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in the Company’s financial statements in future periods. The table below shows a preliminary analysis for |
the H&I Acquisiti Purchase consideration at preliminary fair val Cash $ 10,687,500 Notes payable, net of debt discount 4,753,673 Amount of consideration $ 15,441,173 Assets acquired and liabilities assumed at preliminary fair value Cash $ 208,552 Accounts receivable 1,042,194 Inventory 1,848,729 Contract assets 367,177 Other current assets 80,771 Marketing intangible 1,610,000 Customer intangible 4,843,000 Property and equipment 610,882 Operating lease assets 831,951 Other assets - Accounts payable and accrued expenses ( 1,207,424 ) Contract liabilities ( 3,770,081 ) Deferred tax liabilities ( 1,670,000 ) Lease liabilities ( 856,377 ) Financing leases ( 18,600 ) Loans payable ( 204,399 ) Net tangible assets acquired $ 3,716,375 Total net assets acquired $ 3,716,375 Consideration paid 15,441,173 Preliminary goodwill $ 11,724,798 The estimated useful life remaining on the property and equipment |
acquired is 3 to 7 years. Proforma The following unaudited proforma results of operations |
are presented for information purposes only. The unaudited proforma results of operations are not intended to present actual results |
that would have been attained had the Asien’s Acquisition, the Kyle’s Acquisition, the Wolo Acquisition and the H&I Acquisition |
been completed as of January 1, 2020, nor to project potential operating results as of any future date or for any future periods. The |
revenue and net loss before non-controlling interest of Asien’s from May 29, 2020 through December 31, 2020 included in the consolidated |
income statement amounted to approximately $7,625,222 and $431,641, respectively. The revenue and net loss before non-controlling interest |
of Kyle’s from October 1, 2020 through December 31, 2020 included in the consolidated statement of operations amounted to approximately |
$1,120,224 and $380,500, respectively. The revenue and net loss before non-controlling interest of Wolo from April 1, 2021 through December |
31, 2021 included in the consolidated income statement amounted to approximately $5,716,030 and $1,970,239, respectively. The revenue |
and net loss before non-controlling interest of High Mountain and Innovative Cabinets from October 9, 2021 through December 31, 2021 |
included in the consolidated income statement amounted to approximately $ 10,249,281 and $ 81,773 , respectively. The unaudited proforma |
results of operations also removes the effect of Goedeker and Neese as if they had been disposed of on January 1, 2020. F- 28 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Years Ended December 31, 2021 2020 Revenues, net $ 51,589,004 $ 42,131,589 Net income (loss) $ ( 4,445,617 ) $ 1,733,005 Basic earnings (loss) per share $ ( 0.94 ) $ 0.36 Diluted earnings (loss) per share $ ( 0.94 ) $ 0.36 Basic Number of Shares (*) 4,749,971 4,807,429 Diluted Number of Shares (*) 4,749,971 4,807,429 * shares assuming as if issued as of January 1. NOTE 11—NOTES PAYABLE Summary of Notes Payable December 31, 2021 December 31, 2020 Line of Credit $ - $ 301,081 8% Subordinated Amortizing Promissory Notes - 101,980 6% Subordinated Amortizing Promissory Notes 581,963 975,985 PPP loans - 357,500 4.5% Unsecured Promissory Notes - 41,675 Loans on vehicles 396,351 90,374 Financing leases 522,166 - Subtotal 1,500,480 1,868,595 Line of Credit - ( 301,081 ) Current portion of notes payable ( 793,174 ) ( 429,183 ) Long-term notes payable $ 707,306 $ 1,138,331 Asien’s Arvest Bank On July 10, 2020, Asien’s entered into |
a promissory note and security agreement with Arvest Bank for a revolving loan for up to $ 400,000 . The loan bore interest at 5.25 % per |
annum, subject to change in accordance with the Variable Rate (as defined in the promissory note and security agreement), the calculation |
for which is the U.S. Prime Rate plus 2 %. The remaining principal balance of the note at December 31, 2020 was $ 301,081 and it had accrued |
interest of $ 995 . On October 8, 2021, the revolving loan was paid off and terminated for $ 301,240 . 8% Subordinated Amortizing Promissory Note A portion of the purchase price for acquisition |
of Asien’s on May 28, 2020 was paid by the issuance of an 8 % subordinated amortizing promissory note in the principal amount of |
$ 200,000 by 1847 Asien to the Asien’s Seller. Interest on the outstanding principal amount were payable quarterly at the rate of |
eight percent ( 8 %) per annum. The outstanding principal amount of the note amortized on a one-year straight-line basis in accordance |
with a specified amortization schedule, with all unpaid principal and accrued, but unpaid interest being fully due and payable on May |
28, 2021. As of December 31, 2020, the remaining principal balance of the note was $ 101,980 and it had accrued interest of $ 1,095 . |
The note and accrued interest were repaid in May 2021. 6% Amortizing Promissory Note On July 29, 2020, 1847 |
