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

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TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 1847
Asien expensed management fees of $ 300,000 for the years ended December 31, 2022 and 2021. 1847
Cabinet expensed management fees of $ 500,000 and $ 350,000 for the years ended December 31, 2022 and 2021, respectively. 1847
Wolo expensed management fees of $ 300,000 and $ 225,000 for the years ended December 31, 2022 and 2021, respectively. On
a consolidated basis, the Company expensed total management fees of $ 1,100,000 and $ 875,000 for the years ended December 31, 2022 and
2021, respectively. Advances From
time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of December
31, 2022 and 2021, a total of $ 118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest,
and do not have formal repayment terms or arrangements. As
of December 31, 2022 and 2021, the Manager has funded the Company $ 74,928 in related party advances. These advances are unsecured, bear
no interest, and do not have formal repayment terms or arrangements. Building
Lease On
September 1, 2020, Kyle’s entered into an industrial lease agreement with the Kyle’s Sellers, who are officers of Kyle’s
and principal shareholders of the Company. The lease is for a term of five years, with an option for a renewal term of five years and
provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for
months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. As of December
31, 2022 and 2021, the total rent expense under this related party leases was $87,106. NOTE 16—CONVERTIBLE
PREFERRED SHARES Series
A Senior Convertible Preferred Shares On
September 30, 2020, the Company executed a share designation, which was amended on November 20, 2020, March 26, 2021 and September 29,
2021, to designate 4,450,460 of its shares as series A senior convertible preferred shares. Following is a description of the rights
of the series A senior convertible preferred shares. Ranking. The series A senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon
liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to
or on parity with the series A senior convertible preferred shares; (ii) on parity with the series B senior convertible preferred shares
and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares;
and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and
each other class or series that is expressly made senior to the series A senior convertible preferred shares. Dividend
Rights. Holders of series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0 % of the stated
value ($ 2.00 per share, subject to adjustment). Dividends shall accrue from day to day, whether or not declared, and shall be cumulative.
Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common shares at the Company’s discretion.
Dividends payable in common shares shall be calculated based on a price equal to eighty percent ( 80 %) of the volume weighted average
price for the common shares on the Company’s principal trading market (the “VWAP”) during the five (5) trading days
immediately prior to the applicable dividend payment date; provided, however, that if the common shares are not registered, and Rule
144 rulemaking referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon
the fixed price of $ 1.57 ; provided further, that the Company may only elect to pay dividends in common shares based upon such fixed price
if the VWAP for the five (5) trading days immediately prior to the applicable dividend payment date is $ 1.57 or higher. F- 31 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 Liquidation
Rights. Subject to the rights of creditors and the holders of any senior securities or parity securities (in each case, as defined
in the share designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets
of the Company (whether capital or surplus) shall be made to or set apart for the holders of securities that are junior to the series
A senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, including the common shares
and allocation shares, each holder of outstanding series A senior convertible preferred shares shall be entitled to receive an amount
of cash equal to 115 % of the stated value plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether
or not declared) to, but not including the date of final distribution to such holders. If, upon any liquidation, the assets, or proceeds
thereof, distributable among the holders of the series A senior convertible preferred shares shall be insufficient to pay in full the
preferential amount payable to the holders of the series A senior convertible preferred shares and liquidating payments on any other
shares of any class or series of parity securities as to the distribution of assets on any liquidation, then such assets, or the proceeds
thereof, shall be distributed among the holders of series A senior convertible preferred shares and any such other parity securities
ratably in accordance with the respective amounts that would be payable on such series A senior convertible preferred shares and any
such other parity securities if all amounts payable thereon were paid in full. Voting
Rights. The series A senior convertible preferred shares do not have any voting rights; provided that, so long as any series A senior
convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series A senior convertible preferred
shares, which majority must include Leonite Capital LLC so long as it holds any series A senior convertible preferred shares (the “Requisite
Holders”), voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal
of any of the provisions of the share designation. In addition, so long as any series A senior convertible preferred shares are outstanding,
the affirmative vote of the Requisite Holders shall be required prior to the creation or issuance by the Company or by its subsidiaries
Kyle’s and Wolo of (i) any parity securities; (ii) any senior securities; and (iii) any new indebtedness other than (A) intercompany
indebtedness by Kyle’s or Wolo in favor of the Company, (B) indebtedness incurred in favor of the sellers of Kyle’s or Wolo
in connection with the acquisition of Kyle’s or Wolo, or (C) indebtedness (or the refinancing of such indebtedness) the proceeds
of which are used to complete the acquisition of Kyle’s or Wolo related expenses or working capital to operate the business of
Kyle’s or Wolo. Notwithstanding the foregoing, this shall not apply to any financing transaction the use of proceeds of which will
be used to redeem the series A senior convertible preferred shares and the warrants issued in connection therewith. Conversion
Rights. Each series A senior convertible preferred share, plus all accrued and unpaid dividends thereon, shall be convertible, at
the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable common shares determined
by dividing the stated value ($ 2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of
$ 7.00 per share (subject to adjustment); provided that in no event shall the holder of any series A senior convertible preferred shares
be entitled to convert any number of series A senior convertible preferred shares that upon conversion the sum of (i) the number of common
shares beneficially owned by the holder and its affiliates and (ii) the number of common shares issuable upon the conversion of the series
A senior convertible preferred shares with respect to which the determination of this proviso is being made, would result in beneficial
ownership by the holder and its affiliates of more than 4.99 % of the then outstanding common shares. This limitation may be waived (up
to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company. Redemption
Rights. The Company may redeem in whole, or upon the written consent of the Requisite Holders and in the manner provided for in such
written consent, in part, the series A senior convertible preferred shares by paying in cash therefore a sum equal to 115 % of the stated
value plus the amount of accrued and unpaid plus any other amounts due pursuant to the terms of the series A senior convertible preferred
shares. F- 32 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 Adjustments. The share designation contains standard adjustments to the conversion price in the event of any share splits, share combinations,
share reclassifications, dividends paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations
or similar transactions. In addition, the share designation provides that if, but only if, the Requisite Holders provide the Company
with at least ten (10) business day’s prior written notice, then, from and after the date of such notice, the stated dividend rate,
the stated value and the conversion price shall automatically adjust as follows: ● On the first day of the 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date. ● On
the first day of the 24th month following the issuance date of any series A senior convertible
preferred shares, the stated dividend rate shall automatically increase by an additional
five percent (5.0%) per annum, the stated value shall automatically increase by ten percent
(10%) and the conversion price shall automatically adjust to the lower of the (i) initial
conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days
immediately preceding such date. ● On
the first day of the 36th month following the issuance date of any series A senior convertible
preferred shares, the stated dividend rate shall automatically increase by an additional
five percent (5.0%) per annum, the stated value shall automatically increase by ten percent
(10%) and the conversion price shall automatically adjust to the lower of the (i) initial
conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days
immediately preceding the third adjustment date. Notwithstanding
the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.03. In addition,
if any legislation or rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933,
as amended, for convertible securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 1847

