text stringlengths 0 1.95M |
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tax assets (liabilities) $ ( 599,000 ) $ ( 2,070,000 ) F- 41 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 The |
Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At December 31, 2022 and |
2021, the Company does not believe that a liability for uncertain tax provisions exists, and therefore, accrued interest and penalties |
were $ 0 , respectively. The tax years ended December 31, 2016 through December 31, 2022 are considered to be open under statute and therefore |
may be subject to examination by the Internal Revenue Service and various state jurisdictions. The |
Company is a partnership for federal income taxes; however, its subsidiaries are C corporations. The Company will file consolidated returns |
whenever possible. Following is a summary of prepaid and deferred tax assets and liabilities for December 31, 2022 and 2021: As |
of December 31, 2022 2021 Prepaid income taxes (accrued tax |
liability) $ 122,000 $ ( 175,000 ) Deferred tax liability $ ( 599,000 ) $ ( 2,070,000 ) Years |
Ended December 31, 2022 2021 Income tax expense $ 1,677,000 $ 218,000 NOTE 20 |
—SUBSEQUENT EVENTS Warrant |
Dividend On |
January 3, 2023, the Company issued warrants for the purchase of 407,872 common shares as a dividend to common shareholders of record |
as of December 23, 2022 pursuant to a warrant agent agreement, dated January 3, 2023, with VStock Transfer, LLC. Each holder of common |
shares received a warrant to purchase one (1) common share for every ten (10) common shares owned as of the record date (with the number |
of shares underlying the warrant received rounded down to the nearest whole number). Each warrant represents the right to purchase common |
shares at an initial exercise price of $ 4.20 per share (subject to certain adjustments as set forth in the warrants). The Company may, |
at its option, voluntarily reduce the then-current exercise price to such amount and for such period or periods of time which may be |
through the expiration date as may be deemed appropriate by the board of directors. Cashless exercises of the warrants are not permitted. The |
warrants will generally be exercisable in whole or in part beginning on the later of (i) January 3, 2024 or (ii) the date that a registration |
statement on Form S-3 with respect to the issuance and registration of the common shares underlying the warrants has been filed with |
and declared effective by the SEC, and thereafter until January 3, 2026. The |
Company may redeem the warrants at any time in whole or in part at $ 0.001 per warrant (subject to equitable adjustment to reflect share |
splits, share dividends, share combinations, recapitalizations and like occurrences) upon not less than 30 days’ prior written |
notice to the registered holders of the warrants. Private |
Placements On |
February 3, 2023, the Company entered into securities purchase agreements with two accredited investors, pursuant to which the Company |
issued to such investors (i) promissory notes in the aggregate principal amount of $ 604,000 , which include an original issue discount |
in the amount of $ 60,400 , (ii) five-year warrants for the purchase of an aggregate of 125,833 common shares at an exercise price of $ 4.20 per share (subject to adjustment) and (iii) an aggregate of 125,833 common shares for an aggregate purchase price of $ 543,600 . On |
February 9, 2023, the Company entered into securities purchase agreements with the same two accredited investors, pursuant to which the |
Company issued to such investors (i) promissory notes in the aggregate principal amount of $ 2,557,575 , which include an original issue |
discount in the amount of $ 139,091 , and (ii) five-year warrants for the purchase of an aggregate of 532,827 common shares at an exercise |
price of $ 4.20 per share (subject to adjustment). The Company also issued 289,772 common shares to one investor and issued to the other |
investor a five-year warrant for the purchase of 243,055 common shares at an exercise price of 0.01 per share (subject to adjustment). |
The aggregate purchase price was $ 2,301,818 . F- 42 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 On |
February 22, 2023, the Company entered into another securities purchase agreement with one of the investors pursuant to which the Company |
issued to such investor (i) a promissory note in the principal amount of $ 878,000 , which includes an original issue discount in the amount |
of $ 87,800 , (ii) a five-year warrant for the purchase of 182,917 common shares at an exercise price of $ 4.20 per share (subject to adjustment) |
and (iii) a five-year warrant for the purchase of 198,343 common shares at an exercise price of $ 0.01 per share (subject to adjustment) |
for a total purchase price of $ 790,200 . In |
the aggregate, the Company issued promissory notes in the aggregate principal amount of $ 4,039,575 , warrants for the purchase of an aggregate |
of 1,282,975 common shares and 415,605 common shares for gross proceeds of $ 3,635,618 and net proceeds of approximately $ 3,553,118 . The |
notes bear interest at a rate of 12% per annum and mature on the first anniversary of the date of issuance; provided that any principal |
amount or interest which is not paid when due shall bear interest at a rate of the lesser of 16 % per annum or the maximum amount permitted |
by law from the due date thereof until the same is paid. The notes require monthly payments of principal and interest commencing in May |
