arcee-ai/sec-data-full · Datasets at Hugging Face

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on the vested portion of principal amount at the rate of eight percent ( 8 %) per annum. To the extent vested, the vested portion of the
principal and all accrued but unpaid interest on such vested portion of the principal shall be paid in one lump sum on the last day of
the thirty-sixth (36th) month following the date of the note. F- 32 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The vested principal of the note due at the maturity
date shall be calculated each year based on the average annual consolidated EBITDA (as defined in the note) of 1847 Cabinet for each
of the years ended December 31, 2020, 2021 and 2022. The EBITDA for each year shall be divided by $1.4 million multiplied by 100 to obtain
the vested percentage. The vested principal for each year shall be equal to the vested percentage for that year multiplied by $350,000.
To the extent that the vested percentage for the subject year is less than 80%, no portion of the note for that year shall vest. To the
extent that the vested percentage for the subject year is equal to or greater than 120%, the vested principal shall be equal to $420,000
for that year and no more. For the year ended December 31, 2020, EBITDA of 1847 Cabinet was approximately $1,531,000, resulting in a
vested amount of approximately $415,000. For the year ended December 31, 2021, EBITDA of 1847 Cabinet was approximately $427,504, resulting
in an additional vested amount of approximately $602,204. As of December 31, 2021, the fair value of the outstanding balance expected
to be paid on this note was $1,001,183. 1847 Cabinet will have the right to redeem all
but no less than all of the note at any time prior to the maturity date. If 1847 Cabinet elects to redeem the note, the redemption price
will be payable in cash and is equal to the then outstanding vested portion of the principal plus any remaining unvested principal amount
plus accrued but unpaid interest thereon (calculated over 36 months). For purposes of this redemption calculation, the “unvested
principal amount” shall be $ 350,000 per year. The note contains customary events of default.
The right of the Kyle’s Sellers to receive payments under the note is subordinated to all indebtedness of 1847 Cabinet, whether
outstanding as of the closing date or thereafter created, to banks, insurance companies and other financial institutions or funds, and
federal or state taxation authorities. NOTE 13—CONVERTIBLE PROMISSORY NOTE S Secured Convertible
Promissory Notes On October 8, 2021, the Company and each of its
subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo Mfg, Wolo H&S, Kyle’s, High Mountain and Innovative Cabinets,
entered into a note purchase agreement with two institutional investors, pursuant to which the Company 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 , the Company 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, the Company granted the financing agent 750,000 warrants with
a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets acquisition 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 notes at December 31, 2021 is $ 23,787,936 , net of debt discounts of $ 3,072,064 , and they have accrued interest of $ 467,689 . 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. The Company 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 with such prepayment. In addition, immediately upon receipt by the Company or any subsidiary of any proceeds from any issuance
of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by the Company or any subsidiary
of any of the collateral or any of its respective assets (other than asset sales or dispositions in the ordinary course of business which
are permitted by the note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain, condemnation or
similar proceedings, the Company must prepay the notes in an amount equal to all such proceeds, net of reasonable and customary transaction
costs, fees and expenses properly attributable to such transaction and payable by the Company or a subsidiary in connection therewith
(in each case, paid to non-affiliates). F- 33 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The holders of the notes
may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any accrued but unpaid
interest on such portion, into common shares of the Company at a conversion price equal to $ 2.50 (subject to equitable adjustments for
stock splits, stock combinations, recapitalizations and similar transactions, as well as for future issuances below the conversion price).
Notwithstanding the foregoing, the notes contain a beneficial ownership limitation, which provides that the Company shall not effect
any conversion to the extent that after giving effect to the conversion, the holder, together with 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
such conversion. Upon no fewer than 61 days’ prior notice to the Company, a holder may increase or decrease such beneficial
ownership limitation (up to a maximum of 9.99 %) and any such increase or decrease will not be effective until the 61 st day
