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

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grid note was terminated. Building Lease On September 1, 2020, Kyle’s entered into
an industrial lease agreement with the Kyle’s Sellers, who are officers of Kyle’s and principal shareholders of the Company.
See Note 13 for details regarding this lease. NOTE 16—SHAREHOLDERS’ EQUITY (DEFICIT) Allocation Shares As of December 31, 2021 and 2020, the Company
had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle the holder thereof to vote on any matter
relating to the Company other than in connection with amendments to the Company’s operating agreement and in connection with certain
other corporate transactions as specified in the operating agreement. The Manager owns 100 % of the allocation shares
of the Company which represent the original equity interest in the Company. As a holder of the allocation shares, the Manager is entitled
to receive a 20 % profit allocation as a form of preferred distribution, pursuant to a profit allocation formula upon the occurrence of
certain events. Generally, the distribution of the profit allocation is paid upon the occurrence of the sale of a material amount of capital
stock or assets of one of the Company’s businesses, including if the Company distributes its equity ownership in a subsidiary to
the Company’s shareholders in a spin-off or similar transaction (a “Sale Event”), or, at the option of the Manager,
at the five-year anniversary date of the acquisition of one of the Company’s businesses (a “Holding Event”). The Company
records distributions of the profit allocation to the holders upon occurrence of a Sale Event or Holding Event as dividends declared on
allocation interests to stockholders’ equity when they are approved by the Company’s board of directors. The 1,000 allocation shares are issued and outstanding
and held by the Manager, which is controlled by Mr. Roberts, the Company’s chief executive officer and a principal shareholder. Series A Senior Convertible Preferred Shares On September 30, 2020, the Company executed a
share designation, which was amended on November 20, 2020, March 26, 2021 and September 29, 2021, to designate 4,450,460 of its shares
as series A senior convertible preferred shares. Following is a description of the rights of the
series A senior convertible preferred shares. Dividends. Dividends at the rate per annum
of 14.0 % of the stated value ($ 2.00 per share, subject to adjustment) shall accrue on the series A senior convertible preferred shares.
Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears
on each dividend payment date in cash or common shares at the Company’s discretion. Dividends payable in common shares shall be
calculated based on a price equal to eighty percent ( 80 %) of the volume weighted average price (“VWAP”) for the common shares
on the Company’s principal trading market during the five (5) trading days immediately prior to the applicable dividend payment
date; provided, however, that if the common shares are not registered, and rulemaking referred to below is effective on the payment date,
the dividends payable in common shares shall be calculated based upon the fixed price of $ 1.57 ; provided further, that the Company may
only elect to pay dividends in common shares based upon such fixed price if the VWAP for the five (5) trading days immediately prior to
the applicable dividend payment date is $ 1.57 or higher. F- 41 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Liquidation. Subject to the rights of the
Company’s creditors and the holders of any senior securities or parity securities (in each case, as defined in the share designation),
upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital
or surplus) shall be made to or set apart for the holders of securities that are junior to the series A senior convertible preferred shares
as to the distribution of assets on any liquidation of the Company, each holder of outstanding series A senior convertible preferred shares
shall be entitled to receive an amount of cash equal to 115 % of the stated value plus an amount of cash equal to all accumulated accrued
and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders. If, upon
any liquidation of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the series A senior
convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series A senior
convertible preferred shares and liquidating payments on any other shares of any class or series of parity securities as to the distribution
of assets on any liquidation of the Company, then such assets, or the proceeds thereof, shall be distributed among the holders of series
A senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would
be payable on such series A senior convertible preferred shares and any such other parity securities if all amounts payable thereon were
paid in full. Voting Rights . The series A senior convertible
preferred shares do not have any voting rights; provided that, so long as any series A senior convertible preferred shares are outstanding,
the affirmative vote of holders of a majority of series A senior convertible preferred shares, which majority must include Leonite so
long as Leonite holds any series A senior convertible preferred shares (the “Requisite Holders”), voting as a separate class,
shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the share designation.
In addition, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of the Requisite Holders
shall be required prior to the Company’s (or Kyle’s or Wolo’s) creation or issuance of (i) any parity securities; (ii)
any senior securities; and (iii) any new indebtedness other than (A) intercompany indebtedness by Kyle’s or Wolo in favor of the
Company, (B) indebtedness incurred in favor of the sellers of Kyle’s or Wolo in connection with the acquisition of Kyle’s
or Wolo, or (C) indebtedness (or the refinancing of such indebtedness) the proceeds of which are used to complete the acquisition of Kyle’s
