arcee-ai/sec-data-full · Datasets at Hugging Face

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Ending December 31, Amount 2023 $ 551,210 2024 66,988 2025 52,231 2026 17,427 2027 8,184 Thereafter - Total payments $ 696,040 NOTE 13 —NOTE PAYABLE – RELATED PARTY On September 30, 2020, a portion of the purchase
price for the acquisition of Kyle’s was paid by the issuance of a promissory note by 1847 Cabinet to the Kyle’s Sellers in
the principal amount of $ 1,260,000 . Payment of the principal and accrued interest on the note was subject to vesting. As of December 31,
2021, the vested principal and accrued interest balance of the related party note was $1,001,183 and $103,156, respectively. On July 26, 2022, the Company and 1847 Cabinet
entered into a conversion agreement with the Kyle’s Sellers, pursuant to which they agreed to convert $797,221 of the vesting note
into 189,815 common shares of the Company at a conversion price of $4.20 per share. As a result, the Company recognized a loss on extinguishment
of debt of $ 303,706 . Pursuant to the conversion agreement, the note was cancelled, and the Company agreed to pay $ 558,734 to the Kyle’s
Sellers no later than October 1, 2022. See also Note 20 regarding an amendment to the conversion agreement. As of December 31, 2022, the
vested principal and accrued interest balance of the related party note was $ 362,779 and $ 203,291 , respectively. NOTE
14—CONVERTIBLE PROMISSORY NOTES Secured
Convertible Promissory Notes On
October 8, 2021, the Company and each of its subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, entered into a note purchase agreement
with two institutional investors, pursuant to which the Company issued to these purchasers secured convertible promissory notes in the
aggregate principal amount of $ 24,860,000 . The notes contain an aggregate original issue discount of $ 497,200 . As a result, the total
purchase price was $ 24,362,800 . After payment of expenses of $ 617,825 , the Company received net proceeds of $ 23,744,975 , of which $ 10,687,500 was used to fund the cash portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets. In addition, as
consideration for the financing, the Company granted the financing agent warrants for the purchase of 187,500 common shares with a fair
value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803 . The agent fees were
reflected as a discount against the convertible note payable with the warrants being included in additional paid in capital and the equity
interest being including within noncontrolling interest on the consolidated balance sheet. The remaining principal balance of the convertible
notes at December 31, 2022 is $ 22,432,803 , net of debt discounts of $ 2,427,197 , and an accrued interest balance of $ 500,702 . F- 28 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 The
notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street Journal
from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase to 24% or the
maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and payable quarterly
in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through and including the
maturity date, October 8, 2026. The
Company may voluntarily prepay the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10 % of the principal
and interest paid in connection with such prepayment. In addition, immediately upon receipt by the Company or any subsidiary of any proceeds
from any issuance of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by the Company
or any subsidiary of any of the collateral or any of its respective assets (other than asset sales or dispositions in the ordinary course
of business which are permitted by the note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain,
condemnation or similar proceedings, the Company must prepay the notes in an amount equal to all such proceeds, net of reasonable and
customary transaction costs, fees and expenses properly attributable to such transaction and payable by the Company or a subsidiary in
connection therewith (in each case, paid to non-affiliates). The
holders of the notes may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any
accrued but unpaid interest on such portion, into common shares at a conversion price equal to $ 4.20 (subject to standard adjustments,
including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations. Pursuant
to the terms of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the
right, but not the obligation, to participate in any securities offering other than a permitted issuance (as defined in the note purchase
agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of first refusal
to participate in any issuance of indebtedness until the notes have been terminated; provided, however, that this right of first refusal
shall not apply to permitted issuances. The
note purchase agreement and the notes contain customary representations, warranties, affirmative and negative financial and other covenants
and events of default for loans of this type. The notes are guaranteed by each subsidiary and are secured by a first priority security
interest in all of the assets of the Company and its subsidiaries. 6%
Subordinated Convertible Promissory Notes On
October 8, 2021, a portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets was paid by the issuance
of 6 % subordinated convertible promissory notes in the aggregate principal amount of $ 5,880,345 by 1847 Cabinet to the H&I Sellers. The
notes bear interest at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of
default (as defined in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes
in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At
any time prior to October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent ( 20 %) of the original
principal amount of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined
by dividing the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined
in accordance with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In addition, on October
8, 2021, the Company entered into an exchange agreement with the holders, pursuant to which the Company granted them the right to exchange
all of the principal amount and accrued but unpaid interest under the notes or any portion thereof for a number of common shares to be
determined by dividing the amount to be converted by an exchange price equal to the higher of (i) the 30-day volume weighted average
price for the common shares on the primary national securities exchange or over-the-counter market on which the common shares are traded
over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) $ 10.00 (subject to equitable adjustments
for stock splits, stock combinations, recapitalizations and similar transactions). F- 29 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 The
notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described
above. The rights of the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible
promissory notes described above. On
July 26, 2022, the Company and 1847 Cabinet entered into a conversion agreement with the H&I Sellers, pursuant to which they agreed
to convert an aggregate of $ 3,360,000 of the convertible notes into an aggregate of 800,000 common shares of the Company at a conversion
price of $ 4.20 per share. As a result, the Company recognized a loss on extinguishment of debt of $ 1,280,000 . The remaining principal
balance of the convertible notes at December 31, 2022 is $2,234,996, net of debt discounts of $285,350, and an accrued interest balance
of $381,426. Following
is a summary of payments due on convertible notes payable for the succeeding five yea Year
Ending December 31, Amount 2023 $ - 2024 2,520,346 2025 - 2026 24,860,000 2027 - Thereafter - Total payments $ 27,380,346 NOTE 15—RELATED
PARTIES Management
Services Agreement On
April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant
to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services
performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i)
reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with
respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received
by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid
Parent Management Fees. The Company expensed $ 0 in Parent Management Fees for the years ended December 31, 2022 and 2021. Offsetting
Management Services Agreements 1847
Asien entered into an offsetting management services agreement with the Manager on May 28, 2020, 1847 Cabinet entered into an offsetting
management services agreement with the Manager on August 21, 2020 (which was amended and restated on October 8, 2021) and 1847 Wolo entered
into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements,
1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or
2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services
to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services
agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide
certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the
management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by
such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements,
exceeds, or is expected to exceed, 9.5% of the Company’s gross income in any fiscal year or the Parent Management Fee in any fiscal
quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other
management fees to be paid to the Manager under other offsetting management services agreements. F- 30 1847
HOLDINGS LLC NOTES

