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Agent”) acted as placement agent in connection with the Private Placement pursuant to a letter agreement, dated August 11, 2023,
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between the Company and the Placement Agent (the “Placement Agency Agreement”), and received (i) a cash transaction fee equal
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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
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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
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issuable upon conversion of the Notes and exercise of the Warrants at an exercise price of $ 0.2013 per share (subject to adjustment) (the
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“Placement Agent Warrant”). The Placement Agent Warrant is exercisable at any time on or after the date that is the six months
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after the date of issuance and until the fifth anniversary thereof. 24 1847
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HOLDINGS LLC NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED) Conversion of Promissory Notes As previously disclosed, on February 3,
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2023, the Company issued a promissory note in the principal amount of $ 104,000 to Mast Hill Fund, L.P. (“Mast Hill”) and
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a promissory note in the principal amount of $ 500,000 to Leonite Fund I, LP (“Leonite”). These notes (the “February
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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
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from Mast Hill and Leonite that an Event of Default has occurred under the February 3 Notes for failure to make certain payments when
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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
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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
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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,
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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
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amount of $ 1,166,667 to Leonite. These notes (the “February 9 Notes”) are convertible into the Company’s common
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shares only upon an Event of Default (as defined in the February 9 Notes). On August 9, 2023, the Company received notices
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from Mast Hill and Leonite that an Event of Default has occurred under the February 9 Notes for failure to make certain payments when
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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
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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
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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
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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
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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
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2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The
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following management’s discussion and analysis of financial condition and results of operations provides information that management
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believes is relevant to an assessment and understanding of our plans and financial condition . The following financial information
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is derived from our financial statements and should be read in conjunction with such financial statements and notes thereto set forth
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elsewhere herein. Use
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of Terms Except
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as otherwise indicated by the context and for the purposes of this report only, references in this report to “we,” “us,”
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“our” and “our company” refer to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated
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subsidiaries. References to “our manager” refer to 1847 Partners LLC, a Delaware limited liability company. Special
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Note Regarding Forward Looking Statements This
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report contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently
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available to us. All statements other than statements of historical facts are forward-looking statements. These statements relate to
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future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause
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our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity,
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performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not
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limited to, statements ab ● our
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ability to effectively integrate and operate the businesses that we acquire; ● our
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ability to successfully identify and acquire additional businesses; ● our
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organizational structure, which may limit our ability to meet our dividend and distribution
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policy; ● our
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ability to service and comply with the terms of indebtedness; ● our
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cash flow available for distribution and our ability to make distributions to our common
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shareholders; ● our
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ability to pay the management fee, profit allocation and put price to our manager when due; ● labor
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disputes, strikes or other employee disputes or grievances; ● the
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regulatory environment in which our businesses operate under; ● trends
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in the industries in which our businesses operate; ● the
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competitive environment in which our businesses operate; ● changes
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in general economic or business conditions or economic or demographic trends in the United
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States including changes in interest rates and inflation; ● our
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and our manager’s ability to retain or replace qualified employees of our businesses
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and our manager; ● casualties,
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condemnation or catastrophic failures with respect to any of our business’ facilities; ● costs
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and effects of legal and administrative proceedings, settlements, investigations and claims;
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and ● extraordinary
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or force majeure events affecting the business or operations of our businesses. In
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some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,”
|
“should,” “would,” “expect,” “plan,” “intend,” “anticipate,”
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“believe,” “estimate,” “predict,” “potential,” “project” or “continue”
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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,
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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
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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
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underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the
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forward-looking statements. No forward-looking statement is a guarantee of future performance. 26 In
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addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These
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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
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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
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forward-looking statements made in this report relate only to events or information as of the date on which the statements are made in
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this report. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking
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statements, whether as a result of new information, future events, changed circumstances or any other reason. Overview We
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are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that
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have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America. On
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May 28, 2020, our subsidiary 1847 Asien Inc., or 1847 Asien, acquired Asien’s Appliance, Inc., a California corporation, or Asien’s.
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Asien’s has been in business since 1948 serving the North Bay area of Sonoma County, California. It provides a wide variety of
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appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing. Its main
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focus is delivering personal sales and exceptional service to its customers at competitive prices. On
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September 30, 2020, our subsidiary 1847 Cabinet Inc., or 1847 Cabinet, acquired Kyle’s Custom Wood Shop, Inc., an Idaho corporation,
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or Kyle’s. Kyle’s is a leading custom cabinetry maker servicing contractors and homeowners since 1976 in Boise, Idaho and
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the surrounding area. Kyle’s focuses on designing, building, and installing custom cabinetry primarily for custom and semi-custom
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builders. On
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March 30, 2021, our subsidiary 1847 Wolo Inc., or 1847 Wolo, acquired Wolo Mfg. Corp., a New York corporation, and Wolo Industrial Horn
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& Signal, Inc., a New York corporation (which we collectively refer to as Wolo). Headquartered in Deer Park, New York and founded
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in 1965, Wolo designs and sells horn and safety products (electric, air, truck, marine, motorcycle and industrial equipment), and offers
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vehicle emergency and safety warning lights for cars, trucks, industrial equipment and emergency vehicles. On
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October 8, 2021, our subsidiary 1847 Cabinet acquired High Mountain Door & Trim Inc., a Nevada corporation, or High Mountain, and
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Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited liability company, or Innovative Cabinets. Headquartered in
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Reno, Nevada and founded in 2014, High Mountain specializes in all aspects of finished carpentry products and services, including doors,
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door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, and fireplace mantles,
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among others, working primarily with large homebuilders of single-family homes and commercial and multi-family developers. Innovative
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Cabinets is headquartered in Reno, Nevada and was founded in 2008. It specializes in custom cabinetry and countertops for a client base
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consisting of single-family homeowners, builders of multi-family homes, as well as commercial clients. On
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February 9, 2023, our subsidiary, 1847 ICU Holdings Inc., or 1847 ICU, acquired ICU Eyewear Holdings, Inc., a California corporation,
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