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

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with such prepayment. In addition, immediately upon receipt by our company or any subsidiary of any proceeds from any issuance of indebtedness
(other than certain permitted indebtedness), any proceeds of any sale or disposition by our company or any subsidiary of any of the collateral
or any of its respective assets (other than asset sales or dispositions in the ordinary course of business which are permitted by the
note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceedings,
we must prepay the notes in an amount equal to all such proceeds, net of reasonable and customary transaction costs, fees and expenses
properly attributable to such transaction and payable by our company or a subsidiary in connection therewith (in each case, paid to non-affiliates). The
holders of the notes may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any
accrued but unpaid interest on such portion, into our common shares at a conversion price equal to $10.00 (subject to standard adjustments,
including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations. Pursuant
to the terms of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the
right, but not the obligation, to participate in any securities offering other than a permitted issuance (as defined in the note purchase
agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of first refusal
to participate in any issuance of indebtedness until the notes have been terminated; provided, however, that this right of first refusal
shall not apply to permitted issuances. The
note purchase agreement and the notes contain customary representations, warranties, affirmative and negative financial and other covenants
and events of default for loans of this type. The notes are guaranteed by each subsidiary and are secured by a first priority security
interest in all of our assets. 6%
Subordinated Convertible Promissory Notes On
October 8, 2021, 1847 Cabinet issued 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345 to
Steven J. Parkey and Jose D. Garcia-Rendon, the sellers of High Mountain and Innovative Cabinets. On July 26, 2022, we and 1847 Cabinet
entered into a conversion agreement with Steven J. Parkey and Jose D. Garcia-Rendon, pursuant to which they agreed to convert an aggregate
of $3,360,000 of the convertible notes into an aggregate of 800,000 common shares at a conversion price of $4.20 per share. As a result,
we recognized a loss on extinguishment of debt of $1,280,000. The remaining principal balance of the notes at December 31, 2022 is $2,234,996,
net of debt discounts of $285,350, and an accrued interest balance of $381,426. The
notes bear interest at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of
default (as defined in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes
in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At
any time prior to October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent (20%) of the original
principal amount of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined
by dividing the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined
in accordance with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In addition, on October 8,
2021, we entered into an exchange agreement with the holders, pursuant to which we granted them the right to exchange all of the principal
amount and accrued but unpaid interest under the notes or any portion thereof for a number of our common shares to be determined by dividing
the amount to be converted by an exchange price equal to the higher of (i) the 30-day volume weighted average price for our common
shares on the primary national securities exchange or over-the-counter market on which our common shares are traded over the thirty
(30) trading days immediately prior to the applicable exchange date or (ii) $10.00 (subject to equitable adjustments for stock splits,
stock combinations, recapitalizations and similar transactions). 101 The
notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described
above. The rights of the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible
promissory notes described above. 6%
Amortizing Promissory Note On
July 29, 2020, 1847 Asien entered into a securities purchase agreement with Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees
of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992, or the Asien’s Seller, pursuant to which the Asien’s Seller sold
103,750 of our common shares to 1847 Asien a purchase price of $10.00 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, the parties 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 above, 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. On October 20, 2022, the parties entered into a letter agreement pursuant to which the parties agreed to
extend the maturity date of the note to February 28, 2023 and revised the repayment terms so that the outstanding principal amount and
all accrued interest thereon shall be payable monthly, beginning on November 30, 2022, in accordance with the payment schedule set forth
on Exhibit A to the letter agreement. As additional consideration for entering into the letter agreement, 1847 Asien also agreed to pay
the Asien’s Seller $87,707 as an amendment fee. The note is unsecured and contains customary events of default. The remaining principal
and accrued interest balance of the note at December 31, 2022 was $465,805 and $94,456, respectively. Related Party Promissory Note On September 30, 2020, a portion of the purchase price for the acquisition
of Kyle’s was paid by the issuance of a promissory note by 1847 Cabinet to Stephen Mallatt, Jr. and Rita Mallatt, or the Kyle’s
Sellers, in the principal amount of $1,260,000. Payment of the principal and accrued interest on the note was subject to vesting. As of
December 31, 2021, the remaining principal and accrued interest balance of the note was $203,291. On
July 26, 2022, we and 1847 Cabinet entered into a conversion agreement with the Kyle’s Sellers, pursuant to which they agreed to
convert $797,221 of the vesting note into 189,815 common shares at a conversion price of $4.20 per share. As a result, we recognized
a loss on extinguishment of debt of $303,706. Pursuant to the conversion agreement, the note was cancelled, and we agreed to pay $558,734
to the Kyle’s Sellers no later than October 1, 2022. See also “— Recent Developments ” above regarding the
amendment to the conversion agreement. Financing
Leases On
May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, which matures in December 2027.
The balance payable was $229,080 as of December 31, 2022. On
October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,376, which matures in December
2027. The balance payable was $203,169 as of December 31, 2022. 102 On
March 28, 2022, Kyle’s entered an equipment financing lease to purchase machinery and equipment for $316,798, which matures in
January 2028. The balance payable was $274,527 as of December 31, 2022. On
April 11, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for $11,706, which matures in
June 2027. The balance payable was $10,237 as of December 31, 2022. On
July 13, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for $240,260, which matures in
June 2028. The balance payable was $223,179 as of December 31, 2022. Vehicle
Loans Asien’s
has entered into seven retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging
from 3.74% to 8.72% with an aggregate remaining principal amount of $93,140 as of December 31, 2022. 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 $50,950 as of December 31, 2022. High
Mountain has entered into twelve retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment
at rates ranging from 3.74% to 6.34% with an aggregate remaining principal amount of $71,723 as of December 31, 2022. Innovative
Cabinets has entered into two retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment
at rates of 3.74% with an aggregate remaining principal amount of $14,422 as of December 31, 2022. Total
Debt The
following table shows aggregate figures for the total debt, net of discounts, described above that is coming due in the short and long
term as of December 31, 2022. See the above disclosures for more details regarding these loans. Short-Term Long-Term Total
Debt Secured Convertible
Promissory Notes $ - $ 22,432,803 $ 24,432,803 6% Subordinated Convertible
Promissory Notes - 2,234,996 2,234,996 6% Amortizing Promissory Note 465,805 - 465,805 Related Party Promissory Note 362,779 - 362,779 Financing Leases 185,718 784,148 969,866 Vehicle
Loans 85,405 144,830 230,235 Total $ 1,099,707 $ 25,596,777 $ 26,696,484 Contractual
Obligations Our
principal commitments consist mostly of obligations under the loans described above and other contractual commitments described below. We
have engaged the Manager to manage our day-to-day operations and affairs. Our relationship with the Manager will be governed principally
by the following agreements: ● the
management services agreement and offsetting management services agreements relating to the
management services the Manager will perform for us and the businesses we own and the management
fee to be paid to the Manager in respect thereof; and ● our

