10-Q: American Rebel Holdings Reports Q3 2024 Results, Revenue Declines Amidst Financial Restructuring

American Rebel Holdings reports a decrease in revenue for Q3 2024 and ongoing efforts to address financial challenges and compliance issues.

Summary

• American Rebel Holdings reported a net loss of $1.75 million for the three months ended September 30, 2024, compared to a net loss of $2.79 million for the same period in 2023.
• Revenue decreased by 30% to $2.34 million in Q3 2024 from $3.35 million in Q3 2023.
• The company's gross margin turned negative at -$497,977 for Q3 2024, compared to a positive gross margin of $250,134 in Q3 2023.
• Operating expenses decreased significantly to $542,695 in Q3 2024 from $3.18 million in Q3 2023, primarily due to adjustments in deferred compensation expense.
• Interest expense increased substantially to $649,216 in Q3 2024 from $95,330 in Q3 2023 due to increased borrowing costs.
• For the nine months ended September 30, 2024, the net loss was $9.70 million, compared to $3.61 million for the same period in 2023.
• Revenue for the nine months decreased by 16% to $9.64 million in 2024 from $11.42 million in 2023.
• The company's gross margin for the nine months was $374,001 in 2024, compared to $2.55 million in 2023.
• The company is working to address a notice of default from Bank of America regarding its line of credit and is negotiating a forbearance or repayment plan.
• The company is also addressing compliance issues with Nasdaq, including the timely filing of periodic reports.

Sentiment

Score: 3

Explanation: The document presents a challenging financial situation with declining revenue, negative gross margins, and increasing debt. While the company is taking steps to address these issues, the overall sentiment is negative due to the significant financial difficulties and compliance concerns.

Positives

• Operating expenses decreased significantly in Q3 2024 due to adjustments in deferred compensation expense.
• The company is actively working to address compliance issues with Nasdaq and has submitted a plan to regain compliance.
• The company is working to renegotiate the terms and covenants of its line of credit.
• The company is working to settle outstanding claims with Silverback Capital Corporation by issuing shares of common stock.

Negatives

• Revenue decreased significantly in Q3 2024 and for the nine months ended September 30, 2024.
• The company reported a negative gross margin for Q3 2024.
• Interest expense increased substantially due to higher borrowing costs.
• The company received a notice of default from Bank of America regarding its line of credit.
• The company received a notice from Nasdaq regarding the late filing of its Q3 2024 report.
• The company has a working capital deficit of $(4,776,970) as of September 30, 2024.
• The company has an accumulated deficit of $57,184,075 as of September 30, 2024.

Risks

• The company's ability to continue as a going concern is dependent on its ability to raise capital and achieve profitability.
• The company is facing potential litigation related to trademark infringement.
• The company is subject to risks related to its debt obligations and compliance with financing agreements.
• The company is subject to risks related to maintaining compliance with Nasdaq listing rules.
• The company is subject to risks related to its internal control over financial reporting.
• The company is subject to risks related to new tariffs or border adjustment taxes or other import restrictions.

Future Outlook

The company expects to incur additional losses during the fiscal year ending December 31, 2024, and beyond, as a result of increased investment in inventory, manufacturing capacity, marketing and sales expenses, and other growth initiatives.

Management Comments

• American Rebel is boldly positioning itself as Americas Patriotic Brand in a time when national spirit and American values are being rekindled and redefined.
• American Rebel is an advocate for the 2nd Amendment and conveys a sense of responsibility to teach and preach good common practices of gun ownership.
• The concealed carry lifestyle refers to a set of products and a set of ideas around the emotional decision to carry a gun everywhere you go.
• Management believes a significant opportunity exists to enter the $110+ billion-dollar beer industry with a premium domestic beer.

Industry Context

The report notes that second amendment businesses have experienced a slowdown in sales volume during the past twelve months, which aligns with the company's experience.

Comparison to Industry Standards

• The company aims for gross margin percentages to be consistently in the 20% range, but the current results are significantly below this target.
• The company's brand strategy is similar to the successful Harley-Davidson Motorcycle philosophy, referenced in this quote from Richard F. Teerlink, Harleys chairman and former chief executive, Its not hardware; it is a lifestyle, an emotional attachment. Thats what we have to keep marketing to.

Legal Proceedings

• The company received notice of a complaint filed in the U.S. District Court for the District of Utah by Liberty Safe and Security Products, Inc., alleging trademark infringement.

Related Party Transactions

• Three of the company's officers lent the company approximately $260,793, net of repayments during the nine months ended September 30, 2024.
• On June 28, 2024, the Company entered into a short-term loan with a director, Lawrence Sinks, evidenced by a promissory note in the principal amount of $400,000.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of equity to raise capital and settle debts.
• Employees may be affected by cost-cutting measures and potential changes in business objectives.
• Customers may be affected by changes in product offerings and pricing.
• Suppliers and creditors may be affected by the company's financial difficulties and potential changes in payment terms.

Next Steps

• The company is negotiating with Bank of America to address a notice of default on its line of credit.
• The company is working to regain compliance with Nasdaq listing rules after receiving a notice regarding the late filing of its Q3 2024 report.
• The company is working to settle outstanding claims with Silverback Capital Corporation by issuing shares of common stock.
• The company expects to continue to implement its remediation plans throughout the fiscal year ending December 31, 2025, to address material weaknesses in internal control over financial reporting.

Key Dates