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

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or exercise. The securities purchase agreement contains a
participation right, which provides that, subject to certain exceptions, until the note is extinguished in its entirety, if we directly
or indirectly offer, sell, grant any option to purchase, or otherwise dispose of (or announces any offer, sale, grant or any option to
purchase or other disposition of) any of our debt, equity, or equity equivalent securities, or enter into any definitive agreement with
regard to the foregoing, we must offer to issue and sell to or exchange with the holder securities in such transaction in an amount up
to the original principal amount of the note. The securities purchase agreement also provides the holder with customary piggy-back registration
rights for the common shares underlying the note and the warrant and contains other customary representations and warranties and covenants
for a transaction of this type. 27 Underwriting Agreement On August 2, 2022, we entered into an underwriting
agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc., as representatives of the underwriters named on Schedule
1 thereto, relating to our public offering of common shares. Under the underwriting agreement, we agreed to sell 1,428,572 common shares
to the underwriters, at a purchase price per share of $3.948 (the offering price to the public of $4.20 per share minus the underwriters’
discount), and also agreed to grant to the underwriters a 45-day option to purchase up to 214,286 additional common shares, solely to
cover over-allotments, if any, at the public offering price less the underwriting discounts, pursuant to our registration statement on
Form S-1 (File No. 333-259011) under the Securities Act of 1933, as amended. On August 5, 2022, the closing of the public
offering was completed and we sold 1,428,572 common shares for total gross proceeds of $6 million. After deducting the underwriting commission
and expenses, we received net proceeds of approximately $5.2 million. Note Conversions On July 26, 2022, the Company and 1847 Cabinet
entered into a conversion agreement with Steven J. Parkey and Jose D. Garcia-Rendon, pursuant to which they agreed to convert an aggregate
of $3,360,000 of the 6% subordinated convertible promissory notes described under “ —Liquidity
and Capital Resources” below into a number of common shares equal to such conversion amount divided by the price per share
of the common shares sold in the public offering. On August 2, 2022, we issued an aggregate of 800,000 common shares upon conversion
of these notes. On July 26, 2022, the Company and 1847 Cabinet
entered into a conversion agreement with Stephen Mallatt, Jr. and Rita Mallatt, pursuant to which they agreed to convert $797,221 of
the 8% vesting promissory note described under “ —Liquidity and Capital
Resources” below into a number of common shares equal to such conversion amount divided by the price per share of the common
shares sold in the public offering. On August 2, 2022, we issued 189,815 common shares upon conversion of this note. In addition,
the 8% vesting promissory note was cancelled and 1847 Cabinet agreed to pay a sum of $558,734 to the holders on or prior to October 1,
2022. On July 26, 2022, the Company also entered into
a conversion agreement with Bevilacqua PLLC, the Company’s outside securities counsel, pursuant to which it agreed to convert $1,197,280
of the accounts payable owed to it into a number of common shares equal to such conversion amount divided by the price per share of the
common shares sold in the public offering. On August 2, 2022, the Company issued 285,067 common shares to Bevilacqua PLLC. Warrants As a result of the issuance of the note to Mast
Hill Fund, L.P. on July 8, 2022, the exercise price of certain of our outstanding warrants and the conversion price of our outstanding
convertible notes were adjusted to $5.20 pursuant to certain antidilution provisions of such warrants and convertible notes. In addition,
certain of our outstanding warrants include an “exploding” feature, whereby the exercise price was reset to $5.20 and the
number of shares underlying the warrants was increased in the same proportion as the exercise price decrease. As a result of the issuance of the common shares
upon conversion of the notes as described above at a conversion price of $4.20 per share, the exercise price of certain of our outstanding
warrants and the conversion price of our outstanding convertible notes were adjusted to $4.20 pursuant to certain antidilution provisions
of such warrants and convertible notes. In addition, certain of our outstanding warrants include an “exploding” feature,
whereby the exercise price was reset to $4.20 and the number of shares underlying the warrants was increased in the same proportion as
the exercise price decrease. In July 2022, we issued 50,002 common shares
