10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2019

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 333-193821

1847 HOLDINGS LLC

(Exact name of registrant as specified in its charter)

Delaware	38-3922937
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

590 Madison Avenue, 21st Floor, New York, NY	10022
(Address of principal executive offices)	(Zip Code)

(212) 521-4052

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for comply with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 18, 2019, there were 3,165,625 common shares of the registrant issued and outstanding.

1847 HOLDINGS LLC

Quarterly Report on Form 10-Q

Period Ended September 30, 2019

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	57
Item 4.	Controls and Procedures	58
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosures	59
Item 5.	Other Information	59
Item 6.	Exhibits	59

i

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

1847 HOLDINGS LLC

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018	2
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	3
Consolidated Statements of Shareholders’ Deficit for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	4
Consolidated Statements of Cash Flows for the Nine Months September 30, 2019 and 2018 (unaudited)	5
Notes to Unaudited Consolidated Financial Statements	6

1

1847 HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(unaudited)
ASSETS
Current Assets
Cash	$	197,048		$	333,880
Accounts receivable, net		1,789,986			549,568
Inventories, net		2,570,717			487,690
Prepaid expenses and other current assets		1,003,876			145,978
TOTAL CURRENT ASSETS		5,561,627			1,517,116
Property and equipment, net		3,667,107			4,491,089
Operating lease right of use assets		2,682,294			-
Goodwill		6,553,727			22,166
Intangible assets, net		16,433			21,533
Other assets		45,375			375
TOTAL ASSETS	$	18,526,563		$	6,052,279
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	4,095,368		$	1,203,435
Floor plan payable		13,908			109,100
Current portion of operating lease liability		436,042			-
Advances, related party		179,565			174,333
Lines of credit		1,313,749			-
Note payable – related party, including accrued interest of $14,647 and $7,549 as of September 30, 2019 and December 31, 2018, respectively		131,647			124,549
Loan payable, related party – current portion		680,884			-
Notes payable – current portion		4,410,685			293,641
Uncertain tax liability		-			8,000
Warrant liability		172,144			-
Promissory notes – current portion		456,228			-
Customer deposits		2,939,331			-
Current portion of financing lease liability		344,716			299,157
TOTAL CURRENT LIABILITIES		15,174,267			2,212,215
Non-current notes-payable		-			3,262,434
Operating lease liability – long term, net of current portion		2,246,252			-
Promissory note payable – long term		1,025,000			1,025,000
Non-current deferred tax liability		-			364,601
Accrued expenses – long term, related party		792,300			451,857
Loan payable, related party – long term, net of current portion		3,593,325			-
Financing lease liability, net of current portion		363,281			763,239
TOTAL LIABILITIES	$	23,194,425		$	8,079,346
SHAREHOLDERS’ DEFICIT
Allocation shares, 1,000 shares issued and outstanding	$	1,000		$	1,000
Common Shares, 500,000,000 shares authorized, 3,165,625 and 3,115,625 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		3,165			3,115
Additional paid-in capital		442,014			11,891
Accumulated deficit		(4,133,325	)		(2,155,084	)
TOTAL SHAREHOLDERS’ DEFICIT		(3,687,146	)		(2,139,078	)
NONCONTROLLING INTERESTS		(980,716	)		112,011
TOTAL SHAREHOLDERS’ DEFICIT		(4,667,862	)		(2,027,067	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	18,526,563		$	6,052,279

The accompanying notes are an integral part of these consolidated financial statements

2

1847 HOLDINGS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
REVENUES
Services	$	742,041		$	883,460		$	2,293,765		$	2,543,087
Sales of parts and equipment		670,221			583,054			1,523,031			1,155,668
Furniture and appliances		12,132,103			-			22,748,153			-
TOTAL REVENUE		13,544,365			1,466,514			26,564,949			3,698,755
OPERATING EXPENSES
Cost of sales		10,709,830			478,195			20,255,556			1,034,786
Personnel costs		1,501,428			513,912			3,397,661			1,498,923
Depreciation and amortization		349,157			346,333			1,037,243			1,054,233
Fuel		143,658			226,738			503,923			605,581
General and administrative		1,963,599			333,696			4,050,269			1,347,196
TOTAL OPERATING EXPENSES		14,667,672			1,898,874			29,244,652			5,540,719
NET LOSS FROM OPERATIONS		(1,123,307	)		(432,360	)		(2,679,703	)		(1,841,964	)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt		(173,145	)		(8,268	)		(348,651	)		(528,223	)
Write-off of contingent consideration		-			-			-			395,634
Interest expense		(338,520	)		(140,351	)		(789,380	)		(411,880	)
Change in warrant liability		54,500			-			57,100			-
Other income (expense)		4,740			-			9,829			-
Gain (loss) on sale of property and equipment		-			-			24,224			(4,008	)
TOTAL OTHER INCOME (EXPENSE)		(452,425	)		(148,619	)		(1,046,878	)		(548,477	)
NET LOSS BEFORE INCOME TAXES		(1,575,732	)		(580,979	)		(3,726,581	)		(2,390,441	)
INCOME TAX EXPENSE (BENEFIT)		(395,763	)		(154,600	)		(655,613	)		(746,100	)
NET LOSS BEFORE NON-CONTROLLING INTERESTS		(1,179,969	)		(426,379	)		(3,070,968	)		(1,644,341	)
NON-CONTROLLING INTEREST		(395,258	)		(173,217	)		(1,092,727	)		(624,448	)
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS SHAREHOLDERS	$	(784,711	)	$	(253,162	)	$	(1,978,241	)	$	(1,019,893	)
Net Loss Per Common Share: Basic and diluted	$	(0.25	)	$	(0.08	)		(0.63	)	$	(0.33	)
Weighted-average number of common shares outstanding: Basic and diluted		3,165,100			3,115,625			3,147,918			3,115,625

The accompanying notes are an integral part of these consolidated financial statements

3

1847 HOLDINGS LLC

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT

(UNAUDITED)

For the Nine Months Ended September 30, 2019

	Common Shares				Allocation		Additional Paid-In		Accumulated			Non- Controlling			Shareholders’
	Shares		Amount		Shares		Capital		Deficit			Interest			Deficit
BALANCE – January 1, 2019		3,115,625	$	3,115	$	1,000	$	11,891	$	(2,155,084	)	$	112,011		$	(2,027,067	)
Net loss		-		-		-		-		(368,579	)		(266,680	)		(635,259	)
BALANCE – March 31, 2019		3,115,625		3,115		1,000		11,891		(2,523,663	)		(154,669	)		(2,662,326	)
Common shares and warrants issued in connection with convertible note payable		50,000		50		-		430,123		-			-			430,173
Net loss		-		-		-		-		(824,951	)		(430,789	)		(1,255,740	)
BALANCE – June 30, 2019		3,165,625		3,165		1,000		442,014		(3,348,614	)		(585,458	)		(3,487,893	)
Net loss		-		-		-		-		(784,711	)		(395,258	)		(1,179,969	)
BALANCE – September 30, 2019		3,165,625	$	3,165	$	1,000	$	442,014	$	(4,133,325	)	$	(980,716	)	$	(4,667,862	)

For the Nine Months Ended September 30, 2018

	Common Shares				Allocation		Additional Paid-In		Accumulated			Non- Controlling			Shareholders’
	Shares		Amount		Shares		Capital		Deficit			Interest			Deficit
BALANCE – January 1, 2018		3,115,625	$	3,115	$	1,000	$	11,891	$	(1,159,724	)	$	658,524		$	(485,194	)
Net loss		-		-		-		-		(529,145	)		(264,047	)		(793,192	)
BALANCE – March 31, 2018		3,115,625		3,115		1,000		11,891		(1,688,869	)		394,477			(1,278,386	)
Net loss		-		-		-		-		(237,586	)		(187,184	)		(424,770	)
BALANCE – June 30, 2018		3,115,625		3,115		1,000		11,891		(1,926,455	)		207,293			(1,703,156	)
Net loss		-		-		-		-		(253,162	)		(173,217	)		(426,379	)
BALANCE – September 30, 2018		3,115,625	$	3,115	$	1,000	$	11,891	$	(2,179,617	)	$	34,076		$	(2,129,535	)

The accompanying notes are an integral part of these consolidated financial statements

4

1847 HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES
Net loss	$	(3,070,968	)	$	(1,644,341	)
Adjustments to reconcile net loss to net cash used in by operating activities:
Gain (loss) on sale of property and equipment		(24,224	)		4,008
Depreciation and amortization		1,037,243			1,054,233
Amortization of financing costs		206,313			88,481
Loan contingency write-down		-			(395,634	)
Amortization of warrant feature of note payable		142,338			-
Amortization of OID interest		32,813			-
Amortization of operating lease right of use assets		19,107			-
Changes in operating assets and liabilities:
Accounts receivable		(617,794	)		65,448
Inventory		433,101			(21,310	)
Prepaid expenses and other assets		(148,465	)		72,322
Accounts payable and accrued expenses		(354,830	)		454,299
Other current liabilities		1,234,143			-
Operating lease liability		(19,107	)		-
Customer deposits		800,064			-
Warrant liability		(57,100	)		-
Uncertain tax position and deferred taxes		(572,398	)		(746,100	)
Due to related parties		5,232			(7,288	)
Net cash used in operating activities		(954,532	)		(1,075,882	)
INVESTING ACTIVITIES
Acquisition of Goedeker, net of cash acquired		1,135,368			-
Proceeds from the sale of property and equipment		39,750			202,025
Purchase of equipment		(17,076	)		(2,000	)
Net cash provided by investing activities		1,158,042			200,025
FINANCING ACTIVITIES
Proceeds of short-term borrowings		822,461			-
Proceeds from notes payable		27,000			3,781,908
Repayment of notes payable		(399,287	)		(93,767	)
Note payable – related party		(246,207	)		117,000
Repayment of lines of credit		(180,865	)		(675,000	)
Repayment of financing leases		(363,444	)		(2,218,500	)
Financing costs and early extinguishment of debt		-			(528,223	)
Net cash provided by (used in) financing activities		(340,342	)		383,418
NET CHANGE IN CASH		(136,832	)		(492,439	)
CASH
Beginning of period		333,880			501,422
End of period	$	197,048		$	8,983

The accompanying notes are an integral part of these consolidated financial statements

5

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS

1847 Holdings LLC (the “Company”) was formed under the laws of the State of Delaware on January 22, 2013. The Company is in the business of acquiring small businesses in a variety of different industries.

On March 3, 2017, the Company’s wholly-owned subsidiary 1847 Neese Inc., a Delaware corporation (“1847 Neese”), entered into a stock purchase agreement with Neese, Inc., an Iowa corporation (“Neese”), and Alan Neese and Katherine Neese, pursuant to which 1847 Neese acquired all of the issued and outstanding capital stock of Neese. As a result of this transaction, the Company owns 55% of 1847 Neese, with the remaining 45% held by the sellers.

On January 10, 2019, the Company established 1847 Goedeker Inc. (“Goedeker”) as a wholly-owned subsidiary in the State of Delaware in connection with the proposed acquisition of assets from Goedeker Television Co., Inc., a Missouri corporation (“Goedeker Television”), described below. On March 20, 2019, the Company established 1847 Goedeker Holdco Inc. (“1847 Holdco”) as a wholly-owned subsidiary in the State of Delaware and subsequently transferred all of its shares in Goedeker to 1847 Holdco, such that Goedeker became a wholly-owned subsidiary of 1847 Holdco.

On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker, pursuant to which, on April 5, 2019, Goedeker acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (see Note 9). As a result of this transaction, the Company owns 70% of 1847 Holdco, with the remaining 30% held by third-parties. (See Note 17).

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, 1847 Neese, Neese, 1847 Holdco and Goedeker. All significant intercompany balances and transactions have been eliminated in consolidation.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and are presented in US dollars.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2018.

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

Stock Splits

On January 22, 2018, the Company completed a 1-for-5 reverse split of its outstanding common shares. As a result of this stock split, the Company’s issued and outstanding common shares decreased from 3,115,500 to 623,125 shares.

On May 10, 2018, the Company completed a 5-for-1 forward stock split of its outstanding common shares. As a result of this stock split, the Company’s issued and outstanding common shares increased from 623,125 to 3,115,625 shares.

Accordingly, all share and per share information has been restated to retroactively show the effect of these stock splits.

6

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Segment Reporting

The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders. Beginning with the second quarter of 2019, the Company changed its operating and reportable segments from one segment to two segments: the Land Management Segment, which is operated by Neese, and the Retail and Appliances Segment, which is operated by Goedeker.

The Land Management Segment will be responsible for the activities that provide professional services on waste disposal and land application services based in Grand Junction, Iowa.

The Retail and Appliances Segment will be responsible for the activities in e-commerce destination for home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods based in St. Louis, Missouri.

The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under “Holding Company” below and these include costs associated with executive management, financing activities and public company compliance.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company’s prior financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended September 30, 2019. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder’s equity.

Revenue Recognition and Cost of Revenue 

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company’s adoption of this ASU resulted in no change to the Company’s results of operations or balance sheet.

Land Management Segment

Neese’s payment terms are due on demand from acceptance of delivery. Neese does not incur incremental costs obtaining purchase orders from customers, however, if Neese did, because all of Neese’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

7

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

The revenue that Neese recognizes arises from orders it receives from customers. Neese’s performance obligations under the customer orders correspond to each service delivery or sale of equipment that Neese makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the service or equipment sale to be completed. Control of the delivery transfers to customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, Neese’s products, which generally occurs at the later of when the customer obtains title to the equipment or when the customer assumes risk of loss. The transfer of control generally occurs at a point of delivery. Once this occurs, Neese has satisfied its performance obligation and Neese recognizes revenue.

Neese also sells equipment by posting it on auction sites specializing in farm equipment. Neese posts the equipment for sale on a “magazine” site for several weeks before the auction. When Neese decides to sell, it moves the equipment to the auction site. The auctions are one day. If Neese accepts a bid, the customer pays the bid price and arranges for pick-up of the equipment.

Transaction Price ‒ Neese agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon service fee. In Neese’s contracts with customers, it allocates the entire transaction price to the service fee to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Neese collects concurrently with revenue-producing activities are excluded from revenue.

If Neese continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Substantially all of Neese’s sales are to businesses, including farmers or municipalities and very little to individuals.

Disaggregated Revenue ‒ Neese disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Neese’s revenue by contract type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues
Trucking	$	383,709	$	568,004	$	1,267,550	$	1,580,032
Waste hauling and pumping		40,781		45,349		417,138		296,891
Repairs		181,129		163,618		309,330		429,348
Other		136,422		106,489		299,747		236,816
Total services		742,041		883,460		2,293,765		2,543,087
Sales of parts and equipment		670,221		583,054		1,523,031		1,155,668
Total revenue	$	1,412,262	$	1,466,514	$	3,816,796	$	3,698,755

Performance Obligations ‒ Performance obligations for the different types of services are discussed below:

● Trucking ‒ Revenues for time and material contracts are recognized when the merchandise or commodity is delivered to the destination specified in the agreement with the customer.

● Waste Hauling and pumping ‒ Revenues for waste hauling and pumping is recognized when the hauling, pumping, and spreading are complete.

● Repairs ‒ Revenues for repairs are recognized upon completion of equipment serviced.

● Sales of parts and equipment ‒ Revenues for the sale of parts and equipment are recognized upon the transfer and acceptance by the customer.

8

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Accounts Receivable, Net ‒ Accounts receivable, net, are amounts due from customers where there is an unconditional right to consideration. Unbilled receivables of $0 and $139,766 are included in this balance at September 30, 2019 and December 31, 2018, respectively. The payment of consideration related to these unbilled receivables is subject only to the passage of time.

Neese reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value. The estimates are based on an analysis of past due receivables, historical bad debt trends, current economic conditions, and customer specific information. After Neese has exhausted all collection efforts, the outstanding receivable balance relating to services provided is written off against the allowance. Additions to the provision for bad debt are charged to expense.

Neese determined that an allowance for loss of $29,001 was required at September 30, 2019 and December 31, 2018.

Retail and Appliances Segment

Goedeker collects the full sales price from the customer at the time the order is placed. Goedeker does not incur incremental costs obtaining purchase orders from customers, however, if Goedeker did, because all Goedeker’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Goedeker recognizes arises from orders it receives from customers. Goedeker’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, Goedeker’s products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment. Once this occurs, Goedeker has satisfied its performance obligation and Goedeker recognizes revenue. Revenue from the sale of long-term service warranties are recognized net of costs to sell the contracts to the third-party warranty service company.

Transaction Price ‒ Goedeker agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In Goedeker’s contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Goedeker collects concurrently with revenue-producing activities are excluded from revenue.

If Goedeker continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Cost of revenue includes the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.

Substantially all Goedeker’s sales are to individual retail consumers.

Disaggregated Revenue ‒ Goedeker disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Goedeker’s revenue by sales type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Appliance sales	$	10,086,489	$	-	$	18,535,801	$	-
Furniture sales		1,398,843		-		2,969,390		-
Other sales		646,771		-		1,242,962		-
Total revenue	$	12,132,103	$	-	$	22,748,153	$	-

Performance Obligations – Goedeker’s performance obligations include delivery of products and, in some instances, performance of services such as installation. Revenue for the sale of merchandise is recognized upon shipment to the customer; or in some instances, upon delivery and installation of the product which typically occur simultaneously.

9

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Receivables

Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company’s assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.

Allowance for Credit Losses

Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on the Company’s accounts receivable. The Company charges credit losses against the allowance and credits subsequent recoveries, if any, to the allowance. Historical loss experience and contractual delinquency of accounts receivables, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of accounts receivable on a collective basis and relates to probable incurred losses of unimpaired accounts receivables. The Company records a general allowance for credit losses that includes forecasted future credit losses.

Inventory

Inventory consists of finished products acquired for resale and is valued at the lower-of-cost-or-market with cost determined on a specific item basis for the Neese and of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on a average item basis for Goedeker. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $99,546 at September 30, 2019 and December 31, 2018.

Property and Equipment

Property and equipment is stated at cost. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Tractors	3-7
Trucks and vehicles	3-6

10

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2019, the Company classified a warrant issued in conjunction with a term loan as a derivative instrument. (see Note 11).

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

11

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the three and nine months ended September 30, 2019, the following 895,565 potentially dilutive securities were excluded from diluted loss per share: 200,000 for outstanding warrants and 695,565 related to the convertible note payable and accrued interest. There are no such common share equivalents outstanding as of September 30, 2018.

Going Concern Assessment

Management assesses going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

The Company has generated losses since its inception and has relied on cash on hand, external bank lines of credit and the sale of a note to support cashflow from operations. As of and for the nine months ended September 30, 2019, the Company had a net loss attributable to 1847 Holdings shareholders of $1,978,241, negative working capital of $9,612,640 and net cash used in operations of $954,532. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of the consolidated financial statements in this Quarterly Report on Form 10-Q, indicate improved operations and the Company’s ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements.

12

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years; and earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. On January 1, 2019, the Company recognized $624,157 of financing lease assets and $624,157 of financing lease liabilities, including noncurrent financing lease liabilities of $559,972, as a result of adopting this standard. As part of its adoption, the Company elected the following practical expedients: the Company has not reassessed whether any expired or existing contracts are or contain leases, the Company has not reassessed lease classification for any expired or existing leases; the Company has not reassessed initial direct costs for any existing leases; and the Company has not separated lease and non-lease components. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements and related disclosures. The comparative periods have not been restated for the adoption of ASU 2016-02.

NOTE 3—BUSINESS SEGMENTS

Summarized financial information concerning the Company’s reportable segments is presented below:

	For the Nine Months Ended September 30, 2019												For the Nine Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	2,293,765		$	-		$	-		$	2,293,765		$	2,543,087		$	-	$	-		$	2,543,087
Sales of parts and equipment		1,523,031			-			-			1,523,031			1,155,668			-		-			1,155,668
Furniture and appliances revenue		-			22,748,153			-			22,748,153			-			-		-			-
Total Revenue		3,816,796			22,748,153			-			26,564,949			3,698,755			-		-			3,698,755
Total cost of sales		1,369,440			18,886,115			-			20,255,556			1,034,786			-		-			1,034,786
Total operating expenses		4,104,427			4,765,211			119,458			8,989,096			4,249,254			-		256,679			4,505,933
Loss from operations	$	(1,657,071	)	$	(903,173	)	$	(119,458	)	$	(2,679,703	)	$	(1,585,285	)	$	-	$	(256,679	)	$	(1,841,964	)

	For the Three Months Ended September 30, 2019												For the Three Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	742,041		$	-		$	-		$	742,041		$	883,460		$	-	$	-		$	883,460
Sales of parts and equipment		670,221			-			-			670,221			583,054			-		-			583,054
Furniture and appliances revenue		-			12,132,103			-			12,132,103			-			-		-			-
Total Revenue		1,412,262			12,132,103			-			13,544,365			1,466,514			-		-			1,466,514
Total cost of sales		596,286			10,113,543			-			10,709,829			478,195			-		-			478,195
Total operating expenses		1,346,937			2,571,324			39,582			3,957,843			1,413,428			-		7,251			1,420,679
Loss from operations	$	(530,961	)	$	(552,764	)	$	(39,582	)	$	(1,123,307	)	$	(425,109	)	$		$	(7,251	)	$	(432,360	)

13

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 4—RECEIVABLES

At September 30, 2019 and December 31, 2018, receivables consisted of the following:

	September 30, 2019			December 31, 2018
Credit card payments in process of settlement	$	490,737		$	-
Vendor rebates receivable		967,565			-
Trade receivables from customers		360,685			578,569
Total receivables		1,818,987			578,569
Allowance for doubtful accounts		(29,001	)		(29,001	)
Accounts receivable, net	$	1,789,986		$	549,568

Following is a summary of activity in the allowance for doubtful accounts:

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	29,001	$	14,001
Provisions for losses		-		15,000
Accounts charged-off		-		-
Balance at end of period	$	29,001	$	29,001

NOTE 5—INVENTORIES

At September 30, 2019 and December 31, 2018, the inventory balances are composed of:

	September 30, 2019			December 31, 2018
Machinery and Equipment	$	189,452		$	427,551
Parts		155,252			159,685
Appliances		1,979,773			-
Furniture		303,845			-
Other		41,941			-
Subtotal		2,670,263			587,236
Allowance for inventory obsolescence		(99,546	)		(99,546	)
Inventories, net	$	2,570,717		$	487,690

Following is a summary of transactions in the allowance for inventory obsolescence:

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	99,546	$	70,000
Provisions for obsolescence		-		48,000
Write-down in inventory value		-		(18,454	)
Balance at end of period	$	99,546	$	99,546

Inventory and accounts receivable are pledged to secure a loan from Burnley, SBCC and Home State Bank described and defined in the notes below.

NOTE 6—DEPOSITS WITH VENDORS

Deposits with vendors represent cash on deposit with one vendor arising from accumulated rebates paid by the vendor. The deposits are used by the vendor to seek to secure the Company’s purchases. The deposit can be withdrawn at any time up to the amount of the Company’s credit line with the vendor. Alternatively, the Company could secure their credit line with a floor plan line from a lender and withdraw all its deposits. The Company has elected to leave the deposits with the vendor on which it earns interest income. In the acquisition of assets of Goedeker Television, Goedeker Television retained the vendor deposits.

14

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 7—PROPERTY AND EQUIPMENT

Property and equipment consist of the following at September 30, 2019 and December 31, 2018:

Classification	September 30, 2019			December 31, 2018
Buildings and improvements	$	5,338		$	5,338
Equipment and machinery		3,026,541			2,943,490
Tractors		2,834,888			2,834,888
Trucks and other vehicles		1,147,304			1,147,304
Leasehold improvements		117,626			-
Total		7,131,697			6,931,020
Less: Accumulated depreciation		(3,464,590	)		(2,439,931	)
Property and equipment, net	$	3,667,107		$	4,491,089

Depreciation expense for the nine months ended September 30, 2019 and 2018 was $1,032,143 and $1,054,233, respectively.

All property and equipment are pledged to secure loans from Burnley, SBCC and Home State Bank as described and defined in the notes below.

NOTE 8—INTANGIBLE ASSETS

The following provides a breakdown of identifiable intangible assets as of September 30, 2019 and December 31, 2018:

Customer Relationships	September 30, 2019			December 31, 2018
Identifiable intangible assets, gross	$	34,000		$	34,000
Accumulated amortization		(17,567	)		(12,467	)
Identifiable intangible assets, net	$	16,433		$	21,533

In connection with the acquisition of Neese, the Company identified intangible assets of $34,000 representing customer relationships. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 5 years and amortization expense amounted to $5,100 for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the estimated annual amortization expense for each of the next four fiscal years is as follows:

2019 (remainder)	$	1,700
2020		6,800
2021		6,800
2022		1,133
Total	$	16,433

NOTE 9—ACQUISITION

On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker (the “Stockholders”), pursuant to which Goedeker agreed to acquire substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (the “Goedeker Business”).

On April 5, 2019, Goedeker, 1847 Holdco, and the Stockholders entered into an amendment to the asset purchase agreement and closing of the acquisition of substantially all of the assets of Goedeker Television used in the Goedeker Business was completed (the “Acquisition”).

The aggregate purchase price was $6,200,000 consisting of: (i) $1,500,000 in cash, subject to adjustment; (ii) the issuance of a promissory note in the principal amount of $4,100,000; and (iii) up to $600,000 in earn out payments (as described below). As additional consideration, 1847 Holdco agreed to issue to each of the Stockholders a number of shares of its common stock equal to a 11.25% non-dilutable interest (22.5% total) in all of the issued and outstanding stock of 1847 Holdco as of the closing date.

15

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

The cash portion was decreased by the amount of outstanding indebtedness of Goedeker Television for borrowed money existing as of the closing. As a result, the cash portion was adjusted to $478,000. In addition, the cash portion of the purchase price is subject to a customary post-closing working capital adjustment provision with a target working capital of $(1,802,000) (negative amount).

Pursuant to the asset purchase agreement, the parties agreed to cooperate in determining a reasonable arrangement designed to provide Goedeker with the benefits under a digital marketing agreement between Goedeker Television and Power Digital Marketing. In consideration for Goedeker Television so cooperating, Goedeker agreed to pay to Goedeker Television a total of $20,000, which amount Goedeker Television will use to pay Power Digital Marketing for amounts due under the digital marketing agreement for services to be rendered during the months of April 2019 and May 2019. Goedeker Television also agreed to cause the digital marketing agreement to be terminated as of May 30, 2019 to ensure that Goedeker Television no longer has any obligations under the digital marketing agreement.

Goedeker Television is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets:

1. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;

2. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and

3. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.

To the extent the EBITDA of the Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, Goedeker must pay a partial earn out payment to Goedeker Television in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the “Achievement Percentage” is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000.

To the extent Goedeker Television is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker Television is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.

The rights of Goedeker Television to receive any earn out payment are subordinate to the rights of Burnley and SBCC under separate subordination agreements that Goedeker Television entered into with them on April 5, 2019 in connection with the Acquisition (see Notes 10 and 11).

The provisional fair value of the purchase consideration issued to Goedeker Television was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $535,940. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The Company is currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation for Goedeker will be included in the Company’s financial statements in future periods. The table below shows preliminary analysis for the Goedeker asset purchase:

16

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Provisional Purchase Consideration at preliminary fair value:
Note payable, net of $215,500 of capitalized financing costs	$	4,484,500
Financing of acquisition through notes payable, common stock and warrants (see Note 19)		2,583,000
Amount of consideration	$	7,067,500
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	1,135,368
Accounts receivable		792,173
Inventories		2,516,128
Working capital adjustment receivable and other assets		554,636
Property and equipment		206,612
Accounts payable and accrued expenses		(2,472,568	)
Customer deposits		(2,196,409	)
Other liabilities		-
Net tangible assets acquired	$	535,940
Total net assets acquired	$	535,940
Consideration paid		7,067,500
Preliminary goodwill	$	6,531,560

The following presents the pro-forma combined results of operations of the Company as if the Acquisition was completed on January 1, 2018 (before non-controlling interest).

	For the Nine Months Ended September 30,
	2019			2018
Revenues, net	$	39,511,848		$	46,582,000
Net income (loss) allocable to common shareholders	$	(2,423,507	)	$	544,000
Net loss per share	$	(0.77	)	$	0.17
Weighted average number of shares outstanding		3,165,625			3,165,625

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2018 or 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 Goedeker since April 5, 2019 acquisition date through September 30, 2019 included in the consolidated income statement amounted to approximately $22,748,000 and $1,548,000, respectively.

The estimated useful life remaining on the property and equipment acquired is 4 to 5 years.

NOTE 10—LINES OF CREDIT

Burnley Capital LLC

On April 5, 2019, Goedeker, as borrower, and 1847 Holdco entered into a loan and security agreement with Burnley Capital LLC (“Burnley”) for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base or (ii) $1,500,000 (provided that such amount may be increased to $3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any time in accordance with the loan and security agreement. The “borrowing base” means an amount equal to the sum of the following: (i) the product of 85% multiplied by the liquidation value of Goedeker’s inventory (net of all liquidation costs) identified in the most recent inventory appraisal by an appraiser acceptable to Burnley (ii) multiplied by Goedeker’s eligible inventory (as defined in the loan and security agreement), valued at the lower of cost or market value, determined on a first-in-first-out basis. In connection with the closing of the Acquisition on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. The balance of the line of credit amounts to $576,962 as of September 30, 2019, comprised of principal of $675,295 and net of unamortized debt discount of $98,333.

17

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

The revolving note matures on April 5, 2022, provided that at Burnley’s sole and absolute discretion, it may agree to extend the maturity date for two successive terms of one year each. The revolving note bears interest at a per annum rate equal to the greater of (i) the LIBOR Rate (as defined in the loan and security agreement) plus 6.00% or (ii) 8.50%; provided that upon an event of default (as defined below) all loans, all past due interest and all fees shall bear interest at a per annum rate equal to the foregoing rate plus 3.00%. Goedeker shall pay interest accrued on the revolving note in arrears on the last day of each month commencing on April 30, 2019.

Goedeker may at any time and from time to time prepay the revolving note in whole or in part. If at any time the outstanding principal balance on the revolving note exceeds the lesser of (i) the difference of the total loan amount minus any reserves and (ii) the borrowing base, then Goedeker shall immediately prepay the revolving note in an aggregate amount equal to such excess. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Holdco in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the revolving note in an aggregate amount equal to 100% of such net proceeds. A “prepayment event” means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Holdco; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Holdco with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Holdco of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

Under the loan and security agreement, Goedeker is required to pay a number of fees to Burnley, including the following:

● a commitment fee during the period from closing to the earlier of the maturity date or termination of Burnley’s commitment to make loans under the loan and security agreement, which shall accrue at the rate of 0.50% per annum on the average daily difference of the total loan amount then in effect minus the sum of the outstanding principal balance of the revolving note, which such accrued commitment fees are due and payable in arrears on the first day of each calendar month and on the date on which Burnley’s commitment to make loans under the loan and security agreement terminates, commencing on the first such date to occur after the closing date;

● an annual loan facility fee equal to 0.75% of the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), which is fully earned on the closing date for the term of the loan (including any extension) but shall be due and payable on each anniversary of the closing date;

● a monthly collateral management fee for monitoring and servicing the revolving loan equal to $1,700 per month for the term of revolving note, which is fully earned and non-refundable as of the date of the loan and security agreement, but shall be payable monthly in arrears on the first day of each calendar month; provided that payment of the collateral management fee may be made, at the discretion of Burnley, by application of advances under the revolving loan or directly by Goedeker; and

● if the revolving loan is terminated for any reason, including by Burnley following an event of default, then Goedeker shall pay, as liquidated damages and compensation for the costs of being prepared to make funds available, an amount equal to the applicable percentage multiplied by the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), wherein the term applicable percentage means (i) 3%, in the case of a termination on or prior to the first anniversary of the closing date, (ii) 2%, in the case of a termination after the first anniversary of the closing date but on or prior to the second anniversary thereof, and (iii) 0.5%, in the case of a termination after the second anniversary of the closing date but on or prior to the maturity date.

18

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

The loan and security agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the revolving note when due, or to pay any fees due under the loan and security agreement; (ii) if any representation, warranty or certification in the loan and security agreement or any document delivered in connection therewith is incorrect in any material respect; (iii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iv) for the occurrence of any default in respect of any other indebtedness of more than $100,000; (v) for any voluntary or involuntary bankruptcy, insolvency or dissolution; (vi) for the occurrence of one or more judgments, non-interlocutory orders, decrees or arbitration awards involving in the aggregate a liability of $25,000 or more; (vii) if Goedeker or 1847 Holdco, or officer thereof, is charged by a governmental authority, criminally indicted or convicted of a felony under any law that would reasonably be expected to lead to forfeiture of any material portion of collateral, or such entity is subject to an injunction restraining it from conducting its business; (viii) if Burnley determines that a material adverse effect (as defined in the loan and security agreement) has occurred; (ix) if a change of control (as defined in the loan and security agreement) occurs; (x) if there is any material damage to, loss, theft or destruction of property which causes, for more than thirty consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities; (xi) if there is a loss, suspension or revocation of, or failure to renew any permit if it could reasonably be expected to have a material adverse effect; and (xii) for the occurrence of any default or event of default under the term loan with SBCC (as defined below), the 9% subordinated promissory note issued to Goedeker Television, the secured convertible promissory note issued to Leonite (as defined below) or any other debt that is subordinated to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The revolving note is secured by a first priority security interest in all of the assets of Goedeker and 1847 Holdco. In connection with such security interest, on April 5, 2019, (i) 1847 Holdco entered into a pledge agreement with Burnley, pursuant to which 1847 Holdco pledged the shares of Goedeker held by it to Burnley, and (ii) Goedeker entered into a deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker’s bank accounts.

In addition, on April 5, 2019, the Company entered into a guaranty with Burnley to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of Burnley to receive payments under the revolving note are subordinate to the rights of Northpoint (as defined below) under a subordination agreement that Burnley entered into with Northpoint.

At September 30, 2019, Goedeker did not meet certain loan covenants under the loan and security agreement. The agreement requires compliance with the following ratios as a percentage of earnings before interest, taxes, depreciation, and amortization for the twelve-month period ended September 30, 2019. The table below shows the required ratio and actual ratio for such period.

Covenant	Actual Ratio	Required Ratio
Total debt ratio	(9.6)x	4.50x
Senior debt ratio	(3.7)x	1.75x
Interest coverage ratio	(0.7)x	1.0x

In addition, Goedeker was not in compliance with a requirement with respect to the liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At September 30, 2019, the actual ratio was 0.24x compared to a requirement of 0.65x

The loan and security agreement with SBCC described below contains the same covenants and a cross default provision, whereby a default under the Burnley loan and security agreement triggers a default under the SBCC loan and security agreement. Accordingly, the Company is in technical, not payment default, on these loan and security agreements and has classified such debt as a current liability. The Company has developed plans that will return it to full compliance including a recently received proposal from a new asset-based lender.

There are no cross default provisions that would require any other long-term liabilities to be classified as current. Although the 9% subordinated promissory note described below contains a cross default provision that is triggered by the acceleration of the senior debt, such cross default provision would only be triggered for a technical default like the one that occurred if the senior lender accelerated the senior debt, which has not happened.

19

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Northpoint Commercial Finance LLC

On June 24, 2019, Goedeker, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC (“Northpoint”), which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR plus 7.99%. The balance of the line of credit amounts to $736,788 as of September 30, 2019.

Pursuant to the loan and security agreement, Goedeker shall pay the following fees to Northpoint: (i) an audit fee for each audit conducted as determined by Northpoint, equal to the out-of-pocket expense incurred by Northpoint plus any minimum audit fee established by Northpoint; (ii) a fee for any returned payments equal to the lesser of the maximum amount permitted by law or $50; (iii) a late fee for each payment not received by the 25^th day of a calendar month, and each month thereafter until such payment is paid, equal to the greater of 5% of the amount past due or $25; (iv) a billing fee equal to $250 for any month for which Goedeker requests a paper billing statement; (v) a live check fee equal to $50 for each check that Goedeker sends to Northpoint for payment of obligations under the loan and security agreement; (vi) processing fees to be determined by Northpoint; and (vii) any additional fees that Northpoint may implement from time to time.

The loan and security agreement contains customary events of default, including in the event of (i) non-payment, (ii) a breach by Goedeker of any of its representations, warranties or covenants under the loan and security agreement or any other agreement entered into with Northpoint, or (iii) the bankruptcy or insolvency of Goedeker.  The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type.

The Northpoint loans are secured by a security interest in all of the inventory of Goedeker that is manufactured or sold by vendors identified in the loan and security agreement. In connection with the loan and security agreement, on June 24, 2019, 1847 Holdco entered into a guaranty in favor of Northpoint, to guaranty the obligations of Goedeker under the loan and security agreement.

NOTE 11—TERM LOANS

SBCC

On April 5, 2019, Goedeker, as borrower, and 1847 Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (“SBCC”) for a term loan in the principal amount of $1,500,000, pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0% of the outstanding equity securities of Goedeker on a fully-diluted basis for an aggregate price equal to $100. The balance of the note amounts to $1,049,186 as of September 30, 2019, comprised of principal of $1,406,250 and net of unamortized debt discount of $155,750 and unamortized warrant feature of $201,314.

The term note matures on April 5, 2023 and bears interest at the sum of the cash interest rate (defined as 11% per annum) plus the PIK interest rate (defined as 2% per annum); provided that upon an event of default all principal, past due interest and all fees shall bear interest at a per annum rate equal to the cash interest rate and the PIK interest rate, in each case plus 3.00%. Interest accrued at the cash interest rate shall be due and payable in arrears on the last day of each month commencing May 31, 2019. Interest accrued at the PIK interest rate shall be automatically capitalized, compounded and added to the principal amount of the term note on each last day of each quarter unless paid in cash on or prior to the last day of each quarter; provided that (i) interest accrued pursuant to an event of default shall be payable on demand, and (ii) in the event of any repayment or prepayment, accrued interest on the principal amount repaid or prepaid (including interest accrued at the PIK interest rate and not yet added to the principal amount of term note) shall be payable on the date of such repayment or prepayment. Notwithstanding the foregoing, all interest on term note, whether accrued at the cash interest rate or the PIK interest rate, shall be due and payable in cash on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker must repay to SBCC on the last business day of each March, June, September and December, commencing with the last business day of June 2019, an aggregate principal amount of the term note equal to $93,750, regardless of any prepayments made, and must pay the unpaid principal on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker may prepay the term note in whole or in part from time to time; provided that if such prepayment occurs (i) prior to the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 5.0% of such prepayment, (ii) prior to the second anniversary of the closing date and on or after the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 3.0% of such prepayment, or (iii) prior to the third anniversary of the closing date and on or after the second anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 1.0% of such prepayment, in each case as liquidated damages for damages for loss of bargain to SBCC. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Holdco in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the term note in an aggregate amount equal to 100% of such net proceeds. A “prepayment event” means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Holdco; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Holdco with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Holdco of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

20

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

The loan and security agreement with SBCC contains the same events of default as the loan and security agreement with Burnley, provided that the reference to the term loan in the cross-default provision refers instead to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The term note is secured by a second priority security interest (subordinate to the revolving loan) in all of the assets of Goedeker and 1847 Holdco. In connection with such security interest, on April 5, 2019, (i) 1847 Holdco entered into a pledge agreement with SBCC, pursuant to which 1847 Holdco pledged the shares of Goedeker held by it to SBCC, and (ii) Goedeker entered deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker’s bank accounts.

In addition, on April 5, 2019, the Company entered into a guaranty with SBCC to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of SBCC to receive payments under the term note are subordinate to the rights of Northpoint and Burnley under separate subordination agreements that SBCC entered into with them.

As noted above, the Company is in technical, not payment default, on this loan and security agreement and has classified such debt as a current liability.

Home State Bank

On June 13, 2018, Neese entered into a term loan agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2019. Pursuant to the terms of the note, Neese will make semi-annual payments of $302,270 beginning on January 20, 2019 and continuing every six months thereafter until July 20, 2020, the maturity date; provided however, that Neese will pay the note in full immediately upon demand by Home State Bank. The balance of the note amounts to $3,361,499 as of September 30, 2019, comprised of principal of $3,376,757 and net of unamortized debt discount of $15,258.

The loan agreement contains customary representations and warranties. Pursuant to the terms of the loan agreement and the note, an “event of default” includes: (i) if Neese fails to make any payment when due under the note; (ii) if Neese fails to comply with or to perform any other term, obligation, covenant or condition contained in the note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Home State Bank and Neese; (iii) if Neese defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Home State Bank’s property or Neese’s ability to repay the note or perform Neese’s obligations under the note or any of the related documents; (iv) if any warranty, representation or statement made or furnished to Home State Bank by Neese or on Neese’s behalf under the note or the related documents is false or misleading in any material respect; (v) upon the dissolution or termination of Neese’s existence as a going business, the insolvency of Neese, the appointment of a receiver for any part of Neese’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Neese, (vi) upon commencement of foreclosure or forfeiture proceedings by any creditor of Neese or by any governmental agency against any collateral securing the loan; and (vii) if a material adverse change occurs in Neese’s financial condition, or Home State Bank believes the prospect of payment or performance of the note is impaired. If any event of default occurs, all commitments and obligations of Home State Bank immediately will terminate and, at Home State Bank’s option, all indebtedness immediately will become due and payable, all without notice of any kind to Neese. Additionally, upon an event of default, the interest rate on the note will be increased by 3 percentage points. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

The loan is secured by inventory, accounts receivable, and certain fixed assets of Neese. The loan agreement limited the payment of interest on certain promissory notes (See Note 14) to $40,000 annually or fees to the Company’s manager. The Company continues to accrue interest and management fee at the contractual amounts. Such accruals (in excess of $40,000 in interest on the promissory notes) are shown as long-term accrued expenses in the accompanying balance sheet as of June 30, 2019.