or Wolo related expenses or working capital to operate the business of Kyle’s or Wolo. Notwithstanding the foregoing, this shall
not apply to any financing transaction the use of proceeds of which the Company will use to redeem the series A senior convertible preferred
shares and the warrants issued in connection therewith. Conversion Rights . Each series A senior
convertible preferred share, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof,
at any time and from time to time into such number of fully paid and nonassessable common shares determined by dividing the stated value,
plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $ 1.75 per share; provided that in no event shall
the holder of any series A senior convertible preferred shares be entitled to convert any number of series A senior convertible preferred
shares that upon conversion the sum of (i) the number of common shares beneficially owned by the holder and its affiliates and (ii) the
number of common shares issuable upon the conversion of the series A senior convertible preferred shares with respect to which the determination
of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99 % of the then outstanding
common shares of the Company. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon
not less than sixty-one (61) days’ prior notice to the Company. Redemption . The Company may redeem in whole,
or upon the written consent of the Requisite Holders and in the manner provided for in such written consent, in part, the series A senior
convertible preferred shares by paying in cash therefore a sum equal to 115 % of the stated value plus the amount of accrued and unpaid
plus any other amounts due pursuant to the terms of the series A senior convertible preferred shares. Adjustments . The share designation contains
standard adjustments to the conversion price in the event of any share splits, share combinations, share reclassifications, dividends
paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations or similar transactions. In addition,
the share designation provides that if, but only if, the Requisite Holders provide the Company with at least ten (10) business day’s
prior written notice, then, from and after the date of such notice, the stated dividend rate, the stated value and the conversion price
shall automatically adjust as follows: ● On the first day of the 12 th month following the issuance
date of any series A senior convertible preferred shares, the stated dividend rate shall increase by five percent (5.0%) per annum
and the conversion price shall adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of
the ten (10) trading days immediately preceding such date. F- 42 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 ● On the first day of the 24 th month following the issuance
date of any series A senior convertible preferred shares, the stated dividend rate shall increase by an additional five percent
(5.0%) per annum, the stated value shall increase by ten percent (10%) and the conversion price shall automatically adjust to the lower
of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such
date. ● On the first day of the 36 th month following the issuance
date of any series A senior convertible preferred shares, the stated dividend rate shall increase by an additional five percent
(5.0%) per annum, the stated value shall increase by ten percent (10%) and the conversion price shall automatically adjust to the lower
of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding the
third adjustment date. Notwithstanding the foregoing, the conversion
price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075. In addition, if any legislation or
rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933, as amended, for convertible
securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible securities like the
series A senior convertible preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that
are based upon the lowest VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed
unless the common shares issuable upon conversion are then registered under an effective registration statement. Additional Equity Interest. On the third
adjustment date set forth above, the Company is required to cause Kyle’s and Wolo to issue to the holders of series A senior convertible
preferred shares, on a pro rata basis, a ten percent ( 10 %) equity stake Kyle’s and/or Wolo (the “Additional Equity Interest”).
The holders of series A senior convertible preferred shares issued in connection with the financing to complete the acquisition of Kyle’s
shall receive the equity stake in Kyle’s and the holders of series A senior convertible preferred shares issued in connection with
the financing to complete the acquisition of Wolo shall receive the equity stake in Wolo. The Company is required to cause Kyle’s
and Wolo to grant to the holders of the series A senior convertible preferred shares upon the issuance to them of the Additional Equity
Interest a right to receive an additional number of shares of common stock of Kyle’s or Wolo if Kyle’s or Wolo issues to any
third-party equity securities at a price below the acquisition price (as defined below). Such additional number of shares of common stock
of Kyle’s or Wolo to be issued in such instance shall be equal to a number of shares of common stock of Kyle’s or Wolo which,
when added to the number of shares of common stock of Kyle’s or Wolo constituting the Additional Equity Interest, would be equal
to the total number of shares of common stock which would have been issued to a holder of series A senior convertible preferred shares
if the price per share of common stock of Kyle’s or Wolo was equivalent to the price per equity security paid by such third-party
in Kyle’s or Wolo. For purposes of this provision, “acquisition price” means the price per share of Kyle’s and
Wolo that was paid by the Company upon the acquisition of Kyle’s and Wolo, respectively. On September 30, 2020, the Company sold an aggregate

