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

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tax assets (liabilities) $ ( 599,000 ) $ ( 2,070,000 ) F- 41 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 The
Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2022 and
2021, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties
were $ 0 , respectively. The tax years ended December 31, 2016 through December 31, 2022 are considered to be open under statute and therefore
may be subject to examination by the Internal Revenue Service and various state jurisdictions. The
Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns
whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2022 and 2021: As
of December 31, 2022 2021 Prepaid income taxes (accrued tax
liability) $ 122,000 $ ( 175,000 ) Deferred tax liability $ ( 599,000 ) $ ( 2,070,000 ) Years
Ended December 31, 2022 2021 Income tax expense $ 1,677,000 $ 218,000 NOTE 20
—SUBSEQUENT EVENTS Warrant
Dividend On
January 3, 2023, the Company issued warrants for the purchase of 407,872 common shares as a dividend to common shareholders of record
as of December 23, 2022 pursuant to a warrant agent agreement, dated January 3, 2023, with VStock Transfer, LLC. Each holder of common
shares received a warrant to purchase one (1) common share for every ten (10) common shares owned as of the record date (with the number
of shares underlying the warrant received rounded down to the nearest whole number). Each warrant represents the right to purchase common
shares at an initial exercise price of $ 4.20 per share (subject to certain adjustments as set forth in the warrants). The Company may,
at its option, voluntarily reduce the then-current exercise price to such amount and for such period or periods of time which may be
through the expiration date as may be deemed appropriate by the board of directors. Cashless exercises of the warrants are not permitted. The
warrants will generally be exercisable in whole or in part beginning on the later of (i) January 3, 2024 or (ii) the date that a registration
statement on Form S-3 with respect to the issuance and registration of the common shares underlying the warrants has been filed with
and declared effective by the SEC, and thereafter until January 3, 2026. The
Company may redeem the warrants at any time in whole or in part at $ 0.001 per warrant (subject to equitable adjustment to reflect share
splits, share dividends, share combinations, recapitalizations and like occurrences) upon not less than 30 days’ prior written
notice to the registered holders of the warrants. Private
Placements On
February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company
issued to such investors (i) promissory notes in the aggregate principal amount of $ 604,000 , which include an original issue discount
in the amount of $ 60,400 , (ii) five-year warrants for the purchase of an aggregate of 125,833 common shares at an exercise price of $ 4.20 per share (subject to adjustment) and (iii) an aggregate of 125,833 common shares for an aggregate purchase price of $ 543,600 . On
February 9, 2023, the Company entered into securities purchase agreements with the same two accredited investors, pursuant to which the
Company issued to such investors (i) promissory notes in the aggregate principal amount of $ 2,557,575 , which include an original issue
discount in the amount of $ 139,091 , and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise
price of $ 4.20 per share (subject to adjustment). The Company also issued 289,772 common shares to one investor and issued to the other
investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment).
The aggregate purchase price was $ 2,301,818 . F- 42 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 On
February 22, 2023, the Company entered into another securities purchase agreement with one of the investors pursuant to which the Company
issued to such investor (i) a promissory note in the principal amount of $ 878,000 , which includes an original issue discount in the amount
of $ 87,800 , (ii) a five-year warrant for the purchase of 182,917 common shares at an exercise price of $ 4.20 per share (subject to adjustment)
and (iii) a five-year warrant for the purchase of 198,343 common shares at an exercise price of $ 0.01 per share (subject to adjustment)
for a total purchase price of $ 790,200 . In
the aggregate, the Company issued promissory notes in the aggregate principal amount of $ 4,039,575 , warrants for the purchase of an aggregate
of 1,282,975 common shares and 415,605 common shares for gross proceeds of $ 3,635,618 and net proceeds of approximately $ 3,553,118 . The
notes bear interest at a rate of 12% per annum and mature on the first anniversary of the date of issuance; provided that any principal
amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16 % per annum or the maximum amount permitted
by law from the due date thereof until the same is paid. The notes require monthly payments of principal and interest commencing in May
2023. The Company may voluntarily prepay the outstanding principal amount and accrued interest of each note in whole upon payment of
certain prepayment fees. In addition, if at any time the Company receives cash proceeds from any source or series of related or unrelated
