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

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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 ($ 3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price
of $ 3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred
shares be entitled to convert any number of series B 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 B 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 (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms
of the series B senior convertible preferred shares. 16 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) 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 the stated dividend rate, the stated value and the conversion
price shall automatically adjust as follows: On
the first day of the 12 th month following the issuance of the first series B
senior convertible preferred share, 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 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. 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. Notwithstanding
the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $ 0.0075 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. On
February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $ 3.00 per unit, for aggregate gross proceeds of $ 961,000 .
On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of approximately $ 320,000 . The Company had
issuance costs relating to the offering of approximately $ 15,000 , resulting in net proceeds of $ 1,266,000 . 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 $ 3.00 per common share (subject to adjustment), which 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 $ 1,266,000 of net proceeds were allocated on a relative fair value basis of $ 1,113,650 to the series B preferred
shares and $ 152,350 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. As
of March 31, 2022 and December 31, 2021, the Company had 426,999 and 0 series B senior convertible preferred shares issued and outstanding,
respectively. During
the three months ended March 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares
in the amount of $ 13,760 . Mezzanine
Equity Classification We
applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives
and Hedging” (“ASC 815”), in order to determine the appropriate classification for both the series A senior convertible
preferred shares and the series B senior convertible preferred shares. 17 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) 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) exceeded the number
of authorized but unissued common shares available, temporary equity classification is required. As of March 31, 2022 and December 31,
2021, there were 1,684,849 and 1,818,182 series A senior convertible preferred shares presented in mezzanine equity, respectively. As
of March 31, 2022 and December 31, 2021, there were 426,999 and 0 series B senior convertible preferred shares presented in mezzanine
equity, respectively. NOTE 12—SHAREHOLDERS’ DEFICIT Common
Shares As
of March 31, 2022, the Company was authorized to issue 500,000,000 common shares. As of March 31, 2022 and December 31, 2021, the Company
had 4,995,232 and 4,842,851 common shares issued and outstanding, respectively. On
February 16, 2022, the Company issued 152,851 common shares upon the conversion of 133,333 series A senior convertible preferred shares. On
March 23, 2022, the Company declared a common share dividend of $ 0.05 per share, or $ 249,762 , to shareholders of record as of March 31,
2022. This dividend was paid on April 15, 2022. Warrants On
February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000.
On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of $320,000. 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 $3.00 per
common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair
value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend
yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free interest rate of 0.31%; (iv) expected life of three
years; (v) estimated fair value of the common shares of $1.94 per share; and (vi) various probability assumptions related to redemption,
calls and price resets. The fair value of the warrants was $379,533 or $0.89 per warrant, resulting in the amount allocated to the warrants,
based on their relative fair of $152,350, which was recorded as additional paid in capital. The
warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including
upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances.
The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the
Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered
or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted
daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is
at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in
part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months
of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months
of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months. Below
is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2022: Warrants Weighted- Average Exercise Price Outstanding at
December 31, 2021 5,200,460 $ 2.38 Granted 426,999 3.00 Exercised - - Forfeited - - Outstanding
at March 31, 2022 5,627,459 $ 2.43 Exercisable
at March 31, 2022 5,627,459 $ 2.43 As
of March 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 2.17 years and a total intrinsic value
of $ 497,500 . 18 1847
HOLDINGS LLC NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH
31, 2022 (UNAUDITED) NOTE
13—LOSS PER SHARE The
computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to 1847 Holdings common
shareholders for the three months ended March 31, 2022 consisted of the followin Basic and Diluted Loss Per Share March 31, 2022 Net loss per common share attributable to 1847 Holdings common shareholders’ $ ( 1,008,245 ) Weighted average common shares outstanding 4,915,655 Basic and diluted loss per share $ ( 0.21 ) For

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 ($ 3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price

of $ 3.00 per share (subject to adjustments); provided that in no event shall the holder of any series B senior convertible preferred

shares be entitled to convert any number of series B 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 B 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 (but not in part) the series B 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 dividends and any other amounts due pursuant to the terms

of the series B senior convertible preferred shares. 16 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) 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 the stated dividend rate, the stated value and the conversion

price shall automatically adjust as follows: On

the first day of the 12 th month following the issuance of the first series B

senior convertible preferred share, 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 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. 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. Notwithstanding

the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $ 0.0075 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. On

February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $ 3.00 per unit, for aggregate gross proceeds of $ 961,000 .

