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

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consisted of $906,743 of interest expense, offset by a gain on disposal of property of equipment of $32,747 and other income of $318,
while other expense, net, for the three months ended March 31, 2021 consisted of loss on adjustment shares of $757,792 and interest expense
of $45,121, offset by a gain on forgiveness of debt of $360,302. Income
tax expense . We had an income tax expense of $123,000 for the three months ended March 31, 2022, as compared to $0
for the three months ended March 31, 2021. Net
loss from continuing operations . As a result of the cumulative effect of the factors described above, our net loss from continuing
operations was $927,208 for the three months ended March 31, 2022, as compared to a net loss of $853,992 for the three months ended March
31, 2021. Liquidity
and Capital Resources As
of March 31, 2021, we had cash and cash equivalents of $1,638,924. To date, we have financed our operations primarily through revenue
generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders. Although
we do not believe that we will require additional cash to continue our operations over the next twelve months, we do believe additional
funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our
business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems
acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase
price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one
of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business
plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or
our equity or equity in one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling
to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan
could be as much as $5,000,000 . We will seek growth as funds become available from cash flow, borrowings, additional capital raised
privately or publicly, or seller retained financing. 27 Our
primary use of funds will be for future acquisitions, public company expenses including regular distributions to our shareholders, investments
in future acquisitions, payments to the Manager pursuant to the management services agreement, potential payment of profit allocation
to the Manager and potential put price to the Manager in respect of the allocation shares it owns. The management fee, expenses, potential
profit allocation and potential put price are paid before distributions to shareholders and may be significant and exceed the funds we
hold, which may require us to dispose of assets or incur debt to fund such expenditures. See Item 1. “Business—Our Manager”
included in our Annual Report on Form 10-K for the year ended December 31, 2021 for more information concerning the management fee, the
profit allocation and put price. The
amount of management fee paid to the Manager by us is reduced by the aggregate amount of any offsetting management fees, if any, received
by the Manager from any of our businesses. As a result, the management fee paid to the Manager may fluctuate from quarter to quarter.
The amount of management fee paid to the Manager may represent a significant cash obligation. In this respect, the payment of the management
fee will reduce the amount of cash available for distribution to shareholders. The
Manager, as holder of 100% of our allocation shares, is entitled to receive a twenty percent (20%) profit allocation as a form of preferred
equity distribution, subject to an annual hurdle rate of eight percent (8%), as follows. Upon the sale of a company subsidiary, the Manager
will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high water mark plus
(ii) the subsidiary’s net income since its acquisition by the Company exceeds the 8% hurdle rate. The 8% hurdle rate is the product
of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by the Company, multiplied by (iii)
the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according
to United States generally accepted accounting principles with certain adjustments). In certain circumstances, after a subsidiary has
been held for at least 5 years, the Manager may also trigger a profit allocation with respect to such subsidiary (determined based solely
on the subsidiary’s net income since its acquisition). The amount of profit allocation may represent a significant cash payment
and is senior in right to payments of distributions to our shareholders. Therefore, the amount of profit allocation paid, when paid,
will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. See Item 1.
“Business—Our Manager—Our Manager as an Equity Holder—Manager’s Profit Allocation” included in our
Annual Report on Form 10-K for the year ended December 31, 2021 for more information on the calculation of the profit allocation. Our
operating agreement also contains a supplemental put provision, which gives the Manager the right, subject to certain conditions, to
cause us to purchase the allocation shares then owned by the Manager upon termination of the management services agreement. The amount
of put price under the supplemental put provision is determined by assuming all of our subsidiaries are sold at that time for their fair
market value and then calculating the amount of profit allocation would be payable in such a case. If the management services agreement