21

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

If the Company sells property, plant, and equipment securing the loan, it must remit the appraised value of the equipment to Home State Bank. During the nine months ended September 30, 2019, $0 was remitted to Home State Bank pursuant to this requirement. During the three months ended, September 30, 2019, Home State Bank advanced $27,000 against the term loan to pay the annual liability insurance premium.

The Company adopted ASU 2015-03 by deducting $51,427 of net debt issuance costs from the term loan. Amortization of debt issuance costs totaled $16,210 for the three months ended September 30, 2019.

Following is a summary of payments due on the SBCC and Home State Bank terms loan for the succeeding five years:

	Amount
2019 (remainder)	$	187,500
2020		3,751,757
2021		375,000
2022		375,000
2023		93,750
Total payments		4,783,007
Less current portion of principal payments		4,783,007
Debt issuance costs, net		(372,322	)
Long-term portion of principal payments	$	-

NOTE 12—FLOOR PLAN LOANS PAYABLE

At September 30, 2019, $13,908 of machinery and equipment inventory was pledged to secure a floor plan loan from a commercial lender. The Company must remit proceeds from the sale of the secured inventory to the floor plan lender and pays a finance charge that can vary monthly at the option of the lender. The balance of the floor plan payable as of September 30, 2019 and December 31, 2018 amounted to $13,908 and $109,100, respectively.

NOTE 13—PROMISSORY NOTES

Secured Convertible Promissory Note

On April 5, 2019, the Company, 1847 Holdco and Goedeker (collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) the Company issued to Leonite 50,000 common shares, (ii) the Company issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) 1847 Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in 1847 Holdco.

The note carries an original issue discount of $64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Therefore, the purchase price of the note was $650,000. Furthermore, the Company issued 50,000 shares of common stock valued at $137,500 and a debt-discount related to the warrants valued at $292,673. The company amortized $211,088 of financing costs related to the shares and warrants in the nine months ended September 30, 2019. The remaining net balance of the note at September 30, 2019 is $456,228, comprised of principal of $714,286 and net of unamortized original issuance discount interest of $31,473 and financing costs of $76,250 and unamortized debt discount warrant feature of $150,335.

The note bears interest at the rate of the greater of (i) 12% per annum and (ii) the prime rate as set forth in the Wall Street Journal on April 5, 2019 plus 6.5% guaranteed over the holding period on the unconverted principal amount, on the terms set forth in the note (the “Stated Rate”). Any amount of principal or interest on the note which is not paid by the maturity date shall bear interest at the rate at the lesser of 24% per annum or the maximum legal amount permitted by law (the “Default Interest”).

22

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Beginning on May 5, 2019 and on the same day of each and every calendar month thereafter throughout the term of the note, 1847 shall make monthly payments of interest only due under the note to Leonite at the Stated Rate as set forth above. 1847 shall pay to Leonite on an accelerated basis any outstanding principal amount of the note, along with accrued, but unpaid interest, from: (i) net proceeds of any future financings by the Company, but not its subsidiaries, whether debt or equity, or any other financing proceeds, except any transaction having a specific use of proceeds requirement that such proceeds are to be used exclusively to purchase the assets or equity of an unaffiliated business and the proceeds are used accordingly; (ii) net proceeds from any sale of assets of 1847 or any of its subsidiaries other than sales of assets in the ordinary course of business or receipt by 1847 or any of its subsidiaries of any tax credits, subject to rights of Goedeker, or other financing sources of 1847 (including its subsidiaries) existing prior to the date of the note; and (iii) net proceeds from the sale of any assets outside of the ordinary course of business or securities in any subsidiary.

The note will mature 12 months from the issue date, or April 5, 2020, at which time the principal amount and all accrued and unpaid interest, if any, and other fees relating to the note, will be due and payable. Unless an event of default as set forth in the note has occurred, 1847 has the right to prepay principal amount of, and any accrued and unpaid interest on, the note at any time prior to the maturity date at 115% of the principal amount (the “Premium”), provided, however, that if the prepayment is the result of any of the occurrence of any of the transactions described in subparagraphs (i), (ii) or (iii) above then such prepayment shall be the unpaid principal amount, plus accrued and unpaid interest and other amounts due but without the Premium.

The note contains customary events of default, including in the event of (i) non-payment, (ii) a breach by 1847 of its covenants under the securities purchase agreement or any other agreement entered into in connection with the securities purchase agreement, or a breach of any of representations or warranties under the note, or (iii) the bankruptcy of 1847. The note also contains a cross default provision, whereby a default by 1847 of any covenant or other term or condition contained in any of the other financial instrument issued by of 1847 to Leonite or any other third party after the passage all applicable notice and cure or grace periods that results in a material adverse effect shall, at Leonite’s option, be considered a default under the note, in which event Leonite shall be entitled to apply all rights and remedies under the terms of the note.

Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of the Company into which such common shares may be changed or reclassified. The number of common shares to be issued upon each conversion of the note shall be determined by dividing the conversion amount by the applicable conversion price then in effect. The conversion amount is the sum of: (i) the principal amount of the note to be converted plus (ii) at Leonite’s option, accrued and unpaid interest, plus (iii) at Leonite’s option, Default Interest, if any, plus (iv) Leonite’s expenses relating to a conversion, plus (v) at Leonite’s option, any amounts owed to Leonite. The conversion price shall be $1.00 per share (subject to adjustment as further described in the note for common share distributions and splits, certain fundamental transactions, and anti-dilution adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately be equal to the lesser of (i) such conversion price less 40%; and (ii) the lowest weighted average price of the common shares during the 21 consecutive trading day period immediately preceding the trading day that 1847 receives a notice of conversion or (iii) the discount to market based on subsequent financings with other investors.

Notwithstanding the foregoing, in no event shall Leonite be entitled to convert any portion of the note in excess of that portion of the note upon conversion of which the sum of (1) the number of common shares beneficially owned by Leonite and its affiliates (other than common shares which may be deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has purchased a portion of the note from Leonite) and (2) the number of common shares issuable upon the conversion of the portion of the note with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite and its affiliates of more than 4.99% of the outstanding common shares of the Company. Such limitations on conversion may be waived (up to a maximum of 9.99%) by Leonite upon, at its election, not less than 61 days’ prior notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite, as may be specified in such notice of waiver).

23

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Concurrently with 1847 and Leonite entering into the securities purchase agreement and as security for 1847’s obligations thereunder, on April 5, 2019, the Company, 1847 Holdco and Goedeker entered into a security and pledge agreement with Leonite, pursuant to which, in order to secure 1847’s timely payment of the note and related obligations and the timely performance of each and all of its covenants and obligations under the securities purchase agreement and related documents, 1847 unconditionally and irrevocably granted, pledged and hypothecated to Leonite a continuing security interest in and to, a lien upon, assignment of, and right of set-off against, all presently existing and hereafter acquired or arising assets. Such security interest is a first priority security interest with respect to the securities that the Company owns in 1847 Holdco and in 1847 Neese, and a third priority security interest with respect to all other assets.

The rights of Leonite to receive payments under the note are subordinate to the rights of Northpoint, Burnley and SBCC under separate subordination agreements that Leonite entered into with them.

9% Subordinated Promissory Note

As noted above, a portion of the purchase price for the Acquisition was paid by the issuance by Goedeker to Steve Goedeker, as representative of Goedeker Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. The note will accrue interest at 9% per annum, amortized on a five-year straight-line basis and payable quarterly in accordance with the amortization schedule attached thereto, and mature on April 5, 2023. Goedeker has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by Goedeker of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of Goedeker. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans with Burnley and SBCC are not payment defaults, they fall under clause (B) above and would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.

The rights of the holder to receive payments under the note are subordinate to the rights of Northpoint, Burnley and SBCC under separate subordination agreements that the holder entered into with them.

The remaining balance of the note at September 30, 2019 is $4,274,209, comprised of principal of $4,530,293 and net of unamortized debt discount of $256,084.

8% Vesting Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a vesting promissory note in the principal amount of $1,875,000 (which was determined to have no fair value as of September 30, 2019 and December 31, 2018) by 1847 Neese and Neese to the sellers of Neese. Payment of the principal and accrued interest on the vesting promissory note is subject to vesting and a contingent consideration subject to fair market valuation adjustment at each reporting period. The vesting promissory note bears interest on the vested portion of the principal amount at the rate of eight percent (8%) per annum and is due and payable in full on June 30, 2020 (the “Maturity Date”). The principal of the vesting promissory note vests in accordance with the following formula:

● Fiscal Year 2017: If Adjusted EBITDA for the fiscal year ending December 31, 2017, exceeds an Adjusted EBITDA target of $1,300,000 (the “Adjusted EBITDA Target”), then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2017 through the Maturity Date. For the year ended December 31, 2017, Adjusted EBITDA was $788,958, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2017.

● Fiscal Year 2018: If Adjusted EBITDA for the fiscal year ending December 31, 2018, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2018 through the Maturity Date. For the year ended December 31, 2018, Adjusted EBITDA was approximately $320,000, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2018.

● Fiscal Year 2019: If Adjusted EBITDA for the fiscal year ending December 31, 2019, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2019 through the Maturity Date.

24

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

For purposes of the vesting promissory note, “Adjusted EBITDA” means the earnings before interest, taxes, depreciation and amortization expenses, in accordance with GAAP applied on a basis consistent with the accounting policies, practices and procedures used to prepare the financial statements of Neese as of the closing date, plus to the extent deducted in calculating such net income: (i) all expenses related to the transactions contemplated hereby and/or potential or completed future financings or acquisitions, including legal, accounting, due diligence and investment banking fees and expenses; (ii) all management fees, allocations or corporate overhead (including executive compensation) or other administrative costs that arise from the ownership of Neese by 1847 Neese including allocations of supervisory, centralized or other parent-level expense items; (iii) one-time extraordinary expenses or losses; and (iv) any reserves or adjustments to reserves which are not consistent with GAAP. Additionally, for purposes of calculating Adjusted EBITDA, the purchase and sales prices of goods and services sold by or purchased by Neese to or from 1847 Neese, its subsidiaries or affiliates shall be adjusted to reflect the amounts that Neese would have realized or paid if dealing with an independent third-party in an arm’s-length commercial transaction, and inventory items shall be properly categorized as such and shall not be expenses until such inventory is sold or consumed.

At June 30, 2018, management made the determination that the vesting note payable had no value because it estimated that the EBITDA threshold of $1,300,000 for both 2018 and 2019 would be not attained, thus eliminating the requirement for a payment under terms of the note payable.

The vesting promissory note contains customary events of default, including in the event of: (i) non-payment; (ii) a default by 1847 Neese or Neese of any of their covenants under the stock purchase agreement, the vesting promissory note, or any other agreement entered into in connection with the stock purchase agreement, or a breach of any of their representations or warranties under such documents; or (iii) the bankruptcy of 1847 Neese or Neese.

Under terms of the term loan with Home State Bank described in Note 11, this note may not be paid until the term loan is paid in full.

10% Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the sellers of Neese. The promissory note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018; provided, however, that the unpaid principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time, the cash on hand of 1847 Neese and Neese exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid principal and accrued, but unpaid, interest thereon is fully prepaid. The promissory note contains the same events of default as the vesting promissory note. The promissory note has not been repaid, thus the Company is in default under this note. Under terms of the term loan with Home State Bank described in Note 11, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. Accordingly, the loan is shown as a long-term liability as of June 30, 2019. Additionally, the term loan lender limits the payment of interest on this note to $40,000 annually. The Company continues to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

25

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 14—FINANCING LEASES

The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neese’s equipment with Utica Leaseco, LLC (“Utica”), pursuant to a master lease agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees (collectively, the “Lessee”). Under the master lease agreement, Utica loaned an aggregate of $3,240,000 for certain of Neese’s equipment listed therein, which it leases to the Lessee. The initial term of the master lease agreement was for 51 months. Under the master lease agreement, the Lessee agreed to pay a monthly rent of $53,000 for the first three (3) months, with such amount increasing to $85,322 for the remaining forty-eight (48) months.

On June 14, 2017, the parties entered into a first amendment to lease documents, pursuant to which the parties agreed to, among other things, extend the term of the master lease agreement from 51 months to 57 months and amend the payments due thereunder. Under the amendment, the Lessee agreed to pay a monthly rent of $53,000 for the first ten (10) months, with such amount increasing to $85,322 for the remaining forty-seven (47) months. In connection with the extension of the term of the master lease agreement, the parties also amended the schedule of stipulated loss values and early termination payment schedule attached thereto. In connection with the amendment, the Lessee agreed to pay Utica an amendment fee of $2,500.

On October 31, 2017, the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule is 51 months and agreed monthly payments are $25,807.

If any rent is not received by Utica within five (5) calendar days of the due date, the Lessee shall pay a late charge equal to ten (10%) percent of the amount. In addition, in the event that any payment is not processed or is returned on the basis of insufficient funds, upon demand, the Lessee shall pay Utica a charge equal to five percent (5%) of the amount of such payment. The Lessee is also required to pay an annual administration fee of $5,000. Upon the expiration of the term of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) $162,000 (five percent (5%) of the total invoice cost (as defined in the master lease agreement)); or (b) the fair market value of the equipment, as determined by Utica. Upon the expiration of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) $49,000 (five percent (5%) of the total invoice cost); or (b) the fair market value of the equipment, as determined by Utica.

Provided that no default under the master lease agreement has occurred and is continuing beyond any applicable grace or cure period, the Lessee has an early buy-out option with respect to all but not less than all of the equipment, upon the payment of any outstanding rental payments or other fees then due, plus an additional amount set forth in the master lease agreement, which represents the anticipated fair market value of the equipment as of the anticipated end date of the master lease agreement. In addition, the Lessee shall pay to Utica an administrative charge to be determined by Utica to cover its time and expenses incurred in connection with the exercise of the option to purchase, including, but not limited to, reasonable attorney fees and costs. Furthermore, upon the exercise by the Lessee of this option to purchase the equipment, the Lessee shall pay all sales and transfer taxes and all fees payable to any governmental authority as a result of the transfer of title of the equipment to Lessee. The early buy-out option was not available on the second equipment schedule to the master lease agreement until after December 31, 2018.

In connection with the master lease agreement, the Lessee granted a security interest on all of its right, title and interest in and to: (i) the equipment, together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished by the supplier; (ii) all accounts, chattel paper, deposit accounts, documents, other equipment, general intangibles, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing; (iii) all books and records pertaining to the foregoing; (iv) all property of such Lessee held by Utica, including all property of every description, in the custody of or in transit to Utica for any purpose, including safekeeping, collection or pledge, for the account of such Lessee or as to which such Lessee may have any right or power, including but not limited to cash; and (v) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing.

On February 1, 2018, Utica agreed to continue the $53,000 payments for three additional months and extend the maturity of the loan by three months. Additionally, Utica agreed to defer the February 3, 2018 payment to February 20, 2018. The Company paid one-half the normal late fee, $2,650 for the late payment. On March 2, 2018, Utica agreed to defer the March 3 payment to March 30, 2018. The Company paid a late payment fee of $5,300 for the payment deferral.

26

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

On April 18, 2018, Utica, the Lessee, and Ellery W. Roberts, as guarantor under the master lease agreement, entered into a forbearance agreement relating to the non-payment of certain rent payments due under the master lease agreement for the months of March 2018 and April 2018. Pursuant to the forbearance agreement, Utica agreed to forbear from demanding payment in full and exercising its remedies under the master lease agreement until June 3, 2018. Pursuant to the forbearance agreement, the Lessee agreed to, among other things, (i) make the payments set forth in the forbearance agreement on or before the dates specified therein, totaling $173,376, (ii) be current on all rent due under Schedule 1 of the master lease agreement by June 3, 2018 and be current on all rent due under Schedule 2 of the master lease agreement by May 30, 2018, (ii) reinstate or renew and continue in effect all insurance as required under the master lease agreement at Lessee’s sole cost and expense, (iv) pay a forbearance fee to Utica totaling $4,500, which shall not be due until termination of the master lease agreement and (v) execute a surrender agreement with respect to the Lessee’s equipment, which will be held in escrow by Utica and not deemed effective unless and until the earlier to occur of: (a) the June 3, 2018, provided liabilities under master lease agreement remain due but unpaid; (b) such time as Utica accelerates due and unpaid liabilities pursuant to the term of the forbearance agreement and the master lease agreement; or (c) a default occurs under the forbearance agreement or the master lease agreement.

A portion of the proceeds from the term loan from Home State Bank (Note 11) were applied to reduce the balance of this lease to $475,000. The lease is payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000. As a result, the parties to the forbearance agreement agreed that the forbearance agreement is terminated and is no longer in effect. In completing the early payout, the Company incurred a loss of $405,674 plus an additional loss of $95,130 from the write-off of unamortized debt issuance costs. The loss on early extinguishment of debt arose from the buyout provisions in the lease and because the Company had delayed making the regular payment of $85,322 until May 3, 2018, rather than July 3, 2017 as contemplated in the original master lease agreement. Management chose to close the term loan because of the much lower interest rate and the loan allows the Company to make payments that match its operating cycle rather than monthly payments.

If the Company sells equipment or inventory, it must remit to Utica the amount loaned against the equipment. Such payments are accumulated and applied to the balance at the end of the lease term. During the three months ended September 30, 2019, $116,067 of payments and $0 of lien release payments were remitted to Utica.

The assets and liabilities under the master lease agreement are recorded at the fair value of the assets at the time of acquisition.  

The Company adopted ASU 2015-03 by deducting $28,070 of net debt issuance costs from the long-term portion of the financing lease. Amortization of debt issuance costs totaled $3,015 for the three months ended September 30, 2019.

At June 30, 2019, annual minimum future lease payments under this Master Lease Agreement are as follows:

	Amount
2019 (remainder of year)	$	141,875
2020		464,269
2021		464,269
2022		77,335
Total minimum lease payments		1,147,748
Less amount representing interest		240,504
Present value of minimum lease payments		907,244
Less current portion of minimum lease		(344,716	)
Less debt issuance costs, net		(28,070	)
Less payments to Utica for release of lien		(249,784	)
Less lease deposits		(38,807	)
End of lease buyout payments		117,413
Long-term present value of minimum lease payment	$	363,280

The interest rate on the capitalized lease is approximately 15.5%.

27

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 15—OPERATING LEASE

On March 3, 2017, Neese entered into an agreement of lease with K&A Holdings, LLC, a limited liability company that is wholly-owned by officers of Neese. The agreement of lease is for a term of ten (10) years and provides for a base rent of $8,333 per month. In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum. The agreement of lease contains customary events of default, including if Neese shall fail to pay rent within five (5) days after the due date, or if Neese shall fail to perform any other terms, covenants or conditions under the agreement of lease, and other customary representations, warranties and covenants. Under terms of the term loan agreement with Home State Bank (Note 11), the Company may not pay salary or rent to such officers of Neese in excess of $100,000 per year beginning on the date of the term loan agreement, June 13, 2018. The Company is accruing monthly rent, but because of the limitation in the term loan, $183,333 of accrued rent is classified as a long-term accrued liability.

The amount accrued for amounts included in the measurement of operating lease liabilities was $25,000 for the three months ended September 30, 2019.

Supplemental balance sheet information related to leases was as follows:

	September 30, 2019
Operating lease right-of-use lease asset	$	624,157
Accumulated amortization		(43,928	)
Net balance	$	580,229
Lease liability, current portion		62,182
Lease liability, long term		518,047
Total operating lease liabilities	$	580,229
Weighted Average Remaining Lease Term - operating leases		89 Months
Weighted Average Discount Rate - operating leases		6.85	%

Maturities of the lease liability are as follows:

	For the Years Ended
2019 (October to December)	$	25,000
2020		100,000
2021		100,000
2022		100,000
2023		100,000
2024		100,000
Thereafter		216,667
Total lease payments		741,667
Less imputed interest		161,437
Maturities of lease liabilities	$	580,230

Neese leased a piece of equipment on an operating lease. The lease originated in May 2014 for a five year term with annual payments of $11,830 with a final payment in July 2019.

28

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

On April 5, 2019, Goedeker entered into a lease agreement with S.H.J., L.L.C., a Missouri limited liability company and affiliate of Goedeker. The lease is for a term five (5) years and provides for a base rent of $45,000 per month. In addition, Goedeker is responsible for all taxes and insurance premiums during the lease term. In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum. The lease contains customary events of default, including if: (i) Goedeker shall fail to pay rent within five (5) days after the due date; (ii) any insurance required to be maintained by Goedeker pursuant to the lease shall be canceled, terminated, expire, reduced, or materially changed; (iii) Goedeker shall fail to comply with any term, provision, or covenant of the lease and shall not begin and pursue with reasonable diligence the cure of such failure within fifteen (15) days after written notice thereof to Goedeker; (iv) Goedeker shall become insolvent, make an assignment for the benefit of creditors, or file a petition under any section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States of America or any State thereof; or (v) a receiver or trustee shall be appointed for the leased premises or for all or substantially all of the assets of Goedeker.

Supplemental balance sheet information related to leases was as follows:

	September 30, 2019
Operating lease right-of-use lease asset	$	2,300,000
Accumulated amortization		(197,935	)
Net balance	$	2,102,065
Lease liability, current portion		373,860
Lease liability, long term		1,728,205
Total operating lease liabilities	$	2,102,065
Weighted Average Remaining Lease Term - operating leases		54 Months
Weighted Average Discount Rate - operating leases		6.5	%

Maturities of the lease liability are as follows:

	For the Years Ended
2019 (October to December)	$	135,000
2020		540,000
2021		540,000
2022		540,000
2023		540,000
2024		135,000
Total lease payments		2,430,000
Less imputed interest		(327,935	)
Maturities of lease liabilities	$	2,102,065

29

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 16—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% (2.0% annualized) of its adjusted net assets for services performed.

Offsetting Management Services Agreement - 1847 Neese

On March 3, 2017, 1847 Neese entered into an offsetting management services agreement with the Manager.

Pursuant to the offsetting management services agreement, 1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500 per quarter; provided, however, 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 1847 Neese, 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 1847 Neese 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 1847 Neese, 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 of the management fee paid or to be paid by 1847 Neese, 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 aggregate amount of the management fee (before any adjustment thereto) calculated and payable under the management services agreement (the “Parent Management Fee”) with respect to such fiscal quarter, then the management fee to be paid by 1847 Neese 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 by 1847 Neese, 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.

1847 Neese shall also reimburse the Manager for all costs and expenses of 1847 Neese which are specifically approved by the board of directors of 1847 Neese, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of 1847 Neese in connection with performing services under the offsetting management services agreement.

The services provided by the Manager include: conducting general and administrative supervision and oversight of 1847 Neese’s day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to 1847 Neese’s business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines. The Company expensed $187,500 in management fees for the nine months ended September 30, 2019 and 2018, respectively.

Under terms of the term loan from Home State Bank, no fees may be paid to the Manager without permission of the bank, which the Manager does not expect to be granted within the forthcoming year. Accordingly, $563,309 due the Manager is classified as a long-term accrued liability.

30

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Offsetting Management Services Agreement - Goedeker

On April 5, 2019, Goedeker entered into an offsetting management services agreement with the Manager.

Pursuant to the offsetting management services agreement, Goedeker appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $62,500 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, 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 Goedeker, 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 Goedeker 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 Goedeker, 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 Goedeker, 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 aggregate amount of the Parent Management Fee with respect to such fiscal quarter, then the management fee to be paid by Goedeker 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 by Goedeker, 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.

Notwithstanding the foregoing, payment of the management fee is subordinated to the payment of interest on the 9% subordinated promissory note (see Note 13), such that no payment of the management fee may be made if Goedeker is in default under the note with regard to interest payments and, for the avoidance of doubt, such payment of the management fee will be contingent on Goedeker being in good standing on all associated loan covenants. In addition, during the period that that any amounts are owed under the 9% subordinated promissory note or the earn out payments, the annual management fee shall be capped at $250,000.

In addition, the rights of the Manager to receive payments under the offsetting management services agreement are subordinate to the rights of Burnley and SBCC under separate subordination agreements that the Manager entered into with Burnley and SBCC on April 5, 2019.

Goedeker shall also reimburse the Manager for all costs and expenses of Goedeker which are specifically approved by the board of directors of Goedeker, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of Goedeker in connection with performing services under the offsetting management services agreement.

The services provided by the Manager include: conducting general and administrative supervision and oversight of Goedeker’s day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to Goedeker’s business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines.

31

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of September 30, 2019 and December 31, 2018, a total of $179,565 advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of September 30, 2019 and December 31, 2018, the Manager has funded the Company $60,732 and $55,500 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 provides that the Company may from time to time request additional advances from the Manager up to an aggregate additional amount of $100,000, which will be added to the note if the Manager, in its sole discretion, so provides. Interest shall accrue on the unpaid portion of the principal amount and the unpaid portion of all advances outstanding at a fixed rate of 8% per annum, and along with the outstanding portion of the principal amount and the outstanding portion of all advances, shall be payable in one lump sum due on the maturity date, which is the first anniversary of the date of the note. The maturity date of the grid promissory note was extended until January 3, 2021. If all or a portion of the principal amount or any advance under the note, or any interest payable thereon is not paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate of 12% per annum. In the event the Company completes a financing involving at least $500,000, the Company must, contemporaneously with the closing of such financing transaction, repay the entire outstanding principal and accrued and unpaid interest on the note. The note is unsecured and contains customary events of default. As of September 30, 2019 and December 31, 2018, the Manager has advanced $117,000 of the promissory note and the Company has accrued interest of $14,647 and $7,549, respectively.

Building Lease

On March 3, 2017, Neese entered into an agreement of lease with K&A Holdings, LLC, a limited liability company that is wholly-owned by officers of Neese. See Note 15 for details regarding this lease.

NOTE 17—SHAREHOLDERS’ DEFICIT

Allocation Shares

As of September 30, 2019 and December 31, 2018, the Company had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle the holder thereof to vote on any matter relating to the Company other than in connection with amendments to the Company’s operating agreement and in connection with certain other corporate transactions as specified in the operating agreement.

The Manager owns 100% of the allocation shares of the Company, which are a separate class of limited liability company interests that, together with the common shares, will comprise all of the classes of equity interests of the Company. The Manager received the allocation shares with its initial capitalization of the Company. The allocation shares generally will entitle the Manager to receive a twenty percent (20%) profit allocation as a form of incentive designed to align the interests of the Manager with those of the Company’s shareholders. Profit allocation has two components: an equity-based component and a distribution-based component. The equity-based component will be paid when the market for the Company’s shares appreciates, subject to certain conditions and adjustments. The distribution-based component will be paid when the distributions the Company pays to shareholders exceed an annual hurdle rate of eight percent (8.0%), subject to certain conditions and adjustments. While the equity-based component and distribution-based component are interrelated in certain respects, each component may independently result in a payment of profit allocation if the relevant conditions to payment are satisfied.

The 1,000 allocation shares are issued and outstanding and held by the Manager, which is controlled by Mr. Roberts, the Company’s chief executive officer and controlling shareholder.

32

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

Common Shares

The Company is authorized to issue 500,000,000 common shares as of September 30, 2019 and December 31, 2018. As of September 30, 2019 and December 31, 2018, the Company had 3,165,625 and 3,115,625 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of the Company for a vote.

On April 5, 2019, the Company, issued 50,000 common shares to Leonite pursuant to the securities purchase agreement (see Note 13).

The Company did not issue any shares in the nine months ended September 30, 2018.

Warrants

On April 5, 2019, the Company issued a warrant to purchase 200,000 common shares to Leonite pursuant to the securities purchase agreement (see Note 13). The warrant has a term of five years, an exercise price of $1.25 per share (subject to adjustment), and may be exercised on a cashless basis.

Accordingly, a portion of the proceeds was allocated to the warrant based on its relative fair value using the Black Scholes option-pricing model. The assumptions used in the Black-Scholes model are as follows: (i) dividend yield of 0%; (ii) expected volatility of 140.3%, (iii) weighted average risk-free interest rate of 2.31%, (iv) expected life of five years, and (v) estimated fair value of the common shares of $2.75 per share.

The warrant also contains an ownership limitation. The Company shall not effect any exercise of the warrant, and Leonite shall not have the right to exercise any portion of the warrant, to the extent that after giving effect to issuance of common shares upon exercise the warrant, Leonite, together with its affiliates, and any other persons acting as a group together with Leonite or any of its affiliates, would beneficially own in excess of 4.99% of the number of common shares outstanding immediately after giving effect to the issuance of common shares issuable upon exercise of the warrant.  Upon no fewer than 61 days’ prior notice to the Company, Leonite may increase or decrease such beneficial ownership limitation provisions and any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. 

Noncontrolling Interests

The Company owns 55.0% of 1847 Neese and 70% of 1847 Holdco.  For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810, which are applicable to reporting the equity and net income or loss attributable to noncontrolling interests. The results of 1847 Neese and 1847 Holdco are included in the consolidated statement of income. The net loss attributable to the 45% non-controlling interest of 1847 Neese amounted to $628,210 and $624,448 for the nine months ended September 30, 2019 and 2018, respectively. The net loss attributable to the 30% non-controlling interest of 1847 Holdco amounted to $464,518 for the period from April 5, 2019 (acquisition) to September 30, 2019.

NOTE 18—COMMITMENTS AND CONTINGENCIES

Corporate Office

An office space has been leased on a month-by-month basis.

The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

33

1847 HOLDINGS LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

(UNAUDITED)

NOTE 19—SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the nine months ended September 30, 2019 and 2018 were as follows:

	For the Nine Months Ended September 30,
	2019			2018
Interest paid	$	815,021		$	413,018
Income tax paid		-			-
Business Combinations:
Current Assets	$	3,308,301		$	-
Property and equipment		206,612			-
Working capital adjustment receivable		554,636			-
Assumed liabilities		(4,668,977	)		-
Goodwill		6,531,560			-
Cash acquired in acquisition of Goedeker		1,135,368			-
Financing:
Term Loan		1,500,000			-
Debt discount financing costs		(178,000	)		-
Warrant feature upon issuance of term loan		(229,244	)		-
Term loan, net		1,092,756			-
Line of Credit		754,682			-
Debt discount on line of credit		(128,682	)		-
Issuance of common shares on promissory note		(137,500	)		-
Line of Credit, net		488,500			-
Promissory Note		714,286			-
Promissory Note original issue and debt discount		(79,286	)		-
Warrants issued in conjunction with notes payable		(292,673	)		-
Promissory Note, net		342,327			-
9% Subordinated Promissory Note		4,700,000			-
Debt discount financing costs		(215,500	)		-
9% Subordinated Promissory Note, net		4,484,500			-
Warrant liability		229,244			-
Additional Paid in Capital – common shares and warrants issued	$	430,173		$	-
Operating lease, ROU assets and liabilities	$	3,325,558		$	-

NOTE 20—SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10), the Company has analyzed its operations subsequent to September 30, 2019 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Use of Terms

Except as otherwise indicated by the context and for the purposes of this report only, references in this report to “1847 Holdings,” “we,” “our” and “our company” refer to 1847 Holdings LLC, a Delaware limited liability company, and its consolidated subsidiaries.

Special Note Regarding Forward Looking Statements

Certain information contained in this report includes forward-looking statements. The statements herein which are not historical reflect our current expectations and projections about our future results, performance, liquidity, financial condition, prospects and opportunities and are based upon information currently available to our company and our management and our interpretation of what is believed to be significant factors affecting the businesses, including many assumptions regarding future events. The following factors, among others, may affect our forward-looking statements:

● our ability to successfully identify and acquire additional businesses, and to operate such businesses that we may acquire in the future and to effectively integrate and improve such businesses;

● our organizational structure, which may limit our ability to meet our dividend and distribution policy;

● our ability to service and comply with the terms of indebtedness that we expect to incur in the future;

● our cash flow available for distribution and our ability to make monthly distributions in the future to our common shareholders;

● our ability to pay the management fee, profit allocation and put price to our manager, 1847 Partners LLC, when due;

● labor disputes, strikes or other employee disputes or grievances;

● our ability to implement our acquisition and management strategies;

● the regulatory environment in which our businesses may operate under;

● trends in the industries in which our businesses may operate;

● the competitive environment in which our businesses will operate;

● changes in general economic or business conditions or economic or demographic trends in the United States including changes in interest rates and inflation;

● our company’s and our manager’s ability to retain or replace qualified employees of our future businesses and our manager;

● casualties, condemnation or catastrophic failures with respect to any of our business’ or future business’ facilities;

● costs and effects of legal and administrative proceedings, settlements, investigations and claims; and

● extraordinary or force majeure events affecting the business or operations of our future businesses.

Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words “may,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. Actual results, performance, liquidity, financial condition, prospects and opportunities could differ materially from those expressed in, or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” included in our Offering Statement on Form 1-A, as amended (File No. 024-11064), and matters described in this report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this report will in fact occur.

Potential investors should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

The specific discussions herein about our company include financial projections and future estimates and expectations about our company’s business. The projections, estimates and expectations are presented in this report only as a guide about future possibilities and do not represent actual amounts or assured events. All the projections and estimates are based exclusively on our company management’s own assessment of our business, the industry in which we work and the economy at large and other operational factors, including capital resources and liquidity, financial condition, fulfillment of contracts and opportunities. The actual results may differ significantly from the projections.

Potential investors should not make an investment decision based solely on our projections, estimates or expectations.

35

Overview

We are an acquisition holding company focused on acquiring and managing a group of small businesses, which we characterize as those that have an enterprise value of less than $50 million, in a variety of different industries headquartered in North America. To date, we have completed two acquisitions.

In March 2017, our subsidiary 1847 Neese Inc., or 1847 Neese, acquired Neese, Inc., or Neese. Headquartered in Grand Junction, Iowa and founded in 1991, Neese is an established business specializing in providing a wide range of land application services and selling equipment and parts, primarily to the agricultural industry, but also to the construction and lawn and garden industries. Neese’s revenue mix is composed of waste disposal and a variety of agricultural services, wholesaling of agricultural equipment and parts, local trucking services, various shop services, and other products and services. Services to the local agricultural and farming communities include manure spreading, land rolling, bin whipping, cleaning of bulk storage bins and silos, equipment rental, trucking, vacuuming, building erection, and others.

In April 2019, we acquired substantially all of the assets of Goedeker Television Co., or Goedeker Television, through our subsidiary 1847 Goedeker Inc., or Goedeker, which now operates the prior business of Goedeker Television, a Missouri corporation founded in 1951. Headquartered in St. Louis, Missouri, Goedeker is a one-stop e-commerce destination for home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods.

Through our structure, we plan to offer investors an opportunity to participate in the ownership and growth of a portfolio of businesses that traditionally have been owned and managed by private equity firms, private individuals or families, financial institutions or large conglomerates. We believe that our management and acquisition strategies will allow us to achieve our goals to begin making and growing regular monthly distributions to our common shareholders and increasing common shareholder value over time.

We seek to acquire controlling interests in small businesses that we believe operate in industries with long-term macroeconomic growth opportunities, and that have positive and stable earnings and cash flows, face minimal threats of technological or competitive obsolescence and have strong management teams largely in place. We believe that private company operators and corporate parents looking to sell their businesses will consider us to be an attractive purchaser of their businesses. We intend to make these future businesses our majority-owned subsidiaries and intend to actively manage and grow such businesses. We expect to improve our businesses over the long term through organic growth opportunities, add-on acquisitions and operational improvements.

Management Fees

We entered into a management services agreement with our manager on April 15, 2013, pursuant to which we are required to pay our manager a quarterly management fee equal to 0.5% (2.0% annualized) of our adjusted net assets for services performed.

In addition, 1847 Neese entered into an offsetting management services agreement with our manager on March 3, 2017 and Goedeker entered into an offsetting management services agreement with our manager on April 5, 2019. Pursuant to the offsetting management services agreements, 1847 Neese appointed our manager to provide certain services to it for a quarterly management fee equal to $62,500 per quarter and Goedeker appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of $62,500 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, 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 1847 Neese or Goedeker, together with all other management fees paid or to be paid by all other subsidiaries of our company to our manager, in each case, with respect to any fiscal year exceeds, or is expected to exceed, 9.5% of our gross income with respect to such fiscal year, then the management fee to be paid by 1847 Neese or Goedeker 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 our manager by all of the subsidiaries of our company, until the aggregate amount of the management fee paid or to be paid by 1847 Neese or Goedeker, together with all other management fees paid or to be paid by all other subsidiaries of our company to our manager, in each case, with respect to such fiscal year, does not exceed 9.5% of our gross income with respect to such fiscal year, and (iii) if the aggregate amount the management fee paid or to be paid by 1847 Neese or Goedeker, together with all other management fees paid or to be paid by all other subsidiaries of our company to our manager, in each case, with respect to any fiscal quarter exceeds, or is expected to exceed, the aggregate amount of the management fee (before any adjustment thereto) calculated and payable under the management services agreement, which we refer to as the parent management fee, with respect to such fiscal quarter, then the management fee to be paid by 1847 Neese or Goedeker 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 by 1847 Neese or Goedeker, together with all other management fees paid or to be paid by all other subsidiaries of our company to our 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.

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Notwithstanding the foregoing, under terms of the term loan from Home State Bank described below, no fees may be paid to our manager without permission of the bank, which our manager does not expect to be granted within the forthcoming year. Accordingly, $388,308 due our manager is classified as a long-term accrued liability as of September 30, 2019.

In addition, payment of the management fee to Goedeker is subordinated to the payment of interest on the 9% subordinated promissory note described below, such that no payment of the management fee may be made if Goedeker is in default under the note with regard to interest payments and, for the avoidance of doubt, such payment of the management fee will be contingent on Goedeker being in good standing on all associated loan covenants. In addition, during the period that that any amounts are owed under the 9% subordinated promissory note or the earn out payments to Goedeker Television described below, the annual management fee shall be capped at $250,000.

The rights of our manager to receive payments are also subordinate to the rights of Burnley and SBCC (each as defined below) under separate subordination agreements that our manager entered into with Burnley and SBCC on April 5, 2019.

Segments

We have two reportable segments: land management services and retail and appliances. Additionally, unallocated shared-service costs, which include various corporate level expenses and other governance functions, are presented as corporate services.

The land management services segment, operated by Neese, is comprised of an established business specializing in providing a wide range of land application services and selling equipment and parts, primarily to the agricultural industry in Iowa, but also to the construction and lawn and garden industries. The land management services segment is composed of waste disposal and a variety of agricultural services, wholesaling of agricultural equipment and parts, local trucking services, various shop services, and other products and services.

The retail and appliances segment, operated by Goedeker, is comprised of retail store and an e-commerce destination for home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods based in St. Louis, Missouri.

Emerging Growth Company

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

● have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

● comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

● submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay” and “say-on-frequency;” and

● disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” until December 31, 2019.

37

Results of Operations

Comparison of Three Months Ended September 30, 2019 and 2018

The following table sets forth key components of our results of operations during the three months ended September 30, 2019 and 2018, both in dollars and as a percentage of our revenue.

	September 30, 2019						September 30, 2018
	Amount			% of Revenue			Amount			% of Revenue
Revenue
Services	$	742,041			5.5		$	883,460			60.2
Sales of parts and equipment		670,221			4.9			583,054			39.8
Furniture and appliances		12,132,103			89.6			-			-
Total revenue		13,544,365			100.00			1,466,514			100.0
Operating expenses
Cost of sales		10,709,830			79.1			478,195			32.6
Personnel costs		1,501,428			11.1			513,912			35.0
Depreciation and amortization		349,157			2.6			346,333			23.6
Fuel		143,658			1.1			279,755			19.1
General and administrative		1,963,599			14.4			280,679			19.1
Total operating expenses		14,667,672			108.3			1,898,874			129.4
Net loss from operations		(1,123,307	)		(8.3	)		(432,360	)		(29.4	)
Other income (expense)
Financing costs and loss on early extinguishment of debt		(173,145	)		(1.3	)		(8,268	)		(0.6	)
Interest expense		(338,520	)		(2.4	)		(140,351	)		(9.6	)
Change in warrant liability		54,500			0.4			-			-
Other income (expense)		4,740			-			-			-
Gain (loss) on sale of fixed assets		-			-			-			-
Total other income (expense)		(452,425	)		(3.3	)		(148,619	)		(10.2	)
Net loss before income taxes		(1,575,732	)		(11.6	)		(580,979	)		(39.6	)
Income tax expense (benefit)		(395,763	)		(2.9	)		154,600			10.5
Net loss before non-controlling interests		(1,179,969	)		(8.7	)		(426,379	)		(29.2	)
Less net loss attributable to non-controlling interests		(395,258	)		(2.9	)		(173,217	)		(11.8	)
Net loss attributable to company shareholders	$	(784,711	)		(5.8	)	$	(253,162	)		(17.4	)

Total revenue. Our total revenue was $13,544,365 for the three months ended September 30, 2019, including $12,132,103 from our new retail and appliances segment, as compared to $1,466,514 for the three months ended September 30, 2018.