with such prepayment. In addition, immediately upon receipt by our company or any subsidiary of any proceeds from any issuance of indebtedness

(other than certain permitted indebtedness), any proceeds of any sale or disposition by our company or any subsidiary of any of the collateral

or any of its respective assets (other than asset sales or dispositions in the ordinary course of business which are permitted by the

note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain, condemnation or similar proceedings,

we must prepay the notes in an amount equal to all such proceeds, net of reasonable and customary transaction costs, fees and expenses

properly attributable to such transaction and payable by our company or a subsidiary in connection therewith (in each case, paid to non-affiliates). The

holders of the notes may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any

accrued but unpaid interest on such portion, into our common shares at a conversion price equal to $10.00 (subject to standard adjustments,

including a full ratchet antidilution adjustment); provided that the notes contain certain beneficial ownership limitations. Pursuant

to the terms of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the

right, but not the obligation, to participate in any securities offering other than a permitted issuance (as defined in the note purchase

agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of first refusal

to participate in any issuance of indebtedness until the notes have been terminated; provided, however, that this right of first refusal

shall not apply to permitted issuances. The

note purchase agreement and the notes contain customary representations, warranties, affirmative and negative financial and other covenants

and events of default for loans of this type. The notes are guaranteed by each subsidiary and are secured by a first priority security

interest in all of our assets. 6%

Subordinated Convertible Promissory Notes On

October 8, 2021, 1847 Cabinet issued 6% subordinated convertible promissory notes in the aggregate principal amount of $5,880,345 to

Steven J. Parkey and Jose D. Garcia-Rendon, the sellers of High Mountain and Innovative Cabinets. On July 26, 2022, we and 1847 Cabinet

entered into a conversion agreement with Steven J. Parkey and Jose D. Garcia-Rendon, pursuant to which they agreed to convert an aggregate

of $3,360,000 of the convertible notes into an aggregate of 800,000 common shares at a conversion price of $4.20 per share. As a result,

we recognized a loss on extinguishment of debt of $1,280,000. The remaining principal balance of the notes at December 31, 2022 is $2,234,996,

net of debt discounts of $285,350, and an accrued interest balance of $381,426. The

notes bear interest at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of

default (as defined in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes

in whole or in part, without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At

any time prior to October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent (20%) of the original

principal amount of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined

by dividing the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined

in accordance with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In addition, on October 8,

2021, we entered into an exchange agreement with the holders, pursuant to which we granted them the right to exchange all of the principal

amount and accrued but unpaid interest under the notes or any portion thereof for a number of our common shares to be determined by dividing

the amount to be converted by an exchange price equal to the higher of (i) the 30-day volume weighted average price for our common

shares on the primary national securities exchange or over-the-counter market on which our common shares are traded over the thirty

