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

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thereof, shall be distributed among the holders of series B senior convertible preferred shares and any such other parity securities
ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any
such other parity securities if all amounts payable thereon were paid in full. Voting
Rights . The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior
convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred
shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal
of any of the provisions of the share designation or (ii) the Company’s creation or issuance of any parity securities or any senior
securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities
or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding
series B senior convertible preferred shares. Conversion
Rights . Each series B 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
by dividing the stated value ($ 3.00 per share), plus the value of the accrued, but unpaid, dividends thereon, by the conversion price
of $ 12.00 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. 19 1847 HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 24 th 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 36 th 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 $ 0.03 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. From
February 24, 2022 to March 24, 2022, the Company sold an aggregate of 426,999 units, at a price of $ 3.00 per unit, for aggregate
gross proceeds of $ 1,281,000 . From April 20, 2022 to May 19, 2022, the Company sold an aggregate of 54,567 units to our Chief
Executive Officer, Ellery W. Roberts, for aggregate gross proceeds of $ 163,700 . The Company had total issuance costs relating to
these offerings of approximately $ 15,000 , resulting in net proceeds of $ 1,429,700 . 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 $ 1,429,700 of net proceeds were allocated on a relative fair value basis of $ 1,257,650 to the series B preferred shares and $ 172,050 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 June 30, 2022 and December 31, 2021, the Company had 481,566 and 0 series B senior convertible preferred shares issued and outstanding,
respectively. During
the three months ended June 30, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares
in the amount of $ 48,983 and paid prior period accrued dividends of $29,351 . During the six months ended June 30, 2022, the Company accrued
dividends attributable to the series B senior convertible preferred shares in the amount of $ 62,743 and paid prior period accrued dividends
of $29,351 . 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. 20 1847 HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 June 30, 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 June 30, 2022 and December 31, 2021, there were 481,566 and 0 series B senior convertible preferred shares presented in mezzanine
equity, respectively. NOTE 12—SHAREHOLDERS’
DEFICIT Reverse
Stock Split The
Company’s board of directors approved a 1-for-4 reverse stock split of its issued, outstanding common shares, which became effective
August 3, 2022. See Note 1 for additional information. Common
Shares As
of June 30, 2022, the Company was authorized to issue 500,000,000 common shares. As of June 30, 2022 and December 31, 2021, the Company
had 1,248,829 and 1,210,733 common shares issued and outstanding, respectively. On
February 16, 2022, the Company issued 38,096 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 As
described in Note 11, the Company issued units during the six months ended June 30, 2022, with each unit consisting 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 $12.00 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 $7.76 per share; and (vi) various probability assumptions related to redemption,
calls and price resets. The fair value of the warrants was $428,034, or $0.89 per warrant, resulting in the amount allocated to the warrants,
based on their relative fair of $172,050, which was recorded as additional paid-in capital. The
warrants allow the holder to purchase one (1) common share at an exercise price of $12.00 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

thereof, shall be distributed among the holders of series B senior convertible preferred shares and any such other parity securities

ratably in accordance with the respective amounts that would be payable on such series B senior convertible preferred shares and any

such other parity securities if all amounts payable thereon were paid in full. Voting

Rights . The series B senior convertible preferred shares do not have any voting rights; provided that, so long as any series B senior

convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series B senior convertible preferred

shares, voting as a separate class, shall be necessary for approving, effecting or validating (i) any amendment, alteration or repeal

of any of the provisions of the share designation or (ii) the Company’s creation or issuance of any parity securities or any senior

securities. Notwithstanding the foregoing, such vote of the holders shall not be required in connection with the issuance of parity securities

or senior securities if, and so long as, the proceeds resulting from the issuance of such securities are used to redeem in full the outstanding

series B senior convertible preferred shares. Conversion

Rights . Each series B 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

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

of $ 12.00 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. 19 1847 HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 24 th 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 36 th 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 $ 0.03 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. From

February 24, 2022 to March 24, 2022, the Company sold an aggregate of 426,999 units, at a price of $ 3.00 per unit, for aggregate

gross proceeds of $ 1,281,000 . From April 20, 2022 to May 19, 2022, the Company sold an aggregate of 54,567 units to our Chief

Executive Officer, Ellery W. Roberts, for aggregate gross proceeds of $ 163,700 . The Company had total issuance costs relating to

these offerings of approximately $ 15,000 , resulting in net proceeds of $ 1,429,700 . 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 $ 1,429,700 of net proceeds were allocated on a relative fair value basis of $ 1,257,650 to the series B preferred shares and $ 172,050 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 June 30, 2022 and December 31, 2021, the Company had 481,566 and 0 series B senior convertible preferred shares issued and outstanding,

respectively. During

the three months ended June 30, 2022, the Company accrued dividends attributable to the series B senior convertible preferred shares

in the amount of $ 48,983 and paid prior period accrued dividends of $29,351 . During the six months ended June 30, 2022, the Company accrued

dividends attributable to the series B senior convertible preferred shares in the amount of $ 62,743 and paid prior period accrued dividends

of $29,351 . 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. 20 1847 HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 June 30, 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 June 30, 2022 and December 31, 2021, there were 481,566 and 0 series B senior convertible preferred shares presented in mezzanine

equity, respectively. NOTE 12—SHAREHOLDERS’

DEFICIT Reverse

Stock Split The

Company’s board of directors approved a 1-for-4 reverse stock split of its issued, outstanding common shares, which became effective

August 3, 2022. See Note 1 for additional information. Common

Shares As

of June 30, 2022, the Company was authorized to issue 500,000,000 common shares. As of June 30, 2022 and December 31, 2021, the Company

had 1,248,829 and 1,210,733 common shares issued and outstanding, respectively. On

February 16, 2022, the Company issued 38,096 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 As

described in Note 11, the Company issued units during the six months ended June 30, 2022, with each unit consisting 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 $12.00 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 $7.76 per share; and (vi) various probability assumptions related to redemption,

calls and price resets. The fair value of the warrants was $428,034, or $0.89 per warrant, resulting in the amount allocated to the warrants,

based on their relative fair of $172,050, which was recorded as additional paid-in capital. The

warrants allow the holder to purchase one (1) common share at an exercise price of $12.00 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