BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2024

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES

Basis of Presentation

These Condensed Consolidated Financial Statements contain unaudited information as of June 30, 2024, and for the six months ended June 30, 2024 and 2023. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2023 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2023 is derived from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2024. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The Condensed Consolidated Financial Statements include the accounts of Lazydays Holdings, Inc. and Lazy Days RV Center, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Going Concern

Accounting Standards Codification (ASC) 205-40, Presentation of Financial Statements – Going Concern, requires management to evaluate an entity’s ability to continue as a going concern for the twelve-month period following the date on which the financial statements are available for issuance. As a part of this evaluation, management may consider the potential mitigating impact of its plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period after the issuance date. Such an evaluation indicated certain

negative conditions and events, described further below, that raise substantial doubt about the Company's ability to continue as a going concern.

The Company has experienced a decline in its operating performance driven primarily by the continued recreational vehicle industry slowdown and consumer uncertainty. As a result, as of June 30, 2024, the Company was not in compliance with certain financial covenants under the Second Amended and Restated Credit Agreement dated as of February 21, 2023 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) by and among LDRV Holdings Corp., as Borrower Representative, Manufacturers and Traders Trust Company, as Administrative Agent, and the other loan parties and lenders party thereto, including a minimum consolidated EBITDA covenant, but the Company has received temporary waivers from 100% of the lenders participating in the Credit Agreement (for the defaults at issue through August 30, 2024). Due to the reclassification of our long-term debt as a current liability, the Company was also not in compliance with the current ratio covenant. The Company is not certain as to when the industry will recover and anticipates that unit sales may continue to be well below long-term averages and therefore believes the potential exists that it may continue to not be in compliance with existing financial covenants under the Credit Agreement for the twelve-month period after the issuance date of the financial statements. If the Company is not in compliance with its covenants, absent a further waiver or amendment, it will be an event of default at the end of the waiver period that would give lenders the right, but not the obligation, to accelerate amounts outstanding. In that event, the Company may need to seek other sources of capital and there can be no assurances that the Company would be able to do so on acceptable terms.

As of June 30, 2024, and excluding the reclassification of long-term debt to current, the Company had $27.7 million of working capital, which included $42 million of cash on hand. In light of the recent industry challenges the Company has faced, it implemented cost reductions with estimated annual savings of $30 million; is actively negotiating an amendment to its Credit Agreement; and is seeking to raise additional capital.

While management intends for both its cost cutting efforts and plans to enter into a new amendment to the Credit Agreement with covenants that the Company can satisfy and/or obtaining additional capital to alleviate the conditions or events that raise substantial doubt about its ability to continue as a going concern, these elements are not entirely within the Company’s control. In addition, there is no guarantee that the cost reductions will continue to be achieved or have the full value of expected benefits, that such an amendment will be agreed or that additional capital will be available on terms acceptable to the Company or at all. As a result, there is substantial doubt regarding the Company's ability to continue as a going concern.

The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and the satisfaction of liabilities in the normal course of business for one year following the issuance of these unaudited financial statements.

Critical Accounting Policies

Our critical accounting policies have not materially changed during the six months ended June 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Reclassifications

Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net income (loss).