Asien expensed management fees of $ 300,000 for the years ended December 31, 2022 and 2021. 1847

Cabinet expensed management fees of $ 500,000 and $ 350,000 for the years ended December 31, 2022 and 2021, respectively. 1847

Wolo expensed management fees of $ 300,000 and $ 225,000 for the years ended December 31, 2022 and 2021, respectively. On

a consolidated basis, the Company expensed total management fees of $ 1,100,000 and $ 875,000 for the years ended December 31, 2022 and

2021, respectively. Advances From

time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of December

31, 2022 and 2021, a total of $ 118,834 in advances from related parties are outstanding. These advances are unsecured, bear no interest,

and do not have formal repayment terms or arrangements. As

of December 31, 2022 and 2021, the Manager has funded the Company $ 74,928 in related party advances. These advances are unsecured, bear

no interest, and do not have formal repayment terms or arrangements. Building

Lease On

September 1, 2020, Kyle’s entered into an industrial lease agreement with the Kyle’s Sellers, who are officers of Kyle’s

and principal shareholders of the Company. The lease is for a term of five years, with an option for a renewal term of five years and

provides for a base rent of $7,000 per month for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for

months 37-60. In addition, Kyle’s is responsible for all taxes, insurance and certain operating costs during the lease term. As of December

31, 2022 and 2021, the total rent expense under this related party leases was $87,106. NOTE 16—CONVERTIBLE

PREFERRED SHARES Series

A Senior Convertible Preferred Shares On

September 30, 2020, the Company executed a share designation, which was amended on November 20, 2020, March 26, 2021 and September 29,

2021, to designate 4,450,460 of its shares as series A senior convertible preferred shares. Following is a description of the rights

of the series A senior convertible preferred shares. Ranking. The series A senior convertible preferred shares rank, with respect to the payment of dividends and the distribution of assets upon

liquidation, (i) senior to all common shares, allocation shares, and each other class or series that is not expressly made senior to

or on parity with the series A senior convertible preferred shares; (ii) on parity with the series B senior convertible preferred shares

and each other class or series that is not expressly subordinated or made senior to the series A senior convertible preferred shares;

and (iii) junior to all indebtedness and other liabilities with respect to assets available to satisfy claims against the Company and

each other class or series that is expressly made senior to the series A senior convertible preferred shares. Dividend

Rights. Holders of series A senior convertible preferred shares are entitled to dividends at a rate per annum of 14.0 % of the stated

value ($ 2.00 per share, subject to adjustment). Dividends shall accrue from day to day, whether or not declared, and shall be cumulative.

Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common shares at the Company’s discretion.

