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agreement, then we will have the right, in our sole discretion, to issue a note in lieu of payment of the put price when due. In either |
case the note would have an aggregate principal amount equal to the put price, would bear interest at a rate of LIBOR plus 4.0% per annum, |
would mature on the first anniversary of the date upon which the put price was initially due, and would be secured by the then-highest |
priority lien available to be placed on our equity interests in each of our businesses. Our obligations under the put provision of our |
operating agreement are absolute and unconditional. In addition, we will be subject to certain obligations and restrictions upon exercise |
of our manager’s put right until such time as our obligations under the put provision of our operating agreement, including any |
related note, have been satisfied in full, includin ● subject to our right to issue a note in the circumstances described above, we must use commercially reasonable |
efforts to raise sufficient debt or equity financing to permit us to pay the put price or note when due and obtain approvals, waivers |
and consents or otherwise remove any restrictions imposed under contractual obligations or applicable law or regulations that have the |
effect of limiting or prohibiting us from satisfying our obligations under the supplemental put agreement or note; ● our manager will have the right to have a representative observe meetings of our board of directors and |
have the right to receive copies of all documents and other information furnished to the board of directors; ● our company and its businesses will be restricted in their ability to sell or otherwise dispose of their |
property or assets or any businesses they own and in their ability to incur indebtedness (other than in the ordinary course of business) |
without granting a lien on the proceeds therefrom to our manager, which lien will secure our obligations under the put provision of our |
operating agreement or note; and ● we will be restricted in our ability to (i) engage in certain mergers or consolidations, (ii) sell, transfer |
or otherwise dispose of all or a substantial part of our business, property or assets or all or a substantial portion of the stock or |
beneficial ownership of our businesses or a portion thereof, (iii) liquidate, wind-up or dissolve, (iv) acquire or purchase the property, |
assets, stock or beneficial ownership or another person, or (v) declare and pay distributions to our common shareholders. 23 We have also agreed to indemnify our manager for |
any losses or liabilities it incurs or suffers in connection with, arising out of or relating to its exercise of its put right or any |
enforcement of terms and conditions of the supplemental put provision of our operating agreement. The put price will be paid prior to the payment |
of distributions to our shareholders. If we do not have sufficient liquid assets to pay the put price when due, we may be required to |
liquidate assets or incur debt in order to pay the put price. Termination of the management services agreement, |
by any means, will not affect our manager’s rights with respect to the allocation shares that it owns. In this regard, our manager |
will retain its put right and its allocation shares after ceasing to serve as our manager. As a result, if we terminate our manager, regardless |
of the reason for such termination, it would retain the right to exercise the put right and demand payment of the put price. RETAIL AND APPLIANCES BUSINESS Our retail and appliances business is operated |
by Asien’s. This business segment accounted for approximately 21.8% and 41.6% of our total revenues for the years ended December |
31, 2022 and 2021, respectively. Overview Since 1948, we have been providing a wide variety |
of appliance services, including sales, delivery/installation, in-home service and repair, extended warranties, and financing in the North |
Bay area of Sonoma County, California. Our main focus is delivering personal sales and exceptional service to our customers at competitive |
prices. We operate one of the area’s oldest appliance |
stores and are well known and highly respected throughout the North Bay area. We have strong, established relationships with customers |
and contractors in the community. We provide products and services to a diverse group of customers, including homeowners, builders, and |
designers. As a member of BrandSource, a buying group that offers vendor programs, factory direct deals, marketing support, opportunity |
buys, close-outs, consumer rebates, finance offers, and similar benefits, we offer a full line of top brands from U.S. and international |
manufacturers. Products and Services Appliance Sales With a showroom display area of approximately |