The land management services segment generates revenue through the provision of waste disposal and a variety of land application services, wholesaling of agricultural equipment and parts, local trucking services, various shop services, and other products and services. Revenue from the land management segment decreased by $54,252 or 3.7%, to $1,412,262 for the three months ended September 30, 2019 from $1,466,514 for the three months ended September 30, 2018. Such decrease resulted from a $141,419 decrease in services revenue, offset by a $87,167 increase in sales of parts and equipment. The decrease in services revenue was primarily due to a $184,295 decline in trucking revenue primarily attributable to decline in revenue from one customer in 2019 compared to 2018.

The retail and appliances segment generates revenue through the sales of home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods.

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Cost of sales. Cost of sales for the land management services segment consist of the direct costs of our equipment and parts. Cost of sales for the retail and appliances segment consist of the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors. Our total cost of sales was $10,709,830 for the three months ended September 30, 2019, including $10,113,543 from our new retail and appliances segment, as compared to $478,195 for the three months ended September 30, 2018.

Cost of sales for the land management services segment increased by $118,091 or 24.7%, to $596,286 for the three months ended September 30, 2019 from $478,195 for the three months ended September 30, 2018. The increase in cost of sales is attributable to the increase in sales of parts and equipment and an increase in the gross profit percentage.

Personnel costs. Personnel costs include employee salaries and bonuses plus related payroll taxes. It also includes health insurance premiums, 401(k) contributions, and training costs. Our personnel costs were $1,501,428 for the three months ended September 30, 2019, including $980,620 from our new retail and appliances segment, as compared to $513,912 for the three months ended September 30, 2018.

Personnel costs for the land management services segment increased by $6,895, or 1.3%, to $520,807 for the three months ended September 30, 2019 from $513,912 for the three months ended September 30, 2018.

Fuel costs. Fuel costs, which are attributable to our land management services segment, include fuel for our on-road trucking and off-road manure spreading services. Our fuel costs decreased by $83,080, or 36.6%, to $143,658 for the three months ended September 30, 2019 from $226,738 for the three months ended September 30, 2018. The decrease in fuel is the result of a slight decline in market prices for fuel and the timing of fuel purchases and the decline in trucking revenue.

General and administrative expenses. Our general and administrative expenses consist primarily of professional advisor fees, bad debts reserve, rent expense, advertising, bank fees, and other expenses incurred in connection with general operations. Our total general and administrative expenses increased by $1,629,903, or 488.4%, to $1,963,599 for the three months ended September 30, 2019, including $1,579,659 from our new retail and appliances segment, from $333,696 for the three months ended September 30, 2018. As a percentage of revenue, general and administrative expenses were 14.5% and 22.7% for the three months ended September 30, 2019 and 2018, respectively.

General and administrative expenses for the land management services segment increased by $50,243 or 17.1%, to $344,358 for the three months ended September 30, 2019 from $294,115 for the three months ended September 30, 2018. The primary changes were decreases in professional fees of $6,647 offset by an increase general and administrative of $9,677 and in equipment repairs of $47,213. As a percentage of land management services revenue, general and administrative expenses for the land management services amounted to 24.3% and 20.1% for the three months ended September 30, 2019 and 2018, respectively.

General and administrative expenses for our holding company amounted to $39,582 for the three months ended September 30, 2019 and 2018.

Total other income (expense). We had $452,425 in total other expense, net, for the three months ended September 30, 2019, as compared to other expense, net, of $148,619 for the three months ended September 30, 2018. Other expense in the three months ended September 30, 2019 consisted of financing costs of $173,145, interest expense of $338,520, and other income of $59,240, while other expense for the three months ended September 30, 2018 consisted of financing costs of $8,268 and interest expense of $140,351.

Net loss attributable to company shareholders. As a result of the cumulative effect of the factors described above, our net loss attributable to our shareholders increased by $531,549, or 210.0%, to $784,711 for the three months ended September 30, 2019 from $253,162 for the three months ended September 30, 2018.

39

Comparison of Nine Months Ended September 30, 2019 and September 30, 2018

The following table sets forth key components of our results of operations during the nine months ended September 30, 2019 and 2018, both in dollars and as a percentage of our revenue.

	September 30, 2019						September 30, 2018
	Amount			% of Revenue			Amount			% of Revenue
Revenue
Services	$	2,293,765			8.6		$	2,543,087			68.8
Sales of parts and equipment		1,523,031			5.7			1,155,668			31.2
Furniture and appliances		22,748,153			85.7			-			-
Total revenue		26,564,949			100.0			3,698,755			100.00
Operating expenses
Cost of sales		20,255,556			76.2			1,034,786			28.0
Personnel costs		3,397,661			12.8			1,498,923			40.5
Depreciation and amortization		1,037,243			3.9			1,054,233			28.5
Fuel		503,923			1.9			605,581			16.4
General and administrative		4,050,269			15.2			1,347,196			36.4
Total operating expenses		29,244,652			110.1			5,540,719			149.8
Net loss from operations		(2,679,703	)		(10.1	)		(1,841,964	)		(49.8	)
Other income (expense)
Financing costs and loss on early extinguishment of debt		(348,651	)		(1.3	)		(528,223	)		(14.3	)
Write-off of contingent consideration		-			-			395,634			10.7
Interest expense		(789,380	)		(2.9	)		(411,880	)		(11.1	)
Change in warrant liability		57,100			0.2			-			-
Other income (expense)		9,829			-			-			-
Gain (loss) on sale of fixed assets		24,224			0.1			(4,008	)		(0.1	)
Total other income (expense)		(1,046,878	)		(3.9	)		(548,477	)		(14.8	)
Net loss before income taxes		(3,726,581	)		(14.0	)		(2,390,441	)		(64.6	)
Income tax expense (benefit)		(655,613	)		(2.5	)		(746,100	)		(20.2	)
Net loss before non-controlling interests		(3,070,968	)		(11.5	)		(1,644,341	)		(44.4	)
Less net loss attributable to non-controlling interests		(1,092,727	)		(4.1	)		(624,448	)		(16.9	)
Net loss attributable to company shareholders	$	(1,978,241	)		(7.4	)	$	(1,019,893	)		(27.5	)

Total revenue. Our total revenue was $26,564,949 for the nine months ended September 30, 2019, including $22,748,153 from our new retail and appliances segment from the date of acquisition on April 5, 2019 to September 30, 2019, as compared to $3,698,755 for the nine months ended September 30, 2018.

Revenue from the land management segment increased by $118,041, or 3.2%, to $3,816,796 for the nine months ended September 30, 2019 from $3,698,755 for the nine months ended September 30, 2018. Such increase resulted from an $367,363 increase in sales of parts and equipment, offset by a $249,322 decrease in services revenue. The decrease in services revenue was primarily due to a decline in trucking revenue of $317,657 primarily attributable to the loss of revenue from one customer.

Cost of sales. Our total cost of sales was $20,255,556 for the nine months ended September 30, 2019, including $18,886,116 from our new retail and appliances segment from the date of acquisition on April 5, 2019 to September 30, 2019, as compared to $1,034,786 for the nine months ended September 30, 2018.

Cost of sales for the land management services segment increased by $334,654, or 32.3%, to $1,369,440 for the nine months ended September 30, 2019 from $1,034,786 for the nine months ended September 30, 2018. The increase in cost of sales is attributable to the increase in sales of parts and equipment and an increase in the gross profit percentage.

Personnel costs. Our total personnel costs were $3,397,661 for the nine months ended September 30, 2019, including $1,873,628 from our new retail and appliances segment from the date of acquisition on April 5, 2019 to September 30, 2019, as compared to $1,498,923 for the nine months ended September 30, 2018.

Personnel costs for the land management services segment increased by $25,110, or 1.7%, to $1,524,033 for the nine months ended September 30, 2019 from $1,498,923 for the nine months ended September 30, 2018.

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Fuel costs. Our fuel costs, which are attributable to the land management services segment, decreased by $101,658, or 16.8%, to $503,923 for the nine months ended September 30, 2019 from $605,581 for the nine months ended September 30, 2018. The decrease in fuel is the result of a slight decline in market prices for fuel and the timing of fuel purchases, as well as the decline in trucking revenue.

General and administrative expenses. Our total general and administrative expenses increased by $2,703,073, or 200.6%, to $4,050,269 for the nine months ended September 30, 2019, including $2,869,491 from our new retail and appliances segment from the date of acquisition on April 5, 2019 to September 30, 2019, from $1,347,196 for the nine months ended September 30, 2018. As a percentage of revenue, general and administrative expenses were 15.2% and 36.4% for the nine months ended September 30, 2019 and 2018, respectively.

General and administrative expenses for the land management services segment decreased by $34,015, or 3.1%, to $1,061,319 for the nine months ended September 30, 2019 from $1,095,334 for the nine months ended September 30, 2018. The primary changes were decrease in professional fees of $132,465 and general and administrative expenses of $27,760, offset by a $126,210 increase in equipment repairs. As a percentage of land management services revenue, general and administrative expenses for the land management services segment amounted to 27.8% and 29.6% for the nine months ended September 30, 2019 and 2018, respectively.

General and administrative expenses for our holding company decreased by $132,403, or 52.6%, to $119,459 for the nine months ended September 30, 2019, from $251,862 for the nine months ended September 30, 2018. The decrease was due to a decrease in professional fees compared to the prior year period.

Total other income (expense). We had $1,046,878 in total other expense, net, for the nine months ended September 30, 2019, as compared to other expense, net, of $548,477 for the nine months ended September 30, 2018. Other expense in the nine months ended September 30, 2019 consisted of financing costs of $348,651 and interest expense of $789,380, offset by a change in warrant liability of $57,100, other income of $9,829 and a gain on sale of fixed assets of $24,224 while other expense for the nine months ended September 30, 2018 consisted of financing costs of $528,223, interest expense of $411,880 and loss on sale of fixed assets of $4,008, offset by write-off of contingent consideration of $395,634.

Net loss attributable to company shareholders. As a result of the cumulative effect of the factors described above, our net loss attributable to our shareholders increased by $984,477, or 96.5%, to $1,978,241 for the nine months ended September 30, 2019 from $1,019,893 for the nine months ended September 30, 2018.

Liquidity and Capital Resources

As of September 30, 2019, we had cash and cash equivalents of $197,048. To date, we have financed our operations primarily through cash proceeds from financing activities, borrowings and equity contributions by our shareholders.

Although we do not believe that we will require additional cash to continue our operations over the next twelve months (i.e., we do not believe that there is a going concern issue), we do believe additional funds are required to execute our business plan and our strategy of acquiring additional businesses. The funds required to execute our business plan will depend on the size, capital structure and purchase price consideration that the seller of a target business deems acceptable in a given transaction. The amount of funds needed to execute our business plan also depends on what portion of the purchase price of a target business the seller of that business is willing to take in the form of seller notes or equity of our company or one of our subsidiaries. Given these factors, we believe that the amount of outside additional capital necessary to execute our business plan on the low end (assuming target company sellers accept a significant portion of the purchase price in the form of seller notes or equity in our company or one of our subsidiaries) ranges between $100,000 to $250,000. If, and to the extent, that sellers are unwilling to accept a significant portion of the purchase price in seller notes and equity, then the cash required to execute our business plan could be as much as $5,000,000. We will seek growth as funds become available from cash flow, borrowings, additional capital raised privately or publicly, or seller retained financing.

Our primary use of funds will be for future acquisitions, public company expenses including monthly distributions to our shareholders, investments in future acquisitions, payments to our manager pursuant to the management services agreement, potential payment of profit allocation to our manager and potential put price to our manager in respect of the allocation shares it owns. The management fee, expenses, potential profit allocation and potential put price are paid before monthly distributions to shareholders and may be significant and exceed the funds held by our company, which may require our company to dispose of assets or incur debt to fund such expenditures. See “Item 1. Business—Our Manager” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information concerning the management fee, the profit allocation and put price.

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At September 30, 2019, Goedeker did not meet certain loan covenants under the loan and security agreements with Burnley and SBCC. The agreements require compliance with the following ratios as a percentage of earnings before interest, taxes, depreciation, and amortization for the twelve-month period ended September 30, 2019. The table below shows the required ratio and actual ratio for such period.

Covenant	Actual Ratio	Required Ratio
Total debt ratio	(9.6)x	4.50x
Senior debt ratio	(3.7)x	1.75x
Interest coverage ratio	(0.7)x	1.0x

In addition, Goedeker was not in compliance with a requirement with respect to the liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At September 30, 2019, the actual ratio was 0.24x compared to a requirement of 0.65x.

Accordingly, our company is in technical, not payment default, on these loan and security agreements and has classified such debt as a current liability. We have developed plans that will return us to full compliance including a recently received proposal from a new asset-based lender. In addition to the proposal from a new asset-based lender, we have taken the following two steps that we believe will positively impact our retail and appliance business:

● we hired an appliance industry veteran as chief executive officer of our retail and appliance business to drive growth and increase profitability; and

● we have engaged outside consultants to increase traffic to the website of our retail and appliance business and improve our on-line shopping experience.

We believe these efforts and others will increase revenue and allow us to regain compliance with our debt covenants.

There are no cross default provisions that would require any other long-term liabilities to be classified as current. Although the 9% subordinated promissory note described below contains a cross default provision that is triggered by the acceleration of the senior debt, such cross default provision would only be triggered for a technical default like the one that occurred if the senior lender accelerated the senior debt, which has not happened.

The amount of management fee paid to our manager by our company is reduced by the aggregate amount of any offsetting management fees, if any, received by our manager from any of our businesses. As a result, the management fee paid to our manager may fluctuate from quarter to quarter. The amount of management fee paid to our manager may represent a significant cash obligation. In this respect, the payment of the management fee will reduce the amount of cash available for distribution to shareholders. See “Item 1. Business—Our Manager—Our Manager as a Service Provider—Management Fee” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the calculation of the management fee.

Our manager, as holder of 100% of our allocation shares, is entitled to receive a twenty percent (20%) profit allocation as a form of preferred equity distribution, subject to an annual hurdle rate of eight percent (8%), as follows. Upon the sale of a company subsidiary, the manager will be paid a profit allocation if the sum of (i) the excess of the gain on the sale of such subsidiary over a high water mark plus (ii) the subsidiary’s net income since its acquisition by the company exceeds the 8% hurdle rate. The 8% hurdle rate is the product of (i) a 2% rate per quarter, multiplied by (ii) the number of quarters such subsidiary was held by the company, multiplied by (iii) the subsidiary’s average share (determined based on gross assets, generally) of our company’s consolidated net equity (determined according to U.S. generally accepted accounting principals, or GAAP. with certain adjustments). In certain circumstances, after a subsidiary has been held for at least 5 years, the manager may also trigger a profit allocation with respect to such subsidiary (determined based solely on the subsidiary’s net income since its acquisition). The amount of profit allocation may represent a significant cash payment and is senior in right to payments of the dividend on the series A preferred and other distributions to our shareholders. Therefore, the amount of profit allocation paid, when paid, will reduce the amount of cash available to our company for its operating and investing activities, including future acquisitions. See “Item 1. Business—Our Manager—Our Manager as an Equity Holder—Manager’s Profit Allocation” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the calculation of the profit allocation.

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Our operating agreement also contains a supplemental put provision, which gives our manager the right, subject to certain conditions, to cause our company to purchase the allocation shares then owned by our manager upon termination of the management services agreement. The amount of put price under the supplemental put provision is determined by assuming all of our subsidiaries are sold at that time for their fair market value and then calculating the amount of profit allocation would be payable in such a case. If the management services agreement is terminated for any reason other than the manager’s resignation, the payment to our manager could be as much as twice the amount of such hypothetical profit allocation. As is the case with profit allocation, the calculation of the put price is complex and based 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” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information on the calculation of the put price. The put price obligation, if the 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 our company for its operating and investing activities, including future acquisitions.

Summary of Cash Flow

The following table provides detailed information about our net cash flow for the period indicated:

Cash Flow

	Nine Months Ended September 30,
	2019			2018
Net cash used in operating activities	$	(954,532	)	$	(1,075,882	)
Net cash provided by investing activities		1,158,042			200,025
Net cash provided by (used in) financing activities		(340,342	)		383,418
Net increase (decrease) in cash and cash equivalents		(136,832	)		(492,439	)
Cash and cash equivalents at beginning of period		333,880			501,422
Cash and cash equivalent at end of period	$	197,048		$	8,983

Net cash used in operating activities was $954,532 for the nine months ended September 30, 2019, as compared to $1,075,882 for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, the net loss of $3,070,968, a decrease in accounts payable and accrued expenses of $354,830, a decrease in accounts receivable of $617,794 and a decrease in uncertain tax position and deferred taxes of $572,398, offset by an increase in other current liabilities of $1,234,143, depreciation and amortization of $1,037,243, an increase in customer deposits of $800,064 and a decrease in inventory of $433,101, were the primary drivers of the net cash used in operating activities. For the nine months ended September 30, 2018, the net loss of $1,644,341, a decrease in uncertain tax position and deferred taxes of $746,100 and a loan contingency write-down of $395,634, offset by depreciation and amortization of $1,054,233 and an increase in accounts payable and accrued expenses of $454,299 were the primary drivers of the used in by operating activities.

Net cash provided by investing activities was $1,158,042 for the nine months ended September 30, 2019, consisting of net cash acquired in the acquisition of Goedeker of $1,135,368, proceeds from sale of property and equipment of $39,750 and offset by the purchase of equipment in the amount of $17,076. Net cash provided by investing activities was $200,025 for the nine months ended September 30, 2018, consisting of $202,025 of proceeds from sale of property and equipment, offset by the purchase of equipment in the amount of $2,000.

Net cash used in financing activities was $340,342 for the nine months ended September 30, 2019, as compared to net cash provided by financing activities of $383,418 for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, net cash used in financing activities consisted of proceeds of short-term borrowing $849,461 and, offset by net payments on notes payable of $399,827, related party note payments of $246,207, repayment to line of credit of $180,865 and repayments on capital lease obligations of $363,444. For the nine months ended September 30, 2018, net cash provided by financing activities consisted of proceeds from notes payable in the amount of $3,781,908 and proceeds from related party notes payable in the amount of $117,000, offset by repayments of notes payable of $93,767, repayment to line of credit in the amount of $675,000, principal payments on the capital lease of $2,218,500 and financing costs and early extinguishment of debt of $528,223.

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Grid Promissory Note

On January 3, 2018, we issued a grid promissory note to our manager in the initial principal amount of $50,000. The note provides that we may from time to time request additional advances from our manager up to an aggregate additional amount of $100,000, which will be added to the note if our manager, in its sole discretion, so provides. Interest shall accrue on the unpaid portion of the principal amount and the unpaid portion of all advances outstanding at a fixed rate of 8% per annum, and along with the outstanding portion of the principal amount and the outstanding portion of all advances, shall be payable in one lump sum due on the maturity date, which was the first anniversary of the date of the note. The maturity date of the grid promissory note was extended until January 3, 2021. If all or a portion of the principal amount or any advance under the note, or any interest payable thereon is not paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate of 12% per annum. The note is unsecured and contains customary events of default. As of September 30, 2019, our manager has advanced $117,000 of the promissory note and we have accrued interest of $14,647.

Revolving Loan - Burnley

On April 5, 2019, Goedeker, as borrower, and 1847 Goedeker entered into a loan and security agreement with Burnley Capital LLC, or Burnley, for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base or (ii) $1,500,000 (provided that such amount may be increased to $3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any time in accordance with the loan and security agreement. The “borrowing base” means an amount equal to the sum of the following: (i) the product of 85% multiplied by the liquidation value of Goedeker’s inventory (net of all liquidation costs) identified in the most recent inventory appraisal by an appraiser acceptable to Burnley (ii) multiplied by Goedeker’s eligible inventory (as defined in the loan and security agreement), valued at the lower of cost or market value, determined on a first-in-first-out basis. In connection with the closing of the acquisition of Goedeker Television on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. The balance of the line of credit amounts to $576,962 as of September 30, 2019, comprised of principal of $675,295 and net of unamortized debt discount of $98,333.

The revolving note matures on April 5, 2022, provided that at Burnley’s sole and absolute discretion, it may agree to extend the maturity date for two successive terms of one year each. The revolving note bears interest at a per annum rate equal to the greater of (i) the LIBOR Rate (as defined in the loan and security agreement) plus 6.00% or (ii) 8.50%; provided that upon an event of default (as defined below) all loans, all past due interest and all fees shall bear interest at a per annum rate equal to the foregoing rate plus 3.00%. Goedeker shall pay interest accrued on the revolving note in arrears on the last day of each month commencing on April 30, 2019.

Goedeker may at any time and from time to time prepay the revolving note in whole or in part. If at any time the outstanding principal balance on the revolving note exceeds the lesser of (i) the difference of the total loan amount minus any reserves and (ii) the borrowing base, then Goedeker shall immediately prepay the revolving note in an aggregate amount equal to such excess. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Goedeker in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the revolving note in an aggregate amount equal to 100% of such net proceeds. A “prepayment event” means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Goedeker; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Goedeker with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Goedeker of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

Under the loan and security agreement, Goedeker is required to pay a number of fees to Burnley, including the following:

● a commitment fee during the period from closing to the earlier of the maturity date or termination of Burnley’s commitment to make loans under the loan and security agreement, which shall accrue at the rate of 0.50% per annum on the average daily difference of the total loan amount then in effect minus the sum of the outstanding principal balance of the revolving note, which such accrued commitment fees are due and payable in arrears on the first day of each calendar month and on the date on which Burnley’s commitment to make loans under the loan and security agreement terminates, commencing on the first such date to occur after the closing date;

● an annual loan facility fee equal to 0.75% of the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), which is fully earned on the closing date for the term of the loan (including any extension) but shall be due and payable on each anniversary of the closing date;

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● a monthly collateral management fee for monitoring and servicing the revolving loan equal to $1,700 per month for the term of revolving note, which is fully earned and non-refundable as of the date of the loan and security agreement, but shall be payable monthly in arrears on the first day of each calendar month; provided that payment of the collateral management fee may be made, at the discretion of Burnley, by application of advances under the revolving loan or directly by Goedeker; and

● if the revolving loan is terminated for any reason, including by Burnley following an event of default, then Goedeker shall pay, as liquidated damages and compensation for the costs of being prepared to make funds available, an amount equal to the applicable percentage multiplied by the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), wherein the term applicable percentage means (i) 3%, in the case of a termination on or prior to the first anniversary of the closing date, (ii) 2%, in the case of a termination after the first anniversary of the closing date but on or prior to the second anniversary thereof, and (iii) 0.5%, in the case of a termination after the second anniversary of the closing date but on or prior to the maturity date.

The loan and security agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the revolving note when due, or to pay any fees due under the loan and security agreement; (ii) if any representation, warranty or certification in the loan and security agreement or any document delivered in connection therewith is incorrect in any material respect; (iii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iv) for the occurrence of any default in respect of any other indebtedness of more than $100,000; (v) for any voluntary or involuntary bankruptcy, insolvency or dissolution; (vi) for the occurrence of one or more judgments, non-interlocutory orders, decrees or arbitration awards involving in the aggregate a liability of $25,000 or more; (vii) if Goedeker or 1847 Goedeker, or officer thereof, is charged by a governmental authority, criminally indicted or convicted of a felony under any law that would reasonably be expected to lead to forfeiture of any material portion of collateral, or such entity is subject to an injunction restraining it from conducting its business; (viii) if Burnley determines that a material adverse effect (as defined in the loan and security agreement) has occurred; (ix) if a change of control (as defined in the loan and security agreement) occurs; (x) if there is any material damage to, loss, theft or destruction of property which causes, for more than thirty consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities; (xi) if there is a loss, suspension or revocation of, or failure to renew any permit if it could reasonably be expected to have a material adverse effect; and (xii) for the occurrence of any default or event of default under the term loan with SBCC, the 9% subordinated promissory note issued to Goedeker Television, the secured convertible promissory note issued to Leonite (as defined below) or any other debt that is subordinated to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The revolving note is secured by a first priority security interest in all of the assets of Goedeker and 1847 Goedeker. In connection with such security interest, on April 5, 2019, (i) 1847 Goedeker entered into a pledge agreement with Burnley, pursuant to which 1847 Goedeker pledged the shares of Goedeker held by it to Burnley, and (ii) Goedeker entered into a deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker’s bank accounts.

In addition, on April 5, 2019, we entered into a guaranty with Burnley to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of Bunley to receive payments under the revolving note are subordinate to the rights of Northpoint (as defined below) under a subordination agreement that Burnley entered into with Northpoint.

As noted above, our company is in technical, not payment default, on this loan and security agreement and has classified such debt as a current liability.

Revolving Loan – Northpoint

On June 24, 2019, Goedeker, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC, or Northpoint, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR plus 7.99%. The balance of the line of credit amounts to $736,788 as of September 30, 2019.

Pursuant to the loan and security agreement, Goedeker shall pay the following fees to Northpoint: (i) an audit fee for each audit conducted as determined by Northpoint, equal to the out-of-pocket expense incurred by Northpoint plus any minimum audit fee established by Northpoint; (ii) a fee for any returned payments equal to the lesser of the maximum amount permitted by law or $50; (iii) a late fee for each payment not received by the 25^th day of a calendar month, and each month thereafter until such payment is paid, equal to the greater of 5% of the amount past due or $25; (iv) a billing fee equal to $250 for any month for which Goedeker requests a paper billing statement; (v) a live check fee equal to $50 for each check that Goedeker sends to Northpoint for payment of obligations under the loan and security agreement; (vi) processing fees to be determined by Northpoint; and (vii) any additional fees that Northpoint may implement from time to time.

The loan and security agreement contains customary events of default, including in the event of (i) non-payment, (ii) a breach by Goedeker of any of its representations, warranties or covenants under the loan and security agreement or any other agreement entered into with Northpoint, or (iii) the bankruptcy or insolvency of Goedeker.  The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type.

The Northpoint loans are secured by a security interest in all of the inventory of Goedeker that is manufactured or sold by vendors identified in the loan and security agreement. In connection with the loan and security agreement, on June 24, 2019 1847 Holdco entered into a guaranty in favor of Northpoint, to guaranty the obligations of Goedeker under the loan and security agreement.

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Term Loan - SBCC

On April 5, 2019, Goedeker, as borrower, and 1847 Goedeker entered into a loan and security agreement with Small Business Community Capital II, L.P., or SBCC, for a term loan in the principal amount of $1,500,000, pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0% of the outstanding equity securities of Goedeker on a fully-diluted basis for an aggregate price equal to $100. The balance of the note amounts to $1,049,186 as of September 30, 2019, comprised of principal of $1,406,250 and net of unamortized debt discount of $155,750 and unamortized warrant feature of $201,314.

The term note matures on April 5, 2023 and bears interest at the sum of the cash interest rate (defined as 11% per annum) plus the PIK interest rate (defined as 2% per annum); provided that upon an event of default all principal, past due interest and all fees shall bear interest at a per annum rate equal to the cash interest rate and the PIK interest rate, in each case plus 3.00%. Interest accrued at the cash interest rate shall be due and payable in arrears on the last day of each month commencing May 31, 2019. Interest accrued at the PIK interest rate shall be automatically capitalized, compounded and added to the principal amount of the term note on each last day of each quarter unless paid in cash on or prior to the last day of each quarter; provided that (i) interest accrued pursuant to an event of default shall be payable on demand, and (ii) in the event of any repayment or prepayment, accrued interest on the principal amount repaid or prepaid (including interest accrued at the PIK interest rate and not yet added to the principal amount of term note) shall be payable on the date of such repayment or prepayment. Notwithstanding the foregoing, all interest on term note, whether accrued at the cash interest rate or the PIK interest rate, shall be due and payable in cash on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker must repay to SBCC on the last business day of each March, June, September and December, commencing with the last business day of June 2019, an aggregate principal amount of the term note equal to $93,750, regardless of any prepayments made, and must pay the unpaid principal on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker may prepay the term note in whole or in part from time to time; provided that if such prepayment occurs (i) prior to the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 5.0% of such prepayment, (ii) prior to the second anniversary of the closing date and on or after the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 3.0% of such prepayment, or (iii) prior to the third anniversary of the closing date and on or after the second anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 1.0% of such prepayment, in each case as liquidated damages for damages for loss of bargain to SBCC. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Goedeker in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the term note in an aggregate amount equal to 100% of such net proceeds. A “prepayment event” means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Goedeker; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Goedeker with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Goedeker of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

The loan and security agreement with SBCC contains the same events of default as the loan and security agreement with Burnley, provided that the reference to the term loan in the cross default provision refers instead to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The term note is secured by a second priority security interest (subordinate to the revolving loan) in all of the assets of Goedeker and 1847 Goedeker. In connection with such security interest, on April 5, 2019, (i) 1847 Goedeker entered into a pledge agreement with SBCC, pursuant to which 1847 Goedeker pledged the shares of Goedeker held by it to SBCC, and (ii) Goedeker entered deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker’s bank accounts.

In addition, on April 5, 2019, we entered into a guaranty with SBCC to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of SBCC to receive payments under the term note are subordinate to the rights of Northpoint and Burnley under separate subordination agreements that SBCC entered into with them.

As noted above, our company is in technical, not payment default, on this loan and security agreement and has classified such debt as a current liability.

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Term Loan - Home State Bank

On June 13, 2018, Neese entered into a term loan agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25. Pursuant to the terms of the note, Neese will make semi-annual payments of $302,270 beginning on January 20, 2019 and continuing every six months thereafter until July 20, 2020, the maturity date; provided however, that Neese will pay the note in full immediately upon demand by Home State Bank. The balance of the note amounts to $3,361,499 as of September 30, 2019, comprised of principal of $3,376,757 and net of unamortized debt discount of $15,258.

The loan agreement contains customary representations and warranties. Pursuant to the terms of the loan agreement and the note, an “event of default” includes: (i) if Neese fails to make any payment when due under the note; (ii) if Neese fails to comply with or to perform any other term, obligation, covenant or condition contained in the note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Home State Bank and Neese; (iii) if Neese defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Home State Bank’s property or Neese’s ability to repay the note or perform Neese’s obligations under the note or any of the related documents; (iv) if any warranty, representation or statement made or furnished to Home State Bank by Neese or on Neese’s behalf under the note or the related documents is false or misleading in any material respect; (v) upon the dissolution or termination of Neese’s existence as a going business, the insolvency of Neese, the appointment of a receiver for any part of Neese’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Neese, (vi) upon commencement of foreclosure or forfeiture proceedings by any creditor of Neese or by any governmental agency against any collateral securing the loan; and (vii) if a material adverse change occurs in Neese’s financial condition, or Home State Bank believes the prospect of payment or performance of the note is impaired. If any event of default occurs, all commitments and obligations of Home State Bank immediately will terminate and, at Home State Bank’s option, all indebtedness immediately will become due and payable, all without notice of any kind to Neese. Additionally, upon an event of default, the interest rate on the note will be increased by 3 percentage points. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

The loan is secured by inventory, accounts receivable, and certain fixed assets of Neese. The loan agreement limited the payment of interest on the 8% vesting promissory note and 10% promissory note described below to $40,000 annually or fees to our manager. We continue to accrue interest and management fees at the contractual amounts. Such accruals (in excess of $40,000 in interest on the promissory notes) are shown as long-term accrued expenses in the accompanying balance sheet as of September 30, 2019.

Secured Convertible Promissory Note

On April 5, 2019, our company, 1847 Goedeker and Goedeker (which are collectively referred to herein as 1847) entered into a securities purchase agreement with Leonite Capital LLC, or Leonite, pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) our company issued to Leonite 50,000 common shares, (ii) our company issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) 1847 Goedeker issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in 1847 Goedeker.

The note carries an original issue discount of $64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Therefore, the purchase price of the note was $650,000. We amortized $211,088 of financing costs related to the common shares and warrants in the nine months ended September 30, 2019. The remaining net balance of the note at September 30, 2019 is $456,228, comprised of principal of $714,286 and net of unamortized original issuance discount interest of $31,473, unamortized financing costs of $76,250, and unamortized debt discount warrant feature of $150,335.

The note bears interest at the rate of the greater of (i) 12% per annum and (ii) the prime rate as set forth in the Wall Street Journal on April 5, 2019 plus 6.5% guaranteed over the holding period on the unconverted principal amount, on the terms set forth in the note (which is referred to as the Stated Rate). Any amount of principal or interest on the note which is not paid by the maturity date shall bear interest at the rate at the lesser of 24% per annum or the maximum legal amount permitted by law (which is referred to as the Default Interest).

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Beginning on May 5, 2019 and on the same day of each and every calendar month thereafter throughout the term of the note, 1847 shall make monthly payments of interest only due under the note to Leonite at the Stated Rate as set forth above. 1847 shall pay to Leonite on an accelerated basis any outstanding principal amount of the note, along with accrued, but unpaid interest, from: (i) net proceeds of any future financings by our company, but not its subsidiaries, whether debt or equity, or any other financing proceeds, except any transaction having a specific use of proceeds requirement that such proceeds are to be used exclusively to purchase the assets or equity of an unaffiliated business and the proceeds are used accordingly; (ii) net proceeds from any sale of assets of 1847 or any of its subsidiaries other than sales of assets in the ordinary course of business or receipt by 1847 or any of its subsidiaries of any tax credits, subject to rights of Goedeker, or other financing sources of 1847 (including its subsidiaries) existing prior to the date of the note; and (iii) net proceeds from the sale of any assets outside of the ordinary course of business or securities in any subsidiary.

The note will mature 12 months from the issue date, or April 5, 2020, at which time the principal amount and all accrued and unpaid interest, if any, and other fees relating to the note, will be due and payable. Unless an event of default as set forth in the note has occurred, 1847 has the right to prepay principal amount of, and any accrued and unpaid interest on, the note at any time prior to the maturity date at 115% of the principal amount, or the Premium, provided, however, that if the prepayment is the result of any of the occurrence of any of the transactions described in subparagraphs (i), (ii) or (iii) above then such prepayment shall be the unpaid principal amount, plus accrued and unpaid interest and other amounts due but without the Premium.

The note contains customary events of default, including in the event of (i) non-payment, (ii) a breach by 1847 of its covenants under the securities purchase agreement or any other agreement entered into in connection with the securities purchase agreement, or a breach of any of representations or warranties under the note, or (iii) the bankruptcy of 1847. The note also contains a cross default provision, whereby a default by 1847 of any covenant or other term or condition contained in any of the other financial instrument issued by of 1847 to Leonite or any other third party after the passage all applicable notice and cure or grace periods that results in a material adverse effect shall, at Leonite’s option, be considered a default under the note, in which event Leonite shall be entitled to apply all rights and remedies under the terms of the note.

Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of our company into which such common shares may be changed or reclassified. The number of common shares to be issued upon each conversion of the note shall be determined by dividing the conversion amount by the applicable conversion price then in effect. The conversion amount is the sum of: (i) the principal amount of the note to be converted plus (ii) at Leonite’s option, accrued and unpaid interest, plus (iii) at Leonite’s option, Default Interest, if any, plus (iv) Leonite’s expenses relating to a conversion, plus (v) at Leonite’s option, any amounts owed to Leonite. The conversion price shall be $1.00 per share (subject to adjustment as further described in the note for common share distributions and splits, certain fundamental transactions, and anti-dilution adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately be equal to the lesser of (i) such conversion price less 40%; and (ii) the lowest weighted average price of the common shares during the 21 consecutive trading day period immediately preceding the trading day that 1847 receives a notice of conversion or (iii) the discount to market based on subsequent financings with other investors.

Notwithstanding the foregoing, in no event shall Leonite be entitled to convert any portion of the note in excess of that portion of the note upon conversion of which the sum of (1) the number of common shares beneficially owned by Leonite and its affiliates (other than common shares which may be deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted portion of any other security of our company subject to a limitation on conversion or exercise analogous to the limitations contained in the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has purchased a portion of the note from Leonite) and (2) the number of common shares issuable upon the conversion of the portion of the note with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite and its affiliates of more than 4.99% of the outstanding common shares of our company. Such limitations on conversion may be waived (up to a maximum of 9.99%) by Leonite upon, at its election, not less than 61 days’ prior notice to us, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite, as may be specified in such notice of waiver).

Concurrently with 1847 and Leonite entering into the securities purchase agreement and as security for 1847’s obligations thereunder, on April 5, 2019, our company, 1847 Goedeker and Goedeker entered into a security and pledge agreement with Leonite, pursuant to which, in order to secure 1847’s timely payment of the note and related obligations and the timely performance of each and all of its covenants and obligations under the securities purchase agreement and related documents, 1847 unconditionally and irrevocably granted, pledged and hypothecated to Leonite a continuing security interest in and to, a lien upon, assignment of, and right of set-off against, all presently existing and hereafter acquired or arising assets. Such security interest is a first priority security interest with respect to the securities that our company owns in 1847 Goedeker and in 1847 Neese, and a third priority security interest with respect to all other assets.

The rights of Leonite to receive payments under the note are subordinate to the rights of Northpoint, Burnley and SBCC under separate subordination agreements that Leonite entered into with them.

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9% Subordinated Promissory Note

A portion of the purchase price for the acquisition of assets from Goedeker Television was paid by the issuance by Goedeker of a 9% subordinated promissory note in the principal amount of $4,100,000. The note will accrue interest at 9% per annum, amortized on a five-year straight-line basis and payable quarterly in accordance with the amortization schedule attached thereto, and mature on April 5, 2023. Goedeker has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by Goedeker of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of Goedeker. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans with Burnley and SBCC are not payment defaults, they fall under clause (B) above and would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.

The rights of the holder to receive payments under the note are subordinate to the rights of Northpoint, Burnley and SBCC under separate subordination agreements that the holder entered into with them.

The remaining balance of the note at September 30, 2019 is $4,274,209, comprised of principal of $4,530,293 and net of unamortized debt discount of $256,084.

8% Vesting Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of an 8% vesting promissory note in the principal amount of $1,875,000 (which was determined to have no fair value as of September 30, 2019 and December 31, 2018) by 1847 Neese and Neese to the sellers of Neese. Payment of the principal and accrued interest on the note is subject to vesting and a contingent consideration subject to fair market valuation adjustment at each reporting period. The note bears interest on the vested portion of the principal amount at the rate of eight percent (8%) per annum and is due and payable in full on June 30, 2020. The principal of the note vests in accordance with the following formula:

● Fiscal Year 2017: If Adjusted EBITDA for the fiscal year ending December 31, 2017 exceeds an Adjusted EBITDA target of $1,300,000 (referred to as the Adjusted EBITDA Target), then a portion of the principal amount of the note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2017 through the maturity date. For the year ended December 31, 2017, Adjusted EBITDA was $788,958, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2017.

● Fiscal Year 2018: If Adjusted EBITDA for the fiscal year ending December 31, 2018 exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2018 through the maturity date. For the year ended December 31, 2018, Adjusted EBITDA was approximately $320,000, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2018.

● Fiscal Year 2019: If Adjusted EBITDA for the fiscal year ending December 31, 2019 exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2019 through the maturity date.

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For purposes of the note, “Adjusted EBITDA” means the earnings before interest, taxes, depreciation and amortization expenses, in accordance with GAAP applied on a basis consistent with the accounting policies, practices and procedures used to prepare the financial statements of Neese as of the closing date, plus to the extent deducted in calculating such net income: (i) all expenses related to the transactions contemplated hereby and/or potential or completed future financings or acquisitions, including legal, accounting, due diligence and investment banking fees and expenses; (ii) all management fees, allocations or corporate overhead (including executive compensation) or other administrative costs that arise from the ownership of Neese by 1847 Neese including allocations of supervisory, centralized or other parent-level expense items; (iii) one-time extraordinary expenses or losses; and (iv) any reserves or adjustments to reserves which are not consistent with GAAP. Additionally, for purposes of calculating Adjusted EBITDA, the purchase and sales prices of goods and services sold by or purchased by Neese to or from 1847 Neese, its subsidiaries or affiliates shall be adjusted to reflect the amounts that Neese would have realized or paid if dealing with an independent third-party in an arm’s-length commercial transaction, and inventory items shall be properly categorized as such and shall not be expenses until such inventory is sold or consumed.

At June 30, 2018, management made the determination that the vesting note payable had no value because it estimated that the EBITDA threshold of $1,300,000 for both 2018 and 2019 would be not attained, thus eliminating the requirement for a payment under terms of the note payable.

The note contains customary events of default, including in the event of: (i) non-payment; (ii) a default by 1847 Neese or Neese of any of their covenants under the stock purchase agreement, the note, or any other agreement entered into in connection with the acquisition of Neese, or a breach of any of their representations or warranties under such documents; or (iii) the bankruptcy of 1847 Neese or Neese.

