UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended:
or
For the transition period from ____________ to _____________
Commission
File Number:
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
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).
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 ☐ |
| 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 August 15, 2024, there were
1847 HOLDINGS LLC
Quarterly Report on Form 10-Q
Period Ended June 30, 2024
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 | 26 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 38 |
| Item 4. | Controls and Procedures | 38 |
| PART II | ||
| OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 40 |
| Item 1A. | Risk Factors | 40 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 |
| Item 3. | Defaults Upon Senior Securities | 40 |
| Item 4. | Mine Safety Disclosures | 40 |
| Item 5. | Other Information | 40 |
| Item 6. | Exhibits | 41 |
i
PART I
FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS. |
1847 HOLDINGS LLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2024 | December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Receivables, net | ||||||||
| Contract assets | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term deposits | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Non-current assets of discontinued operations | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Contract liabilities | ||||||||
| Due to related parties | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Current portion of notes payable, net | ||||||||
| Current portion of convertible notes payable, net | ||||||||
| Current portion of revolving line of credit, net | ||||||||
| Related party note payable | ||||||||
| Derivative liabilities | ||||||||
| Warrant liabilities | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Finance lease liabilities, net of current portion | ||||||||
| Notes payable, net of current portion | ||||||||
| Convertible notes payable, net of current portion | ||||||||
| Revolving line of credit, net of current portion | ||||||||
| Deferred tax liability, net | ||||||||
| Non-current liabilities of discontinued operations | ||||||||
| TOTAL LIABILITIES | ||||||||
| Shareholders’ Deficit | ||||||||
| Series A senior convertible preferred shares, par value, | ||||||||
| Series B senior convertible preferred shares, par value, | ||||||||
| Series D senior convertible preferred shares, par value, | ||||||||
| Allocation shares, | ||||||||
| Common shares, $ | ||||||||
| Distribution receivable | ( | ) | ( | ) | ||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL 1847 HOLDINGS SHAREHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| NON-CONTROLLING INTERESTS | ( | ) | ( | ) | ||||
| TOTAL SHAREHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Personnel | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Impairment of goodwill and intangible assets | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Loss on disposal of property and equipment | ( | ) | ( | ) | ||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discounts | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on extinguishment of debt | ( | ) | ( | ) | ||||||||||||
| Gain on change in fair value of warrant liabilities | ||||||||||||||||
| Loss on change in fair value of derivative liabilities | ( | ) | ( | ) | ||||||||||||
| Preliminary gain on bargain purchase | ||||||||||||||||
| Total Other Expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax benefit (expense) | ( | ) | ( | ) | ||||||||||||
| NET LOSS FROM CONTINUING OPERATIONS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on disposition of Asien’s | ||||||||||||||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS | ( | ) | ( | ) | ||||||||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS FROM CONTINUING OPERATIONS | ||||||||||||||||
| NET (INCOME) LOSS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS FROM DISCONTINUED OPERATIONS | ( | ) | ||||||||||||||
| NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| NET LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS ATTRIBUTABLE TO 1847 HOLDINGS | ( | ) | ( | ) | ||||||||||||
| NET LOSS ATTRIBUTABLE TO 1847 HOLDINGS | $ | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
| PREFERRED SHARE DIVIDENDS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DEEMED DIVIDENDS | ( | ) | ( | ) | ( | ) | ||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS’ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| ( | ) | ( | ) | |||||||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
| Series
A Senior Convertible Preferred Shares | Series
B Senior Convertible Preferred Shares | Series
D Senior Convertible Preferred Shares | Allocation | Common Shares | Distribution | Additional Paid-In | Accumulated | Non-
Controlling | Total Shareholders’ | |||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Shares | Amount | Receivable | Capital | Deficit | Interests | Deficit | |||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series A preferred share dividends | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series B preferred share dividends | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series A preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series B preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of convertible notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares and prefunded warrants in connection with a public offering | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrant liabilities upon exercise of prefunded warrants | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon exercise of prefunded warrants | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Extinguishment of warrant liabilities upon exercise of prefunded warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend from down round provision in warrants | - | - | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - series A senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - series B senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series B preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of convertible notes payable | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants in connection with a private debt offering | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon exercise of prefunded warrants | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Extinguishment of warrant liabilities upon exercise of prefunded warrants | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of series D preferred shares in connection with a private debt offering | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - series A senior convertible preferred shares | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - series D senior convertible preferred shares | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||
4
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
Series
A Senior Preferred Shares | Series
B Senior Preferred Shares | Allocation | Common Shares | Distribution | Additional Paid-In | Accumulated | Non- Controlling | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Shares | Amount | Receivable | Capital | Deficit | Interests | (Deficit) | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series A preferred shares dividends | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares and warrants in connection with a private debt offering | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon cashless exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend from issuance of warrants to common shareholders | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend from down round provision in warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends - series A senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Dividends - series B senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||
| Issuance of common shares upon settlement of accrued series A preferred shares dividends | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon cashless exercise of warrants | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon exercise of warrants | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares upon conversion of series B preferred shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend from down round provision in warrants | - | - | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Dividends - series A senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Dividends - series B senior convertible preferred shares | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
1847 HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations | ||||||||
| Gain on disposition of Asien’s | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Preliminary gain on bargain purchase | ( | ) | ||||||
| Loss on disposal of property and equipment | ||||||||
| Loss on extinguishment of debt | ||||||||
| Impairment of goodwill and intangible assets | ||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ||||||
| Loss on change in fair value of derivative liabilities | ||||||||
| Deferred taxes | ( | ) | ||||||
| Inventory reserve | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of debt discounts | ||||||||
| Amortization of right-of-use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | ( | ) | ( | ) | ||||
| Contract assets | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Contract liabilities | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities from continuing operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for ICU Eyewear, net of cash acquired | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash used in investing activities from continuing operations | ( | ) | ||||||
| Net cash used in investing activities from discontinued operations | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net proceeds from notes payable | ||||||||
| Net proceeds from issuance of common shares and warrants in connection with a private debt offering | ||||||||
| Net proceeds from issuance of common shares and warrants in connection with a public offering | ||||||||
| Net proceeds (repayments) from revolving line of credit | ( | ) | ||||||
| Proceeds from exercise of warrants | ||||||||
| Repayments of notes payable and finance lease liabilities | ( | ) | ( | ) | ||||
| Repayments of convertible notes payable | ( | ) | ||||||
| Accrued series B preferred share dividends paid | ( | ) | ||||||
| Net cash provided by financing activities from continuing operations | ||||||||
| Net cash used in financing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS | ( | ) | ||||||
| CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS | ||||||||
| Cash from continuing operations at the beginning of the period | $ | $ | ||||||
| Cash from continuing operations at the end of the period | $ | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Net assets acquired in the acquisition of ICU Eyewear | $ | $ | ||||||
| Net assets from the disposition of Asien’s | $ | $ | ||||||
| Deemed dividend from issuance of warrants to common shareholders | $ | $ | ||||||
| Deemed dividend from down round provision in warrants | $ | $ | ||||||
| Accrued dividends on series A preferred shares | $ | $ | ||||||
| Accrued dividends on series B preferred shares | $ | $ | ||||||
| Accrued dividends on series D preferred shares | $ | $ | ||||||
| Issuance of common shares upon settlement of accrued series A dividends | $ | $ | ||||||
| Issuance of common shares upon settlement of accrued series B dividends | $ | $ | ||||||
| Issuance of common shares upon conversion of series A shares | $ | $ | ||||||
| Issuance of common shares upon conversion of series B shares | $ | $ | ||||||
| Issuance of common shares upon cashless exercise of warrants | $ | $ | ||||||
| Debt discount on notes payable | $ | $ | ||||||
| Fair value of derivative liabilities recognized upon issuance of promissory notes | $ | $ | ||||||
| Fair value of warrant liabilities recognized upon issuance of prefunded warrants | $ | $ | ||||||
| Issuance of common shares upon exercise of prefunded warrants | $ | $ | ||||||
| Extinguishment of warrant liabilities upon exercise of prefunded warrants | $ | $ | ||||||
| Issuance of common shares upon conversion of convertible notes payable and accrued interest | $ | $ | ||||||
| Issuance of warrants in connection with a private debt offering | $ | $ | ||||||
| Issuance of series D preferred shares in connection with a private debt offering | $ | $ | ||||||
| Financed purchases of property and equipment | $ | $ | ||||||
| Fair value of note payable issued for services | $ | $ | ||||||
| Reclassification of accrued interest to convertible notes payable | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
The accompanying unaudited condensed consolidated financial statements of 1847 Holdings LLC (the “Company,” “we,” “us,” or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q of Regulation S-X. They do not include all the information and footnotes required by GAAP for complete financial statements. The December 31, 2023 consolidated balance sheet data was derived from audited financial statements but do not include all disclosures required by GAAP. The interim unaudited condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K, as filed with the Securities and Exchange Commission on April 25, 2024. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial statements, consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.
Discontinued Operations
On February 26, 2024, Asien’s Appliance, Inc. (“Asien’s”), a wholly owned subsidiary of 1847 Asien Inc. (“1847 Asien”), entered into a general assignment (the “Assignment Agreement”), for the benefit of its creditors, with SG Service Co., LLC (the “Assignee”). Pursuant to the Assignment Agreement, Asien’s transferred ownership of all or substantially all of its right, title, and interest in, as well as custody and control of, its assets to the Assignee in trust. The results of operations of Asien’s are reported as discontinued operations for the three and six months ended June 30, 2024 and 2023. Unless otherwise noted, amounts and disclosures throughout these notes to condensed consolidated financial statements relate solely to continuing operations and exclude all discontinued operations. See Note 3 for additional information.
The Company evaluates all disposal transactions to determine whether such disposal qualifies for reporting as discontinued operations in accordance with ASC 205-20, “Discontinued Operations.” A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results when the following occurs: (1) a component (or group of components) meets the criteria to be classified as held for sale; (2) the component or group of components is disposed of by sale; or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off). For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statement of operations for current and all prior periods presented. The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheet for prior periods.
Reverse Share Splits
On July 8, 2024, the Company effected a 1-for-13 reverse split of its outstanding common shares. All outstanding common shares and warrants were adjusted to reflect the 1-for-13 reverse split, with the respective exercise prices of the warrants proportionately increased. The outstanding convertible notes and preferred shares conversion prices were adjusted to reflect a proportional decrease in the number of common shares to be issued upon conversion.
All share and per share data throughout these condensed consolidated financial statements have been retroactively adjusted to reflect the reverse share split. The total number of authorized common shares did not change. As a result of the reverse common share split, an amount equal to the decreased value of common shares was reclassified from “common shares” to “additional paid-in capital.”
7
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
Reclassifications
Certain reclassifications within operating expenses have been made to the prior period’s financial statements to conform to the current period financial statement presentation. There is no impact in total to the results of operations and cash flows in all periods presented.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. These amendments are to be applied retrospectively. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures by requiring; (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied prospectively, with retrospective application permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.
The Company currently believes there are no other issued and not yet effective accounting standards that are materially relevant to our condensed consolidated financial statements.
8
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
NOTE 2—LIQUIDITY AND GOING CONCERN ASSESSMENT
Management assesses liquidity and going concern uncertainty in the Company’s condensed 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 financial statements are 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 considered various scenarios, forecasts, projections, estimates and made 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, management made 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.
As of June 30, 2024, the Company had cash and
cash equivalents of $
The Company has generated operating losses since its inception and has relied on cash on hand, sales of securities, external bank lines of credit, and issuance of third-party and related party debt to support cashflows from operations. The Company expects that within the next twelve months, it will not have sufficient cash and other resources on hand to sustain its current operations or meet its obligations as they become due unless it obtains additional financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
An assessment was performed to determine whether there were conditions or events that, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern within one year after the condensed consolidated financial statements are issued. Initially, this assessment did not consider the potential mitigating effect of management’s plans that had not been fully implemented. Based on this assessment, substantial doubt exists regarding the Company’s ability to continue as a going concern.
Management plans to address these concerns by securing additional financing through debt and equity offerings. Management assessed the mitigating effect of its plans to determine if it is probable that the plans would be effectively implemented within one year after the consolidated financial statements are issued and when implemented, would mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern. These plans are subject to market conditions and reliance on third parties, and there is no assurance that effective implementation of the Company’s plans will result in the necessary funding to continue current operations and satisfy current debt obligations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern beyond one year from the date the condensed consolidated financial statements are issued.
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
9
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
NOTE 3—DISCONTINUED OPERATIONS
On February 26, 2024, Asien’s entered into an Assignment Agreement, for the benefit of its creditors. Pursuant to the Assignment Agreement, Asien’s transferred ownership of all or substantially all of its right, title, and interest in, as well as custody and control of, its assets to the Assignee in trust. The Company received no cash consideration related to the assignment. Following the assignment, the Company retained no financial interest in Asien’s.
The
assignment of Asien’s represents a strategic shift and its results are reported as discontinued operations for the three and six
months ended June 30, 2024 and 2023. The Company recognized a gain on disposition of Asien’s of $
| December
31, 2023 | ||||
| Current assets of discontinued operations | ||||
| Cash and cash equivalents | $ | |||
| Investments | ||||
| Receivables | ||||
| Inventories, net | ||||
| Prepaid expenses and other current assets | ||||
| Total current assets of discontinued operations | ||||
| Non-current assets of discontinued operations | ||||
| Property and equipment, net | ||||
| Total assets of discontinued operations | $ | |||
| Current liabilities of discontinued operations | ||||
| Accounts payable and accrued expenses | $ | |||
| Customer deposits | ||||
| Current portion of notes payable | ||||
| Total current liabilities of discontinued operations | ||||
| Non-current liabilities of discontinued operations | ||||
| Notes payable, net of current portion | ||||
| Total liabilities of discontinued operations | $ | |||
10
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
| Three
Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Personnel | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Other Income (Expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Total Other Expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss from discontinued operations before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax benefit | ||||||||||||||||
| Net loss from discontinued operations | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income (loss) attributable to non-controlling interests from discontinued operations | ( | ) | ||||||||||||||
| Net loss from discontinued operations attributable to 1847 Holdings | $ | ( | ) | ( | ) | ( | ) | |||||||||
11
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
| Six
Months Ended June 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Deferred taxes | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables | ||||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Customer deposits | ( | ) | ||||||
| Net cash used in operating activities from discontinued operations | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Investments in certificates of deposit | ( | ) | ||||||
| Net cash used in investing activities from discontinued operations | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Repayments of notes payable | ( | ) | ( | ) | ||||
| Net cash used in financing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents from discontinued operations | $ | ( | ) | $ | ( | ) | ||
NOTE 4—DISAGGREGATION OF REVENUES AND SEGMENT REPORTING
Following
the divesture of the retail and appliances segment, the Company now has
The Retail and Eyewear Segment provides a wide variety of eyewear products (non-prescription reading glasses, sunglasses, blue light blocking eyewear, sun readers, outdoor specialty sunglasses and other eyewear-related products) as well as personal protective equipment (face masks and select health and personal care items).
The Construction Segment provides finished carpentry products and services (door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, fireplace mantles, windows, and custom design and build of cabinetry and countertops).
The Automotive Supplies Segment provides horn and safety products (electric, air, truck, marine, motorcycle, and industrial equipment) and vehicle emergency and safety warning lights (cars, trucks, industrial equipment, and emergency vehicles).