upon cashless exercises of two warrants in which 59,633 common shares underlying the warrants were surrendered to pay the exercise price. On August 5, 2022, pursuant to the underwriting
agreement, we issued a common share purchase warrant to each representative for the purchase of 35,715 common shares at an exercise price
of $5.25, subject to adjustments. The warrants will be exercisable at any time
and from time to time, in whole or in part, during the period commencing on February 5, 2023 and ending on August 2, 2027 and may be
exercised on a cashless basis under certain circumstances. The warrants provide for registration rights (including a one-time demand
registration right and unlimited piggyback rights) and customary anti-dilution provisions (for share dividends and splits and recapitalizations)
and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting
from corporate events (which would include dividends, reorganization, mergers and similar events). Following the changes to our outstanding warrants,
the number of common shares issuable upon exercise of our outstanding warrants as of the date of this report is 3,165,319 shares. Common Share Dividend On July 29, 2022, the Company declared a common
share dividend of $0.13125 per share to shareholders of record as of August 4, 2022. This dividend will be paid on August 19, 2022. 28 Impact of Coronavirus Pandemic Starting
in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules,
social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response
to the pandemic and the need to contain it. At this time, there continues to
be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to
it will impact our business, operations and financial results. Asien’s was qualified as an essential business
and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business
interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic
has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced
and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results.
Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s
profitability and financial condition. Kyle’s was also qualified as an essential
business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful
business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their
building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during
the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment.
Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees.
Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially
as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products
and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does
not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive
employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and
experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial
condition. High Mountain was qualified as an essential business
and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did
not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High
Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety. Innovative Cabinets was also qualified as an
essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy
restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative
Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities.
Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher
supply costs, which could adversely impact its profitability and financial condition. Wolo qualified as an essential business and remained
open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business.
The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately
90% of Wolo’s vendor base is located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had
a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports
and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs
by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases
and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers.
We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position. The spread of COVID-19 has also adversely
impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The
pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability
to access capital in the future, which could negatively affect our liquidity. The extent to which the pandemic may impact
our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including
the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of
the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic
and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas
present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. 29 Management Fees On April 15, 2013, the Company and the Manager
entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee
equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management
Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any
offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid

or exercise. The securities purchase agreement contains a

participation right, which provides that, subject to certain exceptions, until the note is extinguished in its entirety, if we directly

or indirectly offer, sell, grant any option to purchase, or otherwise dispose of (or announces any offer, sale, grant or any option to

purchase or other disposition of) any of our debt, equity, or equity equivalent securities, or enter into any definitive agreement with

regard to the foregoing, we must offer to issue and sell to or exchange with the holder securities in such transaction in an amount up

to the original principal amount of the note. The securities purchase agreement also provides the holder with customary piggy-back registration

rights for the common shares underlying the note and the warrant and contains other customary representations and warranties and covenants

for a transaction of this type. 27 Underwriting Agreement On August 2, 2022, we entered into an underwriting

agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc., as representatives of the underwriters named on Schedule

1 thereto, relating to our public offering of common shares. Under the underwriting agreement, we agreed to sell 1,428,572 common shares

to the underwriters, at a purchase price per share of $3.948 (the offering price to the public of $4.20 per share minus the underwriters’

discount), and also agreed to grant to the underwriters a 45-day option to purchase up to 214,286 additional common shares, solely to

cover over-allotments, if any, at the public offering price less the underwriting discounts, pursuant to our registration statement on

Form S-1 (File No. 333-259011) under the Securities Act of 1933, as amended. On August 5, 2022, the closing of the public

offering was completed and we sold 1,428,572 common shares for total gross proceeds of $6 million. After deducting the underwriting commission

and expenses, we received net proceeds of approximately $5.2 million. Note Conversions On July 26, 2022, the Company and 1847 Cabinet

entered into a conversion agreement with Steven J. Parkey and Jose D. Garcia-Rendon, pursuant to which they agreed to convert an aggregate

of $3,360,000 of the 6% subordinated convertible promissory notes described under “ —Liquidity

and Capital Resources” below into a number of common shares equal to such conversion amount divided by the price per share

of the common shares sold in the public offering. On August 2, 2022, we issued an aggregate of 800,000 common shares upon conversion

of these notes. On July 26, 2022, the Company and 1847 Cabinet

entered into a conversion agreement with Stephen Mallatt, Jr. and Rita Mallatt, pursuant to which they agreed to convert $797,221 of

the 8% vesting promissory note described under “ —Liquidity and Capital

Resources” below into a number of common shares equal to such conversion amount divided by the price per share of the common

shares sold in the public offering. On August 2, 2022, we issued 189,815 common shares upon conversion of this note. In addition,

the 8% vesting promissory note was cancelled and 1847 Cabinet agreed to pay a sum of $558,734 to the holders on or prior to October 1,

2022. On July 26, 2022, the Company also entered into

a conversion agreement with Bevilacqua PLLC, the Company’s outside securities counsel, pursuant to which it agreed to convert $1,197,280

of the accounts payable owed to it into a number of common shares equal to such conversion amount divided by the price per share of the

common shares sold in the public offering. On August 2, 2022, the Company issued 285,067 common shares to Bevilacqua PLLC. Warrants As a result of the issuance of the note to Mast

Hill Fund, L.P. on July 8, 2022, the exercise price of certain of our outstanding warrants and the conversion price of our outstanding

convertible notes were adjusted to $5.20 pursuant to certain antidilution provisions of such warrants and convertible notes. In addition,

certain of our outstanding warrants include an “exploding” feature, whereby the exercise price was reset to $5.20 and the

number of shares underlying the warrants was increased in the same proportion as the exercise price decrease. As a result of the issuance of the common shares

upon conversion of the notes as described above at a conversion price of $4.20 per share, the exercise price of certain of our outstanding

warrants and the conversion price of our outstanding convertible notes were adjusted to $4.20 pursuant to certain antidilution provisions

of such warrants and convertible notes. In addition, certain of our outstanding warrants include an “exploding” feature,

whereby the exercise price was reset to $4.20 and the number of shares underlying the warrants was increased in the same proportion as

the exercise price decrease. In July 2022, we issued 50,002 common shares

upon cashless exercises of two warrants in which 59,633 common shares underlying the warrants were surrendered to pay the exercise price. On August 5, 2022, pursuant to the underwriting

agreement, we issued a common share purchase warrant to each representative for the purchase of 35,715 common shares at an exercise price

of $5.25, subject to adjustments. The warrants will be exercisable at any time

and from time to time, in whole or in part, during the period commencing on February 5, 2023 and ending on August 2, 2027 and may be

exercised on a cashless basis under certain circumstances. The warrants provide for registration rights (including a one-time demand

registration right and unlimited piggyback rights) and customary anti-dilution provisions (for share dividends and splits and recapitalizations)

and anti-dilution protection (adjustment in the number and price of such warrants and the shares underlying such warrants) resulting

from corporate events (which would include dividends, reorganization, mergers and similar events). Following the changes to our outstanding warrants,

the number of common shares issuable upon exercise of our outstanding warrants as of the date of this report is 3,165,319 shares. Common Share Dividend On July 29, 2022, the Company declared a common

share dividend of $0.13125 per share to shareholders of record as of August 4, 2022. This dividend will be paid on August 19, 2022. 28 Impact of Coronavirus Pandemic Starting

in late 2019, a novel strain of the coronavirus, or COVID-19, began to rapidly spread around the world and every state in the United States. Most states and cities have at various times instituted quarantines, restrictions on travel, “stay at home” rules,

social distancing measures and restrictions on the types of businesses that could continue to operate, as well as guidance in response

to the pandemic and the need to contain it. At this time, there continues to

be significant volatility and uncertainty relating to the full extent to which the COVID-19 pandemic and the various responses to

it will impact our business, operations and financial results. Asien’s was qualified as an essential business

and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful business

interruption. However, Asien’s is dependent upon suppliers to provide it with all of the products that its sells. The pandemic

has impacted and may continue to impact suppliers and manufacturers of certain of its products. As a result, Asien’s has faced

and may continue to face delays or difficulty sourcing certain products, which could negatively affect its business and financial results.

