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

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six months ended June 30, 2021 consisted of a gain on the disposition of 1847 Neese of $3,282,804 and a gain on forgiveness of debt of
$360,302, offset by a loss on the issuance of adjustment shares of $757,792 as described below, interest expense of $181,633, and other
expense of $3,539. The significant increase in interest expense was primarily a result of convertible debt issuances during the fourth
quarter of 2021 in order to help finance the acquisitions of High Mountain and Innovative Cabinets. Income tax benefit . We
had an income tax benefit of $316,000 for the six months ended June 30, 2022, as compared to $21,900 for the six months ended June 30,
2021. Net income (loss) from continuing operations .
As a result of the cumulative effect of the factors described above, our net loss from continuing operations was $1,074,876 for the six
months ended June 30, 2022, as compared to a net income of $2,130,856 for the six months ended June 30, 2021. Liquidity and Capital Resources As of June 30, 2022, we had cash and cash equivalents
of $1,326,736. 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. 35 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 Six Months
Ended June 30, 2022 2021 Net cash used in operating activities from continuing operations $ (615,446 ) $ (60,575 ) Net cash used in investing activities from continuing operations (157,830 ) (5,339,252 ) Net cash provided by financing activities from continuing operations 716,479 5,497,002 Net change in cash and cash equivalents from continuing operations (56,797 ) 97,175 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 $ 1,326,736 $ 1,477,524 Net cash used in operating activities from continuing
operations was $615,446 for the six months ended June 30, 2022, as compared to $60,575 for the six months ended June 30, 2021. The increase
in cash used from operating activities during the six months ended June 30, 2022 was primarily a result of increased receivables, decreased
contract liabilities, decreased deferred tax liability, offset by decreased inventories, increased accounts payable and accrued expenses,
and decreased prepaids and other current assets. 36 Net cash used in investing activities from continuing
operations was $157,830 for the six months ended June 30, 2022, as compared to $5,339,252 for the six months ended June 30, 2021. The
decrease in cash used from investing activities during the six months ended June 30, 2022 was primarily a result of the cash paid in
acquisitions during the comparable period. Net cash provided by financing activities from
continuing operations was $716,479 for the six months ended June 30, 2022, as compared to $5,497,002 for the six months ended June 30,
2021. The decrease in cash provided from investing activities during the six months ended June 30, 2022 was primarily a result of decreased
proceeds from preferred shares and notes payable issuances and increased dividend payments, offset by decreased notes payable payments. 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 $10.00 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 99,710 common shares to such holders. Series B Unit Offering 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 $12.00 per share (subject to adjustment), which may be exercised on a cashless basis under certain
circumstances. Subscription Agreement On March 29, 2021, we entered into a subscription
agreement with 1847 Wolo, pursuant to which 1847 Wolo issued 1,000 shares of its series A preferred stock to us for gross proceeds
to 1847 Wolo of $3,000,000. The series A preferred stock has no voting rights and is not convertible into the common stock or any other
securities of 1847 Wolo. Dividends at the rate per annum of 16.0% of the stated value of $3,000 per share shall accrue on the series
A preferred stock (subject to adjustment) and shall accrue from day to day, whether or not declared, and shall be cumulative. Accruing
dividends are payable quarterly in arrears on each of the following dividend payment dat January 15, April 15, July 15 and October
15 beginning on April 15, 2021. Upon any liquidation, dissolution or winding up of 1847 Wolo, before any payment shall be made to the
holders of 1847 Wolo’s common stock, the series A preferred stock then outstanding shall be entitled to be paid out of the funds
and assets available for distribution to 1847 Wolo’s stockholders an amount per share equal to the stated value of $3,000 per share,
plus any accrued, but unpaid dividends. Debt Secured Convertible
Promissory Notes On October 8, 2021, we and each of our subsidiaries
1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain and Innovative Cabinets, entered into a note purchase
agreement with two institutional investors, including Leonite, pursuant to which we issued to these purchasers secured convertible promissory
notes in the aggregate principal amount of $24,860,000. The notes contain an aggregate original issue discount of $497,200. As a result,
the total purchase price was $24,362,800. After payment of expenses of $617,825, we received net proceeds of $23,744,975, of which $10,687,500
was used to fund the cash portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets. In addition, as
consideration for the financing, we granted the financing agent 187,500 warrants with a fair value of $956,526 and 7.5% interest in High
Mountain and Innovative Cabinets which had a fair value of $1,146,803. The agent fees were reflected as a discount against the convertible
note payable with the warrants being included in additional paid in capital and the equity interest being including within noncontrolling
interest on the consolidated balance sheet. The remaining principal balance of the notes at June 30, 2022 is $22,108,707, net of debt
discounts of $2,751,293, and they have accrued interest of $495,200. 37 The notes bear interest

six months ended June 30, 2021 consisted of a gain on the disposition of 1847 Neese of $3,282,804 and a gain on forgiveness of debt of