The Company reports all other business activities that are not reportable in the Corporate Services Segment. The Company provides general corporate services to its segments; however, these services are not considered when making operating decisions and assessing segment performance. The Corporate Services Segment includes costs associated with executive management, financing activities and other public company-related costs.
12
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
| For the Three Months Ended June 30, 2024 | ||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Total | |||||||||||||
| Revenues | ||||||||||||||||
| Eyewear-related | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment and other | ||||||||||||||||
| Automotive horns | ||||||||||||||||
| Automotive lighting | ||||||||||||||||
| Custom cabinets and countertops | ||||||||||||||||
| Finished carpentry | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
| For the Three Months Ended June 30, 2023 | ||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Total | |||||||||||||
| Revenues | ||||||||||||||||
| Eyewear-related | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment and other | ||||||||||||||||
| Automotive horns | ||||||||||||||||
| Automotive lighting | ||||||||||||||||
| Custom cabinets and countertops | ||||||||||||||||
| Finished carpentry | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Total | |||||||||||||
| Revenues | ||||||||||||||||
| Eyewear-related | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment and other | ||||||||||||||||
| Automotive horns | ||||||||||||||||
| Automotive lighting | ||||||||||||||||
| Custom cabinets and countertops | ||||||||||||||||
| Finished carpentry | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
| For the Six Months Ended June 30, 2023 | ||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Total | |||||||||||||
| Revenues | ||||||||||||||||
| Eyewear-related | $ | $ | $ | $ | ||||||||||||
| Personal protective equipment and other | ||||||||||||||||
| Automotive horns | ||||||||||||||||
| Automotive lighting | ||||||||||||||||
| Custom cabinets and countertops | ||||||||||||||||
| Finished carpentry | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
13
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
| For the Three Months Ended June 30, 2024 | ||||||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Corporate Services | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Personnel | ( | ) | ||||||||||||||||||
| Personnel – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||||||
| General and administrative – management fees | ||||||||||||||||||||
| General and administrative – corporate allocation | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Professional fees | ||||||||||||||||||||
| Impairment of goodwill and intangible assets | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| For the Three Months Ended June 30, 2023 | ||||||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Corporate Services | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Personnel | ( | ) | ||||||||||||||||||
| Personnel – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||||||
| General and administrative – management fees | ||||||||||||||||||||
| General and administrative – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| For the Six Months Ended June 30, 2024 | ||||||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Corporate Services | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Personnel | ( | ) | ||||||||||||||||||
| Personnel – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||||||
| General and administrative – management fees | ||||||||||||||||||||
| General and administrative – corporate allocation | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Professional fees | ||||||||||||||||||||
| Impairment of goodwill and intangible assets | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
14
1847 HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024
(UNAUDITED)
| For the Six Months Ended June 30, 2023 | ||||||||||||||||||||
| Retail
and Eyewear | Construction | Automotive Supplies | Corporate Services | Total | ||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Cost of revenues | ||||||||||||||||||||
| Personnel | ( | ) | ||||||||||||||||||
| Personnel – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| General and administrative | ( | ) | ||||||||||||||||||
| General and administrative – management fees | ||||||||||||||||||||
| General and administrative – corporate allocation | ( | ) | ( | ) | ||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||
| As of June 30, 2024 | ||||||||||||||||||||
| Retail
and Eyewear | Construction | Automotive
Supplies | Corporate
Services | Total | ||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets | $ | $ | $ | $ | $ | |||||||||||||||
| Long-lived assets | ||||||||||||||||||||
| Goodwill | ||||||||||||||||||||
| Total assets | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 5—PROPERTY AND EQUIPMENT
| June
30, 2024 | December 31, 2023 | |||||||
| Machinery and equipment | $ | $ | ||||||
| Office furniture and equipment | ||||||||
| Transportation equipment | ||||||||
| Displays | ||||||||