6,000 square feet, we offer a complete line of home and kitchen appliances to residential customers, includin ● Cooking : Products include cooktops, microwaves, warming drawers, ventilation, wall ovens, |
ranges and range tops. Major brands include Beko, BlueStar, Café, DCS, Fisher Paykel, Five Star, Fulgor Milano, GE, Haier, Jenn-Air, |
KitchenAid, Maytag, Miele, Monogram, Sub-Zero, Viking, Whirlpool and Wolf. ● Refrigeration : Products include a wide variety of refrigerator configurations, freezers |
and ice makers, and wine and beer coolers. Major brands include Fisher Paykel, Jenn-Air, KitchenAid, Liebherr, Miele, Monogram, Perlick, |
Sub-Zero, Viking and Whirlpool. ● Laundry : Products include washers, dryers and laundry extras. Major brands include Amana, |
ASKO, Beko, Fisher & Paykel, GE, Maytag, Miele, Speed Queen and Whirlpool. ● Clean Up : Products include dishwashers, trash compactors, and in-sink food waste disposers. |
Major brands include AGA, Amana, ASKO, Beko, Café, Cove, Crosley, Fisher Paykel, GE, Hot Point, Jenn-Air, KitchenAid, Maytag, Miele, |
Monogram, Viking and Whirlpool. ● Outdoor : Products include outdoor grills, refrigeration, and storage. Major brands include |
DCS, Green Mountain Grills, LYNX, Marvel, Perlick, Sub-Zero, Viking and Wolf. Appliance Services We also offer a variety of appliance services, |
including delivery, installation, warranty service and appliance repair and maintenance. We are the largest independent appliance service |
company in Sonoma County. Our service technicians are experts, averaging 15 years of field experience with factory training. They are |
vendor certified to handle our customers’ kitchen appliance, laundry, and outdoor appliance service needs. We also offer extended |
warranties. 24 Pricing We provide premium and super premium products to the North Bay customer. |
A significant number of the appliances in our catalog are subject to a unilateral minimum retail price policy, or UMRP, or |
minimum advertised pricing restrictions. UMRP restricts a reseller from discounting the customer price for an appliance below a vendor |
published UMRP and product promotions are solely those specified by the vendor and unilaterally available. We thrive in the premium market |
by providing the customer with a higher overall perceived value as well as a competitive total invoice cost by offering premium service |
at reasonable rates. Our sales associates are industry professionals with an average of more than 15 years of experience selling appliances. |
This team of six averages over twelve years seniority with the senior member having been with us for 27 years. The premium appliance market |
requires this expertise as very often sales and customer service teams are interacting with designers, builders, and contractors, as well |
as our core customer, the homeowner. Our hard-earned reputation for this expertise in sales, installation and service accretes to our |
advantage when we compete directly across product lines that are also available from other local resellers and big box competitors. Our |
merchant and sales team are responsible to ensure that pricing and promotion for these appliances are competitive. Vendor/Supplier Relationships The |
following table sets forth the vendors and suppliers that accounted for more than 10% of our purchases for the year ended December 31, |
2022: Supplier Total Purchases (2021) Total Purchases (2022) Percent of Purchases (2022) Riggs Distributing, Inc. $ 2,558,915 $ 1,753,121 24.3 % General Electric 2,411,825 1,798,537 24.9 % Whirlpool 1,203,187 830,283 11.5 % Products are purchased from all suppliers on an |
at-will basis. We have no long-term purchase agreements with any supplier. Relationships with suppliers are subject to change from time |
to time. Changes in relationships with suppliers occur periodically and could positively or negatively impact our net sales and operating |
profits. We believe that we can be successful in mitigating negative effects resulting from unfavorable changes in the relationships with |
suppliers through, among other things, the development of new or expanded supplier relationships. Please see Item 1A “ Risk Factors—Risks |
Related to Our Retail and Appliances Business ” and Item 1A “ Risk Factors—Risks Related to Our Business and Structure—The |
COVID-19 pandemic may cause a material adverse effect on our business ” for a description of the risks related to our supplier |
relationships, including those associated with the COVID-19 pandemic. BrandSource Membership We are part of the member-owned buying group, |
BrandSource, which has an internal marketing company as well as a company to finance their purchases from some brands. Members of BrandSource can compete with box stores |
by banding together under the buying group; the dealers/members own the buying group/co-op. Simply put, the group aids members in helping |
them buy better, reduce costs, drive business into their stores and educate them in a way an independent dealer could not do it alone. We believe that the benefits of our membership |
with this group inclu ● $19 billion dollar buying power allowing members to compete on the price of products (same as box store); ● BrandSource finance through Progressive Leasing so members can get credit approved to purchase goods; 25 ● BrandSource marketing so members can compete for consumer store traffic. This includes turnkey websites, |
digital and social marketing, as well as print and video marketing. This allows members to actually out-market the box stores locally; ● National and regional education forums for members to be “in the know” on industry trends, |
vendor product knowledge and idea exchange; and ● BrandSource AVB retail technology solutions and consulting. Marketing We market our products through a variety of methods, |
both digital and traditional. Some examples include digital advertising, radio, billboards and “go local” marketing. Digital Advertising We participate in pay-per-click ads, digital banner |
ads, YouTube videos, Facebook posts, and similar digital media, through our membership in BrandSource. We also have a professional and |
easy-to-use website (www.asiensappliance.com), which allows customers to research, compare, and order products online. This site is hosted |
and maintained by BrandSource. Radio We run radio spots on various stations throughout |
the year, with most spots promoting our brand. These advertisements strive to promote our experience, expertise, service, local ownership, |
and more than 70 years in business. Some radio spots are paid for by appliance manufacturers, in which case we will promote the quality |
of the brand, rather than the price. Billboards We have secured two prominent billboards in Sonoma |
County: ● Northbound 101 across from the Corby Avenue auto row in Santa Rosa. We advertise on it half the year at |
different intervals. ● Southbound 101 in Petaluma near the Petaluma Village Premium Outlets. In many cases, as with the radio ads, appliance |
manufacturers will pay for advertising on the billboards. “Go Local” Marketing We also participate in the “GO LOCAL” |
marketing organization for locally owned independent businesses. Members of this organization use a shared brand, targeted advertising, |
and a rewards card to increase sales and gain market share. Customers and Markets We currently serve customers in the areas of Sonoma, |
Napa, Marin, Lake and Mendocino counties, California. The large majority of customers are homeowners and their contractors, with the homeowner |
being key in the final decisions. We have a diverse customer base, with no one customer accounting for more than 10% of total revenue. Customer Support Customer Service is of critical importance to |
our success. We primarily conduct customer service in person or on the telephone, although web-initiated chat, text and email are available |
and rapidly growing coordination and communication. We believe in allowing our customer to set the preferred method for communication. |
Our role in providing premium appliances can often require substantial pre-sales support, such as when quoting a multi-appliance bid package |
for a builder. Since 2020, there has been a material shift toward online sales and the appliance industry is no exception. Our customer service is available to field inbound |
customer calls from 8:00 am to 5:30 pm PST, Monday through Friday and Saturday from 9:00 am to 5:00 pm. 26 Logistics The large majority of our inventory consists of |
customers’ completed orders, most of which are selected from models on display in our extensive showroom. We do, however, maintain |
a supply of common and in-demand appliances for walk-in customers who are looking to make same-day purchases. We take ownership of inventory when it is delivered |
to our warehouse. At this point, warehouse staff unloads the product, determines the delivery location and arranges for delivery of the |
product. Customers may arrange for a delivery service or their third-party installers and contractors to pick-up their appliances at our |
warehouse or have it scheduled for drop-off or installation. We will coordinate third-party delivery or recommend factory trained third-party |
installation services when necessary. We also offer installation services. Another important service is haul-away of a customer’s |
used appliances. This service is included with drop-off or installation. We contract with a local third-party recycling firm to ensure |
that used appliances receive optimum recycling and appropriate disposal. Our return and exchange policy is designed to |
be as worry-free and customer friendly as possible. A customer may cancel or exchange an item that is on order or is not subject to a |
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