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include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and |
training costs. Our total personnel costs were $3,247,442 for the year ended December 31, 2021, as compared to $734,867 for the year ended |
December 31, 2020. Personnel costs for the retail and appliances |
segment were $1,013,992 for the year ended December 31, 2021 and $525,346 for the period from May 29, 2020 to December 31, 2020 following |
the acquisition of Asien’s. As a percentage of retail and appliances revenue, personnel costs for the retail and appliances segment |
were 8.0% for the year ended December 31, 2021 and 6.9% for the period from May 29, 2020 to December 31, 2020. Personnel costs for the construction segment were |
$1,518,643 for the year ended December 31, 2021, including costs from the acquisitions of High Mountain and Innovative Cabinets of $522,560 |
for the period of October 9, 2021 to December 31, 2021, and $209,521 for the period from October 1, 2020 to December 31, 2020 following |
the acquisition of Kyle’s. As a percentage of construction revenue, personnel costs for the construction segment were 12.4% for |
the year ended December 31, 2021 and 18.7% for the period from October 1, 2020 to December 31, 2020. Personnel costs for the automotive supplies segment |
were $714,807 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo. As a percentage of automotive |
supplies revenue, personnel costs for the automotive supplies segment were 12.5% for the period from April 1, 2021 to December 31, 2021. Depreciation and amortization . Our |
total depreciation and amortization expense was $908,982 for the year ended December 31, 2021, as compared to $176,612 for the year ended |
December 31, 2020. General and administrative expenses . |
Our general and administrative expenses consist primarily of professional advisor fees, stock-based compensation, bad debts reserve, rent |
expense, advertising, bank fees, and other expenses incurred in connection with general operations. Our total general and administrative |
expenses were $7,296,736 for the year ended December 31, 2021, as compared to $2,652,429 for the year ended December 31, 2020. General and administrative expenses for the retail |
and appliances segment were $1,696,267 for the year ended December 31, 2021 and $1,362,169 for the period from May 29, 2020 to December |
31, 2020 following the acquisition of Asien’s. As a percentage of retail and appliances revenue, general and administrative expenses |
for the retail and appliances segment were 13.3% for the year ended December 31, 2021 and 17.9% for the period from May 29, 2020 to December |
31, 2020. 83 General and administrative expenses for the construction |
segment were $2,064,918 for the year ended December 31, 2021, including costs from the acquisitions of High Mountain and Innovative Cabinets |
of $1,133,747 for the period of October 9, 2021 to December 31, 2021, and $394,168 for the period from October 1, 2020 to December 31, 2020 |
following the acquisition of Kyle’s. As a percentage of construction revenue, general and administrative expenses for the construction |
segment were 16.9% for the year ended December 31, 2021 and 22.9% for the period from October 1, 2020 to December 31, 2020. General and administrative expenses for the automotive |
supplies segment were $2,248,738 for the period from April 1, 2021 to December 31, 2021 following the acquisition of Wolo. As a percentage |
of automotive supplies revenue, general and administrative expenses for the automotive supplies segment were 39.3% for the period from |
April 1, 2021 to December 31, 2021. General and administrative expenses for our holding |
company increased by $390,718, or 43.6%, to $1,286,813 for the year ended December 31, 2021 from $896,092 for the year ended December |
31, 2020. The increase was due to an increase in corporate costs, professional fees and an officer severance expense, offset by stock |
compensation of $436,386 issued in the prior year period. Total other income (expense) . We |
had $2,399,119 in total other expense, net, for the year ended December 31, 2021, as compared to other expense, net, of $554,172 for |
the year ended December 31, 2020. Other expense, net, for the year ended December 31, 2021 consisted of a loss on redemption of preferred |
shares of $4,017,553, interest expense of $1,296,537, a loss on write-down of vesting note payable of $602,204 and a loss on extinguishment |
of debt of $137,692, offset by a gain on disposition of subsidiary of $3,282,804 related to the disposition of Neese, a gain on forgiveness |
of debt of $360,302, a gain on sale of property and equipment of $10,885 and other income of $876, while total other expense, net, for |
the year ended December 31, 2020 consisted of a loss on extinguishment of debt of $286,350, interest expense of $249,626 and other expense |