sources, including, but not limited to, the issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities
pursuant to an equity line of credit (as defined in the notes) or the sale of assets outside of the ordinary course of business, each
holder shall have the right in its sole discretion to require the Company to immediately apply up to 50 % of such proceeds to repay all
or any portion of the outstanding principal amount and interest then due under the notes. The notes are unsecured and have priority over
all other unsecured indebtedness. The notes contain customary affirmative and negative covenants and events of default for a loan of
this type. The
notes are convertible into common shares at the option of the holders at any time on or following the date that an event of default (as
defined in the notes) occurs under the notes at a conversion price equal the lower of (i) $ 4.20 (subject to adjustments) and (ii) 80 %
of the lowest volume weighted average price of the common shares on any trading day during the five (5) trading days prior to the conversion
date; provided that such conversion price shall not be less than $ 0.03 (subject to adjustments). The
conversion price of the notes and the exercise price of the warrants are subject to standard adjustments, including a price-based adjustment
in the event that the Company issues any common shares or other securities convertible into or exercisable for common shares at an effective
price per share that is lower than the conversion or exercise price, subject to certain exceptions. In addition, the notes and the warrants
contain an ownership limitation, such that the Company shall not effect any conversion or exercise, and the holders shall not have the
right to convert or exercise, any portion of the notes or the warrants to the extent that after giving effect to the issuance of common
shares upon conversion or exercise, such holder, together with its affiliates and any other persons acting as a group together with such
holder or any of its affiliates, would beneficially own in excess of 4.99 % of the number of common shares outstanding immediately after
giving effect to the issuance of common shares upon conversion or exercise. Acquisition
of ICU Eyewear On
December 21, 2022, the Company’s newly formed wholly owned subsidiaries 1847 ICU Holdings Inc. (“1847 ICU”) and 1847
ICU Acquisition Sub Inc. (“Merger Sub”) entered into an agreement and plan of merger with ICU Eyewear Holdings Inc. (“ICU
Holdings”) and San Francisco Equity Partners, as the stockholder representative, which was amended on February 9, 2023. F- 43 1847
HOLDINGS LLC NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER
31, 2022 AND 2021 On
February 9, 2023, closing of the transactions contemplated by the agreement and plan of merger was completed. Pursuant to the agreement
and plan of merger, Merger Sub merged with and into ICU Holdings, with ICU Holdings surviving the merger as a wholly owned subsidiary
of 1847 ICU. The merger consideration paid by 1847 ICU to the stockholders of ICU Holdings consists of (i) $ 4,000,000 in cash, minus
any unpaid debt of ICU Holdings and certain transaction expenses, and (ii) 6 % subordinated promissory notes in the aggregate principal
amount of $ 500,000 . The
notes bear interest at the rate of 6 % per annum with all principal and accrued interest being due and payable in one lump sum on February
9, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10 %. 1847 ICU may prepay
all or any portion of the notes at any time prior to the maturity date without premium or penalty of any kind. The notes contain customary
events of default, including, without limitation, in the event of (i) non-payment, (ii) a default by 1847 ICU of any of its covenants
in the notes, the agreement and plan of merger or any other agreement entered into in connection with the agreement and plan of merger,
or a breach of any of the representations or warranties under such documents, (iii) the insolvency or bankruptcy of 1847 ICU or ICU Holdings
or (iv) a change of control (as defined in the notes) of 1847 ICU or ICU Holdings. The notes are unsecured and subordinated to all senior
indebtedness (as defined in the notes). Loan
and Security Agreement On
February 9, 2023, 1847 ICU, ICU Holdings and ICU Holdings’ wholly owned subsidiary ICU Eyewear, Inc. (together, the “Borrower”)
entered into a loan and security agreement with Industrial Funding Group, Inc. for a revolving loan of up to $ 5,000,000 , which is
evidenced by a secured promissory note in the principal amount of up to $ 5,000,000 . On February 9, 2023, 1847 ICU received an advance
of $ 2,063,182 under the note, of which $ 1,963,182 was used to repay certain debt of ICU Holdings in connection with the agreement and
plan of merger, with the remaining $ 100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and
assigned the loan and security agreement, the note and related loan documents to GemCap Solutions, LLC. The
note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the
“Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime

tax assets (liabilities) $ ( 599,000 ) $ ( 2,070,000 ) F- 41 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 The

Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2022 and

2021, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties

were $ 0 , respectively. The tax years ended December 31, 2016 through December 31, 2022 are considered to be open under statute and therefore

may be subject to examination by the Internal Revenue Service and various state jurisdictions. The

Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns

whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2022 and 2021: As

of December 31, 2022 2021 Prepaid income taxes (accrued tax

liability) $ 122,000 $ ( 175,000 ) Deferred tax liability $ ( 599,000 ) $ ( 2,070,000 ) Years

Ended December 31, 2022 2021 Income tax expense $ 1,677,000 $ 218,000 NOTE 20

—SUBSEQUENT EVENTS Warrant

Dividend On

January 3, 2023, the Company issued warrants for the purchase of 407,872 common shares as a dividend to common shareholders of record

as of December 23, 2022 pursuant to a warrant agent agreement, dated January 3, 2023, with VStock Transfer, LLC. Each holder of common

shares received a warrant to purchase one (1) common share for every ten (10) common shares owned as of the record date (with the number

of shares underlying the warrant received rounded down to the nearest whole number). Each warrant represents the right to purchase common

shares at an initial exercise price of $ 4.20 per share (subject to certain adjustments as set forth in the warrants). The Company may,

at its option, voluntarily reduce the then-current exercise price to such amount and for such period or periods of time which may be

through the expiration date as may be deemed appropriate by the board of directors. Cashless exercises of the warrants are not permitted. The

warrants will generally be exercisable in whole or in part beginning on the later of (i) January 3, 2024 or (ii) the date that a registration

statement on Form S-3 with respect to the issuance and registration of the common shares underlying the warrants has been filed with

and declared effective by the SEC, and thereafter until January 3, 2026. The

Company may redeem the warrants at any time in whole or in part at $ 0.001 per warrant (subject to equitable adjustment to reflect share

splits, share dividends, share combinations, recapitalizations and like occurrences) upon not less than 30 days’ prior written

notice to the registered holders of the warrants. Private

Placements On

February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company

issued to such investors (i) promissory notes in the aggregate principal amount of $ 604,000 , which include an original issue discount

in the amount of $ 60,400 , (ii) five-year warrants for the purchase of an aggregate of 125,833 common shares at an exercise price of $ 4.20 per share (subject to adjustment) and (iii) an aggregate of 125,833 common shares for an aggregate purchase price of $ 543,600 . On

February 9, 2023, the Company entered into securities purchase agreements with the same two accredited investors, pursuant to which the

Company issued to such investors (i) promissory notes in the aggregate principal amount of $ 2,557,575 , which include an original issue

discount in the amount of $ 139,091 , and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise

price of $ 4.20 per share (subject to adjustment). The Company also issued 289,772 common shares to one investor and issued to the other

investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment).

The aggregate purchase price was $ 2,301,818 . F- 42 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 On

February 22, 2023, the Company entered into another securities purchase agreement with one of the investors pursuant to which the Company

issued to such investor (i) a promissory note in the principal amount of $ 878,000 , which includes an original issue discount in the amount

of $ 87,800 , (ii) a five-year warrant for the purchase of 182,917 common shares at an exercise price of $ 4.20 per share (subject to adjustment)

and (iii) a five-year warrant for the purchase of 198,343 common shares at an exercise price of $ 0.01 per share (subject to adjustment)

for a total purchase price of $ 790,200 . In

the aggregate, the Company issued promissory notes in the aggregate principal amount of $ 4,039,575 , warrants for the purchase of an aggregate

of 1,282,975 common shares and 415,605 common shares for gross proceeds of $ 3,635,618 and net proceeds of approximately $ 3,553,118 . The

notes bear interest at a rate of 12% per annum and mature on the first anniversary of the date of issuance; provided that any principal

amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16 % per annum or the maximum amount permitted

by law from the due date thereof until the same is paid. The notes require monthly payments of principal and interest commencing in May