Ending December 31, Amount 2023 $ 551,210 2024 66,988 2025 52,231 2026 17,427 2027 8,184 Thereafter - Total payments $ 696,040 NOTE 13 —NOTE PAYABLE – RELATED PARTY On September 30, 2020, a portion of the purchase

price for the acquisition of Kyle’s was paid by the issuance of a promissory note by 1847 Cabinet to the Kyle’s Sellers in

the principal amount of $ 1,260,000 . Payment of the principal and accrued interest on the note was subject to vesting. As of December 31,

2021, the vested principal and accrued interest balance of the related party note was $1,001,183 and $103,156, respectively. On July 26, 2022, the Company and 1847 Cabinet

entered into a conversion agreement with the Kyle’s Sellers, pursuant to which they agreed to convert $797,221 of the vesting note

into 189,815 common shares of the Company at a conversion price of $4.20 per share. As a result, the Company recognized a loss on extinguishment

of debt of $ 303,706 . Pursuant to the conversion agreement, the note was cancelled, and the Company agreed to pay $ 558,734 to the Kyle’s

Sellers no later than October 1, 2022. See also Note 20 regarding an amendment to the conversion agreement. As of December 31, 2022, the

vested principal and accrued interest balance of the related party note was $ 362,779 and $ 203,291 , respectively. NOTE

14—CONVERTIBLE PROMISSORY NOTES Secured

Convertible Promissory Notes On

October 8, 2021, the Company and each of its subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, entered into a note purchase agreement

with two institutional investors, pursuant to which the Company issued to these purchasers secured convertible promissory notes in the

aggregate principal amount of $ 24,860,000 . The notes contain an aggregate original issue discount of $ 497,200 . As a result, the total

purchase price was $ 24,362,800 . After payment of expenses of $ 617,825 , the Company received net proceeds of $ 23,744,975 , of which $ 10,687,500 was used to fund the cash portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets. In addition, as

consideration for the financing, the Company granted the financing agent warrants for the purchase of 187,500 common shares with a fair

value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803 . The agent fees were

reflected as a discount against the convertible note payable with the warrants being included in additional paid in capital and the equity

interest being including within noncontrolling interest on the consolidated balance sheet. The remaining principal balance of the convertible

notes at December 31, 2022 is $ 22,432,803 , net of debt discounts of $ 2,427,197 , and an accrued interest balance of $ 500,702 . F- 28 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 The

notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street Journal

from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase to 24% or the

maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and payable quarterly

in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through and including the

maturity date, October 8, 2026. The

Company may voluntarily prepay the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10 % of the principal

