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Agent”) acted as placement agent in connection with the Private Placement pursuant to a letter agreement, dated August 11, 2023,
between the Company and the Placement Agent (the “Placement Agency Agreement”), and received (i) a cash transaction fee equal
to 6 % of the aggregate gross proceeds, (ii) a non-accountable and non-reimbursable due diligence and expense fee equal to 1 % of the aggregate
gross proceeds and (iii) a warrant for the purchase of a number of common shares equal to eight percent ( 8 %) of the number common shares
issuable upon conversion of the Notes and exercise of the Warrants at an exercise price of $ 0.2013 per share (subject to adjustment) (the
“Placement Agent Warrant”). The Placement Agent Warrant is exercisable at any time on or after the date that is the six months
after the date of issuance and until the fifth anniversary thereof. 24 1847
HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED) Conversion of Promissory Notes As previously disclosed, on February 3,
2023, the Company issued a promissory note in the principal amount of $ 104,000 to Mast Hill Fund, L.P. (“Mast Hill”) and
a promissory note in the principal amount of $ 500,000 to Leonite Fund I, LP (“Leonite”). These notes (the “February
3 Notes”) are convertible into the Company’s common shares only upon an Event of Default (as defined in the February 3 Notes). On August 4, 2023, the Company received notices
from Mast Hill and Leonite that an Event of Default has occurred under the February 3 Notes for failure to make certain payments when
due. Mast Hill and Leonite agreed in writing that they will not require any payments in cash for the over-due amounts or accelerate the
payments due under the February 3 Notes for a period of 60 days. Since an Event of Default has occurred, Mast Hill and Leonite have the
right to convert the February 3 Notes, including the over-due amounts, into common shares at their election. On August 4, 2023, Mast Hill converted $ 72,561 of principal and certain penalties and fees into 553,505 common shares. On August 4, 2023, Leonite converted $ 329,440 of principal and interest into 2,000,000 common shares. As previously disclosed, on February 9,
2023, the Company issued a promissory note in the principal amount of $ 1,390,909 to Mast Hill and a promissory note in the principal
amount of $ 1,166,667 to Leonite. These notes (the “February 9 Notes”) are convertible into the Company’s common
shares only upon an Event of Default (as defined in the February 9 Notes). On August 9, 2023, the Company received notices
from Mast Hill and Leonite that an Event of Default has occurred under the February 9 Notes for failure to make certain payments when
due. Mast Hill and Leonite agreed in writing that they will not require any payments in cash for the over-due amounts or accelerate the
payments due under the February 9 Notes for a period of 60 days. Since an Event of Default has occurred, Mast Hill and Leonite have the
right to convert the February 9 Notes, including the over-due amounts, into common shares at their election. On August 9, 2023, Mast Hill converted $ 100,000 of penalties and fees into 672,043 common shares. Conversion of Preferred Shares Subsequent to June 30, 2023, the Company issued
an aggregate of 14,390,404 common shares upon the conversion of an aggregate of 1,306,667 series A senior convertible preferred shares. Subsequent to June 30, 2023, the Company issued
an aggregate of 1,529,263 common shares upon the conversion of an aggregate of 100,333 series B senior convertible preferred shares. Common Shares Issued as Payment of Dividends On July 30, 2023, the Company issued 1,178,727 as payment of dividends on the series A senior convertible preferred shares and series B senior convertible preferred shares. 25 ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The
following management’s discussion and analysis of financial condition and results of operations provides information that management
believes is relevant to an assessment and understanding of our plans and financial condition . The following financial information
is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth
elsewhere herein. Use
of Terms Except
as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,”
“our” and “our company” refer to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated
subsidiaries. References to “our manager” refer to 1847 Partners LLC, a Delaware limited liability company. Special
Note Regarding Forward Looking Statements This
report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently
available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to
future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not
limited to, statements ab ● our
ability to effectively integrate and operate the businesses that we acquire; ● our
ability to successfully identify and acquire additional businesses; ● our
organizational structure, which may limit our ability to meet our dividend and distribution
policy; ● our
ability to service and comply with the terms of indebtedness; ● our
cash flow available for distribution and our ability to make distributions to our common
shareholders; ● our
ability to pay the management fee, profit allocation and put price to our manager when due; ● labor
disputes, strikes or other employee disputes or grievances; ● the
regulatory environment in which our businesses operate under; ● trends
in the industries in which our businesses operate; ● the
competitive environment in which our businesses operate; ● changes
in general economic or business conditions or economic or demographic trends in the United
States including changes in interest rates and inflation; ● our
and our manager’s ability to retain or replace qualified employees of our businesses
and our manager; ● casualties,
condemnation or catastrophic failures with respect to any of our business’ facilities; ● costs
and effects of legal and administrative proceedings, settlements, investigations and claims;
and ● extraordinary
or force majeure events affecting the business or operations of our businesses. In
some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,”
“should,” “would,” “expect,” “plan,” “intend,” “anticipate,”
“believe,” “estimate,” “predict,” “potential,” “project” or “continue”
or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance
on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases,
beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current
expectations include, among other things, those listed under Item 1A “Risk Factors” included in our Annual Report on Form
10-K for the year ended December 31, 2022 and elsewhere in this report. If one or more of these risks or uncertainties occur, or if our
underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the
forward-looking statements. No forward-looking statement is a guarantee of future performance. 26 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. 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,