Under terms of the term loan with Home State Bank described above, the note may not be paid until the term loan is paid in full.

10% Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a 10% promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the sellers of Neese. The note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018; provided, however, that the unpaid principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time, the cash on hand of 1847 Neese and Neese exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid principal and accrued, but unpaid, interest thereon is fully prepaid. The note contains the same events of default as the 8% vesting promissory note. The note has not been repaid, thus we are in default under this note. Under terms of the term loan with Home State Bank described above, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement. Accordingly, the loan is shown as a long-term liability as of September 30, 2019. Additionally, the term loan lender limits the payment of interest on this note to $40,000 annually. We continue to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

Floor Plan Loans Payable

At September 30, 2019, $13,908 of machinery and equipment inventory was pledged to secure a floor plan loan from a commercial lender. We must remit proceeds from the sale of the secured inventory to the floor plan lender and pay a finance charge that can vary monthly at the option of the lender. The balance of the floor plan payable as of September 30, 2019 amounted to $13,908.

Master Lease Agreement

The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neese’s equipment with Utica Leaseco, LLC, or Utica, pursuant to a master lease agreement, dated March 3, 2017, between Utica and 1847 Neese and Neese, as co-lessees (collectively, referred to as the Lessee). Under the master lease agreement, Utica loaned an aggregate of $3,240,000 for certain of Neese’s equipment listed therein, which it leases to the Lessee. The initial term of the master lease agreement was for 51 months. Under the master lease agreement, the Lessee agreed to pay a monthly rent of $53,000 for the first three (3) months, with such amount increasing to $85,321.63 for the remaining forty-eight (48) months.

On June 14, 2017, the parties entered into a first amendment to lease documents, pursuant to which the parties agreed to, among other things, extend the term of the master lease agreement from 51 months to 57 months and amend the payments due thereunder. Under the amendment, the Lessee agreed to pay a monthly rent of $53,000 for the first ten (10) months, with such amount increasing to $85,321.63 for the remaining forty-seven (47) months. In connection with the extension of the term of the master lease agreement, the parties also amended the schedule of stipulated loss values and early termination payment schedule attached thereto. In connection with the amendment, the Lessee agreed to pay Utica an amendment fee of $2,500.

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On October 31, 2017, the Lessee and Utica entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule is 51 months and agreed monthly payments are $25,807.

If any rent is not received by Utica within five (5) calendar days of the due date, the Lessee shall pay a late charge equal to ten (10%) percent of the amount. In addition, in the event that any payment is not processed or is returned on the basis of insufficient funds, upon demand, the Lessee shall pay Utica a charge equal to five percent (5%) of the amount of such payment. The Lessee is also required to pay an annual administration fee of $3,000. Upon the expiration of the term of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) five percent (5%) of the Total Invoice Cost (as defined in the master lease agreement); or (b) the fair market value of the equipment, as determined by Utica.

Provided that no default under the master lease agreement has occurred and is continuing beyond any applicable grace or cure period, the Lessee has an early buy-out option with respect to all but not less than all of the equipment, upon the payment of any outstanding rental payments or other fees then due, plus an additional amount set forth in the master lease agreement, which represents the anticipated fair market value of the equipment as of the anticipated end date of the master lease agreement. In addition, the Lessee shall pay to Utica an administrative charge to be determined by Utica to cover its time and expenses incurred in connection with the exercise of the option to purchase, including, but not limited to, reasonable attorney fees and costs. Furthermore, upon the exercise by the Lessee of this option to purchase the equipment, the Lessee shall pay all sales and transfer taxes and all fees payable to any governmental authority as a result of the transfer of title of the equipment to Lessee.

In connection with the master lease agreement, the Lessee granted a security interest on all of its right, title and interest in and to: (i) the equipment, together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished by the supplier; (ii) all accounts, chattel paper, deposit accounts, documents, other equipment, general intangibles, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing; (iii) all books and records pertaining to the foregoing; (iv) all property of such Lessee held by Utica, including all property of every description, in the custody of or in transit to Utica for any purpose, including safekeeping, collection or pledge, for the account of such Lessee or as to which such Lessee may have any right or power, including but not limited to cash; and (v) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing.

On February 1, 2018, Utica agreed to continue the $53,000 payments for three additional months and extend the maturity of the loan by three months. Additionally, Utica agreed to defer the February 3, 2018 payment to February 20, 2018. We paid one-half the normal late fee, $2,650 for the late payment. On March 2, 2018, Utica agreed to defer the March 3 payment to March 30, 2018. We paid a late payment fee of $5,300 for the payment deferral. 

On April 18, 2018, Utica, the Lessee, and Ellery W. Roberts, as guarantor under the master lease agreement, entered into a forbearance agreement relating to the non-payment of certain rent payments due under the Master Lease Agreement for the months of March 2018 and April 2018. Pursuant to the forbearance agreement, Utica agreed to forbear from demanding payment in full and exercising its remedies under the master lease agreement until June 3, 2018. Pursuant to the forbearance agreement, the Lessee agreed to, among other things, (i) make the payments set forth in the forbearance agreement on or before the dates specified therein, totaling $173,376, (ii) be current on all rent due under Schedule 1 of the master lease agreement by June 3, 2018 and be current on all rent due under Schedule 2 of the master lease agreement by May 30, 2018, (ii) reinstate or renew and continue in effect all insurance as required under the master lease agreement at Lessee’s sole cost and expense, (iv) pay a forbearance fee to Utica totaling $4,500, which shall not be due until termination of the master lease agreement and (v) execute a surrender agreement with respect to the Lessee’s equipment, which will be held in escrow by Utica and not deemed effective unless and until the earlier to occur of: (a) June 3, 2018, provided liabilities under master lease agreement remain due but unpaid; (b) such time as Utica accelerates due and unpaid liabilities pursuant to the term of the forbearance agreement and the master lease agreement; or (c) a default occurs under the forbearance agreement or the master lease agreement.

A portion of the proceeds from the term loan described below were applied to reduce the balance of this lease to $475,000. The lease is payable in 46 payments of $12,881.96 beginning July 3, 2018 and an end-of-term buyout of $38,000. As a result, the parties to the forbearance agreement agreed that the forbearance agreement is terminated and is no longer in effect.

The remaining balance of the lease amounts to $707,997 as of September 30, 2019, comprised of principal of $907,245 and net of unamortized debt discount of $28,070, accrued payments on lien release of $249,784 and lease deposits of $38,807, offset by end of lease buyout payments of $117,413.

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Total Debt

The following table shows aggregate figures for the total debt described above that is coming due in the short and long term as of September 30, 2019. See the above disclosures for more details regarding these loans.

	Short-Term		Long-Term		Total Debt
Grid Promissory Note	$	131,647	$	-	$	131,647
Revolving Loan – Burnley		576,962		-		576,962
Revolving Loan – Northpoint		736,788		-		736,788
Term Loan - SBCC		1,049,186		-		1,049,186
Term Loan - Home State Bank		3,376,757		-		3,376,757
Secured Convertible Promissory Note		456,228		-		456,228
9% Subordinated Promissory Note		680,884		3,593,325		4,274,209
10% Promissory Note		-		1,025,000		1,025,000
Floor Plan Loans Payable		13,908		-		13,908
Master Lease Agreement		344,716		363,281		707,997
Total	$	7,367,076	$	4,981,606	$	12,348,682

Contractual Obligations

We have engaged our manager to manage the day-to-day operations and affairs of our company. Our relationship with our manager will be governed principally by the following agreements:

● the management services agreement relating to the management services our manager will perform for us and the businesses we own and the management fee to be paid to our manager in respect thereof; and

● our company’s operating agreement setting forth our manager’s rights with respect to the allocation shares it owns, including the right to receive profit allocations from our company, and the supplemental put provision relating to our manager’s right to cause our company to purchase the allocation shares it owns.

Pursuant to the management services agreement that we entered into with our manager, our manager will have the right to cause our company to purchase the allocation shares then owned by our manager upon termination of the management services agreement. The redemption value of the allocation shares will be recorded outside of permanent equity in the mezzanine section of the balance sheet. We will recognize any change in the redemption value of the allocation shares by recording a dividend between net income and net income available to common shareholders. The amount recorded for the allocation shares is largely related to the fair value of the profit allocation that our manager, as holder of the allocation shares, will receive. The carrying value of the allocation shares will represent an estimate of the amounts to ultimately be paid to our manager, whether as a result of the occurrence of one or more of the various trigger events or upon the exercise of the supplemental put provision contained in our operating agreement following the termination of the management services agreement. See “Item 1. Business—Our Manager—Our Manager as an Equity Holder—Supplemental Put Provision” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information about this agreement.

We also expect that our manager will enter into offsetting management services agreements, transaction services agreements and other agreements, in each case, with some or all of the businesses that we acquire in the future. See “Item 1. Business—Our Manager” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information about these and other agreements our company intends to enter into with our manager.

Pursuant to the asset purchase agreement with Goedeker Television, dated April 5, 2019, Goedeker Television is also entitled to receive the following earn out payments to the extent the Goedeker business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets:

1. An earn out payment of $200,000 if the EBITDA of the Goedeker business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;

2. An earn out payment of $200,000 if the EBITDA of the Goedeker business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and

3. An earn out payment of $200,000 if the EBITDA of the Goedeker business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.

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To the extent the EBITDA of the Goedeker business for any applicable period is less than $2,500,000 but greater than $1,500,000, Goedeker must pay a partial earn out payment to Goedeker Television in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the “Achievement Percentage” is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker business for any applicable period is equal or less than $1,500,000.

To the extent Goedeker Television is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker Television is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.

The rights of Goedeker Television to receive any earn out payment are subordinate to the rights of Burnley and SBCC under separate subordination agreements that Goedeker Television entered into with them on April 5, 2019.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

The following discussion relates to critical accounting policies for our consolidated company. The preparation of financial statements in conformity with GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

Revenue Recognition and Cost of Revenue 

On January 1, 2018, we adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification, or ASC, Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. Our adoption of this ASU resulted in no change to our results of operations or balance sheet.

Land Management Segment

Neese’s payment terms are due on demand from acceptance of delivery. Neese does not incur incremental costs obtaining purchase orders from customers, however, if Neese did, because all of Neese’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized. 

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The revenue that Neese recognizes arises from orders it receives from customers. Neese’s performance obligations under the customer orders correspond to each service delivery or sale of equipment that Neese makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the service or equipment sale to be completed. Control of the delivery transfers to customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, Neese’s products, which generally occurs at the later of when the customer obtains title to the equipment or when the customer assumes risk of loss. The transfer of control generally occurs at a point of delivery. Once this occurs, Neese has satisfied its performance obligation and Neese recognizes revenue.

Neese also sells equipment by posting it on auction sites specializing in farm equipment. Neese posts the equipment for sale on a “magazine” site for several weeks before the auction. When Neese decides to sell, it moves the equipment to the auction site. The auctions are one day. If Neese accepts a bid, the customer pays the bid price and arranges for pick-up of the equipment.

Transaction Price ‒ Neese agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon service fee. In Neese’s contracts with customers, it allocates the entire transaction price to the service fee to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Neese collects concurrently with revenue-producing activities are excluded from revenue.

If Neese continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Substantially all of Neese’s sales are to businesses, including farmers or municipalities and very little to individuals.

Disaggregated Revenue ‒ Neese disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Performance Obligations ‒ Performance obligations for the different types of services are discussed below:

● Trucking ‒ Revenues for time and material contracts are recognized when the merchandise or commodity is delivered to the destination specified in the agreement with the customer.

● Waste Hauling and pumping ‒ Revenues for waste hauling and pumping is recognized when the hauling, pumping, and spreading are complete.

● Repairs ‒ Revenues for repairs are recognized upon completion of equipment serviced.

● Sales of parts and equipment ‒ Revenues for the sale of parts and equipment are recognized upon the transfer and acceptance by the customer.

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Accounts Receivable, Net ‒ Accounts receivable, net, are amounts due from customers where there is an unconditional right to consideration. Unbilled receivables of $0 and $139,766 are included in this balance at September 30, 2019 and December 31, 2018, respectively. The payment of consideration related to these unbilled receivables is subject only to the passage of time.

Neese reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value. The estimates are based on an analysis of past due receivables, historical bad debt trends, current economic conditions, and customer specific information. After Neese has exhausted all collection efforts, the outstanding receivable balance relating to services provided is written off against the allowance. Additions to the provision for bad debt are charged to expense.

Neese determined that an allowance for loss of $29,001 was required at September 30, 2019 and December 31, 2018.

Retail and Appliances Segment

Goedeker collects the full sales price from the customer at the time the order is placed. Goedeker does not incur incremental costs obtaining purchase orders from customers, however, if Goedeker did, because all Goedeker’s contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Goedeker recognizes arises from orders it receives from customers. Goedeker’s performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, Goedeker’s products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment. Once this occurs, Goedeker has satisfied its performance obligation and Goedeker recognizes revenue. Revenue from the sale of long-term service warranties are recognized net of costs to sell the contracts to the third-party warranty service company.

Transaction Price ‒ Goedeker agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In Goedeker’s contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Goedeker collects concurrently with revenue-producing activities are excluded from revenue.

If Goedeker continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Cost of revenue includes the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.

Substantially all Goedeker’s sales are to individual retail consumers.

Disaggregated Revenue ‒ Goedeker disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Performance Obligations – Goedeker’s performance obligations include delivery of products and, in some instances, performance of services such as installation. Revenue for the sale of merchandise is recognized upon shipment to the customer; or in some instances, upon delivery and installation of the product which typically occur simultaneously.

Receivables

Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufactures from whom we purchase products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on our assessment of the credit history with our manufacturers, we have concluded that there should be no allowance for uncollectible accounts. We historically collect substantially all of our outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.

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Allowance for Credit Losses

Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on our accounts receivable. We charge credit losses against the allowance and credits subsequent recoveries, if any, to the allowance. Historical loss experience and contractual delinquency of accounts receivables, and management’s judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of accounts receivable on a collective basis and relates to probable incurred losses of unimpaired accounts receivables. We record a general allowance for credit losses that includes forecasted future credit losses.

Inventory

Inventory consists of finished products acquired for resale and is valued at the lower-of-cost-or-market with cost determined on a specific item basis for the Neese and of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on an average item basis for Goedeker. We periodically evaluate the value of items in inventory and provide write-downs to inventory based on our estimate of market conditions.

Property and Equipment

Property and equipment is stated at cost. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery & Equipment	3-7
Tractors	3-7
Trucks and vehicles	3-6

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5

Long-Lived Assets 

We review our property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

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Derivative Instrument Liability

We account for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At June 30, 2019, we classified a warrant issued in conjunction with a term loan as a derivative instrument designated.

Recent Accounting Pronouncements

Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit’s carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. We are currently in the process of evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements.

Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years; and earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. As part of our adoption, we elected the following practical expedients: we have not reassessed whether any expired or existing contracts are or contain leases, we have not reassessed lease classification for any expired or existing leases; we have not reassessed initial direct costs for any existing leases; and we have not separated lease and non-lease components. The adoption of the standard did not have a material impact on our consolidated financial statements and related disclosures. The comparative periods have not been restated for the adoption of ASU 2016-02.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2019. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which we are still in the process of remediating as of September 30, 2019, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for the description of these weaknesses.

Changes in Internal Control Over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During its evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2019, our management identified the following material weaknesses:

● We did not have appropriate policies and procedures in place to evaluate the proper accounting and disclosures of key documents and agreements.

● We do not have sufficient and skilled accounting personnel with an appropriate level of technical accounting knowledge and experience in the application of accounting principles generally accepted in the United States commensurate with our financial reporting requirements.

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, our management has identified the steps necessary to address the material weaknesses, and in the third quarter of fiscal 2019, we continued to implement the following remedial procedures:

● Once we raise additional funds, Robert D. Barry, CPA intends to resign as a director of our company and will become our Chief Financial Officer. Mr. Barry has more than 10 years of experience acting as chief financial officer of various companies and has significant GAAP and SEC reporting experience.

● We plan to make necessary changes by providing training to our financial team and our other relevant personnel on the GAAP accounting guidelines applicable to financial reporting requirements.

● We plan to hire a financial controller for Neese. Mr. Barry is acting as interim controller for Neese until a permanent controller is hired.

● We have engaged the outsourced accounting and financial reporting services of Carrollton Partners, LLC and will continue to use its services after Robert D. Barry assumes the role of Chief Financial Officer.

We intend to complete the remediation of the material weaknesses discussed above as soon as practicable but we can give no assurance that we will be able to do so. Designing and implementing an effective disclosure controls and procedures is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to devote significant resources to maintain a financial reporting system that adequately satisfies our reporting obligations. The remedial measures that we have taken and intend to take may not fully address the material weaknesses that we have identified, and material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.

Other than in connection with the implementation of the remedial measures described above, there were no changes in our internal controls over financial reporting during the third quarter of fiscal 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS.

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the third quarter of fiscal year 2019 that were not previously disclosed in a current report on Form 8-K that was filed during the quarter.

During the three month period ended September 30, 2019, we did not repurchase any of our common shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the third quarter of fiscal year 2019 but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6. EXHIBITS.

Exhibit No.	Description of Exhibit
3.1	Certificate of Formation of 1847 Holdings LLC (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed on February 7, 2014)
3.2	Second Amended and Restated Operating Agreement of 1847 Holdings LLC, dated January 19, 2018 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on January 22, 2018)
4.1	Specimen certificate evidencing a common share of 1847 Holdings LLC (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 filed on February 7, 2014)
10.1*	Loan and Security Agreement, dated June 24, 2019, between Northpoint Commercial Finance LLC and 1847 Goedeker Inc.
10.2*	Amendment to Loan and Security Agreement, dated August 2, 2019, between 1847 Goedeker Inc. and Northpoint Commercial Finance LLC
10.3*	Guaranty, dated June 24, 2019, by 1847 Goedeker Holdco Inc. in favor of Northpoint Commercial Finance LLC
31.1*	Certifications of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certifications of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 18, 2019	1847 HOLDINGS LLC
	/s/ Ellery W. Roberts
	Name: Ellery W. Roberts
	Title:   Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer and Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement (this “Agreement”) is dated as of June 24, 2019 between 1847 Goedeker Inc., a Delaware corporation (“Borrower”) and Northpoint Commercial Finance LLC, a Delaware limited liability company (“Lender”).

In consideration of the mutual covenants and undertakings herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby agree as follows:

1. Loans.

Lender may from time to time advance funds (each, a “Loan”) for acquisition, financing and/or refinancing by Borrower of inventory (individually and collectively “Inventory”) and for such other purposes as are acceptable to Lender. Borrower understands and agrees that each Loan will be solely at Lender’s discretion, and Borrower expressly disclaims any right to expect otherwise as a result of any course of dealing between Borrower or Lender, any particular need for any such Loan by Borrower, Lender’s dealings with others, Lender’s arrangements with any Vendor, or otherwise. Lender may establish a credit limit for Borrower and may adjust such credit limit from time to time. Such credit limit does not constitute a commitment or committed line of credit from Lender. To be eligible for a Loan, Inventory must be: (a) serialized, unless otherwise agreed to by Lender; (b) adequately described on an invoice issued to Borrower by a manufacturer or distributor approved by Lender (each, a “Vendor”). (c) approved by Lender, in Lender’s discretion, for financing pursuant to a program authorized by the applicable Vendor; and (d) encumbered by a first priority perfected security interest in favor of Lender.

2. Payment.

(a) Promise to Pay. Lender may provide to Borrower, in a manner chosen by Lender from time to time, one or more of the following: a statement of financial transaction, a program letter, an approval letter, a billing statement, or other documentation identifying Inventory, the amount of the Loan for such Inventory, and the applicable interest rates and financial terms for such Loan (individually and collectively, a “Schedule”). Borrower’s failure to notify Lender in writing of any objection to a particular Schedule within ten (10) days of the date such Schedule is first made available to Borrower shall constitute Borrower’s: (a) acceptance of all terms thereof; (b) agreement that Lender is financing that Inventory at Borrower’s request; and (c) agreement that that Schedule will be incorporated herein by reference. The amount of the Loan for an item of Inventory shall be deemed to be the original invoice cost (“Invoice Cost”) of that item of Inventory as listed on the applicable Schedule. Borrower promises to pay to Lender the amount of each Loan pursuant to each applicable Schedule, together with interest and charges on the Invoice Cost and/or fees on the account as specified in each applicable Schedule and this Agreement (collectively, the “Total Debt”). If Borrower timely objects to the terms of any Schedule and such objection is not resolved within three (3) business days, Borrower will pay Lender for such Inventory, and the terms of such Schedule shall be deemed for all purposes to be, in accordance with the most recent terms for similar Inventory to which Borrower has not objected. Regardless of the payment terms contained in any Schedule, if Lender determines at any time that the Total Debt outstanding exceeds the value of Borrower’s inventory for which Lender has an enforceable first lien security interest, then Borrower will upon demand by Lender pay the amount of such excess to Lender for application to the Obligations. Borrower assigns to Lender all present and future price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments owed to Borrower by a Vendor. Borrower irrevocably authorizes each Vendor to pay these directly to Lender. All payments hereunder and under each Schedule shall be made payable to Lender and delivered to the address specified by Lender from time to time or paid in such manner as Lender may specify from time to time. As to all payments made by or on behalf of Borrower with respect to its Obligations, Lender may apply any payments received to the Obligations, or any portion thereof in any manner and in any order as Lender may determine in its sole discretion, notwithstanding contrary instructions received. Application of payments made on Borrower’s account may occur up to two (2) business days after deposit into Lender’s account to allow for clearance of funds. Any payment deposited after 3:00pm prevailing time in Atlanta, Georgia into Lender’s account will be deemed to have been deposited into Lender’s account the next business day.

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(b) Interest. The Schedule for a Loan will include the applicable per annum interest rates for that Loan. Any late payment interest rate listed on that Schedule may be charged to that Loan upon any payment under this Agreement or under any Schedule being past due and until such payment is made. Any maturity rate of interest listed on that Schedule may be charged to that Loan when the maturity date set forth on that Schedule has passed. Any applicable default rate of interest listed on that Schedule may be charged to that Loan upon the occurrence of any Default. If Borrower timely objects to the terms of any Schedule and such objection is not resolved within three (3) business days, the applicable interest rates for that Loan shall be in accordance with the most recent terms for similar Inventory to which Borrower has not objected; provided, however, if there are no prior terms, until resolution by the parties hereto, interest shall accrue at LIBOR (which is subject to change) plus twelve percent (12%) per annum. As used in this Agreement and all Schedules, “LIBOR” means a variable rate adjusted monthly that for any calendar month is equal to the greater of (i) the highest interest rate (rounded upwards, if necessary, to the nearest 1/1000^th of 1%) published on the website bloomberg.com during the calendar month prior to such calendar month as the one-month London Interbank Offered Rate for United States dollar deposits (or, if such page shall cease to be publicly available or, if the information/description contained on such page, in Lender’s sole discretion, shall cease to accurately reflect such London Interbank Offered Rate, then such rate as reported by any publicly available recognized source of similar market data selected by Lender that, in Lender’s reasonable judgment, accurately reflects such London Interbank Offered Rate) and (ii) any “Minimum LIBOR” rate set forth in any applicable Schedule. Interest shall accrue and be payable monthly, in arrears, and shall be due and payable by the fifteenth (15^th) day of the calendar month following the calendar month in which such interest accrues. Interest shall be calculated based upon a 360 day year and the actual number of days elapsed in such calendar month. Lender may adjust any rate of interest hereunder upon prior notice to and acceptance by Borrower (which notice may, but shall not be required to, be included in a Schedule), which acceptance shall be conclusively evidenced by Borrower’s request for Loans following Lender providing notice to Borrower of the adjusted rate of interest. The adjusted rate of interest shall become effective as of the first day of the month following the month in which Borrower accepts the adjusted rate of interest. It is the intention of Lender not to charge interest pursuant to any Schedule at a rate in excess of the highest rate permitted by applicable law. In making such determination, interest on any outstanding credit amount shall be spread over the entire period that such credit amount is outstanding. If any interest rate provided for in this Agreement exceeds the legally permitted rate, the rate will automatically be reduced to the maximum rate permitted by applicable law. Any interest paid by Borrower to Lender in excess of the highest rate permitted by applicable law will be applied to reduce the outstanding principal of the Obligations, and if no Obligations remain outstanding, will be refunded to Borrower.

(c) Fees. Borrower agrees to pay to Lender each of the following fees if assessed by Lender: (i) an “Audit Fee” for each audit conducted as determined by Lender, which shall be equal in each case to the Lender’s actual out-of-pocket expenses incurred in connection with such audit or any minimum audit fee amount established by Lender (with audits to be conducted as frequently as Lender, in its sole discretion, deems prudent); (ii) a “Returned Payment Fee”, in each case in which Lender receives a check, ACH electronic payment or other amount in payment of Obligations and such payment is returned or rejected by Lender’s bank for insufficient funds or for any other reason, even if it is paid subsequently, in an amount equal to the lesser of (a) the maximum amount permitted by law or (b) $50.00; and (iii), a “Late Fee” for each payment that is not received by Lender by the 25th day of a calendar month, and on the 25th day of each successive calendar month thereafter until such past due amount is received by Lender, in an amount equal to the greater of (a) five percent (5%) of the amount past due for such payment and (b) $25; (iv) a “Billing Fee” in an amount equal to $250.00 for each month that Borrower requests a paper billing statement or a paper statement of financial transaction; (v) a “Live Check Fee” in an amount equal to $50.00 for each check or similar instrument that Borrower sends to Lender for payment of Obligations or for any other payment of Obligations by Borrower to Lender other than electronic payments initiated on a website provided by Lender; (vi) a “Processing Fee” on each item of Inventory in an amount to be specified in the applicable Schedule; and (vii) any such additional fees and/or changes to the above-listed fees as Lender shall implement from time to time in connection with the servicing and/or administration of Borrower’s account with Lender, to be effective as of the notice date, or such other future date as Lender shall advise, and in each case upon prior notice to and acceptance by Borrower (which notice may, but shall not be required to, be included in a Schedule), which acceptance shall be conclusively evidenced by Borrower’s request for Loans following Lender sending notice to Borrower of a particular additional and/or changed fee. Delivery of any such notice by facsimile or other electronic transmission shall be equally effective as delivery of a printed notice. Borrower further agrees to pay Lender the maximum fees permitted by applicable law in respect of any requests from Borrower for accounting, listings of Collateral, statements of account, or explanations of surpluses or deficiencies. All of the foregoing fees constitute compensation to Lender for services rendered and are not interest or a charge for the use of money.

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3. Collateral.

In order to secure all present and future obligations, whether under this Agreement or any other current or future agreement, Borrower hereby grants to Lender a security interest in all inventory of Borrower manufactured, distributed, or sold by Electrolux Home Products, Inc.; LG Electronics U.S.A., Inc.; Samsung Electronics America, Inc.; and/or their respective affiliates or bearing any trade names, trademarks, or logos of Electrolux Home Products, Inc.; LG Electronics U.S.A., Inc.; Samsung Electronics America, Inc.; and/or their respective affiliates, whether now owned or hereafter acquired and wherever located; all returns, repossessions, exchanges, substitutions, replacements, attachments, parts, accessories and accessions of any of the foregoing; all price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments related to any of the foregoing; supporting obligations to any of the foregoing; and products and proceeds in whatever form of any of the foregoing (including without limitation all goods, money, checks, accounts, deposit accounts, chattel paper, instruments, documents, and general intangibles arising from any of the foregoing) (collectively, the “Collateral”). Borrower agrees that the Collateral shall at all times remain personal property, shall not become affixed to or form a part of any real estate without the consent of Lender, and shall be located at Borrower’s place(s) of business or at any other locations otherwise approved in writing by Lender from time to time. Lender retains the right to demand additional protection for the approval of a new location for Inventory, which includes, but is not limited to, a properly executed landlord/lienholder waiver(s). Borrower shall not remove any of the Collateral from such location(s) (except for moving Collateral between or among approved locations). Borrower shall take all actions that Lender from time to time reasonably deems necessary or appropriate to protect and perfect its security interest in the Collateral. Borrower hereby irrevocably authorizes the Lender at any time and from time to time to file in any filing office in any Uniform Commercial Code jurisdiction any initial financing statements and amendments thereto which, among other things, list the Collateral and provide any other information required to evidence the agreements set forth herein, or as may be amended from time to time, or for sufficiency or filing office acceptance. Borrower also ratifies its authorization for Lender to have filed in any Uniform Commercial Code jurisdiction any like initial financing statements or amendments thereto if filed prior to the date hereof. Both Borrower and Lender intend for Borrower to sell the Inventory, but only in the ordinary course of its business as Borrower normally sells such Inventory. Therefore, Borrower may sell any item of Inventory provided that: (a) no Default exists and (b) the price obtained for such item of Inventory is not less than the unpaid Total Debt attributable thereto. Borrower will hold in trust for Lender all of the proceeds of any sale of Inventory, and Borrower will immediately remit the unpaid Invoice Cost of such item of Inventory to Lender. Upon demand by Lender, Borrower shall immediately remit to Lender the full unpaid Invoice Cost of any item of Inventory (which amount shall be applied in repayment of the Loan(s) relating to such item of Inventory or otherwise as determined by Lender in its sole discretion) as to which (i) Borrower receives any deposit or similar amount from a contemplated purchaser and/or (ii) Borrower enters into a contract to sell such item of Inventory. The immediately preceding two sentences shall not apply to any Inventory financed by Lender under a scheduled payment or other non-“pay as sold” program. Borrower shall bear the entire risk of loss or destruction of, or damage to, the Collateral. Borrower will procure and continuously maintain “all risk” property insurance covering each item of Collateral for the full replacement value thereof and with such loss payable and other endorsements as Lender may require, plus such other insurance as Lender may specify from time to time. Borrower shall immediately notify Lender of any loss, theft or damage to any Collateral. Lender may alter the insurance requirements under this Section 3, as Lender reasonably deems necessary, by giving written notice to Borrower. Borrower hereby agrees that Lender may act as Borrower’s representative in making, adjusting and settling claims with respect to the Collateral under any such insurance policies, and endorsing Borrower’s name on any drafts, checks or other instruments drawn by an insurer and relating to the Collateral. Until Borrower’s presentation of proper evidence of valid insurance meeting the requirements of this Section 3 in a form and substance satisfactory to Lender, in its sole discretion, or in the event of Borrower’s failure to secure and maintain insurance as herein required, Lender may, to protect and insure the Collateral, at its sole option, secure such insurance on behalf of Borrower, and Borrower hereby promises to pay to Lender on demand any amounts expended by Lender for such insurance. Insurance purchased by Lender may include coverage beyond those required by this Section 3. Lender’s affiliates may act as insurance carrier, premium finance company and/or insurance administrator, and may be compensated through premium charges, commissions, premium rebates and Bees. Borrower acknowledges that any insurance obtained by Lender is solely for the benefit of Lender and may be more expensive than insurance obtained by Borrower. Lender will promptly discontinue any insurance purchased by Lender upon Borrower’s presentation of proper evidence of valid insurance meeting the requirements of this Section 3. Lender’s acceptance of policies in lesser amounts in one instance shall not be a waiver of Borrower’s obligations hereunder in any other instances. BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT: (a) LENDER IS NOT THE MANUFACTURER OR THE SELLER OF THE INVENTORY; AND (b) LENDER HAS NOT MADE ANY WARRANTY OR REPRESENTATION WITH RESPECT TO THE INVENTORY OF ANY NATURE OR KIND WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE MERCHANTABILITY OF THE INVENTORY, ITS FITNESS FOR A PARTICULAR PURPOSE, ITS COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS OR ITS NON-INFRINGEMENT OF THE RIGHTS OF OTHERS. BORROWER IRREVOCABLY WAIVES ANY CLAIMS AGAINST LENDER WITH RESPECT TO THE INVENTORY WHETHER FOR BREACH OF WARRANTY OR OTHERWISE. BORROWER AGREES THAT ITS OBLIGATIONS TO LENDER WITH RESPECT TO INVENTORY FINANCED BY LENDER SHALL BE ABSOLUTE AND UNCONDITIONAL AT ALL TIMES AFTER LENDER HAS ADVANCED OR COMMITTED TO ADVANCE ALL OR ANY PART OF THE INVOICE COST OF SUCH INVENTORY TO THE SELLER THEREOF. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BORROWER WILL NOT DELAY PAYMENT OF ANY OBLIGATIONS TO LENDER, OR ASSERT ANY DEFENSE OR SET-OFF WITH RESPECT TO SUCH OBLIGATIONS, DUE TO A DISPUTE BETWEEN BORROWER AND A VENDOR OF INVENTORY AND REGARDLESS OF ANY DISCOUNT OR ALLOWANCE PROVIDED BY A VENDOR TO BORROWER.

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4. Borrower’s Representations. Warranties and Covenants.

Borrower represents and warrants to Lender that: the execution of and performance by Borrower under the terms of this Agreement, each Schedule and related financing documents have been approved for Borrower by all necessary corporate or other action as applicable; Borrower is duly formed and is in good standing and qualified to do business in its state of organization (if applicable) and in the state(s) in which its place(s) of business is (are) located; the execution and delivery of this Agreement does not contravene any of Borrower’s organizational documents or any other agreement, document or instrument to which Borrower is a party; this Agreement is a valid, binding and enforceable agreement of Borrower; Borrower lawfully possesses and owns each item of Collateral financed or refinanced by Lender for Borrower; the Collateral is free from, and will remain free from, all liens or other encumbrances, except for the security interest granted hereby and any security interests that are junior in priority to the security interest granted hereby; if Borrower acquires any inventory from a Vendor with funds advanced under this Agreement, then all of Borrower’s inventory acquired from such Vendor is free from, and will remain free from, all liens or other encumbrances, except for the security interest granted hereby; Borrower is a merchant engaged in the business of selling the Inventory and other personal property of a kind similar to the Inventory; all information supplied and statements made by Borrower in any financial statement or other document delivered to Lender at any time is, and shall be, true, correct, complete and genuine when delivered; the Borrower is not a party to or the subject of any lawsuit, governmental investigation or proceeding or material dispute with any party, except as previously disclosed in writing to Lender; the Financial Statements and other information provided by Borrower to Lender in the credit application or otherwise have not materially changed from the date of submission of such information through the date of Borrower’s signing of this Agreement; and the Financial Statements and other information provided by any guarantor of Borrower (or by any other party liable for any of Borrower’s and/or its affiliates obligations to Lender and/or its affiliates) in the credit application or otherwise have not materially changed from the date of submission of such information through the date of Borrower’s signing of this Agreement. Each request for a Loan by Borrower will be a reaffirmation of Borrower’s representations and warranties contained herein as of the date of such request.

Borrower agrees: that the Borrower will not change its principal residence (if Borrower is an individual), its chief executive office (if Borrower is not a registered organization), or its State of organization (if Borrower is a registered organization organized under State law) without prior written consent from Lender; that Borrower will not change its name or entity type without prior consent from Lender; that Borrower will not merge or consolidate with any other party or sell, transfer, abandon, or otherwise dispose of a substantial part of Borrower’s assets (other than the sale of Inventory in the ordinary course of business); to defend, at Borrower’s own expense, any action, proceeding or claim affecting the Collateral; to give notice to Lender of (i) any defect or non-conformity in any shipment of the Inventory financed by Lender, or any claim of a right to reject or revoke acceptance of such Inventory for any reason, no later than five (5) days after delivery of such Inventory and (ii) any event or circumstance that has caused, or would reasonably be expected to cause, a material adverse effect on the Borrower, its business or its financial prospects, immediately upon becoming aware of such event or circumstance; to pay promptly all taxes, assessments, license fees and other public or private charges when levied or assessed against the Collateral, this Agreement, any Schedule, or payments to be made in connection therewith (such obligation shall survive the termination of this Agreement); to pay all transportation and storage charges on the Collateral, and pay all rents and other amounts, if any, for the use of premises on which Borrower keeps any Collateral; to obtain, upon the request of Lender, waivers of interest and/or non-disturbance agreements from landlords, lienholders, warehousemen and/or bailors as to locations where any Collateral is located; that if a certificate of title is required by law with respect to any item of Collateral, Borrower shall obtain such certificate and shall note the security interest of Lender thereon and shall do everything necessary or expedient to preserve or perfect the security interest of Lender therein; that Borrower will not misuse, fail to keep in good repair, secrete or, except with Lender’s prior written consent, rent, lend, assign or otherwise transfer any of the Collateral, or use the Collateral for any purpose other than in accordance with accepted industry practices; that Lender may enter upon Borrower’s premises at any reasonable time to inspect the Collateral and Borrower’s books and records pertaining to the Collateral with the full cooperation and assistance of Borrower; to take all such actions reasonably requested by Lender to further implement and give effect to the agreements contained in this Agreement; and to indemnify and hold harmless Lender and its affiliates from any claims, losses, costs and expenses asserted by Borrower, any customer of Borrower or any other party relating to or arising out of this Agreement or any Collateral; to deliver to Lender, within ninety (90) days after the close of each fiscal year of Borrower, Borrower’s balance sheet, and statement of income (“Financial Statements”) certified by a recognized firm of certified public accountants as having been prepared in accordance with generally accepted accounting principles and as presenting fairly the financial condition of Borrower as of the date thereof and for the period then ended; to deliver to Lender upon request by Lender (i) copies of Borrower’s quarterly Financial Statements certified by the chief financial officer of Borrower as presenting fairly the financial condition of Borrower as of the date thereof and for the period then ended, (ii) copies of Borrower’s monthly Financial Statements certified by the chief financial officer of Borrower as presenting fairly the financial condition of Borrower as of the date thereof and for the period then ended, (iii) a report of the Collateral in a form and substance acceptable to Lender including without limitation a detailed listing of Borrower’s inventory, accounts receivable, accounts payable, and sales journals and that is certified by the chief financial officer of the Borrower as being true, correct, complete and genuine; and (iv) such other financial statements or information regarding Borrower or the Collateral, as Lender reasonably may request from time to time.

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5. Power of Attorney.

To facilitate and carry out the purposes of this Agreement and Borrower’s obligations to Lender, Borrower hereby irrevocably appoints Lender and its affiliates, as Borrower’s true and lawful attorney-in-fact, with power of substitution, to do the following acts on behalf of Borrower: to prepare, execute and deliver in the name of Borrower security agreements, financing statements, Certificates of Title and Statements of Origin relating to the Collateral; to endorse Borrower’s name upon any notes, checks, drafts, money orders and other forms of instruments made payable to Borrower; and generally to perform all acts and do all things necessary to preserve and protect the Collateral and Lender’s rights and interest therein and to otherwise accomplish the purposes of this Agreement, including the making of affidavits and the acknowledgment of instruments as fully as if done by the Borrower. The foregoing powers are coupled with an interest and shall be irrevocable without the prior written consent of Lender, as long as any Obligations remain outstanding.

6. Default.

Borrower and Lender acknowledge that time is of the essence in this Agreement. As used in this Agreement, “Default” means any one or combination of the following: (a) any of Borrower’s obligations to Lender and/or any affiliate of Lender under this Agreement, any Schedule or any other agreement are not paid or performed as required; (b) there occurs a default by any affiliate of Borrower under any agreement with Lender and/or any affiliate of Lender; (c) there occurs a default by Borrower under any agreement with another lender, (d) there occurs a material default by Borrower under any material agreement to which Borrower is a party; (e) any sale or other disposition of the Inventory is made by Borrower other than in compliance with Section 3 of this Agreement, (f) Borrower breaches any representation, warranty or covenant contained herein or in any other instrument or agreement delivered by Borrower to Lender or any affiliate of Lender in connection with this Agreement or any other transaction; (g) Borrower dies, ceases to do business as a going concern or there occurs a material change in the ownership or management of Borrower’s business; (g) any of the Inventory is lost, damaged or destroyed and Borrower fails to pay to Lender within five (5) days thereafter (the “Grace Period”) the unpaid Invoice Cost of such Inventory; however, If Lender seeks payment for any Inventory from the proceeds of the insurance described in Section 3 of this Agreement, then the Grace Period will not begin for such Inventory until Lender gives notice to Borrower that Borrower must make payment for such Inventory; (i) Borrower becomes insolvent or bankrupt Borrower makes an assignment for the benefit of creditors or consents to the appointment of a trustee or receiver; a trustee or a receiver is appointed for Borrower or for a substantial part of its property without its consent; bankruptcy, reorganization or insolvency proceedings are instituted by or against Borrower; or any of the foregoing occurs with respect to any guarantor or other party liable for any of Borrower’s and/or its affiliates obligations to Lender and/or its affiliates; (j) all or any part of the Inventory is attached, levied or seized upon in any proceeding and such process is not discharged within ten (10) days; (k) Lender believes that the prospect of payment or performance of Borrower’s and/or its affiliates obligations to Lender and/or its affiliates is impaired, whether by reason of a material adverse change in the business prospects or financial condition of Borrower or otherwise, or, in good faith, believes that the Collateral is insufficient security for Borrower’s obligations to Lender; (1) any guarantor, surety or endorser for any of Borrower’s and/or its affiliate’s obligations to Lender and/or its affiliates dies, defaults under any agreement with, or in favor of; Lender or any affiliate of Lender, or any guaranty of the obligations secured hereby is terminated; or (m) Lender believes that the prospect of payment or performance of the obligations of any guarantor, surety or endorser for any of Borrower’s and/or its affiliate’s obligations to Lender and/or its affiliates is impaired, whether by reason of a material adverse change in the business prospects or financial condition or otherwise.

