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and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the |
proper authority to execute them within the look-forward period. The Company has generated operating losses since |
its inception and has relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related |
party debt to support cashflow from operations. For the year ended December 31, 2021, the Company incurred operating losses from continuing |
operations of $ 3,721,157 (before deducting losses attributable to non-controlling interests and excluding net income from discontinued |
operations), cash flows used in operations of $ 897,566 (excluding the cashflow from discontinued operations) and negative working capital |
of $ 1,295,692 (excluding the negative working capital from discontinued operations). Management has prepared estimates of operations |
for fiscal year 2022 and believes that sufficient funds will be generated from operations to fund its operations and to service its debt |
obligations for one year from the date of the filing of the consolidated financial statements in the Company’s Annual Report on |
Form 10-K, which indicate improved operations and the Company’s ability to continue operations as a going concern. The impact of COVID-19 on the Company’s |
business has been considered in these 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 CARES Act provides for economic assistance loans through the SBA. On April 28, |
2020, Asien’s received $ 357,500 in 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 SBA. The accompanying consolidated financial statements |
have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities |
in the normal course of business. F- 15 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Management believes that based on relevant conditions |
and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of the consolidated financial |
statements in the Company’s Annual Report on Form 10-K indicate improved operations and the Company’s ability to continue |
operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations |
not improve in the look forward period. Recent Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Othe Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, |
the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s |
carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative |
impairment test is necessary. The Company will test goodwill for impairment within one year of the acquisition or annually as of December |
1, and whenever indicators of impairment exist. In June 2016, the FASB issued ASU 2016-13 Financial |
Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition |
of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model |
with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual |
reporting periods, and interim periods within those years beginning after December 15, 2019. This pronouncement was amended under ASU 2019-10 to |
allow an extension on the adoption date for entities that qualify as a small reporting company. The Company has elected this extension |
and the effective date for the Company to adopt this standard will be for fiscal years beginning after December 15, 2022. The Company |
has not completed its assessment of the standard but does not expect the adoption to have a material impact on the Company’s consolidated |
financial position, results of operations, or cash flows. NOTE 3 – BUSINESS SEGMENTS Summarized financial information concerning the |
Company’s reportable segments for the years ended December 31, 2021 and 2020 is presented below. Year Ended December 31, 2021 Retail & Appliances Construction Automotive Supplies Corporate Services Total Revenue Furniture and appliances $ 12,741,064 $ - $ - $ - $ 12,741,064 Construction - 12,203,890 - - 12,203,890 Automotive supplies - - 5,716,030 - 5,716,030 Total Revenue 12,741,064 12,203,890 5,716,030 - 30,660,984 Cost of sales 9,773,371 6,966,064 3,572,289 - 20,311,724 Operating expenses 2,892,973 4,153,938 3,119,435 1,286,813 11,453,159 Income (loss) from operations $ 74,720 $ 1,083,888 $ ( 975,694 ) $ ( 1,286,813 ) $ ( 1,103,899 ) Year Ended December 31, 2020 Retail & Appliances Construction Automotive Supplies Corporate Services Total Revenue Furniture and appliances $ 7,625,222 $ - $ - $ - $ 7,625,222 Construction - 1,120,224 - - 1,120,224 Automotive supplies - - - - - Total Revenue 7,625,222 1,120,224 - - 8,745,446 Cost of sales 5,866,413 665,022 - - 6,531,435 Operating expenses 1,986,775 681,040 - 896,092 3,563,908 Loss from operations $ ( 227,967 ) $ ( 225,838 ) $ - $ ( 896,092 ) $ ( 1,349,897 ) F- 16 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 NOTE 4—CASH EQUIVALENTS AND INVESTMENTS December 31, 2021 December 31, 2020 Cash and cash equivalents Operating accounts $ 1,383,533 $ 976,538 Restricted accounts - 403,811 Subtotal $ 1,383,533 $ 1,380,349 Held to Maturity Investments Restricted accounts - certificates of deposit (4 – |
24-month maturities, FDIC insured) $ 276,429 $ 276,270 Subtotal $ 276,429 $ 276,270 TOTAL $ 1,659,962 $ 1,656,619 NOTE 5—DISCONTINUED OPERATIONS ASC 360-10-45-9 requires that a long-lived asset |
(disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria |
that the sale of the asset (disposal group) is probable, and actions required to complete the plan indicate that it is unlikely that |
significant changes to the plan will be made or that the plan will be withdrawn. For the Goedeker Spin-Off, these criteria were achieved |
on September 10, 2020, when the board approved the Goedeker Spin-Off and subsequently on October 23, 2020, when the Company completed |
the Goedeker Spin-Off. These criteria were achieved in March 2021 for the Neese Spin-Off. The discontinued operations as of December 31, |
