text stringlengths 0 1.95M |
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allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The |
assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 62.5-63.25%; (iii) weighted average |
risk-free interest rate of 0.16%; (iv) expected life of three years; (v) estimated fair value of the common shares of $10.40-$21.00 per |
share; and (vi) various probability assumptions related to redemption, calls and price resets. The amount allocated to the warrants, |
based on their relative fair of $1,472,914, was recorded as additional paid-in capital. The |
warrants allow the holder to purchase one (1) common share at an exercise price of $ 4.20 per common share (subject to adjustment including |
upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. |
Upon a reduction to the exercise price of such warrants, the number of warrant shares shall increase such that the aggregate exercise |
price will remain the same. The warrants have a term of three years and are callable by the Company after one year if the 30-day average |
stock price is in excess of $5 and the trading volume in the Company’s shares exceed 100,000 shares a day over such period. The |
Company can also redeem the warrants during the term for $0.50 a warrant in the first year; $1.00 a warrant in the second year; and $1.50 |
a warrant in the third year. On |
October 8, 2021, the Company issued to Leonite Capital LLC a five-year warrant for the purchase of 62,500 common shares with an exercise |
price of $ 0.04 per share and a five-year warrant for the purchase of 125,000 common shares with an exercise price of $ 10.00 per share |
(subject to adjustment), which such exercise price was adjusted to $ 4.20 following the adjustments described below. The exercise price |
is subject to standard adjustments, including upon any future equity offering with a lower exercise price. Upon a reduction to the exercise |
price of such warrants, the number of warrant shares shall increase such that the aggregate exercise price will remain the same. The |
warrants may be exercised on a cashless basis under certain circumstances and contain certain beneficial ownership limitations. F- 38 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 During |
2022 (as described in Note 16), the Company issued units, with each unit consisting of one (1) series B senior convertible preferred |
share and a three-year warrant to purchase one (1) common share at an exercise price of $ 12.00 per common share (subject to adjustment), |
which such exercise price was adjusted to $ 4.20 following the adjustments described below. Accordingly, a portion of the proceeds were |
allocated to the warrant based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The |
assumptions used in the model were as follows: (i) dividend yield of 0%; (ii) expected volatility of 51.81%; (iii) weighted average risk-free |
interest rate of 0.31%; (iv) expected life of three years; (v) estimated fair value of the common shares of $7.76 per share; and (vi) |
various probability assumptions related to redemption, calls and price resets. The fair value of the warrants was $379,533, or $3.15 |
per warrant, resulting in the amount allocated to the warrants, based on their relative fair of $172,050, was recorded as additional |
paid-in capital. The |
warrants allow the holder to purchase one (1) common share at an exercise price of $4.20 per common share (subject to adjustment including |
upon any future equity offering with a lower exercise price), which may be exercised on a cashless basis under certain circumstances. |
The Company may force the exercise of the warrants at any time after the one year anniversary of the date of the warrants, if (i) the |
Company is listed on a national securities exchange or the over-the-counter market, (ii) the underlying common shares are registered |
or the holder of the warrant otherwise has the ability to trade the underlying common shares without restriction, (iii) the 30-day volume-weighted |
daily average price of the common shares exceeds 200% of the exercise price, as adjusted, and (iv) the average daily trading volume is |
at least 100,000 common shares during such 30-day period. The Company may redeem the warrants held by any holder in whole (but not in |
part) by paying in cash to such holder as follows: (i) $0.50 per share then underlying the warrant if within the first twelve (12) months |
of issuance; (ii) $1.00 per share then underlying the warrant if after the first twelve (12) months, but before twenty-four (24) months |
of issuance; and (iii) $1.50 per share then underlying the warrant if after twenty-four months, but before thirty-six (36) months. On |
July 8, 2022 (as described in Note 12), the Company entered into a securities purchase agreement with Mast Hill Fund, L.P., pursuant |
to which the Company issued to it a promissory note in the principal amount of $ 600,000 , and a five-year warrant for the purchase of 100,000 common shares at an exercise price of $ 6.00 per share (subject to adjustment), which such exercise price was adjusted to $ 4.20 following the adjustments described below, which may be exercised on a cashless basis if the market price of the Company’s common |
shares is greater than the exercise price, for total net proceeds of $ 499,600 . Additionally, the Company issued a three-year warrant |
to J.H. Darbie & Co (the broker) for the purchase of 3,600 common shares at an exercise price of $ 7.50 (subject to adjustment), which |
such exercise price was adjusted to $ 4.20 following the adjustments described below, which may be exercised on a cashless basis if the |
market price of the Company’s common shares is greater than the exercise price. Accordingly, a portion of the proceeds were allocated |
to the warrants based on its relative fair value using the Geometric Brownian Motion Stock Path Monte Carlo Simulation. The assumptions |
used in the model were as follows: (i) dividend yield of 0 %; (ii) expected volatility of 49.11 %; (iii) weighted average risk-free interest |
rate of 3.13 %; (iv) expected life of five years ; (v) estimated fair value of the common shares of $ 7.23 per share; and (vi) various probability |
