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

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preferred share, 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 of the first series B senior convertible
preferred share, 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. F- 35 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 Notwithstanding
the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.03 per share
(subject to adjustment for splits or dividends of the common shares). 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 securities like the series B senior convertible
preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that are based upon the lowest
VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed unless the common shares
issuable upon conversion are then registered under an effective registration statement. From
February 24, 2022 to March 24, 2022, the Company sold an aggregate of 426,999 units, at a price of $ 3.00 per unit, for aggregate gross
proceeds of $ 1,281,000 . From April 20, 2022 to May 19, 2022, the Company sold an aggregate of 54,567 units to the Company’s Chief
Executive Officer, Ellery W. Roberts, for aggregate gross proceeds of $ 163,700 . The Company had total issuance costs relating to these
offerings of approximately $15,000, resulting in net proceeds of $1,429,700. Each
unit consists of one (1) series B senior convertible preferred share and a three-year warrant to purchase one (1) common share at an
exercise price of $ 12.00 per common share (subject to adjustments), which such exercise price was adjusted to $ 4.20 following the adjustments
(see Note 17), and may be exercised on a cashless basis under certain circumstances. The embedded conversion options of the series B
senior convertible preferred shares and warrants were clearly and closely related to the equity host and did not require bifurcation. The $1,429,700 of net proceeds were allocated on a relative fair value basis of $1,257,650 to the series B preferred shares and $172,050
to the warrants. The series B preferred shares fair value was derived using an Option Pricing Method and the warrants fair value was
derived using a Monte Carlo Simulation Model. On
August 26, 2022, the Company redeemed 16,667 series B senior convertible preferred shares for a total redemption price of $ 57,501 . During
the year ended December 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares in the
amount of $ 162,268 and paid prior period accrued dividends of $ 129,103 . As
of December 31, 2022 and 2021, the Company had 464,899 and 0 series B senior convertible preferred shares issued and outstanding, respectively. Mezzanine
(Temporary) Equity Classification The
Company applied the guidance in ASC Topic 480, Distinguishing Liabilities from Equity and ASC Topic 815, Derivatives and Hedgin g,
in order to determine the appropriate classification for both the series A senior convertible preferred shares and the series B senior
convertible preferred shares (see above for series A and B senior convertible preferred shares rights). ASC
480 requires equity instruments to be evaluated on an ongoing basis for mezzanine equity (temporary equity) vs permanent equity classification.
As a result of the maximum number of common shares that may be issuable (upon conversion of the preferred securities) exceeding the number
of authorized but unissued common shares available, temporary equity classification is required. As of December 31, 2021, there were 1,818,182 series A senior convertible preferred shares presented in mezzanine equity. As
a result of the 1-for-4 reverse split of the outstanding common shares on August 2, 2022 (as described in Note 1), the maximum number
of common shares that may be issuable (upon conversion of the preferred securities) no longer exceeded the number of unissued common
shares available, resulting in the reclassification of 1,684,849 series A senior convertible preferred shares and 481,566 series B senior
convertible preferred shares from mezzanine equity to permanent equity. F- 36 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 NOTE 17—SHAREHOLDERS’
EQUITY (DEFICIT) Allocation
Shares As
of December 31, 2022 and 2021, the Company had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle
the holder thereof to vote on any matter relating to the Company other than in connection with amendments to the Company’s operating
agreement and in connection with certain other corporate transactions as specified in the operating agreement. The
Manager owns 100 % of the allocation shares of the Company which represent the original equity interest in the Company. As a holder of
the allocation shares, the Manager is entitled to receive a 20 % profit allocation as a form of preferred distribution, pursuant to a
profit allocation formula upon the occurrence of certain events. Generally, the distribution of the profit allocation is paid upon the
occurrence of the sale of a material amount of capital stock or assets of one of the Company’s businesses, including if the Company
distributes its equity ownership in a subsidiary to the Company’s shareholders in a spin-off or similar transaction (a “Sale
Event”), or, at the option of the Manager, at the five-year anniversary date of the acquisition of one of the Company’s businesses
(a “Holding Event”). The Company records distributions of the profit allocation to the holders upon occurrence of a Sale
Event or Holding Event as dividends declared on allocation interests to stockholders’ equity when they are approved by the Company’s
board of directors. The 1,000 allocation shares are issued and outstanding and held by the Manager, which is controlled by Mr. Roberts, the Company’s chief
executive officer and a principal shareholder. Common
Shares The
Company’s board of directors approved a 1-for-4 reverse stock split of its issued and outstanding common shares, which became effective
August 2, 2022 (as described in Note 1). As
of December 31, 2022 and 2021, the Company was authorized to issue 500,000,000 common shares. As of December 31, 2022 and 2021, the Company
had 4,079,137 and 1,210,918 common shares issued and outstanding, respectively. On
March 26, 2021, the Company issued an aggregate of 99,710 common shares to the holders of the series A senior convertible preferred shares
issued during 2020. The purchase price for the units issued to such holders was $ 1.90 per unit. As noted above, on March 26, 2021, the
Company issued additional units at a purchase price of $ 1.65 per unit. In exchange for the consent of the holders of the Company’s
outstanding series A senior convertible preferred shares to the issuance of these additional units at a lower purchase price than such
holders paid for their shares, the Company issued 99,710 common shares to such holders. On
February 16, 2022, the Company issued 38,096 common shares upon the conversion of 133,333 series A senior convertible preferred shares. From
July 12, 2022 to September 15, 2022, the Company issued 126,669 common shares upon cashless exercises of warrants. On
August 2, 2022, the Company entered into an underwriting agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc.,
as representatives of the underwriters named on Schedule 1 thereto, relating to the Company’s public offering of common shares.
Under the underwriting agreement, the Company agreed to sell 1,428,572 common shares to the underwriters, at a gross purchase price per
share of $ 4.20 per share, pursuant to the Company’s registration statement on Form S-1 (File No. 333-259011) under the Securities
Act of 1933, as amended. On August 5, 2022, the closing of the public offering was completed and the Company sold 1,428,572 common shares
for total gross proceeds of $ 6 million. After deducting underwriting commissions and expenses, the Company received net proceeds of approximately
$ 5.15 million. F- 37 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 On
August 2, 2022, the Company issued an aggregate of 800,000 common shares upon the partial extinguishment of the 6 % convertible promissory
notes issued to the H&I Sellers (as described in Note 14). On August 2, 2022, the Company issued 189,815 common shares upon the partial extinguishment of the related party promissory issued to the Kyle’s Sellers (as described in Note
13). On
August 2, 2022, the Company issued 285,067 common shares to Bevilacqua PLLC, the Company’s outside securities counsel, upon the
settlement of accounts payable (as described in Note 9). On
March 23, 2022, the Company declared a common share dividend of $ 0.05 per share, or an aggregate of $ 249,762 , to shareholders of record
as of March 31, 2022. This dividend was paid on April 15, 2022. On
July 29, 2022, the Company declared a common share dividend of $ 0.13125 per share, or an aggregate of $ 337,841 , to shareholders of record
as of August 4, 2022. This dividend was paid on August 19, 2022. On
August 23, 2022, the Company declared a common share dividend of $ 0.13125 per share, or an aggregate of $ 505,751 to shareholders of record
as of September 30, 2022. This dividend was paid on October 17, 2022. Warrants During
2021 (as described in Note 16), the Company issued units, with each unit consisting of one (1) series A senior convertible preferred
share and a three-year warrant to purchase one (1) common share at an exercise price of $ 10.00 per common share (subject to adjustment),
which such exercise price was adjusted to $ 4.20 following the adjustments described below. Accordingly, a portion of the proceeds were

