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December 22, 2020, the Company and its wholly-owned subsidiary 1847 Wolo Inc. (“1847 Wolo”) entered into a stock purchase |
agreement with Wolo Mfg. Corp., a New York corporation (“Wolo Mfg”), and Wolo Industrial Horn & Signal, Inc., a New York |
corporation (“Wolo H&S”), and Barbara Solow and Stanley Solow (together, the “Wolo Sellers”), pursuant to |
which 1847 Wolo acquired all of the issued and outstanding stock of Wolo Mfg and Wolo H&S on March 30, 2021 (see Note 11). As a result |
of this transaction, the Company owns 92.5% of 1847 Wolo, with the remaining 7.5% held by a third-party, and 1847 Wolo owns 100% of Wolo |
Mfg and Wolo H&S. On |
March 3, 2017, the Company’s wholly owned subsidiary 1847 Neese Inc., a Delaware corporation (“1847 Neese”), entered |
into a stock purchase agreement with Neese, Inc., an Iowa corporation (“Neese”), and Alan Neese and Katherine Neese (the |
“Neese Sellers”), pursuant to which 1847 Neese acquired all of the issued and outstanding capital stock of Neese on March |
3, 2017. As a result of this transaction, the Company owned 55% of 1847 Neese, with the remaining 45% held by the Neese Sellers. On April |
19, 2021, the Company entered into a stock purchase agreement with the Neese Sellers, pursuant to which the Neese Sellers purchased the |
Company’s 55% ownership interest in 1847 Neese for a purchase price of $325,000 in cash (the “Neese Spin-Off”). As |
a result of the Neese Spin-Off, 1847 Neese is no longer a subsidiary of the Company (see Note 4). On |
September 23, 2021, 1847 Cabinet entered into a securities purchase agreement with High Mountain Door & Trim Inc., a Nevada corporation |
(“High Mountain”), and Sierra Homes, LLC d/b/a Innovative Cabinets & Design, a Nevada limited liability company (“Innovative |
Cabinets”), and Steven J. Parkey and Jose D. Garcia-Rendon (together, the “H&I Sellers”), pursuant to which 1847 |
Cabinet acquired all of the issued and outstanding capital stock or other equity securities of High Mountain and Innovative Cabinets |
on October 8, 2021 (see Note 11). As a result of this transaction, 1847 Cabinet acquired 92.5% of High Mountain and Innovative Cabinets, |
with the remaining 7.5% held by a third-party. On April 1, 2022, 1847 Cabinet transferred all of its shares of High Mountain to Innovative |
Cabinets, as a result of which Innovative Cabinets now owns 92.5% of High Mountain, with the remaining 7.5% held by a third-party. NOTE 2—SUMMARY |
OF SIGNIFICANT ACCOUNTING POLICIES Basis |
of Presentation The |
consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the |
United States of America (“GAAP”) and are presented in US dollars. The |
results of 1847 Neese are included within discontinued operations for the year ended December 31, 2021. Principles |
of Consolidation The |
consolidated financial statements of the Company include the accounts of the Company and its majority-owned or controlled subsidiaries. |
Intercompany accounts and transactions have been eliminated in consolidation. F- 8 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 Reverse |
Share Split On |
August 2, 2022, the Company effected a 1-for-4 reverse split of its outstanding common shares. All outstanding common shares and warrants |
were adjusted to reflect the 1-for-4 reverse split, with respective exercise prices of the warrants proportionately increased. The outstanding |
convertible notes and series A and B convertible senior preferred shares conversion prices were adjusted to reflect a proportional decrease |
in the number of common shares to be issued upon conversion. All |
share and per share data throughout these condensed consolidated financial statements have been retroactively adjusted to reflect the |
reverse share split. The total number of authorized common shares did not change. As a result of the reverse common share split, an amount |
equal to the decreased value of common shares was reclassified from “common shares” to “additional paid-in capital.” Use |
of Estimates The |
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported |
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the |
reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Segment |
Reporting The |
Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 280, Segment |
Reporting , requires that an enterprise report selected information about reportable segments in its financial reports issued to its |
shareholders. The Company has 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 Mfg and Wolo H&S (together, “Wolo”). The Retail |
and Appliances Segment is comprised of the business of Asien’s, which is based in Santa Rosa, CA, and provides a wide variety of |
appliance products (laundry, refrigeration, cooking, dishwashers, outdoor, accessories, parts, and other appliance related products) |
and services (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, 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, NY, 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. The |
Company provides general corporate services to its 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. Cash and Cash Equivalents, and Marketable Securities Cash and cash equivalents consist of cash on hand |
and highly liquid investments with original maturities of three months or less. The Company maintains deposits in several financial institutions, |
which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). |
The Company has not experienced any losses related to amounts in excess of FDIC limits. As of December 31, 2022 and 2021, the Company |
had $ 380,401 and $ 369,963 in excess of FDIC limits, respectively. The Company’s investments in |
marketable securities are classified based on the nature of the securities and their availability for use in current operations. The |
Company classifies its marketable debt securities as either short-term or long-term based on each instrument’s underlying contractual |
maturity date. F- 9 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 Reclassifications Certain |
reclassifications within property and equipment, notes payable, preferred shares, and operating expenses have been made to prior period’s |
financial statements to conform to the current period financial statement presentation. There is no impact in total to the results of |
operations and cash flows in all periods presented. Revenue |
Recognition and Cost of Revenue The |
Company records revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers . Revenue is recognized to |
depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be |
entitled in exchange for those goods or services. ASC 606 also requires additional disclosure about the nature, amount, timing, and uncertainty |
of revenue and cash flows arising from customer purchase orders, including significant judgments. Retail |
and Appliances Segment The Company collects payment for special-order |
models including tax and partial payment for non-special orders from the customer at the time the order is placed. The Company does not |
incur incremental costs obtaining purchase orders from customers, however, if it did, because all contracts are less than a year in duration, |
any contract costs incurred would be expensed rather than capitalized. Performance |
Obligations – The revenue that the Company recognizes arises from orders it receives from customers. The Company’s performance |
obligations under the customer orders correspond to each sale of merchandise that it makes to customers under the purchase orders; as |
a result, each purchase order generally contains only one performance obligation based on the merchandise sale to be completed. Control |
of the delivery transfers to customers when the customer can direct the use of, and obtain substantially all the benefits from, the Company’s |
products, which generally occurs when the customer assumes the risk of loss. The transfer of control generally occurs at the point of |
pickup, shipment, or installation. Once this occurs, the Company has satisfied its performance obligation and it recognizes revenue. Transaction |
Price ‒ The Company agrees with customers on the selling price of each transaction. This transaction price is generally based on |
the agreed upon sales price. In the Company’s contracts with customers, it allocates the entire transaction price to the sales |
price, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Any |
sales tax that the Company collects concurrently with revenue-producing activities are excluded from revenue. Cost |
of revenue includes the cost of purchased merchandise plus freight and any applicable delivery charges from the vendor to the Company. |
Substantially all sales are to individual retail consumers (homeowners), builders and designers. The large majority of customers are |
homeowners and their contractors, with the homeowner being key in the final decisions. The Company has a diverse customer base with no |
one client accounting for more than 10 % of total revenue. Customer |
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