of $18,196. Income tax benefit (expense) . We |
had an income tax expense of $218,139 for the year ended December 31, 2021, as compared to an income tax benefit of $83,931 for the year |
ended December 31, 2020. Net loss from continuing operations . |
As a result of the cumulative effect of the factors described above, our net loss from continuing operations was $3,721,157 for the year |
ended December 31, 2021, as compared to $1,820,138 for the year ended December 31, 2020. Liquidity and Capital Resources As of December 31, 2021, we had cash and cash |
equivalents of $1,383,533. 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. 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 our manager |
pursuant to the management services agreement, potential payment of profit allocation to our manager and potential put price to our 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. Item 1 “ Business—Our Manager ” for more information concerning the management |
fee, the profit allocation and put price. The amount of management fee paid to our manager |
by us is reduced by the aggregate amount of any offsetting management fees, if any, received by our manager from any of our businesses. |
As a result, the management fee paid to our manager may fluctuate from quarter to quarter. The amount of management fee paid to our 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. 84 Our 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 subsidiary, our 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 us 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 us, multiplied by (iii) the subsidiary’s average share (determined based on gross |
assets, generally) of our consolidated net equity (determined according to GAAP with certain adjustments). In certain circumstances, after |
a subsidiary has been held for at least 5 years, our 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 ” for |
more information on the calculation of the profit allocation. Our operating agreement also contains a supplemental |
put provision, which gives our manager the right, subject to certain conditions, to cause us to purchase the allocation shares then owned |
by our 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 our manager’s |
resignation, the payment to our 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 ” |
for more information on the calculation of the put price. The put price obligation, if our 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 Cash Flow Years Ended December 31, 2021 2020 Net cash provided by (used in) operating activities from continuing operations $ (897,566 ) $ 137,500 Net cash provided by (used in) investing activities from continuing operations (15,684,770 ) 1,060,872 Net cash provided by financing activities from continuing operations 16,585,520 181,977 Net increase in cash and cash equivalents from continuing operations 3,184 1,380,349 Cash and cash equivalents at beginning of year 1,380,349 - Cash and cash equivalent at end of year $ 1,383,533 $ 1,380,349 Net cash used in operating activities from continuing |
operations was $897,566 for the year ended December 31, 2021, as compared to net cash provided by operating activities from continuing |
operations of $137,500 for the year ended December 31, 2020. For the year ended December 31, 2021, the net loss of $3,588,934, a |
gain of disposition of subsidiary of $3,282,804, a change in contract liabilities of $ 950,640 and a |
gain on forgiveness of debt of $360,302 , offset by a loss on redemption of series A senior convertible preferred shares of $4,017,553, non-cash depreciation and amortization of $908,982, an increase in accounts payable and accrued |
expenses of $719,890, a loss on write-down of contingent notes payable of $602,204, a decrease in inventory of $389,110 and a change in |
debt discounts of $382,565, were the primary drivers of the net cash used in operating activities. For the year ended December |
31, 2020, the net loss of $9,658,769, a decrease in prepaids and other costs of $495,831 and an |
increase in inventory of $565,264, offset by a gain from discontinued operations of $7,838,631, an increase in accounts payable and accrued |
expenses of $962,464 and an increase in customer deposits of $965,254, were the primary drivers of the net cash provided by operating |
activities. Net cash used in investing activities from continuing |
operations was $15,684,770 for the year ended December 31, 2021, as compared to net cash provided by investing activities from continuing |
operations of $1,060,872 for the year ended December 31, 2020. Net cash used in investing activities for the year ended December 31, 2021 |
consisted of net cash acquired in (paid for) acquisitions (Wolo, High Mountain and Innovative Cabinets) of $15,857,295 and purchase |
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