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the outstanding balance of the note into 100,000 common shares. On July 21, 2020, Leonite converted $ 50,000 of |
the outstanding balance of the note into 50,000 common shares. On August 4, 2020, Goedeker used a portion of |
the proceeds from the Goedeker IPO to repay the note in full. The total payoff amount was $ 780,653 , consisting of principal of $ 771,431 and interest of $ 9,222 . On September 2, 2020, the Company entered into |
amendment to the warrant issued to Leonite on April 5, 2019. Pursuant to the amendment, the parties amended the warrant to allow for |
the conversion of the warrant into 180,000 common shares in exchange for Leonite’s surrender of the remaining 20,000 common shares |
underlying this warrant, as well as all 200,000 common shares underlying the second warrant issued to Leonite on May 11, 2020. On September |
2, 2020, Leonite exercised the first warrant in accordance with the foregoing amendment and the Company issued 180,000 common shares |
to Leonite. As a result of this exercise, both warrants were cancelled. NOTE 14—OPERATING LEASES Kyle’s On September 1, 2020, Kyle’s entered into |
an industrial lease agreement with the Kyle’s Sellers, who are officers of Kyle’s and principal shareholders of the Company. The lease is for a term of five years , with an option for a renewal term of five years, and provides for a base rent of $7,000 per month |
for the first 12 months, which will increase to $7,210 for months 13-16 and to $7,426 for months 37-60. In addition, Kyle’s is |
responsible for all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events |
of default, representations, warranties and covenants. On June 9, 2021, Kyle’s entered into an |
additional industrial lease agreement with a third party. The lease commenced on January 1, 2022 and is for a term of 62 months, with |
an option for a renewal term of five years, and provides for a base rent of $3,336 for months 3-4 (with no payments for the first two |
months), with gradual increases to $7,508 for final year. In addition, Kyle’s is responsible for its proportionate share of all |
taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, |
warranties and covenants. The lease increased the operating lease right to use asset and corresponding operating lease liability by $ 361,158 . F- 35 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Supplemental balance sheet information related |
to these leases is as follows: December 31, 2021 Operating lease right-of-use lease asset $ 735,074 Accumulated amortization ( 85,777 ) Net balance $ 649,297 Lease liability, current portion 113,105 Lease liability, long term 539,234 Total operating lease liabilities $ 652,339 Weighted Average Remaining Lease Term - operating leases 54 months Weighted Average Discount Rate - operating leases 5.5 % Future minimum lease payments under these operating |
lease as of December 31, 2021 were as follows: 2022 $ 146,559 2023 169,839 2024 174,043 2025 146,885 2026 90,099 Thereafter 15,017 Total lease payments 742,442 Less |
imputed interest ( 90,103 ) Maturities |
of lease liabilities $ 652,339 High Mountain On December 1, 2017, High Mountain entered into |
a lease agreement with a third party. The lease commenced on January 1, 2018 and was for a period of 48 months, expiring on December |
31, 2021. High Mountain is continuing to pay on a month-to-month basis until the new facility described below is ready. The base rent |
is $ 12,767 per month. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance and certain operating |
costs. The lease agreement contains customary events of default, representations, warranties and covenants. On October 29, 2021, High Mountain entered into |
a new lease agreement with a third party. The term of the lease will commence upon the completion of work, which is expected in March |
or April 2022, and is for a period of 61 months. The base rent is $29,400 for months 2-13 (with no payments for the first month), with |
gradual increases to $34,394 for months 50-61. In addition, High Mountain is responsible for its proportionate share of all taxes, insurance |
and certain operating costs during the lease term. The lease agreement contains customary events of default, representations, warranties |
and covenants. F- 36 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Supplemental balance sheet information related |
to these leases is as follows: December |
31, 2021 Operating lease right-of-use lease asset $ 2,055,995 Accumulated amortization ( 337,812 ) Net balance $ 1,718,183 Lease liability, current portion 258,843 Lease liability, long term 1,459,339 Total operating lease liabilities $ 1,718,182 Weighted Average Remaining Lease Term - operating leases 61 Months Weighted Average Discount Rate - operating leases 4.0 % Future minimum lease payments under these operating |