$360,302, offset by a loss on the issuance of adjustment shares of $757,792 as described below, interest expense of $181,633, and other

expense of $3,539. The significant increase in interest expense was primarily a result of convertible debt issuances during the fourth

quarter of 2021 in order to help finance the acquisitions of High Mountain and Innovative Cabinets. Income tax benefit . We

had an income tax benefit of $316,000 for the six months ended June 30, 2022, as compared to $21,900 for the six months ended June 30,

2021. Net income (loss) from continuing operations .

As a result of the cumulative effect of the factors described above, our net loss from continuing operations was $1,074,876 for the six

months ended June 30, 2022, as compared to a net income of $2,130,856 for the six months ended June 30, 2021. Liquidity and Capital Resources As of June 30, 2022, we had cash and cash equivalents

of $1,326,736. 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. 35 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 Six Months

Ended June 30, 2022 2021 Net cash used in operating activities from continuing operations $ (615,446 ) $ (60,575 ) Net cash used in investing activities from continuing operations (157,830 ) (5,339,252 ) Net cash provided by financing activities from continuing operations 716,479 5,497,002 Net change in cash and cash equivalents from continuing operations (56,797 ) 97,175 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 $ 1,326,736 $ 1,477,524 Net cash used in operating activities from continuing

operations was $615,446 for the six months ended June 30, 2022, as compared to $60,575 for the six months ended June 30, 2021. The increase

in cash used from operating activities during the six months ended June 30, 2022 was primarily a result of increased receivables, decreased

contract liabilities, decreased deferred tax liability, offset by decreased inventories, increased accounts payable and accrued expenses,

and decreased prepaids and other current assets. 36 Net cash used in investing activities from continuing

operations was $157,830 for the six months ended June 30, 2022, as compared to $5,339,252 for the six months ended June 30, 2021. The

decrease in cash used from investing activities during the six months ended June 30, 2022 was primarily a result of the cash paid in

acquisitions during the comparable period. Net cash provided by financing activities from

continuing operations was $716,479 for the six months ended June 30, 2022, as compared to $5,497,002 for the six months ended June 30,

2021. The decrease in cash provided from investing activities during the six months ended June 30, 2022 was primarily a result of decreased

proceeds from preferred shares and notes payable issuances and increased dividend payments, offset by decreased notes payable payments. 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 $10.00 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 99,710 common shares to such holders. Series B Unit Offering 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 $12.00 per share (subject to adjustment), which may be exercised on a cashless basis under certain

circumstances. Subscription Agreement On March 29, 2021, we entered into a subscription

agreement with 1847 Wolo, pursuant to which 1847 Wolo issued 1,000 shares of its series A preferred stock to us for gross proceeds

to 1847 Wolo of $3,000,000. The series A preferred stock has no voting rights and is not convertible into the common stock or any other

securities of 1847 Wolo. Dividends at the rate per annum of 16.0% of the stated value of $3,000 per share shall accrue on the series

A preferred stock (subject to adjustment) and shall accrue from day to day, whether or not declared, and shall be cumulative. Accruing

dividends are payable quarterly in arrears on each of the following dividend payment dat January 15, April 15, July 15 and October

15 beginning on April 15, 2021. Upon any liquidation, dissolution or winding up of 1847 Wolo, before any payment shall be made to the

holders of 1847 Wolo’s common stock, the series A preferred stock then outstanding shall be entitled to be paid out of the funds

and assets available for distribution to 1847 Wolo’s stockholders an amount per share equal to the stated value of $3,000 per share,

plus any accrued, but unpaid dividends. Debt Secured Convertible

Promissory Notes On October 8, 2021, we and each of our subsidiaries

1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain and Innovative Cabinets, entered into a note purchase

agreement with two institutional investors, including Leonite, pursuant to which we issued to these purchasers secured convertible promissory

notes in the aggregate principal amount of $24,860,000. The notes contain an aggregate original issue discount of $497,200. As a result,

the total purchase price was $24,362,800. After payment of expenses of $617,825, we received net proceeds of $23,744,975, of which $10,687,500

was used to fund the cash portion of the purchase price for the acquisition of High Mountain and Innovative Cabinets. In addition, as

consideration for the financing, we granted the financing agent 187,500 warrants with a fair value of $956,526 and 7.5% interest in High

Mountain and Innovative Cabinets which had a fair value of $1,146,803. The agent fees were reflected as a discount against the convertible

note payable with the warrants being included in additional paid in capital and the equity interest being including within noncontrolling

interest on the consolidated balance sheet. The remaining principal balance of the notes at June 30, 2022 is $22,108,707, net of debt

discounts of $2,751,293, and they have accrued interest of $495,200. 37 The notes bear interest