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

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of future performance. In addition, statements that “we believe”
and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available
to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information
may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or
review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to
unduly rely upon these statements. 19 The forward-looking statements made in this report
relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the
federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new
information, future events, changed circumstances or any other reason. Overview We are an acquisition holding company focused
on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million,
in a variety of different industries headquartered in North America. On May 28, 2020, our subsidiary 1847 Asien Inc.,
or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s. Asien’s has been in business
since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales,
delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and
exceptional service to its customers at competitive prices. On September 30, 2020, our subsidiary 1847 Cabinet
Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading
custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses
on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders. On March 30, 2021, our subsidiary 1847 Wolo Inc.,
or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation (which
we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded in 1965, Wolo designs and sells horn and safety products
(electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning lights for cars,
trucks, industrial equipment and emergency vehicles. On October 8, 2021, our subsidiary 1847 Cabinet
acquired High Mountain Door & Trim Inc., a Nevada corporation, or High Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets &
Design, a Nevada limited liability company, or Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain specializes
in all aspects of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom
sinks and cabinets, bookcases, built-in closets, and fireplace mantles, among others, working primarily with large homebuilders of single-family
homes and commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes
in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well
as commercial clients. On February 9, 2023, our subsidiary, 1847 ICU
Holdings Inc., or 1847 ICU, acquired ICU Eyewear Holdings, Inc., a California corporation, and its subsidiary ICU Eyewear, Inc., a California
corporation, which we collectively refer to as ICU Eyewear. Headquartered in Hollister, California and founded in 1956, ICU Eyewear specializes
in the sale and distribution of reading eyewear and sunglasses, blue light blocking eyewear, sun readers, and other outdoor specialty
sunglasses, as well as select health and personal care items, including face masks. Through our structure, we offer investors an opportunity
to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity
firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition
strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increase common
shareholder value over time. We seek to acquire controlling interests in small
businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable
earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in
place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive
purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses.
We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements. Recent Developments Amendment to 6% Amortizing Promissory Note On April 6, 2023, we entered into an amendment
to the 6% amortizing promissory note described in “ —Liquidity and Capital Resources—Debt—6% Amortizing Promissory
Note ” below, effective retroactively to October 20, 2022. Pursuant to the amendment, the parties agreed to extend the maturity
date of the note to July 30, 2023 and revised the repayment terms so that the outstanding principal amount and all accrued interest thereon
shall be payable in three payments on April 6, 2023, June 30, 2023 and July 30, 2023. As additional consideration for entering into the
amendment, we also agreed to pay an amendment fee of $84,362 on the maturity date. Amendments to Securities Purchase Agreements On May 15, 2023, we entered into amendments to the securities purchase agreements relating to the series A senior convertible preferred
shares and series B senior convertible preferred shares, pursuant to which the securities purchase agreements were amended to include
a provision requiring the exercise of warrants issued pursuant to such securities purchase agreements for the issuance of a number of
common shares equal to the quotient of (i) eighty percent (80%) of the Black Scholes Value of the warrants divided by (ii) the applicable
exercise price of the warrants. We expect to issue a forced exercise notice on May 16, 2023 with the requisite shares being issued on
May 17, 2023. We are effecting the forced exercise in part to eliminate the anti-dilution adjustment provisions of the warrants, including
the “exploding” feature of the warrants issued in connection with the series A preferred financing which would result not
just in the exercise price of the warrants being reduced, but in the number of underlying warrant shares being increased proportionately. 20 Management Fees On April 15, 2013, we and our manager entered
into a management services agreement, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% of
our adjusted net assets for services performed (which we refer to as 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 our 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) our manager as of the end of such fiscal quarter, and (iii) increased by the amount of
any outstanding accrued and unpaid parent management fees. We did not expense any parent management fees for the three months ended March
31, 2023 and 2022. 1847 Asien entered into an offsetting management
services agreement with our manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with our manager
on August 21, 2020 (which was amended and restated on October 8, 2021), 1847 Wolo entered into an offsetting management services agreement
with our manager on March 30, 2021 and 1847 ICU entered into an offsetting management services agreement with our manager on February
9, 2023. Pursuant to the offsetting management services agreements, each of 1847 Asien, 1847 Wolo and 1847 ICU appointed our 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) and 1847 Cabinet appointed our 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; 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 our 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 our manager under other offsetting management services agreements. Each of these entities shall also reimburse our
manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs
and expenses, which are actually incurred by our manager or its affiliates on behalf of these entities in connection with performing services
under the offsetting management services agreements. 1847 Asien expensed management fees of $75,000
for the three months ended March 31, 2023 and 2022. 1847 Cabinet expensed management fees of $125,000
for the three months ended March 31, 2023 and 2022. 1847 Wolo expensed management fees of $75,000
for the three months ended March 31, 2023 and 2022. 1847 ICU expensed management fees of $0 for the
three months ended March 31, 2023. On a consolidated basis, our company expensed
total management fees of $275,000 for the three months ended March 31, 2023 and 2022, respectively. Segments The Financial Accounting Standards Board, or FASB,
Accounting Standard Codification, or ASC, Topic 280, Segment Reporting , requires that an enterprise report selected information
about reportable segments in its financial reports issued to its shareholders. As of March 31, 2023, we have four reportable segments
– the retail and appliances segment, which is operated by Asien’s, the retail and eyewear segment, which is operated by ICU
Eyewear, the construction segment, which is operated by Kyle’s, High Mountain and Innovative Cabinets, and the automotive supplies
segment, which is operated by Wolo. The retail and appliances segment provides a wide
variety of appliance products (laundry, refrigeration, cooking, dishwashers, outdoor, accessories, parts, and other appliance related
products) and services (delivery, installation, service and repair, extended warranties, and financing). The retail and eyewear segment provides a wide
variety of eyewear products (non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers and outdoor specialty
sunglasses). The construction segment provides finished carpentry
products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace
mantles, windows, and custom design and build of cabinetry and countertops). The automotive supplies segment provides horn
and safety products (electric, air, truck, marine, motorcycle, and industrial equipment), and offers vehicle emergency and safety warning
lights for cars, trucks, industrial equipment, and emergency vehicles. We provide general corporate services to our segments;
however, these services are not considered when making operating decisions and assessing segment performance. These services are reported
under “Corporate Services” below and these include costs associated with executive management, financing activities and public
company compliance. 21 Results of Operations Comparison of the Three Months Ended March
31, 2023 and 2022 The following table sets forth key components
of our results of operations during the three months ended March 31, 2023 and 2022, both in dollars and as a percentage of our revenues. Three Months Ended March 31, 2023 2022 Amount %
of Revenues Amount %