7. Remedies.

If a Default occurs, the indebtedness herein described and all other debts then owing by Borrower to Lender and/or its affiliates under this Agreement or any other present or future agreement (the “Oblieations”) shall, if Lender shall so elect, become immediately due and payable, provided, however, that upon the institution of any bankruptcy, reorganization or insolvency proceedings filed by or against Borrower, the Obligations shall automatically become immediately due and payable without notice or demand of any kind. Furthermore, if a Default occurs, Lender shall have all of the rights and remedies of a Lender under the Uniform Commercial Code and any other applicable laws. Borrower agrees that Lender may, by itself or through an agent, without notice to any person and without judicial process of any kind, enter into any premises or upon any land owned, leased or otherwise under the apparent control of Borrower where Lender believes the Collateral may be, and disassemble, render unusable and/or repossess all or any items of the Collateral. Borrower expressly waives all rights to possession of the Collateral after default and all claims for injuries suffered through or loss caused by such entering and/or repossession by Lender. Borrower shall, upon demand by Lender, assemble the Collateral and return it to Lender at a place designated by Lender. Borrower agrees that the repurchase of any item of Collateral by the manufacturer or any distributor thereof shall constitute a commercially reasonable private sale of the Collateral by Lender, if the price obtained is equal to: (a) the then outstanding Invoice Cost of such item of Collateral, minus (b) the sum of all (i) unpaid principal curtailments on the Collateral (which Borrower agrees will approximate the depreciation of the Collateral) and (ii) amounts incurred, if any, to restore such item of Collateral to the equivalent of unused condition. Expenses of retaking, holding, preparing for sale, selling and the like shall include attorney’s fees and other legal expenses and shall be the responsibility of Borrower. Borrower is also responsible to pay all other costs and expenses incurred by Lender in connection with this Agreement, including but not limited to attorneys’ fees and other legal expenses in connection with or arising out of any deficiency suit, collection actions or otherwise following a Default. All such costs and expenses are payable by Borrower on demand by Lender and constitute part of the Obligations. Borrower understands that Lender’s rights are cumulative and not alternative. Borrower hereby expressly waives notice of non-payment, presentment, protest, dishonor, default, intent to accelerate the maturity hereof and acceleration of the maturity hereof.

8. Termination.

Either party may terminate this Agreement at any time by prior written notice received by the other party. If Lender terminates this Agreement, Borrower agrees that (i) if Borrower is not in default hereunder, forty five (45) days prior notice of termination is reasonable and sufficient (although this provision shall not be construed to mean that shorter periods may not, in particular circumstances, also be reasonable and sufficient) and (ii) if Borrower is in default hereunder, Lender may elect to terminate this Agreement immediately upon the giving of written notice to Borrower. All outstanding, non-contingent Obligations shall survive the termination of this Agreement. Until all Obligations are performed or satisfied in full, any termination of this Agreement shall not affect Lender’s security interest in the Collateral and all undertakings, agreements, covenants, warranties, and representations of Borrower contained in this Agreement or any other documents relating to or executed in connection with This Agreement shall continue to be effective. Lender shall not be required to record any terminations or satisfactions of any of Lender’s liens on the Collateral unless and until all Obligations are performed or satisfied in full.

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9. Miscellaneous.

Borrower authorizes Lender to give credit information about Borrower to Lender’s subsidiaries, affiliates, and agents and to Vendors. Borrower can prevent Lender from sharing credit information, other than information about Lender’s transactions or experience with Borrower, by giving written notice to Lender requesting Lender to not share such information. Lender may correct patent errors and fill in blanks herein. Lender may, in its sole discretion, waive a default or cure a default at Borrower’s expense. Any such waiver in any particular instance or any waiver of a particular default shall not be a waiver of any other defaults at the same time or at any other time. No provision of this Agreement shall be varied or modified by any prior or subsequent statement, conduct or act of any of the parties, except by a writing specifically referring to this Agreement and signed by all parties hereto. No course of dealing, course of performance„ or usage of trade shall be considered in the interpretation or enforcement of this Agreement. Borrower waives any right it may have to introduce evidence of any such course of dealing course of performance or usage of trade. Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable than not impair or invalidate the remainder of this Agreement, and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. This Agreement may be executed in two or more counterparts, each of which, when so executed and delivered, shall be an original, but all of which together shall constitute one and the same document. This Agreement and each applicable Schedule contain the entire agreement of the parties hereto with respect to the subject matter hereof. Delivery of an executed counterpart of this Agreement by facsimile or other electronic transmission shall be equally effective as delivery of an original executed counterpart of this Agreement. Any provisions hereof contrary to, prohibited by, or invalid under applicable law shall be inapplicable hereto, deemed omitted here from, and shall not invalidate the remaining provisions hereof. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement Borrower acknowledges that it has read and understood this Agreement and received a true copy hereof, and waives notice of Lender’s acceptance hereof. Lender’s failure to charge or accrue interest or any other fees provided herein shall not be deemed a waiver by Lender of its claim thereto. This Agreement and any related instruments and documents may be endorsed, assigned and transferred in whole or in part by Lender, and any such holder and/or assignee of this Agreement shall succeed to and be possessed of the rights of Lender under this Agreement to the extent transferred and assigned. The rights and obligations of Borrower may not be assigned without the prior written consent of Lender. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns, heirs and personal representatives. All notices, demands and requests required or permitted to be given under this Agreement shall be in writing and delivered by either: (i) personal delivery^-, (ii) nationally recognized overnight express courier; (iii) facsimile, email or other electronic transmission, or (iv) certified mail, return receipt requested, with all postage and other costs of such delivery paid or prepaid. Delivery shall be deemed to have been made on the earliest of the date of personal delivery, the date one business day after dispatch by overnight express service, the date of confirmation of the facsimile or email transmission as provided by the transmitting equipment or the date five days after the date of mailing by certified mail. Unless and until notice is provided to the contrary, notices shall be addressed to the respective addresses set forth below or to any other or additional persons and addresses as the parties may from time to time designate in a writing sent as provided above. Any claim which Borrower may have against Lender arising out of this Agreement or the transactions contemplated herein must be asserted by Borrower within one (1) year of it accruing or else it shall be deemed waived. Borrower agrees that such period is reasonable and sufficient for it to investigate and act upon any such claim. This Agreement shall be governed, construed and enforced in accordance with the laws of the State of Georgia without reference to conflict of laws principles. Borrower consents to the jurisdiction of the federal and state courts located in the State of Georgia for all purposes in connection with this Agreement. Borrower hereby waives and agrees not to assert any objection to the jurisdiction of any of such Courts, including the objection of inconvenient forum. Borrower further consents that any process or notice of motion or other application to any of said Courts or a Judge thereof, or any notice in connection with any proceedings hereunder, may be served inside or outside the State of or the District of Georgia by registered or certified mail, return receipt requested, to the last known address or by personal service provided a reasonable time for appearance is allowed, or in such other manner as may be permissible under the Rules of said Courts. TO THE EXTENT PERMITTED BY LAW, EACH PARTY HERETO, FOLLOWING CONSULTATION WITH LEGAL COUNSEL, KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS WITH REGARD TO DISPUTES IN ANY WAY DIRECTLY AND/OR INDIRECTLY ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.

Borrower and Lender have caused this Agreement to be executed as of the date and year first above written.

NORTHPOINT COMMERCIAL FINANCE LLC		1874 Goedeker Inc.
By:	/s/ KAREN S. PERKINS	By:	/s/ Robert D. Barry
Print Name:	KAREN S. PERKINS	Print Name:	Robert D. Barry
Title:	SR. UNDERWRITER	Title:	Chief Financial Officer

Address for notices:	Address for notices:
600 Northwinds	13850 Manchester Road
11675 Rainwater Drive, Suite 450	Ballwin, MO 63011
Alpharetta, GA 30009	ATTN ROBERT BARIS

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EX-10.2

Exhibit 10.2

AMENDMENT TO LOAN AND SECURITY AGREEMENT

This Amendment to Loan and Security Agreement (this “Amendment”) is dated as of August 2, 2019 between 1847 Goedeker Inc. (“Borrower”) and Northpoint Commercial Finance LLC (“Lender”).

Borrower and Lender are parties to a Loan and Security Agreement dated as of June 24, 2019 (as amended, restated, supplemented, or otherwise modified from time to time, the “Loan Agreement”).

For good and valuable consideration, the receipt and sufficiency of which are acknowledged. Borrower and Lender agree as follows:

1. The Loan Agreement is amended by deleting the first sentence of Section 3 and replacing it with the following:

In order to secure all present and future obligations, whether under this Agreement or any other current or future agreement, Borrower hereby grants to Lender a security interest in all inventory of Borrower manufactured, distributed, or sold by Electrolux Home Products, Inc.; LG Electronics U.S.A., Inc.; Samsung Electronics America, Inc.; Broan Nutone LLC; Dacor, Inc.; Fisher & Paykel Appliances Limited; Sharp Electronics Corporation; Dynamic Cooking Systems, Inc.; Miele, Incorporated; Felix Storch, Inc.; Elica S.p.A.; MOEN Incorporated; Wolf Steel LTD.; and/or any affiliates of any of the foregoing or bearing any trade names, trademarks, or logos of Electrolux Home Products, Inc.; LG Electronics U.S.A., Inc.; Samsung Electronics America, Inc.; Broan-Nutone LLC; Dacor, Inc.; Fisher & Paykel Appliances Limited; Sharp Electronics Corporation; Dynamic Cooking Systems, Inc.; Miele, Incorporated; Felix Storch, Inc.; Elica S.p.A.; MOEN Incorporated; Wolf Steel LTD.; and/or any affiliates of any of the foregoing, whether now owned or hereafter acquired and wherever located; all returns, repossessions, exchanges, substitutions, replacements, attachments, parts, accessories and accessions of any of the foregoing; all price protection payments, discounts, rebates, credits, factory holdbacks and incentive payments related to any of the foregoing; supporting obligations to any of the foregoing; and products and proceeds in whatever form of any of the foregoing (including without limitation all goods, money, checks, accounts, deposit accounts, chattel paper, instruments, documents, and general intangibles arising from any of the foregoing) (collectively, the “Collateral” ).

2. Except as expressly amended by this Amendment, the Loan Agreement shall remain unchanged and in full force and effect, and the Loan Agreement is hereby ratified and reaffirmed in all respects. This Amendment is not intended to be, nor shall it be construed to create, a novation or accord and satisfaction.

3. Each reference in the Loan Agreement to “this Agreement”, “hereunder”, “herein”, or words of like import referring to the Loan Agreement shall mean and refer to the Loan Agreement as amended hereby. All terms governing the Loan Agreement shall govern this Amendment. Unless otherwise defined in this Amendment, all capitalized terms used in this Amendment have the same meaning given to those terms in the Loan Agreement.

The parties hereto have executed this Amendment as of the date first set forth above.

1874 GOEDEKER INC.
By:	/s/ Robert D. Barry
Print Name:	Robert D. Barry
Title:	Chief Financial Officer

NORTHPOINT COMMERCIAL FINANCE LLC
By:	/s/ KAREN S. PERKINS
Print Name:	KAREN S. PERKINS
Title:	SR. UNDERWRITER

EX-10.3

Exhibit 10.3

GUARANTY

This Guaranty (this “Guaranty”) is dated as of June 24, 2019 by 1847 Goedeker Holdco Inc. a Delaware corporation (“Guarantor”) in favor of Northpoint Commercial Finance LLC, a Delaware limited liability company and its affiliates (individually and collectively “Northpoint”). As used in this Guaranty, affiliates of Northpoint Commercial Finance LLC includes any party that, directly or indirectly, (i) controls Northpoint Commercial Finance LLC, (ii) is controlled by Northpoint Commercial Finance LLC, or (iii) is under common control with Northpoint Commercial Finance LLC.

Northpoint may, from time to time, extend financial accommodations to 1847 Goedeker Inc. (“Obligor”).

Northpoint is unwilling to extend, or continue to extend, financial accommodations to Obligor, unless Guarantor unconditionally guarantees to Northpoint the payment and performance of all obligations of Obligor at any time owing to Northpoint.

With knowledge that Northpoint will extend, or continue to extend, financial accommodations to Obligor in reliance upon the existence of this Guaranty, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:

1. Guaranty. Guarantor unconditionally, absolutely, and irrevocably guarantees to Northpoint, without off-set or deduction, the prompt payment and performance of all indebtedness, obligations and liabilities of Obligor at any time owing to Northpoint, whether direct or indirect, matured or unmatured, primary or secondary, or certain or contingent (individually, a “Guaranteed Obligation” and collectively, the “Guaranteed Obligations”). This Guaranty is a guaranty of payment and not a guaranty of collection. Guarantor guarantees to Northpoint the punctual and faithful performance by Obligor of each and every Guaranteed Obligation. If Obligor defaults in the payment or performance of any Guaranteed Obligation, if there exists any event or condition which, with notice or the passage of time or both, would constitute a default under any Guaranteed Obligation, or if there is a liquidation, bankruptcy, assignment for the benefit of creditors or similar proceeding affecting the status, existence, assets or obligations of Obligor, Guarantor shall pay directly to Northpoint the sums that Obligor is obligated to pay to Northpoint, whether by acceleration or otherwise, and promptly perform all other Guaranteed Obligations. If Northpoint is required to return any payment made to Northpoint by or on behalf of Obligor, whether as a result of Obligor’s bankruptcy, reorganization or otherwise, Guarantor acknowledges that this Guaranty covers all such amounts.

2. Continuing Nature of Guaranty. This Guaranty is a continuing guarantee and shall apply without regard to the form or the amount of the Guaranteed Obligations in existence at any time. Guarantor may prospectively revoke this Guaranty by sending written notice, by certified mail, return receipt requested, to Northpoint at the address for Northpoint specified below (the “Revocation Notice”). The revocation of this Guaranty shall not be effective with respect to any Guaranteed Obligation arising on or prior to the date occurring fifteen (15) days after Northpoint’s receipt of the Revocation Notice (the “Revocation Date”) or arising at any time after the Revocation Date, if arising as the result of a commitment made by Northpoint to Obligor on or prior to the Revocation Date.

3. Absolute Nature of Guaranty. The obligations of Guarantor under this Guaranty are absolute and unconditional. Nothing shall discharge or satisfy the liability of Guarantor under this Guaranty except the full performance and payment of the Guaranteed Obligations. It is the obligation of Guarantor to discharge the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action or omission whatsoever, whether or not particularly described herein. Guarantor is not entering into this Guaranty in reliance on the value or the availability of any of the Collateral. Guarantor acknowledges that Guarantor may be required to pay the Guaranteed Obligations, in full, without the assistance or support of any other party. Guarantor has not been induced to enter into this Guaranty on the basis that any party other than Obligor will be liable to perform any Guaranteed Obligation or that Northpoint will look to any other party to perform any Guaranteed Obligation. Guarantor shall not be released from such obligations for any reason, nor shall such obligations be reduced, diminished or discharged for any reason, including, without limitation,:

(a) Modifications and Indulgences. Any modification, renewal, or alteration of any agreement, document, or instrument relating to any Guaranteed Obligation, or any indulgence, waiver, adjustment, preference, extension, or compromise made by Northpoint in favor of Obligor or Guarantor.

(b) Condition of Obligor or Guarantor. Any insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution, or similar proceeding affecting Obligor or Guarantor; any sale, lease, or other disposition of any of the assets of Obligor or Guarantor; or any reorganization of; or change in the composition of, the shareholders, partners, or members of Obligor or Guarantor.

(c) Invalidity of Guaranteed Obligations. The invalidity, illegality, or unenforceability of any Guaranteed Obligation for any reason whatsoever, including, without limitation,: the existence of valid defenses, counterclaims, or off-sets to any Guaranteed Obligation; the violation of applicable usury laws by any Guaranteed Obligation; or the inauthenticity of any document or instrument relating to the Guaranteed Obligations.

(d) Release of Obligor. Any complete or partial release of Obligor or any other party from any Guaranteed Obligation.

Guaranty - Page 1 of 3

(e) Release of Collateral; Care of Collateral; Status of Liens. Any release, surrender, exchange, deterioration, waste, loss, or impairment of any collateral securing payment of any Guaranteed Obligation (the “Collateral”), whether negligent or willful; the failure of Northpoint or any other party to exercise reasonable care in the preservation, protection, sale or other treatment of any of the Collateral; the failure of Northpoint to create or perfect any security interest intended to be given by Obligor in connection with any Guaranteed Obligation (a “Security Interest”); the unenforceability of any Security Interest; the subordination of any Security Interest to any other lien or encumbrance; or the taking or accepting by Northpoint of any other security for, or assurance of payment of, any Guaranteed Obligation.

(f) Other Action or Inaction. Any other action or inaction on the part of Northpoint, including, without limitation, any failure of Northpoint to timely enforce any right or remedy available to Northpoint in connection with the Guaranteed Obligations, whether or not such action or inaction (i) prejudices Guarantor, (ii) increases the likelihood that Guarantor will be required to pay or perform any Guaranteed Obligation, or (iii) exposes the Guarantor to greater liability under this Guaranty.

4. Waivers. Guarantor waives:

(a) Action Against Others. Any right to require Northpoint to: institute suit or exhaust remedies against Obligor or any other party liable for any Guaranteed Obligation; enforce Northpoint’s rights in any of the Collateral or other security that is at any time given to secure any Guaranteed Obligation; enforce Northpoint’s rights against any other guarantor of any Guaranteed Obligation; join Obligor or any other party liable for any Guaranteed Obligation in any action seeking to enforce this Guaranty; or exhaust any other remedies available to Northpoint or resort to any other means of obtaining payment or performance of any Guaranteed Obligation.

(b) Section 10-7-24 of Official Code of Georgia. The provisions of Section 10-24 of the Official Code of Georgia; any right to direct the application of payments provided for in Section 13-4-42 of the Official Code of Georgia or any similar law of Georgia or any other state, or of the United States; and agrees that Northpoint may apply any payments received from Guarantor, Obligor, or any other party to the Guaranteed Obligations in such order as Northpoint may elect in its discretion.

(c) Notices. Notice of the amount of credit extended by Northpoint to Obligor at any time, whether primary or secondary; notice of the modification or extension of any Guaranteed Obligation; notice of a default or other non-performance by Obligor in connection with any Guaranteed Obligation; notice of the transfer or disposition by Northpoint of any Guaranteed Obligation; notice of the repossession, sale or other disposition of any of the Collateral; notice of the acceptance of this Guaranty by Northpoint; demand and presentation for payment upon Obligor or any other party liable for any Guaranteed Obligation; protest, notice of protest, and diligence of bringing suit against Obligor or any other party; and any other notices that Guarantor might otherwise be entitled by law.

(d) Defenses. Any defenses to the payment and performance of Guarantor’s obligations under this Guaranty, including, without limitation, (i) any defenses based on suretyship or impairment of the collateral or the like and (ii) any defenses arising by reason of any claim or defense based upon an election of remedies by Northpoint that in any manner impairs, affects, reduces, releases, destroys, or extinguishes Guarantor’s subrogation rights, rights to proceed against Obligor or against any other party or security, including, without limitation, any defense based upon an election of remedies by Northpoint under the provisions of Section 580(d) of the California Code of Civil Procedure, or any similar law of California or any other state, or of the United States.

(e) Marshal. Any right to require Northpoint to marshal any assets in favor of Guarantor or against or in payment of any or all the Guaranteed Obligations.

(f) Subrogation. Until all Guaranteed Obligations are paid in full, any right which Guarantor may at any time have against Obligor, or any other party liable for any Guaranteed Obligation, as the result of the performance by Guarantor of its obligations under this Guaranty, including, but not limited to, contractual, statutory, and common law rights of subrogation, reimbursement, indemnification, contribution, and other rights of recourse whatsoever.

5. Representations and Warranties. Guarantor represents and warrants to Northpoint that:

(a) Benefit. Guarantor has received, or will receive, direct or indirect benefit from the creation of the Guaranteed Obligations.

(b) No Representation by Northpoint. Neither Northpoint nor any other party has made any representation, warranty, or statement to Guarantor in order to induce Guarantor to execute this Guaranty.

(c) Financial Condition. As of the date hereof, and after giving effect to this Guaranty and the contingent obligations contained herein, Guarantor is solvent and has assets which, when fairly valued, exceed its liabilities.

6. Default. Guarantor will be in breach of this Guaranty if any one or combination of the following occur: (a) any of Guarantor’s obligations to Northpoint under this Guaranty or under any other agreement with or in favor of Northpoint are not paid or performed as required; (b) Guarantor breaches any representation, warranty or covenant contained in this Guaranty or in any other agreement with or in favor of Northpoint; (c) Guarantor ceases to do business as a going concern or there occurs a material change in the ownership or management of Guarantor’s business; (d) Guarantor becomes insolvent or bankrupt; Guarantor makes an assignment for the benefit of creditors or consents to the appointment of a trustee or receiver; a trustee or a receiver is appointed for Guarantor or for a substantial part of its property without its consent; bankruptcy, reorganization or insolvency proceedings are instituted by or against Guarantor; (e) Northpoint believes that the prospect of payment or performance of Guarantor’s obligations to Northpoint is impaired, whether by reason of a material adverse change in the business prospects or fmancial condition of Guarantor or otherwise.

Guaranty - Page 2 of 3

7. Miscellaneous. TO ME EXTENT PERMITTED BY LAW, GUARANTOR, FOLLOWING CONSULTATION WITH LEGAL COUNSEL, KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS WITH REGARD TO DISPUTES IN ANY WAY DIRECTLY AND/OR INDIRECTLY ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS GUARANTY. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Georgia, without reference to applicable conflict of laws principles. Guarantor consents to the jurisdiction and venue of state and federal courts located in the State of Georgia in connection with Northpoint’s enforcement of any of Guarantor’s obligations under this Guaranty. Guarantor waives and agrees not to assert any objection to the jurisdiction of any of such courts, including the objection of inconvenient forum. Guarantor consents that any process or notice of motion or other application to any of said courts or a judge thereof, or any notice in connection with any proceedings hereunder, may be served inside or outside the State of or the District of Georgia by registered or certified mail, return receipt requested, to the last known address or by personal service provided a reasonable time for appearance is allowed, or in such other manner as may be permissible under the Rules of said Courts. This Guaranty shall not be deemed to create any right in any party except as provided herein and shall inure to the benefit of, and be binding upon, the permitted successors and assigns of Guarantor and Northpoint. Guarantor agrees that Northpoint may, without the consent of, or notice to, Guarantor, assign all or any portion of its rights hereunder to any other party to which any Guaranteed Obligation is transferred, assigned or negotiated. Guarantor shall be liable for all attorneys’ fees and other costs and expenses incurred by Northpoint in connection with Northpoint’s enforcement of this Guaranty. No provision of this Guaranty shall be varied or modified by any prior or subsequent statement, conduct or act of any of the parties, except by a writing specifically referring to this Guaranty and signed by Guarantor and Northpoint. Any provision of this Guaranty held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Guaranty, and the effect thereof shall be confined to the provision so held to be invalid or unenforceable. This Guaranty contains the entire agreement with respect to the subject matter hereof. Any signature delivered by Guarantor by facsimile transmission or by e-mail transmission of an adobe file format document (also known as a “PDF file”) shall be deemed an original signature hereto. The section headings contained in this Guaranty are for reference purposes only and shall not affect in any way the meaning or interpretation of this Guaranty. The obligations of Guarantor may not be assigned without the prior written consent of Lender. All notices, demands and requests required or permitted to be given under this Guaranty shall be in writing and delivered by certified mail, return receipt requested, with all postage and other costs of such delivery paid or prepaid. Delivery shall be deemed to have been made on the date five days after the date of mailing by certified mail. Unless and until notice is provided to the contrary, notices shall be addressed to Northpoint’s address set forth below. Any claim that Guarantor may have against Northpoint arising out of this Guaranty or the transactions contemplated herein must be asserted by Guarantor within one (1) year of it accruing or else it shall be deemed waived. Guarantor agrees that such period is reasonable and sufficient for it to investigate and act upon any such claim.

Guarantor has executed this Guaranty as of the date first set forth above.

1847 Goedeker Holdco Inc.
By:	/s/ Robert D. Barry
Printed Name:	Robert D. Barry
Title:	President

Address for notices to Northpoint:

Northpoint Commercial Finance LLC

11675 Rainwater Drive, Suite 450

Alpharetta, GA 30009

Attn: Operations

Guaranty - Page 3 of 3

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Ellery W. Roberts, certify that:

1. I have reviewed this quarterly report on Form 10-Q of 1847 Holdings LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 18, 2019

/s/ Ellery W. Roberts

Ellery W. Roberts

Chief Executive Officer and

Chief Financial Officer

(Principal Executive Officer and

Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned Chief Executive Officer and Chief Financial Officer of 1847 HOLDINGS LLC (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has executed this statement this 18^th day of November, 2019.

/s/ Ellery W. Roberts

Ellery W. Roberts

Chief Executive Officer and

Chief Financial Officer 

(Principal Executive Officer and

Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to 1847 Holdings LLC and will be retained by 1847 Holdings LLC and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

XML

Related Parties (Details) - USD ($)			1 Months Ended	9 Months Ended
	Jan. 03, 2018	Mar. 03, 2017	Apr. 15, 2013	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Advances, related party				$ 179,565		$ 174,333
Management fee				187,500	$ 187,500
Long term accrued liability				563,309
Note payable - related party				117,000		117,000
Accrued interest				14,647		7,549
Manager [Member]
Advances, related party				60,732		$ 55,500
Officer [Member]
Advances, related party				$ 179,565
Management Services Agreement [Member]
Description of management fee			Quarterly management fee equal to 0.5% (2.0% annualized) of its adjusted net assets for services performed.
Description of gross income		Expected to exceed, 9.5% of the Company's gross income with respect to such fiscal year
Offsetting Management Services Agreement [Member]
Management consulting fee, quarterly		$ 62,500
Promissory Note [Member]
Management fee	$ 100,000
Initial principal amount	$ 50,000
Additional advances, description	The note provides that the Company may from time to time request additional advances from the Manager up to an aggregate additional amount of $100,000, which will be added to the note if the Manager, in its sole discretion, so provides.
Fixed annual interest rate	8.00%
Interest rate	12.00%
Repayment, description	In the event the Company completes a financing involving at least $500,000, the Company must, contemporaneously with the closing of such financing transaction, repay the entire outstanding principal and accrued and unpaid interest on the note.
May 2014 [Member]
Lease term				5 years
April 5, 2019 [Member]
Lease term				5 years
April 5, 2019 [Member] | Manager [Member]
Description of management fee				Quarterly management fee equal to the greater of $62,500 or 2% of adjusted net assets
Management consulting fee, quarterly				$ 62,500
Maximum [Member] | April 5, 2019 [Member]
Management fee				$ 250,000
Goedeker Television [Member] | April 5, 2019 [Member]
Interest rate				9.00%

XML

Acquisition (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net loss per share	$ (0.25)	$ (0.08)	$ (0.63)	$ (0.33)
Weighted average number of shares outstanding	3,165,100	3,115,625	3,147,918	3,115,625
Business Acquisitions [Member]
Revenues, net			$ 39,511,848	$ 46,582,000
Net income (loss) allocable to common shareholders			$ (2,423,507)	$ 544,000
Net loss per share			$ (0.77)	$ 0.17
Weighted average number of shares outstanding			3,165,625	3,165,625

XML

Intangible Assets (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Accumulated amortization	$ (5,100)	$ (5,100)	$ (5,100)
Identifiable intangible assets, net	16,433	21,533
Customer Relationships [Member]
Identifiable intangible assets, gross	34,000	34,000
Accumulated amortization	(17,567)	(12,467)
Identifiable intangible assets, net	$ 16,433	$ 21,533

XML

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Classification	September 30, 2019			December 31, 2018
Buildings and improvements	$	5,338		$	5,338
Equipment and machinery		3,026,541			2,943,490
Tractors		2,834,888			2,834,888
Trucks and other vehicles		1,147,304			1,147,304
Leasehold improvements		117,626			-
Total		7,131,697			6,931,020
Less: Accumulated depreciation		(3,464,590	)		(2,439,931	)
Property and equipment, net	$	3,667,107		$	4,491,089

XML

Term Loans (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of annual minimum future lease payments

	Amount
2019 (remainder)	$	187,500
2020		3,751,757
2021		375,000
2022		375,000
2023		93,750
Total payments		4,783,007
Less current portion of principal payments		4,783,007
Debt issuance costs, net		(372,322	)
Long-term portion of principal payments	$	-

XML

Acquisition

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Acquisition

NOTE 9—ACQUISITION

On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker (the "Stockholders"), pursuant to which Goedeker agreed to acquire substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (the "Goedeker Business").

On April 5, 2019, Goedeker, 1847 Holdco, and the Stockholders entered into an amendment to the asset purchase agreement and closing of the acquisition of substantially all of the assets of Goedeker Television used in the Goedeker Business was completed (the "Acquisition").

The aggregate purchase price was $6,200,000 consisting of: (i) $1,500,000 in cash, subject to adjustment; (ii) the issuance of a promissory note in the principal amount of $4,100,000; and (iii) up to $600,000 in earn out payments (as described below). As additional consideration, 1847 Holdco agreed to issue to each of the Stockholders a number of shares of its common stock equal to a 11.25% non-dilutable interest (22.5% total) in all of the issued and outstanding stock of 1847 Holdco as of the closing date.

The cash portion was decreased by the amount of outstanding indebtedness of Goedeker Television for borrowed money existing as of the closing. As a result, the cash portion was adjusted to $478,000. In addition, the cash portion of the purchase price is subject to a customary post-closing working capital adjustment provision with a target working capital of $(1,802,000) (negative amount).

Pursuant to the asset purchase agreement, the parties agreed to cooperate in determining a reasonable arrangement designed to provide Goedeker with the benefits under a digital marketing agreement between Goedeker Television and Power Digital Marketing. In consideration for Goedeker Television so cooperating, Goedeker agreed to pay to Goedeker Television a total of $20,000, which amount Goedeker Television will use to pay Power Digital Marketing for amounts due under the digital marketing agreement for services to be rendered during the months of April 2019 and May 2019. Goedeker Television also agreed to cause the digital marketing agreement to be terminated as of May 30, 2019 to ensure that Goedeker Television no longer has any obligations under the digital marketing agreement.

Goedeker Television is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets:

1. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater;

2. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and

3. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.

To the extent the EBITDA of the Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, Goedeker must pay a partial earn out payment to Goedeker Television in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the "Achievement Percentage" is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000.

To the extent Goedeker Television is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker Television is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.

The rights of Goedeker Television to receive any earn out payment are subordinate to the rights of Burnley and SBCC under separate subordination agreements that Goedeker Television entered into with them on April 5, 2019 in connection with the Acquisition (see Notes 10 and 11).

The provisional fair value of the purchase consideration issued to Goedeker Television was allocated to the net tangible assets acquired. The Company accounted for the Acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $535,940. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The Company is currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation for Goedeker will be included in the Company's financial statements in future periods. The table below shows preliminary analysis for the Goedeker asset purchase:

Provisional Purchase Consideration at preliminary fair value:
Note payable, net of $215,500 of capitalized financing costs	$	4,484,500
Financing of acquisition through notes payable, common stock and warrants (see Note 19)		2,583,000
Amount of consideration	$	7,067,500
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	1,135,368
Accounts receivable		792,173
Inventories		2,516,128
Working capital adjustment receivable and other assets		554,636
Property and equipment		206,612
Accounts payable and accrued expenses		(2,472,568	)
Customer deposits		(2,196,409	)
Other liabilities		-
Net tangible assets acquired	$	535,940
Total net assets acquired	$	535,940
Consideration paid		7,067,500
Preliminary goodwill	$	6,531,560

The following presents the pro-forma combined results of operations of the Company as if the Acquisition was completed on January 1, 2018 (before non-controlling interest).

	For the Nine Months Ended September 30,
	2019			2018
Revenues, net	$	39,511,848		$	46,582,000
Net income (loss) allocable to common shareholders	$	(2,423,507	)	$	544,000
Net loss per share	$	(0.77	)	$	0.17
Weighted average number of shares outstanding		3,165,625			3,165,625

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Acquisition been completed as of January 1, 2018 or 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 Goedeker since April 5, 2019 acquisition date through September 30, 2019 included in the consolidated income statement amounted to approximately $22,748,000 and $1,548,000, respectively.

The estimated useful life remaining on the property and equipment acquired is 4 to 5 years.

XML

Inventories

9 Months Ended

Sep. 30, 2019

Inventory, Net [Abstract]

Inventories

NOTE 5—INVENTORIES

At September 30, 2019 and December 31, 2018, the inventory balances are composed of:

	September 30, 2019			December 31, 2018
Machinery and Equipment	$	189,452		$	427,551
Parts		155,252			159,685
Appliances		1,979,773			-
Furniture		303,845			-
Other		41,941			-
Subtotal		2,670,263			587,236
Allowance for inventory obsolescence		(99,546	)		(99,546	)
Inventories, net	$	2,570,717		$	487,690

Following is a summary of transactions in the allowance for inventory obsolescence:

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	99,546	$	70,000
Provisions for obsolescence		-		48,000
Write-down in inventory value		-		(18,454	)
Balance at end of period	$	99,546	$	99,546

Inventory and accounts receivable are pledged to secure a loan from Burnley, SBCC and Home State Bank described and defined in the notes below.

XML

Promissory Notes

9 Months Ended

Sep. 30, 2019

Promissory Notes

PROMISSORY NOTES

NOTE 13—PROMISSORY NOTES

Secured Convertible Promissory Note

On April 5, 2019, the Company, 1847 Holdco and Goedeker (collectively, "1847") entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company ("Leonite"), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286. As additional consideration for the purchase of the note, (i) the Company issued to Leonite 50,000 common shares, (ii) the Company issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) 1847 Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in 1847 Holdco.

The note carries an original issue discount of $64,286 to cover Leonite's legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Therefore, the purchase price of the note was $650,000. Furthermore, the Company issued 50,000 shares of common stock valued at $137,500 and a debt-discount related to the warrants valued at $292,673. The company amortized $211,088 of financing costs related to the shares and warrants in the nine months ended September 30, 2019. The remaining net balance of the note at September 30, 2019 is $456,228, comprised of principal of $714,286 and net of unamortized original issuance discount interest of $31,473 and financing costs of $76,250 and unamortized debt discount warrant feature of $150,335.

The note bears interest at the rate of the greater of (i) 12% per annum and (ii) the prime rate as set forth in the Wall Street Journal on April 5, 2019 plus 6.5% guaranteed over the holding period on the unconverted principal amount, on the terms set forth in the note (the "Stated Rate"). Any amount of principal or interest on the note which is not paid by the maturity date shall bear interest at the rate at the lesser of 24% per annum or the maximum legal amount permitted by law (the "Default Interest").

Beginning on May 5, 2019 and on the same day of each and every calendar month thereafter throughout the term of the note, 1847 shall make monthly payments of interest only due under the note to Leonite at the Stated Rate as set forth above. 1847 shall pay to Leonite on an accelerated basis any outstanding principal amount of the note, along with accrued, but unpaid interest, from: (i) net proceeds of any future financings by the Company, but not its subsidiaries, whether debt or equity, or any other financing proceeds, except any transaction having a specific use of proceeds requirement that such proceeds are to be used exclusively to purchase the assets or equity of an unaffiliated business and the proceeds are used accordingly; (ii) net proceeds from any sale of assets of 1847 or any of its subsidiaries other than sales of assets in the ordinary course of business or receipt by 1847 or any of its subsidiaries of any tax credits, subject to rights of Goedeker, or other financing sources of 1847 (including its subsidiaries) existing prior to the date of the note; and (iii) net proceeds from the sale of any assets outside of the ordinary course of business or securities in any subsidiary.

The note will mature 12 months from the issue date, or April 5, 2020, at which time the principal amount and all accrued and unpaid interest, if any, and other fees relating to the note, will be due and payable. Unless an event of default as set forth in the note has occurred, 1847 has the right to prepay principal amount of, and any accrued and unpaid interest on, the note at any time prior to the maturity date at 115% of the principal amount (the "Premium"), provided, however, that if the prepayment is the result of any of the occurrence of any of the transactions described in subparagraphs (i), (ii) or (iii) above then such prepayment shall be the unpaid principal amount, plus accrued and unpaid interest and other amounts due but without the Premium.

The note contains customary events of default, including in the event of (i) non-payment, (ii) a breach by 1847 of its covenants under the securities purchase agreement or any other agreement entered into in connection with the securities purchase agreement, or a breach of any of representations or warranties under the note, or (iii) the bankruptcy of 1847. The note also contains a cross default provision, whereby a default by 1847 of any covenant or other term or condition contained in any of the other financial instrument issued by of 1847 to Leonite or any other third party after the passage all applicable notice and cure or grace periods that results in a material adverse effect shall, at Leonite's option, be considered a default under the note, in which event Leonite shall be entitled to apply all rights and remedies under the terms of the note.

Under the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of the Company into which such common shares may be changed or reclassified. The number of common shares to be issued upon each conversion of the note shall be determined by dividing the conversion amount by the applicable conversion price then in effect. The conversion amount is the sum of: (i) the principal amount of the note to be converted plus (ii) at Leonite's option, accrued and unpaid interest, plus (iii) at Leonite's option, Default Interest, if any, plus (iv) Leonite's expenses relating to a conversion, plus (v) at Leonite's option, any amounts owed to Leonite. The conversion price shall be $1.00 per share (subject to adjustment as further described in the note for common share distributions and splits, certain fundamental transactions, and anti-dilution adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately be equal to the lesser of (i) such conversion price less 40%; and (ii) the lowest weighted average price of the common shares during the 21 consecutive trading day period immediately preceding the trading day that 1847 receives a notice of conversion or (iii) the discount to market based on subsequent financings with other investors.

Notwithstanding the foregoing, in no event shall Leonite be entitled to convert any portion of the note in excess of that portion of the note upon conversion of which the sum of (1) the number of common shares beneficially owned by Leonite and its affiliates (other than common shares which may be deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has purchased a portion of the note from Leonite) and (2) the number of common shares issuable upon the conversion of the portion of the note with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite and its affiliates of more than 4.99% of the outstanding common shares of the Company. Such limitations on conversion may be waived (up to a maximum of 9.99%) by Leonite upon, at its election, not less than 61 days' prior notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite, as may be specified in such notice of waiver).

Concurrently with 1847 and Leonite entering into the securities purchase agreement and as security for 1847's obligations thereunder, on April 5, 2019, the Company, 1847 Holdco and Goedeker entered into a security and pledge agreement with Leonite, pursuant to which, in order to secure 1847's timely payment of the note and related obligations and the timely performance of each and all of its covenants and obligations under the securities purchase agreement and related documents, 1847 unconditionally and irrevocably granted, pledged and hypothecated to Leonite a continuing security interest in and to, a lien upon, assignment of, and right of set-off against, all presently existing and hereafter acquired or arising assets. Such security interest is a first priority security interest with respect to the securities that the Company owns in 1847 Holdco and in 1847 Neese, and a third priority security interest with respect to all other assets.

The rights of Leonite to receive payments under the note are subordinate to the rights of Burnley and SBCC under separate subordination agreements that Leonite entered into with them on April 5, 2019.

9% Subordinated Promissory Note

As noted above, a portion of the purchase price for the Acquisition was paid by the issuance by Goedeker to Steve Goedeker, as representative of Goedeker Television, of a 9% subordinated promissory note in the principal amount of $4,100,000. The note will accrue interest at 9% per annum, amortized on a five-year straight-line basis and payable quarterly in accordance with the amortization schedule attached thereto, and mature on April 5, 2023. Goedeker has the right to redeem all or any portion of the note at any time prior to the maturity date without premium or penalty of any kind. The note contains customary events of default, including in the event of (i) non-payment, (ii) a default by Goedeker of any of its covenants under the asset purchase agreement or any other agreement entered into in connection with the asset purchase agreement, or a breach of any of representations or warranties under such documents, or (iii) the bankruptcy of Goedeker. The note also contains a cross default provision which provides that if there occurs with respect to the revolving loan with Burnley or the term loan with SBCC (A) a default with respect to any payment obligation thereunder that entitles the holder thereof to declare such indebtedness to be due and payable prior to its stated maturity or (B) any other default thereunder that entitles, and has caused, the holder thereof to declare such indebtedness to be due and payable prior to maturity. Since the defaults under the loans with Burnley and SBCC are not payment defaults, they fall under clause (B) above and would require Burnley or SBCC to accelerate the payment of indebtedness under their notes (which they have not done) before the cross default provisions would result in a default under this note.

The rights of the holder to receive payments under the note are subordinate to the rights of Burnley and SBCC under separate subordination agreements that the holder entered into with them on April 5, 2019 in connection with the Acquisition.

The remaining balance of the note at September 30, 2019 is $4,274,209, comprised of principal of $4,530,293 and net of unamortized debt discount of $256,084.

8% Vesting Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a vesting promissory note in the principal amount of $1,875,000 (which was determined to have no fair value as of September 30, 2019 and December 31, 2018) by 1847 Neese and Neese to the sellers of Neese. Payment of the principal and accrued interest on the vesting promissory note is subject to vesting and a contingent consideration subject to fair market valuation adjustment at each reporting period. The vesting promissory note bears interest on the vested portion of the principal amount at the rate of eight percent (8%) per annum and is due and payable in full on June 30, 2020 (the "Maturity Date"). The principal of the vesting promissory note vests in accordance with the following formula:

● Fiscal Year 2017: If Adjusted EBITDA for the fiscal year ending December 31, 2017, exceeds an Adjusted EBITDA target of $1,300,000 (the "Adjusted EBITDA Target"), then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2017 through the Maturity Date. For the year ended December 31, 2017, Adjusted EBITDA was $788,958, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2017.

● Fiscal Year 2018: If Adjusted EBITDA for the fiscal year ending December 31, 2018, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2018 through the Maturity Date. For the year ended December 31, 2018, Adjusted EBITDA was approximately $320,000, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2018.

● Fiscal Year 2019: If Adjusted EBITDA for the fiscal year ending December 31, 2019, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2019 through the Maturity Date.

For purposes of the vesting promissory note, "Adjusted EBITDA" means the earnings before interest, taxes, depreciation and amortization expenses, in accordance with GAAP applied on a basis consistent with the accounting policies, practices and procedures used to prepare the financial statements of Neese as of the closing date, plus to the extent deducted in calculating such net income: (i) all expenses related to the transactions contemplated hereby and/or potential or completed future financings or acquisitions, including legal, accounting, due diligence and investment banking fees and expenses; (ii) all management fees, allocations or corporate overhead (including executive compensation) or other administrative costs that arise from the ownership of Neese by 1847 Neese including allocations of supervisory, centralized or other parent-level expense items; (iii) one-time extraordinary expenses or losses; and (iv) any reserves or adjustments to reserves which are not consistent with GAAP. Additionally, for purposes of calculating Adjusted EBITDA, the purchase and sales prices of goods and services sold by or purchased by Neese to or from 1847 Neese, its subsidiaries or affiliates shall be adjusted to reflect the amounts that Neese would have realized or paid if dealing with an independent third-party in an arm's-length commercial transaction, and inventory items shall be properly categorized as such and shall not be expenses until such inventory is sold or consumed.

At June 30, 2018, management made the determination that the vesting note payable had no value because it estimated that the EBITDA threshold of $1,300,000 for both 2018 and 2019 would be not attained, thus eliminating the requirement for a payment under terms of the note payable.

The vesting promissory note contains customary events of default, including in the event of: (i) non-payment; (ii) a default by 1847 Neese or Neese of any of their covenants under the stock purchase agreement, the vesting promissory note, or any other agreement entered into in connection with the stock purchase agreement, or a breach of any of their representations or warranties under such documents; or (iii) the bankruptcy of 1847 Neese or Neese.

Under terms of the term loan with Home State Bank described in Note 11, this note may not be paid until the term loan is paid in full.

10% Promissory Note

A portion of the purchase price for the acquisition of Neese was paid by the issuance of a promissory note in the principal amount of $1,025,000 by 1847 Neese and Neese to the sellers of Neese. The promissory note bears interest on the outstanding principal amount at the rate of ten percent (10%) per annum and was due and payable in full on March 3, 2018; provided, however, that the unpaid principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time, the cash on hand of 1847 Neese and Neese exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid principal and accrued, but unpaid, interest thereon is fully prepaid. The promissory note contains the same events of default as the vesting promissory note. The promissory note has not been repaid, thus the Company is in default under this note. Under terms of the term loan with Home State Bank described in Note 11, this note may not be paid until the term loan is paid in full. The payees on the note agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. Accordingly, the loan is shown as a long-term liability as of June 30, 2019. Additionally, the term loan lender limits the payment of interest on this note to $40,000 annually. The Company continues to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America ("GAAP") and are presented in US dollars.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2018.

Accounting Basis

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

Stock Splits

Stock Splits

On January 22, 2018, the Company completed a 1-for-5 reverse split of its outstanding common shares. As a result of this stock split, the Company's issued and outstanding common shares decreased from 3,115,500 to 623,125 shares.

On May 10, 2018, the Company completed a 5-for-1 forward stock split of its outstanding common shares. As a result of this stock split, the Company's issued and outstanding common shares increased from 623,125 to 3,115,625 shares.

Accordingly, all share and per share information has been restated to retroactively show the effect of these stock splits.

Segment Reporting

Segment Reporting

The Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders. Beginning with the second quarter of 2019, the Company changed its operating and reportable segments from one segment to two segments: the Land Management Segment, which is operated by Neese, and the Retail and Appliances Segment, which is operated by Goedeker.

The Land Management Segment will be responsible for the activities that provide professional services on waste disposal and land application services based in Grand Junction, Iowa.

The Retail and Appliances Segment will be responsible for the activities in e-commerce destination for home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods based in St. Louis, Missouri.

The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under "Holding Company" below and these include costs associated with executive management, financing activities and public company compliance.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company's prior financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended September 30, 2019. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder's equity.

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Revenue Recognition and Cost of Revenue

Revenue Recognition and Cost of Revenue 

On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company's adoption of this ASU resulted in no change to the Company's results of operations or balance sheet.

Land Management Segment

Neese's payment terms are due on demand from acceptance of delivery. Neese does not incur incremental costs obtaining purchase orders from customers, however, if Neese did, because all of Neese's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Neese recognizes arises from orders it receives from customers. Neese's performance obligations under the customer orders correspond to each service delivery or sale of equipment that Neese makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the service or equipment sale to be completed. Control of the delivery transfers to customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, Neese's products, which generally occurs at the later of when the customer obtains title to the equipment or when the customer assumes risk of loss. The transfer of control generally occurs at a point of delivery. Once this occurs, Neese has satisfied its performance obligation and Neese recognizes revenue.

Neese also sells equipment by posting it on auction sites specializing in farm equipment. Neese posts the equipment for sale on a "magazine" site for several weeks before the auction. When Neese decides to sell, it moves the equipment to the auction site. The auctions are one day. If Neese accepts a bid, the customer pays the bid price and arranges for pick-up of the equipment.

Transaction Price ‒ Neese agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon service fee. In Neese's contracts with customers, it allocates the entire transaction price to the service fee to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Neese collects concurrently with revenue-producing activities are excluded from revenue.

If Neese continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Substantially all of Neese's sales are to businesses, including farmers or municipalities and very little to individuals.

Disaggregated Revenue ‒ Neese disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Neese's revenue by contract type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues
Trucking	$	383,709	$	568,004	$	1,267,550	$	1,580,032
Waste hauling and pumping		40,781		45,349		417,138		296,891
Repairs		181,129		163,618		309,330		429,348
Other		136,422		106,489		299,747		236,816
Total services		742,041		883,460		2,293,765		2,543,087
Sales of parts and equipment		670,221		583,054		1,523,031		1,155,668
Total revenue	$	1,412,262	$	1,466,514	$	3,816,796	$	3,698,755

Performance Obligations ‒ Performance obligations for the different types of services are discussed below:

● Trucking ‒ Revenues for time and material contracts are recognized when the merchandise or commodity is delivered to the destination specified in the agreement with the customer.

● Waste Hauling and pumping ‒ Revenues for waste hauling and pumping is recognized when the hauling, pumping, and spreading are complete.

● Repairs ‒ Revenues for repairs are recognized upon completion of equipment serviced.

● Sales of parts and equipment ‒ Revenues for the sale of parts and equipment are recognized upon the transfer and acceptance by the customer.

Accounts Receivable, Net ‒ Accounts receivable, net, are amounts due from customers where there is an unconditional right to consideration. Unbilled receivables of $0 and $139,766 are included in this balance at September 30, 2019 and December 31, 2018, respectively. The payment of consideration related to these unbilled receivables is subject only to the passage of time.

Neese reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value. The estimates are based on an analysis of past due receivables, historical bad debt trends, current economic conditions, and customer specific information. After Neese has exhausted all collection efforts, the outstanding receivable balance relating to services provided is written off against the allowance. Additions to the provision for bad debt are charged to expense.

Neese determined that an allowance for loss of $29,001 was required at September 30, 2019 and December 31, 2018.

Retail and Appliances Segment

Goedeker collects the full sales price from the customer at the time the order is placed. Goedeker does not incur incremental costs obtaining purchase orders from customers, however, if Goedeker did, because all Goedeker's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Goedeker recognizes arises from orders it receives from customers. Goedeker's performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, Goedeker's products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment. Once this occurs, Goedeker has satisfied its performance obligation and Goedeker recognizes revenue. Revenue from the sale of long-term service warranties are recognized net of costs to sell the contracts to the third-party warranty service company.

Transaction Price ‒ Goedeker agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In Goedeker's contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Goedeker collects concurrently with revenue-producing activities are excluded from revenue.

If Goedeker continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Cost of revenue includes the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.

Substantially all Goedeker's sales are to individual retail consumers.

Disaggregated Revenue ‒ Goedeker disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Goedeker's revenue by sales type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Appliance sales	$	10,086,489	$	-	$	18,535,801	$	-
Furniture sales		1,398,843		-		2,969,390		-
Other sales		646,771		-		1,242,962		-
Total revenue	$	12,132,103	$	-	$	22,748,153	$	-

Performance Obligations – Goedeker's performance obligations include delivery of products and, in some instances, performance of services such as installation. Revenue for the sale of merchandise is recognized upon shipment to the customer; or in some instances, upon delivery and installation of the product which typically occur simultaneously.

Receivables

Receivables

Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company's assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.

Allowance for credit losses

Allowance for Credit Losses

Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on the Company's accounts receivable. The Company charges credit losses against the allowance and credits subsequent recoveries, if any, to the allowance. Historical loss experience and contractual delinquency of accounts receivables, and management's judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of accounts receivable on a collective basis and relates to probable incurred losses of unimpaired accounts receivables. The Company records a general allowance for credit losses that includes forecasted future credit losses.

Inventory

Inventory

Inventory consists of finished products acquired for resale and is valued at the lower-of-cost-or-market with cost determined on a specific item basis for the Neese and of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on a average item basis for Goedeker. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $99,546 at September 30, 2019 and December 31, 2018.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Tractors	3-7
Trucks and vehicles	3-6

Goodwill and Intangible Assets

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5

Long-Lived Assets

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Derivative Instrument Liability

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2019, the Company classified a warrant issued in conjunction with a term loan as a derivative instrument. (see Note 11).

Income Taxes

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

Basic Income (Loss) Per Share

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the three and nine months ended September 30, 2019, the following 895,565 potentially dilutive securities were excluded from diluted loss per share: 200,000 for outstanding warrants and 695,565 related to the convertible note payable and accrued interest. There are no such common share equivalents outstanding as of September 30, 2018.

Going Concern Assessment

Going Concern Assessment

Management assesses going concern uncertainty in the Company's consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the "look-forward period", as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

The Company has generated losses since its inception and has relied on cash on hand, external bank lines of credit and the sale of a note to support cashflow from operations. As of and for the nine months ended September 30, 2019, the Company had a net loss attributable to 1847 Holdings shareholders of $1,978,241, negative working capital of $9,612,640 and net cash used in operations of $954,532. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of the consolidated financial statements in this Quarterly Report on Form 10-Q, indicate improved operations and the Company's ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements.

Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years; and earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. On January 1, 2019, the Company recognized $624,157 of financing lease assets and $624,157 of financing lease liabilities, including noncurrent financing lease liabilities of $559,972, as a result of adopting this standard. As part of its adoption, the Company elected the following practical expedients: the Company has not reassessed whether any expired or existing contracts are or contain leases, the Company has not reassessed lease classification for any expired or existing leases; the Company has not reassessed initial direct costs for any existing leases; and the Company has not separated lease and non-lease components. The adoption of the standard did not have a material impact on the Company's consolidated financial statements and related disclosures. The comparative periods have not been restated for the adoption of ASU 2016-02.

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Shareholders' Deficit

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

SHAREHOLDERS' DEFICIT

NOTE 17—SHAREHOLDERS' DEFICIT

Allocation Shares

As of September 30, 2019 and December 31, 2018, the Company had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle the holder thereof to vote on any matter relating to the Company other than in connection with amendments to the Company's operating agreement and in connection with certain other corporate transactions as specified in the operating agreement.

The Manager owns 100% of the allocation shares of the Company, which are a separate class of limited liability company interests that, together with the common shares, will comprise all of the classes of equity interests of the Company. The Manager received the allocation shares with its initial capitalization of the Company. The allocation shares generally will entitle the Manager to receive a twenty percent (20%) profit allocation as a form of incentive designed to align the interests of the Manager with those of the Company's shareholders. Profit allocation has two components: an equity-based component and a distribution-based component. The equity-based component will be paid when the market for the Company's shares appreciates, subject to certain conditions and adjustments. The distribution-based component will be paid when the distributions the Company pays to shareholders exceed an annual hurdle rate of eight percent (8.0%), subject to certain conditions and adjustments. While the equity-based component and distribution-based component are interrelated in certain respects, each component may independently result in a payment of profit allocation if the relevant conditions to payment are satisfied.

The 1,000 allocation shares are issued and outstanding and held by the Manager, which is controlled by Mr. Roberts, the Company's chief executive officer and controlling shareholder.

Common Shares

The Company is authorized to issue 500,000,000 common shares as of September 30, 2019 and December 31, 2018. As of September 30, 2019 and December 31, 2018, the Company had 3,165,625 and 3,115,625 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of the Company for a vote.

On April 5, 2019, the Company, issued 50,000 common shares to Leonite pursuant to the securities purchase agreement (see Note 13).

The Company did not issue any shares in the nine months ended September 30, 2018.

Warrants

On April 5, 2019, the Company issued a warrant to purchase 200,000 common shares to Leonite pursuant to the securities purchase agreement (see Note 13). The warrant has a term of five years, an exercise price of $1.25 per share (subject to adjustment), and may be exercised on a cashless basis.

Accordingly, a portion of the proceeds was allocated to the warrant based on its relative fair value using the Black Scholes option-pricing model. The assumptions used in the Black-Scholes model are as follows: (i) dividend yield of 0%; (ii) expected volatility of 140.3%, (iii) weighted average risk-free interest rate of 2.31%, (iv) expected life of five years, and (v) estimated fair value of the common shares of $2.75 per share.

The warrant also contains an ownership limitation. The Company shall not effect any exercise of the warrant, and Leonite shall not have the right to exercise any portion of the warrant, to the extent that after giving effect to issuance of common shares upon exercise the warrant, Leonite, together with its affiliates, and any other persons acting as a group together with Leonite or any of its affiliates, would beneficially own in excess of 4.99% of the number of common shares outstanding immediately after giving effect to the issuance of common shares issuable upon exercise of the warrant.  Upon no fewer than 61 days' prior notice to the Company, Leonite may increase or decrease such beneficial ownership limitation provisions and any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company. 

Noncontrolling Interests

The Company owns 55.0% of 1847 Neese and 70% of 1847 Holdco.  For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810, which are applicable to reporting the equity and net income or loss attributable to noncontrolling interests. The results of 1847 Neese and 1847 Holdco are included in the consolidated statement of income. The net loss attributable to the 45% non-controlling interest of 1847 Neese amounted to $628,210 and $624,448 for the nine months ended September 30, 2019 and 2018, respectively. The net loss attributable to the 30% non-controlling interest of 1847 Holdco amounted to $464,518 for the period from April 5, 2019 (acquisition) to September 30, 2019.

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Financing Leases (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
For the year ending December 31,
2019 (remainder of year)	$ 141,875
2020	464,269
2021	464,269
2022	77,335
Total minimum lease payments	1,147,748
Less amount representing interest	240,504
Present value of minimum lease payments	907,244
Less current portion of minimum lease	(344,716)	$ (299,157)
Less debt issuance costs, net	(28,070)
Less payments to Utica for release of lien	(249,784)
Less lease deposits	(38,807)
End of lease buyout payments	117,413
Long-term present value of minimum lease payment	$ 363,280

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Term Loans (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
2020	$ 141,875
2021	464,269
2022	464,269
2023	77,335
Less current portion of principal payments	4,410,685	$ 293,641
Long-term portion of principal payments		$ 3,262,434
Secured Convertible Promissory Note [Member]
2019 (remainder)	187,500
2020	3,751,757
2021	375,000
2022	375,000
2023	93,750
Total payments	4,783,007
Less current portion of principal payments	4,783,007
Debt issuance costs, net	(372,322)
Long-term portion of principal payments

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Operating Lease (Details Textual) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018	Jun. 13, 2018
Annual payments for lease payments	$ 741,667	$ 741,667	$ 2,430,000
Interest rate on unpaid amount		18.00%
Operating lease base rent		$ 8,333
Long-term accrued liability	183,333	$ 183,333
Operating lease liabilities	25,000
Salary or rent not payable				$ 100,000
April 5, 2019 [Member]
Lease term		5 years
Operating lease base rent		$ 45,000
May 2014 [Member]
Annual payments for lease payments	$ 11,830	$ 11,830
Lease term		5 years

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Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Accounting Policies [Abstract]
Appliance sales	$ 10,086,489		$ 18,535,801
Furniture sales	1,398,843		2,969,390
Other sales	646,771		1,242,962
Total revenue	$ 12,132,103		$ 22,748,153

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Business Segments (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue
Services	$ 742,041	$ 883,460	$ 2,293,765	$ 2,543,087
Sales of parts and equipment	670,221	583,054	1,523,031	1,155,668
Furniture and appliances revenue	12,132,103		22,748,153
Total Revenue	13,544,365	1,466,514	26,564,949	3,698,755
Total cost of sales	10,709,829	478,195	20,255,556	1,034,786
Total operating expenses	3,957,843	1,420,679	8,989,096	4,505,933
Loss from operations	(1,123,307)	(432,360)	(2,679,703)	(1,841,964)
Land Management Services [Member]
Revenue
Services	742,041	883,460	2,293,765	2,543,087
Sales of parts and equipment	670,221	583,054	1,523,031	1,155,668
Furniture and appliances revenue
Total Revenue	1,412,262	1,466,514	3,816,796	3,698,755
Total cost of sales	596,286	478,195	1,369,440	1,034,786
Total operating expenses	1,346,937	1,413,428	4,104,427	4,249,254
Loss from operations	(530,961)	(425,109)	(1,657,071)	(1,585,285)
Retail & Appliances [Member]
Revenue
Services
Sales of parts and equipment
Furniture and appliances revenue	12,132,103		22,748,153
Total Revenue	12,132,103		22,748,153
Total cost of sales	10,113,543		18,886,115
Total operating expenses	2,571,324		4,765,211
Loss from operations	(552,764)		(903,173)
Corporate Services [Member]
Revenue
Services
Sales of parts and equipment
Furniture and appliances revenue
Total Revenue
Total cost of sales
Total operating expenses	39,582	7,251	119,458	256,679
Loss from operations	$ (39,582)	$ (7,251)	$ (119,458)	$ (256,679)

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
OPERATING ACTIVITIES
Net loss	$ (3,070,968)	$ (1,644,341)
Adjustments to reconcile net loss to net cash used in by operating activities:
Gain (loss) on sale of property and equipment	(24,224)	4,008
Depreciation and amortization	1,037,243	1,054,233
Amortization of financing costs	206,313	88,481
Loan contingency write-down		(395,634)
Amortization of warrant feature of note payable	142,338
Amortization of OID interest	32,813
Amortization of operating lease right of use assets	19,107
Changes in operating assets and liabilities:
Accounts receivable	(617,794)	65,448
Inventory	433,101	(21,310)
Prepaid expenses and other assets	(148,465)	72,322
Accounts payable and accrued expenses	(354,830)	454,299
Other current liabilities	1,234,143
Operating lease liability	(19,107)
Customer deposits	800,064
Warrant liability	(57,100)
Uncertain tax position and deferred taxes	(572,398)	(746,100)
Due to related parties	5,232	(7,288)
Net cash used in operating activities	(954,532)	(1,075,882)
INVESTING ACTIVITIES
Acquisition of Goedeker, net of cash acquired	1,135,368
Proceeds from the sale of property and equipment	39,750	202,025
Purchase of equipment	(17,076)	(2,000)
Net cash provided by investing activities	1,158,042	200,025
FINANCING ACTIVITIES
Proceeds of short-term borrowings	822,461
Proceeds from notes payable	27,000	3,781,908
Repayment of notes payable	(399,287)	(93,767)
Note payable - related party	(246,207)	117,000
Repayment of lines of credit	(180,865)	(675,000)
Repayment of financing leases	(363,444)	(2,218,500)
Financing costs and early extinguishment of debt		(528,223)
Net cash provided by (used in) financing activities	(340,342)	383,418
NET CHANGE IN CASH	(136,832)	(492,439)
CASH
Beginning of period	333,880	501,422
End of period	$ 197,048	$ 8,983

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Consolidated Balance Sheets - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current Assets
Cash	$ 197,048	$ 333,880
Accounts receivable, net	1,789,986	549,568
Inventories, net	2,570,717	487,690
Prepaid expenses and other current assets	1,003,876	145,978
TOTAL CURRENT ASSETS	5,561,627	1,517,116
Property and equipment, net	3,667,107	4,491,089
Operating lease right of use assets	2,682,294
Goodwill	6,553,727	22,166
Intangible assets, net	16,433	21,533
Other assets	45,375	375
TOTAL ASSETS	18,526,563	6,052,279
CURRENT LIABILITIES
Accounts payable and accrued expenses	4,095,368	1,203,435
Floor plan payable	13,908	109,100
Current portion of operating lease liability	436,042
Advances, related party	179,565	174,333
Lines of credit	1,313,749
Note payable - related party, including accrued interest of $14,647 and $7,549 as of September 30, 2019 and December 31, 2018, respectively	131,647	124,549
Loan payable, related party - current portion	680,884
Notes payable - current portion	4,410,685	293,641
Uncertain tax liability		8,000
Warrant liability	172,144
Promissory notes - current portion	456,228
Customer deposits	2,939,331
Current portion of financing lease liability	344,716	299,157
TOTAL CURRENT LIABILITIES	15,174,267	2,212,215
Non-current notes-payable		3,262,434
Operating lease liability - long term, net of current portion	2,246,252
Promissory note payable - long term	1,025,000	1,025,000
Non-current deferred tax liability		364,601
Accrued expenses - long term, related party	792,300	451,857
Loan payable, related party - long term, net of current portion	3,593,325
Financing lease liability, net of current portion	363,281	763,239
TOTAL LIABILITIES	23,194,425	8,079,346
SHAREHOLDERS' DEFICIT
Allocation shares, 1,000 shares issued and outstanding	1,000	1,000
Common Shares, 500,000,000 shares authorized, 3,165,625 and 3,115,625 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	3,165	3,115
Additional paid-in capital	442,014	11,891
Accumulated deficit	(4,133,325)	(2,155,084)
TOTAL SHAREHOLDERS' DEFICIT	(3,687,146)	(2,139,078)
NONCONTROLLING INTERESTS	(980,716)	112,011
TOTAL SHAREHOLDERS' DEFICIT	(4,667,862)	(2,027,067)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$ 18,526,563	$ 6,052,279

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 20—SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10), the Company has analyzed its operations subsequent to September 30, 2019 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements.

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Related Parties

9 Months Ended

Sep. 30, 2019

Related Parties [Abstract]

RELATED PARTIES

NOTE 16—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% (2.0% annualized) of its adjusted net assets for services performed.

Offsetting Management Services Agreement - 1847 Neese

On March 3, 2017, 1847 Neese entered into an offsetting management services agreement with the Manager.

Pursuant to the offsetting management services agreement, 1847 Neese appointed the Manager to provide certain services to it for a quarterly management fee equal to $62,500 per quarter; provided, however, 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 1847 Neese, 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 1847 Neese 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 1847 Neese, 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 of the management fee paid or to be paid by 1847 Neese, 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 aggregate amount of the management fee (before any adjustment thereto) calculated and payable under the management services agreement (the "Parent Management Fee") with respect to such fiscal quarter, then the management fee to be paid by 1847 Neese 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 by 1847 Neese, 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.

1847 Neese shall also reimburse the Manager for all costs and expenses of 1847 Neese which are specifically approved by the board of directors of 1847 Neese, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of 1847 Neese in connection with performing services under the offsetting management services agreement.

The services provided by the Manager include: conducting general and administrative supervision and oversight of 1847 Neese's day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to 1847 Neese's business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines. The Company expensed $187,500 in management fees for the nine months ended September 30, 2019 and 2018, respectively.

Under terms of the term loan from Home State Bank, no fees may be paid to the Manager without permission of the bank, which the Manager does not expect to be granted within the forthcoming year. Accordingly, $563,309 due the Manager is classified as a long-term accrued liability.

Offsetting Management Services Agreement - Goedeker

On April 5, 2019, Goedeker entered into an offsetting management services agreement with the Manager.

Pursuant to the offsetting management services agreement, Goedeker appointed the Manager to provide certain services to it for a quarterly management fee equal to the greater of $62,500 or 2% of adjusted net assets (as defined in the management services agreement); provided, however, 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 Goedeker, 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 Goedeker 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 Goedeker, 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 Goedeker, 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 aggregate amount of the Parent Management Fee with respect to such fiscal quarter, then the management fee to be paid by Goedeker 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 by Goedeker, 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.

Notwithstanding the foregoing, payment of the management fee is subordinated to the payment of interest on the 9% subordinated promissory note (see Note 13), such that no payment of the management fee may be made if Goedeker is in default under the note with regard to interest payments and, for the avoidance of doubt, such payment of the management fee will be contingent on Goedeker being in good standing on all associated loan covenants. In addition, during the period that that any amounts are owed under the 9% subordinated promissory note or the earn out payments, the annual management fee shall be capped at $250,000.

In addition, the rights of the Manager to receive payments under the offsetting management services agreement are subordinate to the rights of Burnley and SBCC under separate subordination agreements that the Manager entered into with Burnley and SBCC on April 5, 2019.

Goedeker shall also reimburse the Manager for all costs and expenses of Goedeker which are specifically approved by the board of directors of Goedeker, including all out-of-pocket costs and expenses, that are actually incurred by the Manager or its affiliates on behalf of Goedeker in connection with performing services under the offsetting management services agreement.

The services provided by the Manager include: conducting general and administrative supervision and oversight of Goedeker's day-to-day business and operations, including, but not limited to, recruiting and hiring of personnel, administration of personnel and personnel benefits, development of administrative policies and procedures, establishment and management of banking services, managing and arranging for the maintaining of liability insurance, arranging for equipment rental, maintenance of all necessary permits and licenses, acquisition of any additional licenses and permits that become necessary, participation in risk management policies and procedures; and overseeing and consulting with respect to Goedeker's business and operational strategies, the implementation of such strategies and the evaluation of such strategies, including, but not limited to, strategies with respect to capital expenditure and expansion programs, acquisitions or dispositions and product or service lines.

Advances

From time to time, the Company has received advances from its chief executive officer to meet short-term working capital needs. As of September 30, 2019 and December 31, 2018, a total of $179,565 advances from related parties are outstanding. These advances are unsecured, bear no interest, and do not have formal repayment terms or arrangements.

As of September 30, 2019 and December 31, 2018, the Manager has funded the Company $60,732 and $55,500 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 provides that the Company may from time to time request additional advances from the Manager up to an aggregate additional amount of $100,000, which will be added to the note if the Manager, in its sole discretion, so provides. Interest shall accrue on the unpaid portion of the principal amount and the unpaid portion of all advances outstanding at a fixed rate of 8% per annum, and along with the outstanding portion of the principal amount and the outstanding portion of all advances, shall be payable in one lump sum due on the maturity date, which is the first anniversary of the date of the note. The maturity date of the grid promissory note was extended until January 3, 2021. If all or a portion of the principal amount or any advance under the note, or any interest payable thereon is not paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate of 12% per annum. In the event the Company completes a financing involving at least $500,000, the Company must, contemporaneously with the closing of such financing transaction, repay the entire outstanding principal and accrued and unpaid interest on the note. The note is unsecured and contains customary events of default. As of September 30, 2019 and December 31, 2018, the Manager has advanced $117,000 of the promissory note and the Company has accrued interest of $14,647 and $7,549, respectively.

Building Lease

On March 3, 2017, Neese entered into an agreement of lease with K&A Holdings, LLC, a limited liability company that is wholly-owned by officers of Neese. See Note 15 for details regarding this lease.

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Operating Lease (Details 1) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Operating Lease, Lease Income [Abstract]
2019 (July to December)	$ 25,000	$ 135,000
2020	100,000	540,000
2021	100,000	540,000
2022	100,000	540,000
2023	100,000	540,000
2024	100,000	135,000
Thereafter	216,667
Total lease payments	741,667	2,430,000
Less imputed interest	161,437	(327,935)
Maturities of lease liabilities	$ 580,230	$ 2,102,065

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Promissory Notes (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Common stock shares issued	3,165,625		3,115,625
Common stock shares issued, value	$ 3,165		$ 3,115
Promissory notes current portion	$ 456,228
Interest rate	8.00%
Promissory note payable	$ 714,286
Interest on the promissory notes	$ 40,000
Minimum [Member]
EBITDA threshold		$ 1,300,000
April 5, 2019 [Member] | Leonite [Member]
Common stock shares issued	50,000
Shares issuable upon warrants exercised	200,000
Warrant exercise price	$ 1.25
Fiscal Year 2017 [Member]
Adjusted EBITDA target for vesting of promissory note	$ 788,958
Threshold amount promissory note	$ 1,300,000
Description of vesting promissory note	Fiscal Year 2017: If Adjusted EBITDA for the fiscal year ending December 31, 2017, exceeds an Adjusted EBITDA target of $1,300,000 (the "Adjusted EBITDA Target"), then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2017 through the Maturity Date. For the year ended December 31, 2017, Adjusted EBITDA was $788,958, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2017.
Fiscal Year 2018 [Member]
Adjusted EBITDA target for vesting of promissory note	$ 320,000
Threshold amount promissory note	$ 1,300,000
Description of vesting promissory note	Fiscal Year 2018: If Adjusted EBITDA for the fiscal year ending December 31, 2018, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2018 through the Maturity Date. For the year ended December 31, 2018, Adjusted EBITDA was approximately $320,000, below the threshold amount of $1,300,000, therefore no portion of the note vested in fiscal year 2018.
Fiscal Year 2019 [Member]
Description of vesting promissory note	Fiscal Year 2019: If Adjusted EBITDA for the fiscal year ending December 31, 2019, exceeds the Adjusted EBITDA Target, then a portion of the principal amount of the vesting promissory note that is equal to sixty percent (60%) of such excess shall vest. Interest shall be payable on such vested portion of principal from January 1, 2019 through the Maturity Date.
Goedeker [Member] | April 5, 2019 [Member] | 9% Subordinated Promissory Note [Member]
Term loan principal amount	$ 4,100,000
Promissory notes current portion	4,274,209
Promissory notes	4,530,293
Unamortized debt discount	$ 256,084
Interest rate	9.00%
Maturity Date	Apr. 05, 2023
SBCC [Member] | April 5, 2019 [Member]
Term loan principal amount	$ 1,500,000
Promissory notes current portion	1,049,186
Promissory notes	1,406,250
SBCC [Member] | April 5, 2019 [Member] | Warrant [Member]
Unamortized debt discount	150,335
SBCC [Member] | April 5, 2019 [Member] | Secured Convertible Promissory Note [Member]
Term loan principal amount	$ 714,286
Common stock shares issued	50,000
Common stock shares issued, value	$ 137,500
Shares issuable upon warrants exercised	200,000
Warrant exercise price	$ 1.25
Original issue discount	$ 64,286
Purchase price of note	650,000
Debt discount	292,673
Amortizaton of financing costs	211,088
Promissory notes current portion	456,228
Promissory notes	714,286
Unamortized debt discount	$ 31,473
Interest rate	12.00%
Financing costs	$ 76,250
Non-dilutable interest	7.50%
SBCC [Member] | May 5, 2019 [Member] | Secured Convertible Promissory Note [Member]
Note maturity rate	115.00%
Conversion price per share	$ 1.00
Debt conversion, description	(1) the number of common shares beneficially owned by Leonite and its affiliates (other than common shares which may be deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained in the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has purchased a portion of the note from Leonite) and (2) the number of common shares issuable upon the conversion of the portion of the note with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite and its affiliates of more than 4.99% of the outstanding common shares of the Company. Such limitations on conversion may be waived (up to a maximum of 9.99%) by Leonite upon, at its election, not less than 61 days' prior notice to the Company, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite, as may be specified in such notice of waiver).
Leonite [Member] | April 5, 2019 [Member] | Secured Convertible Promissory Note [Member]
Debt conversion, description	The conversion price shall be $1.00 per share (subject to adjustment as further described in the note for common share distributions and splits, certain fundamental transactions, and anti-dilution adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately be equal to the lesser of (i) such conversion price less 40%; and (ii) the lowest weighted average price of the common shares during the 21 consecutive trading day period immediately preceding the trading day that 1847 receives a notice of conversion or (iii) the discount to market based on subsequent financings with other investors.
Neese Acquisition [Member] | 10% Promissory Note [Member]
Description for prepayment of the promissory note and accrued interest	The Company continues to accrue interest at the contract rate; however, given the limitations of the term loan, all accrued interest in excess of $40,000 is included in long-term accrued expenses.
1847 Neese [Member] | Neese Acquisition [Member] | 8% Vesting Promissory Note [Member]
Business acquisition vesting promissory note	$ 1,875,000
Interest rate	8.00%
Maturity Date	Jun. 30, 2020
1847 Neese [Member] | Neese Acquisition [Member] | 10% Promissory Note [Member]
Interest rate	10.00%
Promissory note payable	$ 1,025,000
Description for prepayment of the promissory note and accrued interest	, that the unpaid principal, and all accrued, but unpaid, interest thereon shall be prepaid if at any time, and from time to time, the cash on hand of 1847 Neese and Neese exceeds $250,000 and, then, the prepayment shall be equal to the amount of cash in excess of $200,000 until the unpaid principal and accrued, but unpaid, interest thereon is fully prepaid.
Cash balance to prepay outstanding promissory note and accrued interest	$ 250,000
Prepayment of short term debt in excess of cash balance, amount	200,000
Interest on the promissory notes	$ 40,000

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Lines of Credit (Details Textual)		1 Months Ended	9 Months Ended
	Apr. 05, 2019	Jun. 24, 2019 USD ($)	Sep. 30, 2019 USD ($)
Lines of Credit (Textual)
Line of credit facility interest description			Fair value immediately prior to such event equal to or greater than $25,000.
Subordinated promissory note percentage			100.00%
Loan and security agreement, other description		(i) non-payment, (ii) a breach by Goedeker of any of its representations, warranties or covenants under the Loan and Security Agreement or any other agreement entered into with Northpoint, or (iii) the bankruptcy or insolvency of Goedeker.  The Loan and Security Agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type.	(i) for failure to pay principal and interest on the revolving note when due, or to pay any fees due under the loan and security agreement; (ii) if any representation, warranty or certification in the loan and security agreement or any document delivered in connection therewith is incorrect in any material respect; (iii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iv) for the occurrence of any default in respect of any other indebtedness of more than $100,000; (v) for any voluntary or involuntary bankruptcy, insolvency or dissolution; (vi) for the occurrence of one or more judgments, non-interlocutory orders, decrees or arbitration awards involving in the aggregate a liability of $25,000 or more; (vii) if Goedeker or 1847 Holdco, or officer thereof, is charged by a governmental authority, criminally indicted or convicted of a felony under any law that would reasonably be expected to lead to forfeiture of any material portion of collateral, or such entity is subject to an injunction restraining it from conducting its business; (viii) if Burnley determines that a material adverse effect (as defined in the loan and security agreement) has occurred; (ix) if a change of control (as defined in the loan and security agreement) occurs; (x) if there is any material damage to, loss, theft or destruction of property which causes, for more than thirty consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities; (xi) if there is a loss, suspension or revocation of, or failure to renew any permit if it could reasonably be expected to have a material adverse effect; and (xii) for the occurrence of any default or event of default under the term loan with SBCC (as defined below), the 9% subordinated promissory note issued to Goedeker Television, the secured convertible promissory note issued to Leonite (as defined below) or any other debt that is subordinated to the revolving loan.
Liquidity Ratio [Member]
Lines of Credit (Textual)
Actual ratio			0.24
Required ratio			0.65
Burnley [Member]
Lines of Credit (Textual)
Line of credit principal amount			$ 675,295
Line of credit facility interest description	The revolving note bears interest at a per annum rate equal to the greater of (i) the LIBOR Rate (as defined in the loan and security agreement) plus 6.00% or (ii) 8.50%; provided that upon an event of default (as defined below) all loans, all past due interest and all fees shall bear interest at a per annum rate equal to the foregoing rate plus 3.00%.
Line of credit outstanding			576,962
Note due date	Apr. 05, 2022
Unamortized debt discount			$ 98,333
Loan and security agreement, description	Under the loan and security agreement, Goedeker is required to pay a number of fees to Burnley, including the following: ● a commitment fee during the period from closing to the earlier of the maturity date or termination of Burnley’s commitment to make loans under the loan and security agreement, which shall accrue at the rate of 0.50% per annum on the average daily difference of the total loan amount then in effect minus the sum of the outstanding principal balance of the revolving note, which such accrued commitment fees are due and payable in arrears on the first day of each calendar month and on the date on which Burnley’s commitment to make loans under the loan and security agreement terminates, commencing on the first such date to occur after the closing date; ● an annual loan facility fee equal to 0.75% of the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), which is fully earned on the closing date for the term of the loan (including any extension) but shall be due and payable on each anniversary of the closing date; ● a monthly collateral management fee for monitoring and servicing the revolving loan equal to $1,700 per month for the term of revolving note, which is fully earned and non-refundable as of the date of the loan and security agreement, but shall be payable monthly in arrears on the first day of each calendar month; provided that payment of the collateral management fee may be made, at the discretion of Burnley, by application of advances under the revolving loan or directly by Goedeker; and ● if the revolving loan is terminated for any reason, including by Burnley following an event of default, then Goedeker shall pay, as liquidated damages and compensation for the costs of being prepared to make funds available, an amount equal to the applicable percentage multiplied by the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), wherein the term applicable percentage means (i) 3%, in the case of a termination on or prior to the first anniversary of the closing date, (ii) 2%, in the case of a termination after the first anniversary of the closing date but on or prior to the second anniversary thereof, and (iii) 0.5%, in the case of a termination after the second anniversary of the closing date but on or prior to the maturity date.
Subordinated promissory note percentage			9.00%
Burnley [Member] | April 5, 2019 [Member]
Lines of Credit (Textual)
Loan and security agreement, description			(i) the borrowing base or (ii) $1,500,000 (provided that such amount may be increased to $3,000,000 in Burnley’s sole discretion) minus reserves established Burnley at any time in accordance with the loan and security agreement. The “borrowing base” means an amount equal to the sum of the following: (i) the product of 85% multiplied by the liquidation value of Goedeker’s inventory (net of all liquidation costs) identified in the most recent inventory appraisal by an appraiser acceptable to Burnley (ii) multiplied by Goedeker’s eligible inventory (as defined in the loan and security agreement), valued at the lower of cost or market value, determined on a first-in-first-out basis.
Burnley [Member] | April 5, 2019 [Member] | Maximum [Member]
Lines of Credit (Textual)
Issuance of revolving note			$ 1,500,000
Goedeker [Member] | April 5, 2019 [Member]
Lines of Credit (Textual)
Borrowed amount			744,000
Northpoint Commercial Finance LLC [Member]
Lines of Credit (Textual)
Line of credit outstanding		$ 1,000,000	$ 736,788
Interest rate		7.99%
Loan and security agreement, description		(i) an audit fee for each audit conducted as determined by Northpoint, equal to the out-of-pocket expense incurred by Northpoint plus any minimum audit fee established by Northpoint; (ii) a fee for any returned payments equal to the lesser of the maximum amount permitted by law or $50; (iii) a late fee for each payment not received by the 25th day of a calendar month, and each month thereafter until such payment is paid, equal to the greater of 5% of the amount past due or $25; (iv) a billing fee equal to $250 for any month for which Goedeker requests a paper billing statement; (v) a live check fee equal to $50 for each check that Goedeker sends to Northpoint for payment of obligations under the loan and security agreement; (vi) processing fees to be determined by Northpoint; and (vii) any additional fees that Northpoint may implement from time to time.

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Organization and Nature of Business

9 Months Ended

Sep. 30, 2019

Organization and Nature of Business [Abstract]

Organization and Nature of Business

NOTE 1—ORGANIZATION AND NATURE OF BUSINESS

1847 Holdings LLC (the "Company") was formed under the laws of the State of Delaware on January 22, 2013. The Company is in the business of acquiring small businesses in a variety of different industries.