lease as of December 31, 2021 were as follows: 2022 $ 294,000 2023 364,560 2024 379,142 2025 394,308 2026 410,082 Thereafter 68,788 Total lease payments 1,910,880 Less |
imputed interest ( 192,697 ) Maturities |
of lease liabilities $ 1,718,183 Innovative Cabinets On January 20, 2020, Innovative Cabinets entered |
into a lease agreement with the third party. The term of the lease commenced on April 1, 2020 and is for a period of 36 months. The base |
rent is $ 2,936 for the first year, with gradual increases to $ 3,140 for the final year. In addition, Innovative Cabinets is responsible |
for its proportionate share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary |
events of default, representations, warranties and covenants. F- 37 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 On December 7, 2020, Innovative Cabinets entered |
into a lease agreement with the third party. The term of the lease commenced on January 1, 2021 and is for a period of 61 months. The |
base rent is $ 15,600 for 2021, with gradual increases to $ 18,085 for 2026. In addition, Innovative Cabinets is responsible for its proportionate |
share of all taxes, insurance and certain operating costs during the lease term. The lease agreement contains customary events of default, |
representations, warranties and covenants. Supplemental balance sheet information related |
to these leases is as follows: December 31, 2021 Operating lease right-of-use lease asset $ 1,232,993 Accumulated amortization ( 454,609 ) Net balance $ 778,384 Lease liability, current portion 218,873 Lease liability, long term 584,833 Total operating lease liabilities $ 803,706 Weighted Average Remaining Lease Term - operating leases 42 Months Weighted Average Discount Rate - operating leases 4.02 % Future minimum lease payments under these operating |
lease as of December 31, 2021 were as follows: 2022 $ 230,191 2023 208,020 2024 204,558 2025 210,695 2026 18,085 Total lease payments 871,549 Less |
imputed interest ( 67,843 ) Maturities |
of lease liabilities $ 803,706 F- 38 1847 |
HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Wolo On October 4, 1978, Wolo Mfg entered into a lease |
agreement with PKL Realty LLC (formerly P.K.L. Realty Corp). This lease agreement has been amended numerous times. Pursuant to the latest |
amendment entered into in July 2020, the lease expires on July 31, 2022 and provides for rent of $ 6,897 from August 8, 2021 to July 31, |
2022. The lease agreement contains customary events of default representations, warranties and covenants. Supplemental balance sheet information related |
to this lease is as follows: December 31, 2021 Operating lease right-of-use lease asset $ 153,663 Accumulated amortization ( 106,924 ) Net balance $ 46,739 Lease liability, current portion 47,328 Lease liability, long term - Total operating lease liabilities $ 47,328 Weighted Average Remaining Lease Term - operating leases 7 months Weighted Average Discount Rate - operating leases 6.0 % Future minimum lease payments under this operating |
lease as of December 31, 2021 were as follows: 2022 $ 48,279 Total lease payments 48,279 Less imputed interest ( 951 ) Maturities of lease liabilities $ 47,328 Asien’s Asien’s has an office and showroom space |
that has been leased on a month-by-month basis for $ 11,665 per month. Supplemental cash flows information related to |
leases was as follows: December 31, 2021 December 31, 2020 Cash paid for amounts included in the measurement of lease liability: Operating cash flows from operating lease $ 985,122 $ 21,000 Right-of-use asset obtained in exchange for lease obligati Operating lease $ 3,040,854 $ 373,916 NOTE 15—RELATED PARTIES Management Services Agreement On April 15, 2013, the Company and 1847 Partners |
LLC (the “Manager”) entered into a management services agreement, pursuant to which the Company is required to pay the Manager |
a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the “Parent Management Fee”). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees |
received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) |
by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal |
quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $ 0 in Parent |
Management Fees for the years December 31, 2021 and 2020. F- 39 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Offsetting Management Services Agreements 1847 Neese entered into an offsetting management |
services agreement with the Manager on March 3, 2017, which is included in discontinued operations, Goedeker entered into an offsetting |
management services agreement with the Manager on April 5, 2019, which is included in discontinued operations, 1847 Asien entered into |
an offsetting management services agreement with the Manager on May 28, 2020, 1847 Cabinet entered into an offsetting management services |
agreement with the Manager on August 21, 2020, which was amended and restated on October 8, 2021, and 1847 Wolo entered into an offsetting |