of future performance. In addition, statements that “we believe”

and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available

to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information

may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or

review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to

unduly rely upon these statements. 19 The forward-looking statements made in this report

relate only to events or information as of the date on which the statements are made in this report. Except as expressly required by the

federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new

information, future events, changed circumstances or any other reason. Overview We are an acquisition holding company focused

on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million,

in a variety of different industries headquartered in North America. On May 28, 2020, our subsidiary 1847 Asien Inc.,

or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s. Asien’s has been in business

since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of appliance services, including sales,

delivery/installation, in-home service and repair, extended warranties, and financing. Its main focus is delivering personal sales and

exceptional service to its customers at competitive prices. On September 30, 2020, our subsidiary 1847 Cabinet

Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation, or Kyle’s. Kyle’s is a leading

custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and the surrounding area. Kyle’s focuses

on designing, building, and installing custom cabinetry primarily for custom and semi-custom builders. On March 30, 2021, our subsidiary 1847 Wolo Inc.,

or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn & Signal, Inc., a New York corporation (which

we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded in 1965, Wolo designs and sells horn and safety products

(electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning lights for cars,

trucks, industrial equipment and emergency vehicles. On October 8, 2021, our subsidiary 1847 Cabinet

acquired High Mountain Door & Trim Inc., a Nevada corporation, or High Mountain, and Sierra Homes, LLC d/b/a Innovative Cabinets &

Design, a Nevada limited liability company, or Innovative Cabinets. Headquartered in Reno, Nevada and founded in 2014, High Mountain specializes

in all aspects of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom

sinks and cabinets, bookcases, built-in closets, and fireplace mantles, among others, working primarily with large homebuilders of single-family

homes and commercial and multi-family developers. Innovative Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes

in custom cabinetry and countertops for a client base consisting of single-family homeowners, builders of multi-family homes, as well

as commercial clients. On February 9, 2023, our subsidiary, 1847 ICU

Holdings Inc., or 1847 ICU, acquired ICU Eyewear Holdings, Inc., a California corporation, and its subsidiary ICU Eyewear, Inc., a California

corporation, which we collectively refer to as ICU Eyewear. Headquartered in Hollister, California and founded in 1956, ICU Eyewear specializes

in the sale and distribution of reading eyewear and sunglasses, blue light blocking eyewear, sun readers, and other outdoor specialty

sunglasses, as well as select health and personal care items, including face masks. Through our structure, we offer investors an opportunity

to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity

firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition

strategies will allow us to achieve our goals to make and grow regular distributions to our common shareholders and increase common

shareholder value over time. We seek to acquire controlling interests in small

businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable

earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in

place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive

purchaser of their businesses. We make these businesses our majority-owned subsidiaries and actively manage and grow such businesses.