On March 3, 2017, the Company's wholly-owned subsidiary 1847 Neese Inc., a Delaware corporation ("1847 Neese"), entered into a stock purchase agreement with Neese, Inc., an Iowa corporation ("Neese"), and Alan Neese and Katherine Neese, pursuant to which 1847 Neese acquired all of the issued and outstanding capital stock of Neese. As a result of this transaction, the Company owns 55% of 1847 Neese, with the remaining 45% held by the sellers.

On January 10, 2019, the Company established 1847 Goedeker Inc. ("Goedeker") as a wholly-owned subsidiary in the State of Delaware in connection with the proposed acquisition of assets from Goedeker Television Co., Inc., a Missouri corporation ("Goedeker Television"), described below. On March 20, 2019, the Company established 1847 Goedeker Holdco Inc. ("1847 Holdco") as a wholly-owned subsidiary in the State of Delaware and subsequently transferred all of its shares in Goedeker to 1847 Holdco, such that Goedeker became a wholly-owned subsidiary of 1847 Holdco.

On January 18, 2019, Goedeker entered into an asset purchase agreement with Goedeker Television and Steve Goedeker and Mike Goedeker, pursuant to which, on April 5, 2019, Goedeker acquired substantially all of the assets of Goedeker Television used in its retail appliance and furniture business (see Note 9). As a result of this transaction, the Company owns 70% of 1847 Holdco, with the remaining 30% held by third-parties. (See Note 17).

The consolidated financial statements include the accounts of the Company and its consolidated subsidiaries, 1847 Neese, Neese, 1847 Holdco and Goedeker. All significant intercompany balances and transactions have been eliminated in consolidation.

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Consolidated Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
CURRENT LIABILITIES
Note payable - related party, including accrued interest	$ 14,647	$ 7,549
SHAREHOLDERS' DEFICIT
Allocation shares, issued	1,000	1,000
Allocation shares, outstanding	1,000	1,000
Common shares, authorized	500,000,000	500,000,000
Common shares, issued	3,165,625	3,115,625
Common shares, outstanding	3,165,625	3,115,625

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Summary of Significant Accounting Policies (Details 2)	9 Months Ended
	Sep. 30, 2019
Building and Improvements [Member]
Estimated useful lives of property and equipment	4 years
Machinery and Equipment [Member] | Minimum [Member]
Estimated useful lives of property and equipment	3 years
Machinery and Equipment [Member] | Maximum [Member]
Estimated useful lives of property and equipment	7 years
Tractors [Member] | Minimum [Member]
Estimated useful lives of property and equipment	3 years
Tractors [Member] | Maximum [Member]
Estimated useful lives of property and equipment	7 years
Trucks and vehicles [Member] | Minimum [Member]
Estimated useful lives of property and equipment	3 years
Trucks and vehicles [Member] | Maximum [Member]
Estimated useful lives of property and equipment	6 years

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Receivables (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Receivables [Abstract]
Credit card payments in process of settlement	$ 490,737
Vendor rebates receivable	967,565
Trade receivables from customers	360,685	578,569
Total receivables	1,818,987	578,569
Allowance for doubtful accounts	(29,001)	(29,001)	$ (14,001)
Accounts receivable, net	$ 1,789,986	$ 549,568

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Shareholders' Deficit (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Shareholders' Deficit (Textual)
Common shares,authorized	500,000,000		500,000,000
Common shares, issued	3,165,625		3,115,625
Common shares, outstanding	3,165,625		3,115,625
Common shares, voting rights	one vote
Ownership of allocation shares by manager	100.00%
Allocation of profit	20.00%
Interest rate	8.00%
Net loss attributable to non-controlling interests	$ 628,210	$ 624,448
Allocation shares, authorized	1,000		1,000
Allocation shares, outstanding	1,000		1,000
1847 Holdco [Member]
Shareholders' Deficit (Textual)
Noncontrolling interest, ownership percentage	45.00%
April 5, 2019 [Member] | Leonite [Member]
Shareholders' Deficit (Textual)
Common shares, issued	50,000
Noncontrolling interest, ownership percentage	4.99%
Shares issuable upon warrants exercised	200,000
Warrant exercise price	$ 1.25
Estimated fair value	$ 2.75
Leonite [Member] | April 5, 2019 [Member]
Shareholders' Deficit (Textual)
Warrant term	5 years
Dividend yield	0.00%
Expected volatility	140.30%
Weighted average risk-free interest rate	2.31%
Expected life	5 years
Noncontrolling Interest | 1847 Holdco [Member]
Shareholders' Deficit (Textual)
Noncontrolling interest, ownership percentage	30.00%
Noncontrolling Interest | 1847 Neese [Member]
Shareholders' Deficit (Textual)
Acquisition interest acquired	55.00%
Noncontrolling Interest | 1847 Holdco [Member]
Shareholders' Deficit (Textual)
Acquisition interest acquired	70.00%
Net loss attributable to non-controlling interests	$ 464,518

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Acquisition (Details) - Goedeker [Member]	Sep. 30, 2019 USD ($)
Provisional Purchase Consideration at preliminary fair value:
Note payable, net of $215,500 of capitalized financing costs	$ 4,484,500
Financing of acquisition through notes payable, common stock and warrants (see Note 19)	2,583,000
Amount of consideration	7,067,500
Assets acquired and liabilities assumed at preliminary fair value
Cash	1,135,368
Accounts receivable	792,173
Inventories	2,516,128
Working capital adjustment receivable and other assets	554,636
Property and equipment	206,612
Accounts payable and accrued expenses	(2,472,568)
Customer deposits	(2,196,409)
Other liabilities
Net tangible assets acquired	535,940
Total net assets acquired	535,940
Consideration paid	7,067,500
Preliminary goodwill	$ 6,531,560

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Property and Equipment (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Property and Equipment (Textual)
Depreciation expense	$ 1,032,143	$ 1,054,233

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2019

Finite-Lived Intangible Assets, Net [Abstract]

Schedule of intangible assets

Customer Relationships	September 30, 2019			December 31, 2018
Identifiable intangible assets, gross	$	34,000		$	34,000
Accumulated amortization		(17,567	)		(12,467	)
Identifiable intangible assets, net	$	16,433		$	21,533

Schedule of annual amortization expense

2019 (remainder)	$	1,700
2020		6,800
2021		6,800
2022		1,133
Total	$	16,433

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Financing Leases (Tables)

9 Months Ended

Sep. 30, 2019

Financing Leases [Abstract]

Schedule of annual minimum future lease payment

	Amount
2019 (remainder of year)	$	141,875
2020		464,269
2021		464,269
2022		77,335
Total minimum lease payments		1,147,748
Less amount representing interest		240,504
Present value of minimum lease payments		907,244
Less current portion of minimum lease		(344,716	)
Less debt issuance costs, net		(28,070	)
Less payments to Utica for release of lien		(249,784	)
Less lease deposits		(38,807	)
End of lease buyout payments		117,413
Long-term present value of minimum lease payment	$	363,280

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Floor Plan Loans Payable

9 Months Ended

Sep. 30, 2019

Floor Plan Loans Payable [Abstract]

FLOOR PLAN LOANS PAYABLE

NOTE 12—FLOOR PLAN LOANS PAYABLE

At September 30, 2019, $13,908 of machinery and equipment inventory was pledged to secure a floor plan loan from a commercial lender. The Company must remit proceeds from the sale of the secured inventory to the floor plan lender and pays a finance charge that can vary monthly at the option of the lender. The balance of the floor plan payable as of September 30, 2019 and December 31, 2018 amounted to $13,908 and $109,100, respectively.

XML

Intangible Assets

9 Months Ended

Sep. 30, 2019

Finite-Lived Intangible Assets, Net [Abstract]

Intangible Assets

NOTE 8—INTANGIBLE ASSETS

The following provides a breakdown of identifiable intangible assets as of September 30, 2019 and December 31, 2018:

Customer Relationships	September 30, 2019			December 31, 2018
Identifiable intangible assets, gross	$	34,000		$	34,000
Accumulated amortization		(17,567	)		(12,467	)
Identifiable intangible assets, net	$	16,433		$	21,533

In connection with the acquisition of Neese, the Company identified intangible assets of $34,000 representing customer relationships. These assets are being amortized on a straight-line basis over their weighted average estimated useful life of 5 years and amortization expense amounted to $5,100 for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the estimated annual amortization expense for each of the next four fiscal years is as follows:

2019 (remainder)	$	1,700
2020		6,800
2021		6,800
2022		1,133
Total	$	16,433

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Receivables

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Receivables

NOTE 4—RECEIVABLES

At September 30, 2019 and December 31, 2018, receivables consisted of the following:

	September 30, 2019			December 31, 2018
Credit card payments in process of settlement	$	490,737		$	-
Vendor rebates receivable		967,565			-
Trade receivables from customers		360,685			578,569
Total receivables		1,818,987			578,569
Allowance for doubtful accounts		(29,001	)		(29,001	)
Accounts receivable, net	$	1,789,986		$	549,568

Following is a summary of activity in the allowance for doubtful accounts:

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	29,001	$	14,001
Provisions for losses		-		15,000
Accounts charged-off		-		-
Balance at end of period	$	29,001	$	29,001

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 18—COMMITMENTS AND CONTINGENCIES

Corporate Office

An office space has been leased on a month-by-month basis.

The officers and directors are involved in other business activities and most likely will become involved in other business activities in the future.

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Financing Leases

9 Months Ended

Sep. 30, 2019

Financing Leases [Abstract]

FINANCING LEASES

NOTE 14—FINANCING LEASES

The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neese’s equipment with Utica Leaseco, LLC (“Utica”), pursuant to a master lease agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees (collectively, the “Lessee”). Under the master lease agreement, Utica loaned an aggregate of $3,240,000 for certain of Neese’s equipment listed therein, which it leases to the Lessee. The initial term of the master lease agreement was for 51 months. Under the master lease agreement, the Lessee agreed to pay a monthly rent of $53,000 for the first three (3) months, with such amount increasing to $85,322 for the remaining forty-eight (48) months.

On June 14, 2017, the parties entered into a first amendment to lease documents, pursuant to which the parties agreed to, among other things, extend the term of the master lease agreement from 51 months to 57 months and amend the payments due thereunder. Under the amendment, the Lessee agreed to pay a monthly rent of $53,000 for the first ten (10) months, with such amount increasing to $85,322 for the remaining forty-seven (47) months. In connection with the extension of the term of the master lease agreement, the parties also amended the schedule of stipulated loss values and early termination payment schedule attached thereto. In connection with the amendment, the Lessee agreed to pay Utica an amendment fee of $2,500.

On October 31, 2017, the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neese’s equipment listed therein. The term of the second equipment schedule is 51 months and agreed monthly payments are $25,807.

If any rent is not received by Utica within five (5) calendar days of the due date, the Lessee shall pay a late charge equal to ten (10%) percent of the amount. In addition, in the event that any payment is not processed or is returned on the basis of insufficient funds, upon demand, the Lessee shall pay Utica a charge equal to five percent (5%) of the amount of such payment. The Lessee is also required to pay an annual administration fee of $5,000. Upon the expiration of the term of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) $162,000 (five percent (5%) of the total invoice cost (as defined in the master lease agreement)); or (b) the fair market value of the equipment, as determined by Utica. Upon the expiration of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) $49,000 (five percent (5%) of the total invoice cost); or (b) the fair market value of the equipment, as determined by Utica.

Provided that no default under the master lease agreement has occurred and is continuing beyond any applicable grace or cure period, the Lessee has an early buy-out option with respect to all but not less than all of the equipment, upon the payment of any outstanding rental payments or other fees then due, plus an additional amount set forth in the master lease agreement, which represents the anticipated fair market value of the equipment as of the anticipated end date of the master lease agreement. In addition, the Lessee shall pay to Utica an administrative charge to be determined by Utica to cover its time and expenses incurred in connection with the exercise of the option to purchase, including, but not limited to, reasonable attorney fees and costs. Furthermore, upon the exercise by the Lessee of this option to purchase the equipment, the Lessee shall pay all sales and transfer taxes and all fees payable to any governmental authority as a result of the transfer of title of the equipment to Lessee. The early buy-out option was not available on the second equipment schedule to the master lease agreement until after December 31, 2018.

In connection with the master lease agreement, the Lessee granted a security interest on all of its right, title and interest in and to: (i) the equipment, together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished by the supplier; (ii) all accounts, chattel paper, deposit accounts, documents, other equipment, general intangibles, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing; (iii) all books and records pertaining to the foregoing; (iv) all property of such Lessee held by Utica, including all property of every description, in the custody of or in transit to Utica for any purpose, including safekeeping, collection or pledge, for the account of such Lessee or as to which such Lessee may have any right or power, including but not limited to cash; and (v) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing.

On February 1, 2018, Utica agreed to continue the $53,000 payments for three additional months and extend the maturity of the loan by three months. Additionally, Utica agreed to defer the February 3, 2018 payment to February 20, 2018. The Company paid one-half the normal late fee, $2,650 for the late payment. On March 2, 2018, Utica agreed to defer the March 3 payment to March 30, 2018. The Company paid a late payment fee of $5,300 for the payment deferral.

On April 18, 2018, Utica, the Lessee, and Ellery W. Roberts, as guarantor under the master lease agreement, entered into a forbearance agreement relating to the non-payment of certain rent payments due under the master lease agreement for the months of March 2018 and April 2018. Pursuant to the forbearance agreement, Utica agreed to forbear from demanding payment in full and exercising its remedies under the master lease agreement until June 3, 2018. Pursuant to the forbearance agreement, the Lessee agreed to, among other things, (i) make the payments set forth in the forbearance agreement on or before the dates specified therein, totaling $173,376, (ii) be current on all rent due under Schedule 1 of the master lease agreement by June 3, 2018 and be current on all rent due under Schedule 2 of the master lease agreement by May 30, 2018, (ii) reinstate or renew and continue in effect all insurance as required under the master lease agreement at Lessee’s sole cost and expense, (iv) pay a forbearance fee to Utica totaling $4,500, which shall not be due until termination of the master lease agreement and (v) execute a surrender agreement with respect to the Lessee’s equipment, which will be held in escrow by Utica and not deemed effective unless and until the earlier to occur of: (a) the June 3, 2018, provided liabilities under master lease agreement remain due but unpaid; (b) such time as Utica accelerates due and unpaid liabilities pursuant to the term of the forbearance agreement and the master lease agreement; or (c) a default occurs under the forbearance agreement or the master lease agreement.

A portion of the proceeds from the term loan from Home State Bank (Note 11) were applied to reduce the balance of this lease to $475,000. The lease is payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000. As a result, the parties to the forbearance agreement agreed that the forbearance agreement is terminated and is no longer in effect. In completing the early payout, the Company incurred a loss of $405,674 plus an additional loss of $95,130 from the write-off of unamortized debt issuance costs. The loss on early extinguishment of debt arose from the buyout provisions in the lease and because the Company had delayed making the regular payment of $85,322 until May 3, 2018, rather than July 3, 2017 as contemplated in the original master lease agreement. Management chose to close the term loan because of the much lower interest rate and the loan allows the Company to make payments that match its operating cycle rather than monthly payments.

If the Company sells equipment or inventory, it must remit to Utica the amount loaned against the equipment. Such payments are accumulated and applied to the balance at the end of the lease term. During the three months ended September 30, 2019, $116,067 of payments and $0 of lien release payments were remitted to Utica.

The assets and liabilities under the master lease agreement are recorded at the fair value of the assets at the time of acquisition.  

The Company adopted ASU 2015-03 by deducting $28,070 of net debt issuance costs from the long-term portion of the financing lease. Amortization of debt issuance costs totaled $3,015 for the three months ended September 30, 2019.

At June 30, 2019, annual minimum future lease payments under this Master Lease Agreement are as follows:

	Amount
2019 (remainder of year)	$	141,875
2020		464,269
2021		464,269
2022		77,335
Total minimum lease payments		1,147,748
Less amount representing interest		240,504
Present value of minimum lease payments		907,244
Less current portion of minimum lease		(344,716	)
Less debt issuance costs, net		(28,070	)
Less payments to Utica for release of lien		(249,784	)
Less lease deposits		(38,807	)
End of lease buyout payments		117,413
Long-term present value of minimum lease payment	$	363,280

The interest rate on the capitalized lease is approximately 15.5%

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of property and equipment useful lives

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Tractors	3-7
Trucks and vehicles	3-6

Schedule of identifiable intangible assets

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5

Goedeker [Member]

Schedule of disaggregated revenue

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Appliance sales	$	10,086,489	$	-	$	18,535,801	$	-
Furniture sales		1,398,843		-		2,969,390		-
Other sales		646,771		-		1,242,962		-
Total revenue	$	12,132,103	$	-	$	22,748,153	$	-

Neese [Member]

Schedule of disaggregated revenue

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues
Trucking	$	383,709	$	568,004	$	1,267,550	$	1,580,032
Waste hauling and pumping		40,781		45,349		417,138		296,891
Repairs		181,129		163,618		309,330		429,348
Other		136,422		106,489		299,747		236,816
Total services		742,041		883,460		2,293,765		2,543,087
Sales of parts and equipment		670,221		583,054		1,523,031		1,155,668
Total revenue	$	1,412,262	$	1,466,514	$	3,816,796	$	3,698,755

XML

Consolidated Statements of Shareholders' Deficit (Unaudited) - USD ($)	Common Shares	Allocation Shares	Additional Paid-In Capital	Accumulated Deficit	Non-Controlling Interest	Total
Beginning Balance, Amount at Dec. 31, 2017	$ 3,115	$ 1,000	$ 11,891	$ (1,159,724)	$ 658,524	$ (485,194)
Beginning Balance, Shares at Dec. 31, 2017	3,115,625
Net loss				(529,145)	(264,047)	(793,192)
Ending Balance, Amount at Mar. 31, 2018	$ 3,115	1,000	11,891	(1,688,869)	394,477	(1,278,386)
Ending Balance, Shares at Mar. 31, 2018	3,115,625
Net loss				(237,586)	(187,184)	(424,770)
Ending Balance, Amount at Jun. 30, 2018	$ 3,115	1,000	11,891	(1,926,455)	207,293	(1,703,156)
Ending Balance, Shares at Jun. 30, 2018	3,115,625
Net loss				(253,162)	(173,217)	(426,379)
Ending Balance, Amount at Sep. 30, 2018	$ 3,115	1,000	11,891	(2,179,617)	34,076	(2,129,535)
Ending Balance, Shares at Sep. 30, 2018	3,115,625
Beginning Balance, Amount at Dec. 31, 2018	$ 3,115	1,000	11,891	(2,155,084)	112,011	(2,027,067)
Beginning Balance, Shares at Dec. 31, 2018	3,115,625
Net loss				(368,579)	(266,680)	(635,259)
Ending Balance, Amount at Mar. 31, 2019	$ 3,115	1,000	11,891	(2,523,663)	(154,669)	(2,662,326)
Ending Balance, Shares at Mar. 31, 2019	3,115,625
Common shares and warrants issued in connection with convertible note payable, Amount	$ 50		430,123			430,173
Common shares and warrants issued in connection with convertible note payable, Shares	50,000
Net loss				(824,951)	(430,789)	(1,255,740)
Ending Balance, Amount at Jun. 30, 2019	$ 3,165	1,000	442,014	(3,348,614)	(585,458)	(3,487,893)
Ending Balance, Shares at Jun. 30, 2019	3,165,625
Net loss				(784,711)	(395,258)	(1,179,969)
Ending Balance, Amount at Sep. 30, 2019	$ 3,165	$ 1,000	$ 442,014	$ (4,133,325)	$ (980,716)	$ (4,667,862)
Ending Balance, Shares at Sep. 30, 2019	3,165,625

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 18, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	1847 Holdings LLC
Entity Central Index Key	0001599407
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Common Stock, Shares Outstanding		3,165,625
Entity File Number	333-193821
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	DE

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Inventories (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Subtotal	$ 2,670,263	$ 587,236
Allowance for inventory obsolescence	(99,546)	(99,546)
Inventories, net	2,570,717	487,690
Machinery and Equipment [Member]
Subtotal	189,452	427,551
Parts [Member]
Subtotal	155,252	159,685
Appliances [Member]
Subtotal	1,979,773
Furniture [Member]
Subtotal	303,845
Other [Member]
Subtotal	$ 41,941

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Business Segments

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Business Segments

NOTE 3—BUSINESS SEGMENTS

Summarized financial information concerning the Company's reportable segments is presented below:

	For the Nine Months Ended September 30, 2019												For the Nine Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	2,293,765		$	-		$	-		$	2,293,765		$	2,543,087		$	-	$	-		$	2,543,087
Sales of parts and equipment		1,523,031			-			-			1,523,031			1,155,668			-		-			1,155,668
Furniture and appliances revenue		-			22,748,153			-			22,748,153			-			-		-			-
Total Revenue		3,816,796			22,748,153			-			26,564,949			3,698,755			-		-			3,698,755
Total cost of sales		1,369,440			18,886,115			-			20,255,556			1,034,786			-		-			1,034,786
Total operating expenses		4,104,427			4,765,211			119,458			8,989,096			4,249,254			-		256,679			4,505,933
Loss from operations	$	(1,657,071	)	$	(903,173	)	$	(119,458	)	$	(2,679,703	)	$	(1,585,285	)	$	-	$	(256,679	)	$	(1,841,964	)

	For the Three Months Ended September 30, 2019												For the Three Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	742,041		$	-		$	-		$	742,041		$	883,460		$	-	$	-		$	883,460
Sales of parts and equipment		670,221			-			-			670,221			583,054			-		-			583,054
Furniture and appliances revenue		-			12,132,103			-			12,132,103			-			-		-			-
Total Revenue		1,412,262			12,132,103			-			13,544,365			1,466,514			-		-			1,466,514
Total cost of sales		596,286			10,113,543			-			10,709,829			478,195			-		-			478,195
Total operating expenses		1,346,937			2,571,324			39,582			3,957,843			1,413,428			-		7,251			1,420,679
Loss from operations	$	(530,961	)	$	(552,764	)	$	(39,582	)	$	(1,123,307	)	$	(425,109	)	$		$	(7,251	)	$	(432,360	)

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Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Total services	$ 742,041	$ 883,460	$ 2,293,765	$ 2,543,087
Sales of parts and equipment	670,221	583,054	1,523,031	1,155,668
Total revenue	1,412,262	1,466,514	3,816,796	3,698,755
Trucking [Member]
Total services	383,709	568,004	1,267,550	1,580,032
Waste hauling and pumping [Member]
Total services	40,781	45,349	417,138	296,891
Repairs [Member]
Total services	181,129	163,618	309,330	429,348
Other [Member]
Total services	$ 136,422	$ 106,489	$ 299,747	$ 236,816

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Summary of Significant Accounting Policies (Details Textual)		1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended
	May 10, 2018	Jan. 22, 2018	Sep. 30, 2019 USD ($)	Jun. 30, 2019 Segment	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) shares	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Summary of Significant Accounting Policies (Textual)
Stock Split	5-for-1	1-for-5
Increase/Decrease in issued and outstanding common shares	623,125 to 3,115,625 shares	3,115,500 to 623,125 shares
Obsolescence allowance			$ 99,546			$ 99,546		$ 99,546
Working capital			9,612,640			9,612,640
Unbilled receivables			0			0		139,766
Allowance for loss						$ 29,001		$ 29,001
Potentially dilutive securities | shares						895,565
Net cash used in operating activities						$ (954,532)	$ (1,075,882)
Net loss attributable to 1847 Holdings shareholders			(784,711)		$ (253,162)	(1,978,241)	$ (1,019,893)
Number of segment | Segment				1
January 1, 2019 [Member]
Summary of Significant Accounting Policies (Textual)
Financing lease assets			624,157			624,157
Financing lease liabilities			624,157			624,157
Noncurrent financing lease liabilities			$ 559,972			$ 559,972
Secured Convertible Promissory Note [Member]
Summary of Significant Accounting Policies (Textual)
Potentially dilutive securities | shares						200,000
Warrant [Member]
Summary of Significant Accounting Policies (Textual)
Potentially dilutive securities | shares						695,565

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Financing Leases (Details Textual)				1 Months Ended	3 Months Ended	9 Months Ended		10 Months Ended
	Feb. 01, 2018 USD ($)	Jun. 14, 2017 USD ($)	Mar. 03, 2017 USD ($)	Mar. 02, 2018 USD ($)	Sep. 30, 2019 USD ($) Payments	Sep. 30, 2019 USD ($) Payments	Sep. 30, 2018 USD ($)	Oct. 31, 2017 USD ($)	Apr. 18, 2018 USD ($)
Amortization of debt issuance costs						$ 206,313	$ 88,481
Number of payments | Payments					46	46
Forbearance amount									$ 173,376
Forbearance fee					$ 4,500	$ 4,500
Current balance of the term loan					475,000	475,000
Lease payable beginning					12,882	12,882
Lease payable ending					38,000	38,000
Early payout loss					405,674	405,674
Loss from the write-off of unamortized debt issuance costs					95,130	95,130
Delayed payment					85,322	$ 85,322
Master Lease Agreement [Member]
Lease term, description						If any rent is not received by Utica within five (5) calendar days of the due date, the Lessee shall pay a late charge equal to ten (10%) percent of the amount.
Administration fee						$ 5,000
Leases payable description under lease agreement						(a) $162,000 (five percent (5%) of the total invoice cost (as defined in the master lease agreement)); or (b) the fair market value of the equipment, as determined by Utica. Upon the expiration of the master lease agreement, the Lessee is required to pay, together with all other amounts then due and payable under the master lease agreement, in cash, an end of term buyout price equal to the lesser of: (a) $49,000 (five percent (5%) of the total invoice cost); or (b) the fair market value of the equipment, as determined by Utica.
Interest rate, capitalized lease						15.50%
Debt issuance costs						$ 28,070
Amortization of debt issuance costs						3,015
Capital lease term			51 months
Lease rent monthly			$ 53,000
Number of months			3 months
Increased monthly rent			$ 85,322
Number of months for increased rent			48 months
Payments made to related party against loan taken for equipment						$ 90,260
Net lien release payment					0
Payments of lease agreement					$ 116,067
Master Lease Agreement [Member] | Utica [Member]
Proceeds from capital lease								$ 980,000
Capital lease term								51 months
Lease rent monthly	$ 53,000							$ 25,807
Number of months	3 months
Late payment fee	$ 2,650			$ 5,300
Master Lease Agreement [Member] | First amendment lease documentst [Member]
Administration fee		$ 2,500
Capital lease term		57 months
Lease rent monthly		$ 53,000
Number of months		10 months
Increased monthly rent		$ 85,322
Number of months for increased rent		47 months
Master Lease Agreement [Member] | Utica Leaseco, LLC [Member] | Equipment [Member]
Proceeds from capital lease			$ 3,240,000

XML

Term Loans (Details Textual) - USD ($)		3 Months Ended	9 Months Ended
	Jun. 13, 2018	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Term Loans (Textual)
Amortization of debt issuance costs			$ 206,313	$ 88,481
Note payable amount		$ 456,228	$ 456,228
Leonite [Member] | April 5, 2019 [Member]
Term Loans (Textual)
Warrant term			5 years
SBCC [Member] | April 5, 2019 [Member]
Term Loans (Textual)
Term loan principal amount		1,500,000	$ 1,500,000
Warrant term			10 years
Debt instrument, interest rate description			Interest at the sum of the cash interest rate (defined as 11% per annum) plus the PIK interest rate (defined as 2% per annum); provided that upon an event of default all principal, past due interest and all fees shall bear interest at a per annum rate equal to the cash interest rate and the PIK interest rate, in each case plus 3.00%.
Debt instrument, periodic payment			$ 93,750
Debt instrument, maturity date range, end			Apr. 05, 2023
Note payable amount		1,049,186	$ 1,049,186
Notes payable principal amount		1,406,250	1,406,250
Unamortized debt discount		155,750	155,750
Debt instrument unamortized warrants		$ 201,314	$ 201,314
Fully-diluted basis an aggregate price		$ 100	$ 100
Loan prepayment event, description			(i) prior to the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 5.0% of such prepayment, (ii) prior to the second anniversary of the closing date and on or after the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 3.0% of such prepayment, or (iii) prior to the third anniversary of the closing date and on or after the second anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 1.0% of such prepayment, in each case as liquidated damages for damages for loss of bargain to SBCC. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Holdco in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the term note in an aggregate amount equal to 100% of such net proceeds. A “prepayment event” means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Holdco; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Holdco with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Holdco of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.
Neese [Member] | Banking [Member]
Term Loans (Textual)
Debt instrument, periodic payment, principal	$ 3,654,074
Debt instrument, interest rate	6.85%
Debt instrument, periodic payment	$ 302,270
Debt instrument, maturity date range, start	Jan. 20, 2019
Debt instrument, maturity date range, end	Jul. 20, 2020
Debt instrument, maturity date, description	Beginning on January 20, 2019 and continuing every six months thereafter until July 20, 2020, the maturity date; provided however, that Neese will pay the note in full immediately upon demand by Home State Bank.
Debt instrument, lease buyout amount			$ 3,361,499
Debt instrument, remaining balance of lease			3,376,757
Interest payment of promissory notes			40,000
Repayment of secured loan		$ 27,000	0
Debt issuance costs, net		51,427	51,427
Amortization of debt issuance costs			16,210
Unamortized debt discount		$ 15,258	$ 15,258
Debt coverage ratio, description	Annual interest rate of 6.85% with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2019.

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Intangible Assets (Details 1) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Finite-Lived Intangible Assets, Net [Abstract]
2019 (remainder)	$ 1,700
2020	6,800
2021	6,800
2022	1,133
Total	$ 16,433	$ 21,533

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Inventories (Details 1) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Inventory, Net [Abstract]
Balance at beginning of period	$ 99,546	$ 70,000
Provisions for obsolescence		48,000
Write-down in inventory value		(18,454)
Balance at end of period	$ 99,546	$ 99,546

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Acquisition (Details Textual) - USD ($)	3 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Acquisition (Textual)
Business acquisition purchase price payable in promissory note						$ 8,000
Revenue	13,544,365	$ 1,466,514		26,564,949	$ 3,698,755
Net loss	(1,179,969)	$ (426,379)		$ (3,070,968)	$ (1,644,341)
Maximum [Member] | Property, Plant and Equipment [Member]
Acquisition (Textual)
Estimated useful life				5 years
Minimum [Member] | Property, Plant and Equipment [Member]
Acquisition (Textual)
Estimated useful life				4 years
Goedeker Television [Member] | April 5, 2019 [Member]
Acquisition (Textual)
Business acquisition purchase price payable earn out payments	20,000		20,000	$ 20,000
Additional consideration description				Television is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.
Business acquisition purchase price in cash description				Goedeker Business for any applicable period is less than $2,500,000 but greater than $1,500,000, Goedeker must pay a partial earn out payment to Goedeker Television in an amount equal to the product determined by multiplying (i) the EBITDA Achievement Percentage by (ii) the applicable earn out payment for such period, where the "Achievement Percentage" is the percentage determined by dividing (A) the amount of (i) the EBITDA of the Goedeker Business for the applicable period less (ii) $1,500,000, by (B) $1,000,000. For avoidance of doubt, no partial earn out payments shall be earned or paid to the extent the EBITDA of the Goedeker Business for any applicable period is equal or less than $1,500,000.
Earn out payments description				Goedeker Television is also entitled to receive the following earn out payments to the extent the Goedeker Business achieves the applicable EBITDA (as defined in the asset purchase agreement) targets: 1. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the closing date is $2,500,000 or greater; 2. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the first anniversary of closing date is $2,500,000 or greater; and 3. An earn out payment of $200,000 if the EBITDA of the Goedeker Business for the trailing twelve (12) month period from the second anniversary of the closing date is $2,500,000 or greater.
Fair value of net assets				$ 535,940
Capitalized financing costs				215,500
Goedeker [Member]
Acquisition (Textual)
Revenue			22,748,000
Net loss			1,548,000
Goedeker [Member] | April 5, 2019 [Member]
Acquisition (Textual)
Business acquisition purchase price	6,200,000		6,200,000	6,200,000
Business acquisition purchase price payable in promissory note	4,100,000		4,100,000	4,100,000
Business acquisition purchase price in cash	1,500,000		1,500,000	1,500,000
Business acquisition purchase price payable earn out payments	600,000		600,000	$ 600,000
Additional consideration description				1847 Holdco agreed to issue to each of the Stockholders a number of shares of its common stock equal to a 11.25% non-dilutable interest (22.5% total) in all of the issued and outstanding stock of 1847 Holdco as of the closing date.
Adjusted cash portion	$ 478,000		$ 478,000	$ 478,000
Business acquisition purchase price in cash description				The cash portion of the purchase price is subject to a customary post-closing working capital adjustment provision with a target working capital of $(1,802,000) (negative amount).

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Lines of Credit

9 Months Ended

Sep. 30, 2019

Lines of Credit [Abstract]

LINES OF CREDIT

NOTE 10—LINES OF CREDIT

Burnley Capital LLC

On April 5, 2019, Goedeker, as borrower, and 1847 Holdco entered into a loan and security agreement with Burnley Capital LLC ("Burnley") for revolving loans in an aggregate principal amount that will not exceed the lesser of (i) the borrowing base or (ii) $1,500,000 (provided that such amount may be increased to $3,000,000 in Burnley's sole discretion) minus reserves established Burnley at any time in accordance with the loan and security agreement. The "borrowing base" means an amount equal to the sum of the following: (i) the product of 85% multiplied by the liquidation value of Goedeker's inventory (net of all liquidation costs) identified in the most recent inventory appraisal by an appraiser acceptable to Burnley (ii) multiplied by Goedeker's eligible inventory (as defined in the loan and security agreement), valued at the lower of cost or market value, determined on a first-in-first-out basis. In connection with the closing of the Acquisition on April 5, 2019, Goedeker borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. The balance of the line of credit amounts to $576,962 as of September 30, 2019, comprised of principal of $675,295 and net of unamortized debt discount of $98,333.

The revolving note matures on April 5, 2022, provided that at Burnley's sole and absolute discretion, it may agree to extend the maturity date for two successive terms of one year each. The revolving note bears interest at a per annum rate equal to the greater of (i) the LIBOR Rate (as defined in the loan and security agreement) plus 6.00% or (ii) 8.50%; provided that upon an event of default (as defined below) all loans, all past due interest and all fees shall bear interest at a per annum rate equal to the foregoing rate plus 3.00%. Goedeker shall pay interest accrued on the revolving note in arrears on the last day of each month commencing on April 30, 2019.

Goedeker may at any time and from time to time prepay the revolving note in whole or in part. If at any time the outstanding principal balance on the revolving note exceeds the lesser of (i) the difference of the total loan amount minus any reserves and (ii) the borrowing base, then Goedeker shall immediately prepay the revolving note in an aggregate amount equal to such excess. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Holdco in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the revolving note in an aggregate amount equal to 100% of such net proceeds. A "prepayment event" means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Holdco; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Holdco with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Holdco of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

Under the loan and security agreement, Goedeker is required to pay a number of fees to Burnley, including the following:

● a commitment fee during the period from closing to the earlier of the maturity date or termination of Burnley's commitment to make loans under the loan and security agreement, which shall accrue at the rate of 0.50% per annum on the average daily difference of the total loan amount then in effect minus the sum of the outstanding principal balance of the revolving note, which such accrued commitment fees are due and payable in arrears on the first day of each calendar month and on the date on which Burnley's commitment to make loans under the loan and security agreement terminates, commencing on the first such date to occur after the closing date;

● an annual loan facility fee equal to 0.75% of the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), which is fully earned on the closing date for the term of the loan (including any extension) but shall be due and payable on each anniversary of the closing date;

● a monthly collateral management fee for monitoring and servicing the revolving loan equal to $1,700 per month for the term of revolving note, which is fully earned and non-refundable as of the date of the loan and security agreement, but shall be payable monthly in arrears on the first day of each calendar month; provided that payment of the collateral management fee may be made, at the discretion of Burnley, by application of advances under the revolving loan or directly by Goedeker; and

● if the revolving loan is terminated for any reason, including by Burnley following an event of default, then Goedeker shall pay, as liquidated damages and compensation for the costs of being prepared to make funds available, an amount equal to the applicable percentage multiplied by the revolving commitment (i.e., the maximum amount that Goedeker may borrow under the revolving loan), wherein the term applicable percentage means (i) 3%, in the case of a termination on or prior to the first anniversary of the closing date, (ii) 2%, in the case of a termination after the first anniversary of the closing date but on or prior to the second anniversary thereof, and (iii) 0.5%, in the case of a termination after the second anniversary of the closing date but on or prior to the maturity date.

The loan and security agreement contains customary events of default, including, among others: (i) for failure to pay principal and interest on the revolving note when due, or to pay any fees due under the loan and security agreement; (ii) if any representation, warranty or certification in the loan and security agreement or any document delivered in connection therewith is incorrect in any material respect; (iii) for failure to perform any covenant or agreement contained in the loan and security agreement or any document delivered in connection therewith; (iv) for the occurrence of any default in respect of any other indebtedness of more than $100,000; (v) for any voluntary or involuntary bankruptcy, insolvency or dissolution; (vi) for the occurrence of one or more judgments, non-interlocutory orders, decrees or arbitration awards involving in the aggregate a liability of $25,000 or more; (vii) if Goedeker or 1847 Holdco, or officer thereof, is charged by a governmental authority, criminally indicted or convicted of a felony under any law that would reasonably be expected to lead to forfeiture of any material portion of collateral, or such entity is subject to an injunction restraining it from conducting its business; (viii) if Burnley determines that a material adverse effect (as defined in the loan and security agreement) has occurred; (ix) if a change of control (as defined in the loan and security agreement) occurs; (x) if there is any material damage to, loss, theft or destruction of property which causes, for more than thirty consecutive days beyond the coverage period of any applicable business interruption insurance, the cessation or substantial curtailment of revenue producing activities; (xi) if there is a loss, suspension or revocation of, or failure to renew any permit if it could reasonably be expected to have a material adverse effect; and (xii) for the occurrence of any default or event of default under the term loan with SBCC (as defined below), the 9% subordinated promissory note issued to Goedeker Television, the secured convertible promissory note issued to Leonite (as defined below) or any other debt that is subordinated to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The revolving note is secured by a first priority security interest in all of the assets of Goedeker and 1847 Holdco. In connection with such security interest, on April 5, 2019, (i) 1847 Holdco entered into a pledge agreement with Burnley, pursuant to which 1847 Holdco pledged the shares of Goedeker held by it to Burnley, and (ii) Goedeker entered into a deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker's bank accounts.

In addition, on April 5, 2019, the Company entered into a guaranty with Burnley to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of Burnley to receive payments under the revolving note are subordinate to the rights of Northpoint (as defined below) under a subordination agreement that Burnley entered into with Northpoint.

At September 30, 2019, Goedeker did not meet certain loan covenants under the loan and security agreement. The agreement requires compliance with the following ratios as a percentage of earnings before interest, taxes, depreciation, and amortization for the twelve-month period ended September 30, 2019. The table below shows the required ratio and actual ratio for such period.

Covenant	Actual Ratio	Required Ratio
Total debt ratio	(9.6)x	4.50x
Senior debt ratio	(3.7)x	1.75x
Interest coverage ratio	(0.7)x	1.0x

In addition, Goedeker was not in compliance with a requirement with respect to the liquidity ratio, which is the ratio of cash and available borrowings to customer deposits. At September 30, 2019, the actual ratio was 0.24x compared to a requirement of 0.65x

The loan and security agreement with SBCC described below contains the same covenants and a cross default provision, whereby a default under the Burnley loan and security agreement triggers a default under the SBCC loan and security agreement. Accordingly, the Company is in technical, not payment default, on these loan and security agreements and has classified such debt as a current liability. The Company has developed plans that will return it to full compliance including a recently received proposal from a new asset-based lender.

There are no cross default provisions that would require any other long-term liabilities to be classified as current. Although the 9% subordinated promissory note described below contains a cross default provision that is triggered by the acceleration of the senior debt, such cross default provision would only be triggered for a technical default like the one that occurred if the senior lender accelerated the senior debt, which has not happened.

Northpoint Commercial Finance LLC

On June 24, 2019, Goedeker, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC ("Northpoint"), which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by Goedeker of inventory at an interest rate of LIBOR plus 7.99%. The balance of the line of credit amounts to $736,788 as of September 30, 2019.

Pursuant to the loan and security agreement, Goedeker shall pay the following fees to Northpoint: (i) an audit fee for each audit conducted as determined by Northpoint, equal to the out-of-pocket expense incurred by Northpoint plus any minimum audit fee established by Northpoint; (ii) a fee for any returned payments equal to the lesser of the maximum amount permitted by law or $50; (iii) a late fee for each payment not received by the 25^th day of a calendar month, and each month thereafter until such payment is paid, equal to the greater of 5% of the amount past due or $25; (iv) a billing fee equal to $250 for any month for which Goedeker requests a paper billing statement; (v) a live check fee equal to $50 for each check that Goedeker sends to Northpoint for payment of obligations under the loan and security agreement; (vi) processing fees to be determined by Northpoint; and (vii) any additional fees that Northpoint may implement from time to time.