Asien entered into a securities purchase agreement with the Asien’s Seller, pursuant to which the Asien’s Seller sold to 415,000 of the Company’s common shares to 1847 Asien a purchase price of $ 2.50 per share. As consideration, 1847 Asien issued to |
the Asien’s Seller a two-year 6% amortizing promissory note in the aggregate principal amount of $1,037,500. On October 8, 2021, |
1847 Asien and the Asien’s Seller entered into amendment no. 1 to securities purchase agreement to amend certain terms of the securities |
purchase agreement and the 6% amortizing promissory note. Pursuant to the amendment, the repayment terms of the 6% amortizing promissory |
note were revised so that one-half (50%) of the outstanding principal amount ($518,750) and all accrued interest thereon shall be amortized |
on a two-year straight-line basis and payable quarterly in accordance with the amortization schedule set forth on Exhibit A to the amendment, |
except for the payments that were initially scheduled on January 1, 2022 and April 1, 2022, which were paid from the proceeds of the |
senior convertible promissory notes described below, and the second-half (50%) of the outstanding principal amount ($518,750) and all |
accrued, but unpaid interest thereon shall be paid on the second anniversary of the date of the 6% amortizing promissory note, along |
with any other unpaid principal or accrued interest thereon. The note is unsecured and contains customary events of default. The remaining |
principal balance of the note at December 31, 2021 is $ 583,961 and it has accrued interest of $ 21,758 . F- 29 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Inventory Financing Agreement On September 25, 2020, Asien’s entered |
into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”), pursuant to |
which Wells Fargo may extend credit to Asien’s from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. |
The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written |
notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative |
covenants and events of default for a loan of this type. The agreement is secured by all assets of Asien’s and is guaranteed by |
1847 Asien and the Company. As of December 31, 2021, Asien’s has not borrowed any funds under this agreement. 4.5% Unsecured Promissory Note On October 30, 2017, Asien’s entered into |
a stock repurchase agreement with Paul A. Gwilliam and Terri L. Gwilliam, co-trustees of the Gwilliam Family Trust, pursuant to which |
Asien’s issued an unsecured promissory note in the aggregate principal amount of $ 540,000 for a term of 5 years. The note bore |
interest at the rate of the 4.25 % per annum. The remaining principal balance of the note at December 31, 2020 was $ 41,675 . The note and |
accrued interest were repaid in July 2021. Loans on Vehicles Asien’s has entered into seven retail installment |
sale contracts pursuant to which Asien’s agreed to finance its delivery trucks at rates ranging from 3.74 % to 8.72 % with an aggregate |
remaining principal amount of $ 146,043 as of December 31, 2021. Kyle’s Intercompany Secured Promissory Note In connection with the |
acquisition of Kyle’s, the Company provided 1847 Cabinet with the funds necessary to pay the cash portion of the purchase price |
and cover acquisition expenses. In connection therewith, on September 30, 2020, 1847 Cabinet issued a secured promissory note to the |
Company in the principal amount of $4,525,000, which was amended and restated on December 11, 2020 and again on October 8, 2021 to increase |
the principal amount to $15,955,325. The note bears interest at the rate of 16% per annum. Interest on the note is cumulative and any |
unpaid accrued interest will compound on each anniversary date of the note. Interest is due and payable in arrears to the Company on |
December 1, March 1, June 1 and October 1, commencing on December 1, 2021. In the event payment of principal or interest due under the |
note is not made when due, giving effect to any grace period which may be applicable, or in the event of any other default (as defined |
in the note), the outstanding principal balance shall from the date of default immediately bear interest at the rate of 5 % above the |
then applicable interest rate for so long as such default continues. The Company may demand payment in full of the note at any time, |
even if 1847 Cabinet has complied with all of the terms of the note, and the note shall be due in full, without demand, upon the third |
party sale of all or substantially all the assets and business of 1847 Cabinet or the third party sale or other disposition of any capital |
stock of 1847 Cabinet. 1847 Cabinet may prepay the note at any time without penalty. If and to the extent any amounts are owing under |
the secured convertible promissory notes described below due to a default thereunder, in addition to payment obligations due under the |
note, 1847 Cabinet is required to immediately make payments to the Company so that the Company may make payments in compliance with the |