preferred share, 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 of the first series B senior convertible

preferred share, 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. F- 35 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 Notwithstanding

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

(subject to adjustment for splits or dividends of the common shares). 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 securities like the series B senior convertible

preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that are based upon the lowest

VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed unless the common shares

issuable upon conversion are then registered under an effective registration statement. From

February 24, 2022 to March 24, 2022, the Company sold an aggregate of 426,999 units, at a price of $ 3.00 per unit, for aggregate gross

proceeds of $ 1,281,000 . From April 20, 2022 to May 19, 2022, the Company sold an aggregate of 54,567 units to the Company’s Chief

Executive Officer, Ellery W. Roberts, for aggregate gross proceeds of $ 163,700 . The Company had total issuance costs relating to these

offerings of approximately $15,000, resulting in net proceeds of $1,429,700. Each

unit consists of one (1) series B senior convertible preferred share and a three-year warrant to purchase one (1) common share at an

exercise price of $ 12.00 per common share (subject to adjustments), which such exercise price was adjusted to $ 4.20 following the adjustments

(see Note 17), and may be exercised on a cashless basis under certain circumstances. The embedded conversion options of the series B

senior convertible preferred shares and warrants were clearly and closely related to the equity host and did not require bifurcation. The $1,429,700 of net proceeds were allocated on a relative fair value basis of $1,257,650 to the series B preferred shares and $172,050

to the warrants. The series B preferred shares fair value was derived using an Option Pricing Method and the warrants fair value was

derived using a Monte Carlo Simulation Model. On

August 26, 2022, the Company redeemed 16,667 series B senior convertible preferred shares for a total redemption price of $ 57,501 . During

the year ended December 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares in the

amount of $ 162,268 and paid prior period accrued dividends of $ 129,103 . As

of December 31, 2022 and 2021, the Company had 464,899 and 0 series B senior convertible preferred shares issued and outstanding, respectively. Mezzanine

(Temporary) Equity Classification The

Company applied the guidance in ASC Topic 480, Distinguishing Liabilities from Equity and ASC Topic 815, Derivatives and Hedgin g,

in order to determine the appropriate classification for both the series A senior convertible preferred shares and the series B senior

convertible preferred shares (see above for series A and B senior convertible preferred shares rights). ASC

480 requires equity instruments to be evaluated on an ongoing basis for mezzanine equity (temporary equity) vs permanent equity classification.