We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements. Recent Developments Amendment to 6% Amortizing Promissory Note On April 6, 2023, we entered into an amendment

to the 6% amortizing promissory note described in “ —Liquidity and Capital Resources—Debt—6% Amortizing Promissory

Note ” below, effective retroactively to October 20, 2022. Pursuant to the amendment, the parties agreed to extend the maturity

date of the note to July 30, 2023 and revised the repayment terms so that the outstanding principal amount and all accrued interest thereon

shall be payable in three payments on April 6, 2023, June 30, 2023 and July 30, 2023. As additional consideration for entering into the

amendment, we also agreed to pay an amendment fee of $84,362 on the maturity date. Amendments to Securities Purchase Agreements On May 15, 2023, we entered into amendments to the securities purchase agreements relating to the series A senior convertible preferred

shares and series B senior convertible preferred shares, pursuant to which the securities purchase agreements were amended to include

a provision requiring the exercise of warrants issued pursuant to such securities purchase agreements for the issuance of a number of

common shares equal to the quotient of (i) eighty percent (80%) of the Black Scholes Value of the warrants divided by (ii) the applicable

exercise price of the warrants. We expect to issue a forced exercise notice on May 16, 2023 with the requisite shares being issued on

May 17, 2023. We are effecting the forced exercise in part to eliminate the anti-dilution adjustment provisions of the warrants, including

the “exploding” feature of the warrants issued in connection with the series A preferred financing which would result not

just in the exercise price of the warrants being reduced, but in the number of underlying warrant shares being increased proportionately. 20 Management Fees On April 15, 2013, we and our manager entered

into a management services agreement, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% of

our adjusted net assets for services performed (which we refer to as 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 our 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) our manager as of the end of such fiscal quarter, and (iii) increased by the amount of

any outstanding accrued and unpaid parent management fees. We did not expense any parent management fees for the three months ended March

31, 2023 and 2022. 1847 Asien entered into an offsetting management

services agreement with our manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services agreement with our manager

on August 21, 2020 (which was amended and restated on October 8, 2021), 1847 Wolo entered into an offsetting management services agreement

with our manager on March 30, 2021 and 1847 ICU entered into an offsetting management services agreement with our manager on February

9, 2023. Pursuant to the offsetting management services agreements, each of 1847 Asien, 1847 Wolo and 1847 ICU appointed our 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) and 1847 Cabinet appointed our 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; 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 our 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 our manager under other offsetting management services agreements. Each of these entities shall also reimburse our

manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket costs

and expenses, which are actually incurred by our manager or its affiliates on behalf of these entities in connection with performing services

under the offsetting management services agreements. 1847 Asien expensed management fees of $75,000

for the three months ended March 31, 2023 and 2022. 1847 Cabinet expensed management fees of $125,000

for the three months ended March 31, 2023 and 2022. 1847 Wolo expensed management fees of $75,000

for the three months ended March 31, 2023 and 2022. 1847 ICU expensed management fees of $0 for the

three months ended March 31, 2023. On a consolidated basis, our company expensed

total management fees of $275,000 for the three months ended March 31, 2023 and 2022, respectively. Segments The Financial Accounting Standards Board, or FASB,

Accounting Standard Codification, or ASC, Topic 280, Segment Reporting , requires that an enterprise report selected information

about reportable segments in its financial reports issued to its shareholders. As of March 31, 2023, we have four reportable segments

– the retail and appliances segment, which is operated by Asien’s, the retail and eyewear segment, which is operated by ICU

Eyewear, the construction segment, which is operated by Kyle’s, High Mountain and Innovative Cabinets, and the automotive supplies

segment, which is operated by Wolo. The retail and appliances segment provides a wide

variety of appliance products (laundry, refrigeration, cooking, dishwashers, outdoor, accessories, parts, and other appliance related

products) and services (delivery, installation, service and repair, extended warranties, and financing). The retail and eyewear segment provides a wide

variety of eyewear products (non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers and outdoor specialty

sunglasses). The construction segment provides finished carpentry

products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace

mantles, windows, and custom design and build of cabinetry and countertops). The automotive supplies segment provides horn

and safety products (electric, air, truck, marine, motorcycle, and industrial equipment), and offers vehicle emergency and safety warning

lights for cars, trucks, industrial equipment, and emergency vehicles. We provide general corporate services to our segments;

however, these services are not considered when making operating decisions and assessing segment performance. These services are reported

under “Corporate Services” below and these include costs associated with executive management, financing activities and public

company compliance. 21 Results of Operations Comparison of the Three Months Ended March

31, 2023 and 2022 The following table sets forth key components

of our results of operations during the three months ended March 31, 2023 and 2022, both in dollars and as a percentage of our revenues. Three Months Ended March 31, 2023 2022 Amount %

of Revenues Amount %