arcee-ai/sec-data-full · Datasets at Hugging Face

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on many factors that cannot be predicted with any certainty at this time. See Item 1 “ Business—Our Manager—Our Manager
as an Equity Holder—Supplemental Put Provision ” for more information on the calculation of the put price. The put price
obligation, if our manager exercises its put right, will represent a significant cash payment and is senior in right to payments of distributions
to our shareholders. Therefore, the amount of put price will reduce the amount of cash available to us for our operating and investing
activities, including future acquisitions. 98 Summary
of Cash Flow The
following table provides detailed information about our net cash flow for the period indicat Cash
Flow Years
Ended December 31, 2022 2021 Net cash used
in operating activities from continuing operations $ (4,131,477 ) $ (897,566 ) Net cash used in investing
activities from continuing operations (160,418 ) (15,684,770 ) Net
cash provided by financing activities from continuing operations 3,987,717 16,585,520 Net increase (decrease) in
cash and cash equivalents from continuing operations (304,178 ) 3,184 Cash
and cash equivalents at beginning of year 1,383,533 1,380,349 Cash
and cash equivalent at end of year $ 1,079,355 $ 1,383,533 Net
cash used in operating activities from continuing operations was $4,131,477 for the year ended December 31, 2022, as compared to $897,566
for the year ended December 31, 2021. The increase in cash used from operating activities was primarily a result of the increased net
loss, decreased receivables, and increased deferred tax liability, offset by increased inventories and increased accounts payable and
accrued expenses. Net
cash used in investing activities from continuing operations was $160,418 for the year ended December 31, 2022, as compared to $15,684,770
for the year ended December 31, 2021. The decrease in cash used in investing activities was primarily a result of the cash paid in acquisitions
during the prior year. Net
cash provided by financing activities from continuing operations was $3,987,717 for the year ended December 31, 2022, as compared to
$16,585,520 for the year ended December 31, 2021. The decrease in cash provided by investing activities was primarily a result of decreased
proceeds from preferred shares and notes payable issuances and increased dividend payments, offset by an equity offering and decreased
notes payable payments. Series
A Unit Offering On
March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each
unit consists of one (1) series A senior convertible preferred share and a three-year warrant to purchase one (1) common share at an
exercise price of $10.00 per common share (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments
described below, which may be exercised on a cashless basis under certain circumstances. As described in further detail below, we contributed
to 1847 Wolo the $3,000,000 raised in this offering in exchange for 1,000 shares of 1847 Wolo’s series A preferred stock, at a
price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847 Wolo. In
exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units
at a lower purchase price than such holders paid for their shares, we issued an aggregate of 99,710 common shares to such holders. Series
B Unit Offering From
February 24, 2022 to March 24, 2022, we sold an aggregate of 426,999 units, at a price of $3.00 per unit, for aggregate gross proceeds
of $1,281,000. From April 20, 2022 to May 19, 2022, we sold an aggregate of 54,567 units to our Chief Executive Officer, Ellery
W. Roberts, for aggregate gross proceeds of $163,700. We had total issuance costs relating to these offerings of approximately $15,000,
resulting in net proceeds of $1,429,700. Each unit consists of one (1) series B senior convertible preferred share and a three-year warrant
to purchase one (1) common share at an exercise price of $12.00 per share (subject to adjustment), which such exercise price was adjusted
to $4.20 following the down round warrant adjustments described below, which may be exercised on a cashless basis under certain circumstances. Private
Placement On
July 8, 2022, we entered into a securities purchase agreement with Mast Hill Fund, L.P., pursuant to which we issued to it a promissory
note in the principal amount of $600,000 and a five-year warrant for the purchase of 100,000 common shares at an exercise price of $6.00
per share (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments described below, which may
be exercised on a cashless basis if the market price of our common shares is greater than the exercise price, for total net proceeds
of $499,600. Additionally, we issued a three-year warrant to J.H. Darbie & Co (the broker) for the purchase of 3,600 common shares
at an exercise price of $7.50 (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments described
below, which may be exercised on a cashless basis if the market price of our common shares is greater than the exercise price. Accordingly,
a portion of the proceeds were allocated to the warrants based on its relative fair value using the Geometric Brownian Motion Stock Path
Monte Carlo Simulation. On August 10, 2022, the promissory note was repaid in full. 99 Public
Offering On
August 2, 2022, we entered into an underwriting agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc., as representatives