after such notice is delivered to the Company. Pursuant to the terms
of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the right, but
not the obligation, to participate in any securities offering of the Company other than a permitted issuance (as defined in the note
purchase agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of
first refusal to participate in any issuance of indebtedness by the Company until the notes have been terminated; provided, however,
that this right of first refusal shall not apply to permitted issuances. The note purchase agreement and the notes contain
customary representations, warranties, affirmative and negative financial and other covenants and events of default for loans of this
type. The notes are guaranteed by each subsidiary and are secured by a first priority security interest in all of the assets of the Company
and its subsidiaries. 6% Subordinated
Convertible Promissory Notes A portion of the purchase
price for the acquisition of High Mountain and Innovative Cabinets on October 8,
2021 was paid by the issuance of 6 % subordinated convertible promissory notes in the aggregate principal amount of $ 5,880,345 by 1847 Cabinet to the H&I Sellers. The remaining principal balance of the notes at December 31, 2021 is $ 4,838,997 , net of debt
discount of $ 1,041,348 , and they have accrued interest of $ 108,262 . The notes bear interest
at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of default (as defined
in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes in whole or in part,
without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At any time prior to
October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent ( 20 %) of the original principal amount
of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined by dividing
the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined in accordance
with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In
addition, on October 8, 2021, the Company entered into an exchange agreement with the H&I Sellers, pursuant to which the Company
granted them the right to exchange all of the principal amount and accrued but unpaid interest under the notes or any portion thereof
for a number of common shares of the Company to be determined by dividing the amount to be converted by an exchange price equal to the
higher of (i) the 30-day volume weighted average price for the Company’s common shares on the primary national securities
exchange or over-the-counter market on which such common shares are traded over the thirty (30) trading days immediately prior to
the applicable exchange date or (ii) $ 2.50 (subject to equitable adjustments for stock splits, stock combinations, recapitalizations
and similar transactions). The notes contain customary
events of default, including in the event of a default under the secured convertible promissory notes described above. The rights of
the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible promissory
notes described above. Leonite Capital Note On April 5, 2019, the Company, Holdco and Goedeker
(collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC (“Leonite”), pursuant
to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $ 714,286 due April 5, 2020. As additional consideration for the purchase of the note, (i) the Company issued to Leonite 50,000 common shares, (ii) the Company issued
to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which
may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest
in Holdco. F- 34 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The note carried an original issue discount of
$ 64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection
with the purchase of the note. Furthermore, the Company issued 50,000 common shares valued at $ 137,500 and a debt-discount related to
the warrants valued at $ 292,673 . The Company amortized $ 292,673 of financing costs related to the shares and warrants in the year ended
December 31, 2020. On May 11, 2020, 1847 and Leonite entered into
a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the
note to October 5, 2020, (ii) that 1847’s failure to repay the note on the original maturity date of April 5, 2020 shall not constitute
and event of default under the note and (iii) to increase the principal amount of the note by $ 207,145 , as a forbearance fee. In connection with the amendment, (i) the Company
issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment),
which may be exercised on a cashless basis and (ii) upon closing of the Asien’s Acquisition, 1847 Asien issued to Leonite shares
of common stock equal to a 5% interest in 1847 Asien. The amendment represented a prepayment of principal and accrued interest resulting
in a debt extinguishment and the Company recorded an aggregate extinguishment loss of $773,856. Under the note, Leonite had the right at any
time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note
into fully paid and non-assessable common shares or any shares of capital stock or other securities of the Company into which such common
shares may be changed or reclassified. On May 4, 2020, Leonite converted $ 100,000 of