is terminated for any reason other than the Manager’s resignation, the payment to the Manager could be as much as twice the amount
of such hypothetical profit allocation. As is the case with profit allocation, the calculation of the put price is complex and based
on many factors that cannot be predicted with any certainty at this time. See Item 1. “Business—Our Manager—Our Manager
as an Equity Holder—Supplemental Put Provision” included in our Annual Report on Form 10-K for the year ended December 31,
2021 for more information on the calculation of the put price. The put price obligation, if the Manager exercises its put right, will
represent a significant cash payment and is senior in right to payments of distributions to our shareholders. Therefore, the amount of
put price will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. Summary
of Cash Flow The
following table provides detailed information about our net cash flow for the period indicat Three
Months Ended March 31, 2022 2021 Net cash used
in operating activities from continuing operations $ (536,260 ) $ (360,719 ) Net cash provided by (used
in) investing activities from continuing operations (31,055 ) 945,704 Net
cash provided by financing activities from continuing operations 822,706 173,559 Net increase in cash and cash
equivalents from continuing operations 255,391 758,544 Cash
and cash equivalents from continuing operations at beginning of period 1,383,533 1,380,349 Cash
and cash equivalents from continuing operations at end of period $ 1,638,924 $ 2,138,893 28 Net cash used in operating activities from continuing operations was
$536,260 for the three months ended March 31, 2022, as compared to $360,719 for the three months ended March 31, 2021. For the three months
ended March 31, 2022, the net loss from continuing operations of $927,208, changes in receivables of 539,818, inventory of $378,192, contract
liabilities of $851,454, and operating lease liabilities of $83,729, offset by changes in depreciation and amortization of $511,371, amortization
and of debt discounts of $249,374, amortization of right-of-use assets of $98,031, prepaid expenses and other current assets of $311,511,
accounts payable and accrued expenses of $964,586, and customer deposits of $212,284, were the primary drivers of the net cash used in
operating activities. For the three months ended March 31, 2021, the net loss from continuing operations of $755,811, changes in receivables
of $124,065, inventory of $115,545, prepaids and other costs of $62,071, contract liabilities of $122,247, and non-cash forgiveness of
debt of $360,302, offset by an changes in accounts payable and accrued expenses of $65,969, customer deposits of $328,580, depreciation
and amortization of $122,106, and loss on adjustment shares of $757,792 in common share issuances, were the primary drivers of the net
cash provided by operating activities. Net
cash used in investing activities from continuing operations was $31,055 for the three months ended March 31, 2022, as compared to net
cash provided by investing activities from continuing operations of $945,704 for the three months ended March 31, 2021. Net cash used
in investing activities for the three months ended March 31, 2022 consisted of purchases of property and equipment of $66,291 and investments
in certificates of deposit of $262, offset by proceeds from the disposal of property of equipment of $35,498, while net cash provided
by investing actives for the three months ended March 31, 2021 consisted of net cash acquired from the acquisition of Wolo of $1,094,524,
offset by the purchase of equipment and vehicles of $148,820. Net
cash provided by financing activities from continuing operations was $822,706 for the three months ended March 31, 2022, as compared
to $173,559 for the three months ended March 31, 2021. Net cash provided by financing activities for the three months ended March 31,
2022 consisted of net proceeds from the issuance of series B senior convertible preferred shares of $1,266,000, offset by repayments
of notes payables and finance lease liabilities of $58,317, dividends on preferred shares of $135,215, and dividends on common shares
of $249,762, while net cash provided by financing activities for the three months ended March 31, 2021 consisted of net proceeds of $3,000,000
from the sale of units described below, net line of credit proceeds of $569,395 and proceeds from vehicle loans of $123,405, offset by
the repayments of notes payable and finance lease liabilities of $143,432, payments to Wolo’s seller of $3,000,000 and to Kyle’s
seller of $33,630, payments of preferred dividends of $176,950 and the payment of financing costs of $165,229. Series
A Unit Offering On
March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each
unit consists 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.
As described in further detail below, we contributed to 1847 Wolo the $3,000,000 raised in this offering in exchange for 1,000 shares
of 1847 Wolo’s series A preferred stock, at a price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847
Wolo. In
exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units
at a lower purchase price than such holders paid for their shares, we issued an aggregate of 398,838 common shares to such holders. Series
B Unit Offering On