and interest paid in connection with such prepayment. In addition, immediately upon receipt by the Company or any subsidiary of any proceeds

from any issuance of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by the Company

or any subsidiary of any of the collateral or any of its respective assets (other than asset sales or dispositions in the ordinary course

of business which are permitted by the note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain,

condemnation or similar proceedings, the Company must prepay the notes in an amount equal to all such proceeds, net of reasonable and

customary transaction costs, fees and expenses properly attributable to such transaction and payable by the Company or a subsidiary in

connection therewith (in each case, paid to non-affiliates). The

holders of the notes may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any

accrued but unpaid interest on such portion, into common shares at a conversion price equal to $ 4.20 (subject to standard adjustments,

including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations. Pursuant

to the terms of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the

right, but not the obligation, to participate in any securities offering other than a permitted issuance (as defined in the note purchase

agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of first refusal

to participate in any issuance of indebtedness until the notes have been terminated; provided, however, that this right of first refusal

shall not apply to permitted issuances. The

note purchase agreement and the notes contain customary representations, warranties, affirmative and negative financial and other covenants

and events of default for loans of this type. The notes are guaranteed by each subsidiary and are secured by a first priority security

interest in all of the assets of the Company and its subsidiaries. 6%

Subordinated Convertible Promissory Notes On

October 8, 2021, a portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets was paid by the issuance

of 6 % subordinated convertible promissory notes in the aggregate principal amount of $ 5,880,345 by 1847 Cabinet to the H&I Sellers. The

notes bear interest at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of

default (as defined in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes

in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At

any time prior to October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent ( 20 %) of the original

principal amount of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined

by dividing the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined

in accordance with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In addition, on October

8, 2021, the Company entered into an exchange agreement with the holders, pursuant to which the Company granted them the right to exchange

all of the principal amount and accrued but unpaid interest under the notes or any portion thereof for a number of common shares to be

determined by dividing the amount to be converted by an exchange price equal to the higher of (i) the 30-day volume weighted average

price for the common shares on the primary national securities exchange or over-the-counter market on which the common shares are traded

over the thirty (30) trading days immediately prior to the applicable exchange date or (ii) $ 10.00 (subject to equitable adjustments

for stock splits, stock combinations, recapitalizations and similar transactions). F- 29 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 The

notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described

above. The rights of the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible

promissory notes described above. On

July 26, 2022, the Company and 1847 Cabinet entered into a conversion agreement with the H&I Sellers, pursuant to which they agreed

to convert an aggregate of $ 3,360,000 of the convertible notes into an aggregate of 800,000 common shares of the Company at a conversion

price of $ 4.20 per share. As a result, the Company recognized a loss on extinguishment of debt of $ 1,280,000 . The remaining principal

balance of the convertible notes at December 31, 2022 is $2,234,996, net of debt discounts of $285,350, and an accrued interest balance

of $381,426. Following

is a summary of payments due on convertible notes payable for the succeeding five yea Year

Ending December 31, Amount 2023 $ - 2024 2,520,346 2025 - 2026 24,860,000 2027 - Thereafter - Total payments $ 27,380,346 NOTE 15—RELATED

PARTIES Management

Services Agreement On

April 15, 2013, the Company and 1847 Partners LLC (the “Manager”) entered into a management services agreement, pursuant

to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services

performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i)

reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with

respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received

by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid

Parent Management Fees. The Company expensed $ 0 in Parent Management Fees for the years ended December 31, 2022 and 2021. Offsetting

Management Services Agreements 1847

Asien entered into an offsetting management services agreement with the Manager on May 28, 2020, 1847 Cabinet entered into an offsetting

management services agreement with the Manager on August 21, 2020 (which was amended and restated on October 8, 2021) and 1847 Wolo entered

into an offsetting management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements,

1847 Asien appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $75,000 or

2% of adjusted net assets (as defined in the management services agreement), 1847 Cabinet appointed the Manager to provide certain services

to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services

agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide

certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the

management services agreement); provided, however, in each case that if the aggregate amount of management fees paid or to be paid by

such entities, together with all other management fees paid or to be paid to the Manager under other offsetting management services agreements,

exceeds, or is expected to exceed, 9.5% of the Company’s gross income in any fiscal year or the Parent Management Fee in any fiscal

quarter, then the management fee to be paid by such entities shall be reduced, on a pro rata basis determined by reference to the other

management fees to be paid to the Manager under other offsetting management services agreements. F- 30 1847

HOLDINGS LLC NOTES