on the vested portion of principal amount at the rate of eight percent ( 8 %) per annum. To the extent vested, the vested portion of the

principal and all accrued but unpaid interest on such vested portion of the principal shall be paid in one lump sum on the last day of

the thirty-sixth (36th) month following the date of the note. F- 32 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The vested principal of the note due at the maturity

date shall be calculated each year based on the average annual consolidated EBITDA (as defined in the note) of 1847 Cabinet for each

of the years ended December 31, 2020, 2021 and 2022. The EBITDA for each year shall be divided by $1.4 million multiplied by 100 to obtain

the vested percentage. The vested principal for each year shall be equal to the vested percentage for that year multiplied by $350,000.

To the extent that the vested percentage for the subject year is less than 80%, no portion of the note for that year shall vest. To the

extent that the vested percentage for the subject year is equal to or greater than 120%, the vested principal shall be equal to $420,000

for that year and no more. For the year ended December 31, 2020, EBITDA of 1847 Cabinet was approximately $1,531,000, resulting in a

vested amount of approximately $415,000. For the year ended December 31, 2021, EBITDA of 1847 Cabinet was approximately $427,504, resulting

in an additional vested amount of approximately $602,204. As of December 31, 2021, the fair value of the outstanding balance expected

to be paid on this note was $1,001,183. 1847 Cabinet will have the right to redeem all

but no less than all of the note at any time prior to the maturity date. If 1847 Cabinet elects to redeem the note, the redemption price

will be payable in cash and is equal to the then outstanding vested portion of the principal plus any remaining unvested principal amount

plus accrued but unpaid interest thereon (calculated over 36 months). For purposes of this redemption calculation, the “unvested

principal amount” shall be $ 350,000 per year. The note contains customary events of default.

The right of the Kyle’s Sellers to receive payments under the note is subordinated to all indebtedness of 1847 Cabinet, whether

outstanding as of the closing date or thereafter created, to banks, insurance companies and other financial institutions or funds, and

federal or state taxation authorities. NOTE 13—CONVERTIBLE PROMISSORY NOTE S Secured Convertible

Promissory Notes On October 8, 2021, the Company and each of its

subsidiaries 1847 Asien, 1847 Wolo, 1847 Cabinet, Asien’s, Wolo Mfg, Wolo H&S, Kyle’s, High Mountain and Innovative Cabinets,

entered into a note purchase agreement with two institutional investors, pursuant to which the Company 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 , the Company 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, the Company granted the financing agent 750,000 warrants with

a fair value of $956,526 and 7.5% interest in High Mountain and Innovative Cabinets acquisition 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 notes at December 31, 2021 is $ 23,787,936 , net of debt discounts of $ 3,072,064 , and they have accrued interest of $ 467,689 . 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. The Company 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 with such prepayment. In addition, immediately upon receipt by the Company or any subsidiary of any proceeds from any issuance

of indebtedness (other than certain permitted indebtedness), any proceeds of any sale or disposition by the Company or any subsidiary

of any of the collateral or any of its respective assets (other than asset sales or dispositions in the ordinary course of business which

are permitted by the note purchase agreement), or any proceeds from any casualty insurance policies or eminent domain, condemnation or

similar proceedings, the Company must prepay the notes in an amount equal to all such proceeds, net of reasonable and customary transaction

costs, fees and expenses properly attributable to such transaction and payable by the Company or a subsidiary in connection therewith

(in each case, paid to non-affiliates). F- 33 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The holders of the notes

may, in their sole discretion, elect to convert any outstanding and unpaid principal portion of the notes, and any accrued but unpaid

interest on such portion, into common shares of the Company at a conversion price equal to $ 2.50 (subject to equitable adjustments for

stock splits, stock combinations, recapitalizations and similar transactions, as well as for future issuances below the conversion price).

Notwithstanding the foregoing, the notes contain a beneficial ownership limitation, which provides that the Company shall not effect

any conversion to the extent that after giving effect to the conversion, the holder, together with 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

such conversion. Upon no fewer than 61 days’ prior notice to the Company, a holder may increase or decrease such beneficial

ownership limitation (up to a maximum of 9.99 %) and any such increase or decrease will not be effective until the 61 st day

after such notice is delivered to the Company. Pursuant to the terms

of the notes, until the date that is eighteen (18) months after the issuance date of the notes, the holders shall have the right, but

not the obligation, to participate in any securities offering of the Company other than a permitted issuance (as defined in the note

purchase agreement) in an amount of up to the original principal amount of the notes. In addition, the holders shall have the right of

first refusal to participate in any issuance of indebtedness by the Company until the notes have been terminated; provided, however,