2023. The Company may voluntarily prepay the outstanding principal amount and accrued interest of each note in whole upon payment of

certain prepayment fees. In addition, if at any time the Company receives cash proceeds from any source or series of related or unrelated

sources, including, but not limited to, the issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities

pursuant to an equity line of credit (as defined in the notes) or the sale of assets outside of the ordinary course of business, each

holder shall have the right in its sole discretion to require the Company to immediately apply up to 50 % of such proceeds to repay all

or any portion of the outstanding principal amount and interest then due under the notes. The notes are unsecured and have priority over

all other unsecured indebtedness. The notes contain customary affirmative and negative covenants and events of default for a loan of

this type. The

notes are convertible into common shares at the option of the holders at any time on or following the date that an event of default (as

defined in the notes) occurs under the notes at a conversion price equal the lower of (i) $ 4.20 (subject to adjustments) and (ii) 80 %

of the lowest volume weighted average price of the common shares on any trading day during the five (5) trading days prior to the conversion

date; provided that such conversion price shall not be less than $ 0.03 (subject to adjustments). The

conversion price of the notes and the exercise price of the warrants are subject to standard adjustments, including a price-based adjustment

in the event that the Company issues any common shares or other securities convertible into or exercisable for common shares at an effective

price per share that is lower than the conversion or exercise price, subject to certain exceptions. In addition, the notes and the warrants

contain an ownership limitation, such that the Company shall not effect any conversion or exercise, and the holders shall not have the

right to convert or exercise, any portion of the notes or the warrants to the extent that after giving effect to the issuance of common

shares upon conversion or exercise, such holder, together with its affiliates and any other persons acting as a group together with such

holder or any of its affiliates, would beneficially own in excess of 4.99 % of the number of common shares outstanding immediately after

giving effect to the issuance of common shares upon conversion or exercise. Acquisition

of ICU Eyewear On

December 21, 2022, the Company’s newly formed wholly owned subsidiaries 1847 ICU Holdings Inc. (“1847 ICU”) and 1847

ICU Acquisition Sub Inc. (“Merger Sub”) entered into an agreement and plan of merger with ICU Eyewear Holdings Inc. (“ICU

Holdings”) and San Francisco Equity Partners, as the stockholder representative, which was amended on February 9, 2023. F- 43 1847

HOLDINGS LLC NOTES

TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER

31, 2022 AND 2021 On

February 9, 2023, closing of the transactions contemplated by the agreement and plan of merger was completed. Pursuant to the agreement

and plan of merger, Merger Sub merged with and into ICU Holdings, with ICU Holdings surviving the merger as a wholly owned subsidiary

of 1847 ICU. The merger consideration paid by 1847 ICU to the stockholders of ICU Holdings consists of (i) $ 4,000,000 in cash, minus

any unpaid debt of ICU Holdings and certain transaction expenses, and (ii) 6 % subordinated promissory notes in the aggregate principal

amount of $ 500,000 . The

notes bear interest at the rate of 6 % per annum with all principal and accrued interest being due and payable in one lump sum on February

9, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10 %. 1847 ICU may prepay

all or any portion of the notes at any time prior to the maturity date without premium or penalty of any kind. The notes contain customary

events of default, including, without limitation, in the event of (i) non-payment, (ii) a default by 1847 ICU of any of its covenants

in the notes, the agreement and plan of merger or any other agreement entered into in connection with the agreement and plan of merger,

or a breach of any of the representations or warranties under such documents, (iii) the insolvency or bankruptcy of 1847 ICU or ICU Holdings

or (iv) a change of control (as defined in the notes) of 1847 ICU or ICU Holdings. The notes are unsecured and subordinated to all senior

indebtedness (as defined in the notes). Loan

and Security Agreement On

February 9, 2023, 1847 ICU, ICU Holdings and ICU Holdings’ wholly owned subsidiary ICU Eyewear, Inc. (together, the “Borrower”)

entered into a loan and security agreement with Industrial Funding Group, Inc. for a revolving loan of up to $ 5,000,000 , which is

evidenced by a secured promissory note in the principal amount of up to $ 5,000,000 . On February 9, 2023, 1847 ICU received an advance

of $ 2,063,182 under the note, of which $ 1,963,182 was used to repay certain debt of ICU Holdings in connection with the agreement and

plan of merger, with the remaining $ 100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and

assigned the loan and security agreement, the note and related loan documents to GemCap Solutions, LLC. The

note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the

“Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime