American Rebel Holdings, Inc. (NASDAQ:AREB) is a diversified company that designs, manufactures, and markets branded safes, personal security and self-defense products, apparel, and most recently, American Rebel Beer. The company has a rich history spanning over a decade, marked by both successes and challenges as it navigates the evolving landscape of its various business segments.

Company Background

Founded in 2014 as CubeScape, Inc., the company underwent a name change to American Rebel Holdings, Inc. in 2017 and completed a business combination with its majority stockholder, American Rebel, Inc. This strategic move solidified the company's focus on becoming "America's Patriotic Brand," leveraging the appeal of its founder and Chief Executive Officer, Andy Ross, who has a strong media presence and loyal following.

Business Segments

American Rebel's primary business operations can be divided into three main segments: Safes, Soft Goods, and Beverages. The Safes segment is the company's core and largest business, accounting for 98-99% of revenue. This segment includes a variety of safe products, such as large floor safes, portable keyed safes, and vault doors, designed to protect firearms, valuables, and other important items from theft, fire, and natural disasters. The company believes its safes provide safety, security, style, and peace of mind at competitive prices.

The Soft Goods segment includes American Rebel's line of apparel and accessories, such as backpacks and jackets, which feature the company's concealment pockets for firearms. This segment contributes a small portion of revenue, around 0.5-1.4% in the periods reported.

The Beverages segment is the newest addition to American Rebel's portfolio, launched in 2023 with the introduction of its American Rebel Light Beer. This segment currently makes up around 0.3-0.7% of total revenue.

American Rebel promotes and sells 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 avenues, including website and e-commerce platforms.

American Rebel Beer

In August 2023, American Rebel entered into a Master Brewing Agreement with Associated Brewing Company, appointing them as the exclusive producer and seller of American Rebel branded spirits, with the initial product being American Rebel Light Beer. The company established American Rebel Beverages, LLC as a wholly-owned subsidiary to hold its licenses with respect to the beer business. The company has distribution agreements in place for the beer in several states, including Kansas, Tennessee, Missouri, Connecticut, and Ohio, and is working to expand its footprint.

Challenges and Innovations

Throughout its history, American Rebel has faced various challenges, including the effects of the COVID-19 pandemic, which impacted its manufacturing capabilities and supply chain. Additionally, the company has had to navigate geopolitical conflicts and government actions to slow rapid inflation, which have produced varying effects on the business.

Despite these headwinds, American Rebel has continued to innovate and expand its product offerings within the safe and personal security category. The company has introduced new models, such as the Sport 20 and BTC 12 safes, aimed at meeting the evolving needs of cost-conscious consumers. Additionally, the company has diversified into the cannabis dispensary market, designing specialized safes to meet the industry's inventory control requirements.

Diversification Efforts

The launch of the American Rebel Beer brand in 2024 represents a significant diversification effort by the company. Positioning the brand as "America's Patriotic Beer," American Rebel has established distribution agreements in several states. The company has appointed industry veteran Todd Porter as the President of its American Rebel Beverages subsidiary to lead the expansion of the beer business.

Financials

American Rebel's financial performance has been mixed in recent years. For the six months ended June 30, 2024, the company reported revenue of $7.3 million, a 10% decrease compared to the same period in the prior year. Gross profit for the six-month period was $871,980, representing a 62% decline from the prior year. The company's net loss for the six months ended June 30, 2024, was $7.95 million, compared to a net loss of $817,260 in the same period of 2023.

For the most recent fiscal year (2023), American Rebel reported revenue of $16.23 million, with a net loss of $11.10 million. Operating cash flow and free cash flow were both negative at $7.04 million.

In the most recent quarter (Q2 2024), the company reported revenue of $3.26 million, down from $3.67 million in the prior year period. The net loss for the quarter was $5.25 million, with operating cash flow at -$1.79 million and free cash flow at -$1.80 million. Year-over-year revenue declined 11% due to slower sales in the current market conditions. Gross margin decreased significantly from 19% to 1% due to the decrease in sales and higher costs of goods sold.

Liquidity

These financial challenges have been exacerbated by the company's significant debt obligations and liquidity constraints. American Rebel has received several default notices from lenders, including Bank of America and Altbanq Lending LLC, due to its inability to meet certain debt covenants and make required payments. The company is actively negotiating with its lenders to find a resolution and secure additional funding to support its ongoing operations and growth initiatives.

As of the most recent reporting period, American Rebel's liquidity position is as follows: - Debt/Equity Ratio: 2.57 - Cash: $452,790 - Current Ratio: 0.93 - Quick Ratio: 0.27

The company had a $2 million line of credit with Bank of America which expired on February 28, 2024. American Rebel is currently negotiating with Bank of America regarding repayment options, as the company received a notice of default on the credit facility with a balance of $2.02 million.

Geographic Performance

American Rebel primarily sells its products in the United States. The recent launch of its American Rebel Beer brand has focused on select states, including Kansas, Tennessee, Ohio, and Connecticut, with plans for further expansion.

Future Outlook

Despite these difficulties, American Rebel remains committed to its diversification strategy and is exploring new revenue streams, including licensing opportunities for the American Rebel brand name. The company believes that the strong brand recognition and loyal customer base of the American Rebel name may present significant licensing value to third-party manufacturers and marketers looking to tap into the brand's target demographic.

American Rebel is also relaunching the SAFE GUARD brand with new safe models in an effort to expand market reach and drive revenue growth. This initiative, along with the continued expansion of the American Rebel Beer brand, represents key strategies for the company's future growth.

In summary, American Rebel Holdings, Inc. is a company navigating a challenging period as it seeks to balance the expansion of its core safe and personal security business with the launch and growth of its American Rebel Beer brand. The company's financial performance has been impacted by supply chain issues, increased competition, and debt obligations, but it remains focused on diversifying its revenue streams and exploring new opportunities to leverage the strength of the American Rebel brand. Investors will be closely watching the company's ability to overcome these obstacles and execute on its strategic initiatives in the coming quarters. The success of new product launches, improvements in operational efficiency, and the resolution of ongoing financial challenges will be critical factors in determining American Rebel's future performance and potential return to profitability.