of the underwriters named on Schedule 1 thereto, relating to our public offering of common shares. Under the underwriting agreement,
we agreed to sell 1,428,572 common shares to the underwriters, at a gross purchase price per share of $4.20 per share, pursuant to our
registration statement on Form S-1 (File No. 333-259011) under the Securities Act. On August 5, 2022, the closing of the public offering
was completed and we sold 1,428,572 common shares for total gross proceeds of $6 million. After deducting underwriting commissions and
expenses, we received net proceeds of approximately $5.15 million. Dividends During
the year ended December 31, 2022, we accrued dividends attributable to the series A senior convertible preferred shares in the amount
of $590,162 and paid prior period accrued dividends of $615,593. During
the year ended December 31, 2022, we accrued dividends attributable to the series B senior convertible preferred shares in the amount
of $162,268 and paid prior period accrued dividends of $129,103. On
November 10, 2021, we declared a common share dividend of $0.05 per share, or an aggregate of $242,160, to shareholders of record as
of December 31, 2021. The dividend paid was paid on January 14, 2022. On
March 23, 2022, we declared a common share dividend of $0.05 per share, or an aggregate of $249,762, to shareholders of record as of
March 31, 2022. This dividend was paid on April 15, 2022. On
July 29, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $337,841, to shareholders of record as of
August 4, 2022. This dividend was paid on August 19, 2022. On
August 23, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $505,751 to shareholders of record as
of September 30, 2022. This dividend was paid on October 17, 2022. Warrant
Adjustments As
a result of the issuance of the note to Mast Hill Fund, L.P. on July 8, 2022, the exercise price of certain of our outstanding warrants
was adjusted to $5.20 pursuant to certain antidilution provisions of such warrants (down round feature). In addition, certain of our
outstanding warrants include an “full ratchet” feature, whereby the exercise price was reset to $5.20 and the number of shares
underlying the warrants was increased in the same proportion as the exercise price decrease. As a result, we recognized a deemed dividend
of approximately $6.4 million, which was calculated using a Black-Scholes pricing model. As
a result of the public offering, the exercise price of certain of our outstanding warrants was adjusted to $4.20 pursuant to certain
antidilution provisions of such warrants (down round feature). In addition, certain of our outstanding warrants include an “full
ratchet” feature, whereby the exercise price was reset to $4.20 and the number of shares underlying the warrants was increased
in the same proportion as the exercise price decrease. As a result, we recognized a deemed dividend of approximately $2.6 million, which
was calculated using a Black-Scholes pricing model. 100 Debt Secured
Convertible Promissory Notes On
October 8, 2021, we and each of our subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain
and Innovative Cabinets, entered into a note purchase agreement with two institutional investors, including Leonite, pursuant to which
we issued to these purchasers secured convertible promissory notes in the aggregate principal amount of $24,860,000. The notes contain
an aggregate original issue discount of $497,200. As a result, the total purchase price was $24,362,800. After payment of expenses of
$617,825, we received net proceeds of $23,744,975, of which $10,687,500 was used to fund the cash portion of the purchase price for the
acquisition of High Mountain and Innovative Cabinets. In addition, as consideration for the financing, we granted the financing agent
187,500 warrants with a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803.
The agent fees were reflected as a discount against the convertible note payable with the warrants being included in additional paid
in capital and the equity interest being including within noncontrolling interest on the consolidated balance sheet. The remaining principal
balance of the convertible notes at December 31, 2022 is $22,432,803, net of debt discounts of $2,427,197, and an accrued interest balance
of $500,702. The
notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street
Journal from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase
to 24% or the maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and
payable quarterly in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through
and including the maturity date, October 8, 2026. We may voluntarily prepay
the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10% of the principal and interest paid in connection

on many factors that cannot be predicted with any certainty at this time. See Item 1 “ Business—Our Manager—Our Manager

as an Equity Holder—Supplemental Put Provision ” for more information on the calculation of the put price. The put price

obligation, if our manager exercises its put right, will represent a significant cash payment and is senior in right to payments of distributions

to our shareholders. Therefore, the amount of put price will reduce the amount of cash available to us for our operating and investing

activities, including future acquisitions. 98 Summary

of Cash Flow The

following table provides detailed information about our net cash flow for the period indicat Cash