consisted of $906,743 of interest expense, offset by a gain on disposal of property of equipment of $32,747 and other income of $318,

while other expense, net, for the three months ended March 31, 2021 consisted of loss on adjustment shares of $757,792 and interest expense

of $45,121, offset by a gain on forgiveness of debt of $360,302. Income

tax expense . We had an income tax expense of $123,000 for the three months ended March 31, 2022, as compared to $0

for the three months ended March 31, 2021. Net

loss from continuing operations . As a result of the cumulative effect of the factors described above, our net loss from continuing

operations was $927,208 for the three months ended March 31, 2022, as compared to a net loss of $853,992 for the three months ended March

31, 2021. Liquidity

and Capital Resources As

of March 31, 2021, we had cash and cash equivalents of $1,638,924. To date, we have financed our operations primarily through revenue

generated from operations, cash proceeds from financing activities, borrowings, and equity contributions by our shareholders. Although

we do not believe that we will require additional cash to continue our operations over the next twelve months, we do believe additional

funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our

business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems

acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase

price of a target business the seller of that business is willing to take in the form of seller notes or our equity or equity in one

of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business

plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or

our equity or equity in one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling

to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan

could be as much as $5,000,000 . We will seek growth as funds become available from cash flow, borrowings, additional capital raised

privately or publicly, or seller retained financing. 27 Our

primary use of funds will be for future acquisitions, public company expenses including regular distributions to our shareholders, investments

in future acquisitions, payments to the Manager pursuant to the management services agreement, potential payment of profit allocation

to the Manager and potential put price to the Manager in respect of the allocation shares it owns. The management fee, expenses, potential

profit allocation and potential put price are paid before distributions to shareholders and may be significant and exceed the funds we

hold, which may require us to dispose of assets or incur debt to fund such expenditures. See Item 1. “Business—Our Manager”

included in our Annual Report on Form 10-K for the year ended December 31, 2021 for more information concerning the management fee, the

profit allocation and put price. The

amount of management fee paid to the Manager by us is reduced by the aggregate amount of any offsetting management fees, if any, received

by the Manager from any of our businesses. As a result, the management fee paid to the Manager may fluctuate from quarter to quarter.

The amount of management fee paid to the Manager may represent a significant cash obligation. In this respect, the payment of the management

fee will reduce the amount of cash available for distribution to shareholders. The

Manager, as holder of 100% of our allocation shares, is entitled to receive a twenty percent (20%) profit allocation as a form of preferred

equity distribution, subject to an annual hurdle rate of eight percent (8%), as follows. Upon the sale of a company subsidiary, the Manager

will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high water mark plus

(ii) the subsidiary’s net income since its acquisition by the Company exceeds the 8% hurdle rate. The 8% hurdle rate is the product

of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by the Company, multiplied by (iii)

the subsidiary’s average share (determined based on gross assets, generally) of our consolidated net equity (determined according

to United States generally accepted accounting principles with certain adjustments). In certain circumstances, after a subsidiary has

been held for at least 5 years, the Manager may also trigger a profit allocation with respect to such subsidiary (determined based solely

on the subsidiary’s net income since its acquisition). The amount of profit allocation may represent a significant cash payment

and is senior in right to payments of distributions to our shareholders. Therefore, the amount of profit allocation paid, when paid,

will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. See Item 1.

“Business—Our Manager—Our Manager as an Equity Holder—Manager’s Profit Allocation” included in our

Annual Report on Form 10-K for the year ended December 31, 2021 for more information on the calculation of the profit allocation. Our

operating agreement also contains a supplemental put provision, which gives the Manager the right, subject to certain conditions, to

cause us to purchase the allocation shares then owned by the Manager upon termination of the management services agreement. The amount

of put price under the supplemental put provision is determined by assuming all of our subsidiaries are sold at that time for their fair

market value and then calculating the amount of profit allocation would be payable in such a case. If the management services agreement

is terminated for any reason other than the Manager’s resignation, the payment to the Manager could be as much as twice the amount

of such hypothetical profit allocation. As is the case with profit allocation, the calculation of the put price is complex and based

on many factors that cannot be predicted with any certainty at this time. See Item 1. “Business—Our Manager—Our Manager

as an Equity Holder—Supplemental Put Provision” included in our Annual Report on Form 10-K for the year ended December 31,