The loan and security agreement contains customary events of default, including in the event of (i) non-payment, (ii) a breach by Goedeker of any of its representations, warranties or covenants under the loan and security agreement or any other agreement entered into with Northpoint, or (iii) the bankruptcy or insolvency of Goedeker.  The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type.

The Northpoint loans are secured by a security interest in all of the inventory of Goedeker that is manufactured or sold by vendors identified in the loan and security agreement. In connection with the loan and security agreement, on June 24, 2019, 1847 Holdco entered into a guaranty in favor of Northpoint, to guaranty the obligations of Goedeker under the loan and security agreement.

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Deposits with Vendors

9 Months Ended

Sep. 30, 2019

Deposits With Vendors [Abstract]

Deposits With Vendors

NOTE 6—DEPOSITS WITH VENDORS

Deposits with vendors represent cash on deposit with one vendor arising from accumulated rebates paid by the vendor. The deposits are used by the vendor to seek to secure the Company's purchases. The deposit can be withdrawn at any time up to the amount of the Company's credit line with the vendor. Alternatively, the Company could secure their credit line with a floor plan line from a lender and withdraw all its deposits. The Company has elected to leave the deposits with the vendor on which it earns interest income. In the acquisition of assets of Goedeker Television, Goedeker Television retained the vendor deposits.

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Supplemental Disclosures of Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Information [Abstract]

Supplemental disclosures of cash flow information

	For the Nine Months Ended September 30,
	2019			2018
Interest paid	$	815,021		$	413,018
Income tax paid		-			-
Business Combinations:
Current Assets	$	3,308,301		$	-
Property and equipment		206,612			-
Working capital adjustment receivable		554,636			-
Assumed liabilities		(4,668,977	)		-
Goodwill		6,531,560			-
Cash acquired in acquisition of Goedeker		1,135,368			-
Financing:
Term Loan		1,500,000			-
Debt discount financing costs		(178,000	)		-
Warrant feature upon issuance of term loan		(229,244	)		-
Term loan, net		1,092,756			-
Line of Credit		754,682			-
Debt discount on line of credit		(128,682	)		-
Issuance of common shares on promissory note		(137,500	)		-
Line of Credit, net		488,500			-
Promissory Note		714,286			-
Promissory Note original issue and debt discount		(79,286	)		-
Warrants issued in conjunction with notes payable		(292,673	)		-
Promissory Note, net		342,327			-
9% Subordinated Promissory Note		4,700,000			-
Debt discount financing costs		(215,500	)		-
9% Subordinated Promissory Note, net		4,484,500			-
Warrant liability		229,244			-
Additional Paid in Capital – common shares and warrants issued	$	430,173		$	-
Operating lease, ROU assets and liabilities	$	3,325,558		$	-

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Inventories (Tables)

9 Months Ended

Sep. 30, 2019

Inventory, Net [Abstract]

Schedule of Inventory

	September 30, 2019			December 31, 2018
Machinery and Equipment	$	189,452		$	427,551
Parts		155,252			159,685
Appliances		1,979,773			-
Furniture		303,845			-
Other		41,941			-
Subtotal		2,670,263			587,236
Allowance for inventory obsolescence		(99,546	)		(99,546	)
Inventories, net	$	2,570,717		$	487,690

Schedule of transactions in the allowance for inventory

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	99,546	$	70,000
Provisions for obsolescence		-		48,000
Write-down in inventory value		-		(18,454	)
Balance at end of period	$	99,546	$	99,546

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Lines of Credit (Tables)

9 Months Ended

Sep. 30, 2019

Lines of Credit [Abstract]

Schedule of percentage of earnings before interest, taxes, depreciation, and amortization

Covenant	Actual Ratio	Required Ratio
Total debt ratio	(9.6)x	4.50x
Senior debt ratio	(3.7)x	1.75x
Interest coverage ratio	(0.7)x	1.0x

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Lines of Credit (Details)	12 Months Ended
	Sep. 30, 2019
Total debt ratio [Member]
Actual Ratio	(9.6)
Required Ratio	4.50
Senior debt ratio [Member]
Actual Ratio	(3.7)
Required Ratio	1.75
Interest coverage ratio [Member]
Actual Ratio	(0.7)
Required Ratio	1.0

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Intangible Assets (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Intangible Assets (Textual)
Weighted average estimated useful life	5 years
Amortization expense	$ 5,100	$ 5,100	$ 5,100
Customer Relationships [Member]
Intangible Assets (Textual)
Identifiable intangible assets	34,000	34,000
Amortization expense	$ 17,567	$ 12,467

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Property and Equipment (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Total	$ 7,131,697	$ 6,931,020
Less: Accumulated depreciation	(3,464,590)	(2,439,931)
Property and equipment, net	3,667,107	4,491,089
Buildings and improvements [Member]
Total	5,338	5,338
Equipment and machinery [Member]
Total	3,026,541	2,943,490
Tractors [Member]
Total	2,834,888	2,834,888
Trucks and other vehicles [Member]
Total	1,147,304	1,147,304
Leasehold improvements [Member]
Total	$ 117,626

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Supplemental Disclosures of Cash Flow Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Supplemental Cash Flow Information [Abstract]
Interest paid	$ 815,021	$ 413,018
Income tax paid
Business Combinations:
Current Assets	5,561,627		$ 1,517,116
Property and equipment	7,131,697		6,931,020
Working capital adjustment receivable	554,636
Assumed liabilities	23,194,425		8,079,346
Goodwill	6,553,727		22,166
Cash acquired in acquisition of Goedeker	1,135,368
Financing:
Term Loan	1,500,000
Debt discount financing costs	(215,500)
Warrant feature upon issuance of term loan	(229,244)
Term loan, net	1,092,756
Line of Credit	754,682
Debt discount on line of credit	(128,682)
Issuance of common shares on promissory note	(137,500)
Line of Credit, net	488,500
Promissory Note	714,286
Promissory Note original issue and debt discount	(79,286)
Warrants issued in conjunction with notes payable	(292,673)
Promissory Note, net	342,327
9% Subordinated Promissory Note	4,700,000
Debt discount financing costs	(215,500)
9% Subordinated Promissory Note, net	4,484,500
Warrant liability	172,144
Additional Paid in Capital - common shares and warrants issued	442,014		$ 11,891
Operating lease, ROU assets and liabilities	$ 3,325,558

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Term Loans

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

TERM LOANS

NOTE 11—TERM LOANS

SBCC

On April 5, 2019, Goedeker, as borrower, and 1847 Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. ("SBCC") for a term loan in the principal amount of $1,500,000, pursuant to which Goedeker issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of Goedeker equal to 5.0% of the outstanding equity securities of Goedeker on a fully-diluted basis for an aggregate price equal to $100. The balance of the note amounts to $1,049,186 as of September 30, 2019, comprised of principal of $1,406,250 and net of unamortized debt discount of $155,750 and unamortized warrant feature of $201,314.

The term note matures on April 5, 2023 and bears interest at the sum of the cash interest rate (defined as 11% per annum) plus the PIK interest rate (defined as 2% per annum); provided that upon an event of default all principal, past due interest and all fees shall bear interest at a per annum rate equal to the cash interest rate and the PIK interest rate, in each case plus 3.00%. Interest accrued at the cash interest rate shall be due and payable in arrears on the last day of each month commencing May 31, 2019. Interest accrued at the PIK interest rate shall be automatically capitalized, compounded and added to the principal amount of the term note on each last day of each quarter unless paid in cash on or prior to the last day of each quarter; provided that (i) interest accrued pursuant to an event of default shall be payable on demand, and (ii) in the event of any repayment or prepayment, accrued interest on the principal amount repaid or prepaid (including interest accrued at the PIK interest rate and not yet added to the principal amount of term note) shall be payable on the date of such repayment or prepayment. Notwithstanding the foregoing, all interest on term note, whether accrued at the cash interest rate or the PIK interest rate, shall be due and payable in cash on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker must repay to SBCC on the last business day of each March, June, September and December, commencing with the last business day of June 2019, an aggregate principal amount of the term note equal to $93,750, regardless of any prepayments made, and must pay the unpaid principal on the maturity date unless payment is sooner required by the loan and security agreement.

Goedeker may prepay the term note in whole or in part from time to time; provided that if such prepayment occurs (i) prior to the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 5.0% of such prepayment, (ii) prior to the second anniversary of the closing date and on or after the first anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 3.0% of such prepayment, or (iii) prior to the third anniversary of the closing date and on or after the second anniversary of the closing date, Goedeker shall pay SBCC an amount equal to 1.0% of such prepayment, in each case as liquidated damages for damages for loss of bargain to SBCC. In addition, in the event and on each occasion that any net proceeds (as defined in the loan and security agreement) are received by or on behalf of Goedeker or 1847 Holdco in respect of any prepayment event following the occurrence and during the continuance of an event of default, Goedeker shall, immediately after such net proceeds are received, prepay the term note in an aggregate amount equal to 100% of such net proceeds. A "prepayment event" means (i) any sale, transfer, merger, liquidation or other disposition (including pursuant to a sale and leaseback transaction) of any property of Goedeker or 1847 Holdco; (ii) a change of control (as defined in the loan and security agreement); (iii) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property of Goedeker or 1847 Holdco with a fair value immediately prior to such event equal to or greater than $25,000; (iv) the issuance by Goedeker of any capital stock or the receipt by Goedeker of any capital contribution; or (v) the incurrence by Goedeker or 1847 Holdco of any indebtedness (as defined in the loan and security agreement), other than indebtedness permitted under the loan and security agreement.

The loan and security agreement with SBCC contains the same events of default as the loan and security agreement with Burnley, provided that the reference to the term loan in the cross-default provision refers instead to the revolving loan.

The loan and security agreement contains customary representations, warranties and affirmative and negative financial and other covenants for a loan of this type. The term note is secured by a second priority security interest (subordinate to the revolving loan) in all of the assets of Goedeker and 1847 Holdco. In connection with such security interest, on April 5, 2019, (i) 1847 Holdco entered into a pledge agreement with SBCC, pursuant to which 1847 Holdco pledged the shares of Goedeker held by it to SBCC, and (ii) Goedeker entered deposit account control agreement with Burnley, SBCC and Montgomery Bank relating to the security interest in Goedeker's bank accounts.

In addition, on April 5, 2019, the Company entered into a guaranty with SBCC to guaranty the obligations under the loan and security agreement upon the occurrence of certain prohibited acts described in the guaranty.

The rights of SBCC to receive payments under the term note are subordinate to the rights of Northpoint and Burnley under separate subordination agreements that SBCC entered into with them.

As noted above, the Company is in technical, not payment default, on this loan and security agreement and has classified such debt as a current liability.

Home State Bank

On June 13, 2018, Neese entered into a term loan agreement with Home State Bank, pursuant to which Neese issued a promissory note to Home State Bank in the principal amount of $3,654,074 with an annual interest rate of 6.85% with covenants to maintain a minimum debt coverage ratio of 1.00 to 1.25 measured at December 31, 2019. Pursuant to the terms of the note, Neese will make semi-annual payments of $302,270 beginning on January 20, 2019 and continuing every six months thereafter until July 20, 2020, the maturity date; provided however, that Neese will pay the note in full immediately upon demand by Home State Bank. The balance of the note amounts to $3,361,499 as of September 30, 2019, comprised of principal of $3,376,757 and net of unamortized debt discount of $15,258.

The loan agreement contains customary representations and warranties. Pursuant to the terms of the loan agreement and the note, an "event of default" includes: (i) if Neese fails to make any payment when due under the note; (ii) if Neese fails to comply with or to perform any other term, obligation, covenant or condition contained in the note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Home State Bank and Neese; (iii) if Neese defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Home State Bank's property or Neese's ability to repay the note or perform Neese's obligations under the note or any of the related documents; (iv) if any warranty, representation or statement made or furnished to Home State Bank by Neese or on Neese's behalf under the note or the related documents is false or misleading in any material respect; (v) upon the dissolution or termination of Neese's existence as a going business, the insolvency of Neese, the appointment of a receiver for any part of Neese's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Neese, (vi) upon commencement of foreclosure or forfeiture proceedings by any creditor of Neese or by any governmental agency against any collateral securing the loan; and (vii) if a material adverse change occurs in Neese's financial condition, or Home State Bank believes the prospect of payment or performance of the note is impaired. If any event of default occurs, all commitments and obligations of Home State Bank immediately will terminate and, at Home State Bank's option, all indebtedness immediately will become due and payable, all without notice of any kind to Neese. Additionally, upon an event of default, the interest rate on the note will be increased by 3 percentage points. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.

The loan is secured by inventory, accounts receivable, and certain fixed assets of Neese. The loan agreement limited the payment of interest on certain promissory notes (See Note 14) to $40,000 annually or fees to the Company's manager. The Company continues to accrue interest and management fee at the contractual amounts. Such accruals (in excess of $40,000 in interest on the promissory notes) are shown as long-term accrued expenses in the accompanying balance sheet as of June 30, 2019.

If the Company sells property, plant, and equipment securing the loan, it must remit the appraised value of the equipment to Home State Bank. During the nine months ended September 30, 2019, $0 was remitted to Home State Bank pursuant to this requirement. During the three months ended, September 30, 2019, Home State Bank advanced $27,000 against the term loan to pay the annual liability insurance premium.

The Company adopted ASU 2015-03 by deducting $51,427 of net debt issuance costs from the term loan. Amortization of debt issuance costs totaled $16,210 for the three months ended September 30, 2019.

Following is a summary of payments due on the SBCC and Home State Bank terms loan for the succeeding five years:

	Amount
2019 (remainder)	$	187,500
2020		3,751,757
2021		375,000
2022		375,000
2023		93,750
Total payments		4,783,007
Less current portion of principal payments		4,783,007
Debt issuance costs, net		(372,322	)
Long-term portion of principal payments	$	-

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Property and Equipment

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

NOTE 7—PROPERTY AND EQUIPMENT

Property and equipment consist of the following at September 30, 2019 and December 31, 2018:

Classification	September 30, 2019			December 31, 2018
Buildings and improvements	$	5,338		$	5,338
Equipment and machinery		3,026,541			2,943,490
Tractors		2,834,888			2,834,888
Trucks and other vehicles		1,147,304			1,147,304
Leasehold improvements		117,626			-
Total		7,131,697			6,931,020
Less: Accumulated depreciation		(3,464,590	)		(2,439,931	)
Property and equipment, net	$	3,667,107		$	4,491,089

Depreciation expense for the nine months ended September 30, 2019 and 2018 was $1,032,143 and $1,054,233, respectively.

All property and equipment are pledged to secure loans from Burnley, SBCC and Home State Bank as described and defined in the notes below.

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Receivables (Tables)

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Schedule of receivables

	September 30, 2019			December 31, 2018
Credit card payments in process of settlement	$	490,737		$	-
Vendor rebates receivable		967,565			-
Trade receivables from customers		360,685			578,569
Total receivables		1,818,987			578,569
Allowance for doubtful accounts		(29,001	)		(29,001	)
Accounts receivable, net	$	1,789,986		$	549,568

Schedule of allowance for doubtful accounts

	September 30, 2019		December 31, 2018
Balance at beginning of period	$	29,001	$	14,001
Provisions for losses		-		15,000
Accounts charged-off		-		-
Balance at end of period	$	29,001	$	29,001

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Acquisition (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Schedule of preliminary analysis for the Goedeker asset purchase

Provisional Purchase Consideration at preliminary fair value:
Note payable, net of $215,500 of capitalized financing costs	$	4,484,500
Financing of acquisition through notes payable, common stock and warrants (see Note 19)		2,583,000
Amount of consideration	$	7,067,500
Assets acquired and liabilities assumed at preliminary fair value
Cash	$	1,135,368
Accounts receivable		792,173
Inventories		2,516,128
Working capital adjustment receivable and other assets		554,636
Property and equipment		206,612
Accounts payable and accrued expenses		(2,472,568	)
Customer deposits		(2,196,409	)
Other liabilities		-
Net tangible assets acquired	$	535,940
Total net assets acquired	$	535,940
Consideration paid		7,067,500
Preliminary goodwill	$	6,531,560

	For the Nine Months Ended September 30,
	2019			2018
Revenues, net	$	39,511,848		$	46,582,000
Net income (loss) allocable to common shareholders	$	(2,423,507	)	$	544,000
Net loss per share	$	(0.77	)	$	0.17
Weighted average number of shares outstanding		3,165,625			3,165,625

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Operating Lease (Tables)

9 Months Ended

Sep. 30, 2019

Operating Lease, Lease Income [Abstract]

Schedule of supplemental balance sheet information

	September 30, 2019
Operating lease right-of-use lease asset	$	624,157
Accumulated amortization		(43,928	)
Net balance	$	580,229
Lease liability, current portion		62,182
Lease liability, long term		518,047
Total operating lease liabilities	$	580,229
Weighted Average Remaining Lease Term - operating leases		89 Months
Weighted Average Discount Rate - operating leases		6.85	%

Schedule of maturities of the lease liability

	For the Years Ended
2019 (October to December)	$	25,000
2020		100,000
2021		100,000
2022		100,000
2023		100,000
2024		100,000
Thereafter		216,667
Total lease payments		741,667
Less imputed interest		161,437
Maturities of lease liabilities	$	580,230

	For the Years Ended
2019 (October to December)	$	135,000
2020		540,000
2021		540,000
2022		540,000
2023		540,000
2024		135,000
Total lease payments		2,430,000
Less imputed interest		(327,935	)
Maturities of lease liabilities	$	2,102,065

Supplemental balance sheet information related to leases

	September 30, 2019
Operating lease right-of-use lease asset	$	2,300,000
Accumulated amortization		(197,935	)
Net balance	$	2,102,065
Lease liability, current portion		373,860
Lease liability, long term		1,728,205
Total operating lease liabilities	$	2,102,065
Weighted Average Remaining Lease Term - operating leases		54 Months
Weighted Average Discount Rate - operating leases		6.5	%

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Business Segments (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Business Segments

For the Nine Months Ended September 30, 2019												For the Nine Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	2,293,765		$	-		$	-		$	2,293,765		$	2,543,087		$	-	$	-		$	2,543,087
Sales of parts and equipment		1,523,031			-			-			1,523,031			1,155,668			-		-			1,155,668
Furniture and appliances revenue		-			22,748,153			-			22,748,153			-			-		-			-
Total Revenue		3,816,796			22,748,153			-			26,564,949			3,698,755			-		-			3,698,755
Total cost of sales		1,369,440			18,886,115			-			20,255,556			1,034,786			-		-			1,034,786
Total operating expenses		4,104,427			4,765,211			119,458			8,989,096			4,249,254			-		256,679			4,505,933
Loss from operations	$	(1,657,071	)	$	(903,173	)	$	(119,458	)	$	(2,679,703	)	$	(1,585,285	)	$	-	$	(256,679	)	$	(1,841,964	)

	For the Three Months Ended September 30, 2019												For the Three Months Ended September 30, 2018
	Land Management Services			Retail & Appliances			Corporate Services			Total			Land Management Services			Retail & Appliances		Corporate Services			Total
Revenue
Services	$	742,041		$	-		$	-		$	742,041		$	883,460		$	-	$	-		$	883,460
Sales of parts and equipment		670,221			-			-			670,221			583,054			-		-			583,054
Furniture and appliances revenue		-			12,132,103			-			12,132,103			-			-		-			-
Total Revenue		1,412,262			12,132,103			-			13,544,365			1,466,514			-		-			1,466,514
Total cost of sales		596,286			10,113,543			-			10,709,829			478,195			-		-			478,195
Total operating expenses		1,346,937			2,571,324			39,582			3,957,843			1,413,428			-		7,251			1,420,679
Loss from operations	$	(530,961	)	$	(552,764	)	$	(39,582	)	$	(1,123,307	)	$	(425,109	)	$		$	(7,251	)	$	(432,360	)

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Supplemental Disclosures of Cash Flow Information

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Information [Abstract]

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

NOTE 19—SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the nine months ended September 30, 2019 and 2018 were as follows:

	For the Nine Months Ended September 30,
	2019			2018
Interest paid	$	815,021		$	413,018
Income tax paid		-			-
Business Combinations:
Current Assets	$	3,308,301		$	-
Property and equipment		206,612			-
Working capital adjustment receivable		554,636			-
Assumed liabilities		(4,668,977	)		-
Goodwill		6,531,560			-
Cash acquired in acquisition of Goedeker		1,135,368			-
Financing:
Term Loan		1,500,000			-
Debt discount financing costs		(178,000	)		-
Warrant feature upon issuance of term loan		(229,244	)		-
Term loan, net		1,092,756			-
Line of Credit		754,682			-
Debt discount on line of credit		(128,682	)		-
Issuance of common shares on promissory note		(137,500	)		-
Line of Credit, net		488,500			-
Promissory Note		714,286			-
Promissory Note original issue and debt discount		(79,286	)		-
Warrants issued in conjunction with notes payable		(292,673	)		-
Promissory Note, net		342,327			-
9% Subordinated Promissory Note		4,700,000			-
Debt discount financing costs		(215,500	)		-
9% Subordinated Promissory Note, net		4,484,500			-
Warrant liability		229,244			-
Additional Paid in Capital – common shares and warrants issued	$	430,173		$	-
Operating lease, ROU assets and liabilities	$	3,325,558		$	-

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Operating Lease

9 Months Ended

Sep. 30, 2019

Operating Lease, Lease Income [Abstract]

OPERATING LEASE

NOTE 15—OPERATING LEASE

On March 3, 2017, Neese entered into an agreement of lease with K&A Holdings, LLC, a limited liability company that is wholly-owned by officers of Neese. The agreement of lease is for a term of ten (10) years and provides for a base rent of $8,333 per month. In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum. The agreement of lease contains customary events of default, including if Neese shall fail to pay rent within five (5) days after the due date, or if Neese shall fail to perform any other terms, covenants or conditions under the agreement of lease, and other customary representations, warranties and covenants. Under terms of the term loan agreement with Home State Bank (Note 11), the Company may not pay salary or rent to such officers of Neese in excess of $100,000 per year beginning on the date of the term loan agreement, June 13, 2018. The Company is accruing monthly rent, but because of the limitation in the term loan, $183,333 of accrued rent is classified as a long-term accrued liability.

The amount accrued for amounts included in the measurement of operating lease liabilities was $25,000 for the three months ended September 30, 2019.

Supplemental balance sheet information related to leases was as follows:

	September 30, 2019
Operating lease right-of-use lease asset	$	624,157
Accumulated amortization		(43,928	)
Net balance	$	580,229
Lease liability, current portion		62,182
Lease liability, long term		518,047
Total operating lease liabilities	$	580,229
Weighted Average Remaining Lease Term - operating leases		89 Months
Weighted Average Discount Rate - operating leases		6.85	%

Maturities of the lease liability are as follows:

	For the Years Ended
2019 (October to December)	$	25,000
2020		100,000
2021		100,000
2022		100,000
2023		100,000
2024		100,000
Thereafter		216,667
Total lease payments		741,667
Less imputed interest		161,437
Maturities of lease liabilities	$	580,230

Neese leased a piece of equipment on an operating lease. The lease originated in May 2014 for a five year term with annual payments of $11,830 with a final payment in July 2019.

On April 5, 2019, Goedeker entered into a lease agreement with S.H.J., L.L.C., a Missouri limited liability company and affiliate of Goedeker. The lease is for a term five (5) years and provides for a base rent of $45,000 per month. In addition, Goedeker is responsible for all taxes and insurance premiums during the lease term. In the event of late payment, interest shall accrue on the unpaid amount at the rate of eighteen percent (18%) per annum. The lease contains customary events of default, including if: (i) Goedeker shall fail to pay rent within five (5) days after the due date; (ii) any insurance required to be maintained by Goedeker pursuant to the lease shall be canceled, terminated, expire, reduced, or materially changed; (iii) Goedeker shall fail to comply with any term, provision, or covenant of the lease and shall not begin and pursue with reasonable diligence the cure of such failure within fifteen (15) days after written notice thereof to Goedeker; (iv) Goedeker shall become insolvent, make an assignment for the benefit of creditors, or file a petition under any section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States of America or any State thereof; or (v) a receiver or trustee shall be appointed for the leased premises or for all or substantially all of the assets of Goedeker.

Supplemental balance sheet information related to leases was as follows:

	September 30, 2019
Operating lease right-of-use lease asset	$	2,300,000
Accumulated amortization		(197,935	)
Net balance	$	2,102,065
Lease liability, current portion		373,860
Lease liability, long term		1,728,205
Total operating lease liabilities	$	2,102,065
Weighted Average Remaining Lease Term - operating leases		54 Months
Weighted Average Discount Rate - operating leases		6.5	%

Maturities of the lease liability are as follows:

	For the Years Ended
2019 (October to December)	$	135,000
2020		540,000
2021		540,000
2022		540,000
2023		540,000
2024		135,000
Total lease payments		2,430,000
Less imputed interest		(327,935	)
Maturities of lease liabilities	$	2,102,065

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements of the Company have been prepared without audit in accordance with generally accepted accounting principles in the United States of America ("GAAP") and are presented in US dollars.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in the Company's annual report on Form 10-K for the year ended December 31, 2018.

Accounting Basis

The Company uses the accrual basis of accounting and GAAP. The Company has adopted a calendar year end.

Stock Splits

On January 22, 2018, the Company completed a 1-for-5 reverse split of its outstanding common shares. As a result of this stock split, the Company's issued and outstanding common shares decreased from 3,115,500 to 623,125 shares.

On May 10, 2018, the Company completed a 5-for-1 forward stock split of its outstanding common shares. As a result of this stock split, the Company's issued and outstanding common shares increased from 623,125 to 3,115,625 shares.

Accordingly, all share and per share information has been restated to retroactively show the effect of these stock splits.

Segment Reporting

The Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") Topic 280, Segment Reporting, requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders. Beginning with the second quarter of 2019, the Company changed its operating and reportable segments from one segment to two segments: the Land Management Segment, which is operated by Neese, and the Retail and Appliances Segment, which is operated by Goedeker.

The Land Management Segment will be responsible for the activities that provide professional services on waste disposal and land application services based in Grand Junction, Iowa.

The Retail and Appliances Segment will be responsible for the activities in e-commerce destination for home furnishings, including appliances, furniture, bath and kitchen fixtures, décor, lighting and home goods based in St. Louis, Missouri.

The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. These services are reported under "Holding Company" below and these include costs associated with executive management, financing activities and public company compliance.

Cash and Cash Equivalents

The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain Statements of Operations reclassifications have been made in the presentation of the Company's prior financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended September 30, 2019. The Company reclassified certain operating expense accounts in the Consolidated Statement of Operations. The reclassification had no impact on financial position, net income, or shareholder's equity.

Revenue Recognition and Cost of Revenue 

On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification ("ASC") Topic 605, Revenue Recognition. This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer purchase orders, including significant judgments. The Company's adoption of this ASU resulted in no change to the Company's results of operations or balance sheet.

Land Management Segment

Neese's payment terms are due on demand from acceptance of delivery. Neese does not incur incremental costs obtaining purchase orders from customers, however, if Neese did, because all of Neese's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Neese recognizes arises from orders it receives from customers. Neese's performance obligations under the customer orders correspond to each service delivery or sale of equipment that Neese makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the service or equipment sale to be completed. Control of the delivery transfers to customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, Neese's products, which generally occurs at the later of when the customer obtains title to the equipment or when the customer assumes risk of loss. The transfer of control generally occurs at a point of delivery. Once this occurs, Neese has satisfied its performance obligation and Neese recognizes revenue.

Neese also sells equipment by posting it on auction sites specializing in farm equipment. Neese posts the equipment for sale on a "magazine" site for several weeks before the auction. When Neese decides to sell, it moves the equipment to the auction site. The auctions are one day. If Neese accepts a bid, the customer pays the bid price and arranges for pick-up of the equipment.

Transaction Price ‒ Neese agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon service fee. In Neese's contracts with customers, it allocates the entire transaction price to the service fee to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Neese collects concurrently with revenue-producing activities are excluded from revenue.

If Neese continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Substantially all of Neese's sales are to businesses, including farmers or municipalities and very little to individuals.

Disaggregated Revenue ‒ Neese disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Neese's revenue by contract type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues
Trucking	$	383,709	$	568,004	$	1,267,550	$	1,580,032
Waste hauling and pumping		40,781		45,349		417,138		296,891
Repairs		181,129		163,618		309,330		429,348
Other		136,422		106,489		299,747		236,816
Total services		742,041		883,460		2,293,765		2,543,087
Sales of parts and equipment		670,221		583,054		1,523,031		1,155,668
Total revenue	$	1,412,262	$	1,466,514	$	3,816,796	$	3,698,755

Performance Obligations ‒ Performance obligations for the different types of services are discussed below:

● Trucking ‒ Revenues for time and material contracts are recognized when the merchandise or commodity is delivered to the destination specified in the agreement with the customer.

● Waste Hauling and pumping ‒ Revenues for waste hauling and pumping is recognized when the hauling, pumping, and spreading are complete.

● Repairs ‒ Revenues for repairs are recognized upon completion of equipment serviced.

● Sales of parts and equipment ‒ Revenues for the sale of parts and equipment are recognized upon the transfer and acceptance by the customer.

Accounts Receivable, Net ‒ Accounts receivable, net, are amounts due from customers where there is an unconditional right to consideration. Unbilled receivables of $0 and $139,766 are included in this balance at September 30, 2019 and December 31, 2018, respectively. The payment of consideration related to these unbilled receivables is subject only to the passage of time.

Neese reviews accounts receivable on a periodic basis to determine if any receivables will potentially be uncollectible. Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable value. The estimates are based on an analysis of past due receivables, historical bad debt trends, current economic conditions, and customer specific information. After Neese has exhausted all collection efforts, the outstanding receivable balance relating to services provided is written off against the allowance. Additions to the provision for bad debt are charged to expense.

Neese determined that an allowance for loss of $29,001 was required at September 30, 2019 and December 31, 2018.

Retail and Appliances Segment

Goedeker collects the full sales price from the customer at the time the order is placed. Goedeker does not incur incremental costs obtaining purchase orders from customers, however, if Goedeker did, because all Goedeker's contracts are less than a year in duration, any contract costs incurred would be expensed rather than capitalized.

The revenue that Goedeker recognizes arises from orders it receives from customers. Goedeker's performance obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, Goedeker's products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of shipment. Once this occurs, Goedeker has satisfied its performance obligation and Goedeker recognizes revenue. Revenue from the sale of long-term service warranties are recognized net of costs to sell the contracts to the third-party warranty service company.

Transaction Price ‒ Goedeker agrees with customers on the selling price of each transaction. This transaction price is generally based on the agreed upon sales price. In Goedeker's contracts with customers, it allocates the entire transaction price to the sales price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any sales tax, value added tax, and other tax Goedeker collects concurrently with revenue-producing activities are excluded from revenue.

If Goedeker continued to apply legacy revenue recognition guidance for the three and nine months ended September 30, 2019, revenues, gross margin, and net loss would not have changed.

Cost of revenue includes the cost of purchased merchandise plus the cost of delivering merchandise and where applicable installation, net of promotional rebates and other incentives received from vendors.

Substantially all Goedeker's sales are to individual retail consumers.

Disaggregated Revenue ‒ Goedeker disaggregates revenue from contracts with customers by contract type, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Goedeker's revenue by sales type is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Appliance sales	$	10,086,489	$	-	$	18,535,801	$	-
Furniture sales		1,398,843		-		2,969,390		-
Other sales		646,771		-		1,242,962		-
Total revenue	$	12,132,103	$	-	$	22,748,153	$	-

Performance Obligations – Goedeker's performance obligations include delivery of products and, in some instances, performance of services such as installation. Revenue for the sale of merchandise is recognized upon shipment to the customer; or in some instances, upon delivery and installation of the product which typically occur simultaneously.

Receivables

Receivables consist of credit card transactions in the process of settlement. Vendor rebates receivable represent amounts due from manufactures from whom the Company purchases products. Rebates receivable are stated at the amount that management expects to collect from manufacturers, net of accounts payable amounts due the vendor. Rebates are calculated on product and model sales programs from specific vendors. The rebates are paid at intermittent periods either in cash or through issuance of vendor credit memos, which can be applied against vendor accounts payable. Based on the Company's assessment of the credit history with its manufacturers, it has concluded that there should be no allowance for uncollectible accounts. The Company historically collects substantially all of its outstanding rebates receivables. Uncollectible balances are expensed in the period it is determined to be uncollectible.

Allowance for Credit Losses

Provisions for credit losses are charged to income as losses are estimated to have occurred and in amounts sufficient to maintain an allowance for credit losses at an adequate level to provide for future losses on the Company's accounts receivable. The Company charges credit losses against the allowance and credits subsequent recoveries, if any, to the allowance. Historical loss experience and contractual delinquency of accounts receivables, and management's judgment are factors used in assessing the overall adequacy of the allowance and the resulting provision for credit losses. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions or portfolio performance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revisions as more information becomes available.

The allowance for credit losses consists of general and specific components. The general component of the allowance estimates credit losses for groups of accounts receivable on a collective basis and relates to probable incurred losses of unimpaired accounts receivables. The Company records a general allowance for credit losses that includes forecasted future credit losses.

Inventory

Inventory consists of finished products acquired for resale and is valued at the lower-of-cost-or-market with cost determined on a specific item basis for the Neese and of finished products acquired for resale and is valued at the low-of-cost-or-market with cost determined on a average item basis for Goedeker. The Company periodically evaluates the value of items in inventory and provides write-downs to inventory based on its estimate of market conditions. The Company estimated an obsolescence allowance of $99,546 at September 30, 2019 and December 31, 2018.

Property and Equipment

Property and equipment is stated at cost. Depreciation of furniture, vehicles and equipment is calculated using the straight-line method over the estimated useful lives as follows:

	Useful Life (Years)
Building and Improvements	4
Machinery and Equipment	3-7
Tractors	3-7
Trucks and vehicles	3-6

Goodwill and Intangible Assets

In applying the acquisition method of accounting, amounts assigned to identifiable assets and liabilities acquired were based on estimated fair values as of the date of acquisition, with the remainder recorded as goodwill. Identifiable intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets with indefinite lives are tested for impairment within one year of acquisitions or annually as of December 1, and whenever indicators of impairment exist. The fair value of intangible assets are compared with their carrying values, and an impairment loss would be recognized for the amount by which a carrying amount exceeds its fair value.

Acquired identifiable intangible assets are amortized over the following periods:

Acquired intangible Asset	Amortization Basis	Expected Life (years)
Customer-Related	Straight-line basis	5

Long-Lived Assets

The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents and amounts due to shareholders. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts, and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2019, the Company classified a warrant issued in conjunction with a term loan as a derivative instrument. (see Note 11).

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. As the Company had a net loss for the three and nine months ended September 30, 2019, the following 895,565 potentially dilutive securities were excluded from diluted loss per share: 200,000 for outstanding warrants and 695,565 related to the convertible note payable and accrued interest. There are no such common share equivalents outstanding as of September 30, 2018.

Going Concern Assessment

Management assesses going concern uncertainty in the Company's consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the "look-forward period", as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.

The Company has generated losses since its inception and has relied on cash on hand, external bank lines of credit and the sale of a note to support cashflow from operations. As of and for the nine months ended September 30, 2019, the Company had a net loss attributable to 1847 Holdings shareholders of $1,978,241, negative working capital of $9,612,640 and net cash used in operations of $954,532. Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts, for one year from the date of the filing of the consolidated financial statements in this Quarterly Report on Form 10-Q, indicate improved operations and the Company's ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.

Recent Accounting Pronouncements

Not Yet Adopted

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the update requires only a single-step quantitative test to identify and measure impairment based on the excess of a reporting unit's carrying amount over its fair value. A qualitative assessment may still be completed first for an entity to determine if a quantitative impairment test is necessary. The update is effective for fiscal year 2021 and is to be adopted on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company will test goodwill for impairment within one year of the acquisition or annually as of December 1, and whenever indicators of impairment exist.

In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2019. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements.

Recently Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU is a comprehensive new leases standard that amends various aspects of existing guidance for leases and requires additional disclosures about leasing arrangements. It will require companies to recognize lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. Topic 842 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous leases guidance. The ASU is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years; and earlier adoption is permitted. In the financial statements in which the ASU is first applied, leases shall be measured and recognized at the beginning of the earliest comparative period presented with an adjustment to equity. Practical expedients are available for election as a package and if applied consistently to all leases. On January 1, 2019, the Company recognized $624,157 of financing lease assets and $624,157 of financing lease liabilities, including noncurrent financing lease liabilities of $559,972, as a result of adopting this standard. As part of its adoption, the Company elected the following practical expedients: the Company has not reassessed whether any expired or existing contracts are or contain leases, the Company has not reassessed lease classification for any expired or existing leases; the Company has not reassessed initial direct costs for any existing leases; and the Company has not separated lease and non-lease components. The adoption of the standard did not have a material impact on the Company's consolidated financial statements and related disclosures. The comparative periods have not been restated for the adoption of ASU 2016-02.

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Organization and Nature of Business (Details)	9 Months Ended
	Sep. 30, 2019
Organization and Nature of Business (Textual)
State of incorporation	Delaware
Date of Incorporation	Jan. 22, 2013
Goedeker Television [Member]
Organization and Nature of Business (Textual)
Acquired interest, description	The Company owns 70% of 1847 Holdco, with the remaining 30% held by third-parties.
1847 Neese [Member]
Organization and Nature of Business (Textual)
Acquired interest, description	The Company owns 55% of 1847 Neese, with the remaining 45% held by the sellers.

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Summary of Significant Accounting Policies (Details 3)	9 Months Ended
	Sep. 30, 2019
Accounting Policies [Abstract]
Acquired intangible Asset	Customer-Related
Amortization Basis	Straight-line basis
Expected Life (years)	5 years

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Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
REVENUE
Services	$ 742,041	$ 883,460	$ 2,293,765	$ 2,543,087
Sales of parts and equipment	670,221	583,054	1,523,031	1,155,668
Furniture and appliances	12,132,103		22,748,153
TOTAL REVENUE	13,544,365	1,466,514	26,564,949	3,698,755
OPERATING EXPENSES
Cost of sales	10,709,830	478,195	20,255,556	1,034,786
Personnel costs	1,501,428	513,912	3,397,661	1,498,923
Depreciation and amortization	349,157	346,333	1,037,243	1,054,233
Fuel	143,658	226,738	503,923	605,581
General and administrative	1,963,599	333,696	4,050,269	1,347,196
TOTAL OPERATING EXPENSES	14,667,672	1,898,874	29,244,652	5,540,719
NET LOSS FROM OPERATIONS	(1,123,307)	(432,360)	(2,679,703)	(1,841,964)
OTHER INCOME (EXPENSE)
Financing costs and loss on early extinguishment of debt	(173,145)	(8,268)	(348,651)	(528,223)
Write-off of contingent consideration				395,634
Interest expense	(338,520)	(140,351)	(789,380)	(411,880)
Change in warrant liability	54,500		57,100
Other income (expense)	4,740		9,829
Gain (loss) on sale of property and equipment			24,224	(4,008)
TOTAL OTHER INCOME (EXPENSE)	(452,425)	(148,619)	(1,046,878)	(548,477)
NET LOSS BEFORE INCOME TAXES	(1,575,732)	(580,979)	(3,726,581)	(2,390,441)
INCOME TAX EXPENSE (BENEFIT)	(395,763)	(154,600)	(655,613)	(746,100)
NET LOSS BEFORE NON-CONTROLLING INTERESTS	(1,179,969)	(426,379)	(3,070,968)	(1,644,341)
NON-CONTROLLING INTEREST	(395,258)	(173,217)	(1,092,727)	(624,448)
NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS SHAREHOLDERS	$ (784,711)	$ (253,162)	$ (1,978,241)	$ (1,019,893)
Net Loss Per Common Share: Basic and diluted	$ (0.25)	$ (0.08)	$ (0.63)	$ (0.33)
Weighted-average number of common shares outstanding: Basic and diluted	3,165,100	3,115,625	3,147,918	3,115,625

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Receivables (Details 1) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Receivables [Abstract]
Balance at beginning of period	$ 29,001	$ 14,001
Provisions for losses		15,000
Accounts charged-off
Balance at end of period	$ 29,001	$ 29,001

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Operating Lease (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Operating Lease, Lease Income [Abstract]
Operating lease right-of-use lease asset	$ 624,157	$ 2,300,000
Accumulated amortization	(43,928)	(197,935)
Net balance	580,229	2,102,065
Lease liability, current portion	62,182	373,860
Lease liability, long term	518,047	1,728,205
Total operating lease liabilities	$ 580,229	$ 2,102,065
Weighted Average Remaining Lease Term - operating leases	89 years	54 years
Weighted Average Discount Rate - operating leases	6.85%	6.50%

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Floor Plan Loans Payable (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Floor plan loans payable	$ 13,908	$ 109,100
Floor Plan Loans [Member]
Machinery and Equipment inventory pledged to secure a loan	13,908
Floor plan loans payable	$ 13,908	$ 13,908