of $2.34 million, quarterly net income of -$1.75 million. Revenue decreased 30% year-over-year due to slower sales in the current market conditions. Gross margin percentage decreased from 8% in Q3 2023 to -18% in Q3 2024 due to the decrease in sales volume and increased costs. The company is working to increase sales volume and manage costs to improve its gross margins.
Despite the net losses, American Rebel's liquidity position has remained relatively stable, with a working capital balance of $2.55 million as of December 31, 2023. However, this position has deteriorated, with a working capital deficit of $4.78 million as of September 30, 2024. The company's ability to continue as a going concern is dependent on its ability to raise additional capital and achieve profitability through its growth initiatives.
As of September 30, 2024, American Rebel had $127,690 in cash and cash equivalents. The company had a $2.00 million line of credit with Bank of America, which was secured by the assets of its Champion subsidiaries. The line of credit matured on April 30, 2024, with an outstanding balance of approximately $1.90 million. American Rebel is currently negotiating with Bank of America to cure the default and establish a plan for repayment of the line of credit.
The company's debt-to-equity ratio was -0.701 as of September 30, 2024. American Rebel's current ratio was 0.61 and quick ratio was 0.17 as of the same date, indicating potential liquidity challenges.
Operational Challenges and Resilience
American Rebel has faced several operational challenges in recent years, including supply chain disruptions, geopolitical tensions, and the impact of the COVID-19 pandemic. The company has demonstrated resilience by adapting its business model and diversifying its product offerings to mitigate these headwinds.
The acquisition of the Champion Entities in 2022 has been a significant driver of the company's growth, but it has also introduced integration challenges. American Rebel has worked diligently to streamline operations, improve efficiency, and capitalize on the synergies between its core safe and security business and the newly acquired assets.
The launch of the American Rebel Beer brand in 2023 has been a bold strategic move, positioning the company as a lifestyle brand with a broader appeal to patriotic consumers. While the beer business is still in its early stages, the company has secured distribution agreements in several key markets and is working to expand its national footprint.
Product Segments
American Rebel operates through three main product segments: Safes, Soft Goods, and Beverages.
The Safes segment, which generated approximately 98% of the company's total revenue in the first nine months of 2024, includes large safes, personal safes, and vault doors. The large safes are constructed with 11-gauge U.S.-made steel and feature a double plate steel door, double-steel door casements, and reinforced door edges. These safes provide up to 75 minutes of fire protection at 1,200 degrees Fahrenheit and offer fully adjustable interiors to accommodate firearms and other valuables. The personal safes are compact and easy to operate, meeting TSA airline firearm guidelines for travel. The company's vault doors are made of 4.5-inch double steel plate thickness with sandwiched fire insulation, providing greater rigidity, security, and fire protection.
The Soft Goods segment, accounting for approximately 1.6% of total revenue in the first nine months of 2024, offers an assortment of personal security products, backpacks, jackets, and other apparel and accessories under the American Rebel brand. The backpacks and jackets feature the company's proprietary "Personal Protection Pocket" for concealed carry of firearms.
The Beverages segment, contributing approximately 0.2% of total revenue in the first nine months of 2024, includes the American Rebel Light Beer. In August 2023, the company entered into a Master Brewing Agreement with Associated Brewing Company to be the exclusive producer and seller of American Rebel branded spirits, with the initial product being the American Rebel Light Beer.
Risks and Outlook
American Rebel's growth and profitability are subject to several risks, including the potential for increased competition in the safe and security products market, ongoing supply chain disruptions, and the ability to successfully integrate and capitalize on the Champion Entities acquisition. Additionally, the company's foray into the beer industry exposes it to the challenges and regulatory complexities of the highly competitive and mature beer market.
The company faces industry headwinds, including supply chain disruptions and inflationary pressures, which have impacted its financial performance. However, American Rebel is working to diversify its product offerings, expand distribution, and improve operational efficiency to drive growth.
Despite these risks, the company's strong brand identity, innovative product portfolio, and diversified business model have positioned it for potential long-term success. The company's ability to navigate the evolving market landscape and capitalize on emerging opportunities will be crucial in determining its future trajectory.
The gun safe industry is experiencing rapid growth and innovation, which presents opportunities for American Rebel's branded safes. The company is also focused on expanding its American Rebel Beer brand through regional distribution agreements.
American Rebel's management has provided limited guidance for the upcoming fiscal year, but the company's recent expansion into new markets and the launch of the American Rebel Beer brand suggest a cautiously optimistic outlook. The company's ability to maintain its NASDAQ listing and secure additional financing will be critical in supporting its growth initiatives and achieving profitability.
Conclusion
American Rebel Holdings, Inc. has carved out a unique niche in the safe, personal security, and lifestyle product markets, leveraging its patriotic brand identity and innovative product development. The company's diversification into the beer industry and the strategic acquisition of the Champion Entities have added complexity to its operations, but they also present compelling avenues for growth.
As American Rebel navigates the challenges of the current market environment, its ability to adapt, innovate, and capitalize on emerging opportunities will be the key drivers of its long-term success. The company's focus on increasing sales volume, managing costs, and improving gross margins will be crucial in addressing its current financial challenges.
Investors should closely monitor the company's financial performance, operational execution, and strategic initiatives as it continues to forge a patriotic legacy in the years to come. The upcoming negotiations with Bank of America regarding the line of credit and the company's efforts to secure additional financing will be critical milestones in determining American Rebel's future trajectory and its ability to overcome its current liquidity constraints.