Dividends payable in common shares shall be calculated based on a price equal to eighty percent ( 80 %) of the volume weighted average

price for the common shares on the Company’s principal trading market (the “VWAP”) during the five (5) trading days

immediately prior to the applicable dividend payment date; provided, however, that if the common shares are not registered, and Rule

144 rulemaking referred to below is effective on the payment date, the dividends payable in common shares shall be calculated based upon

the fixed price of $ 1.57 ; provided further, that the Company may only elect to pay dividends in common shares based upon such fixed price

if the VWAP for the five (5) trading days immediately prior to the applicable dividend payment date is $ 1.57 or higher. F- 31 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 Liquidation

Rights. Subject to the rights of creditors and the holders of any senior securities or parity securities (in each case, as defined

in the share designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets

of the Company (whether capital or surplus) shall be made to or set apart for the holders of securities that are junior to the series

A senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, including the common shares

and allocation shares, each holder of outstanding series A senior convertible preferred shares shall be entitled to receive an amount

of cash equal to 115 % of the stated value plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether

or not declared) to, but not including the date of final distribution to such holders. If, upon any liquidation, the assets, or proceeds

thereof, distributable among the holders of the series A senior convertible preferred shares shall be insufficient to pay in full the

preferential amount payable to the holders of the series A senior convertible preferred shares and liquidating payments on any other

shares of any class or series of parity securities as to the distribution of assets on any liquidation, then such assets, or the proceeds

thereof, shall be distributed among the holders of series A senior convertible preferred shares and any such other parity securities

ratably in accordance with the respective amounts that would be payable on such series A senior convertible preferred shares and any

such other parity securities if all amounts payable thereon were paid in full. Voting

Rights. The series A senior convertible preferred shares do not have any voting rights; provided that, so long as any series A senior

convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series A senior convertible preferred

shares, which majority must include Leonite Capital LLC so long as it holds any series A senior convertible preferred shares (the “Requisite

Holders”), voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal

of any of the provisions of the share designation. In addition, so long as any series A senior convertible preferred shares are outstanding,

the affirmative vote of the Requisite Holders shall be required prior to the creation or issuance by the Company or by its subsidiaries

Kyle’s and Wolo of (i) any parity securities; (ii) any senior securities; and (iii) any new indebtedness other than (A) intercompany

indebtedness by Kyle’s or Wolo in favor of the Company, (B) indebtedness incurred in favor of the sellers of Kyle’s or Wolo

in connection with the acquisition of Kyle’s or Wolo, or (C) indebtedness (or the refinancing of such indebtedness) the proceeds

of which are used to complete the acquisition of Kyle’s or Wolo related expenses or working capital to operate the business of

Kyle’s or Wolo. Notwithstanding the foregoing, this shall not apply to any financing transaction the use of proceeds of which will

be used to redeem the series A senior convertible preferred shares and the warrants issued in connection therewith. Conversion

Rights. Each series A senior convertible preferred share, plus all accrued and unpaid dividends thereon, shall be convertible, at

the option of the holder thereof, at any time and from time to time, into such number of fully paid and nonassessable common shares determined

by dividing the stated value ($ 2.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by a conversion price of

$ 7.00 per share (subject to adjustment); provided that in no event shall the holder of any series A senior convertible preferred shares

be entitled to convert any number of series A senior convertible preferred shares that upon conversion the sum of (i) the number of common

shares beneficially owned by the holder and its affiliates and (ii) the number of common shares issuable upon the conversion of the series

A senior convertible preferred shares with respect to which the determination of this proviso is being made, would result in beneficial

ownership by the holder and its affiliates of more than 4.99 % of the then outstanding common shares. This limitation may be waived (up

to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days’ prior notice to the Company. Redemption

Rights. The Company may redeem in whole, or upon the written consent of the Requisite Holders and in the manner provided for in such

written consent, in part, the series A senior convertible preferred shares by paying in cash therefore a sum equal to 115 % of the stated

value plus the amount of accrued and unpaid plus any other amounts due pursuant to the terms of the series A senior convertible preferred

shares. F- 32 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 Adjustments. The share designation contains standard adjustments to the conversion price in the event of any share splits, share combinations,

share reclassifications, dividends paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations

or similar transactions. In addition, the share designation provides that if, but only if, the Requisite Holders provide the Company

with at least ten (10) business day’s prior written notice, then, from and after the date of such notice, the stated dividend rate,

the stated value and the conversion price shall automatically adjust as follows: ● On the first day of the 12th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date. ● On

the first day of the 24th month following the issuance date of any series A senior convertible

preferred shares, the stated dividend rate shall automatically increase by an additional

five percent (5.0%) per annum, the stated value shall automatically increase by ten percent

(10%) and the conversion price shall automatically adjust to the lower of the (i) initial

conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days

immediately preceding such date. ● On

the first day of the 36th month following the issuance date of any series A senior convertible

preferred shares, the stated dividend rate shall automatically increase by an additional

five percent (5.0%) per annum, the stated value shall automatically increase by ten percent

(10%) and the conversion price shall automatically adjust to the lower of the (i) initial

conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days

immediately preceding the third adjustment date. Notwithstanding

the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.03. In addition,

if any legislation or rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933,

as amended, for convertible securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible