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management services agreement with our manager on August 21, 2020 (which was amended and restated on October 8, 2021), 1847 Wolo entered |
into an offsetting management services agreement with our manager on March 30, 2021 and 1847 ICU entered into an offsetting management |
services agreement with our manager on February 9, 2023. Pursuant to the offsetting management services agreements, each of 1847 Asien, |
1847 Wolo and 1847 ICU appointed our manager to provide certain services to it for a quarterly management fee equal to the greater of |
$75,000 or 2% of adjusted net assets (as defined in the management services agreement) and 1847 Cabinet appointed our manager to provide |
certain services to it for a quarterly management fee equal to the greater of $75,000 or 2% of adjusted net assets (as defined in the |
management services agreement), which was increased to $125,000 or 2% of adjusted net assets on October 8, 2021; provided, however, in |
each case that if the aggregate amount of management fees paid or to be paid by such entities, together with all other management fees |
paid or to be paid to our manager under other offsetting management services agreements, exceeds, or is expected to exceed, 9.5% of our |
gross income in any fiscal year or the parent management fee in any fiscal quarter, then the management fee to be paid by such entities |
shall be reduced, on a pro rata basis determined by reference to the other management fees to be paid to our manager under other offsetting |
management services agreements. Each |
of these entities shall also reimburse our manager for all of their costs and expenses which are specifically approved by their board |
of directors, including all out-of-pocket costs and expenses, which are actually incurred by our manager or its affiliates on behalf |
of these entities in connection with performing services under the offsetting management services agreements. 1847 |
Asien expensed management fees of $300,000 for the years ended December 31, 2022 and 2021. 1847 |
Cabinet expensed management fees of $500,000 and $350,000 for the years ended December 31, 2022 and 2021, respectively. 1847 |
Wolo expensed management fees of $300,000 and $225,000 for the years ended December 31, 2022 and 2021, respectively. On |
a consolidated basis, our company expensed total management fees of $1,100,000 and $875,000 for the years ended December 31, 2022 and |
2021, respectively. Segments The |
Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 280, Segment Reporting , requires |
that an enterprise report selected information about reportable segments in its financial reports issued to its shareholders. As of December |
31, 2022, we have three reportable segments - the retail and appliances segment, which is operated by Asien’s, the construction |
segment, which is operated by Kyle’s, High Mountain and Innovative Cabinets, and the automotive supplies segment, which is operated |
by Wolo. The retail |
and appliances segment is comprised of the business of Asien’s, which is based in Santa Rosa, California, and provides a wide variety |
of appliance services including sales, delivery, installation, service and repair, extended warranties, and financing. The construction |
segment is comprised of the businesses of Kyle’s, High Mountain and Innovative Cabinets. Kyle’s, which is based in Boise, |
Idaho, provides a wide variety of construction services including custom design and build of kitchen and bathroom cabinetry, delivery, |
installation, service and repair, extended warranties, and financing. High Mountain, which is based in Reno, Nevada, specializes in all |
aspects of finished carpentry products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks |
and cabinets, bookcases, built-in closets, and fireplace mantles, among others, as well as window installation. Innovative Cabinets, |
also based in Reno, Nevada, specializes in custom cabinetry and countertops. The |
automotive supplies segment is comprised of the business of Wolo, which is based in Deer Park, New York, and designs and sells horn and |
safety products (electric, air, truck, marine, motorcycle and industrial equipment), and offers vehicle emergency and safety warning |
lights for cars, trucks, industrial equipment and emergency vehicles. We |
provide general corporate services to our segments; however, these services are not considered when making operating decisions and assessing |
segment performance. These services are reported under “Corporate Services” below and these include costs associated with |
executive management, financing activities and public company compliance. 94 Discontinued |
Operations On |
April 19, 2021, we entered into a stock purchase agreement with the original owners of Neese, pursuant to which they purchased our 55% |
ownership interest in 1847 Neese for a purchase price of $325,000 in cash. As a result of this transaction, 1847 Neese is no longer a |
subsidiary of our company. All financial information of 1847 Neese previously presented as part of land management services operations |
are classified as discontinued operations and not presented as part of continuing operations for the year ended December 31, 2021. Results |
of Operations The |
following table sets forth key components of our results of operations during the years ended December 31, 2022 and 2021, both in dollars |
and as a percentage of our revenues. Years |
Ended December 31, 2022 2021 Amount % |
of Revenues Amount % |
of Revenues Revenues $ 48,929,124 100.00 % $ 30,660,984 100.0 % Operating Expenses Cost of revenues 33,227,730 67.9 % 20,100,906 65.6 % Personnel 9,531,101 19.5 % 3,803,497 12.4 % Depreciation |
and amortization 2,037,112 4.2 % 908,982 3.0 % General |
and administrative 9,872,689 20.2 % 6,951,498 22.7 % Total |
Operating Expenses 54,668,632 111.7 % 31,764,883 103.6 % Loss From Operations (5,739,508 ) (11.7 )% (1,103,899 ) (3.6 )% Other Income (Expenses) Other |
income (expense) (11,450 ) (0.0 )% 876 0.0 % Interest |
expense (4,594,740 ) (9.4 )% (1,296,537 ) (4.2 )% Gain |
on forgiveness of debt - - 360,302 1.2 % Gain |
on disposal of property and equipment 65,417 0.1 % 10,885 0.0 % Gain |
on disposition of subsidiary - - 3,282,804 10.7 % Loss |
on extinguishment of debt (2,039,815 ) (4.2 )% (137,692 ) (0.4 )% Loss |
on redemption of preferred shares - - (4,017,553 ) (13.1 )% Loss |
on write-down of contingent note payable (158,817 ) (0.3 )% (602,204 ) (2.0 )% Total |
Other Income (Expense) (6,739,405 ) (13.8 )% (2,399,119 ) (7.8 )% Net Loss Before Income Taxes (12,478,913 ) (25.5 )% (3,503,018 ) (11.4 )% Income |
tax benefit (expense) 1,677,000 3.4 % (218,139 ) (0.7 )% Net Loss |
From Continuing Operations $ (10,801,913 ) (22.1 )% $ (3,721,157 ) (12.1 )% Total |
revenues . Our total revenues were $48,929,124 for the year ended December 31, 2022, as compared to $30,660,984 for the year ended |
December 31, 2021. The |
retail and appliances segment generates revenue through the sales of home furnishings, including appliances and related products. Revenues |
from the retail and appliances segment decreased by $2,069,934, or 16.2%, to $10,671,129 for the year ended December 31, 2022 from $12,741,063 |
for the year ended December 31, 2021. Such decrease was primarily due to ongoing supply chain delays and cost increases with appliance |
manufacturers, increased time it takes to receive products, and decreased customer demand. The |
construction segment generates revenue through the sale of finished carpentry products and services, including doors, door frames, base |
boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in closets, and fireplace mantles, among others, as well |
as kitchen countertops. Revenues from the construction segment increased by $19,565,017, or 160.3%, to $31,768,907 for the year ended |
December 31, 2022 from $12,203,890 for the year ended December 31, 2021. Such increase was primarily due to the acquisitions of High |
Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, revenues from the |
construction segment increased by $514,545, or 9.5%. Such increase was primarily due to increases in the average customer contract in |
the construction segment. The |
automotive supplies segment generates revenue through the design and sale of horn and safety products (electric, air, truck, marine, |
motorcycle and industrial equipment), including vehicle emergency and safety warning lights for cars, trucks, industrial equipment and |
emergency vehicles. Revenues from the automotive supplies segment increased by $773,057, or 13.5%, to $6,489,088 for the year ended December |
31, 2022 from $5,716,031 for the year ended December 31, 2021. Such increase was primarily due to the acquisition of Wolo, which was |
acquired on March 31, 2021. 95 Cost |
of revenues . Our total cost of revenues was $33,227,730 for the year ended December 31, 2022, as compared to $20,100,906 for the year |
ended December 31, 2021. Cost |
of revenues for the retail and appliances segment consists 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. Cost of revenues for the retail |
and appliances segment decreased by $1,579,436, or 16.1%, to $8,203,401 for the year ended December 31, 2022 from $9,782,837 for the |
year ended December 31, 2021. Such decrease primarily due to the decrease in revenues from the retail and appliance segment. As a percentage |
of retail and appliances revenues, cost of revenues for the retail and appliances segment was 76.9% and 76.8% for the years ended December |
31, 2022 and 2021, respectively. Cost |
of revenues for the construction segment consists of finished goods, lumber, hardware and materials and plus direct labor and related costs, |
net of any material discounts from vendors. Cost of revenues for the construction segment increased by $14,270,276, or 212.7%, to $20,980,103 |
for the year ended December 31, 2022 from $6,709,827 for the year ended December 31, 2021. Such increase was primarily due to the acquisitions |
of High Mountain and Innovative Cabinets, which were acquired in the fourth quarter of 2021. Excluding these acquisitions, cost of revenues |
for the construction segment increased by $544,095, or 18.4%. Such increase was primarily due to the corresponding increase in revenues |
from the construction segment, as well as increased product and delivery costs. As a percentage of construction revenues, cost of revenues |
for the construction segment was 66.0% and 55.0% for the years ended December 31, 2022 and 2021, respectively. Cost |
of revenues for the automotive supplies segment consists of the costs of purchased finished goods plus freight and tariff costs. Cost of |
revenues for the automotive supplies segment increased by $435,984, or 12.1%, to $4,044,226 for the year ended December 31, 2022 from $3,608,242 |
for the year ended December 31, 2021. Such increase was primarily due to the acquisition of Wolo, which was acquired on March 31, 2021. |
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