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and countertops. The Automotive Supplies Segment is comprised |
of the business of Wolo, which is based in Deer Park, NY, and 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. The Company provides general corporate services |
to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These |
services are reported under “Corporate Services” below and these include costs associated with executive management, financing |
activities and public company compliance. Cash and Cash Equivalents The Company considers all highly liquid investments |
with the original maturities of three months or less to be cash equivalents. F- 9 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Use of Estimates The preparation of financial statements in conformity |
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure |
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during |
the reporting period. Actual results could differ from those estimates. Impact of COVID-19 The impact of COVID-19 on the Company’s |
business has been considered in management’s estimates and assumptions; however, it is too early to know the full impact of COVID-19 |
or its timing on a return to more normal operations. Further, the recently enacted Coronavirus Aid, Relief and Economic Security Act (the |
“CARES Act”) provides for economic assistance loans through the United States Small Business Administration (the “SBA”). |
On April 28, 2020, Asien’s received $ 357,500 in Paycheck Protection Program (“PPP”) loans from the SBA under the CARES |
Act. The PPP provides that the PPP loans may be partially or wholly forgiven if the funds are used for certain qualifying expenses as |
described in the CARES Act. Asien’s used the proceeds from the PPP loans for qualifying expenses and to applied for forgiveness |
of the PPP loans in accordance with the terms of the CARES Act. On February 16, 2021, Asien’s received notice from Exchange |
Bank that its loan had been forgiven in its entirety by the Small Business Administration (See Note 11). Reclassifications Certain Statements of Operations reclassifications |
have been made in the presentation of the Company’s prior financial statements and accompanying notes to conform to the presentation |
for the year ended December 31, 2021. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. |
The reclassification had no impact on financial position, net income, or shareholder’s equity. Revenue Recognition and Cost of Revenue On January 1, 2018, the Company adopted Accounting |
Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) , which supersedes the revenue |
recognition requirements in ASC Topic 605, Revenue Recognition . This ASU is based on the principle that revenue is recognized |
to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to |
be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, |
and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s |
adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet. Retail and Appliances Segment The Company collects 100% of the payment for |
special-order models including tax and 50% of the payment for non-special orders from the customer at the time the order is placed. The |
Company does not incur incremental costs obtaining purchase orders from customers, however, if it did, because all contracts are less |
than a year in duration, any contract costs incurred would be expensed rather than capitalized. Performance Obligations – The revenue that |
the Company recognizes arises from orders it receives from customers. The Company performance obligations under the customer orders correspond |
to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains |
only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the |
customer can direct the use of, and obtain substantially all the benefits from, the Company’s products, which generally occurs |
when the customer assumes the risk of loss. The transfer of control generally occurs at the point of pickup, shipment, or installation. |
Once this occurs, the Company has satisfied its performance obligation and it recognizes revenue. Transaction Price ‒ The Company agrees |
with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In |
the Company’s contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the |
determination of the relative standalone selling price allocated to each performance obligation. Any sales tax that the Company collects |
concurrently with revenue-producing activities are excluded from revenue. F- 10 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Cost of revenue includes the cost of purchased |
merchandise plus freight and any applicable delivery charges from the vendor to the Company. Substantially all sales are to individual |
retail consumers (homeowners), builders and designers. The large majority of customers are homeowners and their contractors, with the |
homeowner being key in the final decisions. The Company has a diverse customer base with no one client accounting for more than 5 % of |
total revenue. Customer deposits ‒ The Company records |
customer deposits when payments are received in advance of the delivery of the merchandise. The Company expects that substantially all |
of the customer deposits will be recognized within six months as the performance obligations are satisfied. Construction Segment The Company’s construction segment revenues |
are derived primarily through contracts with customers whereby the Company specializes in all aspects of products and services relating |
to finished carpentry, custom cabinetry, and countertops. The Company recognizes revenue when control of the promised goods or services |
is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those |
goods or services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties |
are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. A contract’s transaction price is allocated |
to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Since most contracts |
are bundled to include both material and installation services, the Company combines these items into one performance obligation as the |
overall promise to transfer the individual goods or services is not separately identifiable from other promises in the contract and, |
therefore, is not distinct. The Company does offer assurance-type warranties on certain of its installed products and services that do |
not represent a separate performance obligation and, as such, do not impact the timing or extent of revenue recognition. For any contracts that are not complete at the |
reporting date, the Company recognizes revenue over time, because of the continuous transfer of control to the customer as work is performed |
at the customer’s site and, therefore, the customer controls the asset as it is being installed. The Company utilizes the cost-to-cost |
measure of progress method as it believes this best depicts the transfer of control of assets to the customer, which occurs as costs |
are incurred. When this method is used, the Company estimates the costs to complete individual contracts and record as revenue that portion |
of the total contract price that is considered complete based on the relationship of costs incurred to date to total anticipated costs. |
Unforeseen events and circumstances can alter the estimate of the costs associated with a particular contract. Total estimated costs |
at completion can be impacted by changes in productivity, scheduling, cost of labor, and materials. Additionally, external factors such |
as weather, and customer delays may affect the progress of a project’s completion, and thus the timing and amount of revenue recognition, |
cash flow, and profitability from a particular contract may be adversely affected. An insignificant portion of sales, primarily |
retail sales, is accounted for on a point-in-time basis when the sale occurs. Sales taxes, when incurred, are recorded as a liability |
and excluded from revenue on a net basis. Contracts can be subject to modification to account |
for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification |
either creates new, or changes the existing, enforceable rights and obligations. Most contract modifications are for goods or services |
that are not distinct from the existing contract due to the significant integration service provided in the context of the contract and |
are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and |
the Company’s measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue |
on a cumulative catch-up basis. All contracts are billed either contractually |
or as work is performed. Billing on long-term contracts occurs primarily on a monthly basis throughout the contract period whereby the |
Company submits progress invoices for customer payment based on actual or estimated costs incurred during the billing period. On some |
contracts, the customer may withhold payment on an invoice equal to a percentage of the invoice amount, which will be subsequently paid |
after satisfactory completion of each project. This amount is referred to as retainage and is common practice in the construction industry, |
as it allows for customers to ensure the quality of the service performed prior to full payment. The retention provisions are not considered |
a significant financing component. Cost of revenues earned include all direct material |
and labor costs and those indirect costs related to contract performance. The cost of significant uninstalled materials, re-work, or |
scrap is generally excluded from the cost-to-cost measure of progress as it is not proportionate to the entity’s progress in satisfying |
the performance obligation. F- 11 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Contract Assets and Contract Liabilities The Company records a contract asset when it |
has satisfied its performance obligation prior to billing and a contract liability when a customer payment is received prior to the satisfaction |
of the Company’s performance obligation. The difference between the beginning and ending balances of contract assets and liabilities |
primarily results from the timing of the Company’s performance and the customer’s payment. At times, the Company has a right |
to payment from previous performance that is conditional on something other than passage of time, such as retainage, which is included |
in contract assets or contract liabilities, as determined on a contract-by-contract basis. Automotive Supplies Segment The Company’s automotive supplies segment |
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. Focused on the automotive and industrial after-market, |
the Company sells its products to big-box national retail chains, through specialty and industrial distributors, as well as online/mail |
order retailers and original equipment manufacturers. The Company collects 100 % of the payment for |
internet and phone orders, including tax, from the customer at the time the order is shipped. Customers placing orders with a purchase |
order through the EDI (Electronic Data Interface) are allowed to purchase on credit and make payment after receipt of product on the |
agreed upon terms. Performance Obligations – The revenue that |
the Company recognizes arises from orders it receives from contracts with customers. The Company’s performance obligations under |
the customer orders correspond to each sale of merchandise that it makes to customers and each order generally contains only one performance |
obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct |
the use of, and obtain substantially all the benefits from, the Company’s products, which generally occurs when the customer assumes |
the risk of loss. The transfer of control generally occurs at the point of shipment of the order. Once this occurs, the Company has satisfied |
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