Flow Years

Ended December 31, 2022 2021 Net cash used

in operating activities from continuing operations $ (4,131,477 ) $ (897,566 ) Net cash used in investing

activities from continuing operations (160,418 ) (15,684,770 ) Net

cash provided by financing activities from continuing operations 3,987,717 16,585,520 Net increase (decrease) in

cash and cash equivalents from continuing operations (304,178 ) 3,184 Cash

and cash equivalents at beginning of year 1,383,533 1,380,349 Cash

and cash equivalent at end of year $ 1,079,355 $ 1,383,533 Net

cash used in operating activities from continuing operations was $4,131,477 for the year ended December 31, 2022, as compared to $897,566

for the year ended December 31, 2021. The increase in cash used from operating activities was primarily a result of the increased net

loss, decreased receivables, and increased deferred tax liability, offset by increased inventories and increased accounts payable and

accrued expenses. Net

cash used in investing activities from continuing operations was $160,418 for the year ended December 31, 2022, as compared to $15,684,770

for the year ended December 31, 2021. The decrease in cash used in investing activities was primarily a result of the cash paid in acquisitions

during the prior year. Net

cash provided by financing activities from continuing operations was $3,987,717 for the year ended December 31, 2022, as compared to

$16,585,520 for the year ended December 31, 2021. The decrease in cash provided by investing activities was primarily a result of decreased

proceeds from preferred shares and notes payable issuances and increased dividend payments, offset by an equity offering and decreased

notes payable payments. Series

A Unit Offering On

March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each

unit consists of one (1) series A senior convertible preferred share and a three-year warrant to purchase one (1) common share at an

exercise price of $10.00 per common share (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments

described below, which may be exercised on a cashless basis under certain circumstances. As described in further detail below, we contributed

to 1847 Wolo the $3,000,000 raised in this offering in exchange for 1,000 shares of 1847 Wolo’s series A preferred stock, at a

price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847 Wolo. In

exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units

at a lower purchase price than such holders paid for their shares, we issued an aggregate of 99,710 common shares to such holders. Series

B Unit Offering From

February 24, 2022 to March 24, 2022, we sold an aggregate of 426,999 units, at a price of $3.00 per unit, for aggregate gross proceeds

of $1,281,000. From April 20, 2022 to May 19, 2022, we sold an aggregate of 54,567 units to our Chief Executive Officer, Ellery

W. Roberts, for aggregate gross proceeds of $163,700. We had total issuance costs relating to these offerings of approximately $15,000,

resulting in net proceeds of $1,429,700. Each unit consists of one (1) series B senior convertible preferred share and a three-year warrant

to purchase one (1) common share at an exercise price of $12.00 per share (subject to adjustment), which such exercise price was adjusted

to $4.20 following the down round warrant adjustments described below, which may be exercised on a cashless basis under certain circumstances. Private

Placement On

July 8, 2022, we entered into a securities purchase agreement with Mast Hill Fund, L.P., pursuant to which we issued to it a promissory

note in the principal amount of $600,000 and a five-year warrant for the purchase of 100,000 common shares at an exercise price of $6.00

per share (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments described below, which may

be exercised on a cashless basis if the market price of our common shares is greater than the exercise price, for total net proceeds

of $499,600. Additionally, we issued a three-year warrant to J.H. Darbie & Co (the broker) for the purchase of 3,600 common shares

at an exercise price of $7.50 (subject to adjustment), which such exercise price was adjusted to $4.20 following the adjustments described

below, which may be exercised on a cashless basis if the market price of our common shares is greater than the exercise price. Accordingly,

a portion of the proceeds were allocated to the warrants based on its relative fair value using the Geometric Brownian Motion Stock Path