management services agreement with the Manager on March 30, 2021. Pursuant to the offsetting management services agreements, 1847 Neese |
appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500, Goedeker appointed the Manager |
to provide certain services to it for a quarterly management fee equal to $62,500, 1847 Asien appointed the Manager to provide certain |
services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management |
services agreement), 1847 Cabinet appointed the Manager to provide certain services to it for a quarterly management fee equal to the |
greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement), which was increased to $125,000 or |
2% of adjusted net assets on October 8, 2021, and 1847 Wolo appointed the Manager to provide certain services to it for a quarterly management |
fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, |
in each case that (i) pro rated payments shall be made in the first quarter and the last quarter of the term, (ii) if the aggregate amount |
of management fees paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other subsidiaries |
of the Company to the Manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of the Company’s |
gross income with respect to such fiscal year, then the management fee to be paid by such subsidiaries for any remaining fiscal quarters |
in such fiscal year shall be reduced, on a pro rata basis determined by reference to the management fees to be paid to the Manager by |
all of the subsidiaries of the Company, until the aggregate amount of the management fee paid or to be paid by such subsidiaries, together |
with all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect |
to such fiscal year, does not exceed 9.5% of the Company’s gross income with respect to such fiscal year, and (iii) if the aggregate |
amount the management fee paid or to be paid by such subsidiaries, together with all other management fees paid or to be paid by all other |
subsidiaries of the Company to the Manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the Parent |
Management Fee with respect to such fiscal quarter, then the management fee to be paid by such subsidiaries for such fiscal quarter shall |
be reduced, on a pro rata basis, until the aggregate amount of the management fee paid or to be paid such subsidiaries, together with |
all other management fees paid or to be paid by all other subsidiaries of the Company to the Manager, in each case, with respect to such |
fiscal quarter, does not exceed the Parent Management Fee calculated and payable with respect to such fiscal quarter. Each of these subsidiaries shall also reimburse |
the Manager for all of their costs and expenses which are specifically approved by their board of directors, including all out-of-pocket |
costs and expenses, which are actually incurred by the Manager or its affiliates on behalf of these subsidiaries in connection with performing |
services under the offsetting management services agreements. 1847 Asien expensed management fees of $ 300,000 for the year ended December 31, 2021 and $ 178,022 for the period from May 29, 2020 to December 31, 2020. 1847 Cabinet expensed management fees of $ 345,556 for the year ended December 31, 2021 and $ 75,000 for the period from October 1, 2020 to December 31, 2020. 1847 Wolo expensed management fees of $ 235,833 for the year ended December 31, 2021. In conjunction with acquisition of Wolo, our manager also received a fee of $ 110,000 . On a consolidated basis, the Company expensed |
total management fees of $ 981,389 and $ 253,022 for the years ended December 31, 2021 and 2020, respectively. Advances From time to time, the Company has received advances |
from its chief executive officer to meet short-term working capital needs. As of December 31, 2021 and 2020, a total of $ 118,834 in advances |
from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements. F- 40 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 As of December 31, 2021 and 2020, the Manager |
has funded the Company $ 74,927 and $ 71,358 in related party advances, respectively. These advances are unsecured, bear no interest, and |
do not have formal repayment terms or arrangements. Grid Promissory Note On January 3, 2018, the Company issued a grid |
promissory note to the Manager in the initial principal amount of $ 50,000 . The note provided that the Company could request additional |
advances from the Manager up to an aggregate additional amount of $150,000. On December 7, 2020, parties amended and restated the note |
for a new principal amount of $ 56,900 and maturity date of December 7, 2021 . Interest on the note accrued on the unpaid portion of the |
principal amount and the outstanding portion of all advances at a fixed rate of 8 % per annum. As of December 31, 2020, the Manager had |
advanced $ 56,900 of the note and the Company had accrued interest of $ 25,159 . On October 8, 2021, the loan was repaid in full and the |
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