(30) trading days immediately prior to the applicable exchange date or (ii) $10.00 (subject to equitable adjustments for stock splits,

stock combinations, recapitalizations and similar transactions). 101 The

notes contain customary events of default, including in the event of a default under the secured convertible promissory notes described

above. The rights of the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible

promissory notes described above. 6%

Amortizing Promissory Note On

July 29, 2020, 1847 Asien entered into a securities purchase agreement with Joerg Christian Wilhelmsen and Susan Kay Wilhelmsen, as trustees

of the Wilhelmsen Family Trust, U/D/T Dated May 1, 1992, or the Asien’s Seller, pursuant to which the Asien’s Seller sold

103,750 of our common shares to 1847 Asien a purchase price of $10.00 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, the parties 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 above, 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. On October 20, 2022, the parties entered into a letter agreement pursuant to which the parties agreed to

extend the maturity date of the note to February 28, 2023 and revised the repayment terms so that the outstanding principal amount and

all accrued interest thereon shall be payable monthly, beginning on November 30, 2022, in accordance with the payment schedule set forth

on Exhibit A to the letter agreement. As additional consideration for entering into the letter agreement, 1847 Asien also agreed to pay

the Asien’s Seller $87,707 as an amendment fee. The note is unsecured and contains customary events of default. The remaining principal

and accrued interest balance of the note at December 31, 2022 was $465,805 and $94,456, respectively. Related Party Promissory Note On September 30, 2020, a portion of the purchase price for the acquisition

of Kyle’s was paid by the issuance of a promissory note by 1847 Cabinet to Stephen Mallatt, Jr. and Rita Mallatt, or the Kyle’s

Sellers, in the principal amount of $1,260,000. Payment of the principal and accrued interest on the note was subject to vesting. As of

December 31, 2021, the remaining principal and accrued interest balance of the note was $203,291. On

July 26, 2022, we and 1847 Cabinet entered into a conversion agreement with the Kyle’s Sellers, pursuant to which they agreed to

convert $797,221 of the vesting note into 189,815 common shares at a conversion price of $4.20 per share. As a result, we recognized

a loss on extinguishment of debt of $303,706. Pursuant to the conversion agreement, the note was cancelled, and we agreed to pay $558,734

to the Kyle’s Sellers no later than October 1, 2022. See also “— Recent Developments ” above regarding the

amendment to the conversion agreement. Financing

Leases On

May 6, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $276,896, which matures in December 2027.

The balance payable was $229,080 as of December 31, 2022. On

October 12, 2021, Kyle’s entered in an equipment financing lease to purchase equipment for $245,376, which matures in December

2027. The balance payable was $203,169 as of December 31, 2022. 102 On

March 28, 2022, Kyle’s entered an equipment financing lease to purchase machinery and equipment for $316,798, which matures in

January 2028. The balance payable was $274,527 as of December 31, 2022. On

April 11, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for $11,706, which matures in

June 2027. The balance payable was $10,237 as of December 31, 2022. On

July 13, 2022, Kyle’s entered in an equipment financing lease to purchase machinery and equipment for $240,260, which matures in

June 2028. The balance payable was $223,179 as of December 31, 2022. Vehicle

Loans Asien’s

has entered into seven retail installment sale contracts pursuant to which it agreed to finance its delivery trucks at rates ranging

from 3.74% to 8.72% with an aggregate remaining principal amount of $93,140 as of December 31, 2022. 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 $50,950 as of December 31, 2022. High

Mountain has entered into twelve retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment

at rates ranging from 3.74% to 6.34% with an aggregate remaining principal amount of $71,723 as of December 31, 2022. Innovative

Cabinets has entered into two retail installment sale contracts pursuant to which it agreed to finance delivery trucks and equipment

at rates of 3.74% with an aggregate remaining principal amount of $14,422 as of December 31, 2022. Total

Debt The

following table shows aggregate figures for the total debt, net of discounts, described above that is coming due in the short and long

term as of December 31, 2022. See the above disclosures for more details regarding these loans. Short-Term Long-Term Total

Debt Secured Convertible

Promissory Notes $ - $ 22,432,803 $ 24,432,803 6% Subordinated Convertible

Promissory Notes - 2,234,996 2,234,996 6% Amortizing Promissory Note 465,805 - 465,805 Related Party Promissory Note 362,779 - 362,779 Financing Leases 185,718 784,148 969,866 Vehicle

Loans 85,405 144,830 230,235 Total $ 1,099,707 $ 25,596,777 $ 26,696,484 Contractual

Obligations Our

principal commitments consist mostly of obligations under the loans described above and other contractual commitments described below. We

have engaged the Manager to manage our day-to-day operations and affairs. Our relationship with the Manager will be governed principally

by the following agreements: ● the

management services agreement and offsetting management services agreements relating to the

management services the Manager will perform for us and the businesses we own and the management

fee to be paid to the Manager in respect thereof; and ● our