2021 and for the year ended December 31, 2021 are comprised entirely of the business of Neese. The discontinued operations as of December |
31, 2020 and for the year ended December 31, 2020 are comprised of the businesses of Neese and Goedeker. For comparability purposes, certain prior period |
line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented |
in the accompanying consolidated statements of operations, consolidated statements of cash flows, and the consolidated balance sheets. In accordance with ASC 205-20-S99, Allocation |
of Interest to Discontinued Operations , the Company elected to not allocate consolidated interest expense to discontinued operations |
where the debt is not directly attributable to or related to discontinued operations. F- 17 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The following information presents the major |
classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets as of December |
31, 2021 and 2020: December 31, 2021 December 31, 2020 Current Assets – discontinued operatio Cash $ - $ 416,831 Accounts receivable, net - 334,095 Inventories, net - 305,080 Prepaid expenses and other current assets - 268,602 Total current assets – discontinued operations - 1,324,608 Noncurrent Assets – discontinued operatio Property and equipment, net - 1,925,844 Operating lease right of use assets - 501,827 Goodwill - 22,166 Intangible assets, net - 7,933 - Total noncurrent assets $ - $ 2,457,770 Current liabilities – discontinued operatio Accounts payable and accrued expenses $ - $ 484,852 Current portion of operating lease liability - 67,725 Notes payable – current portion - 446,545 Total current liabilities – discontinued operations - 999,122 Long term liabilities – discontinued operatio Notes payable – long term, net of current portion - 4,187,376 Accrued expenses – long term, related party - 1,359,989 Financing lease liability, net of current portion - 434,102 Total long term liabilities – discontinued operations $ - $ 5,981,467 F- 18 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The following information presents the major |
classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations for the |
years ended December 31, 2021 and 2020: Years Ended December 31, 2021 2020 REVENUES Services $ 612,862 $ 3,379,653 Sales of parts and equipment 324,189 3,322,945 Furniture and appliances - 42,709,714 TOTAL REVENUE 937,051 49,412,312 OPERATING EXPENSES Cost of sales 298,050 38,488,245 Personnel costs 485,774 6,534,408 Depreciation and amortization 360,746 1,547,378 Fuel 112,746 378,115 General and administrative 290,872 8,555,731 TOTAL OPERATING EXPENSES 1,548,188 55,503,877 LOSS FROM OPERATIONS ( 611,137 ) ( 6,091,564 ) OTHER INCOME (EXPENSE) Financing costs and loss on early extinguishment of debt ( 320 ) ( 792,721 ) Gain on forgiveness of debt 380,247 - Loss on extinguishment of debt - ( 1,852,426 ) Gain on sale of assets 548,723 130,748 Loss on acquisition receivable - ( 809,000 ) Change in warrant liability - ( 2,127,656 ) Interest expense ( 78,308 ) ( 985,840 ) Other income (expense) 1,200 3,599 TOTAL OTHER INCOME (EXPENSE) 851,542 ( 6,433,296 ) NET LOSS BEFORE INCOME TAXES 240,405 ( 12,524,860 ) INCOME TAX EXPENSE - 350,603 NET INCOME (LOSS) BEFORE NON-CONTROLLING INTERESTS 240,405 ( 12,875,463 ) LESS NET INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTS 108,182 ( 5,036,832 ) NET INCOME (LOSS) ATTRIBUTABLE TO SHAREHOLDERS $ 132,223 $ ( 7,838,631 ) F- 19 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The following information presents the major |
classes of line items constituting significant operating, investing and financing cash flow activities in the unaudited consolidated |
statements of cash flows relating to discontinued operatio Years Ended December 31, 2021 2020 Cash flows from operating activities of discontinued operatio Net Income (Loss) $ 240,405 $ ( 12,875,461 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities of discontinued |
operatio Depreciation and amortization 360,746 1,547,378 Amortization of financing costs and warrant features 2,187 842,174 Stock compensation - 281,194 Amortization of operating lease right-of-use assets 19,007 63,253 Gain on forgiveness of PPP loans ( 380,247 ) - Loss on extinguishment of debt - 2,052,118 Amortization of original interest discount - 100,511 Gain on sale of equipment ( 548,723 ) ( 130,748 ) Change in fair value of warrant liability - 2,127,656 Write-off of acquisition receivable - 809,000 Changes in operating assets and liabiliti Accounts receivable 10,698 ( 3,327,816 ) Inventory ( 161,286 ) ( 2,125,032 ) Prepaid expenses and other assets 49,222 ( 1,144,323 ) Accounts payable and accrued expenses 118,980 368,128 Operating lease liability ( 19,007 ) ( 63,253 ) Vendor deposits - ( 252,688 ) Deferred tax asset - 635,503 Customer deposits - 14,427,180 Accrued expense long-term 137,438 454,209 Net cash provided by (used in) operating activities from discontinued operations $ ( 170,580 ) $ 3,788,983 Cash flows from investing activities in discontinued operatio Proceeds from sale of equipment $ 675,000 $ 209,500 Purchase of equipment ( 30,697 ) ( 137,499 ) Net cash provided by investing activities in discontinued operations $ 644,303 $ 72,001 Cash flows from financing activities in discontinued operatio Proceeds from initial public offering $ - $ 8,602,166 Proceeds from note payable 380,385 1,612,297 Repayments of notes payable ( 589,078 ) ( 3,474,557 ) Repayment of floor plan - ( 10,581 ) Net borrowings from lines of credit - ( 1,339,430 ) Financing fees - ( 219,110 ) Repayment of financing lease - ( 721,151 ) Net cash provided by (used in) financing activities in discontinued operations $ ( 208,693 ) $ 4,449,634 F- 20 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The following are the financial instruments of |