grid note was terminated. Building Lease On September 1, 2020, Kyle’s entered into

an industrial lease agreement with the Kyle’s Sellers, who are officers of Kyle’s and principal shareholders of the Company.

See Note 13 for details regarding this lease. NOTE 16—SHAREHOLDERS’ EQUITY (DEFICIT) Allocation Shares As of December 31, 2021 and 2020, the Company

had authorized and outstanding 1,000 allocation shares. These allocation shares do not entitle the holder thereof to vote on any matter

relating to the Company other than in connection with amendments to the Company’s operating agreement and in connection with certain

other corporate transactions as specified in the operating agreement. The Manager owns 100 % of the allocation shares

of the Company which represent the original equity interest in the Company. As a holder of the allocation shares, the Manager is entitled

to receive a 20 % profit allocation as a form of preferred distribution, pursuant to a profit allocation formula upon the occurrence of

certain events. Generally, the distribution of the profit allocation is paid upon the occurrence of the sale of a material amount of capital

stock or assets of one of the Company’s businesses, including if the Company distributes its equity ownership in a subsidiary to

the Company’s shareholders in a spin-off or similar transaction (a “Sale Event”), or, at the option of the Manager,

at the five-year anniversary date of the acquisition of one of the Company’s businesses (a “Holding Event”). The Company

records distributions of the profit allocation to the holders upon occurrence of a Sale Event or Holding Event as dividends declared on

allocation interests to stockholders’ equity when they are approved by the Company’s board of directors. The 1,000 allocation shares are issued and outstanding

and held by the Manager, which is controlled by Mr. Roberts, the Company’s chief executive officer and a principal shareholder. Series A Senior Convertible Preferred Shares On September 30, 2020, the Company executed a

share designation, which was amended on November 20, 2020, March 26, 2021 and September 29, 2021, to designate 4,450,460 of its shares

as series A senior convertible preferred shares. Following is a description of the rights of the

series A senior convertible preferred shares. Dividends. Dividends at the rate per annum

of 14.0 % of the stated value ($ 2.00 per share, subject to adjustment) shall accrue on the series A senior convertible preferred shares.

Dividends shall accrue from day to day, whether or not declared, and shall be cumulative. Dividends shall be payable quarterly in arrears

on each dividend payment date in cash or common shares at the Company’s discretion. Dividends payable in common shares shall be

calculated based on a price equal to eighty percent ( 80 %) of the volume weighted average price (“VWAP”) for the common shares

on the Company’s principal trading market during the five (5) trading days immediately prior to the applicable dividend payment

date; provided, however, that if the common shares are not registered, and rulemaking referred to below is effective on the payment date,

the dividends payable in common shares shall be calculated based upon the fixed price of $ 1.57 ; provided further, that the Company may

only elect to pay dividends in common shares based upon such fixed price if the VWAP for the five (5) trading days immediately prior to

the applicable dividend payment date is $ 1.57 or higher. F- 41 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 Liquidation. Subject to the rights of the

Company’s creditors and the holders of any senior securities or parity securities (in each case, as defined in the share designation),

upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital

or surplus) shall be made to or set apart for the holders of securities that are junior to the series A senior convertible preferred shares

as to the distribution of assets on any liquidation of the Company, each holder of outstanding series A senior convertible preferred shares

shall be entitled to receive an amount of cash equal to 115 % of the stated value plus an amount of cash equal to all accumulated accrued

and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders. If, upon

any liquidation of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the series A senior

convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series A senior

convertible preferred shares and liquidating payments on any other shares of any class or series of parity securities as to the distribution

of assets on any liquidation of the Company, then such assets, or the proceeds thereof, shall be distributed among the holders of series

A senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would

be payable on such series A senior convertible preferred shares and any such other parity securities if all amounts payable thereon were

paid in full. Voting Rights . The series A senior convertible

preferred shares do not have any voting rights; provided that, so long as any series A senior convertible preferred shares are outstanding,

the affirmative vote of holders of a majority of series A senior convertible preferred shares, which majority must include Leonite so

long as Leonite holds any series A senior convertible preferred shares (the “Requisite Holders”), voting as a separate class,

shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the share designation.

In addition, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of the Requisite Holders

shall be required prior to the Company’s (or Kyle’s or Wolo’s) creation or issuance of (i) any parity securities; (ii)

any senior securities; and (iii) any new indebtedness other than (A) intercompany indebtedness by Kyle’s or Wolo in favor of the

Company, (B) indebtedness incurred in favor of the sellers of Kyle’s or Wolo in connection with the acquisition of Kyle’s

or Wolo, or (C) indebtedness (or the refinancing of such indebtedness) the proceeds of which are used to complete the acquisition of Kyle’s

or Wolo related expenses or working capital to operate the business of Kyle’s or Wolo. Notwithstanding the foregoing, this shall

not apply to any financing transaction the use of proceeds of which the Company will use to redeem the series A senior convertible preferred

shares and the warrants issued in connection therewith. Conversion Rights . Each series A senior

convertible preferred share, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof,

at any time and from time to time into such number of fully paid and nonassessable common shares determined by dividing the stated value,

plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $ 1.75 per share; provided that in no event shall

the holder of any series A senior convertible preferred shares be entitled to convert any number of series A senior convertible preferred

shares that upon conversion the sum of (i) the number of common shares beneficially owned by the holder and its affiliates and (ii) the

number of common shares issuable upon the conversion of the series A senior convertible preferred shares with respect to which the determination

of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99 % of the then outstanding

common shares of the Company. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon

not less than sixty-one (61) days’ prior notice to the Company. Redemption . The Company may redeem in whole,

or upon the written consent of the Requisite Holders and in the manner provided for in such written consent, in part, the series A senior

convertible preferred shares by paying in cash therefore a sum equal to 115 % of the stated value plus the amount of accrued and unpaid

plus any other amounts due pursuant to the terms of the series A senior convertible preferred shares. Adjustments . The share designation contains

standard adjustments to the conversion price in the event of any share splits, share combinations, share reclassifications, dividends

paid in common shares, sales of substantially all of the Company’s assets, mergers, consolidations or similar transactions. In addition,

the share designation provides that if, but only if, the Requisite Holders provide the Company with at least ten (10) business day’s

prior written notice, then, from and after the date of such notice, the stated dividend rate, the stated value and the conversion price

shall automatically adjust as follows: ● On the first day of the 12 th month following the issuance

date of any series A senior convertible preferred shares, the stated dividend rate shall increase by five percent (5.0%) per annum

and the conversion price shall adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of

the ten (10) trading days immediately preceding such date. F- 42 1847 HOLDINGS LLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 AND 2020 ● On the first day of the 24 th month following the issuance

date of any series A senior convertible preferred shares, the stated dividend rate shall increase by an additional five percent

(5.0%) per annum, the stated value shall increase by ten percent (10%) and the conversion price shall automatically adjust to the lower

of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such

date. ● On the first day of the 36 th month following the issuance

date of any series A senior convertible preferred shares, the stated dividend rate shall increase by an additional five percent

(5.0%) per annum, the stated value shall increase by ten percent (10%) and the conversion price shall automatically adjust to the lower

of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding the

third adjustment date. Notwithstanding the foregoing, the conversion

price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075. In addition, if any legislation or

rules are adopted whereby the holding period of securities for purposes of Rule 144 of the Securities Act of 1933, as amended, for convertible

securities that convert at market-adjusted rates is increased resulting in a longer holding period for convertible securities like the

series A senior convertible preferred shares and the unavailability at the time of conversion of Rule 144, the pricing provisions that

are based upon the lowest VWAP of the previous ten (10) trading days immediately preceding the relevant adjustment date shall be removed

unless the common shares issuable upon conversion are then registered under an effective registration statement. Additional Equity Interest. On the third

adjustment date set forth above, the Company is required to cause Kyle’s and Wolo to issue to the holders of series A senior convertible

preferred shares, on a pro rata basis, a ten percent ( 10 %) equity stake Kyle’s and/or Wolo (the “Additional Equity Interest”).

The holders of series A senior convertible preferred shares issued in connection with the financing to complete the acquisition of Kyle’s

shall receive the equity stake in Kyle’s and the holders of series A senior convertible preferred shares issued in connection with

the financing to complete the acquisition of Wolo shall receive the equity stake in Wolo. The Company is required to cause Kyle’s

and Wolo to grant to the holders of the series A senior convertible preferred shares upon the issuance to them of the Additional Equity

Interest a right to receive an additional number of shares of common stock of Kyle’s or Wolo if Kyle’s or Wolo issues to any

third-party equity securities at a price below the acquisition price (as defined below). Such additional number of shares of common stock

of Kyle’s or Wolo to be issued in such instance shall be equal to a number of shares of common stock of Kyle’s or Wolo which,

when added to the number of shares of common stock of Kyle’s or Wolo constituting the Additional Equity Interest, would be equal

to the total number of shares of common stock which would have been issued to a holder of series A senior convertible preferred shares

if the price per share of common stock of Kyle’s or Wolo was equivalent to the price per equity security paid by such third-party

in Kyle’s or Wolo. For purposes of this provision, “acquisition price” means the price per share of Kyle’s and

Wolo that was paid by the Company upon the acquisition of Kyle’s and Wolo, respectively. On September 30, 2020, the Company sold an aggregate