assumptions related to down round price adjustments. The fair value of the warrants was $ 2,405,306 , or $ 6.01 per warrant, resulting in |
the amount allocated to the warrants, based on their relative fair of $ 402,650 , which was recorded as additional paid-in capital. On |
August 10, 2022, the promissory note was repaid in full. On September 15, 2022, Mast Hill Fund, L.P. exercised its warrant on a cashless |
basis. As |
a result of the issuance of the note to Mast Hill Fund, L.P. on July 8, 2022, the exercise price of certain of the Company’s outstanding |
warrants was adjusted to $ 5.20 pursuant to certain antidilution provisions of such warrants (down round feature). In addition, certain |
of the Company’s outstanding warrants include a “full ratchet” feature, whereby the exercise price was reset to $ 5.20 and the number of shares underlying the warrants was increased in the same proportion as the exercise price decrease. As a result, the |
Company recognized a deemed dividend of approximately $ 6.4 million, which was calculated using a Black-Scholes pricing model. F- 39 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 On |
August 5, 2022, the Company issued a common share purchase warrant to each of Craft Capital Management LLC and R.F. Lafferty & Co. |
Inc., the representatives of the underwriters for the public offering described above, for the purchase of 35,715 common shares at an |
exercise price of $ 5.25 , subject to adjustments. The warrants will be exercisable at any time and from time to time, in whole or in part, |
during the period commencing on February 5, 2023 and ending on August 2, 2027 and may be exercised on a cashless basis under certain |
circumstances. As |
a result of the public offering, the exercise price of certain of the Company’s outstanding warrants was adjusted to $ 4.20 pursuant |
to certain antidilution provisions of such warrants (down round feature). In addition, certain of the Company’s outstanding warrants |
include an “full ratchet” feature, whereby the exercise price was reset to $ 4.20 and the number of shares underlying the |
warrants was increased in the same proportion as the exercise price decrease. As a result, the Company recognized a deemed dividend of |
approximately $ 2.6 million, which was calculated using a Black-Scholes pricing model. Below |
is a table summarizing the changes in warrants outstanding during the years ended December 31, 2022 and 2021: Warrants Weighted- Average Exercise Price Outstanding at December 31, 2020 658,071 $ 10.00 Granted 642,051 9.03 Outstanding at December 31, 2021 1,300,122 $ 9.52 Granted (1) 1,978,432 5.25 Exercised ( 209,635 ) ( 5.58 ) Outstanding at December 31, 2022 3,068,919 $ 5.10 Exercisable at December 31, 2022 2,997,489 $ 5.10 (1) Includes the issuance of warrants for the purchase of 295,427 common shares and an increase of 1,683,005 common shares underlying warrants pursuant to the adjustments described above. As |
of December 31, 2022, the outstanding warrants have a weighted average remaining contractual life of 1.43 years and a total intrinsic |
value of $ 108,750 . NOTE 18—EARNINGS |
(LOSS) PER SHARE The |
computation of weighted average shares outstanding and the basic and diluted loss per common share attributable to common shareholders |
for the years ended December 31, 2022 and 2021 consisted of the followin Year |
Ended December 31, 2022 Year |
Ended December 31, 2021 Net loss per common share attributable |
to common shareholders ( 20,071,529 ) $ ( 5,815,824 ) Weighted average common shares outstanding 2,400,014 4,749,971 Basic and diluted loss per share $ ( 8.36 ) $ ( 1.22 ) For |
the year ended December 31, 2022, there were 6,466,803 potential common share equivalents from warrants, convertible debt, and series |
A and B convertible preferred shares excluded from the diluted earnings per share calculations as their effect is anti-dilutive. For |
the year ended December 31, 2021, there were 4,397,235 potential common share equivalents from warrants, convertible debt, and series |
A convertible preferred shares excluded from the diluted earnings per share calculations as their effect is anti-dilutive. F- 40 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 NOTE |
19 —INCOME TAXES As |
of December 31, 2022 and 2021, the Company had net operating loss carry forwards of $ 1,248,630 and $ 438,209 , respectively, that may be |
available to reduce future years’ taxable income in varying amounts through 2041. The |
provision for Federal income tax consists of the followin The |
cumulative tax effect at the expected rate of 13.5 % and ( 3.4 )% of significant items comprising the Company’s net deferred tax amount |
is as follows: The |
components for the provision of income taxes inclu December 31, 2022 December 31, 2021 Current Federal and State $ ( 206,000 ) $ 143,000 Deferred Federal and |
State ( 1,471,000 ) 75,300 Total (benefit) provision |
for income taxes $ ( 1,677,000 ) $ 218,300 A |
reconciliation of the statutory US Federal income tax rate to the Company’s effective income tax rate is as follows: December 31, 2022 December 31, 2021 Federal tax 21.0 % 21.0 % State tax 1.1 % 1.7 % Permanent items ( 3.1 )% ( 5.0 )% Measurement Period Adjustment - ( 16.9 )% Valuation Allowance - 2.3 % Other ( 5.5 )% ( 6.5 )% Effective income tax |
rate 13.5 % ( 3.4 )% Deferred |
income taxes reflect the net tax effect of temporary differences between amounts recorded for financial reporting purposes and amounts |
used for tax purposes. The Company has a net cumulative current deferred tax asset of $ 168,000 and a net cumulative long-term deferred |
tax liability of $ 769,000 . The major components of deferred tax assets and liabilities are as follows: December 31, 2022 December 31, 2021 Deferred tax assets Inventory obsolescence $ 93,000 $ 107,000 Sales return reserve - - Business interest limitation 1,707,000 481,000 Lease liability 650,000 712,000 Other 75,000 135,000 Loss carryforward 285,000 153,000 Valuation Allowance - - Total deferred tax assets $ 2,810,000 $ 1,588,000 Deferred tax liabilities Fixed assets $ ( 418,000 ) $ ( 230,000 ) Right of Use Assets ( 628,000 ) ( 706,000 ) Intangibles ( 2,363,000 ) ( 2,722,000 ) Total deferred tax liabilities $ ( 3,409,000 ) $ ( 3,658,000 ) Total net deferred income |
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