Even if Asien’s is able to find alternate sources for such products, they may cost more, which could adversely impact Asien’s

profitability and financial condition. Kyle’s was also qualified as an essential

business and remained open during the pandemic, with certain occupancy restrictions at times, so it did not experience any meaningful

business interruption. However, certain key customers of Kyle’s elected to either temporarily stop building homes or delayed their

building process, particularly during the second quarter of 2020, which adversely affected Kyle’s sales. Further, early on during

the pandemic, several of Kyle’s employees had taken time off because of medical issues, and some of them did not return to employment.

Kyle’s has been hiring and training new employees to replace lost productivity because of the aforementioned loss of employees.

Kyle’s did not experience any meaningful business interruption related to any of its key suppliers; although recently, potentially

as a result of the pandemic and resulting impact, Kyle’s has seen price increases in certain key raw materials such as wood products

and hardware. These increases may negatively affect Kyle’s profitability and financial condition. If the pace of the pandemic does

not continue to slow, it may continue to negatively affect Kyle’s ability to generate sales opportunities and to hire productive

employees, as well as impact the cost of raw materials. Therefore, Kyle’s business operations may experience further delays and

experience lost sales opportunities and increased costs, which could further adversely impact Kyle’s profitability and financial

condition. High Mountain was qualified as an essential business

and remained open during the pandemic. As it followed both federal and Nevada state guidelines regarding occupancy restrictions, it did

not experience significant business disruptions, although it did experience some loss of productivity due to employee absences. High

Mountain continues to comply with Nevada state and CDC guidelines regarding workplace safety. Innovative Cabinets was also qualified as an

essential business and thus remained open during the pandemic, while complying with federal and Nevada state guidelines regarding occupancy

restrictions. However, since a substantive amount of its materials come from Asia, where its manufacturing network is located, Innovative

Cabinets did experience longer supply chain lead-times and higher logistics costs. It has been exploring alternative sourcing opportunities.

Given the prevailing market conditions for building supplies and materials, it may continue to experience supply chain issues and higher

supply costs, which could adversely impact its profitability and financial condition. Wolo qualified as an essential business and remained

open during the pandemic. At no time during the pandemic did it experience an internal contamination forcing it to stop its business.

The pandemic has had a dramatic impact on Wolo’s supply chain as it has on others in the automotive aftermarket. Approximately

90% of Wolo’s vendor base is located in China. The pandemic issues impacting ports in the U.S. due to lack of personnel has had

a ripple effect on Chinese suppliers. Containers are slow to be emptied in the U.S., causing a backlog of ships waiting to get into ports

and limiting containers and ships returning to China. The lack of containers and available space on ships has escalated shipping costs

by over 300% from 2020. Costs for raw materials have also started to increase due to availability. Wolo cannot absorb these increases

and began passing on a price increase to customers starting June 1, 2021, although the effective date may be later for some customers.

We believe that this is an industry-wide issue and that it should not put Wolo in an unfavorable pricing position. The spread of COVID-19 has also adversely

impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The

pandemic has resulted, and may continue to result, in a significant disruption of global financial markets, which may reduce our ability

to access capital in the future, which could negatively affect our liquidity. The extent to which the pandemic may impact

our results will depend on future developments, which are highly uncertain and cannot be predicted as of the date of this report, including

the effectiveness of vaccines and other treatments for COVID-19, and other new information that may emerge concerning the severity of

the pandemic and steps taken to contain the pandemic or treat its impact, among others. Nevertheless, the pandemic

and the current financial, economic and capital markets environment, and future developments in the global supply chain and other areas

present material uncertainty and risk with respect to our performance, financial condition, results of operations and cash flows. 29 Management Fees On April 15, 2013, the Company and the Manager

entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee

equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management

Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any

offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid