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on many factors that cannot be predicted with any certainty at this time. See Item 1 “ Business—Our Manager—Our Manager |
as an Equity Holder—Supplemental Put Provision ” for more information on the calculation of the put price. The put price |
obligation, if our manager exercises its put right, will represent a significant cash payment and is senior in right to payments of distributions |
to our shareholders. Therefore, the amount of put price will reduce the amount of cash available to us for our operating and investing |
activities, including future acquisitions. 98 Summary |
of Cash Flow The |
following table provides detailed information about our net cash flow for the period indicat Cash |
Flow Years |
Ended December 31, 2022 2021 Net cash used |
in operating activities from continuing operations $ (4,131,477 ) $ (897,566 ) Net cash used in investing |
activities from continuing operations (160,418 ) (15,684,770 ) Net |
cash provided by financing activities from continuing operations 3,987,717 16,585,520 Net increase (decrease) in |
cash and cash equivalents from continuing operations (304,178 ) 3,184 Cash |
and cash equivalents at beginning of year 1,383,533 1,380,349 Cash |
and cash equivalent at end of year $ 1,079,355 $ 1,383,533 Net |
cash used in operating activities from continuing operations was $4,131,477 for the year ended December 31, 2022, as compared to $897,566 |
for the year ended December 31, 2021. The increase in cash used from operating activities was primarily a result of the increased net |
loss, decreased receivables, and increased deferred tax liability, offset by increased inventories and increased accounts payable and |
accrued expenses. Net |
cash used in investing activities from continuing operations was $160,418 for the year ended December 31, 2022, as compared to $15,684,770 |
for the year ended December 31, 2021. The decrease in cash used in investing activities was primarily a result of the cash paid in acquisitions |
during the prior year. Net |
cash provided by financing activities from continuing operations was $3,987,717 for the year ended December 31, 2022, as compared to |
$16,585,520 for the year ended December 31, 2021. The decrease in cash provided by investing activities was primarily a result of decreased |
proceeds from preferred shares and notes payable issuances and increased dividend payments, offset by an equity offering and decreased |
notes payable payments. Series |
A Unit Offering On |
March 26, 2021, we sold an aggregate of 1,818,182 units, at a price of $1.65 per unit, for aggregate gross proceeds of $3,000,000. Each |
unit consists of one (1) series A senior convertible preferred share and a three-year warrant to purchase one (1) common share at an |
exercise price of $10.00 per common 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 under certain circumstances. As described in further detail below, we contributed |
to 1847 Wolo the $3,000,000 raised in this offering in exchange for 1,000 shares of 1847 Wolo’s series A preferred stock, at a |
price of $3,000 per share, to fund, in part, the planned acquisition of Wolo by 1847 Wolo. In |
exchange for the consent of the holders of our outstanding series A senior convertible preferred shares to the issuance of these units |
at a lower purchase price than such holders paid for their shares, we issued an aggregate of 99,710 common shares to such holders. Series |
B Unit Offering From |
February 24, 2022 to March 24, 2022, we sold an aggregate of 426,999 units, at a price of $3.00 per unit, for aggregate gross proceeds |
of $1,281,000. From April 20, 2022 to May 19, 2022, we sold an aggregate of 54,567 units to our Chief Executive Officer, Ellery |
W. Roberts, for aggregate gross proceeds of $163,700. We had total issuance costs relating to these offerings of approximately $15,000, |
resulting in net proceeds of $1,429,700. Each unit consists 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 share (subject to adjustment), which such exercise price was adjusted |
to $4.20 following the down round warrant adjustments described below, which may be exercised on a cashless basis under certain circumstances. Private |
Placement On |
July 8, 2022, we entered into a securities purchase agreement with Mast Hill Fund, L.P., pursuant to which we 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 our common shares is greater than the exercise price, for total net proceeds |
of $499,600. Additionally, we 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 our 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. On August 10, 2022, the promissory note was repaid in full. 99 Public |
Offering On |
August 2, 2022, we entered into an underwriting agreement with Craft Capital Management LLC and R.F. Lafferty & Co. Inc., as representatives |
of the underwriters named on Schedule 1 thereto, relating to our public offering of common shares. Under the underwriting agreement, |
we agreed to sell 1,428,572 common shares to the underwriters, at a gross purchase price per share of $4.20 per share, pursuant to our |
registration statement on Form S-1 (File No. 333-259011) under the Securities Act. On August 5, 2022, the closing of the public offering |
was completed and we sold 1,428,572 common shares for total gross proceeds of $6 million. After deducting underwriting commissions and |
expenses, we received net proceeds of approximately $5.15 million. Dividends During |
the year ended December 31, 2022, we accrued dividends attributable to the series A senior convertible preferred shares in the amount |
of $590,162 and paid prior period accrued dividends of $615,593. During |
the year ended December 31, 2022, we accrued dividends attributable to the series B senior convertible preferred shares in the amount |
of $162,268 and paid prior period accrued dividends of $129,103. On |
November 10, 2021, we declared a common share dividend of $0.05 per share, or an aggregate of $242,160, to shareholders of record as |
of December 31, 2021. The dividend paid was paid on January 14, 2022. On |
March 23, 2022, we declared a common share dividend of $0.05 per share, or an aggregate of $249,762, to shareholders of record as of |
March 31, 2022. This dividend was paid on April 15, 2022. On |
July 29, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $337,841, to shareholders of record as of |
August 4, 2022. This dividend was paid on August 19, 2022. On |
August 23, 2022, we declared a common share dividend of $0.13125 per share, or an aggregate of $505,751 to shareholders of record as |
of September 30, 2022. This dividend was paid on October 17, 2022. Warrant |
Adjustments 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 our outstanding warrants |
was adjusted to $5.20 pursuant to certain antidilution provisions of such warrants (down round feature). In addition, certain of our |
outstanding warrants include an “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, we recognized a deemed dividend |
of approximately $6.4 million, which was calculated using a Black-Scholes pricing model. As |
a result of the public offering, the exercise price of certain of our outstanding warrants was adjusted to $4.20 pursuant to certain |
antidilution provisions of such warrants (down round feature). In addition, certain of our 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, we recognized a deemed dividend of approximately $2.6 million, which |
was calculated using a Black-Scholes pricing model. 100 Debt Secured |
Convertible Promissory Notes On |
October 8, 2021, we and each of our subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo, Kyle’s, High Mountain |
and Innovative Cabinets, entered into a note purchase agreement with two institutional investors, including Leonite, pursuant to which |
we issued to these purchasers secured convertible promissory notes in the aggregate principal amount of $24,860,000. The notes contain |
an aggregate original issue discount of $497,200. As a result, the total purchase price was $24,362,800. After payment of expenses of |
$617,825, we received net proceeds of $23,744,975, of which $10,687,500 was used to fund the cash portion of the purchase price for the |
acquisition of High Mountain and Innovative Cabinets. In addition, as consideration for the financing, we granted the financing agent |
187,500 warrants with a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets which had a fair value of $1,146,803. |
The agent fees were reflected as a discount against the convertible note payable with the warrants being included in additional paid |
in capital and the equity interest being including within noncontrolling interest on the consolidated balance sheet. The remaining principal |
balance of the convertible notes at December 31, 2022 is $22,432,803, net of debt discounts of $2,427,197, and an accrued interest balance |
of $500,702. The |
notes bear interest at a rate per annum equal to the greater of (i) 4.75% plus the U.S. Prime Rate that appears in The Wall Street |
Journal from time to time or (ii) 8%; provided that, upon an event of default (as defined in the notes), such rate shall increase |
to 24% or the maximum legal rate. Payments of interest only, computed at such rate on the outstanding principal amount, will be due and |
payable quarterly in arrears commencing on January 1, 2022 and continuing on the first day of each calendar quarter thereafter through |
and including the maturity date, October 8, 2026. We may voluntarily prepay |
the notes in whole or in part upon payment of a prepayment fee in an amount equal to 10% of the principal and interest paid in connection |
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