As a result of the maximum number of common shares that may be issuable (upon conversion of the preferred securities) exceeding the number

of authorized but unissued common shares available, temporary equity classification is required. As of December 31, 2021, there were 1,818,182 series A senior convertible preferred shares presented in mezzanine equity. As

a result of the 1-for-4 reverse split of the outstanding common shares on August 2, 2022 (as described in Note 1), the maximum number

of common shares that may be issuable (upon conversion of the preferred securities) no longer exceeded the number of unissued common

shares available, resulting in the reclassification of 1,684,849 series A senior convertible preferred shares and 481,566 series B senior

convertible preferred shares from mezzanine equity to permanent equity. F- 36 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 NOTE 17—SHAREHOLDERS’

EQUITY (DEFICIT) Allocation

Shares As

of December 31, 2022 and 2021, the Company had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle

the holder thereof to vote on any matter relating to the Company other than in connection with amendments to the Company’s operating

agreement and in connection with certain other corporate transactions as specified in the operating agreement. The

Manager owns 100 % of the allocation shares of the Company which represent the original equity interest in the Company. As a holder of

the allocation shares, the Manager is entitled to receive a 20 % profit allocation as a form of preferred distribution, pursuant to a

profit allocation formula upon the occurrence of certain events. Generally, the distribution of the profit allocation is paid upon the

occurrence of the sale of a material amount of capital stock or assets of one of the Company’s businesses, including if the Company

distributes its equity ownership in a subsidiary to the Company’s shareholders in a spin-off or similar transaction (a “Sale

Event”), or, at the option of the Manager, at the five-year anniversary date of the acquisition of one of the Company’s businesses

(a “Holding Event”). The Company records distributions of the profit allocation to the holders upon occurrence of a Sale

Event or Holding Event as dividends declared on allocation interests to stockholders’ equity when they are approved by the Company’s

board of directors. The 1,000 allocation shares are issued and outstanding and held by the Manager, which is controlled by Mr. Roberts, the Company’s chief

executive officer and a principal shareholder. Common

Shares The

Company’s board of directors approved a 1-for-4 reverse stock split of its issued and outstanding common shares, which became effective

August 2, 2022 (as described in Note 1). As

of December 31, 2022 and 2021, the Company was authorized to issue 500,000,000 common shares. As of December 31, 2022 and 2021, the Company

had 4,079,137 and 1,210,918 common shares issued and outstanding, respectively. On

March 26, 2021, the Company issued an aggregate of 99,710 common shares to the holders of the series A senior convertible preferred shares

issued during 2020. The purchase price for the units issued to such holders was $ 1.90 per unit. As noted above, on March 26, 2021, the

Company issued additional units at a purchase price of $ 1.65 per unit. In exchange for the consent of the holders of the Company’s

outstanding series A senior convertible preferred shares to the issuance of these additional units at a lower purchase price than such

holders paid for their shares, the Company issued 99,710 common shares to such holders. On

February 16, 2022, the Company issued 38,096 common shares upon the conversion of 133,333 series A senior convertible preferred shares. From

July 12, 2022 to September 15, 2022, the Company issued 126,669 common shares upon cashless exercises of warrants. On

August 2, 2022, the Company entered into an underwriting agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc.,

as representatives of the underwriters named on Schedule 1 thereto, relating to the Company’s public offering of common shares.

Under the underwriting agreement, the Company agreed to sell 1,428,572 common shares to the underwriters, at a gross purchase price per

share of $ 4.20 per share, pursuant to the Company’s registration statement on Form S-1 (File No. 333-259011) under the Securities

Act of 1933, as amended. On August 5, 2022, the closing of the public offering was completed and the Company sold 1,428,572 common shares

for total gross proceeds of $ 6 million. After deducting underwriting commissions and expenses, the Company received net proceeds of approximately

$ 5.15 million. F- 37 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 On

August 2, 2022, the Company issued an aggregate of 800,000 common shares upon the partial extinguishment of the 6 % convertible promissory

notes issued to the H&I Sellers (as described in Note 14). On August 2, 2022, the Company issued 189,815 common shares upon the partial extinguishment of the related party promissory issued to the Kyle’s Sellers (as described in Note

13). On

August 2, 2022, the Company issued 285,067 common shares to Bevilacqua PLLC, the Company’s outside securities counsel, upon the

settlement of accounts payable (as described in Note 9). On

March 23, 2022, the Company declared a common share dividend of $ 0.05 per share, or an aggregate of $ 249,762 , to shareholders of record

as of March 31, 2022. This dividend was paid on April 15, 2022. On

July 29, 2022, the Company declared a common share dividend of $ 0.13125 per share, or an aggregate of $ 337,841 , to shareholders of record

as of August 4, 2022. This dividend was paid on August 19, 2022. On

August 23, 2022, the Company declared a common share dividend of $ 0.13125 per share, or an aggregate of $ 505,751 to shareholders of record

as of September 30, 2022. This dividend was paid on October 17, 2022. Warrants During

2021 (as described in Note 16), the Company issued units, with each unit consisting of one (1) series A senior convertible preferred

share and a three-year warrant to purchase one (1) common share at an exercise price of $ 10.00 per common share (subject to adjustment),

which such exercise price was adjusted to $ 4.20 following the adjustments described below. Accordingly, a portion of the proceeds were