On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of approximately $ 320,000 . The Company had

issuance costs relating to the offering of approximately $ 15,000 , resulting in net proceeds of $ 1,266,000 . 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 $ 3.00 per common share (subject to adjustment), which 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 $ 1,266,000 of net proceeds were allocated on a relative fair value basis of $ 1,113,650 to the series B preferred

shares and $ 152,350 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. As

of March 31, 2022 and December 31, 2021, the Company had 426,999 and 0 series B senior convertible preferred shares issued and outstanding,

respectively. During

the three months ended March 31, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares

in the amount of $ 13,760 . Mezzanine

Equity Classification We

applied the guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives

and Hedging” (“ASC 815”), in order to determine the appropriate classification for both the series A senior convertible

preferred shares and the series B senior convertible preferred shares. 17 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) 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) exceeded the number

of authorized but unissued common shares available, temporary equity classification is required. As of March 31, 2022 and December 31,

2021, there were 1,684,849 and 1,818,182 series A senior convertible preferred shares presented in mezzanine equity, respectively. As

of March 31, 2022 and December 31, 2021, there were 426,999 and 0 series B senior convertible preferred shares presented in mezzanine

equity, respectively. NOTE 12—SHAREHOLDERS’ DEFICIT Common

Shares As

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

had 4,995,232 and 4,842,851 common shares issued and outstanding, respectively. On

February 16, 2022, the Company issued 152,851 common shares upon the conversion of 133,333 series A senior convertible preferred shares. On

March 23, 2022, the Company declared a common share dividend of $ 0.05 per share, or $ 249,762 , to shareholders of record as of March 31,

2022. This dividend was paid on April 15, 2022. Warrants On

February 24, 2022, the Company sold an aggregate of 320,333 units, at a price of $3.00 per unit, for aggregate gross proceeds of $961,000.

On March 24, 2022, the Company sold an additional 106,666 units for aggregate gross proceeds of $320,000. 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 $3.00 per

common share (subject to adjustment). Accordingly, a portion of the proceeds were allocated to the warrant based on its relative fair

value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions used in the model were as follows: (i) dividend

yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free interest rate of 0.31%; (iv) expected life of three

years; (v) estimated fair value of the common shares of $1.94 per share; and (vi) various probability assumptions related to redemption,

calls and price resets. The fair value of the warrants was $379,533 or $0.89 per warrant, resulting in the amount allocated to the warrants,

based on their relative fair of $152,350, which was recorded as additional paid in capital. The

warrants allow the holder to purchase one (1) common share at an exercise price of $3.00 per common share (subject to adjustment including

upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances.

The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the

Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered

or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted

daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is

at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in

part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months

of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months

of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months. Below

is a table summarizing the changes in warrants outstanding during the three months ended March 31, 2022: Warrants Weighted- Average Exercise Price Outstanding at

December 31, 2021 5,200,460 $ 2.38 Granted 426,999 3.00 Exercised - - Forfeited - - Outstanding

at March 31, 2022 5,627,459 $ 2.43 Exercisable

at March 31, 2022 5,627,459 $ 2.43 As

of March 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 2.17 years and a total intrinsic value

of $ 497,500 . 18 1847

HOLDINGS LLC NOTES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH

31, 2022 (UNAUDITED) NOTE

13—LOSS PER SHARE The

computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to 1847 Holdings common

shareholders for the three months ended March 31, 2022 consisted of the followin Basic and Diluted Loss Per Share March 31, 2022 Net loss per common share attributable to 1847 Holdings common shareholders’ $ ( 1,008,245 ) Weighted average common shares outstanding 4,915,655 Basic and diluted loss per share $ ( 0.21 ) For