2021 for more information on the calculation of the put price. The put price obligation, if the Manager exercises its put right, will

represent a significant cash payment and is senior in right to payments of distributions to our shareholders. Therefore, the amount of

put price will reduce the amount of cash available to us for our operating and investing activities, including future acquisitions. Summary

of Cash Flow The

following table provides detailed information about our net cash flow for the period indicat Three

Months Ended March 31, 2022 2021 Net cash used

in operating activities from continuing operations $ (536,260 ) $ (360,719 ) Net cash provided by (used

in) investing activities from continuing operations (31,055 ) 945,704 Net

cash provided by financing activities from continuing operations 822,706 173,559 Net increase in cash and cash

equivalents from continuing operations 255,391 758,544 Cash

and cash equivalents from continuing operations at beginning of period 1,383,533 1,380,349 Cash

and cash equivalents from continuing operations at end of period $ 1,638,924 $ 2,138,893 28 Net cash used in operating activities from continuing operations was

$536,260 for the three months ended March 31, 2022, as compared to $360,719 for the three months ended March 31, 2021. For the three months

ended March 31, 2022, the net loss from continuing operations of $927,208, changes in receivables of 539,818, inventory of $378,192, contract

liabilities of $851,454, and operating lease liabilities of $83,729, offset by changes in depreciation and amortization of $511,371, amortization

and of debt discounts of $249,374, amortization of right-of-use assets of $98,031, prepaid expenses and other current assets of $311,511,

accounts payable and accrued expenses of $964,586, and customer deposits of $212,284, were the primary drivers of the net cash used in

operating activities. For the three months ended March 31, 2021, the net loss from continuing operations of $755,811, changes in receivables

of $124,065, inventory of $115,545, prepaids and other costs of $62,071, contract liabilities of $122,247, and non-cash forgiveness of

debt of $360,302, offset by an changes in accounts payable and accrued expenses of $65,969, customer deposits of $328,580, depreciation

and amortization of $122,106, and loss on adjustment shares of $757,792 in common share issuances, were the primary drivers of the net

cash provided by operating activities. Net

cash used in investing activities from continuing operations was $31,055 for the three months ended March 31, 2022, as compared to net

cash provided by investing activities from continuing operations of $945,704 for the three months ended March 31, 2021. Net cash used

in investing activities for the three months ended March 31, 2022 consisted of purchases of property and equipment of $66,291 and investments

in certificates of deposit of $262, offset by proceeds from the disposal of property of equipment of $35,498, while net cash provided

by investing actives for the three months ended March 31, 2021 consisted of net cash acquired from the acquisition of Wolo of $1,094,524,

offset by the purchase of equipment and vehicles of $148,820. Net

cash provided by financing activities from continuing operations was $822,706 for the three months ended March 31, 2022, as compared

to $173,559 for the three months ended March 31, 2021. Net cash provided by financing activities for the three months ended March 31,

2022 consisted of net proceeds from the issuance of series B senior convertible preferred shares of $1,266,000, offset by repayments

of notes payables and finance lease liabilities of $58,317, dividends on preferred shares of $135,215, and dividends on common shares

of $249,762, while net cash provided by financing activities for the three months ended March 31, 2021 consisted of net proceeds of $3,000,000

from the sale of units described below, net line of credit proceeds of $569,395 and proceeds from vehicle loans of $123,405, offset by

the repayments of notes payable and finance lease liabilities of $143,432, payments to Wolo’s seller of $3,000,000 and to Kyle’s

seller of $33,630, payments of preferred dividends of $176,950 and the payment of financing costs of $165,229. Series

A Unit Offering On

March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each

unit consists 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 $2.50 per common share (subject to adjustment), which may be exercised on a cashless basis under certain circumstances.

As described in further detail below, we contributed to 1847 Wolo the $3,000,000 raised in this offering in exchange for 1,000 shares

of 1847 Wolo’s series A preferred stock, at a price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847

Wolo. In

exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units

at a lower purchase price than such holders paid for their shares, we issued an aggregate of 398,838 common shares to such holders. Series

B Unit Offering On