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

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for the three months ended March 31, 2022. Pro Forma Information The following unaudited pro forma results presented
below include the effects of the Wolo, High Mountain and Sierra Homes acquisitions as if they had been consummated as of January 1, 2021,
with adjustments to give effect to pro forma events that are directly attributable to the acquisitions. March 31, March 31, 2022 2021 Revenues $ 12,073,878 $ 13,373,918 Net income (loss) ( 927,208 ) 317,547 Net loss attributable to 1847 Holdings common shareholders’ ( 1,008,245 ) ( 1,398,248 ) Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted $ ( 0.21 ) $ ( 0.29 ) These unaudited pro forma results are presented for informational
purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred
at the beginning of the period presented, nor are they indicative of future results of operations. 11 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) NOTE
10—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 three months ended March 31, 2022 and 2021. Offsetting
Management Services Agreements The
Company’s subsidiary 1847 Asien Inc. (“1847 Asien”) entered into an offsetting management services agreement with the
Manager on May 28, 2020, the Company’s subsidiary 1847 Cabinet Inc. (“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 the Company’s subsidiary
1847 Wolo Inc. (“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 our 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. 1847
Asien expensed management fees of $ 75,000 and $ 75,000 for the three months ended March 31, 2022 and 2021, respectively. 1847
Cabinet expensed management fees of $ 125,000 and $ 75,000 for the three months ended March 31, 2022 and 2021, respectively. 1847
Wolo expensed management fees of $ 75,000 and $ 0 for the three months ended March 31, 2022 and 2021, respectively. On
a consolidated basis, the Company expensed total management fees of $ 275,000 and $ 260,000 for the three months ended March 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 March
31, 2022 and December 31, 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 March 31, 2022 and December 31, 2021, the Manager has funded the Company $ 74,928 and $ 74,928 in related party advances, respectively.
These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements. 12 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) Building
Lease On
September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, 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. The
total rent expense under this related party leases was $ 21,776 for the three months ended March 31, 2022. NOTE
11—MEZZANINE EQUITY 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. 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. 13 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) 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 Custom Wood Shop, Inc. (“Kyle’s”) and Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (together,
“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

for the three months ended March 31, 2022. Pro Forma Information The following unaudited pro forma results presented

below include the effects of the Wolo, High Mountain and Sierra Homes acquisitions as if they had been consummated as of January 1, 2021,

with adjustments to give effect to pro forma events that are directly attributable to the acquisitions. March 31, March 31, 2022 2021 Revenues $ 12,073,878 $ 13,373,918 Net income (loss) ( 927,208 ) 317,547 Net loss attributable to 1847 Holdings common shareholders’ ( 1,008,245 ) ( 1,398,248 ) Loss per share attributable to 1847 Holdings common shareholders’: Basic and diluted $ ( 0.21 ) $ ( 0.29 ) These unaudited pro forma results are presented for informational

purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred

at the beginning of the period presented, nor are they indicative of future results of operations. 11 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) NOTE

10—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 three months ended March 31, 2022 and 2021. Offsetting

Management Services Agreements The

Company’s subsidiary 1847 Asien Inc. (“1847 Asien”) entered into an offsetting management services agreement with the

Manager on May 28, 2020, the Company’s subsidiary 1847 Cabinet Inc. (“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 the Company’s subsidiary

1847 Wolo Inc. (“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 our 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. 1847

Asien expensed management fees of $ 75,000 and $ 75,000 for the three months ended March 31, 2022 and 2021, respectively. 1847

Cabinet expensed management fees of $ 125,000 and $ 75,000 for the three months ended March 31, 2022 and 2021, respectively. 1847

Wolo expensed management fees of $ 75,000 and $ 0 for the three months ended March 31, 2022 and 2021, respectively. On

a consolidated basis, the Company expensed total management fees of $ 275,000 and $ 260,000 for the three months ended March 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 March

31, 2022 and December 31, 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 March 31, 2022 and December 31, 2021, the Manager has funded the Company $ 74,928 and $ 74,928 in related party advances, respectively.

These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements. 12 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) Building

Lease On

September 1, 2020, Kyle’s entered into an industrial lease agreement with Stephen Mallatt, Jr. and Rita Mallatt, 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. The

total rent expense under this related party leases was $ 21,776 for the three months ended March 31, 2022. NOTE

11—MEZZANINE EQUITY 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. 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. 13 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) 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 Custom Wood Shop, Inc. (“Kyle’s”) and Wolo Mfg. Corp. and Wolo Industrial Horn & Signal, Inc. (together,

“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