Monte Carlo Simulation. On August 10, 2022, the promissory note was repaid in full. 99 Public

Offering On

August 2, 2022, we entered into an underwriting agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc., as representatives

of the underwriters named on Schedule 1 thereto, relating to our public offering of common shares. Under the underwriting agreement,

we agreed to sell 1,428,572 common shares to the underwriters, at a gross purchase price per share of $4.20 per share, pursuant to our

registration statement on Form S-1 (File No. 333-259011) under the Securities Act. On August 5, 2022, the closing of the public offering

was completed and we sold 1,428,572 common shares for total gross proceeds of $6 million. After deducting underwriting commissions and

expenses, we received net proceeds of approximately $5.15 million. Dividends During

the year ended December 31, 2022, we accrued dividends attributable to the series A senior convertible preferred shares in the amount

of $590,162 and paid prior period accrued dividends of $615,593. During

the year ended December 31, 2022, we accrued dividends attributable to the series B senior convertible preferred shares in the amount

of $162,268 and paid prior period accrued dividends of $129,103. On

November 10, 2021, we declared a common share dividend of $0.05 per share, or an aggregate of $242,160, to shareholders of record as

of December 31, 2021. The dividend paid was paid on January 14, 2022. On

March 23, 2022, we declared a common share dividend of $0.05 per share, or an aggregate of $249,762, to shareholders of record as of

March 31, 2022. This dividend was paid on April 15, 2022. On

July 29, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $337,841, to shareholders of record as of

August 4, 2022. This dividend was paid on August 19, 2022. On

August 23, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $505,751 to shareholders of record as

of September 30, 2022. This dividend was paid on October 17, 2022. Warrant

Adjustments As

a result of the issuance of the note to Mast Hill Fund, L.P. on July 8, 2022, the exercise price of certain of our outstanding warrants

was adjusted to $5.20 pursuant to certain antidilution provisions of such warrants (down round feature). In addition, certain of our

outstanding warrants include an “full ratchet” feature, whereby the exercise price was reset to $5.20 and the number of shares

underlying the warrants was increased in the same proportion as the exercise price decrease. As a result, we recognized a deemed dividend

of approximately $6.4 million, which was calculated using a Black-Scholes pricing model. As

a result of the public offering, the exercise price of certain of our outstanding warrants was adjusted to $4.20 pursuant to certain

antidilution provisions of such warrants (down round feature). In addition, certain of our outstanding warrants include an “full

ratchet” feature, whereby the exercise price was reset to $4.20 and the number of shares underlying the warrants was increased

in the same proportion as the exercise price decrease. As a result, we recognized a deemed dividend of approximately $2.6 million, which

was calculated using a Black-Scholes pricing model. 100 Debt Secured

Convertible Promissory Notes On

October 8, 2021, we and each of our subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain

and Innovative Cabinets, entered into a note purchase agreement with two institutional investors, including Leonite, pursuant to which

we issued to these purchasers secured convertible promissory notes in the aggregate principal amount of $24,860,000. The notes contain

an aggregate original issue discount of $497,200. As a result, the total purchase price was $24,362,800. After payment of expenses of

$617,825, we received net proceeds of $23,744,975, of which $10,687,500 was used to fund the cash portion of the purchase price for the

acquisition of High Mountain and Innovative Cabinets. In addition, as consideration for the financing, we granted the financing agent

187,500 warrants with a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803.

The agent fees were reflected as a discount against the convertible note payable with the warrants being included in additional paid

in capital and the equity interest being including within noncontrolling interest on the consolidated balance sheet. The remaining principal

balance of the convertible notes at December 31, 2022 is $22,432,803, net of debt discounts of $2,427,197, and an accrued interest balance

of $500,702. The

notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street

Journal from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase

to 24% or the maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and

payable quarterly in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through

and including the maturity date, October 8, 2026. We may voluntarily prepay

the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10% of the principal and interest paid in connection