that this right of first refusal shall not apply to permitted issuances. The note purchase agreement and the notes contain

customary representations, warranties, affirmative and negative financial and other covenants and events of default for loans of this

type. The notes are guaranteed by each subsidiary and are secured by a first priority security interest in all of the assets of the Company

and its subsidiaries. 6% Subordinated

Convertible Promissory Notes A portion of the purchase

price for the acquisition of High Mountain and Innovative Cabinets on October 8,

2021 was paid by the issuance of 6 % subordinated convertible promissory notes in the aggregate principal amount of $ 5,880,345 by 1847 Cabinet to the H&I Sellers. The remaining principal balance of the notes at December 31, 2021 is $ 4,838,997 , net of debt

discount of $ 1,041,348 , and they have accrued interest of $ 108,262 . The notes bear interest

at a rate of six percent (6%) per annum and are due and payable on October 8, 2024; provided that upon an event of default (as defined

in the notes), such interest rate shall increase to ten percent (10%) per annum. 1847 Cabinet may prepay the notes in whole or in part,

without penalty or premium, upon ten (10) business days prior written notice to the holders of the notes. At any time prior to

October 8, 2022, the holders may, in their sole discretion, elect to convert up to twenty percent ( 20 %) of the original principal amount

of the notes and all accrued, but unpaid, interest into such number of shares of the common stock of 1847 Cabinet determined by dividing

the amount to be converted by a conversion price determined by dividing (i) the fair market value of 1847 Cabinet (determined in accordance

with the notes) by (ii) the number of shares of 1847 Cabinet outstanding on a fully diluted basis. In

addition, on October 8, 2021, the Company entered into an exchange agreement with the H&I Sellers, pursuant to which the Company

granted them the right to exchange all of the principal amount and accrued but unpaid interest under the notes or any portion thereof

for a number of common shares of the Company to be determined by dividing the amount to be converted by an exchange price equal to the

higher of (i) the 30-day volume weighted average price for the Company’s common shares on the primary national securities

exchange or over-the-counter market on which such common shares are traded over the thirty (30) trading days immediately prior to

the applicable exchange date or (ii) $ 2.50 (subject to equitable adjustments for stock splits, stock combinations, recapitalizations

and similar transactions). The notes contain customary

events of default, including in the event of a default under the secured convertible promissory notes described above. The rights of

the holders to receive payments under the notes are subordinated to the rights of the purchasers under secured convertible promissory

notes described above. Leonite Capital Note On April 5, 2019, the Company, Holdco and Goedeker

(collectively, “1847”) entered into a securities purchase agreement with Leonite Capital LLC (“Leonite”), pursuant

to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $ 714,286 due April 5, 2020. As additional consideration for the purchase of the note, (i) the Company issued to Leonite 50,000 common shares, (ii) the Company issued

to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which

may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest

in Holdco. F- 34 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 The note carried an original issue discount of

$ 64,286 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection

with the purchase of the note. Furthermore, the Company issued 50,000 common shares valued at $ 137,500 and a debt-discount related to

the warrants valued at $ 292,673 . The Company amortized $ 292,673 of financing costs related to the shares and warrants in the year ended

December 31, 2020. On May 11, 2020, 1847 and Leonite entered into

a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the

note to October 5, 2020, (ii) that 1847’s failure to repay the note on the original maturity date of April 5, 2020 shall not constitute

and event of default under the note and (iii) to increase the principal amount of the note by $ 207,145 , as a forbearance fee. In connection with the amendment, (i) the Company

issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment),

which may be exercised on a cashless basis and (ii) upon closing of the Asien’s Acquisition, 1847 Asien issued to Leonite shares

of common stock equal to a 5% interest in 1847 Asien. The amendment represented a prepayment of principal and accrued interest resulting

in a debt extinguishment and the Company recorded an aggregate extinguishment loss of $773,856. Under the note, Leonite had the right at any

time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note

into fully paid and non-assessable common shares or any shares of capital stock or other securities of the Company into which such common

shares may be changed or reclassified. On May 4, 2020, Leonite converted $ 100,000 of