2023. The Company may voluntarily prepay the outstanding principal amount and accrued interest of each note in whole upon payment of |
certain prepayment fees. In addition, if at any time the Company receives cash proceeds from any source or series of related or unrelated |
sources, including, but not limited to, the issuance of equity or debt, the exercise of outstanding warrants, the issuance of securities |
pursuant to an equity line of credit (as defined in the notes) or the sale of assets outside of the ordinary course of business, each |
holder shall have the right in its sole discretion to require the Company to immediately apply up to 50 % of such proceeds to repay all |
or any portion of the outstanding principal amount and interest then due under the notes. The notes are unsecured and have priority over |
all other unsecured indebtedness. The notes contain customary affirmative and negative covenants and events of default for a loan of |
this type. The |
notes are convertible into common shares at the option of the holders at any time on or following the date that an event of default (as |
defined in the notes) occurs under the notes at a conversion price equal the lower of (i) $ 4.20 (subject to adjustments) and (ii) 80 % |
of the lowest volume weighted average price of the common shares on any trading day during the five (5) trading days prior to the conversion |
date; provided that such conversion price shall not be less than $ 0.03 (subject to adjustments). The |
conversion price of the notes and the exercise price of the warrants are subject to standard adjustments, including a price-based adjustment |
in the event that the Company issues any common shares or other securities convertible into or exercisable for common shares at an effective |
price per share that is lower than the conversion or exercise price, subject to certain exceptions. In addition, the notes and the warrants |
contain an ownership limitation, such that the Company shall not effect any conversion or exercise, and the holders shall not have the |
right to convert or exercise, any portion of the notes or the warrants to the extent that after giving effect to the issuance of common |
shares upon conversion or exercise, such holder, together with its affiliates and any other persons acting as a group together with such |
holder 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 upon conversion or exercise. Acquisition |
of ICU Eyewear On |
December 21, 2022, the Company’s newly formed wholly owned subsidiaries 1847 ICU Holdings Inc. (“1847 ICU”) and 1847 |
ICU Acquisition Sub Inc. (“Merger Sub”) entered into an agreement and plan of merger with ICU Eyewear Holdings Inc. (“ICU |
Holdings”) and San Francisco Equity Partners, as the stockholder representative, which was amended on February 9, 2023. F- 43 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 On |
February 9, 2023, closing of the transactions contemplated by the agreement and plan of merger was completed. Pursuant to the agreement |
and plan of merger, Merger Sub merged with and into ICU Holdings, with ICU Holdings surviving the merger as a wholly owned subsidiary |
of 1847 ICU. The merger consideration paid by 1847 ICU to the stockholders of ICU Holdings consists of (i) $ 4,000,000 in cash, minus |
any unpaid debt of ICU Holdings and certain transaction expenses, and (ii) 6 % subordinated promissory notes in the aggregate principal |
amount of $ 500,000 . The |
notes bear interest at the rate of 6 % per annum with all principal and accrued interest being due and payable in one lump sum on February |
9, 2024; provided that upon an event of default (as defined in the notes), such interest rate shall increase to 10 %. 1847 ICU may prepay |
all or any portion of the notes at any time prior to the maturity date without premium or penalty of any kind. The notes contain customary |
events of default, including, without limitation, in the event of (i) non-payment, (ii) a default by 1847 ICU of any of its covenants |
in the notes, the agreement and plan of merger or any other agreement entered into in connection with the agreement and plan of merger, |
or a breach of any of the representations or warranties under such documents, (iii) the insolvency or bankruptcy of 1847 ICU or ICU Holdings |
or (iv) a change of control (as defined in the notes) of 1847 ICU or ICU Holdings. The notes are unsecured and subordinated to all senior |
indebtedness (as defined in the notes). Loan |
and Security Agreement On |
February 9, 2023, 1847 ICU, ICU Holdings and ICU Holdings’ wholly owned subsidiary ICU Eyewear, Inc. (together, the “Borrower”) |
entered into a loan and security agreement with Industrial Funding Group, Inc. for a revolving loan of up to $ 5,000,000 , which is |
evidenced by a secured promissory note in the principal amount of up to $ 5,000,000 . On February 9, 2023, 1847 ICU received an advance |
of $ 2,063,182 under the note, of which $ 1,963,182 was used to repay certain debt of ICU Holdings in connection with the agreement and |
plan of merger, with the remaining $ 100,000 used to pay lender fees. On February 11, 2023, the Industrial Funding Group, Inc. sold and |
assigned the loan and security agreement, the note and related loan documents to GemCap Solutions, LLC. The |
note matures on February 9, 2025 with all advances bearing interest at an annual rate equal to the greater of (i) the sum of (a) the |
“Prime Rate” as reported in the “Money Rates” column of The Wall Street Journal, adjusted as and when such prime |
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