terms of the secured convertible promissory notes. The note contains customary covenants and events of default for loans of this type. |
The note is guaranteed by Kyle’s, High Mountain and Sierra Homes and is secured by a security interest in all of the assets |
of 1847 Cabinet, Kyle’s, High Mountain and Sierra Homes; provided that the rights of the Company to receive payments under |
the note are subordinated to the rights of the purchasers under secured convertible promissory notes described below (Note 12). The |
remaining principal balance of the note at December 31, 2021 is $ 6,549,073 and it has accrued interest of $ 35,416 . Loans on Vehicles Kyle’s has entered into two retail installment |
sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging from 5.90 % to 6.54 % with an aggregate remaining |
principal amount of $ 64,255 as of December 31, 2021. F- 30 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Financing Leases Kyle’s has entered into two financing lease |
agreements for expansion equipment. The equipment was installed in December 2021. These agreements have terms of six years beginning |
at the time of installation. On May 6, 2021, Kyle’s entered in an equipment |
financing lease to purchase equipment for $ 276,896 , maturing on December 1, 2027. The balance payable was $ 276,896 as of December 31, |
2021. On October 12, 2021, Kyle’s entered in |
an equipment financing lease to purchase equipment for $ 245,375 , maturing on December 1, 2027. The balance payable was $ 245,375 as of |
December 31, 2021. Following is a summary of payments due on financing |
leases for the succeeding five yea Year Ending December 31, Amount 2022 $ 99,075 2023 99,075 2024 99,075 2025 99,075 2026 99,075 Thereafter 99,075 Total payments 594,450 L amount representing interest ( 72,178 ) Present value of minimum lease payments $ 522,272 As of December 31, 2021, the weighted-average |
remaining lease term for all finance leases is 6 years. Wolo 6% Secured Promissory Note A portion of the purchase price for the acquisition |
of Wolo on March 30, 2021 was paid by the issuance of a 6 % secured promissory note in the principal amount of $ 850,000 by 1847 Wolo to |
the Wolo Sellers. Interest on the outstanding principal amount was payable quarterly at the rate of six percent ( 6 %) per annum. On October |
8, 2021, the promissory note was repaid in full. Credit Agreement and Notes On March 30, 2021, 1847 Wolo and Wolo entered |
into a credit agreement with Sterling National Bank for revolving loans in the principal amount of $1,000,000 and a term loan in the |
principal amount of $3,550,000. On October 8, 2021, the revolving loan and the term loan were repaid in full. High Mountain/Innovative Cabinets Loans on Vehicles/Equipment High Mountain and Innovative Cabinets have entered |
into seventeen retail installment sale contracts pursuant to which they agreed to finance delivery trucks and equipment at rates ranging |
from 3.74 % to 6.80 % with an aggregate remaining principal amount of $ 186,054 as of December 31, 2021. Financing Leases On February 14, 2019, High Mountain entered in an equipment financing lease to purchase a lift truck for $24,337, maturing on January 19, 2024. The balance payable |
was $11,044 as of December 31, 2021. On June 2, 2020, High Mountain entered in an equipment financing lease to purchase office printers for $9,240, maturing on May 2, 2024. The balance payable was $5,757 |
as of December 31, 2021. F- 31 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Following is a summary of payments due on financing |
leases for the succeeding five yea Year Ending December 31, Amount 2022 $ 8,161 2023 8,161 2024 1,515 2025 - 2026 - Thereafter - Total payments 17,837 L |
amount representing interest ( 1,036 ) Present |
value of minimum lease payments $ 16,801 As of December 31, 2021, the weighted-average |
remaining lease term for all finance leases is 2.10 years. PPP Loans On April 28, 2020, Asien’s received $357,500 |
in PPP loans from the SBA under provisions of the CARES Act. The PPP loans have two-year terms and bear interest at a |
rate of 1.0% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. |
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. Following is a summary of payments due on |
notes payable and financing leases for the succeeding five |
yea Year Ending December 31, Amount 2022 $ 820,400 2023 212,554 2024 179,868 2025 160,270 2026 118,647 Thereafter 206,701 Total payments $ 1,698,440 NOTE 12—VESTING NOTE PAYABLE – RELATED PARTY Vesting Promissory Note A portion of the purchase price for the acquisition |
of Kyle’s on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to the Kyle’s Sellers |
in the principal amount of $ 1,050,000 , which increased to a principal amount of up to $ 1,260,000 pursuant to the vested percentage calculation |
described below. Payment of the principal and accrued interest on the note is subject to vesting as described below. The note bears interest |
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