the discontinued operatio Lines of Credit Burnley Capital LLC On April 5, 2019, Goedeker, as borrower, and |
Holdco entered into a loan and security agreement with Burnley Capital LLC (“Burnley”) for revolving loans in an aggregate |
principal amount that will not exceed the lesser of (i) the borrowing base (as defined in the loan and security agreement) or (ii) $1,500,000 |
minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of |
the acquisition of Goedeker Television on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued |
a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was |
$571,997. On August 4, 2020, Goedeker used a portion of |
the proceeds from its initial public offering (the “Goedeker IPO”) to repay the revolving note in full and the loan and security |
agreement was terminated. The total payoff amount was $ 118,194 , consisting of principal of $ 32,350 , interest of $ 42 and prepayment, legal, |
and other fees of $ 85,802 . Northpoint Commercial Finance LLC On June 24, 2019, Goedeker entered into a loan |
and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate |
maximum loan amount of $ 1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR |
plus 7.99 %. As of December 31, 2019, the balance of the line of credit was $ 678,993 . Goedeker terminated the loan and security agreement |
on May 18, 2020. Home State Bank On June 13, 2018, Neese entered into a term loan |
agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 |
with an annual interest rate of 6.85% and with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December |
31, 2020. Neese met this covenant for the year ended December 31, 2020. On July 30, 2020, Neese entered into a change in terms agreement |
with Home State Bank to amend the terms of the term loan. Pursuant to the change in terms agreemen (i) the maturity date was extended |
to July 30, 2022; (ii) the interest rate was changed to 5.50%; (iii) Neese agreed to pay accrued interest in the amount of $95,970; (iv) |
Neese agreed to make payments of $30,000 beginning on September 30, 2020 and continuing thereafter on a monthly basis until maturity, |
at which time a final interest payment is due; (v) Neese agreed to make a payment of $260,000 on December 30, 2020 and December 30, 2021; |
(vi) Neese agreed to make two new advances under the note in the amounts $51,068 and $517,529 to repay in full Neese’s capital |
lease transactions due to Utica Leaseco LLC described below; (vii) Neese agreed to pay a loan fee of $17,500; and (viii) Home State Bank |
agreed to make a loan advance to checking for $17,500. The balance of the note amounts to $3,225,321, comprised of principal of $3,239,176, |
net of unamortized debt discount of $13,855 as of December 31, 2020. If Neese sells property, plant, and equipment |
securing the loan, it must remit the appraised value of the equipment to Home State Bank. During the nine months ended September 30, |
2021 and 2020, $ 400,000 and $ 145,690 , respectively, was remitted to Home State Bank pursuant to this requirement. Notes Payable and Warrant Liability Arvest Loan On August 25, 2020, Goedeker entered into a promissory |
note and security agreement with Arvest Bank for a loan in the principal amount of $ 3,500,000 . As of October 23, 2020, the outstanding |
balance of this loan is $ 3,340,602 , comprised of principal of $ 3,446,126 , net of unamortized loan costs of $ 103,524 . F- 21 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 PPP Loan On April 8, 2020, Goedeker received a $642,600 |
PPP loan from the SBA under the provisions of the CARES Act. The PPP loan had an 18-month term and bore interest at a rate of 1.0% per |
annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The PPP provides that the |
loan could be partially or wholly forgiven if the funds were used for certain qualifying expenses as described in the CARES Act. The |
balance of the PPP loan was $642,600 as of September 30, 2020 and was classified as a current liability. On November 2, 2020, Goedeker |
repaid the PPP loan. Small Business Community Capital II, L.P. On April 5, 2019, Goedeker, as borrower, and |
Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan |
in the principal amount of $ 1,500,000 , pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $ 1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0 % of the outstanding equity securities |
of Goedeker on a fully-diluted basis for an aggregate price equal to $ 100 . As of December 31, 2019, the balance of the note was $ 999,201 . On August 4, 2020, Goedeker used a portion of |
the proceeds from the Goedeker IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff |
amount was $ 1,122,412 consisting of principal of $ 1,066,640 , interest of $ 11,773 and prepayment, legal, and other fees of $ 43,999 . Goedeker classified the warrant as a derivative |
liability on the balance sheet at June 30, 2020 of $ 2,250,000 based on the estimated value of the warrant in the Goedeker IPO. The increase |
in the value of the warrant from the estimated value of $ 122,344 at December 31, 2020 resulted in a charge of $ 2,127,656 during the period |
January 1, 2020 through October 23, 2020 (date of distribution). Immediately prior to the closing of the Goedeker IPO on August 4, 2020, |
SBCC converted the warrant into 250,000 shares of common stock. 10% Promissory Note A portion of the purchase price for the acquisition |
of Neese was paid by the issuance of a promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the Neese Sellers. |
The note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full |
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