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may elect to perform an optional qualitative assessment to determine whether it is more likely than not that the fair value of its reporting |
units has fallen below their carrying value. This assessment is based on several factors, including industry and market conditions, overall |
financial performance, including an assessment of cash flows in comparison to actual and projected results of prior periods. If it is |
determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value based on such qualitative |
analysis, or if the Company elects to skip this step, the Company performs a Step 1 quantitative analysis to determine the fair value |
of the reporting unit. At December 31, 2022 and 2021, there were no impairments of goodwill. Intangible |
Assets Acquired |
identifiable intangible assets are amortized over the following periods: Acquired intangible Asset Amortization |
Basis Expected |
Life (years) Customer-Related Straight-line basis 9 - 15 Marketing-Related Straight-line basis 5 Technology-Related Straight-line basis 7 The |
Company periodically evaluates the reasonableness of the useful lives of these assets. These assets are reviewed for impairment when |
events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written |
down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives. |
At December 31, 2022 and 2021, there were no impairments of intangible assets. Long-Lived |
Assets The |
Company reviews its property and equipment and right-of-use (“ROU”) assets for impairment whenever events or changes in circumstances |
indicate that the carrying amount of an asset group may not be recoverable. The test for impairment is required to be performed by management |
upon triggering events. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to |
the future undiscounted cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment |
to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived |
assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. At December 31, 2022 and 2021, |
there were no impairments of long-lived assets. F- 13 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 Fair |
Value of Financial Instruments The |
fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in |
an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities |
are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the |
quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on |
the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three |
categori Level |
1: Unadjusted quoted prices that are available in active markets for identical assets or liabilities at the measurement date. Level |
2: Significant other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly |
or indirectly. Level |
3: Significant unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management |
judgment. The Company’s marketable securities are |
considered held to maturity are comprised of certificates of deposit and are categorized as Level 2 in the fair value hierarchy. Cash and cash equivalents, receivables, inventories, |
prepaid expenses, accounts payable, accrued expenses, customer deposits, and contract assets and liabilities approximate fair value, due |
to their short-term nature. The carrying value of notes payable and short and long-term debt also approximates fair value since these |
instruments bear market rates of interest. Assets |
and liabilities that are measured at fair value on a nonrecurring basis relate primarily to long-lived assets, intangible assets, and |
goodwill, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets. Income |
Taxes Income |
taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities |
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing |
assets and liabilities and their respective tax bases. Deferred |
income tax assets and liabilities are recorded with respect to temporary differences in the accounting treatment of items for financial |
reporting purposes and for income tax purposes. Where, based on the weight of available evidence, it is more likely than not that some |
amount of recorded deferred tax assets will not be realized, a valuation allowance is established for the amount that, in management’s |
judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. A tax position must |
meet a minimum probability threshold before a financial statement benefit is recognized. The minimum threshold is defined as a tax position |
that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related |
appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest |
amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Stock-Based |
Compensation The |
Company records stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation . All transactions in |
which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value |
of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments |
issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the |
equity instruments issued and are recognized over the employees required service period, which is generally the vesting period. F- 14 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 Basic |
Income (Loss) Per Share Basic |
earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of shares of common stock outstanding |
during each period. Diluted earnings (loss) per share is calculated by adjusting the weighted average number of shares of common stock |
outstanding for the dilutive effect, if any, of common stock equivalents. Common stock equivalents whose effect would be antidilutive |
are not included in diluted earnings (loss) per share. The Company uses the treasury stock method to determine the dilutive effect, which |
assumes that all common stock equivalents have been exercised at the beginning of the period and that the funds obtained from those exercises |
were used to repurchase shares of common stock of the Company at the average closing market price during the period (see Note 18). Operating |
Leases The |
Company accounts for leases in accordance with ASC Topic 842, Leases . The Company determines whether a contract is a lease at |
contract inception or for a modified contract at the modification date. At inception or modification, the Company recognizes ROU assets |
and related lease liabilities on the balance sheet for all leases greater than one year in duration. Lease liabilities and their corresponding |
ROU assets are initially measured at the present value of the unpaid lease payments as of the lease commencement date. If the lease contains |
a renewal and/or termination option, the exercise of the option is included in the term of the lease if the Company is reasonably certain |
that a renewal or termination option will be exercised. As the Company’s leases do not provide an implicit rate, the Company uses |
an estimated incremental borrowing rate (“IBR”) based on the information available at the commencement date of the respective |
lease to determine the present value of future payments. The IBR is determined by estimating what it would cost the Company to borrow |
a collateralized amount equal to the total lease payments over the lease term based on the contractual terms of the lease and the location |
of the leased asset. Operating |
lease payments are recognized as an expense on a straight-line basis over the lease term in equal amounts of rent expense attributed |
to each period during the term of the lease, regardless of when actual payments are made. This generally results in rent expense in excess |
of cash payments during the early years of a lease and rent expense less than cash payments in later years. The difference between rent |
expense recognized and actual rental payments is typically represented as the spread between the ROU asset and lease liability. When |
calculating the present value of minimum lease payments, the Company accounts for leases as one single lease component if a lease has |
both lease and non-lease fixed cost components. Variable lease and non-lease cost components are expensed as incurred. The |
Company does not recognize ROU assets and lease liabilities for short-term leases that have an initial lease term of 12 months or less. The Company recognizes the lease payments associated with short-term leases as an expense on a straight-line basis over the lease term. F- 15 1847 |
HOLDINGS LLC NOTES |
TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER |
31, 2022 AND 2021 Liquidity and Going Concern Assessment As of December 31, 2022, the Company had cash |
and cash equivalents of $ 1,079,355 . For the year ended December 31, 2022, the Company incurred a loss from operations of $ 5,739,508 (before |
deducting losses attributable to non-controlling interests), cash flows used in operations of $ 4,131,477 , and working capital deficit |
of $ 2,935,590 . The Company has generated operating losses since its inception and has relied on cash on hand, sales of securities, external |
bank lines of credit, and issuance of third-party and related party debt to support cashflow from operations, which creates substantial |
doubt about its ability to continue as a going concern for a period at least one year from the date of issuance of these consolidated |
financial statements. Management |
plans to address the above as needed by, securing additional bank lines of credit and obtaining additional financing through debt or |
equity transactions. Management has implemented tight cost controls to conserve cash. The ability of |
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